By Verified Complaint filed September 10, 2008, Plaintiff Sand Canyon Mortgage Corporation, f/k/a Option One Mortgage Corporation (Sand Canyon), seeks a declaratory judgment, pursuant to G. L. c. 240 §§ 6-10, to revive a mortgage held by Sand Canyon (Sand Canyon Mortgage), alleging discharged without authorization, which encumbered property known as 9 Bagnall Avenue in Saugus (Property). Sand Canyon also seeks a declaration that the Sand Canyon Mortgage is superior to the interests of Defendants and any subsequent liens or interests created after the recording of the Sand Canyon Mortgage. [Note 2]
On March 19, 2010, Defendant Mortgage Electronic Registration Systems, Inc., as nominee for MSA Mortgage, LLC (MERS), filed a Motion for Summary Judgment requesting that the court declare the Sand Canyon Mortgage void and enter judgment declaring that a subsequent mortgage held by MERS (MERS Mortgage) is superior to the Sand Canyon Mortgage. Sand Canyon opposed this motion through a written opposition filed on May 10, 2010. A hearing was held on June 22, 2010, at which all parties were heard. The summary judgment record includes affidavits of Erica P. Bigelow, Esq., counsel for MERS; Meredith Swisher, Esq., and Deborah J. Dunlop, paralegal at Bernkopf Goodman, both on behalf of Plaintiff; in addition to the parties briefs and submissions filed in accordance with Land Court Rule 4. [Note 3] The following material facts are not in dispute:
1. Sand Canyon is a corporation having a usual place of business at 3 Ada Drive, Irvine, California.
2. MERS is a corporation having a usual place of business at P.O. Box 2026, Flint, Michigan.
3. Defendant Joseph Vincent Flammia is an individual with a last known mailing address at the Property.
4. Defendant Edward John Flammia is an individual with a last known mailing address at the Property.
5. On September 7, 2006, Joseph Vincent Flammia granted a mortgage on the Property to Sand Canyon to secure a debt of $308,550.00. The Sand Canyon Mortgage was recorded in Book 26076, at Page 34 of the South Essex District Registry of Deeds. At the time the Sand Canyon Mortgage was granted, Joseph Flammia did not have a record in the Property.
6. Joseph Flammia subsequently defaulted on the loan secured by the Sand Canyon Mortgage. On April 14, 2007, Plaintiff instituted foreclosure proceedings against Joseph Flammia with a total debt outstanding of $324,636.12.
7. On August 15, 2007, a discharge of the Sand Canyon Mortgage was recorded with said Deeds in Book 27108, at Page 44, without Sand Canyons authorization or knowledge. The debt secured by the Sand Canyon Mortgage was not paid in full and the account remains active.
8. On September 24, 2007, Edward John Flammia granted a mortgage on the Property to MERS to secure a debt of $200,000. The MERS Mortgage is recorded with said Deeds in Book 27205, at Page 170. The MERS Mortgage references a deed dated February 1, 2002, recorded in Book 18276, at Page 448 as the source of Edward Flammias title to the Property.
9. At the time the MERS Mortgage was granted, an examination of the grantor index at said Deeds would have shown that Edward John Flammia had held title to the Property since September 13, 2002, when a deed from Edward Flammia and Joseph V. Flammia to Edward Flammia was recorded in Book 19223, at Page 340. A title search from the February 1, 2002 deed referenced in the MERS Mortgage going forward would disclose the chain of title as follows:
a. Deed dated February 1, 2002 from Edward Flammia and Joseph V. Flammia to Edward Flammia, recorded with said Deeds in Book 18276, at Page 448. This deed was recorded on February 4, 2002.
b. Deed dated March 15, 2002, recorded on September 13, 2002 from Edward Flammia to Joseph V. Flammia and Edward Flammia, recorded with said Deeds in Book 18426, at Page 307.
c. Deed dated February 1, 2002 recorded on September 13, 2002, from Edward and Joseph V. Flammia to Edward Flammia, recorded with said Deeds in Book 19223, at Page 340. This deed is identical to the deed referenced in paragraph a above.
d. The MERS Mortgage.
At the time of the MERS Mortgage, MERS was a bonafide purchaser for value, without knowledge of the Sand Canyon Mortgage.
