The court amends its Memorandum and Order Allowing Respondent Deutsche Bank's Motion to Dismiss, dated December 14, 2016, by substituting this Amended Memorandum and Order in its entirety:
This case commenced April 11, 2014, with the filing of a petition subsequent to registration (a so-called S-case/S-petition, see G.L. c. 185, § 114 et. seq.). Petitioners, John and Rosa Schiavone (Schiavones), seek a judicial order that their deed to the property located at 155- 157 Cornell Street in the Roslindale section of Boston (Property), now in a recently canceled certificate of title, be carried forward to a new certificate of title. The Schiavones contend that the 2012 foreclosure of a mortgage on the Property by respondent Deutsche Bank National Trust Company, as Trustee for Long Beach Mortgage Loan Trust 2006-7 (Deutsche), was void because Deutsche failed to comply with the preforeclosure notice provisions of G.L. c. 244, § 35A and paragraph 22 of the mortgage, and did not have power of attorney to conduct the foreclosure. Therefore, the Schiavones maintain, all instruments relating to the foreclosure should be expunged and a new certificate of title issued. Deutsche now brings a motion to dismiss, arguing that even if the petitioners have made a colorable showing as to why the foreclosure is void, they are barred from lodging any challenge to the 2012 foreclosure raised for the first time after the entry of a new certificate of title pursuant to G.L. c. 185, § 70. The Schiavones are equally barred, Deutsche argues, by principles of judicial estoppel because in their prior Chapter 7 bankruptcy action they acknowledged the validity of Deutsche's mortgage and obtained a discharge of debts in return for surrendering title to the Property. If not barred, Deutsche asserts that the Schiavones have not presented sufficient evidence as to why the 2012 foreclosure sale should be invalidated. As further explained below, Deutsche's motion to dismiss is allowed and the Schiavones' S-petition is dismissed with prejudice in its entirety.
The Schiavones filed their Subsequent Complaint on April 11, 2014. On July 28, 2015, a citation by certified mail was issued. On September 16, 2015, the Schiavones filed their First Amended Subsequent Complaint (Compl.). The Answer and Counterclaim of Cambridge Street Realty, LLC (Cambridge Street), Bruce E. Efron, and Laura S. Efron was filed on October 9, 2015 (Answer). On November 16, 2015, Respondent Deutsche filed a Motion to Dismiss S- Petition and Memorandum in Support of Motion to Dismiss S-Petition (Motion to Dismiss). On December 11, 2015, Deutsche filed a Supplemental Motion to Dismiss S-Petition and Memorandum of Supplemental Motion to Dismiss S-Petition (Def. Supp. Mem.).
On December 30, 2015, the Schiavones filed a Motion under Mass. R. Civ. P. Rule 19 to Join an Additional Party and a Motion to Stay the Case until MERS is Served and Given an Opportunity to Respond. On January 7, 2016, Deutsche filed an Opposition to Petitioners' Motion to Stay Case and Cambridge Street filed a Limited Opposition to Petitioners' Motion under Mass. R. Civ. P. Rule 19 to Join an Additional Party and Motion to Stay Case. On January 19, 2016, the court allowed Petitioners' Motion under Mass. R. Civ. P. Rule 19 to Join an Additional Party and denied Petitioners' Motion to Stay.
On January 21, 2016, the Schiavones filed Petitioners' Motion to Join a Third Petitioner Under Rules 25(c) and 19 and David Kiah's Motion to Intervene and be Joined as a Party Petitioner Under Rules 24 and 19 (Pet. Mot. to Join). On January 22, 2016, the Schiavones filed their Opposition to Deutsche's Motion to Dismiss and Memorandum of Law in Support of Opposition to Motion to Dismiss (Pet. Opp. Mem.). On January 27, 2016, the court allowed the Petitioners' Motion to Join a Third Petitioner Under Rules 25(c) and 19 and allowed David Kiah's Motion to Intervene and be Joined as a Party Petitioner under Rules 24 and 19.
On February 19, 2016, David Kiah filed his Motion to Strike and Opposition to Deutsche's Supplemental Motion to Dismiss (Kiah Motion to Strike) and Memorandum of Law in Support of his Motion to Strike and Opposition to Deutsche's Supplemental Motion to Dismiss. On March 7, 2016, Deutsche filed its Opposition to David Kiah's Motion to Strike Supplemental Motion to Dismiss S-Petition. On March 8, David Kiah filed his Affidavit in Support of Motion to Strike and Opposition to Deutsche's Supplemental Motion to Dismiss. On March 10, 2016, Cambridge Street filed its Opposition to Motion of David Kiah to Strike Supplemental Motion to Dismiss S-Petition. On March 18, 2016, Deutsche's Motion to Dismiss and David Kiah's Motion to Strike were heard and taken under advisement. On March 21, 2016, Rosa Schiavone filed an Affidavit in Support of David Kiah's Motion to Strike and Opposition to Deutsche's Supplemental Motion to Dismiss. This Memorandum and Order follows.
Standard for Motion to Dismiss
The Motion to Dismiss seeks dismissal of the S-petition under Mass. R. Civ. P. 12(b)(6), for failure to state a claim upon which relief can be granted. In considering a motion to dismiss for failure to state a claim, the court accepts as true well-pleaded factual allegations and reasonable inferences drawn therefrom, Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43 , 45 (2004), but does not accept "legal conclusions cast in the form of factual allegations." Iannacchino v. Ford Motor Co., 451 Mass. 623 , 633 (2008), quoting Schaer v. Brandeis Univ., 432 Mass. 474 , 477 (2000). Generally, if matters outside the pleadings are presented to and not excluded by the court, the motion will be treated as a motion for summary judgment. Mass. R. Civ. P. 12(b), 12(c). The court may, however, take into account matters of public record and documents integral to, referred to, or explicitly relied on in the complaint, whether or not attached, without converting the motion to a motion for summary judgment. Marram, 442 Mass. at 45 n. 4; Schaer, 432 Mass. at 477; Reliance Ins. Co. v. City of Boston, 71 Mass. App. Ct. 550 , 555 (2008); Shuel v. DeIeso, 16 LCR 329 , 329 n.2 (2008).
