Flores et al v. OneWest Bank FSB et al
Filing
26
Judge Richard G. Stearns: ORDER entered granting 17 Motion to Dismiss. Clerk will enter an Order of Dismissal and close the case. (Zierk, Marsha)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 15-CV-13858-RGS
PEDRO A. FLORES, ESTHER YANES-ALVAREZ,
and ROSA YANES
v.
ONEWEST BANK, F.S.B., INDYMAC MORTGAGE SERVICES,
OCWEN SERVICING, LLC, AND
FEDERAL NATIONAL MORTGAGE ASSOCIATION
MEMORANDUM AND ORDER ON
DEFENDANTS’ MOTION TO DISMISS
March 23, 2016
STEARNS, D.J.
Plaintiffs Pedro Flores, Esther Yanes-Alvarez, and Rosa Yanes, are the
former joint owners of 77 School Street, Everett, Massachusetts (Property),
where they still reside. This is the latest in an iterative series of complaints
filed by the plaintiffs in state and federal courts alleging that defendants’
unfair and predatory mortgage lending and loan servicing practices led to a
wrongful foreclosure on the Property in May of 2012.
Flores and Yanes-Alvarez are a married couple, and Rosa Yanes is
Yanes-Alvarez’s mother.
In March of 2003, Flores and Yanes-Alvarez
purchased the Property for $390,000, financed with a loan of $370,500 from
Novastar Home Mortgage (Novastar). In July of 2004, they deeded a partial
interest in the Property to Ms. Yanes and refinanced the loan with a Novastar
adjustable rate mortgage. The Flores family refinanced a third time with
Novastar in May of 2006, and a fourth time with Dynamic Capital Mortgage,
Inc. (Dynamic) in April of 2007. The subject of this lawsuit is the 2007 loan
from Dynamic – a fixed 7.25% rate on an initial principal balance of
$460,000. The loan required interest-only payments for the first 10 years.
To secure their payment obligations, the Flores family executed a mortgage
on the Property dated April 6, 2007, in favor of Mortgage Electronic
Registration Systems, Inc. (MERS) as mortgagee and nominee for the lender.
Am. Compl. ¶ 20. MERS assigned the mortgage to defendant OneWest Bank
F.S.B. on March 17, 2010.
In 2008,
the Flores Family suffered a series of unfortunate events that
made it difficult for them to meet their monthly mortgage
obligations. Mr. Flores lost one of his two jobs, Ms. YanesAlvarez lost her job, and Ms. Yanes suffered a serious medical
issue that forced her out of her job and led to significant medical
expenses.
Id. ¶ 29. Plaintiffs eventually defaulted on the mortgage, but allege that they
“never received a notice of their right to cure their default.” Id. ¶ 30. In April
of 2012, with the assistance of counsel, the plaintiffs sought a loan
modification and “other loss mitigation alternatives.” Id. ¶ 32. On April 24,
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2012, they received a letter from defendant Indymac Mortgage Services
requesting additional documentation (while there is no other mention of
Indymac in any of the court pleadings, presumably the letter was sent in its
role as a subsidiary of OneWest). A loan modification application was sent
to the plaintiffs on April 25, 2012. The application was denied on May 11,
2012. Plaintiffs claim that “the sole reason [for the bank’s rejection was] that
a foreclosure was scheduled for May 15, 2012, and it would not be delayed.”
Id. ¶ 39. OneWest purchased the Property at the May 15 foreclosure. On
June 13, 2012, the Property was conveyed to Fannie Mae, id. ¶¶ 41-44, which
remains the current owner of the Property. Id. ¶¶ 43-45.
In April of 2013, Fannie Mae began eviction proceedings against the
Flores family in the Malden District Court. The Flores raised four defenses:
(1) the mortgage that they had granted on the Property was “illegal under
Massachusetts law and unenforceable”; (2) the foreclosure sale of the
Property was invalid because “the foreclosing entity violated its duty of good
faith and reasonable diligence”; (3) the foreclosure was invalid because they
did not receive notice; and (4) the mortgage was not properly notarized.
After filing their answer in the eviction action, in May of 2013, Flores
and Yanes-Alvarez filed a voluntary joint petition under Chapter 13 of the
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Bankruptcy Code. 1 See In re Flores, No. 13-12872 (Bankr. D. Mass. 2013).
