54 N.E.3d 548
Mass. App. Ct.2016Background
- Milton Santos purchased a Revere home in 2006 and financed it with mortgages; he defaulted in 2008.
- U.S. Bank (trustee) held the first mortgage; Wells Fargo serviced the loan.
- Santos applied multiple times (including a three-month HAMP trial period plan) for a HAMP permanent modification; defendants denied permanent modification and later foreclosed, purchasing the property at sale in July 2010.
- Defendants brought a postforeclosure summary process action in District Court; judgment for possession entered and Santos’s appeal was dismissed.
- Santos sued in Superior Court alleging (1) lack of § 35A ninety-day right-to-cure notice (seeking to void foreclosure) and (2) negligent processing of HAMP modification applications.
- The Superior Court dismissed the § 35A claim as precluded by the prior summary process judgment and granted summary judgment to defendants on negligence; the Appeals Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Santos may litigate a § 244, § 35A right-to-cure notice claim in Superior Court after failing to raise it in the summary process action | Santos argued the § 35A claim could be reserved and litigated in Superior Court and that later clarifications of jurisdiction (e.g., Schumacher) made his choice reasonable | Defendants argued claim preclusion/res judicata bars relitigation because the identical parties and issue could have been litigated in the summary process action which produced a final judgment | Claim preclusion applies; Santos should have raised the § 35A challenge in the summary process action and the Superior Court dismissal is affirmed |
| Whether a § 35A notice violation must be litigated in Superior Court rather than in summary process | Santos contended § 35A is part of foreclosure power-of-sale requirements and thus appropriately raised in Superior Court | Defendants pointed to existing summary process avenues to challenge title and to case law indicating summary process could address such defenses | Court: postforeclosure § 35A challenges can be raised in summary process, but to defeat eviction on less-than-fundamental-unfairness grounds a preforeclosure equitable action is required; here summary process was the proper forum |
| Whether HAMP or related Servicer Participation Agreements create a duty of care enabling negligence claims for mishandled modification applications | Santos argued defendants negligently processed HAMP applications and owed duties (invoking third-party beneficiary/other theories) | Defendants argued HAMP creates no private right or duty, borrowers are not intended third-party beneficiaries of SPAs, and no independent duty exists under Massachusetts law | Held: HAMP and SPAs do not create a duty of care; negligence claim fails as a matter of law and summary judgment for defendants is affirmed |
| Whether any alternative legal theories survive (e.g., breach of TPP, Chapter 93A, implied covenant) | Santos did not press breach-of-TPP or c.93A claims on appeal; suggested good faith/duty theories at oral argument | Defendants noted those claims were not pled or were otherwise not before the court | Court declined to decide hypothetical viability; observed some courts permit c.93A or TPP-based claims but they were not raised here |
Key Cases Cited
- Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) (HAMP background; courts reject private right under HAMP and analyze third-party beneficiary claims)
- Spaulding v. Wells Fargo Bank, N.A., 714 F.3d 769 (4th Cir. 2013) (describing HAMP purpose and framework; denial of private enforcement)
- MacKenzie v. Flagstar Bank, FSB, 738 F.3d 486 (1st Cir. 2013) (First Circuit holds no duty arises from HAMP and borrowers are not intended third-party beneficiaries)
- Schumacher, U.S. Bank Natl. Assn. v. Schumacher, 467 Mass. 421 (Mass. 2014) (clarifies treatment of § 35A claims: preforeclosure equitable action or summary process counterclaim; concurring opinion explains ‘‘fundamental unfairness’’ standard in postforeclosure summary process)
- Markle v. HSBC Mort. Corp. (USA), 844 F. Supp. 2d 172 (D. Mass. 2012) (refuses to recognize a new duty of care based on HAMP guidelines)