The plaintiffs, Bruce Nutting and Michele M. Nutting (the Nuttings or plaintiffs), filed their petition to try title pursuant to G. L. c. 240, §§1-5 on November 14, 2012. The Nuttings challenge the validity of a foreclosure sale of the property where the Nuttings reside, known as 134 Old Ocean Street, Marshfield, Massachusetts (Property), by Nationstar Mortgage LLC (Nationstar), and the subsequent foreclosure deed of the Property to Federal National Mortgage Association (FNMA). The Nuttings claim that neither Nationstar nor FNMA possess or can establish any lawful and valid title to the Property. Thus, the plaintiffs argue, any adverse claim to title that might arise out of the foreclosure sale by Nationstar is void. Defendants allege that the chain of title of the mortgage and the note secured by the mortgage is clear and determinable, and request this court to grant a motion to dismiss due to lack of subject matter jurisdiction, and in a counterclaim request declaratory relief with respect to FNMAs title following the foreclosure sale.
Plaintiffs filed their initial complaint against defendants Nationstar, FNMA, GN Mortgage, LLC (GN Mortgage) and Guaranty Bank F.S.B (Guaranty Bank), seeking declaratory relief, to quiet title, and to remove a cloud on title, relating to a mortgage on the Property, which they granted in 2007. Plaintiffs filed an amended one-count petition to try title pursuant to G. L. c. 240, §§ 1-5 on December 24, 2012, dropping GN Mortgage and Guaranty Bank as defendants. The remaining defendants filed a motion to dismiss for failure to state a claim upon which relief can be granted under Mass. R. Civ. P. 12(b)(6) on February 11, 2013. The court (Grossman, J.) denied defendants' motion on October 30, 2013. By leave of court granted on May 1, 2014, the defendants filed an amended answer with a counterclaim seeking declaratory relief with respect to FNMAs title. On May 15, 2014, the parties filed a joint motion to stay further proceedings pending a decision in Abate v. Fremont Investment and Loan, 470 Mass. 821 (2015), which was then pending before the Supreme Judicial Court.
On April 13, 2015, following the Abate decision, defendants filed a motion to dismiss for lack of subject matter jurisdiction pursuant to Mass. R. Civ. P. 12(b)(1). On May 18, 2015, plaintiffs filed their opposition to the motion to dismiss, and their cross-motion to dismiss counterclaims pursuant to Mass. R. Civ. P. 12(b)(1) and 12(b)(6). [Note 1] Defendants filed their reply to plaintiffs' opposition to their motion to dismiss and opposition to plaintiffs cross-motion to dismiss counterclaim on May 22, 2015. The court (Speicher, J.) held a hearing on the motions to dismiss on June 4, 2015. Only the defendants availed themselves of the opportunity to appear at the hearing on the motions.
For the reasons set forth below, defendants motion to dismiss is ALLOWED, and plaintiffs cross-motion to dismiss the counterclaim is DENIED.
The following facts are accepted as true for the purpose of deciding these motions to dismiss pursuant to Mass. R. Civ. P. 12(b)(1):
1. The Property was deeded to the Nuttings by quitclaim deed dated August 1, 2007, and recorded with the Plymouth County Registry of Deeds (Registry) on August 1, 2007 in Book 34902, Page 263.
2. The Nuttings reside in the Property as their primary residence and maintain actual possession thereof.
3. The Nuttings executed a promissory note (the promissory note) to GN Mortgage, LLC (GN Mortgage) dated August 1, 2007, secured by a mortgage (the mortgage) on the Property, also executed by the Nuttings, in the amount of $292,500. On the mortgage, GN Mortgage is designated as the Lender; Mortgage Electronic Registration Systems (MERS), acting solely as a nominee for Lender and Lenders successors and assigns, is designated as the mortgagee. The mortgage is dated August 1, 2007 and was recorded on the same day with the Registry in Book 34902 Page 264.
