JOAN N. FEENEY, Bankruptcy Judge.
Two matters are before the Court: 1) the Motion for Summary Judgment filed by Deutsche Bank National Trust Company, as Trustee for WAMU Mortgage Pass-Through Certificates Series 2004-AR4 ("Deutsche Bank") and JPMorgan Chase Bank, N.A. ("Chase"), as the loan servicer for Deutsche Bank (jointly, the "Defendants"); and 2) the Defendants' Motion to Strike Forensic Audit Report. The Plaintiff, Laura Sheedy ("Sheedy," the "Debtor," or the "Plaintiff") filed Oppositions to both Motions. The Court heard the matters on July 10, 2012 and ordered the parties to file Supplemental Briefs. The issues presented include whether the Debtor's causes of action under the Truth in Lending Act, 15 U.S.C. §§ 1601-1667f ("TILA") and Mass. Gen. Laws ch. 93A, §§ 1-11 ("Chapter 93A") are barred by the applicable statutes of limitation and whether the Debtor has submitted any evidence to withstand the Defendants' summary judgment motion with respect to her count for fraud, deceit and misrepresentation.
The Debtor filed a voluntary Chapter 13 petition on June 8, 2010. On Schedule A-Real Property, she listed real property located at 11 Harrington Road, Lexington, Massachusetts (the "Property") valued at $1.1 million and subject to a secured claim in the sum of $861,157.30. The Debtor listed her ownership interest as follows: "Trustee over Cardinal Trust." Accordingly, it is unclear whether the Debtor, in fact, has a beneficial ownership interest in the Property and whether she is the sole trustee of the Cardinal Trust. If she holds a beneficial interest in the Trust, that interest is personal property and should have been listed on Schedule B-Personal Property. On Schedule F-Creditors Holding Unsecured Nonpriority Claims, the Debtor listed claims totaling $27,886.66.
The Debtor filed a Chapter 13 Plan on July 20, 2010 in which she stated:
On September 30, 2011, Chase filed a Motion for Leave to Amend Proof of Claim. The Debtor filed a Response in which she did not object to the Motion but cautioned that she did not waive any issues raised in this adversary proceeding. The Court granted the Motion on October 25, 2011. The amended claim, which lists Chase as the creditor, sets forth a secured claim in the sum of $842,908.47
On April 26, 2011, the Debtor filed a Verified Complaint against the Defendants, commencing the present adversary proceeding. In her Complaint, she made the following allegations, which this Court paraphrases, and in some instances quotes, as follows:
Based upon the foregoing allegations, the Debtor formulated five counts as follows: Count I-Rescission pursuant to TILA; Count II-Chapter 93A; Count III-Fraud, Deceit and Misrepresentation; Count IV-Objection to Claim; and Count V-Standing of Deutsche Bank. Notably, the Complaint is devoid of any specific references to particular sections of TILA or Chapter 93A.
The Debtor adopted Dilbert's Forensic Audit Report to support the allegations set forth in her Complaint. The so-called Forensic Audit Report contains several terse conclusions interspersed with voluminous references to, and verbatim reproductions of, various consumer protection laws and regulations. For example, Dilbert stated that he believed the following:
Dilbert listed documents he requested but did not receive from Chase, including the initial loan application and final loan application; the executed notice of right to cancel; final closing statements; and "[a]ny and all income documents provided by borrower to corroborate their income [sic];" a copy of the loan payment history, and copies of executed pooling and servicing
The Debtor's Complaint concerns a 2004 loan transaction. On April 16, 2004, the Debtor, as sole owner of the Property, executed a promissory note (the "Note") in favor of Washington Mutual Bank, FA, as lender, in the original principal amount of $810,000 (the "Refinance Transaction"). On April 21, 2004, to secure repayment of the Note, the Debtor executed a mortgage on the Property (the "Mortgage"), which was duly recorded in the Middlesex South Registry of Deeds.
The Note has an adjustable interest rate. Pursuant to an "Addendum to Fixed/Adjustable Rate Note," executed in conjunction with the Note, the Debtor was required to make interest only monthly payments of $2,446.87 during the first five years of the loan term.
