DYNELL LATSON and ANNABEL LATSON v. Plaza Home Mortgage, Inc.

United States Court of Appeals
For the First Circuit
No. 12-1462
DYNELL LATSON and ANNABEL LATSON,
Plaintiffs, Appellants,
v.
PLAZA HOME MORTGAGE, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Lynch, Chief Judge,
Souter, Associate Justice, *
and Selya, Circuit Judge.
Robert D. Loventhal on brief for appellants.
AiVi Nguyen on brief for appellee.
February 27, 2013
Hon. David H. Souter, Associate Justice (Ret.) of the Supreme *
Court of the United States, sitting by designation.

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SOUTER, Associate Justice. Massachusetts residents
Dynell and Annabel Latson sued their mortgage lender, Plaza Home
Mortgage, Inc., alleging state common law and statutory violations
in making two house loans. The district court dismissed for
failure to state a claim, Fed. R. Civ. P. 12(b)(6), and the Latsons
appealed. We review the decision de novo, accepting as true all
well-pleaded facts and drawing all reasonable inferences from them
in favor of the plaintiffs-appellants. Tasker v. DHL Ret. Sav.
Plan, 621 F.3d 34, 38 (1st Cir. 2010). The enquiry is whether "the
combined allegations, taken as true, . . . state a plausible,
[rather than] merely conceivable, case for relief."
Sepúlveda-Villarini v. Dep't of Educ. of P.R., 628 F.3d 25, 29 (1st
Cir. 2010). We think they do not as to the Latsons' common law
claim, and the substantive issues raised under the statute are
obviated by untimeliness. We accordingly affirm.
If true, the complaint, with the attached exhibits, see
Blackstone Realty LLC v. FDIC, 244 F.3d 193, 195 n.1 (1st Cir.
2001), would establish the following facts. In March 2006, the
Latsons bought a three-family dwelling in Dorchester,
Massachusetts, financing the entire $525,000 price with two
mortgage loans from Plaza. The first, for $367,500.00, had a
starting interest rate of 6.75% adjustable as high as 11.75%. The
second, for $157,500.00, had a fixed rate of 11.50%.
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In August 2011, more than five years later and after the
collapse of the housing market, the Latsons hired a lawyer, who
sent Plaza a demand letter citing the Massachusetts consumer
protection statute, Mass. Gen. Laws ch. 93A, § 9(3). It included
allegations that Plaza had not adequately disclosed the terms of
the Latsons' loans before their signing. The Latsons sought
damages of "at least $100,000" as well as "interest, costs and
attorneys' fees." Plaza rejected the claims, and the Latsons filed
this action in federal district court under its diversity
jurisdiction.
They charged that in making the two home loans Plaza
breached the implied covenant of good faith and fair dealing under
Massachusetts law and violated the Commonwealth's consumer
protection statute, Mass. Gen. Laws ch. 93A, §§ 2, 9. The specific
allegations were that prior to closing Plaza failed to provide them
with a proper commitment letter, good-faith estimate, or other
documents required by the Real Estate Settlement Procedures Act
(RESPA), 12 U.S.C. §§ 2601–2617, and gave them insufficient
opportunity to review the terms of the loans. They also claimed
that Plaza either "knew or should have known" that an appraisal of
the property that the Latsons obtained at Plaza's request was "too
high." The Latsons asserted that all these acts and omissions were
actionable under both their common-law and statutory claims.
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In its motion to dismiss, Plaza denied that the Latsons
had alleged any conduct that breached the covenant of good faith
and fair dealing or violated chapter 93A; it also argued that the
statute of limitations had run on the statutory claim. The Latsons
filed no response, and the district court granted the motion. The
Latsons moved for reconsideration, which the district court
refused, and then filed this timely appeal.
