Plaintiff Deutsche Bank National Trust Company, as Trustee for GSAMP Trust 2005-HE4, Mortgage Pass-Through Certificates, Series 2005-HE4 (Deutsche Bank), initiated this action on March 29, 2017, seeking a declaratory judgment that the sale of Unit 12-3 of the Northbrook Condominium in Amesbury (Unit) by the Essex County Sheriff's Department to satisfy a condominium lien was defective. As of the date of the Sheriff's sale, Deutsche Bank was the record holder by assignment of a first mortgage on the Unit (Mortgage). Defendants Northbrook Condominium Association (Association), Paul M. Wozny and Elaine M. Wozny, Gary Sackrider, Esq., and Henry Fournier argue the Sheriff's sale was properly conducted pursuant to G. L. c. 183A, § 6, and G. L. c. 254, § 5A, and extinguished the Mortgage, so that Deutsche Bank took nothing from SouthStar by assignment.
The Woznys, who purchased the Unit at the Sheriff's sale, filed an Answer and four-count counterclaim against Deutsche Bank, seeking a declaration that the Mortgage was extinguished and alleging Deutsche Bank is equitably estopped from asserting any right, title or interest in and to the Unit. The Woznys also allege unjust enrichment and violations of G. L. c. 93A, and filed a cross- claim against the Association and others, alleging fraud, negligent misrepresentation, and violations of G. L. c. 93A.
The Association moved to dismiss the Woznys' cross-claim pursuant to Mass. R. Civ. P. 12(b)(6). At a case management conference, the parties discussed the various theories of the case and the appropriate motions and briefing schedule. They agreed to draft a proposed joint statement of facts to determine the threshold issue before this court and whether summary judgment would be appropriate on that issue. On June 29, 2017, Attorney Sackrider moved for judgment on the pleadings on the Woznys' cross-claim against him pursuant to Mass. R. Civ. P. 12(c).
A joint statement of undisputed material facts was filed on July 13, 2017. Ultimately, after much discussion, all parties recognized that the summary judgment issue regarding whether the Mortgage has been extinguished should proceed before consideration of the other claims.
Summary Judgment
The cross-motions for summary judgment focus on whether the Unit remains encumbered by the Mortgage, given the procedure the Association followed in connection with the foreclosure of the condominium lien under G. L. c. 183A, § 6, and G. L. c. 254, § 5A, and the lack of action by Deutsche Bank during the five years following the Sheriff's sale. 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 of material fact and that the moving party is entitled to judgment as a matter of law." Mass. R. Civ. P. 56(c). In accordance with Land Court Rule 6, the court now decides the motion on the papers without oral argument.
The following undisputed material facts are taken from the parties' Joint Statement of Undisputed Material Facts: [Note 1]
1. Lisa Dalomba (Dalomba) acquired the Unit (a/k/a 44 Pamela Lane) on March 26, 2003. The Unit is more fully described in a deed recorded with the Essex South County Registry of Deeds (Registry) in Book 20455, at Page 286. [Note 2]
2. Dalomba executed a promissory note (Note) in favor of SouthStar Funding, LLC (SouthStar) in the amount of $218,000, in connection with her purchase of the Unit. The Note was secured by a mortgage (Mortgage) to Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for SouthStar.
Condominium Enforcement Action Essex County District Court
3. The Northbrook Condominium Association (Association) initiated an action against Dalomba for delinquent common area assessments, attorney's fees, and fines in the Newburyport Division of the Essex County District Court Department on May 26, 2011. See Flanagan, as Treasurer of the Northbrook Condominium Association v. Dalomba, 1122- CV-000315 (District Court Case).
4. An attested copy of the complaint in the District Court Case was recorded with the Registry on June 1, 2011, in Book 30442, at Page 84.
5. In addition to delinquent common area assessments, attorney's fees and fines, the complaint also sought for relief an award against Dalomba for damages; an order establishing the amount of the lien under G. L. c. 254, § 5A; an order establishing the amount of the priority lien over any claims of the first mortgage holder, as provided for under G. L. c. 183A, § 6; and an order authorizing the sale of the real estate to satisfy the lien. (Emphasis added.)
6. The thirty-day and sixty-day notices, required under G. L. c. 183A, § 6(c), first par., were sent by regular and certified mail to SouthStar and MERS (together, Mortgagees), in accordance with the statute. [Note 3] The mailing addresses for the Mortgagees were obtained by the Association from the Registry, since neither Southstar nor MERS had provided the Association with notice of its name, address and statement of interest as first mortgagee, as required by G. L. c. 183A, § 6(c). Dalomba was sent the thirty-day notice.
