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SJC-12798
MARK R. THOMPSON & another1 vs. JPMORGAN CHASE BANK, N.A.
Suffolk. February 13, 2020. - November 25, 2020.
Present: Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher, & Kafker, JJ.2
Mortgage, Foreclosure, Real estate. Real Property, Mortgage, Sale. Sale, Real estate. Notice, Foreclosure of mortgage.
Certification of a question of law to the Supreme Judicial Court by the United States Court of Appeals for the First Circuit.
Alan E. Schoenfeld, of New York (Arpit Garg, of the District of Columbia, & Mark C. Fleming also present) for the defendant. Todd S. Dion for the plaintiffs. The following submitted briefs for amici curiae: Andrew C. Glass, Gregory N. Blase, & Hollee M. Watson for American Bankers Association & others. Marissa I. Delinks & Samuel C. Bodurtha for Federal National Mortgage Association & another. Francis J. Nolan for Real Estate Bar Association for Massachusetts, Inc., & another. Jack Saade, pro se.
1 Beth A. Thompson.
2 Chief Justice Gants participated in the deliberation on this case prior to his death. 2
GAZIANO, J. Eight years after the plaintiff homeowners
defaulted on their mortgage payments, JPMorgan Chase Bank, N.A.
(Chase or bank), foreclosed on their home and sold it at auction
pursuant to the statutory power of sale. See G. L. c. 183,
§ 21. In the course of the foreclosure, Chase sent the notice
required by G. L. c. 244, § 35A, and scripted in regulations
issued by the Division of Banks (division) at 209 Code Mass.
Regs. § 56.04. The division does not permit a foreclosing
mortgagee to alter the language of the required notice, which
provides, inter alia, that "you can still avoid foreclosure by
paying the total past-due amount before a foreclosure sale takes
place." 209 Code Mass. Regs. § 56.04. The terms of the
plaintiffs' mortgage, however, specified that they could
reinstate their mortgage by paying all past due amounts until
"five days before sale of the Property pursuant to any power of
sale contained in this Security Instrument."
One month after the foreclosure sale, the plaintiffs
commenced this action in the Superior Court to set aside the
foreclosure. They argued that these conflicting statements as
to the last day upon which they possibly could reinstate their
mortgage -- up to the foreclosure sale, as the notice stated, or
up to five days before the foreclosure sale, as the terms of the
mortgage provided -- meant that the bank's notice was 3
misleading, potentially deceptive, and therefore should render
the foreclosure sale void. See, e.g., Pinti v. Emigrant Mtge.
Co., 472 Mass. 226, 240 (2015).
After the matter was removed to the United States District
Court for the District of Massachusetts, a Federal District
Court judge granted summary judgment to Chase. See Thompson vs.
J.P. Morgan Chase Bank, N.A., U.S. Dist. Ct., No. 18-10131 (D.
Mass. May 11, 2018) (Thompson I). The United States Court of
Appeals for the First Circuit reversed. See Thompson v.
JPMorgan Chase Bank, N.A., 915 F.3d 801, 805 (1st Cir.)
(Thompson II), opinion withdrawn, 931 F.3d 109 (1st Cir. 2019)
(Thompson III). It concluded that, because the notice failed to
include the five-day limitation specified in the mortgage
contract, the notice was potentially deceptive and, therefore,
void pursuant to our decision in Pinti. Thompson II, 915 F.3d
at 804-805, citing Pinti, 472 Mass. at 237-238.
On a petition for reconsideration, in which Chase and
numerous amici pointed out for the first time that the bank was
required under Massachusetts law to send the notice verbatim,
the First Circuit vacated its decision and certified the
following question to this court:
"Did the statement in the August 12, 2016, default and acceleration notice that 'you can still avoid foreclosure by paying the total past-due amount before a foreclosure sale takes place' render the notice inaccurate or deceptive in a manner that renders the 4
subsequent foreclosure sale void under Massachusetts law?"
Thompson III, 931 F.3d at 111.
