Flores v. OneWest Bank, F.S.B. ( 2018 )

United States Court of Appeals
For the First Circuit
No. 16-1385
PEDRO A. FLORES; ESTHER YANES-ÁLVAREZ; ROSA YANES,
Plaintiffs, Appellants,
v.
ONEWEST BANK, F.S.B.; INDYMAC MORTGAGE SERVICES; OCWEN
SERVICING, LLC; FEDERAL NATIONAL MORTGAGE ASSOCIATION,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Torruella, Selya, and Barron,
Circuit Judges.
Carmenelisa Pérez-Kudzma and Pérez-Kudzma Law Office P.C. on
brief for appellants.
Marissa I. Delinks, Maura K. McKelvey, and Hinshaw &
Culbertson LLP on brief for appellees.
March 23, 2018
BARRON, Circuit Judge. This case concerns an appeal
from the dismissal of a suit that challenges the lawfulness of a
2012 foreclosure sale of a home in Massachusetts. The property at
issue formerly belonged to the plaintiffs: Pedro Flores, Esther
Yanes-Álvarez, and Rosa Yanes. Their complaint set forth numerous
claims alleging, among other things, that the defendants -- OneWest
Bank, Indymac Mortgage Services, Ocwen Servicing, and the Federal
National Mortgage Association -- had engaged in unfair and
predatory mortgage lending and loan servicing practices and that
the foreclosure sale of the property was void. We affirm the
District Court's order dismissing all of the claims.
I.
To set the stage, we recount the following facts as they
are recited in the amended complaint. On or about April 6, 2007,
the plaintiffs refinanced their home mortgage loan for their home
in Everett, Massachusetts. The home mortgage loan was originated
by Dynamic Capital Mortgage and secured by a mortgage on the
property with Mortgage Electronic Registration Systems Inc.
("MERS"), which the mortgage named as mortgagee.
In 2008, the plaintiffs were unable to meet their monthly
mortgage obligations and eventually defaulted on the mortgage. On
April 25, 2012, the plaintiffs applied for a loan modification
from Indymac Mortgage Services, a division of OneWest Bank. On
May 11, 2012, Indymac denied the plaintiffs' application. OneWest
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effectuated the foreclosure pursuant to the statutory power of
sale. Mass. Gen. Laws ch. 183, § 21. Defendant OneWest purchased
the property at the foreclosure sale.
More than three years later, on November 15, 2015, the
plaintiffs brought this suit in the District Court for the District
of Massachusetts. The operative complaint set forth nine claims.
The defendants moved to dismiss all of the claims, and the District
Court granted the motion. The plaintiffs now appeal the dismissal
of eight of the nine claims.1 Our standard of review for an order
granting a motion to dismiss is de novo. Rodi v. S. New England
Sch. of Law, 389 F.3d 5, 12 (1st Cir. 2004). In performing the
review, "[n]on-conclusory factual allegations in the complaint
must . . . be treated as true." Ocasio-Hernández v. Fortuño-
Burset, 640 F.3d 1, 12 (1st Cir. 2011).
II.
The plaintiffs' eight claims, which are all brought
under Massachusetts law, fall into what amounts to four different
categories. Three claims seek a judgment declaring that the
foreclosure sale is void. A fourth claim is for an action to quiet
title. A fifth claim is for breach of the duty of good faith and
reasonable diligence. The final three claims at issue are brought
1
The one claim that the plaintiffs do not appeal was for
unjust enrichment. The District Court dismissed that claim on the
ground that unjust enrichment is a theory of equitable recovery,
rather than an independent cause of action.
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under two different consumer protection statutes. For the reasons
that follow, we affirm the dismissal of all of these claims.
A.
We begin with the three claims for which the plaintiffs
seek a judgment declaring that the foreclosure sale is void. The
first of these claims contends that the sale is void because the
defendants failed to comply with Massachusetts General Laws
Chapter 244, § 15A ("§ 15A") in conducting the sale. Section 15A
requires a mortgagee conveying title to mortgaged premises
pursuant to a foreclosure proceeding under the provisions of
Chapter 244 to:
[W]ithin thirty days of taking possession or
conveying title, notify all residential
tenants of said premises, and the office of
the assessor or collector of taxes of the
municipality in which the premises are located
and any persons, companies, districts,
commissions or other entities of any kind
which provide water or sewer service to the
premises, of said taking possession or
conveying title.
Id.
The complaint alleged that the defendants violated this
provision's thirty-day notification requirement by notifying the
municipal tax-collector of the foreclosure sale only in March of
2013, which was approximately eleven months after the sale had
occurred. The defendants, in their motion to dismiss, argued that
this claim was for a tort under Massachusetts law because they
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contend that it alleged (albeit implicitly) that the defendants
had conducted the foreclosure sale negligently and in bad faith.
