James B. Nutter & Company (JBNC) makes loans secured by reverse mortgages. A reverse mortgage
is a loan or line of credit available to a person over the age of 62 who has equity in real estate, typically the persons home. The loan provides the borrower with cash (usually in the form of a single lump-sum payment) and is secured by the borrowers equity in the real estate. There are no monthly payments; instead, the loan is due and payable in full when the borrower dies, sells the home, or no longer uses the home as her principle residence.
Court v. Financial Freedom Acquisition LLC, 807 F.3d 351, 354 (1st Cir. 2015). JBNCs reverse mortgages use a standard form. Paragraph 20 of its standard form does not explicitly incorporate the statutory power of sale, G.L. c. 183, § 21. JBNC seeks to foreclose on many of its mortgages, and has to date brought 45 cases in the Land Court seeking to determine its rights to foreclose under its form mortgage. The court has determined that three cases, including this one, in which the defendants have appeared, are ripe for resolving the specific and sole issue of whether paragraph 20 of the form JBNC mortgage acts to incorporate the statutory power of sale notwithstanding its failure to do so explicitly. At the instruction of the court, JBNC has brought a limited motion for partial judgment on the pleadings on this issue; the defendant in this case opposes the motion. The motion was argued to the court on July 14, 2016. As set forth in this Memorandum and Order, the court finds that the language of paragraph 20 that Lender may invoke the power of sale and any other remedies permitted by applicable law is sufficient to incorporate the statutory power of sale by reference, even though the language of paragraph 20 is not substantially equivalent to that of the statute.
On October 27, 2015, JBNC filed its complaint in James B. Nutter & Co. v. Judith A. Ouellette, et al., 15 MISC 000458. Case management conferences were held on December 8, 2015, and January 15, 2016. Plaintiff's Motion to Amend Complaint was allowed and the amended complaint deemed filed on March 25, 2016. The Commonwealth of Massachusetts Commissioner of Revenue filed his answer on March 30, 2016. The claims against defendant David E. Sweeney were dismissed on April 21, 2016. The Plaintiff's Motion to Amend Complaint was allowed and the Second Amended Complaint deemed filed on April 27, 2016. The answer and counterclaim of defendant Deborah A. Cassidy and Lori Jean Cassidy was filed on May 27, 2016. At a continued case management conference on June 8, 2016, the defendants were given leave to treat JBNC's Limited Motion for Judgment on the Pleadings filed in case no. 16 MISC 000083 as filed in this case, and to file oppositions. [Note 1] Plaintiff filed its answer to counterclaims on June 16, 2016. The defendants appeared at the hearing on the Limited Motion for Judgment on the Pleadings and opposed it.
The court heard argument on the Plaintiff's Limited Motion for Judgment on the Pleadings on July 14, 2016, and took the motion under advisement. For the following reasons, the motion is allowed.
Limited Motion for Judgment on the Pleadings
Plaintiff's motion has been deemed a limited motion for partial judgment on the pleadings under Mass. R. Civ. P. 12(c). This motion will be analyzed under the standard of a motion to dismiss for failure to state a claim upon which relief can be granted. Jarosz v. Palmer, 436 Mass. 526 , 529-530 (2002). The court accepts as true well-pleaded factual allegations and reasonable inferences drawn therefrom, Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43 , 45 (2004), but does not accept legal conclusions cast in the form of factual allegations. Iannacchino v. Ford Motor Co., 451 Mass. 623 , 633 (2008), quoting Schaer v. Brandeis Univ., 432 Mass. 474 , 477 (2000); see Jarosz, 436 Mass. at 529-530. Generally, if matters outside the pleadings are presented to and not excluded by the court, the motion will be treated as a motion for summary judgment. Mass. R. Civ. P. 12(b), 12(c). The court may, however, take into account matters of public record and documents integral to, referred to, or explicitly relied on in the complaint, whether or not attached, without converting the motion to a motion for summary judgment. Marram, 442 Mass. at 45 n.4; Schaer, 432 Mass. at 477; Reliance Ins. Co. v. City of Boston, 71 Mass. App. Ct. 550 , 555 (2008); Shuel v. DeIeso, 16 LCR 329 , 329 n.2 (2008). Therefore, the court will accept as true the allegations of the verified complaint filed in 16 MISC 000083, the amended complaint filed in 16 MISC 000053, and the second amended complaint filed in 15 MISC 000458 (collectively, the complaints) for the purposes of the Limited Motion for Judgment on the Pleadings only. The court will consider the various recorded instruments submitted with the complaints and the Limited Motion for Judgment on the Pleadings, in particular the form JBNC reverse mortgage at issue.
