SUNTRUST MORTGAGE, INC. vs. HOEUN CHAN AND NOEUN OUM, MOM NOP, US BANK, NA as TRUSTEE, and DISCOVER BANK, NA

Plaintiff filed its unverified Complaint on April 14, 2011, pursuant to G.L. c. 240 §§ 6-10 and G.L. c. 231A, seeking to remove cloud on title and seeking a declaration that any lien held by Defendant Discover Bank, NA ("Discover") on property located at 68 Sheldon Street, Lowell, Massachusetts ("Locus") is junior to any lien on Locus held by Plaintiff. A case management conference was held on June 21, 2011, at which only Plaintiff appeared. A status conference was held on September 20, 2011, at which only Plaintiff appeared. On May 7, 2012, Plaintiff filed its Motion for Summary Judgment, together with supporting memorandum and Affidavit of David Glod, Esq. Another status conference was held on May 22, 2012, at which only Plaintiff appeared. A hearing on Plaintiff's Motion for Summary Judgment was held on July 9, 2012, and the matter was taken under advisement. None of Defendants appeared at the summary judgment hearing. On July 10, 2012, Plaintiff filed a Motion to Default all Defendants, and default was entered on the same date against all Defendants.

Summary judgment is appropriate where there are no genuine issues of material fact and where the summary judgment record entitles the moving party to judgment as a matter of law. See Cassesso v. Comm'r of Corr., 390 Mass. 419 , 422 (1983); Cmty. Nat'l Bank v. Dawes, 369 Mass. 550 , 553 (1976); Mass. R. Civ. P. 56(c).

I find that the following material facts are not in dispute:

1. Defendants Hoeun Chan ("Chan") and Noeun Oum ("Oum") took title to Locus by deed dated February 25, 2000, and recorded with the Middlesex North Registry of Deeds (the "Registry") in Book 10681, Page 257.

2. On or about July 19, 2006, Chan and Oum granted a mortgage (the "Chan/Oum Mortgage") to Mortgage Electronic Registration Systems, Inc. ("MERS") as nominee for Mortgage Lenders Network USA, INC. ("Lender") and Lender's assigns. The Chan/Oum Mortgage was recorded with the Registry at Book 20345, Page 202.

3. On or about October 10, 2007, Defendant U.S. Bank National Association, as Trustee ("U.S. Bank") [Note 1] filed a Complaint to Foreclose Mortgage (the Chan/Oum Mortgage) with the Land Court pursuant to the Servicemembers Civil Relief Act. Judgment issued in that case in favor of U.S. Bank on March 4, 2008.

4. On or about February 15, 2008, February 22, 2008, and February 29, 2008, U.S. Bank published a Notice of Mortgagee Sale of Real Estate in the Lowell Sun, which indicated U.S. Bank's intent to conduct a foreclosure sale of Locus by public auction on March 10, 2008.

5. On or about March 10, 2008, entry onto Locus was made by U.S. Bank.

6. On or about March 10, 2008, a foreclosure auction was held at Locus, and Locus was purportedly sold to U.S. Bank as the highest bidder (the "Foreclosure Sale").

7. By foreclosure deed dated April 3, 2008 (the "Foreclosure Deed"), U.S. Bank purported to convey Locus to itself. The Foreclosure Deed was recorded with the Registry on April 23, 2008, in Book 22119, Page 273.

8. On April 16, 2008, MERS executed an assignment of the Chan/Oum Mortgage, assigning the Chan/Oum Mortgage and the underlying mortgage note to U.S. Bank (the "U.S. Bank Assignment"). The U.S. Bank Assignment was recorded with the Registry in Book 22119, Page 267 on April 23, 2008.

9. By deed dated June 5, 2008, and recorded with the Registry at Book 22255, Page 108 (the "Nop Deed"), U.S. Bank purported to convey Locus to Defendant Mom Nop ("Nop").

10. On or about June 17, 2008, Nop purported to grant a mortgage to MERS as nominee for Plaintiff and its assigns (the "Nop Mortgage"). The Nop Mortgage was recorded with the Registry in Book 22255, Page 110.

11. On or about February 25, 2010, Discover caused an Execution to be levied against all real or personal property held by Nop (the "Execution"). The Execution was issued out of Lowell District Court in case name Discover Bank v. Mom Nop, docket number 200911CV003248. The Execution was recorded on or about April 14, 2010, at the Registry in Book 23878, Page 45.

12. On August 5, 2010, MERS executed an assignment of mortgage purporting to assign the Nop Mortgage to Plaintiff (the "SunTrust Assignment"). The SunTrust Assignment was recorded with the Registry in Book 24168, Page 103.