On May 24, 2013, Fannie Mae filed a motion for relief from stay in the
Bankruptcy Court seeking to gain possession of the Property. The debtorplaintiffs did not file an objection, and the Court granted the motion on June
11, 2013. Id. at Dkt. #27. Two days later, the debtor-plaintiffs, joined by Rosa
Yanes, filed an adversary proceeding in the Bankruptcy Court against
defendants OneWest, Indymac, and Federal National Mortgage Association
asserting six claims (similar to the claims echoed in this action): (1) breach
of the duty of good faith and reasonable diligence; (2) violation of Mass. Gen.
Laws ch. 244, § 35A; (3) violation of Mass. Gen. Laws ch. 183, § 28C; (4)
violation of Mass. Gen. Laws ch. 93A; (5) unjust enrichment; and (6) to quiet
title. See In re Flores, No. 13-01153 (Bankr. D. Mass. 2013) – Dkt. #1.
Defendants moved to dismiss, asserting lack of subject matter jurisdiction,
or, in the alternative, for abstention. Id. – Dkt. #42. Plaintiffs failed to
oppose and, on July 8, 2014, the Bankruptcy Court entered an Order of
Abstention. Id. – Dkt. #53.
Plaintiffs filed this federal court Complaint on November 15, 2015, on
the eve of a hearing in the Malden District Court to restore the eviction action
The eviction action was stayed because of the bankruptcy filing. Rosa
Yanes was not a party in the bankruptcy.
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to the docket. An Amended Complaint was filed on November 16, 2015,
asserting the same nine claims against each defendant: (Count I) breach of
the duty of good faith and reasonable diligence; (Count II) violation of Mass.
Gen. Laws ch. 244, § 35A; (Count III) violation of Mass. Gen. Laws ch. 183,
§ 28C (Borrower’s Interest Act); (Count IV) violation of Mass. Gen. Laws ch.
93A; (Count V) unjust enrichment; (Count VI) quiet title; (Count VII) unfair
and deceptive practices pursuant to Section 5 of the Federal Trade
Commission Act (FTCA); (Count VIII) failure to comply with Mass. Gen.
Laws ch. 244, § 15A and §§ 11-17C; and (Count IX)2 failure to comply with
paragraph 22 of the mortgage instrument. In their allegations, plaintiffs
state that the increase in their mortgage payments at Year Ten was greater
than thirty-three percent of their combined income; that rental income on
the Property had been inaccurately listed as $1,425, when it is $1,200; that
they have no recollection of executing the mortgage before a notary; and that
the execution of the acknowledgement of the mortgage was defective.
DISCUSSION
To survive a motion to dismiss, “a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on
The Amended Complaint contains two counts listed as Count VIII.
For clarity, the court refers to this claim (second Count VIII) as Count IX.
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its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), quoting Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007). Two basic principles guide the
court’s analysis. “First, the tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal conclusions.”
Iqbal, 556 U.S. at 678. “Second, only a complaint that states a plausible claim
for relief survives a motion to dismiss.” Id. at 679. A claim is facially
plausible if its factual content “allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. at 678.
“If the factual allegations in the complaint are too meager, vague, or
conclusory to remove the possibility of relief from the realm of mere
conjecture, the complaint is open to dismissal.” S.E.C. v. Tambone, 597 F.3d
436, 442 (1st Cir. 2010).
Count I of plaintiffs’ Amended Complaint alleges that defendants have
breached “the duty of good faith and reasonable diligence” by “rejecting an
alternative to foreclosure and refusing to delay the foreclosure to fully
consider a loan modification.” Am. Compl. ¶ 67. Good faith is a duty infused
in a contract. “The concept of good faith ‘is shaped by the nature of the
contractual relationship from which the implied covenant derives,’ and the
‘scope of the covenant is only as broad as the contract that governs the
particular relationship.’” Young v. Wells Fargo Bank, N.A., 717 F.3d 224, 238
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(1st Cir. 2013), quoting Ayash v. Dana-Farber Cancer Inst., 443 Mass. 367,
385 (2005). Plaintiffs fail to point to any contract that required defendants
“to fully consider a loan modification.” Id. ¶ 67. Plaintiffs admit that they
have not made (or have been unable to make) loan payments since 2008. Id.
