Boguslav et al v. BLB Trading, LLC

Filing 22

District Judge Timothy S Hillman: MEMORANDUM AND ORDER entered granting 9 Motion to Dismiss for Failure to State a Claim and denying 21 Motion for Leave to File Document. (Castles, Martin)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
________________________________________________
)
BRUCE BOGUSLAV and
)
LINDA BOGUSLAV,
)
Plaintiffs,
)
)
)
v.
)
)
BLB TRADING, LLC,
)
Defendant.
)
________________________________________________)

CIVIL ACTION
NO. 14-40143-TSH

MEMORANDUM AND ORDER ON DEFENDANT’S
MOTION TO DISMISS
September 29, 2015
Background
Plaintiffs Bruce and Linda Boguslav (“Plaintiffs”) have brought a complaint against BLB
Trading, LLC (“Defendant”) alleging unfair or deceptive acts, fraud, and Home Affordable
Modification Program (“HAMP”) violations. These claims arise out of a mortgage Plaintiffs
executed in 2005 that Defendant is now attempting to foreclose upon. Plaintiffs filed this action
in Worcester Superior Court on September 16, 2014 and the Defendant removed it to this Court
on October 2, 2014 based upon diversity jurisdiction.
This Order addresses Defendant’s Motion to Dismiss Plaintiffs’ Complaint for Failure to
State a Claim (Docket No. 9). For the reasons set forth below, the motion is granted.
Standard of Review
To survive a 12(b)(6) motion to dismiss for failure to state a claim, a complaint must
include sufficient factual detail to make the plaintiff’s claim to relief plausible on its face.
Ashcroft v. Iqbal, 556 U.S. 662 (2009). A claim is facially plausible when the complaint’s

factual content “allows the court to draw the reasonable inference that the defendant is liable for
the misconduct alleged.” Id. In evaluating a motion to dismiss, the court must accept all factual
allegations in the complaint as true and draw all reasonable inferences in the plaintiff’s favor.
Langadinos v. American Airlines, Inc., 199 F.3d 68, 68 (1st Cir. 2000). The court may consider
only facts and documents that are incorporated into the complaint; otherwise the Court must
convert the motion into one for summary judgment under Fed. R. Civ. P. 12(d). See Trans-Spec
Truck Serv., Inc. v. Caterpillar, Inc., 524 F.3d 315, 321 (1st Cir. 2008). Narrow exceptions to
this rule exist for “documents the authenticity of which are not disputed by the parties;
documents central to plaintiffs’ claim; or documents sufficiently referred to in the complaint.”
Foley v. Wells Fargo Bank, N.A., 772 F.3d 63, 74 (1st Cir. 2014) (citing Watterson v. Page, 987
F.2d 1, 3 (1st Cir. 1993) (internal alterations omitted).
Dismissal is appropriate if the plaintiff’s well-pleaded facts do not “possess enough heft
to show that plaintiff is entitled to relief.” Ruiz Rivera v. Pfizer Pharm., LLC, 521 F.3d 76, 84 (1st
Cir. 2008) (internal quotations and alterations omitted). Although detailed factual allegations are
not necessary, the standard “requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 555 (2007). “The relevant inquiry focuses on the reasonableness of the inference of
liability that the plaintiff is asking the court to draw from the facts alleged in the complaint.”
Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d 1, 13 (1st Cir. 2011).
Facts
The Plaintiffs reside at 50 Whisper Drive, Worcester, Massachusetts. See Plaintiff’s
Amended Verified Complaint (“Pl.’s Am. Compl.”) (Docket No. 6-2 at pp.100-105) ¶ 1. The

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Defendant is a limited liability company organized under the laws of Florida. Def. Notice of
Removal (Docket No. 1) p. 2.
The Plaintiffs owned the property at 50 Whisper Drive and on September 2, 2006, they
deeded the property to the Leviticus Realty Trust. Def. Memo. (Docket No. 10) Ex. 10. The
Plaintiffs, as trustees of the Leviticus Trust, transferred the property to the “Keeping Kids in
Their Home Foundation Corp” (“KKHFC”) on November 14, 2012. Pl.’s Am. Compl. ¶ 6. Id.
KKHFC is the current record owner of the property. Def. Memo. Ex. 11.
On December 2, 2005, the Plaintiffs executed a mortgage and note on the property for
$504,000.00 to Mortgage Electronic Registrations Systems (“MERS”). Id. at ¶ 3. The mortgage
states that “MERS is a separate corporation that is acting solely as a nominee for Lender and
Lender’s successors and assigns. MERS is the mortgagee under this Security Instrument.” Pl.’s
Am. Compl. Ex. B. On October 10, 2006, MERS assigned the mortgage to GMAC Mortgage
Corporation (“GMAC”). Pl.’s Am. Compl. ¶ 4; see Pl.’s Am. Compl. Ex. C. On December 23,
2008, GMAC assigned the mortgage to ACT Properties, LLC (“ACT”). Pl.’s Am. Compl. ¶ 5;
see Pl.’s Am. Compl. Ex. D. On July 16, 2010, MERS assigned the mortgage to Defendant.
Pl.’s Am. Compl. ¶ 6. Defendant’s affidavit, attached to the Plaintiffs’ amended complaint as
Exhibit E, shows two additional attempted assignments: ACT to PA Portfolio Investors (“PA”)
on January 18, 2012, and PA to Defendant on January 26, 2012. See Pl.’s Am. Compl. Ex. E.
The promissory note is currently held by the Defendant. See Pl.’s Am. Compl. ¶ 13. As
submitted to the Court, there is a separate paper1 attached to the Note on which is written the
signature of former Fremont Vice President Michael Koch and, above the signature, Defendant’s
name and office address. Pl.’s Am. Compl. Ex. F. Fremont did not specially indorse the Note to

