Culhane v. Aurora Loan Services of Nebras

United States Court of Appeals
For the First Circuit
No. 12-1285
ORATAI CULHANE,
Plaintiff, Appellant,
v.
AURORA LOAN SERVICES OF NEBRASKA,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Lynch, Chief Judge,
Souter,* Associate Justice,
and Selya, Circuit Judge.
George E. Babcock, with whom Rockwell P. Ludden and Ludden
Kramer Law P.C. were on brief, for appellant.
Reneau J. Longoria, with whom John A. Doonan, Erin P. Severini
and Doonan, Graves & Longoria, LLC were on brief, for appellee.
February 15, 2013
__________
* Hon. David H. Souter, Associate Justice (Ret.) of the Supreme
Court of the United States, sitting by designation.
SELYA, Circuit Judge. As the millennium dawned, American
financial markets soared to new heights. One of the vehicles that
propelled this dizzying flight involved the bundling and
securitization of residential mortgage loans.1 But all good things
come to an end, cf. Geoffrey Chaucer, Troilus and Criseyde (circa
1374) ("There is an end to everything, to good things as well."),
and it was not long before the economy faltered and the housing
bubble burst. A rash of residential mortgage foreclosures
followed.
Novel practices had been devised to facilitate the
bundling and securitization of residential mortgage loans — and
those practices gave rise to hitherto unanswered questions in the
foreclosure context. The fact pattern here is emblematic: the
mortgagor's note was delivered to one party (the lender) and then
transferred; the mortgage itself was granted to a different entity,
Mortgage Electronic Registration Systems, Inc.,2 and later assigned
to the foreclosing entity. We are asked, as a matter of first
1
Generally speaking, securitization is the process of pooling
financial assets such as loans or accounts receivable to create an
investment instrument (i.e., a security). Thus, the securitization
of mortgage loans involves the creation of a mortgage-backed
security: mortgage loans are purchased from lenders, bundled, and
combined to create a single debt instrument. Interests in this
instrument can then be sold to investors who enjoy the benefit of
the revenue stream flowing from the mortgage payments.
2
Mortgage Electronic Registration Systems, Inc. is a
subsidiary of MERSCORP, Inc. Both are Delaware corporations based
in Virginia. For simplicity's sake, we refer to them collectively
as "MERS."
-2-
impression for this court, to pass upon not only the legality and
effect of this arrangement but also the mortgagor's right to
challenge it. The substantive law of Massachusetts controls our
inquiry.
After careful consideration, we conclude that, in the
circumstances of this case, the mortgagor has standing to contest
the validity of the mortgage assignment made by MERS to the
foreclosing entity. We also conclude, however, that the MERS
framework is faithful to the age-old tenets of mortgage law in
Massachusetts and that, therefore, the foreclosure here was not
unlawful.
I. BACKGROUND
The relevant facts are essentially undisputed. In April
of 2006, plaintiff-appellant Oratai Culhane refinanced the mortgage
on her single-family home in Milton, Massachusetts. To accomplish
this refinancing, she delivered a promissory note in the face
amount of $548,000 to the lender, Preferred Financial Group, Inc.,
doing business as Preferred Mortgage Services (Preferred). She
simultaneously executed a separate mortgage indenture in favor of
MERS as "nominee for [Preferred] and [Preferred]'s successors and
assigns." This mortgage, which secured the promissory note, was
recorded on April 11, 2006 in the Norfolk County Registry of Deeds.
-3-
Under the terms of the mortgage, MERS, as mortgagee of
record, held legal title to the mortgaged premises. As such, it
enjoyed a power of sale "solely as nominee" for the lender.
At this juncture, we think it helpful to provide some
background about the mysterious entity known as MERS. We introduce
this subject with a riddle: What entity is not a bank but claims to
hold title to approximately half of all the mortgaged homes in the
country? The answer is MERS. See Michael Powell & Gretchen
Morgenson, MERS? It May Have Swallowed Your Loan, N.Y. Times, Mar.
