At issue in these two consolidated cases is the validity of a deed and mortgage executed by Defendant Lawrence P. Novak (Novak) in 2007 with respect to property owned by the Novak Family Trust, at 235 Candy Lane in Brockton, Massachusetts (the Property). On February 18, 2011, Plaintiff Wells Fargo, N.A., as Trustee for BNC Mortgage Loan Trust 2007-4 Mortgage Pass-Through Certificates, Series 2007- 4 (Wells Fargo) filed its Complaint in the first action -- 11 MISC 445494, seeking the reformation and/or equitable subrogation of a mortgage Novak purported to grant to Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for lender BNC Mortgage, Inc. in 2007. [Note 1] On the same date, Plaintiff Joanne Sullivan, as Trustee of the Novak Family Trust, filed a Complaint in the second action -- 11 MISC 445499, seeking to establish the Trusts title to the Property, and to determine the validity of cetain liens on the Property, including the subject mortgage. The two cases were consolidated on May 17, 2011.
On November 6, 2013, Wells Fargo moved for summary judgment to establish the validity of the 2007 mortgage as a first mortgage lien on the Property either through estoppel by deed or reformation. Alternatively, Wells Fargo sought summary judgment equitably subrogating the 2007 mortgage to the first lien position of an earlier mortgage paid off with proceeds from the 2007 mortgage. Novak filed his Oppostion to Wells Fargos summary judgment motion on January 10, 2014, [Note 2] arguing that the mortgage he granted to BNC Mortgage, Inc. in 2007 is not valid because he did not own the Property in 2007 and otherwise lacked authority to grant the subject mortgage. Novak also asserts that Wells Fargo is equitably estopped from obtaining an affirmation of the mortgages validity because Novak relied on the representation of BNC Mortgage, Inc.s agent regarding his authority to execute a deed of the Property to himself and to then execute the subject mortgage. [Note 3]
All parties having been given an opportunity to submit written statements in support or in opposition to Plaintiff Wells Fargos Motion for Summary Judgment, I have determined, pursuant to Land Court Rule 6, that said Motion may be decided on the papers, without oral argument. Now, based upon the undisputed, material facts established in the summary judgment record, and making all inferences in favor of the non-moving party, I find that Wells Fargo is entitled to summary judgment under its estoppel by deed theory.
Undisputed Material Facts
The essential facts are undisputed. The parties are in full agreement that Novak was not a Trustee of the Novak Family Trust in 2007 when he (1) executed and recorded a Trustees Certificate representing that he was sole Trustee of the Novak Family Trust, that the Trust had not been amended or modified, that he had not resigned or been removed as Trustee, and that he had full authority to convey the Property; (2) executed a deed purporting to grant the Property from himself as Trustee to himself individually; and (3) purported to grant a mortgage on the Property to MERS, as nominee for BNC, Inc., as security for a $245,000 loan. It is also undisputed that a portion of the proceeds from that mortgage were used to pay off a promissory note given by Novak to the New Century Mortgage Corporation in 2004 and that, as a result of the payoff, the 2004 mortgage on the subject property which secured that note was discharged.
Finally, it is undisputed that Novak, the Donor of the Novak Family Trust, reappointed himself Trustee in 2012.
More specifically, the summary judgment record demonstrates the following undisputed, material facts:
1. By quitclaim deed, dated May 30, 2002 and recorded in the Plymouth County Registry of Deeds (the Registry) at Book 22297, Page 92, Ramaiah M. Prabhakar and Latha Prabhakar conveyed the property known and numbered as 235 Candy Lane in Brockton (the Property) to Lawrence P. Novak (Novak) for consideration of $300,000.
2. By quitclaim deed, dated July 12, 2002 and recorded in the Registry on November 14, 2002 at Book 23403, Page 190, Novak conveyed the Property, for nominal consideration, from himself, individually to himself, as Trustee of the Novak Family Trust (the Trust). [Note 4]
3. An Indenture of Trust for said Trust (the Indenture), dated May 31, 1989, was also recorded in the Registry on November 14, 2002 at Book 23403, Page 192.