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At oral argument, Defendant asserted that this paper is in fact the reverse side of the Note, and its appearance as a
separate sheet of paper is a result of the Court’s electronic filing system.

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Defendant. Pl.’s Am. Compl. ¶ 12. It was Fremont’s practice to indorse notes in blank shortly
after origination if they were sold into the secondary market or to investors. Pl.’s Am. Compl. ¶
12; Pl.’s Am. Compl. Ex. G. Fremont became inactive July 25, 2008, and Defendant was
organized July 1, 2009. Pl.’s Am. Compl. ¶ 13.
Plaintiffs admitted at oral argument that in early, 2006, they defaulted on the Mortgage
and have not made any payments since. As of September 16, 2014, they owed $503, 654.90 in
principal and $373,132.55 in interest and other charges on the Mortgage. The Plaintiffs
commenced a loan modification request and review at some point after they received the notice
of foreclosure, and have been furnished a hardship package to complete. Pl.’s Am. Compl. ¶ 15.
A foreclosure auction was scheduled for 10:00 a.m. on September 17, 2014. Id.
Discussion
The Plaintiffs argue that Defendant cannot foreclose on the mortgage because the
assignment from MERS to GMAC was invalid; because MERS cannot assign mortgages
generally; the Note Defendant holds is uncollectible because Fremont did not exist
contemporaneously with Defendant, making it impossible for the Note to be specially indorsed to
Defendant by Fremont; and that Defendant acted in violation of HAMP rules.2
A.

Assignment of the Mortgage from MERS to Defendant BLB
Plaintiffs allege that the October 10, 2006 assignment from MERS to GMAC is “invalid

and unauthorized,” in part because Fremont was inactive at the time of assignment. See Pl. Am.
Compl. ¶ 8. This is analogous to the situation in Rosa v. MERS, where the court granted
defendant’s motion to dismiss, holding a MERS assignment was valid when the plaintiff alleged

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To the extent that Plaintiffs intended to allege violations of Mass. Gen L. c. 93A (“unfair and deceptive acts and
practices and unfair dealings as well as violations of the consumer protection statutes,” see Pl. Am. Compl. ¶ 14, it is
simply a “formulaic recitation of the elements,” without any basis in fact, see Twombly, 550 U.S. at 555, and
accordingly, will not be given further discussion.

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that an assignment by MERS was invalid and unauthorized because the original lender had
dissolved. See 821 F. Supp. 2d 423, 428 (D. Mass. 2011). The dissolution of the original lender
does not affect MERS’ authority to assign a mortgage. Id. at 431; Kiah v. Aurora Loan Servs.
LLC., 2010 WL 4781849 *4 (D. Mass. 2010).
Plaintiffs further contend that the July 16, 2010 assignment from MERS to Defendant
“negates the rest of the assignment chain upon which BLB relies in its foreclosure notices.” Pl.
Am. Compl. ¶ 10. They argue that by July 16, 2010, MERS had already assigned away its
interest in the mortgage to GMAC (October 10, 2006), and was thus unable to assign any interest
in the mortgage. See U.S. Bank v. Ibanez, 458 Mass. 637, 651 (Mass. 2011). Even if the original
MERS-GMAC assignment were to be found invalid (making it possible for MERS to assign a
legal interest in the mortgage), a valid, direct MERS-Defendant assignment would only make
Defendant’s power to foreclose valid.
Plaintiffs also argue that the July 23, 2008 assignment from GMAC to ACT was invalid
because the listed title of the person who signed the assignment is a “limited signing officer,”
and that limited signing officers may not be authorized to make mortgage assignments under
Mass. Gen. Laws c. 183 § 54B. By the plain text of c. 183 § 54B, limited signing officers are
authorized to make assignments under § 54B. The statute lists the positions able to make
binding assignments of mortgages, including “principal, investment, mortgage or other officer,”
and “other similar office or position.” Mass. Gen. Laws c. 183 § 54B.
Plaintiffs also asserted at oral argument that the initial MERS-GMAC assignment was
possibly invalid because “MERS is not the entity that could assign it. It had to be Fremont and
Fremont didn’t do it.” This is incorrect. This argument has been addressed by the First Circuit
several times. See Butler v. Deutsche Bank Trust Co. Ams., 748 F.3d 28, 32 (1st Cir. 2014) ,

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Woods, 733 F.3d at 355; Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282, 291-93 (1st Cir.
2013); Elgin v. Aurora Loan Services, LLC, 2014 WL 2048452, *2-4, 13-40062-TSH, (D. Mass.
May 16, 2014); Halacy v. Wells Fargo Bank, NA, No. 12–11447–TSH, 2013 WL 6152351, *2-4
(D. Mass. November 13, 2013). At that point, Fremont did not have the assignable legal interest
in the mortgage; MERS did as Fremont’s nominee.
B.

