D'Alessio v. CIT Bank, N.A. (In re D'Alessio)
| Decision Date | 11 June 2018 |
| Docket Number | Adversary Proceeding No. 17–3026,Case No. 17–30521–EDK |
| Citation | 587 B.R. 211 |
| Parties | IN RE: Stephen A. D'ALESSIO, Debtor Stephen A. D'Alessio, Plaintiff v. CIT Bank, N.A., Defendant |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
Louis S. Robin, Law Offices of Louis S. Robin, Longmeadow, MA, for Plaintiff.
Joseph Dolben, Marinosci Law Group, P.C., Warwick, RI, Michael Grant, LeClair Ryan, P.C, Boston, MA, for Defendant.
Before the Court is the "Defendant's Motion for Summary Judgment" (the "Summary Judgment Motion") filed by CIT Bank, N.A. ("CIT"), the defendant in this adversary proceeding and a party in interest in the underlying Chapter 13 bankruptcy case filed by Stephen A. D'Alessio (the "Debtor"). In his complaint, the Debtor seeks, inter alia , a declaratory judgment that CIT is not entitled to foreclose a reverse mortgage on real property owned by the Debtor's spouse at the time of the execution of the reverse mortgage, but currently owned by the Debtor. In order to resolve the Summary Judgment Motion, the Court must determine whether the Debtor is a "Borrower" with respect to the reverse mortgage.
In 1988, the Debtor and his spouse ("Patricia") acquired title to property located at 164 East Street, Mount Washington, Massachusetts (the "Property") as joint tenants. In 1990, they conveyed title to Patricia only. 20 years later, the Property was mortgaged to secure a home equity conversion mortgage loan (a "reverse mortgage")1 from CIT's predecessor, Financial Freedom Acquisition, LLC ("Financial Freedom"). In connection with the transaction, Patricia and the Debtor signed several documents. Most of the loan documents were signed solely by Patricia; however, both Patricia and the Debtor signed the actual mortgage (the "Mortgage").
Following Patricia's death in September 2015, CIT mailed to the Debtor a "Home Equity Conversion Mortgage Repayment Notice" informing him that, in light of Patricia's death, the loan was due and payable in full and, absent payment, the lender would initiate foreclosure proceedings. The loan was not repaid. On June 20, 2017, prior to any foreclosure sale of the Property, the Debtor filed a voluntary petition under Chapter 13 of the United States Bankruptcy Code (the "Bankruptcy Code" or the "Code").2
On his schedules filed with the bankruptcy petition, the Debtor disclosed an ownership interest in the Property (which he had inherited upon Patricia's death). The Debtor also filed a Chapter 13 plan (the "Plan"), through which he proposed to cure prepetition real estate tax arrears on the Property. In the main bankruptcy case, CIT objected to confirmation of the Debtor's Plan (the "Plan Objection") and moved for relief from the automatic stay imposed by § 362 of the Bankruptcy Code (the "Motion for Relief from Stay"). In the Plan Objection, CIT complains that the Plan does not provide for adequate treatment of its claim (i.e., a payoff of the entire outstanding loan amount). In the Motion for Relief from Stay, CIT maintains that it is entitled to proceed with its nonbankruptcy rights to collect the full, accelerated amount of its reverse mortgage loan (and to proceed with a foreclosure of the Property, if necessary).
The Debtor opposed both of CIT's pleadings and also commenced this adversary proceeding raising three related claims for relief. In Count I, the Debtor seeks a declaratory judgment declaring him a "Borrower" under the Mortgage, which would negate CIT's claimed right to collect the entire mortgage loan balance through foreclosure at this time. In Count II, the Debtor alleges a breach of contract. Lastly, in Count III, the Debtor alleges a violation of the Massachusetts consumer protection law ("Chapter 93A") on grounds that CIT has attempted to foreclose the Property without a right to do so. Each of the pending controversies—the adversary complaint, the Plan Objection, and the Motion for Relief from Stay—require the resolution of one issue: with respect to the reverse mortgage transaction, is the Debtor a "Borrower"?
Under the Debtor's reasoning, the Mortgage, as a contract of adhesion, must be strictly construed against CIT. The Debtor argues that his signature on the Mortgage, followed by the designation "Borrower," creates an ambiguity that must be construed in his favor—i.e., that he is indeed a "Borrower" with respect to the Mortgage. And because he is a surviving "Borrower" who currently resides in the Property, the Debtor contends, CIT has no right to foreclose under the loan documents. In further support of this argument, the Debtor relies on federal law that appears to prohibit the Department of Housing and Urban Development ("HUD") from insuring reverse mortgage loans that would allow foreclosure while a "homeowner" continues to occupy the property following the death of a borrowing spouse.
