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Date: 09-01-2015

Case Style: Laura Sheedy v. Deutsche Bank National Trust Company

Case Number: 14-1246

Judge: Torruella

Court: United States Court of Appeals for the First Circuit on appeal from the District of Massachusetts (Suffolk County)

Plaintiff's Attorney: Dave Baker for appellant.

Defendant's Attorney: Donn Randall, with whom Carol E. Kamm, Jamie L. Kessler and
Bulkley, Richardson and Gelinas, LLP, were on brief, for appellees.

Description: This case involves an attempt
by a Chapter 13 debtor to avoid foreclosure on her residential
mortgage through a lender liability suit in an adversary proceeding
within her bankruptcy case. Agreeing with the bankruptcy court, we
find all claims to be either time-barred or without merit, and
therefore affirm its grant of summary judgment in favor of the
I. Background
A. The Loan and Mortgage
We review the facts in the light most favorable to
Debtor-Appellant Laura Sheedy, the party opposing summary judgment.
See Rosaura Bldg. Corp. v. Municipality of Mayagüez, 778 F.3d 55,
58 (1st Cir. 2015) (citing Agusty–Reyes v. Dep't of Educ. of P.R.,
601 F.3d 45, 48 (1st Cir. 2010)); In re Iannochino, 242 F.3d 36, 39
(1st Cir. 2001) (applying the same standard in a bankruptcy
appeal). Sheedy and her husband are self-employed and have worked
in various real estate businesses. She considers herself
"relatively sophisticated in real estate matters (but not
finance)," and she has held a real estate broker license since the
early 1980s.
In 1987, Sheedy and her husband purchased a residence in
Lexington, Massachusetts. Over the years, the couple continually
transferred the property's title amongst themselves and the
Cardinal Trust (the "Trust") -- in which Sheedy holds a beneficial
interest and is also the trustee -- with the purpose of refinancing
or using loan proceeds for other legitimate purposes. In one such
transaction in 2003, she conveyed title from the Trust to herself.
Then, in 2004, she refinanced the property (the "2004
Transaction"). For the 2004 Transaction, Sheedy executed a
promissory note (the "Note") for $810,000 in favor of Washington
Mutual Bank ("WAMU"). A mortgage corresponding to the 2004
Transaction (the "Mortgage") was also given to WAMU and was
properly recorded on April 21, 2004.
The Note provided for an interest rate of 3.625% for five
years. Then, the interest rate was set to change annually by
adding 2.75% to the weekly average yield on United States Treasury
securities adjusted to a constant maturity of one year, based on an
index issued by the Federal Reserve Board. Whatever the resulting
rate was under that formula, the terms of the Note required that it
be between 2.75% and 8.625%. Additionally, after the first
adjustment following the initial five-year period, all other
changes could not be by increments of more than 2%. The initial
monthly payment under the Note was $4,109.56, but the terms of the
Note were amended in an addendum so that Sheedy would only pay
interest during the first five years. This resulted in Sheedy only
having to pay $2,446.87 monthly for the first five years.
In 2008, federal regulators closed WAMU and the Federal
Deposit Insurance Corporation ("FDIC") was named receiver.
JPMorgan Chase National Association ("Chase") acquired certain WAMU
assets from the FDIC, including an assignment of the Mortgage.
Chase then assigned the Mortgage to Deutsche Bank National Trust
Company ("Deutsche Bank," and, together with Chase, the "Secured
Creditors"), as Trustee for WAMU Mortgage Pass-Through Certificates
Series 2004-AR4 (the "Securitized Trust"). Chase continued
servicing the loan.
In 2009, by the time the first adjustment in payment was
scheduled, Sheedy was current in her loan but faced a decline in
business as the recession began. The monthly payment jumped to
$4,055.05 -- an amount slightly less than the number provided by
the terms of the Note, ignoring the initial interest-only period
granted under the addendum. Sheedy could not meet the new payments
and she fell into default.
Sheedy retained MFI-Miami -- a mortgage fraud
investigation firm that does not engage in the practice of law --
to analyze her loan documents and determine whether she had been
misled as to the terms of the Note and Mortgage. MFI-Miami
provided her with a "comprehensive analysis" of the 2004
Transaction. The report stated that "[t]here are serious problems
with the way this loan was originated . . . which were committed by
the lender. It contains elements of illegal bait and switch and
deception practices." For example, the report mentioned that the
Truth in Lending statement1 differs from the terms of the Note
because it stated that the payment beginning on the sixty-first
month, i.e., at the time of the first adjustment, would be
$4,331.44. Thus, Sheedy had been told by WAMU that the first
payment due after the adjustment would in fact be higher than what
the Note itself reflected, and even higher than what she was
actually required to pay when the adjustment occurred. Also, the
Truth in Lending statement did not disclose that the payments for
the first five years would only include interest and no principal
would amortize.
