Juárez v. Select Portfolio Servicing, Inc. , 708 F.3d 269 ( 2013 )

United States Court of Appeals
For the First Circuit
No. 11-2431
MELISSA A. JUÁREZ,
Plaintiff, 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.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Denise J. Casper, U.S. District Judge]
Before
Torruella, Ripple,* and Howard,
Circuit Judges.
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.
February 12, 2013
*
Of the Seventh Circuit, sitting by designation.
TORRUELLA, Circuit Judge. This appeal comes before us
after a dismissal of a complaint filed pro se by Melissa A. Juárez
against two entities she claims illegally foreclosed her home once
she defaulted on her mortgage payments. The district court
dismissed her complaint for failure to state a claim. Because we
find that the complaint states plausible claims for relief and that
the district court abused its discretion in deciding that it would
be futile to allow an amendment to the complaint, we reverse.
I.
A. Factual and Procedural Background
On October 29, 2010, Juárez, an attorney acting pro se,
filed a complaint 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
Juárez, again acting pro se, filed an amended verified complaint.
1. The amended complaint
The facts as alleged by Juárez in her amended complaint
are as follows.
Juárez 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
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record, relates exclusively to the first loan. Said loan
consisted of a note in the amount of $280,800, which was secured by
a mortgage on the property.1
After closing, the note and mortgage exchanged hands
several times within the secondary mortgage market. The amended
complaint states that, upon Juárez'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 26 U.S.C. § 860A. The trust
was governed by a Pooling and Servicing Agreement ("PSA"). The
entities involved in the operations of the trust were: U.S. Bank as
trustee; Asset Backed Securities Corporation as depositor and
issuing entity; Wells Fargo as Master Servicer; SPS (the second
defendant here) as servicer; and DLJ Mortgage Capital, Inc. as
seller.
According to the amended complaint, the PSA and the
federal tax code's provisions regulating REMICs required that all
1
The second mortgage was in the amount of $70,200.
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assets, which in the secondary mortgage market consist of mortgage
loans, be transferred or assigned to the trust by January 1, 2006
in order for the trust to qualify as a REMIC. The trust was thus
required to stop receiving assets after said date in order to
become a static pool of assets.
Juárez 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.
Juárez 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.
Juárez 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
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to U.S. Bank as trustee. It is dated October 16, 2008, and states
as part of the heading: "Date of Assignment: June 13, 2007."
Juárez 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 an 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 Mass. Gen. Laws ch. 244, § 14 ("Section 14"), for lack of legal
standing to foreclose; one count under Mass. Gen. Laws ch. 244, § 2("Section 2") for failure to comply with the entry requirement; one
count of fraud based on defendants' representations during
foreclosure proceedings regarding their right to foreclose; and one
count under Mass. Gen. Laws ch. 93A, § 9 ("Chapter 93A") for unfair
and deceptive practices in the conduct of trade or commerce.3
Juárez requested that it be determined: that defendants were not
2
Massachusetts mortgage law prescribes the procedure to be
followed by a mortgagee who seeks to foreclose by entry, rather
than by power of sale, and requires that the entry be recorded in
a certificate. See Mass. Gen. Laws ch. 244, § 2.
3
Juárez also included a count in which she charged defendants
with not notifying her via mail of the foreclosure sale as required
in Section 14. The district court dismissed that count because it
found that said section only requires that the notices be sent, not
that they be received. Juárez seems to have abandoned said claim
because it was not briefed before this Court. We will therefore
not address it further. See DeCaro v. Hasbro, Inc., 580 F.3d 55,
64 (1sr Cir. 2009) (stating that "contentions not advanced in an
appellant's opening brief are deemed waived.").
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the legal owners of the mortgage and note at the time of the
foreclosure; that the court declare the foreclosure invalid; that
she be restored as the property's legal owner; that she be allowed
to move back into or place the home up for sale; and that she be
awarded actual monetary damages and any other relief the court
deemed proper.
2. Defendants' motion to dismiss
After the removal of the complaint, Juárez, still acting
pro se, sought to have the case remanded. Defendants on their part
sought the dismissal of the complaint under Fed. R. Civ. P.
12(b)(6) for failure to state a claim.4 By this point, Juárez
retained counsel and opposed the motion to dismiss.
In their motion to dismiss, defendants argued that Juárez
is forever barred as a matter of law from litigating the
4
Defendants' motion to dismiss was also based on Fed. R. Civ. P.
