EVELYN J. ERESIAN, TRUSTEE FOR MARION D. AHARONIAN v. JOHN PAUL SCHEFFER a/k/a PAUL SCHEFFER and MARTHA M. SCHEFFER

This action was initiated by Evelyn J. Eresian, Trustee for Marion D. Aharonian (Evelyn / plaintiff), a prior owner of the property at 62 Westwood Road, Shrewsbury, Massachusetts (locus / property). The plaintiff seeks a declaratory judgment pursuant to G.L. c. 231A, §§ 1-5 to the effect that certain documents relating to the 1990 foreclosure of a mortgage encumbering the locus, by Merrill Lynch Equity Management, Inc. (Merrill Lynch), are invalid. Merrill Lynch is a predecessor in title to the current owners of the property, John Paul and Martha Scheffer (Scheffers / defendants).

It should be noted that this is the sixth action brought by the plaintiff or members of her family in various federal courts or courts of the Commonwealth seeking to challenge the said foreclosure. Relying in large measure upon the doctrine of res judicata, [Note 1] the defendants have moved to dismiss, ostensibly pursuant to Mass. R. Civ. P. 12 (b) (6). [Note 2] As the court will grant the Motion to Dismiss on that basis, the laches argument raised by the defendants need not be addressed.

Background

At the outset, it is necessary to review the extensive history of litigation associated with both the plaintiff and the locus. This court draws from other court decisions where appropriate.

On August 4, 1969, A.J. Sluckis Realty Corporation conveyed the property to Evelyn Eresian and her husband Ara Eresian (Ara Sr.) as tenants by the entirety. [Note 3] On the same day, the Eresians gave a mortgage encumbering the locus, to the Home Federal Savings & Loan Association of Worcester. [Note 4] On February 1, 1973, the Eresians conveyed the property to Evelyn, individually. [Note 5] On January 4, 1980, Evelyn conveyed the property to “Evelyn J. Eresian, Trustee for Marion D. Aharonian.” [Note 6] Evelyn, as Trustee, gave two mortgages encumbering the property, the second and third behind a first mortgage to the Worcester County Institution for Savings, to Merrill Lynch. One mortgage was given to Merrill Lynch in 1985 [Note 7] and one in 1987. [Note 8] Francis Reed held a fourth mortgage on the property. [Note 9] Merrill Lynch foreclosed on the property both by sale and by entry on October 30, 1990, [Note 10] after (a) initial proceedings in the Land Court pursuant to the Soldiers’ and Sailors’ Civil Relief Act, (b) providing notice of the sale to the plaintiff, and (c) publishing notice in the Worcester Telegram & Gazette. [Note 11] The foreclosure sale was conducted by auction at which Ara Sr. was the high bidder. [Note 12] However, when Ara Sr. failed to complete the purchase, Merrill Lynch obtained the property as the second highest bidder. A foreclosure deed and affidavit of sale were duly recorded. [Note 13]

On the day preceding the foreclosure sale, the plaintiff’s son, Ara Eresian, Jr. (Ara Jr.) recorded a subordination agreement at the Registry purporting to show that the Merrill Lynch mortgages were subordinated to the fourth mortgage, the Reed mortgage. [Note 14] The Reed Mortgage was then purportedly assigned to Eva Marie Eresian (Eva Marie), the plaintiff’s daughter. Eva Marie sought thereafter, to foreclose upon the property. The Land Court issued a restraining order against Eva Marie to prevent her from proceeding with the foreclosure. Eva Marie subsequently conveyed the property to her daughter, Melanie Eresian (Melanie), who had not specifically been named in the Land Court order.

Ara Sr., acting under a Power of Sale given to him by Melanie purported to conduct a foreclosure sale of the property at which Melanie was the high bidder. [Note 15] This scenario unfolded notwithstanding the presence of a Worcester Constable who announced the issuance of the Land Court restraining order.