For purposes of the Limited Motion for Judgment on the Pleadings pursuant to Mass. R. Civ. P. 12(c), the court accepts as true the following facts as alleged in the complaint.
1. The property at issue is located at 23 Locust Street in Danvers, Massachusetts (Ouellette Property).
2. The defendants John C. Cassidy, Lori Jean Cassidy and Deborah A. Cassidy are the children and only heirs of Judith A. Ouellette.
3. Judith A. Ouellette became the owner of the Ouellette Property by way of deeds dated March 16, 1971 and recorded in the Essex South District Registry of Deeds in Book 5754, Page 221; dated November 4, 1976 and recorded with said Registry of Deeds in Book 6286, Page 386; dated September 13, 1979 and recorded with said Registry of Deeds in Book 10150, Page 79; dated September 26, 2007 and recorded with said Registry of Deeds in Book 27230, Page 503.
4. On September 27, 2007, Judith A. Ouellette executed and delivered a note to JBNC in the original principal amount of Four Hundred Twenty-Four Thousand Five Hundred and 00/100 Dollars ($424,500) (Ouellette Note).
5. On September 27, 2007, Judith A. Ouellette granted a Home Equity Conversion Mortgage recorded in the Essex South District Registry of Deeds in Book 27230, Page 517 to JBNC in the original principal amount of Four Hundred Twenty-Four Thousand Five Hundred and 00/100 Dollars ($424,500) (Ouellette Mortgage).
6. Paragraph 9 of the Ouellette Mortgage provides, in relevant part, that one of the grounds for immediate payment in full of the debt secured by such mortgage is the failure of the borrower, Judith A. Ouellette, to physically occupy the mortgaged property as her principle residence for a period of longer than twelve (12) consecutive months.
7. The Ouellette Mortgage does not explicitly incorporate the Statutory Condition and Power of Sale of G.L. c. 183, § 21. Paragraph 20 of the Ouellette Mortgage provides, in relevant part:
Foreclosure Procedure. If Lender requires immediate payment in full under Paragraph 9, Lender may invoke the power of sale and any other remedies permitted by applicable law At this sale Lender or another person may acquire the Property. This is known as foreclosure and sale. In any lawsuit for foreclosure and sale, Lender will have the right to collect all costs allowed by law.
8. Prior to April 18, 2014, Judith A. Ouellette no longer resided at the Ouellette Property due to physical illness. According to JBNC, this entitled it to accelerate the debt and declare the debt to be in default if not reinstated within thirty days.
JBNC's complaint alleges that paragraph 20 in the Ouellette Mortgage, which is identical to all the mortgages in the cases before the court (collectively, the form Reverse Mortgage), incorporates the statutory power of sale contained in G.L. c. 183, § 21. JBNC argues that the foreclosure procedure set forth in paragraph 20 of the form Reverse Mortgage serves the same function as G.L. c. 183, § 21, is substantially similar to the language in G.L. c. 183, § 21, and indicates that the parties to the form Reverse Mortgage intended to grant JBNC the statutory power of sale. In this Limited Motion for Judgment on the Pleadings, JBNC seeks a declaration from the court that paragraph 20 in the form Reverse Mortgage incorporates the statutory power of sale contained in G.L. c. 183, § 21.
The defendant argues that paragraph 20 in the Reverse Mortgage does not incorporate G.L. c. 183, § 21 and therefore does not allow JBNC to foreclose by the statutory power of sale. The defendant also alleges that the court must reform rather than interpret the Reverse Mortgage in order to determine the meaning of paragraph 20. The defendants argue that the Reverse Mortgage cannot be reformed without evidence of mutual mistake by the parties during the formation of the Reverse Mortgage.
