Shea v. Federal National Mortgage Association ( 2015 )

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13-P-1630 Appeals Court
PAUL SHEA vs. FEDERAL NATIONAL MORTGAGE ASSOCIATION & others.1
No. 13-P-1630. February 18, 2015.
Real Property, Mortgage. Assignment. Mortgage, Real estate,
Assignment, Foreclosure. Practice, Civil, Motion to
dismiss.
At issue is whether a judge properly dismissed2 the
plaintiff's claims3 attacking the validity of a mortgage
1
Mortgage Electronic Registration Systems, Inc.; One West
Bank, FSB; and Harmon Law Offices, P.C.
2
We see no merit in the plaintiff's contention that the
judge improperly, and sub silentio, converted the motion into
one for summary judgment. Without converting the motion into
one for summary judgment, the judge was permitted to take into
account "matters of public record, orders, items appearing in
the record of the case, and exhibits attached to the complaint,"
Schaer v. Brandeis Univ., 432 Mass. 474, 477 (2000), quoting
from 5A Wright & Miller, Federal Practice & Procedure § 1357, at
299 (1990). See Mass.R.Civ.P. 12(b), 365 Mass. 754 (1974). See
also Golchin v. Liberty Mut. Ins. Co., 460 Mass. 222, 224
(2011). Here the relevant documents were attached as exhibits
to the complaint.
3
This is in essence an action to quiet title, although the
plaintiff's complaint asserts claims for (1) unfair debt
collection practices under 15 U.S.C. §§ 1692(a) et seq.; (2)
unfair debt collection practices under G. L. c. 93, §§ 49 et
seq.; (3) trespass; (4) intentional infliction of emotional
2
foreclosure to which Eaton v. Federal Natl. Mort. Assn., 462
Mass. 569 (2012), does not apply.4 The plaintiff contends that
the foreclosure was void because the mortgage was not validly
assigned to OneWest Bank FSB (OneWest), the foreclosing
mortgagee. He argues that the assignment was invalid because
(1) the assignor never held the underlying note, and (2) the
assignment was not specifically authorized by the owner of the
debt.5 We affirm.6
Background.7 The plaintiff (and another person who is not a
party to this case) purchased the property at issue in April
2005. In 2007, as part of a refinancing of the property, the
plaintiff granted a mortgage to IndyMac Bank, FSB (IndyMac) to
secure a loan in the amount of $281,600. In pertinent part, the
2007 mortgage contained the following provisions.
The mortgage defines IndyMac, which is the owner of the
debt, as the "Lender." The mortgage defines Mortgage Electronic
distress; (5) declaratory relief; and (6) an action to quiet or
establish title under G. L. c. 240, § 6.
4
Eaton v. Federal Natl. Mort. Assn., supra at 589, applies
"only to mortgage foreclosure sales for which the mandatory
notice of sale has been given after" June 22, 2012. Here, the
foreclosure was completed in 2011. In Galiastro v. Mortgage
Electronic Registration Sys., Inc., 467 Mass. 160, 161 (2014),
the Supreme Judicial Court extended the Eaton holding to cases
"in which the issue was preserved and an appeal was pending in
the Appeals Court on June 22, 2012, the date of the rescript in
Eaton." This case was entered on the Appeals Court docket on
October 11, 2013.
5
The plaintiff agrees that all of his claims rise and fall
on the two points he raises here.
6
Our review is de novo. See, e.g., Massachusetts State
Police Commissioned Officers Assn. v. Commonwealth, 462 Mass.
219, 221 (2012).
7
The facts are drawn from the well-pleaded allegations of
the complaint, which we accept, arguendo, to have been verified,
although it is not clear from the record that a signature page
verifying the complaint was filed contemporaneously with it.
Nothing in our decision turns on whether the complaint was
properly verified.
3
Registration System, Inc. (MERS), as "a separate corporation
that is acting solely as a nominee for Lender and Lender's
successors and assigns. MERS is the mortgagee under this
Security Instrument" (emphasis in original).
A section entitled "TRANSFER OF RIGHTS IN THE PROPERTY"
provides that the mortgage secures both the repayment of the
loan and the borrower's performance of covenants and agreements
to the Lender. That section continues as follows:
"Borrower does hereby mortgage, grant and convey to MERS
(solely as nominee for Lender and Lender's successors and
assigns) and to the successors and assigns of MERS, with
power of sale . . . .
. . .
