Martins v. U.S. Bank, N.A. et al

Filing 28

Judge Richard G. Stearns: MEMORANDUM AND ORDER entered denying Martins' request for a preliminary injunction. The parties will have twenty-one (21) days from the date of this Order to supplement the pleadings on the motions to dismiss if they so choose. (RGS, law2)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 11-11349-RGS
MARIA MARTINS a/k/a MARIA HELENA MARTINS
v.
U.S. BANK, N.A., SUCCESSOR IN INTEREST TO
THE FEDERAL DEPOSIT INSURANCE CORP. AS RECEIVER FOR DOWNEY
SAVINGS AND LOAN ASS’N, F.A.
and
ALLIED HOME MORTGAGE CAPITAL CORP.
MEMORANDUM AND ORDER ON
PLAINTIFF’S MOTION FOR A PRELIMINARY INJUNCTION
September 26, 2011
STEARNS, D.J.
In an attempt to save her home from foreclosure, Maria Martins asks the court
to enjoin defendant U.S. Bank from conducting a foreclosure sale scheduled for
October 12, 2011.1 It is undisputed that Martins has been in default on her payments
on the underlying mortgage since 2009. On July 22, 2011, she brought suit against

1

Although Allied Home Mortgage Capital Corp. (Allied) is also named as a
defendant, no allegations are made in the Complaint suggesting any real liability on its
part. (Allied notes that it takes no position on the motion for a preliminary injunction
as it has “no interest in the property in question, financial or otherwise.”) Allied moved
on September 1, 2011, to dismiss itself from the case, although the court has not yet
acted on the motion.

U.S. Bank in the Massachusetts Superior Court alleging various irregularities in the
manner in which Downey Savings and Loan Ass’n (Downey), the original mortgagee,
had dealt with her efforts to refinance the mortgage. Her principal theory is that U.S.
Bank is liable for negligently performing its contractual duties under the Obama
Administration’s Home Affordable Modification Program (HAMP), 12 U.S.C. §
1701x(c)(5).2 Under HAMP, according to Martins, U.S. Bank “[was] not permitted
to proceed with a foreclosure sale until a borrower has been evaluated for HAMP
[relief].”3 The Superior Court issued a temporary restraining order anticipating that the
2

Martins acknowledges that any actual contractual obligation would run between
the bank and the U.S. Government, making her at best a third-party beneficiary of the
contract. But see Spinner v. Nutt, 417 Mass. 549, 555 (1994) (to recover as a thirdparty beneficiary, a plaintiff must show that she was the intended beneficiary of the
contract, not merely an incidental one).
3

Martins argues in her pleadings and through counsel at the hearing that based
on an unpublished opinion by a Justice of the Massachusetts Superior Court, U.S. Bank
as a mortgagee had a good-fath duty to consider reasonable alternatives to foreclosing
on her home. As counsel stated, “our position is that a modification under HAMP is
such a reasonable alterative and should be considered before foreclosure goes
forward.” Hr’g Tr. at 4-5. Counsel acknowledged that no Massachusetts appellate
opinion has placed such a duty on a mortgage holder. The duty imposed by the
Massachusetts appellate courts is of a different stripe. The law governing a
mortgagee’s responsibility to the mortgagor in the exercise of a power of sale is
relatively straightforward. The mortgagee “‘must act in good faith and must use
reasonable diligence to protect the interests of the mortgagor.’” Seppala & Aho Constr.
Co. v. Petersen, 373 Mass. 316, 320 (1977), quoting West Roxbury Co-op. Bank v.
Bowser, 324 Mass. 489, 492 (1949). “If the statutory norms found in G.L. c. 244, §§
11-17B, governing foreclosure of real estate mortgages, have been adhered to,
Massachusetts cases have generally regarded that as satisfying the fiduciary duty of a
2

case would be resolved in the federal courts. On July 28, 2011, U.S. Bank, as
expected, removed the case to the U.S. District Court. On September 7, 2011, U.S.
Bank moved to dismiss the Complaint in its entirety, arguing that Martins’ claims are
barred by the applicable statutes of limitations and that, more fundamentally, she has
no private right of action under HAMP. A hearing on the motion for a preliminary
injunction was held on September 12, 2011. The court agreed to defer briefly a
decision to give the parties the opportunity to file supplemental briefing on the viability
of Martins’ secondary claim under the Massachusetts Predatory Home Loan Practices
Act, Mass. Gen. Laws ch. 183C.
“The test governing the award of a preliminary injunction . . . requires
consideration of (1) the movant’s likelihood of success on the merits, (2) the potential
for irreparable harm, (3) a balancing of the relevant equities, and (4) the effect on the
public interest.” Campbell Soup Co. v. Giles, 47 F.3d 467, 470 (1st Cir. 1995).
“Likelihood of success is the main bearing wall of the four-factor framework.” RossSimons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 16 (1st Cir. 1996).
Without prejudging the ultimate disposition of Martins’ claims, I doubt that she
has any genuine prospect of success on the merits as required by the Campbell Soup
mortgagee to deal fairly with the mortgaged property, unless the mortgagee’s conduct
manifested fraud, bad faith, or the absence of reasonable diligence in the foreclosure
sale process.” Pemstein v. Stimpson, 36 Mass. App. Ct. 283, 286 (1994).
3

test. In the first instance, the HAMP-related claims (Counts I and II) are not – as U.S.
Bank argues – sustainable as a private cause of action. As Judge Woodlock points out
in Okoye v. Bank of New York Mellon, 2011 WL 3269686, at *7 n.10 (D. Mass. July
28, 2011), virtually every federal court that has grappled with the issue has come to the
same conclusion. Although a lender’s HAMP-related conduct might be so unfair and
deceptive as to give rise to a derivative claim under Mass. Gen. Laws ch. 93A, the
unfair conduct complained of in Counts III, IV, and V, occurred on or before April 4,
2005, when Martins refinanced her mortgage with Downey, and therefore lies outside
the four-year Chapter 93A statute of limitations.4 See Mass. Gen. Laws ch. 260, § 5A.
Finally, Martins’ claim under Mass. Gen. Laws ch. 183C (Count VI) is barred by the
five-year statute of limitations that governs the bringing of an action.5 See Mass. Gen.

4

The conduct alleged on the part of U.S. Bank that falls within the statutory
deadline (Count VII) is based on a claim of a negligent evaluation of Martins’ eligibility
for a HAMP loan modification and a mishandling of her paperwork. It is well
established that mere negligence will not support a claim of a Chapter 93A violation.
See Darviris v. Petros, 442 Mass. 274, 278 (2004).
5

Although no decided cases have addressed the issue of whether Mass. Gen.
Laws ch. 183C, § 15(b)(2), establishes an indefinite statute of limitations with respect
to an action to enjoin a foreclosure, I agree with U.S. Bank that Martins’ loan ceased
to be a “high-cost mortgage loan” as the tolling statute requires when it was modified
by the parties in 2008 to remove the pre-payment penalty.
4

Laws ch. 183C, § 15(b)(1).6
ORDER
For the foregoing reasons, Martins’ motion for a preliminary injunction is
DENIED. The parties will have twenty-one (21) days from the date of this Order to
supplement the pleadings on the motions to dismiss if they so choose.
SO ORDERED.
/s/ Richard G. Stearns
________________________________
UNITED STATES DISTRICT JUDGE

6

The remaining Counts of unjust enrichment, fraud, and the negligent infliction
of emotional distress are either time-barred or inadequately pled.
5