A determination of whether paragraph 20 in the Reverse Mortgage incorporates the statutory power of sale is an interpretation not a reformation of the plain language of the Reverse Mortgage. [T]o be entitled to reformation, a party must 'establish that the undisputed material facts fully, clearly, and decisively show a mutual mistake.' OneBeacon Am. Ins. Co. v. Travelers Indem. Co. of Ill., 465 F.3d 38, 41 (1st Cir. 2006), citing Polaroid Corp. v. Travelers Indem. Co., 414 Mass. 747 , 756 (1993); see, e.g., Countrywide Home Loans, Inc. v. Bruce, 21 LCR 194 , 196-199 (2011) (Misc. Case. No. 386939) (Piper, J.). The mistake must either be mutual or be made by one party and known to the other party. Polaroid Corp., 414 Mass. at 756; Franz v. Franz, 308 Mass. 262 , 266267 (1941) (holding that reformation of contract is appropriate where there was mutual mistake by the parties and reformation is necessary to give effect to the intent of both parties). Under Massachusetts law, a written contract may be reformed if its language 'does not reflect the true intent of both parties.' OneBeacon Am. Ins. Co., 465 F.3d at 41, citing Polaroid Corp., 414 Mass. at 756.
Neither party alleges that the language of paragraph 20 in the Reverse Mortgage is flawed due to mutual mistake or that paragraph 20 fails to reflect the true, agreed upon intent of the parties. Rather, the parties are in dispute about whether paragraph 20, in its current form, incorporates the statutory power of sale. In this Limited Motion for Judgment on the Pleadings, JBNC is requesting an interpretation of the contractual language set forth in the Reverse Mortgage. The court can interpret paragraph 20 of the form Reverse Mortgage without having to find mutual mistake by the parties.
In interpreting paragraph 20, the first question is whether its language is ambiguous. Whether contract language is ambiguous is a question of law for the court. Basis Tech. Corp. v. Amazon.com, Inc., 71 Mass. App. Ct. 29 , 36 (2008). To determine whether language in a contract is ambiguous, courts examine the language of the contract by itself, independent of extrinsic evidence concerning the drafting history or the intention of the parties. Bank v. Thermo Elemental Inc., 451 Mass. 638 , 648 (2008). Language is ambiguous if it is susceptible of more than one meaning so that reasonably intelligent persons would differ as to which meaning is the proper one. Basis Tech. Corp., 71 Mass. App. Ct. at 36-37, quoting Citation Ins. Co. v. Gomez, 426 Mass. 379 , 381 (1998). Ambiguity . . . is not created just because the parties disagree about the contract's meaning. Barclays Bank PLC v. Poynter, 710 F.3d 16, 21 (1st Cir. 2013).
The meaning of paragraph 20 in the Reverse Mortgage is free from ambiguity. Therefore it must be interpreted according to its plain terms, with its words construed in their usual and ordinary sense. General Convention of the New Jerusalem in the U.S. of Am., Inc. v. MacKenzie, 449 Mass. 832 , 835 (2007). As discussed below, the plain terms of paragraph 20 favor a finding that the form Reverse Mortgage incorporates the statutory power of sale.
The statutory power of sale is set out in G.L. c. 183, § 21. Under this statute, if a mortgage provides for a power of sale, the mortgagee, in exercising the power, may foreclose without obtaining prior judicial authorization. Eaton v. Fed. Nat. Mortgage Ass'n, 462 Mass. 569 , 579-80 (2012). In order for a mortgagee to foreclose by exercise of the power of sale, the mortgage itself must grant such mortgagee the statutory power of sale. Pinti v. Emigrant Mortgage Co., 472 Mass. 226 , 232 (2015). It is well-settled law that the statutory power may be incorporated into a mortgage in three ways: (1) incorporating the exact language that defines the Statutory Power of Sale of § 21 into the text of the mortgage; (2) referring to this definition, generally by use of the term 'Statutory Power of Sale'; or (3) language in the mortgage defining a power substantially similar to that of the statutory power. Norton v. Joseph, 17 LCR 40 , 41 (2009), affd, 77 Mass. App. Ct. 1120 (2010), citing The Massachusetts Co. v. Midura, 3 LCR 138 (1995).
