Plaintiff, LaSalle Bank National Association, as Trustee for the Registered Holders of Structured Asset Securities Corporation, Structured Asset Investment Loan Trust, Mortgage Pass-Through Certificates, Series 2004-8, commenced this case on January 14, 2008, seeking to remove a cloud on title, pursuant to G.L. c. 240, §§ 6-10, from a parcel of real property, known as and numbered 279 Common Street in Quincy, owned of record by Defendant John OSullivan. Defendant, Capital Trust, LLC, answered the Complaint on February 20, 2008, and filed a Counterclaim and Cross-claim. Plaintiff answered the Counterclaim on March 24, 2008. [Note 1]
On August 13, 2009, Plaintiffs filed a Motion for Summary Judgment. Defendant Capital filed a Cross-Motion for Summary Judgment on September 15, 2009. The motions were argued on October 21, 2009, and are the matters presently before the court.
After reviewing the record before the Court, I find that the following facts are not in dispute:
1. Defendant John OSullivan (Defendant OSullivan) is the owner of a parcel of real property, known as and numbered 279 Common Street in Quincy (Property).
2. In order finance the purchase the Property, Defendant OSullivan obtained two loans from Finance America, LLC (Finance America), on June 16, 2004, signing promissory notes in favor of Finance America in the amounts of $308,000.00 and $77,000.00. In exchange, Defendant OSullivan granted two mortgages on the Property to Mortgage Electronic Registration Systems (MERS), as nominee for Finance America.
3. The mortgage securing the $308,000.00 note was recorded on June 16, 2004, with the Norfolk County Registry of Deeds, Book 21168, Page 432 (First LaSalle Mortgage).
4. The mortgage securing the $77,000.00 note was recorded on June 16, 2004, with the Registry of Deeds, Book 21168, Page 453 (Second LaSalle Mortgage).
5. The notes and mortgages were subsequently assigned to Plaintiff. [Note 2]
6. In late 2005, Defendant OSullivan attempted to refinance the First and Second LaSalle Mortgages through a company called LSI Local Solutions (LSI). As a result, LSI sent Ocwen Loan Servicing [Note 3] payoff checks on behalf of Defendant OSullivan for both the First and Second LaSalle Mortgages.
7. Subsequently, Defendant OSullivan exercised a contractual right to cancel the mortgage refinance transaction. As a result, LSI requested that the payoff checks be returned.
8. On January 23, 2006, MERS recorded Deeds of Release, dated December 7, 2005, with the Registry of Deeds, Book 23330, Page 237 and 238, discharging the First and Second LaSalle Mortgages.
9. At all times relevant, the notes secured by the First and Second LaSalle Mortgages were not satisfied.
10. The mortgages were discharged in error.
11. On September 11, 2006, MERS recorded a Rescission of Full Reconveyance, dated July 26, 2006, with the Registry of Deeds, Book 24064, Page 416, reinstating the Second LaSalle Mortgage.
12. On October 16, 2006, Defendant OSullivan subdivided the Property into three parcels. The approved subdivision was filed with the Registry of Deeds, Page 68 of 2006 (PLBK#561).
13. Defendant OSullivan intended to build a residential structure on one of the subdivided lots.
14. In order to finance the construction, Defendant OSullivan applied for a construction loan from Defendant Capital Trust, LLC (Defendant Capital), in November 2006.
15. Defendant Capital is an asset-based lender, which generally does not consider the borrowers ability to repay but places emphasis on the value of the collateral. Typically, during the application process, Defendant Capital speaks with the applicant to review the project and to determine whether there are any existing mortgages on the property. Defendant Capital also visits and inspects the property to perform an appraisal of the property. Defendant Capital does not require a written loan application or obtain a credit report.
16. Defendant OSullivan does not recollect whether Defendant Capital asked about the LaSalle Mortgages, during the application process.
17. Defendant OSullivan does not recollect whether Defendant Capital requested documents relating to the LaSalle Mortgages, during the application process.
18. During the application process, Defendant OSullivan did not conceal anything but was very open on everything; whatever they asked him for, he gave.
19. Christopher M. Anderson, a corporate representative of Defendant Capital has no recollection of whether Defendant OSullivan told him that the First LaSalle Mortgage encumbered the Property, during the application process.
20. Mr. Anderson does not remember the amount that Defendant OSullivan told him was owed on the prior mortgages on the Property, during the application process.
21. During the application process, Mr. Anderson does remember discussing the Second LaSalle Mortgage with Defendant OSullivan.
