Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 1 of 30 STEVEN CARVER and SALLY J. CARVER, Plaintiffs, v. UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS THE BANK OF NEW YORK MELLON f/k/a THE BANK OF NEW YORK, AS TRUSTEE FOR THE HOLDERS OF THE CERTIFICATES, FIRST HORIZON MORTGAGE PASS-THROUGH CERTIFICATES SERIES FHAMS 2005- FA11, BY FIRST HORIZON HOME LOANS, A DIVISION OF FIRST TENNESSEE BANK NATIONAL ASSOCIATION, MASTER SERVICER, IN ITS CAPACITY AS AGENT FOR THE TRUSTEE UNDER POOLING AND SERVICING AGREEMENT, Civil Action No. 13-cv-10005-MLW Defendants. REPORT AND RECOMMENDATION ON DEFENDANT BANK OF NEW YORK MELLON S MOTION FOR SUMMARY JUDGMENT (Dkt. No. 79) AND DEFENDANT S MOTION TO STRIKE (Dkt. No. 85) CABELL, U.S.M.J. March 1, 2016 This matter arises from the defendant Bank of New York Mellon s (BONYM) 1 decision to foreclose on the home of the plaintiffs, Steven and Sally J. Carver (the plaintiffs) 2. The plaintiffs responded by filing a lawsuit challenging BONYM s right to foreclose, and BONYM in turn 1 BONYM acts as the Trustee for the holders of certain certificates, First Horizon Mortgage Pass-Through Certificates Series FHAMS 2005-FA11, by First Horizon Home Loans, a division of First Tennessee Bank National Association, Master Servicer, in its capacity as agent for the Trustee under the Pooling and Servicing Agreement. 2 Sally J. Carver passed away on February 28, 2014, after the case had commenced. (Dkt. No. 28). For convenience and consistency with the record, the Court continues to use the plural plaintiffs.
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 2 of 30 asserted several counterclaims. BONYM now moves for summary judgement on the plaintiff s claims as well as its own counterclaims. (Dkt. No. 79). For the reasons discussed below, it is respectfully recommended that BONYM s motion for summary judgment be granted on the plaintiffs claims, and granted in part and denied in part with respect to BONYM s counterclaims. BONYM also moves to strike an objection the plaintiffs filed challenging the Court s denial of the plaintiffs motion to compel discovery. (Dkt. No. 85). The Court recommends that the motion to strike be denied. I. RELEVANT FACTS 3 According to a foreclosure deed recorded in the Plymouth County Registry of Deeds on March 11, 2013, BONYM is the record owner of property located at 157 Old Ocean Street, Marshfield, Massachusetts (the property). Affidavit of Nationstar Mortgage, LLC, at Ex. A (Nationstar Aff.) (Dkt. No. 19). The plaintiffs at all relevant times resided at the property. On November 21, 2005, they executed a mortgage and a promissory note in connection with the property, in the amount of $333,750.00. Second Amended Petition to Try Title (Petition), at 7, 9 (Dkt. No. 8). The mortgage identified Mortgage Electronic Registration Systems, Inc. (MERS) 4 as the mortgagee solely as nominee for [the] Lender and Lender s successors and assigns, and named First Horizon Home Loan Corporation (First Horizon) as the lender. The mortgage was recorded on December 5, 2005, with the Plymouth County Registry of Deeds. Petition, at 8; 3 The facts are undisputed unless otherwise noted, and are set out in the light most favorable to the non-moving party. See DeNovellis v. Shalala, 124 F.3d 298, 302 (1st Cir. 1997). 4 MERS is a nonstock corporation owned by its members. It 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. Culhane v. Aurora Loan Servs. of Nebraska, 708 F.3d 282, 287 (1st Cir. 2013). Stated differently, the MERS system allows servicing rights and beneficial ownership interests to be traded electronically between members without the need to record publicly each mortgage assignment. Doing so facilitates the bundling and securitization of loans. Where a mortgage is assigned to a non-mers member, however, the transfer is recorded publicly and MERS involvement with the mortgage ends at that point. 2
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 3 of 30 BONYM Statement of Facts (SOF), at 3 (Dkt. No. 81). The promissory note was executed solely in favor of the lender First Horizon. Both the mortgage and note thereafter traveled separate paths before reuniting in BONYM s hands in June of 2012. The note traveled just once. On December 29, 2005, First Horizon transferred the promissory note to BONYM and it has remained there ever since. 5 BONYM SOF, at 10; Nationstar Aff., at 16. By contrast, the mortgage was assigned twice. In 2008, while MERS as nominee for First Horizon still held the mortgage, the plaintiffs defaulted on their mortgage and First Horizon sent them a letter dated June 17, 2008, giving them 90 days to cure the default. BONYM SOF, at 6. It is unclear whether the plaintiffs ever cured the default. Then, on January 16, 2009, MERS as nominee for First Horizon assigned the mortgage to First Horizon Home Loans, a Division of First Tennessee Bank National Association (FHHL), and the assignment was recorded on January 26, 2009 (the MERS assignment). 6 The MERS assignment identified MERS as the original mortgagee, was executed by a MERS representative, and was notarized. BONYM SOF, at 4; Nationstar Aff., at Ex. D. As of April 2011, the plaintiffs were again in arrears on their mortgage payments. On April 26, 2011, FHHL and the plaintiffs agreed to modify the plaintiffs loan by capitalizing the plaintiffs arrears and temporarily reducing their interest rate. BONYM SOF, at 7. The modified 5 BONYM s SOF asserts that First Horizon transferred the note to it on November 3, 2006 but this date appears to be a scrivener s error. BONYM SOF, at 10. BONYM cites the Affidavit of the mortgage servicer named Nationstar as support for the November 2006 date but Nationstar s affidavit states that the note was assigned to BONYM on December 29, 2005, and counsel for BONYM represented at oral argument that BONYM has held the note since December 2005. The rest of the record also supports the transfer date as being December 29, 2005. Accordingly, the Court is satisfied that First Horizon transferred the promissory note to BONYM on December 29, 2005. 6 The plaintiffs challenge whether the MERS assignment was legally effective to transfer an interest in the mortgage loan but they admit that the assignment exists and that it was recorded. Plaintiffs Responses to Defendant s Statement of Undisputed Facts ( Plaintiffs Responses ), at 4 (Dkt. No. 99). 3