The Land Court subsequently invalidated this foreclosure. [Note 16] Merrill Lynch brought suit against multiple members of the Eresian family, including the current plaintiff, alleging that the signature on the Subordination Agreement had been forged. [Note 17] In Miscellaneous Case No. 154992 a Judge of the Land Court granted summary judgment in favor of Merrill Lynch, finding that the Subordination Agreement was a nullity inasmuch as it had been forged. [Note 18] The judgment of the Land Court was thereafter affirmed on appeal. [Note 19]

Plaintiff then contacted the Worcester County Institution for Savings (WCIS), which at that juncture, held the first mortgage. [Note 20] Plaintiff paid off the obligation, but had WCIS assign the mortgage rather than discharge it. WCIS assigned the mortgage to the plaintiff’s cousin Paul Nagel, who, in turn, assigned the mortgage to BWP, a company controlled by Ara Jr. [Note 21] BWP then leased the premises to the plaintiff to allow her to remain in possession of the property. [Note 22] Merrill Lynch brought an action challenging the assignment of the first mortgage, alleging that it was merely a ruse to avoid the foreclosure. [Note 23] The defendants in that action, which included the current plaintiff, claimed a superior right to possession of the property. [Note 24]

In Miscellaneous Case No. 169513 the Land Court Judge ruled in favor of Merrill Lynch and declared that the first mortgage had been discharged. [Note 25] In that decision, the Judge found as follows:

Based on my decision in [Miscellaneous Case No. 154992], current record title to Locus is held by Merrill, subject to the First Mortgage, held by BWP, and the Second Mortgage, held by Merrill. [Note 26]

The Judge continued:

Based on the foregoing and my observations as to the credibility of the witnesses, I find that Defendants, stage-managed by Ara Jr., acted in concert to discharge a family obligation to WCIS in a way which left the obligation alive and in their control, with the result that Merrill would hopefully be forced to discharge the debt in order to protect its (nominally) second position. [Note 27]

The Court concluded that Merrill Lynch held title to the property and that it was not subject to the first mortgage. [Note 28] Once again, the decision of the Land Court was affirmed on appeal. [Note 29]

While the two actions in the Land Court were pending, Merrill Lynch initiated a Summary Process action in the Worcester Housing Court against Evelyn, Ara Sr., and “all other occupants” of the property.” [Note 30] The Answer referenced the Land Court litigation, but was stricken as being untimely filed.

Prior to trial in the Housing Court on January 2, 1992, Evelyn Eresian filed a Motion to Dismiss. She argued, inter alia, that the plaintiff lacked standing to bring the Summary Process action and that as she had an agreement with BWP, the “first mortgagee in possession”, she had a right under G.L. c. 244, ss. 1 and 2, to remain in possession of the locus. The Court denied the Motion to Dismiss and the case proceeded to trial. [Note 31] Merrill Lynch introduced uncontroverted evidence that it had secured title to the locus by means of the foreclosure sale. The defendants refused to testify or otherwise challenge the sale. [Note 32]

The Housing Court rendered a judgment in favor of Merrill Lynch, [Note 33] which was affirmed on appeal. [Note 34] In its decision, the Appeals Court observed that “[t]he [Eresians] do not raise any issues concerning the propriety of the judge’s findings concerning the mortgages held by [Merrill Lynch], [Merrill Lynch’s] superior right of possession to the subject property, or the [Eresians’] failure to offer defenses below.” [Note 35]

Thereafter, Ara Jr. initiated an action in Superior Court seeking to set aside two discharges of mortgages that he had held on the Locus prior to the Merrill Lynch mortgages. [Note 36] He alleged that Merrill Lynch had (a) verbally agreed to pay the debt owed to him on the underlying loans and (b) to hold the discharges in escrow until the debt was paid. He alleged, however, that neither event had occurred. [Note 37] Merrill Lynch successfully moved for summary judgment on grounds that the six-year statute of limitations on contract actions under G.L. c. 260, s. 2, had passed. [Note 38]

In 1994, Merrill Lynch had conveyed the locus to Michael and Patricia Grenier. [Note 39] The Greniers, in turn, conveyed the locus to William and Margaret Welch in 2001. [Note 40] In 2004, the property was conveyed to the defendants herein, the Scheffers. [Note 41]

On July 10, 2006, the Scheffers filed for protection under Chapter 13 of Bankruptcy Act. [Note 42] That case was thereafter converted to one under Chapter 7. As it was determined that Ara Jr. lacked standing to object to the Trustee’s notice of intention to abandon the locus, Ara Jr., utilizing a corporation in which he served as president and treasurer, purchased the claim of an unsecured creditor. [Note 43] According to the Bankruptcy Trustee, there were two adversary proceedings, “which are very identical in nature: One filed by Ara Eresian…, and another one filed by his mother, Evelyn J. Eresian as trustee” for Marion D. Aharonian. Both parties objected to the Trustee’s Notice of Intent to Abandon the [Locus]. [Note 44] It was alleged that the original foreclosure was defective, that there “wasn’t a proper entry… or that it was a defective entry.” [Note 45] The Bankruptcy Court overruled these objections, stating that “there is no plausible or credible argument whatsoever that this foreclosure was defective . . . .” [Note 46]

