TORRUELLA, Circuit Judge.
In the wake of the foreclosure crisis, litigants have increasingly sought out clarification regarding the validity of mortgage transfers precipitated by Mortgage Electronic Registration Systems, Inc. ("MERS"). The general contours of these claims are well known, and many of the facts underlying this case parallel past foreclosure litigation. A homeowner, Frank P. Butler ("Butler"), upon falling behind in his mortgage payments, saw his home foreclosed upon, twice. These foreclosure sales were not conducted by Butler's original lender, but by a financial institution that had received his mortgage via an assignment from MERS. Butler brought suit for wrongful foreclosure, slander of title, and unfair and deceptive business practices under Massachusetts law. Finding that the foreclosure sales were in accordance with all relevant statutory law, the district court dismissed for failure to state a claim. On appeal, Butler presents a multitude of theories as to why Deutsche Bank lacked legal possession over both his mortgage and accompanying note, making it an improper party to foreclose. Concluding, like the district court before us, that Butler's complaint states no legally cognizable claim for relief, we affirm.
On January 31, 2007, Butler borrowed $370,000.00 from Homecomings Financial, LLC ("Homecomings"). This loan was secured with a promissory note and mortgage on his Quincy, Massachusetts home. The mortgage document listed Homecomings as "lender" and MERS as both "mortgagee" and "nominee for [Homecomings] and [Homecomings]'s successors and assigns." The mortgage further specified that MERS held the "power of sale."
Subsequently, MERS again assigned Butler's mortgage, this time to Deutsche Bank Trust Company Americas as Trustee for RALI 2007QS3 ("Deutsche Bank").
On March 2, 2011, Butler's mortgage was assigned a third time. Deutsche Bank Trust Company Americas as Trustee assigned the mortgage to Deutsche Bank Trust Company Americas as Trustee for RALI 2007QS3. This assignment was labeled "confirmatory" and signed by Michelle Swaim for Deutsche Bank. It too was recorded in the Norfolk County Registry of Deeds.
Deutsche Bank conducted a foreclosure sale on May 25, 2011, ultimately purchasing Butler's property for $230,327.77. On November 30, 2011, Deutsche bank filed a foreclosure deed at the Norfolk County Registry of Deeds. Later determining that this first foreclosure sale may have been void for failure to provide Butler with the required fourteen days' notice, see Mass. Gen. Laws ch. 244, § 14, Deutsche Bank conducted a second foreclosure sale on March 8, 2012. Deutsche Bank was again the highest bidder, purchasing Butler's home for $200,000.00. An executed deed of foreclosure was recorded on April 18, 2012.
Butler's complaint, originally filed in state court, included four counts: (1) unfair and deceptive business practices pursuant to Mass. Gen. Laws § 93A ("Chapter 93A"); (2) wrongful foreclosure based on the May 25, 2011 foreclosure sale; (3) wrongful foreclosure based on the March 8, 2012 foreclosure sale; and (4) slander of title. In support of these claims, Butler presented a bevy of theories as to why Deutsche Bank did not validly possess either his mortgage or his mortgage note, making it unable to foreclose. Finding each of these theories lacking, the district court dismissed the suit for failure to state a claim.
On appeal, Butler argues that Deutsche Bank could not legally foreclose because: (1) MERS lacked legal authority to transfer his mortgage and, moreover, admits that it only "tracks" the sale of mortgage notes, but does not undertake assignments; (2) Stephan, a "robo-signer," could not validly serve as signatory on the assignments;
We review a district court's grant of a motion to dismiss de novo. Clark v. Boscher, 514 F.3d 107, 112 (1st Cir.2008). We take all facts pled, as well as all reasonable inferences to be drawn therefrom, in the light most favorable to the non-movant. Id. (citing Ramos-Piñero v. Puerto Rico, 453 F.3d 48, 51 (1st Cir.2006)). This deferential review, however, does not require that we accept the complaint wholesale; "bald assertions" and "unsupportable conclusions" are properly disregarded. Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir.1996). We affirm the grant of a motion to dismiss only where the facts, presumed to be true, fail to state a claim for which relief may be granted. Fed.R.Civ.P. 12(b)(6).
All four counts of Butler's complaint rest on the shared presumption that Deutsche Bank lacked the power to foreclose, either because it did not legally possess Butler's mortgage or because it had not unified that mortgage with its underlying promissory note at the time of foreclosure. In resolving this case, therefore, we begin by reviewing the common theories underlying all counts.