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 4 of 30 payment plan proved ineffective, however. In August and September of 2011, the plaintiffs failed to make their modified mortgage payments. BONYM SOF, at 9. During this same time period, Nationstar Mortgage, LLC (Nationstar) began servicing the plaintiffs mortgage, effective August 16, 2011. Nationstar, as a sub-servicer of FHHL, sent the plaintiffs a 150-day notice of right to cure letter on September 8, 2011. BONYM SOF, at 8-9. 7 The plaintiffs did not cure the default. BONYM SOF, at 11. Nationstar consequently retained the law firm of Doonan Graves and Longoria, LLC, to commence foreclosure proceedings, and filed a Servicemembers Action with the Massachusetts Land Court. BONYM SOF, at 11. Shortly thereafter, on June 11, 2012, 8 a complaint to foreclose the mortgage was also filed with the Massachusetts Land Court. BONYM SOF, at 12. On June 13, 2012, the second assignment of the mortgage took place. FHHL assigned the mortgage to BONYM in BONYM s capacity as Trustee for the holders of the First Horizon Mortgage Pass-Through Certificates Series FHAMS 2005-FA11 (the FHHL assignment). The FHHL assignment identified MERS as the original mortgagee as nominee for First Horizon, and it was notarized, executed by a FHHL representative, and recorded on June 21, 2012. Nationstar Aff., at Ex. E; BONYM SOF, at 5. Thus, as of June 13, 2012, BONYM held both the promissory note and the mortgage. With respect to the mortgage, both the 2009 MERS assignment to FHHL and the 2012 FHHL 7 The plaintiffs dispute this assertion and contend in their opposition that BONYM had failed to provide any of the servicing agreements between Nationstar and FHHL, or Nationstar and BONYM. On June 18, 2015, however, BONYM submitted a supplemental affidavit which included the agreements. This evidence identified Nationstar as mortgage servicer and, further, set out its ability to act on behalf of FHHL and, effective October of 2011, its ability to act on behalf of BONYM. Supplemental Affidavit of Reneau J. Longoria, Esq. (Longoria Supp.), at Exs. A-D. (Dkt. No. 104). The Court provided the plaintiffs an opportunity to respond to the new evidence but they declined to do so. (Dkt. No. 111). Consequently, the Court treats the evidence as undisputed, and finds that Nationstar as of August 16, 2011 had the ability to act on behalf of FHHL. 8 BONYM asserts in its papers that the complaint was filed June 12th but the document itself is dated June 11, 2012. This minor discrepancy is of no consequence. 4
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 5 of 30 assignment to BONYM listed MERS as the original mortgagee. In addition, both assignments were executed by a representative of the assignor, both were notarized, and both were recorded. The Servicemembers Action and foreclosure proceedings remained pending in state court at the time of the FHHL assignment. With respect to the Servicemembers Action, the Order of Notice was published in the Marshfield Mariner on August 15, 2012, was served on the plaintiffs on August 22, 2012, and was recorded with the Registry of Deeds on August 27, 2012. Affidavit of Reneau J. Longoria, Esq. (Longoria Aff.), at 6, Ex. 2 (Dkt. No. 20). On September 5, 2012, BONYM sent the plaintiffs a notice of intent to foreclose the mortgage and pursue deficiency after foreclosure. BONYM SOF, at 16; Longoria Aff., at 7, Ex. 3. On September 13, 2012, Jeffrey Jefferson, a limited vice president of Nationstar as attorney in fact for BONYM, executed the affidavit regarding the note secured by the foreclosed mortgage. His affidavit stated among other things that (1) he was a duly authorized agent of Nationstar, (2) Nationstar was the mortgage servicer, and (3) Nationstar was also the authorized agent of BONYM, the foreclosing mortgagee and holder of the plaintiffs note. 9 BONYM SOF, at 18; Nationstar Aff., at 18, Ex. I. The foreclosure sale took place on November 16, 2012. At the time of the sale, the total debt owed under the note and mortgage was $407,403.16. BONYM purchased the property for $66,000.00, and a foreclosure deed of the property to BONYM was executed on December 12, 9 The plaintiffs attack the affidavit as hearsay but this attack is unavailing. Generally speaking, evidence must be admissible at trial in order to be considered on summary judgment. A significant exception, [however], is affidavits; under Fed. R. Civ. P. 56[(c)(4)], affidavits, although not themselves admissible at trial, may be offered in support of, or opposition to, summary judgment if they set forth facts that would be admissible under the Federal Rules of Evidence. A motion to strike is the proper vehicle for challenging the admissibility of materials submitted in support of a motion for summary judgment. Goguen ex rel. Estate of Goguen v. Textron, Inc., 234 F.R.D. 13, 16 (D. Mass. 2006) (citations omitted). Here, the plaintiffs merely assert without more that BONYM s materials are hearsay, and they have not moved to strike any specific documents or other portion of BONYM s summary judgment motion. The plaintiffs did file a motion to strike in connection with BONYM s first motion for summary judgment but that motion did not challenge any specific documents and was in any event denied. (Dkt. Nos. 26, 39). 5
