BANK OF NEW YORK MELLON AS TRUSTEE FOR THE CERTIFICATE HOLDERS OF CWMBS 2004-12 vs. WAYNE M. ROBINSON and RAMONA A. ROBINSON

Plaintiff filed its Verified Complaint To Remove Cloud on Title on April 28, 2010, pursuant to the provisions of G. L. c. 240, § 6 and G. L. c. 231A, attempting to reform a mortgage granted by Defendant Wayne M. Robinson (“Wayne”) which Defendant Ramona A. Robinson (“Ramona”) (together with Wayne, “Defendants”) did not execute. A case management conference was held on May 28, 2010. Plaintiff filed its Motion for Summary Judgment on September 17, 2010, together with supporting memorandum and Affidavit of Richard Fendley. On November 15, 2010, Ramona filed her Opposition and Cross-Motion, together with supporting memorandum and Statement of Material Facts. A hearing was held on the two motions on January 20, 2011, and the matter was taken under advisement. [Note 1]

I find the following material facts are not in dispute:

1. By deed dated March 6, 2002, and recorded with the Middlesex South District Registry of Deeds (the “Registry”) at Book 35002, Page 302, Defendants took title to property located at 7 Mount Vernon Street, North Reading, MA (“Locus”) as tenants by the entirety.

2. On March 6, 2002, Wayne and Ramona, as Borrowers, executed a mortgage (“Mortgage 1”) in the amount of $212,100.00 on Locus to Option One Mortgage Corporation, which was recorded with the Registry at Book 35002, Page 305.

3. On March 2, 2004, Wayne executed a Uniform Residential Loan Application for a refinance of Mortgage 1.

4. Wayne executed a mortgage (“Mortgage 2”) in the amount of $270,000.00 on Locus to MERS, as nominee for America’s Wholesale Lender, dated April 2, 2004, and recorded with the Registry at Book 42533, Page 562. Mortgage 2 listed Wayne as the sole Borrower. A Fixed/Adjustable Rate Rider to MERS as nominee was executed the same day by Wayne as sole Borrower. A HUD Settlement Statement was executed the same day by Wayne as sole Borrower. The HUD Settlement Statement indicated that $211,195.73 of the loan proceeds were used to pay off Mortgage 1.

5. By notarized letter dated September 8, 2010, and filed with this court on September 14, 2010, Wayne stated that he took full responsibility for the payments under Mortgage 2.

6. Wayne and Ramona executed a Separation Agreement (the “Separation Agreement”) on September 17, 2010, which was allowed by the Middlesex Probate and Family Court on the same day. A copy of the Separation Agreement was filed with this court at a status conference held on September 23, 2010. The Separation Agreement provides that Locus shall be sold “as soon as possible.”. The Settlement Agreement also provided

The parties agree to share the expenses of any transaction should the property be sold. Such as stamp taxes, recording fees, drafting of deed, discharge tracking fees, and recording of discharge, and shall split equally any proceeds thereafter. [Note 2]

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The sole issue in the case at bar is whether Ramona should have been a party to Mortgage 2. Both parties agree that Mortgage 2 currently encumbers only Wayne’s one-half interest in Locus. The summary judgment record discloses that Wayne and Ramona jointly own Locus and jointly executed a purchase money mortgage (Mortgage 1). The summary judgment record also discloses that the proceeds of Mortgage 2 were used to pay off Mortgage 1. Plaintiff argues that Ramona will be unjustly enriched if her interest is not subject to Mortgage 2, as she received the benefit of the pay-off of Mortgage 1, on which she was liable. Plaintiff also points out that there are no junior liens on Locus which would be detrimentally impacted by equitable relief in this matter. Ramona argues that she never intended to execute Mortgage 2 and as a result there was no mutual mistake, and points out that she never executed the mortgage application, Mortgage 2, or the HUD Settlement Statement. As a result, she argues, the summary judgment record does not disclose any intention for her to be bound by Mortgage 2, and the mistake was a unilateral mistake made by Plaintiff.

