United States District Court, D. Massachusetts
DEUTSCHE BANK NATIONAL TRUST, AS TRUSTEE FOR IXIS 2006-HE3, Plaintiff,
JAMES P. MOYNIHAN, Defendant.
MEMORANDUM AND ORDER RE: PLAINTIFF DEUTSCHE BANK
NATIONAL TRUST COMPANY'S MOTION FOR SUMMARY JUDGMENT
(DOCKET ENTRY # 63)
MARIANNE B. BOWLER UNITED STATES MAGISTRATE JUDGE.
before this court is a motion for summary judgment filed by
plaintiff Deutsche Bank National Trust Company, as Trustee
for IXIS 2006-HE3 (“DBNTC”), seeking to enforce a
lost promissory note. (Docket Entry # 63). Defendant James P.
Moynihan (“defendant”) opposes the motion.
(Docket Entry # 73). After conducting a hearing on April 25,
2017, this court took the motion under advisement. (Docket
Entry # 77).
parties' dispute arises out of a promissory note executed
by defendant and secured by a mortgage on property in Lowell,
Massachusetts, where defendant resides (“the
property”). (Docket Entry # 1). The complaint sets out
two counts against defendant and former defendant Durham
Commercial Capital Corporation (“Durham”).
(Docket Entry # 1, p. 8). Count One requests a declaratory
judgment in favor of DBNTC against defendant establishing
that DBNTC rightfully owns the note and is “entitled to
immediate physical possession of the original [of the
note].” (Docket Entry # 1, ¶ 40). Count Two
requests a declaratory judgment in favor of DBNTC against
defendant establishing that DBNTC, under section one of
Massachusetts General Laws chapter 231A and section
3-301(iii) (“section 3-301”) of Massachusetts
General Laws chapter 106 (“chapter 106”), is
entitled to enforce the terms of the note and the mortgage
granting DBNTC a security interest in the property and may
exercise the “default remedies provided for in the
mortgage including exercise of the statutory power of
sale.” (Docket Entry # 1, ¶ 45). On August 22,
2016, DBNTC filed a notice voluntarily dismissing Durham from
this action. (Docket Entry # 45).
March 2, 2017, DBNTC moved for summary judgment under
Fed.R.Civ.P. 56 (“Rule 56”) based on three
arguments. (Docket Entry ## 63, 64). DBNTC contends that it
is entitled to enforce the note under chapter 106, sections
3-301 and 3-309. (Docket Entry # 64, p. 5). DBNTC also
maintains that declaratory relief is warranted because
defendant is judicially and collaterally estopped from
challenging DBNTC's enforcement of the note. (Docket
Entry # 64, pp. 10, 13). Defendant submits that DBNTC's
motion should be denied because there is a genuine issue of
material fact as to whether DBNTC ever had possession of the
promissory note and if the note was even lost. (Docket Entry
# 73, pp. 1, 8). Defendant also counters the judicial and
collateral estoppel arguments made by DBNTC. (Docket Entry #
73, pp. 10-13).
judgment is designed to “‘pierce the boilerplate
of the pleadings and assay the parties' proof in order to
determine whether trial is actually required.'”
Tobin v. Federal Express Corp., 775 F.3d 448, 450
(1st Cir. 2014) (quoting Wynne v. Tufts University School
of Medicine, 976 F.2d 791, 794 (1st Cir. 1992)). It is
appropriate “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). It is inappropriate “if the record is
sufficiently open-ended to permit a rational factfinder to
resolve a material factual dispute in favor of either
side.” Pierce v. Cotuit Fire District, 741
F.3d 295, 301 (1st Cir. 2014); see also Ruiz-Rosa v.
Rullan, 485 F.3d 150, 155 (1st Cir. 2007) (applying same
legal standard applied by district court when reviewing
summary judgment ruling).
issues of fact are those that a factfinder could resolve in
favor of the nonmovant, while material facts are those whose
‘existence or nonexistence has the potential to change
the outcome of the suit.'” Green Mountain
Realty Corp. v. Leonard, 750 F.3d 30, 38 (1st Cir. 2014)
(quoting Tropigas de Puerto Rico, Inc. v. Certain
Underwriters at Lloyd's of London, 673 F.3d 53, 56
(1st Cir. 2011)). The evidence is viewed “in the light
most favorable to the non-moving party” and “all
reasonable inferences” are drawn in his favor.
Ahmed v. Johnson, 752 F.3d 490, 495 (1st Cir. 2014).
