Opinion
1581CV06127
12-04-2018
Stewart Title Guaranty Company v. Emigrant Mortgage Company
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Yarashus, Valerie A., J.
MEMORANDUM OF DECISION AND ORDER ON CROSS MOTIONS FOR PARTIAL SUMMARY JUDGMENT AS TO INTEREST
Valerie A. Yarashus Justice Superior Court
I. Introduction
This case arises out of a foreclosure which was determined to be void by the Supreme Judicial Court in Pinti v. Emigrant Mortgage Co., 472 Mass. 226 (2015). As a result of that decision, the sale of the property was void, the transaction was unwound and the purchase price was returned to the buyer more than three years after the sale. The plaintiff, Stewart Title Guaranty Company ("Stewart Title"), and the defendant, Emigrant Mortgage Co. ("Emigrant") have now cross moved for partial summary judgment on the sole issue of whether, as a matter of law, Emigrant was required to refund not only the purchase price to the buyer, Harold Wilion, but also interest from the date of the sale to the date the funds were returned. For the reasons stated below, Stewart Title’s Motion for Partial Summary Judgment on this issue is ALLOWED and Emigrant’s Cross Motion for Summary Judgment is DENIED.
The purchaser of the property, Harold Wilion, collected on the title insurance he had purchased for this property and assigned any rights he may have to Stewart Title, which is now the plaintiff in this matter pursuant to the assignment of rights.
A previous motion for partial summary judgment was decided by Krupp, J., on September 26, 2016. In that decision, the Court ruled that "on the facts of this case, the MOS [Memorandum of Sale] is no bar to plaintiff seeking to recover damages in excess of the purchase price of the property."
II. Background
The relevant facts in this matter are not disputed. On March 13, 2008, Linda S. Pinti and Lesley R. Phillips (collectively, "Pinti") purchased the property located at 1643 Cambridge Street, Unit 52, in Cambridge, Massachusetts (the "Property"). Pinti executed and delivered a promissory note to Emigrant in the amount of $160, 000.00. To secure the loan obligation, Pinti gave a mortgage for the Property to Emigrant on the same date. Eventually, Pinti defaulted on the loan and Emigrant initiated foreclosure proceedings.
Emigrant conducted its foreclosure sale of the Property on August 9, 2012. The original plaintiff in the instant action, Harold Wilion ("Wilion"), was the highest bidder and purchased the Property at this foreclosure sale. In exchange for the purchase price of $260, 000.00, Emigrant gave Wilion a foreclosure deed to the Property on September 10, 2012. In connection with this foreclosure sale, Wilion obtained a policy of title insurance which was underwritten by Stewart Title.
Pinti remained at the Property, and so Wilion filed a summary process action for possession in the Cambridge District Court against Pinti. Pinti defended the summary process action and raised issues of the validity of the foreclosure sale in the Superior Court action of Pinti v. Emigrant Mortgage Co., Inc., Civil Action No. 1381CV00348. The Superior Court entered judgment against Pinti, who appealed. The Supreme Judicial Court accepted the matter sua sponte for direct appellate review. On July 17, 2015, the SJC issued its decision in Pinti and held that Emigrant failed to comply strictly with the notice provision set forth in paragraph 22 of the Property’s mortgage and therefore the foreclosure sale to Wilion was void. See 472 Mass. at 227 , 242. The SJC gave its decision in Pinti prospective application only, but applied its decision to the parties in Pinti. Id. at 243.
As a result of the decision and a demand letter, Emigrant returned the purchase price of $260, 000.00 to Wilion by check with a cover letter dated October 8, 2015. Although Wilion included a demand for interest, Emigrant declined to include interest with its check, based on its interpretation that interest was not required.
Wilion made a claim to Stewart Title on the policy of title insurance he purchased in connection with the foreclosure deed. Stewart Title paid Wilion $120, 000.00 (including the interest that is the subject of these cross motions for partial summary judgment), and the parties executed a Release and Settlement Agreement as well as an Assignment of Claims.
Emigrant has refused to pay Wilion any additional amount for interest or otherwise, and has refused Stewart Title’s similar demands as subrogee and assignee to Wilion’s rights. Statutory interest on $260, 000.00 from September 10, 2012 (date of foreclosure sale) through October 13, 2015 (date of repayment of the purchase price) calculated at 12% per annum pursuant to G.L.c. 231, § 6C equals $96, 420.82.
