Introduction
Sandy Schaefer-Ung (Schaefer-Ung) has lived on the property located at 38 Tar Kiln Road in Orleans (Property) since about March 30, 2007, when, to purchase it, she borrowed $350,000 from Taylor, Bean & Whitaker Mortgage Corp. (TBW) in exchange for a promissory note secured by a mortgage granted to Mortgage Electronic Registration Systems, Inc. (MERS). MERS purportedly assigned the mortgage to U.S. Bank, National Association as Trustee (U.S. Bank as Trustee) for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Pass-Through Certificates, Series 2007-2 (TBW Trust) on September 30, 2011. After Schaefer-Ung defaulted on the loan, U.S. Bank as Trustee commenced foreclosure proceedings and held a foreclosure sale of the Property. On the same day as the foreclosure sale, Schaefer-Ung brought this action to compel U.S. Bank as Trustee, as well as Homeward Residential, Inc. (Homeward), as loan servicer; MERS, as mortgagee; TBW Trust, as the trust to which the Mortgage was assigned; DLJ Mortgage Capital, Inc. (DLJ), named as "seller" in the prospectus for the Trust; Credit Suisse Ag, f/k/a First Boston Mortgage Securities Corp. (Credit Suisse), named as "depositor" in the prospectus for the Trust; and Gretel Norgoet (Norgoet), an individual who allegedly bought the Property at the foreclosure sale, to try title to the Property under the Try Title Statute, G.L. c. 240, §§ 1-5. After some procedural wrangling, described in detail below, U.S. Bank as Trustee appeared and filed a counterclaim under the Try Title Statute, and the remaining defendants were either dismissed or disclaimed their interest.
U.S. Bank as Trustee now moves for summary judgment, arguing that it properly foreclosed and that Schaefer-Ung's allegations that the foreclosure proceedings are invalid are without merit. As discussed further below, U.S. Bank as Trustee properly conducted the foreclosure proceedings, but because Norgoet, the high bidder at the foreclosure auction, has not yet taken title to the Property, there are disputes of fact that require further inquiry before deciding where superior title now lies. U.S. Bank as Trustee's motion for summary judgment is allowed in part and denied in part. Schaefer-Ung's motion to strike is also denied.
Procedural History
On August 29, 2012, Schaefer-Ung filed the Complaint to Try Title. Motion of Respondents, U.S. Bank as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Pass-Through Certificates, Series 2007-2, and Homeward Residential, Inc., to Dismiss Petition to Try Title and Motion of Respondents, U.S. Bank as Trustee for TBW Mortgage- Backed Trust Series 2007-2, TBW Mortgage Pass-Through Certificates, Series 2007-2, and Homeward Residential, Inc., for Leave to File Attested Copies of Supporting Documents were filed on October 3, 2012, were filed on October 2, 2012. On October 4, 2012, the court allowed the Motion of Respondents, U.S. Bank as Trustee for TBW Mortgage-Backed Trust Series 2007- 2, TBW Mortgage Pass-Through Certificates, Series 2007-2 and Homeward Residential, Inc., for Leave to File Attested Copies of Supporting Documents on October 3, 2012. The First Amended Petition to Try Title pursuant to G.L. c. 240, §§ 1-5 was filed on October 10, 2012.
Defendants, U.S. Bank National Association, as Trustee for TBW Mortgage-Backed Trust Series, 2007-2, TBW Mortgage Pass-Through Certificates, Series 2007-2's, Homeward Residential Inc.'s, and Mortgage Electronic Registration Systems, Inc.'s Motion to Dismiss (Motion to Dismiss) and Memorandum of Law in Support of Defendants, U.S. Bank National Association, as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Pass- Through Certificates, Series 2007-2's, Homeward Residential Inc.'s, and Mortgage Electronic Registration Systems, Inc.'s Motion to Dismiss were filed on November 28, 2012. On January 14, 2013, Schaefer-Ung filed Petitioner's Opposition to Motion to Dismiss of U.S. Bank National Association, as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Backed-Certificates, Series 2007-2, Homeward Residential, Inc., and Mortgage Electronic Registration Systems, Inc. Respondents, U.S. Bank National Association, as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Pass-Through Certificates, Series 2007-2's, Homeward Residential Inc.'s, and Mortgage Electronic Registration System, Inc.'s Reply Memorandum in Support of their Motion to Dismiss was filed on January 22, 2013.
The Answer of Gretel Norgoet was filed on January 25, 2013.
On January 29, 2013, the Motion to Dismiss was heard, and in open court, Schaefer-Ung filed Petitioner's Voluntary Dismissal against U.S. Bank as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Pass-Through Certificates, Series 2007-2, Mortgage Electronic Registration Systems, Inc., Homeward Residential, Inc., DLJ Mortgage Capital, Inc., and Credit Suisse Ag, f/k/a First Boston Mortgage Securities Corp. (Bank Defendants), without prejudice, as the Bank Defendants had not filed an answer or motion for summary judgment pursuant to Mass. R. Civ. P. 41(a)(1)(i). The court dismissed the claims against the Bank Defendants without prejudice, making Norgoet the only remaining defendant, and denied the Motion to Dismiss as moot.
On April 1, 2013, Norgoet filed Motion to Dismiss and Reinstate Bank Defendants (Norgoet Mot. to Dismiss), Memorandum in Support of Defendant Gretel Norgoet's Motion to Dismiss and Reinstate Bank Defendants, and Motion under Chapter 231, § 6F. Respondents, U.S. Bank as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Pass-Through Certificates, Series 2007-2, Homeward Residential, Inc., and Mortgage Electronic Registration Systems, Inc., filed their Motion to Intervene and for Costs and Fees and Memorandum of Law in Support of Respondents, U.S. Bank National Association, as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgages Pass-Through Certificates, Series 2007-2, Mortgage Electronic Registration Systems, Inc. and Homeward Residential Inc.'s Motion to Intervene and For Costs and Fees (Mot. to Intervene) were filed on April 29, 2013. On the same day, Schaefer-Ung filed Petitioner's Opposition to Respondent Norgoet's Motion to Dismiss and Reinstate Bank Defendants (Opp. Norgoet's Mot. to Dismiss) and Affidavit of Attorney Jamie Ranney, Esq., in Support of Petitioner's Opposition to Respondent's Motion to
Dismiss (Ranney Aff.). Petitioner's Opposition to Motion to Intervene and for Costs and Fees of U.S. Bank as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Pass- Through Certificates, Series 2007-2, Homeward Residential, Inc., and Mortgage Electronic Registration Systems, Inc. was filed on May 8, 2013.
Respondent, U.S. Bank as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Pass-Through Certificates, Series 2007-2's Supplemental Memorandum in Support of its Motion to Dismiss was filed on May 9, 2013, and a hearing was held on Norgoet's Motion to Dismiss and Reinstate Bank Defendants, Norgoet's Motion under Chapter 231, § 6F, and Defendant U.S. Bank as Trustee and Homeward's Motion to Intervene and For Costs and Fees. The court found that Norgoet disclaimed all right and title adverse to the petitioner pursuant to G.L. c. 240, § 3, dismissed all claims against Norgoet without prejudice, permitted her to make an application for costs, and withdrew the Motion Under Chapter 231, § 6F without prejudice to its being renewed after final judgment is entered. The court also found that MERS and Homeward disclaimed all right and title adverse to the petitioner pursuant to G.L. c. 240, § 3, and granted them leave to make an application for costs. With respect to U.S. Bank as Trustee, the court allowed the Motion to Intervene pursuant to Mass. R. Civ. P. 24(a) (2) and accepted U.S. Bank as Trustee's Renewed Motion to Dismiss. On May 28, 2013, Schaefer-Ung filed Petitioner's Supplemental Opposition to U.S. National Associations, as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Backed-Certificates, Series 2007-2's Motion to Dismiss.
The Motion to Dismiss was heard on June 5, 2013 and taken under advisement. After the hearing on the Motion to Dismiss, the following filings were made: on June 14, 2013, Petitioners Memorandum on the New York Express Trust Entitled "TBW Mortgage-Backed Trust Series 2007-2," Filed in Accordance With This Court's June 5, 2013 Briefing Schedule, and Respondent, U.S. Bank National Association, as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Pass-Through Certificates, Series 2007-2, Second Supplemental Memorandum in Support of its Motion to Dismiss ; on June 21, 2013, Petitioner's Supplemental Opposition to U.S. Bank National Association, as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Backed-Certificates, Series 2007-2's Motion to Dismiss, and Respondent, U.S. Bank National Association, as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Pass-Through Certificates, Series 2007-2's Response to Petitioner's Memorandum on the New York Express Trust Entitled "TBW Mortgage-Backed Trust Series 2007-2"; on July 5, 2013, Respondent, U.S. Bank National Association, as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Pass-Through Certificates, Series 2007-2's Notice of Supplemental Authority; on July 16, 2013, Respondent, U.S. Bank as Trustee's Third Supplemental Memorandum in Support of its Motion to Dismiss (Leave of Court Granted on July 8, 2013); and on July 23, 2013, Petitioner's Further Supplemental Opposition to
U.S. Bank National Association, as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Backed-Certificates, Series Trust 2007-2's Motion to Dismiss.
