HENRY J. BOROFF, Bankruptcy Judge.
Before the Court are the parties' cross-motions for summary judgment on the debtor's claim that the defendant's prepetition foreclosure of her residence was void under Massachusetts law because the defendant did not provide proper notice of the foreclosure and did not hold the mortgage on the property at either the time it sent notice of the foreclosure or at the time of the foreclosure sale. Although many of the discrete arguments raised in the motions are determinable on summary judgment, for the reasons that follow, remaining issues of material fact preclude the entry of summary judgment for either party.
Most of the facts relevant to this case are not disputed.
On September 22, 2009, Harmon Law Offices, P.C. ("Harmon"), the law office retained by Wells Fargo to foreclose on the Mortgage, mailed both a Notice of Foreclosure Sale and a Notice of Intention to Foreclose Mortgage and of Deficiency After Foreclosure of Mortgage (the "Foreclosure Notices") to the Debtor by both certified mail, return receipt requested, and by first class mail. Aff. of Kristin A. Hedvig in Supp. of Wells Fargo Bank, NA's Mot. for Summ. J. 2 ¶¶ 9, 10 & Exs. A, B, Oct. 6, 2011, ECF No. 63. The certified mailings were returned to Harmon as "unclaimed," but the first class mailings were not returned as undeliverable. Id. at 2 ¶¶ 9, 10.
The Debtor says that she received none of the Foreclosure Notices until well after the foreclosure sale was concluded. She did not find the slip left by the post office indicating that a certified letter was waiting to be claimed until some weeks after the sale, as the notice had been attached to her seldom—used front door and not left in the condominium complex's common mailbox area. Pl.'s Aff. in Supp. of Cross-Mot. for Summ. J. 1-2 ¶¶ 3, 4, 6, Nov. 7, 2011, ECF No. 68. She claims not to have received the first class mailings due to an illness that prevented her from walking to the common mailbox area. Id. at 2 ¶ 7.
On October 23, 2009, Wells Fargo conducted a foreclosure sale at which the Property was sold to a third-party buyer (the "Foreclosure Sale"). Prior to the recording of the foreclosure deed, however, the Debtor filed a petition under Chapter 13 of the Bankruptcy Code.
The Debtor argues that the Foreclosure Sale should be declared void because she
In response, Wells Fargo argues that Massachusetts law requires only that advance notice of a foreclosure sale be properly mailed, and that the foreclosing entity is not required to prove actual receipt of the notice. It was the Debtor's responsibility, says Wells Fargo, to provide an address where certified mailings and other notices could be received, and her failure to do so cannot now invalidate the foreclosure.
With one notable exception discussed below, the parties are substantially in agreement as to the travel of the Mortgage through various entities from execution through foreclosure. On February 24, 1992, the Debtor granted the Mortgage to Shawmut Mortgage. Sherri E. Russell Aff. in Supp. of Wells Fargo's Mot. for Summ. J. Ex. B, Oct. 6, 2011, ECF No. 61. The Mortgage then passed to Fleet Mortgage Corp. ("Fleet Mortgage") when Fleet Mortgage merged with Shawmut Mortgage on May 31, 1996, as confirmed by an assignment of the Mortgage from "Fleet Mortgage Corp. Successor by Merger to Shawmut Mortgage Co." to "Fleet Mortgage Corp." dated May 31, 1996. Russell Aff. Exs. C, D. On June 1, 2001, the Mortgage became an asset of Washington Mutual Home Loans, Inc. ("WaMu HLI"), when Fleet Mortgage and WaMu HLI merged. Russell Aff. Ex. F.
What happened next is the subject of some dispute between the parties, although that dispute turns largely on their different legal interpretations of the events, rather than a true factual dispute. After the merger between Fleet Mortgage and WaMu HLI, Washington Mutual Bank, FA ("WaMu FA") and one of its wholly-owned subsidiaries,
The Debtor argues that Wells Fargo is not the holder of the Mortgage, because WaMu FA did not acquire the assets of the Limited Partnership, which assets included the Mortgage, and thus had no rights in the Mortgage to assign to Wells Fargo. Wells Fargo maintains that this Court need not consider the Debtor's argument, because the Debtor does not have standing to pursue it.
