OLIVER B. HENDRICKS v. FEDERAL NATIONAL MORTGAGE ASSOCIATION.

FOOTNOTES

[Note 1] The order for dismissal entered by the court upon the docket reads as follows:

“April 2, 2014. Hearing held on Motion to Dismiss. Attorneys Kane and Vawter appeared and argued. After argument, for the reasons expressed from the bench and summarized below, and substantially the reasons set forth in the moving papers, applying the standards governing motions to dismiss brought under Mass. R. Civ. P. 12 (b)(6) set forth in Iannachino v. Ford Motor Co., 451 Mass. 623 , 63536 (2008), the Court GRANTED the Motion to Dismiss, ruling: (1) Section 70 of G.L. c. 185 bars this action. The third paragraph of G.L. c. 185, § 70 provides that nothing shall prevent a “mortgagor or other person in interest” from “directly impeaching, by bill in equity or otherwise, any foreclosure proceedings affecting registered land[,]” but only if such a challenge is made “prior to the entry of a new certificate of title[.]” Here, the new certificate of title, following the foreclosure, issued in 2010. This statute represents a legislative effort to balance the interests of the Registration Act, which serves certainty of title, against the interest of a mortgagor in having a meaningful opportunity and proper forum (this court) to challenge a foreclosure of a mortgage on registered land. In this way, once a new certificate of title has issued following a foreclosure, courts other than the Land Court, which lack jurisdiction over complaints “affecting title to registered land” see G.L. c. 185, § 1 (a 1/2), may rely on the validity of registered land title in post-foreclosure proceedings, such as summary process, where title is put into contest. The statute insists that a mortgagor owner challenging the title coming out of a mortgage foreclosure do so seasonably for this good policy reason. There is no due process violation, or other Constitutional defect, in limiting the ability to challenge a foreclosure after the new certificate of title has issued. This is because, prior to the issuance of a certificate of title, foreclosure papers are vetted by the Land Court district personnel pursuant to court guidelines and supervision, and mortgagors retain all remedies as to title prior to the new certificate issuing. The holder of the new certificate of title, and all others dealing with the property, must be able to rely on the title certified after the court issues the certificate, and allowing collateral attack in another court to upend that title would defeat the certainty of title principles central to the Registration Act. (2) As an alternative and independently sufficient reason requiring dismissal, the plaintiff’s claims are barred by the doctrine of res judicata, even without operation of G.L. c. 185, § 70. This is true as to both claim preclusion and issue preclusion, see Heacock v. Heacock, 402 Mass. 1 (1988), where, as here, the Housing Court in the summary process action issued no judgment affecting title to registered land, or altering in any way the title as set forth in the post-foreclosure certificate of title, but determined only that the foreclosing mortgagee was entitled to possession. Cf. Feinzig v. Ficksman, 42 Mass. App. Ct. 113 , 115-16 (1997) (“[W]hile a Superior Court judge may order the discontinuance of a trespass on registered land, that judge may not fashion a judgment which has the effect of imposing an encumbrance on the registered title.”) (A) As to claim preclusion, Court does not accept the argument that a defendant mortgagor has the privilege of holding back a claim or defense (based on alleged defects in the foreclosure process) in a summary process proceeding for the purpose of later attacking the foreclosure. See Bank of New York v. Bailey, 460 Mass. 327 , 33334 (2011); Solomont v. Howe Real Estate Advisors, 19 LCR 481 , 487 (2011) (Misc. Case No. 11 MISC 448092) (Piper, J.). This is so whether there is an affirmative claim or simply a defense actually pressed by the mortgagor. See Sheehan Constr. Co. v. Dudley, 299 Mass. 51 , 53 (1937), Bank of N.Y. v. Bailey, 460 Mass. 327 (2011), Bank of America Nat’l Ass’n v. Rosa, 466 Mass. 613 (2013), and U.S. Bank Nat'l Ass'n v. Schumacher, 467 Mass. 421 (2014), all of which instruct that the validity of a foreclosure (and of title coming out of it) is integral to, and must be proved, in a post-foreclosure summary process action. Challenges to the foreclosure must be raised at that time, or they are lost. This is true notwithstanding that one reading of the Housing Court rules at the time did not make this a compulsory counterclaim. The prohibition on claim splitting does not depend on whether the claim held back in the initial proceeding is a compulsory one. The rule against claim splitting guards against sequential cases over the same operative facts, each presenting new legal claims and arguments. The multiplicity of litigation growing out of Mr. Hendricks’ foreclosure is a clear demonstration of the reasons the rule against piecemeal presentation of legal claims and theories exists. (B) As to issue preclusion, the issues