Butler presents several theories as to why Deutsche Bank lacked legal possession of his mortgage. We treat each theory in turn.
Butler first attempts to challenge the legality of MERS head-on, arguing that under Massachusetts law it lacks the ability to transfer his mortgage. He theorizes that MERS, as "nominee" for the noteholder, Homecomings, holds the mortgage only as equitable trustee. In consequence, being able to act solely pursuant to Homecoming's authority, MERS cannot independently undertake a mortgage transfer. That MERS is also the mortgagee of record, Butler asserts, does not expand the limited nature of its authority as "nominee." In consequence of the fact that MERS possesses no separately assignable interest, Butler theorizes, any transfer in which MERS purports to act as the assignor, or any subsequent transfer arising thereafter, is necessarily void.
Our court has previously considered, and found wanting, this precise challenge to MERS's ability to serve as assignor of a mortgage. Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282, 291-93 (1st Cir.2013) (analyzing Massachusetts mortgage law to determine that MERS, as nominee and mortgagee of record, possesses the ability to transfer its interest in a mortgage); see also Woods v. Wells Fargo Bank, N.A., 733 F.3d 349, 355 (1st Cir. 2013) ("Culhane made clear that MERS's status as an equitable trustee does not circumscribe the transferability of its legal interest."). Because Culhane has previously done the heavy lifting of engaging with the intricacies of Massachusetts mortgage law, see Culhane, 708 F.3d at 291-93, we will not repeat its detailed explication here. Suffice it to say, Massachusetts allows a mortgage to be split from its underlying note,
Butler further challenges the validity of the transfers based on a theory that MERS only "tracks" the assignment of mortgage notes, but does not undertake assignments of the accompanying mortgages. Citing to the 2011 "MERS Case Law Outline" — a document prepared by MERS to familiarize users with its legal structure — Butler asserts that MERS itself disclaims any role as an assignor. This argument both misconceives MERS's business model and misconstrues the language of the "MERS Case Law Outline."
For one, that MERS separately tracks the transfer of promissory notes does not call into question the sufficiency of written assignments duly recorded in a county registry of deeds. Woods, 733 F.3d at 355. In fact, crucial to MERS's business model is its ability to remain mortgagee of record, possessing a legal interest in a homeowner's mortgage, while the beneficial interest in that accompanying note is transferred among MERS's member institutions. See Culhane, 708 F.3d at 287 (explaining MERS's functioning). That MERS electronically records these transfers of a mortgage note does not affect, much less invalidate, its ability to separately assign the mortgage. Woods, 733 F.3d at 355 ("[T]he MERS registry electronically tracks transfers of a mortgagor's promissory note, a process which is legally distinct from the assignment and recordation of mortgage interests in a county registry of deeds."). For another, no part of the "MERS Case Law Outline" disclaims MERS's ability to make assignments. That document states only that the records kept by MERS tracking the transfer of mortgage notes are "not electronic assignments." That is quite true. No reasonable interpretation of such a proffer, however, can lead to the conclusion that MERS lacks the legal authority to separately transfer a mortgage via a written and recorded assignment, as it did here.
Butler's next allegation of invalidity stems from the conduct of Stephan, a "confirmed `Robo-Signer,'" who signed the first and second assignments in his capacity as a vice president of MERS. Stephan's signature, Butler suggests, renders the assignments insufficient to pass legal title.
Faced with a nearly identical claim, our court has unequivocally "decline[d] to speculate on the meaning ... [of] the term [`robo-signing']." See Wilson v. HSBC Mortg. Servs., Inc., 744 F.3d 1, 13-14 (1st Cir.2014) (collecting cases showing the lack of a uniform definition of "robo-signers" and their precise role in the process of bundling and securitizing home mortgages). Moreover, we have held that "the bare allegation of `robo-signing' does nothing to undermine the validity" of an assignment. Id.
In fact, Massachusetts statutory law sets forth the precise requirements for a valid mortgage assignment:
Mass. Gen. Laws ch. 183, § 54B. MERS's assignments of the Butler mortgage fully abided by these statutory requirements: Stephan, in his capacity as a vice president of MERS, signed both assignments in the presence of a notary public. Culhane, 708 F.3d at 294 (finding that an assignment adhering to the requirements of section 54B is valid); see also Wilson, 744 F.3d at 12-13.