12(b)(7) for failure to join necessary and indispensable parties
pursuant Fed. R. Civ. P. 19. Defendants argued that New Century
Mortgage Corporation, the entity which according to defendants
assigned the mortgage to U.S. Bank, and the current owners of the
foreclosed property were both necessary and indispensable parties.
The district court ultimately dismissed the case based on its
conclusion that the amended complaint failed to state any claim and
it did not reach the joinder issue. It stated in a footnote: "In
light of the Court's conclusion that the amended complaint fails to
state a plausible claim, the Court need not reach whether the
dismissal is warranted under Rule 12(b)(7)." The parties did not
brief the matter before this Court and we will therefore not
address it, as joinder issues under Fed. R. Civ. P. 19 "turn on
specific facts, will not recur in identical form and the district
judge is closer to the facts . . . and has a comparative advantage
over a reviewing court." Picciotto v. Cont'l Cas. Co., 512 F.3d 9,
15 (1st Cir. 2008) (quoting Tell v. Trs. of Dartmouth Coll., 145
F.3d 417, 418 n.1 (1st Cir. 1998)).
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foreclosure because she failed to enjoin the proceedings before
they concluded. They also posited that the copy of the "Corporate
Assignment of Mortgage" that Juárez attached to her amended
complaint clearly indicates that the mortgage in question was
assigned to U.S. Bank at the time the foreclosure began, and that
it was immaterial that the document was executed after the
foreclosure because the document is a confirmatory assignment.5 In
any case, they argued, the amended complaint conceded that Asset
Backed Securities acquired Juárez's loan immediately after it was
executed. Juárez, for her part, asserted that, when a foreclosure
is carried out by one who lacks the power to do so, said
foreclosure is null and void and may be challenged even if the
foreclosure already took place. She denied that the "Corporate
Assignment of Mortgage" is a confirmatory assignment and sustained
that no assignment took place before the foreclosure. Accordingly,
Juárez asserted that U.S. Bank did not hold the mortgage at the
time foreclosure proceedings began and thus had no power of sale at
that time. Regarding the note and mortgage, Juárez argued that
defendants had not proffered that they had possession of the note
at the time of the publication of her home's auction.
5
As will be discussed in great detail below, in Massachusetts, a
"confirmatory assignment" of a mortgage is a written document that
may be executed and recorded after the foreclosure of the mortgaged
property, when the written assignment of the mortgage was executed
before the foreclosure, but was not in recordable form. See U.S.
Bank Nat'l Ass'n v. Ibáñez, 941 N.E.2d 40 (Mass. 2011).
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Defendants presented a second set of arguments regarding
Juárez's standing to challenge the validity of the foreclosure.
Specifically, they argued that Juárez could not challenge the
assignment of the mortgage because she was neither a party nor a
third-party beneficiary of the PSA. Juárez responded that she
recognized that she was not a party to the PSA, but claimed that
the case involves a trust governed only by the PSA, and that said
document proscribed the assignment of assets into the trust after
January 1, 2006.
Regarding the fraud claim, defendants argued that Juárez
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 Juárez's claim under Chapter 93A because
Juárez defaulted on her payments and has neither alleged any unfair
or deceptive practice on their part nor indicated how she was
injured. Juárez's response to the request for dismissal of her
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.
Juárez then asserted that, "[b]ased upon all of the foregoing,
[she] had also pled her [f]raud claims with particularity". Juárez
also argued that New Century Mortgage Corporation could not have
assigned her mortgage in 2008 or even June 2007, because it had
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gone bankrupt under Chapter 11 in April 2007. Finally, Juárez
stated that she had raised a meritorious claim (without specifying
which claim she was referring to) and that her complaint "does more
than state legal conclusions of the 'defendant did me wrong.'" She
requested that the court grant her leave to amend the complaint "to
add claims related to the willfully deceptive acts of creating
appearance of ownership of her loan."
Defendants filed a reply brief in which, among other
things, they pointed out that Juárez 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 Juárez "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 the 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
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place because the document specifies June 13, 2007, as the "Date of
Assignment." "Such confirmatory assignment," the court said, "is
entirely consistent with the [Supreme Judicial Court of
Massachusetts' ("SJC") decision in Ibáñez." It also found that the
fact that the assignment was not recorded before the foreclosure
took place was immaterial, and that Juárez's argument that U.S.
Bank had to hold both the mortgage and the note in order to
foreclose was meritless. The district court further determined
that Juárez lacked standing to challenge the assignment because she
is neither a party to nor a third-party beneficiary of the PSA.
