December 10, 2012

Published: December 10, 2012

By Tom Egan Massachusetts Lawyers Weekly

Where a judgment was entered for the plaintiff in a summary process action following a mortgage foreclosure, the defendants should have been granted relief from judgment given a defective assignment of the mortgage to the plaintiff.

Invalidity of assignment

“Thomas Carr and Michelle (Dourian) Carr (‘Carrs’) purchased the property located at 28 Charles Street, Natick, Massachusetts, as husband and wife (tenants by the entirety), with a home loan from East‑West Mortgage (‘East‑West’) in the amount of $150,000.00. On September 14, 2005, the Carrs executed a mortgage to secure the note. Under the mortgage, Mortgage Electronic Registration System, Inc. (‘MERS’) was the mortgagee acting as a nominee for East‑West. Thereafter, two assignments took place.

“On April 29, 2008, East‑West assigned the mortgage loan to Regions Bank d/b/a Regions Mortgage, Inc. (‘Regions Bank’). This assignment was recorded at the Middlesex County registry of deeds on May 5, 2008.

“Twelve days prior to April 29, 2008, on April 17, 2008, Regions Bank assigned its interest in the property to Chase Home Finance, LLC (‘Chase’). This assignment was also recorded at the Middlesex County registry of deeds on May 5, 2008.

“The assignment to Chase from Regions Bank, and the later assignment from East-West to Regions Bank, contained the ‘effective date’ of October 4, 2007, a date that preceded the actual transfer of legal title from Regions Bank to Chase on April 29, 2008 by several months.

“On October 28, 2010, Chase held a foreclosure sale of the property. Chase was the highest bidder at the foreclosure sale. Throughout the foreclosure process, Chase acted as the holder of the mortgage loan. Thereafter, Chase unconditionally sold the property to Federal National Mortgage Association (‘Fannie Mae’), who is the plaintiff in this eviction action. …

“In determining the request for relief under Rule 60(b)(6) in this case, the trial court was required to apply the clear standard articulated in United States Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637 (2011) that the use of effective dates will not alter the fact that the transfer of mortgage assignment is only effective on the transfer. Regions Bank cannot cure a cloud on Chase’s legal title by the use of an earlier ‘effective date.’ … The order in which the assignments were recorded does not determine when the transfer of legal title to the mortgage became effective.

“The assignment to Chase was invalid because Regions Bank did not own the mortgage at the time of that transfer. Chase did not hold the mortgage when it carried out the foreclosure sale of the Carrs’ home. Because the underlying foreclosure sale by Chase is void, Fannie Mae’s claim to superior right of possession based on that sale must fail.

“As noted, Ibanez clearly establishes that the use of effective dates will not alter the fact that the transfer of mortgage assignment is only effective on the transfer. The trial judge erred in his belief that Regions Bank had cured the cloud on Chase’s legal title by the use of an earlier ‘effective date.’ … Clearing a cloud on title by a later assignment of a mortgage runs contrary to G.L.c. 183, §21 and G.L.c. 244, §14. If the parties do not have their assignments at the time of the publication of the notices and sales of the mortgages, they lack the authority to foreclose. …

“The trial judge also erroneously concluded that the order in which the assignments were recorded would determine when the transfer of legal title to the mortgage became effective. An assignment of a mortgage is a transfer of legal title in Massachusetts only upon the transfer or execution date, not the recording date. At all times relevant in this action, recording was not a legal requirement, but merely the ‘better practice.’ … A transfer of legal title in Massachusetts becomes effective only upon the transfer or execution date. Recording does not change the requirement that the party must hold title in order to execute a proper transfer.

“As the trial judge erroneously determined that relief was not available to the defendants under Mass. R. Civ. P. 60(b) in summary process actions, the denial of the Carrs’ Rule 60(b) motion is vacated, and the matter is returned to the trial court for a hearing on the motion to vacate judgment.”

Federal National Mortgage Association v. Carr, et al. (Lawyers Weekly No. 13-068-12) (8 pages) (Coven, J.) (Appellate Division, Northern District) Appealed from a decision by Harbour, J., in Natick District Court. No brief filed for the plaintiff; Daniel B. Daley for the defendants (App. Div. No. 12-ADMS-10024) (Nov. 29, 2012).