Opinion
16-P-1040
05-30-2017
Jean DUPLESSIS v. WELLS FARGO BANK, NATIONAL ASSOCIATION, trustee,& others.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The plaintiff, Jean Duplessis, brought this action in an effort to avoid foreclosure of his interest in a multifamily residential property that he owns as an investment. A Superior Court judge dismissed Duplessis's complaint for failure to state a claim upon which relief can be granted. See Mass.R.Civ.P. 12(b)(6), 365 Mass. 754 (1974). We reverse so much of the judgment as dismissed count III against the defendant mortgagee, trustee Wells Fargo Bank, National Association (Wells Fargo), and defendant loan servicer, Ocwen Loan Servicing, LLC (Ocwen). We affirm the judgment in all other respects.
Duplessis's verified complaint also seeks damages.
Background. We summarize the relevant facts set forth in the verified complaint, which are taken as true for purposes of our review of a rule 12(b)(6) dismissal. See Golchin v. Liberty Mut. Ins. Co., 460 Mass. 222, 223, S.C., 466 Mass. 156 (2011).
Duplessis and his estranged wife, Virginia Duplessis, are the owners of the real estate known as 565 River Street in the Mattapan section of Boston (the property). The property is a multifamily residential building, which Duplessis purchased in order to earn rents as a landlord. Duplessis does not live there; he lives in Randolph.
Virginia Duplessis is not a party to this case.
In order to buy the property, Duplessis took a loan from Fremont Investment and Loan (Fremont). In connection with that loan, Duplessis signed a promissory note dated November 12, 2004. Duplessis's note was secured by a mortgage on the property granted by both him and Virginia Duplessis to Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for Fremont. Eventually, the mortgage was assigned to Wells Fargo.
Duplessis granted Virginia an interest in the property on the same day as the note and mortgage were executed.
In 2008, Duplessis's personal liability on the note was discharged in bankruptcy. Although there was a foreclosure proceeding concerning the property in 2010, the complaint alleges that Wells Fargo now seeks to foreclose again. Duplessis admits that he has not made any payment on the loan in six years.
On or about October 2, 2015, Wells Fargo's lawyer, practicing with the defendant law firm Michienzie and Sawin, LLC (Michienzie), sent a "Notice of Mortgage Foreclosure Sale" to Duplessis and Virginia Duplessis in care of Duplessis's attorney. The notice included an attachment entitled "Certificate Relative to Foreclosing Party's Right to Foreclose Pursuant to 209 CMR 18.21A(2)(c)," purportedly signed by an employee of defendant Ocwen. The notice stated that a foreclosure sale would be held on October 29, 2015, at 11:00 a.m.
Duplessis commenced this action on October 22, 2015, seeking, at the outset, a preliminary injunction. On November 16, 2015, a Superior Court judge denied Duplessis's request for a preliminary injunction on the ground that he had failed to establish irreparable harm from a foreclosure "on this commercial investment property."
Duplessis's complaint asserts three causes of action. Count I, against Wells Fargo, asserts that the statute of limitations related to enforcement of negotiable instruments, see G. L. c. 106, § 3-118, bars Wells Fargo's attempt to foreclose. Count II, asserted against Michienzie, alleges violation of the State and Federal fair debt collection practices acts, their corresponding regulations, and G. L. c. 93A. Count III is entitled "Breach of Contract." It asserts that Duplessis has been damaged by a failure by all defendants to give preforeclosure notices that he claims are contractually required.
In his complaint, Duplessis requested the following relief: (i) a permanent injunction preventing foreclosure; (ii) a declaration that the mortgage is void; and (iii) damages in an unspecified amount.
In late 2015, Wells Fargo and Ocwen moved to dismiss counts I and II of the complaint and Michienzie moved to dismiss all counts. Wells Fargo and Ocwen joined in Michienzie's motion. On May 27, 2016, a Superior Court judge allowed Wells Fargo and Ocwen's motion and also allowed Michienzie's motion as joined by Wells Fargo and Ocwen. A judgment of dismissal as to all counts was entered on the docket on May 31, 2016. This appeal followed.
Discussion. Our review of the motion judge's decision is de novo. See Ryan v. Holie Donut, Inc., 82 Mass. App. Ct. 633, 635 (2012).
Count I. We construe count I of the complaint, entitled "Statute of Limitations," as an action for a declaratory judgment stating that Wells Fargo is barred from foreclosing on the mortgage by a provision of the Uniform Commercial Code as adopted in Massachusetts, which states:
"[A]n action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date."