The Truth in Lending Disclosure Statement, which the Debtor executed on April 16, 2004, provided in capital letters: "Variable rate: Your loan contains a variable-rate feature. Disclosures about the variable-rate features have been provided to your earlier." The Plaintiff also acknowledged receipt of the Consumer Handbook on Adjustable-Rate Mortgages and the appropriate "Adjustable Rate Mortgage Loan Disclosure Statement" in writing. The Adjustable Rate Mortgage Loan Disclosure Statement contained an explanation that (1) the interest rate would generally be based on an index, (2) the initial interest rate might be lower than the sum of the margin plus the index, and (3) the initial monthly payment for the first sixty months of the loan would consist solely of interest. The Adjustable Rate Mortgage Loan Disclosure Statement further explained how the interest rate and monthly payments could change. The Note and the "Fixed/Adjustable Rate Rider" explained the index and the calculation of the interest rate. The Plaintiff also was informed of her right to receive a copy of the appraisal report.
As the Debtor stated in her Complaint, she considers herself to be more sophisticated
The Debtor and her husband reported total income of $203,378 on their 2004 federal income tax return. On a Uniform Residential Loan Application, dated April 15, 2004, which was executed by both the Debtor and her spouse, the Debtor, however, represented that her gross monthly income was $14,975; her husband represented that his gross monthly income was $15,000. The Plaintiff indicated at her deposition that she considered making payments on the principal balance of the Note during the first five years of the loan term, but she elected not to do so.
The Debtor transferred title to the Property to the Cardinal Trust in October 2007.
Washington Mutual Bank, FA endorsed the Note in blank. According to Victoria L. Viviano, Sr. Research Specialist at Chase, Deutsche Bank is the current holder of the Note.
Pursuant to a Purchase and Assumption Agreement between the Federal Deposit Insurance Corporation (the "FDIC"), Receiver of Washington Mutual Bank, and Chase, dated September 25, 2008, which will be discussed more fully in the context of Count V of the Complaint, Chase acquired certain assets, including all loans and loan commitments, of Washington Mutual Bank from the FDIC acting as Receiver. In an Affidavit, Robert C. Schoppe, the Receiver in Charge for FDIC as Receiver of Washington Mutual Bank, the Office of Thrift Supervision and the FDIC closed Washington Mutual Bank, which was formerly know as Washington Mutual Bank, FA on September 25, 2008 and thereafter Chase became the owner of Washington Mutual Bank's "loans and commitments by operation of law." The FDIC, however, retained "liability to any borrower for monetary relief ... related in any way to any loan or commitment to lend made by [Washington Mutual Bank] prior to failure...." Chase became the custodian of the Note on behalf of Deutsche Bank on September 25, 2008. The Note has remained in the physical custody of Chase as the custodian of Deutsche Bank since that date. Chase is the loan servicer for Deutsche Bank.
Deutsche Bank owns the Mortgage result of an assignment, dated January 26, 2010. Chase, as successor in interest from the FDIC, as Receiver for Washington Mutual Bank f/k/a Washington Mutual Bank FA, executed an assignment of the Mortgage to Deutsche Bank, which was recorded in the Middlesex South Registry of Deeds on February 5, 2010. Deutsche Bank, transferred its claim to Chase, as the loan servicer, on May 5, 2011, with a May 1, 2011 effective date. Chase and Deutsche, through the Affidavit of Jon S. Davis, Esq. of the firm of Stanton & Davis, submitted invoices to document the property inspection fees, foreclosure fees and costs, and bankruptcy fees included in the filed proof of claim.
With respect to Count I for rescission, the Debtor relies upon the Forensic Audit Report prepared by Dilbert, particularly his conclusion that "the Clients [the Debtor and her spouse] did not receive a copy of their initial application within 72 hours of signing their application."
The Debtor's husband, Thomas Sheedy, who executed the Note, but not the Mortgage, in his Affirmation, stated that "[a]ccording to my records, I did not receive any such Notice [of Right to Cancel] at the closing even though I signed the Promissory Note and other documents." The Debtor, however, stated that "[a]ccording to my records, I received two copies [of the Notice of Right to Cancel] at the closing."
With respect to Count II-Chapter 93A, the Debtor relies upon the Forensic Audit Report which provides that "[w]ith this mortgage having an adjustable rate feature, any proposed payment after the first recast date would be impossible to accurately predict because there is no way of knowing what the CMT Index (which the recast rate is based on) will be 60 months in the future."