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 6 of 30 2012. BONYM SOF, at 19, 25, 26; Longoria Aff., at 13; Nationstar Aff., at Ex. A. In conjunction with the foreclosure deed, a Nationstar official named Chris Carley executed an affidavit (the Carley affidavit). The Carley affidavit states that the principal, interest and tax obligations under the mortgage were not paid prior to the foreclosure sale, that notices of sale were published in the local newspaper, that Mr. Carley complied with all aspects of M.G.L. c. 244, 14, and that BONYM sold the mortgaged premises by public auction to BONYM on November 16, 2012. Nationstar Aff., at Ex. A; Longoria Aff., at Ex. 9. At the time of the foreclosure sale, the plaintiffs were due for the February 2012 payment. BONYM SOF, at 25. II. RELEVANT PROCEDURAL BACKGROUND The plaintiffs filed a petition to try title in state court pursuant to M.G.L. c. 240, and the matter was removed here on January 2, 2013. (Dkt. No. 1). On January 22, 2013, BONYM answered the plaintiffs petition and asserted counterclaims for breach of contract, unjust enrichment, declaratory judgment, and possession. BONYM SOF, at 46. (Dkt. No. 81). On February 12, 2013, the plaintiffs filed an answer to BONYM s counterclaims. BONYM SOF, at 47. (Dkt. No. 10). On February 20, 2014, BONYM filed its first motion for summary judgment. (Dkt. No. 16). The plaintiffs asserted that they could not adequately respond to the summary judgment motion without additional discovery, and subsequently filed (with Court permission) a motion to compel discovery. (Dkt. Nos. 26, 53, 58). The motion to compel was referred to a magistrate judge for resolution and the Court in the interim denied BONYM s motion for summary judgment without prejudice pending resolution of the motion to compel discovery. (Dkt. No. 62). On December 10, 2014, the magistrate judge denied the motion to compel discovery. (Dkt. No. 74). On December 17, 2014, BONYM renewed its motion for summary judgment via the present 6
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 7 of 30 motion. (Dkt. No. 79). On December 29, 2014, the plaintiffs filed an objection to the magistrate judge s denial of their motion to compel. (Dkt. No. 84). On January 12, 2015, BONYM filed a motion to strike the plaintiffs objection. (Dkt. No. 85). The plaintiffs objection is pending before the District Judge while the motion to strike has been referred to this Court for a report and recommendation. III. STANDARD OF REVIEW A party is entitled to summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(a). The moving party bears the initial burden of assert[ing] the absence of a genuine issue of material fact and then support[ing] that assertion by affidavits, admissions, or other materials of evidentiary quality. Mulvihill v. Top-Flite Golf Co., 335 F.3d 15, 19 (1st Cir. 2003). A fact is material if it might affect the outcome of the suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine issue of material fact exists where the evidence with respect to the material fact in dispute is such that a reasonable jury could return a verdict for the nonmoving party. Id. at 258. Once the moving party has satisfied its burden, the burden shifts to the non-moving party to set forth specific facts showing that there is a genuine, triable issue. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). The Court must view the entire record in the light most favorable to the non-moving party and indulge all reasonable inferences in that party's favor. Johnson v. Gordon, 409 F.3d 12, 17 (1st Cir. 2005). Summary judgment is appropriate if, after viewing the record in the non-moving party's favor, the Court determines that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. Id. 7
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 8 of 30 Although the plaintiffs oppose summary judgment, they have not submitted a statement of facts, opting instead to respond to BONYM s statement of undisputed material facts. Notably, many of those responses are argumentative, lack support in the record, contain legal rather than factual assertions, and present the absence of fact as evidence of a material dispute. Plaintiffs Responses to Defendant s Statement of Undisputed Facts ( Plaintiffs Responses ), at 1, 4, 5, 7, 8, 9, 10, 18, 19, 24, 40. Rule 56 contemplates more than this. Under L.R. 56.1, a party opposing a motion for summary judgment shall include a concise statement of the material facts of record as to which it is contended that there exists a genuine issue to be tried, with page references to affidavits, depositions and other documentation. Likewise, under Fed. R. Civ. P. 56(c)(1), where an opposing party asserts that a fact is genuinely disputed, the assertion must be supported by specific reference to materials in the record or by demonstration that the moving party s statements are not supported by the record. Fed. R. Civ. P. 56(c)(1). Generally, only evidence that would be admissible at trial may be considered in connection with a motion for summary judgment. Iorio v. Aramarck Servicemaster, C.A. No. 03-40147, 2005 WL 3728715, at *6 (D. Mass. Sept. 30, 2005). Thus, while endeavoring to construe the facts in the light most favorable to the plaintiffs, the Court is constrained to consider only those responses and statements that are material and properly supported. IV. DISCUSSION As a threshold matter, the plaintiffs argue anew that they cannot adequately respond to BONYM s summary judgment motion without the benefit of the discovery they sought through their motion to compel. As noted above, the plaintiffs have challenged the magistrate judge s denial of their motion and that challenge remains pending at present. (Dkt. No. 84). As explained more fully below, the Court does not believe that the requested discovery bears on any of the issues 8
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 9 of 30 presented in the summary judgment motion. It is appropriate, therefore, to proceed to consider the arguments on the merits. 10 The Parties Claims Broadly speaking, the plaintiffs attack the overall process leading to BONYM s purchase of the property at foreclosure in three ways. First, they argue that bifurcating the note from the mortgage in 2005 violated state law and the terms of the mortgage, rendering the subsequent assignments and foreclosure invalid. Second, they argue that regardless of the bifurcation, the 2009 MERS and 2012 FHHL assignments suffered from several infirmities which rendered them invalid and incapable of passing a valid interest in the mortgage. Third, they argue that the 2012 foreclosure sale was invalid because it failed to comply with certain statutory requirements. BONYM contends it received valid title through the foreclosure proceeding and asserts counterclaims for breach of the mortgage contract and unjust enrichment. BONYM also seeks a declaratory judgment that the foreclosure was lawful, and seeks actual possession of the property. 