Ara Jr. and Evelyn also filed adversary proceedings in the Bankruptcy action challenging the Scheffers’ discharges which had been granted a year earlier. [Note 47] The Bankruptcy Court dismissed both proceedings and stated that “[t]his adversary proceeding is but one in a long list of legal proceedings initiated by [Ara Jr.] in a misguided and obsessive crusade to avenge the 1990 foreclosure of property previously owned by [plaintiff] . . .” The Court went on to observe that Ara Jr. “has exhibited a pattern of behavior that any reasonable person would find shocking.” [Note 48] The judgments of the Bankruptcy Court were upheld on appeal. [Note 49]

The plaintiff, in her capacity as Trustee, has initiated the instant action in which she seeks inter alia, the following declarations: (a) that the Certificate of Entry “executed on October 30, 1990” is materially false and is consequently “null and void, ab initio,” (b) that the foreclosure sale conducted on October 30, 1990 was “null and void, ab initio,” and (c) the Affidavit of Sale with respect to the foreclosure sale is materially false and is therefore “null and void, ab initio.”

Invoking the doctrine of res judicata, the defendant now moves to dismiss the case at bar. For the reasons that follow, this court concurs that the instant matter must be dismissed.

Discussion

In reviewing a motion to dismiss, the court accepts as true the well-pleaded factual allegations in a plaintiff’s complaint, as well as any favorable inferences which reasonably may be drawn from those allegations. When evaluating a motion to dismiss, the court may consider, in addition to the complaint, exhibits and other matters fairly incorporated within it and matters susceptible to judicial notice, without converting the motion to dismiss into a motion for summary judgment. Marram v. Kobrick Offshore Fund, Inc., 442 Mass. 43 , 45 (2004). The court may take into consideration “matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint . . .” Schaer v. Brandeis Univ., 432 Mass. 474 , 477 (2000); Reliance Ins. Co. v. Boston, 71 Mass. App. Ct. 550 , 555 (2008). “Properly considered public records include the records of other courts in related proceedings, of which the judge may take judicial notice in any event.” Reliance Ins., 71 Mass. App. Ct. at 555; Brookline v. Goldstein, 388 Mass. 443 , 447 (1983). For purposes of the pending motion to dismiss, the court may properly consider the records of prior lawsuits relating to the locus in which the plaintiff (and her family members’) were parties. Such lawsuits together with the relevant appeals occurred in the Land Court, the Superior Court, the Worcester Housing Court, the Massachusetts Appeals Court, the United States Bankruptcy Court, and the United States District Court.

The plaintiff asks this court to declare that certain instruments and actions relating to the foreclosure and the subsequent sale of the property are null and void, with the apparent goal of vesting title in the plaintiff. For their part, the defendants rely upon the doctrines of res judicata and laches as bases for their Motion. [Note 50] Because this court sees fit to dismiss the action on grounds of res judicata, it need not reach the issue of laches. [Note 51]

Notwithstanding the relatively indulgent standard by which motions to dismiss are to be reviewed, it is clear that the plaintiff has no legally viable claim to challenge the propriety of the 1990 foreclosure by Merrill Lynch. She may not, therefore, successfully challenge the title currently held by the Scheffers. The plaintiff’s opportunity to raise alleged irregularities in the foreclosure process has long since passed. This action is barred by the prior litigation including that in the Worcester Housing Court which was affirmed on appeal in favor of Merrill Lynch. [Note 52] That adjudication serves to bar the plaintiff, at this very late date, from now obtaining a judgment that would in any way derogate from the defendants’ title to the locus.

Res judicata is the generic term for various doctrines by which a judgment in one action will be held to have a binding effect in another. It comprises ‘claim preclusion’ and ‘issue preclusion.’ ‘Claim preclusion’ is the modern term for the doctrines traditionally known as ‘merger’ and ‘bar’ and prohibits the maintenance of an action based on the same claim that was the subject of an earlier action between the same parties or their privies.” Heacock v. Heacock, 402 Mass. 21 , 23 (1988). Claim preclusion stands in the way of a repetitive litigation as to all matters that could have or should have been litigated in the earlier action. Charlette v. Charlette Bros. Foundry, Inc., 59 Mass. App. Ct. 34 , 44 (2003). Under the doctrine of claim preclusion, a valid, final judgment becomes binding on the parties and their privies, and bars further litigation of all matters that were or should have been adjudicated in the action. Heacock v. Heacock, 402 Mass. 21 , 23 (1988); see also Kobrin v. Board of Registration in Medicine, 444 Mass. 837 , 843 (2005). Preclusion rests on the basis that the precluded party had the incentive and opportunity to litigate the matter fully in the prior lawsuit. See Kobrin, 444 Mass. at 843.

