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Culley v. Bank of America, N.A.

United States District Court, D. Massachusetts

March 29, 2019



          David H. Hennessy, United States Magistrate Judge.

         Plaintiffs Kathryn K. Culley and Christian P. Culley (together, “Plaintiffs”) brought this action against Bank of America, N.A. (“Bank of America”), Wells Fargo Bank, N.A. (“Wells Fargo”), First American Title Insurance Company (“First American”), and Harmon Law Offices, P.C. (“Harmon, ” and together with Bank of America, Wells Fargo, and First American, the “Defendants”) seeking relief in relation to the foreclosure of Plaintiffs' home. With their verified complaint, Plaintiffs filed an emergency motion for a preliminary injunction barring the current eviction proceedings against them in Central Housing Court. See dkt. no. 4 (motion for preliminary injunction); see also Bank of Am., N.A. v. Culley, 18H85SP002517 (Mass. Hous. Ct. June 12, 2018). Bank of America and Wells Fargo (together, the “Bank Defendants”) opposed the preliminary injunction motion. Dkt. no. 25. All Defendants have filed motions to dismiss Plaintiffs' verified complaint. See dkt. no. 12 (Harmon motion); dkt. no. 19 (First American motion); dkt. no. 22 (Bank Defendants motion). Plaintiffs have opposed First American's and the Bank Defendants' motions to dismiss. See dkt. nos. 32, 40. Harmon's motion to dismiss is unopposed.

         The Court heard the parties on Plaintiffs' motion for a preliminary injunction and Defendants' dismissal motions on July 26, August 24, and September 25, 2018. Dkt. nos. 33, 37, 43. At the Court's direction, the Bank Defendants and Plaintiffs submitted further briefing. See dkt. nos. 44, 45. Having reviewed the parties' submissions and for the reasons that follow, Harmon's motion to dismiss (dkt. no. 12) is GRANTED; First American's motion to dismiss (dkt. no. 19) is GRANTED; Bank Defendants' motion to dismiss (dkt. no. 22) is GRANTED; and Plaintiffs' motion for a preliminary injunction (dkt. no. 4) is DENIED.

         I. BACKGROUND

         A. The Note and Mortgage

         On September 30, 2005, Plaintiffs acquired the property known as 22A Lovers Lane in Southborough, Massachusetts (the “Property”) by quitclaim deed. Dkt. no. 3 (“Complaint”), at p. 19 ¶ 25;[1] dkt. no. 3-2, at pp. 2-3 (copy of deed). The purchase price was $978, 500. Dkt. no. 3-2, at pp. 2-3.

         To purchase the Property, Plaintiffs obtained a loan in the amount of $550, 000 from non-party Gateway Funding Diversified Mortgage Services, L.P. (“Gateway”). Complaint, at p. 22 ¶ 39. The loan was evidenced by a promissory note (the “Note”), dated September 30, 2005 in favor of Gateway. See id.; see also dkt. no. 3-4, at pp. 23-25 (copy of Note). As security for the Note, Plaintiffs executed a mortgage on the Property in the principal amount of $550, 000 (the “Mortgage”). Complaint at p. 21, ¶ 33; dkt. no. 3-4, at p. 27 (copy of Mortgage). The Mortgage identified Gateway as the lender and named Mortgage Electronic Registration Systems, Inc. (“MERS”), as nominee for Gateway, as the mortgagee of record. Dkt. no. 3-4, at p. 27. The Mortgage was recorded in the Worcester South Registry of Deeds (the “Registry of Deeds”) on September 30, 2005. Id.

         At some point in time, Gateway endorsed the Note in blank. Dkt. no. 3-5, at p. 15. At a later time, Gateway endorsed the Note to Wells Fargo. Dkt. no. 3-2, at p. 17. Wells Fargo thereafter endorsed the Note in blank. See dkt. no. 3-4, at p. 25. On April 2, 2011, MERS, as nominee for Gateway, assigned the Mortgage to Bank of America (the “Assignment of Mortgage”). Dkt. no. 23-2, at p. 2. The Assignment of Mortgage was recorded in the Registry of Deeds on August 1, 2011. Id.