22. Mr. Anderson finds the $77,000 figure of the Second LaSalle Mortgage familiar, stating that it seems more in the range of the amount of the mortgage of record.
23. Mr. Anderson does not recognize the $308,000 figure of the First LaSalle Mortgage, stating that he does not recall the dollar amount seeming as significant as this large amount.
24. On November 28, 2006, Defendant Capital loaned Defendant OSullivan $50,000.00, in exchange for a mortgage of the Property. The mortgage was recorded on November 29, 2006, with the Registry of Deeds, Book 24311, Page 585.
25. On January 3, 2007, Defendant Capital loaned Defendant OSullivan $200,000.00, in exchange for a mortgage of the Property. The mortgage was recorded on January 3, 2007, with the Registry of Deeds, Book 24422, Page 237.
26. On April 7, 2007, MERS recorded a Rescission of Full Reconveyance, dated April 4, 2007, with the Registry of Deeds, Book 24702, Page 45, reinstating the First LaSalle Mortgage.
Summary judgment is granted where there are no issues of material fact and when the moving party is entitled to judgment as a matter of law. Mass. R. Civ. P. 56(c); Cassesso v. Commr of Corr., 390 Mass. 419 , 422 (1983); Cmty. Natl Bank v. Dawes, 369 Mass. 550 , 553 (1976). The moving party bears the burden of demonstrating affirmatively the absence of a triable issue, and its entitlement to judgment as a matter of law. Pederson v. Time, Inc., 404 Mass. 14 , 16-17 (1989). In viewing the record before it, the Court reviews the evidence in the light most favorable to the nonmoving party. Donaldson v. Farrakhan, 436 Mass. 94 , 96 (2002).
In the present case, the issue before the court is whether Defendant Capital had actual knowledge of the erroneously discharged LaSalle Mortgage at the time that Defendant Capital took its mortgage. While the question of actual knowledge is ordinarily one of fact, here, the parties do not dispute the facts of the Defendant Capitals usual business practices in investigating and approving loans or the interactions between Defendant OSullivan and Christopher M. Anderson, corporate representative of Defendant Capital. Thus, there is no triable issue in controversy in this case, and the case is, therefore, proper for summary judgment.
General Laws chapter 183, § 4 provides in pertinent part: A conveyance of an estate in fee simple, fee tail, or for like shall not be valid against any person, except the grantor his heirs and devisees and persons having actual knowledge of it, unless it is recorded in the registry of deeds for the county or district in which the land to which it relates lies. In other words, an unrecorded conveyance of an interest in land is valid against those persons with actual knowledge of the conveyance. G.L. c. 183, § 4; Bd. of Selectmen of Hanson v. Lindsay, 444 Mass. 502 , 510 (2005); Commonwealth Elec. Co. v. MacCardell, 66 Mass. App. Ct. 646 , 648-49 (2006).
Actual notice is a question of fact. McCarthy v. Lane, 301 Mass. 125 , 128 (1938). The party relying on the unrecorded instrument bears the burden of demonstrating actual notice, by a preponderance of the evidence. Hughes v. Williams, 229 Mass. 467 , 470 (1918); McCarthy, 301 Mass. at 129; see Mishara v. Albion, 341 Mass. 652 , 655 (1961). The purpose of the recording statute is to create a system on which purchasers may rely. Richardson v. Lee Realty Corp., 364 Mass. 632 , 635 (1974) (citing Swasey v. Emerson, 168 Mass. 118 , 120 (1897)). Therefore, actual notice is strictly construed. McCarthy, 301 Mass. at 128 (and cases cited); Gen. Builders Supply Co. v. Arlington Coop. Bank, 359 Mass. 691 , 697 (1971); Richardson, 364 Mass. at 635 (and cases cited). Thus, it is said that [k]nowledge of facts which would ordinarily put a party upon inquiry is not enough. McCarthy, 301 Mass. at 128 (and cases cited), cited in Richardson, 364 Mass. 632 (1974) (possible improprieties by an executor on record in the registry of probate, which might have invalidated a sheriffs sale, were too ambiguous to create a duty of inquiry into the validity of the sale); cf. Emmons v. White, 58 Mass. App. Ct. 54 , 67 (2003) (Purchaser who knew details of an impending settlement agreement had knowledge specific and unambiguous enough to trigger a duty in him to inquire about whether it had been fully effectuated.) (citing Feldman v. Souza, 27 Mass. App. Ct. 1142 , 1144 (1989)).
