Serra v. Quantum Servicing, Corp.

United States Court of Appeals
For the First Circuit
No. 13-1557
JOHN P. SERRA, II,
Plaintiff, Appellant,
v.
QUANTUM SERVICING, CORP., WELLS FARGO BANK, N.A.,
TRUSTEE FOR RMAC PASS-THROUGH TRUST, SERIES 2010-A,
Defendants, Appellees,
EQUIFIRST CORPORATION,
Defendant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Douglas P. Woodlock, U.S. District Judge]
Before
Torruella, Circuit Judge,
Souter,* Associate Justice,
and Thompson, Circuit Judge.
Glenn F. Russell, Jr., with whom Glenn F. Russell, Jr. &
Associates, P.C., was on brief for appellant.
Reneau J. Longoria, with whom Stephen M. Valente and Doonan,
Graves & Longoria, LLC, were on brief for appellees.
March 31, 2014
*
The Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
TORRUELLA, Circuit Judge. John P. Serra, II ("Serra")
asserts that his property was wrongfully sold at foreclosure by a
party without any valid legal interest in his mortgage. He also
extends claims in wrongful foreclosure and unfair business
practices against an earlier mortgage holder that tried,
unsuccessfully, to foreclose. All of these claims are predicated
on a theory that Mortgage Electronic Registration Systems, Inc.
("MERS") lacked the authority to transfer Serra's mortgage. This
court, however, has expressly adopted a contrary view of MERS's
legality, and stare decisis is a hurdle far too high for Serra to
surmount.
Additionally, Serra claims that subsequent mortgage
assignees may incur liability for the allegedly predatory loan
terms crafted by his original lender and that his right to
rescission was improperly cut short by the sale of his property.
Because a review of relevant Massachusetts law shows that these
claims are similarly lacking, we affirm.
I. Background
On May 2, 2007, Serra refinanced his residential home
mortgage, taking out a $276,250 loan from EquiFirst Corporation
("EquiFirst")1 secured by his Bellingham, Massachusetts home. The
1
Serra's original complaint named three defendants: EquiFirst,
Quantum, and Wells Fargo. A failure to timely serve EquiFirst,
however, led to its dismissal from the case without prejudice on
June 17, 2011. Notwithstanding that dismissal, Serra's twice-
amended complaint continued to list EquiFirst as defendant. In
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mortgage listed MERS as "nominee" for EquiFirst and as the
"mortgagee" of record. According to Serra, the terms of this
mortgage loan were both structurally unfair and knowingly against
his best interest, in violation of Massachusetts law.
The Serra mortgage underwent a series of assignments
beginning on April 7, 2009, when MERS transferred the mortgage to
Barclays Bank, PLC. Barclays immediately transferred the mortgage
onwards and, by November 25, 2009, it had been assigned to Quantum
Servicing Corp. ("Quantum"). On June 1, 2011, Quantum undertook an
additional assignment, transferring the mortgage to Wells Fargo
Bank, N.A. as Trustee for RMAC Pass-Through Trust, Series 2010-A
("Wells Fargo"). Quantum remained the loan's servicer.
In October 2010, Serra sent a letter to Quantum -- then
acting as servicer for Wells Fargo -- seeking to rescind his
mortgage under the Massachusetts Consumer Credit Cost Disclosure
Act ("MCCCDA"). Namely, Serra alleged that a $244.48 credit
reporting fee was far above the accepted $50.00 market rate,
amounting to a statutory violation sufficient for rescission.
Quantum's response letter posed two questions: (1) could Serra
tender the loan proceeds in full, and (2) could Serra provide
documentation proving rescission was warranted. Quantum never
substance, however, these amended complaints alleged no claims
against, and sought no relief from, EquiFirst. The district court
thus determined that the sole defendants were effectively Quantum
and Wells Fargo -- a determination Serra does not challenge on
appeal.
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received a response to these inquiries, and subsequently, Wells
Fargo sold Serra's property at foreclosure.
Serra's suit, originally brought in state court, was
removed on the basis of diversity. Having conducted a foreclosure
sale and believing it was owed a deficiency judgment, Wells Fargo
counterclaimed before the district court for breach of contract and
possession of the foreclosed property. Summary judgment as to all
claims was eventually entered in favor of Wells Fargo and Quantum,
precipitating this appeal.