There are three elements that need to be established if one is to invoke the principles of claim preclusion: “(1) the identity or privity of the parties to the present and prior actions, (2) identity of the cause of action, and (3) prior final judgment on the merits.” Kobrin v. Bd. of Registration in Med., 444 Mass. 837 , 843 (2005). The burden is on the moving party to establish each of the three elements. See Longval v. Comm’r of Correction, 448 Mass. 412 , 416-417 (2007). However, “[t]he plaintiff cannot avoid the force of res judicata by varying the form or phrases contained in her declaration in the earlier action in the allegations of her present bill when it is apparent from comparison of the pleadings in both that they set forth in substance and effect the same cause of action.” Franklin v. North Weymouth Cooperative Bank, 283 Mass. 275 , 280 (1933). “The effect of a former judgment, if admissible, depends not upon the form of the pleadings but upon the essence of the violation of legal right on which pleadings are founded.” Mackintosh v. Chambers, 285 Mass. 594 , 597 (1934). “The statement of a different form of liability is not a different cause of action, provided it grows out of the same transaction, act, or agreement, and seeks redress for the same wrong.” Id. at 596.

With respect to the first element, for a claim to be precluded, there must be “sufficient legal identity” between the interest of the current litigant and the prior litigant. See Rudow v. Fogel, 376 Mass. 587 , 589 (1978); Boyd v. Jamaica Plain Co-op Bank, 7 Mass. App. Ct. 153 , 154-155, 157-159 (1979). This is held to be the case where the current litigant and the prior litigant are in privity with each other.

“One comprehensive definition of privies is such persons as are privies in estate-as donor and donee, lessor and lessee and joint tenants; or privies in blood-as heir and ancestor; or privies in representation - as executor and testator or administrator and intestate; or privies in law- where the law without the privity in blood or estate casts land upon another, as by escheat.” Brooks v. Sec. of the Commonwealth, 257 Mass. 91 , 94-95 (1926). “Whether a party is in privity with another depends largely on the specific circumstances at issue; privity, in fact, has been described as any ‘relationship that justifies binding someone not a party.’” Rhode Island Hosp. Trust Nat'l Bank, 789 F.2d at 82.

There can be no question that the Scheffers are in privity with Merrill Lynch, which was the plaintiff in the Summary Process action. The Scheffers’ chain of title derives from Merrill Lynch through a chain of grantor-grantee transactions. The next question asks whether the plaintiff herein is in privity with the defendant in the Summary Process proceeding. This court is satisfied that the answer to that question is in the affirmative. The instant action has been brought by the plaintiff, Evelyn Eresian, in her capacity as Trustee for Marion D. Aharonian. The Summary Process action named Evelyn Eresian, and “all other occupants” as defendants. Evelyn Eresian, Trustee, held title to the property at the time of the foreclosure as the result of a conveyance from Evelyn Eresian, individually. This court is satisfied that the two entities are at least in privity with one another, as grantor and grantee. Given the unique circumstances pertaining herein, the nature of any privity is closer even than that encountered in a customary grantor-grantee relationship. [Note 53]

Although as a matter of law, the two entities, trustee and individual, may be separate, see McCarthy v. William H. Wood Lumber Co., 219 Mass. 566 , 570 (1914), this is a situation in which their interest in the locus is, for all essential purposes, one and the same. Where “there has been a judicial inquiry into the subject matter in which the person to be affected by the judgment has had an opportunity either personally or by representative to be heard fully,” McCarthy v. William H. Wood Lumber Co., 219 Mass. 566 , 569 (1914), res judicata may be applied. Evelyn Eresian was in attendance at the Housing Court for her motion to dismiss and for the disposition of the Summary Process action where she was afforded every opportunity to be heard in either capacity as a former owner or as occupant of the locus, i.e. in her capacity as trustee or in her individual capacity. The same opportunity has been afforded her in the instant case. The plaintiff’s reliance on the fact that the Trustee and the individual may not be legally identical persons is therefore, unavailing. It would defy both logic and the policies which underlie the doctrine of res judicata were this court to conclude given the highly unique circumstances pertaining herein, that there is a meaningful distinction between Evelyn the individual and Evelyn the trustee who presumes to challenge the foreclosure in the instant action. To accede to such an argument would be to turn a blind eye to the manipulative practices that have taken place over the twenty-two year post foreclosure period involving not only the plaintiff, but members of her family, as well. This court is satisfied that for purposes of the first element of claim preclusion, there is sufficient identity of parties under the principles of claim preclusion.

