CENTRAL MORTGAGE COMPANY and another [Note 1] v. STEPHEN GALEBACH and others [Note 2]

COVEN, P.J. This appeal follows the entry of partial summary judgment [Note 3] and a jury verdict after our return of this case to the trial court following our decision in HSBC Bank USA, Nat'l Ass'n v. Galebach, 2012 Mass. App. Div. 155 (Galebach I). We return this case for a new trial concluding that, pursuant to Galiastro v. Mortgage Elec. Registration Sys., Inc., 467 Mass. 160 (2014), the Galebachs were entitled to litigate the ownership of the mortgage note at the time of the foreclosure upon their property.

In Galebach I, we reversed an order of summary judgment in favor of HSBC Bank USA concluding that a genuine issue of material fact existed as to whether HSBC Bank USA complied with required conditions for the foreclosure sale on the Galebachs' property. See G.L. c. 244 et seq. Specifically, we held that the affidavit of sale relied upon to prove compliance with G.L. c. 244 was deficient. Galebach I, supra at 158-161. We observed in Galebach I that the issue of whether the foreclosing entity was the proper note holder was contested. Id. at 157 n.8. We noted that absence because while the case was on appeal and days before oral argument, the Supreme Judicial Court issued its opinion in Eaton v. Federal Nat'l Mtge. Ass'n, 462 Mass. 569 (2012), holding, in what appeared to be a prospective ruling, [Note 4] that a foreclosure by statutory power of sale is invalid unless a foreclosing mortgagee, as that term is used

Page 32

in G.L. c. 244, holds both the mortgage and the underlying mortgage note at the time a notice of sale is issued. [Note 5] Eaton, supra at 571.

On return of this case, the Galebachs filed a motion to amend their answer to include new defenses and counterclaims. That motion was allowed over objection. The status of the ownership of the note was squarely raised. Prior to trial, plaintiffs filed a motion to exclude evidence related to the holder or owner of the promissory note based upon Eaton and a prior ruling of the court that Eaton was prospective and could not be raised as an issue.

The Supreme Judicial Court in Galiastro v. Mortgage Elec. Registration Sys., Inc., 467 Mass. 160 (2014), readdressed the issue of the applicability of Eaton. The Court stated:

"Although we observed [in Eaton,] that 'somewhat similarly situated' parties would not receive the benefit of that interpretation, we did not decide whether parties in a procedural posture identical to that of the litigants in Eaton could receive such a benefit. Consequently, that question has resulted in conflicting treatment by different panels of the Appeals Court. . . .

"We . . . now decide that the interpretation of 'mortgagee' announced in Eaton is applicable to cases that were pending on appeal in the Appeals Court when the rescript in Eaton issued, and in which the litigants asserted and preserved a claim that a foreclosure by power of sale is invalid where the foreclosing mortgagee does not hold the note. Where multiple cases await appellate review on precisely the same question, it is inequitable for the case chosen as a vehicle to announce the court's holding to be singled out as the 'chance beneficiary' of an otherwise prospective rule" (citations omitted).

Galiastro, supra at 166-168.

We reject the plaintiffs' argument that, because the Eaton issue was not raised in Galebach I, the issue of whether the plaintiffs held the mortgage and note at the time of the purported foreclosure is waived. The Galiastro clarification was based on equity. It would be inconsistent with the equitable reasoning of Galiastro to restrict its holding, as argued by the plaintiffs, to those cases where the issue was raised on an active appeal at the time of Eaton. We conclude that to deny a mortgagor the right to raise an Eaton issue in pre-appeal litigation would, in the words of Galiastro, divide inequitably classes of litigants into lucky "chance beneficiar[ies]" and those that are not. Id. at 168. In these circumstances, though initially not raised in Galebach I, on

Page 33

return of this case an amended answer with defenses and counterclaims was filed and allowed and the Eaton issue was then placed in active litigation. [Note 6]

We turn to the error claimed on the counterclaim for fraud. A motion for summary judgment is in order and shall be granted where the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there are no genuine issues as to any material fact and where the summary judgment record entitles the moving party to judgment as a matter of law. Nashua Corp. v. First State Ins. Co., 420 Mass. 196, 202 (1995). "A complete failure of proof concerning an essential element of the non-moving party's case renders all other facts immaterial" and mandates summary judgment in favor of the moving party. Kourouvacilis v. Gen. Motors Corp., 410 Mass. 706, 711 (1991).

In their counterclaim, the Galebachs alleged that the plaintiffs, deliberately and with knowledge, wrongfully misrepresented and concealed the true identity of the holder and owner of the mortgage note. They further alleged that the action of the plaintiffs harmed them by denying them the right and opportunity to work out a negotiated agreement with the true note holder.

In ruling upon the cross motions, the motion judge acknowledged that sufficient evidence existed to maintain an action for fraud. However, notwithstanding a pleaded claim of fraud, the court ruled on a narrow basis that the Galebachs' claim was, in reality, a claim of slander of title. The motion judge reasoned that the actual theory of the fraud claim rested upon the assertions of the Galebachs that the plaintiffs filed false documents in the registry of deeds. And, under this theory, the motion judge concluded that the Galebachs, not having suffered a "realized or liquidated" loss, could not maintain a slander of title claim.

Although the motion judge may have been correct that a slander of title claim was not supported, [Note 7] the fraud claim was sufficiently pleaded and supported. There was

Page 34

evidence that the original note lacked the proper chain of title for HSBC Bank USA to be the true note holder, and the note, as presented, was created to make it appear that HSBC Bank USA was the owner of the note.

The matter is returned to the trial court for a new trial.