We answer the reported question, "No." Paragraph 16 of the
plaintiffs' mortgage states that "[a]ll rights and obligations
contained in this Security Instrument are subject to any
requirements and limitations of Applicable Law." Accordingly,
the longer time for reinstatement specified by G. L. c. 244,
§ 35A -- any time prior to the foreclosure sale -- constitutes
controlling and applicable law that supersedes the conflicting
provision of the mortgage contract. Because that statute and
its enabling regulations obligate mortgagees to accept a
reinstatement payment at any time prior to a foreclosure sale,
just as the notice stated, the notice sent by Chase was neither
deceptive nor misleading.
1. Background. On June 13, 2006, the plaintiffs entered
into a residential mortgage agreement with Washington Mutual
Bank to secure a $322,500 loan. See Thompson II, 915 F.3d at
802. The mortgage was a standard form "Freddie Mac/Fannie Mae"
residential mortgage (a so-called GSE Uniform Mortgage), an
instrument widely used across Massachusetts. See Pinti, 472
Mass. at 236 n.16.
a. Legal background. Two provisions of a GSE Uniform
Mortgage contract are particularly relevant here. Paragraph 22 5
specifies notice requirements that must be met before a
mortgagee may accelerate a loan and begin foreclosure
proceedings.3 Paragraph 19 of the GSE Uniform Mortgage places
limits and conditions on mortgagors' rights to reinstate a
mortgage after acceleration. Paragraph 19 includes the
provision at issue here, which purports to terminate the
plaintiffs' right to reinstate "five days before sale of the
Property pursuant to any power of sale contained in this
Security Instrument."4
3 Paragraph 22 provides:
"Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 unless Applicable Law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the non- existence of a default or any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke the STATUTORY POWER OF SALE and any other remedies permitted by Applicable Law. . . ."
4 Paragraph 19 of the mortgage states: 6
As do the contractual obligations of paragraph 22 of the
GSE Uniform Mortgage, G. L. c. 244, § 35A, also establishes
notice requirements before a foreclosing mortgagee can
accelerate a mortgage obligation and foreclose based on borrower
default. Under the statute, the required notice must inform the
mortgagor, inter alia, "that the mortgagor may redeem the
property by paying the total amount due, prior to the
foreclosure sale." G. L. c. 244, § 35A (c) (8). As mentioned,
the division has issued regulations specifying the precise form
that this notice must take; a foreclosing mortgagor may not
"Borrower's Right to Reinstate After Acceleration. If Borrower meets certain conditions, Borrower shall have the right to have enforcement of this Security Instrument discontinued at any time prior to the earliest of: (a) five days before sale of the Property pursuant to any power of sale contained in this Security Instrument; (b) such other period as Applicable Law might specify for the termination of Borrower's right to reinstate; or (c) entry of a judgment enforcing this Security Instrument. Those conditions are that Borrower: (a) pays Lender all sums which then would be due under this Security Instrument and the Note as if no acceleration had occurred; (b) cures any default of any other covenants or agreements; (c) pays all expenses incurred in enforcing this Security Instrument, including, but not limited to, reasonable attorneys' fees, property inspection and valuation fees, and other fees incurred for the purpose of protecting Lender's interest in the Property and rights under this Security Instrument; and (d) takes such action as Lender may reasonably require to assure that Lender's interest in the Property and rights under this Security Instrument, and Borrower's obligation to pay the sums secured by this Security Instrument, shall continue unchanged. . . ." 7
alter the notice. See 209 Code Mass. Regs. § 56.04 ("the '90-
day Right to Cure Your Mortgage Default' notice must conform to
the following: . . ." [emphasis added]).
b. Foreclosure and prior proceedings. Sometime after
2008, the United States Office of Thrift Supervision seized
Washington Mutual Bank and placed it in receivership with the
Federal Deposit Insurance Corporation (FDIC); the FDIC then sold
its banking subsidiaries to Chase. See Thompson II, 915 F.3d
at 803. In this way, Chase became the mortgagee on the
plaintiffs' mortgage. Id. In July of 2009, the plaintiffs
defaulted on their mortgage; since that time, they have made no
payments.
On August 12, 2016, Chase sent the plaintiffs notice of its
intention to accelerate the loan and foreclose on their home.
