CANDY LO v. FEDERAL HOME LOAN MORTGAGE CORP (2011)

MEMORANDUM AND ORDER ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

INTRODUCTION

Plaintiff Candy Lo (“Lo”) brings this action against Defendants Chase Home Finance, LLC (“Chase”) and the Federal Home Loan Mortgage Corp. (“Freddie Mac”), challenging the foreclosure of her mortgage and sale of the property located at 19 Dixon Avenue, Worcester, Massachusetts (“the property”).   The defendants now move for summary judgment on the following counts:  Count I:  Fraud and Bad Faith;  Count II:  Breach of Contract;  Count III:  Wrongful Foreclosure;  Count IV:  Breach of Duties by Defendant Freddie Mac; ²  Count V:  Intentional or Grossly Negligent Infliction of Emotional Distress;  and Count VI:  Negligent Infliction of Emotional Distress.   For the reasons below, the Defendants' Motion for Summary Judgment is ALLOWED IN PART and DENIED IN PART.

BACKGROUND

After executing a promissory note in the amount of $216,000 and securing the note by granting a mortgage on the property in November 2002 (“the mortgage”), Lo defaulted on her payment obligations in or about June 2006.

In December 2006, Chase, the holder of the mortgage at the time, sent Lo notice by a December 6, 2006 letter with attached documents that it was initiating foreclosure proceedings.   This letter also indicated that a foreclosure auction was scheduled for December 28, 2006.   In the same month, Chase and Lo attempted to negotiate a repayment plan.   Towards this purpose, Chase faxed Lo a proposed document listing terms, including:  Lo would pay $2,191.95 by the 15 th of each month beginning in January 2007 until June 15, 2008, with an initial deposit of $6,000.   Lo made certain handwritten changes to this document, signed it, and then sent it with an accompanying letter signed by Lo's fiancé, Charles DeGennaro, and a check for $6,000 to Chase, expecting to later receive a final corrected agreement to sign.   Chase never sent Lo a new document.   Chase has provided for the record a document identical in terms to the original proposed document that contains no written changes on its face, but bears Lo's signatures.   Lo disputes that this document is genuine.

The parties agree that they reached an agreement in December 2006 (hereafter, “Agreement”) through which Chase would accept payments in exchange for “forebearing” foreclosure, but they dispute certain terms of the Agreement.   Among other things, Lo alleges, and Chase disputes, that Chase through its agents verbally agreed to accept certain payments later than the 15 th of several months.   Lo made payments for the months January—June;  however, there are disputes as to the timeliness of these payments according to the terms of the Agreement and any variances agreed to by Chase's employees.   Lo also alleges, and Chase disputes, that Chase failed to credit and/or return Lo's February, May, and June 2007 payments.

Having decided that Lo had breached the Agreement by failing to make payments on time, Chase mailed Lo a letter dated June 21, 2007 stating that Chase was reinitiating foreclosure proceedings.   This letter also states that a copy of the December 6, 2006 documents was attached;  however, the record does not contain any indication that these allegedly accompanying documents were either attached or mailed.   This June 21, 2007 letter also stated that the auction originally scheduled for December 6, 2006 had been postponed by public proclamation to March 28, 2007, on which date it was postponed in the same manner to April 27, 2007, on which date it was once more postponed in the same manner to July 27, 2007, the newly scheduled auction date.³

At public auction on July 27, 2007, Chase was the highest bidder on the property.   Chase assigned its bid to Freddie Mac, which received title to the property and brought a summary process action against Lo. Lo then filed the instant action which was consolidated with the summary process action.

DISCUSSION

Summary judgment shall be granted where there are no genuine issues as to any material fact and the moving party is entitled to judgment as a matter of law.  Mass. R. Civ. P. 56(c);  Cassesso v. Commissioner of Correction, 390 Mass. 419, 422 (1983);  Community Nat'l Bank v. Dawes, 369 Mass. 550, 553 (1976).   The moving party bears the burden of affirmatively demonstrating both the absence of a triable issue and that the summary judgment record entitles the moving party to judgment as a matter of law.  Pederson v. Time, Inc., 404 Mass. 14, 16–17 (1989).   The moving party may satisfy this burden either by submitting affirmative evidence that negates an essential element of the opposing party's case or by demonstrating that the opposing party has no reasonable expectation of proving an essential element of his case at trial.   Flesner v. Technical Communications Corp., 410 Mass. 805, 809 (1991).   The opposing party cannot rest on his or her pleadings and mere assertions of disputed facts to defeat the motion for summary judgment.  LaLonde v. Eissner, 405 Mass. 207, 209 (1989).

