Kenney v. U.S. Bank, National Association
Judge F. Dennis Saylor, IV: ORDER entered. MEMORANDUM AND ORDER on Defendant's Motion to Dismiss. The motion to dismiss is GRANTED as to Counts 3 (violation of 940 CMR 8.00 et seq.), 6 (unconscionability), 7 (fraud), and 8 (unjust enrichment), and otherwise DENIED.(FDS, law1)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
U.S. BANK, N.A.,
Civil Action No.
MEMORANDUM AND ORDER
ON DEFENDANT’S MOTION TO DISMISS
This is a dispute concerning an upcoming mortgage foreclosure. Plaintiff Kevin Kenney
has been in default on his mortgage for approximately nine years. U.S. Bank, N.A., the current
holder of the note, now seeks to foreclose. Kenney has brought suit against U.S. Bank under
state law seeking to enjoin the foreclosure and recover damages. U.S. Bank has moved to
dismiss the complaint in its entirety. For the following reasons, the motion to dismiss will be
granted in part and denied in part.
The facts are set forth as alleged in the complaint and attached exhibits.
Kevin Kenney owns a residential property located at 1 Chamberlain Street in Hopkinton,
Massachusetts (the “property”). (Compl. ¶ 3). U.S. Bank is the successor-in-interest to various
parties who were assigned the note. (Id. ¶ 2).
On April 24, 2006, Kenney applied for his first mortgage refinancing with Mortgage
Lenders Network USA, Inc. According to the complaint, Mortgage Lenders was a “prodigious
‘subprime’ lender” that has since filed for bankruptcy. (Id. ¶¶ 4-5). Mortgage Lenders served as
the mortgage broker on the transaction and received a commission for its services. (Id. ¶ 6).
Before Kenney signed the mortgage documents, Mortgage Lenders representatives allegedly told
him that he would receive an “interest only” fixed-rate loan with a 6% interest rate. (Id. ¶¶ 7-8).
However, the loan included an adjustable rate “balloon” note with an initial rate of 8.69%,
capped at 14.69%. (Id. ¶ 9). 1 During the 2006 refinancing process, Kenney contends that he was
unaware he was signing an adjustable rate mortgage, because the loan documents were
“misleading and confusing.” (Id. ¶¶ 10, 20-21). The principal amount of the refinancing loan
was $380,700. (Compl. Ex. F. at 3).
Mortgage Lenders allegedly did not require written verification of Kenney’s income
during the application process. (Compl. ¶ 11). The complaint alleges that Mortgage Lenders
inflated Kenney’s income, as his actual resources would not justify the “terms and provisions of
the mortgage.” (Id. ¶¶ 12-13). The complaint further alleges that Mortgage Lenders knew that it
was misleading Kenney and other borrowers about their mortgages, allegedly as part of the
practice of “mortgage flipping,” whereby lenders saddle borrowers with debt to eliminate home
equity and increase the likelihood of foreclosure. (Id. ¶¶ 16, 18). Mortgage Lenders allegedly
encouraged its brokers to falsify loan documents to increase the number of subprime mortgages.
(Id. ¶ 23).
Kenney went into default on his loan in 2008. (Compl. Ex. A at 1). 2 In October 2014, he
Specifically, the rate would be calculated by adding 619 basis points to the six-month London Interbank
Offered Rate (“LIBOR”), and then round that sum to the nearest one-eighth of one percentage point. (Compl. Ex. F
at 17). The rate would reset every six months on a “Change Date.” (Id.).
The complaint includes a demand letter pursuant to Mass. Gen. Laws ch. 93A dated May 29, 2015, from
Kenney’s then-attorney, Raymond Mastroianni. It includes additional factual allegations not included in the text of
the complaint itself.
was offered a temporary loan modification through the Home Affordable Modification Program.
(Compl. ¶ 24). 3 He would receive a permanent loan modification if he successfully made all
payments under a trial period plan (“TPP”). (Id.).