“[A] court acting under general principles of equity jurisprudence has broad power to reform, rescind, or cancel written instruments, including mortgages, on grounds such as fraud, mistake, accident, or illegality.” Beaton v. Land Court, 367 Mass. 385 , 392 (1975). Unjust enrichment is another equitable ground that warrants reformation of a mortgage. “Unjust enrichment is defined as retention of money or property of another against the fundamental principles of justice or equity and good conscience.” Santagate v. Tower, 64 Mass. App. Ct. 324 , 328 (2005).

The injustice of unjust enrichment is that “[t]he benefit must be unjust, a quality that turns on the reasonable expectations of the parties.” See Community Builders v. Indian Motorcycle Assocs., 44 Mass. App. Ct. 537 , 560 (1998). The summary judgment record shows that the parties had a reasonable expectation of Ramona entering into Mortgage 2. Plaintiff’s expectation is obvious. Clearly Plaintiff expected and intended Mortgage 2 to create a security interest in the entire Locus. Without that security, Plaintiff would have been unwilling to extend the loan. The proceeds of Mortgage 2 were used to pay off Mortgage 1. Ramona never executed the mortgage application, Mortgage 2, or the HUD Settlement Statement. However, that oversight in itself does not resolve the question of her expectation. Regardless of whether Ramona’s name appears on the documents, it would be unreasonable for her to expect not to be obligated for Mortgage 2, considering all the circumstances, as discussed, infra.

Together with Wayne, Ramona took title to Locus and executed Mortgage 1, the original purchase money mortgage. Clearly Ramona intended to be bound by that mortgage and accepted her share of the responsibility to repay that loan. When the proceeds from Mortgage 2 were applied to Mortgage 1, Ramona received a significant benefit because she no longer shared an obligation to repay Mortgage 1 and her interest in Locus was no longer subject to Mortgage 1. Nothing in the record indicates that she was unaware of Mortgage 2 or its benefits, except the absence of her signature on the documents. Furthermore, she clearly should have been aware of both, because of her interest in Locus as a tenant by the entirety. The summary judgment record gives no evidence that Ramona communicated any intention not to execute Mortgage 2, and no reason to doubt that Ramona shared Wayne’s intention to remain a borrower in a continuation of the same fundamental relationship as with Mortgage 1, only vis-a-vis a different mortgagee. [Note 3] It would be unreasonable for either Wayne or Ramona to expect a second mortgagee to be willing to accept only one-half of the security interest that the first mortgagee required. Likewise, it would be unreasonable for Ramona, who had been a mortgagor for two years, to expect the encumbrance on her property interest to disappear instantaneously and at essentially no cost to herself. Furthermore, the Settlement Agreement reflects the fact that, subsequent to the execution of Mortgage 2, both Wayne and Ramona were going to benefit from the sale of Locus and intended to share both the expenses and proceeds of such sale, including the recording of the discharge of Mortgage 2. [Note 4]

It appears that both Ramona’s expectation and Plaintiff’s expectation was that Ramona and Wayne would remain bound in a new mortgage secured by the same property interest that had secured the prior mortgage. As a result, I find that Ramona would be unjustly enriched if her interest in Locus remains unencumbered.

This unjust enrichment is strong evidence of a mutual mistake. “It is well established that legal instruments, including deeds, may be reformed on the ground of mutual mistake.” Lhu v. Dignoti, 431 Mass. 292 , 294 (2000). Plaintiff was clearly mistaken in its belief that it had created a security interest in Ramona’s property interest in Locus. Nothing in the summary judgment record shows that it was not Ramona’s intention to sign Mortgage 2, or that she did not mistakenly believe that she was legally bound by Mortgage 2 as it was executed; to the contrary, the Settlement Agreement clearly provides that Ramona anticipated that she was entitled to the financial benefits of ownership of Locus and the discharge of Mortgage 2. It is not reasonable to presume that she would intend to accept a clear benefit of this magnitude at Plaintiff’s expense. [Note 5] As a result, I find that a mutual mistake occurred between Plaintiff and Ramona that warrants reforming Mortgage 2 to encumber her interest in Locus.

As a result of the foregoing, I ALLOW Plaintiff’s Motion for Summary Judgment and DENY Ramona’s Cross-Motion for Summary Judgment.

Judgment to enter accordingly.

Alexander H. Sands, III

Justice

Dated: February 23, 2011