Serra v. Quantum Servicing, Corp.

• Decision Date: 31 March 2014
• Docket Number: No. 13–1557.,13–1557.
• Parties: John P. SERRA, II, Plaintiff, Appellant, v. QUANTUM SERVICING, CORP., Wells Fargo Bank, N.A., Trustee for RMAC Pass–Through Trust, Series 2010–A, Defendants, Appellees, Equifirst Corporation, Defendant.
• Court: U.S. Court of Appeals — First Circuit

747 F.3d 37

John P. SERRA, II, Plaintiff, Appellant,

v. QUANTUM SERVICING, CORP., Wells Fargo Bank, N.A., Trustee for RMAC Pass–Through Trust, Series 2010–A, Defendants, Appellees,Equifirst Corporation, Defendant.

No. 13–1557.

United States Court of Appeals,First Circuit.

March 31, 2014.

Glenn F. Russell, Jr., with whom Glenn F. Russell, Jr. & Associates, P.C., was on brief for appellant.

Reneau J. Longoria, with whom Stephen M. Valente and Doonan, Graves & Longoria, LLC, were on brief for appellees.

Before TORRUELLA, Circuit Judge, SOUTER,^* Associate Justice, and THOMPSON, Circuit Judge.

TORRUELLA, Circuit Judge.

John P. Serra, II (“Serra”) asserts that his property was wrongfully sold at foreclosure by a party without any valid legal interest in his mortgage. He also extends claims in wrongful foreclosure and unfair business practices against an earlier mortgage holder that tried, unsuccessfully, to foreclose. All of these claims are predicated on a theory that Mortgage Electronic Registration Systems, Inc. (“MERS”) lacked the authority to transfer Serra's mortgage. This court, however, has expressly adopted a contrary view of MERS's legality, and stare decisis is a hurdle far too high for Serra to surmount.

Additionally, Serra claims that subsequent mortgage assignees may incur liability for the allegedly predatory loan terms crafted by his original lender and that his right to rescission was improperly cut short by the sale of his property. Because a review of relevant Massachusetts law shows that these claims are similarly lacking, we affirm.

I. Background

On May 2, 2007, Serra refinanced his residential home mortgage, taking out a $276,250 loan from EquiFirst Corporation (“EquiFirst”) ¹ secured by his Bellingham, Massachusetts home. The mortgage listed MERS as “nominee” for EquiFirst and as the “mortgagee” of record. According to Serra, the terms of this mortgage loan were both structurally unfair and knowingly against his best interest, in violation of Massachusetts law.

The Serra mortgage underwent a series of assignments beginning on April 7, 2009, when MERS transferred the mortgage to Barclays Bank, PLC. Barclays immediately transferred the mortgage onwards and, by November 25, 2009, it had been assigned to Quantum Servicing Corp. (“Quantum”). On June 1, 2011, Quantum undertook an additional assignment, transferring the mortgage to Wells Fargo Bank, N.A. as Trustee for RMAC Pass–Through Trust, Series 2010–A (“Wells Fargo”). Quantum remained the loan's servicer.

In October 2010, Serra sent a letter to Quantum—then acting as servicer for Wells Fargo—seeking to rescind his mortgage under the Massachusetts Consumer Credit Cost Disclosure Act (“MCCCDA”). Namely, Serra alleged that a $244.48 credit reporting fee was far above the accepted $50.00 market rate, amounting to a statutory violation sufficient for rescission. Quantum's response letter posed two questions: (1) could Serra tender the loan proceeds in full, and (2) could Serra provide documentation proving rescission was warranted. Quantum never received a response to these inquiries, and subsequently, Wells Fargo sold Serra's property at foreclosure.

Serra's suit, originally brought in state court, was removed on the basis of diversity. Having conducted a foreclosure sale and believing it was owed a deficiency judgment, Wells Fargo counterclaimed before the district court for breach of contract and possession of the foreclosed property. Summary judgment as to all claims was eventually entered in favor of Wells Fargo and Quantum, precipitating this appeal.

II. Discussion

Because this appeal is before us as a result of the district court's grant of summary judgment, our review is de novo, and we interpret all facts on the record in support of the nonmoving party below. Bos. Prop. Exch. Transfer Co. v. Iantosca, 720 F.3d 1, 9 (1st Cir.2013). All reasonable inferences that may be extrapolated from the record are drawn in favor of the non-movant, but allegations of a merely speculative or conclusory nature are rightly disregarded. Suárez v. Pueblo Int'l, Inc., 229 F.3d 49, 53 (1st Cir.2000). We affirm the district court's grant of summary judgment if, after undertaking this independent review, we agree that there exists no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); McCarthy v. Nw. Airlines, Inc., 56 F.3d 313, 315 (1st Cir.1995).

A. MERS's Ability to Transfer Serra's Mortgage

Serra brings claims for wrongful foreclosure against Quantum and Wells Fargo. He also seeks to prove that Quantum engaged in unfair or deceptive business practices. Mass. Gen. Laws ch. 93A (“Chapter 93A”). Because these claims are predicated on the same erroneous legal theory, we review and dismiss them together.