Respondent, U.S. Bank as Trustee's Motion for Leave to File a Fourth Supplemental Memorandum in Support of Its Motion to Dismiss to Address Recent Applicable Supreme Judicial Court Decision was filed on April 30, 2014, and allowed by the court on May 2, 2014. Respondent, U.S. Bank as Trustee's Fourth Supplemental Memorandum in Support of Motion to Dismiss was filed on May 8, 2014, and Petitioner's Reply to U.S. Bank as Trustee's Fourth Supplemental Memorandum in Support of Motion to Dismiss was filed on May 15, 2014. On June 10, 2014, the court issued its Order Allowing in Part and Denying in Part Respondents' Motion to Dismiss and Granting Leave to Amend Complaint.
On June 24, 2014, the Second Amended Petition to Try Title pursuant to G.L. c. 240, §§ 1-5 was filed. The Answer to Petitioner's Second Amended Petition to Try Title pursuant to G.L. c. 240, §§ 1-5 was filed on July 16, 2014. On January 9, 2015, the Counterclaim of Respondent, U.S. Bank as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Pass-Through Certificates, Series 2007-2, Against Petitioner, Sandy Schaefer-Ung, was filed. Petitioner's Answer and Affirmative Defenses to Respondent(s)' Counterclaims was filed on February 2, 2015. A telephone conference call was held on November 12, 2015, where the parties agreed to mediation, which was ultimately unsuccessful.
On May 17, 2016, Respondent's Motion for Summary Judgment (Mot.), Respondent's Statement of Reasons in Support of Motion for Summary Judgment, Affidavit in Support of Respondent's Motion for Summary Judgment (Gostebski Aff.), Affidavit of Christine Abely in Support of Respondent's Motion for Summary Judgment (Abely Aff.), and Statement of Facts in Support of Respondent's Motion for Summary Judgment (SOF) were filed. On May 31, 2016, Respondent's Amended Statement of Reasons in Support of Motion for Summary Judgment was filed. On July 5, 2016, Schaefer-Ung filed Respondent-in-Counterclaim's Opposition to Petitioner-in-Counterclaim's Motion for Summary Judgment (Pet. Opp.), Schaefer Ung's Response to U.S. Bank as Trustee's Statement of Facts (Resp.) and Her Additional Statement of Undisputed Material Facts (Add. SOF), and Respondent-in-Counterclaim's Motion to Strike A) Affidavit of Christine Abely and Exhibits thereto and B) Affidavit of Nicole Gostebski and Exhibits thereto. On July 13, 2016, Opposition to Petitioner's Motion to Strike the Affidavits of Christine Abely and Nicole Gostebski, Reply to Petitioner's Opposition to U.S. Bank as Trustee's Motion for Summary Judgment, and U.S. Bank as Trustee's Response to Petitioner's Additional Statement of Alleged Undisputed Material Facts (Resp. Add. SOF) were filed. A hearing on the Motion for Summary Judgment and Motion to Strike was held on July 14, 2016, and the motions were taken under advisement.
On July 21, 2016, the Affidavit of John S. McNicholas in Support of Respondent's Motion for Summary Judgment was filed (McNicholas Aff.). On August 3, 2016, Schaefer-Ung's Reply to U.S. Bank as Trustee's Opposition to her Motion to Strike Affidavits of Christine Abely and Nicole Gostebski and Exhibits thereto, Schaefer-Ung's Motion to Strike the Affidavit of John S. McNicholas and Exhibits thereto, and Motion for Court to Accept for Filing and Consideration Respondent-in-Counterclaim's Reply to U.S. Bank as Trustee's Opposition to her Motion to Strike Affidavits, and her Motion to Strike John McNicholas' Affidavit were filed. On August 5, 2016, the court allowed the Motion for Court to Accept for Filing and Consideration Respondent-in-Counterclaim's Reply to U.S. Bank as Trustee's Opposition to her Motion to Strike Affidavits, and her Motion to Strike John McNicholas' Affidavit. Respondent's Opposition to Petitioner's Motion to Strike the Affidavit of John S. McNicholas and Exhibits thereto, and Response to Petitioner's Reply on Motion to Strike the Affidavits of Christine Abely and Nicole Gostebski and Exhibits thereto were filed on August 15, 2016. This Memorandum and Order follows.
Motion to Strike [Note 1]
Mass. R. Civ. P. 56(e) provides that affidavits used to support or oppose a summary judgment motion "shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein." Schaefer-Ung has moved to strike the Affidavits of Attorney Christine Abely (Abely), Nicole Gostebski (Gostebski), and Attorney John McNicholas (McNicholas), along with their attached exhibits, on the grounds that they opine on matters that are hearsay and beyond the scope of their personal knowledge.
With respect to Abely's affidavit, Schaefer-Ung takes issue with Abely's ability to authenticate various documents in the discovery record. This argument is baseless. Abely attested that she is an attorney at the law firm of Hinshaw & Culbertson, LLP, and an attorney of record for U.S. Bank as Trustee. She attests, under the pains and penalties of perjury, to the authenticity of copies of various recorded documents, as well as documents in possession of her law firm such as the original Note, original Mortgage, the unrecorded foreclosure deed, and Memorandum of Sale. Abely Aff. ¶¶ 1-13. Abely has personal knowledge of the original Note and Mortgage because her law firm is holding them on behalf of U.S. Bank as Trustee and, according to U.S. Bank as Trustee's response to interrogatories, the Note has been in the law firm's possession since 2012. Id. at ¶¶ 2-5; Mot., Exh. D. Abely also had personal knowledge as to the veracity of the unrecorded foreclosure deed and Memorandum of Sale because she stated that she obtained copies of them directly from U.S. Bank as Trustee's foreclosure counsel, Korde & Associates. Id. at ¶¶ 11-12. Other than the conclusory statements that the documents are hearsay, Schaefer-Ung has not presented any supporting evidence to dispute the legitimacy of those documents affirmed by Abely. The Motion to Strike Abely's affidavit is DENIED.
Schaefer-Ung makes similar challenges in regards to Gostebski's affidavit and claims that she fails to lay a foundation for certain "business record" documents. For a "business record" to be admissible, it must satisfy the statutory requirements that the record was made
(a) in good faith, (b) in the regular course of business, (c) before the commencement of the legal action, and (d) that it was in the regular course or practice of the business to make such records at the time of the event recorded or within a reasonable time thereafter. G.L. c. 233, § 78; DiMarzo v. American Mut. Ins. Co., 389 Mass. 85 , 105-106 (1983). Gostebski states she is a "Senior Loan Analyst" for Ocwen Financial Corporation, whose indirect subsidiary is Ocwen Loan Servicing, LLC (Ocwen), the servicer of the mortgage loan of Schaefer-Ung on behalf of U.S. Bank as Trustee. Gostebski Aff. ¶ 1. She says that in the regular performance of her job functions, she is familiar with the business records maintained by Ocwen for purposes of servicing mortgage loans, which are made at or near the time by, or from information provided by, persons with knowledge of the activity and transactions reflected in the records, and are kept in the regular course of business. Gostebski also personally examined the business records concerning Schaefer-Ung's loan. Id. at ¶¶ 2-3. Based on this, Gostebski attests that all of the exhibits identified in her affidavitthe Note, Schaefer-Ung's payment histories when serviced by TBW, AHMSI/Homeward, and Ocwen, communications with AHMSI/Homeward, correspondence with Schaefer-Ung's counsel, and the PSAare true and accurate. Id. at ¶¶ 4-12. As a Senior Loan Analyst, Gostebski has personal knowledge as to the documents in the loan servicing file and Schaefer-Ung has failed to counter the testimony provided in her affidavit. Moreover, she is entitled to authorize business records of predecessor servicers, which also qualify under the business records exception. Beal Bank, SSB v. Eurich, 444 Mass. 813 , 818-819 (2005). The Motion to Strike Gostebski's affidavit is DENIED.
