571 B.R. 491
Bankr. D. Mass.2017Background
- In 2006 the debtor executed a $178,500 promissory note secured by a mortgage on real property in Agawam, MA; the recorded mortgage referenced a legal description but no description was attached.
- Debtor defaulted and in late 2012 applied to convey a deed in lieu; she vacated the property after Defendants allegedly told her they would accept a deed in lieu.
- After she vacated, Debtor alleges Defendants refused the deed in lieu and changed the locks, denying her access.
- Debtor filed Chapter 7 in June 2015, converted to Chapter 13 in December 2015, and commenced this adversary proceeding on December 15, 2016 asserting seven counts: avoidance under §544, breach of contract, wrongful eviction/conversion, breach of quiet enjoyment, Chapter 93A, misrepresentation, and intentional infliction of emotional distress.
- Defendants moved to dismiss all counts; court considered standing to assert §544 avoidance, statute of frauds for deed-in-lieu contract, statutes of limitations for tort/Chapter 93A claims, and applicability of quiet-enjoyment doctrine.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a Chapter 13 debtor may exercise trustee avoidance powers under §544 | Kalesnik: Chapter 13 estate includes §544 recoveries (§1306, §541) so debtor should be able to prosecute avoidance actions; policy/§1325 requires treating avoidance value in plans | HSBC/Ocwen: §544 expressly vests powers in a "trustee"; Code grants debtor-in-possession such powers in Ch.11/12 but not in Ch.13; majority rule forbids Chapter 13 debtor standing | Dismissed: Chapter 13 debtors lack standing to exercise Chapter 5 avoidance powers outside narrow §522(h) context; Count I dismissed |
| Whether an alleged oral agreement to accept a deed in lieu is enforceable (breach of contract) | Kalesnik: Defendants promised to accept deed in lieu if she vacated; they reneged | Defendants: No written agreement complies with Mass. statute of frauds; debtor did not deliver a deed; no specific damages pled | Dismissed: Deed-in-lieu contract is a sale of land subject to statute of frauds; no writing alleged; Count II dismissed |
| Whether tort and Chapter 93A claims are timely (wrongful eviction/conversion, misrepresentation, IIED, Chapter 93A) | Kalesnik: Discovery rule/equitable estoppel tolled limitations until early 2014 when she discovered deception | Defendants: Debtor knew or should have known by May 1, 2013 (letter from counsel) or by late 2012 when she vacated; therefore claims are time-barred | Mixed: Tort claims (Counts III, VI, VII) dismissed as time-barred (3‑yr); Chapter 93A claim (Count V) survives because it may have accrued later and is subject to 4‑yr tolling/discovery inquiry |
| Whether covenant/breach of quiet enjoyment applies to a lender–mortgagor relationship | Kalesnik: Statute and doctrine cover wrongful self-help evictions; lenders liable | Defendants: Covenant protects tenants; statute Mass. Gen. Laws ch.186 §14 applies to lessors/landlords, not lenders | Dismissed: Quiet enjoyment claim (Count IV) fails because covenant/statute applies to landlord-tenant tenancy; Defendants not landlords |
Key Cases Cited
- Hartford Underwriters Ins. Co. v. Union Planters Bank, 530 U.S. 1 (emphasizing that statutes granting rights to a “trustee” should not be read to include others)
- Stangel v. United States (In re Stangel), 219 F.3d 498 (majority rule that Chapter 13 debtors lack Chapter 5 avoidance standing)
- Watterson v. Page, 987 F.2d 1 (pleading-stage standard — accept complaint allegations and reasonable inferences)
- Sanchez v. Pereira-Castillo, 590 F.3d 31 (plausibility standard for entitlement to relief)
- Ashcroft v. Iqbal, 556 U.S. 662 (complaints must plead factual enhancement beyond naked assertions)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (Twombly plausibility pleading standard)
- Levin v. Berley, 728 F.2d 551 (Massachusetts discovery rule for accrual of statute of limitations)
- Cambridge Plating Co. v. Napco, Inc., 991 F.2d 21 (statute of limitations begins when plaintiff reasonably should know of injury)