MELISSA A. JUAREZ, Plаintiff, Appellant, v. SELECT PORTFOLIO SERVICING, INC. AND U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE, ON BEHALF OF THE HOLDERS OF THE ASSET BACKED SECURITIES CORPORATION HOME EQUITY LOAN TRUST, SERIES NC 2005-HE8, ASSET BACKED PASS-THROUGH CERTIFICATES, SERIES NC 2005-HE8, Defendants, Appellees.
No. 11-2431
United States Court of Appeals For the First Circuit
February 12, 2013
Torruella, Ripple, and Howard, Circuit Judges.
[Hon. Denise J. Casper, U.S. District Judge]
Glenn F. Russell, Jr., with whom Law Office of Glenn F. Russell, Jr., was on brief for appellant.
Peter F. Carr, II, with whom Charlotte L. Bednar and Eckert Seamans Cerin & Mellott, LLC, was on brief for appellees.
* Of the Seventh Circuit, sitting by designation.
I.
A. Factual and Procedural Background
On October 29, 2010, Juarez, an attorney acting pro se, filed a complаint in Massachusetts state court against defendants U.S. Bank National Association as Trustee on Behalf of the Holders of the Asset Backed Securities Corporation Home Equity Loan Trust, Series NC 2005-HE8 (“U.S. Bank“) and Select Portfolio Servicing, Inc. (“SPS“), U.S. Bank‘s servicer. Defendants removed the case from the Suffolk County Superior Court to the district court after Juarez, again acting pro se, filed an amended verified complaint.
1. The amended complaint
The facts as alleged by Juarez in her amended complaint are as follows.
Juarez purchased a house in Suffolk County, Massachusetts, on August 5, 2005. She financed the purchase by taking out two loans. The complaint, for reasons not stated in the
After closing, the note and mortgage exchanged hands several times within the secondary mortgage market. The amended complaint states that, upon Juarez‘s information and belief, the note and mortgage passed from New Century Mortgage, the original lender, to NC Capital Corporation and, later, from NC Capital Corporation to Asset Backed Securities Corporation. None of the transactions mentioned above were recorded in the Suffolk County Registry of Deeds after they occurred.
In order to pool and securitize loans, Asset Backed Securities established a trust in the form of a real estate mortgage investment conduit (“REMIC“), a special type of trust that receives favorable tax treatment. See
According to the amended complaint, the PSA and the federal tax code‘s provisions regulating REMICs required that all
Juarez alleges that, even though Asset Backed Securities Corporation acquired her loan immediately after it was executed, the assignment of the loan to the trustee U.S. Bank occurred after January 1, 2006, meaning that it went into the trust in violation of the PSA. She alleges that the assignment was void because it was contrary to the trust‘s governing document.
Juarez acknowledged in the amended complaint that she could not afford the payments on both mortgages and defaulted. Foreclosure proceedings began in the summer of 2008, culminating in the sale of her home at an auction on October 22, 2008. She claims, however, that defendants did not hold the note and the mortgage at the time they began the foreclosure proceedings against her, and that the foreclosure was therefore illegal under Massachusetts mortgage law.
Juarez attached as an exhibit to her amended complaint a copy of a document entitled “Corporate Assignment of Mortgage,” which was recorded in the corresponding registry of deeds on October 29, 2008, after the foreclosure had been completed. The document is the purported assignment of her loan from NC Mortgage
Juarez further alleged that no one entered her home on July 22, 2008, contrary to what the Certificate of Entry, which she also attached to her amended complaint, states. Said certificate reflects that аn attorney-in-fact for U.S. Bank entered the mortgage premises on July 22, 2008.2
The amended complaint included one count for a violation of
2. Defendants’ motion to dismiss
After the removal of the complaint, Juarez, still acting pro se, sought to have the case remanded. Defendants on their part sought the dismissal of the complaint under
In their motion to dismiss, defendants argued that Juarez is forever barred as a matter of law from litigating the
Regarding the fraud claim, defendants argued that Juarez failed to plead fraud with the required degree of particularity and that she did not detail the specific acts carried out by defendants upon which she relied to her own detriment. Defendants also requested the dismissal of Juarez‘s claim under Chapter 93A because Juarez defaulted on her payments and has neither alleged any unfair or deceptive practice on their part nor indicated how she was injured. Juarez‘s response to the request for dismissal of hеr Chapter 93A claim was unclear. She appeared to argue that, because defendant SPS responded to her demand letter by stating that the foreclosure could not be rescinded, SPS was being deceptive. Juarez then asserted that, “[b]ased upon all of the foregoing, [she] had also pled her [f]raud claims with particularity“. Juarez also argued that New Century Mortgage Corporation could not have assigned her mortgage in 2008 or even June 2007, because it had
Defendants filed a reply brief in which, among other things, they pointed out that Juarez did not allege in the complaint that the assignment was void because of New Century‘s bankruptcy and that she “could have raised such defenses to the foreclosure in 2008 had she taken any action to contest the debt or the foreclosure.” They further stated that Juarez “never opposed the foreclosure, and actually asked Defendants to proceed with the foreclosure because she could not afford her financial obligations.”