         B. Property Defects and Other Litigation

         Shortly after Plaintiffs acquired the Property, they learned that it lacked both regulatory septic system approval and a certificate of occupancy. Significant structural defects and other issues surfaced as well.[2] In response, Plaintiffs filed various grievances. For example, Plaintiffs lodged complaints against the builder/vendor involved in the Property's construction, as well as the engineer. Both had their licenses revoked. See dkt. no. 18-1, at p. 20 n.3; dkt. no. 3-2, at pp. 50-54. In 2009, Plaintiffs also filed a claim with their title insurer, First American. See dkt. no. 3-2, at pp. 32-33. First American denied Plaintiffs' claim because the Property's structural and regulatory issues were unrelated to its title. See dkt. no. 3-5, at pp. 80-82 (“The refusal of a third party to purchase your Property due to other reasons, such as code violations, structural defects, or other physical aspects of your Property is not an unmarketability of title matter that would be covered under your Policy.”).

         Plaintiffs also took legal action separate from the instant case. In 2006, they sued the sellers and contractors of the Property. See Culley, 2016 WL 6235754, at *1. That litigation spanned ten years and two trials. See id. First, in 2010 a jury awarded Plaintiffs $1, 093, 487 in damages. Id. at *2. However, the trial judge deemed the verdict excessive and ordered a new trial unless Plaintiffs accepted a remittitur to $140, 518. Id. Plaintiffs did not accept, and during the second trial declined to offer evidence of the damages they had won at the first trial.[3] Id. The case proceeded as a bench trial, and the judge ultimately awarded Plaintiffs $25 in nominal damages, and about $259, 000 in attorneys' fees and costs. Id. at *3. The judgment was affirmed on appeal. Id. at *6.

         C. Default, Foreclosure, and Subsequent Conduct

         In April 2010, Wells Fargo advised Plaintiffs that their loan was in default after they had stopped making payments in February 2010. See dkt. no. 3-4 at 15 (letter to Plaintiffs from Harmon). Plaintiffs apparently informed Wells Fargo that they were in litigation against the seller and builder; in a letter dated August 13, 2010, Wells Fargo agreed to suspend debt collection and foreclosure activities through December 31, 2010, “to allow time for a ruling to be made on the current ongoing litigation regarding [the Property].” Dkt. no. 3-3, at p. 5. In a subsequent letter dated March 8, 2011, Wells Fargo again agreed to suspend foreclosure activities, writing: “At this time, [Wells Fargo] does not anticipate any further foreclosure action until the litigation issues involving this property have been resolved.” Dkt. no. 3-3, at p. 20. The letter further noted that a Wells Fargo employee would “continue to monitor [the] mortgage loan and provide [Plaintiffs] with periodic status updates.” Id.

         In May 2012, Wells Fargo filed a Servicemembers Civil Relief Act (“SCRA”) complaint against Plaintiffs in Massachusetts Land Court. See id. at 24. In August 2012, the Land Court entered a judgment, concluding that Plaintiffs were not entitled to the benefits of the SCRA. Id. at 27. On August 31, 2016, Wells Fargo mailed Plaintiffs a letter notifying them that they had ninety days to cure their default on the loan. Id. at 58. Wells Fargo retained Harmon to handle foreclosure proceedings. See id. at 68. After fairly extensive correspondence among Plaintiffs, Wells Fargo, and Harmon, foreclosure proceedings were initiated. See id. at 88.

         A foreclosure sale was scheduled for October 18, 2017. See dkt. no. 3-5, at 24. The sale ultimately was postponed to January 3, 2018. Id. at 29. On January 3, 2018, Bank of America purchased the Property at the foreclosure sale for $522, 000 after two other bidders failed to perform. Id. at 62. Bank of America is the current owner of record. Id. at 46; see also id. at 59- 61 (foreclosure deed).

