Fisher v. HSBC Bank USA,et al
Filing
29
Judge Nathaniel M. Gorton: MEMORANDUM AND ORDER entered. "For the foregoing reasons, the motion of Bank of America, N.A., to dismiss (Docket No. 16 ) is DENIED. The motion of defendants HSBC Bank USA and Ocwen Loan Servicing LLC to dismiss (Docket No. 17 ) is DENIED. So ordered."(McDonagh, Christina)
Case 1:17-cv-12532-NMG Document 29 Filed 09/18/18 Page 1 of 15
United States District Court
District of Massachusetts
Denise Fisher f/k/a Denise
Santry
Plaintiff,
v.
HSBC Bank as Trustee et al.
Defendants.
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Civil Action No.
17-12532-NMG
MEMORANDUM & ORDER
GORTON, J.
This dispute arises from a Home Affordable Modification
Program (“HAMP”) Trial Period Plan with respect to a mortgage on
real estate located on Revere Street in Hull, Massachusetts
(“the Property”).
Denise Fisher (“plaintiff” or “Fisher”)
alleges that HSBC Bank, USA, N.A. as trustee for the holders of
Deutsche Mortgage Securities Trust Mortgage Pass Through
Certificates Series 2004-2 (“HSBC Bank”) and its predecessor in
interest Bank of America, N.A. (“BANA”) breached a contract in
which they agreed to consider a loan modification if certain
conditions were met.
In addition to the bank defendants, Fisher
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brings this action against Ocwen Loan Servicing LLC (“Ocwen”),
the current servicer of her loan.
Pending before the Court are
separate motions of 1) BANA and 2) HSBC Bank and Ocwen to
dismiss the complaint.
I.
Background
Denise Fisher originally acquired title to real estate
located on Revere Street in Hull, Massachusetts in 1986.
She
became the sole owner of the property in December, 1992.
In
November, 2003, Fisher executed a promissory note in favor of
Greenpoint Mortgage Funding Inc. (“Greenpoint”) to evidence a
loan (“the note”).
On that same date, as security for repayment
of the note, Fisher granted a mortgage lien to Mortgage
Electronic Registration Systems, Inc. as nominee for Greenpoint
(“the mortgage”).
to HSBC Bank.
In November, 2011, the mortgage was assigned
Ocwen became the loan servicer in or about
December, 2013.
In late 2009, Fisher received a HAMP Trial Period Plan
(“TPP”) package from BANA, the loan servicer before Ocwen.
The
TPP provides that Ms. Fisher would make three payments on or
before January 1, February 1 and March 1, 2010, respectively.
The plan also provides that the trial period began on January 1,
2010, and would end on the earlier of the first day of the month
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following the month in which the last TPP payment is due or the
termination of the plan.
Different sections of the TPP bear on the parties’
divergent arguments so it is appropriate to include those
sections in their entirety:
Section 2.F
If prior to the Modification Effective Date [April 1,
2010], (i) the Servicer does not provide me a fully
executed copy of this plan and the Modification Agreement;
(ii) I have not made the Trial Period payments required
under Section 2 of the Plan; or (iii) the Servicer
determines that my representations in Section 1 are no
longer true and correct, the Loan Documents will not be
modified and this Plan will terminate. In this event, the
Servicer will have all of the rights and remedies provided
by the Loan Documents, and any payment I make under this
Plan shall be applied to amounts I owe under the Loan
Documents and shall not be refunded to me.
Section 2.G
I understand that the Plan is not a modification of the
Loan Documents and that the Loan Documents will not be
modified unless and until (i) I meet all of the conditions
required for modification, (ii) I received a fully executed
copy of a Modification Agreement, and (iii) the
Modification Effective Date [April 1, 2010] has passed. I
further understand and agree that the Servicer will not be
obligated or bound to make any modification of the Loan
Documents if I fail to meet any one of the requirements
under this Plan. . . .
Section 3
Once Servicer is able to determine the final amounts of
unpaid interest and any other delinquent amounts (except
late charges) to be added to my loan balance and after
deducting from my loan balance any remaining money held at
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the end of the Trial Period under Section 2.D, above, the
Servicer will determine the new payment amount. If I
comply with the requirements in Section 2 and my
representations in Section 1 continue to be true in all
material respects, the Servicer will send me a Modification
Agreement for my signature which will modify my Loan
Documents as necessary to reflect this new payment amount
and waive any unpaid late charged accrued to date.