The district court held a hearing, denied thе motion to remand from the bench, and later issued a Memorandum and Order dismissing the case in its entirety.
3. The district court‘s decision
The district court determined that the amended complaint failed to state any claim for which relief could be granted and dismissed the case. It found that the “Corporate Assignment of Mortgage” evidenced that a valid pre-closure assignment had taken
The district court also found that New Century Mortgage Corporation‘s Chapter 11 bankruptcy did not, on its own, mean that it was without authority to assign the mortgage since Chapter 11 allows petitioners to continue operating in their normal course of business. Moreover, it determined that Juarez‘s allegation that no one entered her home was not enough to challenge the validity of the Certificate of Entry signed by two witnesses. Finally, the fraud claim and the Chapter 93A claims suffered a similar fate as the district court found that Juarez had not pled with pаrticularity the actions she took to her own detriment after relying on purported fraudulent conduct by the defendants, and that Juarez failed to identify any unfair or deceptive practices.
The court then turned to Juarez‘s request for leave to amend the complaint and found that an amendment would be futile
Juarez filed this timely appeal. She sets forth a large number of interrelated issues essentially contending that the district court erred in dismissing her complaint for failure to state plausible claims for lack of legal standing to foreclose under Section 14, fraud, Chapter 93A, and for failure to do a proper entry under Section 2. She also argues that the district court erred in dismissing as conclusory her allegation that New Century was bankrupt and could not have validly made an assignment of her mortgage. In her brief, Juarez focuses mainly on the district court‘s interpretation of Ibanez and its finding that a bona fide confirmatory assignment had taken place. Defendants for their part reiterate that Juarez defaulted and that her fаilure to enjoin the foreclosure forever bars any claim regarding its validity. They insist that a valid assignment took place before the foreclosure began, as the “Corporate Assignment of Mortgage”
II.
A. Standards of Review
We review dismissals under
Finally, we review both grants and denials of motions to amend complaints for abuse of discretion. Children” cite=“274 F.3d 12” pinpoint=“19” court=“1st Cir.” date=“2001“>Hatch v. Dep‘t for Children, 274 F.3d 12, 19 (1st Cir. 2001). A district court‘s exercise of discretion will be left untouched if “the record evinces an arguably adequate basis for the court‘s decision,” such as futility of the amendment. Id. A request for leave to amend filed before discovery is complete and before a motion for summary judgment has been filed is “gauged by reference to the liberal criteria of
B. Analysis
1. Lack of power of sale under Section 14
In the case at bar it is evident that the amended complaint Juarez filed while acting pro se is by no means a model of clarity. However, a reading in the light most favorable to her leads us to conclude that it establishes a plausible claim for violation of Section 14.