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 Juárez'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 Juárez had not pled with
particularity the actions she took to her own detriment after
relying on purported fraudulent conduct by the defendants, and that
Juárez failed to identify any unfair or deceptive practices.
The court then turned to Juárez's request for leave to
amend the complaint and found that an amendment would be futile
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because the "Corporate Assignment of Mortgage" shows that U.S. Bank
was the mortgagee's assignee at the time foreclosure began. It
thus characterized said document as "the exact type of confirmatory
assignment the Court in Ibáñez noted was sufficient." The court
also noted briefly in a footnote that it would be futile to allow
Juárez to amend the complaint to re-plead those two claims, and
that its conclusion was supported by its analysis of the Section 14
claim.
Juárez 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, Juárez focuses mainly on the
district court's interpretation of Ibáñez and its finding that a
bona fide confirmatory assignment had taken place. Defendants for
their part reiterate that Juárez defaulted and that her failure 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"
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evidences, and that, in any case, she lacks standing to challenge
its validity.
II.
A. Standards of Review
We review dismissals under Rule 12(b)(6) de novo.
Feliciano-Hernández v. Pereira-Castillo, 663 F.3d 527, 532 (1st
Cir. 2011). We separate the factual allegations from the
conclusory statements in order to analyze whether the former, if
taken as true, set forth a "plausible, not merely a conceivable,
case for relief." Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1,
12 (1st Cir. 2011) (quoting Sepúlveda-Villarini v. Dep't of Educ.
of P.R., 628 F.3d 25, 29 (1st Cir. 2010)). In reviewing Juárez's
complaint, we cannot "disregard properly pled factual allegations"
nor "attempt to forecast a plaintiff's likelihood of success on the
merits." Id. at 12-13 (quoting Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009)). If the facts alleged in her amended complaint
"'allow[] the court to draw the reasonable inference that the
defendant[s] [are] liable for the misconduct alleged,' the claim
has facial plausibility." Id. at 12. "The relevant inquiry focuses
on the reasonableness of the inference of liability that the
plaintiff is asking the court to draw from the facts alleged in the
complaint." Id. at 13.
Finally, we review both grants and denials of motions to
amend complaints for abuse of discretion. Hatch v. Dep't for
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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 Federal Rule of Civil Procedure 12(b)(6)." Id.B. Analysis
1. Lack of power of sale under Section 14
In the case at bar it is evident that the amended
complaint Juárez 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 Juárez'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
6
The foreclosure in this case took place before the SJC issued
Eaton v. Fed. Nat'l Mort. Ass'n, 469 N.E.2d 1118 (Mass. 2012),
where the court "construe[d] the term ["mortgagee"] to refer to the
person or entity . . . holding the mortgage [at the time the
foreclosure initiates] and also either holding the mortgage note or
acting on behalf of the note holder." Id. at 1121. Before Eaton,
it was understood that the mortgagee seeking to execute only had to
possess the mortgage to initiate the procedures. The SJC expressly
made that ruling prospective, and we therefore only address whether
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support said contention.7 First, the complaint claims that the PSA
did not authorize the transfer of Juárez's loan into the trust
after January 1, 2006 and that no valid assignment had taken place
before that. Alternatively, the complaint contends that no
assignment had taken place by the time foreclosure proceedings
began in 2008.
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 Juárez 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 Juárez 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 part 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
defendants held the mortgage, and not both the note and the
mortgage, at the time they foreclosed.
7
The district court found a third ground under which the
complaint challenges defendants' authority to foreclose: "that
assignments of the mortgage were not recorded prior to the notice
of sale or subsequent [to] the foreclosure sale." We do not
separately address this issue and instead address it in our
discussion of Ibáñez.
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(D. Mass. 2012); Culhane v. Aurora Loan Servs. of Neb., 826 F.
Supp. 2d 352, 378 (D. Mass. 2011). But it is certainly one thing
to question whether an assignment took place pursuant to the terms
of a loan trust's governing documents (in this case, the PSA), and
quite another to question whether the assignment took place before
the foreclosure began, as Section 14 requires.
Juárez'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.
Juárez 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 Assignment'
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notation on the top of the document with a date of June 13, 2007."