11 (1) The Claim Regarding Bifurcation of the Note and Mortgage BONYM was assigned the note on December 29, 2005, but was not assigned the mortgage until June 13, 2012. Thus, from December 29, 2005 to June 13, 2012, the note and mortgage were held by different entities. The plaintiffs advance two arguments related to this fact. They argue as an initial matter that BONYM has failed to show it held the note as of December 29, 2005. They argue that, regardless, the bifurcation of the note from the MERS mortgage breached the terms of 10 The Court invited the plaintiffs at oral argument to submit supplemental briefing explaining how each piece of information they sought might be germane to any claim in the summary judgment motion. They declined to do so. (Dkt. No. 111). 11 Even though BONYM purchased the property through foreclosure in 2012, the plaintiff Steven Carver has continued to reside there. 9
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 10 of 30 the mortgage contract at Paragraph 20. Plaintiffs Opp n, at p. 17; Petition, at 19. Neither argument has merit. With respect to the first argument, the plaintiffs attempt to create a dispute by pointing to an apparent conflict between Nationstar s Affidavit, which denotes the December 29, 2005 transfer date, and the language of the January 2009 MERS assignment, which purports to transfer the mortgage and the note to FHHL. The plaintiffs argue that BONYM cannot credibly contend it held the note in December of 2005 if MERS claimed to have assigned it in January of 2009. There is no genuine dispute, however. It is true that the January 2009 MERS assignment indicates that MERS assigns said mortgage and the note and claim to FHHL, but this appears to be nothing more than superfluous, empty language. Among other things, the plaintiffs acknowledge elsewhere in their opposition that First Horizon ceased being the Lender when it sold or assigned its interests in [the plaintiffs ] note on or before December 29, 2005. Plaintiffs Opp n, at p. 6. Consistent with this assertion, BONYM avers through affidavit that it received the note via an assignment from First Horizon on December 29, 2005. Nationstar Aff., at 16. Moreover, BONYM at oral argument subsequently produced the original note and a scanned version was submitted as part of the record. (Dkt. No. 110). The plaintiffs were invited to respond to the evidence but declined to do so. Against this backdrop, the wording in the 2009 MERS assignment provides no basis to undermine this Court s conclusion that BONYM received the note from First Horizon on December 29, 2005, and has held it since then. See e.g., Culhane v. Aurora Loan Services of Nebraska, 708 F.3d 282, 293, n. 8 (1st Cir. 2013) (Where court found similar language not compelling in light of the record, stating [i]t is plain, however, that MERS never held the note. We need not probe this point because 10
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 11 of 30 this superfluous language does not affect the validity of the transfer of legal title to the mortgaged property. ). The plaintiffs argue that even assuming the note was assigned to BONYM, that assignment violated Massachusetts law and/or paragraph 20 of the mortgage because the note could not properly be split from the mortgage. This argument fails easily. Splitting a note and mortgage does not violate state law because the note and the mortgage are instruments which exist on separate planes and need not be held by the same entity. Culhane, 708 F.3d at 292; Butler v. Deutsche Bank Trust Co. Americas, 748 F.3d 28, 32-3 (1st Cir. 2014) ( Suffice it to say, Massachusetts allows a mortgage to be split from its underlying note. ). Similarly, bifurcating the mortgage and note did not violate paragraph 20 of the mortgage agreement. Paragraph 20 provides in relevant part that, [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 Borrower. Petition, at 18. The plaintiffs argue that, because paragraph 20 provides that the note may be transferred together with this Security Instrument, it means they must stay together and any separate transfers of the note and mortgage would thus violate this provision. The Massachusetts Land Court has considered and rejected this very argument. Considering language identical to that relied upon here by the plaintiffs, the Court stated: According to its plain terms and its usual and ordinary sense, paragraph 20 does not require that the Note and Mortgage be conveyed together. It simply addresses the question of what notice is to be provided to the borrower upon sale of the Note and/or Mortgage. It provides that the Note can be transferred, along with the Mortgage, without prior notice to the borrower. On the other hand, if the Loan Servicer changes, then the borrower is entitled to written notice of that change. Paragraph 20 does not require that the Note and Mortgage be assigned together. The assignment of the Note to another entity while MERS held the Mortgage did not breach the Mortgage. 11
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 12 of 30 Abate v. Freemont Inv. & Loan, No. 12 MISC 464855 RBF, 2012 WL 6115613, at *12 (Mass. Land Ct. Dec. 10, 2012) aff'd sub nom. Abate v. Fremont Inv. & Loan, 470 Mass. 821 (2015). The First Circuit has similarly considered this same argument based on the same language and rejected it as baseless, particularly where, as here, the mortgage and note were separated at their inception. See Culhane, 708 F.3d at 293, n. 6, ( This suggestion [that the mortgage and note cannot be bifurcated] 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: [the Lender] was granted the note and MERS the mortgage. ). The reasoning articulated in Abate and Culhane is sound and the Court follows it here. The bifurcation of the note and mortgage did not violate state law or the terms of the mortgage contract. Accordingly, the transfer of the note to BONYM on December 29, 2005 was valid. (2) The Claims Regarding The Mortgage Chain of Title Moving on from the 2005 transfer of the note, the plaintiffs allege that the MERS and FHHL assignments in 2009 and 2012 respectively were invalid, and that BONYM as a consequence never possessed valid title. Between their petition and their opposition to the motion for summary judgment, the plaintiffs appear to advance three principal arguments in support of this claim. First, the plaintiffs contend that a public prospectus document they obtained somehow suggests that MERS was required to first assign the mortgage to another entity before it could properly be assigned to FHHL. Alternatively, they argue that MERS lost the authority to assign the mortgage at all because the mortgage was pooled along with other MERS mortgages in a trust governed by a document referred to as the pooling and services agreement (PSA). 