¶ 29. Given the default, defendants had no duty to suspend the foreclosure
sale to accommodate a loan modification. See MacKenzie v. Flagstar Bank,
FSB, 738 F.3d 486, 491 (1st Cir. 2013); see also Figueroa v. Fed. Nat’l Mortg.
Ass’n, 2013 WL 2244348, at *3 (D. Mass. May 20, 2013) (“Fannie Mae was
not bound to act as a fiduciary for Figueroa in deciding whether or not to
pursue foreclosure; it was only bound to act as a fiduciary in actually
conducting the foreclosure process.”). Cf. Souza v. Bank of Am. Nat’l Ass’n,
2013 WL 3457185, at *3 (D. Mass. July 8, 2013) (“Every Court of Appeals
that has addressed the issue has concluded that HAMP does not provide an
implied right of action under federal law.”).
Count II (violation of Mass. Gen. Laws ch. 244, § 35A), Count VIII
(failure to comply with Mass. Gen. Laws ch. 244, § 15A, §§ 11-17C) and Count
IX (failure to comply with paragraph 22 of the mortgage instrument) are
tort-based claims arising from defendants’ alleged wrongful foreclosure on
the Property. The foreclosure occurred on May 15, 2012. This case was
commenced on November 15, 2015.
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The statute of limitations in
Massachusetts for an action in tort is three years. See Mass. Gen. Laws. ch.
260, § 2A. Accordingly, these claims are time-barred.
Count III (Mass. Gen. Laws ch. 183, § 28C), and Count IV (Mass. Gen.
Laws ch. 93A), asserting irregularities in the execution of plaintiffs’ April 6,
2007 refinancing documents are consumer protection claims.3 These claims
are subject to a four-year statute of limitations. Mass. Gen. Laws ch. 260, §
5A. Consequently, they also must be dismissed as time-barred. See Da Silva
v. U.S. Bank, N.A., 885 F. Supp. 2d 500, 504 (D. Mass. 2012) (“A violation
involving an issuance of a loan begins to accrue from the moment the parties
entered into the loan.”).
The unjust enrichment claim, Count V, alleges that defendants
retained monies from the foreclosure sale in excess of what plaintiffs owe.
The Property sold for $556,522.66 on May 15, 2012, while plaintiffs’ debt,
according to a November 18, 2013 statement from Ocwen Loan Servicing
LLC, was “a principal balance in the amount of $460,000.00.”4 Am. Compl.
Substantively, there is no dispute that plaintiffs conveyed a mortgage
on the Property in exchange for the 2007 loan. In other words, they obtained
the benefit of their bargain.
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As plaintiffs had a ten-year, interest-only loan, it is unsurprising that
the principal balance is less than the bid at sale as plaintiffs were not making
mortgage payments, including interest, which the mortgagee is permitted to
recover, in addition to the principal and the expenses incurred in bringing a
foreclosure proceeding. See Mass. Gen. Laws. ch. 183, § 27.
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¶ 49. However, unjust enrichment is a theory of equitable recovery, not an
independent cause of action. See Mass. Eye and Ear Infirmary v. QLT
Phototherapeutics, Inc., 412 F.3d 215, 234 (1st Cir. 2005) (“Unjust
enrichment is an equitable stopgap for occasional inadequacies in
contractual remedies at law.”); Lopes v. Commonwealth, 442 Mass. 170, 179
(2004). “Where a binding contract governs the parties’ relationship, the
contract provides the measure of the [aggrieved party’s] right and no action
for unjust enrichment lies.” McKesson HBOC, Inc. v. New York State
Common Retirement Fund, Inc., 339 F.3d 1087, 1091 (9th Cir. 2003);
Santagate v. Tower, 64 Mass. App. Ct. 324, 329 (2005). Because plaintiffs
have an adequate remedy at law, the claim for unjust enrichment will be
dismissed.5
In Count VI, plaintiffs assert a claim to quiet title, alleging that the
2007 mortgage “was not properly executed.” Am. Compl. ¶ 94. As factual
support, plaintiffs report that they “do not recall appearing before a notary”;
As the court has noted, plaintiffs have a remedy at law provided by
Mass. Gen. Laws ch. 183, § 27, which requires the pay over of any surplus of
a foreclosure after the deduction of “all costs, charges or expenses incurred
or sustained by him or them by reason of any default . . . .” The accounting,
however, is not due until 60 days after all legal proceedings related to the
foreclosure are concluded. Consequently, even if the claim is construed as
one for an accounting, it is premature, as the mortgagee’s duty has not yet
attached because of the litigation brought by the plaintiffs. See generally
Duclersaint v. Fed. Nat’l Mortg. Ass’n, 427 Mass. 809, 811-812 (1998).
