This action concerns the Parties dispute over claimed ownership interests in a residential property located at 36 Falvey Street, West Springfield, Massachusetts (Locus). Briefly recited, Plaintiff Raymond J. Stevens, III (Stevens or Plaintiff) claims to have acquired sole interest in Locus through a 2009 warranty deed granted by Mary A. Murray (Murray), who had acquired her interest in Locus following a March 2006 foreclosure of Defendant Thomas Mitchells (Mitchell) interest in Locus by his mortgagee. However, Defendant Handy Developers, Inc. (Handy Developers) of which Mitchell is the sole officer and shareholder now claims to own some percentage interest in Locus through a series of late-recorded conveyances and the operation of certain court orders and judgments (all to be discussed in detail infra).
On October 4, 2012, Plaintiff filed the Complaint in this action pursuant to G.L. c. 240 § 1 et seq., the Try Title statute, asking the Court to order Defendants to show cause why they should not bring an action to resolve whether they have any right, title, or interest in Locus. In their Amended Answer filed December 7, 2012, Defendants jointly counterclaimed seeking a declaration of their rights in Locus. [Note 1] Defendants assert that the interest in Locus acquired and mortgaged by Mitchell in 2005 was less than one-hundred percent (100%), and thus the foreclosure deed and subsequent conveyances that led to Plaintiffs acquisition also conveyed less than one-hundred percent (100%) of the ownership interest in Locus. Handy Developers claims it was subsequently deeded the remaining, partial interest in 2008.
On August 1, 2013, Plaintiff moved for summary judgment, seeking a declaration that he is the sole owner of Locus in fee simple and that Defendants have no right, title, or interest in Locus. On September 3, 2013, Defendants filed their opposition to Plaintiffs Motion for Summary Judgment. Following a hearing held on November 13, 2013, the Motion was taken under advisement. Now for the reasons discussed below, I find that the material facts are not in dispute, and on the basis of such undisputed facts, I find that Plaintiff Stevens is entitled to summary judgment in his favor, declaring that he owns a one-hundred percent (100%) interest in Locus.
II. UNDISPUTED MATERIAL FACTS
Based upon the pleadings, the Parties statements of fact, and the admissible material submitted in support of Plaintiffs Motion for Summary Judgment and Defendants Opposition, I find that the following material facts are undisputed:
1. By warranty deed dated September 27, 1965, Handy Developers, Inc. conveyed the property at 36 Falvey Street, West Springfield, Massachusetts (Locus) to Robert J. Lorenz (Robert Senior) [Note 2] and Alice Lorenz (Alice), as tenants by the entirety (the Lorenz Deed). The Lorenz Deed was recorded on September 27, 1965 at the Hampden County Registry of Deeds (Registry). [Note 3]
2. On October 15, 1973, the Hampden County Probate Court issued a divorce judgment (the Divorce Judgment) to dissolve the marriage of Robert Senior and Alice, which provided that, in the event Locus were sold, Alice would be paid 60% of the net sale proceeds and Robert Senior would be paid 40% of the net sale proceeds. The Divorce Judgment became final on April 16, 1974, but was not recorded with the Registry [Note 4] until August 29, 2007, long after the deaths of Alice and Robert Senior.
3. On May 6, 1974, Alice filed a Petition to Partition the Property in the Hampden County Probate Court (Partition Petition), in which she claimed that Locus was owned by herself and Robert Senior as tenants in common, and that her interest was 60% and Robert Seniors interest was 40%.
4. No objections were filed to the Partition Petition, and on December 5, 1974, the Hampden Probate Court allowed the Partition Petition and decreed that Alice held a 3/5ths undivided interest in Locus and that Robert Senior held a 2/5ths undivided interest in Locus (the Partition Judgment). The Partition Judgment also appointed a Commissioner and ordered that a warrant be issued to the Commissioner to sell Locus at private sale for not less than thirty-one thousand ($31,000) dollars.
5. Locus was never sold pursuant to the Partition Judgment, and the Partition Judgment was not recorded with the Registry [Note 5] until thirty (30) years later, well after Robert Seniors death in 2003, and Alices death in 1977.
6. On February 18, 1977, the Hampden County Probate Court issued a Judgment of Modification in Case No. 38326, modifying the 1973 Divorce Judgment (the Modification). The Modification removed the provision requiring the distribution of net proceeds in the event Locus were sold, and substituted the following provision:
that said plaintiff [Alice] convey to said defendant [Robert Senior] for the sum of five thousand ($5,000) dollars all her right, title and interest in and to [Locus], said sum to be payable at the rate of twenty-five ($25) dollars each and every week beginning March 18, 1977 and secured by a mortgage and note on said real estate .