6, 2011, at BU1.
MERS was formed by a consortium of residential mortgage
lenders and investors desiring to streamline the process of
transferring ownership of mortgage loans in order to facilitate
securitization. See Christopher L. Peterson, Foreclosure, Subprime
Mortgage Lending, and the Mortgage Electronic Registration System,
78 U. Cin. L. Rev. 1359, 1368-69 (2010). Various entities involved
in the residential mortgage lending business can become "members"
of MERS. As such, they pay an annual fee and agree to the rules of
membership. Lender members may name MERS as mortgagee in mortgages
that they originate, service, or own.
MERS's mortgagee status is narrowly circumscribed: it
acts solely as "nominee" for the owner or servicer of the mortgage,
including the owner's or servicer's successors and assigns. There
is one condition: the party for whom MERS serves as nominee must be
-4-
a member of MERS. The upshot of this arrangement is that MERS
holds the legal title to the mortgage as mortgagee of record, but
it does not have any beneficial interest in the loan.
MERS maintains an electronic database cataloguing the
mortgages that it holds. This database tracks the identities of
the noteholders and servicers of the underlying loans. When a note
is sold by one MERS member to another, the sale is memorialized in
the MERS database, and MERS remains the mortgagee of record.
If a note within the MERS system is sold to a nonmember,
MERS assigns the mortgage to the new noteholder or its designee.
MERS's involvement ends at that point. To expedite the execution
of assignments, MERS designates "certifying officers." These
"certifying officers" are typically employees of member firms.
MERS authorizes these persons, through formal corporate
resolutions, to execute assignments on its behalf. This system
reduces paperwork and avoids fees that otherwise would be required
to record assignments of mortgages at local recording offices.
Similarly, it facilitates the bundling and securitization of loans.
This case offers a paradigmatic example of how the MERS
framework operates. After making the loan, Preferred (a MERS
member) subsequently transferred the plaintiff's note to fellow
MERS member Deutsche Bank Trust Company Americas (Deutsche), as
trustee for Residential Accredit Loans Inc., Mortgage Asset-Backed
-5-
Pass-Through Certificates, Series 2006-QO5 (RALI 2006 Trust).3
Although the endorsement was undated, the cut-off date for mortgage
loans to be transferred into the RALI 2006 Trust was May 1, 2006,
so the endorsement necessarily took place on or before that date
(the validity of this transfer was unsuccessfully challenged below,
but the plaintiff does not contest it in her appellate briefs).
At the times relevant hereto, defendant-appellee Aurora
Loan Services of Nebraska (Aurora), acting for Deutsche, had the
responsibility of servicing the loans held in the RALI 2006 Trust.
In an assignment dated April 7, 2009, MERS transferred the mortgage
to Aurora. This assignment, recorded on April 24, 2009, was
executed by Joann Rein, who is both an employee of Aurora and a
"certifying officer" for MERS.
When the plaintiff fell behind in her note payments,
Aurora — now both servicer of the note and mortgagee of record —
initiated foreclosure proceedings. It first filed a complaint in
the Land Court seeking a declaration that the plaintiff was not
entitled to the protections of the Servicemembers Civil Relief Act
(SCRA), 50 U.S.C. app. § 533. The Land Court ruled that the SCRA
presented no obstacle to Aurora's enforcement of its power of sale.
See Mass. Gen. Laws ch. 183, § 21; id. ch. 244, § 14.
3
The RALI 2006 Trust holds a pool of one- to four-family
residential, payment-option, adjustable-rate, first-lien mortgage
loans with a negative amortization feature.
-6-
Next, Aurora published a notice of intent to foreclose
the mortgage and sent copies of this notice to all the required
parties. See id. ch. 244, § 14. The foreclosure, originally set
for October 22, 2009, was postponed from time to time due to the
plaintiff's requests for loan modifications under the Home
Affordable Modification Program, 12 U.S.C. § 5219a, and a series of
abortive bankruptcy proceedings. When these hurdles were cleared,
the foreclosure was set for June 20, 2011.