Finally, Schaefer-Ung has moved to strike the affidavit of McNicholas based on lack of personal knowledge. McNicholas is a partner at Korde & Associates, and was attorney of record for U.S. Bank as Trustee for the foreclosure of Schaefer-Ung's mortgage and the sale of the Property. McNicholas Aff., ¶ 1. He attests that in his capacity as counsel for U.S. Bank as Trustee, he is familiar with the documents maintained in his firm's possession concerning the foreclosure of Schaefer-Ung's mortgage. Id. at ¶ 2. As such, he has personal knowledge of the documents in his firm's file that he authenticates in his affidavitthe original unrecorded foreclosure deed and original Memorandum of Sale. McNicholas's affidavit appropriately authenticates the copies of those documents attached thereto, as the originals reside in his law firm's office. Id. at ¶¶ 3-4. His affidavit also eliminates any concern over whether Abely could properly authenticate the unrecorded foreclosure deed and Memorandum of Sale because the copies sent to her came from Korde & Associates, McNicholas's firm, which holds the originals. Accordingly, the Motion to Strike the Affidavit of John S. McNicholas is also DENIED.
Summary Judgment Standard
Generally, summary judgment may be entered if the "pleadings, depositions, answers to interrogatories, and responses to requests for admission . . . together with the affidavits . . . show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Mass. R. Civ. P. 56(c). In viewing the factual record presented as part of the motion, the court draws "all logically permissible inferences" from the facts in favor of the non-moving party. Willitts v. Roman Catholic Archbishop of Boston, 411 Mass. 202 , 203 (1991). "Summary judgment is appropriate when, 'viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to a judgment as a matter of law.'" Regis College v. Town of Weston, 462 Mass. 280 , 284 (2012), quoting Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117 , 120 (1991).
Undisputed Facts
The following facts are undisputed or deemed admitted for the purpose of summary judgment:
1. Schaefer-Ung executed a mortgage to MERS on March 30, 2007 (Mortgage), in connection with her purchase of property located at 38 Tar Kiln Road, Orleans, Massachusetts (Property). The Mortgage was recorded with the Barnstable County Registry of Deeds (registry) on April 5, 2007 at Book 21915, Page 124. SOF ¶¶ 1-2; Resp. ¶¶ 1-2; Mot., Exh. A; Add. SOF ¶ 1; Resp. Add. SOF ¶ 1.
2. The Mortgage states that the mortgagee, MERS, is acting solely as a nominee for TBW and its successors and assigns. The Mortgage provides that it secures a note (Note) of the same date signed by Schaefer-Ung, as borrower, for a loan in the principal amount of $350,000 from Taylor, Bean, & Whitaker Mortgage Corp. (TBW). SOF ¶ 3; Resp. ¶ 3; Mot., Exhs. A, B.
3. The Note was endorsed in blank, purportedly by Erla Carter-Shaw, Executive Vice President of TBW. SOF ¶ 4; Resp. ¶ 4; Mot., Exh. B.
4. In or around May 29, 2007, Credit Suisse, DLJ, Wells Fargo Bank, N.A. (Wells Fargo), TBW, and U.S. Bank as Trustee, executed a Pooling and Servicing Agreement (PSA) dated May 1, 2007, that created the TBW Trust. As of May 1, 2007, the TBW Trust consisted of 3,452 fixed-rate mortgage loans with an aggregate principal balance of approximately $648,509,965 secured by first liens on one-to-four family residential properties. The TBW Trust "closed" on May 30, 2007. SOF ¶¶ 35-38; Resp. ¶¶ 35-38; Add. SOF ¶¶ 2-5; Resp. Add. SOF ¶¶ 2-5; Mot., Exhs. S, T.
5. Schaefer-Ung began to fall behind on payments, and made her last payment on the loan on February 16, 2011, in the amount of $2,599.66. SOF ¶ 8; Resp. ¶ 8; Mot., Exh. E; Add. SOF ¶ 6; Resp. Add. SOF ¶ 6.
6. Schaefer-Ung's bank statement dated March 25, 2011 had an ending balance of $34.29, and did not include any rental payment or mortgage payment. SOF ¶ 14; Resp. ¶ 14; Mot. Exh. H.
7. American Home Mortgage Servicing, Inc. (AHMSI), on behalf of U.S. Bank as Trustee, sent a letter to Schaefer-Ung on April 19, 2011, providing her with a notice of default (Notice). U.S. Bank as Trustee states that the Notice was sent by certified mail and a United States Postal Service (USPS) tracking confirmation indicates it was delivered to the Property, though the confirmation does not list a specific address just the location of "Orleans, MA". The Notice listed the total amount due on the loan as $5,359.52. The Notice stated that "you have the right to 'cure' or reinstate the loan after acceleration and the right to assert in the foreclosure proceeding the nonexistence of a default or any other defense you may have to acceleration and sale." SOF ¶¶ 9-12; Resp. ¶¶ 9-12; Mot., Exhs. F, G.
8. Schaefer-Ung called her mortgage loan servicer, AHMSI (later Homeward), on April 21, 2011. Portions of the communication logs of AHMSI/Homeward are in the record and show the dates on which calls were made and a brief description of the content of those conversations. The logs indicate that during the April 21, 2011, conversation Schaefer-Ung stated that she was unable to make the payment due to a loss of income. Several additional telephone conversations occurred between Schaefer-Ung and AHMSI/Homeward following the initial call. The logs indicate that during these conversations Schaefer-Ung stated that she was working with a third party to attempt to obtain a loan modification. [Note 2] SOF ¶¶ 17-19; Resp. ¶¶ 17-19; Mot., Exh. I.
9. Schaefer-Ung's bank statement dated April 25, 2011, had an ending balance of $19.16, and her bank statement dated May 25, 2011, had an ending balance of $140.88. SOF ¶¶ 15-16; Resp. ¶¶ 15-16; Mot. Exh. H.
10. The communication logs from AHMSI/Homeward indicate that on June 11, 2011, AHMSI/Homeward advised Schaefer-Ung that at least half the balance due was needed to avoid a foreclosure. SOF ¶ 20; Resp. ¶ 20; Mot., Exh. I.
11. On September 30, 2011, the Mortgage was assigned to U.S. Bank as Trustee (Assignment). The Assignment was recorded in the registry on October 11, 2011, at Book 25744, Page 119. The Assignment was executed by April King, as Assistant Secretary of MERS, and her signature was notarized before a notary public in Duval County, Florida. The Assignment incorrectly states that MERS is assigning the Note along with the Mortgage. MERS did not have the Note in its possession to assign. SOF ¶¶ 5-6; Resp. ¶¶ 5-6; Mot., Exh. C.
12. The document custodians of the Note were Colonial Bank, N.A. and its successor-in-interest, Branch Banking and Trust Company (BB&T) from April 25, 2007, to April 30, 2012, at which time the Note was released to AHMSI/Homeward for foreclosure on behalf of U.S. Bank as Trustee. The Note was then sent to Hinshaw & Culbertson on behalf of U.S. Bank as Trustee. Hinshaw and Culbertson received the Note on November 16, 2012. Since that time, the Note has remained in the possession of and is currently located with Hinshaw & Culbertson. SOF ¶ 7; Resp. ¶ 7; Mot., Exh. D.
13. On October 21, 2011, U.S. Bank as Trustee filed a complaint under the Servicemembers Civil Relief Act in the Land Court as case no. 11 MISC 454978 (Servicemembers Action). A Mortgagee's Affidavit Under Chapter 206 of the Acts of 2007 was filed along with the complaint. The Mortgagee's Affidavit is signed by Josh Trussel, Vice President of AHMSI as attorney in fact, and attests that the Notice was sent to Schaefer-Ung pursuant to G.L. c. 244, § 35A, as amended. Attached to the Mortgagee's Affidavit is a copy of the Notice sent on April 19, 2011. Mot. to Intervene, Exh. C.
14. On March 16, 2012, Schaefer-Ung filed a Chapter 7 bankruptcy petition. In her petition, she listed a single bank account containing $500.00. Besides the Property itself and household goods, miscellaneous art and collectibles, wearing apparel, and a 1998 vehicle, Schaefer-Ung indicated that she had no other assets, including no other bank accounts, stocks, or retirement savings of any kind. SOF ¶¶ 22-24; Resp. ¶¶ 22-24; Mot., Exhs. J, K.
