The U.S. Court of Appeals for the First Circuit recently confirmed that language stating the mortgagee is a nominee for "Lender and Lender's successors and assigns" suffices to make the mortgagee the mortgage holder. Additionally, the Court confirmed that an assignment made in contravention of such a trust agreement is at most voidable at the option of the parties to the trust agreement, not void as a matter of law.
The Court also held that the lawsuit itself cannot serve to meet the requirement for a pre-suit demand letter under Mass. Gen. Laws ch. 93A §9(3).
A copy of the opinion is available at: Link to Opinion
In 2004, the borrower executed a promissory note to the lender and granted a mortgage in the property to Mortgage Electronic Registration Systems, Inc. ("MERS") as the "nominee" for the originating lender and its successors and assigns. In 2008, MERS assigned the mortgage to a different entity. A second assignment was recorded to the same assignee in 2011.
In 2012, MERS published a confirmatory assignment for the 2008 assignment, and stated the secondary assignment was a nullity as it did not have the rights to assign the mortgage at that time. In 2013, the servicer of the loan recorded an affidavit stating it held the note secured by the mortgage.
In 2015, the assignee notified the borrower of its intent to foreclose on the property under Massachusetts law.
The borrower filed this action, claiming the assignee was not the proper party to bring the statutory foreclosure, and seeking damages for slander of title based on the same allegation. The borrower also sued the servicer for damages under Massachusetts General Laws Chapter 93A, the Massachusetts catch-all consumer protection statute.
The defendants moved for judgment on the pleadings, which was granted. The borrower appealed.
On appeal, the borrower argued that the assignee was not the holder of the mortgage when it attempted to exercise its statutory power of sale and thus had no power to exercise, because the assignment from MERS to the assignee was void.
The First Circuit disagreed, ruling that language stating MERS is a nominee for "Lender and Lender's successors and assigns does suffice to make the mortgagee the mortgage holder." Culhane v. Aurora Loan Services of Nebraska, 708 F.3d 282 (1st Cir. 2013). The borrower's mortgage contained that same language.
The borrower also argued that the assignment to the assignee was in violation of a trust agreement between the assignee and investors of the loan. The First Circuit referenced its holding in Butler v. Deutsche Bank Trust Co. Americas, 748 F.3d 28, 37 (1st Cir. 2014), that an assignment made in contravention of such a trust agreement is at most voidable at the option of the parties to the trust agreement, not void as a matter of law.
The borrower further argued that the assignment was void because MERS itself stated that it lacked standing to assign the mortgage in the 2012 confirmatory assignment. However, the Court noted that the confirmatory assignment specifically stated that the 2011 assignment was void because MERS lacked the authority to assign. The Court found this argument hardly casted doubt on the 2008 assignment.
The borrower separately argued that the notice of foreclosure sale failed to refer to intermediate transfers, in supposed violation of Mass. Gen. Laws ch. 244 § 14.
As you may recall, Mass. Gen. Laws ch. 244 § 14 states that "in the event a mortgagee holds a mortgage pursuant to an assignment, no notice under this section shall be valid unless (i) at the time such notice is mailed, an assignment, or a chain of assignments, evidencing the assignment of the mortgage to the foreclosing mortgagee has been duly recorded in the registry of deeds for the county or district where the land lies and (ii) the recording information for all recorded assignments is referenced in the notice of sale required in this section."
The borrower argued that MERS never properly held the mortgage, and that the assignee had to set forth a chain of title that ran from the lender, to the various parties supposedly involved in the "intermediate transfers" of the mortgage to the final assignee.
The First Circuit again disagreed, holding that MERS was the record holder of the mortgage, as the borrower granted a mortgage to it, as nominee for the lender, in 2004. The Court noted there were no allegations that MERS ever assigned the mortgage back to the lender or to any other entity prior to the 2008 assignment to the assignee. Thus, the Court also found this argument deficient.
The Court also held that the foreclosure notice published by the assignee complied with § 14. The notice referenced the 2008 assignment from the record holder, the mortgagee, to the assignee. It referenced "an assignment of the mortgage to the foreclosing mortgagee" that "has been duly recorded in the registry of deeds for the county or district where the land lies" and for which "the recording information . . . [was] referenced in the notice of sale required in this section." Mass. Gen. Laws ch. 244 §14; U.S. Bank Nat'l Ass'n v. Ibanez, 941 N.E.2d 40, 53 (Mass. 2011) ("A foreclosing entity may provide a complete chain of assignments linking it to the record holder of the mortgage, or a single assignment from the record holder of the mortgage.").
In the borrower's allegations against the servicer, she sought damages under Massachusetts General Laws Chapter 93A.
As you may recall, Chapter 93A prohibits "unfair or deceptive acts or practices in the conduct of any trade or commerce." Mass. Gen. Laws ch. 93A § 2(a). The statute also requires that, thirty days before filing a claim under Chapter 93A, a claimant must, as a general matter, send a "written demand for relief" to the defendant, outlining the unfair or deceptive act or practice and the injury suffered. Id. § 9(3).
The First Circuit held that the lawsuit itself could not serve as the require pre-suit demand letter.
On appeal, the borrower argued that she did not need to comply with the demand letter requirement. She asserted the exception that "[t]he demand requirements of this paragraph shall not apply if . . . the prospective respondent does not maintain a place of business or does not keep assets within the [C]ommonwealth" applied.
The borrower did not argue this exception in the lower court, and thus the Court found the argument waived.
Accordingly, the First Circuit affirmed the dismissal of the borrower's claims.
Ralph T. Wutscher
Maurice Wutscher LLP
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