Andrews v. HSBC Bank USA, N.A.

Filing 16

Judge Nathaniel M. Gorton: ENDORSED ORDER entered. MEMORANDUM AND ORDERFor the foregoing reasons, plaintiffs motion to remand (Docket No. 9) is DENIED and HSBCs motion to dismiss (Docket No. 11) is ALLOWED. So ordered.(Caruso, Stephanie)

United States District Court
District of Massachusetts

HARRY M. ANDREWS,
Plaintiff,
v.
HSBC BANK USA, N.A., AS
TRUSTEE FOR FREMONT HOME LOAN
TRUST 2006-C, MORTGAGE BACKED
CERTIFICATES, SERIES 2006-C
Defendant.

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Civil Action No.
16-12621-NMG

MEMORANDUM & ORDER
GORTON, J.
This case arises from an attempted foreclosure of a
residential mortgage in Beverly, Massachusetts.

Harry Andrews

(“Andrews” or “plaintiff”) brought this action in Massachusetts
Superior Court against HSBC Bank USA, N.A., as Trustee for
Fremont Home Loan Trust 206-C, Mortgage Backed Certificates,
Series 2006-C (“HSBC”).

Plaintiff challenges HSBC’s standing to

foreclose, contesting its ownership of the note and mortgage,
whether the property is subject to a properly recorded lien and
the adequacy of the notice given by HSBC.
case to this Court.

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Defendant removed the

Pending before this Court is plaintiff’s motion to remand
the action to Massachusetts Superior Court and HSBC’s motion to
dismiss.

For the reasons that follow, the motion to remand will

be denied and the motion to dismiss will be allowed.
I.

Background
Plaintiff purchased the residential property located at 3

Hemlock Street, Beverly, Massachusetts (“the property”) in
October, 1974.

On June 27, 2006, plaintiff borrowed $506,000

secured by a promissory note (“the note”) from Fremont
Investment & Loan (“Fremont”).

On the same day, to secure the

note, plaintiff granted a mortgage lien (“the mortgage”) to
Mortgage Electronic Registration Systems, Inc. (“MERS”), acting
as nominee for Fremont.

In May, 2012, MERS assigned the

mortgage to HSBC as Trustee.

The mortgage is serviced by Ocwen

Loan Servicing, LLC (“Ocwen”).
After the economic downturn of the past decade, plaintiff
fell behind on his mortgage payments and HSBC initiated
foreclosure proceedings on the property.

On June 24, 2014,

HSBC, through its servicer Ocwen, sent a right to cure notice to
plaintiff, pursuant to M.G.L. c. 244 § 35A.
On October 27, 2016, Andrews commenced this action by
filing a complaint in the Massachusetts Superior Court for Essex
County.

HSBC removed the action to federal court on December
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27, 2016.

Plaintiff filed the pending motion to remand one

month later and the following week, HSBC filed the pending
motion to dismiss.
II.

Motion to Remand
A.

Legal Standard

Federal diversity jurisdiction is available in cases
arising between citizens of different states in which the amount
in controversy exceeds $75,000. 28 U.S.C. § 1332(a).

The party

seeking to invoke federal jurisdiction bears the burden of
establishing subject-matter jurisdiction. Danca v. Private
Health Care Sys., Inc., 185 F.3d 1, 4 (1st Cir. 1999).

Removal

of the action is proper if the court determines, “by a
preponderance of the evidence, that the amount in controversy
exceeds [$75,000].” 28 U.S.C. § 1446(c)(2)(B).
B.

Application

The parties are citizens of different states because the
plaintiff is a Massachusetts resident while HSBC is a citizen of
Delaware, the state where it is “located” under 28 U.S.C. §
1348. See Wachovia Bank, N.A. v. Schmidt, 546 U.S. 303, 318
(holding that a national bank, for § 1348 purposes, is a citizen
of “the State in which its main office, as set forth in its
articles of association, is located”).

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The parties disagree as to whether the amount in
controversy requirement under 28 U.S.C. § 1332 has been met.
HSBC contends in its notice of removal that the amount in
controversy exceeds $75,000 because plaintiff seeks to prevent
foreclosure on a $506,000 mortgage.