15. The bankruptcy court entered an order discharging Schaefer-Ung on June 12, 2012. SOF ¶ 25; Resp. ¶ 25; Mot., Exh. J.
16. The foreclosure sale was advertised pursuant to G.L. c. 244, § 14 on June 1, 2012, June 8, 2012, and June 15, 2012, in the Cape Codder, a newspaper published in Needham and having circulation in Orleans. Pursuant to said notice, the sale was to occur on June 27, 2012, at 3:00PM at the Property. It was subsequently postponed by public proclamation to July 25, 2012, at 12:00PM and again postponed to August 29, 2012, at 2:00PM. Mot., Exhs. P, Q.
17. On June 22, 2012, Schaefer-Ung informed AHMSI/Homeward that she was attempting to sell the Property. The communication logs from AHMSI/Homeward indicate that she was informed that the only way the foreclosure could be placed on hold was if there were an offer on the Property and the appropriate paperwork was provided. SOF ¶ 21; Resp. ¶ 21; Mot., Exh. I.
18. On June 23, 2012, Attorney Jamie Ranney (Ranney), counsel for Schaefer-Ung, wrote to Korde & Associates, the law firm noticing the foreclosure, requesting the firm to "immediately provide validation and verification of any debt purportedly owned by my client to my office." Ranney informed Korde & Associates that he would consider any entry onto the Property for the purpose of a foreclosure sale to be a trespass. SOF ¶¶ 26-27; Resp. ¶¶ 26-27; Mot., Exh. L.
19. On July 23, 2012, Ranney sent a purported demand letter under G.L. c. 93A, § 9, to Homeward, U.S. Bank as Trustee, Korde & Associates, and MERS. SOF ¶ 28; Resp. ¶ 28; Mot., Exh. M.
20. Homeward responded to Ranney's July 23, 2012 letter with a letter dated July 26, 2012, providing a copy of the Note endorsed in blank and stating that the "Note holder of the above referenced account is U.S. Bank National Association, as Trustee for TBW Mortgage- Backed Trust Series 2007-2, TBW Mortgage Pass-Through Certificates, Series 2007-2." The letter further stated that "[t]he instrument representing the indebtedness of the Mortgage Debt (Note) is not a recordable document, but is in our possession or held on our behalf by our custodian." SOF ¶¶ 29-30; Resp. ¶¶ 29-30; Mot., Exh. N.
21. Ranney was advised that a foreclosure sale would be held on August 29, 2012. SOF ¶ 31; Resp. ¶ 31; Mot., Exh. O.
22. The present action was filed on the morning of August 29, 2012, prior to the foreclosure sale of the Property that afternoon. SOF ¶ 34; Resp. ¶ 34; Mot., Exh. R; Opp. to Norgoet's Mot. to Dismiss, ¶ 6; Ranney Aff. ¶¶ 8, 17.
23. On August 29, 2012, U.S. Bank as Trustee, held a foreclosure sale at the Property. At the foreclosure sale, Norgoet, a third-party buyer, was the high bidder for the Property. Prior to the auction, Attorney Ranney made a public pronouncement at the foreclosure sale regarding the try title petition and warning all bidders in attendance, including Norgoet, about the pending try title action and advising that Schaefer-Ung would not vacate the premises voluntarily even if a sale were consummated. Before any bidding took place, Attorney Ranney also physically handed a copy of the try title petition to Norgoet. SOF ¶¶ 32-33; Resp. ¶¶ 32-33; Mot., Exhs. P, Q; Opp. to Norgoet's Mot. to Dismiss, ¶¶ 7-8; Ranney Aff. ¶ 17.
24. According to the Memorandum of Sale, Norgoet bid $260,000 for the Property and delivered a check in the sum of $5,000 to the auctioneer at the time of the foreclosure sale. Add. SOF ¶¶ 13-17; Resp. Add. SOF ¶¶ 13-17; Mot., Exh. Q.
25. On October 1, 2012, a foreclosure deed was executed naming Norgoet as the grantee. The foreclosure deed was never recorded. Attached to the unrecorded foreclosure deed is a post-foreclosure affidavit of sale executed on October 1, 2012, by Daniel Staten of AHMSI/Homeward. The affidavit states that U.S. Bank as Trustee has complied with G.L. c. 244, § 14, and that "the requirements of the power of sale included in the Mortgage and of the statute have been complied with in all respects." The affidavit references a Power of Attorney recorded in the Worcester County Registry of Deeds on June 2, 2011 at Book 47453, Page 22. This Limited Power of Attorney states that U.S. Bank as Trustee appoints the servicer, AHMSI/Homeward, as its Attorney-in-Fact and authorizes AHMSI/Homeward to act on its behalf for the purpose of performing such acts and executing such documents in the name of U.S. Bank as Trustee in connection with servicing certain mortgage loans held by U.S. Bank, including foreclosing on the properties in default. Add. SOF ¶¶ 24-25; Resp. Add. SOF ¶¶ 24-25; Mot., Exh. P.
26. In addition, a second Limited Power of Attorney was attached to the unrecorded foreclosure deed executed on October 1, 2012, by Daniel Staten of AHMSI/Homeward as Attorney in Fact. This second Limited Power of Attorney authorizes Korde & Associates to make entry onto the Property and conduct the foreclosure on U.S. Bank as Trustee's behalf and execute documents necessary and directly incidental to the foreclosure auction. Mot., Exh. P.
27. On May 9, 2013, Norgoet disclaimed all right and title adverse to Schaefer-Ung pursuant to G.L. c. 240, § 3. In Norgoet's Motion to Dismiss, she states that she is "prepared to pay consideration and accept title from the [U.S. Bank as Trustee] provided that [U.S. Bank as Trustee] produce a good and sufficient Foreclosure Deed conveying record title to the property, unclouded by [Schaefer-Ung's] pending action." Norgoet indicated that she is only disclaiming because she has no present claim of title to the property as merely the highest bidder since Schaefer-Ung has called into question U.S. Bank as Trustee's ability to foreclose and record the foreclosure deed. Add. SOF ¶ 29; Resp. Add. SOF, ¶ 29; Norgoet Mot. to Dismiss at 2.
Discussion
Based on these undisputed facts, U.S. Bank as Trustee has moved for summary judgment. The Try Title statute, G.L. c. 240, §§ 1-5, provides that a plaintiff may bring a try title action if the plaintiff is in possession of property to which it holds record title that is clouded by an actual or possible adverse claim. G.L. c. 240, § 1; Abate v. Fremont Inv. & Loan, 470 Mass. 821 , 827 (2015); Bevilacqua v. Rodriguez, 460 Mass. 762 , 767 n.5 (2011). Under the statutory scheme, the plaintiff in possession with record title files a complaint naming as defendant the person or entity claiming superior title. The complaint demands that the adverse claimant appear and show cause why it should not bring an action to establish its superior title. G.L. c. 240, § 1. A defendant in a try title action may exercise its right, when appropriate, to bring a motion to dismiss for lack of subject matter jurisdiction or for failure to state a claim. Mass. R. Civ. P. 12(b)(1), 12(b)(6). In particular, a defendant may move to dismiss for lack of standing on the grounds that the plaintiff has not met the jurisdictional requirements of possession or holding record title. Abate, 470 Mass. at 827-828, 830. If the plaintiff's complaint survives a motion to dismiss, the plaintiff is entitled to the relief in the statute: that the defendant appear and try its claim to title or be barred. G.L. c. 240, § 3. In other words, the defendant must bring an action to try its title. This action may be brought as a counterclaim. Id.; Mass. R. Civ. P. 13; Abate v. Fremont Inv. & Loan, 20 LCR 630 , 632 (2012), aff'd, 470 Mass. 821 (2015). Once a counterclaim is brought it serves as the adverse claimant's action to establish its superior title. The plaintiff can then file a reply to the counterclaim that denies the allegations that the defendant holds superior title and raises any affirmative defenses that are appropriate.