For purposes of Count III — Fraud, Deceit, and Misrepresentation, the Debtor relies upon the Forensic Audit Report for the proposition that any proposed payment after the first recast date would be impossible to accurately predict because the mortgage has an adjustable rate feature.
A movant is entitled to summary judgment when "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), made applicable to this proceeding by Fed. R. Bankr P. 7056. "A dispute is `genuine' if the evidence about the fact is such that a reasonable jury could resolve the point in favor of the non-moving party. A fact is `material' if it has the potential of determining the outcome of the litigation." Baker v. St. Paul Travelers Ins. Co., 670 F.3d 119, 125 (1st Cir.2012) (quoting Scottsdale Ins. Co. v. Torres, 561 F.3d 74, 77 (1st Cir.2009)).
"The non-movant may defeat a summary judgment motion by demonstrating, through submissions of evidentiary quality, that a trialworthy issue persists." Rockwood v. SKF USA Inc., 687 F.3d 1, 9 (1st Cir.2012) (quoting Iverson v. City of Boston, 452 F.3d 94, 98 (1st Cir.2006)). They "must be able to point to specific, competent evidence to support [their] claim." Id. (quoting Soto-Ocasio v. Fed. Express Corp., 150 F.3d 14, 18 (1st Cir.1998)). In evaluating the evidence, the court "must construe the record in the light most favorable to the nonmovant and resolv[e] all reasonable inferences in that party's favor while safely ignoring conclusory allegations, improbable inferences, and unsupported speculation." Collins v. Univ. of N.H., 664 F.3d 8, 14 (1st Cir.2011) (alteration in original) (internal quotation marks omitted).
The Defendants moved to strike the Forensic Audit Report prepared by Dilbert. They contend correctly that "Mr. Dilbert... failed to demonstrate that he is qualified to testify as an expert." The Defendants add that in his Report Dilbert admitted that he had not reviewed many, if not most of, the relevant documents in this case. Accordingly, they contend the report fails to meet the evidentiary standard of Federal Rule of Evidence 702, made applicable to this adversary proceeding by Bankruptcy Rule 9017.
In response, the Debtor argues the following:
The Debtor relies upon Dilbert's Forensic Audit Report in opposing summary judgment as the report is the foundation upon which her Complaint rests, and she does refer to the Complaint in her opposition to the Defendants' Motion for Summary Judgment. Indeed, without the Forensic Audit Report, the grounds for the Debtor's Complaint crumble.
The court in Fidler v. Central Coop. Bank (In re Fidler), 210 B.R. 411 (Bankr. D.Mass.1997), vacated in part, 226 B.R. 734
In re Fidler, 210 B.R. at 422. See also In re Ludlow Hosp. Soc., Inc., 216 B.R. 312, 321 n. 11 (Bankr.D.Mass.1997) (affidavit must "(1) be made on personal knowledge, (2) set forth such facts as would be admissible in evidence, and (3) show affirmatively that the affiant is competent to testify to the matters stated therein."). The court in Fidler added: "professional education is not a prerequisite to qualify as an expert witness. One can qualify as an expert witness based upon practical experience as well." Id. (citing Southern Cement Co. v. Sproul, 378 F.2d 48, 49 (5th Cir.1967), and Grain Dealers Mut. Ins. Co. v. Farmers Union Coop. Elevator & Shipping Assn., 377 F.2d 672, 679 (10th Cir.1967)).
Dilbert's Forensic Audit Report is devoid of information as to his qualifications to express opinions as to the Refinance Transaction in this case. Dilbert did not sign the Report under penalty of perjury. The vast body of the Report is nothing more than a string of citations to statutes and regulations, many of which, such as those referencing the Massachusetts Credit Cost Disclosure Act, Mass. Gen. Laws ch. 140D, § 1 et seq., are inapplicable to the Finance Transaction. The findings contained in the Report are conclusory and in one instance completely devoid of evidentiary support for a finding of fraud, deceit and misrepresentation. In particular, the Court finds that Dilbert's belief that "the Lender's actions in negotiation and execution of the loan documents contained all the elements necessary to render the mortgage contract void for fraud and misrepresentation" is without merit. Accordingly, the Court shall enter an order striking the Forensic Audit Report.