For purposes of the Motion to Dismiss pursuant to Mass. R. Civ. P. 12(b)(6), the court accepts as true the following facts as alleged in the Complaint as well as any favorable inferences that reasonably can be drawn from them:
The Schiavones' Chain of Title
1. The Property is registered land. All documents in the title history of the Property referred to herein are filed for registration in the Suffolk Registry District of the Land Court (Registry District) except for two documents that were recorded on the recorded side in the Suffolk Registry of Deeds (Registry of Deeds). Compl. ¶ 5.
2. On May 21, 1987, Joyce Zambito (Zambito) conveyed the Property to Yee Ling Chow and Yen Lu Chow (Chows). The same day, the deed to the Property was filed for registration in the Registry District in Book 100, Page 833 as Document No. 422863 and issued Certificate of Title (COT) No. 100833. Compl. ¶ 7; Answer, Exhs. A-B.
3. On May 26, 1987, a document titled "Declaration of Trust Establishing Cornell Street Real Estate Trust" dated May 21, 1987 was mistakenly recorded in the Registry of Deeds in Book 13713, Page 26. The sole trustee of the Cornell Street Real Estate Trust (Trust) is Yee Ling Chow. Compl. ¶ 10; Answer, Exh. F.
4. The Declaration of Trust states in relevant part:
Every instrument executed by any one (1) person who, according to the record in said place of recording, appears to be a Trustee hereunder shall be conclusive evidence in favor of every person relying thereon or claiming thereunder that at the time of the delivery thereof this Trust was in full force and effect, and that the Trustee was duly directed by the beneficiaries to execute and deliver the same. Any person dealing with the trust property or the Trustees may always rely without further inquiry, on a certificate signed by any one (1) person appearing from the aforesaid records in said place of recording to be a Trustee hereunder as to whether or not this Declaration of Trust has been terminated, as to who are the beneficiaries hereunder, or as to the existence or nonexistence of any fact or facts which constitute conditions precedent to any acts by the Trustee or are in any other manner germane to the affairs of the Trust.
Compl. ¶ 11.
5. A deed of the Property from the Chows to Yee Ling Chow, as Trustee of the Cornell Street Realty Trust, dated May 21, 1987, was also inadvertently recorded in the Registry of Deeds on May 26, 1987 in Book 13713, Page 32 (1987 Recorded Deed), rather than filed for registration. No transfer COT was issued pursuant to the deed and the deed was never filed for registration in the Registry District. Compl. ¶¶ 9, 12-14; Answer, Exh. E.
6. Along with the deed, the Chows gave a mortgage to Centrust Mortgage Corporation (Centrust), which was filed for registration on May 21, 1987 in the Registry District in Book 500, Page 33 as Document No. 422864 and noted on COT No. 100833. Subsequently, on January 29, 1988, the mortgage was assigned from Centrust to Foster Mortgage by an assignment which was filed for registration in the Registry District on August 11, 1988 as Document No. 441587 and noted on COT No. 100833. Pet. Opp. Mem., pp. 10-11; Answer, Exhs. C-D.
7. The error in failing to register the 1987 Recorded Deed was compounded when Yee Ling Chow, as Trustee, conveyed the Property to Martha Fay, Sidney Atwood, and Joan Cunningham (Fay, Atwood, and Cunningham), and the deed to the Property was filed for registration in the Registry District on January 11, 1991 in Book 104, Page 802 as Document No. 472149, and issued transfer certificate of title (TCOT) No. 104802. Compl. ¶ 15; Answer, Exhs. G-H.
8. The mortgage held by Foster Mortgage was discharged by a discharge dated January 17, 1991 and erroneously recorded in the Registry of Deeds on March 25, 1991 in Book 16760, Page 197 (Foster Mortgage Discharge). Answer, Exh. I.
9. On November 20, 2003, Fay, Atwood, and Cunningham conveyed the Property to John Schiavone. The deed to the Property was filed for registration in the Registry District in Book 597, Page 12 as Document No. 670872, and issued TCOT No. 120212. Compl. ¶ 16; Answer, Exhs. J-K.
10. On October 25, 2006, John Schiavone conveyed the Property to himself and his wife, Rosa Schiavone. The deed to the Property was filed for registration in the Registry District in Book 615, Page 123 as Document No. 727900, and issued TCOT No. 123923. Along with the deed, the Schiavones gave a mortgage to Long Beach Mortgage Company (Long Beach) dated June 2, 2006, that was filed for registration in the Registry District as Document No. 727901 and listed as an encumbrance on the memorandum of encumbrances to TCOT No. 123923 (Mortgage). Compl. ¶¶ 17-18; Answer, Exhs. L, M, N.
Facts Relating to the Foreclosure
11. In or around October 2008, the Schiavones' missed at least one loan payment and, therefore, were in default. Compl., Exh. A.
12. General Laws c. 244, § 35A(a) states in relevant part that "[a]ny mortgagor of residential real property located in the commonwealth, shall have a 90-day right to cure a default of a required payment as provided in such residential mortgage or note secured by such residential real property by full payment of all amounts that are due without acceleration of the maturity of the unpaid balance of such mortgage."
13. General Laws c. 244, § 35A(b) provides that the "mortgagee, or anyone holding thereunder, shall not accelerate maturity of the unpaid balance of such mortgage obligation or otherwise enforce the mortgage because of a default consisting of the mortgagor's failure to make any such payment in subsection (a) by any method authorized by this chapter or any other law until at least 90 days after the date a written notice is given by the mortgagee to the mortgagor."