In reviewing a summary judgment motion, a court may examine
“all of the record materials on file, ”
Geshke v. Crocs, Inc., 740 F.3d 74, 77 (1st Cir.
2014), “including depositions, documents,
electronically stored information, affidavits or declarations
. . . or other materials.” Fed.R.Civ.P. 56(c)(1);
see Ahmed v. Johnson, 752 F.3d at 495.
“Unsupported allegations and speculation, ”
however, “do not demonstrate either entitlement to
summary judgment or the existence of a genuine issue of
material fact sufficient to defeat summary judgment.”
Rivera-Colon v. Mills, 635 F.3d 9, 12 (1st Cir.
2011); see Serra v. Quantum Servicing, Corp., 747
F.3d 37, 39-40 (1st Cir. 2014) (“allegations of a
merely speculative or conclusory nature are rightly
disregarded”). Adhering to this framework, the record
sets out the following facts.
quitclaim deed dated August 28, 2003 and recorded at the
Middlesex North Registry of Deeds, defendant acquired the
property located at 619-621 Stevens Street in Lowell,
Massachusetts. (Docket Entry # 65-2). Defendant, as borrower,
executed the promissory note dated May 1, 2006 in favor of
New Century Mortgage Corporation (“New Century”),
as lender, in the original principal amount of $360, 000.
(Docket Entry # 65-3). The note was payable “to the
order of, without recourse New Century Mortgage
Corporation.” (Docket Entry # 65-3, p.
7).Above the printed name “New Century
Mortgage Corporation” was a blank signature line.
(Docket Entry # 65-3, p. 7). Defendant was the only borrower
on the note. (Docket Entry # 65-3, p. 6). The note expressly
allows “the Lender” to transfer the note and
states that, “The Lender or anyone who takes [the note]
by transfer and who is entitled to receive payments under
[the note] is called the ‘Note Holder.'”
(Docket Entry # 65-3, p. 2).
agreed to make monthly payments of $2, 703.90 on the first
day of each month starting on June 1, 2006. (Docket Entry #
65-3, pp. 2-3). The note dictated that the monthly payments
applied to interest before principal. (Docket Entry # 65-3,
p. 2). The note further contained a flexible, index-based
interest rate that adjusted every six months after the first
day of May 2008. (Docket Entry # 65-3). The interest rate on
the principal would range between 9.013% and 10.513% at the
first adjustment date and would not drop below 9.013% nor
exceed 16.013%. (Docket Entry # 65-3, p. 4). The note also
stated that defendant would default if he failed to make the
monthly payments in full. (Docket Entry # 65-3, p. 5). As
stated in the note, the “Note Holder may enforce its
rights under this [n]ote against each [borrower] individually
or against all of [the borrowers] together.” (Docket
Entry # 65-3, p. 5). The note was “governed by federal
law and the law of the jurisdiction in which the property
encumbered by the Security Instrument . . . is located[,
]” i.e., Massachusetts. (Docket Entry # 65-3, p. 6).
1, 2006, to secure the repayment and other obligations
contained in the note, defendant granted a mortgage
encumbering the property to New Century. (Docket Entry #
65-4). Like the quitclaim deed, the mortgage is recorded at
the Middlesex North Registry of Deeds. (Docket Entry # 65-4).
The mortgage provides notice to defendant that “one or
more changes of the Loan Servicer [might occur] unrelated to
a sale of the [note]” during the life of the mortgage.
(Docket Entry # 65-4, pp. 11-12). Under the terms of the
mortgage, defendant conveyed and granted New Century and its
“successors and assigns” the “power of
sale.” (Docket Entry # 65-4, pp. 3, 13).