Butler's complaint next alleges that Deutsche Bank lacked valid possession of his mortgage, as its receipt of the assignment was in violation of RALI 2007QS3's PSA. Specifically, the PSA required that: (1) any mortgage assigned to the trust undergo a series of transfers through three predetermined parties and (2) all assignments to the trust be complete by February 27, 2007. That Deutsche Bank received the mortgage without its first passing through these required intermediaries, and at a date some two years beyond the trust's closing date, Butler asserts, are violations of the trust's terms sufficient to render its possession of the mortgage void.
The contours of this argument have proved a moving target throughout this litigation, as Butler initially appeared to assent to the application of Massachusetts law but now, on appeal, argues that New York law controls. Given this shifting focus, we pause briefly trace the claim's evolution.
In support of its motion to dismiss, Deutsche Bank argued that, under Massachusetts
In his opposition to this motion to dismiss, Butler was silent on the issue of New York law and, indeed, failed to claim — under any governing law — that such assignments would be void and not voidable. Rather, arguing that "in Massachusetts foreclosure operates as a `creature of contract,'" he claimed to derive standing to challenge Deutsche Bank's possession on the grounds that only Homecomings, not Deutsche Bank, was party to his original contract.
Applying Massachusetts law, the district court dismissed this claim, reasoning that a homeowner lacks standing to challenge a mortgage assignment that is voidable, but not void. Although that decision predated Culhane, the court's conclusion was in line with our later holding therein: an assignment that is voidable, but not void, may not be challenged by a homeowner that is not a direct party to, or beneficiary of, the transfer. Culhane, 708 F.3d at 291 ("[A] mortgagor does not have standing to challenge shortcomings in an assignment that render it merely voidable at the election of one party but otherwise effective to pass legal title."). Thus, the district court reasoned that a failure to abide by the PSA, while making the transfer of Butler's mortgage voidable at the behest of the trust beneficiaries, was not the sort of shortcoming able to create judicial standing for Butler to challenge Deutsche Bank's possession.
In his opening appellate brief, Butler again argued that Deutsche Bank's failure to prove that his mortgage transferred through three intermediary parties — those named in the trust's governing terms — and was received by Deutsche Bank by the appropriate closing date, would "result[] in a failure of the trust's interest in the Butler mortgage and note." Here, for the first time, Butler suggested that New York law generally governs the transfer of assets into a New York business trust. He continued on to say, however, that "as an assignment of a mortgage is a transfer of an interest in land in the Commonwealth, with regards to the trust's specific claim of the dominion and control over the title to the Butler real property, Massachusetts law would need to be referenced."
It is only in his reply brief that Butler clearly sets forth his current claim. Therein, Butler asserts that New York Estates, Powers and Trust Law makes clear that "every ... act of the trustee in contravention of the trust, except as authorized by this article and by any other provision of law, is void." N.Y. Est. Powers & Trusts Law § 7-2.4 (emphasis added). In support of this claim, he cites Wells Fargo Bank, N.A. v. Erobobo, No. 31648/2009, 2013 WL 1831799 (N.Y.Sup.Ct. 2013) (unpublished), which ruled that contravention of a trust's PSA rendered a mortgage assignment void. Id. at *8-9. While noting that a number of courts have disclaimed the reasoning of Erobobo, on the grounds that New York courts commonly allow for the ratification of ultra vires acts by trustees, Butler asserts that these cases erroneously interpret New York law. Moreover, although Butler's reply brief discusses the content and effect of New York law, it wholly neglects to reference to the predicate question of Massachusetts
Deutsche Bank, at oral arguments and through supplemental briefing, argues that Butler has waived the ability to claim that New York law applies, having failed to raise the issue before the district court and bringing it, squarely, only in his reply brief.