         On May 23, 2018, Harmon, on behalf of Bank of America, initiated eviction proceedings by mailing Plaintiffs a “72 hour notice to quit and vacate premises.” Id. at 69-70. On June 1, 2018, a summary process eviction proceeding was initiated in Central Housing Court. See id. at 72. Facing eviction, Plaintiffs filed the instant action on June 11, 2018, alleging that the foreclosure sale was void and moving to enjoin the eviction proceedings. See dkt. nos. 1, 3, 4.

         On July 26, 2018, the Court granted Bank of America's oral motion to continue the preliminary injunction hearing in order resolve all pending motions at the same time, based on Bank of America's representation that it would not act on the Central Housing Court eviction proceeding until the motions were resolved. Dkt. no. 34.


         To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a plaintiff must “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). That is, “[f]actual allegations must be enough to raise a right to relief above the speculative level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Id. at 555 (internal citations omitted). “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 556). Indeed, plausible “means something more than merely possible, and gauging a pleaded situation's plausibility is a ‘context-specific' job that compels [the Court] ‘to draw on [its] judicial experience and common sense.'” Schatz v. Republican State Leadership Comm., 669 F.3d 50, 55 (1st Cir. 2012) (quoting Iqbal, 556 U.S. at 679).

         Despite this generous standard, “Rule 12(b)(6) is not entirely a toothless tiger . . . . The threshold for stating a claim may be low, but it is real.” Dartmouth Review v. Dartmouth Coll., 889 F.2d 13, 16 (1st Cir. 1989) (quotation omitted). The complaint must therefore “allege a factual predicate concrete enough to warrant further proceedings.” DM Research, Inc. v. Coll. of Am. Pathologists, 170 F.3d 53, 55 (1st Cir. 1999) (emphasis in original). “A pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). Dismissal is appropriate if a plaintiff's well-pleaded facts do not “possess enough heft to show that [the] plaintiff is entitled to relief.” Ruiz Rivera v. Pfizer Pharm., LLC, 521 F.3d 76, 84 (1st Cir. 2008) (quotations and original alterations omitted).

         The court “must assume the truth of all well-plead[ed] facts and give the plaintiff the benefit of all reasonable inferences therefrom.” Ruiz v. Bally Total Fitness Holding Corp., 496 F.3d 1, 5 (1st Cir. 2007) (citing Rogan v. Menino, 175 F.3d 75, 77 (1st Cir. 1999)). “Under Rule 12(b)(6), the district court may properly consider only facts and documents that are part of or incorporated into the complaint; if matters outside the pleadings are considered, the motion must be decided under the more stringent standards applicable to a Rule 56 motion for summary judgment.” Rivera v. Centro Médico de Turabo, Inc., 575 F.3d 10, 15 (1st Cir. 2009) (quoting Trans-Spec Truck Serv., Inc. v. Caterpillar, Inc., 524 F.3d 315, 321 (1st Cir. 2008)). There lies an exception to this rule “for documents the authenticity of which [is] not disputed by the parties; for official public records; for documents central to [a plaintiff's] claim; or for documents sufficiently referred to in the complaint.” Rivera, 575 F.3d at 15 (quoting Alt. Energy, Inc. v. St. Paul Fire & Marine Ins. Co., 267 F.3d 30, 33 (1st Cir. 2001)).

         Notwithstanding the above, the Court must apply a liberal standard where, as here, the Plaintiffs' complaint was filed pro se. Sergentakis v. Channell, 272 F.Supp.3d 221, 224 (D. Mass. 2017) (citing Gibbs v. SLM Corp., 336 F.Supp.2d 1, 5 (D. Mass. 2004)). A liberal construction of pro se pleadings is necessary “to avoid inappropriately stringent rules and unnecessary dismissals.” Sergentakis, 272 F.Supp.3d at 224 (citation omitted).


         This analysis presents the Court's attempt to delineate Plaintiffs' causes of action and complained-of conduct.

         A. Foreclosure Notice and Process

         The best reading of Plaintiffs' complaint reveals several allegations that the Bank Defendants and Harmon unlawfully and improperly commenced and completed foreclosure proceedings. Specifically, the complaint alleges that: (i) the published notice of foreclosure was deficient; (ii) the Assignment of Mortgage to Bank of America was legally ineffective; (iii) Bank of America lacked authority to enforce the Note and foreclose; (iv) the Bank Defendants failed to make a public proclamation continuing the foreclosure sale, and thus the sale was not properly noticed; and (v) the Bank Defendants failed to comply with pre-foreclosure notice requirements. I address each contention in turn.