Based on a comprehensive reading of the amended complaint, the crux of Juarez‘s contention appears to be that defendants lacked authority to foreclose her property under Section 14 because U.S. Bank did not have the power of sale at the time they foreclosed.6 The amended complaint puts forth two theories to
We need not address the first theory, which challenges the assignment of the loan into the trust after January 1, 2006, in violation of the PSA because we find that Juarez has alleged enough facts to set forth a plausible claim for violations of Section 14 under the second theory. We thus need not address the question of whether Juarez has standing to challenge the assignment under the terms of the PSA given that she is neither a party nor a third-party beneficiary to the PSA. We nonetheless note without deciding that many of the district courts that have addressed the issue have found no standing on the рart of a mortgagor to challenge the validity of the assignment of their mortgage under a PSA. See, e.g., Oum v. Wells Fargo, N.A., 842 F. Supp. 2d 407, 413 (D. Mass. 2012); Wenzel v. Sand Canyon Corp., 841 F. Supp. 2d 463, 478-479
Juarez‘s second theory does the latter. That is, rather than question the transactions that led to the assignment to U.S. Bank, it questions whether the assignment in fact properly took place before the foreclosure. In other words, she questions whether the entity that foreclosed her property actually had the power of sale at the time the foreclosure took place. It is, therefore, not a question of the validity of the assignment under the PSA, but a question of the timing of the assignment in relation to the initiation of the foreclosure proceedings.
Juarez repeatedly alleges throughout the amended complaint that defendants in this case did not hold the mortgage at the time they foreclosed and, therefore, had no right to exercise the power of sale under Section 14. She attached to the amended complaint the “Corporate Assignment of Mortgage” and, immediately following its introduction in the pleading, made several allegations to challenge its validity. Among them, she included the following assertion: “[t]he recorded assignment was dated and notarized on October 16, 2008, but has a ‘Date of Assignmеnt’
Defendants have argued all along that, despite its title, the document is in fact a confirmatory assignment of the kind recognized by the SJC in Ibanez as a valid means of documenting that a bona fide assignment had taken place before the foreclosure. Defendants assert that, “[o]n its face, the assignment of the Mortgage attached to Juarez‘s Verified Complaint is a confirmatory assignment, executed on October 16, 2008 to confirm the June 13, 2007 assignment.” As stated above, the district court agreed with defendants’ arguments, and found it would be futile to allow Juarez to amend the complaint because it was clear from the document
Ibanez consisted of two consolidated appeals of cases arising out of quiet title actions brought by U.S. Bank and Wells Fargo, respectively, after they each bought back a property they had foreclosed. The SJC found that the entities had failed to show they held the mortgages at the time they foreclosed, and thus their titles were null and void. Even though the cases that gave rise to the Ibanez decision were filed by entities who foreclosed and bought the properties back, and thus the burden of showing that their title was valid was on said entities, Ibanez clearly held that a foreclosure carried out by an entity that does not hold the power of sale is void.8 See 941 N.E.2d at 50, 53.
In Ibanez, the SJC also went over other basic principles of Massachusetts mortgage law. It explained that, Massachusetts is a “title theory” state where “a mortgage is a transfer of legal title to secure a debt.” Id. “Like a sale of land itself, the assignment of a mortgage is a conveyance of an interest in land that requires a writing signed by the grantor.” Id. (emphasis added). Even if the written assignment need not be in recordable
lacking the power of sale, were in fact cаses brought by mortgagors after the foreclosures had ended. See, e.g., Moor v. Dick, 72 N.E. 967 (1905).
In this case, even a perfunctory scrutiny of the “Corporate Assignment of Mortgage” attached by Juarez to her amended complaint reveals that we are before a document that was executed after the foreclosure and that it purports to reference, by virtue of its heading, a pre-foreclosure assignment. Specifically, the heading reads “Date of Assignment: June 13, 2007,” and it states that the document was executed “[o]n October 16, 2008.” However, nothing in the document indicates that
Know all men by these presents that in consideration of the sum of . . . paid to the above name Assignor [New Century Mortgage Corporation] . . . the said Assignor hereby assigns unto the above-named Assignee [U.S. Bank] the said Mortgage together with the note . . . together with all moneys now owing or that may hereafter become due . . . , and the said assignor hereby grants and conveys unto the said Assignee, the Assignor‘s beneficial interest under the mortgage.
This Court cannot, based solely on a reading of the document, as the district court did, assert that this is “the exact type of confirmatory assignment the Court in Ibanez noted was sufficient.”
For there to be a valid confirmatory assignment here, a valid written assignment must have taken place before foreclosure proceedings began. That previous assignment, as explained in Ibanez, need not be in recordable form, but it should exist in written form. Since defendants have not produced that document, we cannot assert without further discovery that a valid confirmatory assignment took place. We thus find that the district court erred in holding that a valid confirmatory assignment had taken place and
Having found that Juarez‘s complaint states sufficient facts for a plausible Section 14 claim, we now turn to the other claims asserted in her amended complaint.