III. Discussion
A. Standard for Summary Judgment
Summary judgment is granted where there are no genuine issues of material fact and where the moving party is entitled to judgment as a matter of law. Mass.R.Civ.P. 56(c); Cassesso v. Commissioner of Corr., 390 Mass. 419, 422 (1983); Community Nat’l Bank v. Dawes, 369 Mass. 550, 553 (1976). The moving party bears the burden of affirmatively demonstrating the absence of a triable issue, and that the summary judgment record entitles the moving party to judgment as a matter of law. Flesner v. Technical Commc’ns Corp., 410 Mass. 805, 808-09 (1991); Pederson v. Time, Inc., 404 Mass. 14, 16-17 (1989); see Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716 (1991). The court considers the evidence presented in the light most favorable to the nonmoving party. Mass.R.Civ.P. 56(c); Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120 (1991); Parent v. Stone & Webster Eng’g Corp., 408 Mass. 108, 113 (1990); Flynn v. Boston, 59 Mass.App.Ct. 490, 491 (2003). The nonmoving party, however, cannot rest on his or her pleadings and mere assertions of disputed facts to defeat the motion for summary judgment. LaLonde v. Eissner, 405 Mass. 207, 209 (1989). "[B]are assertions and conclusions ... are not enough to withstand a well-pleaded motion for summary judgment." Polaroid Corp. v. Rollins Envtl. Servs., Inc., 416 Mass. 684, 696 (1993).
B. Legal Analysis
In arguing the Pinti case to the SJC, the parties did not ask the Court to address whether interest was also owed to Wilion, and so the Court did not specifically address that issue in its decision. The question of whether third-party buyers at a foreclosure sale, which is later determined to be void, are entitled to interest on the purchase price that is returned to them appears to be a matter of first impression in Massachusetts, with no appellate decisions that are directly on point. However, at least three other states (California, Hawaii and Oregon) have addressed this precise issue, and all of them have found that a void non-judicial foreclosure sale entitles the putative buyer to the return of the purchase price, plus interest, until the date of reimbursement. See, e.g., Residential Capital v. Cal-Western Reconveyance Corp., 108 Cal.App.4th 807, 822, 823-24 (2003) (holding that, where foreclosure sale was void for failure to comply with applicable statutory scheme, "the return of the purchase price, plus accrued interest, as received, was the only remedy to which [purchaser] was entitled"); Lee v. HSBC Bank USA, 121 Hawaii 287, 296 (2009) ("[A]n agreement created at a foreclosure sale conducted pursuant to [statute] is void and unenforceable where the foreclosure sale is invalid under the statute and ... the high bidder at such a sale is entitled only to return of his or her downpayment plus accrued interest"); Staffordshire Invs., Inc. v. Cal-Western Reconveyance Corp., 209 Or.App. 528, 542-44 (2006) (holding that "a foreclosure sale entered into in violation of [applicable] statutory prohibition ... renders the contract void and plaintiff’s remedy is limited to return of the purchase funds and, if applicable, interest").
In addition to the three states that have published opinions, an unpublished Washington opinion arrives at the same conclusion. Gamlam v. Select Portfolio Servicing, Inc., 150 Wash.App. 1035, 2009 WL 1589377 at *3-4 (2009) (unpublished) (holding that, where bankruptcy court had voided non-judicial foreclosure sale of debtor’s property because defendant mortgage holder violated bankruptcy stay by proceeding with sale, plaintiff buyer "was entitled to interest and damages from the date of the [voided] sale"). ---------
In those cases, the courts found that the sales were void because the parties had violated the comprehensive statutory schemes applicable to non-judicial foreclosure sales in those states. Here, the Supreme Judicial Court based its decision in Pinti on a finding that Emigrant did not strictly comply with paragraph 22 of its mortgage, which relates to providing notice of the default. 472 Mass. at 237-38. "[T]he notice provisions in paragraph 22 are ‘terms of the mortgage, ’ not terms of a statute ‘relating to the foreclosure of mortgages by the exercise of a power of sale.’" Id. at 239, quoting G.L.c. 183, § 21. Therefore, even though Stewart Title has pleaded multiple theories in the Complaint-negligence, negligent misrepresentation and breach of contract/breach of warranty-this case is, in essence, one concerning a breach of contract. To the extent it is relevant, the Court concludes that the plaintiff in this case may recover interest based upon breach of contract.
This conclusion is consistent with long-standing Massachusetts law that interest is included as part of damages in a breach of contract case. Specifically, G.L.c. 231, § 6C, provides, "In all actions based on contractual obligations, upon a verdict, finding or order for judgment for pecuniary damages, interest shall be added by the clerk of the court to the amount of damages, at the contract rate, if established, or at the rate of twelve percent per annum from the date of the breach or demand." This provision" ‘is designed to compensate a damaged party for the loss of use or unlawful detention of money.’ An award of interest is made ‘so that a person wrongfully deprived of the use of money should be made whole for his [or her] loss.’" Sterilite Corp. v. Continental Cas. Co., 397 Mass. 837, 841 (1986), quoting Perkins Sch. for the Blind v. Rate Setting Comm’n, 383 Mass. 825, 835 (1981).
Stewart Title has asserted that the correct calculation, applying these principles, is $96, 420.82 and Emigrant has not challenged that calculation if the above principles are used.
ORDER
Accordingly, for the reasons stated above, Stewart Title’s Motion for Partial Summary Judgment on this issue is ALLOWED in the amount of $96, 420.82 and Emigrant’s Cross Motion for Summary Judgment is DENIED.