HSBC Bank USA, N.A. v. Morris

99 Mass.App.Ct. 417

168 N.E.3d 1111

HSBC BANK USA, N.A., trustee,¹

v.Tommy L. MORRIS & another.²

No. 19-P-1126

Appeals Court of Massachusetts, Plymouth.

October 29, 2020

April 7, 2021

Tommy L. Morris, pro se (Mary L. Morris, pro se, also present).

Christopher J. Williamson for the plaintiff.

Present: Vuono, Sullivan, & Englander, JJ.

VUONO, J.

The defendants, Tommy L. and Mary L. Morris (Morrises), appeal from a summary judgment entered in favor of the plaintiff, HSBC Bank USA, N.A., as trustee of the Fremont Home Loan Trust 2005-E, Mortgage Backed Certificates, Series 2005-E (HSBC), in a summary process eviction action brought by HSBC following a foreclosure sale. The Morrises raise a variety of arguments with respect to the predatory nature of the mortgage loan and with respect to the foreclosure proceedings.³ The primary issue we address concerns the Morrises' allegation that HSBC violated G. L. c. 183C, the Predatory Home Loan Practices Act (PHLPA or act), which the Morrises' answer designated as a defense. We conclude that, in the circumstances presented here, the alleged violation of the PHLPA should have been pleaded as a counterclaim, not a defense, but that, regardless, the Morrises could not assert a violation of the PHLPA in response to this postforeclosure summary process action. We further conclude that there were no errors in the foreclosure proceedings. Consequently, we affirm the judgment but do so on grounds different in some respects from those relied on by the motion judge.

Background. We summarize the undisputed facts in the summary judgment record.⁴ On October 27, 2005, the Morrises purchased a home with the proceeds from two loans obtained from Fremont Investment & Loan (Fremont). This matter concerns the primary loan, which was an interest-only loan for the first two years, at which point it turned into an adjustable rate loan. By September 2008, the Morrises' monthly payments on the loan had increased substantially, and they realized that they could no longer afford the loan. On the advice of counsel, the Morrises stopped making payments. The loan was secured by a mortgage that named Mortgage Electronic Registration Systems, Inc., as the lender, "acting solely as a nominee for Lender and Lender's successors and assigns." The mortgage was subsequently assigned to HSBC.

Meanwhile, in 2007, the Massachusetts Attorney General brought a lawsuit against Fremont claiming that Fremont engaged in unfair or deceptive acts or practices in originating and servicing certain home mortgage loans between 2004 and 2007. See Commonwealth v. Fremont Inv. & Loan, 452 Mass. 733, 734-735, 897 N.E.2d 548 (2008). Some of the Attorney General's allegations pertained to adjustable rate loans -- the very type of loan held by the Morrises -- and the "payment shock" that resulted when borrowers' low introductory monthly payments began to increase. Id. at 740 n.14, 897 N.E.2d 548. In 2009, Fremont agreed to pay ten million dollars to settle the lawsuit. It appears that the Morrises received a check for approximately $2,000 from the Attorney General's office as part of the Fremont settlement.

In the years that followed, the Morrises remained in default on the loan, and HSBC ultimately began taking steps to foreclose the mortgage. On or about April 15, 2016, the Morrises' loan servicer sent the Morrises a right to cure letter, which was followed more than ninety days later by an acceleration notice. See G. L. c. 244, § 35A. The notice stated that the "[m]ortgage [l]oan," which was defined as both the note and the mortgage, had been accelerated. HSBC then filed a complaint to determine the military status of the Morrises pursuant to the Servicemembers Civil Relief Act. See 50 U.S.C. §§ 3901 et seq. On or about June 20, 2017, HSBC sent the Morrises a notice of the foreclosure sale. See G. L. c. 244, § 14. On July 21, 2017, a foreclosure sale was held, and HSBC purchased the property. On September 18, 2017, the Morrises were served with a notice to quit, but they continued to occupy the property. HSBC then filed this summary process eviction action followed by a motion for summary judgment, which was granted after a hearing by a judge of the Housing Court. The Morrises appealed from the judgment.

Discussion. 1. Predatory Home Loan Practices Act. The PHLPA was enacted in 2004 as a comprehensive measure to target trends associated with predatory lending. See A. Lambiaso, Comprehensive Bill Targeting Predatory Lending Gains Momentum, State House News Service, Mar. 15, 2004. See also St. 2004, c. 268, § 6. The PHLPA prohibits lenders from making " ‘high-cost home mortgage loan[s]’ unless certain statutory criteria are met." Drakopoulos v. U.S. Bank Nat'l Ass'n, 465 Mass. 775, 782-783 & n.13, 991 N.E.2d 1086 (2013), quoting G. L. c. 183C, §§ 3, 4. A "[h]igh cost home mortgage loan" is defined as "a consumer credit transaction that is secured by the borrower's principal dwelling, other than a reverse mortgage transaction, a home mortgage loan" that has an annual percentage rate or points and fees that exceed specified limits.⁵ G. L. c. 183C, § 2.