Three days before the rescheduled foreclosure, the
plaintiff repaired to the state superior court seeking both
injunctive relief and monetary damages. Citing diversity of
citizenship and the existence of a controversy in the requisite
amount, Aurora removed the case to the federal district court. See
28 U.S.C. §§ 1332(a), 1441. It then moved for summary judgment.
After some preliminary skirmishing, the inquiry narrowed to the
question of how, if at all, MERS's involvement in the chain of
title impacted Aurora's authority to foreclose. The district court
resolved this question in favor of Aurora. Culhane v. Aurora Loan
Servs., 826 F. Supp. 2d 352, 378-79 (D. Mass. 2011).
On December 8, 2011 — ten days after the district court
entered summary judgment — Aurora foreclosed the mortgage on the
plaintiff's property by entry and sale, purchasing the property for
$490,000.
-7-
II. ANALYSIS
In Massachusetts, when a mortgage includes a power of
sale — as this mortgage does — the mortgagee "may foreclose without
obtaining prior judicial authorization 'upon any default in the
performance or observance' of the mortgage, including, of course,
nonpayment of the underlying mortgage note." Eaton v. Fed. Nat'l
Mortg. Ass'n, 969 N.E.2d 1118, 1127 (Mass. 2012) (footnote and
internal citation omitted) (quoting Mass. Gen. Laws ch. 183, § 21).
The Massachusetts Supreme Judicial Court (SJC) recently interpreted
the statutes governing foreclosure by sale as requiring a
foreclosing mortgagee both to control the note (either as the
noteholder or as its agent) and to hold the mortgage. Id. at 1129
& n.20, 1131. The SJC expressly stated that this binary
requirement constituted a new statutory interpretation and,
therefore, was to be given only prospective effect. See id. at
1132-33; accord McKenna v. Wells Fargo Bank, 693 F.3d 207, 215 (1st
Cir. 2012).
In the case at hand, the plaintiff does not contest that,
at the time of the foreclosure, Deutsche held her note and that
Aurora was properly denominated as the Deutsche loan servicer. At
that time, the mortgage stood in Aurora's name — but the plaintiff
does not concede the validity of the assignment from MERS to
-8-
Aurora. Our inquiry, therefore, focuses on the validity of that
assignment.4
There is, however, a threshold issue. Because Aurora
insists that the plaintiff lacks standing to challenge the validity
of the assignment to Aurora, we start with this issue.
A. Standing.
Whether a mortgagor has standing to challenge the
assignment of her mortgage — an assignment to which she is not a
party and of which she is not a third-party beneficiary — is a
matter of first impression for this court. The nisi prius courts
within the circuit have expressed divergent views. Compare, e.g.,
Butler v. Deutsche Bank Trust Co., No. 12-10337, 2012 WL 3518560,
at *6-7 (D. Mass. Aug. 14, 2012) (holding that mortgagor has
limited standing), with, e.g., Oum v. Wells Fargo, 842 F. Supp. 2d
407, 415 (D. Mass. 2012) (holding that mortgagor lacks standing),
with, e.g., Rosa v. Mortg. Elec. Sys., Inc., 821 F. Supp. 2d 423,
429 n.5 (D. Mass. 2011) (holding that mortgagors "appear to have
standing"). We conclude that a nonparty mortgagor, like the
plaintiff, has standing to raise certain challenges to the
assignment of her mortgage.
"The existence vel non of standing is a legal question
and, therefore, engenders de novo review." Me. People's Alliance
4
Because we resolve this question in favor of Aurora, see
text infra, we need not dwell on the purely prospective effect of
the SJC's decision in Eaton.
-9-
& Natural Res. Def. Council v. Mallinckrodt, Inc., 471 F.3d 277,
283 (1st Cir. 2006). The Constitution limits the judicial power of
federal courts to actual cases and controversies. U.S. Const. art.
