By its second amended complaint filed February 13, 1991, Plaintiff, Merrill Lynch Equity Management, Inc. ("Merrill") seeks, among other relief, a declaration that a purported Subordination Agreement recorded in the Worcester County Registry of Deeds (to which all recording references in this Decision refer) on October 29, 1990 bears the forged signature of an officer of Merrill as well as the forged signature of a notary who allegedly acknowledged the officer's signature. The effect of the Subordination Agreement was to subordinate two mortgages on premises located at 62 Westwood Road, Shrewsbury. ("Locus") given to Merrill by Defendant Evelyn Eresian as trustee of a trust ("Evelyn") to a junior mortgage that Evelyn had originally given to Francis J. Reed ("Reed"). If the signature of Merrill's officer is a forgery, Merrill contends that it is the owner of Locus as the result of a foreclosure sale which took place on October 30, 1990 and any interest in Locus claimed by anyone through the Reed mortgage would be extinguished by the sale.
Plaintiff filed a motion for Summary Judgment on April 4, 1991 and submitted in support Affidavits of Reed, Aletha A. McGuiggan, Robert J. Lavell ("Lavell") and Chantal D. Presmy ("Presmy"), together with copies of portions of Depositions of Defendants Ara Eresian, Jr. ("Ara Jr.") and Melanie Eresian ("Melanie"). The motion was argued on November 25, 1991. Merrill was represented by counsel. No counsel appeared for the Defendants but Ara Jr. appeared pro-se. Ara Jr. submitted an affidavit from himself. By leave of Court, Merrill submitted on November 26, 1991 a second Affidavit of Mr. Lavell.
Based on all the material properly before me under Mass. R. Civ. P. 56, I find and rule for Plaintiff as follows:
1. Evelyn has been employed for more than 40 years as a title abstractor at Hobbs Abstract Company in Worcester. Evelyn's husband is the Defendant Ara Eresian, Sr. ("Ara Sr."), who is now retired. Evelyn and Ara Sr. have three adult children, all named herein as defendants, namely Melanie (who resides at 25 Westwood Road, Shrewsbury), Eva Marie Eresian ("Eva") and Ara Jr. Melanie is presently employed at Hobbs Abstract Co. Ara Jr. is a self-employed manager of real estate. It is not clear what if any employment Eva is engaged in. Evelyn purchased Locus approximately 20 years ago and resides there with Ara Sr. and her mother.
2. The following recorded instruments are relevant:
a) Mortgage of Locus dated August 13, 1985 from Evelyn to Merrill securing the original principal sum of $127,000, at Book 8872, Page 16 (the "1985 Mortgage").
b) Mortgage of Locus dated November 4, 1987 from Evelyn to Merrill securing the original principal sum of $94,000, at Book 10923, Page 375 (the "1987 Mortgage").
The 1985 Mortgage and the 1987 Mortgage are referred collectively as the Merrill Mortgages. They are subordinate to a mortgage which is not at issue in this action. The Merrill Mortgages were thus, before the Subordination Agreement, second and third mortgages, respectively.
c) Mortgage of Locus dated November 1, 1988 from Evelyn to Reed securing the original principal sum of $158,000, at Book 11729, Page 79 (the "Reed Mortgage").
d) Assignment of mortgage at Book 13065, Page 109, dated August 29, 1990 (the "Reed Assignment") purporting to be by Reed assigning the Reed Mortgage to Bryan R. Denault ("Denault"). Melanie, by deposition, states that Reed's signature on the Reed Assignment is acknowledged by Ara Jr.
e) Subordination Agreement dated August 31, 1990, at Book 13072, Page 187 (the "Subordination Agreement"), purportedly executed by Merrill, whereby Merrill subordinates the Merrill Mortgages to the Reed Mortgage. The Subordination Agreement, inter alia, recites Denault as the holder of the Reed Mortgage, recites consideration of $1.00 "and other valuable considerations (sic)", purports to be signed on behalf of Merrill by Lavell, Vice President, and purports to be acknowledged by Presmy in Duval county, Florida on August 31, 1990.
f ) Assignment of Mortgage, at Book 13073, Page 257, dated September 3, 1990, purporting to be by Bryan R. Denault, assigning the Reed Mortgage to Eva.
g) Assignment of Mortgage, at Book 13162 , Page 273 dated December 12 , 1990, purporting to be by Eva, assigning the Reed Mortgage to Melanie.
