Opinion
19-P-1345
12-28-2020
DIPLOMAT PROPERTY MANAGER, LLC v. DANIEL J. WILSON & another.
NOTICE: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule 23.0, as appearing in 97 Mass. App. Ct. 1017 (2020) (formerly known as rule 1:28, as amended by 73 Mass. App. Ct. 1001 [2009]), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
The defendants, Daniel J. Wilson and Angela L. Lagross-Wilson, owned real property (property) that was foreclosed on and sold to Diplomat Property Manager, LLC (Diplomat) at an auction pursuant to the statutory power of sale. See G. L. c. 183, § 21. After purchasing the property, Diplomat initiated a summary process action in the Housing Court seeking possession of the property and monetary damages for the defendants' postforeclosure occupancy of the property. A judge of the Housing Court granted summary judgment for Diplomat, and the defendants appealed.
The judgment did not reflect any monetary damages for the defendants' use and occupancy of the property.
On appeal, the defendants argue that the foreclosure of the property, and subsequent sale to Diplomat, is void because the notice they received of their default and the right to cure such default, sent by the mortgagee pursuant to G. L. c. 244, § 35A, and paragraph 22 of the mortgage, was "potentially deceptive." Substantially the same argument was advanced in Thompson v. JPMorgan Chase Bank, N.A., 915 F.3d 801, 805 (1st Cir.) (Thompson I), opinion withdrawn, 931 F.3d 109 (1st Cir. 2019) (Thompson II), and the United States Court of Appeals for the First Circuit certified a question to the Supreme Judicial Court asking whether the language used in the default notice in that case -- language identical in all relevant respects to the notice in this case -- rendered the notice deceptive and thus voided the foreclosure under Massachusetts law. Thompson II, supra at 111. The Supreme Judicial Court answered this question in the negative. See Thompson v. JPMorgan Chase Bank, N.A., 486 Mass. 286, 288 (2020) (Thompson III). We stayed this appeal pending that answer, and now with the benefit of that decision, we affirm.
The Thompson case was originally brought in the Superior Court, but was subsequently removed to the United States District Court for the District of Massachusetts, and a Federal District Court judge granted summary judgment for JPMorgan Chase Bank, N.A. See Thompson vs. J.P. Morgan Chase Bank, N.A., U.S. Dist. Ct., No. 18-10131 (D. Mass. May 11, 2018). The United States Court of Appeals for the First Circuit (First Circuit) initially reversed, but when it was pointed out that, under Massachusetts law, the notice was required to take the precise form that it had, the First Circuit vacated its decision. See Thompson II, 931 F.3d at 111; Thompson I, 915 F.3d at 805.
The exact question certified to the Supreme Judicial Court was as follows: "Did the statement in the August 12, 2016, default and acceleration notice that 'you can still avoid foreclosure by paying the total past-due amount before a foreclosure sale takes place' render the notice inaccurate or deceptive in a manner that renders the subsequent foreclosure sale void under Massachusetts law?" Thompson v. JPMorgan Chase Bank, N.A., 486 Mass. 286, 287-288 (2020), quoting Thompson II, 931 F.3d at 111.
Background. On August 5, 2005, the defendants entered into a mortgage agreement with National City Mortgage, a division of National City Bank of Indiana. The mortgage was a standard form "Freddie Mac/Fannie Mae" residential mortgage, which is "an instrument widely used across Massachusetts" and the same form used in Thompson III, 486 Mass. at 288. Particularly relevant to this appeal are paragraph 22 and paragraph 19 of the mortgage.
Paragraph 22 sets forth certain notice requirements that a mortgagee must satisfy before it can accelerate the loan and initiate foreclosure proceedings. Specifically, paragraph 22 requires a mortgagee to notify the mortgagor of the default, the action required to cure the default, and the date by which the default must be cured, and to state that the failure to cure the default may result in acceleration of the loan and sale of the property. Further, a mortgagee must notify a mortgagor of the right to reinstate after acceleration and the right to bring a court action to assert the nonexistence of a default or any other defenses. Paragraph 19 of the mortgage governs the circumstances in which a mortgagor may reinstate the mortgage after the loan has already been accelerated. It states, in part, that a mortgagor may reinstate the mortgage at any time until "five days before sale of the Property pursuant to any power of sale contained in this Security Instrument."