12 Petition, at 12 Neither party explains exactly what a PSA is or whether the PSA here is similar to those in other cases involving MERS. In any event, it appears to be the governing document used where mortgage loans are pooled together in a 12
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 13 of 30 21-35. The plaintiffs argue that additional discovery is needed in order to determine whether these claims have merit, further rendering summary judgment inappropriate. Second, the plaintiffs argue that the mortgage assignments were void because First Horizon, which transferred the note to BONYM, and FHHL, which was assigned the mortgage from MERS, were not members of MERS. They argue also that MERS failed as required to disclose the principal it acted as agent for in connection with the assignment, and in any event could not assign the mortgage because neither it nor First Horizon held the note at the time of the MERS assignment to FHHL. See Petition, at 52f-h. Third, the plaintiffs claim that, even if MERS had the authority to assign their mortgage, the MERS and FHHL assignments failed to comply with state law. They argue that (1) the assignments were not lawfully executed in accordance with M.G.L. c. 183, 30 because the signatories to the assignments did not personally appear before the notaries to sign on the dates in question; (2) the signatories were not duly authorized and improperly signed the assignments on behalf of both the assignor and assignee, in violation of M.G.L. c. 183, 54B; and (3) the assignments failed to comply with M.G.L. c. 183 because there was a lack of consideration and the assignments failed to list the mortgage broker or originator. Petition, at 52a-e; 62a-e. The Court addresses each of these arguments in turn. i. The Claim That The MERS Assignment May Have Violated The PSA The plaintiffs claim that, according to a prospectus they obtained, the MERS assignment may have violated a requirement that it be assigned to another entity before being assigned to FHHL, or may have alternately been invalidated if it was pooled with other mortgages pursuant to the PSA. They argue that more discovery is needed to determine whether the requirements of the trust and converted into mortgage-backed securities. [and generate] a potential income stream for investors. See U.S. Bank Nat. Ass'n v. Ibanez, 458 Mass. 637, 649 (2011). 13
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 14 of 30 PSA were followed, and contend that BONYM should be required to show that it lawfully obtained title to the plaintiffs mortgage in compliance with the PSA. This argument is unavailing, however, because the plaintiffs have no standing to challenge the MERS assignment as violative of the PSA. A mortgagor may challenge an assignment of his mortgage on the ground that the assignee is not actually the mortgagee, because that claim, if true, would render the assignment void. Culhane, 708 F.3d at 290; Lindsay v. Wells Fargo Bank, C.A. No. 12-11714, 2013 WL 5010977, at *7 (D. Mass. Sept. 11, 2013) (Mortgagor has standing to challenge the validity of an assignment based on an argument that the assignor did not in fact hold the mortgage and, thus, had no interest to assign. ). By contrast, a mortgagor has no standing to challenge shortcomings that would merely render an assignment voidable. Culhane, 708 F.3d at 291. Claims that assert procedural infirmities or defects in the assignment of a mortgage are thus barred for lack of standing. Cades v. Bank of New York Mellon, C.A. No. 13-12116, 2013 WL 6212592, at *4 (D. Mass. Nov. 29, 2013). The reasoning behind this distinction is straightforward. A homeowner in Massachusetts even when not a party to or third party beneficiary of a mortgage assignment has standing to challenge that assignment as void because success on the merits would prove the purported assignee is not, in fact, the mortgagee and therefore lacks any right to foreclose on the mortgage. Wilson v. HSBC Mortgage Servs., Inc., 744 F.3d 1, 9 (1st Cir. 2014). That same homeowner, though, lacks standing to claim the assignment is voidable [for some procedural infirmity] because the assignee still would have received legal title vis-a-vis the homeowner. Thus, even successfully proving that the assignment was voidable would not affect the rights as between those two parties or provide the homeowner with a defense to the foreclosure action. Id. Because a claim that an assignment violated the terms of a PSA alleges at most a procedural infirmity, a 14
