Giannasca v. Deutsche Bank, N.T. Co. et. al.
Firm Petition for FAR-27062 As Filed to the Massachusetts Supreme Judicial Court
Mr. Giannasca Filed Litigation Pro Se challenging Deutsche Bank N.T. Co. & Others, where the Trial Court (Middlesex Superior Court) made finding that Mr. Giannasca elected to "Surrender" the property in a filed Chapter 7 bankruptcy, and therefore he was now precluded from challenging the attempted foreclosure action. The Trial Court also relied upon the wording of Giannasca's Mortgage terms stating that MERS could simultaneously "act" for the Lender and the Lender's successor/assigns, and due to such wording the assignment was valid due to MERS magical ability to act for "successors/assigns".
Mr. Giannasca thereafter filed his Appeal Pro Se, submitting a brief of a mere 10 pages. Thereafter Mr. Giannasca approached the Firm to merely present oral argument, to which we agreed to do so.
Despite our extensive briefing of the plethora of Issues presented in the Appeal, the Court focused on the bankruptcy issue, in which I was required to use all of the tme at oral argument to field the Panel's questions relative to the bankruptcy issue. The Appeal Court docket, and the oral argument can be found/heard here Giannasca v. Deutsche Bank, N.T. Co., 2018-P-0349 We cited case law supporting our position that the "remedy" of "surrender" is exclusively reserved for The Bankruptcy Trustee to utilize during an active Bankruptcy estate, and once the Trustee abandons the property (as occurred here), and the bankruptcy estate is closed, the surrender remedy is at an end.
On August 21, 2019, the Panel issued its Opinion. The Majority sidestepped the bankruptcy surrender issue, however it sided with the financial institution under cited case law regarding the wording in the Mortgage indicating that MERS could simultaneously act as a "nominee" for the Lender and all assigns of the Lender,
However Judge Rubin issued a strong Dissent (rarely seen in foreclosure matters) where he carefully examined the particular circumstances of the fact pattern presented and found that he knew of "no authority, that stands for the proposition that a purported mortgage holder could "act" for an open an undefined class of "note holders". and that the majority cited none, This finding by Judge Rubin clearly implicates the claimed (apparently magical) ability of MERS to act for all successor/assign notowners, as this clearly circumvents the peculiar Massachusetts centuries old real property laws. Mr. Giannasca's Mortgage terms also include a "limitations clause" at paragraph 16 which clearly identifies that the terms of the mortgage are subject to "Applicable Law", a contractually defined term at p. 2 of the mortgage at the Definitions section which include state law and all non-appealable final judicial rulings [such as Eaton v. Fed Nat'l Mortgage Ass'n, 462 Mass. 569 (SJC 2012) and U.S. Bank Nat'l Ass'n v. Ibanez, 458 Mass 637 (SJC 2011) ] .
Additionally, there has been no judicial ruling that has examined MERS claimed role as a "nominee". Indeed, the SJC has twice opined its uncertainty to the use of this term in the "mortgage context",
see Eaton at n. 29
[Note 29] As noted at the outset of this opinion, the mortgage identifies MERS as mortgagee, but one that acts as the "nominee" of the lender. It is not clear what "nominee" means in this context, but the use of the word may have some bearing on the agency question. We express no opinion whether MERS or Green Tree was acting as agent of the note holder or with the note holder's authority at the time of the foreclosure sale. Eaton is entitled to pursue discovery on this issue in connection with her Superior Court action.
see also the case that we successfully argued before Massachusetts' highest Court;
Galiastro v. MERS 467 Mass. 160 (SJC 2014), at n. 19
[Note 19] MERS accepted, for purposes of the motion to dismiss, the Galiastros' allegation that it was not an authorized agent of the note holder. See note 8, supra. On appeal, MERS argues for the first time that it was an agent of the note holder and thus should prevail even if the conclusion reached in Eaton applies. As support, MERS points to a clause in the Galiastros' mortgage providing that MERS is a "nominee for Lender and Lender's successors and assigns." As was the case in Eaton, supra at 590 n.4, "[i]t is not clear what 'nominee' means in this context, but the use of the word may have some bearing on the agency question."
