Massachusetts Superior Court Concludes Lender Properly Foreclosed and Seized Borrower’s Personal Property Following Loan Default

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A recent Massachusetts Superior Court case, Germinara v. Bakis, et al. (decided May 13, 2019), involved a plaintiff borrower who obtained a commercial loan in order to fund the purchase and operation of a gas station/convenience store, which was owned by an LLC formed by the plaintiff. The loan was secured by both the gas station property and contents and a second property that was owned by the borrower in trust. Further, the lender and the funder of the loan were granted mortgages and deeds-in-lieu of foreclosure to secure the interest on both properties owned by the borrower. When the plaintiff defaulted on the loan, the lender and the funder took title to the two properties by exercising the deeds-in-lieu of foreclosure. They sold both properties and, additionally, seized some items of the borrower’s personal property that had been located at the properties, such as trucks and vehicles. Some of these items were owned by the plaintiff in his individual capacity, and not by the LLC that held title to the gas station; however, the lender held other security obligations which included the vehicles.

Following the sale of the properties and the seizing of the borrower’s personal property, the borrower filed suit, claiming that the lender had violated M. G. L. c. 93A and other statutes during the loan transaction, including by (1) charging an interest rate above the maximum level allowed by Chapter 93A; (2) requiring deeds-in-lieu of foreclosure as collateral for the loan; (3) engaging in illegal conduct in attempting to collect the loan; and (4) by wrongfully seizing the plaintiff’s personal property and foreclosing on the two properties. As a remedy, the borrower sought rescission of the loans and the deeds-in-lieu of foreclosure. Following a three-week trial, a judge in the Essex Superior Court held that the lender and the funder had not violated Chapter 93A, had not wrongfully seized the borrower’s personal property, and had not wrongfully foreclosed on the two properties. Although the judge did find that the terms of the mortgage note violated the anti-usury statute, he concluded that the proper remedy was not to rescind the loan, but to modify the interest rate. The judge therefore concluded that the borrower still owed the lender nearly $500,000, plus daily interest. Finally, the judge also ordered the borrower to pay the lender’s legal fees and costs.


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