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Bank of America, N.A. v. Barnes Hill LLC

United States District Court, D. Massachusetts

May 13, 2019

BANK OF AMERICA, N.A., Plaintiff,


          Denise J. Casper United States District Judge

         I. Introduction

         Plaintiff Bank of America, N.A. (“BANA”) has filed this lawsuit against Defendants Alan J. Bankart and Diane K. Bankart (the “Bankarts”) and their company, Barnes Hill, LLC (“Barnes”) (collectively, the “Bankart Defendants”), in connection with BANA's interest in a line of credit agreement entered in 2000 and secured by a mortgage on the Bankarts' property. D. 50. BANA also seeks a declaration that, among other things, BANA's mortgage takes priority over any interest that JPMorgan Chase Bank, N.A. (“Chase”) may have arising from the later 2006 refinancing agreement with the Bankarts. Id. Chase and the Bankart Defendants, in turn, filed counterclaims against BANA and crossclaims against one another. D. 52; D. 67; D. 68. BANA has moved for partial summary judgment on Chase's counterclaims, D. 134, and BANA's claims and counterclaim against the Bankart Defendants, D. 39; D. 133.[1] The Bankart Defendants filed a motion for summary judgment with respect to their counterclaims against BANA. D. 139. Finally, Chase has moved for summary judgment on its counterclaims and an affirmative defense against BANA. D. 135. For the reasons stated below, the Court DENIES BANA's motion for summary judgment against Chase, D. 134, and ALLOWS IN PART and DENIES IN PART as moot Chase's motion for summary judgment against BANA, D. 135. The Court DENIES the Bankart Defendants' motion, D. 139, and ALLOWS BANA's motions against the Bankart Defendants, D. 39; D. 133.

         II. Standard of Review

         The Court grants summary judgment where there is no genuine dispute as to any material fact and the undisputed facts demonstrate that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). “A fact is material if it carries with it the potential to affect the outcome of the suit under the applicable law.” Santiago-Ramos v. Centennial P.R. Wireless Corp., 217 F.3d 46, 52 (1st Cir. 2000) (quoting Sánchez v. Alvarado, 101 F.3d 223, 227 (1st Cir. 1996)). The movant “bears the burden of demonstrating the absence of a genuine issue of material fact.” Carmona v. Toledo, 215 F.3d 124, 132 (1st Cir. 2000); see Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the movant meets its burden, the non-moving party may not rest merely on the allegations or denials in her pleadings, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986), but “must, with respect to each issue on which she would bear the burden of proof at trial, demonstrate that a trier of fact could reasonably resolve that issue in her favor, ” Borges ex rel. S.M.B.W. v. Serrano-Isern, 605 F.3d 1, 5 (1st Cir. 2010). “As a general rule, that requires the production of evidence that is ‘significant[ly] probative.'” Id. (alteration in original) (quoting Anderson, 477 U.S. at 249). The Court “view[s] the record in the light most favorable to the nonmovant, drawing reasonable inferences in his favor.” Noonan v. Staples, Inc., 556 F.3d 20, 25 (1st Cir. 2009). “When deciding cross-motions for summary judgment, the court must consider each motion separately, drawing inferences against each movant in turn.” Reich v. John Alden Life Ins. Co., 126 F.3d 1, 6 (1st Cir. 1997).