2. Juarez‘s fraud and Chapter 93A claims
In order to state a claim for fraud under Massachusetts law, a complaint must plead:
(1) that the statement was knowingly false; (2) that [defendants] made the false statement with the intent to deceive; (3) that the statement was material to the plaintiffs’ decision . . . ; (4) that the plaintiffs reasonably relied on the statement; and (5) that the plaintiffs werе injured as a result of their reliance.
Doyle v. Hasbro, Inc., 103 F.3d 186, 193 (1st Cir. 1996) (citations omitted). Of course, the complaint must also pass muster under
In her amended complaint, Juarez states that defendants knew they were not the legal owners of her mortgage and
Regarding the substantial injury, the amended complaint says little. It is certainly possible that the entity which she alleges illegally foreclosed her home caused her substantial harm. It is also quite possible that the an illegal foreclosure per se caused her substantial harm. Likewise, it is possible that she relied upon defendants’ representations of ownership and that, if she had known about their alleged falsity, she would have acted to prevent the foreclоsure. At the very least, it is possible that she would not have, as defendants explain in their reply brief before the district court, “actually asked defendants to proceed with the foreclosure.” But establishing that something possibly happened is far distant from the threshold particularity requirements that must be pled under
Juarez‘s claim under Chapter 93A was also properly dismissed as insufficiently pled. Massachusetts consumer protection law proscribes “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.”
Juarez‘s amended complaint stated that defendants engaged in trade or commerce in Massachusetts within the meaning of Chapter 93A; that their unfair and deceptive practices occurred primarily in Massachusetts; that she sent them a demand letter as required by the statute in question, copy of which she attached to the complaint; and that their unfair and deceptive acts consisted of foreclosing her home without complying with the requirements of Section 14 and Section 2, foreclosing her home without a legal right to do so, and selling her home a second time without any legal right to do so. As a consequence, she asserted, she suffered harm.
The amended complaint indeed alleges some of the basic facts necessary to establish a claim under Chapter 93A, such as defendants’ connection with commerce in Massachusetts. It fails, however, to give notice to defendants regarding the discrete acts she alleges were unfair or deceptive “within the penumbra of some . . . concept of unfairness [or deceptiveness].” Kenda Corp., 329 F.3d at 234 (quoting Linkage Corp., 679 N.E.2d at 209). It is not enough in the context of Chapter 93A for Juarez to allege that defendants foreclosed on her property in violation of Massachusetts foreclosure law. Something more is required for Juarez to establish that the violation “‘has an extortionate quality that
We find, however, that the district court abused its discretion in determining, in passing and in a footnote, that its analysis of the Section 14 claim supports its conclusion that an amendment to re-plead the fraud and the consumer protection law claims would be futile. To the extent that the district court relied on its erroneous findings regarding the Section 14 claim in its analysis of the fraud and Chapter 93A claims, it erred.
Juarez should be allowed to amend her complaint to re-plead her fraud and Chapter 93A claims. The totality of the circumstances specific to this case support our decision to allow it to survive this first procedural stage and allow for a second amendment. Juarez filed her case in state court acting pro se, and it was removed to the district court almost immediately thereafter. We are thus presented with a very different case than one where a plaintiff has filed several fatally flawed complaints and nevertheless sought amendment, without explaining which new allegations she would bring or how any new facts could save prior complaints already deemed deficient. Indeed, “complaints cannot be based on generalities, but some latitude has to be allowed where a claim looks plausible based on what is known.” Pruell v. Caritas Christi, 678 F.3d 10, 15 (1st Cir. 2012) (finding that a second
3. Juarez‘s Section 2 claim
Juarez‘s claim for failure to make a proper entry under Section 2, however, was correctly dismissed. Section 2 requires that,
[i]f an entry for breach of condition is made without a judgment, a memorandum of the entry shall be made on the mortgage deed and signed by the mortgagor or person claiming under him, or a certificate, under oath, of two competent witnesses to prove the entry shall be made.
Finally, we see no reason to dwell at this juncture on Juarez‘s argument that New Century had already filed a Chapter 11
III.
The case is remanded to the district court for further proceedings consistent with this opinion.
Remanded.