Sovereign Bank v. Sturgis
| Decision Date | 22 March 2012 |
| Docket Number | Civil Action No. 11–10601–DPW. |
| Parties | SOVEREIGN BANK, Plaintiff, v. Michael P. STURGIS and Constance Sturgis, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
OPINION TEXT STARTS HERE
Preempted
M.G.L.A. c. 140D, § 1; c. 183, § 27; c. 244, § 35AHoward M. Brown, Richard E. Gentilli, Bartlett Hackett Feinberg P.C., Boston, MA, for Plaintiff.
James T. Ranney, Jamie Ranney, PC, Nantucket, MA, for Defendants.
Plaintiff Sovereign Bank (“Sovereign”) brought this action against Defendants Michael and Constance Sturgis to collect a deficiency allegedly due on several notes after Sovereign foreclosed on the properties securing the debts. The Sturgises responded with an array of fifteen counterclaims alleging various unlawful acts committed by Sovereign in the course of servicing the loans and foreclosing on the mortgages. Both parties have filed motions to dismiss the respective claims against them pursuant to Fed.R.Civ.P. 12(b)(6).
To survive a motion to dismiss for failure to state a claim upon which relief can be granted, “a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (internal citation omitted). All well-pleaded factual allegations in the complaint must be taken as true and all reasonable inferences must be drawn in the pleader's favor. SEC v. Tambone, 597 F.3d 436, 441 (1st Cir.2010) (en banc).
This highly deferential standard of review “does not mean, however, that a court must (or should) accept every allegation made by the complainant, no matter how conclusory or generalized.” United States v. AVX Corp., 962 F.2d 108, 115 (1st Cir.1992). Dismissal for failure to state a claim is appropriate when the pleadings fail to set forth “factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory.” Berner v. Delahanty, 129 F.3d 20, 25 (1st Cir.1997) (quoting Gooley v. Mobil Oil Corp., 851 F.2d 513, 515 (1st Cir.1988)). The plaintiff must provide “a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the ... claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal citation omitted) (elision in original).
The allegations in the Complaint are read in the light most favorable to Sovereign, the non-moving party as to Defendants' motion.
On December 12, 2006, the Sturgises executed a promissory note in favor of Sovereign in the amount of $1,090,000.00 (the “Flintlock Loan”). Compl. ¶ 10. On March 9, 2009, the Sturgises executed a Home Equity Line of Credit Agreement in favor of Sovereign in the original principal amount of $125,000.00 (the “Flintlock HELOC”). Compl. ¶ 11. The Flintlock Loan and the Flintlock HELOC were secured by mortgages on a property at 24 Flintlock Road, Nantucket, Massachusetts. Compl. ¶ 12. On March 30, 2007, the Sturgises, individually along with a limited liability company known as Scootsam, LLC, executed a promissory note in favor of Sovereign in the amount of $1,775,000.00 (the “Scootsam Loan”). The Scootsam Loan was secured by a mortgage on a property at 5 Amelia Drive, Nantucket, Massachusetts. Compl. ¶¶ 6–7.
The Sturgises defaulted under the terms of the Flintlock Loan, the Flintlock HELOC, and the Scootsam Loan, and Sovereign foreclosed on the two pieces of property securing the loans. Compl. ¶¶ 8, 13. However, the Sturgises remain indebted to Sovereign. On the Scootsam Loan, $747,723.57 remains owing; on the Flintlock Loan, $273,553.07 remains owing; and on the Flintlock HELOC, $128,300.61 remains owing, plus continuing interest, costs, and attorneys' fees. Compl. ¶¶ 9, 14.
The Sturgises move to dismiss the Complaint on the grounds that it fails to allege (1) compliance with various foreclosure statutes and (2) personal liability on the part of the Sturgises for the Scootsam Loan.
Sovereign argues that the Sturgises' motion to dismiss is untimely. On the one hand, the motion was filed too late to comply with the timing requirements under Fed.R.Civ.P. 12(b). Such a motion “must be made before pleading if a responsive pleading is allowed.” Fed.R.Civ.P. 12(b). The Sturgises, however, filed their motion to dismiss over two months after they filed their Answer and Counterclaims. On the other hand, the motion was filed too early to comply with the timing requirements under Fed.R.Civ.P. 12(c). Such a motion is appropriate “[a]fter the pleadings are closed.” Fed.R.Civ.P. 12(c). In the instant case, counterclaims have been filed but Sovereign has not yet responded to them, so the pleadings are not yet closed. See 5 C Wright & Miller, Federal Practice and Procedure: Civil 3d § 1367 at 213. (“Rule 7(a) provides that the pleadings are closed upon the filing of a complaint and an answer (absent a court-ordered reply), unless a counterclaim, cross-claim, or third-party claim is interposed, in which event the filing of a reply to a counterclaim, cross-claim answer, or third-party answer normally will mark the close of the pleadings.”)
