Koufos v. U.S. Bank, N.A.

• Citation: 939 F.Supp.2d 40
• Decision Date: 01 July 2013
• Docket Number: Civil Action No. 12–cv–10743–DJC.
• Court: U.S. District Court — District of Massachusetts
• Parties: Peter H. KOUFOS, Plaintiff, v. U.S. BANK, N.A., as Trustee on Behalf of the Holders of the CFSB Mortgage Pass–Through Certificates Series 2005–CF1, Select Portfolio Servicing, Inc., Lender Processing Services, Lender Processing Services Default Solutions, New Century Mortgage Corp., and Ablitt & Scofield, P.C., Defendants.

939 F.Supp.2d 40

Peter H. KOUFOS, Plaintiff,

v.U.S. BANK, N.A., as Trustee on Behalf of the Holders of the CFSB Mortgage Pass–Through Certificates Series 2005–CF1, Select Portfolio Servicing, Inc., Lender Processing Services, Lender Processing Services Default Solutions, New Century Mortgage Corp., and Ablitt & Scofield, P.C., Defendants.

Civil Action No. 12–cv–10743–DJC.

United States District Court,

D. Massachusetts.

March 21, 2013.

Order Amending in Part July 1, 2013.

Glenn F. Russell, Jr., Law Office of Glenn F. Russell Jr., Fall River, MA, for Plaintiff.

Peter Francis Carr, II, Eckert Seamans Cherin & Mellott, LLC, Boston, MA, for Defendants.

MEMORANDUM AND ORDER

CASPER, District Judge.

I. Introduction

Plaintiff Peter Koufos (“Koufos”) has sued U.S. Bank National Association (“U.S. Bank”), as Trustee on behalf of the holders of the CSFB Mortgage Pass–Through Certificates Series 2005–CF1 (“Trust”), Select Portfolio Servicing, Inc. (“SPS”), Lender Processing Services, LPS Default Solutions, New Century Mortgage Corporation (“New Century”) and Ablitt & Scofield, P.C. (collectively, “Defendants”) asserting claims that primarily relate to U.S. Bank's attempted foreclosure of Koufos's residence.

Koufos's amended verified complaint asserts claims against U.S. Bank for injunctive relief (“Count I”), a declaratory judgment that U.S. Bank does not have standing to enforce the promissory note related to Koufos's mortgage (“Count II”) and a declaratory judgment that U.S. Bank does not have standing to enforce Koufos's mortgage contract (“Count III”). D. 10 at 37–43. Koufos asserts claims against U.S. Bank and SPS alleging violations of Mass. Gen. L. c. 93A (“Count IV”), violation of the Massachusetts Consumer Credit Cost Disclosure Act (“MCCCDA”), Mass. Gen. L. c. 140D (“Count VII”) and intentional and negligent infliction of emotional distress (“Count VIII”). D. 10 at 43–44, 46–48. Koufos asserts claims against all Defendants for civil conspiracy (“Count V”) and unjust enrichment (“Count VI”). D. 10 at 44–46.

U.S. Bank and SPS have moved to dismiss all claims pursuant to Fed.R.Civ.P. 12(b)(6), or to strike Koufos's amended verified complaint under Fed.R.Civ.P. 8 and 12(f) for failing “to comply with the short and plain pleading requirement.” ¹ Def. Mot., D. 14 at 1. For the reasons set forth below, U.S. Bank and SPS's joint motion to dismiss is GRANTED in part and DENIED in part and their motion to strike Koufos's complaint is DENIED.

II. Background

Unless otherwise noted, the following factual allegations are from Koufos's amended verified complaint, D. 10, that the Court accepts as true for the purposes of resolving U.S. Bank and SPS's joint motion to dismiss. Ocasio–Hernández v. Fortuño–Burset, 640 F.3d 1, 12 (1st Cir.2011).

A. Koufos Obtains a Mortgage Loan from New Century

Koufos resides at 19 Skyline Drive in Medway, Massachusetts (the “Property”). ¶ 1. On January 28, 2005, Koufos refinanced the mortgage loan on the Property with Defendant New Century. ¶ 7. Koufos executed a promissory note in the amount of $344,250 (“Koufos note”) and granted New Century a mortgage in his Property (“Koufos mortgage”). ¶¶ 7, 10. The Koufos mortgage was recorded with the Norfolk Registry of Deeds on February 2, 2005. ¶ 11.

B. New Century Goes Bankrupt and Sells Most of Its Loan Assets

On April 2, 2007, New Century filed for Chapter 11 bankruptcy and requested to operate as a debtor in possession (“DIP”) for the approximately two thousand residential loans that it owned at that time. ¶¶ 20–23, 81. New Century, acting as a DIP, in May 2007 agreed to sell a portion of its “mortgage assets” for around $58 million to Ellington Capital Management Group L.L.C. (“Ellington”). ¶¶ 82–83. On June 29, 2007, Ellington purchased New Century's remaining residential loans except for forty-six loans that were either subject to “complications related to the State of Ohio” or required the clearing of title. ¶¶ 85–86. Koufos alleges that Koufos's mortgage and loan had been sold by New Century to some other entity prior to June 29, 2007. ¶ 87.