B. The Bankruptcy Case
On June 8, 2010, after Deutsche Bank commenced
foreclosure proceedings, Sheedy filed for protection under Chapter
13 of the Bankruptcy Code, 11 U.S.C. § 1301 et seq. Then, on
July 20, 2010, she filed a Chapter 13 plan pursuant to 11 U.S.C.
§ 1321. As part of her plan, Sheedy raised a series of allegations
of lender liability, including that the Mortgage was rescindable
under the Truth in Lending Act, 15 U.S.C. §§ 1601-1667f ("TILA"),
and that the Secured Creditors violated Massachusetts General Laws
Chapter 93A, §§ 1-11 ("Chapter 93A"), as well as "general
principles of equity under Massachusetts law" as stated by the
1 Pursuant to Subpart C of Regulation Z of the Federal Reserve
Board, a lender in a refinancing transaction is required to provide
a disclosure statement containing, among other data, the payment
schedule, the variable rates, and the total payments on the
remaining obligation. 12 C.F.R. §§ 226.18, 226.20.
Massachusetts Supreme Judicial Court in Commonwealth v. Fremont
Inv. & Loan, NO. 07-4373, 2008 WL 517279 (Mass. Super. Feb. 26,
2008), aff'd as modified, 897 N.E.2d 548 (Mass. 2008). The plan
also proposed that, after rescission, the principal owed under the
Mortgage be treated as an unsecured claim of Sheedy's. That is,
instead of tendering the full amount of the loan in exchange for
the Mortgage as if the 2004 Transaction had never occurred, Sheedy
would only pay a fraction, as she would for all other unsecured
Deutsche Bank filed a proof of claim (the "Secured
Claim") preserving its status as a secured creditor in the amount
of $842,908.47 due under the Mortgage, and objecting to the
confirmation of the plan.2 On April 26, 2011, Sheedy filed the
instant adversary proceeding to have the bankruptcy court resolve
her lender liability claims, adding that Deutsche Bank and Chase
were also liable for fraud, deceit, and misrepresentation on the
basis that WAMU provided her with inaccurate or false information
concerning the terms of the Note and the Mortgage. Sheedy also
objected to the Secured Claim and challenged Deutsche Bank's
standing as her creditor. The Secured Creditors denied the
allegations and, following discovery, filed a motion for summary
2 The Secured Claim was later transferred to Chase.
C. The Bankruptcy Court Judgment
The bankruptcy court granted summary judgment in favor of
the Secured Creditors and issued a memorandum explaining the bases
for its decision. In re Sheedy, 480 B.R. 204 (Bankr. D. Mass.
2012). As to the TILA claim, the bankruptcy court held that it was
time-barred since Sheedy first brought this claim within the
bankruptcy case in 2010. The statute of limitations for claims for
rescission under TILA varies depending on the circumstances, but is
-- at most -- three years after the extension of credit. 15 U.S.C.
§ 1635(f). The 2004 Transaction occurred in April 2004. Thus, any
attempt to rescind was initiated well after the right was
extinguished by the statute of limitations.
Regarding the Chapter 93A claim, the bankruptcy court
found that Sheedy failed to send a written demand prior to
commencing suit and that she failed to even specify under which
section of Chapter 93A her claim arose.3 It concluded that the
Chapter 13 plan by itself did not constitute a demand as required
by Massachusetts General Laws Chapter 93A, § 9, and the applicable
3 We note that Sheedy's verified complaint in the adversary
proceedings perfunctorily alleges that her claim under Chapter 93A
is based upon the facts that: (1) there was a TILA violation; (2)
she had demanded rescission in her Chapter 13 plan; (3) "Deutsche
Bank obtained the loan at the time when it was in default"; (4)
Chase is a servicing agent of Deutsche Bank, and thus the latter is
liable for the actions of the former on agency grounds; and (5) the
acts of Deutsche Bank through Chase were "unfair and deceptive"
within the meaning of Chapter 93A. There is no further discussion
as to why this constituted a violation of Chapter 93A.
statute of limitations had run because actions arising under
Chapter 93A "shall commence only within four years next after the
cause of action accrues." Mass. Gen. Laws ch. 260, § 5A. Since
the 2004 Transaction in which the alleged unfair and deceptive
practices occurred closed in April 2004, the statute of limitations
for Sheedy's Chapter 93A claims ran out in April 2008.
