In this action, Plaintiffs Daniel J. Lyons and Tammy A. Lyons challenge the validity of a foreclosure deed issued for property at 21 Chapin Street in Northborough, Massachusetts (the Property). Defendant Mortgage Registration Systems, Inc. (MERS) as nominee for Defendant Countrywide Home Loans, Inc. (Countrywide) issued said Foreclosure Deed to a third party [Note 1] after conducting a foreclosure sale on October 26, 2009. In their Verified Complaint, the Plaintiffs assert that MERS did not have proper authority to conduct the foreclosure sale and that, therefore, the sale was void as a matter of law. The Plaintiffs claim that, because the foreclosure sale was conducted by a party lacking the statutory power of sale under the mortgage, there is a cloud on the Plaintiffs title to the Property. Finally, the Plaintiffs assert that only the lender, as the holder of the note, has the right to execute the power of sale under the mortgage until, and unless, it has assigned that mortgage. The Plaintiffs contend that there is no such assignment of record here, and seek cancellation of any unrecorded assignments which may have been made.
On February 9, 2010, Defendants MERS and Countrywide filed a Motion to Dismiss Plaintiffs Complaint, under Mass. R. Civ. P. 12(b)(6). On February 26, 2010, the Plaintiffs filed their Opposition thereto. A hearing on the Motion was held on June 9, 2010, at which time the court invited the parties to submit certain supplemental documentation referenced in, and/or relied upon, in the Plaintiffs Verified Complaint. [Note 2] The Defendants submitted additional documents on June 21 and June 23, 2010; the Plaintiffs submitted additional documents on June 22, 2010.
After considering the documents which are referenced in, or are integral to, the Complaint (including the Plaintiffs Certificate of Title to the Property, the Note and Mortgage, and the Foreclosure Deed and Affidavit), the parties written memoranda of law, and representations made during the hearing on the Defendants Motion to Dismiss, I conclude that the Plaintiffs are not entitled to relief under any of the theories advanced in their Complaint. The Defendants Motion to Dismiss is ALLOWED.
The salient facts in this case are not disputed. The Plaintiffs are listed as owners of the Property on Transfer Certificate of Title No. 14907, issued by the Worcester County District Registry of the Land Court on May 7, 2003. [Note 3] On November 22, 2005, the Plaintiffs executed a note in favor of Countrywide in the amount of $200,000 (the Note). On the same day, the Plaintiffs granted a mortgage on the Property, to secure the Note. Said mortgage was registered on November 30, 2005 in the Worcester County Registry District of the Land Court as Document No. 89153 (the Mortgage), and noted as an encumbrance on the Plaintiffs Certificate of Title to the Property. There are no assignments of the Mortgage (to MERS or any other party) noted on Certificate of Title No. 14907.
The Mortgage executed by the Plaintiffs identifies Countrywide as the Lender and MERS as the mortgagee. The Mortgage states that
MERS is a separate corporation that is acting solely as nominee for Lender and Lenders successors and assigns.
MERS is the mortgagee under this Security Instrument.
The Mortgage further provides, under the heading POWER OF SALE, that
[t]his Security Instrument secures to the Lender: (i) the repayment of the Loan, and all renewals, extensions and modifications of the Note; and (ii) the performance of Borrowers covenants and agreements under this Security Instrument and the Note. For this purpose, Borrower does hereby mortgage, grant, and convey to MERS (solely as nominee for Lender and Lenders successors and assigns) and to the successors and assigns of MERS, with power of sale, the following described property 21 Chapin Street, Northborough Massachusetts. (Emphasis added).
In their Motion to Dismiss, the Defendants assert that MERS, as designated mortgagee under the express terms of the Mortgage, was entitled, upon breach of the Mortgage conditions, to execute the power of sale contained in the Mortgage, by conducting a foreclosure auction pursuant to G.L. c. 244, § 14. In the Plaintiffs Opposition to the Motion, they do not deny that they were in default of their obligations under the Mortgage prior to the foreclosure sale. Nor do the Plaintiffs argue that the foreclosure sale was not conducted in accordance with statutory procedures for notice and advertising. Rather, the Plaintiffs contest the authority of MERS to foreclose on the Property and conduct the foreclosure sale, by asserting that only Countrywide, as Lender, was authorized do so where there is no record that the Mortgage was ever assigned to MERS. The Plaintiffs, moreover, contest the legality of the MERS as nominee for Lender arrangement specified in the Mortgage, asserting that such an arrangement unlawfully separates the note and the mortgage.
