Drakopoulos v. U.S. Bank Nat'Lass'N

• Decision Date: 12 July 2013
• Docket Number: SJC–11271.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: Susanne DRAKOPOULOS & another v. U.S. BANK NATIONAL ASSOCIATION, trustee, & another. <SUP>,</SUP>

465 Mass. 775

991 N.E.2d 1086

Susanne DRAKOPOULOS & another ¹

v.U.S. BANK NATIONAL ASSOCIATION, trustee,² & another. ^3,4

SJC–11271.

Supreme Judicial Court of Massachusetts,

Essex.

Argued March 4, 2013.

Decided July 12, 2013.

Paul R. Collier, III (Pamela A. Lebowitz & Max Weinstein with him) for the plaintiffs.

Peter F. Carr, II, Boston, for the defendants.

Martha Coakley, Attorney General, Glenn Kaplan, Aaron Lamb, & Gabriel O'Malley, Assistant Attorneys General, for the Commonwealth, amicus curiae, submitted a brief.

Present: IRELAND, C.J., SPINA, CORDY, BOTSFORD, GANTS, DUFFLY, & LENK, JJ.

LENK, J.

In 2006, the plaintiffs, Susanne and Peter Drakopoulos,⁵ refinanced their family home in Haverhill through Aegis Lending Corporation (lender), entering into a stated income home mortgage loan secured by a first mortgage on the home.⁶The total monthly payment on this loan proved to be approximately $600 greater than the plaintiffs' total monthly income. Less than six months after the mortgage was funded, it was sold and assigned to the defendant U.S. Bank National Association (bank) as trustee of the Credit Suisse First Boston Mortgage Securities Corp., Home Equity Pass–Through Certificates, Series 2007–1 (trust). The loan was serviced by the defendant Select Portfolio Servicing, Inc. (servicer). The plaintiffs fell behind in their payments and defaulted on the loan; in November, 2008, the bank foreclosed on the mortgage.

The plaintiffs thereafter brought this action, asserting, inter alia, violations of the Predatory Home Loan Practices Act, G.L. c. 183C (act); the Consumer Protection Act, G.L. c. 93A; and the Borrower's Interest Act, G.L. c. 183, § 28C, The plaintiffs also asserted that the loan was unenforceable because it was unconscionable, and they sought damages and rescission for predatory lending practices. A Superior Court judge granted the defendants' motions for summary judgment on all claims, based in large part on the ground that the defendants, as assignees, had no liability for the acts of the lender. The plaintiffs appealed. Because we conclude that the bank is not shielded from liability as a matter of law by virtue of its status as an assignee, and because it has not established the absence of material issues of disputed fact entitling it to judgment on any individual claim, the entry of summary judgment in its favor must be reversed. Because the servicer has not been shown to be an assignee, however, and because the plaintiffs offer no alternative basis on which the servicer might be held liable, we affirm the entry of summary judgment as to it.

1. Standard of review. “In considering a motion for summary judgment, we review the evidence and draw all reasonable inferences in the light most favorable to the nonmoving party.” Premier Capital, LLC v. KMZ, Inc., 464 Mass. 467, 474–475, 984 N.E.2d 286 (2013). “Because our review is de novo, we accord no deference to the decision of the motion judge.” DeWolfe v. Hingham Ctr., Ltd., 464 Mass. 795, 799, 985 N.E.2d 1187 (2013)( DeWolfe ). The defendants, as the moving parties, “have the burden of establishing that there is no genuine issue as to any material fact and that they are entitled to judgment as a matter of law.” Id. “Once the moving party establishes the absence of a triable issue, the party opposing the motion must respond and allege specific facts establishing the existence of a material fact in order to defeat the motion.” SCA Servs., Inc. v. Transportation Ins. Co., 419 Mass. 528, 531, 646 N.E.2d 394 (1995).

2. Background. a. Facts. We summarize the largely undisputed facts in the summary judgment record, viewed in the light most favorable to the plaintiffs, reserving certain facts for later discussion. The plaintiffs owned a house in Haverhill, which Susanne inherited from her mother. Prior to closing on the mortgage loan at issue, the plaintiffs had several times borrowed against the equity in their home. Approximately nine months prior to the subject refinancing, the plaintiffs had obtained a thirty-year adjustable rate mortgage in the principal amount of $155,000, with a base interest rate of 9.24 per cent, for an initial three-year period and monthly payments of $1,224.