The Debtor first asserts that Wells Fargo mischaracterizes the nature of her injury and its causes. According to the Debtor, "[i]t is not the foreclosure per se that caused harm. . . . It is the fact that Wells Fargo lacked record title as the holder of the mortgage and thereby lacked authority to foreclose." Pl.'s Mem. in Opp'n to Def.'s Mot. for Summ. J. 5, Nov. 7, 2011, ECF No. 67. Thus, the Debtor concludes that she has standing to challenge Wells Fargo's right to foreclose. Furthermore,
Even if the Debtor were found to have standing to prosecute the declaratory judgment claim, Wells Fargo maintains that it held the Mortgage at the time it initiated foreclosure proceedings and thus the Foreclosure Sale was valid. While Wells Fargo generally asserts that WaMu FA's purchase of WaMu Securities' interest in the Limited Partnership caused the assets of the Limited Partnership (including the Mortgage) to become assets of WaMu FA, Wells Fargo does not rely on documentary evidence of these various transactions to support its contention that the Mortgage traveled from WaMu HLI to Washington Mutual (and ultimately to Wells Fargo). Instead, Wells Fargo relies on an order issued by the Land Court dated June 28, 2002, see Russell Aff. Ex. G, as establishing Washington Mutual's title to the assets of the Limited Partnership, and thus its ownership of the Mortgage at the time the Assignment to Wells Fargo was executed. In its order, the Land Court stated that:
Russell Aff. Ex. G.
The Land Court Order was issued after WaMu FA filed an Ex-Parte Subsequent Petition (the "S-Petition") in the Massachusetts Land Court on June 2, 2002. According to Wells Fargo, the S-Petition, filed pursuant to MGL ch. 185, § 114, was not limited to any specific piece of property, and Wells Fargo places emphasis on the order's reference to "all" assets of WaMu HLI, which assets would have included the Debtor's Mortgage. Additionally, Wells Fargo says that a search at the Plymouth Registry District of the Land Court shows that the Land Court Order was assigned an individual document number not associated with a particular property address, thus supporting its argument that the order is effective against all property, registered or unregistered, and including the Debtor's Property.
Wells Fargo therefore contends that the Land Court Order effectively "assigned" all of WaMu HLI's assets, including the Mortgage, to WaMu FA, even if the assets of WaMu HLI failed to otherwise become assets of WaMu FA by operation of law. According to Wells Fargo, this Court has no jurisdiction to "invalidate" the Land Court Order, because, under the Rooker-Feldman doctrine, the Court is "precluded `from exercising subject matter jurisdiction where the issues in the case are "inextricably intertwined" with questions previously adjudicated by a state court, such that a federal district [or bankruptcy] court would be in the unseemly position of reviewing a state court decision for error.'" Wells Fargo Post-Hr'g Mem. 5 (quoting
The Debtor maintains, however, that the Land Court Order is not binding on either the Debtor or this Court. The Debtor characterizes the S-Petition as an action to correct the certificate of title on a particular piece of registered land (not the Property at issue in this case). Arguing that the S-Petition was essentially an in rem proceeding, the Debtor says that the Land Court Order has no preclusive effect here.
Because Wells Fargo relies on its standing argument and its assertion that the Land Court Order precludes further litigation regarding whether the Mortgage was transferred from WaMu HLI to WaMu FA, it has not provided further documentation or legal argument to support its contention that WaMu FA's purchase of WaMu Securities' interest in the Limited Partnership transferred all the partnership assets to WaMu FA.
The Debtor argues, however, that the Mortgage, as an asset of the Limited Partnership, was never transferred to WaMu FA and instead remains an asset of the Limited Partnership.
Summary Judgment should be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a), made applicable to this proceeding by Fed. R. Bank. P. 7056. "[W]hile the absence of a genuine dispute as to a material fact is a
In Massachusetts, foreclosure of a mortgage may be undertaken without judicial authorization. Ibanez, 941 N.E.2d at 49. "With the exception of the limited judicial procedure aimed at certifying that the mortgagor is not a beneficiary of the Servicemembers Act, a mortgage holder can foreclose on a property . . . by exercise of the statutory power of sale, if such a power is granted by the mortgage itself." Id. The Mortgage here did grant that power, thus "includ[ing] by reference the power of sale set out in G.L. c. 183, § 21, and further regulated by G.L. c. 244, §§ 11-17C." Id. "Under Massachusetts General Laws chapter 183, section 21, after a mortgagor defaults in the performance of the underlying note, the mortgagee may sell the property at a public auction, conveying the property to the purchaser in fee simple." Culhane v. Aurora Loan Servs. of Neb., 826 F.Supp.2d 352, 360-61 (D.Mass. 2011) (citing Ibanez, 941 N.E.2d at 49). Because the statutory power of sale allows a mortgage holder to foreclose on property "without immediate judicial oversight," the Massachusetts Supreme Judicial Court (the "SJC") has ruled that "one who sells under a power [of sale] must follow strictly its terms. If he fails to do so there is no valid execution of the power, and the sale is wholly void." Ibanez, 941 N.E.2d at 49-50 (quoting Moore v. Dick, 187 Mass. 207, 72 N.E. 967, 968 (1905)).
A mortgage holder who forecloses by power of sale must comply with the notice requirements set forth in MGL ch. 244, § 14. "Advance notice of the foreclosure sale must be provided to the mortgagor by registered mail and other interested parties by publication in a newspaper published or generally circulating in the town where the mortgaged property lies."