Under the terms of the TPP, Kenney was required to make three monthly payments of
$2,580.44 on December 1, 2014; January 1, 2015; and February 1, 2015. (Compl. Ex. A at 6).
The first two payments were made on time without issue. (Id. at 1; Compl. ¶ 25).
A series of severe snowstorms then hit New England in January 2015, causing severe
disruptions to the area. (Compl. Ex. A at 2). According to the complaint, the loan servicer,
Wells Fargo (doing business as America’s Servicing Company) allegedly assured Kenney that
“his loan was in forbearance” and that the February 1, 2015 payment due date would be
postponed until the weather improved. (Id.). The letter does not, however, indicate when the
payment was actually going to be due; instead, it alleges that “the bank would wait until the
weather improved and commerce returned to normalcy before any payment was required.” (Id.).
Sometime after February 1, 2015—the letter does not say when—Kenney attempted to make the
third TPP payment. (Id.). However, the payment was declined as late.
Foreclosure proceedings have now commenced. (Id. at 2-3). U.S. Bank, which has
acquired the note, allegedly has not yet offered a “face-to-face” meeting with Kenney under
Massachusetts’s right-to-cure law. (Compl. ¶ 27).
Kenney filed suit in state court on July 14, 2017. The complaint asserted ten counts:
violation of Mass. Gen. Laws ch. 93A (Count 1); violation of Mass. Gen. Laws ch. 183C (Count
2); violation of 940 CMR 8.00 et seq. (Count 3); violation of the Truth in Lending Act (Count 4);
It appears that in 2009, plaintiff received a second loan modification through Wells Fargo. (Docket No. 8,
Ex. B). However, the second loan modification is not important to the disposition of this motion.
violation of the Federal Real Estate Settlement Procedures Act (Count 5); unconscionability
(Count 6); fraud (Count 7); unjust enrichment (Count 8); estoppel (Count 9); and breach of
contract (Count 10).
That same day, Kenney also filed an ex parte motion for a temporary restraining order and
preliminary injunction to prevent the bank from foreclosing on his property, which was then
scheduled for July 18, 2017. The state court issued the TRO and scheduled a preliminary
injunction hearing for July 21, 2017, which was later rescheduled for August 8, 2017. Because of
the TRO, defendant postponed the foreclosure sale. The bank then removed the action to this
Court on August 2, 2017, and filed this motion to dismiss the complaint on August 25, 2017.
During the hearing on the motion to dismiss, plaintiff’s counsel voluntarily dismissed
Counts 2, 4, and 5 of the complaint and clarified that the remaining counts involved the events
surrounding the 2014 loan modification rather than the 2006 origination. The Court also ruled the
TRO entered by the state court had expired. Because plaintiff’s counsel raised new arguments not
previously discussed in his opposition memorandum, the Court gave both parties an opportunity
to file supplemental memoranda of law. A hearing on the preliminary injunction has been
scheduled for November 29, 2017, and the foreclosure sale is now scheduled to occur on
November 30, 2017.
On a motion to dismiss, the court “must assume the truth of all well-plead[ed] facts and
give . . . plaintiff the benefit of all reasonable inferences therefrom.” Ruiz v. Bally Total Fitness
Holding Corp., 496 F.3d 1, 5 (1st Cir. 2007) (citing Rogan v. Menino, 175 F.3d 75, 77 (1st Cir.
1999)). To survive a motion to dismiss, the complaint must state a claim that is plausible on its
face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In other words, the “[f]actual
allegations must be enough to raise a right to relief above the speculative level, . . . on the
assumption that all the allegations in the complaint are true (even if doubtful in fact).” Id. at 555
(citations omitted). “The plausibility standard is not akin to a ‘probability requirement,’ but it
asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 556). Dismissal is appropriate if the
complaint fails to set forth “factual allegations, either direct or inferential, respecting each
material element necessary to sustain recovery under some actionable legal theory.” Gagliardi v.
Sullivan, 513 F.3d 301, 305 (1st Cir. 2008) (quoting Centro Medico del Turabo, Inc. v. Feliciano
de Melecio, 406 F.3d 1, 6 (1st Cir. 2005)).