3. On November 1, 1988, Evelyn and Melanie purchased for $249,900 the premises at 25 Westwood Road, Shrewsbury (where Melanie now resides). To secure financing for this purchase, Evelyn and Melanie gave the West Newton Mortgage Company a $260,000 mortgage. To provide additional security, Reed assigned to Evelyn a mortgage he held on another property (not involved here); Evelyn in turn assigned that mortgage to the West Newton Mortgage Company. To compensate Reed for assignment his mortgage to her, Evelyn gave Reed the Reed Mortgage. The information in this paragraph comes from Melanie's Deposition.
4. In February 1989 Evelyn and Melanie became embroiled with Reed in an action in the Worcester Probate Court (later transferred to the Housing Court) seeking to enjoin Reed from foreclosing his mortgage on 25 Westwood Road.
5. As of May 1990, Evelyn was in default on both the Merrill Mortgages. Having obtained judgment from this Court Under the Soldiers' and Sailors' Civil Relief Act authorizing Merrill to foreclose the 1987 mortgage, Merrill conducted a foreclosure sale of Locus on October 30, 1990. Ara Sr. and Ara Jr. were both present at that sale. Ara Sr. made the high bid at $112,000. Merrill made the second highest bid at $111,750. Ara Sr. paid a $10,000 cash deposit and signed a memorandum of sale, obligating him to pay the balance within 30 days and providing that in the event of Ara Sr.'s default, the next highest bidder, in this case Merrill, could purchase the property on its bid.
6. According to Ara Jr.'s Deposition, in October 1990 Ara Jr. negotiated a settlement with Reed of Reed's disputes with the Eresian family, which included certain payments to Reed. On October 24, 1990 the Reed Assignment was recorded.
7. On October 29, 1990, the Subordination Agreement was recorded. Later that day, the assignment by Denault to Eva of the Reed Mortgage was recorded. On the following day, Merrill sold Locus at foreclosure (see above).
8. By letter to Merrill's attorney dated November 28, 1990, Ara Sr. demanded a return of the $10,000 deposit he gave at the October 30, 1990 foreclosure sale, stating that he had just learned of the Subordination Agreement.
9. On December 5, 1990, Merrill received a notice from Eva that she intended a foreclosure sale of Locus, without benefit of the Soldiers' and Sailors' Relief Act, on December 21, 1990 at 2:00 P.M., under the Reed mortgage.
10. Merrill asserts that it learned for the first time about the purported assignments of the Reed mortgage and about the Subordination Agreement upon receiving the letter from Ara Sr. and the foreclosure notice from Eva and that Merrill then commenced this action. On December 19, 1990 this Court, on Merrill's application, issued a temporary restraining order restraining Eva from conducting the foreclosure sale.
11. On December 21, 1990 at 12:36 P.M., the Assignment of the Reed Mortgage from Eva to Melanie was recorded (thus making Melanie the selling mortgagee). In spite of the presence of a Worcester Constable who announced the filing of the instant action and the issuance by the Court of the restraining order, Ara Sr., acting under a Power of sale given to him by Melanie, went forward with the sale. Melanie (by Ara Sr. under the power of attorney) made the high bid of $5,000. A foreclosure deed from Melanie, a mortgagor to Melanie, as purchaser, was recorded on December 31, 1990.
12. By Affidavit Reed states:
a) On or about October 22, 1990, Reed did have settlement negotiations with Ara Jr., producing various payments to Reed.
b) As part of the settlement, and at Ara Jr.'s request, Reed executed three documents, one of which was the Reed Assignment.
c) Reed did not acknowledge the Reed Assignment; Ara Jr. said he would acknowledge it.
d) The Reed Assignment, as recorded, bears a date and a date of acknowledgment of August 22, 1990, instead of the true date, October 22, 1990. The significance of this discrepancy is that the Subordination Agreement, also dated August 31, 1990, names Denault as holder of the Reed mortgage.
13. By Affidavit Lavell states:
a) At all times relevant to this action, he has been a Vice President of Merrill and in charge of administering all of Merrill's loan accounts. He has signed documents in that connection which have been recorded in various registries of deeds in the Commonwealth.
b) He is familiar with the loans secured by the Merrill Mortgages. They became delinquent on or about December 16, 1987 and eventually he instructed Merrill's Massachusetts attorneys to foreclose. The combined outstanding balance of the Merrill Mortgages at the time of delinquency was approximately $233,000.00. They were subject to a first mortgage having an approximate balance at the time of delinquency of $30,000.00. Merrill's appraisal of Locus, dated July 26, 1990, indicates a fair market value of $209,000.00.
c) All requests to Merrill by borrowers or borrower's counsel for mortgage loan subordination agreements must receive Lavell's approval. Upon any such approval, a borrower or borrower's counsel drafts the appropriate subordination agreement and forwards the document to Lavell's office for review. According to Merrill's records kept in the ordinary and usual course of business, Merrill has never received any request, oral or written, for the subordination of the Merrill Mortgages. In the circumstances of this case, given the pending mortgage foreclosure proceedings and the fact that the combined loan to value ratio of the Merrill Mortgages exceeds one hundred percent of the fair market value of the Property, Merrill would never have agreed to a request to subordinate the Merrill Mortgages.
d) Lavell did not sign the Subordination Agreement; the signature thereon purporting to be Lavell's is a forgery.