In Count I, the Debtor, while stating that the Refinancing Transaction violated "various sections of the Truth in Lending Act," failed to reference any particular sections of that Act, 15 U.S.C. § 1601 et seq., relying instead upon the Forensic Audit Report. In her brief, citing 12 C.F.R. § 226.23(a)(3), she recognized
The Debtor's claims against the Defendants under the TILA and Chapter 93A are barred by the applicable statutes of limitation. In addition, the Court finds that the Debtor failed to provide the Defendants with a proper demand under Chapter 93A and her reference to that statute in her Chapter 13 plan does not comply with the requirements or the intention of Mass. Gen. Laws ch. 93A.
"Congress enacted the TILA in 1968 `to assure a meaningful disclosure of credit terms' and `to protect the consumer against inaccurate and unfair credit ... practices.'"
The parties do not dispute that TILA and Regulation Z exclusively apply to the Refinance Transaction; the Debtor has not asserted a claim under the Massachusetts Consumer Credit Cost Disclosure Act, Mass. Gen. Laws ch. 140D, §§ 1-34 (the "MCCCDA"). In moving for summary judgment, the Defendants rely upon the three-year statute of limitation. The Refinance Transaction is exempt from rescission under section 1635(f), 12 C.F.R. § 226.23(a)(3), and the United States Supreme Court's decision in Beach v. Ocwen Fed. Bank, 523 U.S. 410, 419, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998) (TILA "permits no federal right to rescind, defensively or otherwise, after the 3-year period of § 1635(f) has run"). The Debtor consummated the Refinance Transaction with Washington Mutual Bank, FA in April of 2004 and thus the right to rescind expired in April of 2007, long before the Debtor commenced her Chapter 13 case and her adversary proceeding against the Defendants.
The Defendants seek summary judgment with respect to Count II based upon the Debtor's failure to make a proper demand prior to commencing suit and the applicable statute of limitation. In response, the Debtor argues that she retains a right to rescind, relying upon Chapter 93A. She states:
The Court rejects the Debtor's argument.
In her Complaint, the Debtor alleged that "[t]he actions of Deutsche Bank, through its servicing agent, ... were unfair and deceptive with in the meaning of Chapter 93A of the General Laws." It is unclear whether she asserted a Chapter 93A violation for refusing her rescission request or for violations of TILA. In any event, she failed to reference any particular sections of Chapter 93A, her conclusory reference to upon Commonwealth v. Fremont Inv. & Loan, 452 Mass. 733, 897 N.E.2d 548 (2008), is misplaced,
Mass. Gen. Laws ch. 93A, § 9. This Court finds that the Debtor's statement in her Chapter 13 plan "that this mortgage loan is rescindable under the Trust in Lending Act, Chapter 93A of the Massachusetts General Laws, and/or principles of equity..." does not constitute a written demand that complies with either the language or goals of the statute. A "`demand letter listing the specific deceptive practices claimed as a prerequisite to suit and as a special element that must be alleged and proved.'" Spring v. Geriatric Auth. of Holyoke, 394 Mass. 274, 287, 475 N.E.2d 727 (1985) (citations omitted). "The twin reasons for the demand letter are, first, to encourage negotiation and settlement, and second, to control the amount of damages recoverable by the plaintiff." Thorpe v. Mut. of Omaha Ins. Co., 984 F.2d 541, 544 (1st Cir.1993). The written demand must make reference to conduct which the plaintiff contends violates Chapter 93A, Piccuirro v. Gaitenby, 20 Mass.App.Ct. 286, 291-292, 480 N.E.2d 30 (1985), and if it
Fernandes v. Havkin, 731 F.Supp.2d 103, 119-20 (D.Mass.2010). See also Manning v. State Farm Ins. Co., 1997 Mass.App.Div. 184, 1997 WL 672056, at *2 (Mass. App.Div.1997) ("An adequate demand letter is a jurisdictional prerequisite to any claim brought under ch. 93A by a consumer plaintiff.... A demand letter under ch. 93A must reasonably describe not only the alleged unfair or deceptive act or practice, but also the claimed injury."); Smith v. Jenkins, 777 F.Supp.2d 264, 267 (D.Mass. 2011) (same). See also Lacey v. BAC Home Loans Serv., LP (In re Lacey), 480 B.R. 13, 2012 WL 2872050 (Bankr.D.Mass. July 12, 2012).