Count 1 (Mass. Gen. Laws ch. 93A)
Count 1 alleges that defendant engaged in unfair and deceptive actions in violation of the
Massachusetts Consumer Protection Act, Mass. Gen. Laws ch. 93A, § 2. “Conduct is unfair or
deceptive if it is ‘within at least the penumbra of some common-law, statutory, or other
established concept of unfairness' or ‘immoral, unethical, oppressive, or unscrupulous.”
Cummings v. HPG Int'l Inc., 244 F.3d 16, 25 (1st Cir. 2001) (quoting PMP Assoc. Inc. v. Globe
Newspaper Co., 366 Mass. 593, 596 (1975)).
Defendant notes that the complaint primarily focuses on alleged wrongdoing in 2006 by
Mortgage Lenders, which is not a party to this suit, and makes only a passing reference to the
fact that plaintiff “did make every payment during the temporary modification period and
complied with all relevant terms and provisions mandated by the bank.” (Compl. ¶ 25).
However, the complaint also includes (and incorporates by reference in paragraph 33) an
attached letter dated May 29, 2015, from plaintiff’s then-counsel. The letter alleges that the
loan’s servicer, Wells Fargo, told plaintiff that due to the snowstorms in January 2015, his loan
was in forbearance and that he could postpone making the February 1, 2015 TPP payment, but
then refused to accept the delayed payment. (Compl. Ex. A at 2). That allegation of a
misleading representation in connection with the loan modification states a claim for violation of
Chapter 93A. See Young v. Wells Fargo Bank, N.A., 717 F.3d 224, 241-42 (1st Cir. 2013)
(vacating dismissal of Chapter 93A claim where the plaintiff's claim “extend[ed] beyond the
alleged breaches of the TPP and include[d] defendants' handling of [the] entire case, beginning
with the negotiations surrounding [the] forbearance agreement through [plaintiff’s] attempts to
obtain a permanent loan modification”); Stagikas v. Saxon Mortg. Servs., Inc., 2013 WL
5373275, at *4 (D. Mass. Sept. 24, 2013) (collecting cases for the proposition that “[c]ourts have
found that when defendants misrepresented to plaintiffs . . . their eligibility for a permanent loan
modification these acts were sufficiently unfair or deceptive to impose [Chapter] 93A liability”
(internal quotations omitted)).
Setting forth the factual basis for a claim in an attachment, rather than in the body of the
complaint, is hardly a model of proper pleading. It may well violate Rule 8, which requires “a
short and plain statement” of any claim for relief, and that any allegations be “simple, concise,
and direct.” Fed. R. Civ. P. 8(a), (d). And the allegation that the bank gave plaintiff a
completely open-ended extension of time to make the payment “until the weather improved,”
and did so orally, not in writing, is barely plausible. Nonetheless, under the circumstances
presented here, the complaint taken as a whole states a Chapter 93A claim. Accordingly, the
motion to dismiss will be denied as to Count 1.
Count 3 (Violation of 940 CMR 8.00 et seq.)
Count 3 alleges a violation of 940 CMR 8.00 et seq., which are regulations promulgated
by the Massachusetts Attorney General to police the conduct of mortgage brokers and lenders.
While violation of those regulations may serve as a basis for claims of unfair or deceptive
conduct under Mass. Gen. Laws ch. 93A, the regulations themselves do not provide a private
cause of action. See Cranmore v. Wells Fargo Bank, N.A., 2013 WL 1195275, at *5 n.3 (D.
Mass. Mar. 25, 2013). See also Vicente v. FCDB SNPWL Trust, 2012 WL 474164, at *2 (D.
Mass. Feb. 13, 2012) (“there is no private right of action under [these regulations]”) (internal
citations omitted). Count 3 will therefore be dismissed.
