Grundy v. HSBC Bank USA, N.A.

• Decision Date: 10 February 2020
• Docket Number: CIVIL ACTION NO. 17-11449-PBS
• Parties: RICHARD GRUNDY, Plaintiff, v. HSBC BANK USA, N.A., as Indenture Trustee for the Registered Noteholders of Renaissance Home Equity Loan Trust 2006-3, and OCWEN LOAN SERVICING, LLC, a Division of Ocwen, Inc., Defendants.
• Court: U.S. District Court — District of Massachusetts

RICHARD GRUNDY, Plaintiff, v. HSBC BANK USA, N.A., as Indenture Trustee for the Registered Noteholdersof Renaissance Home Equity Loan Trust 2006-3,and OCWEN LOAN SERVICING, LLC, a Division of Ocwen, Inc., Defendants.

CIVIL ACTION NO. 17-11449-PBS

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

February 10, 2020

REPORT AND RECOMMENDATION RE: DEFENDANTS HSBC BANK USA, N.A., AS INDENTURE TRUSTEE FOR THE REGISTERED NOTEHOLDERS OF RENAISSANCE HOME EQUITY LOAN TRUST 2006-3, AND OCWEN LOAN SERVICING, LLC, A DIVISION OF OCWEN, INC.'S MOTION FOR SUMMARY JUDGMENT

(DOCKET ENTRY # 76)

BOWLER, U.S.M.J.

Pending before this court is a motion for summary judgment filed by defendants HSBC Bank USA, N.A., as Indenture Trustee for the Registered Noteholders of Renaissance Home Equity Loan Trust 2006-3 ("HSBC"), and Ocwen Loan Servicing, LLC, a division of Ocwen, Inc. ("Ocwen"), (collectively "defendants"). (Docket Entry # 76). Plaintiff Richard Grundy ("plaintiff") opposes the motion. (Docket Entry # 86). After conducting a hearing, this court took the motion (Docket Entry # 76) under advisement.

PROCEDURAL BACKGROUND

On July 3, 2017, plaintiff filed suit in Massachusetts Superior Court (Essex County) to prevent a foreclosure on his home. (Docket Entry # 1-2, pp. 7-23) (Docket Entry # 15, pp. 5-21) (Docket Entry # 44, p. 2).¹ The original complaint raises four counts against defendants: (1) breach of contract; (2) violation of the Fair Housing Act; (3) fraud; and (4) violation of Massachusetts General Laws chapter 93A ("chapter 93A"). (Docket Entry # 15, p. 10). HSBC removed the case to federal court on August 4, 2017. (Docket Entry # 1). On September 25, 2017, defendants moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(6) ("Rule 12(b)(6)"). (Docket Entry # 22). Plaintiff opposed the motion (Docket Entry # 34) and during a February 6, 2018 hearing withdrew the Fair Housing Act claim (Docket Entry # 43).

On September 11, 2018, the district judge adopted (Docket Entry # 57) this court's Report and Recommendation (Docket Entry # 44) that allowed in part and denied in part the motion to dismiss. More specifically, the district judge adopted this court's recommended dismissal of: the fraud claims regarding a 2013 loan modification ("2013 Loan Modification") and a reserve repair fund ("Repair Fund") due to plaintiff's failure to pleadfraud with particularity under Fed. R. Civ. P. 9(b) ("Rule 9(b)"); (2) the fraud claim regarding a 2016 loan modification ("2016 Loan Modification") due to his failure to state a claim under Rule 12(b)(6); and (3) the chapter 93A claim due to the absence of a demand letter. (Docket Entry # 44). Whereas the breach of contract claim regarding a second disbursement from the Repair Fund was dismissed, this court allowed the 2013 Loan Modification breach of contract claim to remain while leaving open the possibility to replead the 2016 Loan Modification breach of contract claim. (Docket Entry # 44).

On July 31, 2018, plaintiff filed a motion for leave to file an amended complaint. (Docket Entry # 49). Initially, defendants reserved the right to oppose the motion pending review of the proposed amended complaint. (Docket Entry # 50). Thereafter, on August 22, 2018, with leave of court and without objection, plaintiff filed an amended complaint. (Docket Entry ## 54, 55). In lieu of seeking to dismiss the amended complaint, defendants filed an answer and an amended answer to the amended complaint. (Docket Entry ## 63, 64). The amended complaint sets out six counts against defendants: (1) breach of contract ("Count One"); (2) breach of the implied covenant of good faith and fair dealing ("Count Two"); (3) promissory estoppel ("Count Three"); (4) fraud ("Count Four"); (5) grossnegligence ("Count Five"); and (6) violation of sections two and nine of chapter 93A ("Count Six"). (Docket Entry ## 54, 55).

In seeking summary judgment (Docket Entry # 76), defendants filed a LR. 56.1 statement of material facts (Docket Entry # 78); an affidavit (Docket Entry # 77-1, pp. 1-8) from Derrick Raleigh ("Raleigh"), a senior loan analyst with Ocwen; various exhibits (Docket Entry ## 77-1, 77-2, 77-4); and a deposition of plaintiff (Docket Entry # 77-3). In addition to opposing the motion (Docket Entry ## 86, 86-1), plaintiff submitted a LR. 56.1 response to defendants' statement of material facts (Docket Entry # 86-2) as well as his own exhibits (Docket Entry ## 86-3 to 86-27, 88), affidavit (Docket Entry 88-6), and statement of additional material facts (Docket Entry # 89).