7. Locus was not, however, conveyed to Robert Senior before Alices sudden death less than two months later. And the Modification was not recorded with the Registry [Note 6] until more than thirty (30) years later, on August 29, 2007, well after the deaths of Alice and Robert Senior.
8. Alice died intestate on April 3, 1977, leaving her two children, Robert J. Lorenz, Jr. (Robert Junior) and Daniel P. Lorenz (Daniel), as her only heirs. Since, pursuant to the Partition Judgment, she held a 3/5ths or 60% undivided interest in Locus at the time of her death, an undivided 30% interest in Locus passed to each of her sons.
9. By warranty deed dated March 15, 1994, Robert Senior purported to convey his right, title and interest in and to Locus to Robert Junior and to reserve a life estate in favor of himself (the Life Estate Deed). [Note 7] The Life Estate Deed provided that if Locus was sold after cessation of Robert Seniors tenancy, Daniel would receive 50% of the net proceeds from the sale. The Life Estate Deed was not recorded with the Registry [Note 8] for over ten (10) years, until October 4, 2004, about nine (9) months after Robert Seniors death.
10. After Robert Seniors death, Robert Junior conveyed his right, title and interest in and to Locus to Shays Park Realty Trust by warranty deed dated July 16, 2004 (the Shays Park Deed).
11. The Shays Park Deed was recorded with the Registry [Note 9] on October 4, 2004, the same date on which the Life Estate Deed was recorded.
12. By instrument dated October 19, 2004, entitled Release, Daniel released any and all obligations as stated in [the Life Estate Deed] (the Release). The Release was recorded with the Registry [Note 10] on January 20, 2005.
13. By warranty deed, dated October 25, 2004, Mitchell, as Trustee of the Shays Park Realty Trust, purported to convey Locus to Mitchell, individually (the Mitchell Deed). The Mitchell Deed was recorded with the Registry [Note 11] on January 20, 2005.
14. On June 16, 2005, Mitchell granted a mortgage on Locus to Aames Funding to secure a debt of $198,000 (the Aames Mortgage). The Aames Mortgage was recorded with the Registry [Note 12] on June 21, 2005.
15. The Aames Mortgage did not purport to be secured by anything less than a 100% interest in Locus.
16. Through the Aames Mortgage, Mitchell warranted that he was the sole owner of Locus.
17. By foreclosure deed dated March 14, 2006, Aames Funding conveyed Locus to itself for consideration of $196,280.30 (the Foreclosure Deed). The Foreclosure Deed was recorded with the Registry [Note 13] on May 11, 2006.
18. The Foreclosure Deed did not purport to convey anything less than a 100% ownership interest in Locus.
19. By quitclaim deed dated August 17, 2006, Daniel conveyed all [his] Right, Title and Interest in Locus to Handy Developers (the 2006 Handy Developers Deed). The 2006 Handy Developers Deed was not recorded with the Registry [Note 14] until October 18, 2006.
20. By a special warranty deed [Note 15] dated September 24, 2006, Aames Funding conveyed Locus to Mary A. Murray (the Murray Deed). The Murray Deed was recorded with the Registry [Note 16] on September 27, 2006, three weeks prior to the recording of the 2006 Handy Developers Deed.
21. By quitclaim deed dated February 6, 2008, Robert Junior conveyed to Handy Developers [a]ll the right, title and interest [he] inherited from the estate of Alice Lorenz in Locus (the 2008 Handy Developers Deed). The 2008 Handy Developers Deed was recorded with the Registry [Note 17] on December 10, 2012.
22. By a warranty deed dated May 4, 2009, and recorded with the Registry [Note 18] on May 8, 2009, Murray conveyed Locus to Stevens (the Stevens Deed). The Stevens Deed does not purport to convey anything less than a 100% interest in the Property.
23. At all material times, Mitchell was the sole officer and shareholder of Handy Developers and controlled Handy Developers.
24. Handy Developers never filed annual reports and Mitchell does not recall that Handy Developers ever filed any tax returns.
25. Handy Developers was dissolved by order of the Supreme Judicial Court No. 69126, pursuant to G.L. c. 156B on October 16, 1964.
26. Although revived on various dates for limited purposes, on August 17, 2006, the date the 2006 Handy Developers Deed was executed, Handy Developers was not an active, valid corporation.