III, § 2, cl. 1. This criterion is satisfied only when the
plaintiff has "such a personal stake in the outcome of the
controversy as to assure that concrete adverseness which sharpens
the presentation of issues upon which the court so largely
depends." Baker v. Carr, 369 U.S. 186, 204 (1962).
When a plaintiff sues in a federal court, she ordinarily
must shoulder the burden of establishing standing. Bennett v.
Spear, 520 U.S. 154, 167-68 (1997). The onus remains the same when
— as in this case — the plaintiff sues in state court and the
defendant invokes federal jurisdiction through removal. Once
removal has been effected, the burden of going forward with the
claim in federal court (including the burden of establishing
standing) still rests with the plaintiff. See DaimlerChrysler
Corp. v. Cuno, 547 U.S. 332, 342 n.3 (2006).
The essence of standing is that a plaintiff must have a
personal stake in the outcome of the litigation. Ramírez v.
Sánchez Ramos, 438 F.3d 92, 97 (1st Cir. 2006). To fulfill this
personal stake requirement, the plaintiff "must establish each part
of a familiar triad: injury, causation, and redressability." Katz
v. Pershing, LLC, 672 F.3d 64, 71 (1st Cir. 2012) (citing Lujan v.
-10-
Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)). We examine
these three elements as they relate to this litigation.
For purposes of standing doctrine, an injury is defined
as "an invasion of a legally protected interest which is (a)
concrete and particularized; and (b) actual or imminent, not
conjectural or hypothetical." Lujan, 504 U.S. at 560 (footnote and
internal citations and quotation marks omitted). The foreclosure
of the plaintiff's home is unquestionably a concrete and
particularized injury to her.
By the same token, there is a direct causal connection
between the challenged action and the identified harm. The action
challenged here relates to Aurora's right to foreclose by virtue of
the assignment from MERS. The identified harm — the foreclosure —
can be traced directly to Aurora's exercise of the authority
purportedly delegated by the assignment.
This leaves the matter of redressability. We are
confident that a determination that Aurora lacked the authority to
foreclose would set the stage for redressing the plaintiff's
claimed injury. Her complaint, at least in part, prays for
monetary damages as a means of ameliorating the asserted wrong. No
more is exigible. See Plains Commerce Bank v. Long Family Land &
Cattle Co., 554 U.S. 316, 327 (2008).
Of course, standing has a prudential aspect, which
overlays its constitutional dimensions. See Coggeshall v. Mass.
-11-
Bd. of Registration of Psychologists, 604 F.3d 658, 666 (1st Cir.
2010). These prudential considerations "ordinarily require a
plaintiff to show that his claim is premised on his own legal
rights (as opposed to those of a third party), that his claim is
not merely a generalized grievance, and that it falls within the
zone of interests protected by the law invoked." Pagán v.
Calderón, 448 F.3d 16, 27 (1st Cir. 2006). As applied here, these
considerations raise a potential question as to whether the
plaintiff's standing is jeopardized by the prudential concern that
a litigant should not normally be permitted to assert the rights
and interests of a third party. With this in mind, several courts
have ruled that mortgagors lack standing to challenge mortgage
assignments because they are neither parties to nor third-party
beneficiaries of the assignments. See, e.g., Oum, 842 F. Supp. 2d
at 413 (citing Edelkind v. Fairmont Funding, Ltd., 539 F. Supp. 2d
449, 453-54 (D. Mass. 2008)); Wenzel v. Sand Canyon Corp., 841 F.
Supp. 2d 463, 477-78 (D. Mass. 2012).
We think that these cases paint with too broad a brush.
It is true that a nonparty who does not benefit from a contract
generally lacks standing to assert rights under that contract.