“With respect to the second element, claim preclusion will apply even though a party is prepared in a second action to present different evidence or legal theories to support his claim or seeks different remedies.” Charlette v. Charlette Bros. Foundry, Inc., 59 Mass. App. Ct. 34 , 44 (2003). “The plaintiff cannot avoid the force of res judicata by varying the form or phrases contained in her declaration in the earlier action in the allegations of her present bill when it is apparent from comparison of the pleadings in both that they set forth in substance and effect the same cause of action.” Franklin v. North Weymouth Cooperative Bank, 283 Mass. 275 , 280 (1933). “The statement of a different form of liability is not a different cause of action, provided it grows out of the same transaction, act, or agreement, and seeks redress for the same wrong.” Id. at 596.

Evelyn was entitled to raise foreclosure related issues in the Summary Process action. See Bank of New York v. Bailey, 460 Mass. 327 , 333-334 (2011). Indeed, the Housing Court was the proper forum in which to mount a challenge to the foreclosure. See id. at 333 (“‘The purpose of summary process is to enable the holder of the legal title to gain possession of premises wrongfully withheld. Right to possession must be shown and legal title may be put in issue. . . . Legal title is established in summary process by proof that the title was acquired strictly according to the power of sale provided in the mortgage; and that alone is subject to challenge.’ Wayne Inv. Corp. v. Abbott, 350 Mass. 775 , 775 (1966), citing Sheehan Constr. Co. v. Dudley, 299 Mass. 51 , 53 (1937), and New England Mut. Life Ins. Co. v. Wing, 191 Mass. 192 , 195 (1906).”). It is entirely appropriate for a defendant in a summary process action to raises as a defense any challenges to the mortgage foreclosure, and to the validity of the title which the foreclosure sale and deed yielded to the plaintiff. See Bailey, at 332. “Deferral of these questions, holding them in reserve for another day in another court, is not an acceptable tactic for the mortgagor to employ . . . . When the foreclosing lender comes into the Housing . . . Court to recover possession, and bases its right on a title derived from a mortgage foreclosure recently conducted against the mortgagor, the mortgagor, who has knowledge of legal grounds why that foreclosure did not establish title in the grantee under the foreclosure deed, is bound to raise and pursue those legal grounds then, in the summary process forum. The failure to do so will preclude later litigation on these questions, which are fundamental elements of the case for possession.” Wenzel v. Sand Canyon Corp., 841 F.Supp.2d 463, 481 (2012), quoting Solomont v. Howe Real Estate Advisors, LLC, No. 11 MISC 448092, 2011 WL 4483960, (Mass. Land Ct. Sept. 28, 2011).

Having been afforded the ample opportunity to dispute the validity of the foreclosure process and its varying elements, the plaintiff is now barred from relitigating those claims. Although the current action is brought as one for declaratory judgment, the legal challenge at the heart of the litigation concerns the propriety of the twenty-two year old foreclosure. “The effect of a former judgment, if admissible, depends not upon the form of the pleadings but upon the essence of the violation of legal right on which pleadings are founded.” Mackintosh v. Chambers, 285 Mass. 594 , 597 (1934). At their core, both the Summary Process action and the instant matter concern the same essential facts and alleged violation of legal rights.

With respect to the third res judicata element, there is no dispute that final judgment entered in the Summary Process proceeding. The Housing Court entered judgment in favor of Merrill Lynch, a judgment that was affirmed on appeal. [Note 54] This court is satisfied that the three requisite elements for the application of res judicata are present. The plaintiff is therefore precluded from proceeding further with this matter

Conclusion

Based upon the foregoing discussion, the defendants have successfully invoked the doctrine of res judicata in support of their motion to dismiss pursuant to Mass. R. Civ. P. 12 (b) (6). As the plaintiff was accorded full opportunity to litigate the issues presented herein, she is barred from litigating them before this court. Accordingly, it is hereby

ORDERED that the defendants’ Motion to Dismiss be, and hereby is, ALLOWED.

Judgment to issue accordingly.

SO ORDERED

By the Court (Grossman, J.)