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Plaintiff concedes that the foreclosure conducted by U.S. Bank was invalid because U.S. Bank was not the holder of the Chan/Oum Mortgage at the time of the foreclosure. Plaintiff argues that the Foreclosure Deed, together with the Nop Deed, assigned the Chan/Oum Mortgage to Nop. Next, Plaintiff argues that the Nop Mortgage acted as an assignment of the Chan/Oum Mortgage from Nop to MERS, Plaintiff's predecessor. In the alternative, Plaintiff contends that the Nop Mortgage granted a mortgage or security interest in the Chan/Oum Mortgage (held by Nop) to MERS. Whatever rights MERS had, Plaintiff contends, were transferred to Plaintiff via the SunTrust Assignment. With respect to Discover, Plaintiff argues that whatever interest MERS had in Locus (and therefore Plaintiff as successor to MERS), derivative of Nop's interest in Locus, is superior to the rights of Discover. Plaintiff states that the Execution was levied against whatever rights Nop had in Locus years after MERS obtained an interest in Locus from Nop, and therefore Plaintiff acquired MERS' priority rights in Locus. I shall address each of these issues in turn.

A. Status of the Chan/Oum Mortgage:

i. Invalid Foreclosure of Chan/Oum Mortgage

Plaintiff concedes, for purposes of this Motion for Summary Judgment, that U.S. Bank was not the holder of the Chan/Oum Mortgage at the time of the Foreclosure Sale, thus the Foreclosure Sale was void and did not transfer Locus to U.S. Bank. See U.S. Bank v. Ibanez, 458 Mass. 637 (2011). "When a foreclosure is void, the foreclosure is a legal nullity and the parties are returned to the position they would have been in, but for the invalid foreclosure." Manson v. GMAC Mortg., LLC, 2012 U.S. Dist. LEXIS 59492 (2012), citing Oum v. Wells Fargo, N.A., 842 F. Supp. 2d 407 (2012). Therefore, I find that the Chan/Oum Mortgage was never extinguished via the Foreclosure Sale and it is still an encumbrance upon Locus. The next issue is which party is the holder of the Chan/Oum Mortgage.

ii. Effect of Foreclosure Deed and Nop Deed

Even after the Foreclosure Sale and execution of the Foreclosure Deed, MERS was the holder of the Chan/Oum Mortgage. The Foreclosure Deed was a nullity because the grantor was U.S. Bank as "holder of the mortgage." At the time the Foreclosure Deed was executed, however, U.S. Bank was a total stranger to the Chan/Oum Mortgage because MERS had not yet assigned it to U.S. Bank.

On April 16, 2008, MERS assigned the Chan/Oum Mortgage to U.S. Bank via the U.S. Bank Assignment. [Note 2] As such, U.S. Bank was the holder of the Chan/Oum Mortgage on June 5, 2008, when it purported to convey Locus to Nop. U.S. Bank, however, did not have the right or power to convey legal title to Locus to Nop; at that time Chan and Oum still owned Locus.

Notwithstanding the quitclaim language in the Nop Deed, Plaintiff contends that through the Nop Deed, U.S. Bank conveyed mortgage rights, i.e. an assignment of the Chan/Oum Mortgage, to Nop. "[W]here a deed of real estate shows by its language that it was intended to pass title by one form of conveyance, by which however title could not pass, courts have made the deed effective by construing it as a deed of some other form, notwithstanding the inappropriateness of the language." Kaufman v. Federal Nat'l Bank, 287 Mass. 97 , 100-101 (1934). "The general intent to convey overrides any intent to employ an ineffective form." Id. "Thus an instrument in the form of a deed of real estate has been held to pass a mortgage held by the grantor on the real estate described." Id, citing Hunt v. Hunt, 31 Mass. 374 (1833); Freeman v. M'Gaw, 32 Mass. 82 (1833); Ruggles v. Barton, 79 Mass. 506 (1882); see also Brown v. Smith, 116 Mass. 108 (1874).

Without deciding the issue, the Supreme Judicial Court of Massachusetts (the "SJC") entertained the notion that a buyer "might be able to establish a chain of assignments passing from his quitclaim deed, through the 'Confirmatory Foreclosure Deed,' through the recorded assignment from [the initial mortgagee to the foreclosing party] and thus ultimately back to [the mortgagor's] original deed of mortgage." Bevilacqua v. Rodriguez, 460 Mass. 762 , 773 (2011). In both this case and in Bevilacqua, the foreclosing party was assigned the relevant mortgage after the Foreclosure Sale took place. Although the discussion in Bevilacqua is dicta, the SJC nonetheless assumed on similar facts to this case that a third party buyer takes mortgage rights via a quitclaim deed from the foreclosing party, who took its rights from an invalid foreclosure deed.