Also some very interesting notes from Eaton include n. 10
[Note 10] Citing In re Marron, 455 B.R. 1, 6-7 (Bankr. D. Mass. 2011), the defendants suggest that because a mortgage and note can be separated, with the mortgage held in trust for the note holder, a mortgagee with "bare legal title" should be able independently to foreclose on the mortgage property as the trustee of the note holder, and thereafter account to the note holder for the sale proceeds. The argument, however, fails to take into account the nature of the trust at issue. This trust is an equitable device that may qualify as a resulting trust, see Young v. Miller, 6 Gray 152, 154 (1856); it is not an express trust that vests specific, independent authority in the trustee to foreclose on the trust property or to take other affirmative acts. A resulting trust "is a reversionary, equitable interest implied by law in property that is held by a transferee, in whole or in part, as trustee for the transferor or the transferor's successors in interest." Restatement (Third) of Trusts § 7 (2003). The duties of a trustee of a resulting trust are limited -- he or she "is under a duty to merely transfer the trust property or the reversionary portion thereof to the reversionary beneficiary or in accordance with that beneficiary's directions. Until the property is so transferred, the title holder remains trustee with a duty to preserve the affected property and its product and to perform any other duties appropriate to the resulting-trust relationship." Id. at § 7 comment e.
and Eaton at n. 27
[Note 27] In its amicus brief, REBA asserts that the contemporary secondary mortgage market exacerbates the title problem because, as we recognized in Ibanez, 458 Mass. at 649, the secondary market operates, permissibly, so that "underlying notes will be held by one entity for the benefit of the bond holders and the mortgages held by a servicer," and if the servicer conducts the foreclosure "there will be no evidence of record that will establish that the mortgagee was also the holder of the note at the time of the foreclosure." In effect, REBA argues, because "the essence of the MERS system is that MERS does not hold the underlying notes . . . and holds the mortgages only as nominee for the holder of the note," there will effectively be a presumption that the mortgagee did not hold the note at the time of the foreclosure.
We respond to REBA's concerns infra, but it is significant that MERS's current "Rules of Membership," version 3.12, most recently revised in March, 2012 (MERS rules), appear to recognize that there needs to be a connection made between the mortgage and the underlying debt as a condition precedent to an effective foreclosure by sale. See Rule 8(1)(a) of the MERS rules (requiring member owner of note or servicer initiating foreclosure on note secured by MERS mortgage first to effectuate assignment of mortgage "to the note owner's servicer, or to such other party expressly and specifically designated by the note owner"); Rule 8(1)(e)(i) of the MERS rules (obligating member note owner or servicer "to execute the assignment of the Security Instrument from [MERS] to the note owner's servicer, or to such other party expressly and specifically designated by the note-owner . . . and promptly send the assignment of the Security Instrument . . . for recording in the applicable public land records"); Rule 8(1)(d) of the MERS rules (revoking authority of MERS certifying officers to initiate foreclosure proceedings in MERS's name on or after July 22, 2011). Finally, as we just stated, we read the relevant mortgage foreclosure statutes to authorize a party who holds the mortgage directly and who serves as the agent of the note holder to qualify as the "mortgagee" entitled to foreclose under the power of sale.
Judge Rubin's Dissent in Giannasca can be found below:
RUBIN, J., dissenting.The assignment in this case purports to be from Mortgage Electronic Registration Systems, Inc. (MERS), acting "solely as nominee for IndyMac Bank, F.S.B." But at the time of the alleged assignment, IndyMac Bank, F.S.B., had no interest in the mortgage. Indeed, it had failed and did not exist. The mortgage holder was apparently MERS, as nominee for Deutsche Bank National Trust Company (Deutsche Bank), as trustee for the IndyMac INDX Mortgage Loan Trust 2005-AR33, Mortgage Pass-Through Certificates, Series 2005-AR33, under the pooling and servicing agreement dated December 1, 2005.1
It is black letter law in this Commonwealth that one who holds an interest in property in one capacity may convey it only when acting in that capacity. See, e.g., Bongaards v. Millen, 440 Mass. 10, 14 (2003) ("D'Amore held the property as trustee for the beneficiaries of the trust, and she lacked power to convey the property in her individual capacity"). "Like a sale of land itself, the assignment of a mortgage is a conveyance of an interest in land that requires a writing signed by the
FN1 I am assuming here that the majority is correct that the note was transferred as the majority describes to Deutsche Bank. There may be a dispute as to this fact; Giannasca appears to assert that ownership of the note actually passed to IndyMac Bank, F.S.B.'s, successor, OneWest Bank, F.S.B., because it was one of IndyMac Bank, F.S.B's assets when it failed, was taken into receivership by the Federal Deposit Insurance Corporation, and its assets sold to OneWest Bank, F.S.B. The issue, however, is immaterial for present purposes because, whoever held the note, it was not the defunct entity, IndyMac Bank, F.S.B.
grantor." U.S. Bank Nat'l Ass'n v. Ibanez, 458 Mass. 637, 649 (2011). The grantor, MERS, solely as nominee for IndyMac Bank, F.S.B., did not hold the mortgage, that is, legal title to the property. See id. ("Where, as here, mortgage loans are pooled together in a trust and converted into mortgage-backed securities, the underlying promissory notes serve as financial instruments generating a potential income stream for investors, but the mortgages securing these notes are still legal title to someone's home or farm and must be treated as such"). "Where, as here, the grantor has nothing to convey, . . . [t]he purported conveyance is a nullity, notwithstanding the parties' intent." Bongaards, supra at 15.
