Army v. CitiMortgage, Inc.

Filing 37

District Judge Timothy S Hillman: ORDER entered granting 28 Motion for Reconsideration re 8 MOTION to Dismiss filed by CitiMortgage, Inc. The motion to dismiss (Docket No. 8) is now granted. All counts of Plaintiff's complaint are hereby dismissed. (Castles, Martin)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
_______________________________________
)
)
LAWRENCE F. ARMY, JR.,
)
CIVIL ACTION
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Plaintiff,
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NO. 15-CV-40016-TSH
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v.
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)
CITIMORTGAGE, INC.,
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)
Defendant.
______________________________________ )
MEMORANDUM AND ORDER ON DEFENDANT’S MOTION FOR
RECONSIDERATION OF PARTIAL DENIAL OF MOTION TO DISMISS
(Docket No. 28)
October 15, 2015
HILLMAN, D.J.
Pending before this Court is the motion of CitiMortgage, Inc. (Defendant) for
reconsideration of this Court’s partial denial of its motion to dismiss. For the reasons set forth
below, Defendant’s motion for reconsideration (Docket No. 28) is granted and Defendant’s
motion to dismiss (Docket No. 8) is granted.
Background
The underlying facts of this dispute are set forth in my previous Memorandum and Order
on Plaintiff’s Motion to Remand and Defendant’s Motion to Dismiss. (Docket No. 26.) See Army
v. CitiMortgage, Inc., No. CIV.A. 15-40016, 2015 WL 4092761, at *1 (D. Mass. July 7, 2015).
Lawrence F. Army, Jr. (Plaintiff) brought suit against Defendant seeking injunctive relief
prohibiting the foreclosure sale of real property, pursuant to the automatic stay provision of the
Bankruptcy Code, 11 U.S.C. § 362 (Count I); a declaratory judgment that Defendant did not have
the authority to foreclose by statutory power of sale under Mass. Gen. Laws ch. 244, § 14 (Count
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II); and breach of the covenant of quiet enjoyment (Count III). Defendant moved to dismiss Count
I for lack of subject matter jurisdiction and Counts II and III for failure to state claims upon which
relief could be granted. On July 7, 2015, this Court issued a decision granting Defendant’s motion
to dismiss Counts I and III and denying Defendant’s motion to dismiss Count II. (Docket No. 26.)
See Army, 2015 WL 4092761. Defendant now moves for reconsideration of this Court’s denial of
its motion to dismiss Count II.
Discussion
Standard of Review
“A court appropriately may grant a motion for reconsideration ‘where the movant shows a
manifest error of law or newly discovered evidence.’” Ruiz Rivera v. Pfizer Pharm., LLC, 521 F.3d
76, 81-82 (1st Cir. 2008) (quoting Kansky v. Coca–Cola Bottling Co. of New England, 492 F.3d
54, 60 (1st Cir. 2007)). A motion for reconsideration should also “be granted if the court ‘has
patently misunderstood a party . . . or has made an error not of reasoning but apprehension.’” Id.
at 82 (quoting Sandoval Diaz v. Sandoval Orozco, No. 01–1022, 2005 WL 1501672, at *2 (D.P.R.
June 24, 2005)) (additional citation omitted). “The granting of a motion for reconsideration is ‘an
extraordinary remedy which should be used sparingly.’” Palmer v. Champion Mortgage, 465 F.3d
24, 30 (1st Cir. 2006) (quoting 11 Charles Alan Wright, et al., Federal Practice and Procedure
§ 2810.1 (2d ed. 1995)).
Analysis
The issue raised by Defendant’s motion to dismiss was “whether the statutory power of
sale, Mass. Gen. Laws ch. 244, § 14, permits a mortgagee to foreclose when a mortgagor’s in
personam debt is unenforceable because it was discharged in bankruptcy.” (Docket No. 26 at 6);
Army, 2015 WL 4092761, at *4. I concluded that Massachusetts courts had not answered this