Accordingly, the defendants contended that this claim was time-
barred, because it was filed outside the three-year statute of
limitations that applies to tort claims under Massachusetts law.
See Mass. Gen. Laws ch. 260, § 2A.
The District Court agreed with the defendants. Accordingly,
the District Court dismissed the claim on that basis.
The plaintiffs now argue on appeal, as they did below in
their complaint and in their opposition to defendants' motion to
dismiss, that the claim is not subject to the three-year statute
of limitations that applies to tort claims in Massachusetts because
the claim seeks to declare the foreclosure sale void for having
been carried out in violation of § 15A. The plaintiffs further
contend that the claim is timely because no other time bar stands
in the way of this claim.
The plaintiffs rely for this argument primarily on the
Massachusetts Supreme Judicial Court's ("SJC") decision in
Bevilacqua v. Rodriguez, 955 N.E.2d 884 (Mass. 2011). They point
out that Bevilacqua establishes that, if a foreclosure transaction
is void, "it is a nullity such that title never left possession of
the original owner . . . . any effort to foreclose by a party
lacking 'jurisdiction and authority' to carry out a foreclosure
under [the relevant] statutes is void." Id. at 897 (internal
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citations and alterations omitted). And the plaintiffs then
contend that it follows that "where a cause of action arises out
of an alleged void transaction, there cannot be a statute of
limitations because title never left the Appellants' possession."
Neither the District Court nor the defendants address
the plaintiffs' contention that, in light of Bevilacqua, the claim
is not subject to the three-year limitations period that applies
to tort claims. But, we need not decide whether the plaintiffs'
argument concerning Bevilacqua has force. Even assuming that it
does, the plaintiffs' argument that the sale is void in consequence
of the claimed statutory violation is clearly wrong. And so we
affirm the dismissal of this claim on that basis. See Otero v.
P.R. Indus. Comm'n, 441 F.3d 18, 20 (1st Cir. 2006) ("We review
the district court's order of dismissal de novo and may affirm on
any ground supported by the record.").
In so ruling, we observe that the plaintiffs base their
contention that the foreclosure sale is void because it violated
§ 15A on Paiva v. Bank of N.Y. Mellon, 120 F. Supp. 3d 7 (D. Mass.
2015). That case correctly noted that the SJC has held that
violations of certain statutory requirements pertaining to
foreclosure sales pursuant to Massachusetts General Laws Chapter
244 would render them void. Id. at 11 (citing Pinti v. Emigrant
Mortg. Co., 33 N.E.3d 1213, 1224 (Mass. 2015); U.S. Bank Nat. Ass'n
v. Schumacher, 5 N.E.3d 882, 891 (Mass. 2014) (Gants, J.,
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concurring); Eaton v. Fed. Nat. Mortg. Ass'n, 969 N.E.2d 1118,
1128 (Mass. 2012); U.S. Bank Nat. Ass'n v. Ibanez, 941 N.E.2d 40,
49 (Mass. 2011)). And Paiva also concluded that § 15A is one of
the statutes pertaining to a foreclosure sale for which "the
consequence of non-compliance is the invalidation of the
foreclosure sale." Id.
Assuming that there was a violation of § 15A, the problem
for the plaintiffs is that Paiva is a federal district court
decision that expressly noted that there was, at the time of that
decision, no state court precedent that directly addressed whether
a violation of § 15A would render a foreclosure sale pursuant to
Massachusetts General Laws Chapter 244 void. Id. at 11 & n.3.
And since Paiva, the Massachusetts Appeals Court has held, albeit
in an unpublished decision, that a mortgagee's failure to provide
notice under the requirements of § 15A does not render the
foreclosure sale void under Massachusetts law. Kiah v. Carpenter,
47 N.E.3d 53 (Mass. App. Ct. 2016), appeal denied, 56 N.E.3d 829
(Mass. 2016).
We see no reason to doubt Kiah's reading of Massachusetts
law. See Stoner v. New York Life Ins. Co., 311 U.S. 464, 467
(1940) ("[F]ederal courts, under the doctrine of Erie Railroad Co.
v. Tompkins . . . must follow the decisions of intermediate state
courts in the absence of convincing evidence that the highest court
of the state would decide differently."). We thus affirm the
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dismissal of this claim on the ground that the sale is not void,
even assuming it was carried out in violation of § 15A.
The plaintiffs also challenge the District Court's
decision to dismiss as time-barred two of their other claims in
which they seek to have the foreclosure sale deemed void. The
plaintiffs do so by, once again, contending that, because these
claims seek to declare the foreclosure sale void under
Massachusetts law, the claims are not subject to the three-year
limitations period that applies to tort claims in Massachusetts
that the District Court applied in dismissing each of these claims.
And the plaintiffs once again rely on Bevilacqua in so arguing.