"[N]owhere on the face of the instrument is there any indication or evidence that [the signatory] was, or in any manner purported to be, an officer or other authorized agent of" the owner of the interest in the mortgage, MERS as nominee for Deutsche Bank. Sullivan v. Kondaur Capital Corp., 85 Mass. App. Ct. 202, 213 (2014).2 It therefore was void, and Giannasca has
FN2 The majority suggests that this flaw could have been addressed by stating that MERS acted "solely as nominee for IndyMac Bank F.S.B. and its successors and assigns," rather than as nominee for Deutsch Bank. Ante at . Because the assignment did not say that, I need not determine whether the majority is correct. I note, however, that I am aware of no authority, and the majority cites none, answering the question whether an assignment like that purporting to be by a nominee acting on behalf of some nonspecific open and indefinite class,
standing to challenge it. As the majority notes, "Whether a mortgage assignment in Massachusetts is valid or void is determined by statute. See G. L. c. 183, § 54B. See also Bank of N.Y. Mellon Corp. v. Wain, 85 Mass. App. Ct. 498, 503 (2014)." Ante at . That statute provides, in relevant part, that an assignment "by a person purporting to hold the position of president, vice president, treasurer, clerk, secretary, cashier, loan representative, principal, investment, mortgage or other officer, agent, asset manager, or other similar office or position, including assistant to any such office or position, of the entity holding such mortgage, or otherwise purporting to be an authorized signatory for such entity, or acting under such power of attorney on behalf of such entity, acting in its own capacity or as a general partner or co-venturer of the entity holding such mortgage, shall be binding upon such entity and shall be entitled to be recorded, and no vote of the entity affirming such authority shall be required to permit recording" (emphasis added). G. L. c. 183, § 54B.
FN2 Cont - Indeed, the majority recognizes that an assignment "is effective to pass legal title and 'cannot be shown to be void'" when "the assignment is (1) made by the mortgage holder or its representative, (2) executed before a notary public, and (3)
rather than on behalf of the actual note holder, would suffice to identify the capacity in which the assignor was acting.
Indeed, the majority recognizes that an assignment "is effective to pass legal title and 'cannot be shown to be void'" when "the assignment is (1) made by the mortgage holder or its representative, (2) executed before a notary public, and (3) signed by an authorized employee of the mortgage holder." Ante at , quoting Wain, 85 Mass. App. Ct. at 503. Here, the assignment was not made by the mortgage holder.
I therefore must dissent from the majority holding that this assignment was not void. Perhaps the signature on behalf of MERS in the incorrect capacity is the result of nothing more than the sloppy work of the party purporting to hold the mortgage. See Sullivan, 85 Mass. App. Ct. at 213, quoting Ibanez, 458 Mass. at 655 (Cordy, J., concurring) ("what is surprising about these cases is . . . the utter carelessness with which the [foreclosing lenders] documented the titles to their assets"). But the majority's decision upsets settled law: "Massachusetts is a title theory state," Faneuil Investors Group, Ltd. Partnership v. Selectmen of Dennis, 458 Mass. 1, 6 (2010), and today's decision may call into question the title to many pieces of property, those in whose chain of title an assignment or other conveyance was made in the wrong capacity –- say individually instead of as trustee -– whose subsequent purchasers have relied on the status of such assignments and conveyances as a nullity. So although today's decision may give the impression of cleaning up a technical flaw, i.e., a minor misstep in the scheme of the multitude of mortgage foreclosures precipitated by the financial crisis of 2007 and 2008, I fear that, compared with requiring a new, proper assignment, today's decision may create an enormous amount of mischief. With respect, I therefore dissent.
Thereafter, Mr.. Giannasca approached us to draft and file the Petition for Further Appellate Review [see PDF above], which we agreed to do so due to the importance of the Dissent issued by Judge Rubin.
We will update this Blog post as necessary