HSBC Bank USA, N.A. v. Morris
| Decision Date | 22 July 2022 |
| Docket Number | SJC-13191 |
| Citation | 190 N.E.3d 485 |
| Parties | HSBC BANK USA, N.A., trustee, v. Tommy L. MORRIS & another. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
The following submitted briefs for amici curiae:
Tommy L. Morris, pro se.
David F. Kiah, for Mary L. Morris.
Christopher J. Williamson, Woburn, for the plaintiff.
Susan Ann Silverstein & Elizabeth A. Aniskevich, of the District of Columbia, & Joshua M. Daniels, for AARP & others.
Maura Healey, Attorney General, & Matthew Lashof-Sullivan & Jane A. Sugarman, Assistant Attorneys General, for the Attorney General.
Grace C. Ross, pro se.
Paul R. Collier, III, for Joseph Cavaliere & another.
Present: Budd, C.J., Gaziano, Lowy, Cypher, Kafker, Wendlandt, & Georges, JJ.
This case requires us to determine whether, in connection with a summary process action brought by the assignee of a home mortgage loan to obtain possession following a nonjudicial foreclosure, a borrower may bring a counterclaim under § 15 (b ) (2) of the Predatory Home Loan Practices Act (PHLPA), G. L. c. 183C. We conclude that such a counterclaim may be asserted following a nonjudicial foreclosure but is limited to the extent of "amounts required to reduce or extinguish the borrower's liability under the high-cost home mortgage loan" plus costs and reasonable attorney's fees. Id. Further concluding that the borrowers’ counterclaim under G. L. c. 93A is barred because it exceeds the extent of the claim of HSBC Bank USA, N.A., as trustee of the Fremont Home Loan Trust 2005-E, Mortgage Backed Certificate, Series 2005-E (HSBC), we reverse in part the Housing Court judge's grant of summary judgment in favor of HSBC and remand for further proceedings consistent with this opinion.3
1. Background. a. Facts. The following facts are either undisputed "or viewed in the light most favorable to ... the party against [whom] summary judgment entered." Berry v. Commerce Ins. Co., 488 Mass. 633, 634, 175 N.E.3d 383 (2021), citing Attorney Gen. v. Bailey, 386 Mass. 367, 371, 436 N.E.2d 139, cert. denied, 459 U.S. 970, 103 S.Ct. 301, 74 L.Ed.2d 282 (1982).
The defendants, Tommy L. and Mary L. Morris (Morrises), purchased their Brockton home (property) in October 2005 with the proceeds from two loans obtained from the lender, Fremont Investment & Loan, Inc. (Fremont); each loan was secured by a mortgage on the property. The primary loan, which is at issue in this litigation, was structured as an interest-only, fixed rate loan for the first two years, turning into an adjustable rate loan that included principal and interest, with the interest adjusted every six months after the initial two-year period expired.4 Both loans had a maturity date of November 1, 2035. Mortgage Electronic Registration Systems, Inc. (MERS), was the mortgagee on the mortgage that secured the loans.5
In 2007, the Attorney General initiated a lawsuit against Fremont for engaging in unfair and deceptive practices in originating and servicing home mortgage loans between 2004 and 2007 in violation of G. L. c. 93A, including home mortgage loans like the Morrises’ home mortgage loan, with a fixed interest rate for the first few years that then increased considerably for the remaining period. See Commonwealth v. Fremont Inv. & Loan, 452 Mass. 733, 737, 897 N.E.2d 548 (2008).
In December 2007, following the expiration of the initial two-year period on the primary home mortgage loan, the Morrises’ monthly payment increased to an amount they could not afford. In 2008, the Morrises retained an attorney to assist them to obtain a modification of the home mortgage loans; the attorney advised them to stop making payments, ostensibly so that he could attempt to negotiate a more affordable monthly rate.6 Acting on this advice, the Morrises made their last payment in September 2008 and subsequently defaulted by failing to make monthly payments.
It does not appear that their attorney negotiated a loan modification.
In 2009, Fremont agreed to pay $10 million to settle the Attorney General's lawsuit, and the Morrises received approximately $2,000 as part of the settlement.7
In February 2012, the assignment of the mortgage from MERS to HSBC was recorded.8 In February 2016, HSBC sent the Morrises a right to cure letter, informing them that if they did not pay the past due amount on their home mortgage loan, they "may be evicted from [their] home after a foreclosure sale." See G. L. c. 244, § 35A. In April 2016, HSBC sent the Morrises a letter regarding their right to request a modified mortgage loan, informing them that HSBC's "records indicate[d] that [the Morrises were] eligible to request a modification of [their] mortgage," and encouraged them to apply for the Home Affordable Modification Program and the Home Affordable Foreclosure Alternative Program. The Morrises did not respond, and it does not appear that they applied to modify their mortgage loan.