In keeping with the purpose of the act, the PHLPA contains a number of provisions to protect borrowers, including a private right of action that allows a borrower to "bring a civil action for injunctive relief or damages in a court of competent jurisdiction for any violation of [the PHLPA]." G. L. c. 183C, § 18 (b ). The PHLPA also allows a borrower, acting in an individual capacity, to "assert claims that the borrower could assert against a lender of the home loan against any subsequent holder or assignee of the home loan" in two circumstances. G. L. c. 183C, § 15 (b ). First, under § 15 (b ) (1), "[a] borrower may bring an original action for a violation of [the PHLPA] in connection with the loan within [five] years of the closing of a high-cost home mortgage loan." Second, under § 15 (b ) (2), a borrower may assert violations of the PHLPA defensively, as follows: "[a] borrower may, at any time during the term of a high-cost home mortgage loan, employ any defense, claim, counterclaim, including a claim for a violation of [the PHLPA], after an action to collect on the home loan or foreclose on the collateral securing the home loan has been initiated or the debt arising from the home loan has been accelerated or the home loan has become [sixty] days in default, or in any action to enjoin foreclosure or preserve or obtain possession of the home that secures the loan."

The question raised here is whether the Morrises' counterclaim that HSBC violated the PHLPA was timely.⁶ The answer to this question does not depend on the merits of the counterclaim.⁷ Rather, the answer depends on how we interpret the act's limitations.

As with any question of statutory interpretation, we look first to the language of the act. See City Elec. Supply Co. v. Arch Ins. Co., 481 Mass. 784, 788, 119 N.E.3d 735 (2019). HSBC maintains, as it did below, that it is entitled to judgment as a matter of law because more than five years had passed between the time the Morrises closed on the loan and the time they brought their counterclaim for violation of the PHLPA and, therefore, the five-year statute of limitations in § 15 (b ) (1) bars their counterclaim. But the Morrises did not allege violation of the PHLPA under § 15 (b ) (1) ; they alleged violation of the PHLPA defensively under § 15 (b ) (2) in response to an action brought by HSBC. Section 15 (b ) (2), unlike § 15 (b ) (1), does not contain a five-year statute of limitations. Because we will not read words into a statute that are not there, we conclude that summary judgment could not have been allowed on the basis that the Morrises' claim was barred by a five-year statute of limitations. See Anderson St. Assocs. v. Boston, 442 Mass. 812, 817, 817 N.E.2d 759 (2004) (rejecting argument that would have required court to read words into statute that were not there).

However, while the five-year statute of limitations in § 15 (b ) (1) does not apply to the Morrises' counterclaim brought under § 15 (b ) (2), the latter section contains a different limitation that renders the Morrises' counterclaim untimely. Section 15 (b ) (2) provides that a borrower may employ a defense, claim, or counterclaim "during the term of a high-cost home mortgage loan" (emphasis added). A foreclosure sale, however, following acceleration of the note and the mortgage, concludes the term of a mortgage loan. The property is sold and the mortgage is extinguished, as is the equity of redemption. See Bevilacqua v. Rodriguez, 460 Mass. 762, 775, 955 N.E.2d 884 (2011) ; Gold Star Homes, LLC v. Darbouze, 89 Mass. App. Ct. 374, 382, 49 N.E.3d 686 (2016). See also Santiago v. Alba Mgt., Inc., 77 Mass. App. Ct. 46, 51, 928 N.E.2d 359 (2010). Once a foreclosure sale occurs, the proceeds from the sale are used to satisfy the debt, and any deficiency may be collected through a deficiency action, assuming preforeclosure notice was provided to the borrower. See G. L. c. 244, § 17B. The Morrises' counterclaim, which was brought after the foreclosure sale, was not brought during the term of the mortgage loan and was thus untimely.⁸

Our conclusion that the words "during the term of a high-cost home mortgage loan" prevent the Morrises from asserting violation of the PHLPA in this postforeclosure summary process action is consistent with additional language in § 15 (b ) (2) that sets forth the specific circumstances in which a borrower may employ a defense, claim, or counterclaim, as all of those circumstances occur prior to a foreclosure sale. See Awuah v. Coverall N. Am., Inc., 460 Mass. 484, 496, 952 N.E.2d 890 (2011) ("When a statute lists elements in a series, the rules of statutory construction guide us to construe general phrases as restricted to elements similar to specific elements listed"). Those circumstances are as follows: "after an action to collect on the home loan or foreclose on the...