A federal appeals court has ruled that apro se plaintiff’s challenge to a foreclosure can move forward in the District of Massachusetts despite deficiencies in her complaint.
On February 12, the U.S. Court of Appeals for the First Circuit reversed a dismissal by Judge Denise Caspar of Melissa Juárez’s complaint.
The appeals court held that Casper abused her discretion in ruling that it would be "futile" to allow Juárez to amend the complaint.
The case, Juárez v. Select Portfolio Servicing Inc., concerns Juárez’s 2005 loan for $280,800, which exchanged hands in several secondary mortgage market transactions.
Juárez, an attorney, sued two defendants for illegal foreclosure in Suffolk County Superior Court in Massachusetts in October 2010. U.S. Bank was trustee of a trust that held the mortgage,and Select Portfolio was its servicer.
The defendants removed the case to federal court in February 2011.
Juárez’s amended complaint acknowledged that she defaulted on the loan but claimed that another party’s assignment of the loan to U.S. Bank violated tax code provisions.
She claimed the defendants did not hold the note when they began the foreclosure proceeding, and she presented evidence to show that the defendants recorded the mortgage assignment document in the relevant registry of deeds after the foreclosure.
In a November 2011 ruling, Casper held it immaterial that the assignment of the mortgage was not recorded before the foreclosure. She also held that Juárez lacked standing to challenge the mortgage assignment because she’s not a party to, or third-party beneficiary of, the trust’s servicing agreement.
In addition, Casper ruled that allowing Juárez to amend the complaint would be futile because the mortgage assignment document states that U.S. Bank was the mortgagee’s assignee at the foreclosure. Juárez appealed.
Judge Juan Torruella wrote the First Circuit opinion, joined by Judge Jeffrey Howard and Judge Kenneth Ripple of the Seventh Circuit, who sat on the panel by designation.
Torruella wrote that Juárez’s complaint was "by no means a model of clarity" but found there was enough to plead the defendants’ lack of legal standing to foreclose under Massachusetts law.
Torruella relied on a watershed 2011 Supreme Judicial Court of Massachusetts ruling, U.S. Bank National Assocation v. Ibáñez, which held that a foreclosure conducted by a party that does not hold the power of sale is void.
He wrote that the mortgage assignment document in question was "the type of confirmatory assignment Ibáñez recognized. …We thus find that the district court erred in holding that a valid confirmatory assignment had taken place and that no plausible claim could be made to the contrary."
Torruella found that the district court abused its discretion "in determining, in passing and in a footnote" that it would be futile to allow Juárez to amend her complaint to replead her fraud and Massachusetts consumer protection law claims.
"Juárez filed her case in state court acting pro se, and it was removed to the district court almost immediately thereafter. We are thus presented with a very different case than one where a plaintiff has filed several fatally flawed complaints and nevertheless sought amendment," Torruella wrote.
Juárez’s lawyer on the appeal, Glenn Russell Jr., a solo practitioner in Fall River, Mass., said the ruling is very significant because it’s "the Ibáñez of the federal court."That’s important because the lending industry removes almost every similar case to federal court, he said.
Russell also said he’s not aware of other First Circuit rulings overturning dismissals of similar cases.
He also that Juárez is a nonpracticing lawyer who works for the state: "She is an attorney in name but she doesn’t litigate. They were weighing that when they looked at the pleading."
The defendant companies and their lawyers at Pittsburgh-based Eckert Seamans Cherin & Mellott did not respond to requests for comment.
Peter Carr, the partner in charge of Eckert’s Boston office, argued for the defendants at the First Circuit.
Sheri Qualters can be contacted at firstname.lastname@example.org.