The law in Massachusetts is clear; the requirement that the notice be mailed
Even if the notice of the Foreclosure Sale were proper, the Debtor also argues that the sale should be declared void, as Wells Fargo is not (and was not) the holder of the Mortgage and thus had no authority to exercise the statutory power of sale. The Debtor is correct in her general assertion that, absent Wells Fargo's status as holder of the Mortgage, the Foreclosure Sale is void; as the SJC has explained:
Ibanez, 941 N.E.2d at 50.
Despite the SJC's clear admonition that failure to hold the mortgage at the time of foreclosure renders a foreclosure sale void, Wells Fargo argues that the Debtor cannot challenge the Foreclosure Sale through her request for declaratory judgment, because the Debtor lacks standing to challenge the Assignment of the Mortgage. This argument is unpersuasive for several reasons.
First, the thrust of the Debtor's argument is not an attack on the Assignment itself, but instead a challenge to Wells Fargo's assertion that Washington Mutual held the Mortgage at the time it executed the Assignment. The Debtor's claim that Washington Mutual did not own the Mortgage at the time it purported to assign it is not a "claim[ ] that the assignment . . . is defective," but rather a claim that, as a stranger to the Mortgage, Washington Mutual could not have passed any ownership rights in the Mortgage to Wells Fargo.
The Court also finds the two cases relied on by Wells Fargo to be inapposite here. In In re Lopez, Judge Hillman discussed standing only in the context of a debtor's allegation that a bank's denial of his request for a loan modification was actionable under the Home Affordable Modification Program ("HAMP"). 446 B.R. 12, 21 (Bankr.D.Mass.2011). Noting his agreement with the "nearly unanimous" conclusion that HAMP "affords no private right of action and that borrowers lack standing as third-party beneficiaries to enforce the HAMP guidelines under a breach of contract theory," Judge Hillman ultimately concluded that the debtor had failed to adequately plead his standing under HAMP. Id. at 21-22.
In Kiah v. Aurora Loan Servs., LLC, Civil Action No. 10-40161-FDS, 2011 WL 841282 (D.Mass. March 4, 2011), the borrower filed an action seeking "a declaratory judgment that `the mortgage on record [was] legally null and void.'" Id. at *1 (emphasis supplied). Among the various allegations raised in the complaint was the borrower's assertion that the mortgage assignment was invalid because it was given for no consideration. Id. at *6. In rejecting that argument, Judge Saylor noted that the allegation was not only speculative, but that the borrower's standing to contest the assignment on the basis of lack of consideration was questionable—since it
And while recent cases have contained somewhat broader language to the effect that a borrower has no standing to challenge a mortgage assignment, as the borrower is neither a party to, nor a third-party beneficiary of, the assignment, see, e.g., Oum v. Wells Fargo, N.A., ___ F.Supp.2d ___ (D.Mass.2012); Wenzel v. Sand Canyon Corp., ___ F.Supp.2d ___ (D.Mass.2012); Peterson, 2011 WL 5075613, the Debtor is not, as previously discussed, challenging the Assignment per se. Instead, the Debtor questions only whether the assignor had any rights in the Mortgage to transfer to the assignee.
The Debtor has standing to challenge the validity of the Foreclosure Sale because she has demonstrated "a concrete and particularized injury in fact, a causal connection that permits tracing the claimed injury to the defendant's actions, and a likelihood that prevailing in the action will afford some redress for the injury." Antilles Cement Corp. v. Fortuno, 670 F.3d 310, 317 (1st Cir.2012) (quoting Weaver's Cove Energy, LLC v. R.I. Coastal Res. Mgmt. Council, 589 F.3d 458, 467 (1st Cir.2009)). The injury to the Debtor is the purported termination of her equity of redemption in the Property by a party who had no authority to foreclose that equity of redemption.
Also of paramount importance is the Debtor's status as a Chapter 13 debtor. By dint of § 1322(b)(5), Congress has promised such debtors the opportunity to propose a Chapter 13 Plan that "provide[s] for the curing of any default within a reasonable time and maintenance of payments while the case is pending," thereby allowing a debtor to "restore and maintain his currency on a longterm debt." In re Euliano, 442 B.R. 177, 186 (Bankr.D.Mass. 2010) (quoting 11 U.S.C. § 1322(b)(5); Grubbs v. Houston First Am. Sav. Ass'n, 730 F.2d 236, 245 (5th Cir.1984)).