The reference to Chapter 93A in the Debtor's Chapter 13 plan is inadequate to constitute a written demand. The plan contains no reference to any specific deceptive practices. Although the Debtor referenced the Truth in Lending Act, she did not allude to any of its specific provisions. The Defendants would be required to speculate as to what if any conduct Washington Mutual engaged in that triggered the Debtor's reference to Chapter 93A, particularly where the Refinance Transaction that occurred in this case is readily distinguishable from the loan transactions considered by the Supreme Judicial Court in Commonwealth v. Fremont Inv. & Loan, 452 Mass. 733, 897 N.E.2d 548 (2008).
In addition to the failure to send a written demand to the Defendants, the Debtor's Chapter 93A claim is barred by the statute of limitations. Under Massachusetts law, actions arising under Chapter 93A "shall be commenced only within four years next after the cause of action accrues." Mass. Gen. Laws Ann. Ch. 260, § 5A. Because the Debtor's asserted claim under TILA for rescission is barred, she cannot rely upon an alleged violation of TILA to obtain rescission under Chapter 93A in the absence of a written demand and a timely filed action. Stated another way, this Court finds that the Debtor cannot assert a right of rescission by way of recoupment under Chapter 93A where she is barred from doing so under TILA and has no cause of action under the MCCCDA.
With respect to the Debtor's claim for fraud and misrepresentation, fraud must be pled with particularity. The Complaint fails to plead fraud with particularity and the Debtor's Objection to the Defendants' Motion for Summary Judgment with respect to Count III fails to rectify the egregious deficiencies of the Complaint and the Forensic Audit Report with respect to the elements of fraud, even assuming the Debtor could assert such a cause of action against Chase who acquired the assets of Washington Mutual Bank from the FDIC, as Receiver, pursuant to a Purchase and Assumption Agreement which provided that the FDIC retained "liability to any borrower for monetary relief ... related in any way to any loan or commitment to
Having granted the Defendants' Motion to Strike, the Debtor submitted no other credible evidence to establish the requisite elements of a fraud claim. Moreover, the Defendants have established that the FDIC did not assume liabilities relating to borrowers' claims pursuant to the Purchase and Assumption Agreement between the FDIC, as Receiver of Washington Mutual Bank and Chase. The Court rejects the Debtor's argument that she can assert her fraud claims against the Defendants in reliance upon 15 U.S.C. § 1641(c) ("Any consumer who has the right to rescind a transaction under section 1635 of this title may rescind the transaction as against any assignee of the obligation.") because of the provisions of section 1641(a) (any civil action for a violation of this subchapter or proceeding under section 1607 of this title which may be brought against a creditor may be maintained against any assignee of such creditor only if the violation for which such action or proceeding is brought is apparent on the face of the disclosure statement, except where the assignment was involuntary."). The undisputed facts establish that "on Bank Closing, the Chartering Authority closed Washington Mutual Bank (the `Failed Bank') pursuant to applicable law and the Corporation [the FDIC] was appointed Receiver thereof." Thus, even if there were violations of TILA which were apparent on the face of the documents executed by the Debtor, which the Debtor did not point to in her papers, the acquisition of the Mortgage by Chase stemmed from Chase's acquisition of the assets of Washington Mutual Bank as a result of the failure of that bank and its closing by the Office of Thrift Supervision and the FDIC, which was not a voluntary assignment of the Mortgage by Washington Mutual.
The Court finds that Count IV is ripe for determination. As noted above, the Court granted Chase's Motion for Leave to Amend Proof of Claim on October 25, 2011. In addition, Jon S. Davis, Esq., a partner in the law firm of Stanton & Davis which served as foreclosure and bankruptcy counsel to the Defendants, submitted an Affidavit setting forth foreclosure costs and fees billed by or to Stanton & Davis to which he attached true and correct copies of invoices, bills, checks, and receipts. The Debtor did not amend her Complaint to set forth specific grounds for objection to the amended proof of claim. Rather, in her Objection to the Motion for Summary Judgment, she stated:
The Court disagrees with the position espoused by the Debtor. The amended proof of claim and the Davis Affidavit contain sufficient information to enable the Debtor to point to fees and costs that are unreasonable and unnecessary.