4. The promissory note was sold or otherwise transferred to FNMA on October 4, 2007.
5. MERS assigned the mortgage to Nationstar by assignment dated August 17, 2011 and recorded with the Registry on September 30, 2011 in Book 40384, Page 228.
6. The assignment was executed by Whytnie Nordman (Nordman), identified as an assistant secretary of MERS, and whose signature was acknowledged by a notary public, who attested that the assistant secretary was personally known to her or whose identity was proved through satisfactory evidence, and that Nordman personally appeared to sign the document.
7. On or before September 12, 2012, FNMA authorized Nationstar to act on its behalf to prosecute foreclosure proceedings with regard to the mortgage. The authorization was memorialized in an affidavit entitled Note Affidavit Under Massachusetts General Laws Chapter 244 Section 35C, which was recorded with the Registry in Book 42023, Page 305 on September 28, 2012. (Note Affidavit)
8. Nationstar sent the Nuttings a default/right to cure letter (Cure Notice) on October 18, 2010.
9. On April 12, 2012, Nationstar filed a complaint under the Servicemembers Civil Relief Act in the Land Court, pursuant to which judgment entered in favor of Nationstar on August 29, 2012.
10. The following steps were taken in the foreclosure process:
a. A Notice of Mortgagees Sale of Real Estate was published in the Marshfield Mariner on October 17, October 24, and October 31, 2012;
b. Notice pursuant to G. L. c. 244, §14 was sent to the Nuttings on October 10, 2012 informing the Nuttings that the Property was to be sold at public auction to be held on November 14, 2012;
c. The Property was sold at public auction to FNMA for $354,701 on November 14, 2012;
d. Nationstar executed a Massachusetts Foreclosure Deed by Corporation (Foreclosure Deed) on November 27, 2012, which was recorded with the Registry on December 12, 2012 at Book 42383 Page 188;
e. The Foreclosure Deed granted the Property to FNMA.
11. The Nuttings filed this action to try title in the Land Court on November 14, 2012 against Nationstar, GN Mortgage, Guaranty Bank and FNMA.
12. FNMA filed a summary process action on February 4, 2013 in the Housing Court. The Housing Court action was stayed pending resolution of the title issue in the present action in this court.
A. Standard of Review for a Motion to Dismiss in a Try Title Action
In reviewing a motion to dismiss for lack of subject matter jurisdiction pursuant to Mass. R. Civ. P. 12(b)(1), the court accepts as true the factual allegations in the complaint, as well as any favorable inferences reasonably drawn from them. Ginther v. Commr of Ins., 427 Mass. 319 , 322 (1998). In considering subject matter jurisdiction under Rule 12(b)(1), the court may consider matters outside the four corners of the complaint, which are used to support the movants claim that the court lacks subject matter jurisdiction. Id. at n.6.
Defendants argue that the motion to dismiss should be granted on the ground that plaintiffs do not have good record title, and therefore do not have standing. Under the try title statute, G. L. c. 240, §§1-5, the court has subject matter jurisdiction only when a petitioner establishes three jurisdictional elements: (1) that he holds record title to the property; (2) that he is a person in possession; and (3) the existence of an actual or possible adverse claim clouding the petitioners record title. Abate v. Fremont Investment & Loan, 470 Mass. 821 , 827- 828 (2015). Plaintiffs have standing when they can prove the first two elements: record title and possession. Bevilacqua v. Rodriguez, 460 Mass. 762 , 767 (2011). As a component of subject matter jurisdiction, a party may challenge . . . standing under [R]ule 12(b)(1) at any time in the action. Abate v. Fremont Inv. & Loan, supra, 470 Mass. at 828.
The first two jurisdictional elements are subject to challenge through the introduction of other evidence negating the petitioner's claim. Id. at 830. Once they have been challenged, the petitioner bears the burden to prove those facts by a preponderance of the evidence. Id. With respect to the third element, when the existence of an adverse claim is challenged, the petitioners factual allegations are entitled to a presumption of truth regardless of a factual challenge... Id.