With respect to Sheedy's claim that the 2004 Transaction
was also the result of fraud, deceit, or misrepresentation, as WAMU
provided her with inaccurate or false information concerning the
terms of the loan, the bankruptcy court held that Sheedy failed to
plead the fraud allegations with particularity. The bankruptcy
court added that it would have reached that conclusion even if it
had taken into consideration the allegations contained in the
report prepared by MFI-Miami.4 Besides the insufficiency of the
4 Sheedy introduced the report and incorporated it by reference
into the allegations in her complaint. The bankruptcy court struck
the report from the record on the grounds that Sheedy failed to
state the preparer's qualifications as an expert pursuant to
Federal Rule of Evidence 702. See Poulis-Minott v. Smith, 388 F.3d
354, 359 (1st Cir. 2004) ("Federal Rule of Evidence 702 provides
that an expert must be qualified to testify based on the expert's
knowledge, skill, experience, training or education. It is the
responsibility of the trial judge to act as gatekeeper and ensure
that the expert is qualified before admitting expert testimony."
(citing Correa v. Cruisers, a Div. of KCS Int'l, Inc., 298 F.3d 13,
24 (1st Cir. 2002))). Sheedy included the bankruptcy court's
refusal to admit this evidence as an issue in her summary of the
facts on appeal, but failed to develop any arguments, which is
sufficient ground for us not to consider the issue. See United
States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) ("[I]ssues
adverted to in a perfunctory manner, unaccompanied by some effort
at developed argumentation, are deemed waived."). Furthermore, we
would give deference to the bankruptcy court's decision, because
pleadings, the bankruptcy court held that Deutsche Bank and Chase
established that the FDIC retained liability relating to borrowers'
claims pursuant to the Purchase and Assumption Agreement between
the FDIC, as receiver of WAMU, and Chase. That is, Chase never
assumed any lender liability of WAMU.5
With regard to Sheedy's objection to the Secured Claim on
the basis that the Secured Creditors failed to explain how the
costs and fees included in the amount claimed were "reasonable and
necessary," the bankruptcy court concluded that Sheedy's claim was
imprecise and that Sheedy had been provided sufficient information
in the form of invoices, bills, checks, and receipts to enable her
to specify which costs and fees were unreasonable and unnecessary.
Sheedy did not set forth the specific grounds for her objection and
failed to meet her burden.
Finally, the bankruptcy court held that Deutsche Bank had
standing to initiate foreclosure proceedings against Sheedy because
"[t]he trial court has broad discretionary powers in qualification
of experts, and that court's decision will be affirmed unless there
is clear error." Poulis-Minott, 388 F.3d at 360 (alteration
omitted) (internal quotation marks and citation omitted). In any
event, even if we were to consider the report, we would still
affirm the dismissal of all claims, for the reasons explained
5 See Yeomalakis v. F.D.I.C., 562 F.3d 56, 60 (1st Cir. 2009)
("When Washington Mutual failed, Chase Bank acquired many assets
but its agreement with the FDIC retains for the FDIC any liability
associated with borrower claims for payment of or any liability to
any borrower for monetary relief, or that provide for any other
form of relief to any borrower." (citations and internal quotation
marks omitted)).
it submitted evidence that it holds the Note, which was endorsed in
blank and without recourse by WAMU, and thus is payable to the
bearer. In reaching this conclusion, the bankruptcy court
dismissed Sheedy's claims that the Mortgage was not validly
assigned to the Securitized Trust under the terms of the Pooling
and Service Agreement ("PSA") because the Mortgage was assigned in
2010 but the Securitized Trust had been formed in 2004.
Sheedy challenged this decision before the district
court, which then affirmed the bankruptcy court.6 This appeal
II. Discussion
A. Standard of Review and Summary Judgment
When reviewing the order of a district court affirming a
bankruptcy court's judgment, we "independently examine the
bankruptcy court's decision, reviewing findings of fact for clear
error and conclusions of law de novo." In re Nosek, 544 F.3d 34,
43 (1st Cir. 2008) (alteration omitted) (quoting In re Northwood
Props., LLC, 509 F.3d 15, 21 (1st Cir. 2007)); In re SPM Mfg.