In support of their Motion for Summary Judgment, the Defendants submitted evidence that the Note was endorsed in blank and without recourse by Washington Mutual Bank, FA and that Deutsche Bank holds the Note, relying upon the Affidavits of Victoria Viviano, a Sr. Research Specialist at Chase, the loan servicer for Deutsche Bank. The Defendants also submitted a chart showing the chain of title to the Mortgage executed by the Debtor.
The Debtor asserted that "[t]here is no evidence that any defendant is the lawful owner of the promissory note." Additionally, in Count V of her Complaint, she asserted that "the assignment was not in conformity with the chain of title requirements of the trust document in that it was not made by the donor/depositor of the trust, which upon information and belief was Washington Mutual Mortgage Securities Corp., not JPMorgan Chase Bank."
The Court rejects the Debtor's assertions as there was ample, unrebutted evidence that Chase holds the Note as custodian for Deutsche Bank. It would appear that the Debtor is simply turning a blind eye to facts adduced by the Defendants that do not support her view of her case. Moreover, to the extent that the Debtor is asking this Court to find that Deutsche Bank lacks standing because "the out of time assignment to the trust in 2010 violated the requirements of the trust documents," the Court finds that she lacks standing to challenge adherence to the provisions of the PSA.
In Wenzel v. Sand Canyon Corp., 841 F.Supp.2d 463 (D.Mass.2012), the court explained standing in the context of a challenge to a chain of assignments. It stated:
Wenzel, 841 F.Supp.2d at 479 n. 16. In Lacey v. BAC Home Loans Serv., LP (In re Lacey), 480 B.R. 13, 2012 WL 2872050 (Bankr.D.Mass. July 12, 2012), this Court concluded a debtor had standing to challenge the validity of the foreclosure sale "to the extent that there is an issue as to whether the entity conducting the foreclosure sale [or issuing notices of intent to foreclose] was the actual holder of the mortgage by way of assignment at the time of the notice and sale." Id. at 35 (citing U.S. Bank Nat'l Ass'n v. Ibanez, 458 Mass. 637, 651, 941 N.E.2d 40 (2011)) ("there must be proof that the assignment was made by a party that itself held the mortgage ... the foreclosing entity must hold the mortgage at the time of the notice and sale in order accurately to identify itself as the present holder in the notice and in order to have authority to foreclose under the power of sale...."). This Court cited with approval the case of Bailey v. Wells Fargo Bank, NA (In re Bailey), 468 B.R. 464 (Bankr.D.Mass.2012), in which the court held that the debtor had standing because her argument was not based on the breach of an underlying contract to which she was not a party, but, instead, was based upon the ownership of the mortgage at the time it was purportedly assigned. This Court stated: "A challenge to the foreclosure sale due to defects in the chain of assignments is readily distinguishable from a challenge to assignments based upon the provisions governing the executions of assignments in a PSA to which the mortgagors are not parties. Lacey, 2012 WL 2872050, at *17 (citing In re Bailey, 468 B.R. at 475-76).
In the present case, the FDIC, as Receiver, acquired the assets of Washington
On January 26, 2010, Chase assigned the Mortgage it acquired from the FDIC as Receiver to Deutsche Bank. To the extent any gap in the chain of assignment existed, the Court finds that the January 26, 2010 assignment was curative.
In view of the foregoing, the Court shall enter an order granting the Defendants' Motion to Strike Forensic Audit Report and granting the Defendants' Motion for Summary Judgment with respect to all counts of the Debtor's Complaint.
TOTAL DUE AS OF June 21,2010 Principal $ 804,907.51 Interest $ 24,672.13 Accumulated Late Charges $ 486.60 Property Inspection Fee $ 65.10 Foreclosure Fees $ 1,300.00 Foreclosure Costs $ 1,963.70 Bankruptcy Fees $ 500.00 Escrow $ 9,013.43 TOTAL BALANCE OWED: $ 842,908.47
Fidler, 210 B.R. at 420.