In accordance with the requirements of both G. L. c. 244, § 35A,
and paragraph 22 of the plaintiffs' mortgage, the notice relayed
that (1) the mortgage loan was in default; (2) tendering the
past-due amount of $200,056.60 would cure the default; (3) the
default had to be cured by November 10, 2016; and (4) if the
plaintiffs failed "to cure the default on or before [November
10, 2016], Chase [could] accelerate the maturity of the
Loan, . . . declare all sums secured by the Security Instrument
immediately due and payable, commence foreclosure proceedings,
and sell the Property." See Thompson II, 915 F.3d at 803. The 8
notice also informed the plaintiffs of their right to reinstate
the mortgage after acceleration, and explained that they could
bring a court action asserting any defenses to foreclosure. Id.
It further stated that the plaintiffs could "still avoid
foreclosure by paying the total past-due amount before a
foreclosure sale takes place." This notice conformed verbatim
to the template required by 209 Code Mass. Regs. § 56.04.
After the foreclosure sale and the filing of the
plaintiffs' complaint to set aside the foreclosure in the
Superior Court, Chase removed the case to the United States
District Court for the District of Massachusetts. There, the
plaintiffs argued that, while the notice sent by Chase informed
them of a "right to reinstate," it did not specify the temporal
limitations on that right contained in paragraph 19 of their
mortgage. This, they claimed, rendered the notice potentially
deceptive such that the foreclosure sale was void. A United
States District Court judge disagreed, and determined that
strict compliance with the notice requirements of paragraph 22
did not require specifying the conditions placed upon the
plaintiffs' right to reinstate contained in paragraph 19.
Accordingly, the judge allowed Chase's motion to dismiss.
On appeal to the First Circuit, the plaintiffs renewed this
argument. See Thompson II, 915 F.3d at 803. Considering the
claim de novo, the court concluded that Chase had complied with 9
the facial requirements of paragraph 22, which only obligated
Chase to give notice of the plaintiffs' substantive right to
reinstate. Id. at 804. The court also correctly noted that
paragraph 19 contains no independent notice requirement. Id.
Nonetheless, the court concluded Chase's notice was potentially
deceptive because it "could mislead the [plaintiffs] into
thinking that they could wait until a few days before the sale
to tender the required payment." Id. The court reached this
determination by reading our decision in Pinti, 472 Mass. at
238, to stand for the proposition that "accuracy and avoidance
of potential deception are conditions of the validity of the
foreclosure." Id. at 805. Thus, it concluded that "the bank
had no obligation under paragraph 19 to lay out its procedures,
but it did have an obligation under paragraph 22 to provide
notice and, under Pinti, to make anything it did say accurate
and avoid potential deception." Id.
As noted, supra, Chase and several amici argued on
reconsideration that Massachusetts law required the notice in
question to be sent unaltered, and that substantial upheaval in
the residential mortgage market would result from the
Thompson II decision. See Thompson III, 931 F.3d at 110. The 10
First Circuit then set aside its decision and certified the
relevant question to this court. See id. at 110-111.5
2. Discussion. Massachusetts is a "non-judicial
foreclosure state," meaning that it allows a mortgagee to
foreclose on a mortgaged property without judicial
authorization, so long as the mortgage instrument grants that
right by reference to the statutory power of sale. See Pinti,
472 Mass. at 232, citing U.S. Bank Nat'l Ass'n v. Ibanez, 458
Mass. 637, 645–646 (2011); G. L. c. 183, § 21. A foreclosing
mortgagee, however, "first [must] comply[ ] with the terms of
the mortgage and with the statutes relating to the foreclosure
of mortgages by the exercise of a power of sale." G. L. c. 183,
§ 21. Because of the "substantial power . . . to foreclose in
Massachusetts without judicial oversight," we repeatedly have
emphasized that "one who sells under a power [of sale] must
follow strictly its terms; the failure to do so results in no
valid execution of the power, and the sale is wholly void."
Federal Nat'l Mtge. Ass'n v. Marroquin, 477 Mass. 82, 86 (2017),
quoting Pinti, 472 Mass. at 232–233. See Pryor v. Baker, 133
5 We acknowledge the amicus brief of American Bankers Association, American Financial Services Association, Bank Policy Institute, Massachusetts Bankers Association, Massachusetts Mortgage Bankers Association, and Mortgage Bankers Association in support of the defendant; of Federal National Mortgage Association and Federal Home Loan Mortgage Corporation in support of the defendant; of Real Estate Bar Association for Massachusetts, Inc., and the Abstract Club; and of Jack Saade. 11
Mass. 459, 460 (1882) ("The exercise of a power to sell by a
mortgagee is always carefully watched, and is to be exercised
with careful regard to the interests of the mortgagor").
