In recent case Reginald Hall & another V. Federal Nation Mortgage Association, Appeals Court of Massachusetts, October 1, 2021, 2021 WL 4483742, the plaintiff appealed from the judgment dismissing their complaint on res judicata grounds, as well as from the order denying their motion to reconsider. The Appellate Court affirmed the decision.
The plaintiffs bought a property located at 52 Ash Street, New Bedford in 2004, with the proceeds of a loan from Santander Bank, N.A. (FKA Sovereign Bank). The note and mortgage subsequently passed to the Federal National Mortgage Association, with Santander continuing to act as administrator as Fannie Mae’s agent. The plaintiffs stopped making payments on the note. This caused Santander to send a notice of default on August 13, 2013. The plaintiffs then filed an action against Santander in the Superior Court seeking a declaratory judgment that Santander did not have authority to foreclose.
While the Superior Court action was pending, Santander conducted a public foreclosure auction. The winning bid was assigned to Fannie Mae, which then took title pursuant to a foreclosure deed. Judgment entered in the Superior Court in Santander’s favor on May 26, 2015. That foreclosure judgment was affirmed on appeal by a panel of this court. Hall v. Santander, N.A., 89 Mass. App. Ct. 1134 (2016). The plaintiffs acknowledge that the foreclosure judgment became final in 2015.
In 2015, Fannie Mae filed a summary process action in the Housing Court seeking possession of the property and to evict the plaintiffs (summary process action). Judgment entered in Fannie’s Mae’s favor in 2017. The plaintiffs did not appeal that judgment, and they acknowledged that it has become final.
The complaint underlying the current appeal was filed by the plaintiffs in Housing Court on November 2, 2017 (second Housing Court action). The complaint alleged violation of the Fair Housing Act, 42 U.S.C. §§ 3605 & 3617, breach of contract, fraud, and violation of G. L. c. 93A. As relief, the plaintiffs sought to have the court enjoin the defendants from evicting the plaintiffs from the property, enjoin the defendants from selling the property to anyone other than the plaintiffs, order that ownership of the property revert to the plaintiffs, and order the defendants to act upon the plaintiffs’ loan modification applications nunc pro tunc. The plaintiffs also sought $1 million in compensatory damages and $5 million in punitive damages. After a hearing, the Housing Court judge allowed the defendants’ motion to dismiss on the ground that the claims were barred by the doctrine of res judicata.
The question on appeal was as follows: Are the claims they have asserted in the second Housing Court action are barred by either the prohibition on collateral attacks of prior judgments, or by the doctrine of res judicata, or both.
The prohibition on collateral attacks prevents litigants from attempting to undermine one court’s ruling in a different court. See Commonwealth v. Wallace, 431 Mass. 705, 707 (2000) (“defendant improperly challenge[d] the validity of the [Superior Court] injunction in his motion to dismiss the [District Court] contempt proceeding”. Except in a few limited circumstances, collateral attacks are prohibited because they “substantially impair[ ]” “the finality of judgments.” Cohen v. Cohen, 470 Mass. 708, 717 (2015), quoting Harker v. Holyoke, 390 Mass. 555, 558 (1983). If the Court were to permit these actions, the finality of judgments would be substantially impaired. This would not be in the best interests of litigants or the public.
Claim preclusion and res judicata prevent relitigation of an issue determined in an earlier action where the same issue arises in a later action, based on a different claim, between the same parties or their privies. Before precluding a party from relitigating an issue, a court must determine that (1) there was a final judgment on the merits in the prior adjudication; (2) the party against whom preclusion is asserted was a party (or in privity with a party) to the prior adjudication; and (3) the issue in the prior adjudication was identical to the issue in the current adjudication. Additionally, the issue decided in the prior adjudication must have been essential to the earlier judgment. Issue preclusion can be used only to prevent relitigation of issues actually litigated in the prior action” (quotations and citations omitted). Kobrin, supra at 843-844.
As to the case herein, the Court applied the 3 steps above – as to (1) there was no dispute that the judgment was filed. As to (2) there is no dispute that the plaintiffs and Santander were parties in both the foreclosure action and the Second Housing Court action. Finally (3) was applied – claims that Santander did not have authority to foreclose on the property were encompassed by the Superior Court action, which specifically sought a declaration to that effect. In addition, claims relating to (1) Santander’s alleged refusal to modify or refinance the loan, (2) Santander’s alleged representations on which the plaintiffs allegedly relied to stop making timely payments on the loan, and (3) alleged discrimination against the plaintiffs due to their race given the historic nature of their home (which was associated with the underground railroad), were all based on acts or events preceding the Superior Court action and on facts that were known or knowable to the plaintiffs at that time. Thus, all the claims could have been brought by the plaintiffs in the Superior Court action.
The Appellate Court affirmed the judgment dismissing the plaintiffs’ complaint and the order denying the plaintiffs’ motion for reconsideration. For more information regarding this case, please contact Deborah Gallo, Esq. at dgallo@friedmanvartolo.com.