4. The Indenture names Novak as the Donor and the sole Trustee of the Trust.
5. Pursuant to the Indenture, the Trustee is authorized to expend all of the assets of the Trust for the maintenance of the Donor.
6. The Indenture provides that Jenna Marie Sullivan (Jenna) and Danielle Sullivan (Danielle), the children of Joanne Sullivan, shall act as Trustees in the event of Novaks death or incapacity, and that if either is unable or unwilling to act as Trustee, no other person need be appointed to serve in their place.
7. Under the Indenture, Jenna and Danielle are granted a beneficial remainder interest in assets of the Trust.
8. Under the fourth provision of the Indenture, the Donor reserves the right to alter, amend or revoke the Trust at any time in whole or in part.
9. The eighth provision of the Indenture states that [i]n the event that Trust shall own any real estate, the same shall not be sold unless both children [Jenna and Danielle] agree to said sale.
10. Exhibit A to the Indenture sets forth the Trustee Powers: the Trustee in addition to and not in limitation of all common law and statutory authority and the powers it has under other provisions of this instrument, shall have the power as to any real or personal property in the trust fund . . . [t]o mortgage . . . [or] to sell in whole or in part at public or at private sale without approval of any court . . . .
11. By quitclaim deed dated October 25, 2004, and recorded in the Registry on the same date at Book 29321, Page 311, Novak, as Trustee of the Trust, purported to convey the Property to Novak, Trustee Novak Family Trust, Individually. [Note 5]
12. Novak then executed a mortgage on the Property to the New Century Mortgage Corporation, dated October 28, 2004 and recorded in the Registry on November 2, 2004 at Book 29389, Page 291 (the New Century Mortgage). The New Century Mortgage secured a promissory note from Novak to the New Century Mortgage Corporation in the principal amount of $180,000.
13. By quitclaim deed dated February 2, 2005, recorded in the Registry on March 11, 2005 at Book 30131, Page 349, Novak reconveyed the Property to himself as Trustee of the Trust for nominal consederation. The New Century Mortgage remained an encumbrance on the Property following the conveyance.
14. In an Amendment of Trust dated September 19, 2005 and recorded in the Registry on September 19, 2005 at Book 31354, Page 295 (the 2005 Amendment), Novak resigned as Trustee of the Trust, and Joanne Sullivan accepted appointment as the successor Trustee.
15. Sullivan was still the sole Trustee on June 25, 2007, when Novak executed a Certificate of Trustee certifying that he was the sole Trustee of the Novak Family Trust . . . and have not resigned nor have I been removed, that [t]he Trust is in full force and effect and has not been amended, modified or terminated and has not been revoked as of the date thereof, and that he has been directed and authorized by the beneficiaries and has full power and authority to convey [the Property] and execute the deed to Novak. Said Certificate was recorded in the Registry on June 29, 2007 at Book 34748, Page 304.
16. Also, by quitclaim deed dated June 25, 2007 and recorded in the Registry on June 29, 2007 at Book 34748, Page 305, Novak, holding himself out as Trustee, purported to convey the Property to himself, individually (the 2007 Deed).
17. In connection with obtaining a refinance loan, Novak executed a promissory note dated June 25, 2007 in favor of BNC Mortgage, Inc. in the principal amount of $245,000 (the BNC Note).
18. To secure the BNC Note, Novak executed a mortgage on the Property to Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for the Lender, BNC Mortgage, Inc., dated June 25, 2007 and recorded in the Registry on June 29, 2007 at Book 34748, Page 307 (the BNC Mortgage).
19. The Closing Instructions from BNC Mortgage, Inc. stated that the BNC Mortgage must record in first lien position[.]
20. BNC Mortgage, Inc.s closing instructions also required that the grantor(s) of the BNC Mortgage be the same person(s) holding title to the Property.