10. The summary judgment record also establishes that prior to the recording of the MERS Mortgage, the following instruments affecting the Property were also of record with said Deeds, but did not appear in the chain of title under Edward Flammia in the grantor index:
a. A deed dated April 20, 2005, from Portigiola Corporation President: Edward John Flammia to Joseph Vincent Flammia, recorded with said Deeds in Book 24193, at Page 136 (Portigiola Instrument). The Portigiola Instrument was indexed under Portigiola Corp. as grantor.
b. The Sand Canyon Mortgage recorded with said Deeds on September 12, 2006, in Book 26076, at Page 34, which references the Portigiola Instrument as the source of Joseph Flammias title.
c. Discharge of the Sand Canyon Mortgage dated August 15, 2007, recorded in Book 27108, at Page 44.
d. Deed dated August 28, 2007, from Joseph Vincent Flammia to Edward John Flammia recorded with said Deeds in Book 27145, at Page 227.
11. There is no deed of record conveying an interest in the Property from Edward Flammia individually to Portigiola Corporation, Portigiola Corp., or Portigiola, Inc.
12. There is no Portigiola Corporation, existing or dissolved, listed in the database of the Massachusetts Secretary of State. A corporation entitled Portigliola, Inc. is of record with the Massachusetts Secretary of State and Edward Flammia is listed as President of Portigliola, Inc.
13. MERS is a bona fide purchaser for value without notice of the Sand Canyon Mortgage.
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A motion for summary judgment may be granted only where there are no genuine issues of material fact in dispute that would preclude disposition of the case as a matter of law. See Community Natl Bank v. Dawes, 369 Mass. 550 , 553-56 (1976). Rule 56(c) of the Massachusetts Rules of Civil Procedure . . . provides that a judge shall grant a motion for summary judgment if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Attorney General v. Bailey, 386 Mass. 367 , 370-71 (1982) (internal quotations omitted). In reviewing a motion for summary judgment, the court shall not assess the credibility of witnesses or the weight of the evidence or make its own decisions of facts. Hub Assocs. v. Goode, 357 Mass. 449 , 451 (1970). The moving party bears the burden of affirmatively showing that there is no triable issue of fact. See Ng Bros. Constr., Inc. v. Cranney, 436 Mass. 638 , 644 (2002).
Equitable subrogation is an exception to the general rule prior in time is prior in right which courts have applied to adjust mortgage priority as an extension of the courts broad power over mortgages. East Boston Savings Bank v. Ogan, 428 Mass. 327 , 328-29 (1998). In applying this equitable principal, courts have frequently held that where a mortgage has been discharged by mistake, equity will set the discharge aside and reinstate the mortgage to the position the parties intended it to occupy, where the rights of intervening lienors have not been affected. Provident Co-op. Bank v. James Talcott, Inc., 358 Mass. 180 , 189 (1970) (internal citations omitted). An important limitation on courts exercising this broad equitable power is that subrogation is appropriate only absent prejudice to innocent third party purchasers. General Builders Supply Co. v. Arlington Co-op Bank, 359 Mass. 691 , 696 (1971) (internal citations omitted).
MERS argues the Sand Canyon Mortgage is void because when it was granted, Joseph Flammia did not have any record interest in the Property. Joseph Flammia claimed a record interest based on the Portigiola Instrument. However, there is no deed conveying an interest to the Portigiola Corporation. MERS further argues that even if the Portigiola Instrument relied upon by Sand Canyon is not a nullity, MERS, as a bona fide purchaser for value without notice, is entitled to rely on the record. On the date or recording of the MERS Mortgage, the record indicated that the Sand Canyon Mortgage had been discharged and consequently, the Sand Canyon Mortgage cannot be revived and subrogated to priority position to the detriment of MERS.
As an initial matter, this court finds that MERS was a bona fide purchaser for value, without notice of the Sand Canyon Mortgage. Although Sand Canyon challenges MERS claim that it is a bona fide purchaser by alleging that MERS had constructive notice of the Sand Canyon Mortgage, it has failed to establish facts to prove its allegation. First, Sand Canyon incorrectly asserts that MERS bears the burden of proving it is a bona fide purchaser. [O]ne claiming that another is not a bona fide purchaser has the burden of proof. Board of Selectmen of Hanson v. Lindsay, 444 Mass. 502 , 509-10 (2005). Second, Sand Canyons contention that MERS should be charged with constructive notice is unfounded. As noted above, the Portigiola Instrument was indexed with said Deeds under Portigiola Corp. as grantor. Consequently, MERS could not have discovered the Sand Canyon Mortgage by conducting a search under Edward Flammia in the grantor index. As a result, MERS could not have obtained actual notice by means of a search conducted in the conventional method, and cannot be charged with constructive notice. Devine v. Town of Nantucket, 449 Mass. 499 , 512 (2007) (internal quotations omitted).