7. Neither Dalomba, nor the Mortgagees (who were not named or served) entered an appearance nor filed any responsive pleadings in the District Court Case.
8. The Association moved for entry of default and default judgment, seeking a money judgment against Dalomba for damages in the amount of $4,557.94; establishment of a lien under G. L. c. 254, § 5A for payment of the judgment; and an order allowing the sale of the Unit to satisfy the lien, pursuant to G. L. c. 183A, § 6.
9. The District Court issued an order on the motion with a handwritten notation as follows: "8- 11-11 MP [Moving Party] only w/notice allowed Doyle, J." Judgment entered for the Association.
10. The Association obtained an "Execution on Money Judgment" against Dalomba on September 15, 2011, and recorded it with the Registry in Book 30737, at Page 96.
Mortgage Assignment to Deutsche Bank
11. On February 12, 2012, MERS purported to assign the Mortgage to Deutsche Bank (Assignment). The Assignment was recorded on March 12, 2012, in Book 31160, at Page 29.
12. At no time prior to the Sheriff's Sale, discussed below, did Deutsche Bank, SouthStar or MERS notify the Association with its name, address or a statement that it was the first mortgage holder, as required under G. L. c. 183A, § 6.
Sheriff's Sale
13. On July 19, 2012, the Essex County Sheriff's Department, on behalf of the Association, sold the Unit to the Woznys for $62,000. The Sheriff's Deed was recorded August 6, 2012, in Book 31594, at Page 44.
14. Deutsche Bank received notice of the scheduled Sheriff's Sale at least thirty days before the auction. [Note 4]
15. Legal notice of the sale was published in the Newburyport Daily News. [Note 5]
16. On September 26, 2012, the Woznys granted a mortgage to Defendant Haverhill Bank, encumbering the Unit as security for a promissory note in the amount of $110,000.
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I. Jurisdiction
In their three-count cross-claim, the Woznys claim the Association is vicariously liable for the alleged fraudulent and/or negligent misrepresentations of Fournier and Sackrider relating to the Sheriff's Sale and their alleged statements that the Sheriff's Sale extinguished the Mortgage. The Woznys also brought a third count against the Association pursuant to G. L. c. 93A (93A). Although this court's determination that the Mortgage was extinguished arguably renders the Woznys' 93A action and tort claims moot, those claims, even if still viable, fall outside this court's jurisdiction. Accordingly, those claims will be dismissed for lack of subject matter jurisdiction.
II. The Association Complied With the Requirements of G. L. c. 183A, § 6 and G. L. c. 254, §§ 5, 5A, and Extinguished the Mortgage
The relevant material facts show that the Association brought a complaint to foreclose its condominium lien pursuant to G. L. c. 183A, § 6, and G. L. c. 254, §§ 5, 5A, against Dalomba only.
G. L. c. 183A, § 6(c), second par., states, in relevant part:
a lien [under G. L. c. 183A, § 6, for unpaid common expenses] is prior to all other liens and encumbrances on a unit except (i) liens and encumbrances recorded before the recordation of the master deed, (ii) a first mortgage on the unit recorded before the date on which the assessment sought to be enforced became delinquent, and (iii) liens for real estate taxes and other municipal assessments or charges against the unit. This lien is also prior to the mortgages described in clause (ii) above to the extent of the common expense assessments based on the budget adopted pursuant to [G. L. c. 183A, § 6 (a)], which would have become due in the absence of acceleration during the six months immediately preceding institution of an action to enforce the lien and to the extent of any costs and reasonable attorneys' fees incurred in the action to enforce the lien . . . (Emphasis added.)
Essentially, when a condominium association initiates a lien enforcement action, it obtains so-called "super-priority" status over a first mortgagee for six months' worth of common expenses. Drummer Boy Homes Ass'n, Inc. v. Britton, 474 Mass. 17 , 406407 (2016).