G. L. c. 106, § 3-118(a ), inserted by St. 1998, c. 24, § 8.
The motion judge dismissed count I on the grounds that (i) Duplessis's promissory note has a maturity date in 2034, and (ii) Duplessis failed to allege that Wells Fargo accelerated the debt more than six years ago. Accordingly, the motion judge found, the complaint does not state facts from which one could conclude that the statute of limitations found in G. L. c. 106, § 3-118, has run, and thus, count I does not state a claim. For his part, Duplessis argues that the complaint should be liberally read as alleging acceleration of his debt more than six years ago because it states that a foreclosure sale occurred in 2010, and, the argument goes, it is obvious that the debt must have been accelerated prior to the 2010 auction.
The complaint does not state the maturity date or attach the note, but the complaint also does not allege that the note has matured. The complaint alleges only that no payments have been made pursuant to the note in more than six years. Duplessis's position on appeal is that there are facts in the complaint from which it can reasonably be inferred that the note was accelerated more than six years ago. In any event, Duplessis does not challenge the motion judge's assertion that the maturity date stated on the face of the note is December 1, 2034.
We need not decide whether Duplessis has sufficiently pleaded acceleration of his note because we affirm the dismissal of count I on different grounds. See Clair v. Clair, 464 Mass. 205, 214 (2013) ("An appellate court may affirm a correct result based on reasons that are different from those articulated by the judge below"). Specifically, we affirm dismissal of count I because the statute of limitations found at G. L. c. 106, § 3-118(a ), does not apply to foreclosures.
The statute cited by Duplessis is found within Article 3 of the Uniform Commercial Code as adopted in Massachusetts at G. L. c. 106, § 1-101 et seq. (the UCC), which, along with Article 4, sets forth the law of negotiable instruments in this Commonwealth. Section 3-118(a ) is addressed to actions to enforce "notes." A mortgage is not a negotiable instrument, and is not a note. It is, instead, "a transfer of legal title to the mortgage property ... made in order to secure a debt, [which is] defeasible when the debt is paid." Eaton v. Federal Natl. Mort. Assn., 462 Mass. 569, 575 (2012). Article 3 of the UCC, as adopted in Massachusetts, does not govern mortgages.
Here, any monetary claim against Duplessis personally for any part of his unpaid debt is barred by the discharge he obtained in 2008, regardless of whether Article 3's § 3-118 might also bar the claim. That does not mean, however, that Duplessis's mortgagee cannot foreclose. "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.' " Christakis v. Jeanne D'Arc Credit Union, 471 Mass. 365, 367 (2015), quoting from Johnson v. Home State Bank, 501 U.S. 78, 84 (1991). A foreclosure is an action in rem, which survives the discharge. Johnson, supra. Like a bankruptcy discharge, UCC § 3-118 applies to Duplessis's note, but does not prevent in rem proceedings against the property. Accordingly, Duplessis is not entitled to the declaration he seeks, even construing all factual allegations in his favor, and count I was correctly dismissed.
Duplessis cites JPMorgan Chase & Co. v. Casarano, 81 Mass. App. Ct. 353, 355-356 (2012), for the proposition that "[w]ithout a valid promissory note, a mortgage is generally not enforceable." In JPMorgan, however, the mortgage was found to be unenforceable because the note was lost and its terms could not be ascertained; accordingly, "there was no evidence of any terms that would reveal whether the debt was in default." Id. at 356. That situation is not presented here, where the note appears to be available.
Count II. Duplessis's second count is brought pursuant to the State and Federal unfair debt collection practices statutes (see G. L. c. 93, § 49 ; 15 U.S.C. § 1692 et seq. ), and G. L. c. 93A. The unfair debt collection practices statutes and corresponding regulations that Duplessis cites apply, however, only to consumer debt and not to business debt. See Fleet Natl.Bank v. Baker, 263 F. Supp. 2d 150, 153 (D. Mass. 2003) ; Amos Financial LLC v. Law Offices of Charles P. Kazarian, P.C., 2016 U.S. Dist. Lexis 72059, *5-7 (D. Mass. 2016).
Duplessis's complaint states plainly that he bought the property for "commercial purposes," and he does not live there. Accordingly, the consumer protection statutes Duplessis cites do not apply here, and count II of the complaint was properly dismissed.
Duplessis's argument that one or more of the defendants voluntarily submitted themselves to the State or Federal fair debt collection statutes is not supported by the legal authority he cites and does not rise to the level of adequate appellate advocacy. Thus, we need not consider it. See Mass.R.A.P. 16(a)(4), as amended, 367 Mass. 921 (1975); Oggiani v. Chief Justice of the Trial Ct., 476 Mass. 1016, 1017 (2017).