Sand Canyon further argues that MERS should have conducted a title examination of both Edward Flammia and Joseph Flammia given the number of times the Property was conveyed between Edward and Joseph for nominal consideration. However, Sand Canyon cannot point to any facts that would require that MERS look beyond Edwards name in the grantor index. A purchaser has no duty of inquiry . . . when there are matters of title which are at most ambiguous concerning some possible impropriety which, if were known by the purchaser, would affect his title. Richardson v. Lee Realty Corp., 364 Mass. 632 , 635 (1974). At best, the numerous conveyances between Edward and Joseph Flammia (and other family members) were suspicious, but not themselves sufficient to put MERS on notice that a title examination using Joseph Flammias name was necessary. See Dalessio v. Baggia, 57 Mass. App. Ct. 468 (2003) (declining to impute constructive notice to mortgagee of out-of-chain conveyance made by defendant-mortgagor as trustee when locus was held by defendant and his wife, despite more than 200 conveyances of locus by defendant individually and as trustee).
Finally, even assuming that MERS had, or should have had, notice of the Portigiola Instrument, MERS would still have been entitled to rely on the discharge of the Sand Canyon Mortgage. The discharge of the Sand Canyon Mortgage was recorded prior to the recording of the MERS Mortgage and Sand Canyon has pointed to nothing in the record that would have put MERS on notice that the discharge was fraudulent or unauthorized. [Note 4] A reasonably diligent title examiner searching for the record title holder of the Property would have concluded, as MERS did, that Edward Flammia held good, clear, and marketable title.
However, this court need not reach the question of whether Plaintiff has met its burden in showing that the Sand Canyon Mortgage should be reinstated and subrogated to the MERS Mortgage. As asserted by MERS, Joseph Flammia did not hold any interest in the Property at the time he granted the Sand Canyon Mortgage. This is so because Joseph Flammias purported source of title was the Portigiola Instrument which was a nullity because Portigiola Corporation never held title to the Property. The conveyance by a grantor that does not hold title exceeds a mere scriveners error and makes the Portigiola Instrument void. [Note 5] Because the Sand Canyon Mortgage relies on the Portigiola Instrument as the source of Joseph Flammias title, this court holds that the Sand Canyon Mortgage is invalid and cannot be subrogated to a priority position. For the reasons set forth herein, Defendant MERS motion for summary judgment hereby is GRANTED.
Judgment to issue accordingly. Karyn F. Scheier
Dated: December 30, 2010
[Note 1] MERS is the only remaining Defendant. All Defendants, except MERS and Gregory Lane, were defaulted by the court pursuant to Mass. R. Civ. P. 55(a) for failing to appear and answer. Defaults were entered against Joseph Vincent Flammia, Edward John Flammia, and Town of Saugus on November 14, 2008. The United States of America and MERS were defaulted on February 2, 2009, although the MERS default was later vacated on March 10, 2009. Defendant Gregory Lane entered into an Agreement for Declaratory Judgment on November 14, 2008, agreeing that Sand Canyon Mortgage is a valid lien, superior to Lanes interest.
[Note 2] In addition, the Verified Complaint sought a lis pendens on the Property, pursuant to G. L. c. 184, § 15, which was allowed by the court on September 10, 2008, and an attachment against the properties of Edward John Flammia was issued by the court on September 29, 2008.
[Note 3] On June 1, 2010, MERS filed a Reply Memorandum of Defendant in support of its Motion for summary judgment, but failed to serve Sand Canyon. As a result, the court allowed Sand Canyon to submit a Response to Defendants Reply Memorandum which Sand Canyon submitted on or before July 6, 2010, as invited to do by the court. MERS subsequently filed a Motion to Strike Plaintiffs Response to Defendants Reply Memorandum on July 8, 2010, which was denied by the court.
[Note 4] Although Sand Canyon insists it is entitled to further discovery because MERS never responded to its request for the loan origination file served on October 5, 2009, Sand Canyon has failed to demonstrate the requisite due diligence both in pursuing discovery before the summary judgment initiative surfaces and in pursuing an extension of time thereafter by failing to file a motion to compel and only first raising the issue in its July 15, 2010 Rule 56(f) affidavit filed months after discovery had ended on January 29, 2010.
[Note 5] In its brief, MERS also argued that the Sand Canyon Mortgage was defective because the Portigiola Instrument upon which it relies lacks a notarial acknowledgement. Sand Canyon denied this fact and asserted that because the second page of the Portigiola Instrument was not recorded, there is a material fact in dispute as to whether it was acknowledged. This court finds that whether or not the Portigiola Instrument was acknowledged, the Sand Canyon Mortgage is nonetheless a nullity for the reasons set forth herein. Therefore, the question of acknowledgement, even if in dispute, is not material to this courts holding.