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question but found that it would be reasonable to infer from the rationale in Eaton v. Fed. Nat.
Mortgage Ass'n, 969 N.E.2d 1118, 1129 (Mass. 2012), that a mortgage cannot be foreclosed under
the statutory power of sale when the underlying promissory note has been discharged in
bankruptcy. Accordingly, I found that Count II of Plaintiff’s complaint stated a plausible claim
for relief. In its motion for reconsideration, Defendant brings my attention to a recent case decided
by the Supreme Judicial Court, Christakis v. D'Arc, 29 N.E.3d 823 (Mass. 2015), which was issued
on May 6, 2015. Although the hearing on Defendant’s motion to dismiss was conducted on June
16, 2015, this new case had not yet come to the attention of either party or this Court.
In Christakis, the Court addressed the issue of “whether judicial liens on real property
remain valid after the owner of the property receives a discharge under Chapter 7 of the Bankruptcy
Code.” 29 N.E.3d at 824. The plaintiff in that case was a debtor who had filed a Chapter 71
bankruptcy petition and had received a discharge; the defendants were creditors, each of whom
had obtained a final judgment against the plaintiff, and a levy of execution had been made on
plaintiff’s real property. Id.
The Christakis court noted that discharge in bankruptcy “‘operates as an injunction’ against
any act to collect debt ‘as a personal liability of the debtor.’” Id. (quoting 11 U.S.C. § 524(a)(2)).
The court also explained, however, that under federal law “[t]he debt itself is not extinguished by
the discharge; it remains in existence but cannot be enforced personally against the debtor.” Id. at
825-26. “Essentially, ‘a bankruptcy discharge extinguishes only one mode of enforcing a claim—
namely, an action against the debtor in personam—while leaving intact another—namely, an
action against the debtor in rem.’” Id. (quoting Johnson v. Home State Bank, 501 U.S. 78, 84

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The plaintiff initially filed a Chapter 13 petition but it was converted into a Chapter 7 case.
Christakis, 29 N.E.3d at 825.
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(1991)). “Thus, the lien may still be enforced, but because of the discharge of personal liability,
the enforcement of the lien ‘is an action in rem with no recourse available against the debtor for
any deficiency.’” Id. (quoting W.L. Norton, Bankruptcy Law and Practice § 58:4, at 58–17 (3d.
ed. 2014)).
The Court went on to explain that Massachusetts law should not differ from Federal law in
this regard, noting that “Massachusetts case law has long provided that liens perfected well before
the filing of a bankruptcy petition remain valid after a discharge. . . . [U]nder State law, we
distinguish between in personam and in rem actions after a discharge, and permit the latter but not
the former.” Id. at 826-27. Although Christakis was a judicial lien case rather than a mortgage
case, the Court specifically noted that its holding did not distinguish judicial liens from mortgages
or consensual liens regarding the survival of discharge under state law. Id. at 829 n.10.
Furthermore, the Court made no mention of a potential conflict with the holding in Eaton, 969
N.E.2d at 1129.2
In light of this new precedent, I conclude that Massachusetts courts have now answered
the question of whether a mortgagor’s debt is enforceable after discharge in bankruptcy. The
answer, provided by the Christakis court, is that discharge does not make mortgage debt
unenforceable; the debt remains in existence and can be enforced with an action against the debtor

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Additionally, the Court cited favorably to Johnson v. Home State Bank, 501 U.S. 78 (1991), in
which the U.S. Supreme Court confronted the issue of “whether a mortgage lien that secures an
obligation for which a debtor’s personal liability has been discharged in a Chapter 7 liquidation is
a ‘claim’ subject to inclusion in an approved Chapter 13 reorganization plan.” Id. at 82. In
resolving this issue, the Supreme Court affirmed that “a discharge extinguishes only ‘the personal
liability of the debtor.’ . . . the [Bankruptcy] Code provides that a creditor’s right to foreclose on
the mortgage survives or passes through the bankruptcy.” Id. at 83 (quoting 11 U.S.C. § 524(a)(1))
(citing Long v. Bullard, 117 U.S. 617 (1886)).
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in rem. 29 N.E.3d at 825-26. Accordingly, upon reconsideration I find that Defendant’s motion to
dismiss should be granted as to Count II.
Conclusion
For the reasons set forth above, Defendant’s Motion for Reconsideration of Partial Denial
of Motion to Dismiss (Docket No. 28) is granted, and Defendant’s Motion to Dismiss (Docket
No. 8) is granted. All counts of Plaintiff’s complaint are hereby dismissed.

SO ORDERED.

/s/ Timothy S. Hillman
TIMOTHY S. HILLMAN
DISTRICT JUDGE

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