14. General Laws c. 244, § 35A(c), in turn, describes the information that must be included in the notice, including in relevant part:
(1) the nature of the default . . . and of the mortgagor's right to cure the default by paying the sum of money required to cure the default;
(2) the date by which the mortgagor shall cure the default to avoid acceleration, a foreclosure or other action to seize the home, which date shall not be less than 90 days after service of the notice and the name, address and local or toll free telephone number of a person to whom the payment or tender shall be made;
(3) that if the mortgagor does not cure the default by the date specified, the mortgagee may take steps to terminate the mortgagor's ownership in the property by a foreclosure proceedings or other action to seize the home;
(4) the name and address of the mortgagee, or anyone holding thereunder, and the telephone number of a representative of the mortgagee whom the mortgagor may contact if the mortgagor disagrees with the mortgagee's assertion that a default has occurred or the correctness of the mortgagee's calculation of the amount required to cure the default;
(5) the name of any current and former mortgage broker or mortgage loan originator for such mortgage or note securing the residential property.
G.L. c. 244, § 35A(a)-(b); G.L. c. 244, § 11-17C; G.L. c. 183, § 21.
15. Paragraph 22 of the Mortgage provides
Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument. . . . . The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the non-existence of a default or any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke the STATUTORY POWER OF SALE and any other remedies permitted by Applicable Law.
Answer, Exh. N.
16. On October 11, 2008, a 90 Day Right to Cure Notice (Notice) was sent to the Schiavones. The "Lender" on the Notice is listed as Washington Mutual Bank (WaMu), although WaMu was dissolved prior to the date of the Notice. Compl. ¶¶ 31-33, Exh. A.
17. The Notice stated that if the amount required to cure the default was not paid by January 14, 2009, WaMu intended to accelerate the Mortgage loan. The Notice sent to the Schiavones did not inform them of their right to bring a court action to assert any defense to acceleration and sale, nor did it disclose the name and address of a legal Lender or any authorized servicing agent as required by paragraph 22 of the Mortgage. It stated the amount due as of the date of the Notice, and provided a telephone number to call to ascertain the precise amount required to be paid to cure the default. Compl. ¶¶ 34-40, Exh. A.
18. On June 25, 2009, JPMorgan Chase Bank, N.A. (JPMorgan)the successor in interest to the Federal Deposit Insurance Corporation (FDIC), as receiver for WaMu, successor in interest to Long Beachassigned the Mortgage to Deutsche, as Trustee. The assignment was filed for registration in the Registry District on July 1, 2009 at Book 615, Page 123 as Document No. 766589, and listed as an encumbrance on the memorandum of encumbrances to TCOT No. 123923. Compl. ¶ 19; Answer, Exh. O.
19. On June 29, 2009, Deutsche filed a case in this court under the Servicemembers' Civil Relief ActDeutsche Bank, as Trustee v. Schiavone, 09 MISC 404906 (Servicemembers' case). In the Servicemembers' case, Deutsche filed a mortgagee's affidavit pursuant to G.L. c. 206, § 11 and copy of the Notice. Judgment entered in the Servicemembers' case on November 30, 2009, where the court authorized Deutsche to make entry and sell property covered by the Mortgage. On August 3, 2012, the Judgment issued by the court in the Servicemembers' case was filed for registration in the Registry District at Book 615, Page 123 as Document No. 806720, and listed as an encumbrance on the memorandum of encumbrances to TCOT No. 123923. Compl. ¶¶ 30-31; Answer, Exhs. P, Q.
20. Notice of the foreclosure sale of the Property was published pursuant to G.L. c. 244, § 14 on December 20 and December 27, 2011, and January 3, 2012. Compl. ¶¶ 43-44.
21. The law firm Stanton & Davis undertook the foreclosure on behalf of Deutsche as legal counsel for JPMorgan. Stanton & Davis sent the notices required by G.L. c. 244, § 14 by certified mail. Compl. ¶¶ 41, 43-44.
22. A Certificate of Entry dated January 13, 2012, and filed for registration in the Registry District at Book 615, Page 123 as Document No. 806723 on August 3, 2012, states that Donna M. Freitas, an employee of the Law Firm of Stanton & Davis, is a "duly authorized agent of [Deutsche Bank]" who made "an open peaceable entry and unopposed entry on the premises." The Certificate of Entry is listed as an encumbrance on the memorandum of encumbrances to TCOT No. 123923. Compl. ¶¶ 22-23; Answer, Exh. R.
23. A Certificate of Authorization from Deutsche, executed as a sealed instrument on July 26, 2012, and filed for registration in the Registry District on August 3, 2012 at Book 615, Page 123 as Document No. 806721, "authorizes and ratifies" Stanton & Davis to make entry onto the Property, bid on behalf of Deutsche, and "execute the Memorandum of Sale of Real Property by Auctioneer and the Affidavit that forms a part of the Foreclosure Deed, as well as taking any other actions necessary to complete the foreclosure on the Mortgaged Premises." The Certificate of Authorization also references a Limited Power of Attorney filed for registration in the Plymouth County Registry District of the Land Court as Document No. 645137 on January 30, 2009. The power of attorney states that Deutsche appoints the servicer, JPMorgan, as its "true and lawful Attorney-in-Fact" and authorizes JPMorgan to act on its behalf "solely for the purpose of performing such acts and executing such documents in the name of [Deutsche] necessary and appropriate to effectuate the following enumerated transactions in respect of any of the mortgages or deeds of trust . . . and promissory notes secured thereby." [Note 1] Compl. ¶ 45.
24. A foreclosure sale took place on January 13, 2012. Deutsche, having the highest bid, purchased the Property. Pet. Opp. Mem., p. 3, Exh. 1.
25. On August 3, 2012, Deutsche executed a foreclosure deed for the Property dated June 28, 2012, and filed the foreclosure deed for registration in the Registry District at Book 642, Page 131 as Document No. 806725, and TCOT No. 129331 issued. An affidavit of sale, made pursuant to G.L. c. 244, § 15, with a copy of a notice of mortgagee's sale of real estate was filed with the foreclosure deed. The affidavit of sale, dated July 31, 2012, is signed by Jon S. Davis, an attorney at Stanton & Davis, counsel to JPMorgan for Deutsche, and attests that the notices required by G.L. c. 244, § 14, were sent by certified mail. The foreclosure deed and affidavit of sale are listed as encumbrances on the memorandum of encumbrances to TCOT No. 129331. Along with the foreclosure deed, the Certificate of Entry was filed for registration in the Registry District. Compl. ¶¶ 20-21, 42; Pet. Opp. Mem., Exh. 1; Answer, Exhs. R, S.