Corp., 984 F.2d 1305, 1310-11 (1st Cir. 1993). Thus, we cede no
deference to the determinations made by the district court in its
review, "but assess the bankruptcy court's decision directly."
6 Sheedy v. Deutsche Bank Nat'l Tr. Co., No. 12–12302, 2014 WL
691612 (D. Mass. Feb. 21, 2014).
In re Am. Cartage, Inc., 656 F.3d 82, 87 (1st Cir. 2011) (citing In
re Carp, 340 F.3d 15, 21 (1st Cir. 2003)).
A party requesting summary judgment is entitled to it
when there is "no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law." Fed. R. Civ.
P. 56(a); see also Perry v. Roy, 782 F.3d 73, 77-78 (1st Cir.
2015). "In bankruptcy, summary judgment is governed in the first
instance by [Federal Rule of] Bankruptcy [Procedure] 7056. By its
express terms, the rule incorporates into bankruptcy practice the
standards of Rule 56 of the Federal Rules of Civil Procedure."
In re Varrasso, 37 F.3d 760, 762 (1st Cir. 1994) (citing Fed. R.
Bankr. P. 7056); see also In re Moultonborough Hotel Grp., LLC, 726
F.3d 1, 4 (1st Cir. 2013) ("The legal standards traditionally
applicable to motions for summary judgment . . . apply without
change in bankruptcy proceedings.").
In this process of evaluating a grant of summary
judgment, "we are not straitjacketed by the [bankruptcy] judge's
reasoning -- quite the contrary, we are free to uphold the court's
order on any basis present in the record." AJC Int'l, Inc. v.
Triple-S Propiedad, 790 F.3d 1, 3 (1st Cir. 2015) (alterations
omitted) (citing Stor/Gard, Inc. v. Strathmore Ins. Co., 717 F.3d
242, 247 (1st Cir. 2013)).
B. The TILA Claim
Congress enacted TILA "to assure a meaningful disclosure
of credit terms so that the consumer will be able to compare more
readily the various credit terms available . . . and avoid the
uninformed use of credit, and to protect the consumer against
inaccurate and unfair credit billing . . . ." Beach v. Ocwen Fed.
Bank, 523 U.S. 410, 412 (1998) (quoting 15 U.S.C. § 1601(a)). TILA
allows consumers to obtain specific disclosures on charges, fees,
interest rates, and their rights under the loan. Id. (citing 15
U.S.C. §§ 1631, 1632, 1635, 1638). One such right a consumer has
under TILA is the right to rescind the loan if the lender fails to
deliver certain forms and to disclose important terms accurately,
provided that the loan is secured by the borrower's principal
dwelling. See 15 U.S.C. § 1635.
The parties agree that the 2004 Transaction is subject to
TILA.7 Sheedy argues that the TILA disclosures she received did
not comply with Regulation Z because some of the amounts disclosed
turned out to be inaccurate and because her husband never received
any disclosures. According to Sheedy, the consequence of her
husband not receiving these disclosures is that the 2004
Transaction is subject to rescission under 15 U.S.C. § 1635(a).
7 Pursuant to 15 U.S.C. § 1633, the Board of Governors of the
Federal Reserve System has exempted some credit transactions in
Massachusetts that are instead regulated under Massachusetts
General Laws Chapter 140D, § 10(a). See In re Smith-Pena, 484 B.R.
512, 517 (Bankr. D. Mass. 2013); 12 C.F.R. § 226.29.
Additionally, Sheedy argues that the Secured Creditors cannot avoid
liability under TILA by relying on disclosures given as part of the
loan obtained when she transferred the property to herself in 2003
because, being a refinancing transaction, the 2004 Transaction
required additional disclosures beyond the ones already received by
her in 2003. See 12 C.F.R. § 226.20(a) ("A refinancing is a new
transaction requiring new disclosures to the consumer.").
We conclude, however, that Sheedy's TILA claim is timebarred
and there is no controversy as to the applicable statue of
limitations.8 Under TILA, a consumer's
right of rescission shall expire three years
after the date of consummation of the
transaction or upon the sale of the property,
whichever occurs first, notwithstanding the
fact that the information and forms required
under this section or any other disclosures
required under this part have not been
delivered to the obligor . . . .