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 15 of 30 mortgagor has no standing to challenge an assignment on that ground. See Woods v. Wells Fargo Bank, N.A., 733 F.3d 349, 354 (1st Cir. 2013); see also, Jepson v. HSBC Bank USA, Nat. Ass n, C.A. No. 12-12179, 2013 WL 639184, at *5 (D. Mass. Feb. 20, 2013) ( [B]oth state and federal courts in Massachusetts have uniformly held that mortgagors may not attack an assignment based on the alleged failures to comply with PSAs, which are contracts to which the borrowers are not a party. ). In short, this claim fails to raise a genuine issue as to the validity of the MERS assignment. See Cades, 2013 WL 6212592, at *4 ( Insofar as [the plaintiff s] amended complaint also suggests that the assignments were in violation of the Trust s Pooling and Servicing Agreement, we find that no standing exists as to those alternate claims, which would render the assignment only voidable. (quoting Woods, 733 F.3d at 354)). And, for the same reasons, no additional discovery is warranted where it would at most go to show that the MERS assignment was voidable. ii. The Claim That MERS Structure Rendered The Assignments Invalid The plaintiffs argue, in a cover-all-bases fashion, that First Horizon and FHHL are not members of MERS. This matters, they argue, because non-mers entities may not receive valid title from or assign valid title to a MERS member. They argue further that MERS could not have been acting as the mortgagee when it assigned the mortgage because it never had any interest in the note at any relevant time. Finally, they argue that MERS had no authority to assign the mortgage because it did not in the assignment disclose the identity of the principal it was acting for, and did not have the principal s authority. Plaintiffs Opp n, at pp. 6 and 14. None of these assertions has any force, however, even assuming the factual allegations are true. To begin, the plaintiffs have no standing to attack the MERS assignment on the ground that it involved a transfer to a non-mers member, because that claim, even if true, would at most 15
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 16 of 30 render the assignment voidable but not void. Mitchell v. U.S. Bank Nat. Ass'n, No. 12 MISC 473427, 2014 WL 1159707, at *14 (Mass. Land Ct. Mar. 21, 2014) ( If parties to the [mortgage assignment] were not MERS members, that would not make the [assignment] void. Depending on the facts, it might make it voidable, but the [plaintiffs], as non-parties to [the assignment] or any relevant agreement with MERS, would have no right to void the transfer. ). Regardless, First Horizon and FHHL did not need to be MERS members in order to effect valid assignments because MERS members can transfer interests among themselves as well as to non-mers member institutions. Indeed, the MERS business model functions to streamline the process of securitization and trading of mortgages. Woods, 733 F.3d at 359, n. 1. Thus, where MERS is named as a mortgage nominee, [t]he mortgage note can then be assigned freely among MERS members. Id. When a transfer is made to a non-mers member, however, MERS then transfers away its interest as mortgagee, thus ending its involvement in the assignment process. Id. Stated differently, the MERS structure itself contemplates assignments to non-mers members. Similarly, although MERS held the mortgage as nominee for First Horizon but had no beneficial interest in the note, that did not deprive MERS of the ability to assign the mortgage. Under Massachusetts law a mortgage and note are separate instruments. When a note and a mortgage are held by separate parties, the mortgagee holds a bare legal interest, and the note holder enjoys the beneficial interest. Culhane, 708 F.3d at 293. The mortgagee thus does not need to have a beneficial interest in order to hold a mortgage. Id. at 291 ( There is no reason to doubt the legitimacy of the common arrangement whereby MERS holds bare legal title as mortgagee of record and the note holder alone enjoys the beneficial interest in the loan. ). This matters because an entity with a legal interest in a mortgage may properly assign that interest under Massachusetts 16
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 17 of 30 law. See Shea v. Fed. Nat. Mortg. Ass n, 87 Mass. App. Ct. 901, 903 (2015) (Despite note holder s right to demand and obtain an assignment of the mortgage, MERS as mortgagee retained the right to assign the mortgage unilaterally absent any restriction in the mortgage document. ); Mills v. U.S. Bank, N.A., 753 F.3d 47, 51-2 (1st Cir. 2014) (Noting that MERS retains the ability to remain mortgagee of record, possessing a legal interest in a homeowner s mortgage, while the beneficial interest in that accompanying note is transferred among MERS member institutions. ). In short, because MERS had a legal interest in the mortgage, it had the authority to assign that interest in the mortgage regardless of whether it held the note (which it did not), or had permission from the note holder. 13 Abate, 2012 WL 6115613, at *8 (Indicating that the path of the note or determining who holds the note is not relevant to whether the [a]ssignment [of the mortgage] was valid because the parties to the assignment do not need to have held the [n]ote in order to pass title). Finally, the plaintiffs argument that MERS was somehow limited to acting on behalf of a principal it failed to get authority from, or moreover failed to identify the principal as required, is simply incorrect. It is settled in Massachusetts that MERS has the authority to assign the mortgage, with or without the demonstration of its principal s assent. Id.; see also, Mitchell, 2014 13 The plaintiffs argue that the additional discovery they have requested discovery regarding MERS structure and its contractual relationship with its members - might affect the outcome of this argument. The Court cannot agree. Whatever that discovery might show, it is clear that MERS held a legal interest in the mortgage as nominee for First Horizon, and that fact alone gave it the authority to assign the mortgage to FHHL in 2009. To be sure, the plaintiffs in their challenge to the denial of the motion to compel raise additional arguments in support of their need for more discovery. They appear to argue that MERS as an entity does not have any rights whatsoever in the mortgaged properties securing MERS-related loans, and therefore had no rights in the plaintiffs property here, and thus cannot be considered a mortgagee. They appear also to argue also that Massachusetts is a title theory state rather than a lien theory state, and that an entity like MERS cannot exist in a title theory state. The argument that MERS business model runs counter to the nature of Massachusetts mortgage law has been resoundingly rejected by the First Circuit. See Woods v. Wells Fargo Bank, N.A., 733 F.3d 349, 355 (1st Cir. 2013). No additional discovery is warranted on this issue. 17
