NATIONSTAR MORTGAGE, LLC v. MARGARET T. PIMENTEL; SECRETARY OF HOUSING AND URBAN DEVELOPMENT; COMMONWEALTH OF MASSACHUSETTS EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES.

This case commenced on November 3, 2017 with the verified complaint of Nationstar Mortgage, LLC ("Nationstar") seeking declaratory relief pursuant to G. L. c. 231A to reform a mortgage from James H. Pimentel and Margaret T. Pimentel (the "Pimentels") to Gateway Funding Diversified Mortgage Services dated November 21, 2006, to state that the mortgage includes the statutory power of sale. The defendant Commonwealth of Massachusetts Executive Office of Health and Human Services ("MassHealth") filed its Answer and Counterclaim on December 13, 2017, asserting one count for Recovery of Medicaid Benefits. On July 23, 2017, MassHealth amended its answer and counterclaim to include two additional counts for defective acknowledgment of the mortgage (Count II) and for Declaratory Judgment (Count III). [Note 1]

Nationstar's motion for summary judgment was filed on April 27, 2018. MassHealth filed a cross-motion for summary judgment. A hearing was held on both motions on September 6, 2018. For the reasons stated below, Nationstar's motion for summary judgment is ALLOWED and MassHealth's cross-motion for summary judgment is DENIED.

FACTS

The undisputed facts established in the record and pertinent to the motion and cross-motion for summary judgment, with all reasonable inferences drawn in the light most favorable to the non-moving party, are as follows:

1. Nationstar is a national banking association and is the holder of a mortgage secured by the property located at 56 Stanley Street in Fall River (the "Property"). [Note 2]

2. The Pimentels were the owners of the Property as tenants by the entirety, by virtue of a Warranty Deed recorded in the Bristol County (Fall River District) Registry of Deeds ("Registry") at Book 795, Page 412. [Note 3] James H. Pimentel died on February 22, 2016. Margaret T. Pimentel defaulted on the mortgage in October, 2016. [Note 4]

3. Defendant MassHealth is a Massachusetts governmental entity and is the holder of a MassHealth lien on the Property. [Note 5]

4. The Pimentels entered into an "Adjustable Rate Note (Home Equity Conversion)" (the "Note") in favor of Gateway Funding Diversified Mortgage on November 21, 2006. [Note 6]

5. The Note was secured by a mortgage executed by the Pimentels dated November 21, 2006, secured by the Property and recorded on November 28, 2006 in the Registry in Book 6496, Page 180 (the "mortgage"). [Note 7]

6. On November 28, 2006, the mortgage was assigned to Seattle Mortgage Company by an assignment recorded in the Registry in Book 6496, Page 190. [Note 8]

7. On July 5, 2007, the mortgage was further assigned to Bank of America, N.A. by an assignment recorded in the Registry in Book 6703, Page 96. [Note 9]

8. On or about November 20, 2012, the mortgage was further assigned to Nationstar by an assignment recorded in the Registry in Book 8082, Page 152. [Note 10]

9. Paragraph 20 of the mortgage, entitled "Foreclosure Procedure," provides in relevant part: "If Lender requires immediate payment in full under Paragraph 9, Lender may invoke the power of sale and any other remedies permitted by applicable law…." [Note 11]

10. The mortgage was acknowledged by the Pimentels before a notary on November 21, 2006. The notary acknowledgment provides: "On this 21 day of November, 2006 before me personally appeared Margaret T. Pimentel and James H. Pimentel to me known and known to me to be the individual(s) described in and who executed the foregoing instrument, and duly acknowledged to me that he/she/they executed the same." [Note 12]

11. MassHealth recorded a lien on November 7, 2016, in the Registry at Book 9102, Page 245, for the cost of medical assistance paid or to be paid on behalf of Margaret Pimentel. [Note 13]

12. MassHealth has a valid claim against proceeds from the transfer or sale of the Property. [Note 14]

DISCUSSION

"Summary judgment is granted where there are no issues of genuine material fact, and the moving party is entitled to judgment as a matter of law." Ng Bros. Constr. v. Cranney, 436 Mass. 638 , 643-44 (2002); Mass. R. Civ. P. 56(c). "The moving party bears the burden of affirmatively showing that there is no triable issue of fact." Ng Bros., supra, 436 Mass. at 644. In determining whether genuine issues of fact exist, the court must draw all inferences from the underlying facts in the light most favorable to the party opposing the motion. See Attorney Gen. v. Bailey, 386 Mass. 367 , 371, cert. denied, 459 U.S. 970 (1982). Whether a fact is material or not is determined by the substantive law, and "an adverse party may not manufacture disputes by conclusory factual assertions." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Ng Bros., supra, 436 Mass. at 648. When appropriate, summary judgment maybe entered against the moving party and may be limited to certain issues. Community Nat'l Bank v. Dawes, 369 Mass. 550 , 553 (1976); Mass. R. Civ. P. 56(c).

Nationstar now moves for summary judgment, arguing that the language in paragraph 20 of the mortgage, referring to the "power of sale," incorporated the statutory power of sale as a matter of law; and further arguing that any defects in the acknowledgement of the mortgage are remedied by G.L. c. 184, § 24, which provides a "safe harbor" for such defects that are a matter of record for at least ten years. MassHealth, seeking judgment in its favor pursuant to a cross-motion for summary judgment, argues that G. L. c. 184, § 24 does not apply in this instance because the defect in the acknowledgement constitutes a material defect in the mortgage and is thus outside the intended scope of the statute.