Paragraphs 22 and 19 of the standard form Freddie Mac/Fannie Mae mortgage agreement are reproduced in Thompson III, 486 Mass. at 288 n.3, 289 n.4.
In addition to the notice requirements in paragraph 22, G. L. c. 244, § 35A, also requires a foreclosing mortgagee to provide a ninety-day written notice to a defaulting mortgagor. The Division of Banks promulgated regulations that specify the exact form that this notice must take. See 209 Code Mass. Regs. § 56.04. When a foreclosing mortgagee sends notice pursuant to G. L. c. 244, § 35A, the notice must strictly conform to the language in 209 Code Mass. Regs. § 56.04. Of note here, the regulation requires a foreclosing mortgagee to inform mortgagors that they "can still avoid foreclosure by paying the total past due amount before a foreclosure sale takes place." 209 Code Mass. Regs. § 56.04.
The defendants here defaulted on their mortgage payments, and received notice of their default by separate letters dated April 24, 2018, entitled "90-Day Right to Cure Your Mortgage Default," as required by 209 Code Mass. Regs. § 56.04. The letters were intended to serve as notice pursuant to both G. L. c. 244, § 35A, and paragraph 22 of the mortgage. The letters notified the defendants of the default and that tendering the total past due amount of $96,689.88 would cure the default. The letters stated that the defendants had until July 23, 2018, ninety days from the date of the notice, to cure the default, and that if the defendants failed to do so, the loan could be accelerated and the property foreclosed on. The letters also provided that, after July 23, 2018, the defendants could "still avoid foreclosure by paying the total past due amount before a foreclosure sale takes place," which is the language of 209 Code Mass. Regs. § 56.04 verbatim.
The defendants did not attempt to cure their mortgage default before the completion of the ninety-day period, and did not attempt to furnish the total past due amount prior to the foreclosure sale. The foreclosure sale took place on October 4, 2018, and the property was sold to Diplomat, the highest bidder at the auction.
Discussion. The defendants contend that the foreclosure sale of the property to Diplomat is void because the notice sent to them pursuant to paragraph 22 of the mortgage and G. L. c. 244, § 35A, was potentially deceptive. However, this argument has now been directly foreclosed by the Supreme Judicial Court in Thompson III, 486 Mass. at 293.
Despite the "substantive similarities" in the notice requirements of paragraph 22 of the mortgage and G. L. c. 244, § 35A, they are read "as being separately grounded and having an independent meaning." Pinti v. Emigrant Mtge. Co., 472 Mass. 226, 239-240 (2015). This, however, does not preclude a mortgagee from using one notice to serve the purposes of both paragraph 22 and § 35A. See Thompson III, 486 Mass. at 294. In fact, the use of such a "hybrid notice," id. at 293, is permitted, and even preferred, as long as the requirements of paragraph 22 of the mortgage are strictly complied with. See id. at 294-295.
Although the failure to strictly comply with the requirements of G. L. c. 244, § 35A, will not invalidate an otherwise valid foreclosure, see U.S. Bank Nat'l Ass'n v. Schumacher, 467 Mass. 421, 431 (2014), the failure to strictly comply with the notice requirements of paragraph 22 of the mortgage will render a foreclosure void. Pinti, 472 Mass. at 243. Moreover, "any notice given pursuant to paragraph 22 of the [mortgage], regardless of whether hybrid, must be accurate and not deceptive." Thompson III, 486 Mass. at 293.