CIT maintains that any ambiguity created by the Debtor's signature on the Mortgage can only be resolved by reference to all the loan documents. CIT argues that such a comprehensive analysis results in only one logical conclusion—that only Patricia, and not the Debtor, was a "Borrower" for purposes of the reverse mortgage transaction. Accordingly, CIT says, it is entitled to repayment of the loan in full, including by way of foreclosing on the Property, if necessary.
Summary judgment should be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a), made applicable to these proceedings by Fed. R. Bankr. P. 7056. The material facts relevant to the Summary Judgment Motion are not in dispute3 and the matter is ready for resolution as a matter of law.
In the Debtor's strict construction of the Mortgage against CIT, the presence of his signature next to the word "Borrower" in the signature block of the Mortgage means that the Debtor is a "Borrower" under the loan documents. The Court agrees with the Debtor that the reverse mortgage is properly characterized as an adhesion contract. See James B. Nutter & Co. v. Estate of Murphy , 478 Mass. 664, 88 N.E.3d 1133, 1139 (2018) (). However, under Massachusetts law,4 "the rule construing ambiguities against the drafter does not require [the court] to adopt the interpretation claimed by the [nondrafting party]." Id. at 1141. Instead the court must deduce "the meaning an objectively reasonable person in the nondrafting party's position would give to the language in the contract." Id. at 1139 (emphasis supplied). And that interpretation must "be, under all [the] circumstances, a reasonable and practical one" Id. at 1141 (quoting Shea v. Bay State Gas Co. , 383 Mass. 218, 418 N.E.2d 597, 602 (1981) ).
The Debtor also urges the Court to ignore the other documents executed in connection with the transaction in determining whether the Debtor is a "Borrower" under the Mortgage. However, "Massachusetts precedent indicates that when an element of ambiguity exists in a document that is part of an integrated transaction involving multiple documents, the group of writings may be considered together in order to ascertain the meaning of one of the individual writings." Zanditon v. Feinstein , 849 F.2d 692, 700 (1st Cir. 1988) ; see also F.D.I.C. v. Singh , 977 F.2d 18, 21 (1st Cir. 1992) (citing Chelsea Indus., Inc. v. Florence , 358 Mass. 50, 260 N.E.2d 732, 735 (1970) ) (where "several writings evidence a single contract or comprise constituent parts of a single transaction, they will be read together"); Lass v. Bank of America, N.A. , 695 F.3d 129 (1st Cir. 2012) () (quoting Gilmore v. Century Bank & Trust Co. , 20 Mass.App.Ct. 49, 477 N.E.2d 1069, 1073 (1985) ); Charlestown Five Cents Sav. Bank v. Zeff , 275 Mass. 408, 176 N.E. 191, 192 (1931) (). In connection with the reverse mortgage transaction, the following eight (8) documents were prepared and executed as follows:
(1) Residential Loan Application for Reverse Mortgages (the "Loan Application")
The Loan Application contains boxes to be filled in by "Borrowers" and "Co–Borrowers." It identifies Patricia as the "Borrower" with her social security number, date of birth, and other identifying information. The boxes for "Co–Borrower" information are empty. The Loan Application also indicates that title to the Property is held in Patricia's name only. The application specifically notes that the loan will be secured by a mortgage on the Property. Patricia signed in the signature block designated "Borrower's Signature." The Debtor is listed as an "Alternative Contact Person." The Debtor did not sign the application as a "Co–Boreower."
(2) Closed–End Fixed Rate Home Equity Conversion Loan Agreement (the "Loan Agreement")
The Loan Agreement identifies Patricia as the "Borrower," specifies the terms of the parties' agreement in connection with the reverse mortgage, and specifically references the promissory note and the Mortgage signed in connection with the transaction. Only Patricia signed the Loan Agreement as the "Borrower."
(3) Closed–End Fixed Rate Note (the "Note")
The Note specifies that the "Borrower" is "each person signing at the end of this Note." Only Patricia signed the Note. The Note further indicates that it is secured by a mortgage of the same date. The Note contains the following provision:
To continue reading
Request your trial