These two claims allege, respectively, that the
foreclosure sale was void because it was carried out in violation
of Massachusetts General Laws Chapter 244, § 35A ("§ 35A") and
that the foreclosure sale was void because it was carried out in
violation of paragraph twenty-two of the mortgage instrument.
Section 35A gives a mortgagor a ninety-day right to cure a payment
default before foreclosure proceedings may be commenced.
Paragraph twenty-two of the mortgage instrument concerns the
mortgagee's provision of notice to the mortgagor of its default,
its right to cure, and the remedies that are available to the
mortgagee upon the mortgagor's failure to cure the default.
The District Court ruled that each of these claims was
time-barred without addressing the plaintiffs' contrary contention
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based on Bevilacqua, although the plaintiffs did raise that
argument below. And the defendants do not address that argument
on appeal. Nevertheless, we may bypass the plaintiffs' contention
about how Bevilacqua bears on whether these claims are time-barred,
because these claims fail on the merits.
The claim that the sale is void because it was carried
out in violation of § 35A fails because the SJC held in Schumacher
that an alleged violation of that statute does not void a
foreclosure sale. 5 N.E.3d at 890. The claim that the sale is
void because it was carried out in violation of paragraph twenty-
two of the mortgage instrument fares no better. The plaintiffs
point out that the SJC in Pinti did rule that a sale carried out
in violation of the very same provision of the mortgage instrument
that is set forth in paragraph twenty-two of this mortgage
instrument is void. But, Pinti expressly provided that this ruling
was to be given prospective effect only, 33 N.E.3d at 1226-27, and
the foreclosure sale in this case took place before Pinti.
Accordingly, we affirm the order of dismissal as to these two
claims as well.
B.
We next turn to the plaintiffs' challenge to the District
Court's dismissal of the claim in which they seek to quiet title.
The District Court dismissed this claim on the ground that the
plaintiffs did not have standing to bring it, because, in light of
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the foreclosure sale, they do not hold both equitable and legal
title to the property. See Bevilacqua, 955 N.E.2d at 889 n.5.
The plaintiffs do not contest the fact that, under Massachusetts
law, they must have both legal and equitable title to the property
to bring their quiet title action. But, while the plaintiffs
contend that they do have the requisite title because the
foreclosure sale is void, we have already explained why the
plaintiffs' arguments in support of that contention lack merit.
As the plaintiffs advance no other argument that suffices to show
that the District Court erred in dismissing this claim for lack of
standing, we affirm the dismissal of this claim.
C.
The plaintiffs next contend that the District Court
erred in dismissing their claim for breach of the duty of good
faith and reasonable diligence due to their having "reject[ed] an
alternative to foreclosure and refusing to delay the foreclosure
to fully consider a loan modification." The District Court
concluded, however, that the plaintiffs failed to point to any
contract that required defendants to take the affirmative step of
considering a loan modification and thus that there was no such
duty. See F.D.I.C. v. LeBlanc, 85 F.3d 815, 822 (1st Cir. 1996).
And the plaintiffs identify no authority on appeal that suggests
otherwise. We thus affirm the District Court's ruling on this
score as well.
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D.
Finally, we turn to the plaintiffs' challenge to the
dismissal of their statutory consumer protections claims. The
plaintiffs brought two of these claims pursuant to, respectively,
Massachusetts General Laws Chapter 183, § 28C and Massachusetts
General Laws Chapter 93A on the ground that, because the
plaintiffs' April 6, 2007, loan was "unaffordable from the start,"
it was "unfair and illegal." The plaintiffs separately contend
that the District Court also erred in dismissing their additional
claim under Chapter 93A, in which they alleged that the
"[d]efendants acted in an unfair and deceptive manner" when they
refused to modify the loan.
The District Court dismissed all three of these claims
on the ground that, as consumer protection claims, they were filed
too late to comply with the four-year statute of limitations that
applies to such claims pursuant to Massachusetts General Laws
Chapter 260, § 5A. In so ruling, the District Court did not engage
with the argument made by the plaintiffs that the statute of
limitations should not apply because there were various
irregularities in the loan. But, the plaintiffs provided no legal
authority below, nor do they identify any on appeal, that would
support their conclusory assertions that, in consequence of these
alleged irregularities, the limitations period never began to run.
Accordingly, these arguments fail. United States v. Zannino, 895
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F.2d 1, 17 (1st Cir. 1990) (issues adverted to in a perfunctory
manner are deemed waived).
The plaintiffs do argue that the "discovery rule" should
apply to toll the statute of limitations "until the plaintiff knew
[or] should have known of the alleged injury." Abdallah v. Bain
Capital LLC, 880 F. Supp. 2d 190, 195 (D. Mass. 2012) (internal
quotation marks omitted). But, the plaintiffs fail to specify
what injury they had not discovered when the loan closed. Instead,
they simply assert -- without explanation -- that it is of import
that the loan in question was an interest only loan for the first
ten years. Thus, this argument for tolling the statute of
limitations fails as well.2 Zannino, 895 F.2d at 17.