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that, despite the language of the acknowledgement, Ms. Yanes did not
produce a driver’s license to establish her identity as she has none; and that
“[t]he acknowledgement is phrased in the singular, while each member of
the Flores Family purportedly signed.” Am. Compl. ¶¶ 95-98. A plaintiff
seeking to quiet title in Massachusetts must show both a right to possession
and legal title to the property. See Bevilacqua v. Rodriguez, 460 Mass. 762,
767 n.5, (2011), quoting Sheriff's Meadow Found., Inc. v. Bay-Courte
Edgartown, Inc., 401 Mass. 267, 269 (1987) (“[A] quiet title action requires
the plaintiff ‘not merely to demonstrate better title to the locus than the
defendants possess, but requires the plaintiff to prove sufficient title to
succeed in its action.’”).
In Massachusetts, the mortgagee, rather than the mortgagor, holds
legal title to the mortgaged property. U.S. Bank Nat’l Ass’n v. Ibanez, 458
Mass. 637, 649 (2011). The mortgagor possesses only an equitable title to
the property as long as the mortgage debt remains unpaid. Id; see generally
Maglione v. BancBoston Mortg. Corp., 29 Mass. App. Ct. 88, 90 (1990)
(“Literally, in Massachusetts, the granting of a mortgage vests title in the
mortgagee to the land placed as security for the underlying debt. The
mortgage splits the title in two parts: the legal title, which becomes the
mortgagee’s, and the equitable title, which the mortgagor retains.”). Thus,
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“a quiet title action is not an avenue open to a mortgagor whose debt is in
arrears because, until the mortgage is discharged, the title necessarily
remains under a cloud.” Oum v. Wells Fargo, N.A., 842 F. Supp. 2d 407, 412
(D. Mass. 2012), abrogated on different grounds, Culhane v. Aurora Loan
Servs. of Nebraska, 708 F.3d 282, 290 (1st Cir. 2013). While the parties fail
to identify the exact date on which plaintiffs stopped making loan payments
(it appears to have been in 2008), it is undisputed that they have not made
any payments since early 2012, and have made no use and occupancy
payments despite holding over on the Property since the foreclosure in May
of 2012. Count VI therefore must be dismissed.
The remaining claim – Count VII – alleges that defendants “engaged
in unfair and deceptive practices by sending misleading communications to
plaintiffs regarding their mortgage loan, monthly mortgage payments,
amounts owed via the United States Postal Service” in violation of Section 5
of the FTCA. Am. Compl. ¶ 101. Section 5 of the FTCA does not authorize a
private right of action. See Lee v. BAC Home Loans Servicing, LP, 2013 WL
212615, at *4 (D. Mass. Jan. 18, 2013), citing Holloway v. Bristol-Meyers
Corp., 45 F.2d 986, 987 (D.C. Cir. 1973) (stating that no private right of
action exists under the FTCA); see also Tanol Distrib., Inc. v. Panasonic Co.,
Div. of Matsushita Elec. Corp. of Am., 1987 WL 13319, at 2 (D. Mass. July 2,
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1987) (“Numerous cases have established that no private right of action
exists under the FTCA.”). Accordingly, Count VII also will be dismissed.
ORDER
Defendants
Federal
National
Mortgage
Association,
IndyMac
Mortgage Services, Ocwen Servicing LLC, and OneWest Bank F.S.B.’s
motion to dismiss the Amended Complaint is ALLOWED. The Clerk will
issue an Order of Dismissal and close the case.
SO ORDERED.
/s/ Richard G. Stearns__________
UNITED STATES DISTRICT JUDGE
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