Andrews’s complaint does

not specify an amount of damages sought but he disputes HSBC’s
contention that the amount in controversy is determined by the
value of the loan.

Plaintiff does not suggest an alternative

amount in controversy, arguing that he is merely seeking to
enjoin foreclosure until HSBC complies with its obligations
under Massachusetts law.
Where the plaintiff seeks equitable relief, the amount in
controversy is “measured by the value of the object of the
litigation”.

Hunt v. Wash State Apple Adver. Comm’n, 432 U.S.

333, 347 (1977).

The First Circuit has noted that many district

courts have held that the amount in controversy in a foreclosure
action is the value of the loan amount. McKenna v. Wells Fargo
Bank, N.A., 693 F.3d 207, 212 (1st Cir. 2012).

Although the

court in McKenna did not need to reach the question, it
expressed a preference for the “face-value-of-the-loan” rule,
noting the simplicity of the rule and the fact that the loan
amount is not vulnerable to manipulation “through strategic
timing of a filing”. Id. at 212.
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Andrews denies that he seeks to enjoin foreclosure
permanently and merely requests that HSBC conform to certain
obligations under Massachusetts law prior to foreclosing.

HSBC

responds by disputing that the injunction plaintiff seeks is
temporary, pointing out that Andrews challenges, among other
things, HSBC’s ownership of the mortgage and note and whether
the property is subject to a properly recorded lien.
Because the allegations in the complaint go to the essence
of the validity of the mortgage and HSBC’s right to foreclose,
the face value of loan is the appropriate measure for the amount
in controversy here. See Larace v. Wells Fargo Bank, N.A., 972
F. Supp. 2d 147, 151 (D. Mass. 2013) (designating the amount in
controversy as the value of the mortgage where the “Defendants’
mortgage interest would be extinguished if [the] Plaintiffs were
ultimately successful”).
Accordingly, plaintiff’s motion to remand will be denied.
III. Motion to Dismiss
HSBC moves to dismiss all three counts of plaintiff’s
complaint for failure to state a claim upon which relief can be
granted.
A.

Legal Standard

To survive a motion to dismiss for failure to state a claim
under Fed. R. Civ. P. 12(b)(6), a complaint must contain
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“sufficient factual matter” to state a claim for relief that is
actionable as a matter of law and “plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 667 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

A claim is

facially plausible if, after accepting as true all nonconclusory factual allegations, the court can draw the
reasonable inference that the defendant is liable for the
misconduct alleged. Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d
1, 12 (1st Cir. 2011).

A court may not disregard properly pled

factual allegations even if actual proof of those facts is
improbable. Id.

Rather, the relevant inquiry focuses on the

reasonableness of the inference of liability that the plaintiff
is asking the court to draw. Id. at 13.
When rendering that determination, a court may not look
beyond the facts alleged in the complaint, documents
incorporated by reference therein and facts susceptible to
judicial notice. Haley v. City of Boston, 657 F.3d 39, 46 (1st
Cir. 2011).
B.

Application
1. Declaratory Judgment

Count I contends that Andrews is entitled to a declaratory
judgment that HSBC lacks legal standing to foreclose on the
property.

In order to be entitled to declaratory relief,
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plaintiff must plausibly claim that HSBC lacks authority to
foreclose under the statute, M.G.L. c. 244 § 14. See U.S. Bank
Nat’l Ass’n v. Ibanez, 941 N.E.2d 40, 50 (Mass. 2011).
Massachusetts is a nonjudicial foreclosure state, allowing a
mortgagee to foreclose by exercising the statutory power of
sale. Galvin v. U.S. Bank, N.A., 852 F.3d 146 (1st Cir. 2017).
In order to exercise that statutory power, the mortgagee must
“hold both the note and the mortgage to have standing to sell
the property at a foreclosure sale”. Id. (citing Eaton v. Fed.
Nat’l Mortg. Ass’n, 969 N.E.2d 1118, 1131 (Mass. 2012)).