On appeal, absent extraordinary circumstances counseling for exception, we routinely deem waived arguments not timely presented before the district court. Rocafort v. IBM Corp., 334 F.3d 115, 121 (1st Cir.2003). This doctrine of waiver applies with equal force to claims seeking the application of a foreign state's law. See Ortiz v. Gaston Cnty. Dyeing Mach. Co., 277 F.3d 594, 597 (1st Cir.2002) (waiving a choice-of-law argument brought first during post-judgment motions); Cheever v. Graves, 32 Mass.App.Ct. 601, 610, 592 N.E.2d 758, 764 (1992)(refusing to consider a choice-of-law argument where "there is nothing in the record before us to indicate that the defendants requested that the judge take judicial notice of the law of Connecticut or ... called the judge's attention to this statute"); cf. Levin v. Dalva Bros., 459 F.3d 68, 72 (1st Cir.2006) (allowing choice-of-law claim that was raised for the first time at trial, but prior to "the court ... issu[ing] any ruling on the issue"); Conn. Nat'l Bank of Hartford v. Kommit, 31 Mass.App.Ct. 348, 351 n. 3, 577 N.E.2d 639, 641 n. 3 (1991) (allowing a party to assert the applicability of Connecticut law for the first time on appeal where "the broader issue of choice-of-law was squarely raised below").
Here, Butler made no mention of the applicability of New York state law before the district court. In fact, the argument Butler presented in his memorandum in opposition to the motion to dismiss did not focus on the issue of void versus voidable assignments at all, and in defense to Deutsche Bank's claims he argued only that its memorandum in support of the motion to dismiss erroneously interpreted Massachusetts law. This shortcoming was further compounded on appeal, where Butler's initial briefing exhibited a marked lack of coherence, appearing to reference New York law only to then disclaim its application on the question of Deutsche Bank's "control over the title to the Butler real property." In sum, the unfocused nature of this brief failed to squarely call our attention to the claim he now relies on.
The effect of these various insufficiencies is clear. To reach Butler's claim would require our court to consider an issue not raised before the district court, presented squarely only in a reply brief, and — even then — missing a discussion of an elemental aspect of the claim. Such an untimely and incomplete presentation of arguments deprives this court of the beneficial insights of the district court and, perhaps more critically, deprives the appellee of a fair opportunity to respond, leaving our court with "one side of a two-sided story."
Under Massachusetts law, it is clear that claims alleging disregard of a trust's PSA are considered voidable, not void. See Woods, 733 F.3d at 354 ("[C]laims that merely assert procedural infirmities in the assignment of a mortgage, such as a failure to abide by the terms of a governing trust agreement, are barred for lack of standing."); Wilson, 744 F.3d at 10 ("[W]hen a corporate officer acts beyond the scope of his authority, his acts in excess of [that] authority, although voidable by the corporation, legally could be ratified and adopted by it.") (alterations and quotation marks omitted) (quoting Comm'r of Banks v. Tremont Trust Co., 259 Mass. 162, 179-80, 156 N.E. 7, 14-15 (1927)); cf. Culhane, 708 F.3d at 291 (allowing for standing where claims are predicated on the theory that "the assignor had nothing to assign or had no authority to make an assignment to a particular assignee"). Thus, having only presented facts sufficient to show the assignment was voidable under Massachusetts law, Butler lacks standing to challenge Deutsche Bank's possession of the mortgage on this ground. Culhane, 708 F.3d at 291. Absent such standing, this theory as to the invalidity of Deutsche Bank's possession cannot form the basis for relief.
Butler additionally predicates his complaint on the theory that Deutsche Bank
Butler is correct that Eaton established that, to properly foreclose on real property in Massachusetts, a party must possess both the mortgage and underlying note. Id. at 1133. Yet, recognizing that this holding significantly recast Massachusetts law, which had long accepted the ability of a mortgage holder to foreclose absent possession of the note, the Massachusetts Supreme Judicial Court ("SJC") applied its ruling prospectively. Id. Thus, for all foreclosure sales in which notice of the right to foreclose is given after June 22, 2012 — the date of Eaton's publication — reunification of the mortgage and note is required. The requirement of reunification was also applied retroactively to Eaton herself, but for all other foreclosure sales predating June 22, 2012, possession of the note was not required. Id.