27. Other than the claimed interest in Locus, Handy Developers has no assets.
In his summary judgment motion, Stevens seeks to defeat Handy Developers claim to a partial ownership interest in Locus on two theories: First, Plaintiffs contention that Mitchell actually did acquire and then mortgage a one-hundred percent (100%) ownership interest in Locus is unsupported by the summary judgment record and therefore fails. Stevens alternatively argues that, if Mitchell acquired and mortgaged less than a 100% ownership interest in Locus, the doctrine of estoppel by deed operates to prevent his alter ego, Handy Developers, from claiming any interest in Locus now. More specifically, Stevens asserts that, because Mitchell granted the Aames Mortgage with warranty covenants, Handy Developers (as the alter ego of Mitchell), is now estopped from asserting any after-acquired interest in Locus against Aames Funding or Aames Fundings successors in interest, including Plaintiff Stevens. In their opposition to Plaintiffs Motion for Summary Judgment, Handy Developers and Mitchell seek to avoid Plaintiffs attempt to pierce the corporate veil, deny that they are subject to any estoppel by deed, and continue to assert a partial ownership interest in Locus, conveyed to Handy Developers from the Lorenz brothers.
Summary judgment is appropriate where there is no genuine issue 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. Opara v. Massachusetts Mut. Life Ins. Co., 441 Mass. 539 , 544 (2004). In making a determination as to whether a genuine issue of material fact exists, the court must draw all reasonable inferences in the light most favorable to the party opposing the motion, and resolve all doubt concerning the existence of a material fact against the moving party. Attorney Gen. v. Bailey, 386 Mass. 367 , 371 (1982). Here, as discussed below, I conclude that the undisputed material facts established in the summary judgment record, entitle Stevens to summary judgment in his favor, as a matter of law.
A threshold issue to be decided by this court is the proportional ownership interest in Locus held by each party (before the operation of any equitable doctrines) as a result of the series of conveyances and court orders that date back to the 1960s.
According to the undisputed facts in the summary judgment record, as of 1965, Locus was owned by Robert Senior and Alice as tenants by the entirety. Following their divorce in 1973, Robert Seniors and Alices ownership interests in Locus were converted by operation of law into a tenancy in common, whereby each owned an undivided fifty percent (50%) interest. See Bernatavicius v. Bernatavicius, 259 Mass. 486 , 490 (1927) ([T]he operation of a divorce of the parties upon a tenancy by the entirety creates a tenancy in common.). [Note 19] Their 1973 Divorce Judgment, which ordered that in the event [Locus] is sold, sixty percent (60%) of the net proceeds thereof shall be paid to [Alice], and forty percent (40%) of the net proceeds thereof shall be paid to [Robert Senior] (emphasis added), neither re-apportioned their equal interests in Locus, nor ordered that Locus be sold. It merely provided for distribution of the proceeds in the event that Locus were to be sold. Thus, Alice and Robert Senior continued to own an undivided fifty percent (50%) interest in Locus following the 1973 Divorce Judgment. And it is undisputed that Locus was not sold while the Divorce Judgment was in effect so as to trigger the provision for the 60/40 distribution of proceeds.
On December 5, 1974, the Hampden County Probate Court issued a Partition Judgment on Alices uncontested Partition Petition, decreeing that partition of Locus be made in the proportion of an undivided three-fifths (3/5th) interest to Alice and an undivided two-fifths (2/5th) interest to Senior, [Note 20] and ordering that Charles D. Canavan, be appointed as Commissioner to make such partition and that a warrant be issued to the Commissioner to sell and convey Locus at a private sale for not less than $31,000 or at a public auction, and to distribute the net proceeds in such manner as to make the partition just and equal. There is no evidence in the summary judgment record that the Probate Court ever actually issued a warrant to the Commissioner to sell and convey Locus and distribute the proceeds. It is undisputed, however, that Locus was not sold pursuant to the Partition Judgment. Although the lack of a sale means that the portion of the Partition Judgment which ordered partition by sale did not become conclusive on the parties or their successors, see G.L. c. 241 § 18 (The partition by division, when confirmed and established by a final decree under section sixteen, or the sale if partition is made by sale, shall be conclusive upon all persons named in the petition . . . and upon all persons claiming through or under them or any of them . . . . (emphasis added)), the portion of the Partition Judgment which decreed the parties proportionate interests in Locus was an interlocutory decree which conclusively determined the identities of the co-tenants and their respective ownership shares or interests, operating as a final judgment subject to rights of appeal. Asker v. Asker, 8 Mass. App. Ct. 634 , 637 (1979) (A decree ordering partition, although denominated interlocutory by G. L. c. 241, Section 10, is final by its nature: once rendered, it is a conclusive determination of the rights of all parties to the proceedings under the petition, and no question any longer remains open concerning either ownership or title, or their individual shares and interest. (quoting Brown v. Bulkley, 11 Cush. 168 , 169 (1853))). There is nothing in the summary judgment record to indicate that there was any appeal. Accordingly, following the Partition Judgment, Alice and Robert Senior respectively held 60% and 40% (3/5ths and 2/5ths) undivided interests in Locus. [Note 21]
