Right to cure foreclosure defense under M.G.L. chapter 244 section 35A in Massachusetts, an update.

23 March 2014

            A significant and potent weapon in the arsenal of foreclosure defense litigants and attorneys was curtailed greatly earlier this month by the Supreme Judicial Court of Massachusetts with its decision U.S. Bank, N.A. v. Schumacher.  The question was whether Mass. Gen. Laws c. 244 § 35A was one of the statutes “relating to the foreclosure of mortgages by the exercise of a power of sale” under Mass. Gen. Law c. 183 § 21.  If it was, then banks would have needed to comply with § 35A strictly.  In practical terms it meant that any violation of the statute’s requirements, regardless how minor and (more importantly) whether any true “damage” was caused by the violation, would be enough to undo the foreclosure.  Unfortunately for homeowners, the Court answered in the negative. 

 

Now, as a practical consequence of the decision, and as the concurrence in Schumacher pointed out, a homeowner needs to bring suit alleging a violation of § 35A to the Superior Court for equitable relief prior to the foreclosure to stop it.  The other option is to raise the § 35A violation in the eviction process as a counterclaim.  However, now a homeowner must not only show a violation, but also that the violation “rendered the foreclosure process so fundamentally unfair that [the homeowner] is entitled to affirmative equitable relief” in order to undo the foreclosure.  U.S. Bank, N.A. v. Schumacher, 467 Mass. 421, 433 (2014).

Keep in mind that prior to this decision, some housing courts ruled that § 35A needed to be complied with strictly, and a violation was sufficient to show the foreclosure did not transfer ownership.  Litigants and their attorneys showed violations of § 35A and were able to undo a foreclosure in the eviction process stage.  This occurred often enough that it was, as stated, a commonly used weapon in the arsenal of the competent foreclosure defense litigant/attorney.  This is now no longer.

Based on this author’s experience in the foreclosure defense field since the Great Recession started, it is his opinion that for all intents and purposes, the practical effect of Schumacher will be to reduce the use of a violation of  § 35A to undo a foreclosure to being a rare occurrence.  (This was a big win for the banks.)

In the event that you are contemplating defending against a foreclosure in Massachusetts, feel free to give this office a call.

My privacy rights in Massachusetts may have been violated; is the inappropriate release of my private/confidential information to one person enough to substantiate a valid claim?

3 March 2014

Answer: Yes, in Massachusetts release to one person is enough.  But keep in mind the release still must be deemed: 1) serious or substantial; and 2) unreasonable.  Mass. Gen. Laws. c. 214 Section 1B.
 

The Supreme Judicial Court of Massachusetts was asked the certified question from a federal court the following:

Can disclosure of private facts about an employee among other employees of a corporation constitute sufficient publication to infringe the employee’s right of privacy?

In addressing the question, the SJC stated that it had indicated that intracorporate release of information would be a violation in the past and answered “Yes.”  Bratt v. Int’l Bus. Machs. Corp., 392 Mass. 508, 519. In doing to, the SJC deviated from the Restatement (Second) of Torts § 652D (1977), which required the disclosure of private facts to the public at large.  Id. It rejected the defendant’s argument that since the disclosure was to only a few other employees, there was not a violation.

Some years later, in a non-employment context, the SJC reiterated the law in Massachusetts in ruling that a release to only one person is enough in Tower v. Hirschhorn. 397 Mass. 581, 587-88 (1986).  It found that release of confidential information to one (or two) adversarial witnesses in litigation could be deemed a release and cited its prior decision of Bratt.  Id. 

So, if you find yourself a victim of the release of personal/confidential information about you, do not be dissuaded by those that think since the release was only to a few people that you have no claim.  In Massachusetts, one it enough!

In the event that you believe your privacy may have been violated in Massachusetts, please feel free to contact this office.

I believe that my privacy has been violated in Massachusetts, do I have a legal claim and are there legally recognized damages?

24 February 2014

Answer:  Quite possibly and quite possibly.

Massachusetts provides a statutory “right against unreasonable, substantial or serious interference with . . . privacy.”  Mass. Gen. Laws c. 214, § 1B.  The superior court of Massachusetts is granted with jurisdiction to decide such matters.  Id.  Equitable relief, such as an injunction, is available under the statute as well.   Id. 

Case law has interpreted the statute are requiring either a substantial or serious invasion, along with it being unreasonable.  Schlesinger v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 409 Mass. 514, 518 (1991) ("The statute obviously was not intended to prohibit serious or substantial interferences which are reasonable or justified."); O'Connor v. Police Comm'r, 408 Mass. 324, 330 (1990) ("We think that it is highly unlikely that the Legislature intended to provide a right of action to a person whose privacy was substantially or seriously interfered with, but reasonably so.").  So, substantial or serious invasions of privacy are permitted if the invasion was reasonable. 