I. COUNT I:  FRAUD AND BAD FAITH

A claim for fraud requires proof that:  the defendant made a misrepresentation of fact;  it was made with the intention to induce another to act upon it;  it was made with the knowledge of its untruth;  it was in fact acted upon;  and damage directly resulted therefrom.   See Graphic Arts Finishers, Inc. v. Boston Redev.   Authority, 357 Mass. 40, 44 (1970).

In her Complaint, Lo makes no factual allegations of fraud as to Freddie Mac. She further concedes that she had no communication with Freddie Mac. As such, she cannot meet her burden of proof and summary judgment is granted on this count as to Freddie Mac.

Lo alleges that Chase purposefully and repeatedly withheld information and misled her about the status of the foreclosure.   Lo also alleges that Chase failed to credit and/or return her payments for the months of February, May, and June 2007.   These factual allegations, if true could support a claim of fraud against Chase.   Because there is a dispute of material fact as to Chase's actions, its knowledge at the relevant times, and whether it acted intentionally, summary judgement is denied on this count with respect to Chase.

II. COUNT II:  BREACH OF CONTRACT

In order to prevail on a breach of contract claim, the plaintiff must prove the existence of an agreement supported by consideration, that the plaintiff was ready, willing, and able to perform, that the defendant breached the contract, and that the plaintiff suffered damages for the breach.   Singarella v. Boston, 342 Mass. 385, 387 (1961).

One contract at issue is the December 2006 Agreement through which Lo would make certain interval payments on moneys owed in exchange for Chase “forebearing” foreclosure proceedings.   The parties agree that they entered into the Agreement, but they disagree on its terms.   This disagreement stems largely from the lack of an agreed-upon finalized document.   Lo alleges that she faxed and mailed an edited version of a proposed agreement to Chase, but Chase never sent back a final corrected version for her to sign.   The defendants do not dispute this fact.   The defendants, however, provide a copy of the original proposed document that was faxed to Lo that contains no written edits, but bears Lo's signature, a copy which Lo alleges was doctored.   With regard to the specific terms, the parties seem to dispute, among other things, the dates on which certain payments by Lo were due.   Lo alleges that in her phone calls with Chase personnel, Chase verbally agreed to certain extensions, which the defendants deny.   The due dates are material because whether Chase breached the Agreement by reinitiating foreclosure proceedings depends on whether Lo first breached the Agreement by being late on her payments.   Furthermore, there is a material dispute over whether Chase properly credited and/or returned Lo's payments for the months of February, May, and June of 2007.   Because of these disputes of material fact, summary judgment on this count is denied.

III. COUNT III:  WRONGFUL FORECLOSURE

The Complaint alleges that Chase's foreclosure was wrongful because Chase 1) initiated foreclosure proceedings when Lo had not breached the Agreement;  2) failed to provide proper statutory notice pursuant to G.L. c. 244, § 14 and 3) failed to act in good faith.   This court will address each of these grounds in turn.

Lo's first argument relates to her contract claim.   Indeed, if Lo did not breach the Agreement, which is a question of fact as discussed above, Chase was not legally entitled to initiate foreclosure proceedings.   Because a dispute of material fact exists in the determination of the contract claim, summary judgment on this count on these grounds must also be denied.

Lo asserts that Chase did not provide sufficient statutory notice of the foreclosure sale on July 28, 2007 pursuant to G.L. c. 244, § 14.   The defendants disagree.

As stated in U.S. Bank Nat'l Ass'n v. Ibanez:

Where a mortgage grants a mortgage holder the power of sale ․ it includes by reference the power of sale set out in G.L. c. 183, § 21, and further regulated by G.L. c. 244, §§ 11–17C.   Under G.L. c. 183, § 21, after a mortgagor defaults in the performance of the underlying note, the mortgage holder may sell the property at a public auction and convey the property to the purchaser in fee simple, and such sale shall forever bar the mortgagor and all persons claiming under him from all right and interest in the mortgaged premises, whether at law or in equity.