Approximately two years later, the Divorce Judgment was modified. The Modification, dated February 18, 1977, removed the original provision regarding the distribution of sale proceeds in the event Locus were sold, and instead ordered that Alice convey to [Robert Senior] all her right, title and interest in and to Locus for the sum of $5,000 payable at the rate of twenty-five dollars ($25.00) per week beginning March 18, 1977, and secured by a mortgage and note. There is no claim made, and no evidence in the record to suggest, that Robert Senior ever gave Alice a note and mortgage for the $5,000 or paid any of the weekly installments before Alices death on April 3, 1977, as contemplated under the Modification. It is undisputed, however, that Alice did not convey her interest in Locus to Robert Senior pursuant to this Modification before her death. And because it was not recorded until 2007 well after both Alice and Robert Senior were dead, and after several interim conveyances had been made to third parties the Modification was ineffective on its own to convey full title of Locus to Robert Senior. See G.L. c. 184 § 17 (A judgment or decree, at law or in equity, . . . . affecting the title to real property, shall not have any effect except against the parties thereto, their heirs and devisees and persons having actual notice thereof, unless a certified copy of the record thereof has been recorded in the registry of deeds for the county or district where the land lies . . . .); see also True v. Wisnioski, 13 Mass. App. Ct. 501 , 502-03 (1982) (where judgment of divorce ordered husband to convey his interest in certain real estate to wife, but wife did not record the judgment until after a creditor had attached the husbands interest in the property, the interest of the creditor in the real estate prevailed). Moreover, it must be noted that the ordered conveyance was conditioned upon Seniors payment of money, secured by a mortgage and note conditions which have not been shown to have been met. For these reasons, I find that, as of the date of Alices sudden death in April, 1977, Alices and Robert Seniors respective 60% and 40% ownership interests in Locus were unchanged.
Because Alice died intestate and divorced, her estate passed to her only heirs at law ? her two children, Robert Junior and Daniel ? who thereby would have each acquired a thirty percent (30%) undivided interest in Locus. [Note 22] Accordingly, in April, 1977, the nominal ownership interests in Locus aligned as follows:
Robert Senior - 40% tenant-in-common; Robert Junior - 30% tenant-in-common ; Daniel - 30% tenant-in-common
By deed, dated March 15, 1994, Robert Senior purported to convey with warranty covenants all his right, title and interest in Locus to Robert Junior, subject to Robert Seniors life estate and the condition that if Locus were transferred to another after Robert Seniors tenancy ceases, Daniel would receive fifty percent (50%) of the net proceeds. Whether or not Robert Senior believed he owned a one-hundred percent (100%) interest in Locus at that time, he in fact only held a forty percent (40%) interest, as discussed above. Accordingly, if the Life Estate Deed is valid, then following Robert Seniors death in December, 2003, Robert Juniors interest in Locus would have totaled 70% (40% acquired through the Life Estate Deed and 30% acquired through intestate transfer from Alices estate). [Note 23] And Daniel would have continued to own the remaining 30% interest.
On July 16, 2004, Robert Junior conveyed with warranty covenants all [his] right, title and interest in Locus to Shays Park Realty Trust. Whether or not Shays Park Realty Trust, Mitchell, and/or Robert Junior believed Robert Junior owned and conveyed a one-hundred percent (100%) fee interest in Locus at that time, Robert Junior could not convey more than the partial interest he owned. [Note 24] On October 19, 2004, Daniel released any and all obligations as stated in [the Life Estate Deed]. [Note 25] Mitchell, as Trustee of Shays Park Realty Trust, thereafter purported to convey Locus to himself, individually, on October 25, 2004.
On January 14, 2005, Mitchell granted a mortgage on Locus to Aames Funding. Through the Aames Mortgage, Mitchell warranted his title to Locus with mortgage covenants as follows:
BORROWER COVENANTS that Borrower is lawfully seised of the estate hereby conveyed and has the right to grant and convey the Property and that the Property is unencumbered, except for encumbrances of record. Borrower warrants and will defend generally the title to the Property against all claims and demands, subject to any encumbrances of record.
Although by this statement Mitchell warranted that he was the sole owner, Mitchell in fact held no more than a 70% interest in Locus at that time.
In March 2006, Aames Funding foreclosed on the Mortgage, and conveyed title to itself by foreclosure deed. Aames Funding then conveyed Locus to Murray pursuant to a special warranty deed dated September 24, 2006. Murray, in turn, conveyed Locus to Plaintiff Stevens by warranty deed dated May 4, 2009. Throughout this chain of conveyances that led to the Stevens Deed, no more than a 70% interest in Locus was actually transferred.