B. Claims of Invalidity that would Render the Foreclosure Void.
In the present case, only the first jurisdictional issue, plaintiffs record title, is in dispute, since the parties agree that the Nuttings are in possession of the Property, and plaintiffs factual allegations are entitled a presumption of truth with respect to the existence of an adverse claim.
Plaintiffs first argue that the foreclosure sale by Nationstar was void because Nationstar did not hold both the promissory note and a valid assignment of the mortgage at the time of the foreclosure sale, as required by Eaton v. Fed. Nat'l Mortgage Ass'n, 462 Mass. 569 (2012). Plaintiffs argue that the assignment from MERS to Nationstar was not effective to pass title to the mortgage because, when the assignment was executed in August 2011 and recorded in September 2011, the beneficial rights (namely, the promissory note) had already been transferred to FNMA. This argument apparently assumes that title to the mortgage automatically transferred to FNMA upon transfer of the note, and as a result, MERS did not have possession of the mortgage at the time it granted the assignment to Nationstar. Plaintiffs appear to argue that ownership of the loan and the mortgage cannot be split, despite the Supreme Judicial Courts recent affirmation to the contrary. See Eaton, 462 Mass. at 576 ([I]n Massachusetts a mortgage and the underlying note can be split.). It is true that the law in Massachusetts long has been that the holder of a promissory note secured by a mortgage has an equitable right to obtain an assignment of the mortgage. Eaton, 462 Mass. at 568-69. And there is some emerging case law from this court and others that the holder of a mortgage might, in some instances, have a right to compel transfer of the note. See, e.g. Cavanaugh v. GMAC Mortgage, LLC, Land Court Misc. Case No. 11 MISC 447901 (Dec. 21, 2012) (Piper, J.). There is, however, no doctrine that states the transfer of a promissory note automatically carries with it title to the mortgage. All the law requires is that the mortgage and the note be united under the same control at the time of the foreclosure. See Eaton, supra.
1. Chain of Title for the Mortgage and Promissory Note
The chain of title for both the mortgage and the promissory note is clear and unbroken. With respect to the mortgage, the undisputed facts show that the mortgage executed by plaintiffs was granted to MERS, as mortgagee. MERS assigned the mortgage to Nationstar by assignment dated August 17, 2011. The assignment was executed by a person identified as an assistant secretary of MERS, whose signature was acknowledged before a notary public. With respect to the promissory note, the plaintiffs executed a promissory note with GN Mortgage on August 1, 2007. The beneficial rights in the loan were transferred to FNMA on October 4, 2007. FNMA then authorized Nationstar to act on its behalf to prosecute foreclosure proceedings with regard to the mortgage. While the plaintiffs claim there may have been intervening endorsements of the promissory note before it was transferred to FNMA, the parties agree that as of November 14, 2012 (the date of the foreclosure sale), as a matter of record title the mortgage had been assigned to Nationstar, and that FNMA, the holder of the promissory note since October 4, 2007, had authorized Nationstar to pursue the foreclosure. A mortgage may be foreclosed by one who, although not the note holder himself, acts as the authorized agent of the note holder, to stand in the shoes of the mortgagee Eaton, 462 Mass. at 586.
Thus, at the time of the foreclosure, and when the Property was sold at public auction on November 14, 2012, Nationstar possessed a valid assignment of the mortgage and was authorized to act on behalf of the owner of the promissory note. [B]ased on the absence of any viable claim that the mortgage assignment, and by extension the subsequent foreclosure, was invalid, plaintiffs claim that Nationstar lacked record title at the time of the foreclosure fails. Abate v. Fremont Inv. & Loan, supra, 470 Mass. at 832.