Read in conjunction with her allegations that U.S. Bank lacked
legal standing to foreclose, the amended complaint can be read to
state a plausible claim that the "Corporate Assignment of Mortgage"
took place after the foreclosure had been finalized, and that it
was not a confirmatory assignment. We believe this to be a
reasonable inference that follows from taking as true Juárez's
factual allegations regarding the discrepancy in the dates and the
fact that said discrepancy clearly and independently emerges from
the document in question. Here, "[t]he reference by attachment,
though perhaps technically deficient, was sufficient to alert the
court and [defendants] to the specific basis" of Juárez's claim
regarding the timing of the assignment. Instituto de Educación
Universal Corp., 209 F.3d at 23.
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 Ibáñez 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 Juárez'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 Juárez
to amend the complaint because it was clear from the document
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itself that it embodied precisely the type of confirmatory
assignment Ibáñez recognized. We cannot so agree. As will be more
fully explained below, we are unable to find at this time, when no
discovery has been conducted, that the document alone evidences a
confirmatory agreement of the kind sufficient under Ibáñez took
place before the foreclosure.
Ibáñez 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 Ibáñez 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, Ibáñez 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.
8
Defendants insist that Juárez is forever barred from litigating
the legality of her foreclosure because she did not file a
complaint to enjoin the foreclosure before it was finalized. They
cite to the following expressions in Ibáñez: "Even where there is
a dispute as to whether the mortgagor was in default or whether the
party claiming to be the mortgage holder is the true mortgage
holder, the foreclosure goes forward unless the mortgagor files an
action and obtains a court order enjoining the foreclosure."
Ibáñez, 941 N.E.2d at 49. We believe those expressions stand for
the proposition that only an injunction can halt a foreclosure, not
that a void foreclosure turns valid and can never be challenged if
it is not enjoined. In fact, the cases cited by the SJC in Ibáñez,
while discussing the nullity of foreclosures carried out by those
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As Ibáñez explained, the Massachusetts statutory
foreclosure scheme affords a mortgagee possessing a power of sale
under Section 14 substantial authority. Only those listed in that
section (i.e. "the mortgagee or his executors, administrators,
successors or assigns") can exercise it. This power, of course,
comes with great responsibility and "[o]ne who sells under a power
[of sale] must follow strictly its terms. If he fails to do so
there is no valid execution of the power and the sale is wholly
void." Ibáñez, 941 N.E.2d at 49-50 (some alterations in original).
That is, "[a]ny effort to foreclose by a party lacking
'jurisdiction and authority' under these statutes is void." Id. at
50 (citations omitted). The power of sale can only be exercised if
the foreclosing entity is the "assignee[] of the mortgage[] at the
time of the notice of sale and the subsequent foreclosure sale."
Id. at 51.
In Ibáñez, 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 cases brought by mortgagors
after the foreclosures had ended. See, e.g., Moor v. Dick, 72 N.E.
967 (1905).
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form at the time of the notice of sale or the subsequent
foreclosure sale, an assignment must take place before the
foreclosure begins. See id. at 54. This, because "[a] valid
assignment of a mortgage gives the holder of that mortgage the
statutory power to sell after a default regardless whether the
assignment has been recorded." Id. at 55. If a valid pre-
foreclosure assignment took place, a "confirmatory assignment may
be executed and recorded after the foreclosure, and doing so will
not make the title defective." Id. But a confirmatory assignment
"cannot confirm an assignment that was not validly made earlier or
backdate an assignment being made for the first time." Id. In
order to determine whether valid assignments had taken place, the
SJC scrutinized the documents submitted by U.S. Bank and Wells
Fargo, respectively, to see if valid assignments or valid
confirmatory assignments sustained the plaintiffs' claims to clear
titles. It found that they did not.
In this case, even a perfunctory scrutiny of the
"Corporate Assignment of Mortgage" attached by Juárez 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
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it is confirmatory of an assignment executed in 2007. Nowhere
does the document even mention the phrase "confirmatory
assignment." Neither does it establish that it confirms a previous
assignment or, for that matter, even make any reference to a
previous assignment in its body. Except for the "June 13, 2007"
date indicated in the heading, the document reads as if the
assignment were executed on October 16, 2008. It states:
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 Ibáñez 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
Ibáñez, 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
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that no plausible claim could be made to the contrary. Whether
that is in fact true and whether Juárez will prevail on the merits
will have to be decided when all the facts surrounding the pre-
foreclosure transactions have been properly ventilated.
Having found that Juárez's complaint states sufficient
facts for a plausible Section 14 claim, we now turn to the other
claims asserted in her amended complaint.