         1. Deficient Notice of Foreclosure

         “Under Massachusetts choice of law principles, claims arising in connection with foreclosures of real property are . . . governed by the law of the state in which the land is located.” Pearson v. United States, 905 F.Supp.2d 400, 403 (D. Mass. 2012) (citing United Guar. Residential Ins. Co. v. O'Neil, No. 933004D, 1994 WL 879614, at *1 (Mass. Super. Ct. June 27, 1994) (stating “[t]he mechanics of foreclosure, including what notice ha[s] to be given, ” are determined by the law of the situs)). In Massachusetts, “[a] foreclosure sale conducted pursuant to a power of sale in a mortgage must comply with all applicable statutory provisions, including in particular . . . [Massachusetts General Laws ch.] 244, § 14.” Eaton v. Fed. Nat'l Mortg. Ass'n, 969 N.E.2d 1118, 1121 (Mass. 2012). Section 14 prescribes the form and method of publication of notice of a foreclosure sale. Prior to foreclosure under a power of sale, the statute requires a mortgagee to publish notice of the sale in a local newspaper “once in each of three successive weeks, the first publication to be not less than twenty-one days before the day of sale, ” and that the notice be sent by registered mail to the owner of record. Mass. Gen. Laws ch. 244, § 14. Registered mail, for purposes of sending notice, includes certified mail. Mass. Gen. Laws ch. 4, § 7. Section 14 further provides that when a mortgagee holds a mortgage pursuant to an assignment, the notice of foreclosure is valid only if:

(i) at the time such notice is mailed, an assignment, or a chain of assignments, evidencing the assignment of the mortgage to the foreclosing mortgagee has been duly recorded in the registry of deeds for the county or district where the land lies and (ii) the recording information for all recorded assignments is referenced in the notice of sale required in this section.

Mass. Gen. Laws ch. 244, § 14.

         Here, Plaintiffs' last monthly loan payment was received in February 2010. See dkt. no.

         3-3, at p. 5 (“As of the date of this letter your loan is showing due for the March 2010 payment.”); id. at 58 (containing 90-day cure letter and noting Plaintiffs did not make the monthly payment due March 2010 or any other payment due thereafter). On August 31, 2016, Wells Fargo, as the loan servicer, issued a 90-day right to cure letter to Plaintiffs. Id. at 58-64. Harmon, on behalf of mortgagee Bank of America and servicer Wells Fargo, caused a notice of sale for October 18, 2017 to be published in the Worcester Telegram & Gazette, once a week for three successive weeks, beginning September 22, 2017. See dkt. no. 3-5, at pp. 62-64 (containing copy of Affidavit of compliance with sale procedures and copy of sale notice). The sale notice was sent to Plaintiffs via certified mail on September 19, 2017. Id. at 6. At the time the notice was mailed and published, the Assignment of Mortgage to Bank of America had been recorded in the Registry of Deeds. Dkt. no. 23-2, at p. 2.[4] Recording information was referenced in the notice of sale. Dkt. no. 3-5, at p. 7. Plaintiff's conclusory allegations fail to controvert the record evidence of compliance with Mass. Gen. Laws ch. 244, § 14, or to make Plaintiffs' claim plausible on its face.