2. Split of the Note and Mortgage
Plaintiffs claim there were intervening transfers of the promissory note before the note ended up in the hands of FNMA, which authorized the foreclosure by Nationstar on its behalf, and that these intervening transfers to entities that did not hold the mortgage rendered the subsequent foreclosure void. However, these factual allegations, even if true (which, on the record before the court they do not appear to be), are irrelevant and without consequence since at the time of the foreclosure the mortgage and promissory note were under common control. [N]othing in Massachusetts law requires a foreclosing mortgagee to demonstrate that prior holders of the record legal interest in the mortgage also held the note at the time each assigned its interest in the mortgage to the next holder in the chain. Sullivan v. Kondaur Capital Corp., 85 Mass. App. Ct. 202 , 210 (2014). Under our law, a mortgage and the underlying note can be split. Shea v. Federal National Mortgage Association, 87 Mass. App. Ct. 901 (2015), quoting Eaton v. Federal National Mortgage Association, supra, 462 Mass. at 586.
Nor do the plaintiffs fare any better by alleging that the split of the mortgage and the promissory note violated Paragraph 20 of the mortgage. Considering identical language and identical arguments, the Land Court has twice rejected this argument. Construed according to its plain terms and its usual and ordinary sense, paragraph 20 does not require that the Note and Mortgage be conveyed together Paragraph 20 does not require that the Note and Mortgage be assigned together. Mitchell v. U. S. Bank Natl Assn, 22 LCR 120 , 123-124 (2014); Abate v. Fremont Inv. & Loan, 20 LCR 630 , 637 (2012).
C. Claims of Invalidity that would Render the Foreclosure Voidable.
The above arguments relating to the validity of the assignment based on the split in ownership of the mortgage and the promissory note at various times prior to the foreclosure are the only claims in the first amended petition that, if established, would potentially render the foreclosure void, if they could establish that at the time of the foreclosure, the foreclosing entity did not hold title to the property. Thus, they are the only claims that, if established, would confirm plaintiffs standing. [A] mortgagors standing [is] limited to claims that a defect in the assignment rendered it void, not merely voidable. Bank of New York Mellon Corp. v. Wain, 85 Mass. App. Ct. 498 , 502 (2014). Plaintiffs remaining claims are of the variety that, if established, would render the foreclosure voidable, and do not affect the validity of a foreclosure that has already occurred. [Note 2] Notwithstanding this deficiency in the plaintiffs claims in this post- foreclosure action, the court examines them as follows.
Plaintiffs claim that the notice to cure sent to them pursuant to G. L. c. 244, §35A was defective, based on the same arguments discussed above, concerning intervening transfers of the promissory note and mortgage. Based on these allegations, the plaintiffs allege that the notice to cure did not adequately or accurately identify the holder of the mortgage. Plaintiffs do not dispute that they received the notice from Nationstar, as the servicer of the loan. There is no dispute that Nationstar was the loan servicer, and at some point became the holder of the mortgage and was explicitly authorized to foreclose on the loan on behalf of FNMA. [T]he statutory notice is designed to provide the mortgagor with the information necessary to contact the party who holds all relevant information about the loan and who holds authority to make decisions or otherwise take action to allow the mortgagor to cure any default, pay off the loan balance by means of a sale or refinancing, or undertake discussions of a possible modification of the loan. In the circumstances of loans such as the one here, that party is the mortgage servicer. Haskins v. Deutsche Bank National Trust Co., 86 Mass. App. Ct. 632 , 640 (2014). See also U.S. Bank Natl Assn v. Schumacher, 467 Mass. 421 , 431 (2014) (holding defective notice to cure did not invalidate foreclosure sale). The omission of the mortgage originator on the notification does not render the foreclosure fundamentally unfair. Collette v. Wells Fargo Bank, N.A., Appeals Court Memorandum and Order Pursuant to Rule 1:28, p. 3 (2015).