This regime of strict compliance does not require a
mortgagee to "demonstrate punctilious performance of every
single mortgage term." Pinti, 472 Mass. at 235. Rather, since
the Nineteenth Century, our cases consistently have required
strict compliance "with the terms of the actual power of sale in
the mortgage [and] with any conditions precedent to the exercise
of the power that the mortgage might contain." Id. at 233-234
(collecting cases). In Pinti, 472 Mass. at 235, we summarized
our jurisprudence concerning what counts as a condition
precedent as "(1) terms directly concerned with the foreclosure
sale authorized by the power of sale in the mortgage,[6] and
(2) those prescribing actions the mortgagee must take in
connection with the foreclosure sale -- whether before or after
the sale takes place." Id.
Consistent with these long-standing principles, in that and
subsequent cases, we have continued to delineate which aspects
6 For example, in McGreevey v. Charlestown Five Cents Sav. Bank, 294 Mass. 480, 481, 484 (1936), we voided a foreclosure sale because the mortgage required the sale to be advertised and held in Suffolk County, even though the property was located in Middlesex County. Similarly, in Moore v. Dick, 187 Mass. 207, 210-212 (1905), we voided a foreclosure sale for failure to comply with the terms of a mortgage contract which specified that the sale be advertised in a particular newspaper. 12
of the regulatory scheme require strict compliance before a
valid foreclosure sale may take place. See, e.g., Turra v.
Deutsche Bank Trust Co. Americas, 476 Mass. 1020, 1022 (2017)
(failure strictly to comply with postforeclosure requirements of
G. L. c. 244, § 15A, did not render sale void); Pinti, 472 Mass.
at 227, 239–240 (failure strictly to comply with notice
requirements of GSE Uniform Mortgage paragraph 22 renders
foreclosure void); U.S. Bank Nat'l Ass'n v. Schumacher, 467
Mass. 421, 422 (2014) (failure strictly to comply with notice
requirements of G. L. c. 244, § 35A, does not render foreclosure
void because G. L. c. 244, § 35A, is not part of foreclosure
process); Eaton v. Federal Nat'l Mtge. Ass'n, 462 Mass. 569,
571, 580–581 (2012) (failure strictly to comply with
requirements of G. L. c. 244, § 14, renders foreclosure void).
Here, Chase sent one notice which satisfied the
requirements of both G. L. c. 244, § 35A, and, at least
facially, those of paragraph 22 of the plaintiffs' GSE Uniform
Mortgage.7 The possibility of such a so-called "hybrid notice"
7 Some potential complexity arises because we have concluded that the terms of GSE Uniform Mortgage paragraph 22 are subject to strict compliance, while the requirements of G. L. c. 244, § 35A, are not. See Pinti, 472 Mass. at 238-240 (distinguishing strict compliance requirement of paragraph 22 from decision in Schumacher, 467 Mass. at 430-431, that G. L. c. 244, § 35A, is not subject to strict compliance). There is no actual conflict, however, in applying the holdings of both Pinti and Schumacher to a single notice. Any provision contained in GSE Uniform Mortgage paragraph 22 must meet the heightened strictures of 13
is explicitly contemplated by paragraph 15 of the GSE Uniform
Mortgage itself: "[i]f any notice required by this Security
Instrument is also required under Applicable Law, the Applicable
Law requirement will satisfy the corresponding requirement under
this Security Instrument."
We agree with the First Circuit that Massachusetts law
under Pinti, 472 Mass. at 235, 240, requires that any notice
given pursuant to paragraph 22 of the GSE Uniform Mortgage,
regardless whether hybrid, must be accurate and not deceptive.
See Thompson II, 915 F.3d. at 804. We disagree, however, that
the notice here was potentially deceptive. We reach this
conclusion because we determine that the more generous
reinstatement period provided under G. L. c. 244, § 35A, governs
over the contractually imposed time limits on reinstatement
articulated in paragraph 19 of the GSE Uniform Mortgage.