now raised in the pending case, viz. the issue of MERS’s ability to hold the mortgage, to be a proper party to carry out foreclosure under G.L. c. 244, and to foreclose in its name, were fully raised and actually decided by the Housing Court. The issues were expressly ruled upon by the Housing Court Judge including, without limitation, in the February 18, 2010 Order denying the defendant’s motion for reconsideration, which states “There is no Massachusetts statute or appellate decision that prohibits or limits the rights of a corporate entity (here Mortgage Electronic Registration System “MERS”) to foreclose on residential property in accordance with G.L. c. 244, § 14. The other arguments raised by defendant pertaining to the conduct of the foreclosure (to the extent they may be relevant to a material issue in this summary process action) are without merit.” No. 10H84SP003045 (Winik, J.). The judgment of the Housing Court was then reviewed and upheld by the Supreme Judicial Court, see Federal Nat’l Mtge. Ass’n v. Hendricks, 463 Mass. 635 (2012). The plaintiff has no ability to re-litigate this issue before the Land Court. (3) Even if the instant litigation were not barred by either G.L. c. 185, § 70 or res judicata, the plaintiff has offered no plausible claim for relief on the merits of his attack on the MERS conducted foreclosure. Here, notwithstanding dicta in Culhane v. Aurora Loan Servs., 826 F. Supp.2d 352, 373 (D. Mass. 2011) (Young, J.) that appears to question MERS’s ability to foreclose in its own name (“despite the standard MERS mortgage contract expressly granting MERS, as nominee, the power to exercise the rights of the note holder, including the power of sale, MERS cannot foreclose in its own name because it has no claim to the underlying debt.” Id.), it is settled that MERS, as a nominee for the lender, may hold title to the mortgage, and assign that title (both of which propositions are confirmed by Culhane, supra., and affirmed in Culhane v. Aurora Loan Servs., 708 F.3d 282, 293 (1st Cir. 2013)). The case of Eaton v. Federal Nat’l Mtge. Ass’n, 462 Mass. 569 (2012) confirms that an “authorized agent of the note holder” who also holds the mortgage may foreclose. Id. at 586. Here, MERS was at all times the nominee for Flagstar Bank F.S.B., and by plaintiff’s admission, “Flagstar Bank FSB’s right, title, and interest in the mortgage and the claim secured was never modified, transferred, and/or assigned.” Cmplt. at para. 6. (The Court notes that, although not briefed, Galiastro v. Mortgage Elec. Registration Sys., Inc., 467 Mass. 160 (2014) would appear to apply the rule announced in Eaton to the instant case, which was filed in the Appeals Court prior to June 22, 2012, despite the foreclosure having occurred prior to the effective date in Eaton.) Moreover, while no appellate court of the Commonwealth has expressly ruled on whether, post-Eaton, MERS may foreclose in its own name, there is no precedent this Court is bound to follow ruling that MERS lacks this authority. The Supreme Judicial Court had the opportunity to make such a ruling in Galiastro, supra., and did not. In fact, the SJC in that case solicited amicus briefs on the topic “Whether Mortgage Electronic Registration Systems ("MERS") has standing to pursue a foreclosure in its own right as a named "mortgagee" with ability to act limited solely as a "nominee" and without any ownership interest or rights in the promissory note associated with the mortgage[.]” See Docket No. SJC-11299, #7 (Feb. 8, 2013). Nonetheless, no favorable attention to such an argument was paid in the Galiastro decision. Mr. Hendricks plainly executed a mortgage establishing MERS as his mortgagee, with the attendant mortgagee’s rights and remedies upon breach, and did so in a mortgage that identified a separate lender to whom note payments were promised. Mr. Hendricks is bound by his contractual undertaking in this regard. This court is convinced that the contractual arrangement, where MERS would hold title for the lender, and act on its behalf, is legally effective, enforceable, and binding. Even were the Court to reach the merits of the case before it, the Court concludes those arguments lack merit and require dismissal even applying the indulgent standards for review of Rule 12 (b)(6) motions. Court to issue an Order dismissing this s-petition.”

[Note 2] This case is brought pursuant to G.L. c. 185, s. 114 et seq., as a proceeding subsequent to registration to alter the relevant certificates of title, and by the terms of the statute is brought in a caption reflective of the original registration action. By definition, the decree or judgment of registration entered in this case many decades ago; there ought not be a second judgment in this same registration case. The adjudication of an S case results, therefore, not in a new judgment, but in an order. Accounting for this nomenclature, derived from the peculiarities of the Registration Act, there is no judgment for the court to enter, and the order now entered by the court constitutes the final, appealable adjudication of this S case by the court.