Meanwhile, shortly after Aames Funding foreclosed on Locus, and prior to the Murray Deed, Daniel executed a quitclaim deed on August 17, 2006, purporting to convey to Handy Developers all [his] Right, Title, and Interest to Locus. [Note 26] Thus, as of October 4, 2012, when this lawsuit commenced, the nominal alignment of ownership interests in Locus were as follows:
Stevens - 70% tenant-in-common ; Handy Developers - 30% tenant-in-common
Application of Equitable Doctrines
In his Motion for Summary Judgment, Plaintiff Stevens relies on two main arguments in support of his claim to a 100% fee interest in Locus. First, Stevens argues that the corporate veil of Handy Developers should be pierced to find that Handy Developers is the mere alter ego of Mitchell, such that in 2006, when Daniel conveyed his interest in Locus to Handy Developers, that interest was in fact conveyed to Mitchell. This leads to Plaintiffs second argument, that because Mitchell warranted his full title in Locus when he granted the Aames Mortgage in 2005, failing to reveal that the Mortgage was to be secured by anything less than a one-hundred percent (100%) ownership interest in Locus, Mitchell is now estopped from claiming the fractional interest he acquired from Daniel against Aames Funding or any of Aames Fundings successors in title, including Plaintiff Stevens. As discussed below, I find that application of these two equitable theories is appropriate in the circumstances.
Piercing the Corporate Veil
Massachusetts courts may pierce the veil of a corporation and disregard its corporate form where it is necessary to avoid gross inequity. My Bread Baking Co. v. Cumberland Farms, Inc., 353 Mass. 614 , 620 (1968); see also Kraft Power Corp. v. Merrill, 464 Mass. 145 , 148 (2013) ([T]he doctrine is not itself a cause of action but an equitable tool that authorizes courts, in rare situations, to ignore corporate formalities, where such disregard is necessary to provide a meaningful remedy for injuries and to avoid injustice. (quoting Attorney Gen. v. M.C.K., Inc., 432 Mass. 546 , 555 (2000)); Evans v. Multicon Constr. Corp., 30 Mass. App. Ct. 728 , 732 (1991) (In rare particular situations to prevent gross inequity, disregard of separate corporate entities may be warranted, i.e., it is permissible to pierce the corporate veil. (internal quotation marks omitted)).
The Massachusetts Appeals Court has cited a set of twelve factors enunciated by the First Circuit Court of Appeals for determining when a corporate form may be disregarded:
(1) common ownership; (2) pervasive control; (3) confused intermingling of business activity assets, or management; (4) thin capitalization; (5) nonobservance of corporate formalities; (6) absence of corporate records; (7) no payment of dividends; (8) insolvency at the time of the litigated transaction; (9) siphoning away of corporate assets by the dominant shareholders; (10) nonfunctioning of officers and directors; (11) use of the corporation for transactions of the dominant shareholders; (12) use of the corporation in promoting fraud.
Evans, supra at 733 (citing Pepsi-Cola Metropolitan Bottling Co. v. Checkers, Inc., 754 F.2d 10, 14-16 (1st Cir. 1985). All twelve factors need not be present to apply the doctrine and pierce the corporate veil. Id. at 736 ([T]he exercise is, of course, not one in counting. One examines the twelve factors to form an opinion whether the over-all structure and operation misleads.).
In the case of Handy Developers, and its sole officer and controlling shareholder, Mitchell, several, but not all, of the above twelve factors are present. The undisputed material facts demonstrate that Mitchells control of Handy Developers was pervasive. For example, at all relevant times, Handy Developers was solely owned and controlled by Mitchell; corporate formalities were not observed (because in fact Handy Developers was not even a corporation lawfully in existence when it purportedly took an ownership interest in Locus from Daniel pursuant to the 2006 Handy Developers Deed); corporate records were not kept in the ordinary course, as Mitchell admits; and Handy Developers was insolvent at the time of the litigated transaction (because, again, it was not even a corporation lawfully in existence when it obtained the 2006 Handy Developers Deed, and because Defendants admit that Handy Developers has no assets other than the claimed interest in Locus).
Most importantly from this courts perspective, use of the corporation for transactions of the dominant shareholder is present here. In particular, based upon the $1.00 consideration recited in the 2006 Handy Developers Deed, Stevens alleged as an undisputed material fact that no consideration was paid for the 2006 Handy Developers Deed. In response, Defendants den[ied] this recited fact, based upon statements contained in the transcript of Mitchells deposition testimony (the Mitchell Deposition). [Note 27] But in the cited portions of the Mitchell Deposition, in response to questions related to whether any consideration was paid for the 2006 Handy Developers Deed from Daniel and the later 2008 Handy Developers Deed from Robert Junior, Mitchell testifies:
There was no consideration. It was just an effort to square things up. Depo. Tr. at 176:3-4.
I said I wish your brother would let me take his interest in [Locus] so I can get my money back. Daniel called somebody else and [Robert Junior] called him back. And [Robert Junior] simply said he was giving me a deed, said so that Tom will get some of the money he blew on us [Robert Junior and Daniel]. Thats how he said it. About a month later I got a deed. Depo. Tr. at 177:23- 178:5.