STANDARD OF REVIEW

Summary judgment is designed "to 'pierce the boilerplate of the pleadings and assay the parties' proof in order to determine whether trial is actually required.'" Tobin v. Fed. Express Corp., 775 F.3d 448, 450 (1st Cir. 2014) (internal citation omitted). It is appropriate 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). It is inappropriate "if the record is sufficiently open-ended to permit a rational factfinder to resolve a materialfactual dispute in favor of either side." Pierce v. Cotuit Fire Dist., 741 F.3d 295, 301 (1st Cir. 2014).

"An issue is 'genuine' when a rational factfinder could resolve it [in] either direction," and a "fact is 'material' when its (non)existence could change a case's outcome." Mu v. Omni Hotels Mgmt. Corp., 882 F.3d 1, 5 (1st Cir. 2018) (internal citation omitted); accord Green Mountain Realty Corp. v. Leonard, 750 F.3d 30, 38 (1st Cir. 2014). The record is viewed in favor of the nonmoving party, and reasonable inferences are drawn in the nonmoving party's favor. See Garcia-Garcia v. Costco Wholesale Corp., 878 F.3d 411, 417 (1st Cir. 2017) (court examines "'record in the light most favorable to the nonmovant' and must make 'all reasonable inferences in that party's favor'") (internal citations omitted); Ahmed v. Johnson, 752 F.3d 490, 495 (1st Cir. 2014). In reviewing a summary judgment motion, a court may examine "all of the record materials on file" even if not cited by the parties. Ahmed, 752 F.3d at 495; Fed. R. Civ. P. 56(c)(3). "'"[C]onclusory allegations, improbable inferences, and unsupported speculation"'" are ignored. Garcia-Garcia, 878 F.3d at 417 (internal citations omitted).

Local Rule 56.1 requires a moving party to "include a concise statement of the material facts of record as to which the moving party contends there is no genuine issue to be tried"with citations to the record. LR. 56.1. In response, the non-moving party must set out his own statement with citations to the record showing that "there exists a genuine issue to be tried." LR. 56.1. Unless the non-moving party's statement controverts the moving party's statement, the moving party's facts are "admitted by [the] opposing part[y]." LR. 56.1; see Cochran v. Quest Software, Inc., 328 F.3d 1, 12 (1st Cir. 2003) (plaintiff's failure to contest date in LR. 56.1 statement of material facts caused date to be admitted on summary judgment); Stonkus v. City of Brockton Sch. Dep't, 322 F.3d 97, 102 (1st Cir. 2003).

Statements regarding the law and legal argument are not properly a part of an LR. 56.1 statement of additional facts. See Dukanci v. Ann Inc. Retail, 117 F. Supp. 3d 115, 117 n.2 (D. Mass. 2015) ("proffered statements fail to comply with Local Rule 56.1 as they . . . consist largely of legal argument"); Matt v. HSBC Bank USA, 968 F. Supp. 2d 351, 354 n.2 (D. Mass. 2013) (plaintiff "offered paragraphs of legal argument that have no place in a party's concise statement of facts"); Neponset Landing Corp. v. Nw. Mut. Life Ins. Co., 902 F. Supp. 2d 149, 153 (D. Mass. 2012) (not crediting as facts LR. 56.1 statements that "merely reflect the arguments of counsel"). Plaintiff includes legal arguments in a number of responses to defendants' LR. 56.1 paragraphs. For example, inresponse to paragraph 14 in defendants' LR. 56.1 statement ("On or about January 28, 2009, $12,500.00 was applied from an escrow account to the outstanding principal and interest on the loan.") (Docket Entry # 78, p. 3, ¶ 14), plaintiff's LR. 56.1 paragraph 14 states it "was a part of the mortgage and not an escrow that would have resulted in the full amount of $12,500.00 being credited to the principal if the money was not to be used for its intended purpose." (Docket Entry # 86-2, p. 3, ¶ 14, sent. 2). The above-quoted response (Docket Entry # 86-2, p. 3, ¶ 14, sent. 2) and other statements of the law and legal arguments in plaintiff's LR. 56.1 response and additional statement (Docket Entry ## 86-2, 89) are ignored and not afforded any weight. Adhering to this framework, the summary judgment record sets out the following facts.

FACTUAL BACKGROUND

Plaintiff owns property located at 6 North Pine Street in Salem, Massachusetts ("the property"). (Docket Entry # 77-3, pp. 6-7). On August 17, 2006, he executed a promissory note ("the note") of $190,000 with a lender, Delta Funding Corporation ("Delta"), to refinance his home. (Docket Entry # 77-1, p. 2, ¶ 4) (Docket Entry # 77-1, p. 10) (Docket Entry # 77-3, p. 7). The note states that although the "amount may change," plaintiff agreed to make initial monthly payments of $1,541.10 on "the first day of each month beginning on October1st, 2006." (Docket Entry # 77-1, p. 10). The note set out an annual 0.03 rate of 9.090% on unpaid principal which may change on various "Change Dates" beginning on September 1, 2009. (Docket Entry # 77-1, pp. 10-11) (bold font omitted). If changed, the interest rate would not be "lower than 9.090[%]." (Docket Entry # 77-1, p. 11, ¶ 4(D)).

The note allows "the Note Holder" to collect a late charge if the monthly payment is overdue by 15 days equal to 3% of the overdue principal and interest payment. (Docket Entry # 77-1, p. 12). Plaintiff, as the borrower, agreed to pay this late charge. (Docket Entry # 77-1, p. 12). If plaintiff did not pay "the full amount of each...