The TPP agreement was signed by Fisher in December, 2009,
and she began making TPP payments in January, 2010. 1
BANA did
not send a loan modification agreement after the three-month
trial period concluded.
Fisher alleges that she was “directed
by a Bank of America Representative to continue sending in her
payments” in the modified amount and that she did so, until
September, 2011.
The complaint asserts that Fisher considered
filing for bankruptcy but decided not to because she believed
she would receive a loan modification.
Fisher claims that she
timely made 18 consecutive monthly payments and that BANA
accepted those payments until September, 2011, when BANA sent
back the payment she made that month enclosed with a written
letter.
Fisher inquired into why she did not receive a modification
agreement from BANA.
1
In early 2012 she received several letters
Although BANA did not sign the TPP, it does not contend that as
a result no contract was formed. Furthermore, plaintiff makes a
plausible claim that there is a valid contract because
defendants accepted plaintiff’s modified payments for 18 months.
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from BANA that informed her that Wells Fargo was her “investor”.
In a subsequent conversation, a BANA Customer Relationship
Manager notified Fisher that her modification was denied
“because her investor did not participate in HAMP” [the Home
Affordable Modification Program].
In March, 2012, Fisher
received a letter from BANA that stated that she did not qualify
for a loan modification because “her only source of income was
unemployment benefits.”
She maintains that statement was
inaccurate and that her HAMP application specified that she was
gainfully employed.
Plaintiff alleges that HSBC and BANA breached an oral
promise to modify her payment schedule and that BANA and its
successors in interest should be estopped from denying the loan
modification.
She also seeks a declaratory judgment that a loan
modification occurred and that it would be unfair and
inequitable for HSBC to be permitted to foreclose on the
Property.
Fisher filed this action in the Massachusetts Superior
Court for Plymouth County in September, 2017, and amended her
complaint in November, 2017.
HSBC and Ocwen removed the case to
this Court in December, 2017.
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II.
Analysis
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 its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007).
In considering the merits of
a motion to dismiss, the Court may look only to the facts
alleged in the pleadings, documents attached as exhibits or
incorporated by reference in the complaint and matters of which
judicial notice can be taken. Nollet v. Justices of Trial Court
of Mass., 83 F. Supp. 2d 204, 208 (D. Mass. 2000), aff’d, 248
F.3d 1127 (1st Cir. 2000).
Furthermore, the Court must accept
all factual allegations in the complaint as true and draw all
reasonable inferences in the plaintiff’s favor. Langadinos v.
Am. Airlines, Inc., 199 F.3d 68, 69 (1st Cir. 2000).
If the
facts in the complaint are sufficient to state a cause of
action, a motion to dismiss the complaint must be denied. See
Nollet, 83 F. Supp. 2d at 208.
Although a court must accept as true all of the factual
allegations contained in a complaint, that doctrine is not
applicable to legal conclusions. Ashcroft v. Iqbal, 556 U.S. 662
(2009).
Threadbare recitals of the legal elements which are
supported by mere conclusory statements do not suffice to state
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a cause of action. Id.
Accordingly, a complaint does not state
a claim for relief where the well-pled facts fail to warrant an
inference of any more than the mere possibility of misconduct.
Id. at 1950.
A. Breach of contract
Fisher submits that BANA “implicitly” promised to modify
her loan if she did not file for bankruptcy.
Defendants respond
that the claim is barred by the statute of limitations and the
statute of frauds and that the complaint does not state a
cognizable claim for relief.
1. Statute of Frauds
The Massachusetts Statute of Frauds provides that
No action shall be brought . . . [u]pon a contract for the
sale of lands . . . or of any interest in or concerning
them . . . [u]nless the promise, contract or agreement upon
which such action is brought, or some memorandum or note
thereof, is in writing and signed by the party to be
charged therewith or by some person thereunto by him
lawfully authorized.
M.G.L. c. 259, § 1.
The parties agree that the underlying mortgage between the
parties is subject to the statute of frauds.
Plaintiff insists,
however, that BANA modified the TPP orally and that such
modification is not proscribed by the statue of frauds.
