LEANDRO M. PITTOL v. WELLS FARGO BANK, N.A., FEDERAL HOME LOAN MORTGAGE CORPORATION, and FEDERAL HOUSING FINANCE AGENCY

Plaintiff commenced this action on May 7, 2010, alleging that Defendant Wells Fargo conducted a wrongful foreclosure against his home. Plaintiff requested relief by way of setting aside the foreclosure and the return of any funds in excess of his indebtedness at the time of the sale. On December 21, 2010, Defendants Wells Fargo and Federal Home Loan Mortgage Corporation (Freddie Mac) moved for summary judgment on all counts of Plaintiff’s complaint. Plaintiff filed his opposition on February 9, 2011, and argument was heard the same day.

In March 2008, Plaintiff purchased property located at 237 Lincoln Street in Marlborough, Massachusetts (the Property) for consideration in the amount of $154,600. The purchase was financed by Wells Fargo. In conjunction with the financing, Pittol executed a note and a mortgage encumbering the Property for $139,140. At some time after the closing on the Property, Freddie Mac became an investor in the mortgage. However, Wells Fargo did not assign its interest in the mortgage to Freddie Mac and it continued to hold the mortgage and service the loan. About six months after the financing, Pittol defaulted on the mortgage. As a result of the default, in February 2009, Wells Fargo retained counsel to commence a foreclosure proceeding on its behalf. Concurrent with the foreclosure proceeding, Wells Fargo filed a complaint with this Court under the Servicemembers Civil Relief Act (SCRA). The Court issued a judgment in favor of Wells Fargo on August 18, 2009. Since the financing in March 2008, Pittol has made only two timely payments and various sporadic untimely payments. The last payment was made by Pittol on December 15, 2008, in the amount of $1,800. On October 29, 2009, Wells Fargo conducted a foreclosure sale. Wells Fargo was the successful bidder. On November 5, 2009, Wells Fargo assigned its bid to Freddie Mac and executed a foreclosure deed in favor of Freddie Mac for the stated consideration of $160,900. Pursuant to that foreclosure deed, Freddie Mac is the current owner of the Property. [Note 1]

Summary judgment is granted where there are no issues of material fact and when the moving party is entitled to judgment as a matter of law. Mass. R. Civ. P. 56(c); Cassesso v. Comm’r of Corr., 390 Mass. 419 , 422 (1983); Cmty. Nat’l Bank v. Dawes, 369 Mass. 550 , 553 (1976). The moving party bears the burden of demonstrating affirmatively the absence of a triable issue and its entitlement to judgment as a matter of law. Pederson v. Time, Inc., 404 Mass. 14 , 16-17 (1989). In viewing the record before it, the court reviews “the evidence in the light most favorable to the nonmoving party.” Donaldson v. Farrakhan, 436 Mass. 94 , 96 (2002).

In weighing the merits of a summary judgment motion, the court must address two questions: (1) whether the factual disputes are genuine, and (2) whether a fact genuinely in dispute is material. Town of Norwood v. Adams-Russell Co., Inc., 401 Mass. 677 , 683 (1988) (citing Anderson v. Liberty, 477 U.S. 242, 247-48 (1986)). “As to materiality, the substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law properly preclude the entry of summary judgment.” Anderson, 477 U.S. at 248, cited in Carey v. New England Organ Bank, 446 Mass. 270 , 278 (2006); Molly A. V. Comm’r of the Dept. Of Mental Retardation, 69 Mass. App. Ct. 267 , 268 n.5 (2007). In order to determine if a dispute about a material fact is genuine, the court must decide whether “the evidence is such that a reasonable [fact finder] could return a verdict for the non-moving party.” Anderson, 477 U.S. at 248.

With respect to any claim on which the party moving for summary judgment does not have the burden of proof at trial, it may demonstrate the absence of a triable issue either by submitting affirmative evidence that negates an essential element of the opponent’s case, or “by demonstrating that proof of that element is unlikely to be forthcoming at trial.” Flesner v. Technical Comm’s Corp., 410 Mass. 805 , 809 (1991). The party opposing summary judgment “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 (1976). However, where appropriate, summary judgment may enter against the moving party. Mass. R. Civ. P. 56(c).

When the court considers the materials accompanying a motion for summary judgment, the inferences to be drawn from the underlying facts contained in such materials must be viewed in the light most favorable to the party opposing the motion. Attorney Gen. v. Bailey, 386 Mass. 367 , 371 (1982). The court does not “pass upon the credibility of witnesses or the weight of the evidence or make its own decision of facts.” Id. at 370. However, the court may only consider evidence which meets the requirements of Mass. R. Civ. P. 56(e). That evidence must come from “pleadings, depositions, answers to interrogatories, and responses to requests for admissions under Rule 36, together with the affidavits, if any.” [Note 2] Mass. R. Civ. P. 56(c).

Wrongful Foreclosure

Plaintiff alleges that it was improper for Wells Fargo to conduct the foreclosure sale because Freddie Mac, not Wells Fargo, was the “owner” of his mortgage. [Note 3] Defendants do not dispute that Freddie Mac was the owner of the mortgage at the time of the foreclosure sale. However, Defendants distinguish Freddie Mac’s “ownership” of the mortgage, due to its investment in the mortgage, from Wells Fargo’s status as the “holder” of the mortgage.