Count 6 (Unconscionability)
Count 6 alleges that “the actions of the defendant . . . are unconscionable.” (Compl. ¶
43). However, unconscionability “is an affirmative defense [to enforcement of a contract] and
not a stand-alone cause of action.” La Casse v. Aurora Loan Servs., LLC, 2016 WL 4535338, at
*7 (D. Mass. Aug. 30, 2016). Accordingly, Count 6 fails to state a claim and will be dismissed.
Count 7 (Fraud)
Count 7 asserts a claim for common-law fraud. To state a claim for fraud under
Massachusetts law, the complaint must allege that (1) the defendant made a false representation
of a material fact, (2) the defendant knew that the alleged representation was false, (3) the
defendant purposefully induced the plaintiff to rely on that representation, (4) the plaintiff relied
on that representation as being true, and (5) the plaintiff was damaged by acting on that
representation. See Stolzoff v. Waste Sys. Int'l Inc., 58 Mass. App. Ct. 747, 759 (2003). In
addition, Fed. R. Civ. P. 9(b) imposes a heightened pleading standard for fraud claims. In order
to meet that burden, a complaint must provide “specification of the time, place, and content of an
alleged false representation.” McGinty v. Beranger Volkswagen, Inc., 633 F.2d 226, 228 (1st
The complaint sets forth a variety of allegedly fraudulent actions committed by Mortgage
Lenders. (Compl. ¶¶ 7-23). But even if the acts of Mortgage Lenders were attributable to
defendant, those events transpired in 2006; this lawsuit was not filed until July 2017, well after
the three-year limitation period for fraud expired. See Charest v. President & Fellows of
Harvard Coll., 2016 WL 614368, at *13 (D. Mass. Feb. 16, 2016).
The text of the complaint itself contains no allegations of fraudulent representations by
U.S. Bank or its agents. It is true that the Chapter 93A demand letter alleges that Wells Fargo
customer service representatives told plaintiff in late January 2015 that “[plaintiff’s] loan was in
forbearance and the bank would wait until the weather improved . . . before any payment was
required,” and that he allegedly relied on that statement in believing that he could delay making
the February 1, 2015 payment. (Compl. Ex. A at 2). But that alleges, at most, a false statement
and detrimental reliance; there is no allegation, in the text of the complaint itself or in the letter,
that the bank knew at the time that the statement was false and intended that the plaintiff would
rely on it to his detriment. Those allegations are not sufficient to state a claim for fraud. The
motion to dismiss will therefore be granted as to Count 7.
Count 8 (Unjust Enrichment)
Count 8 asserts a claim for unjust enrichment. Massachusetts law defines unjust
enrichment as the “retention of money or property of another against the fundamental principles
of justice or equity and good conscience.” Santagate v. Tower, 64 Mass. App. Ct. 324, 329
(2005). To succeed on a claim for unjust enrichment, a plaintiff must show (1) a benefit
conferred upon the defendant by the plaintiff, (2) an appreciation or knowledge by the defendant
of the benefit, and (3) that acceptance or retention of the benefit under the circumstances would
be inequitable without payment for its value. Massachusetts Eye & Ear Infirmary v. QLT
Phototherapeutics, Inc., 552 F.3d 47, 57 (1st Cir. 2009).
However, unjust enrichment is “an equitable remedy, and ‘it is a basic doctrine of equity
jurisprudence that courts of equity should not act . . . when the moving party has an adequate
remedy in law.’” Foley v. Yacht Mgmt. Grp., 2011 WL 4020835, at *8 (D. Mass. Sept. 9, 2011)
(citing Massachusetts v. Mylan Labs., 357 F. Supp. 2d 314, 324 (D. Mass. 2005)). Here, the
damages plaintiff claims on a theory of unjust enrichment are the same damages that he claims
on his claim for breach of contract and other legal theories. Those claims would suffice to
provide an adequate remedy at law if plaintiff indeed suffered any cognizable injury.