Well, the sons of the previous person [Alice and Senior] understood and knew I wasnt paid. Also I expended a lot of money on [Juniors and Daniels] behalf when I picked up that house. They promised me that by giving me each the deed to their part of the house that they got from their mother [Alice] that they had hoped I would receive full payment for what was owed. Depo. Tr. at 62:22-63:4.
Pointing to this testimony (which in any event is hearsay), Defendants ask the court to make the favorable inference that there was, in fact, consideration for the 2006 and 2008 Handy Developers Deeds. But the testimony facially demonstrates that the consideration the Defendants are referring to is the repayment to Mitchell of money that Mitchell blew on the Lorenz brothers, Robert Junior and Danieli.e. cancellation of a past debt Robert Junior and Daniel purportedly owed to Mitchell. Putting aside the hearsay contained in his testimony, Mitchells assertions that the purpose of the 2006 and 2008 Handy Developers Deeds was to square things up with me and about a month later I got the deed illustrate Mitchells use of Handy Developers for his personal business transactions.
Several of the other enumerated factors for piercing the corporate veil may also exist, however, on the summary judgment record before me, and drawing all inferences in favor of Defendants, I do not have enough evidence to deem any of the other factors met. Nonetheless, not all of the factors must be present to determine that equity would be served by piercing the corporate veil in this case. On the material facts before me, and drawing reasonable inferences in favor of Defendants, I conclude that to provide a meaningful remedy for injuries and to avoid injustice, Kraft Power Corp, 464 Mass. at 148, the corporate form of Handy Developers must be disregarded as to the transaction involving the grant of a partial ownership interest in Locus from Daniel. Accordingly, I find that Mitchell, as sole officer and shareholder of Handy Developers, individually acquired Daniels interest in Locus by virtue of the 2006 Handy Developers Deed.
Estoppel by Deed
I must next determine whether, having acquired Daniels interest in Locus through the 2006 Handy Developers Deed, Mitchell is estopped from asserting that interest against Stevens. The doctrine of estoppel by deed provides that if a man conveys, with full covenants of warranty, land to which he has no title, or an imperfect title, and he afterward acquires good title, his after-acquired good title inures to the benefit of his grantee in the prior deed, upon the ground that he is estopped to say that he was not seized in fee of the estate which he has conveyed with warranty. Huzzy v. Heffernan, 143 Mass. 232 , 233 (1887); see also Ayer v. Philadelphia and Boston Face Brick Co., 159 Mass. 84 , 87-88 (1893); Mt. Washington Co-op. Bank v. Benard, 289 Mass. 498 , 500 (1935) (It is the rule in this Commonwealth that a deed with full covenants of warranty estops a grantor who has an imperfect title or no title at all to the real estate conveyed, from setting up against the grantee or those claiming under him any later acquired title to the property and that such a later acquired title inures to the benefit of the grantee and his successors in title). Accordingly, estoppel by deed occurs when a grantor conveyed 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. Zayka v. Giambro, 32 Mass. App. Ct. 748 , 751 (1992).
The conveyance at issue in this case involves a mortgage conveyed by Mitchell to Aames Funding, instead of a traditional warranty deed. Regardless, Mitchell made warranty covenants of title in the Aames Mortgage and he admits as much. Thus I find the case here to be on par with the facts of Mt. Washington Co-op. Bank, 289 Mass. 498 , in which (like Plaintiff Stevens in the instant case), the Defendants derived their title through the foreclosure of a duly recorded mortgage. In fact, the original mortgagors held no title at the time of granting the mortgage (a recorded deed to them as tenants by the entirety having been forged), but three months later the wife alone took actual title to the subject property. The following year, Mt. Washington Co-op Bank took its title to the subject property under a sheriffs deed after obtaining a special attachment, levy, and execution against the husband and wife on a debt owed by both.
The Massachusetts Supreme Judicial Court (SJC) ruled that because the mortgagors did not hold title as tenants by the entirety at the time they granted the mortgage, the mortgagee never held any title to the subject property. However, the mortgagors together had made warranty covenants in the mortgage deed. The SJC noted that [t]he [mortgage] instrument did not purport to be a release or a conveyance only of such right, title and interest as the grantors assumed to hold. It manifests the intent to convey a title in fee to the grantee and not a lesser or a qualified interest. Id. at 500. In making such a covenant, the wife thereby undertook to warrant and defend the title in fee which it was intended the grantee should take. Id. at 501. Applying the doctrine of estoppel by deed, the SJC found that [w]hen she later acquired veritable title to the property [through the deed to herself individually], the covenant of warranty and defense in the mortgage estopped her and those claiming under her from asserting the after acquired title. Id. The SJC consequently ruled that the defendants prevailed in their claim for full ownership of the subject property, which they acquired through the foreclosure deed.