In the early fall of 2006, a representative of the lender visited the plaintiffs' home, at their request, and obtained from them income information, including Internal Revenue Service Forms W–2 and wage stubs from Peter's employer, showing that Peter earned approximately $1,900 each month as a shipper and receiver at a warehouse facility. The lender was made aware that Susanne did not have a job.⁷ The loan application, which the lender prepared and the plaintiffs signed that day, however, listed Peter as having a monthly income from wages of $5,900, and set forth a proposed monthly mortgage payment of $2,573.02. The lender processed the loan as a stated income loan,⁸notwithstanding the receipt of documented borrower income information.

The plaintiffs maintain that they were unaware of the interest rate on the loan, the amount of the monthly payments, and the nature of the mortgage loan. They asserted in deposition testimony that they were rushed to sign the loan documents, not given an opportunity to read them, and told to “just sign the documents.” They maintained that they did not know anything about this type of loan, were never informed that they had received one, were not aware that Peter's income was inflated on the loan application, and were not informed that such loans come with a higher interest rate than loans based on fully documented income.

The lender's underwriting income standards at the time required that the stated income “must be reasonable for the profession.” The plaintiffs submitted evidence that Peter's stated income of $5,900 was over 170 per cent higher than the wage earned by the ninetieth percentile of shippers and receivers. The lender's underwriting reviewer, who conducted a review on the day of the closing, noted “PAYMENT SHOCK CONCERN: Proposed housing payment is greater than 150 percent of current housing payment. Borrower must demonstrate ability to handle increased payments.” Nothing in the record indicates that the lender required the plaintiffs to make such a showing.

The closing took place on October 26, 2006. The lender provided the plaintiffs a loan in the amount of $249,000, with a fixed interest rate of 10.315 per cent, secured by a first mortgage on their home. The monthly payment on the loan was $2,573.02, over $600 more than the plaintiffs' total monthly income. After paying off their existing mortgage and other indebtedness, the transaction left the plaintiffs in receipt of $73,532.31.

An apparent affiliate of the lender, Aegis Mortgage Corporation, ⁹ acted as a loan originator for the trust. The plaintiffs' mortgage and note were sold and assigned to the bank, as trustee for the trust, on April 26, 2007; the assignment was duly recorded on April 29, 2008. The bank arranged for the servicer to service the plaintiffs' loan. After defaulting on their loan payments, on May 2, 2008, the plaintiffs entered into a forbearance agreement with the servicer, but ultimately were unable to comply with its terms. In November, 2008, the bank foreclosed on the mortgage and sold the property at auction.

b. Prior proceedings. On May 28, 2009, the plaintiffs filed their complaint in the Superior Court against the bank and the servicer, seeking money damages and rescission of the 2006 mortgage loan. The complaint asserted six claims: (1) wrongful foreclosure in violation of G.L. c. 244, § 35A, and G.L. c. 183, § 21; (2) violation of the Predatory Home Loan Practices Act, G.L. c. 183C; (3) violation of the Consumer Protection Act, G.L. c. 93A; (4) violation of the Borrower's Interest Act, G.L. c. 183, § 28C; (5) unconscionability; and (6) negligent and intentional infliction of emotional distress.

The parties stipulated to dismissal of the claim for wrongful foreclosure, and the defendants' first motion for summary judgment was allowed on the claim for intentional infliction of emotional distress; the plaintiffs do not appeal from that decision. Following the completion of discovery, the defendants filed their second motion for summary judgment on the remaining four claims, and the plaintiffs filed a cross motion for partial summary judgment. The judge granted the defendants' motion, denied the plaintiffs' cross motion, and denied the plaintiffs' motion to alter or amend the judgment pursuant to Mass. R. Civ. P. 59(e), 365 Mass. 827 (1974). The plaintiffs appealed, and we allowed their petition for direct appellate review.

3. Discussion. a. Assignee liability. The defendants maintain on appeal, as they did in their motion for summary judgment, that they are entitled to judgment as a matter of law on all four remaining claims primarily because they are not liable for the lender's allegedly predatory lending practices during the origination of the loan, prior to its assignment. While the Predatory Home Loan Practices Act (act), G.L. c. 183C, provides that “[a]ny person who purchases or is otherwise assigned a high-cost home mortgage loan shall be subject to all affirmative claims and any defenses with respect to the loan that the borrower could assert against the original lender or borrower of the loan,” G.L. c. 183C, § 15 ( a ), the defendants maintain that the plaintiffs cannot establish that the loan at issue is a “high-cost home mortgage loan.” ¹⁰

Concluding that the plaintiffs' loan did not qualify as a high-costhome mortgage loan, the judge allowed the defendants' motion with respect to the act, a decision that we view as being unwarranted on this record and that, accordingly, must be reversed. See part 3.b, infra. To the extent that the bank may thus have liability as an assignee by virtue of the act, it would extend to “all affirmative claims and defenses with respect to the loan” that the plaintiffs could assert against...