"The evident purposes of the [thirty- and sixty-day statutory notices] are to give the unit owner an opportunity to remedy the delinquency so as to avoid an enforcement action that may result in foreclosure, and to apprise the first mortgagee of the status of the property so it can take appropriate action, as necessary, to protect its security interest." Drummer Boy Homes, 474 Mass. at 406407. Upon notice, a first mortgagee can assume responsibility for a unit owner's unpaid common expenses, maintain its lien priority, and protect its interest from further condominium enforcement action. Id. at 409. The condominium association, on the other hand, receives six months' worth of delinquent common expenses, plus all future common expenses, thereby allowing it to meet its ongoing financial obligations without imposing an additional burden on unit owners who have paid their common expenses in a timely manner. Id. Due to the statutory priority provided by G. L. c. 183A, § 6(c), foreclosure of a lien established by this section will often extinguish even a first mortgage. Residences at Cape Ann Heights Condo. Assoc. v. Halupowski, 83 Mass. App. Ct. 332 , 335 (2013). If a foreclosure sale is authorized to satisfy the lien, and conducted in accordance with the provisions of G. L. c. 254, § 5A, the property will be deemed sold "free of said first mortgages, if as of the date of such sale there are unpaid common expense assessments, costs, or reasonable attorneys' fees the lien for which is given priority over said first mortgages in [G. L. c. 183A, § 6(c)]."
On August 11, 2011, an order issued in the District Court Case allowing the Association's motion for entry of default judgment against Dalomba for "damages . . . which includes attorney's fees" and costs, etc.; and establishment of a lien "under c. 254, § 5A for payment of this judgment . . . allowing the property be sold to satisfy the lien, as per M. G. L. c. 183A, sec. 6." Following entry of the Judgment, which was not appealed, execution issued on September 15, 2011. At the time the Judgment entered, and at the time execution issued and was recorded, SouthStar (and MERS, as nominee) held the Mortgage. SouthStar did not assign the Mortgage to Deutsche Bank until February 21, 2012, after the Judgment entered and Execution issued, but before the Sheriff's Sale took place. Deutsche Bank received actual notice of the scheduled Sheriff's Sale on June 13, 2012. [Note 6]
The Association argues that the statute of limitations bars Deutsche Bank from challenging, after approximately a five-year delay, the Sheriff's Sale as defective and insufficient to extinguish the Mortgage. Deutsche Bank, on the other hand, argues the Association's failure to name it or SouthStar as parties in the District Court Complaint frees Deutsche Bank from being bound by the subsequent judgment. Neither SouthStar nor MERS were named as parties, despite the Association's knowledge of the Mortgage. [Note 7] While the Association brought suit seeking, among other relief, foreclosure of the condominium lien and sale of the Unit, it failed to name the mortgagee of that Unit. As a general rule, a judgment may only be enforced against a party. Williams v. Investors Syndicate, 327 Mass. 124 , 127 (1951). Deutsche Bank further argues the failure by the various first mortgagees to notify the Association of their names, addresses and interest in the Unit, in accordance with G. L. c. 183A, § 6, relieves the Association only of sending the pre-foreclosure delinquency notices. See McDermott v. Marcus, Errico, Emmer & Brooks, P.C., 775 F.3d 109, 127 (D. Mass. 2014) (stating a condominium association was not required to send pre-suit notices to any mortgagee who failed to provide its name and address).
The Association sought, and received, a Judgment for the sale of the Unit. This form of judgment meets the statutory procedures "outlined in G. L. c. 254, § 5A." Cape Ann Heights, 83 Mass. App. Ct. at 332. Although the action to enforce the lien included aspects of an action for money damages, the primary remedy sought was the forced sale of the Unit, which more closely resembles an in rem action as opposed to an action in personam. See Cape Ann Heights, 83 Mass. App. Ct. at 333334, 335 n.3 (stating that "[i]n addition to the assessment against the unit itself, the statute also makes the unit owner personally liable for all sums assessed for his share of the common expenses' . . . and preserves the right of the condominium association to proceed against the unit owner individually for the amount owed").
Deutsche Bank provides no citation that, as a first mortgagee, a mortgagee must be included as a named defendant in the lien foreclosure suit. G. L. c. 254, § 5 provides the "sole mechanism for enforcing condominium association liens[.]" Townehouse of Amherst Condo. Assoc. v. U.S. Bank, Nat'l Assoc., 82 Mass. App. Ct. 1111 (2012) (unpublished memorandum and order pursuant to Rule 1:28). Because the "same mechanism is used to enforce mechanic's liens," cases decided under the mechanic's lien statute are helpful "in reviewing the sufficiency of condominium liens under [G. L. c. 183A.]" Id.
