United States District Court, D. Massachusetts
ELIZABETH A. REGO and TODD W. FRATUS, SR., Plaintiffs,
SELECT PORTFOLIO SERVICES, INC. Defendant.
MEMORANDUM AND ORDER
ALLISON D. BURROUGHS, U.S. DISTRICT JUDGE
Elizabeth Rego and Todd Fratus, Sr. bring claims for
declaratory judgment (Count I), breach of contract (Count
II), breach of the implied covenant of good faith and fair
dealing (Count III), and violation of Massachusetts General
Laws Chapter 93A (Count IV) related to Defendant Select
Portfolio Services, Inc.'s (“SPS”) servicing
and modification of their mortgage loan. [ECF No. 1-1 at 4-13
(“Complaint” or “Compl.”)]. SPS moves
to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6). For the reasons explained herein, the motion is
GRANTED, and the Complaint is DISMISSED
with leave to amend.
following facts are drawn from the Complaint, the
well-pleaded allegations of which are taken as true for
purposes of evaluating SPS's motion to dismiss. See
Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st
Cir. 2014). Certain details are also culled from documents
whose authenticity are not disputed by the parties, from
official public records, and from documents attached or
referred to in the Complaint. See Watterson v. Page,
987 F.2d 1, 3 (1st Cir. 1993).
are domestic partners who purchased their current residence
in Pepperell, Massachusetts in October 2004 for $358, 000
using an “80/20, ” “no money down”
financing that required two mortgages to be issued by First
Franklin Corp. (“First Franklin”). [Compl.
¶¶ 7-9]. The first mortgage had an initial
principal of $286, 400, and the second mortgage had an
initial principal of $71, 600. [Id. ¶¶
9-10]. In early 2008, Plaintiffs began experiencing problems
with First Franklin, which refused to accept certain
payments, returned purported overpayments that it should not
have, and threatened foreclosure at times when
Plaintiffs' account was current. [Id.
¶¶ 14.c-d]. In 2009, First Franklin assigned the
first mortgage to Wells Fargo Bank, N.A. as trustee for a
mortgage-backed securities trust. [ECF No. 9 at 19-20]. In
July 2011, Wells Fargo assigned the first mortgage to PNC
Bank, N.A. and SPS became the servicer for the first
mortgage. [Id. ¶ 15; ECF No. 9 at
23-24]. Prior to SPS taking over as servicer for
the first mortgage, Plaintiffs repeatedly attempted to secure
a modification of both mortgages, but their attempts were
delayed by First Franklin's insistence that several of
their applications were incomplete. [Compl. ¶¶
14.i-15]. First Franklin eventually offered Plaintiffs a
modification that would incorporate both the first and second
mortgages, but sold the mortgages before Plaintiffs could
close on the modification. [Id. ¶¶ 14.n,
servicing transferred, SPS told Plaintiffs that their
outstanding modification offer was void, refused to accept
mortgage payments, required Plaintiffs to reapply for a loan
modification, and informed Plaintiffs that the modification
would not include the second mortgage because it had not been
part of SPS's purchase. [Id. ¶¶ 15-18,
21]. Plaintiffs submitted a new modification application to
SPS, but found the process was disorganized and that SPS had
not received the paperwork related to their prior
modification applications, which caused unnecessary delays.
[Id. ¶¶ 18-19]. At one point, SPS
erroneously sent a check for real estate taxes on
Plaintiffs' property to the Town of Pepperell, but
because no real estate taxes were due, the town returned the
check to SPS. [Id. ¶¶ 28-29]. SPS also
charged attorneys' fees to Plaintiffs' mortgage
balance. [Id. ¶¶ 19-21]. On at least one
occasion when Plaintiffs' first mortgage was current, SPS
scheduled and threatened to proceed with a foreclosure
auction if Plaintiffs refused to make certain trial payments
associated with their loan modification. [Id.
¶¶ 23, 27, 36, 38].
finally secured a modification of the first mortgage on
September 18, 2012, but SPS included $107, 000 in fees,
including attorneys' fees, in the principal due, which
then totaled $375, 077.11. [Id. ¶¶ 21-22].