The language of paragraph 20 in the form Reverse Mortgage incorporates the statutory power of sale by referral. While the form Reverse Mortgage neither recites the exact language of G.L. c. 183, § 21, nor explicitly references the Statutory Power of Sale, paragraph 20 states, Lender may invoke the power of sale and any other remedies permitted by applicable law. Judge Grossman and Judge Speicher of the Land Court have previously held that the language and any other remedies permitted by applicable law includes G.L. c. 183, and therefore incorporates G.L. c. 183, § 21. See Financial Freedom Acquisition, LLC v. Afifi, Land Court Misc. Case No. 447291 (February 1, 2012) (Grossman, J.) (this court is satisfied that the phraseology power of sale permitted by applicable law is tantamount to the statutory power of sale as set forth in G.L. c. 183, s. 21); OneWest Bank, FSB v. Heirs, Land Court Misc. Case No. 478852 (July 2, 2015) (Speicher, J.) ([p]aragraph 20 of the reverse mortgage invokes the power of sale, and it incorporates other remedies permitted by applicable law. I find that the other applicable law invoked as applicable, includes G.L. c. 183, § 21). The paragraph at issue in OneWest Bank, FSB v. Heirs is identical to paragraph 20 in JBNC's form Reverse Mortgage. As G.L. c. 183, § 21 is considered a remedy permitted by applicable law relating to mortgage foreclosures, the court finds that paragraph 20 in the form Reverse Mortgage incorporates the statutory power of sale by reference, notwithstanding references to judicial proceedings, foreclosure proceedings, and lawsuits in paragraph 20.
The form Reverse Mortgage incorporates the statutory power of sale by reference only because paragraph 20 references other remedies permitted by applicable law. The remaining language of paragraph 20 does not define a power substantially similar to that of the statutory power of sale. The requirements set forth in G.L. c. 183, § 21 to conduct a sale under statutory power are not merely suggestions that a mortgagee should comply with in good faith, but are rather positive requirements that a mortgagee must adhere to in a foreclosure by power of sale. See Tamburello v. Monahan, 321 Mass. 445 , 447 (1947). General Laws c. 183, § 21 sets forth specific requirements regarding who may conduct a sale, [Note 2] what property can be sold, [Note 3] where the sale must occur, [Note 4] when the sale must occur, [Note 5] and how the sale must occur. [Note 6] Paragraph 20 in the Reverse Mortgage fails to include these requirements and is therefore not substantially similar to G.L. c. 183, § 21. Paragraph 20 merely states that JBNC must send a notice informing the borrower of:
(i) [The] promise or agreement that borrower failed to keep;
(ii) The action that Borrower must take to correct the default;
(iii) A date by which Borrower must correct the default. That date must be at least 30 days from the date on which the notice is given;
(iv) That if Borrower does not correct the default by the date stated in the notice, Lender may require immediate payment in full, and Lender or another person may acquire the Property by means of foreclosure and sale;
(v) That if Borrower meets the conditions stated in Paragraph 20 above, Borrower will have Lender's enforcement of this Security Instrument remain fully effective as if immediate payment in full had never been required; and
(vi) That Borrower has the right in any lawsuit for foreclosure and sale to argue that the Borrower did keep promises and agreements under the Note and under this Security Instrument, and to present any other defenses that Borrower may have.
Paragraph 20 in the form Reverse Mortgage does not indicate where the sale must occur, when the sale will occur, or how the sale will occur. These are all included in the requirements set forth in G.L. c. 183, § 21. Given the discrepancies discussed above, the court finds that the language of paragraph 20 in the Reverse Mortgage is not substantially similar to G.L. c. 183, § 21.
For the foregoing reasons, the Plaintiff's Limited Motion for Judgment on the Pleadings is ALLOWED. The court declares that paragraph 20 of the form Reverse Mortgage incorporates the Statutory Power of Sale of G.L. c. 183, § 21, by reference.
[Note 1] At the case management conference, the parties disclosed that JBNC had foreclosed on the subject property and that Federal National Mortgage Association (Fannie Mae) is now the owner. Plaintiff's Motion to Amend and Defendants' Motion for Joinder of a Necessary Person are pending.
[Note 2] the mortgagee or his executors, administrators, successors or assigns
[Note 3] the mortgaged premises or such portion thereof as may remain subject to the mortgage in case of partial release thereof, either as a whole or in parcels, together with all improvements that may be thereon
[Note 4] on or near the premises then subject to the mortgage
[Note 5] upon any default in the performance or observance of the foregoing or other condition complying with the terms of the mortgage and with the statutes relating to the foreclosure of mortgages by exercise of a power of sale
[Note 6] by public auction