21. The BNC Mortgage, signed by Novak, included a provision stating: Borrower covenants that Borrower is lawfully seised of the estate hereby conveyed and has the right to grant and convey the Property. In addition to executing the BNC Mortgage, Novak executed an Owner/Seller Affidavit attesting before a notary public that he was the lawful owner of the Property.
22. According to a Settlement Statement dated June 25, 2007, proceeeds from the BNC Mortgage, in the amount of $175,722.39, were used to pay off the New Century promissory note. Cash proceeds in the amount of $52,922.79 were paid to Novak.
23. In a Release of Mortgage/Deed of Trust dated July 11, 2007 and recorded in the Registry on July 31, 2007 at Book 34891, Page 347, New Century Mortgage Corp. discharged the New Century Mortgage.
24. Joanne Sullivan resigned as Trustee by executing and delivering a Resignation of Trustee instrument, dated October 4, 2012. Sullivans Resignation was delivered to Novak by USPS express mail on October 18, 2012.
25. Danielle executed a Successor Co-Trustees Declination, dated on October 4, 2012, declining appointment as successor trustee of the Trust. Jenna executed a successor Co-Trustees Declination on September 27, 2012. Copies of the Declinations were delivered to Novak by USPS express mail on October 18, 2012.
26. Novak, as the the Trust Donor, executed an Amendment to the Trust on October 19, 2012, which added to the terms of the Trust a clause providing that if the trustee resigns or refuses to serve the donor may chose [sic]a new trustee to act in there [sic]stead.
27. In a second instrument, dated October 21, 2012, Novak, as Donor, exercised his power under the October 19, 2012 Amendment by appointing himself to act as Trustee, and also accepted that appointment.
28. Wells Fargo is the current holder of the BNC Note and assignee of the BNC Mortgage by virtue of an Assignment from MERS, dated August 21, 2009 and recorded in the Registry at Book 37809, at Page 302.
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Wells Fargo bases its Summary Judgment Motion on three alternate legal theories. First, Wells Fargo argues that the doctrine of estoppel by deed prevents Novak from denying the validity of the BNC Mortgage because, even if Novak was not the Trustee at the time he executed the BNC Mortgage, he subsequently reappointed himself Trustee after the filing of this action. As an alternative, Wells Fargo argues that, due to either fraud by Novak or the mutual mistakes of all parties in executing the BNC Mortgage, the Mortgage should be reformed to reflect as Borrower, whichever party the Court might determine to be the proper titleholder of the Property. See Pl.s Mot. Summ. J. at 13. Wells Fargo argues, as a third alternative, that the BNC Mortgage should be equitably subrogated to the first priority mortgage lien position vacated when the New Century Mortgage was discharged.
Summary judgment is appropriate when there are no genuine issues of material fact and, viewing the evidence in the light most favorable to the nonmoving party, the moving party is entitled to judgment as a matter of law. Mass. R. Civ. P. 56(c); Opara v. Mass. Mut. Life Ins. Co., 441 Mass. 539 , 544 (2004); Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117 , 120 (1991); Attorney General v. Bailey, 386 Mass. 367 , 370-71 (1982) (citations omitted). The moving party bears the burden of affirmatively demonstrating the absence of a triable issue of fact and that the record entitles it to judgment as a matter of law. Kourouvacilis v. Gen. Motors Corp., 410 Mass. 706 , 711 (1991). For the reasons discussed below, I find that Wells Fargo is entitled to summary judgment that the BNC Mortgage is enforceable as a valid lien on the Property, as if Novak had been the duly appointed Trustee at the time he executed the BNC Mortgage instrument.