         2. Assignment of Mortgage to Bank of America

         Plaintiffs next allege that the Assignment of Mortgage from MERS to Bank of America is invalid because Wells Fargo was the real owner of the Mortgage at the time MERS assigned the Mortgage to Bank of America. This claim simply lacks plausibility. The predicate for Plaintiffs' claim is a thin reed: the original loan number associated with the mortgage loan bears a reference to Wells Fargo. See, e.g., dkt. no. 3-2, at p. 5. In other words, the original mortgage loan given to Plaintiffs by Gateway contained an identification number for a Wells Fargo loan. This isolated reference does not remotely evidence an ownership interest of Wells Fargo in the mortgage loan. Rather, the record establishes ownership interests in Gateway and Bank of America only. Indeed, the Registry of Deeds provides the full chain of title: the Mortgage identifying Gateway as lender and MERS as nominee was recorded in the Registry of Deeds on September 30, 2005. Dkt. no. 3-4, at p. 27. MERS, on behalf of Gateway, assigned the Mortgage to Bank of America on April 2, 2011. Dkt. no. 23-2, at p. 2. The Assignment of Mortgage was recorded in the Registry of Deeds on August 1, 2011 and is the only recorded assignment respecting the Mortgage. Id. Bank of America therefore was the mortgagee of record when nonjudicial foreclosure proceedings commenced. In addition, Plaintiffs' claim overlooks the fact that mortgagees may predetermine securitization and servicing information for mortgage loans prior to lending. As such, Plaintiffs' allegation is not plausible. Twombly, 550 U.S. at 570.

         3. Authority to Enforce the Note

         Plaintiffs further allege that Bank of America was not entitled to foreclose because it did not have the authority to enforce the Note at the time foreclosure proceedings were commenced. This allegation is unsupportable and fails. To be valid, “a foreclosure effected through the statutory power of sale, as governed by and set forth in [Mass. Gen. Laws ch.] 183, § 21, and [ch.] 244, §§ 11-17C, requires the mortgagee to hold the note or to act on behalf of the note holder.” Galiastro v. Mortg. Elec. Registration Sys., Inc., 4 N.E.3d 270, 276 (Mass. 2014) (citing Eaton, 969 N.E.2d at 1131). Massachusetts law permits one who, although not the noteholder himself, acts as the agent of the noteholder and stands “in the shoes” of the mortgagee to effectuate a foreclosure. Eaton, 969 N.E.2d at 1131. Massachusetts law thus requires that an affidavit pursuant to Mass. Gen. Laws ch. 183, § 54B be recorded in the Registry of Deeds, whereby the affiant attests that it either holds the mortgage and note or is acting on behalf of the party entitled to foreclose. Id. at 1133 n.28 (“[The law] allows for the filing of an affidavit that is ‘relevant to the title to certain land and will be of benefit and assistance in clarifying the chain of title.' Such an affidavit may state that the mortgagee either held the note or acted on behalf of the note holder at the time of the foreclosure sale.” (quoting Mass. Gen. Laws ch. 183, § 5B)).

         Here, foreclosure proceedings commenced in September 2017 when the notice of sale was first published. Dkt. no. 3-5, at pp. 62-64. The February 1, 2018 affidavit of Kishia Givens of Wells Fargo attests that Bank of America was “the holder of the promissory note” when nonjudicial foreclosure proceedings commenced. Id. at 67. This affidavit was recorded in the Registry of Deeds pursuant to § 54B. Id. at 66. It serves as sufficient proof that Bank of America held the Note at the time the notice of sale was published, and through the foreclosure sale. Id.

         A review of the record reveals three copies of the Note. One copy shows the Note endorsed by Gateway in blank. A second copy shows “Wells Fargo Bank, N.A.” stamped into the blank endorsee field of the previous endorsement, which reflects a transfer from Gateway to Wells Fargo. Third, the last (and most recent) copy of the Note reflects a third endorsement, from Wells Fargo in blank.[5] The effect of an endorsement in blank is that a note is enforceable by proof of possession alone. See U.C.C. § 3-205(b) (Am. Law Inst. & Unif. Law Comm'n 1977) (“If an indorsement is made by the holder of an instrument and it is not a special indorsement, it is a ‘blank indorsement.' When indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially indorsed.”); Id. § 3-301 (stating that the party entitled to enforce an instrument means “(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument” under other sections of the Code); see also Courtney v. U.S. Bank, N.A., 922 F.Supp.2d 171, 174 (D. Mass. 2013). Because the Note is endorsed in blank, its holder is entitled to enforce it. In this case, that is Bank of America.

         For these reasons, Plaintiffs' conclusory and unsupported claim that Bank of America lacked authority to enforce the Note at the time the foreclosure was noticed is ...

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