26. On October 4, 2013, Deutsche conveyed the Property to Cambridge Street Realty, LLC (Cambridge Street) who was the buyer at the foreclosure sale. On October 7, 2013, the deed to Cambridge Street was filed for registration in the Registry District at Book 648, Page 77 as Document No. 824303 and issued TCOT No. 130477. Compl. ¶ 24; Answer, Exh. T.
27. On October 31, 2014, Cambridge Street conveyed the Property to Bruce E. Efron (Efron). On November 5, 2014, the deed to Efron was filed for registration in the Registry District at Book 653, Page 51 as Document No. 837115 and issued TCOT No. 131451. Compl. ¶ 25; Answer, Exh. U.
28. Also on November 5, 2014, Efron gave a mortgage to Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for "Lender and Lender's successors and assigns," which was filed for registration in the Registry District at Book 653, Page 51 as Document No. 837116 and listed as an encumbrance on the memorandum of encumbrances for COT No. 131451. Compl. ¶ 26; Answer, Exh. V.
29. On May 6, 2015, Efron conveyed the Property back to Cambridge Street. On May 18, 2015, the deed to Cambridge Street WAS filed for registration in the Registry District at Book 655, Page 89 as Document No. 843481 and issued TCOT No. 131889. The mortgage to MERS was listed as an encumbrance to COT No. 131889. Compl. ¶¶ 27-28; Answer, Exh. W. 30. COT No. 131889 is the last Certificate of Title issued for the Property. Compl. ¶ 29.
31. On January 15, 2016, the Schiavones purportedly conveyed a one-third interest in the Property to David Kiah. See Pet. Mot. to Join.
Proceedings in Bankruptcy Action
32. On May 27, 2011, the Schiavones filed their Chapter 7 voluntary bankruptcy petition in the United States Bankruptcy Court for the District of Massachusetts, docketed as case no. 11-15066 (Bankruptcy Action). Def. Supp. Mem., Exh. 1.
33. On June 28, 2011, the Schiavones filed their schedules and listed the Mortgage held by Deutsche on the Property as a secured claim. They also filed their Statement of Intention, and confirmed their intention to surrender the Property in return for a discharge of the debt underlying the Mortgage. Def. Supp. Mem., Exhs. 2-3.
34. In the Bankruptcy Action, the Schiavones did not schedule as assets any claims challenging the validity of the Mortgage held by Deutsche. While the Schiavones did schedule some assets and liabilities, they did not schedule any claims against any creditors. Def. Supp. Mem., Exh. 2.
35. The Property was surrendered and the Schiavones' debt was discharged on August 30, 2011. The Chapter 7 Bankruptcy Action was closed on September 6, 2011. Def. Supp. Mem., Exhs. 1, 4.
Deutsche has moved to dismiss the case under Mass. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief may be granted. Deutsche argues that the Schiavones are barred from bringing this action either by principles of judicial estoppel stemming from the Chapter 7 Bankruptcy Action or under G.L. c. 185, § 70. If not barred, Deutsche argues that the Schiavones have not demonstrated any basis for finding the 2012 foreclosure void. The Schiavones oppose the motion to dismiss, asserting that they are not barred from challenging the foreclosure and have presented sufficient evidence that the foreclosure deed is void based on the inadvertent recording, but not registering, of the 1987 Recorded Deed to Yee Ling Chow as Trustee and subsequent erroneously issued transfer certificates of title. The Schiavones maintain that because the deed from the Chows to Yee Ling Chow as Trustee was not filed for registration, all transfer certificates thereafter were issued in error and only operated as a contract. The Schiavones also assert that the Notice sent to them prior to the foreclosure did not comply with G.L. c. 244, § 35A, and paragraph 22 of the Mortgage because it was not from a "Lender" that was a legal entity and did not contain several essential terms. Further, they assert the law firm of Stanton & Davis did not have the written authorization under seal to carry out the foreclosure required by G.L. c. 244, § 14. David Kiah makes similar arguments in the Kiah Motion to Strike. Since a determination that Schiavones are barred from challenging the foreclosure would be dispositive, those arguments are addressed first.
I. G.L. c. 185, § 70
Generally, "transfer certificates of title are conclusive as to all matters contained therein,' except as otherwise provided in the [Registration Act]." Doyle v. Commonwealth, 444 Mass. 686 , 690 (2005), quoting G.L. c. 185, § 54. This general rule comports with the fundamental purposes behind title registrationensuring certainty of title for transferees of filed for registered land. Id.; Wild v. Constantini, 415 Mass. 663 , 668 (1993). An exception to this rule is provided by G.L. c. 185, § 114, which allows an owner of registered land or other party in interest to bring an S-petition in the Land Court, "requesting the court order changes to certificates when . . . any error or omission was made in entering a certificate or any memorandum thereon'; or for any other reasonable ground.'" Doyle, 444 Mass. at 691-692. The scope of this exception is limited by G.L. c. 185, § 70, which states in relevant part:
In case of foreclosure by exercising the power of sale without a previous judgment of court, the affidavit required by section fifteen of chapter two hundred and forty-four shall be filed and registered with the assistant recorder, in lieu of recording. The purchaser at the foreclosure sale or his assigns may thereupon at any time present the deed under the power of sale to the assistant recorder for filing and registration, and obtain a new certificate; but this chapter shall not prevent the mortgagor or other person in interest, prior to the entry of a new certificate of title, from directly impeaching, by bill in equity or otherwise, any foreclosure proceedings affecting registered land. (emphasis added)
In this case, the foreclosure sale occurred and Deutsche was issued a new transfer certificate of title in 2012. The Schiavones did not file their S-petition until 2014. Deutsche argues that, consequently, G.L. c. 185, § 70, bars the petitioners from contesting Deutsche's certificate of title or any subsequent certificates predicated on the 2012 foreclosure. See Hendricks v. Federal Nat'l Mtge. Ass'n, 22 LCR 184 , 185 n. 1 (2014) (finding that under § 70, a mortgagor seeking to challenge a foreclosure involving registered land must do before a new certificate of title is issued in favor of the purchaser at foreclosure). However, in Sullivan v. Kondaur Capital Corp., 85 Mass. App. Ct. 202 2014), the Appeals Court expressly rejected a foreclosing bank's "suggestion that G.L. c. 185, § 70, implicitly requires any such challenge to be brought before issuance of a new certificate of title following foreclosure." Id. at 208 n. 11. The court found that the language, "prior to the entry of a new certificate of title," need not be applied to limit a challenge to a foreclosure sale based on a claim of valid title to the mortgage. Id.; see also Pappas v. Deutsche Bank Nat'l Trust Co., 24 LCR 221 , 223 n. 6 (2016). As such, Deutsche cannot rely on G.L. c. 185, § 70 to bar the Schiavones from bringing this action.