But under § 1322(c)(1) of the Bankruptcy Code, a Chapter 13 debtor's ability to cure a default on a mortgage note through a Chapter 13 Plan is only available "until such residence is sold at a foreclosure sale that is conducted in accordance with applicable nonbankruptcy law." 11 U.S.C. § 1322(c)(1); see also In re Mellino, 333 B.R. 578, 584 (Bankr.D.Mass.2005) ("Section 1322(c)(1) of the Bankruptcy Code allows a debtor to cure his or her default under a mortgage unless the property has been sold at a foreclosure sale which was conducted in accordance with applicable state law.") (citing In re Crichlow, 322 B.R. 229, 234 (Bankr.D.Mass.2004)).
And, as previously noted, in Massachusetts, a foreclosure sale is "conducted in accordance with applicable nonbankruptcy law" only if the foreclosing party held the mortgage at the time the notice of foreclosure was sent and the foreclosure sale conducted. The Debtor's ability to cure the default and reinstate the Mortgage through a Chapter 13 plan thus turns on whether or not the Foreclosure Sale was validly conducted under Massachusetts law by an entity holding the Mortgage. For these reasons, the Court determines that the Debtor has standing to seek a ruling on the validity of the Foreclosure Sale.
Wells Fargo next argues that the substance of the underlying transactions affecting the Mortgage should not be reexamined, because the Land Court Order established WaMu FA's ownership of WaMu HLI's assets (including the Mortgage), and the Assignment therefore validly conveyed ownership to Wells Fargo prior to the Foreclosure Sale. But Wells Fargo fails to adequately articulate any legal theory supporting its contention that both the Debtor and the Court are bound by the Land Court Order. Wells Fargo refers only briefly to the Rooker-Feldman doctrine as preventing this Court from deciding questions regarding the ownership of the Mortgage, maintaining that this Court has no jurisdiction to "invalidate" the Land Court Order.
The Rooker-Feldman doctrine is not applicable here, because the Debtor was not a party to the Land Court action. See Lance v. Dennis, 546 U.S. 459, 465, 126 S.Ct. 1198, 163 L.Ed.2d 1059 (2006) (Rooker-Feldman does not apply where
As Wells Fargo itself notes, "[t]he purpose of an S-Petition, filed pursuant to G.L. c. 185, § 114, et seq., is to alter certificates of title on registered land." Wells Fargo Post-Hr'g Mem. 2 (emphasis supplied).
In sum, because the Land Court Order was issued in a case unrelated to the one before this Court, and involved neither the Debtor nor the Property at issue here, and because Wells Fargo has not articulated any other reason why the order has preclusive effect in this case, the Court concludes that the Land Court Order is insufficient to establish, for purposes of this case, that Washington Mutual held the Mortgage when it executed the Assignment to Wells Fargo.
To re-cap: the parties agree that the Mortgage was originally given to Shawmut Mortgage. Shawmut Mortgage merged with Fleet Mortgage, which in
But neither party has provided evidence demonstrating what happened to the assets of the Limited Partnership. Under Ohio law, "a partnership interest is personal property." Ohio Rev.Code § 1782.39. The assignment of a partnership interest transfers only the interest in the partnership and the right to receive distributions as a partner; it does not transfer the underlying partnership assets themselves. Ohio Rev. C. § 1782.40. Thus, WaMu FA's purchase of WaMu Securities' interest in the Limited Partnership did not necessarily transfer the assets of the Limited Partnership (which included the Mortgage) to WaMu FA.
The Debtor assumes that the Limited Partnership was merely "dissolved," and therefore would have the Court conclude that, consistent with Ohio law, the assets of the Limited Partnership remain with the Limited Partnership until otherwise distributed through the "winding up process." While the Debtor is correct that, under Ohio law, the assets of a Limited Partnership do not vest in the partners as a matter of law and must be appropriately distributed, see Ohio Rev.Code § 1782.46, it is possible that the Limited Partnership assets vested in WaMu FA pursuant to the underlying partnership agreement or as a result of distribution during the winding-up process. See id. ("Except as otherwise provided in the partnership agreement, the general partners. . . . may wind up the affairs of a limited partnership . . . [and] may do any or all of the following . . .: (3) Dispose of and convey the property of the limited partnership; . . . (5) Distribute to the partners any remaining assets of the limited partnership."). Simply put, there is insufficient evidence on the summary judgment record to conclude either that the Mortgage remains an asset of the Limited Partnership (as the Debtor argues) or became property of WaMu FA (as Wells Fargo argues). Accordingly, the Court cannot determine whether Washington Mutual owned the Mortgage at the time it executed the Assignment to Wells Fargo and both parties' motions for summary judgment must be denied.
For the foregoing reasons, the Court will deny both the Debtor's and Wells Fargo's motions for summary judgment. However, in accordance with the conclusions of law reached herein, a further evidentiary hearing is necessary only to resolve the limited issue of whether the Mortgage, as an asset of the Limited Partnership, ultimately became an asset of Washington Mutual, allowing the assignment of the Mortgage from Washington Mutual to Wells Fargo. An order in conformity with this memorandum shall issue forthwith.