         III. Factual Background

         These relevant facts are drawn from the statements of material fact and supporting documents and are undisputed unless noted otherwise. On November 7, 1997, the Bankarts purchased a property on Weetamo Road, Nantucket, Massachusetts (the “Property”). D. 140 ¶ 1; D. 139-1; D. 145 ¶ 1. In May 2000, the Bankarts transferred the Property by quitclaim deed to Defendant Barnes, D. 140 ¶ 2; D. 139-2; D. 145 ¶ 2, a company owned by the Bankarts, D. 140 ¶ 4; D. 139-3 at 10-11; D. 145 ¶ 4. Shortly thereafter, the Bankarts executed an agreement with Fleet Bank in which they received a $4 million line of credit (the “Fleet Line Agreement”). D. 40 at 2; D. 40-1 at 6-8; see D. 152 ¶ 4 (acknowledging that the Bankarts received a “four million dollar credit facility” from Fleet Bank). Prior to the institution of this litigation, BANA was unable to locate the loan origination file or the original Fleet Line Agreement. D. 40 at 4; D. 40-1 at 3. On August 8, 2018, however, BANA located the original Fleet Line Agreement and invited the parties to inspect the same. D. 147-1 at 1-7; D. 147-2 at 2, 6. According to BANA, as of the time the original Agreement was filed with the Court, the Bankarts had not responded to BANA's offer to make it available for inspection. D. 147 at 2, 6.

         The Fleet Line Agreement, including the $4 million line of credit, was secured by a mortgage on the Property. D. 40 at 2; D. 40-4 at 2 (indicating in document entitled “Fleet Bank Open-End Mortgage” that the line of credit at issue was secured by a mortgage on a property at “1 Weetamo Rd, Nantucket, MA 02554”). The Bankarts deny that the Fleet Line Agreement was secured by a mortgage on the Property, D. 152 ¶ 6, but do not otherwise dispute the authenticity of the mortgage document, D. 152 ¶ 8. The Bankarts signed the mortgage on behalf of Barnes, which is listed as the “mortgagor/borrower.” D. 40-4 at 6; see D. 40 at 2; D. 152 ¶ 7. The mortgage was recorded on April 26, 2002. D. 40-4 at 2.

         BANA asserts that it merged with Fleet Bank on or about March 8, 2004, D. 40 at 3; D. 40-5, and, thus, BANA inherited the Bankarts' mortgage (“BANA Mortgage”). Following the merger, the Bankarts issued repayments pursuant to the Fleet Line Agreement to BANA. D. 40 at 3; D. 40-2 at 38-39 (acknowledging receipt of monthly statements from Bank of America “from when [the Bankarts] first re-drew the line [of credit] down starting in 2006 through 2014”); D. 152 ¶ 11. At some point in or around 2014, the Bankarts ceased making payments to BANA. D. 40 at 3; D. 40-2 at 39; D. 152 ¶ 12. Although the Bankarts acknowledge that “they owe [BANA] approximately $4 million, ” they “dispute . . . whether their obligations to pay this debt is subject to the Fleet Line Agreement[] or whether the Fleet Line Agreement is enforceable.” D. 152 ¶ 12.

         On November 7, 2005, Alan Bankart informed Washington Mutual (“WaMu”) that he intended to refinance the Property to pay off a “home equity line” with BANA. D. 154 ¶ 10; D. 154-1 at 46; D. 157 ¶ 10. Shortly thereafter, WaMu sent the Bankarts a commitment letter indicating that WaMu had approved their application for a residential mortgage loan secured by the Property. D. 134 at 3; 134-6 at 2. The commitment letter also states that WaMu shall have “no obligation [pursuant to the pending mortgage agreement] unless all the foregoing conditions have been satisfied in full, all required documents are signed, and funds actually disbursed on or prior to December 14, 2005.” D. 134-6 at 2. One of the conditions required the Bankarts to provide evidence that their BANA debt was “paid in full at closing and security interest released.” Id. at 3. A similar commitment letter, dated January 17, 2006, reiterated this condition. D. 154 ¶ 12; D. 134-7 at 2; D. 157 ¶ 12. According to Chase, as part of the refinancing process, BANA sent WaMu a payoff statement identifying the Bankarts' outstanding balance and the Bankarts' executed loan modification agreement, which requested that BANA block and close their line of credit upon receipt of payment in full. See D. 154 ¶ 13 (stating that BANA sent WaMu a copy of the Bankarts' payoff statement); D. 154 ¶¶ 24-25 (stating that BANA sent WaMu a copy of the Bankarts' executed modification agreement, which instructs BANA to block the Bankarts' account and close it when the outstanding balance is paid to zero). BANA denies sending these documents to WaMu. D. 157 ¶¶ 13, 24-25.