II. Judicial Estoppel.
As an alternatively sufficient reason requiring dismissal of this S-petition, Deutsche asserts that the Schiavones are barred from challenging the foreclosure pursuant to principles of judicial estoppel. "Judicial estoppel is an equitable doctrine that precludes a party from asserting a position in one legal proceeding that is contrary to a position it had previously asserted in another proceeding." Blanchette v. School Comm. of Westwood, 427 Mass. 176 , 184 (1998), citing Fay v. Federal Nat'l Mtge. Ass'n, 419 Mass. 782 , 787-788 (1995); East Cambridge Sav. Bank v. Wheeler, 422 Mass. 621 , 623-624 (1996) ("[W]e will look to see whether that party is seeking to use the judicial process in an inconsistent way that courts should not tolerate."). Two fundamental elements are at the core of a claim of judicial estoppel: 1) the position being asserted in litigation must be directly inconsistent with a position asserted in prior proceedings, and 2) the party must have succeeded in convincing the court to accept its prior position. Otis v. Arbella Mut. Ins. Co., 443 Mass. 634 , 640-641 (2005). "The purpose of the doctrine is to prevent the manipulation of the judicial process by litigants." Canavan's Case, 432 Mass. 304 , 308 (2000). As an equitable doctrine, judicial estoppel is not to be defined with reference to "inflexible prerequisites or an exhaustive formula" for determining its applicability. New Hampshire v. Maine, 532 U.S. 742, 751 (2001). Rather, the doctrine is properly invoked whenever a party is seeking to use the judicial process in an inconsistent way that courts should not tolerate. Guay v. Burack, 677 F.3d 10, 16 (1st Cir. 2012) ("Where one succeeds in asserting a certain position in a legal proceeding, one may not assume a contrary position in a subsequent proceeding simply because one's interests have changed."), citing New Hampshire, 532 U.S. at 749. Application of the equitable principle of judicial estoppel to a particular case is a matter of discretion. Otis, 443 Mass. at 639-640.
Bankruptcy petitioners have an obligation to disclose all assets to the bankruptcy court, including any legal and potential claims. 11 U.S.C. §§ 521(a)(1) and 541(a)(1). The disclosure must take the form of an asset schedule, which can be amended if circumstances change during the course of the proceedings. Guay, 677 F.3d at 17, citing 11 U.S.C. § 541(a)(7) (the estate property includes any interest in property that the estate acquires after the commencement of the case). "A long-standing tenet of bankruptcy law requires one seeking benefits under its terms to satisfy a companion duty to schedule, for the benefit of creditors, all his interests and property rights." Payless Wholesale Dists., Inc. v. Alberto Culver (P.R.), Inc., 989 F.2d 570, 571-572 (1st Cir. 1993), quoting Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 416 (3rd Cir. 1988). Courts have stressed the importance of disclosure, not only to the creditors but to the bankruptcy court, and have found that a debtor's failure to announce a claim against a creditor in a bankruptcy proceeding precludes the debtor from litigating the cause of action later. Id.; Oneida Motor Freight, Inc., 848 F.2d at 416-418. In short, "it is well-established that a failure to identify a claim as an asset in a bankruptcy proceeding is a prior inconsistent position that may serve as the basis for application of judicial estoppel, barring the debtor from pursuing the claim in a later proceeding." Guay, 677 F.3d at 17, citing Moses v. Howard Univ. Hosp., 606 F.3d 789, 798 (D.C. Cir. 2010).
On May 27, 2011, the Schiavones filed their Chapter 7 bankruptcy petition in the Bankruptcy Action. On June 28, 2011, the Schiavones filed their schedules, including schedules of assets and liabilities. They listed the first Mortgage on the Property held by Deutsche as a secured creditor claim (listed under JPMorgan because they were the servicing agent at the time), but no claims against Deutsche or any other creditor were scheduled as assets. Along with their schedules, the Schiavones filed their Statement of Intention that confirmed their intent to surrender the Property in consideration for a discharge of their debt underlying the Mortgage. The Property was surrendered and the Schiavones' debt was discharged on August 30, 2011. The Chapter 7 Bankruptcy Action was closed on September 6, 2011. On April 11, 2014, the Schiavones filed their S-Petition in this case.