Plaintiffs next make a series of allegations relating to the assignment of the mortgage and the authority of the person who executed the assignment from MERS to Nationstar. They allege that the person signing, Whytnie Nordman, did not personally appear before the notary, was not duly authorized to execute the assignment, and was improperly acting on behalf of both MERS and Nationstar. These allegations are legally without consequence, given that the assignment was properly acknowledged pursuant to the requirements of G. L. c. 183, §54B. G. L. c. 183, §54B provides in relevant part that an
assignment of mortgage if executed before a notary public, justice of the peace or other officer entitled by law to acknowledge instruments, whether executed within or without the commonwealth, by a person purporting to hold the position of president, vice president, treasurer, clerk, secretary, cashier, loan representative, principal, investment, mortgage or other officer, agent, asset manager, or other similar office or position, including assistant to any such office or position, of the entity holding such mortgage, or otherwise purporting to be an authorized signatory for such entity, or acting under such power of attorney on behalf of such entity, acting in its own capacity or as a general partner or co- venturer of the entity holding such mortgage, shall be binding upon such entity and shall be entitled to be recorded, and no vote of the entity affirming such authority shall be required to permit recording.
The assignment signed by Nordman meets the requirements of the section on its face: it states that Nordman personally appeared before the notary, it identifies Nordman as an assistant secretary of MERS, and it states that the assignment was executed before the notary public. Meeting these requirements makes the assignment, as recorded, binding. The Bank of New York Mellon Corp. v. Wain, supra, at 503. Such an assignment, once recorded, is binding even in the face of allegations of forgery. Solo Realty LLC v. Sheredy, Appeals Court Memorandum and Order Pursuant to Rule 1:28 (2015).
Finally, plaintiffs allege that the assignment fails for lack of consideration under G. L. c. 183, §6, and that the assignment is defective because it fails to comply with a requirement in G. L. c. 183, §6D that it list the mortgage originator. Neither of these allegations has any legal merit. G. L. c. 183, §6 requires that every deed presented for record must state the full consideration for the deed. It does not impose such a requirement on mortgage assignments, and in any event, the section further provides that, [f]ailure to comply with this section shall not affect the validity of any deed. Similarly, G. L. c. 183, §6D, which requires that the mortgage broker or mortgage originator be listed on every mortgage and assignment presented for record, also provides that, [f]ailure to comply with this section shall not affect the validity of any mortgage or the recording of any mortgage or assignment of mortgage.
For the foregoing reasons, the defendants motion to dismiss is ALLOWED, and the plaintiffs cross-motion to dismiss is DENIED. [Note 3] Judgment shall enter dismissing the first amended petition to try title with prejudice and granting declaratory relief on the defendants counterclaim. [Note 4]
[Note 1] Given the undisputed facts upon which these motions are based, and the nature of the counterclaim, which seeks declaratory relief with respect to FNMAs title, the plaintiffs cross-motion to dismiss the defendants counterclaim for declaratory relief is really in the nature of a motion for summary judgment, and is treated as such.
[Note 2] Plaintiffs argue that they are entitled to raise issues that render the foreclosure sale voidable on the ground that they filed this action prior to the recording of the foreclosure deed. The foreclosure sale was held on November 14, 2012 at 1:00 P.M., and this action, in an apparent race to the courthouse, was filed at 1:08 P.M. on the same date. The plaintiffs did not seek a preliminary injunctive relief against any part of the foreclosure process. The court considers this action to be a post-foreclosure challenge to the validity of the foreclosure sale.
[Note 3] In their memorandum, plaintiffs request leave to amend their petition in light of case law that has come out subsequent to the filing of their amended petition if the court is otherwise inclined to grant the defendants motion to dismiss. This request is not properly before the court, as no motion to amend has been filed. Johnston v. Box, 453 Mass. 569 , 582 (2009). Treating the request as a motion to amend, it is DENIED. The amended petition was filed more than two and one half years ago, and any motion to further amend should have been filed well before now; and in light of the case law referred to, presumably including Abate, it appears any such amendment would be futile. Adding a new set of facts or a new theory of recovery late in the proceedings provides good reason for denying a motion to amend. Ritter v. Bergmann, 72 Mass. App. Ct. 296 , 303 (2008).
[Note 4] Normally, a dismissal for lack of jurisdiction is without prejudice. Here, however, dismissal is an adjudication on the merits, and is with prejudice. Abate v. Fremont Investment & Loan, 470 Mass. 821 (2015).