The Mortgage expressly designates MERS as the mortgagee (solely as nominee for the Lender, and its successors and assigns). Moreover, for the purpose of securing the Borrowers performance under the Mortgage and the Note, the Mortgage includes the Lyons express grant and conveyance of the Property, with the power of sale, to MERS as nominee in said capacity.
There is no viable basis for the Plaintiffs claim that the foreclosure sale of the Property should be invalidated because MERS foreclosed on the Property as nominee for Countrywide. The Mortgage itself specifically names MERS (as nominee for the Lender) as the mortgagee, and expressly grants the power of sale to MERS as nominee. I find nothing in G.L. c. 244, §14 which would obviate these rights. [Note 4]
The U.S. Bankruptcy Courts decision in In re Huggins, 357 B.R. 180 (Bankr. D. Mass. 2006), also illuminates the fallacy in the Plaintiffs arguments that MERS lacked authority to foreclose as the Lenders nominee because such an arrangement unlawfully separates the note and mortgage. [Note 5] Addressing circumstances strikingly similar to those in the instant case, the Bankruptcy Court ruled in Huggins that MERS as the mortgagee named in a recorded mortgage (albeit in a nominee capacity) was authorized under G.L. c. 244, § 14 to exercise the power of sale. In re Huggins, 357 B.R. at 183. The Bankruptcy Court also found no disconnection between the note and the mortgage where MERS was acting as nominee for the lender which held the note, and that the logic of a denial of MERSs foreclosure right as mortgagee would lead to anomalous and perhaps inequitable results, to wit, if MERS cannot foreclose though named as mortgagee, then either [the lender] can foreclose though not named as mortgagee or no one can foreclose, outcomes not reasonably or demonstrably intended by the parties.
In re Huggins, 357 B.R. at 184.
Here, too, the Plaintiffs expressly granted the Mortgage to MERS (as nominee for the Lender), with the power of sale. As a result of this grant, MERS needed no assignment. Where such an arrangement is entirely consistent with the express terms of the Mortgage, as well as with Massachusetts law, the Plaintiffs complaint does not plausibly suggest an entitlement to relief. Iannacchino v. Ford Motor Company, 451 Mass. 623 , 636 (2008). Accordingly, Judgment shall enter dismissing the Plaintiffs Complaint, with prejudice.
Judith C. Cutler, Justice
Dated: 4 January 2011
[Note 1] Said foreclosure deed was issued to the Bank of New York Mellon f/k/a The Bank of New York as Trustee for the Certificate Holders CWABS, Inc. Asset-Backed Certificates Series 2005-17.
[Note 2] An evaluation under 12(b)(6) can properly include the entirety of documents integral to, referenced in, or explicitly relied upon in the complaint, even if they were not attached to said complaint. See, e.g., Johnston v. Box, 453 Mass. 569 , 583 (2009) and Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43 , 45, n.4 (2004), and cases cited therein.
[Note 3] Prior to the issuance of said Certificate, the Plaintiffs had acquired fractional interests in the Property under Transfer Certificate No. 14789. Said Certificate No. 14789 was cancelled when Transfer Certificate No. 14907 was issued to the Plaintiffs.
[Note 4] Section 14 of Chapter 244, entitled Procedure in Foreclosure Under Power of Sale; Form and Publication of Notice, provides, in relevant part that [t]he mortgagee , or a person authorized by the power of sale may, upon breach of condition and without action, do all the acts authorized or required by the power...(Emphasis added).
[Note 5] The cases cited by the Plaintiffs to support their arguments are either not relevant to question of whether a lenders nominee may exercise the power of sale, or are not controlling because the cases are from another jurisdiction.