The Schiavones had a duty to make known to the bankruptcy court all their assets and liabilities. The defect in the chain of title of the Property, which the Schiavones rely on to support their claim that the foreclosure is void, occurred when the 1987 Recorded Deed was recorded in the Registry of Deeds rather than filed for registration in the Registry District. In their opposition to Deutsche's motion to dismiss, the Schiavones argue that the 1987 recorded mortgage from the Chows to Centrust Mortgage and the later assignment to Foster Mortgage, which would show that Foster Mortgage was senior to any subsequent mortgage and have been on every certificate of title since, would have put any later purchaser, such as Deutsche, on inquiry notice to research the title back and find the fatal defect in the chain. Colony of Wellfleet, Inc. v. Harris, 71 Mass. App. Ct. 522 , 527 (2008) ("The statutory scheme set out in G.L. c. 185 does not protect all purchasers in every circumstance . . . [and] anyone who seeks the protection of G.L. c. 185 must fulfil his or her obligation to investigate further other certificates of title, documents, or plans in the registration system' that are referenced on existing certificates of title for the land to be purchased.'"). The Schiavones, who purchased the Property in 2006, overlook the fact that they themselves were a subsequent purchaser who, according to them, had inquiry notice and an obligation to research the title. From the time they purchased the Property to when they filed their petition in the Bankruptcy Action in 2011, the Schiavones had ample opportunity to investigate the title to the Property and to raise any claims or defenses regarding the title that would call the Mortgage into question. The challenge to the chain of title issues was available to the Schiavones during the pendency of the Bankruptcy Action and they were compelled to raise it at that time.
By declining to raise any issues related to the title and choosing to proceed without making such claims in the Bankruptcy Action, the Schiavones affirmatively acknowledged the validity of the Mortgage and the debt secured by the Mortgage. They are now barred pursuant to the doctrine of judicial estoppel from taking the inconsistent position that the Mortgage was somehow invalid. Further, because the Schiavones made a binding statement of intent to surrender the Property in return for a discharge of their debts, they are conclusively barred from asserting any claims related to the Property, including any challenge to the foreclosure of the Mortgage. See Ibanez v. U.S. Bank Nat'l Ass'n, 856 F. Supp. 2d 273, 275-276 (D. Mass. 2012), citing In re Pratt, 462 F. 3d 14, 18-19 (1st Cir. 2006) (surrender of property and discharge of debts in Chapter 7 proceeding barred borrower's later case asserting wrongful foreclosure of the mortgage); Souza v. Bank of America, N.A., Civil No. 1:13-CV-101810-PBS, 2013 WL 3457185, at *2-3 (D. Mass. 2013) ("Because Souza surrendered her home in bankruptcy, the doctrine of judicial estoppel bars her claims challenging the foreclosure process."); Fitchburg Capital, LLC v. Bourque, No. 12 MISC 464577, 2016 WL 6678242 at * 10 (Mass. Land Ct. Nov. 14, 2016).
Based on the foregoing, the Motion to Dismiss can be allowed and the Kiah Motion to Strike denied without further consideration. In the interests of completeness, the court will address the remaining arguments for dismissal presented by Deutsche.
III. Preforeclosure Notice Requirements
Deutsche contends that even if the Schiavones are not barred by judicial estoppel, their reliance on alleged deficiencies in the preforeclosure Notice under G.L. c. 244, § 35A (§ 35A) and paragraph 22 of the Mortgage to attack the validity of Deutsche's statutory power of sale is baseless. To support its contention, Deutsche relies on two recent decisions from the Supreme Judicial Court: U.S. Bank N.A. v. Schumacher, 467 Mass. 421 , 431 (2014) and Pinti v. Emigrant Mtge. Co., 472 Mass. 226 (2015).
In Schumacher, the question was whether G.L. c. 244, § 35A, was part of the foreclosure process itself and if so, whether a mortgagee's failure to strictly comply with its notice provisions rendered the foreclosure sale void. Schumacher, 467 Mass. at 422. The mortgagor contended that the notice provisions of § 35A, which afford homeowners who have fallen behind on their mortgage payments a ninety-day right to cure a default, was one of "the statutes relating to the foreclosure of mortgages by the exercise of a power of sale" that must be strictly followed in order to exercise the power of sale and conduct a foreclosure. G.L. c. 183, § 21. The SJC held that § 35A was not one of the statutes relating to foreclosure because "[a] homeowner's right to cure a default is a preforeclosure undertaking that, when satisfied, eliminates the default and wholly precludes the initiation of foreclosure proceedings in the first instance, thereby protecting and preserving home ownership." Id. at 430-431.
Based on the majority's holding, Deutsche's failure to strictly comply with § 35A would not make the foreclosure void, since the statute is not incorporated into the statutory power of sale. However, the concurring opinion of Justice Gants, which was fully endorsed by the majority, id. at n. 12, set forth a standard for challenging the adequacy of written notice in the post-foreclosure context in which the Schiavones find themselves. In the concurrence, Justice Gants wrote that a mortgagor could invalidate a foreclosure sale "for reasons other than failure to comply strictly with the power of sale provided in the mortgage" if the mortgagor is able to demonstrate "that the violation of the § 35A rendered the foreclosure so fundamentally unfair that [they are] entitled to affirmative equitable relief." Id. at 432-433 (Gants, J., concurring), quoting Bank of Am., N.A. v. Rosa, 466 Mass. 613 , 624 (2013). Essentially, in a post-foreclosure action, it is not enough for the mortgagors to merely show noncompliance with § 35A. Rather, they must prove that the noncompliance was significant enough to cause them harm or prejudice. See Bulmer v. MidFirst Bank, FSA, 59 F. Supp. 3d 271, 283 (D. Mass. 2014) ("Justice Gants did not define adequate written notice,' but he appears to have reasonably chosen a lower hurdle for relief in the pre-foreclosure than in the post-foreclosure context. This stands to reason; it should be more difficult to undo a foreclosure which has already taken place than to forestall a pending one.").
The Schiavones maintain that their preforeclosure Notice was so deficient as to make the foreclosure "fundamentally unfair" and, thus, void. The Notice came not from Deutsche, the holder of the Mortgage at foreclosure, but from WaMu, who was the purported "Lender" even though it was dissolved at the time. There is no indication in the Notice who the true "Lender" might be, that JPMorgan was the new servicer, or that Deutsche was the owner of the debt. The Notice also lacked essential disclosures required under § 35A, such as the amount required to cure the default, the name and address of the mortgagee, and the Mortgage originator or broker. See G.L. c. 244, § 35A(c). While the Notice did state the total amount delinquent as of October 16, 2008, it required the Schiavones to dial a telephone number to ascertain the current amount required to be paid to cure the default. The only address is a P.O. Box for WaMu listed at the top of the Notice, but it is unclear whether the amount to cure the default is to be sent to that address or elsewhere.
