Justia U.S. 1st Circuit Court of Appeals Opinion Summaries

Plaintiff obtained a mortgage in 1999 and refinanced four times over six years, each time pulling out more equity. The last refinancing and a mortgage obtained for a new house, (the first house was for sale), were based on documents inaccurately describing plaintiff's income and position. Plaintiff, who claimed to be unaware of the inaccurate information, defaulted on payments. The district court rejected his suit, alleging a violation of Mass. Gen. Laws ch. 93A (unfair or deceptive practices), unjust enrichment, a violation of the implied covenant of good faith and fair dealing, negligence, and entitlement to rescission of the loan and an injunction ordering the removal of the loan from his credit history. The First Circuit affirmed dismissal of the covenant claim relating to one loan, the negligence claim, and the rescission/equitable relief claim, but vacated dismissal of the other claims. Whether plaintiff or the loan officer deliberately falsified the loan application and whether default was foreseeable are questions of fact suitable for trial.

In 2000 the planning board approved a development and the developer began purchasing land. In 2002, the Department of Justice issued an opinion that the land could be sold without legislative action, although it was gained from the sea. Construction began; the developer invested $200 million. Because of protests, the legislature investigated and concluded that the developer lacked valid title. A 2007 Department of Justice opinion stated that the land belonged to the public domain. The governor suspended permits and froze construction. Pending a hearing, the developer filed a quiet title action. The Regulations and Permits Administration upheld suspension of construction. The Puerto Rico appeals court ordered the administration to hold an evidentiary hearing (which did not occur), but did not lift the stay on construction. The developer succeeded in its quiet title action; in 2008 construction resumed. The supreme court held that the developer's due process rights had been violated. The district court dismissed a suit under 42 U.S.C. 1983. The First Circuit affirmed. Although the plaintiff did state a procedural due process claim, the defendants are entitled to qualified immunity. The defendants were not on clear notice they they were required to hold a meaningful pre-deprivation hearing.

In 2003 the owner executed a second mortgage with a stated term of four months, in favor of defendant to secure performance of a guaranty. The owner later executed a separate mortgage and defaulted. The lender foreclosed and took possession subject to senior mortgages. In 2007 defendant published notice of foreclosure. The then-owner filed bankruptcy under 11 U.S.C. 362(a), triggering a stay before the deadline under the Massachusetts Obsolete Mortgages Statute, which requires the holder of a mortgage to take action to enforce it within five years after the end of its stated term (September 9, 2008). The bankruptcy court held that defendant's failure to record an extension rendered the mortgage void. The district court reversed. The First Circuit affirmed, holding that the bankruptcy statute tolls the limitations period of the state law. Defendant was not required to choose between filing an extension and foreclosure and still had the right to foreclose at the time the stay became effective.

Pursuant to a permit issued by the Rhode Island Coastal Resources Management Council (CRMC), the developer built 26 of 79 planned homes and installed infrastructure between 1992 and 2007. The Rhode Island Historic Preservation and Heritage Commission (HPHC) became interested in the site and recommended withdrawal of the permit or requiring a complete archaeological data recovery project. In 2009, after informal negotiations, the developer notified the HPHC that it would resume construction absent some response from the agencies. The developer resumed construction and a stop-work order issued. CRMC hearings are ongoing. The district court dismissed the developer's takings claims as unripe, rejecting an argument that the state litigation requirement was excused; that argument was foreclosed by a binding First Circuit holding that Rhode Island's procedures were available and adequate. The First Circuit affirmed, holding that the developer did not prove that state remedies were unavailable or inadequate.

Homeowners fell behind on their mortgage and the bank initiated foreclosure. The homeowners filed a Chapter 13 bankruptcy. The judge denied their motion for rescission of the mortgage and for damages, based on noncompliance with state laws. The district court and First Circuit affirmed. The homeowners signed right-to-cancel forms required under the Massachusetts Consumer Credit Cost Disclosure Act, modeled after the federal Truth in Lending Act (15 U.S.C. 1635); technical flaws in the form cannot serve as a basis for invalidating a transaction five years later. Similarly, a slight delay in receipt of a required high-cost loan disclosure did not justify rescission five years later.