Court: District Court, D. Massachusetts; September 12, 2017; Federal District Court
The case involves Harry Andrews (plaintiff) challenging HSBC Bank USA, N.A. (defendant) regarding its standing to foreclose on a residential mortgage in Beverly, Massachusetts. Plaintiff contests HSBC's ownership of the mortgage note, the validity of the recorded lien on the property, and the adequacy of the foreclosure notice. HSBC removed the case from Massachusetts Superior Court to federal court, where plaintiff filed a motion to remand the case back to state court, and HSBC filed a motion to dismiss.
Plaintiff purchased the property in 1974 and secured a $506,000 loan through a promissory note from Fremont Investment Loan in 2006, granting a mortgage to Mortgage Electronic Registration Systems, Inc. (MERS), which later assigned the mortgage to HSBC in 2012. Following missed payments, HSBC initiated foreclosure proceedings, sending a right to cure notice in 2014.
In analyzing the motion to remand, the court considered federal diversity jurisdiction, requiring differing state citizenship and an amount in controversy exceeding $75,000. The court confirmed that the plaintiff is a Massachusetts resident while HSBC is a Delaware citizen, thus fulfilling the citizenship requirement. HSBC argued that the amount in controversy exceeded $75,000, based on the value of the mortgage, although the plaintiff did not specify damages, asserting he only sought to delay foreclosure pending compliance with state law. The court noted that the value of the object of litigation determines the amount in controversy, with precedent indicating that in foreclosure actions, this value is often equated to the loan amount.
Ultimately, the court denied the motion to remand and granted HSBC's motion to dismiss.
In McKenna v. Wells Fargo Bank, N.A., the court favored the "face-value-of-the-loan" rule for determining the amount in controversy, emphasizing its simplicity and resistance to manipulation. Andrews, the plaintiff, seeks to enforce obligations under Massachusetts law before foreclosure and disputes HSBC’s ownership of the mortgage and note. The court determines that the validity of the mortgage and HSBC's right to foreclose are central issues, making the loan's face value the correct measure for the amount in controversy, thus denying Andrews' motion to remand.
HSBC's motion to dismiss all counts of Andrews' complaint argues that it fails to state a claim. To survive dismissal under Fed. R. Civ. P. 12(b)(6), a complaint must present sufficient factual content to allow a plausible inference of liability. The court will only consider allegations within the complaint and its incorporated documents.
Count I claims a declaratory judgment that HSBC lacks standing to foreclose, requiring a plausible assertion that HSBC does not have the authority under M.G.L. c. 244, § 14. Massachusetts law permits nonjudicial foreclosure, with the requirement that the mortgagee must hold both the note and mortgage to foreclose. Andrews asserts HSBC does not own these instruments but provides only conclusory allegations without factual support. Additionally, he incorrectly claims that filing a lawsuit shifts the burden to HSBC to prove its entitlement to foreclose. In Massachusetts, the note and mortgage can be transferred independently, and a valid written assignment is necessary for the mortgage holder to exercise statutory foreclosure rights.
Massachusetts law does not mandate a mortgagee to prove ownership of a mortgage prior to foreclosure, as established in Rice v. Wells Fargo Bank, N.A. The burden lies with the plaintiff to demonstrate that HSBC does not own the mortgage, which Andrews failed to do. In Count II of his complaint, Andrews argues that HSBC violated M.G.L. c. 244, § 35A by issuing an inadequate right-to-cure notice, claiming it did not comply with two specific requirements: the notice allowed for 153 days to cure instead of the required 150 days, and it lacked the name of the payment contact. HSBC contends that strict compliance with § 35A is unnecessary following U.S. Bank Nat’l Ass’n v. Schumacher, where the Massachusetts Supreme Judicial Court ruled that strict compliance is not a prerequisite for valid foreclosure actions. However, the standard for challenging notice adequacy differs in pre-foreclosure scenarios, which allows a mortgagor to seek to enjoin a foreclosure for failing to provide timely and adequate notice. Although Schumacher did not define "adequate written notice," it emphasized the purpose of § 35A: to afford mortgagors a fair chance to remedy defaults and to furnish necessary contact information. Andrews' claim regarding the deadline is moot, as the notice provided more than the required time, thus satisfying HSBC's obligation under the statute to allow a fair opportunity to cure.
The plaintiff argues that the § 35A notice was deficient because it did not name an individual payment contact, only identifying the mortgage servicer, Ocwen. However, the Massachusetts Appeals Court in Haskins has upheld the use of a mortgage servicer as an appropriate contact in such notices, affirming that servicers possess the necessary information and authority to allow mortgagors to remedy defaults. The § 35A notice provided sufficient contact information and exceeded the required 150-day period for curing defaults. The plaintiff has not presented adequate facts to prove that the notice was defective.
In Count III, the complaint asserts that HSBC cannot foreclose due to an inconsistent property description in the mortgage. The plaintiff highlights that Schedule A includes a reference to an adjacent parcel after the main property description. HSBC counters that the mortgage accurately reflects the legal description of the property and that the reference to the adjacent land is purely for informational purposes. Massachusetts legal principles dictate that specific descriptions prevail over ambiguous ones, and since the description in Schedule A clearly delineates the property boundaries, it is unambiguous. Although Massachusetts courts have not specifically addressed references made for "informational purposes only," a relevant North Carolina case supports the notion that such references do not create ambiguity. Consequently, Count III does not substantiate a claim preventing HSBC from foreclosing on the property.
The court denies the plaintiff's motion to remand and grants HSBC’s motion to dismiss.