15 U.S.C. § 1635(f); see also Beach, 523 U.S. at 413. In fact, a
consumer may exercise the right to rescind any extension of credit
carrying a security interest over his principal dwelling "until
midnight of the third business day" after the extension of credit,
after receiving notice of the right to rescind, or after receiving
8 We note that Sheedy's counsel appeared to concede at oral
argument that her TILA claim was time-barred "as a statutory
claim." Nevertheless, we examined it in an attempt to clarify
Sheedy's arguments and to avoid confusion regarding her statements
that the federal law claims are related to the state law claims,
that TILA relief that is time-barred can still be requested in
recoupment, and that the TILA claim "informs" her other state law
all material disclosures. 12 C.F.R. § 226.15(a)(3). It is when
these disclosures are not delivered that "the right to rescind
shall expire 3 years after the occurrence giving rise to the right
of rescission, or upon transfer of all of the consumer's interest
in the property, or upon sale of the property, whichever occurs
first." Id. Thus, applying the longer three-year period based on
Sheedy's assertion that her husband never received any disclosures,
we agree with the courts below that any claim for rescission under
TILA for lack of disclosures or inaccuracies was brought more than
three years after the consummation of the 2004 Transaction and is
Conscious of this limitations period, Sheedy next argues
that she would still have a right to request rescission in
recoupment by raising it defensively under the Massachusetts
statute. Beach recognized that a debtor in a collections action
has a "right to plead recoupment, a defense arising out of some
feature of the transaction upon which the [creditor's] . . .
action is grounded, [which] survives the expiration of the period
provided by a statute of limitation that would otherwise bar the
recoupment claim as an independent cause of action." 523 U.S. at
415 (citations and internal quotation marks omitted). However, in
this case, because Congress clearly intended that any TILA action
brought outside of the three-year statute of limitations be timebarred,
there is no independent ground to raise the right as a
defense in recoupment. See id. at 418 ("We respect Congress's
manifest intent by concluding that the [TILA] permits no federal
right to rescind, defensively or otherwise, after the 3-year period
of § 1635(f) has run.").
C. The Chapter 93A Claims
Chapter 93A protects consumers from "unfair methods of
competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce . . . ." Mass. Gen. Laws ch. 93A,
§ 2. In order to pursue a claim under this statute, an injured
consumer must, "[a]t least thirty days prior to the filing of any
such action, [mail or deliver] a written demand for relief . . . ."
Mass. Gen. Laws ch. 93A, § 9. Furthermore, actions arising under
Chapter 93A "shall be commenced only within four years next after
the cause of action accrues." Mass. Gen. Laws ch. 260, § 5A; see
also Latson v. Plaza Home Mortg., Inc., 708 F.3d 324, 326 (1st Cir.
2013) ("The limitations period for chapter 93A is four years from
injury." (citing Mass. Gen. Laws ch. 260, § 5A)).
Massachusetts has a discovery rule that triggers the
accrual of the cause of action for purposes of the statute of
limitations "when a plaintiff discovers, or any earlier date when
she should reasonably have discovered, that she has been harmed or
may have been harmed by the defendant's conduct." Epstein v. C.R.
Bard, Inc., 460 F.3d 183, 187 (1st Cir. 2006) (quoting Bowen v. Eli
Lilly & Co., 557 N.E.2d 739, 741 (Mass. 1990)).
Sheedy argues that WAMU behaved in a way that was unfair
and deceptive by not delivering all required material disclosures
and by misrepresenting some of the terms disclosed. She claims
that "[t]he totality of the circumstances surrounding this
transaction fully warrant a conclusion that Sheedy was misled into
entering into a refinancing that was not in her best interests
. . . ." Yet, Sheedy tells us that she knew at the time of the
2004 Transaction that her husband did not receive the required
disclosures she now claims he should have received. Moreover, she
should have known immediately upon receiving the loan documents
that different amounts were listed by WAMU in the Truth in Lending
statement and the Note itself. See Latson, 708 F.3d at 327 ("Here
the interest terms and the implications of their burdens were
apparent when the [borrowers] signed and got their money, a
conclusion underscored by the Massachusetts rule that the terms of
written agreements are binding whether or not their signatories
actually read them.") (citing St. Fleur v. WPI Cable Sys./Mutron,
879 N.E.2d 27, 35 (Mass. 2008)). Therefore, any claim under
Chapter 93A is time-barred because Sheedy's four-year limitations
period began when she entered into the loan in 2004.9
9 Insofar as we conclude that Sheedy's Chapter 93A claim is timebarred,
we need not venture into whether her discussion of WAMU's
conduct in the Chapter 13 plan constituted sufficient written
demand for relief as required by Massachusetts General Laws Chapter
93A, § 9.