In perusing the case law, in general there appears to be two categories of allegations, those involving claims that people/entities bothered the plaintiff.  See e.g., Schlessinger v. Merrill Lynch Pierce, Fenner & Smith, Inc., 409 Mass. 514 (1991) (unwanted telemarketing by financial services company).  Another category being claims that people/entities improperly released information, etc. about the plaintiff to others.  See e.g., Tower v. Hirschhorn, 397 Mass. 581 (1991) (disclosure by neurologist of medical information to adversaries in litigation). 

   

The argument that there are no damages is typically raised by prospective defendants, as the usual type of “hard” damages may not exist or be difficult to show in a violation of privacy matter.  However, this is an incorrect approach to the proper evaluation of a violation of privacy claim because the “right to privacy . . . concerns one’s own peace of mind [and]  . . . may take into account mental suffering.”  Ullian Thermo v. The New England Newspaper Pub. Co. , 306 Mass. 54, 57 (1940).  Nonetheless, damages in a right to privacy case appear to be highly subjective and a point of contention in practice.  There also appears to be a significant variation of opinion about what is a “serious” or “substantial” invasion of privacy.  The matter should be objectively evaluated before considering bringing a claim. 

If you believe that your statutory right to privacy may have been violated, feel free to contact this office to discuss.

After my chapter 13 plan is confirmed, what happens if an asset I have increases in value and I want to sell it and use the proceeds?

3 February 2014

Answer: The whole picture changes and you have to account for the increase in the asset’s value, among other things, so you may want to think very hard before taking that path.

Your chapter 13 plan is moving along and your plan has been confirmed, that means it has been accepted and the bankruptcy court has issued an order establishing the terms of the plan.  (The most important term to debtors is usually how much they have to pay to the trustee on a monthly basis.)  Then something changes, it could be that the debtor starts to struggle to make the payments, or that the debtor wants to end the chapter 13 sooner than the chapter 13 plan is expected to end by paying what they think remains under the plan.  One attractive thought is to sell an asset, such as the debtor’s house, which has increased in value in order to reach the goal.  But this path has been taken before by other debtors and it can be dangerous.  There is much law that applies, so you must plan in advance to see if you should pursue this.

 

First to understand is that in the (federal) First Circuit, which includes Massachusetts, the increase in funds from the sale of the asset is indeed something that the unsecured creditors in your case are entitled to.  In re Barbosa, 235 F.3d 31, 41 (1st Cir. 2000). To be more technical, the creditors will be entitled to whatever exceeds the amount you can exempt in the asset (to satisfy what is called the “best interests of creditors test”).  In fact, it is standard for Massachusetts chapter 13 trustees to insert the following language into the terms of the chapter 13 plan:

Unless otherwise ordered by the court, all property of the estate as defined in       U.S.C. §§ 541 and 1306, including, but not limited to, any appreciation in the value of real property owned by the debtor as of the commencement of the case, shall remain property of the estate during the term of the plan and shall vest in the Debtor(s) only upon discharge.

This language is just icing on the cake for the proposition that an appreciation in value after the petition date is to be considered when deciding the amount of payment to be paid to the trustee in a modified chapter 13 plan.  In re Kieta, 315 B.R. 192, 198 (Bankr. D. Mass. 2004). 

   

Many times, because the new appreciated value obtained is larger than any amount you could exempt, selling and realizing the funds will lead to an increase in payments to the unsecured creditors through the trustee. However, the increased payments occur only if you actually sell the asset and realize the increase value.  If you just keep the asset and do not sell it during your plan, you are entitled to keep the increase/appreciation in value in its original non-liquidated form.  In re Kieta, 315 B.R. 192, 197-98 (Bankr. D. Mass. 2004); In re Trumbas, 245 B.R. 764, 767 fn.6 (Bankr. D. Mass. 2000).  This is why it is very important to plan accordingly before deciding to try to sell the asset and use the proceeds that represent the appreciation in value during the chapter 13 case.  If you do, you must file a new, amended chapter 13 plan and other documents with the court.  

  

If you do plan and decide that selling an asset for some purpose during a chapter 13 plan is the right way to go, an important housekeeping item is that you must seek and obtain court authorization prior to any sale of the asset.  Keep in mind, during a chapter 13, almost all of the property you have and will have is property of the chapter 13 estate and you are not permitted to sell it prior to obtaining court approval.

In the event you are planning to file a chapter 13, feel free to call us.