In this try title action, Schaefer-Ung alleges that she has record title and possession of the Property and that U.S. Bank as Trustee, the foreclosing mortgagee, is claiming superior title by virtue of its foreclosure sale. A completed foreclosure establishes that a foreclosing mortgagee, such as U.S. Bank as Trustee, is making such an adverse claim. Abate, 470 Mass. at 834-835. The evidence in the record is that the try title petition was filed the morning of, but prior to, the actual foreclosure sale of the Property. Since the petition was filed before the sale of the Property, even by a few hours, this court technically lacked jurisdiction over this action because a try title petition can only be brought after foreclosure. Id. at 834. Accordingly, the petition could have been dismissed for lack of subject matter jurisdiction. Since the petition was filed contemporaneously (on the same day) with the foreclosure sale, however, in the interest of judicial economy, the court will treat it as a valid try title petition. [Note 3]
U.S. Bank as Trustee moved to dismiss the First Amended Petition on November 28, 2012. On June 10, 2014, the court allowed the motion in part and denied the motion in part, after finding that the petition stated a claim under the try title statute, G.L. c. 240, § 1. The court gave Schaefer-Ung leave to amend her petition, and she filed the Second Amended Petition on June 24, 2014. On January 9, 2015, U.S. Bank as Trustee brought a counterclaim to try its title to the Property under G.L. c. 240, § 3. It is U.S. Bank as Trustee's counterclaim to establish title to the Property that is the subject of this Motion for Summary Judgment. See Cistercian Order of Strict Observance in Mass., Inc. v. Estate of Burnett, 21 LCR 352 , 353 (2013). Where an adverse party brings a separate and independent action to try title by filing a counterclaim, the original petition ceases to have any legal viability and becomes immaterial for all intents and purposes. Thus, the Second Amended Petition is no longer viable, and the counterclaim becomes the petition to try title, shifting the burden to U.S. Bank as Trustee to establish its superior title. See Mitchell v. U.S. Bank, Nat. Ass'n, 24 LCR 621 , 623 (2016). In effect, the counterclaim seeks a declaratory judgment that U.S. Bank as Trustee holds clear record title to the Property. [Note 4] U.S. Bank as Trustee can do so by showing that, based on the undisputed evidence and as a matter of law, it held the Mortgage by a recorded assignment and the foreclosure was validly performed in accordance with G.L. c. 244, § 14. U.S. Bank as Trustee has presented prima facie evidence that it held the Mortgage at the time of the foreclosure, and up to and including the sale itself, the foreclosure proceedings were properly conducted pursuant to G.L. c. 244, § 14. This, however, does not end the inquiry of who has superior title to the Property.
Due to a series of events that occurred following the foreclosure auction, it is unclear whether the sale was completed, record title transferred, and, as a result, Schaefer-Ung's equity of redemption foreclosed. Because the titles of mortgagee and mortgagor ordinarily are not adverse to each other, but complimentary, until it is established that a foreclosure has occurred, there is no claim of superior title that can be brought by either the mortgagor or the mortgagee. Abate, 470 Mass. at 834-835; Bevilacqua, 460 Mass. at 776-777. As discussed below, while an auction and memorandum of sale forecloses the mortgagor's equity of redemption, breach of the sale agreement can void the foreclosure sale and reinstate the mortgage and the mortgagor's equity of redemption and thereby restore the complementary titles of mortgagor and mortgagee. Because it is unclear whether the foreclosure sale was completed or is void, U.S. Bank as Trustee cannot on summary judgment establish its claim of superior title. The status of the foreclosure sale is an issue of fact requiring a trial.
Though there are questions of fact involving the status of the Property following the foreclosure sale to Norgoet that require resolution at trial, Schaefer-Ung's substantive claims that the foreclosure up to the point of sale was void can still be considered on summary judgment. In her Opposition to the Motion for Summary Judgment, Schaefer-Ung alleges that the foreclosure was void for several reasons: (1) U.S. Bank as Trustee's noncompliance with G.L. c. 244, § 35A; (2) U.S. Bank as Trustee's noncompliance with paragraph 22 of the Mortgage; (3) U.S. Bank as Trustee did not hold the Note at the time of foreclosure; and (4) U.S. Bank as Trustee has failed to show that the foreclosure was properly conducted in accordance with the Mortgage and pursuant to the statutory power of sale. [Note 5] In short, for the reasons discussed in more detail below, U.S. Bank as Trustee properly conducted the foreclosure proceedings against Schaefer-Ung, but
disputes of fact regarding whether the foreclosure sale was finalized prevent reaching a conclusion that either party has superior title.
I. Whether U.S. Bank as Trustee's noncompliance with G.L. c. 244, § 35A renders the foreclosure fundamentally unfair and void.
Schaefer-Ung contends that the foreclosure sale of the Property was invalid because she never received the April 19, 2011 Notice sent by AHMSI, on behalf of U.S. Bank as Trustee, alerting her to her default and right to cure, and because the Notice failed to strictly comply with G.L. c. 244, § 35A. She asserts numerous deficiencies in the Notice including: (1) the Notice not being sent from the mortgagee; (2) improper identification of the mortgagee/loan originator; and (3) failure to identify the precise amount necessary to cure a default and avoid acceleration and only stating the amount due effective as of the April 19, 2011, not the amount due at the end of the notice period. Pet. Opp., at 7-9. U.S. Bank as Trustee argues that the Notice was sent to Schaefer-Ung by certified mail in compliance with G.L. c. 244, § 35A, as evidenced by a USPS tracking confirmation of delivery and the Mortgagee's Affidavit signed by Josh Trussel, Vice President of AHMSI which attests that the Notice was sent to Schaefer-Ung pursuant to G.L. c. 244, § 35A. Mot. to Intervene, Exh. C. U.S. Bank as Trustee additionally maintains that under U.S. Bank Nat'l Ass'n v. Schumacher, 467 Mass. 421 (2014), failure to strictly comply with § 35A is not grounds to void a foreclosure and Schaefer-Ung has failed to establish that any violation of the statute rendered the foreclosure fundamentally unfair.
Section 35A(c) requires, in pertinent part, that the mortgagee give notice to the mortgagor before commencing foreclosure proceedings and that such notice inform the mortgagor of:
(1) the nature of the default claimed on such mortgage of residential real property 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 . . . 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, or anyone holding thereunder, may take steps to terminate the mortgagor's ownership in the property by a foreclosure proceeding 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;
(6) that the mortgagor may be eligible for assistance from the Massachusetts Housing Finance Agency and the division of banks and the local or toll free telephone numbers the mortgagor may call to request this assistance;
(7) that the mortgagor may sell the property prior to the foreclosure sale and use the proceeds to pay off the mortgage;
(8) that the mortgagor may redeem the property by paying the total amount due, prior to the foreclosure sale;
(9) that the mortgagor may be evicted from the home after a foreclosure sale; and
(10) the mortgagor may have the following additional rights, depending on the terms of the residential mortgage: (i) to refinance the obligation by obtaining a loan which would fully repay the residential mortgage debtor; and (ii) to voluntarily grant a deed to the residential mortgage lender in lieu of foreclosure.
The notice shall also include a declaration, appearing on the first page of the notice stating: "This is an important notice concerning your right to live in your home. Have it translated at once."
G.L. c. 244, § 35A(c).
The Notice generally complies with the requirements of § 35A. On the first page of the Notice it contains a declaration stating: "'This is an important notice concerning your right to live in your home. Have it translated at once." The Notice states the nature of the default ("you are in default under the terms and conditions of the Note and Security Instrument (i.e. Deed of Trust, Mortgage, etc.), for failure to pay the required installments when due"), and informs Schaefer-Ung that "you have the right to 'cure' or reinstate the loan after acceleration and the right to assert in the foreclosure proceeding the nonexistence of a default or any other defense you may have to acceleration and sale." The Notice lists $5,359.52 as the total amount due on the loan as of April 19, 2011 and the date on which the full amount needed to be paid by, September 16, 2011, 150 days after the date of the Notice. It states that "[b]ecause of interest, late charges, or credits that may vary from day to day, or be assessed during the processing of this letter, the amount due on the day that you pay may be greater." The Notice provides a toll free telephone number to contact Valerie Villanueva with AHMSI for when Schaefer-Ung intends to pay the amount necessary to cure the delinquency. It further states that if the full amount of the default is not paid by the end of the 150 day notice period, AHMSI "shall accelerate the entire sum of both principal and interest due and payable, and may take steps to terminate your ownership in the property by a foreclosure proceedings or other action to size the home." The Notice declares that Schaefer-Ung "may sell the property prior to the foreclosure sale and use the proceeds to pay off the mortgage. . . may redeem the property by paying the total amount due prior to the foreclosure sale. . . . [and] may be evicted from the home after a foreclosure sale." If there is a dispute as to "the validity of the debt or any portion thereof" it advises Schaefer-Ung to give notice within 30 days of receiving the Notice and lists a telephone number and address for AHMSI. In addition, the Notice states that she may be eligible for Homeownership Counseling or assistance from the
Homeownership Preservation Foundation and provides a HUD toll free telephone number and Homeownership Preservation Foundation telephone number. [Note 6] The Notice states that she "may have the following additional rights, depending on the terms of the residential mortgage: (i) to refinance the obligation by obtaining a loan which would fully repay the residential mortgage debtor; and (ii) to voluntarily grant a deed to the residential mortgage lender in lieu of foreclosure." Mot., Exh. F.