2. Juárez'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 were 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 Fed. R. Civ. P. 9(b), which imposes a so-called
particularity requirement. A complaint must, therefore, include
specifics about "the time, place, and content of the alleged false
representations." United States ex rel. Rost v. Pfizer, Inc., 507
F.3d 720, 731 (1st Cir. 2007) (quoting Doyle v. Hasbro, Inc., 103
F.3d at 194 (additional citations omitted).
In her amended complaint, Juárez states that defendants
knew they were not the legal owners of her mortgage and
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nevertheless initiated and conducted foreclosure proceedings in
which they represented as much. She states that defendants made
such representations, which were material to the foreclosure
proceedings, in three distinct instances: (1) their advertisement
of her property for sale at auction; (2) their repurchase of the
property in July 2008; and (3) their subsequent sale of the
property to a third party in October 2008. She further alleges
that she relied on defendants' representations that they owned the
note and mortgage, and as a result of that reliance, she suffered
substantial injury.
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 foreclosure. 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 Fed. R. Civ. P. 9(b). Much
more would be required, for example, in the way of allegations
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regarding Juárez's reliance on defendants' allegedly false
statements during the foreclosure proceedings. More could also be
alleged concerning who she was in contact with, when and what was
said to her in the alleged misrepresentations. Because the amended
complaint is devoid of those specifics, we affirm the district
court's dismissal of the fraud claim.
Juárez'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." Mass. Gen. Laws ch. 93A, § 2. We have noted, and the
SJC has explained that the statute does not define "unfair" and
"deceptive," but that "[a] practice is unfair if it is within the
penumbra of some common-law, statutory, or other established
concept of unfairness; is immoral, unethical, oppressive, or
unscrupulous; and causes substantial injury to other businessmen."
Kenda Corp. v. Pot O'Gold Money Leagues, 329 F.3d 216, 234 (1st
Cir. 2003) (quoting Linkage Corp. v. Trs. of Bos. Univ., 679 N.E.2d
191, 209 (Mass. 1997)). We have also noted that, "Chapter 93A
liability is decided case-by-case, and Massachusetts courts have
consistently emphasized the 'fact-specific nature of the inquiry.'"
Arthur D. Little, Inc. v. Dooyang Corp., 147 F.3d 47, 55 (1st Cir.
1998) (quoting Linkage Corp., 679 N.E.2d at 209). Ordinarily,
however, good faith disputes over billing, simple breaches of
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contract, or failures to pay invoices, for example, do not
constitute violations of Chapter 93A. Id. (citations omitted).
Juárez'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 Juárez to allege that
defendants foreclosed on her property in violation of Massachusetts
foreclosure law. Something more is required for Juárez to
establish that the violation "'has an extortionate quality that
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gives it the rancid flavor[s] of unfairness [and deceptiveness].'"
Arthur D. Little, Inc., 147 F.3d at 55 (quoting Atkinson v.
Rosenthal, 598 N.E.2d 666, 670 (Mass. App. Ct 1993)).
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.
Juárez 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. Juárez 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
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amendment should be allowed and remanding to give plaintiffs a
final opportunity to file a sufficient complaint). In sum, we are
satisfied that the result here is in accord with Fed. R. Civ.
P.8(e)'s mandate that "[p]leadings . . . be construed as to do
justice," and with Fed. R. Civ. P. 15(a), which "reflects a liberal
amendment policy." United States ex rel. Rost, 507 F.3d at 731.
3. Juárez's Section 2 claim
Juárez'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.
Mass. Gen. Laws ch. 244, § 2. The amended complaint states that no
one entered Juárez's home the day the certificate of entry was
executed, that no power of attorney was recorded with it and that
it does not list two witnesses, as required by the statute. We
agree with the district court in finding that Juárez has failed to
state a claim because: (1) Section 2 does not require that a power
of attorney be recorded with the certificate; (2) the certificate
contains the signatures of two witnesses and is notarized; and (3)
merely stating that no one entered her home is conclusory.
Finally, we see no reason to dwell at this juncture on
Juárez's argument that New Century had already filed a Chapter 11
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bankruptcy at the time defendants alleged the assignment took
place. As Juárez herself acknowledges, bankruptcy law allows a
debtor in possession to continue operating in the normal course of
business and she has not set forth any evidence that this Chapter
11 bankruptcy in particular was somehow different.
III.
The case is remanded to the district court for further
proceedings consistent with this opinion.
Remanded.
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