In addition, the complaint does not set forth with any particularity the basis for the unjust
enrichment claim. As plaintiff concedes, he has technically been in default on his mortgage for
approximately nine years. The complaint does not contend that he made any payments he was
not already required to make. Thus, the complaint does not state a claim that defendant was
unjustly enriched by any payments made to it by plaintiff. Accordingly, Count 8 will be
Count 9 (Estoppel)
Count 9 asserts a claim of promissory estoppel. Under Massachusetts law, to prove such
a claim, a plaintiff must establish that “(1) a promisor makes a promise which he should
reasonably expect to induce action or forbearance of a definite and substantial character on the
part of the promisee, (2) the promise does induce such action or forbearance, and (3) injustice
can be avoided only by enforcement of the promise.” Loranger Constr. Corp. v. E.F.
Hauserman Co., 6 Mass. App. Ct. 152, 154 (1978). The plaintiff must also have suffered
substantial detriment and his reliance must have been reasonable. See id. at 159 n.4; Rhode
Island Hosp. Trust Nat’l Bank v. Varadian, 419 Mass. 841, 850 (1995).
Here, plaintiff contends that defendant’s loan servicer promised that he could postpone
making the February 1, 2015 payment until the weather improved. (Compl. Ex. A at 2). The
May 29, 2015 letter alleges that plaintiff relied on this promise to his detriment. However,
promissory estoppel is a theory of recovery under a promise that is not supported by
consideration. Here, the complaint states a plausible claim for breach of contract (the TPP)
supported by consideration. See Belyea v. Litton Loan Servicing, LLP, 2011 WL 2884964, at *9
(D. Mass. July 15, 2011); Durmic v. J.P. Morgan Chase Bank, N.A., 2010 WL 4825632, at *5
(D. Mass. Nov. 24, 2010). The claim for promissory estoppel is thus an alternative theory of
recovery. Accordingly, the motion to dismiss will be denied as to Count 9.
Count 10 (Breach of Contract)
Count 10 asserts a claim of breach of contract. In order to assert a claim for breach of
contract under Massachusetts law, a complaint must allege “that there was a valid contract, that
the defendant breached its duties under its contractual agreement, and that the breach caused the
plaintiff damage.” Guckenberger v. Boston Univ., 957 F. Supp. 306, 316 (D. Mass. 1997)
(citations omitted). The parties do not appear to dispute that the TPP agreement constituted a
contract. 4 However, defendant contends that its performance was excused because plaintiff
failed to make the final payment on time.
It is undisputed that plaintiff did not make his final TPP payment by February 1, 2015.
However, as discussed earlier, the May 29, 2015 letter contends that defendant’s loan servicer
represented to plaintiff that he could delay making the final TPP payment without any adverse
Courts in this district have held that a TPP “has the appearances of a contract.” See, e.g., Belyea, 2011
WL 2884964, at *7-9; In re Bank of America Home Affordable Modification Program (HAMP) Contract Litig.,
2011 WL 2637222, at *3-4 (D. Mass. July 6, 2011); Durmic, 2010 WL 4825632, at *2-4.
consequences. 5 (Compl. Ex. A at 2). If true, that would constitute a waiver of the condition
precedent in the TPP agreement, and defendant’s refusal to accept the payment after February 1,
2015, would be a breach. See Green v. ExxonMobil Corp., 470 F.3d 415, 420 (1st Cir. 2006)
(“courts may excuse non-performance of a condition precedent where caused by the other
party.”) (citing Restatement (Second) of Contracts § 245 (1981)). Therefore, the motion to
dismiss will be denied as to Count 10.
For the foregoing reasons, the motion to dismiss is GRANTED as to Counts 3 (violation
of 940 CMR 8.00 et seq.), 6 (unconscionability), 7 (fraud), and 8 (unjust enrichment), and
/s/ F. Dennis Saylor
F. Dennis Saylor IV
United States District Judge
Dated: November 9, 2017
A loan servicer operates as an agent in serving the interests of the principal (the note owner). See R.G.
Fin. Corp. v. Vergara-Nunez, 446 F.3d 178, 187 (1st Cir. 2006) (“Typically, a mortgage servicer acts as the agent of
the mortgagee to effect collection of payments on the mortgage loan.”). Accordingly, defendant was bound to honor
promises made by its loan servicer.
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