Based on the Schiavones' allegations and drawing inferences in their favor, it could be found that Deutsche failed to abide by the provisions of § 35A. These defects in the preforeclosure Notice, taken as a whole, may satisfy the threshold "fundamental unfairness" standard articulated in the Schumacher concurrence. The Notice might have been so defective that the Schiavones were unable to negotiate with the mortgagee, reach an agreement, or satisfy their obligation and cure the default. The violations discussed above, such as failing to accurately state who the true "Lender" is, could be of such a significant nature that, in the absence of the Schiavones' claims being barred by judicial estoppel and G.L. c. 185, § 70, it would be inequitable to hold the foreclosure sale valid.
The Schiavones make a similar argument concerning the adequacy of the preforeclosure Notice in regards to the requirements contained in paragraph 22 of the Mortgage. They argue that the Notice failed to state their right to bring a court action or defense to acceleration and sale, and did not provide a valid, legal "Lender" since WaMu was a nonexistent entity at the time. Compliance with paragraph 22 was recently discussed at length by the SJC in Pinti v. Emigrant Mtge. Co., 472 Mass. 226 (2015).
In Pinti, plaintiff-mortgagors brought an action against the mortgagee and purchaser of property at a foreclosure sale, seeking a declaration that the sale was void. Their primary argument was that the mortgagee had failed to comply with the notice requirements of paragraph 22 of the mortgage, particularly its requirement that the notice inform the mortgagor "of the right to reinstate after acceleration and the right to bring a court action to assert the non-existence of a default or any other defense of [the mortgagor] to acceleration and sale." Id. at 227-228. The language in the notice actually sent in Pinti stated that the mortgagors "have the right to assert in any lawsuit for foreclosure and sale the nonexistence of a default or any other defense [they] may have to acceleration and foreclosure and sale." Id. at 237. The SJC found that, given that foreclosures in Massachusetts are nonjudicial, the language of the default notice used by the bank differed enough from paragraph 22 so as to cause the plaintiffs, and other mortgagors, to be "misled into thinking that they had no need to initiate a preforeclosure action against the mortgagee but could wait to advance a challenge or defense to a foreclosure as a response to a lawsuit initiated by the mortgagee." Id. at 237-238.
The SJC distinguished the instant case from Schumacher, where strict compliance with notice of default under § 35A was not required as a condition of a valid foreclosure sale. While noting the substantive similarities between § 35A and paragraph 22, the SJC held that Schumacher did not control since "the notice provisions of paragraph 22 were terms of the mortgage,' not terms of a statute relating to the foreclosure of mortgages by the exercise of a power of sale.'" Id. at 239-240, quoting G.L. c. 183, § 21; Wells Fargo Bank, N.A. v. Cook, 87 Mass. App. Ct. 382 , 389-390 (2015) (Schumacher does not control where issue is whether mortgagee must comply with certain terms of mortgage as opposed to statute relating to foreclosure). Ultimately, the SJC gave Pinti prospective effect, only applying it to mortgage foreclosures that are the subject of paragraph 22 for which the notice of default is sent after the date of the opinion, July 17, 2015, "because of the possible impact that [the] decision may have on the validity of titles." Id. at 243.
Deutsche asserts that because Pinti was only given prospective effect, it did not need to strictly comply with the notice requirements in paragraph 22 of the Mortgage since the Notice was issued in 2008 and the foreclosure occurred in 2012. While Deutsche is correct about the prospective effect of Pinti, the breadth of that prospective effect is unclear. Pinti only addressed whether the language used in the default notice properly informed the plaintiffs of "the right to bring a court action to assert the non-existence of a default or any other defense of [the plaintiffs] to acceleration and sale." Id. at 237-238. Insofar as the Schiavones attempt to void the foreclosure on those grounds, this claim is unavailable to them due to the prospective effect of Pinti. The SJC in Pinti was silent, however, on whether a requirement of strict adherence to other provisions of paragraph 22 was also to be only prospective.
Considering the narrow scope of Pinti, it is unclear whether a requirement of strict compliance with the remainder of the terms in paragraph 22 should have retroactive or prospective effect. "In general, changes in the common law brought about by judicial decisions are given retroactive effect." Hailey v. Birbiglia, 390 Mass. 540 , 544 (1983). Where special circumstances exist, the court will limit the decision to only prospective application. Payton v. Abbott Labs, 386 Mass. 540 , 565 (1982). "Primarily because of concern for litigants and others who have relied on existing precedents, judicial changes in Massachusetts contract and property law have been given only prospective effect." Id. Where reliance plays a much smaller part, however, the decision will operate retroactively. Id. at 565-566.
If strict compliance with the entirety of paragraph 22 is given prospective effect, then Deutsche's noncompliance with its terms would not make the foreclosure void. On the other hand, if strict compliance with paragraph 22 (other than "the right to bring a court action to assert the non-existence of a default or any other defense") is retroactive, then Deutsche's noncompliance may void the foreclosure. Though a decision on this issue need not be reached for the resolution of this matter since the Schiavones are barred from asserting such claims, it is addressed here only to note the lack of clarity the court is left with subsequent to Pinti.
IV. Law Firm's Authority to Act Under G.L. c. 244 § 14
The Schiavones' final argument as to why the foreclosure is void is that the law firm of Stanton & Davis, which undertook the foreclosure process on behalf of Deutsche as legal counsel for JPMorgan, was not authorized to do so under G.L. c. 244, § 14. They claim that because the attorney performing the foreclosure did not have written authorization under seal from Deutsche, Stanton & Davis had no jurisdiction to enter the Property and take further steps to carry out the foreclosure. Deutsche asserts that the law firm did not require any specific written authorization or writing under seal to effectuate the foreclosure on behalf of the mortgagee in accordance with § 14 and that the affidavit of sale made in accordance with G.L. c. 244, § 15, constitutes a prima facie evidence of compliance with the exercise of the power of sale.