Paragraph 22 of the mortgage executed by Plaintiff in favor of Wells Fargo authorized Wells Fargo to invoke the statutory power of sale. It is well established, by both statute and case law, that the holder of a mortgage may foreclose on property by exercising the power of sale when the mortgage itself grants such power. Beaton v. Land Court, 367 Mass. 385 , 390-91; G. L. c. 244, § 14 (The parties authorized to conduct a foreclosure sale include “[t]he mortgagee . . . or a person authorized by the power of sale . . . upon breach of condition and without action, do all the acts authorized or required by the power.”). The Supreme Judicial Court’s recent decision in U.S. Bank National Association v. Ibanez noted that “[i]n the absence of a valid written assignment of a mortgage . . . the mortgage holder remains the same.” U.S. Bank National Association v. Ibanez, 458 Mass. 637 , 653 (2011). In this case, due to the lack of any assignment of Plaintiff’s mortgage, Wells Fargo continued to be the holder of the mortgage, and therefore was entitled to conduct the foreclosure sale.

Accounting

Plaintiff claims that the consideration for the foreclosure deed was in excess of the reasonable costs and fees associated with the foreclosure process and does not account for payments he made. The basis for his allegation is that the original mortgage in favor of Wells Fargo was in the amount of $139,140, while the consideration for the foreclosure deed was $160,900. Plaintiff has requested relief by way of the return of excess funds realized through the foreclosure process.

Wells Fargo has produced a detailed “Loan History” printout showing the payments made by Plaintiff, and he has not advanced any argument or evidence disputing the details contained in the Loan History. Wells Fargo has also documented the outstanding debt at the time of the foreclosure sale, which amounted to $162,297.57 (an amount in excess of the consideration for the foreclosure deed). The outstanding debt owed by Plaintiff when the Property was foreclosed on consisted not only of the unpaid principal of $138,526.05, but also included interest of $11,372.92, escrow advances of $6,554.12, late charges, corporate advances and attorney’s fees.

Unjust Enrichment

Finally, Plaintiff alleges that Defendants were unjustly enriched because they realized the fruits of substantial improvements that he made to the Property which increased its value in excess of the amount of the original mortgage and foreclosure costs. As evidence of this unjust enrichment, Plaintiff relies on an estimate that he obtained from www.zillow.com, which estimates the value of Property as $334,000. Plaintiff has not offered any evidence of specific improvements that he made to the Property prior to the foreclosure sale which would account for this increase in value.

In claims of bad faith or commercial unreasonableness, a showing of inadequate price alone will not invalidate a sale. Resolution Trust Corp. v. Carr, 13 F.3d 425, 430 (1st Cir. 1993) (citing Chartrand v. Newton Trust Co., 296 Mass. 317 , 320 (1936)). In fact, “a mortgagee is permitted to buy the collateral at a foreclosure sale as ‘cheaply’ as it can.” Id. (citing Cambridge Sav. Bank v. Cronin, 289 Mass. 379 , 383 (1936). As pointed out by Defendants, in Resolution Trust Corp. v. Carr the court determined that a price deficiency of as much as 39% of the fair market value could justify the grant of a dispositive motion in favor of the mortgagee. Faced with this, Plaintiff argues that in this case there is a difference of well over 100%, which itself shows that the Defendants were unjustly enriched. Unfortunately, Plaintiff’s calculations are incorrect. The purchase price of $160,900 is 48% of the alleged fair market value of $334,000.

Even if I were to assume that Plaintiff’s calculations were correct, the price is not the sole consideration - there must also be an unjust benefit as shown by the parties’ reasonable expectations. Community Builders, Inc. v. Indian Motorcycle Associates, Inc., 44 Mass. App. Ct. 537 , 560 (1998) (citing Salamon v. Terra, 394 Mass. 857 , 859 (1985)). Here the basis for the parties’ expectations is the mortgage that Plaintiff executed in favor of Wells Fargo. That mortgage does not contain any provision that could in any way be interpreted to provide the Plaintiff with the difference between the purchase price of the Property and its fair market value at the time of a foreclosure sale.

Conclusion

The foreclosure sale was properly conducted by Wells Fargo, the holder of the mortgage at that time. In addition, Plaintiff has offered no evidence which would call into dispute the consideration for the foreclosure deed in favor of Freddie Mac. Finally, the expectations of the parties were not such that Plaintiff could reasonably believe that he would be entitled to any alleged difference between the price he paid for the Property and its market value at the time of the foreclosure sale.

The Defendants have adequately shown that there is no genuine dispute about the material facts. They have also offered substantial evidence negating the essential elements of Plaintiff’s case and clearly demonstrated the unlikelihood that Plaintiff would be able to offer any proof of the elements of his case at trial. Accordingly, Defendants’ motion for summary judgment is GRANTED.

Judgment to enter dismissing the complaint.

Charles W. Trombly, Jr.

Justice

Dated: MARCH 1, 2011