See, e.g., Almond v. Capital Props., Inc., 212 F.3d 20, 24 & n.4
(1st Cir. 2000); Cumis Ins. Soc'y, Inc. v. BJ's Wholesale Club,
Inc., 918 N.E.2d 36, 44 (Mass. 2009). But a Massachusetts real
property mortgagor finds herself in an unusual position because of
-12-
two key facts. First, as explained below, a Massachusetts
mortgagor has a legally cognizable right under state law to ensure
that any attempted foreclosure on her home is conducted lawfully.
See Mass. Gen. Laws ch. 183, § 21; id. ch. 244, § 14. Second,
where (as here) a mortgage contains a power of sale, Massachusetts
law permits foreclosure without prior judicial authorization. See
Eaton, 969 N.E.2d at 1127. Thus — unlike an ordinary debtor who
could challenge an assignment as a defense upon being haled into
court by the assignee seeking to collect on her debt, see 6A C.J.S.
Assignments § 132 (2012) — a Massachusetts mortgagor would be
deprived of a means to assert her legal protections without having
standing to sue. As such, we hold only that Massachusetts
mortgagors, under circumstances comparable to those in this case,
have standing to challenge a mortgage assignment.
The relevant statutory provisions explicitly state that
only a mortgagee has the authority to exercise the statutory power
of sale. The SJC has gone so far as to state that "[a]ny effort to
foreclose by a party lacking jurisdiction and authority to carry
out a foreclosure under these statutes is void." U.S. Bank Nat'l
Ass'n v. Ibanez, 941 N.E.2d 40, 50 (Mass. 2011) (internal quotation
marks omitted). To this end, an action may be brought to set aside
a void foreclosure. See Rogers v. Barnes, 47 N.E. 602, 603-04
(Mass. 1897). This would be the case where, for instance, valid
-13-
legal title was never assigned to the foreclosing entity. See
Ibanez, 941 N.E.2d at 50.
The short of it is that, in Massachusetts, a mortgagor
has a legally cognizable right to challenge a foreclosing entity's
status qua mortgagee. This may, in certain instances, require
challenging the validity of an assignment that purports to transfer
the mortgage to a successor mortgagee. Standing doctrine is meant
to be a shield to protect the court from any role in the
adjudication of disputes that do not measure up to a minimum set of
adversarial requirements. There is no principled basis for
employing standing doctrine as a sword to deprive mortgagors of
legal protection conferred upon them under state law. We hold,
therefore, that a mortgagor has standing to challenge the
assignment of a mortgage on her home to the extent that such a
challenge is necessary to contest a foreclosing entity's status qua
mortgagee.
We caution that our holding, narrow to begin with, is
further circumscribed. We hold only that a mortgagor has standing
to challenge a mortgage assignment as invalid, ineffective, or void
(if, say, the assignor had nothing to assign or had no authority to
make an assignment to a particular assignee). If successful, a
challenge of this sort would be sufficient to refute an assignee's
status qua mortgagee. See 6A C.J.S. Assignments § 132. Withal, a
mortgagor does not have standing to challenge shortcomings in an
-14-
assignment that render it merely voidable at the election of one
party but otherwise effective to pass legal title. See, e.g.,
Serv. Mortg. Corp. v. Welson, 200 N.E. 278, 280 (Mass. 1936);
Murphy v. Barnard, 38 N.E. 29, 31 (Mass. 1894); see also 6A C.J.S.
Assignments § 132.
In this case, the plaintiff's challenge to the assignment
from MERS to Aurora is premised on the notion that MERS never
properly held the mortgage and, thus, had no interest to assign.
If this were so, the assignment would be void (not merely
voidable). Consequently, the plaintiff has standing to challenge
the validity of the assignment.5
B. Validity of the Assignment.
We turn now to the district court's entry of summary
judgment on the merits. In performing our review, we are not
shackled to the district court's reasoning but, rather, may uphold
its ruling on any ground made manifest by the record. See Houlton
Citizens' Coal. v. Town of Houlton, 175 F.3d 178, 184 (1st Cir.