14. By Affidavit Presmy states:
a) At all times relevant to this action she was senior loan administrator in Merrill's loan administration department, which is headed by Lavell, and as such she often acknowledges documents which he has signed.
b) She did not sign the Subordination Agreement, her purported signature is a forgery and the notary stamp appearing thereon is a fabrication. The words "commission expires" as appearing in her notary stamp on the Subordination Agreement are in all capitals, whereas they appear in small letters in her stamp.
c) She was not even at work on August 31, 1990, the date appearing on the acknowledgement.
15. By Affidavit Aletha A. McGuiggan stated that on or about October 16, 1990 she typed for Ara Jr., at his request, two versions of a subordination agreement in the form of the Subordination Agreement. In one Bryan R. Denault appears as the holder of the Mortgages and in the other Francis Reed appears as the holder.
16. On the day of the argument of this motion, Ara Jr. filed an Affidavit stating that:
a) He has been trying to locate Bryan R. Denault. About a week ago, one of Ara Jr.'s tenants in the building in which Denault lived called Ara Jr.'s grandmother and said that the tenant had spoken to Denault's wife in Florida and had told Mrs. Denault that Ara Jr. was looking for Denault.
b) On November 22, 1991, Mrs. Denault called Ara Jr.'s grandmother and said she (Mrs. Denault) would be sending some correspondence from Denault. On November 25, 1991 four pages (including the fax cover sheet) were faxed to Ara Jr. and Evelyn at the Worcester Registry from West Palm Beach Florida, sender not listed.
c) One page was a handwritten letter signed "Elvira Denault" in which the writer says she has received permission from her husband to fax two letters to Ara Jr., and that her husband was willing to help with additional information on his return from the Caribbean December 13.
d) Of the two letters, copies of which formed part of the fax transmission, one is a copy of a letter on Merrill's stationery, dated August 28, 1990, purportedly signed by Lavell, and addressed to Denault at 201 Dewey Street Worcester. It states that Lavell hasreceived "from the attorney" the proposed Subordination Agreement and that he (Lavell) will have it reviewed "and upon completion of your portion of the agreement, I will see that the same is properly executed". The reference to an attorney is a mystery and there is no portion of the agreement providing for execution by Denault.
e) The second part of the fax is another Lavell letter to Denault, this one dated August 31, 1990, also on Merrill stationery. It states that Lavell is enclosing the executed Subordination Agreement, dated August 31, 1990. It also states "You should be aware that the agreement was actually executed yesterday, but was improperly dated for today. I trust that this is not a problem from your viewpoint." That fortuitously explains Ms. Presmy's absence on the 31st.
17. By affidavit dated November 25, 1991, Lavell refers to these two letters and states:
a) The signatures on each of the two letters purporting to be his are forgeries. He never sent or authorized the sending of those letters and never saw those copies before November 25, 1991. He has never dealt or communicated with Bryan Deneault (sic), if he indeed exists, and had never heard of him at the time the letters are dated.
18. There is no genuine issue as to any material fact in this action. The only thing approaching appropriate rebuttal of Merrill's Affidavits is Ara Jr.'s Affidavit of November 25. However, its two accompanying letters, purportedly by Lavell, are not properly before me, because of the hearsay rule: "Mrs. Denault says Bryan Denault says he received these from Merrill". Also, there is no authentication as to the letter purportedly from Mrs. Denault. In addition, Lavell's unrebutted second Affidavit states that the two letters are forgeries.
19. Lavell's purported signature on the Subordination Agreement is a forgery, as is Presmy's acknowledgement.
20. The forged Subordination Agreement is a nullity, even assuming the parties benefitting from it are bona fide purchasers. Breed v. Gardner 187 Mass. 300 (1905). The interest or right of any person or persons in or to Locus arising out of or existing by virtue of the Reed Mortgage is limited to such interest or right such person or persons would hold if the Subordination Agreement never existed.