458 Mass. 637, 646 (2011) (internal quotations and citations omitted).  “It is familiar law that one who sells under a power must follow strictly its terms.   If he fails to do so there is no valid execution of the power and the sale is wholly void.”  Moore v. Dick, 187 Mass. 207, 211 (1905).   One of the terms of the power of sale that must be strictly adhered to is the notice requirement articulated in G.L. c. 244, § 14.   That statute provides that “no sale under such power shall be effectual to foreclose a mortgage, unless, previous to such sale,” advance notice of the foreclosure sale has been provided to the mortgagor, to other interested parties, and by publication in a newspaper published in the town where the mortgaged land lies or of general circulation in that town.   Id. “The manner in which the notice of the proposed sale shall be given is one of the important terms of the power, and a strict compliance with it is essential to the valid exercise of the power.”  Moore, 187 Mass. at 212.  “Because only a present holder of the mortgage is authorized to foreclose on the mortgaged property, and because the mortgagor is entitled to know who is foreclosing and selling the property, the failure to identify the holder of the mortgage in the notice of sale may render the notice defective and the foreclosure sale void.”  Ibanez, 458 Mass. at 648.

Although Chase's December 6, 2006 letter to Lo (Plaintiff's Opposition Exhibit 9) met the statutory requirements,⁴ there is a question of law as to whether the December 2006 Agreement established a requirement for new statutory notice in the event of the Lo's breach.   The parties have stated, and this court agrees, that this is an issue of first impression in this jurisdiction.   Because the terms of the Agreement are in dispute, this court declines to answer this question at this time.⁵  It suffices for the purposes of summary judgment to determine that the material disputes over the terms of the contract warrant the denial of summary judgment on this count as to statutory notice grounds.

Lo also alleges that the foreclosure was improper because Chase failed to act in good faith.   On this ground there are disputes of material fact.  “It has become settled by repeated and unvarying decisions that a mortgagee in executing a power of sale contained in a mortgage is bound to exercise good faith and put forth reasonable diligence.   Failure in these particulars will invalidate the sale even though there be literal compliance with the terms of the power.”  Sandler v. Silk, 292 Mass. 493, 496 (1935), and cases cited.   The mortgagee is acting as a trustee for the benefit of the mortgagor, and when exercising the power of sale, must use good faith and reasonable diligence to, among other things, obtain the best possible price.   See id.   As seen in Sandler v. Silk, even where a plaintiff is entitled to only the usual statutory notice, a defendant's failure to provide more notice, at least where notice has been requested by the homeowner, may be evidence of a lack of good faith which may give rise to a cause of action.   See id.   Here, because questions of material fact exist as to whether Chase acted in good faith in the course of foreclosure proceedings,⁶ summary judgment on this count must also be denied on good faith grounds.

IV. COUNT IV:  BREACH OF DUTIES BY DEFENDANT FREDDIE MAC

With regard to this count, Lo has failed to state a legal claim or cite any case law;  thus, summary judgment is granted.

V. COUNT V:

In order to succeed on a claim for intentional infliction of emotional distress, a plaintiff must prove that (1) the defendant intended to inflict emotional distress, or knew or should have known that emotional distress was the likely result of his conduct, (2) the defendant's conduct was extreme and outrageous, beyond all possible bounds of decency, and utterly intolerable in a civilized community, (3) the actions of the defendant were the cause of the plaintiff's distress, and (4) the emotional distress suffered by the plaintiff was severe and of such a nature that no reasonable person could be expected to endure it.  Agis v. Howard Johnson Co., 371 Mass. 140, 145 (1976).

With regard to the element of extreme and outrageous conduct, the SJC has said:

[Outrageous conduct] cannot be predicated upon “mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities,” nor even is it enough “that the defendant has acted with an intent which is tortious or even criminal, or that he has intended to inflict emotional distress, or even that his conduct has been characterized by ‘malice,’ or a degree of aggravation which would entitle the plaintiff to punitive damages for another tort;” rather, “[l]iability has been found only where the conduct has been so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.”   Massachusetts cases have similarly described the limitations upon what can constitute “extreme and outrageous” conduct.

Foley v. Polaroid Corp., 400 Mass. 82, 99 (1987) (citation omitted);  see also Beecy v. Pucciarelli, 387 Mass. 589, 596 (1982) (conduct in question might be reprehensible, but could not be characterized as extreme and outrageous).

This court reserves judgment on whether the facts in an improper foreclosure case may ever give rise to an intentional infliction of emotional distress action;  however, the conduct alleged by Lo in this case was not so “extreme and outrageous” or “profoundly shocking” (Conway v. Smerling, 37 Mass.App.Ct. 1, 8 (1994)) as to be actionable as intentional infliction of emotional distress.   Thus, summary judgment is granted on this count as to both Freddie Mac and Chase.