The arguments made by the Sturgises all depend on the sufficiency of the Complaint itself and do not relate to pleadings yet to be filed. I heard oral argument from the parties on the Sturgises' motion at the same time I heard Sovereign's motion to dismiss. In the interests of efficiency in the administration of justice, I will relieve the Sturgises from their lack of timeliness burden and consider their motion.
The Sturgises move to dismiss on the basis that Sovereign's Complaint failed to allege facts establishing compliance with G.L. c. 244, § 14, the Massachusetts statute governing foreclosure by sale; G.L. c. 244, § 17B, the Massachusetts statute requiring notice to the mortgagor prior to pursuing a deficiency action; or G.L. c. 183, § 27, the Massachusetts statute requiring a post-foreclosure notice of accounting. The Sturgises claim that compliance with each of the notice requirements is a condition precedent to this suit and that by omitting such allegations, the Complaint fails to state a claim upon which relief can be granted.
G.L. c. 244, § 14, requires that a mortgagee send notice of the foreclosure to the mortgagor at least fourteen days prior to the date of the sale. I need not decide whether compliance with this requirement is a condition precedent which must be alleged in the Complaint. Even if such allegations are necessary, Sovereign's Complaint is sufficient in this regard. The Complaint states that “the Bank duly foreclosed” on both properties. Compl. ¶¶ 8, 13. To foreclose “duly” is to do so “in a proper manner; in accordance with legal requirements.” Black's Law Dictionary 576 (9th ed.2009). In other words, Sovereign alleged that it foreclosed in compliance with G.L. c. 244, § 14, which regulates foreclosures in Massachusetts.
Such a blanket statement of compliance is generally a legal conclusion outside of a court's consideration for the purposes of a motion to dismiss. Iqbal, 129 S.Ct. at 1949. However, pleading the propriety of the foreclosure is only necessary, if it is necessary at all, to establish a condition precedent. The pleading standard for conditions precedent is governed by Fed.R.Civ.P. 9(c), which states: “In pleading conditions precedent, it suffices to allege generally that all conditions precedent have occurred or been performed.” Sovereign meets this standard when it alleges generally that the foreclosure was conducted properly. Accordingly, the purported failure to allege compliance with G.L. c. 244, § 14, does not support dismissal.
G.L. c. 244, § 17B, states that “[n]o action for a deficiency shall be brought ... unless a notice in writing of the mortgagee's intention to foreclose the mortgage has been mailed ... together with a warning of liability for the deficiency ....” G.L. c. 244, § 17B. The § 17B notice “has been described as a ‘condition precedent’ to a deficiency action, having the practical effect ... of treating a foreclosure sale as a complete discharge of the mortgage debt, thwarting a post-foreclosure deficiency judgment, absent statutory notice of intent to pursue a deficiency.” Framingham Sav. Bank v. Turk, 40 Mass.App.Ct. 384, 664 N.E.2d 472, 474 (1996) (citing Guempel v. Great American Ins. Co., 11 Mass.App.Ct. 845, 420 N.E.2d 353, 355–56 (1981)). The Sturgises argue that because a § 17B notice is a prerequisite to this post-foreclosure collection action, and because Sovereign fails to allege that it sent a § 17B notice regarding either foreclosure sale, Sovereign's Complaint fails to state a claim upon which relief can be granted.
The general language stating that Sovereign “duly foreclosed” is insufficient to establish compliance with the condition precedent at issue here. A foreclosure can be conducted properly without the mortgagee sending a § 17B notice; it is only if the mortgagee wishes to preserve the right to pursue a deficiency action that such a notice is necessary. Framingham Sav. Bank, 664 N.E.2d at 474 () Sovereign does not allege compliance with § 17B in its Complaint, even in the general manner allowed by Fed.R.Civ.P. 9(c).
Sovereign argues that under Massachusetts law failure to meet a condition precedent is an affirmative defense only and that a plaintiff need not allege compliance in a complaint. This is often the case; for many...
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