1999). We look to Massachusetts for the substantive rules of
decision. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78
(1938); B & T Masonry Constr. Co. v. Pub. Serv. Mut. Ins. Co., 382
F.3d 36, 38 (1st Cir. 2004).
5
We are confident that this holding is consistent with our
recent decision in Juárez v. Select Portfolio Servicing, Inc., ___
F.3d ___, ___ (1st Cir. 2013) [No. 11-2431, slip op. at 14-15]. In
all events, the standing determination in Juárez rested on the
peculiar facts of that case.
-15-
The plaintiff's claim hinges on the asseveration that
MERS did not legitimately hold the mortgage at the time of
assignment and, therefore, had nothing to assign to Aurora. Even
though the original mortgage papers designated MERS as the holder
of the mortgage, the plaintiff's thesis runs, this designation was
a nullity because MERS never owned the "'beneficial half' of the
legal interest" in the mortgage. We reject this thesis: there is
no reason to doubt the legitimacy of the common arrangement whereby
MERS holds bare legal title as mortgagee of record and the
noteholder alone enjoys the beneficial interest in the loan.
The law contemplates distinctions between the legal
interest in a mortgage and the beneficial interest in the
underlying debt. These are distinct interests, and they may be
held by different parties. See Black's Law Dictionary 885 (9th ed.
2009) (defining "beneficial interest" as a "right or expectancy in
something (such as a trust or estate), as opposed to legal title to
that thing"). So it is here: prior to the assignment to Aurora,
MERS held the legal interest and Deutsche held the beneficial
interest.
We add that — short of the time of foreclosure — the MERS
framework, which customarily separates the legal interest from the
beneficial interest, corresponds with longstanding common-law
principles regarding mortgages. A mortgage loan involves the
borrowing of money by one party, who secures the loan by means of
-16-
a mortgage on a piece of property. It requires the execution of
two separate, but related, contracts: a promissory note and a
mortgage. Eaton, 969 N.E.2d at 1124. The note embodies the
borrower's promise to repay the lender (or, in its stead, the
noteholder). Id. The mortgage, in a title theory state like
Massachusetts, transfers legal title to the mortgaged premises from
the mortgagor to the mortgagee for the sole purpose of securing the
loan. Id. The mortgagee holds bare legal title to the mortgaged
premises, defeasible upon repayment of the loan (because the
mortgagor owns the equity of redemption). Id.
In Massachusetts, the note and the mortgage need not be
held by the same entity. The two instruments exist on separate
planes, and the transfer of the note does not automatically
transfer the mortgage. See id. at 1124-25; Lamson & Co. v. Abrams,
25 N.E.2d 374, 378 (Mass. 1940). But the mortgage (no matter who
holds it) is always subject to the note. As a hoary maxim teaches,
"the debt is the principal and the mortgage an incident." Morris
v. Bacon, 123 Mass. 58, 59 (1877). In other words, the note is the
beneficial interest and the mortgage is the legal interest. See
id.Where — as at the inception of this loan — the mortgage
and the note are held by separate entities, an equitable trust is
implied by law. Eaton, 969 N.E.2d at 1125 & n.10. The SJC has
characterized this equitable trust as a kind of resulting trust.
-17-
Id. at 1125 n.10. Under such an arrangement, the mortgagee is an
equitable trustee who holds bare legal title to the mortgaged
premises in trust for the noteholder. Ibanez, 941 N.E.2d at 53-54.
The noteholder possesses an equitable right to demand and obtain an
assignment of the mortgage. Id. at 54. This makes perfect sense:
if the debtor-mortgagor defaults, the noteholder needs to control
the mortgage in order to enforce its bargained-for security
interest and collect the debt.
Absent a provision in the mortgage instrument restricting
transfer — and there is none here6 — a mortgagee may assign its
mortgage to another party. Because such an assignment is an
interest in land, it requires a writing signed by the assignor.