As a preliminary matter, the 2007 Deed of the Property from Novak as Trustee, to Novak, individually, was void as a matter of law. It is undisputed that Novak was no longer Trustee in June of 2007, having resigned and appointed his sister, Joanne Sullivan, as successor Trustee nearly two years earlier. Nor is there anything in the summary judgment record to suggest either that Sullivan had authorized the conveyance of the Property to Novak, individually, or that the two beneficiaries of the Trust had agreed to such conveyance as required under the terms of the Trust. [Note 6] Thus, the 2007 Deed purporting to convey the Property to Novak, individually was void and without effect. See Daley v. Donovan, 258 Mass. 226 , 227 (1926).
It follows, moreover, that because Novak held no interest in the Property, either as a Trustee or individually, he could not properly grant a mortgage on the Property absent authorization from the then-Trustee. Novak agrees, and argues, therefore, that the BNC Mortgage is void and without effect on the Property. Plaintiff counters, however, that, having subsequently reappointed himself as Trustee, and thereby having re-gained legal title to the Property as Trustee, Novak should not be able to avoid the consequences of his actions in 2007 when he improperly held himself out first, as Trustee, and then, as the record owner of the Property in order to refinance the New Century Mortgage. I agree with Plaintiff that equitable considerations bar Novak from now contesting the validity of the BNC Mortgage as an encumbrance on the Property.
Novak granted the BNC Mortgage after holding himself out as Trustee with authority to convey the Property to himself individually, and then certified that he was the record owner of the Property with the power to mortgage it. [Note 7] The New Century Mortgage, although originally granted on the Property by Novak, individually (as the purported Property owner in 2004), remained as an encumbrance on the Property after Novak re-conveyed the Property to himself as Trustee in 2005, until it was discharged in connection with the 2007 refinance. Where the discharge of the New Century Mortgage lien on the proeprty thus directly benefitted the Trust, it would be inequitable to permit Novak as Trustee to now hold legal title to the Property, unencumbered by any mortgage whatsoever. Accordingly, under the doctrine of estoppel by deed, Novak may not deny the validity of the BNC Mortgage, now that he has re-appointed himself as Trustee.
Estoppel by deed occurs when . . . a grantor conveys property by deed which, unknown to the grantee, the grantor does not own at the time of the conveyance, but which the grantor later acquires. In such a case, the grantor (and anyone claiming under him) is estopped from asserting against the grantee a claim of title to the property conveyed. Dalessio v. Baggia, 57 Mass. App. Ct. 468 , 469-470 (2003), citing Zayka v. Giambro, 32 Mass. App. Ct. 748 , 751 (1992). In the instant case, although Novak did not hold legal title to the Property at the time he executed the BNC Mortgage, he later acquired legal title in October, 2012 when, as Donor, he reappointed himself Trustee following Sullivans resignation. I agree with Plaintiff that Novak is consequently estopped from denying that the BNC Mortgage (now held by Wells Fargo) is an enforceable lien on the Property.
The application of estoppel by deed is further warranted in this instance by traditional equitable principles of estoppel which function to prevent one from benefitting from his own wrongdoing and to avoid injustice. See Harrington v. Fall River Hous. Authy., 27 Mass. App. Ct. 301 , 307 (1989). Here it would be inequitable to permit Novak, as Trustee, to avoid the consequences of his own actions in 2007, intentional or otherwise, in misrepresenting his trustee status and ownership of the Property in order to obtain the $245,000 refinance loan from BNC Mortgage, Inc. This is so particularly where: (1) a portion of the proceeds from the refinancing were used to pay off the entire outstanding balance of Novaks personal note to New Century, resulting in a discharge of the New Century Mortgage lien on the Property; (2) Novak personally received a substantial sum of money from the refinancing proceeds; and (3) Wells Fargo, as a subsequent, third-party assignee of the BNC Mortgage, cannot be charged with either knowledge of the record title in 2007, or with BNCs failure to confirm actual record title of the Property at the time of the refinancing. Finally, application of the estoppel by deed doctrine in this case will work no injustice on any junior lienholders since those lienholders, Maurice Sedwell, Ltd., McClaren Hearing & Air Conditioning Inc., and the United States of America, all recorded their liens after the BNC Mortgage instrument was on record. [Note 8]
Based on the forgoing, I find that Wells Fargo is entitled to summary judgment in its favor declaring that Novak is estopped from denying the validity of the BNC Mortgage, and that the BNC Mortgage is enforceable as a valid lien on the Property as if Novak had been the duly appointed Trustee at the time he executed the BNC Mortgage instrument. Final judgment shall not enter at this time because there remain unresolved claims in the second of the two consolidated cases, 11 MISC 445499. The Plaintiff in that case is Joanne Sullivan, in her capacity as Trustee of the Novak Family Trust. However, Joanne Sullivan is no longer the Trustee, having resigned in 2012. Pursuant to Mass. R. Civ. P. 25 (c), it is hereby ORDERED that unless, within sixty (60) days of this Decision and Order, a Stipulation of Dismissal is filed with respect to the remaining claims in 11 MISC 445499, Lawrence P. Novak shall be substituted as plaintiff Trustee in said action.