However, actual notice does not require affirmative personal knowledge of the conveyance. Curtis v. Mundy, 44 Mass. 405 , 407 (1841). Generally, [i]ntelligible information of a fact, either verbally or in writing, and coming from a source which a party ought to give heed to is sufficient. George v. Kent, 89 Mass. 16 , 18 (1863); accord White v. Foster, 102 Mass. 375 , 380 (1869).
In the present case, Defendant OSullivan has no specific recollection of what questions or documents Defendant Capital asked of him, regarding either of the LaSalle Mortgages, during the application process for the mortgages from Defendant Capital. He states simply that he did not conceal anything but was very open on everything; contending that whatever they asked him for, he gave.
Similarly, Mr. Anderson has no recollection of whether, during the application process, Defendant OSullivan told him that the First LaSalle Mortgage continued to encumber the Property; nor does he remember the amount that Defendant OSullivan told him was owed on the prior mortgages. However, Mr. Anderson does remember discussing the Second LaSalle Mortgage with Defendant OSullivan. In addition, Mr. Anderson finds the $77,000 figure of the Second LaSalle Mortgage familiar, stating that it seems more in the range of the amount of the mortgage of record but does not recognize the $308,000 figure of the First LaSalle Mortgage, stating that he does not recall the dollar amount seeming as significant as this large amount.
These facts do not demonstrate that Defendant Capital had intelligible information regarding the First LaSalle Mortgage, which would constitute actual notice. Neither party remembers any discussion of that mortgage, but Mr. Anderson remembers specifically discussing the Second LaSalle Mortgage. A partys blanket statement that he or she does not remember any specific information given, but knows that he or she gave all information asked for, is simply not sufficient to demonstrate that the party informed had actual notice of any particular information. A party must demonstrate that the party charged with notice actually had knowledge of the specific information. See Tramontozzi v. DAmicis, 344 Mass. 514 , 517 (1962) (the mere existence of information is not sufficient to constitute actual notice). Given the strict standard with which the court applies in determining actual notice, I do not find that Plaintiff has met its burden here.
Plaintiff points out that Defendant OSullivan incorrectly told Defendant Capital that the Second LaSalle Mortgage encumbers only one of the subdivided lots of the Property. Plaintiff appears to argue that when Defendant Capital discovered this was not the case, it was obligated to make an inquiry to determine whether Defendant OSullivan had been further in error on the title to the Property. I disagree. As Mr. Anderson stated in his deposition, a lay landowner does not necessarily know the correct state of his or her title and legally, incorrect statements, such as the one in this case, must be commonplace. Moreover, Defendant OSullivans incorrect statement is not sufficiently specific or unambiguous to require the imposition of inquiry notice on Defendant Capital.
Therefore, the First LaSalle Mortgage was not valid as against Defendant Capital at the time Defendant Capital took its mortgages encumbering the Property. Defendant Capital was correct in relying upon the record. At the time Defendant Capital obtained its two mortgages, only the Second LaSalle Mortgage was on record as encumbering the Property. As a result, the Defendant Capitals mortgages lie in second and third positions.
As a final matter, Defendant Capital has filed a Cross-Claim against Defendant OSullivan, seeking damages from him in the eventuality that the court rules in favor of Plaintiff and subordinates the Defendant Capitals mortgages to the First LaSalle Mortgage. As the court has ruled in favor of Defendant Capital, this Cross-Claim is inapplicable.
For the foregoing reasons, this court concludes that Defendant Capital is the holder of two mortgages encumbering the Property which mortgages lie in second and third position, subordinate only to the Second LaSalle Mortgage. Plaintiff has not met its burden of proving actual notice by Defendant Capital of the erroneously discharged First LaSalle Mortgage at the time that Defendant Capital took its mortgages. Therefore, the First LaSalle Mortgage was not valid as against Defendant Capital at the time Defendant Capital took its mortgages encumbering the Property. In accordance with the foregoing, the Plaintiffs Motion for Summary Judgment is DENIED and the Defendant Capitals Cross-Motion for Summary Judgment is ALLOWED.
Judgment to issue accordingly.
Charles W. Trombly, Jr.
Dated: November 16, 2009
[Note 1] Defendant John OSullivan has failed to make a responsive pleading to either the Complaint or Cross-Claim against him.
[Note 2] The assignment of the First LaSalle Mortgage and has not been recorded. The record does not indicate whether the Second LaSalle Mortgage was recorded; however, that fact is not relevant to the present matter.
[Note 3] Ocwen Loan Servicing is the currently services the LaSalle Mortgages.