"The mortgagee, its successors or assigns, or their authorized representatives must exercise the statutory power of sale." Gold Star Homes, LLC v. Darbouze, 89 Mass. App. Ct. 374 , 379 (2016). "Any effort to foreclose by a party lacking jurisdiction and authority' to carry out a foreclosure under these statutes is void." U.S. Bank Nat'l Ass'n v. Ibanez, 458 Mass. 637 , 647-648 (2011). "General Laws c. 244, § 14, is one of the principal statutory provisions regulating foreclosures conducted under the statutory power of sale." Federal Nat'l Mtge. Ass'n v. Rego, 474 Mass. 329 , 333 (2016). The statute provides in relevant part:
The mortgagee or person having estate in the land mortgaged, or a person authorized by the power of sale, or the attorney duly authorized by a writing under seal or the legal guardian or conservator of such mortgagee or person acting in the name of such mortgagee or person, may, upon breach of condition and without action, perform all acts authorized or required by the power of sale . . . [and] no sale under such power shall be effectual to foreclose a mortgage, unless, previous to such sale, notice of the sale has been published once in each of [three] successive weeks . . . and notice of the sale has been sent by registered mail (emphasis added).
G.L. c. 244, § 14.
Section 14 did not require Stanton & Davis, as Deutsche's attorney, to have written authorization. When the statutory language providing that "the attorney duly authorized by a writing under seal" was added by amendment in 1906, the phrase referred to "the person authorized [to act] by a power of attorney, also known as an attorney in fact; not in reference to legal counsel (the attorney at law)." Rego, 474 Mass. at 334-335. "The expression power of attorney,' in a strict sense, implies a power under seal." Crocker's Notes on Common Forms 417 (5th ed. 1913), citing Cutler v. Haven, 8 Pick. 490 (1829). "[B]y adding this statutory language, the Legislature intended to authorize an attorney in fact to perform the acts of providing notice of a foreclosure sale required by § 14, and did not intend to require the mortgagee to issue written authorization to its legal counsel before counsel may perform such acts on the mortgagee's behalf." Rego, 474 Mass. at 334-335.
Courts have rejected the argument that an attorney at law requires a writing under seal to act on behalf of a mortgagee. Id. at 330-331 ("[B]ecause no person purported to act under a power of attorney, but only as legal counsel acting on behalf of a client, the statutory language on which the [mortgagors] rely to challenge the validity of the foreclosure is inapplicable. We conclude that legal counsel may perform the acts at issue in this case without written authorization, as the person acting in the name of such mortgagee.'"); Fairhaven Savings Bank v. Callahan, 391 Mass. 1011 , 1011 (1984) (G.L. c. 244,§ 14 not violated by failure to have mortgagee's instructions to lawyers "under seal" where mortgagee conducted foreclosure with assistance of attorneys who prepared legal documents); Brown v. Wentworth, 181 Mass. 49 , 52 (1902) (mortgagee "put the foreclosure into professional hands, and relied upon those whom he employed to see that all the proper steps were taken"); Federal Nat'l Ass'n v. Rogers, 2015 Mass. App. Div. 68 , 73 (2015) (authorizing instrument unnecessary where mortgagee conducted foreclosure with the assistance of attorneys who acted on its behalf); HSBC Bank, USA, Nat'l Ass'n v. Howe, No. 15-ADMS-10016, 2016 WL 797622 at *5-6 (Mass. Dist. Ct. Feb. 19, 2016).
Here, Deutsche, as the mortgagee, conducted the foreclosure with assistance of attorneys from Stanton & Davis, counsel for JPMorgan (the servicer) acting on its behalf. Attorneys from Stanton & Davis did have authorization through the Certificate of Authorization from Deutsche executed as sealed instrument on July 26, 2012, after the auction (January 13, 2012), but before the foreclosure deed was filed for registration (August 3, 2012). The certificate authorized Stanton & Davis to make entry onto the Property and conduct the foreclosure on Deutsche's behalf and execute documents necessary and directly incidental to the foreclosure auction. The Certificate of Authorization also references a Limited Power of Attorney filed for registration on January 30, 2009. The power of attorney states that Deutsche appoints the servicer, JPMorgan, as its "true and lawful Attorney-in-Fact" and authorizes JPMorgan to act on their behalf "solely for the purpose of performing such acts and executing such documents in the name of [Deutsche] necessary and appropriate to effectuate the following enumerated transactions in respect of any of the mortgages or deeds of trust . . . and promissory notes secured thereby." An affidavit of sale, dated July 31, 2012, after Deutsche gave JPMorgan power of attorney in 2009 and authorized Stanton & Davis to conduct the foreclosure on its behalf on July 26, 2012, is signed by Jon S. Davis, an attorney at Stanton & Davis, counsel to JPMorgan for Deutsche, and attests that the notices required by G.L. c. 244, § 14 were sent by certified mail. Accordingly, any requirement for a written authorization under seal was satisfied.
For the reasons set forth above, the Motion to Dismiss is ALLOWED and the Kiah Motion to Strike is DENIED. It is ORDERED that the Schiavones' petition is in its entirety DISMISSED with prejudice. It is further ORDERED that the Declaration of Trust establishing Cornell Street Real Estate Trust, the 1987 Recorded Deed and the Foster Mortgage Discharge be brought over from the Registry of Deeds to the Registry District and noted on Certificate of Title No. 100833 and all subsequent Certificates of Title issued. [Note 2]
[Note 1] The court has taken judicial notice of these documents filed for registration in the Land Court Registry District, which the parties referenced but neglected to enter into evidence. See Ramos v. Jones, 23 LCR 93 , n. 2 (2015); Fitzpatrick v. Yeaman, 16 LCR 601 , 602, n.4 (2008).
[Note 2] This case is brought pursuant to G.L. c. 185, § 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 years ago; there ought not to 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.