D. Rescission in Recoupment
As part of the discussion of her alleged state law
claims, i.e., common law fraud and Chapter 93A, Sheedy also
advances in her brief the argument that her request for rescission
in recoupment is immune from any limitations period because the
equitable remedy of recoupment can be raised defensively at any
time. We first describe these remedies by noting that recoupment
is fundamentally different from rescission. See In re O'Connell,
No. 11–10940, 2012 WL 2685149, at *5 (Bankr. D. Mass. July 6, 2012)
("Recoupment and rescission are [like] apples and oranges."). On
the one hand, "[r]escission affects a return to the status quo."
Schwartz v. Rose, 634 N.E.2d 105, 109 (Mass. 1994). It "is the
'unmaking' or 'voidance' of a contract." May v. SunTrust Mort.,
Inc., 7 N.E.3d 1036, 1042 (Mass. 2014) (quoting Black's Law
Dictionary 1420-21 (9th. ed. 2009)). Thus, in order to obtain
rescission of a transaction, the party requesting such remedy "must
restore or offer to restore all that he received under it."
Bellefeuille v. Medeiros, 139 N.E.2d 413, 415 (Mass. 1957)
(citations omitted). On the other hand, recoupment "allows a
defendant to 'defend' against a claim by asserting -- up to the
amount of the claim -- the defendant's own claim against the
plaintiff growing out of the same transaction." Bolduc v. Beal
Bank, SSB, 167 F.3d 667, 672 (1st Cir. 1999) There is no time
limit to raise recoupment as a defense. See May, 7 N.E.3d at 1043
("[T]he right to recoupment contains no time limitations on
assertion of the right. This accords with the common-law
understanding of recoupment as a defensive mechanism whereby a
defendant may, at any time, assert claims against the plaintiff in
reduction of the plaintiff's claims when those claims arise out of
the same transaction; it is an offsetting of liabilities within a
transaction." (alteration omitted) (citing Bose Corp. v. Consumers
Union of U.S., Inc., 326 N.E.2d 8 (Mass. 1975))); see also Bull v.
United States, 295 U.S. 247, 262 (1935) (explaining that recoupment
is allowed "in the nature of a defense arising out of some feature
of the transaction upon which the plaintiff's action is grounded
[and that it] is never barred by the statute of limitations so long
as the main action itself is timely").
In the instant case, this means that if Sheedy is granted
the requested relief of rescission in recoupment, she would be
allowed to avoid the Secured Creditor's foreclosure action by
reviving her own claim arising under the 2004 Transaction. That
would result in rescission being a "setoff" against foreclosure.
Yet, in recoupment, there is a difference between a defendant
obtaining damages caused by a plaintiff and the defendant obtaining
rescission of a mortgage-secured obligation owed to the plaintiff.
See Beach, 523 U.S. at 411 ("Since a statutory rescission right
could cloud a bank's title on foreclosure, Congress may well have
chosen to circumscribe that risk, while permitting recoupment of
damages regardless of the date a collection action may be
brought."); see also May, 7 N.E.3d at 1042. Thus, the question
becomes whether rescission is available to Sheedy in recoupment.
Under Massachusetts common law, "recoupment and
rescission were consistently treated as separate, nonoverlapping
remedies [,] . . . as [these] are inconsistent remedies, a person
who has once elected to pursue one of them cannot afterwards seek
the other." May, 7 N.E.3d at 1042 (alterations omitted) (citations
and internal quotation marks omitted). Despite this apparent
preclusion of rescission in recoupment, Sheedy argues that the
Supreme Judicial Court's decision in May does not impede her from
obtaining such relief. In that case, debtors in a position
equivalent to Sheedy's filed an adversary proceeding against a
creditor, also within a Chapter 13 bankruptcy case, seeking
rescission of a home-refinancing loan transaction. The statute at
issue in May, however, was not Chapter 93A. Instead, it was the
Massachusetts Consumer Credit Cost Disclosure Act ("MCCCDA"), Mass.
Gen. Laws ch. 140D, §§ 1-35, the TILA-equivalent state statute that
"governs the rights and duties of creditors and obligors (borrowers
or consumers) engaged in consumer credit transactions . . .
[including] the refinancing of a consumer's home where the consumer
grants a mortgage to the creditor to secure the refinancing loan."