STATUTORY POWER OF SALE

The first question to be answered is whether the power of sale set forth in Paragraph 20 of the mortgage incorporates, or is the functional equivalent of, the Statutory Power of Sale under G.L. c. 183, § 21, thereby allowing foreclosure without judicial authorization. Since the filing of the plaintiff's verified complaint on November 3, 2017, the Supreme Judicial Court has answered this question in a case indistinguishable in any material way from the present case. In James B. Nutter & Co. v. Estate of Murphy, 478 Mass. 664 (2018), the Supreme Judicial Court affirmed a decision of the Land Court holding that language in a mortgage identical to that in the mortgage at issue in the present action, invoking the "power of sale and any other remedies permitted by applicable law," but failing to explicitly invoke the "statutory power of sale," incorporated the statutory power of sale as defined in G. L. c. 183, § 21. The court concluded "that the only 'reasonable and practical' interpretation of the mortgage is that it incorporates the statutory power of sale." Id. at 672. Accordingly, the court rules, as in Nutter, that the power of sale expressed in paragraph 20 of the mortgage incorporates the statutory power of sale.

DEFECTS IN THE NOTARY ACKNOWLEDGEMENT

It is well-settled in Massachusetts that in order for a deed, including a mortgage deed, to be valid, and validly recorded in accordance with G. L. c. 183, §§ 3 and 29, the "… the grantor must acknowledge that he has executed the instrument as his free act and deed, and a certificate reciting that the grantor appeared before the officer making the certificate and made such acknowledgment must be attached to the instrument in order to entitle it to be recorded[.]" McOuatt v. McOuatt, 320 Mass. 410 , 413 (1946). "An acknowledgment is the formal statement of the grantor to the official authorized to take the acknowledgment that the execution of the instrument was his free act and deed. No particular words are necessary as long as they amount to an admission that he has voluntarily and freely executed the instrument." Id. at 415. The court in McOuatt concluded that "[n]o effect could be given to" the deed because no evidence existed that the grantor "acknowledged the instrument of conveyance to be his free act and deed." Id. The requirement of proper acknowledgment, including a statement that the signing of the document was the free act and deed of the grantor, applies to mortgages as well as deeds. Bank of America, N.A. v. Casey, 474 Mass. 556 , 560 (2016).

In the present action, the notary acknowledgement does not contain a statement to the effect that the Pimentels executed the instrument as their free act and deed in accordance with the holdings in McOuatt and Casey. Instead, the notary acknowledgement states: "On this 21 day of November, 2006 before me personally appeared Margaret T. Pimentel and James H. Pimentel to me known and known to me to be the individual(s) described in and who executed the foregoing instrument, and duly acknowledged to me that he/she/they executed the same." [Note 15] Drawing all inferences from the underlying facts in the light most favorable to the defendant, and therefore assuming the notary acknowledgment is in fact defective, G. L. c. 184, § 24, remedies any such defect because the mortgage containing the notary acknowledgment was recorded more than ten years prior to the commencement of this action. G. L. c. 184, § 24, provides:

When any owner of land the title to which is not registered, or of any interest in such land, signs an instrument in writing conveying or purporting to convey his land or interest, or in any manner affecting or purporting to affect his title thereto, and the instrument, whether or not entitled to record, is recorded, and indexed, in the registry of deeds for the district wherein such land is situated, and a period of ten years elapses after the instrument is accepted for record, and the instrument or the record thereof because of defect, irregularity or omission fails to comply in any respect with any requirement of law relating to seals, corporate or individual, to the validity of acknowledgment, to certificate of acknowledgment, witnesses, attestation, proof of execution, or time of execution, to recitals of consideration, residence, address, or date, to the authority of a person signing for a corporation who purports to be the president or treasurer or a principal officer of the corporation, such instrument and the record thereof shall notwithstanding any or all of such defects, irregularities and omissions, be effective for all purposes to the same extent as though the instrument and the record thereof had originally not been subject to the defect, irregularity or omission, unless within said period of ten years a proceeding is commenced on account of the defect, irregularity or omission, and notice thereof is duly recorded in said registry of deeds and indexed and noted on the margin thereof under the name of the signer of the instrument and, in the event of such proceeding, unless relief is thereby in due course granted.

The broad language of the statute covers the defect alleged by the defendant in the notary acknowledgment, requiring the grantor to acknowledge "…that he has executed the instrument as his free act and deed[.]" McOuatt v. McOuatt, 320 Mass. 410 , 413 (1946). Any such defect in the notary acknowledgement is remedied by the recording of the mortgage and the passage of at least ten years from the date of recording. Thus, "… notwithstanding any or all of such defects, irregularities and omissions, [the mortgage is] effective for all purposes to the same extent as though the instrument and the record thereof had originally not been subject to the defect, irregularity or omission…." G. L. c. 184, § 24.

CONCLUSION

For the reasons stated above, the plaintiff's motion for summary judgment is ALLOWED, and the defendant MassHealth's cross-motion for summary judgment is DENIED.

Upon the filing of an appropriate request for default and motion for default judgment with respect to defendant Margaret Pimentel, judgment will enter reforming the mortgage and dismissing the counterclaims of the defendant MassHealth, or other disposition may follow an appropriate substitution of parties.