Although the modification provided Plaintiffs with several
benefits, including an initial interest rate of 2.00 percent
and a “deferred principal balance” of $153,
077.11 on which interest would not accrue, the modified
mortgage balance would have been considerably lower if not
for the fees caused by SPS's delays. [Id.
¶¶ 22, 37, 39; ECF No. 9 at 27].
filed for Chapter 7 bankruptcy protection in 2017 and
obtained discharges later that year. [Compl. ¶¶
1-2]. On June 21, 2017, Plaintiffs filed an adversary
proceeding against First Franklin, Ditech Financial, LLC
(“Ditech”),  and SPS based on substantially the same
allegations made here. [Id. ¶ 3; see Rego
v. Select Portfolio Servs., Inc. (In re Rego), Adv. Pro.
17-04028 (D. Mass)]. Plaintiffs settled their claims against
First Franklin, but their claims against SPS were dismissed
by the bankruptcy court for lack of jurisdiction on December
8, 2017. [Compl. ¶¶ 5-6; Order of Court, Rego
v. Select Portfolio Servs., Inc. (In re Rego), Adv. Pro.
17-04028 (D. Mass. Dec. 8, 2017), ECF No. 43]. On May 10,
2018, Plaintiffs filed this action in state court seeking a
declaratory judgment in the nature of an accounting and
alleging breach of contract, breach of the implied covenant
of good faith and fair dealing, and a violation of
Massachusetts Chapter 93A. [ECF No. 1-1 at 2; see
generally Compl.]. On June 21, 2018, SPS removed the
action to this Court. [ECF No. 1].
MOTION TO DISMISS STANDARD
motion to dismiss for failure to state a claim, the Court
accepts as true all well-pleaded facts in the complaint and
draws all reasonable inferences in the light most favorable
to the plaintiff. United States ex rel. Hutcheson v.
Blackstone Med., Inc., 647 F.3d 377, 383 (1st Cir.
2011). While detailed factual allegations are not required, a
complaint must set forth “more than labels and
conclusions, ” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007), and it must contain “factual
allegations, either direct or inferential, respecting each
material element necessary to sustain recovery under some
actionable legal theory.” Gagliardi v.
Sullivan, 513 F.3d 301, 305 (1st Cir. 2008) (internal
quotations and citations omitted). The facts alleged, taken
together, must “state a claim to relief that is
plausible on its face.” A.G. ex rel. Maddox v.
Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013) (quoting
Twombly, 550 U.S. at 570). “A claim is
facially plausible if supported by ‘factual content
that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct
alleged.'” Eldredge v. Town of Falmouth,
662 F.3d 100, 104 (1st Cir. 2011) (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 665 (2009)).
assessing the sufficiency of a complaint, the Court first
“separate[s] the complaint's factual allegations
(which must be accepted as true) from its conclusory legal
allegations (which need not be credited).”
Maddox, 732 F.3d at 80 (quoting Morales-Cruz v.
Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)). Next,
the Court “determine[s] whether the remaining factual
content allows a ‘reasonable inference that the
defendant is liable for the misconduct alleged.'”
Id. (quoting Morales-Cruz, 676 F.3d at
224). “[T]he court may not disregard properly pled
factual allegations, ‘even if it strikes a savvy judge
that actual proof of those facts is improbable.'”
Ocasio-Hernandez v. Fortuño-Burset, 640 F.3d
1, 12 (1st Cir. 2011) (quoting Twombly, 550 U.S. at
556). “[W]here the well-pleaded facts do not permit the
court to infer more than the mere possibility of misconduct,
” however, a claim may be dismissed. Iqbal,
556 U.S. at 679.
argues (1) that the Complaint fails to state claims for
breach of contract or breach of the implied covenant of good
faith and fair dealing, (2) that the Complaint fails to state
a Chapter 93A claim, (3) that declaratory relief is barred as
a matter of law, and (4) that the loan modification bars this
action. [ECF No. 9 at 5-16]. The Court will address the first
three arguments in turn, and finds it unnecessary to address
Plaintiffs Fail to State a Breach of Contract or the Implied