Duplessis's briefs suggest that count II states an unfair business practices claim pursuant to G. L. c. 93A, § 11, independent of whether the debt collection statutes apply. To the extent Duplessis has argued this point adequately (see Mass.R.A.P. 16 [a][4] ), it is unavailing for many reasons, two of which we touch on here. First, count II does not allege that any attempt to foreclose by the defendants could be considered unfair for any reason unrelated to application of G. L. c. 106, § 3-118, which we have already determined does not apply. Second, a business-to-business c. 93A claim (unlike a consumer c. 93A claim) is available only to a party who has suffered an actual loss of "money or property." See Auto Flat Car Crushers, Inc. v. Hanover Ins. Co., 469 Mass. 813, 820-826 & n.10 (2014). Count II alleges no such loss, and, accordingly, a c. 93A claim brought pursuant to § 11 does not lie.
Count III. Duplessis's third and final count is titled "Breach of Contract," and alleges that "[t]o the extent that a contract exists between [Duplessis] and any or all of the defendants," the defendants have breached that contract by failing to send preforeclosure notices as required by the subject mortgage and note, and accordingly, the defendants "may not foreclose, and any foreclosure sale that took place would be void." In conclusory fashion, the complaint also alleges that Duplessis has been "damaged" by the failure to send proper notices, but the complaint does not describe any actual harm to Duplessis flowing from these alleged omissions.
Notably, Wells Fargo and Ocwen joined Michienzie's motion, which sought a dismissal of count III. Michienzie's motion to dismiss, however, focused only on whether the complaint alleges a contract between Michienzie and Duplessis. The motion did not explore whether a contract was formed between Duplessis and any other party.
We shall affirm the dismissal of count III as pleaded against Michienzie on the ground that Michienzie is not a proper defendant as to this claim. Michienzie argued correctly that a breach of contract claim cannot lie against it based on alleged contracts to which it is not a party. Regardless of whether count III is properly characterized as a breach of contract action, however, the justiciable controversy lies between Wells Fargo and Ocwen, on one hand, and Duplessis, on the other. Michienzie is merely the law firm hired to carry out the foreclosure proceedings. It is not a mortgagee or a party to the mortgage instrument, and it has no interest of its own in the subject land. Accordingly, there was no error in the motion judge's dismissal of the claim as alleged against Michienzie. See G. L. c. 231A, § 1 ; Entergy Nuclear Generation Co. v. Department of Envtl. Protection, 459 Mass. 319, 325 (2011), quoting from District Attorney for the Suffolk Dist. v. Watson, 381 Mass. 648, 659 (1980) ("An actual controversy exists where there is ‘a "real dispute" caused by the assertion by one party of a duty, right, or other legal relation in which he has a "definite interest," in circumstances indicating that failure to resolve the conflict will almost inevitably lead to litigation’ ").
Wells Fargo and Ocwen, however, never made any argument in their Superior Court submissions as to why count III should be dismissed as against them. They merely joined Michienzie's motion, which was focused entirely on whether Michienzie was a party to any relevant contract. Read in the light most favorable to Duplessis, however, the complaint seeks to allege a basis for an injunction or a declaratory judgment barring a foreclosure until such time as notices compliant with the mortgage have been given. See generally Pinti v. Emigrant Mort. Co., 472 Mass. 226, 243 (2015).
The motion judge dismissed count III on the ground that defendants Wells Fargo and Ocwen had produced notices sent directly to Duplessis in opposition to Duplessis's motion for a preliminary injunction. The judge did not, however, analyze those notices for compliance with the mortgage or the statutory requirements found in G. L. c. 244. The legal issues presented are complex, the procedural context is strained, see note 10, supra, and the factual record is too muddy to affirm dismissal at this juncture.
The motion judge considered the attachments to the opposition to the motion for a preliminary injunction on a rule 12(b)(6) motion, without formally converting the motion to one for summary judgment pursuant to Mass.R.Civ.P. 56, as amended, 436 Mass. 1404 (2002), or giving notice to the parties. See Mass.R.Civ.P. 12(b) ; Gomes v. Metropolitan Property Cas. Ins. Co., 45 Mass. App. Ct. 27, 32 (1998) (judge committed error by not alerting parties that he intended to treat rule 12 [b][6] motion as one for summary judgment). Cf. Schaer v. Brandeis Univ., 432 Mass. 474, 477 (2000).
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Conclusion. So much of the judgment as dismissed count III against Wells Fargo and Ocwen is reversed. In all other respects, the judgment is affirmed.
So ordered.
Affirmed in part, reversed in part.