There
is currently conflicting case law in this district on that kind
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of modification, namely a reduction in interest rate and thus a
corresponding reduction in the amount of monthly payments.
Compare French v. Chase Bank, N.A., No. 10-CV-11330-RGS, 2012 WL
273724, at *2 (D. Mass. Jan. 31, 2012) (concluding that TPP is
subject to statute of frauds because it is “a contract affecting
a mortgage”) with Nickerson-Reti v. Bank of Am., N.A., No. CV
13-12316-FDS, 2018 WL 2271013, at *11 (D. Mass. May 17, 2018)
(holding that “the statute of frauds does not apply to the TPP,
which is not an agreement to modify the loan or the mortgage”).
This Court agrees with the latter approach.
The TPP explicitly states that “the Plan is not a
modification of the Loan Documents” and it is clear that it does
not modify the mortgage.
modification of the loan.
Instead, the TPP is preparatory to a
Section 2.G of the agreement provides
that
the Loan Documents will not be modified unless and until
(i) I meet all of the conditions required for modification,
(ii) I received a fully executed copy of a Modification
Agreement, and (iii) the Modification Effective Date [April
1, 2010] has passed.
The TPP similarly provides that no part of the contract
constitutes “a satisfaction or release in whole or in part of
the obligations contained in the Loan documents.”
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Therefore, this Court agrees with the conclusion of the
Nickerson-Reti court:
to the extent plaintiff contends that she had a fully
enforceable, permanent modification of her loan and
mortgage, the statute of frauds bars that claim. However,
the statute of frauds does not apply to the TPP, which is
not an agreement to modify the loan or the mortgage.
Nickerson-Reti, 2018 WL 2271013 at *11.
2. Statute of Limitations
Defendants next argue that plaintiff’s breach of contract
claim is barred by the statute of limitations.
An action for breach of contract must be brought within six
years after the cause of action accrues. M.G.L. c. 260, § 2.
As
a general rule, “a contract claim accrues at the time of the
breach”. Melrose Hous. Auth. v. New Hampshire Ins. Co., 402
Mass. 27, 32 (1988) (citation omitted).
The statute of
limitations does not begin to run, however, “until the plaintiff
knows or reasonably should know that he or she has been harmed.”
Williams v. Ely, 423 Mass. 467, 473 (1996).
Plaintiff alleges that she was “directed by a [BANA]
representative to continue sending in” her modified payments
after the three-month trial period ended.
She also submits that
BANA accepted those payments until September, 2011, when BANA
sent back her payment “by written letter dated September 6th,
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2011.”
Accepting all plausibly alleged facts in plaintiff’s
complaint as true, Fisher exercised reasonable diligence and
could not have known about the breach before September 6, 2011.
See Riley v. Presnell, 409 Mass. 239, 245 (1991).
Because this
complaint was filed on September 1, 2017, the six year statute
of limitations does not bar her action.
3. Failure to state a claim
BANA maintains that plaintiff does not state a plausible
claim for breach of contract.
Fisher rejoins that she has
adequately pled facts stating a claim that BANA agreed to modify
the plaintiff’s loan “in implicit exchange for her agreement not
to file for bankruptcy protection”, and that BANA breached that
promise.
Under Massachusetts law, a plaintiff asserting breach of
contract must demonstrate that (1) an agreement was made between
plaintiff and defendant that was supported by consideration, (2)
plaintiff was ready, willing and able to perform, (3) defendant
failed to perform a material obligation provided for in the
contract and (4) plaintiff suffered harm caused by defendant’s
failure to perform. Coady Corp. v. Toyota Motor Distributors,
Inc., 346 F.Supp.2d 225, 248 (D. Mass. 2003), aff’d, 361 F.3d 50
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(1st Cir. 2004) (citing Singarella v. City of Boston, 342 Mass.
385, 387 (1961)).
This Court must accept as true all factual allegations
contained in a complaint, provided that those allegations are
not legal conclusions couched in factual clothing. Iqbal, 556
U.S. at 678 (citing Twombly, 550 U.S. at 555).
Under that
standard, plaintiff has stated a claim for breach of contract.
Fisher alleges that a BANA representative told her to
continue sending in modified payments.
Drawing all reasonable
inferences in her favor, it is plausible that the parties agreed
to modify her loan if she would not file for bankruptcy.