[Note 1] Wells Fargo did not separate these claims into separate counts in its Complaint, but included them in its prayers for relief.
[Note 2] The court allowed Novaks motion for an extension of time to file his Opposition.
[Note 3] Novak also filed, separately from his Opposition, numerous motions to strike certain statements contained in Wells Fargos summary judgment filings, claiming those statements to be immaterial, redundant, impertinent or scandalous. The Motions to Strike contain a lot of disjointed and random statements, without adequate supporting documentation or supporting authorities, but they generally consist of Novaks objections to the Plaintiffs assertions that Novak committed fraud. Insofar as the Rule 56 c) materials in the summary judgment record are insufficient to support Wells Fargos gratuitous characterizations of Novaks actions in regard to the subject mortgage as having been fraudulent, such characterizations are stricken. In any event, I need not determine whether Novaks actions were fraudulent in order to decide Wells Fargos Motion for Summary Judgment.
[Note 4] As Trustee of the Trust at the time of the conveyance to the Trust, Novak acquired legal title to the Property. See Kaufman v. Fed Natl Bank, 287 Mass. 97 , 102 (1934); Welch v. City of Boston, 221 Mass. 155 , 174 (1915) (stating that, in general, a trustee holds legal title to trust property). A trustee acts for and represents the trust, and has full legal title to all property in the trust and the rights of possession that accompany it. McClintock v. Scahill, 403 Mass. 397 , 399 (1988).
[Note 5] The ambiguity in the reference to the grantee as Trustee Novak Family Trust, Individually has not been raised as an issue in this summary judgment decision.
[Note 6] Novak raises equitable estoppel as an affirmative defense, arguing that he relied on the representations of an agent of BNC Mortgage, Inc. that he was in fact Trustee in 2007. However, Novak has not demonstrated facts sufficient to support an equitable estoppel claim under Massachusetts law. See Barrow v. Dartmouth North Nursing Home, Inc., 86 Mass. App. Ct. 128 , 134-135 (2014) (stating that [t]o establish estoppel, a party must show (1) a representation intended to induce reliance on the part of a person to whom the representation is made; (2) an act or omission by that person in reasonable reliance on that representation; and (3) detriment as a consequence of the act of omission.). At a minium, the summary judgment record does not establish any etriment to Novak, where the misrepresentations regarding his status as Trustee ultimately resulted in paying off his personal note to New Century and a personal distribution of over $50,000 in cash.
[Note 7] I make no findings or inferences regarding the knowledge or state of mind of the parties at the time of this transaction. Since it has not been shown that Sullivan, as the then-Trustee, was aware of the 2007 refinancing transactions, and since the Plaintiff was not the lender involved in those refinancing transactions, it is immaterial for purposes of deciding this Summary Judgment Motion whether the improperly executed deed and mortgage were the result of mututal mistake or fraud.
[Note 8] None of the junior lienholders named as Interested Parties have filed oppositions to the Plainitffs Motion for Summary Judgment.