Notice of foreclosure in this case was given years before Eaton's publication, and Butler does not claim that Eaton expressly binds his case. Rather, he relies on subsequent decisions by the Massachusetts Appeals Court, which applied Eaton retroactively to litigants who "advanced the same arguments to [the appellate court] at the same time those arguments were being considered by the Supreme Judicial Court" in Eaton. HSBC Bank USA, N.A. v. Norris, No. 11-P-1916, 83 Mass.App.Ct. 1115, 2013 WL 708944, at *2 (Mass.App.Ct. Feb. 28, 2013) ("For the same reason that the Supreme Judicial Court applied its ruling retroactively to Eaton [her]self, we apply it to Norris."); see also Lyons v. Mortg. Elec. Registration Sys., Inc., No. 11-P-650, 2013 WL 2420705, at *1 (Mass.App.Ct. June 5, 2013) (same). Thus, because Butler's claim was in litigation at the time Eaton was resolved, he theorizes that the rule requiring reunification of note and mortgage applies to Deutsche Bank's foreclosure.
A subsequent SJC case, Galiastro v. Mortg. Elec. Registration Sys., Inc., 467 Mass. 160, 4 N.E.3d 270 (2014), has clarified the parameters of Eaton's application, and its holding guides us here. In Galiastro, the SJC answered, affirmatively, the question of whether Eaton's retroactive effect extended to other individuals with cases on appeal at the same time as Eaton. Id. at 277 (applying Eaton's holding "to cases that were pending on appeal in the Appeals Court when the rescript in Eaton issued").
Turning to the instant case, it is clear that Butler's claims fall outside even
In short, we have now determined that Butler's complaint alleged no facts sufficient to suggest Deutsche Bank lacked a legally valid interest in his mortgage — that is, an interest adequate for the commencement of foreclosure proceedings. Still, Butler asserts one final theory specific to the first foreclosure sale. Pointing to a statement in Deutsche Bank's memorandum in support of its motion to dismiss, he alleges that there was a judicial admission as to the invalidity of the first foreclosure sale. In explaining why a second foreclosure sale was conducted, Deutsche Bank stated that "the [first] foreclosure sale may have been void because Butler may not have received the fourteen (14) days' notice of sale required." Butler reads this statement to be an admission of the sale's invalidity, necessarily making his wrongful foreclosure claim sufficiently plausible to survive a motion to dismiss.
It is paramount that "[t]o be binding, a judicial admission must be clear." Harrington v. City of Nashua, 610 F.3d 24, 31 (2010) (citation and internal quotation marks omitted). Thus, a statement that a foreclosure sale "may" have been void cannot be treated as an unambiguous admission of the sale's definite invalidity. At most, such a statement could be an admission that the sale was potentially in violation of Massachusetts statutory notice requirements, Mass. Gen. Laws ch. 244, § 14. Nonetheless, in light of Deutsche Bank's statement, we recognize that a claim that Butler was not provided fourteen days' notice of the impending foreclosure sale might well have been plausible, if pled in his complaint. See, e.g., Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
Unfortunately for Butler, however, that complaint is wholly silent on the issue of notice, asserting only that the first foreclosure sale was void because Deutsche Bank was not the "holder" of his mortgage, and therefore lacked the power to foreclose under Mass. Gen. Laws ch. 244, § 14. Having made no allegations of deficient notice in his complaint, Butler has failed to plead a claim on which relief might be granted. A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d 77, 82 (1st Cir.2013) ("The critical question is whether the claim ... is made plausible by the cumulative effect of the factual allegations contained in the complaint." (alterations and citation omitted)).
This insufficiency is made even more clear in Butler's memorandum in opposition to Deutsche Bank's motion to dismiss, where, far from alleging deficient notice,
In short, Butler's complaint forwards no facts sufficient to support a theory that Deutsche Bank lacked the proper authority to foreclose or that its conduct in foreclosing violated Massachusetts law. We see no grounds on which to question that Deutsche Bank validly received an assignment of Butler's mortgage. Moreover, under governing law, Deutsche Bank was not required to possess the mortgage note when it initiated foreclosure. On appeal, Butler has asserted theories not brought, or even specifically disclaimed, before the district court. Untimely notice and incomplete pleading, however, have rendered these theories inadequate. We find, therefore, that Butler has pled no wrongful foreclosure, slander of title, or Chapter 93A
In sifting through the detritus of the housing market's collapse, courts have been called upon to answer any number of disputes regarding the legal rights of homeowners and financial institutions. Recent litigation in Massachusetts state court has squared at least one more corner of these ongoing debates, and it is clear that the holding of Galiastro is fatal to Butler's claim. Finding that Deutsche Bank need not have possessed Butler's note, and having located no other colorable claim on which relief might be granted, we affirm the district court's decision to dismiss.