New Century entered into a Mortgage Loan Purchase and
Servicing Agreement (“MLPSA”) with NC Capital
Corporation (“NC Capital”) dated December 1,
1998. (Docket Entry # 65-7). The MLPSA allowed New Century to
sell NC Capital pools of mortgage loans determined by the
parties to the agreement. (Docket Entry # 65-7, p. 5). The
MLPSA also contained a mortgage loan document delivery
procedure: “[T]he Company shall . . ., at least four
(4) Business Days prior to the Closing Date, deliver and
release to the Custodian those Mortgage Loan Documents as
required by the Custodial Agreement with respect to each
Mortgage Loan . . .. The Custodian shall certify receipt of
all such Mortgage Loan Documents . . ..” (Docket Entry
# 65-7, p. 20).
2006, NC Capital entered into a Third Amended and Restated
Mortgage Loan Purchase and Warranties Agreement with IXIS
Real Estate Capital, Inc. (“IXIS”) dated April 1,
2006. (Docket Entry # 65-8). IXIS entered into an
Unaffiliated Seller's Agreement (“USA”) with
Morgan Stanley ABS Capital I Inc. (“Morgan
Stanley”) as depositor on September 1, 2006, effective
September 29, 2006. (Docket Entry # 65-9). The USA vested
ownership of each mortgage loan and each related note in
Morgan Stanley upon the sale of the mortgage loans. (Docket
Entry # 65-9, pp. 6-7). The USA also provided that:
The contents of any Mortgage File in the possession of the
Unaffiliated Seller [IXIS] at any time after such sale, and
any principal and interest due . . . and received by or on
behalf of the Unaffiliated Seller, shall be held in trust by
the Unaffiliated Seller for the benefit of the Depositor
[Morgan Stanley] . . ..
(Docket Entry # 65-9, p. 7).
Morgan Stanley entered into a Pooling and Service Agreement
(“the PSA”) on September 1, 2006 with IXIS, as
unaffiliated seller, and DBNTC, as trustee and custodian,
establishing IXIS Real Estate Capital Trust 2006-HE3
(“Trust 2006-HE3”) effective September 29, 2006.
(Docket Entry # 65-10, pp. 1, 31). The PSA also identified
Saxon Mortgage Services, Inc. (“Saxon”) as a loan
servicer. (Docket Entry # 65-10). Section 2.01(a) of the PSA
conveyed all of Morgan Stanley's rights, title, and
interest in the “Trust Fund, ” which the PSA
defines as the “Mortgage Loans” in the
“Mortgage Loan Schedule, ” to DBNTC as trustee.
(Docket Entry # 65-10, pp. 54, 73, 74). The
“Moynihan” loan on the property at “619-621
Stevens Street” was one of the loans included in the
Mortgage Loan Schedule. (Docket Entry 65-1, ¶ 11)
(Docket Entry # 65-12). As stated in the PSA, upon the sale
of the “Mortgage Loans” to DBNTC, it obtained
ownership and possession of the note or of the note held
“in trust” for the benefit of
DBNTC. (Docket Entry # 65-9, § 2.01(b).
Section 2.01(b) further states that, “In connection
with the transfer and assignment of each Mortgage Loan, the
Unaffiliated Seller has delivered or caused to be delivered
to the Custodian . . . the original Mortgage Note bearing all
intervening endorsements evidencing a complete chain of
assignment from the originator to the related Originator . .
..” (Docket Entry # 65-10, pp. 74-75). DBNTC therefore
obtained possession of the original note from Morgan Stanley
pursuant to the PSA and attached schedule, which included the
Moynihan loan. (Docket Entry # 65-1, ¶¶ 10, 11)
(Docket Entry # 65-10, pp. 54, 73, 74) (Docket Entry #
65-12). Pursuant to section 2.08(h) of the PSA, Morgan
Stanley warranted that it had good title and sole ownership
of the mortgage loans, free of any interest of any other
person. (Docket Entry # 65-10, p. 89).
to the note possession history record, DBNTC received the
collateral file containing the original promissory note on
May 12, 2006. (Docket Entry # 65-17). DBNTC therefore had
possession of the note endorsed in blank as of May 12, 2006.
(Docket Entry # 65-17). (Docket Entry # 65-1, ¶ 13). Any
discrepancy between the date DBNTC acquired possession of the
note as evidenced by the note possession history (May 12,
2006) or as evidenced by the PSA and Mortgage Loan Schedule
(September 29, 2006) does not create an issue of material
fact because under either scenario, DBNTC had possession of
the original note no later than September 29, 2006, prior to
the time of loss. (Docket Entry # 65-1, ¶¶ 10, 11)
(Docket Entry # 65-10, pp. 31, 54, 74) (Docket Entry # 65-12)
(Docket Entry # 65-17).
January 1, 2008, defendant defaulted on his monthly payments.
(Docket Entry # 24-2). By affidavit, defendant states that
after granting the mortgage to New Century in 2006, he made a
number of monthly mortgage payments to New Century
“[f]rom 2006 to 2008.” (Docket Entry # 73-4, p. 1).
On June 19, 2008, defendant filed for bankruptcy in the
United States Bankruptcy Court for the District of
Massachusetts (“the bankruptcy court”). (Docket
Entry # 65-14). In the voluntary bankruptcy petition,
defendant expressly stated that he intended to surrender the
property to the creditor, Saxon. (Docket Entry # 65-14, p.