See Mass. Gen. Laws ch. 183, § 3; Ibanez, 941 N.E.2d at 51. In the
same vein, a noteholder may transfer the note to another. See
U.C.C. §§ 3-205, 3-301. An equitable trust exists between the
mortgagee of record and the new noteholder, as such a trust is
always implied by Massachusetts law. See Eaton, 969 N.E.2d at 1125
n.10; Ibanez, 941 N.E.2d at 53-54.
6
The plaintiff suggests that a mortgage provision concerning
notice to the borrower would be breached if the mortgagee
transferred the mortgage without the note. This provision states:
"[t]he Note or a partial interest in the Note (together with this
Security Instrument) can be sold one or more times without prior
notice to the Borrower." This suggestion is jejune. For one
thing, this language is permissive and by no means prohibits the
separation of the two instruments. For another thing, the
instruments were separated upon their inception: Preferred was
granted the note and MERS the mortgage.
-18-
The plaintiff's argument cannot overcome these venerable
precedents. Massachusetts law makes pellucid that the mortgage and
the note are separate instruments; when held by separate parties,
the mortgagee holds a bare legal interest and the noteholder enjoys
the beneficial interest. See Eaton, 969 N.E.2d at 1124. The
mortgagee need not possess any scintilla of a beneficial interest
in order to hold the mortgage.7 Thus, MERS's role as mortgagee of
record and custodian of the bare legal interest as nominee for the
member-noteholder, and the member-noteholder's role as owner of the
beneficial interest in the loan, fit comfortably with each other
and fit comfortably within the structure of Massachusetts mortgage
law.
Here, moreover, MERS had the authority twice over to
assign the mortgage to Aurora. This authority derived both from
MERS's status as equitable trustee and from the terms of the
mortgage contract. We already have explained the question of the
resulting trust that arises in this context. See text supra. We
explain below how the terms of the mortgage contract replicate this
authority.
The terms of the mortgage contract, to which the
plaintiff expressly agreed, authorize the transfer to Aurora. The
7
The SJC has made clear that it is only at the time of
foreclosure that a mortgagee must also hold or control the
beneficial interest in the loan. See Eaton, 969 N.E.2d at 1121,
1125-31, 1132 n.27.
-19-
mortgage papers denominated MERS as mortgagee "solely as nominee
for [Preferred] and [Preferred]'s successors and assigns." Under
Massachusetts law, a nominee in such a situation holds title for
the owner of the beneficial interest. See Morrison v. Lennett, 616
N.E.2d 92, 94-95 (Mass. 1993); Black's Law Dictionary 1149. MERS
originally held title as nominee for Preferred; Preferred assigned
its beneficial interest in the loan to Deutsche; and Deutsche
designated Aurora as its loan servicer. MERS was, therefore,
authorized by the terms of the contract to transfer the mortgage at
the direction of Aurora.
In the assignment, MERS transferred to Aurora what it
held: bare legal title to the mortgaged property.8 That transfer
was valid. See Eaton, 969 N.E.2d at 1124. It follows that Aurora
properly held the mortgage and thus possessed the authority to
foreclose. Mass. Gen. Laws ch. 183, § 21; id. ch. 244, § 14; see
Eaton, 969 N.E.2d at 1124, 1129; Ibanez, 941 N.E.2d at 53.
In an effort to change the trajectory of the debate, the
plaintiff makes a two-pronged argument. We find both prongs
unedifying.
8
The language of the assignment might be read to suggest that
MERS also purposed to assign the note. It is plain, however, that
MERS never held the note. We need not probe this point because
this superfluous language does not affect the validity of the
transfer of legal title to the mortgaged property. See Deutsche
Bank Nat'l Trust Co. v. Cicchelli, Nos. 10 MISC. 423350, 10 MISC.
436809, 2011 WL 3805905, at *3 n.9 (Mass. Land Ct. Aug. 24, 2011).