Defendant’s Ownership of the Note
Plaintiffs assert it is not possible for the Note held by Defendant to be specially indorsed

to Defendant by Fremont because the two entities did not exist contemporaneously: Fremont was
liquidated in 2007 and Defendant was not formed until 2008. While they are correct as to the
timing, the Plaintiffs have not sufficiently alleged that it is impossible for the Note to be
specially indorsed to Defendant. The facts alleged by Plaintiffs are consistent with the Note
being indorsed in blank by Fremont when initially executed, and then being specially indorsed to
Defendant by itself after it obtained possession of the Note. See Pl. Am. Compl. Ex. F. Former
Fremont Vice President Michael Koch states in his affidavit that he does not recall indorsing this
particular Note, but he also states that he indorsed “hundreds, if not thousands” of notes, and that
the Note bears his alleged signature. See id. Where, as here, a complaint pleads facts that are
merely consistent with a defendant’s liability, it stops short of the line between mere possibility
and plausibility of entitlement to relief. Twombly, 550 U.S. at 557.
The signature of Michael Koch on the Note constitutes a blank indorsement. “Regardless
of intent of the signer, a signature is an indorsement unless accompanying words, terms of the
instrument, place of the signature, or other circumstances unambiguously indicate that the
signature was made for a purpose other than indorsement. For the purpose of determining
whether a signature is made on an instrument, a paper affixed to the instrument is a part of the

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instrument. Mass. Gen. Laws c. 106 § 3-204. None of the exceptions listed above are present,
which compels the conclusion that Michael Koch’s signature on a piece of paper attached to the
Note is an indorsement. See Pl. Am. Compl. ¶ 11 (“There is attached to that Note on a separate
piece of paper an undated purported assignment without recourse to BLB Trading, LLC, signed
by Michael Koch, as Vice President of Fremont Investment.”); Pl. Am. Compl. Ex. F.
According to Mass. Gen. Laws c. 106 §3-205, an indorsement made by the holder of the
instrument, when that indorsement does not identify a person to whom it makes the instrument
payable, is a blank indorsement, which may be negotiated by transfer of possession alone until
specially indorsed. Mass. Gen. Laws c. 106 §3-205(a)-(b). A holder may convert a blank
indorsement that consists of only a signature into a special indorsement by writing, above the
signature of the indorser, words identifying the person to whom the instrument is made payable.
Id. Here, Plaintiff has made no allegations as to how it is not possible for Defendant to have
specially indorsed the Note to itself after receiving the blankly indorsed Note, and has not made
a plausible claim as to why Defendant’s Note is uncollectible.
At oral argument, Plaintiffs asserted that the special indorsement on the Note was
undated and does not reference the note. They argue that the indorsement is an assignment, that
assignments require consideration to be valid, and that whether or not the special indorsement is
a valid assignment requires that evidence be heard relating to the validity of the special
indorsement.
The Court finds that an evidentiary hearing on this issue is not necessary, because, other
issues aside, the Note is payable to Defendant whether or not the special indorsement is valid. If
the special indorsement is valid, Defendant is the only entity to whom the Note is payable, but

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even if the special indorsement is invalid, Defendant holds the blankly indorsed Note, and
blankly indorsed instruments are payable to the bearer. Mass. Gen. Laws c. 106 §3-205(b).
C.

Violation of HAMP Rules
Plaintiffs finally claim that Defendant violated HAMP rules. HAMP violations alone do

not provide a private cause of action for a borrower. See Kozaryn v. Ocwen Loan Servicing,
LLC, 784 F. Supp. 2d 100, 102-03 (D. Mass. 2011). HAMP violations may serve as a basis for a
93A claim if they are unfair or deceptive. See id; see also Hannigan v. Bank of America, N.A.,
48 F. Supp. 3d 135, 142 (D. Mass. 2014) (denying defendant’s 12(b)(6) motion where “plaintiffs
applied numerous times for HAMP and Bank of America repeatedly required that they re-submit
information that they had previously provided”); Hanrahan v. Specialized Loan Servicing, LLC,
54 F. Supp. 3d 149, 155 (D. Mass. 2014) (holding plaintiffs have survived the motion to dismiss
stage when they have alleged a pattern or course of conduct involving misrepresentations,
delays, and evasiveness in evaluating a HAMP application). The Plaintiffs have not alleged
unfair or deceptive HAMP violations and if they had, that 93A complaint would face similar
problems to the ones described above.
Conclusion
The Defendants’ Motion to Dismiss (Docket No. 9) is granted and Plaintiffs’ Motion for
Leave to File an Affidavit (Docket No. 21) is denied as moot.

SO ORDERED.

/s/ Timothy S. Hillman ______
TIMOTHY S. HILLMAN
UNITED STATES DISTRICT JUDGE
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