Like the defendants in the Mt. Washington case, Stevens took title to Locus subsequent to a foreclosure of Mitchells mortgage. Mitchell actually had conveyed less than a one-hundred percent (100%) interest in Locus at the time he granted the Aames Mortgage because he did not hold a 100% interest. But Mitchell (like the wife in Mt. Washington) nonetheless granted the Aames Mortgage with warranty covenants and thereby undertook to warrant and defend the title in fee which it was intended the grantee should take. Id. at 501. Like the wife, then, Mitchell is estopped from asserting the after-acquired title he later obtained from Daniel against Aames or its successors in title.
It is of no moment that the defect in Mitchells title may have been discovered through a thorough title search that would have included a review of the records at the Hampden County Probate Court. The rule annunciated in Ayer (although a criticized, minority rule in the United States [Note 28] ) provides that even where a defect is apparent in the title (or even on the face of the deed itself), the warranty made by the grantor is to be taken as assuring you that he owns and will defend you in the unencumbered fee, and thus it does not matter that by the same deed he avows the assertion not to be the fact. Ayer, 159 Mass. at 86. [Note 29]
Accordingly, under the case law of this Commonwealth, Mitchell having first conveyed legal title of Locus with warranty covenants by mortgage at a time when he did not have full ownership title, and having later acquired the remaining title interest in Locus from Daniel in 2006 is now estopped from asserting such later-acquired title against Aames Mortgage or a subsequent grantee (Stevens). By operation of the doctrine of estoppel by deed, the later- acquired title that Mitchell procured from Daniel inures to the benefit of his grantee (Aames Funding) and Stevens as a successor in title to Aames.
For the reasons discussed, I conclude that Stevens is entitled to summary judgment in his favor that he holds title to Locus free of any claims by Mitchell and/or Handy Developers, through the equitable doctrines of piercing the corporate veil and estoppel by deed.
Judgment to enter in accordance with this Decision.
[Note 1] That Defendants jointly counterclaimed to assert their valid title to Locus is anomalous given their stated position. Under no set of facts alleged could both Defendants hold the ownership interest in Locus they claim.
[Note 2] Because several of the individuals discussed in this Decision share the same surname, I use their first names to avoid confusion. Also, because of the identity of their first and last names, I use the Senior and Junior designations when referring to the father and son, respectively.
[Note 3] Book 3142, Page 450.
[Note 4] Book 16893, Page 440.
[Note 5] Alices Partition Petition and the Partition Judgment were recorded on June 26, 2007 at Book 16767, Page 130 and 133 respectively.
[Note 6] Book 16893, Page 441.
[Note 7] I note that the signature of Robert Senior appears identical to the signature of Robert Junior on the Shays Park Deed, discussed infra. I also note that Mitchell notarized Robert Seniors signature on the Life Estate Deed. Stevens, however, has not raised these factors to argue that the Life Estate Deed was invalid. In any event, the validity or invalidity of the Life Estate Deed is not determinative of the outcome in this case, as will be discussed infra.
[Note 8] Book 14535, Page 4.
[Note 9] Book 14535, Page 5
[Note 10] Book 14775, Page 541
[Note 11] Book 14775, Page 545.
[Note 12] Book 15107, Page 50.
[Note 13] Book 15890, Page 190.
[Note 14] Book 16263, Page 494.
[Note 15] In general, whereas a general warranty deed imposes liability on the grantor to defend against all lawful claims of title to the land granted, a special warranty deed only imposes liability on the grantor for defects or clouds on the title arising by, through, or under an act of the grantor. In Massachusetts, a special warranty deed is further distinguished from a quitclaim deed because a special warranty deed warrants against encumbrances made or suffered by a grantor, whereas a quitclaim deed only warrants against encumbrances made by the grantor. See Massachusetts Conveyancers Handbook § 19:2, at 475 (4th ed. 2008) (citing Silverblatt v. Livadas, 340 Mass. 474 , 477-78 (1960).
[Note 16] Book 16217, Page 547.
[Note 17] Book 19584, Page 337.
[Note 18] Book 17780, Page 488.
[Note 19] Although the Massachusetts Uniform Probate Code (MUPC) was not in effect at the time of Alice and Robert Seniors divorce or at the time of Alices death, the result today under the in-effect MUPC would be the same. See G. L. c. 190B, §2-804(b)(2) (. . . divorce or annulment of a marriage . . . . severs the interests of the former spouses in property held by them at the time of the divorce or annulment as joint tenants with the right of survivorship, transforming the interests of the former spouses into tenancies in common.)
