Thompson v. JPMorgan Chase Bank, N.A.

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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
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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. . . ."
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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.