36). On October 7, 2008, the bankruptcy court granted
defendant a chapter seven discharge from his legal obligation
to pay the property debt. (Docket Entry # 65-15).
assignment dated November 11, 2008 and effective May 7, 2008,
New Century transferred the mortgage to DBNTC, as trustee, in
care of Saxon as servicer. (Docket Entry # 1-5, p. 2). The
assignment states that, “New Century Mortgage
Corporation . . . FOR GOOD AND VALUABLE CONSIDERATION
RECEIVED, hereby grants, assigns and transfers to Deutsche
Bank National Trust Company, as Trustee for IXIS 2006-HE3 . .
. All of the right, title, and interest that said New Century
Mortgage Corporation has . . ..” (Docket Entry # 1-5,
p. 2). The assignment was recorded at the Middlesex North
Registry of Deeds. (Docket Entry # 1-5, p. 2). Sometime in
2008 after the transfer of the mortgage, defendant contacted
Saxon by telephone and spoke to an unidentified individual.
(Docket Entry # 73-4). Defendant asked the individual for a
copy of the promissory note. (Docket Entry # 73-4). The Saxon
official was unable to locate a copy and did not know who
held the note. (Docket Entry # 73-4).
April 16, 2010, Ocwen Loan Servicing, LLC
(“Ocwen”) obtained the servicing rights for the
loan from Saxon. (Docket Entry # 65-6). Ocwen's
obligations as DBNTC's servicer included:
sending statements or coupons to the borrower to facilitate
payment, collecting payments from the borrower and making
scheduled disbursements of principal and interest accounts
making disbursements from such account[s] to pay real estate
taxes and or hazard insurance premiums due in connection with
the [p]roperty and to perform other usual and customary
residential loan servicing functions.
(Docket Entry # 24, ¶ 3). In a document dated May 21,
2010, DBNTC granted a limited power of attorney (“the
LPOA”) to Ocwen. (Docket Entry # 65-13). The LPOA was
recorded at the Middlesex North Registry of Deeds. (Docket
Entry # 65-13). The LPOA authorized Ocwen to execute various
documents on behalf of DBNTC regarding foreclosure
proceedings for loans held by DBNTC. In relevant part, the
LPOA states that:
Deutsche Bank National Trust Company . . . hereby constitutes
and appoints Ocwen Loan Servicing LLC. As Servicer . . . the
Trustee's true and lawful Attorney-in-Fact, in the
Trustee's name, place and stead and for the
Trustee's benefit, in connection with all mortgage
loans serviced by the Servicer pursuant to the Agreements
solely for the purpose of performing such acts and executing
such documents in the name of the Trustee necessary
and appropriate to effectuate the following enumerated
transactions in respect of any of the mortgages or deeds of
trust . . . and promissory notes secured thereby (the
“Mortgage Notes”) for which the undersigned is
acting as Trustee for various certificate holders . . ..
(Docket Entry # 65-13, p. 2) (emphasis added). The LPOA
enumerated transactions Ocwen was allowed to carry out on
behalf of DBNTC, including, “With respect to a Mortgage
or Deed of Trust, the foreclosure, the taking of a deed in
lieu of foreclosure, or the completion of judicial or
non-judicial foreclosure or termination, cancellation or
rescission of any such foreclosure . . ..” (Docket
Entry # 65-13, p. 3).
August 16, 2010, defendant filed a complaint in the
Massachusetts Land Court Department of the Trial Court
(“the land court”) seeking a determination that
DBNTC did not hold the mortgage encumbering the property.
(Docket Entry # 1-6). During this proceeding, Ablitt
Scofield, P.C. (“Ablitt”), a law firm located in
Woburn, Massachusetts, represented DBNTC. (Docket Entry ##
about July 20, 2011, DBNTC released the collateral file
containing the note to Ocwen. (Docket Entry # 65-1, ¶
13) (Docket Entry # 65-17). On or about August 16, 2011,
Ocwen returned the file, which contained the original of the
note to DBNTC. (Docket Entry # 65-17). On October 18, 2011,
DBNTC again gave the file containing the original of the note
to Ocwen. Ocwen received the file on November 3, 2011.