May, 7 N.E.3d at 1037. The Supreme Judicial Court concluded that
rescission is not a remedy in recoupment for violations of the
MCCCDA, in part because under the "common-law[,] recoupment does
not include the use of rescission as a form of recoupment." Id. at
Sheedy's attempts to distinguish May from the present
case are fruitless. Pointing to no supporting source, Sheedy asks
us to conclude that, while Massachusetts law does not allow
rescission in recoupment in claims arising under the MCCCDA, the
legislative intent can easily be avoided by any defendant raising
an identical claim as a "Chapter 93A claim." That is, without
explanation, Chapter 93A permits a defendant to revive in
recoupment what the legislature expressly wanted foreclosed by the
statute of limitations under the statute intended to protect such
borrower. We are unpersuaded. Even the May court's statement of
the question before it directly addresses and forecloses the issue
in the instant case: whether any "laws of the Commonwealth
pertaining to recoupment provided for or recognize rescission as a
form of recoupment, at least where rescission is used defensively
to meet an obligation due." Id. at 1041. In answering this
question in the negative, the Supreme Judicial Court emphasized
that a borrower could seek rescission -- where allowed -- but not
in recoupment. Id. at 1043 ("[R]ecoupment and rescission are
separate, and common-law recoupment does not include the use of
rescission as a form of recoupment."). Furthermore, May recognizes
that it is possible for a future plaintiff to have a defensive
claim for damages under Chapter 93A that could be raised in
recoupment, but not a claim for rescission. Id. at 1044 n.17
("Here, however, because the plaintiffs' claim alleging a violation
of G.L. c. 93A is tied to their asserted right to rescission, which
does not exist, their c. 93A claim currently does not appear to
offer relief.").
Sheedy only offers one argument to differentiate her case
from May, stating that since "Sheedy is proceeding under the
federal statute, [May] does not control since it applies only to
the [TILA-equivalent] state statute." This argument contradicts
another statement in Sheedy's brief that the reason we should
ignore the statute of limitations applicable to her TILA claim in
the first place is that a plaintiff may preserve "a right of
rescission under Chapter 93A of the Massachusetts General Laws."
Moreover, in her complaint, Sheedy's sole remedy request under
Chapter 93A was for rescission. Thus, we conclude that, inasmuch
as May does not allow rescission in recoupment under the MCCCDAA,
and rescission in recoupment is not allowed pursuant to
Massachusetts common law, Sheedy has not advanced anything to
support that -- based on the same facts -- a defendant may
circumscribe the statutes to revive such a claim through Chapter
93A. Consequently, Sheedy may not assert a claim for rescission in
recoupment under Chapter 93A.
E. The Fraud, Deceit, and Misrepresentation Claim
Sheedy argues that the "forensic audit report" obtained
from MFI-Miami found that the terms of the Truth in Lending
statement contradict the terms of the loan because the payment due
on the sixty-first month turned out to be $4,055.05, instead of the
$4,331.58 that WAMU disclosed to her. Thus, because she was
notified when she entered into the loan that she would have to pay
a higher amount than what she ended up having to pay, she was
necessarily deceived. Another such example of claimed deceit and
misrepresentation is the fact that the Note stated that she would
have to pay $4,109.56 per month for the first sixty months, but she
was only required to pay $2,446.88 each of these months.
Accordingly, Sheedy stresses that WAMU induced her into entering a
loan with false and misleading information.
As a preliminary observation, while it may be a violation
of federal and state laws and regulations in some circumstances,
Sheedy does not explain how telling a borrower that she will be
responsible for a higher amount than what is actually demanded of
her fraudulently induces such a borrower into entering a loan that
she would not have otherwise executed.10 In any event, Sheedy's
argument is misleading because the amount actually paid by her
10 We do not rule out that some borrowers may be defrauded by
entering into contracts that demand higher payments than what are
actually required of them, e.g., when a borrower expects lower
overall interest expense based on higher payments up-front.
during the initial sixty-month period was based on the addendum to
the Note and not on what the Note itself provided.