The Massachusetts covenant of good faith and fair dealing
is taken to be implied in every contract, Anthony's Pier Four, Inc.
v. HBC Assocs., 583 N.E.2d 806, 820 (Mass. 1991), and provides
"that neither party shall do anything that will have the effect of
destroying or injuring the right of the other party to receive the
fruits of the contract," id. (quoting Drucker v. Roland Wm. Jutras
Assocs., 348 N.E.2d 763, 765 (Mass. 1976)) (internal quotation mark
omitted). To the point here, the covenant only "governs conduct of
parties after they have entered into a contract." Mass. Eye & Ear
Infirmary v. QLT Phototherapeutics, Inc., 412 F.3d 215, 230 (1st
Cir. 2005) (citing Levenson v. L.M.I. Realty Corp., 575 N.E.2d 370,
372 (Mass. App. Ct. 1991)). Once they have done so, the covenant
"may not . . . be invoked to create rights and duties not otherwise
provided for in the existing contractual relationship, as the
purpose of the covenant is to guarantee that the parties remain
faithful to the intended and agreed expectations of the parties in
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their performance." Uno Rests., Inc. v. Bos. Kenmore Realty Corp.,
805 N.E.2d 957, 964 (Mass. 2004).
Here, the guaranteed "fruits" of the Latsons' two loan
contracts with Plaza were the loan funds, which the Latsons
unquestionably received, subject to repayment terms they do not
claim to have been violated. The allegedly wrongful conduct they
describe all occurred before the contracts existed, not in
violation of their terms after formation. The injuries claimed
were in contract preparation, not contract performance. Although
the Latsons assert that the covenant applies to parties simply
negotiating a contract, the cases they cite for this proposition
contain no such statements. See, e.g., Finard & Co. v. Sitt Asset
Mgmt., 945 N.E.2d 404 (Mass. App. Ct. 2011). The district court
correctly dismissed the good faith and fair dealing claim.
Next is the charge that Plaza violated the Massachusetts
consumer protection statute, which gives a cause of action to those
"injured" by "unfair or deceptive acts or practices in the conduct
of any trade or commerce." Mass. Gen. Laws ch. 93A, §§ 2(a), 9(1);
see also Hershenow v. Enter. Rent-A-Car Co. of Bos., 840 N.E.2d
526, 534 (Mass. 2006). The district court dismissed this claim on
the grounds that the Latsons had not pleaded acts by Plaza that
were actually unfair or deceptive, and that in any event they had
not alleged a causal connection between the damages alleged and the
acts said to have been unfair or deceptive.
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We do not reach these issues, however, because the
statute of limitations is an even more straightforward basis for
dismissing the chapter 93A claim. See Carroll v. Xerox Corp., 294
F.3d 231, 241 (1st Cir. 2002) (we may affirm an order granting a
motion to dismiss for any reason supported by the record). The
limitations period for chapter 93A actions is four years from
injury. Mass. Gen. Laws ch. 260, § 5A; Cambridge Plating Co. v.
Napco, Inc., 991 F.2d 21, 25 (1st Cir. 1993); accord Int'l Mobiles
Corp. v. Corroon & Black/Fairfield & Ellis, Inc., 560 N.E.2d 122,
125-26 (Mass. App. Ct. 1990). The Latsons signed the mortgage
agreements at issue in March 2006, and their complaint alleges that
date as the commencement of their injury, described as payment of 1
too much interest as required by "economically unviable" loan
terms. The four-year period, therefore, began to run on the
signing date when the interest began to accrue. They did not send
the required 93A demand letter, however, until August 2011, more
than a year after the limitations period expired.
Although the Latsons' motion to reconsider suggested that
the district court should toll the limitations period under the
discovery rule or the fraud exception, they invoke no basis for
applying either one. While the discovery rule stops the
The Latsons' complaint dates their injury to March 21, 2000, 1
but this is an obvious typographical error; clearly, they intended
to refer to March 21, 2006, the date they signed the loan
agreements.
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limitations clock until a plaintiff knows (or reasonably should
know) that he has or may have been harmed by a defendant's conduct,
see Bowen v. Eli Lilly & Co., 557 N.E.2d 739, 741 (Mass. 1990), so
far as it matters in this case, it does so only when the injuries
are "inherently unknowable" at the moment of their occurrence.
Patsos v. First Albany Corp., 741 N.E.2d 841, 846 & n. 8 (Mass.
2001) (internal quotation marks omitted). Here the interest terms
and the implications of their burdens were apparent when the
Latsons signed and got their money, a conclusion underscored by the
Massachusetts rule that the terms of written agreements are binding
whether or not their signatories actually read them. See St. Fleur
v. WPI Cable Sys./Mutron, 879 N.E.2d 27, 35 (Mass. 2008).
As for the argument that a fraud exception tolls the
statute of limitations, neither the complaint nor the Latsons'
appellate brief speaks of any fact indicating fraud by Plaza.
Accordingly, the chapter 93A claim is time barred and was properly
dismissed.
Affirmed.
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