"General Laws c. 254 does not specify whether, in order to preserve a lien, a lienholder must name the owner of record as a defendant when it files a complaint to enforce its lien." Nat'l Lumber Co. v. Le Francoise Const. Corp., 430 Mass. 663 , 668 (2000), citing Intern'l Fid. Ins. Co. v. Wilson, 387 Mass. 841 , 851 (1983). In Nat'l Lumber, the Supreme Judicial Court considered this silence in the context of the overall objectives the Legislature sought to accomplish. Id. The mechanics lien statute is designed to ensure that a person searching the land records in a registry of deeds can determine with certainty whether or not title to a particular parcel of land is encumbered by a mechanic's lien. Id., citing Pratt & Forrest Co. v. Strand Realty Co., 233 Mass. 314 , 317318 (1919). The National Lumber court ultimately decided that, because the statute provides "an efficient mechanism of ensuring that an enforcement action may readily be identified through routine title searching procedures, such as recording the complaint, a title search by any prospective purchaser . . . readily [accomplishes] that objective," even if not named in the original complaint. Nat'l Lumber, 430 Mass. at 670.
This court finds the Association initiated its lien enforcement action against the proper party, and adhered to the requirements of G. L. c. 183A, § 6. Deutsche Bank had opportunities to protect its interest in the Unit. The agreed facts establish that at the time of the assignment on February 21, 2012, Deutsche Bank had constructive notice of the condominium lien on the Unit because there were instruments on record giving it notice of the delinquent common expense payments and the risk of foreclosure of the lien. A title examination would have disclosed: 1) a copy of the District Court Complaint which was recorded on June 1, 2011; and 2) a copy of the Execution on Money Judgment against Ms. Dalomba, recorded on October 4, 2011. In addition, and importantly, Deutsche Bank received certified mail notice of the scheduled Sheriff's Sale with sufficient time for it to have protected its interest by coming forward and paying Ms. Dalomba's common area expenses. An investigation by Deutsche Bank to determine whether encumbrances had been recorded, conducted any time following the date of the Assignment, would have alerted it to the recorded District Court Complaint. See Nat'l Lumber, 430 Mass. at 670. Deutsche Bank was not entitled to notice of anything that transpired in court or out of court prior to the date on which it was purportedly assigned the Mortgage. It must be charged however, with constructive and actual notice of the situation unfolding over many years with respect to the delinquency of Dalomba's condominium fees. The Association complied with the requirements of G. L. c. 183A, § 6. Deutsche Bank ignored the record to its detriment.
III. Conclusion
Accordingly, Deutsche Bank's motion for summary judgment is DENIED, and the Woznys' cross-motion for summary judgment is GRANTED. The Mortgage on the Unit was extinguished by the Sheriff's Sale, and the Unit was purchased free and clear of the Mortgage. The Association's Motion to Dismiss the Woznys' cross-claim is ALLOWED.
Recognizing that there are other motions pending at this point, the parties have until January 19, 2018, to advise the court whether they want to pursue any of the pending motions before the dismisses the tort claims and 93A claim without prejudice, and enters a declaratory judgment in accordance with this decision.
To secure and enforce the priority lien, however, certain procedural steps are required. G. L. c. 183A, § 6 requires two sets of notices mailed by certified and first class mail, when dealing with a unit owner's delinquency. The first notice is sent to the unit owner and the first mortgagee "[w]hen any portion of the unit owner's share of the common expenses has been delinquent for at least sixty days." G. L. c. 183A, § 6(c). The second notice is sent only to the first mortgagee "thirty days prior to the filing of an action . . . to enforce [the association's] lien for delinquent common expenses." The requirement for sending these notices to the first mortgagee is conditioned on the first mortgagee having "informed the organization of unit owners of its name and mailing address." G. L. c. 183A, § 6(c).
DEUTSCHE BANK NATIONAL TRUST COMPANY, as TRUSTEE for GSAMP TRUST 2005-HE4, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2005-HE4 v. PAUL M. WOZNY, ELAINE M. WOZNY, HAVERHILL BANK, LISA DALOMBA, and NORTHBROOK CONDOMINIUM ASSOCIATION and GARY SACKRIDER, INDIVIDUALLY and as ATTORNEY and AGENT for NORTHBROOK CONDOMINIUM ASSOCIATION, and HENRY FOURNIER, INDIVIDUALLY and as former PRESIDENT of NORTHBROOK CONDOMINIUM ASSOCIATION.