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Galvin v. U.S. Bank, N.A.

United States District Court, District of Massachusetts

March 9, 2015

MARK B. GALVIN and JENNY G. GALVIN
v.
U.S. BANK NATIONAL ASSOCIATION as TRUSTEE RELATING TO CHEVY CHASE FUNDING, LLC MORTGAGE BACK CERTIFICATES SERIES 2007-1; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; CAPITAL ONE, N.A., a/k/a CAPITAL ONE BANK, f/k/a CHEVY CHASE BANK, FSB

MEMORANDUM AND ORDER ON DEFENDANTS' PARTIAL MOTION TO DISMISS

Richard G. Stearns United States District Judge.

Plaintiffs Mark and Jenny Galvin challenge the November 2014 foreclosure of property they owned at 14 Skip Jack Way, Tisbury (Vineyard Haven), Dukes County, Massachusetts. They seek a declaration that defendants U.S. Bank National Association as Trustee Relating to Chevy Chase Funding, LLC Mortgage Back Certificate Series 2007-1 (U.S. Bank Trustee), and Mortgage Electronic Registration Systems, Inc. (MERS) lacked sufficient title to force a sale (Count I). They also allege that defendants breached the terms of the mortgage contract (Count II) and its implied covenant of good faith and fair dealing (Count III); that U.S. Bank Trustee committed common-law trespass on the property (Count IV); that defendants failed to supervise actions taken by others with respect to the administration of the mortgage (Count V); that U.S. Bank Trustee engaged in unfair and deceptive business practices in violation of the Massachusetts Consumer Protection Act, ch. 93A (Count VI); and that defendants intentionally and/or negligently caused them emotional distress (Count VII). Defendants[1] move to dismiss Counts I, II, III, V, and VII (this count as to MERS only) pursuant to Fed.R.Civ.P. 12(b)(6).

BACKGROUND

In 2006, the Galvins took out a loan of $2, 385, 000 from Chevy Chase Bank and executed a mortgage on the property to MERS "solely as nominee for Lender and Lender's successors and assigns." Defs.' Ex. A – MERS Mortgage at 1. See Alt. Energy, Inc. v. St. Paul Fire and Marine Ins. Co., 267 F.3d 30, 33 (1st Cir. 2001) (In resolving a motion to dismiss, the court may properly consider "documents the authenticity of which are not disputed by the parties; [] official public records; [] documents central to plaintiffs' claim; or [] documents sufficiently referred to in the complaint."). In late 2009, plaintiffs defaulted on their loan. In March of 2011, they received a "Notice of Default and Intent to Foreclose" from Specialized Loan Servicing, LLC (SLS), the servicer on the mortgage. In July of 2012, MERS assigned the mortgage to U.S. Bank Trustee. The assignment was recorded in the Dukes County Registry of Deeds in October of 2012.[2] See Boateng v. Interamerican Univ., Inc., 210 F.3d 56, 60 (1st Cir. 2000) ("[A] court may look to matters of public record in deciding a Rule 12(b)(6) motion without converting the motion into one for summary judgment.").

In May of 2013, an "Affidavit Pursuant to M.G.L. Ch. 244, §§ 35B and 35C"[3] was recorded in the Dukes County Registry of Deeds stating that U.S. Bank Trustee was the holder of the promissory note secured by the MERS mortgage. A further "Affidavit Regarding Note Secured by Mortgage Being Foreclosed" was recorded in the Dukes County Registry of Deeds in October of 2014, indicating that U.S. Bank Trustee then held both the mortgage and the note on the Galvins' property. U.S. Bank Trustee foreclosed on the property in November of 2014.

DISCUSSION

In evaluating a motion to dismiss,

we assume the truth of all well-pleaded facts and indulge all reasonable inferences that fit the plaintiff's stated theory of liability. Rogan v. Menino, 175 F.3d 75, 77 (1st Cir.1999); Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir. 1996). We are not bound, however, to credit "bald assertions, unsupportable conclusions, and opprobrious epithets" woven into the fabric of the complaint. Chongris v. Bd. of Appeals, 811 F.2d 36, 37 (1st Cir. 1987) (citation and internal quotation marks omitted).

In re Colonial Mortg. Bankers Corp., 324 F.3d 12, 15 (1st Cir. 2003).

Count I – Declaratory Judgment of Invalid Foreclosure

Plaintiffs' first broadside is aimed principally at MERS. The Galvins argue that the July 2012 MERS assignment to U.S. Bank Trustee was void because MERS as a nominee mortgagee held no assignable interest in the underlying promissory note; moreover, that the entire transaction contravened MERS' internal rules (under these rules MERS acts as a nominee mortgagee only for members that have signed the MERS membership agreement – plaintiffs allege that neither Chevy Chase Bank nor U.S. Bank Trustee are members of MERS); and these arguments aside, defendants violated paragraphs 20 and 22 of the underlying mortgage contract.

Applying "venerable precedents, " the First Circuit has squarely deflected plaintiffs' first arrow of contention – that MERS did not possess an assignable interest in the note. See Culhane v. Aurora Loan Servs. of Nebraska, 708 F.3d 282, 293 (1st Cir. 2013).

Massachusetts law makes pellucid that the mortgage and the note are separate instruments; when held by separate parties, the mortgagee holds a bare legal interest and the noteholder enjoys the beneficial interest. See [Eaton v. Fed. Nat'l Mortg. Ass'n, 462 Mass. 569, 575-576 (2012)]. The mortgagee need not possess any scintilla of a beneficial interest in order to hold the mortgage. . . .
MERS had the authority twice over to assign the mortgage to Aurora. This authority derived both from MERS's status as equitable trustee [for the noteholder] and from the terms of the mortgage contract. . . . The mortgage papers denominated MERS as mortgagee "solely as nominee for [Preferred] and [Preferred]'s successors and assigns." Under Massachusetts law, a nominee in such a situation holds title for the owner of the beneficial interest. See Morrison v. Lennett, 415 Mass. 857, [860-861] (1993); Black's Law Dictionary 1149. MERS originally held title as nominee for Preferred; Preferred assigned its beneficial interest in the loan to Deutsche; ...

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