In short, Serra claims that the MERS business model, under which MERS possesses a bare legal interest in a mortgage, transferable among MERS member institutions, is contrary to Massachusetts law. As a consequence, Serra theorizes, MERS lacked legal authority to transfer the Serra mortgage, rendering both its initial assignment and all subsequent transfers of the mortgage invalid.

This argument willfully disregards our holding in Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282 (1st Cir.2013). In Culhane, we ruled unequivocally that MERS may validly possess and assign a legal interest in a mortgage. Id. at 292–93. Far from finding it contrary to law, we remarked that “MERS's role as mortgagee of record and custodian of the bare legal interest as nominee ... fit[s] comfortably within the structure of Massachusetts mortgage law.” Id. at 293;see also Woods v. Wells Fargo Bank, N.A., 733 F.3d 349, 355 (1st Cir.2013) (applying Culhane to find that “MERS, as the mortgagee of record, possessed the ability to assign [the] mortgage”).

Indeed, Serra conceded at oral argument that Culhane invalidates his claims and offered only the suggestion that we disregard the case in reaching our decision, given that the Massachusetts Supreme Judicial Court has not ruled expressly on this issue of state law.² Of course it is true that Culhane resolved an issue of Massachusetts law, and thus it could theoretically be displaced by a contrary ruling arising from the Massachusetts Supreme Judicial Court. See Blinzler v. Marriott Int'l, Inc., 81 F.3d 1148, 1151 (1st Cir.1996). In the absence of any such contrary holding, however, Culhane unquestionably binds this court: under Massachusetts law, MERS may validly possess and transfer a legal interest in a mortgage. See Arizona v. Rumsey, 467 U.S. 203, 212, 104 S.Ct. 2305, 81 L.Ed.2d 164 (1984) (“[A]ny departure from the doctrine of stare decisis demands special justification.”).

As presciently stated in Culhane itself, where litigants attempt to repackage “old wine in a new bottle ... we see no point in decanting it again.” Culhane, 708 F.3d at 294. Put simply, Serra's theory has been foreclosed. The grant of summary judgmentas to Serra's wrongful foreclosure and Chapter 93A claims is affirmed.

B. Claims Based on Assignee Liability

Serra next seeks to have Quantum and Wells Fargo answer for what he believes are structurally unfair loan terms and predatory lending practices engaged in by EquiFirst. SeeMass. Gen. Laws ch. 93A, § 2; id. ch. 183, § 28C (the “Borrower's Interest Act”). We need not explore whether the loan terms were in fact unlawful. Rather, because both his Chapter 93A claim for damages and his Borrower's Interest Act claim for equitable relief rise and fall on a common, mistaken, theory of assignee liability, we consider them in tandem.

Serra's argument rests solely on a recent Massachusetts Supreme Judicial Court case, Drakopoulos v. U.S. Bank Nat'l Ass'n, 465 Mass. 775, 991 N.E.2d 1086 (2013), which he believes establishes assignee liability for his statutory claims. An independent review of Drakopoulos, however, reveals this argument's erroneous underpinnings.

The plaintiffs in Drakopoulos brought six claims, three of which are relevant here. While two of these claims matched Serra's own, arising under Chapter 93A and the Borrower's Interest Act, the third arose under the Predatory Home Loan Practices Act (“PHLPA”), Mass. Gen. Laws ch. 183C. See Drakopoulos, 991 N.E.2d at 1091. As recognized by the Supreme Judicial Court, PHLPA's text expressly includes a broad grant of assignee liability. Id. at 1092 n. 11;see alsoMass. Gen. Laws ch. 183C, § 15(a) (“Any 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....”). Thus, PHLPA expands the common law of assignee liability in the limited instance of certain “high cost” loans. Drakopoulos, 991 N.E.2d at 1092 (“To the extent that the bank may [ ] have liability as an assignee by virtue of the act, it would extend to ... statutory [Chapter 93A and Borrower's Interest Act claims, as well].” (emphasis added)).

In relying on Drakopoulos, Serra fails to acknowledge that his complaint alleged no violation of PHLPA,³ and thus cannot receive the advantage of that act's broad grant of assignee liability. Moreover, neither Chapter 93A nor the Borrower's Interest Act serves as an independent ground for extending liability to Serra's claims. See id. at 1095 n. 16 (“Where an assignee played no part in the unfair or deceptive acts of an assignor, principles of assignee liability ordinarily will not render the assignee liable for affirmative damages for those acts.”); id. at 1097 n. 20 (“[But for PHLPA], an assignee who took no part in the making of a home loan would not fall within the scope of liability of the Borrower's Interest Act.”).

In the absence of such statutorily created liability, Serra cannot hold Quantum and Wells Fargo responsible for the allegedly predatory practices of their predecessor-in-interest. Ford Motor Credit Co. v....