The Notice is deficient on one important point. The Notice states: "American Home Mortgage Servicing, Inc. is acting as the Mortgage Servicer for [U.S. Bank as Trustee], whose address is 60 Livingston Ave. St. Paul, MN 55107, who is the Mortgagee of the Note and Deed of Trust association with your real estate loan. The originator of the loan is TAYLOR, BEAN & WHITAKER MORTGAGE CORP." The Notice is deficient on this point because it is dated approximately five months before the Assignment by MERS to U.S. Bank as Trustee, which did not occur until September 30, 2011, meaning that U.S. Bank as Trustee could not have been the mortgagee because did not hold the Mortgage at the time of the Notice. Even if the Notice does not strictly comply with § 35A on this point, however, the SJC has held that failure to strictly comply with this section will not necessarily render a foreclosure invalid.
In U.S. Bank Nat'l Ass'n v. Schumacher, the court was faced with deciding 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 SJC found that § 35A is not one of the statutes "relating to foreclosure of mortgages by the exercise of a power of sale," and therefore, failure to strictly comply with G.L. c. 244, § 35A, does not render a foreclosure invalid. Id. at 430, quoting G.L. c. 183, § 21. In the concurrence, which was endorsed by the majority, id. at 429 n. 12, Justice Gants stated 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 § 35A rendered the foreclosure so fundamentally unfair that she is 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).
Schumacher does not explicitly set out what constitutes fundamental unfairness. At a minimum, however, to establish fundamental unfairness Schaefer-Ung would need to present facts indicating that deficiencies in the Notice sent by AHMSI thwarted, in some manner, her effort to cure the default or otherwise reach an agreement or accommodation with her lender. See id. at 431 (stating that the purpose of § 35A is to give the mortgagor a "fair opportunity" to cure the default before acceleration). According to U.S. Bank as Trustee, on April 19, 2011, AHMSI mailed Schaefer-Ung the Notice by certified mail, giving her 150 days to cure the default. The Notice informed Schaefer-Ung that she was in default and provided information regarding the amount to cure, the date on which the payment to cure the default would need to be made by, and various methods by which to contact AHMSI or U.S. Bank to contest the default or to make a payment. Though Schaefer-Ung contends that the noncompliant Notice caused the foreclosure to be fundamentally unfair, the evidence demonstrates that the Notice did not prejudice her or prevent her from paying the total delinquency amount necessary to cure the deficiency or otherwise attempting to reach an agreement or accommodation with her lender.
On April 21, 2011, Schaefer-Ung called AHMSI, the mortgage loan servicer listed on the Notice. Portions of the communication logs of AHMSI are in the record and show the dates on which calls were made and a brief description of the content of those conversations. The logs indicate that during the April 21, 2011, conversation Schaefer-Ung stated that she was unable to make the payment due to a loss of income and that she was working with the HUD program. Several additional telephone conversations occurred between Schaefer-Ung and AHMSI following the initial call. The logs indicate that during these conversations Schaefer-Ung stated that she was working with a third party to attempt to obtain a loan modification. SOF ¶¶ 17-19; Resp. ¶¶ 17-19; Mot., Exh. I. Schaefer-Ung's bank statement dated March 25, 2011, had an ending balance of $34.29, her bank statement dated April 25, 2011, had an ending balance of $19.16, and her bank statement dated May 25, 2011, had an ending balance of $140.88. SOF ¶¶ 14-16; Resp. ¶¶ 14-16; Mot. Exh. H. The communication logs from AHMSI indicate that on June 11, 2011, AHMSI advised Schaefer-Ung that at least half the balance due was needed to avoid a foreclosure. SOF ¶ 20; Resp. ¶ 20; Mot., Exh. I. Based on this undisputed evidence, the Notice did not render the foreclosure fundamentally unfair since it contributed in no way to her failure to cure the default or otherwise reach an agreement or accommodation. She was not confused as to who to contact and in fact contacted the mortgage loan servicer to discuss potential resolution options to cure the default. Furthermore, as evidenced by her bank statements, at all times after default, she lacked the funds to cure so that no changes in the Notice would have allowed her to remedy her default. That she filed a bankruptcy petition on March 16, 2012, also confirms that she lacked sufficient assets or income to cure the default. Schaefer-Ung had a fair opportunity to cure the default or reach an agreement before the foreclosure occurred. Any noncompliance with § 35A would not render the foreclosure fundamental unfair and therefore void.
II. Whether U.S. Bank as Trustee's noncompliance with Paragraph 22 renders the foreclosure void.
Schaefer-Ung argues that because the language in the Notice did not strictly comply with the pre-foreclosure language of paragraph 22 of the Mortgage, the foreclosure sale is void. Paragraph 22 provides that the notice must 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." The language in the Notice sent to Schaefer-Ung states in relevant part:
You are hereby informed that you have the right to "cure" or reinstate the loan after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or any other defense you may have to acceleration and sale.
In her opposition, Schaefer-Ung mistakenly relies on Pinti v. Emigrant Mtge. Co., 472 Mass. 226 (2015), in arguing that the language in the Notice is fatally defective and voids the foreclosure sale. 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. The primary argument as to why the foreclosure was void was that the mortgagee had failed to comply with paragraph 22 of the mortgage, which concerns the mortgagee's provision of notice to the mortgagor of default and the right to cure. Id. at 227-228. The language in the mortgage in Pinti is the same as in paragraph 22 of the Mortgage, and the notice sent in Pinti has nearly the same language as the April 19, 2011 Notice to Schaefer-Ung. [Note 7] Id. at 237. After thorough analysis, the SJC held that the language contained in paragraph 22 must be strictly complied with in any foreclosure proceeding because otherwise mortgagors could 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 237-239. However, the holding in Pinti was explicitly given prospective effect only, to foreclosures occurring after the decision, issued on July 17, 2015. Id. at 243. Because the Notice was sent to Schaefer-Ung on April 19, 2011, and the foreclosure sale was August 29, 2012, Schafer-Ung is not eligible for the prospective relief announced in Pinti.
Schaefer-Ung argues that the holding in Pinti should apply to U.S. Bank as Trustee's noncompliance because the issue had been properly raised and was pending at the time of the Pinti decision, such that U.S. Bank as Trustee was on notice that a failure to comply with any "conditions precedent" to exercising the power of sale would render a foreclosure void. See Roarty v. Mitchell, 7 Gray 243 , 243-244 (1856). Courts in the Commonwealth have yet to address whether the issue of noncompliance with paragraph 22, if raised at the trial court level at the time of Pinti, but before an opinion or judgment was issued in the trial court, subjects the Notice to Pinti's prospective holding. This need not be decided here. In Aurora Loan Services, LLC v. Murphy, 88 Mass. App. Ct. 726 (2015), the mortgagor raised on appeal a challenge to the validity of the foreclosure because the notice to cure did not comply with paragraph 22 of the mortgage, a challenge that was asserted and preserved in the trial court. The Appeals Court applied a limited exception to the prospective requirement of Pinti to cases pending on appeal on the date of the Pinti opinion. Id. at 731-732. There is no reason or authority for this court to carve out a broader exception for those cases where the issue was raised in a trial court action, but no final trial court judgment was entered and the case was not yet pending appeal at the time of the Pinti decision. Id. at 732. Since the Notice need not be in strict compliance with the pre- foreclosure notice language of paragraph 22, the foreclosure is not void.
III. Whether U.S. Bank as Trustee lawfully held the Note at the time of foreclosure.
Schaefer-Ung also maintains that the requirements of Eaton v. Federal Nat'l Mtge. Ass'n, 462 Mass. 569 (2012), that the foreclosing entity have held both the Mortgage and the Note at the time of foreclosure, are applicable to U.S. Bank as Trustee. In Eaton, the SJC held that in order to foreclose, the mortgagee must hold the mortgage and either hold the note or act on behalf on the note holder. Id. at 584-586. The Eaton decision was given prospective effect, applying only to mortgage foreclosure sales for which the mandatory notice of sale was given after the date of the opinion, June 22, 2012. Id. at 588-589. Here, the foreclosure sale was advertised pursuant to G.L. c. 244, § 14 on June 1, 2012, June 8, 2012, and June 15, 2012. The last of those notices was published 7 days before the Eaton decision. Eaton does not apply to the present action and U.S. Bank as Trustee was not required to hold the Note at the time of the foreclosure.