The defendants argue that the notice they received pursuant to paragraph 22 was inaccurate and deceptive because, although it informed them of their right to reinstate the mortgage after acceleration, it did not inform them that paragraph 19 of the mortgage cut off this right five days prior to the foreclosure sale of the property. Instead, contrary to paragraph 19 of the mortgage, but in accordance with 209 Code Mass. Regs. § 56.04, the notice informed them that they could "still avoid foreclosure by paying the total past due amount before a foreclosure sale takes place," thus expanding the temporal limitation in paragraph 19 by five days.
Faced with the same scenario in Thompson III, 486 Mass. at 293, the Supreme Judicial Court concluded that the notice was not deceptive because "the more generous reinstatement period provided under G. L. c. 244, § 35A, govern[ed] over the contractually imposed time limits on reinstatement articulated in paragraph 19." In reaching this conclusion, the court looked to the mortgage agreement, construing it "as a whole, so as to give reasonable effect to each of its provisions." Id., quoting James B. Nutter & Co. v. Estate of Murphy, 478 Mass. 664, 669 (2018). Paragraph 12 of the mortgage allowed for the extension of the reinstatement period, and paragraph 16 of the mortgage provided that "all rights and obligations contained in this Security Instrument are subject to any requirements and limitations of Applicable Law" (quotation omitted). Thompson III, supra.
Because applicable law, specifically G. L. c. 244, § 35A, and 209 Code Mass. Regs. § 56.04, "require[d] foreclosing mortgagees to send a notice specifying that, even after acceleration, homeowners have a legal right to 'avoid foreclosure by paying the total past-due amount before a foreclosure sale takes place,'" the court held that foreclosing mortgagees were legally required to accept a reinstatement payment any time prior to foreclosure. Thompson III, 486 Mass. at 294, quoting 209 Code Mass. Regs. § 56.04. Thus, the notice was not deceptive because it accurately conveyed to the plaintiffs their ability to reinstate the mortgage any time prior to foreclosure. The accuracy of the notice was not diminished by the failure to include the five-day limitation imposed by paragraph 19 because that limitation was not applicable to the plaintiffs. See id.
We apply the same reasoning to this case. Although paragraph 19 of the defendants' mortgage agreement suggests that the defendants must seek to reinstate the mortgage prior to five days before the foreclosure sale, paragraph 12 of the mortgage allows for extension of this payment period. Paragraph 16 states that "[a]ll rights and obligations contained in this Security Instrument are subject to any requirements and limitations of Applicable Law," and applicable law is defined in the mortgage agreement as "all controlling applicable federal, state and local statutes, regulations, ordinances and administrative rules and orders (that have the effect of law) as well as all applicable final, non-appealable judicial opinions."
Where Massachusetts law requires a foreclosing mortgagee to accept a reinstatement payment at any time prior to foreclosure, the provision in paragraph 19 limiting the reinstatement rights of the defendants is superseded. See Thompson, 486 Mass. at 294. Accordingly, the hybrid notice sent to the defendants, pursuant to paragraph 22 of the mortgage and G. L. c. 244, § 35A, accurately reflected their ability to reinstate the mortgage any time prior to the foreclosure sale by paying the total past due amount. There was no deception. See id. The terms of paragraph 22 were strictly complied with, and thus the foreclosure sale of the property to Diplomat was valid. We therefore affirm the judgment of the Housing Court.
The defendants also argue that the notice was confusing because it did not clearly explain whether "the total past due amount" was the preacceleration or postacceleration amount. This argument is unavailing as the line directly below the quoted language stated that the total past due amount was $96,689.88, which is the preacceleration amount. This provides further support that G. L. c. 244, § 35A, and 209 Code Mass. Regs. § 56.04 serve as an extension to the reinstatement payment period because, to reinstate the mortgage after acceleration, the mortgagor need pay to the mortgagee only the sums owed as if no acceleration had occurred.
So ordered.
By the Court (Desmond, Ditkoff & Singh, JJ.),
The panelists are listed in order of seniority.
/s/
Clerk Entered: December 28, 2020.