II. Discussion
Because this appeal is before us as a result of the
district court's grant of summary judgment, our review is de novo,
and we interpret all facts on the record in support of the
nonmoving party below. Bos. Prop. Exch. Transfer Co. v. Iantosca,
720 F.3d 1, 9 (1st Cir. 2013). All reasonable inferences that may
be extrapolated from the record are drawn in favor of the non-
movant, but allegations of a merely speculative or conclusory
nature are rightly disregarded. Suárez v. Pueblo Int'l, Inc., 229
F.3d 49, 53 (1st Cir. 2000). We affirm the district court's grant
of summary judgment if, after undertaking this independent review,
we agree that there exists no genuine dispute as to any material
fact and that the movant is entitled to judgment as a matter of
law. Fed. R. Civ. P. 56(a); McCarthy v. Nw. Airlines, Inc., 56
F.3d 313, 315 (1st Cir. 1995).
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A. MERS's Ability to Transfer Serra's Mortgage
Serra brings claims for wrongful foreclosure against
Quantum and Wells Fargo. He also seeks to prove that Quantum
engaged in unfair or deceptive business practices. Mass. Gen. Laws
ch. 93A ("Chapter 93A"). Because these claims are predicated on
the same erroneous legal theory, we review and dismiss them
together.
In short, Serra claims that the MERS business model,
under which MERS possesses a bare legal interest in a mortgage,
transferable among MERS member institutions, is contrary to
Massachusetts law. As a consequence, Serra theorizes, MERS lacked
legal authority to transfer the Serra mortgage, rendering both its
initial assignment and all subsequent transfers of the mortgage
invalid.
This argument willfully disregards our holding in Culhane
v. Aurora Loan Servs. of Neb., 708 F.3d 282 (1st Cir. 2013). In
Culhane, we ruled unequivocally that MERS may validly possess and
assign a legal interest in a mortgage. Id. at 292-93. Far from
finding it contrary to law, we remarked that "MERS's role as
mortgagee of record and custodian of the bare legal interest as
nominee . . . fit[s] comfortably within the structure of
Massachusetts mortgage law." Id. at 293; see also Woods v. Wells
Fargo Bank, N.A., 733 F.3d 349, 355 (1st Cir. 2013) (applying
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Culhane to find that "MERS, as the mortgagee of record, possessed
the ability to assign [the] mortgage").
Indeed, Serra conceded at oral argument that Culhane
invalidates his claims and offered only the suggestion that we
disregard the case in reaching our decision, given that the
Massachusetts Supreme Judicial Court has not ruled expressly on
this issue of state law.2 Of course it is true that Culhane
resolved an issue of Massachusetts law, and thus it could
theoretically be displaced by a contrary ruling arising from the
Massachusetts Supreme Judicial Court. See Blinzler v. Marriot
Int'l, Inc., 81 F.3d 1148, 1151 (1st Cir. 1996). In the absence of
any such contrary holding, however, Culhane unquestionably binds
this court: under Massachusetts law, MERS may validly possess and
transfer a legal interest in a mortgage. See Arizona v. Rumsey,
467 U.S. 203, 212 (1984) ("[A]ny departure from the doctrine of
stare decisis demands special justification.").
As presciently stated in Culhane itself, where litigants
attempt to repackage "old wine in a new bottle . . . we see no
point in decanting it again." Culhane, 708 F.3d at 294. Put
2
Serra also urges us to disregard Culhane on the theory that the
appellant's briefs in that case were of poor quality. Whatever the
veracity of that claim, it has no effect on the binding nature of
our precedent and, moreover, it certainly did not impede this court
in Culhane from conducting a thorough and convincing analysis of
Massachusetts law. As this claim is forwarded here by a litigant
whose own briefs exhibit a grave dearth of developed argumentation,
we are also reminded that counsel in glass houses ought not throw
stones.
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simply, Serra's theory has been foreclosed. The grant of summary
judgment as to Serra's wrongful foreclosure and Chapter 93A claims
is affirmed.
B. Claims Based on Assignee Liability
Serra next seeks to have Quantum and Wells Fargo answer
for what he believes are structurally unfair loan terms and
predatory lending practices engaged in by EquiFirst. See Mass.
Gen. Laws ch. 93A, § 2; id. ch. 183, § 28C (the "Borrower's
Interest Act"). We need not explore whether the loan terms were in
fact unlawful. Rather, because both his Chapter 93A claim for
damages and his Borrower's Interest Act claim for equitable relief
rise and fall on a common, mistaken, theory of assignee liability,
we consider them in tandem.