Nonetheless, U.S. Bank as Trustee has presented sufficient evidence that it did in fact hold the Note, as well as the Mortgage, at the time of foreclosure. A review of the Note shows that it was endorsed in blank by Erla Carter-Shaw, E.V.P. of TBW. When a note is endorsed in blank, it "may be negotiated by transfer or possession alone," and when negotiated to a person, that person becomes the instrument's "holder." G.L. c. 106, §§ 3-201(b), 3-205(b), 3-301(a). Thus, when a note is endorsed in blank it may be enforced on proof of possession alone. In re Wilson, 442 B.R. 10, 15 (Bankr. D. Mass. 2010) ("By virtue of its possession of a note endorsed in blank, Deutsche Bank is the holder of the note."); In re Almeida, 417 B.R. 140, 149 (Bankr. D. Mass. 2009) ("By virtue of its possession of the note indorsed in blank, Deutsche Bank is the holder of the note and as such has standing in this case to seek payment thereof"), quoting In re Samuels, 415 B.R. 8, 20-21 (Bankr. D. Mass. 2009).
The document custodians of the Note were Colonial Bank, N.A. and its successor-in-interest, BB&T, from April 25, 2007, to April 30, 2012, at which time the Note was released to AHMSI (and later Homeward) for foreclosure on behalf of U.S. Bank as Trustee. The Note was then sent to Hinshaw & Culbertson on behalf of U.S. Bank as Trustee, and was received on November 16, 2012. Since that date, the Note has remained and is currently located with Hinshaw & Culbertson. SOF ¶ 7; Resp. ¶ 7; Mot., Exh. D; Abely Aff. ¶¶ 2-5. On July 23, 2012, Ranney sent a purported Chapter 93A demand letter to Homeward, which responded with a letter dated July 26, 2012, providing a copy of the Note endorsed in blank, and stating that the "Note holder of the above referenced account is U.S. Bank National Association, as Trustee for TBW Mortgage-Backed Trust Series 2007-2, TBW Mortgage Pass-Through Certificates, Series 2007- 2." Homeward's response further stated that "[t]he instrument representing the indebtedness of the Mortgage Debt (Note) is not a recordable document, but is in our possession or held on our behalf by our custodian." SOF ¶¶ 28-30; Resp. ¶¶ 28-30; Mot., Exhs. M, N. The original Note was also produced by U.S. Bank as Trustee to the court at the hearing on the Motion for Summary Judgment. [Note 8] This evidence is sufficient to conclude that at the time of the notice of sale, shortly before the Eaton decision, and at the foreclosure sale itself, U.S. Bank as Trustee held the Note endorsed in blank.
Schaefer-Ung also challenges the Assignment of the Note and Mortgage from MERS. She alleges that MERS never held any interest in the Note to convey, and that therefore the chain of title of the Note is invalid and U.S. Bank as Trustee cannot be shown to have legal standing as the owner of the Note or to have lawfully foreclosed. Schaefer-Ung claims that a certain chain of possession for the Note must be demonstrated in order for U.S. Bank as Trustee to have had the ability to foreclose. This is contrary to the current state of the law.
"[A]lthough a foreclosing mortgagee must demonstrate an unbroken chain of assignments in order to foreclose a mortgage . . . and now must also demonstrate that it holds the note (or acts as authorized agent for the note holder) at the time it commences foreclosure . . . nothing in Massachusetts requires a foreclosing mortgagee to demonstrate that prior holders of the record legal interest in the mortgage also held the note at the time each assigned its interest in the mortgage to the next holder in the chain." Sullivan v. Kondaur Capital Corp., 85 Mass. App. Ct. 202 , 210 (2014). While MERS only had possession of the Mortgage at the time of the Assignment and not the Note, its purported conveyance of the Note does not invalidate the transfer of the Mortgage or have any effect on the validity of the Note. There is no requirement for MERS to have held the Note for its assignment of the Mortgage to be valid because in Massachusetts a mortgage and a note can travel independently prior to the time of foreclosure. Eaton, 462 Mass. at 576; Sullivan, 85 Mass. App. Ct. at 210. "MERS was not required to possess the Note in order to assign the Mortgage." Rosa v. Mtge. Elec. Reg. Sys., Inc., 821 F. Supp. 2d 423, 432 (D. Mass. 2011). Language in the Assignment indicating that MERS was assigning its interest in the Note "does not affect the validity of MERS's assignment of the Mortgage." In re Lopez, 446 B.R. 12, 19 n. 34 (Bankr. D. Mass. 2011), citing Kiah v. Aurora Loan Servs., LLC, No. 10-40161-FDS, 2011 WL 841282, at *8 (D. Mass. Mar. 4, 2011).
Based on the foregoing, U.S. Bank as Trustee held the Note at the time of foreclosure and continues to be in possession of it today. Although not necessary because the notice of sale was published prior to June 22, 2012, U.S. Bank as Trustee complied with the requirements set forth in Eaton. [Note 9]
IV. Whether the foreclosure was conducted in accordance with the mortgage and statutory power of sale.
Schaefer-Ung makes additional cursory arguments with regard to whether the foreclosure was proper. In the final argument of her Opposition she states, "U.S. Bank has failed to support with any documentation and/or evidence its bald allegations set out in its Counterclaim ¶ 9 that 'the foreclosure was conducted in accordance with the terms of the mortgage' and ¶ 10 that 'the foreclosure was properly conducted pursuant to the statutory power of sale.'"
In order for a mortgagee to foreclose by exercising of the power of sale, the mortgage itself must grant such mortgagee the statutory power of sale. Pinti, 472 Mass. at 232. The requirements set forth in G.L. c. 183, § 21, to conduct a sale under statutory power are not merely suggestions that a mortgagee should comply with in good faith, but rather are positive requirements that a mortgagee must adhere to in a foreclosure by power of sale. See Tamburello v. Monahan, 321 Mass. 445 , 447 (1947). General Laws c. 183, § 21 sets forth specific requirements regarding who may conduct a sale, [Note 10] what property can be sold, [Note 11] where the sale must occur, [Note 12] when the sale must occur, [Note 13] and how the sale must occur. [Note 14] "Section 21 provides, however, that for a foreclosure sale pursuant to the power to be valid, the mortgagee must 'first comply[ ] with the terms of the mortgage and with the statutes relating to the foreclosure of mortgages by the exercise of a power of sale.'" Eaton, 462 Mass. at 580-581; see Moore v. Dick, 187 Mass. 207 , 211213 (1905) (where notice of foreclosure sale was given in newspaper other than one named in mortgage agreement's power of sale, foreclosure was void, and plaintiffs were entitled to redeem mortgaged property approximately twenty years after sale; laches is no defense to void sale); Tamburello, 321 Mass. at 446447 (where foreclosure sale conducted in bank office nine-tenths of one mile from mortgaged premises, sale was not "on or near the premises" as required by G.L. c. 183, § 21; sale held void). U.S. Bank as Trustee complied with the terms of the Mortgage and with the statutes relating to the foreclosure.
First, the Mortgage incorporates the statutory power of sale. "It is well-settled law that the statutory power
may be incorporated into a mortgage in three ways: (1) incorporating the exact language that defines the Statutory Power of Sale of § 21 into the text of the mortgage; (2) referring to this definition, generally by use of the term 'Statutory Power of Sale'; or (3) language in the mortgage defining a power substantially similar to that of the statutory power." Norton v. Joseph, 17 LCR 40 , 41 (2009), aff'd, 77 Mass. App. Ct. 1120 (2010), citing The Massachusetts Co. v. Midura, 3 LCR 138 (1995). Here, the language in paragraph 22 of the Mortgage incorporates the statutory power of sale by use of the term "Statutory Power of Sale." Since the Mortgage identified MERS, its successors and assigns as the "mortgagee" with the "power of sale," U.S. Bank as Trustee (assignee of MERS), in exercising the power, was entitled to foreclose upon Schaefer-Ung's default of the mortgage loan without obtaining prior judicial authorization.
Moreover, U.S. Bank as Trustee has made a prima facie showing that the foreclosure proceedings were done in accordance with G.L. c. 244, § 14, through the § 15 affidavit signed by Daniel Staten (Staten), Vice President of AHMSI/Homeward. Federal Nat'l Mtge. Ass'n v. Hendricks, 463 Mass. 635 , 641-642 (2012); HSBC Bank USA, Nat'l Ass'n v. Howe, No. 15-ADMS-10016, 16 WL 797622 at *4-5 (Mass. App. Div. Feb. 19, 2016). "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.