The extent of U.S. Bank's right in Locus was limited to a mortgage interest at the time it executed the Nop Deed. Based on the language of conveyance in the Nop Deed, this court infers that U.S. Bank intended to transfer whatever rights it had in Locus to Nop. More than a century of case law has dictated that a quitclaim deed can transfer a mortgage interest in land if the grantor is merely a mortgagee. Notwithstanding the quitclaim language in the Nop Deed purporting to transfer Locus to Nop, the Nop Deed only transferred mortgage rights to Nop, i.e. an assignment of the Chan/Oum Mortgage. Based on the foregoing, I find that the Nop Deed assigned the Chan/Oum Mortgage to Nop. [Note 3]

iii. Effect of Nop Mortgage

Plaintiff argues that the Nop Mortgage served as a collateral assignment of the Chan/Oum Mortgage to MERS, Plaintiff's predecessor. To support this theory, Plaintiff correctly states the principal that a mortgage "constitute[s] a deed of conveyance which transfer[s] a fee interest to the bank, defeasible upon the performance of the conditions stated therin." Atl. Sav. Bank v. Metro Bank & Trust Co., 9 Mass. App. Ct. 286 , 288 (1980). Plaintiff also argues that Kaufman, Bevilacqua, and the cases cited therein further support this proposition.

The intent to convey supersedes the improper form of the instrument of conveyance. See Hunt, supra (courts "give effect and operation to the deeds of parties, rather according to the manifest intent..."). "A release to one, not in possession, if made for valuable consideration, will be construed to be a bargain and sale, or other lawful conveyance, by which the estate may pass." Id. (emphasis supplied), citing Pray v. Pierce, 7 Mass. 381 (1811). Courts shall not hold a deed to be void if by any construction the deed can be operative. See Wade v. Howard, 28 Mass. 289 , 295 (1831).

In the case at bar, Nop intended to convey a mortgage interest in Locus to MERS. Under the section of the Nop Mortgage entitled "TRANSFER OF RIGHTS IN THE PROPERTY," the Nop Mortgage states: "Borrower does hereby mortgage, grant and convey to MERS (solely as nominee for Lender...) and to the successors and assigns of MERS, with power of sale, the following described property." The Nop Mortgage then describes Locus. The Nop Mortgage is clearly a conveyance of a mortgage interest in Locus.

It is irrelevant that Nop conveyed all rights in Locus that he had. Based on the equities, it would be unjust to declare that Nop did not transfer mortgage rights to MERS. In consideration for a mortgage interest, Plaintiff advanced to Nop $139,500. It was incumbent upon Nop to ascertain the extent of his interest in Locus before he conveyed all that he had to MERS. See Wade, supra, at 298. Moreover, Nop did not appear before this court to assert his rights in Locus. Based on the foregoing, I find that via the Nop Mortgage, Nop assigned the Chan/Oum Mortgage (Nop's only interest in Locus) to MERS, Plaintiff's predecessor.

Moreover, MERS assigned the Chan/Oum Mortgage to Plaintiff by way of the SunTrust Assignment. The SunTrust Assignment states that MERS assigns the Nop Mortgage to Plaintiff. The Nop Mortgage, however, was in fact an assignment of the Chan/Oum Mortgage to MERS. At the time of the SunTrust Assignment therefore, the only interest in Locus that MERS held was the Chan/Oum Mortgage. "The general intent to convey overrides any intent to employ an ineffective form." Kaufman, 287 Mass. at 100. Accordingly, the assignment of the Nop Mortgage effectively assigned the Chan/Oum Mortgage to Plaintiff. Based on the foregoing, I find that Plaintiff is the holder of the Chan/Oum Mortgage.

B. Rights of Discover

On February 25, 2010, Discover levied upon and recorded the Execution with the Registry, seeking to attach all "real or personal property" of Nop. As of June 17, 2008, when Nop assigned the Chan/Oum Mortgage to MERS, Nop no longer had any interest in Locus. The Execution issued on February 25, 2010, more than two years after Nop divested himself of all interest in Locus. As such, the Execution could not have attached to Locus because Nop no longer had any interest in Locus.

Based on the foregoing, it does not appear that Discover has any interest in Locus. I find that to the extent that the Execution levied against any interest in real or personal property held by Nop, such lien is junior to the Chan/Oum Mortgage that is held by Plaintiff.

Based on the foregoing, Plaintiff's Motion for Summary Judgment is ALLOWED. Judgment to enter accordingly.