-20-
Both aspects of the plaintiff's argument are offered in
support of the proposition that the assignment to Aurora does not
comply with Mass. Gen. Laws ch. 183, § 54B. This statute provides
in pertinent part:
[An] assignment of mortgage . . . if executed
before a notary public, . . . by a person
purporting to hold the position of president,
vice president, treasurer, clerk, secretary,
cashier, loan representative, principal,
investment, mortgage or other officer, agent,
asset manager, or other similar office or
position, including assistant to any such
office or position, of the entity holding such
mortgage, or otherwise purporting to be an
authorized signatory for such entity . . .
shall be binding upon such entity and shall be
entitled to be recorded . . . .
Id. The assignment of the mortgage from MERS to Aurora adhered to
these requirements: it was signed by Joanne Rein (an individual
duly certified as a vice president of MERS) and thereafter
notarized.
To be sure, Rein's primary occupation at the time was as
an employee of Aurora. Her designation as a vice president of MERS
was put in place purely as a matter of administrative convenience.
The plaintiff suggests that this duality somehow undermines the
legitimacy of Rein's status as a certifying officer.
This suggestion is little more than wishful thinking.
The Massachusetts statute neither places restrictions on who may be
elected as an officer of the assignor nor imposes special
requirements (say, regular employment) on who may serve as a vice
-21-
president of an assignor corporation. While MERS's practice of
appointing employees of member firms as certifying officers can be
disparaged on policy grounds, such policy judgments are for the
legislature, not the courts. As the Supreme Court explained,
"[c]ourts may not create their own limitations on legislation, no
matter how alluring the policy arguments for doing so." Brogan v.
United States, 522 U.S. 398, 408 (1998).
The second prong of the plaintiff's argument posits that
MERS was not the "entity holding such mortgage" within the purview
of section 54B. But this is simply an old wine in a new bottle: we
already have refuted the substance of this argument, see text
supra, and we see no point in decanting it again.
We need not paint the lily. We conclude, without serious
question, that MERS validly held the mortgage on the plaintiff's
premises at the time of the assignment to Aurora. This leads to
two further conclusions: the assignment was valid, and Aurora
properly exercised the statutory power of sale as both the holder
of the mortgage and the loan servicer for the noteholder. See
Mass. Gen. Laws ch. 183, § 21; id. ch. 244, § 14; Eaton, 969 N.E.2d
at 1129.
C. Constitutional Challenges.
In a last-ditch effort to turn the tables, the plaintiff
asserts that the transfer of her mortgage and the ensuing
-22-
foreclosure resulted in constitutional transgressions. This
assertion is too late and, in all events, has little to commend it.
The plaintiff raised no constitutional challenges below.
The challenges that she now attempts to advance are therefore
forfeit. Dávila v. Corporación de P.R. para la Difusión Pública,
498 F.3d 9, 14 & n.2 (1st Cir. 2007). Accordingly, our review is
for plain error. Tasker v. DHL Ret. Sav. Plan, 621 F.3d 34, 40
(1st Cir. 2010).
There is no error here, plain or otherwise. The
plaintiff claims that the district court's application of section
54B violated her procedural and substantive due process rights and
her right to equal protection by (i) denying her the opportunity to
determine whether the assignment to Aurora was valid and (ii)
arbitrarily including her in a class of mortgagors whose mortgages
were assigned by the actual holder. In the last analysis, these
remonstrances are contingent on the plaintiff's core contention
that MERS did not validly hold the mortgage at the time of its
assignment to Aurora. Because we have concluded that MERS validly
held the mortgage at that time, see supra Part II(B), her
constitutional claims necessarily fail.
-23-
III. CONCLUSION
We need go no further.9 For the reasons elucidated
above, we conclude that Aurora's foreclosure of the plaintiff's
property complied with the requirements of applicable law.
Affirmed.
9
To the extent (if at all) that the plaintiff has attempted
to advance other arguments, we reject them as incoherent,
unaccompanied by any developed argumentation, or both. See United
States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990).
-24-