AHMSI/Homeward was an "attorney duly authorized by a writing under seal." Id. "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. Section 14 required written authorization for AHMSI/Homeward because on the affidavit of sale, AHMSI/Homeward is listed as U.S. Bank's attorney in fact. AHMSI/Homeward, as attorney in fact, had the proper written authorization under § 14 pursuant to a Limited Power of Attorney recorded in the Worcester County Registry of Deeds on June 2, 2011 at Book 47453, Page 22, which states that U.S. Bank as Trustee appoints the servicer, AHMSI/Homeward, as its Attorney-in-Fact and authorizes AHMSI/Homeward to act on their behalf for the purpose of performing such acts and executing such documents in the name of U.S. Bank as Trustee in connection with servicing certain mortgage loans held by U.S. Bank, including foreclosing on the properties in default. AHMSI did so by authorizing Korde & Associates to make entry and conduct the foreclosure on behalf of U.S. Bank as Trustee.
Staten's §15 affidavit is from the duly authorized attorney in fact and provides that U.S. Bank as Trustee has complied with G.L. c. 244, § 14, and that "the requirements of the power of sale included in the mortgage and of the statute have been complied with in all respects." Mot., Exh. P. Contrary to Schaefer-Ung's contentions, U.S. Bank as Trustee has presented sufficient undisputed evidence that the foreclosure was conducted in accordance with the terms of the mortgage and that the foreclosure was properly conducted pursuant to the statutory power of sale.
V. Whether there was a legal sale of the Property at the foreclosure auction.
Though U.S. Bank as Trustee has presented sufficient evidence of its compliance with the statutory foreclosure proceedings leading up to the sale and the sale itself, this does not end the discussion. As stated above, there are issues that have evolved post-foreclosure that render summary judgment in favor of U.S. Bank as Trustee inappropriate at this time.
Schaefer-Ung first contends that U.S. Bank as Trustee's motion should be denied because it is entirely predicated on a sale of the Property to Norgoet at the foreclosure sale in 2012. At foreclosure, Norgoet was the highest bidder, paid the required deposit amount, and signed a Memorandum of Sale, but the foreclosure deed was never delivered and the full purchase price for the Property was never paid due to the filing of this lawsuit on the same day as the foreclosure. During the pendency of this action, Norgoet has disclaimed all of her right, title, and/or interest in the Property under § 3 of the Try Title Statute and the court has dismissed all claims against her. Schaefer-Ung now asserts that because the sale to Norgoet was never finalized, U.S. Bank as Trustee cannot meet its burden of showing that Norgoet purchased the Property at foreclosure and/or that any party has superior title to her.
Conversely, U.S. Bank as Trustee argues that Schaefer-Ung no longer has any right, title, or interest in the Property once the "gavel falls" at the foreclosure auction. "An auction sale is complete, in the generally understood sense, when the auctioneer signifies his acceptance of the highest bid." Outpost Café, Inc. v. Fairhaven Sav. Bank, 3 Mass. App. Ct. 1 , 2 (1975); see Conway Sav. Bank v. Vinick, 287 Mass. 448 , 453 (1934); G.L. c. 106, § 2-328(2) ("a sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner"). Based on these principles, U.S. Bank as Trustee submits that the absence of a foreclosure deed issued to Norgoet after the sale is irrelevant for purposes of establishing whether the sale was complete and if Schaefer-Ung's right of redemption has been foreclosed such that she no longer has superior title to the Property.
General Laws c. 244, § 18, provides that the "mortgagor . . . may, after breach of condition, redeem the land mortgaged, . . . unless the land has been sold pursuant to a power of sale contained in the mortgage deed." Id. Based on the language of § 18, a mortgagor's equity of redemption is barred "at least as early as the point in time when the memorandum of sale was executed with the purchaser at the time of the foreclosure sale." Outpost Café, Inc., 3 Mass. App. Ct. at 7; see Williams v. Resolution GGF OY, 417 Mass. 377 , 384 (1994) (stating that "execution of the memorandum of sale terminated their equity of redemption"). Thus, the equity of redemption is foreclosed before a foreclosure deed is delivered to the buyer at foreclosure. The sale is considered completed once the auction is memorialized by the memorandum of sale. Outpost Café, Inc., 3 Mass. App. Ct. at 3-4, 6 n. 9. If the buyer at the foreclosure auction ultimately breaches the agreement to buy the property, however, that breach can void the foreclosure sale. If the foreclosure sale is voided, then the mortgagee must conduct a new sale. See Bottomly v. Kabachnick, 13 Mass. App. Ct. 480 , 481-482 (1982) (voiding of foreclosure sale resulted in new foreclosure sale). If a foreclosure sale is void it is "viewed as a nullity; it is as if no such sale was made." Id. at 484. This means that the event that barred the equity of redemptionthe saleis deemed not to have happened. As a result, the equity of redemption is reinstated or, more precisely, is treated as if it had never been barred. The mortgagor and mortgagee are restored to their pre-foreclosure, complementary status.
Here, it is undisputed that Norgoet was the highest bidder at the foreclosure auction, and a Memorandum of Sale was executed. Norgoet has not taken delivery of the Deed, so the sale has not been completed. The Memorandum of Sale, signed by Norgoet and U.S. Bank as Trustee, states in relevant part:
In the event that the successful bidder(s) at auction shall default in the purchase of the [Property] . . . the Seller reserves the right to sell the property by Foreclosure Deed to the penultimate bidder provided that the penultimate bidder shall deposit with Seller's attorneys, Korde & Associates, P.C., the amount of the required deposit as set forth herein within three (3) business days after written notice of default of the previous highest bidder and title shall be conveyed to said penultimate bidder within twenty (20) days of said written notice. The rights of the successful bidder may be assigned with the consent of the Seller.
Mot., Exh. Q (emphasis supplied). Although Norgoet disclaimed all of her rights, title, and/or interest in the Property under § 3 of the Try Title Statute and the court dismissed all claims against her, this does not constitute a "written notice of default". U.S. Bank as Trustee has not alleged that Norgoet has defaulted or filed any notice of default against Norgoet. In fact, in her April 1, 2013 Motion to Dismiss and Reinstate Bank Defendants, Norgoet states that as the successful bidder, she is "prepared to pay consideration and accept title from [U.S. Bank as Trustee] provided that [U.S. Bank as Trustee] produce[s] a good and sufficient Foreclosure Deed conveying record title to the property, unclouded by [Schaefer-Ung's] pending action." Norgoet Mot. to Dismiss at 2. Norgoet indicates that she is only disclaiming because she has no present claim of title to the property as merely the highest bidder since Schaefer-Ung has called into question U.S. Bank as Trustee's ability to foreclose and record the foreclosure deed. Id. It is a question of fact whether the sale has been voided, or if it has been finalized to allow the Property to be conveyed to Norgoet by foreclosure deed. Even if Norgoet no longer desires to purchase the Property and is defaulted, there is still a question of fact as to the identity of the penultimate bidder, if any, and if that bidder desires to obtain the Property. The record is unclear as to whether Norgoet was the only bidder and if there was a second highest bidder the Property would be conveyed to in the event that Norgoet has defaulted. Mot. to Intervene, Exh. A. If Norgoet or the penultimate bidder decides to purchase the Property, the foreclosure sale would be declared valid and superior title would be held by the buyer. If, however, Norgoet defaults and there is no other purchaser/grantee, the foreclosure sale would be void and the Property would regain its pre-foreclosure status with Schaefer-Ung's equity of redemption reinstated. Thus, there is an issue of fact as to whether the foreclosure sale is complete or void.
In short, there is no dispute that U.S. Bank as Trustee conducted a valid foreclosure in compliance with G.L. c. 244, § 14, and other applicable law. There is a dispute of fact of whether the foreclosure sale stands thereby barring Schaefer-Ung's equity of redemption and vesting title in U.S. Bank as Trustee and, ultimately, the buyer out of foreclosure, or whether the foreclosure sale is void, thereby reinstating Schafer-Ung's equity of redemption and U.S. Bank as Trustee's position solely as mortgagee. A trial is required to resolve this dispute.
Conclusion
For the foregoing reasons, Schaefer-Ung's Motion to Strike is DENIED. U.S. Bank as Trustee's Motion for Summary Judgment is ALLOWED IN PART and DENIED IN PART. A status conference is set down for January 27, 2017 at 11:00 am.
SO ORDERED
SANDY SCHAEFER-UNG v. U.S. BANK, NATIONAL ASSOCIATION as Truste for TBW MORTGAGE-BACKED TRUST SERIES 2007-2, TBW MORTGAGE PASS-THROUGH CERTIFICATES, SERIES, 2007-2, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., HOMEWARD RESIDENTIAL, INC., DLJ MORTGAGE CAPITAL, INC., CREDIT SUISSE AG f/k/a CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP., and GRETEL NORGOET.