VI. COUNT VI:  NEGLIGENT INFLICTION OF EMOTIONAL DISTRESS

The essential elements of a claim for negligent infliction of emotional distress are “(1) negligence;  (2) emotional distress;  (3) causation;  (4) physical harm manifested by objective symptomatology;  and (5) that a reasonable person would have suffered emotional distress under the circumstances of the case.”  Conley v. Romeri, 60 Mass.App.Ct. 799, 801 (2004), quoting Payton v. Abbott Labs., 386 Mass. 540, 557 (1982).   “[P]laintiffs must corroborate their mental distress claims with enough objective evidence of harm to convince a judge that their claims” were likely genuine.  Sullivan v. Boston Gas Co., 414 Mass. 129, 137–138 (1993).   Expert medical testimony, while not mandatory, might be needed to make this showing.   See id. at 138.

In addition, “[a] successful negligent infliction of emotional distress claim ․ must do more than allege ‘mere upset, dismay, humiliation, grief and anger.’ ”  Id. at 137, quoting Corso v. Merrill, 119 N.H. 647, 653, 406 A.2d 300 (1979).

The record does not contain evidence of physical harm manifested by objective symptomatology, and thus, summary judgment on this count is granted as to both defendants.

ORDER

For the foregoing reasons, the Defendants' Motion for Summary Judgment is ALLOWED IN PART and DENIED IN PART. Summary judgment is ALLOWED on counts I (Fraud and Bad Faith) as to FHMLC, IV (Breach of Duties by Defendant FMHLC), V (Intentional or Grossly Negligent Infliction of Emotional Distress), VI (Negligent Infliction of Emotional Distress).   Summary judgment is DENIED as to counts II (Breach of Contract) and III (Wrongful Foreclosure).   Until further court order, the property at 19 Dixon Avenue, Worcester, Massachusetts is not to be transferred, sold, encumbered, or hypothecated.

FOOTNOTES

FN2. Lo's Complaint incorrectly numbered the counts.   This memorandum numbers them in the appropriate sequential order.   There should be no confusion since the counts' full title descriptions are also used..  FN2. Lo's Complaint incorrectly numbered the counts.   This memorandum numbers them in the appropriate sequential order.   There should be no confusion since the counts' full title descriptions are also used.

FN3. Lo disputes whether these “postponements” actually occurred by public proclamation on these dates.   The defendants have not produced any evidence other than the hearsay statement in the June 21, 2007 letter..  FN3. Lo disputes whether these “postponements” actually occurred by public proclamation on these dates.   The defendants have not produced any evidence other than the hearsay statement in the June 21, 2007 letter.

FN4. It provided Lo with notice of, among other things, when and where the auction would take place as well as the name and address of the correct holder of the mortgage.   See G.L. c. 244, § 14..  FN4. It provided Lo with notice of, among other things, when and where the auction would take place as well as the name and address of the correct holder of the mortgage.   See G.L. c. 244, § 14.

FN5. However, this court specifically notes that the language of G.L. c. 244, § 14 requires notice “upon breach of condition.”   Moreover, Chase sent Lo a letter dated June 21, 2007, which appears to have been intended to be, and Chase argues would constitute, “new” notice.   Whether this document constitutes proper notice under the statute, a question of law that this court will not decide at this time, depends on an issue of fact:  namely, whether the June 21, 2007 letter, which states that a copy of the December 6, 2006 notice documents were attached, actually did have those documents attached when the June 21, 2007 letter was mailed.   The June 21, 2007 letter alone, which does not state, among other things, the location of the scheduled auction, would fail to satisfy the statutory notice requirements..  FN5. However, this court specifically notes that the language of G.L. c. 244, § 14 requires notice “upon breach of condition.”   Moreover, Chase sent Lo a letter dated June 21, 2007, which appears to have been intended to be, and Chase argues would constitute, “new” notice.   Whether this document constitutes proper notice under the statute, a question of law that this court will not decide at this time, depends on an issue of fact:  namely, whether the June 21, 2007 letter, which states that a copy of the December 6, 2006 notice documents were attached, actually did have those documents attached when the June 21, 2007 letter was mailed.   The June 21, 2007 letter alone, which does not state, among other things, the location of the scheduled auction, would fail to satisfy the statutory notice requirements.

FN6. Which may depend on, among other things, whether Chase should have provided more notice of foreclosure and sale given the circumstances..  FN6. Which may depend on, among other things, whether Chase should have provided more notice of foreclosure and sale given the circumstances.

Elizabeth M. Fahey Justice of the Superior Court