Thus,

to survive HSBC’s motion under Fed. R. Civ. P. 12(b)(6),
plaintiff’s complaint must include a plausible claim that HSBC
is not the valid holder of the note and mortgage.
Andrews offers nothing beyond a conclusory allegation that
HSBC does not own the mortgage or note in support of his claim.
He then claims that the mere act of filing a lawsuit shifts the
burden to HSBC to prove its entitlement to foreclose.
In Massachusetts, the note and mortgage are separate legal
instruments and may travel independently. Eaton, 969 N.E.2d at
1124.

The mortgage is an interest in land which may only be

transferred by written assignment. Ibanez, 941 N.E.2d at 51.
After a valid assignment has been executed, the holder of the
mortgage has “the statutory power to sell after a default.” Id.
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at 55.

Contrary to plaintiff’s suggestion, Massachusetts law

does not require a mortgagee affirmatively to prove that it owns
the mortgage before foreclosing. See Rice v. Wells Fargo Bank,
N.A., 2 F. Supp. 3d 25 (D. Mass. 2014) (making clear that
neither Eaton or Ibanez “require a mortgage holder to produce
evidence of ownership before it can foreclose”).

Rather

plaintiff must allege sufficient facts to state a plausible
claim that HSBC does not own the mortgage.
Andrews here has not introduced evidence sufficient to
raise a genuine dispute of fact as to HSBC’s ownership of the
note and its right to foreclose on the mortgage.
2. 35A Notice Requirement
In Count II of his complaint, plaintiff alleges that HSBC
violated M.G.L. c. 244 § 35A by sending a deficient right-tocure notice (“the 35A notice”).

Plaintiff contends that the 35A

notice was inadequate because it did not strictly comply with
two statutory requirements.

First, Andrews notes that the 35A

notice listed a date 153 days after the 35A notice date (thereby
giving plaintiff three extra days to cure).

Second, plaintiff

claims that the 35A notice did not include the name of the
payment contact.

Defendant moves to dismiss Count II by

contending that strict compliance with § 35A is not required
after the decision of the Massachusetts Supreme Judicial Court
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(“SJC”) in U.S. Bank Nat’l Ass’n v. Schumacher. 5 N.E.3d 882
(Mass. 2014).
In Schumacher, the SJC considered a post-foreclosure
challenge to a foreclosure sale and determined that because
§ 35A was not one of the statutes “relating to the foreclosure
of mortgages by the exercise of a power of sale”, strict
compliance was not a prerequisite to a valid foreclosure. Id. at
889-90.

As other courts in this district have recognized,

however, the standard for challenging the adequacy of a notice
sent pursuant to § 35A in a pre-foreclosure action is different.
Sullivan v. Bank of New York Mellon Corp., 91 F. Supp. 3d 154,
167 (D. Mass. 2015).

In a post-foreclosure action, the

mortgagor must prove that a violation of § 35A
rendered the foreclosure so fundamentally unfair that she
is entitled to affirmative equitable relief.
Schumacher, 5 N.E.3d at 891 (Gants, J., concurring).

As to pre-

foreclosure remedies however, Schumacher contemplates a lower
bar for relief, explaining that a mortgagor may seek to enjoin a
foreclosure if the mortgage holder has “failed to provide timely
and adequate written notice.” Id. at 890.

Despite acknowledging

the less restrictive hurdle in pre-foreclosure actions,
Schumacher did not precisely define “adequate written notice”
and the court left open the question of what kind of defect in

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the notice would entitle a mortgagor to pre-foreclosure relief.
Bulmer v. MidFirst Bank, FSA, 59 F. Supp. 3d 271, 283 (D. Mass.
2014)(citing Haskins v. Deutsche Bank Nat’l Trust Co., 19 N.E.3d
455, 460 (Mass. App. Ct. 2014)).
After Schumacher, Massachusetts courts have looked to the
statutory purpose of the right-to-cure notice requirement when
considering the proper grounds for relief based on a defective
notice in the pre-foreclosure context. See Haskins, 19 N.E.3d at
462.