Serra's argument rests solely on a recent Massachusetts
Supreme Judicial Court case, Drakopoulos v. U.S. Bank Nat'l Ass'n,
465 Mass. 775, 991 N.E.2d 1086 (2013), which he believes
establishes assignee liability for his statutory claims. An
independent review of Drakopoulos, however, reveals this argument's
erroneous underpinnings.
The plaintiffs in Drakopoulos brought six claims, three
of which are relevant here. While two of these claims matched
Serra's own, arising under Chapter 93A and the Borrower's Interest
Act, the third arose under the Predatory Home Loan Practices Act
("PHLPA"), Mass. Gen. Laws ch. 183C. See Drakopoulos, 991 N.E.2d
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at 1091. As recognized by the Supreme Judicial Court, PHLPA's text
expressly includes a broad grant of assignee liability. Id. at
1092 n.11; see also Mass. Gen. Laws ch. 183C, § 15(a) ("Any person
who purchases or is otherwise assigned a high-cost home mortgage
loan shall be subject to all affirmative claims and any defenses
with respect to the loan that the borrower could assert against the
original lender . . . ."). Thus, PHLPA expands the common law of
assignee liability in the limited instance of certain "high cost"
loans. Drakopoulos, 991 N.E.2d at 1092 ("To the extent that the
bank may [] have liability as an assignee by virtue of the act, it
would extend to . . . statutory [Chapter 93A and Borrower's
Interest Act claims, as well]." (emphasis added)).
In relying on Drakopoulos, Serra fails to acknowledge
that his complaint alleged no violation of PHLPA,3 and thus cannot
receive the advantage of that act's broad grant of assignee
liability. Moreover, neither Chapter 93A nor the Borrower's
Interest Act serves as an independent ground for extending
liability to Serra's claims. See id. at 1095 n.16 ("Where an
assignee played no part in the unfair or deceptive acts of an
3
Beyond never referencing PHLPA, Serra did not plead facts
sufficient to show his was a "high cost" loan. PHLPA specifically
defines such loans as those in which: (1) the annual percentage
rate "exceed[s] by more than 8 percentage points for first-lien
loans, or more than 9 percentage points for subordinate-lien loans,
the yield on United States Treasury securities," or (2) "the total
points and fees exceed the greater of 5 per cent of the total loan
amount or $400." Mass. Gen. Laws ch. 183C, § 2.
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assignor, principles of assignee liability ordinarily will not
render the assignee liable for affirmative damages for those
acts."); id. at 1097 n.20 ("[But for PHLPA], an assignee who took
no part in the making of a home loan would not fall within the
scope of liability of the Borrower's Interest Act.").
In the absence of such statutorily created liability,
Serra cannot hold Quantum and Wells Fargo responsible for the
allegedly predatory practices of their predecessor-in-interest.
Ford Motor Credit Co. v. Morgan, 404 Mass. 537, 545, 536 N.E.2d
587, 591 (1989)("The common law principle that the assignee stands
in the assignor's shoes means only that the debtor can raise the
same defenses against the assignee as he could have raised against
the assignor."). The district court's grant of summary judgment on
these claims is affirmed.
C. Serra's Right to Rescind
Serra also seeks the post-foreclosure-sale rescission of
his mortgage and, in the alternative, damages for the disregard of
his initial rescission request, which predated the sale of his
property. This claim for rescission is predicated on an alleged
violation of MCCCDA § 10(i)(2), which holds that the under-
reporting of a finance charge by more than $35.00 may amount to a
statutory violation. That is, while Serra paid $244.48 for a
credit report, he alleges that the reasonable market rate was never
more than $50.00. This $194.48 difference, he claims, was
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improperly excluded from the calculation of his finance charge,
resulting in the understatement of the amount financed and annual
percentage rate.
The district court granted summary judgment on this
claim,4 finding that the right to rescind is unequivocally cut off
by a subsequent foreclosure sale and that, although Serra sought
rescission prior to sale, this unilateral act was insufficient to
effectuate such rescission, meaning the right was unexercised when
it terminated at the time of sale. Damages, the district court
held, could be available for the failure of a mortgage holder to
duly undertake consideration of a rescission request. Nonetheless,
concluding that Serra's purported basis for rescission was without
merit, the district court refused to award such damages here.