The plaintiffs also point out that, with respect to their
claim under Chapter 93A that the defendants acted unfairly and
deceptively when they refused to modify their loan, the injury
occurred in May 2012. Thus, they contend that -- contrary to the
District Court's ruling -- they brought their claim within the
2The plaintiffs argue on appeal, for the first time, that
the District Court was wrong to hold that a Chapter 183, § 28C
claim should be subject to the time bar for consumer protection
claims. The plaintiffs argue that a five-year statute of
limitations should apply to that claim pursuant to Mass. Gen. Laws
ch. 183C, § 15(b)(1). But even aside from the fact that this
argument is made for the first time on appeal, see Me. Green Party
v. Me. Sec'y of State, 173 F.3d 1, 4 (1st Cir. 1999), the argument
is of no moment. The plaintiffs still can only avoid the time bar
that they claim does apply to this claim if their tolling argument
is correct, given that the time otherwise has run under that longer
statute of limitations as well.
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four-year statute of limitations for consumer protection claims
because they filed their complaint in 2015.
The defendants respond, however, that, because they had
no duty or obligation to consider the loan modification, there
could not have been a violation of Massachusetts General Laws
Chapter 93A, see Charest v. Fed. Nat. Mortg. Ass'n, 9 F. Supp. 3d
114, 125 (D. Mass. 2014) ("[A] failure to modify a loan under HAMP,
without more, does not constitute a Chapter 93A violation.")
(internal quotations and alterations omitted), and thus that we
may affirm the dismissal of this claim on this alternative basis.
As the plaintiffs did not reply to this argument and provide no
authority to support the unlikely proposition that, where no
express contractual or statutory obligation to modify a loan
exists, a decision to deny a request to modify alone in and of
itself states a claim under Chapter 93A, we affirm the dismissal
of this claim. See Otero, 441 F.3d at 20.
Finally, the plaintiffs challenge the District Court's
dismissal of their claim alleging unfair and deceptive practices
in violation of the Federal Trade Commission Act ("Act"). See 15
U.S.C. § 45. The District Court ruled that the Act does not
authorize a private right of action and therefore dismissed the
claim on that basis. See Lee v. BAC Home Loans Servicing, LP,
2013 WL 212615, at *4 (D. Mass. Jan. 18, 2013).
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The plaintiffs contend that the District Court
misapprehended the nature of this claim. They contend that this
claim was brought pursuant to Chapter 93A and merely alleged that
the violation of that state law was predicated on the fact that
the defendants had violated the federal statute.
Although the complaint did not reference Massachusetts
General Laws Chapter 93A in this particular count, it did reference
"unfair and deceptive practices." And plaintiffs did argue to the
District Court prior to its ruling, as they argue on appeal, that
this count alleged a Chapter 93A claim premised on a violation of
the Act and not a claim under the Act itself.
But, even if the complaint may be read in the plaintiffs'
preferred manner, we still affirm the dismissal of this claim. As
the defendants note, Chapter 93A "requires claimants to set out
specifically any activities in their demand letter as to which
they seek relief. Separate relief on actions not so mentioned is
foreclosed as a matter of law." Passatempo v. McMenimen, 960
N.E.2d 275, 293 (Mass. 2012) (quoting Clegg v. Butler, 676 N.E.2d
1134 (Mass. 1997)). Yet, as the defendants also note, and as the
plaintiffs do not dispute, the plaintiffs' June 5, 2012, demand
letter that stated claims under Chapter 93A made no mention of
there having been any violation of the Act.
The demand letter was not attached to the complaint nor
expressly incorporated by it, and thus consideration of this
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document would normally be forbidden in the context of a motion to
dismiss unless the proceeding was properly converted into one for
summary judgment under Rule 56. See Fed. R. Civ. P. 12(b)(6).
However, we have held that we may make "narrow exceptions for
documents the authenticity of which are not disputed by the
parties; for official public records; for documents central to
plaintiffs' claim; or for documents sufficiently referred to in
the complaint." Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993).
And here, the plaintiffs did not dispute the authenticity of the
demand letter when it was appended by defendants; the demand letter
was central to plaintiffs' Chapter 93A claim; and the document was
referred to in plaintiffs' complaint as a necessary "special
element" of a Chapter 93A cause of action. See Entrialgo v. Twin
City Dodge, Inc., 333 N.E.2d 202, 204 (Mass. 1975) (noting that
for Chapter 93A cause of action, plaintiff's complaint must allege
that the plaintiff sent a demand letter to the defendant). Thus,
because the demand letter made no mention of a violation of the
Act, we affirm the dismissal of this claim, too.
III.
For the foregoing reasons, we affirm the order of
dismissal.
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