         On or about January 19, 2006, Barnes and WaMu executed a promissory note in the amount of $5 million secured by a mortgage on the Property. D. 154 ¶ 16; D. 154-1 at 64-89; D. 157 ¶ 16. The Bankarts signed the promissory note on behalf of Barnes. D. 154-1 at 80. That same day WaMu generated lender closing instructions, advising the Bankarts' settlement agent, Glidden & Glidden, P.C., that it was not authorized to disburse the proceeds from the pending agreement until the Property was cleared of “all liens and encumbrances to ensure that the Lender holds a valid first lien position.” D. 134 at 5; D. 134-8 at 3. On or around January 20, 2006, the Bankarts executed a request to terminate their BANA line of credit, which had a payoff balance of over $4 million. D. 154 ¶ 18; D. 154-1 at 91-92; D. 157 ¶ 18. As part of the termination process, the Bankarts requested that BANA block and close their line of credit account from further use “immediately” and terminate the same upon receipt of payoff. D. 154 ¶ 19; D. 154-1 at 96; D. 157 ¶ 19. Chase alleges, and BANA disputes, that BANA sent the Bankart's request for termination to Chase. D. 154 ¶ 21; D. 157 ¶ 21.

         The WaMu mortgage was recorded on January 25, 2006. D. 154 ¶ 27; D. 157 ¶ 27. That same day, WaMu wired $4, 013, 649.24 to BANA. D. 154 ¶ 28; D. 157 ¶ 28. At the time, WaMu understood that its mortgage on the Property was in “first position, ” D. 134-5 at 17 (confirming that WaMu believed “the title [to the Property] cleared of all liens and encumbrances such that Washington Mutual held the first lien position . . . since [WaMu] had just paid off $4 million to Bank of America”), but took no affirmative action with BANA or the Bankarts to confirm the same, D. 144-1 at 14-15 (stating there was no indication from WaMu's files that it took steps to confirm that BANA discharged a mortgage on the Property).

         Because WaMu overpaid on the outstanding balance, BANA provided a refund of slightly more than $3000 to the Bankarts on February 2, 2006. D. 154 ¶ 33; D. 142-3 at 15; D. 157 ¶ 33. Per BANA's policy, a block should have been placed on the Bankart's' account upon receipt of the refund, which zeroed the balance of the line of credit. D. 154 ¶ 34; D. 154-1 at 58 (explaining that “the block should have been placed on [the account] at that time” but “[u]nfortunately, it wasn't done timely”); D. 157 ¶ 34. BANA, however, did not close or block the account. D. 154 ¶ 34; D. 154-1 at 58; D. 157 ¶ 34. On February 15, 2006, the Bankarts began to withdraw funds from the line of credit. D. 154 ¶ 35; D. 142-3 at 15; D. 157 ¶ 35. Because the Bankarts utilized the line of credit prior to BANA closing the account, BANA was unable to block the account and discharge the BANA Mortgage. D. 154 ¶ 38; D. 154-1 at 58; D. 157 ¶ 38. The Bankarts eventually withdrew $4 million, including the sum recently paid off by Chase, on the line of credit. D. 154 ¶ 41; D. 142-3 at 15-19; 157 ¶ 41.

         Upon the dissolution of WaMu in September 2008, the WaMu Mortgage was assigned to Chase. D. 154 ¶ 44; D. 154-1 at 107; D. 157 ¶ 45. The Bankarts ceased making payments after November 2012. D. 134 at 7; D. 134-5 at 27. Between 2012 and 2016, Chase delayed initiating foreclosure proceedings as part of its loss mitigation effort with the Bankarts. D. 134-5 at 30. On or about August 29, 2016, during initial foreclosure proceedings on the Bankarts' Property, Chase learned from BANA that BANA had not blocked the Bankarts' line of credit account following the January 2006 refinance. D. 154 ¶ 51; D. 157 ¶ 51; see D. 134-5 at 34 (explaining that Chase learned the BANA mortgage continued to ...

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