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 18 of 30 WL 1159707, at *14 ( MERS had the authority to assign the [m]ortgage without identifying its principal or further demonstrating its authority. ). iii. The Claim That The Assignments Failed to Comply With State Law 1. The signatories appearance before notaries The plaintiffs petition asserts that the MERS and BONYM assignments were not lawfully executed in accordance with M.G.L. c. 183, 30 or otherwise because the signatories Marcia Williams and Adam Davis did not personally appear before notaries to sign on the dates in question. Petition, at 52(a), 62(a). This argument has no merit. In the first instance, the plaintiffs do not have standing to raise this argument because it alleges a procedural infirmity which would at most render the assignments voidable rather than void. See e.g., Bank of New York Mellon Corp. v. Wain, 85 Mass. App. Ct. 498, at 503-04 (2014) (Where the plaintiff asserted the assignment was not done in person before a notary public the court held that this claim failed for a more fundamental reason because the homeowners themselves have no right to raise such issues. ). Moreover, although BONYM specifically addresses this issue in its motion for summary judgment, the plaintiffs do not address or support the claim in their opposition, thus relying solely on the conclusory assertion in the petition that the assignments were, in essence, robo-signed. That conclusory assertion is not entitled to any weight on summary judgment, however. Peterson v. GMAC Mortgage, LLC, C.A. No. 11-11115, 2011 WL 5075613, at *5 (D. Mass. Oct. 25, 2011) (Where there is a bare speculative and conclusory assertion of robo-signing, it is not entitled to any weight by the court. ). The claim fails on the merits, though, because both assignments explicitly contain language from the notaries indicating that Williams and Davis appeared personally before them. Nationstar 18
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 19 of 30 Aff., at Ex. D (where Sharon Lawrence, notary public in the state of Texas, notarized the MERS assignment and indicated that Marcia Williams personally appeared before her on January 16, 2009); and Ex. E (where Eric Ray Acklin, notary public in the state of Texas, notarized the FHHL assignment and indicated that Adam Davis personally appeared before him on June 13, 2012). The plaintiffs have simply offered no evidence to rebut the undisputed evidence and the Court finds that the signatories to the assignments did personally appear before the notaries. 2. The signatories authorization to execute the assignments The plaintiffs allege in the petition that Williams and Davis were not duly authorized to execute the assignment(s) on behalf of MERS and FHHL. Further, the plaintiffs claim that the assignments were otherwise invalid because Williams and Davis were acting on behalf of the loan servicer at the same time, and thus purported to execute the assignment as both assignor and as assignee, a legal impossibility. Petition, at 52(b) and (c); 62(b) and (c). Under M.G.L. c. 183, 54B, an assignment that is executed: M.G.L. c. 183, 54B. by a person purporting to hold the position of president, vice president secretary 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, and no vote of the entity affirming such authority shall be required to permit recording. For the reasons discussed above, the plaintiffs lack standing to bring these claims because the deficiencies, even if true, would at most render the assignments voidable rather than void. Wain, 85 Mass. App. Ct. at 502-03 (Where foreclosing entity has established that it validly holds the mortgage, mortgagor has no legally cognizable stake in whether there otherwise might be latent defects in the assignment process). The argument fails on the merits regardless because all that 19
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 20 of 30 M.G.L. c. 183 54B requires is that the person executing the assignment purport to hold one of the identified positions within the entity holding the mortgage. There is no dispute that each of the signatories here held one of the identified positions. Nationstar Aff., at Ex. D (revealing that Williams executed the MERS assignment in her capacity as Assistant Secretary of MERS); and Ex. E (revealing that Davis executed the FHHL assignment in his capacity as limited vice president of Nationstar, as attorney in fact for FHHL). Notwithstanding the plaintiffs claim, it does not matter whether the signatories signing on behalf of the assigning mortgage holder were also employees of the mortgage servicer. Culhane, 708 F.3d at 294. In Culhane, the signatory on an assignment was an employee of the loan servicer as well as a vice president of MERS, and her designation as vice president of MERS was put in place purely as a matter of administrative convenience. Id. The First Circuit rejected the argument that this duality violated the statute, explaining that: 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 president of an assignor corporation. While MERS 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. Id. (quoting Brogan v. United States, 522 U.S. 398, 408 (1998)). In short, the assignments here did not run afoul of M.G.L. c. 183, 54B. 3. The lack of consideration and the failure to list the mortgage broker or originator in the assignments Finally, the plaintiffs petition alleges that the assignments fail for lack of consideration under M.G.L. c. 183, 6 and thus should not have been accepted for recording. The petition further alleges that the assignments fail to comply with M.G.L. c. 183, 6D because they fail to 20