[Note 20] The 3/5ths/ 2/5ths proportionate interests appear to have been decreed based upon the proportionate interests asserted by Alice in her Partition Petition, with no objections being made thereto.
[Note 21] The Partition Judgment was not recorded until 2007, well after Alice and Robert Senior had died, and there is no indication in the summary judgment record that Alice, Robert Senior, or their estates ever attempted to enforce that Judgment.
[Note 22] The result is the same under either the former statutes or the new MUPC, which pertinent provisions took effect January 2, 2012. Former G.L. c. 190 § 3 provided for equal distribution of any land to the decedents children, and the new MUPC G.L. c. 190B § 2-103 provides that the entire intestate estate if there is no surviving spouse, passes in the following order to the individuals designated below who survive the decedent: (1) to the decedents descendants per capita at each generation.
[Note 23] See Note 7, supra. If the Life Estate Deed was not valid, then both Daniel and Robert Junior would presumably each have inherited half of their fathers 40% interest upon Robert Seniors death, so that Daniel and Robert Junior would each have held a 50% undivided interest in Locus as of the date of the Shays Park Deed. If the Life Estate Deed was valid, Robert Junior would have owned a 70% interest in Locus, while Daniel would have held a 30% interest. In either event, however, the Shays Park Deed conveyed less than a 100% interest in Locus.
[Note 24] See Note 23.
[Note 25] Plaintiffs contention that Shays Park Realty Trust actually acquired a 100% interest in Locus at this time because the Release effectively conveyed any interest Daniel held in Locus is not supported by the undisputed material facts. The instrument is explicit that it only serves to release any obligations to Daniel imposed by the Life Estate Deedi.e. the obligation that Daniel receive fifty percent (50%) of any proceeds from the sale of Locus to a third party after Robert Seniors life estate ceased. Further evidence that no conveyance of an ownership interest in Locus is intended by the Release is that it does not mention Shays Park Realty Trust or Mitchell (nor any other intended grantee) nor does it use any of the common terminology of real property conveyance. Accordingly, I find that the Release does not have any effect on any ownership interest that Daniel may have held in Locus.
[Note 26] In 2008, Robert Junior also purported to convey an interest in Locus to Handy Developers through a quitclaim deed. As recited above, however, Robert Junior no longer held any interest in Locus after he conveyed out all his interest to Shays Park Realty Trust in 2004. Therefore, no additional interest in Locus could have been transferred to Handy Developers through this 2008 deed.
[Note 27] Mitchell testified at deposition both in his personal capacity and as a 30(b)(6) designee for Handy Developers.
[Note 28] Yet not overruled in this Commonwealth. See Dalessio v. Baggia, 57 Mass. App. Ct. 468 , 471-72 (2003) (noting criticism of the Ayer Rule and declining to extend its application; but not overruling its application in the warranty covenant context). The Ayer rule is criticized on two grounds: (1) because the rule applies the doctrine of estoppel by deed even where a defect or encumbrance in the title is known or knowable by the grantee; and (2) because the doctrine of estoppel by deed is applied not only to the grantor, but also against one holding by descent or grant from him after acquiring new titleeven if such subsequent grantee is a bona fide purchaser for value. See Ayer, 159 Mass. at 87-88; Dalessio, 57 Mass. App. Ct. at 471-72. In this case, the second criticism is inapplicable, because the grantor subject to estoppel is Mitchell, who is a Defendant in this action, and not any subsequent grantee who qualifies as a bona fide purchaser for value.
It is also worth noting that the cases declining to extend the Ayer rule to certain factual contexts involving quitclaim deeds are not applicable here, in the context of warranty covenants made in a mortgage deed. See Dalessio, 57 Mass. App. Ct. at 471-72 (declining to extend Ayer and Zakaya to a deed containing quitclaim covenants as against a subsequent bona fide purchaser for value of the grantor allegedly subject to estoppel); Conte v. Marine Lumber Co., Inc., 66 Mass. App. Ct. 505 , 512-13 & n. 15 (2006) (declining to extend Ayer and Zakaya to a deed containing quitclaim covenants as against a stranger to the prior grantor transactions and noting that the question would have been different if Marine Lumber were holding the property under the mortgage deed rather than the quitclaim deed).
[Note 29] Mitchell asserts through his statement of undisputed facts that he notified Aames as soon as he learned that he did not have full title to Locus, and that Aames was aware of the situation prior to the foreclosure. The deposition testimony cited in support of this assertion is his own testimony which is, itself, rife with hearsay and therefore does not satisfy the requirements of Mass. R. Civ. P. 56. But even if it could be proved that Aames became aware of the situation after the mortgage was granted, the analysis does not change. The fact is that Mitchell granted the mortgage with warranty covenants, claiming to be the sole owner. Later knowledge concerning the true state of the title does not defeat that warranty.