In July 2016, HSBC sent to the Morrises an acceleration notice in compliance with G. L. c. 244, § 35A, informing them that their home mortgage loan had been accelerated and that they "may have the right to reinstate the [m]ortgage [l]oan by paying" the amount due. The Morrises did not respond.
In November 2016, HSBC filed a complaint in the Land Court to determine the Morrises’ military status pursuant to 50 U.S.C. §§ 3901 et seq. The Morrises did not respond.
In June 2017, HSBC sent to the Morrises a notice of foreclosure sale. See G. L. c. 244, § 14. The notice of sale was published on June 30, July 7, and July 14, 2017. The Morrises did not respond or otherwise reach out to HSBC.
In July 2017, HSBC held a foreclosure sale and sold the Morrises’ home to itself as the highest bidder. See G. L. c. 244, § 14. The proceeds from the sale did not suffice to extinguish the amount of the Morrises’ indebtedness.
In September 2017, the Morrises were served with a seventy-two hour notice to quit. The Morrises did not vacate the property. As discussed supra, the Morrises have made no loan payments since 2008.
b. Procedural history. HSBC initiated the present summary process action in the Housing Court in October 2017, seeking to obtain possession of the property. The Morrises filed an answer asserting, inter alia, that HSBC had no superior right to possession, that HSBC violated the PHLPA, and that they were entitled to damages and injunctive relief under G. L. c. 93A.9 HSBC moved for summary judgment on the ground that it had acquired title through proper compliance with its statutory obligations for a nonjudicial foreclosure. HSBC also contended that the Morrises’ counterclaims were untimely. The Morrises filed a cross motion for summary judgment. The judge granted summary judgment in favor of HSBC, concluding that the Morrises’ PHLPA and c. 93A counterclaims were barred by the applicable statutes of limitations. The Morrises’ subsequent motion for reconsideration or to alter the judgment was denied.
The Morrises appealed, and a divided panel of the Appeals Court affirmed, holding first that the Morrises’ counterclaim pursuant to G. L. c. 183C, § 15 (b ) (2), was untimely because it could only be raised prior to foreclosure, and second that the c. 93A counterclaim was time barred by the four-year statute of limitations because the acts giving rise to the c. 93A claim were known to the Morrises no later than 2008, when they stopped making payments on their home mortgage loan on the advice of counsel. See HSBC Bank USA, N.A. v. Morris, 99 Mass. App. Ct. 417, 421-423 & n.9, 168 N.E.3d 1111 (2021). Following the denial of their motion for reconsideration, the Morrises applied for further appellate review, which we granted.
2. Discussion.10 a. Standard of review. Summary judgment is appropriate where there is no material issue of fact in dispute and the moving party is entitled to judgment as a matter of law. See Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716, 575 N.E.2d 734 (1991) ; Mass. R. Civ. P. 56 (c), as amended, 436 Mass. 1404 (2002). "Our review of a decision on a motion for summary judgment is de novo." Berry, 488 Mass. at 636, 175 N.E.3d 383. We review the evidence in the light most favorable to the party against whom summary judgment entered. See Cabot Corp. v. AVX Corp., 448 Mass. 629, 636-637, 863 N.E.2d 503 (2007).
b. PHLPA. The PHLPA, enacted in 2004, aims to protect borrowers from predatory lending by creating a "broad scheme of liability" against lenders that make "high-cost home mortgage loans"11 without satisfying the statutory criteria. Drakopoulos v. U.S. Bank Nat'l Ass'n, 465 Mass. 775, 782-783 & n.11, n.13, 991 N.E.2d 1086 (2013). See Lambiaso, Comprehensive Bill Targeting Predatory Lending Gains Momentum, State House News Service, Mar. 15, 2004 (Lambiaso, State House News Service) ("These measures will help working families from being victimized and give them new clout by increasing penalties").
The broad remedial purpose of the PHLPA is reflected in the array of remedies available to a borrower when a lender makes a high-cost home mortgage loan in violation of the PHLPA. When a lender has violated the PHLPA,12 a borrower may seek under the statute "injunctive relief or damages," "an order or injunction rescinding a home mortgage loan contract ... or barring the lender from collecting" under the home mortgage loan, "reform[ation of] the terms of the home mortgage loan," "an order or injunction enjoining a lender...
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...in these circumstances.Discussion. "Our review of a decision on a motion for summary judgment is de novo." HSBC Bank USA, N.A. v. Morris, 490 Mass. 322, 326, 190 N.E.3d 485 (2022), quoting Berry v. Commerce Ins. Co., 488 Mass. 633, 636, 175 N.E.3d 383 (2021). The moving party is entitled to......