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 21 of 30 list the mortgage broker or originator. Petition, at 52(d) and (e); 62(d) and (e). For the reasons stated above, the plaintiffs lack standing to challenge the assignments for reasons that at most could only render the assignments voidable. Culhane, 708 F.3d at 291. The claim further fails on its face because M.G.L. c. 183 6 is not applicable to assignments. That section provides that: Every deed presented for record shall contain or have endorsed upon it the full name, residence and post office address of the grantee and a recital of the amount of the full consideration thereof in dollars or the nature of the other consideration therefore, if not delivered for a specific monetary sum. The full consideration shall mean the total price for the conveyance without deduction for any liens or encumbrances assumed by the grantee or remaining thereon. All such endorsements and recitals shall be recorded as part of the deed. Failure to comply with this section shall not affect the validity of any deed. No register of deeds shall accept a deed for recording unless it is in compliance with the requirements of this section. M.G.L. c. 183, 6 (emphasis added). By its very language, section 6 applies to deeds, not assignments. Moreover, noncompliance does not affect the validity of the deed. The claim thus fails. Abate, 2012 WL 6115613, at *9 ( Section 6 applies only to deeds, not assignments, and makes clear that noncompliance does not affect the validity of any deed. The claim that non-compliance affects the validity of the [a]ssignment, thereby invaliding [the Bank s] status as mortgage holder at the time of foreclosure, fails. ). The related claim that the assignments fail to list the mortgage broker or originator as required by section 6D fails for the same reasons. The plaintiffs have no standing to challenge a procedural infirmity in the assignment. The claim fails as well on the merits. Section 6D provides that: Every mortgage and assignment of mortgage presented for record, in which a mortgage broker is involved shall contain or have endorsed upon it the name, post office address and license number of the mortgage broker and, if applicable, the mortgage loan 21
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 22 of 30 originator responsible for placing the mortgage loan with the mortgagee. This endorsement, or notation that no mortgage broker or mortgage loan originator was involved in the mortgage, if known, shall be recorded as part of the mortgage or assignment of mortgage. Failure to comply with this section shall not affect the validity of any mortgage or the recording of any mortgage or assignment of mortgage. M.G.L. c. 183, 6D (emphasis added). The language of the statute directly undermines the plaintiffs argument because [f]ailure to comply with this section shall not affect the validity of the recording of any assignment of mortgage. The Massachusetts Land Court has accordingly concluded that non-compliance with 6D does not affect the validity of the [a]ssignment. Abate, 2012 WL 6115613, at *9 (The legislature s intent in 6D was to ensure that an entity s status as holder of a mortgage cannot be challenged because the mortgage instrument or instrument transferring the mortgage fails to list the broker or originator ). For that reason, the plaintiffs claim here does not undermine the validity of the assignments. (3) Validity of the Foreclosure Sale To place the plaintiffs claims attacking the validity of the foreclosure sale in context, it bears noting that Court has already concluded that (1) BONYM has held the note since late 2005, (2) the MERS and FHHL assignments were valid and effectively passed title to BONYM on June 13, 2012, and (3) BONYM thus held both the note and mortgage as of that date. BONYM subsequently provided the plaintiffs with notices of a foreclosure sale on September 5, 12 and 19, 2012. As such BONYM had standing to conduct the foreclosure sale that took place in November of 2012. See Eaton v. Federal Nat l Mortg. Ass n, 462 Mass. 569 (2012). The plaintiffs argue that the foreclosure sale was nevertheless invalid because BONYM failed to give them proper notice of their right to cure their default, both in violation of paragraph 22 of the mortgage and M.G.L. c. 244 35A. It is unclear whether the plaintiffs rely on the notice 22
Case 1:13-cv-10005-MLW Document 114 Filed 03/01/16 Page 23 of 30 sent after their first default in 2008, or the latter notice sent in 2011 by Nationstar. To the extent it is the 2008 notice, their argument fails because BONYM did not rely on this notice in its Servicemembers action. Longoria Aff., at Ex. 1. (Dkt. No. 20). Regarding the 2011 notice sent by Nationstar, that notice identified FHHL as the mortgage holder and identified First Horizon as the originator of the loan. Nationstar Aff., at Ex. H. The plaintiffs argue that because Nationstar rather than FHHL sent the notice, it failed to comply with M.G.L. c. 244, 35A, because the statute, read literally, requires the mortgagee to notify the mortgagor of the right to cure. BONYM argues that notices of default need not comply strictly with M.G.L. c. 244, 35A. The Court agrees. Massachusetts law provides that mortgagors are entitled to an opportunity to cure a mortgage default prior to foreclosure. M.G.L. c. 244, 35A. Specifically, a mortgagee that seeks to foreclose on a mortgage must notify the mortgagor of his right to cure, and shall not enforce the mortgage until at least 150 days after such notification has been provided. 14 Id. The notice must be given by the mortgagee to the mortgagor, and must provide the mortgagor with certain information, including the nature of the default, the date by which the mortgagor may cure the default, the name and address of the mortgagee, and the telephone number for a representative of the mortgagee whom the mortgagor may contact. Id. Section 35A also requires that a right to cure notice inform the mortgagor of various categories of information, including the name and address of the mortgagee or anyone holding thereunder. Id. The Supreme Judicial Court of Massachusetts (SJC) recently determined that strict or exact compliance with Section 35A is not a prerequisite to a valid foreclosure because the statute does not relate to the actual foreclosure itself. US Bank Nat l Ass n v. Schumacher, 467 Mass. 421, 14 M.G.L. c. 244, 35A was amended as of January 1, 2016 and now provides a mortgagor 90 rather than 150 days to cure a payment default. That amendment has no bearing on any aspect of this case. 23