Such a
modification is permitted under Massachusetts law because the
mode of performance provided by a written contract “may be
varied by a subsequent oral agreement based upon a valid
consideration.” Siegel v. Knott, 316 Mass. 526, 528 (1944)
(collecting cases).
Massachusetts places a heavy burden of
evidence on the party seeking to modify an integrated written
contract by a subsequent oral agreement. Cambridgeport Sav. Bank
v. Boersner, 413 Mass. 432, 439 n. 10 (1992).
At this stage of
the litigation, however, plaintiff must merely allege sufficient
plausible facts, and she has done so.
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Next, BANA contends that plaintiff has not adequately plead
actual damages arising from its alleged breach.
Drawing all
reasonable inferences in Fisher’s favor, however, the complaint
contains sufficient factual allegations to conclude that the
Property will be foreclosed on if plaintiff does not receive the
loan modification.
Further, plaintiff purportedly lost any
rights she might have had under the Truth in Lending Act because
the statute of limitations as to that claim ran out while she
was expecting BANA’s permanent loan modification to arrive.
Finally, BANA proclaims that “plaintiff’s own performance
under the Trial Period Plan is speculative at best” but the
complaint alleges that she complied with requirements of the TPP
and that she made TPP payments for 18 months before BANA
rejected one.
Section 3 of the TPP states that BANA “will send
[her] a Modification Agreement” if she makes her payments and
provides her financial record.
both.
The complaint alleges she did
At this stage, that is enough.
Fisher’s breach of contract claim is barred by neither the
statute of frauds not the statute of limitations.
plausibly alleged the cause of action.
She has
Defendants’ motions to
dismiss will, with respect to Count I, be denied. Cf. Durmic v.
J.P. Morgan Chase Bank, NA, No. 10-CV-10380-RGS, 2010 WL
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4825632, at *2-*4 (D. Mass. Nov. 24, 2010) (denying motion to
dismiss breach of contract claim where plaintiff did not receive
executed copy of TPP from bank).
B. Promissory estoppel
Defendants insist that plaintiff has not stated a
cognizable claim for promissory estoppel because she has not
alleged facts sufficient to show that she reasonably relied and
acted upon a promise by BANA or that she was damaged by her
reliance.
To prevail on a claim of promissory estoppel under
Massachusetts law, a plaintiff must demonstrate that she
“reasonably relied on the alleged promise to [her] detriment”.
Hall v. Horizon House Microwave, 24 Mass. App. Ct. 84, 94
(1987).
BANA promised that it would “send [her] a Modification
Agreement for [her] signature which will modify [her] Loan” if
she provided the required financial forms and made three TPP
payments.
Fisher made modified payments for 18 months, until
BANA stated it no longer would accept them.
She alleges that a
BANA representative told her to continue sending such payments
after the trial period had ended.
To her alleged detriment, she
did not file for bankruptcy and lost a viable Truth in Lending
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Act claim.
Accepting all of plaintiff’s plausibly alleged facts
as true, it was reasonable for her to continue making modified
loan payments in response to the instruction of the BANA
representative.
Although the TPP provides that it would
terminate on April 1, 2010, if Fisher did not receive a copy of
the loan modification agreement, it was reasonable to believe
that BANA waived that provision by virtue of the
representative’s assurances and its pattern of accepting
modified monthly payments through August, 2011.
Plaintiff has adequately pled a claim for promissory
estoppel and defendants’ motions to dismiss will, with respect
to Count II, be denied.
C. Declaratory judgment
Defendants submit that this Court should dismiss
plaintiff’s claim for declaratory relief because the complaint
does not state a cognizable claim for breach of contract or
promissory estoppel.
Because this Court finds that plaintiff
has stated plausible claims for relief on both counts, it will
not dismiss the claim for a declaratory judgment.
Defendants’
motions to dismiss will, with respect to Count III, be denied.
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ORDER
For the foregoing reasons, the motion of Bank of America,
N.A., to dismiss (Docket No. 16) is DENIED.
The motion of
defendants HSBC Bank USA and Ocwen Loan Servicing LLC to dismiss
(Docket No. 17) is DENIED.
So ordered.
/s/ Nathaniel M. Gorton____
Nathaniel M. Gorton
United States District Judge
Dated September 17, 2018
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