We need not retread each step along the district court's
detailed analytical path, for its eventual conclusion neatly
highlights the fatal flaw in Serra's claim. That is, having failed
4
Serra appears to suggest that the district court's conclusion
wrongly relied on precedent interpreting the Federal Truth in
Lending Act ("TILA"). In fact, MCCCDA was intentionally
constructed to align with TILA, see Lynch v. Signal Fin. Co. of
Quincy, 367 Mass. 503, 505, 327 N.E.2d 732, 734 (1975), and
"[w]here the Massachusetts Legislature in enacting a statute
follows a Federal statute, the Massachusetts courts follow the
adjudged construction of the Federal statute by the Federal
courts," In re Fuller, 642 F.3d 240, 243 (1st Cir. 2011)
(alterations omitted)). Thus, in dispatching its duty to
faithfully forecast what a Massachusetts court would do if
presented with this case, see Blinzler, 81 F.3d at 1151, the
district court correctly turned to our own TILA precedent for
guidance, Mayo v. Key Fin. Servs., Inc., 424 Mass. 862, 864, 678
N.E.2d 1311, 1313 (1997).
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to sufficiently plead any valid basis to rescind his mortgage loan
at any time, Serra has presented no genuine issue of material fact
sufficient to require this court to delve into the remainder of his
claims regarding the precise scope and duration of his rescission
rights.
Although it may be, arguendo, that a spurious $194.48
charge would -- on a different record -- suffice to establish an
MCCCDA violation for which rescission might lie, Serra has failed
to provide any evidentiary support for the claim that $50.00 was
the appropriate market rate. In fact, having reviewed the full
record, the sole reference to $50.00 as the accepted rate is found
in Serra's pleadings. This, without more, is insufficient to
survive summary judgment. Transurface Carriers, Inc. v. Ford Motor
Co., 738 F.2d 42, 46 (1st Cir. 1984) (finding no genuine issue of
material fact where a party offered "no more than argument,"
unsupported by "affidavits, deposition, or other appropriate
materials raising a question of fact" (internal citation omitted)).
If factual, Serra must necessarily have derived this
$50.00 figure from some verifiable source, but -- for reasons
unknown -- he decided to leave the record bereft of any and all
supporting proof. In contrast, Wells Fargo and Quantum offer an
affidavit from the credit reporting agency, with accompanying
invoice, attesting that the full $224.48 was a true and reasonable
fee for services. We offer no comment on the actual validity of
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that amount, but on the record before us we see no genuine issue of
material fact in dispute. Having chosen to rest on the laurels of
bald allegation, Serra leaves us no choice but to affirm the grant
of summary judgment. Ruiz-Rosa v. Rullán, 485 F.3d 150, 156 (1st
Cir. 2007) ("Allegations made in a plaintiff's complaint, standing
alone, are not enough to oppose a properly supported motion for
summary judgment.").
D. Wells Fargo's Counterclaims
The final issue remaining on appeal is Serra's claim that
summary judgment was wrongly awarded to Wells Fargo on its
counterclaims for breach of contract and possession.
As to breach of contract, we note that Serra dedicates
less than five lines of his appellate brief to this issue and
offers only the theory that summary judgment is inappropriate given
the "erroneous application of the law described [elsewhere in his
brief.]" Even were such briefing not ripe for a finding of waiver,
see Mass. Sch. of Law at Andover, Inc. v. American Bar Ass'n, 142
F.3d 26, 43 (1st Cir. 1998), we have identified no such "erroneous
application" of law and thus see no viable grounds to disturb the
district court's finding.
The claim regarding possession gives us no greater pause,
as Serra now forwards arguments which were never raised below, and
are thus barred by our waiver doctrine. Sands v. Ridefilm Corp.,
212 F.3d 657, 663 (1st Cir. 2000). In fact, before the district
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court, Serra argued only that Wells Fargo had to prove strict
compliance with Massachusetts' statutory foreclosure requirements,
Mass. Gen. Laws ch. 244, § 14, and the governing documents of the
RMAC Pass-Through Trust, Series 2010-A. Now, he abandons that
argument in favor of the suggestion that mere adherence to those
statutory requirements and trust documents is insufficient, a party
must further bring a claim for "summary process" under Mass. Gen.
Laws ch. 239.
Even were this argument not waived, it is clear that
"summary process" is not the exclusive means by which a foreclosing
entity make seek possession of real property in Massachusetts. See
Mass. Gen. Laws ch. 184, § 18 ("No person shall attempt to recover
possession of land . . . other than through an action brought
pursuant to chapter two hundred and thirty-nine or such other
proceedings authorized by law." (emphasis added)). Having failed
to articulate any clear theory as to why a properly filed
counterclaim before the district court would not constitute such an
alternative means to establish possession, Serra's claim must fail.
III. Conclusion
In the absence of a dispute of law or fact sufficient to
survive summary judgment, we affirm.
Affirmed.
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