915 F.3d 801
1st Cir.2019Background
- In 2006 the Thompsons mortgaged their home to Washington Mutual; mortgage included paragraph 22 (pre-acceleration notice requirements) and paragraph 19 (post-acceleration reinstatement conditions and timing).
- Washington Mutual’s loan and mortgage were later assigned to JPMorgan Chase after FDIC receivership.
- In August 2016 Chase sent default/acceleration notices stating the loan was in default, giving a cure date, and telling the Thompsons they had "the right to reinstate after acceleration" and that they could "still avoid foreclosure by paying the total past-due amount before a foreclosure sale takes place."
- The Thompsons did not cure; Chase held a foreclosure sale in November 2017. The Thompsons sued in state court claiming the notice violated paragraph 22; Chase removed to federal court and moved to dismiss for failure to state a claim.
- The district court granted dismissal, finding the notice complied with paragraph 22. On appeal the First Circuit reviewed de novo whether the notice satisfied strict Massachusetts requirements and whether the notice was misleading.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Chase’s notice complied with paragraph 22’s requirement to inform mortgagor of the right to reinstate after acceleration | Thompson: Notice was deficient because it failed to recite paragraph 19’s conditions and time limits for reinstatement | Chase: Paragraph 22 only requires informing the mortgagor of the substantive right to reinstate, not reciting procedural details from paragraph 19 | Held: Chase had no obligation to recite paragraph 19’s procedural conditions in the paragraph 22 notice; informing of the substantive right suffices |
| Whether the additional language that payment "before a foreclosure sale takes place" was inaccurate or deceptive given paragraph 19’s five-day pre-sale tender requirement | Thompson: That language was misleading because paragraph 19 requires tender at least five days before the sale | Chase: Notice was accurate in stating tender before sale would avoid foreclosure (no meaningful response in the record) | Held: The omission of the five-day pre-sale requirement rendered the notice potentially deceptive under Pinti, even absent any allegation of actual prejudice |
| Whether a mortgagor must show prejudice from an inaccurate or misleading paragraph 22 notice to invalidate a foreclosure | Thompson: Did not allege prejudice (and did not tender payment) | Chase: Implied that absence of prejudice should defeat the claim | Held: Under Massachusetts decisions (Pinti and predecessors), strict compliance is required and an inaccurate/potentially deceptive notice invalidates the foreclosure regardless of asserted prejudice |
Key Cases Cited
- Pinti v. Emigrant Mortg. Co., 33 N.E.3d 1213 (Mass. 2015) (mortgagee must strictly comply with paragraph 22 and notices must not be inaccurate or potentially deceptive)
- U.S. Bank Nat'l Ass'n v. Ibanez, 941 N.E.2d 40 (Mass. 2011) (Massachusetts does not require judicial approval to foreclose; courts enforce strict compliance with mortgage terms tied to power of sale)
- Shaulis v. Nordstrom, Inc., 865 F.3d 1 (1st Cir. 2017) (fraudulent-misrepresentation claims require a showing of injury causally linked to the misrepresentation)
- Galvin v. U.S. Bank, N.A., 852 F.3d 146 (1st Cir. 2017) (de novo review standard for Rule 12(b)(6) dismissal)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (legal conclusions not entitled to assumed truth in pleading)