To successfully pursue a fraud claim under Massachusetts
law, Sheedy had to establish that "(1) [WAMU] made a false
representation with knowledge of its falsity for the purpose of
inducing plaintiffs to act thereon; (2) that [Sheedy] relied upon
the representation as true and acted upon it to [her] detriment;
and (3) that [her] reliance was reasonable under the
circumstances." FAMM Steel, Inc. v. Sovereign Bank, 571 F.3d 93,
105-106 (1st Cir. 2009) (citing Rodi v. S. New Eng. Sch. of Law,
532 F.3d 11, 15 (1st Cir. 2008)).
We take these elements in that order, beginning with the
knowledge element. Because Sheedy does not argue that WAMU had
knowledge of the falsity of the information, we assume that she
implies that it should have been apparent to WAMU that the Note and
the Truth in Lending statement contained different information, and
that one of the numbers was wrong. However, absent more detailed
evidence, it is not obvious that a payment amount provided in the
disclosure is deceptive when the interest rate is variable -- by
its own terms the payment amount will be the result of applying the
interest formula at a future time. See 12 C.F.R. § 226.18(f)
(listing the required disclosures for variable rate). Even
assuming that the variable payment amounts could be predicted and
that WAMU should have had knowledge that the amounts disclosed in
the two documents were different, Sheedy still failed to establish
the remaining elements.
Sheedy's arguments also fail when it comes to the
reliance element. She first recognizes that the details disclosed
by WAMU were contradictory and that "any reasonable person would be
confused by this discrepancy[,]" yet she claims that she still
relied on the higher payment amounts represented by WAMU and acted
upon them to her detriment. Sheedy does not argue that this
resulted in any specific harm. Instead, she simply asks that we
find quite irrationally that she was harmed by the alleged fraud
based on the fact that she was later required to make lower
Finally, Sheedy does not establish how her reliance on
"confusing" and "contradictory" disclosures was reasonable under
the circumstances, especially in light of the facts that she had
been in the real estate industry and had a real estate broker
license since the early 1980s. See Yorke v. Taylor, 124 N.E.2d
912, 916 (Mass. 1955) (noting reliance cannot be deemed reasonable
when alleged misrepresentation is "palpably false").11
11 Because we conclude that Sheedy's allegations on appeal are
insufficient to establish her underlying fraud claim, we need not
examine the effects of the MFI-Miami report's exclusion or the
Secured Creditors arguments that any liability by WAMU was retained
by the FDIC.
F. The Objection to the Secured Claim
Sheedy presents on appeal a short conclusory argument
that the Secured Creditors did not explain why their claim for
costs and attorney fees is "reasonable and necessary," and thus the
claim should be disallowed. Additionally, citing to In re Plant,
288 B.R. 635 (Bankr. D. Mass 2003), without any effort to develop
an argument, Sheedy states simply that the Secured Claim does not
comply with the court's rule for allowing attorney fees. Sheedy
does not state what those rules are.12 We think this is nothing
more than a skeletal presentation of the argument; it is thus
waived.13 See Matt v. HSBC Bank USA, N.A., 783 F.3d 368, 373 (1st
Cir. 2015) ("These issues are stated 'in the most skeletal way,
leaving the court to do counsel's work, create the ossature for the
argument, and put flesh on its bones.'" (quoting Zannino, 895 F.2d
at 17)).
G. Deutsche Bank's Standing as Sheedy's Creditor
In essence, Sheedy's standing challenge is that Deutsche
Bank cannot enforce the Mortgage against her because it was
12 In re Plant includes a detailed explanation of the applicability
of Federal Rule of Bankruptcy Procedure 2016 and Massachusetts
Local Bankruptcy Rule 2016-1. 288 B.R. at 663-64. Those rules in
turn list a number of requirements for applications for
compensation and fees against the estate. Sheedy does not explain
how these were not followed.
13 The district court found the Secured Creditors had presented an
affidavit with sufficient information for Sheedy to explain what
her objection was.
transferred into the Securitized Trust in violation of the PSA, six
years after the trust was created. However, it is Sheedy who lacks
standing to challenge Deutsche Bank's claim against her on this
ground. Sheedy cannot question Deutsche Bank's status as her
creditor unless she "challenge[s] a mortgage assignment as invalid,
ineffective, or void[,]" rather than as an assignment that is only
"voidable." Culhane v. Aurora Loan Services of Nebraska, 708 F.3d
282, 291 (1st Cir. 2013). Yet a valid challenge for violations of
the terms of a PSA would result in the assignment being voidable
and not void. Butler v. Deutsche Bank Tr. Co. Americas, 748 F.3d
28, 37 (1st Cir. 2014) ("Under Massachusetts law, it is clear that
claims alleging disregard of a trust's PSA are considered voidable,
not void.").

Outcome: For the foregoing reasons, we affirm the grant of summary
judgment in favor of the Secured Creditors.

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