The notice requirement in § 35A is designed to give a

mortgagor a “fair opportunity to cure a default before the debt
is accelerated” and to provide the mortgagor with the
information necessary to “contact the party who holds all
relevant information about the loan.” Id. (citing Schumacher, 5
N.E.3d at 890).
The first deficiency of which Andrews complains is that the
35A notice listed a deadline to cure that was not exactly 150
days after the 35A notice date.
three extra days to cure.

The 35A notice gave plaintiff

Section 35A prevents a mortgagee from

accelerating maturity of an unpaid balance until “at least” 150
days after the date a written notice is given to the mortgagor.
M.G.L. c. 244 § 35A (2010).

By the terms of the statute, the

deadline need not be exactly 150 days after the date of the 35A
notice.

HSBC gave a longer-than-required period for plaintiff
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to cure, fulfilling its statutory obligation to provide a fair
opportunity to cure a default.
The plaintiff’s second contention is that the 35A notice
did not identify the name of the payment contact, instead
identifying the name of the mortgage servicer, Ocwen.

Plaintiff

appears to suggest that § 35A requires the name of an
individual.

Contrary to plaintiff’s implication, the

Massachusetts Appeals Court in Haskins explicitly approved of
the use of the mortgage servicer as the contact in a 35A notice.
Haskins, 19 N.E.3d at 462 (noting that the servicer holds all
relevant information about the loan and retains the authority to
allow the mortgagor to cure any default).
The 35A notice at issue here clearly identifies the contact
information for the servicer of the mortgage and provides more
than the statutorily required 150-day period for the mortgagor
to cure the default.

Even given the lower hurdle for relief in

the pre-foreclosure context, Andrews has not alleged facts
sufficient to support a finding that the 35A notice was
defective.
3. Property Description
Count III of the complaint asserts that HSBC cannot
foreclose on the property because the mortgage contains an
inconsistent description of the property.
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Specifically,

plaintiff contends that Schedule A of the mortgage refers to a
second parcel of land after the metes and bounds description of
the property.

Defendant maintains that the mortgage correctly

documents the legal description of the property and notes that
the reference to the adjacent parcel is made explicitly “for
informational purposes only”.
In Massachusetts, the rules of construction regarding
property descriptions are “well settled”. In re Benton, 563 B.R.
113, 123 (Bankr. D. Mass. 2017)(citing Fleming v. McCarthy, No.
94-0691, 1995 WL 808620, at *3 (Mass. Super. Ct. Jan. 18,
1995)).

Where a deed fixes the location of the boundaries of

the property, the description is unambiguous and parol evidence
is not admissible to contradict the description. Fleming, 1995
WL 8080620, at *3.

If a deed contains an inconsistent

description, the more specific description prevails. Id.
The description of the property contained in Schedule A of
the mortgage precisely fixes the boundaries of the property.
The reference to the adjacent lot is listed after the relevant
metes and bounds and rights of way conveyed with the property
and is preceded by the phrase “for informational purposes only”.
Although Massachusetts courts have not considered the
construction of a property description with a reference made for
“informational purposes only,” in Bayview Loan Servicing, LLC v.
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Locklear, the Eastern District of North Carolina held that an
unambiguous property description (in that case a plat map)
controlled despite a differing address listed “for informational
purposes only”. No. 15-cv-220, 2017 WL 3080750, at *4 (E.D.N.C.
July 18, 2017).

In that case, the court confirmed that the

second reference made for informational purposes did not create
an ambiguity.

As in Massachusetts, the rules of construction in

North Carolina similarly dictate that specific descriptions
control and, accordingly, that case is instructive in the case
at bar.
The mortgage here properly refers to the description of the
property and Count III fails to state a claim that HSBC is not
permitted to foreclose on the property.

ORDER
For the foregoing reasons, plaintiff’s motion to remand
(Docket No. 9) is DENIED and HSBC’s motion to dismiss (Docket
No. 11) is ALLOWED.
So ordered.
/s/ Nathaniel M. Gorton______
Nathaniel M. Gorton
United States District Judge
Dated September 12, 2017

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