"Borrower understands and agrees that MERS holds only legal
title to the interests granted by Borrower in this Security
Instrument, but, if necessary to comply with law or custom,
MERS (as nominee for Lender and Lender's successors and
assigns) has the right: to exercise any or all of those
interests, including, but not limited to, the right to
foreclose and sell the Property; and to take any action
required of Lender including, but not limited to, releasing
and canceling this Security Instrument." (Emphasis
supplied.)
On November 11, 2009, MERS assigned the mortgage to
OneWest, which, after other events we set out in the margin,8
foreclosed the property under its power of sale. OneWest then
assigned its successful bid to the Federal National Mortgage
Association (Fannie Mae) and conveyed the property to Fannie Mae
by foreclosure deed on October 21, 2011.
Discussion. The plaintiff argues that the assignment from
MERS to OneWest was void for two reasons.9 First, he contends
8
OneWest, acting through the Harmon Law Offices, P.C.
(Harmon), began foreclosure proceedings by filing a complaint in
the Land Court in November 2009. Judgment entered on the Land
Court complaint on March 23, 2010. On June 16, 2011, OneWest,
through Harmon, sent the plaintiff a notice of the mortgage
foreclosure sale and of deficiency.
9
Because the plaintiff here argues that the assignment to
OneWest was void (not merely voidable), he has standing. See
4
that, despite the fact that the mortgage provides that "MERS is
the mortgagee under this Security Instrument" and that MERS
holds "legal title to the interests granted by Borrower in this
Security Instrument," MERS did not obtain the status of
mortgagee because MERS never held the note. We have recently
rejected this precise argument in Sullivan v. Kondaur Capital
Corp., 85 Mass. App. Ct. 202, 210 (2014), where we stated that
"[n]othing in Massachusetts law requires a foreclosing mortgagee
to demonstrate that prior holders of record legal interest in
the mortgage also held the note at the time each assigned its
interest in the mortgage to the next holder in the chain."
MERS's interest as mortgagee was not "inherently invalid because
it was separated from ownership of the underlying debt." Ibid.Second, we are equally unpersuaded by the plaintiff's
argument that the assignment to OneWest was void because MERS
did not receive specific authorization from IndyMac (the note
holder) before executing the assignment.10 Under our law, "a
mortgage and the underlying note can be split." Eaton v.
Federal Natl. Mort. Assn., supra at 576. Although the note
holder possesses an equitable right to demand and obtain an
assignment of the mortgage, U.S. Bank Natl. Assn. v. Ibanez, 458
Mass. 637, 652 (2011), "[a]bsent a provision in the mortgage
Sullivan v. Kondaur Capital Corp., 85 Mass. App. Ct. 202, 205-
206 (2014) (mortgagor had standing to challenge the foreclosing
entity's chain of legal title); Culhane v. Aurora Loan Servs. of
Neb., 708 F.3d 282, 291 (1st Cir. 2013) (mortgagor had standing
to raise claim "premised on the notion that MERS never properly
held the mortgage and, thus, had no interest to assign"). A
mortgagor's standing to challenge the assignment of his or her
mortgage is limited to those defects that render the assignment
void, not merely voidable. The Bank of N.Y. Mellon Corp. v.
Wain, 85 Mass. App. Ct. 498, 502 (2014). In other words, the
mortgagor's challenge must contest the foreclosing entity's
status as mortgagee. "[A] mortgagor does not have standing to
challenge shortcomings in an assignment that render it merely
voidable at the election of one party but otherwise effective to
pass legal title." Culhane v. Aurora Loan Servs. of Neb.,
supra.
10
The argument appears to be based on a misreading of
Eaton, which held prospectively that in order to foreclose, the
foreclosing mortgagee must either hold the note or act as an
authorized agent for the note holder. Eaton v. Federal Natl.
Mort. Assn., supra at 586.
5
instrument restricting transfer[,] . . . a mortgagee may assign
its mortgage to another party." Culhane v. Aurora Loan Servs.
of Neb., 708 F.3d 282, 292 (1st Cir. 2013). In other words,
despite IndyMac's right (as note holder) to demand and obtain an
assignment of the mortgage in order to enforce its security
interest and collect the debt, MERS (as mortgagee) retained the
right to assign the mortgage unilaterally absent any restriction
in the mortgage document.11 No restriction appears in the
mortgage at issue here.
The motion to dismiss was properly allowed.
Judgment affirmed.
Thomas B. Vawter for the plaintiff.
Marissa I. Delinks for Federal National Mortgage Association.
Scott C. Owens for Harmon Law Offices, P.C.
11
Of course, any assignment of the mortgage requires a
writing signed by the grantor, G. L. c. 183, § 3, and must
otherwise comply with the requirements of G. L. c. 183, § 54B.