Wenzel v. Sand Canyon Corp.
841 F. Supp. 2d 463
D. Mass.2012Background
- Wenzels challenge Wells Fargo’s right to foreclose on their Springfield, MA home following a 2010 foreclosure by Wells Fargo after default on a loan originally from Option One/Mortgage, with Sand Canyon as successor entity and AHMSI servicing; Sand Canyon allegedly assigned the Mortgage to Wells Fargo; Wenzels sue Commerce for insurance claim issues related to tornado damage in 2011; injunctions in state Housing Court and subsequent removal to federal court; First Amended Complaint adds Commerce and expands theories against Wells Fargo and Sand Canyon; Court grants motions to dismiss and dissolves injunction.
- The foreclosure and title issues arose from a 2005 loan and a 2010 assignment; Wenzels allege Sand Canyon lacked authority to assign and Wells Fargo lacked note possession and proper chain of title; Commerce is alleged to have denied insurance claim in bad faith; district court must decide on subject-matter jurisdiction and merits under Rule 12(b)(6).
- The court later dismisses Commerce to preserve diversity; then dismisses Counts I–V against Wells Fargo and Sand Canyon on merits; Counts VI–VII (insurance bad faith and emotional distress) are dismissed without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does adding Commerce destroy complete diversity? | Wenzels contends Commerce’s Massachusetts citizenship breaks diversity. | Commerce argues complete diversity exists prior to its addition. | Yes; diversity destroyed, but Commerce dismissed to preserve jurisdiction. |
| Is Commerce an indispensable or necessary party under Rule 19? | Argues Commerce is necessary for complete relief. | No indispensable party; action can proceed without Commerce. | Commerce not necessary/indispensable; Counts VI–VII dismissed against Commerce and Commerce dismissed from action. |
| Do Wenzels have standing to challenge the Sand Canyon–Wells Fargo assignment? | Wenzels seek declaratory relief invalidating assignment. | Wenzels lack standing to challenge assignment to Wells Fargo. | No standing; Count I dismissed. |
| Are Counts II and III barred by res judicata? | Foreclosure-title issues should be reconsidered. | Earlier Housing Court judgment resolved title/possession. | Yes; Counts II–III barred by res judicata; summary process judgment bar applies. |
| Do claims regarding Chapter 186A, negligence, and fraud have merit? | Chapter 186A protections and negligence/fraud theories support relief. | Chapter 186A inapplicable; no duty for lender; lack of fraud pleading. | Chapter 186A inapplicable to Wenzels; no duty; economic loss doctrine bars negligence; fraud claim fails for lack of particularity. |
Key Cases Cited
- Bank of New York v. Bailey, 460 Mass. 327, 951 N.E.2d 331 (Mass. 2011) (res judicata applicability to summary process foreclosure judgments)
- Ishaq v. Wachovia Mortg., FSB, 2010 WL 1380386 (D. Mass. 2010) (cited for finality of consent judgments (note: WL not allowed))
- Sheehan Construction Co. v. Dudley, 299 Mass. 51, 12 N.E.2d 182 (Mass. 1937) (consent judgments and finality in foreclosure context)
- Solomont v. Howe Real Estate Advisors, LLC, 2011 WL 4483960 (Mass. Land Ct. 2011) (res judicata and title issues in foreclosure context)
- Kelton Corp. v. County of Worcester, 426 Mass. 355, 688 N.E.2d 941 (Mass. 1997) (consent judgments and finality)
- Ibanez v. U.S. Bank Nat’l Ass’n, 458 Mass. 637, 941 N.E.2d 40 (Mass. 2011) (Massachusetts foreclosure statute and standing considerations)
- Picciotto v. Continental Cas. Co., 512 F.3d 9 (1st Cir. 2008) (jurisdictional questions and complete diversity)
- Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 125 S. Ct. 2611, 162 L. Ed. 2d 502 (U.S. 2005) (contamination theory of incomplete diversity)