"The words of a contract must be considered in the context
of the entire contract rather than in isolation." Brigade
Leveraged Capital Structures Fund Ltd. v. PIMCO Income Strategy
Fund, 466 Mass. 368, 374 (2013), quoting General Convention of
New Jerusalem in the U.S. of Am., Inc. v. MacKenzie, 449 Mass.
832, 835 (2007). When interpreting a contract (such as the GSE
Pinti's compliance regime, while those notice provisions found only in G. L. c. 244, § 35A, would be subject to the lesser requirements articulated in Schumacher, supra. 14
Uniform Mortgage), we construe it "as a whole, so as to give
reasonable effect to each of its provisions" (quotation
omitted). James B. Nutter & Co. v. Estate of Murphy, 478 Mass.
664, 669 (2018).
Here, paragraph 12 of the plaintiffs' mortgage gives Chase
the contractual ability to extend the deadline for a
reinstatement payment. Paragraph 16 provides that all "rights
and obligations contained in this Security Instrument are
subject to any requirements and limitations of Applicable Law."
Applicable law is defined to include all "[F]ederal, [S]tate and
local statutes, regulations, ordinances and administrative rules
and orders (that have the effect of law) as well as all
applicable final, non-appealable judicial opinions." Thus, the
language of the mortgage itself gives notice to the plaintiffs
that the five-day limitation of paragraph 19 could be extended
either by the discretion of the mortgagee or, as is the case
here, relevant provisions of State law.
Specifically, G. L. c. 244, § 35A, and its accompanying
regulations require foreclosing mortgagees to send a notice
specifying that, even after acceleration, homeowners have a
legal right to "avoid foreclosure by paying the total past-due
amount before a foreclosure sale takes place." 209 Code Mass.
Regs. § 56.04. Reading paragraphs 12 and 16 of the plaintiffs'
mortgage together with this applicable regulation makes clear 15
that Chase not only had the contractual option to accept a
reinstatement payment at any point prior to foreclosure, it was
required to do so. Thus, while in other States the "five days
prior" limitation contained in GSE Uniform Mortgage paragraph 19
may limit a mortgagee's unequivocal reinstatement rights, in
Massachusetts, this limitation is superseded by the more
generous reinstatement time period specified in the statutory
scheme.
For this reason, the scenario that concerned the First
Circuit, in which the plaintiffs would arrive three days prior
to the sale, cash-in-hand, only to be rebuffed by Chase pointing
to paragraph 19, could not happen. Chase would be obligated to
accept such a reinstatement payment under Massachusetts law; the
fact that Massachusetts law would govern to allow a longer
reinstatement period might not be abundantly clear to
homeowners, based on the language that "limitations" of
applicable law are applicable to the mortgage, but it is
properly represented by the terms of the notice.
Ultimately, the plaintiffs' contention that the notice
requirements of G. L. c. 244, § 35A, are "of no significance" to
Chase's duty to notify pursuant to paragraph 22 is unavailing.
While we have read the terms of a mortgage and the statutes
relating to the foreclosure of mortgages "as being separately
grounded and having an independent meaning," Pinti, 472 Mass. 16
at 240, and the signatories certainly must comply strictly with
the requirements of paragraph 22, even if G. L. c. 244, § 35A,
were to be repealed or modified, there is nothing that says a
single notice could not satisfy both the requirements of G. L.
c. 244, § 35A, and of paragraph 22. Indeed, the possibility
explicitly is contemplated in the GSE Uniform Mortgage itself in
paragraph 15. Moreover, as a practical matter, the consumer
protection aims of both the statutory scheme8 and paragraphs 19
and 22 of the GSE Uniform Mortgage are better served by a single
accurate notice rather than two potentially conflicting
communications.
3. Conclusion. Because the notice in question was neither
inaccurate nor deceptive, we answer the reported question, "No."
The Reporter of Decisions is to furnish attested copies of
this opinion to the clerk of this court. The clerk in turn will
transmit one copy, under the seal of the court, to the clerk of
the United States Court of Appeals for the First Circuit, as the
answer to the question certified, and also will transmit a copy
to each party.
8 See Schumacher, 467 Mass. at 430.