C. New Century Purports to Assign Koufos's Loan to U.S. Bank and U.S. Bank Begins Foreclosure Proceedings

On or about April 9, 2009, Defendant SPS, in accordance with a power of attorney it held on behalf of New Century, purported to assign the Koufos mortgage and note to U.S. Bank as trustee for the Trust, and recorded the assignment with the Norfolk County Registry of Deeds. ¶¶ 13, 15, 27, 88, 98–100, D. 10 Exh. D. U.S. Bank commenced foreclosure proceedings against Koufos. ² ¶ 45. Those proceeding were automatically stayed in December 2010 when Koufos filed for bankruptcy. ¶¶ 89, 91; D. 15 at 2. In March 2011, U.S. Bank filed a motion in bankruptcy court to lift the automatic stay. ¶ 91. Koufos opposed that motion and further challenged U.S. Bank's right to enforce the note. ¶¶ 91–92. On October 21, 2011, the bankruptcy court lifted the automatic stay and dismissed Koufos's challenge for lack of subject matter jurisdiction. ¶ 148.

D. Procedural History

On April 24, 2012, Koufos filed this action in the Norfolk Superior Court challenging U.S. Bank's foreclosure sale of the Property scheduled for April 27, 2012. D. 9 at 1. U.S. Bank and SPS removed the matter to federal court on April 26, 2012. D. 1. On that same day, Koufos moved for injunctive relief to block the foreclosure sale. D. 4, 7. Koufos filed an amended verified complaint on May 2, 2012. D. 10. U.S. Bank and SPS subsequently filed a motion to dismiss or to strike Koufos's amended verified complaint. D. 14. The Court held a hearing on the motions and denied Koufos's motions for injunctive relief, D. 4, 7, and took U.S. Bank and SPS's joint motion to dismiss or strike Koufos's complaint, D. 14, under advisement. D. 23–24.

III. DiscussionA. Standard of Review

To decide a motion to dismiss, the Court must determine if the well-pled facts alleged “plausibly narrate a claim for relief.” Schatz v. Republican State Leadership Comm., 669 F.3d 50, 55 (1st Cir.2012). Stated differently, on the plaintiff's view of the facts, the Court should be able to “draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); see Ocasio–Hernández, 640 F.3d at 12. “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

B. Koufos Has Stated a Right to Declaratory Relief as to U.S. Bank's Standing to Enforce the Koufos Mortgage

The Court first addresses the allegations made in Counts I, II and III. Count I is captioned “Injunctive Relief” and is styled in as a request for a preliminary and a permanent injunction. D. 10 ¶¶ 222–33. An injunction is not a cause of action, but a remedy. See Wentworth Precious Metals, LLC v. City of Everett, No. 11–10909–DPW, 2013 WL 441094, at *15 (D.Mass. Feb. 4, 2013); Green v. Parts Distrib. Xpress, Inc., No. 10–11959–DJC, 2011 WL 5928580 (D.Mass. Nov. 29, 2011). Accordingly, the Court denies this cause of action, but injunctive relief may be available if Koufos succeeds on the merits of his remaining claims.

Counts II and III seek declaratory judgments that U.S. Bank lacks standing to enforce the terms of the Koufos note and mortgage, respectively. D. 10 ¶¶ 243, 257. A declaratory judgment “in a case of actual controversy ... enable[s] litigants to clarify legal rights and obligations before acting upon them.” Ernst & Young v. Depositors Econ. Prot. Corp., 45 F.3d 530, 534 (1995). The First Circuit has recognized that “a Massachusetts mortgagor has a legally cognizable right under state law to ensure that any attempted foreclosure on her home is conducted lawfully.” Culhane v. Aurora Loan Servs. of Nebraska, 708 F.3d 282, 290 (1st Cir.2013).³ Koufos alleges that the “currently scheduled foreclosure auction” would not be “valid.” D. 10 ¶¶ 223 (alleging U.S. Bank “does not have the current legal authority to act pursuant to the power of sale in [Koufos's] mortgage contract, because Defendant(s) could not legally receive a legally valid assignment of [Koufos's] mortgage contractual rights on the date(s) of the purported [a]ssignment”); D. 10 ¶ 226 (alleging that “the Legal Notice [of foreclosure] is not valid because at the time it was sent, [U.S. Bank] was not a proper assignee and holder of [Koufos's] mortgage”); D. 10 ¶ 227 (alleging “[U.S. Bank] cannot conduct a valid foreclosure auction of [Koufos's] residence under Massachusetts law”); D. 10 ¶ 244 (incorporating allegations into Count III).

The Court will not dismiss Count III, which seeks a declaratory judgment that U.S. Bank lacks standing to enforce the mortgage contract. Here, Koufos alleges that New Century had completely divested itself of the Koufos mortgage by June 29, 2007. D. 10 ¶ 87. U.S. Bank relies on a purported assignment from New Century (by SPS through power of attorney) to U.S. Bank (as trustee for the Trust) that took place in April 2009 to establish that U.S. Bank had the right to foreclose under the power of sale contained within Koufos's mortgage contract. D. 15 at 2; Tr. of July 16, 2012 Hearing, D. 24 at 15:5–6, 18:5–8, 19:19–22, 20:14–16.⁴ If Koufos is correct, New Century purported in 2009 to assign to U.S. Bank something that New Century no longer owned and could not assign. In that case, the purported assignment was invalid; any foreclosure proceeding grounded on rights obtained under the invalid assignment would be void. See U.S. Bank Nat. Ass'n v. Ibanez, 458 Mass. 637, 647–48, 941 N.E.2d 40 (2011) (noting that “[a]ny effort to foreclose by a party lacking ‘jurisdiction and authority’ to carry out a foreclosure under these statutes is void” and that a mortgagee has “authority to exercise the power of sale...