(Docket Entry # 65-1, ¶ 13) (Docket Entry # 65-17)
(Docket Entry # 65-20, pp. 1-3, 13). On or about November 21,
2011, Ocwen, DBNTC's servicer, gave the original of the
note to Ablitt as an attachment to an attorney bailee letter
in order to commence and proceed with foreclosure of the
property. (Docket Entry # 65-1, ¶¶ 13, 14) (Docket
Entry ## 65-17, 65-18) (Docket Entry # 65-20, pp. 1-3,
14-15). The attorney bailee letter states that, “By
signing this letter agreement below where indicated, you
[Ablitt] confirm that you are currently holding Documents on
behalf of the Servicer [Ocwen] and the Owner [DBNTC], and
shall only act in accordance with either the Servicer's
or the Owner's instructions with regard to the
Documents.” (Docket Entry # 65-20, p. 17).
December 30, 2011, the land court entered a judgment that,
“by virtue of the assignment of the mortgage dated
November 11, 2008, . . . DBNTC is the current record holder
of the Mortgage, entitled to exercise the power of sale
contained in the Mortgage.” (Docket Entry # 1-6, p. 3).
The judgment also declared that DBNTC “may exercise the
power of sale contained in the Mortgage to foreclose it
without regard to whether or not DBNTC is the current holder
of the Note.” (Docket Entry # 1-6, p. 3).
in 2011, Ablitt began having cash-flow issues. (Docket Entry
# 73-1, p. 22). On or about November 7, 2012, Ablitt entered
into a factoring agreement entitled “Nonrecourse
Receivables Purchase Contract and Security Agreement”
(“the factoring agreement”) with a previous
lender, Durham. (Docket Entry # 73-1, pp. 22, 25). Under the
factoring agreement, Durham agreed to purchase certain
receivables of Ablitt's “in full amount of advances
. . . not exceed[ing] $1, 200, 000.” (Docket Entry #
73-1, p. 26). In the factoring agreement, Ablitt also gave
Durham a security interest in Ablitt's accounts,
“‘promissory notes, chattel paper' . . .
[and] ‘general intangibles.'” (Docket Entry #
73-1, p. 27). DBNTC alleged in its complaint that the
security interest included “custody and control over
[Ablitt]'s assets, files, records, electronically stored
data, hard drives and/or case management systems, not
otherwise identified and retrieved by [Ablitt]'s former
clients.” (Docket Entry # 1, ¶ 35). The complaint
also alleges that Durham “obtained and retained”
the note. (Docket Entry # 1, ¶ 36). Ablitt
continued to deteriorate in 2013 and early 2014. (Docket
Entry # 73-1, p. 23). As a result, Durham began to exert a
level of managerial control over Ablitt's affairs,
culminating in a firm name change to Connolly, Geaney, Ablitt
and Willard, P.C. (“CGAW”). (Docket Entry #
65-19) (Docket Entry # 73-1, p. 26). Sometime in late July or
August 2014, CGAW ceased operations. (Docket Entry # 73-1, p.
about September 3, 2014, three or more creditors of CGAW
filed on CGAW's behalf an involuntary chapter seven
bankruptcy petition in the bankruptcy court (“CGAW
bankruptcy proceeding”). (Docket Entry # 73-1, p. 5).
CGAW never returned the original of the note to DBNTC or
Ocwen. (Docket Entry # 65-17) (Docket Entry # 65-20, ¶
6). In a separate suit initiated by Ocwen against CGAW and
Durham in the United States District Court for the Southern
District of Florida, West Palm Beach Division, Durham filed a
crossclaim on September 15, 2014 against Ablitt for breach of
the factoring agreement and a counterclaim against Ocwen for
failure to pay accounts. (Docket Entry # 73-2, pp. 1-13). On
August 7, 2015, Ocwen renewed a motion for contempt against
Durham for not furnishing documents related to receivable
accounts in the CGAW bankruptcy proceeding. (Docket Entry #
73-1, pp. 2-21).
September 12, 2016, Ocwen, as servicer of DBNTC, executed a
lost note affidavit. (Docket Entry # 65-20). Therein, M.
Johnson, Ocwen's authorized signer, attests that, based
on his personal knowledge and servicing records kept in the
course of Ocwen's regularly conducted business, DBNTC had
possession of the note when the loss of possession occurred.
(Docket Entry # 65-20, ¶¶ 1-2, 5). The affidavit
further states that, despite a diligent search on April 1,
2016, “the original Note could not be located
and” DBNTC “cannot reasonably obtain possession
of the original Note.” (Docket Entry # 65-20, ¶
6). The affidavit also states that, “The original Note
has been ...