BANK NATIONAL ASSOCIATION v. MISTOVICH (2020)

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

The plaintiff, U.S. Bank National Association, filed a postforeclosure summary process action against the defendants, Gregory and Carol Mistovich. Following orders on the parties' motions to dismiss and motions for summary judgment, a final judgment entered in the plaintiff's favor and the judge denied the defendants' postjudgment motions. We affirm.

Background. In 2004 and 2005, respectively, the defendants took out a mortgage and a home equity loan with Wachovia Mortgage Corporation, which later became part of Wells Fargo Bank, N.A. (Wells Fargo). This is the latest in a series of lawsuits involving those loans. We briefly describe the history of those lawsuits.

In 2011, Wells Fargo filed a complaint in Superior Court to collect the balance due on the defendants' home equity loan. The defendants counterclaimed, alleging that Wells Fargo engaged in a variety of misconduct. The defendants' allegations were wide ranging and pertained to Wells Fargo's general lending practices as well as to Wells Fargo's specific attempts to collect on the home equity loan. A final judgment entered in Wells Fargo's favor, was subject to appellate review, and was affirmed. See Wells Fargo Bank, N.A. v. Mistovich, 85 Mass. App. Ct. 1115 (2014).

By 2012, the defendants were also in default on their mortgage. Wells Fargo thus began taking steps to foreclose on the mortgage. First, Wells Fargo filed a complaint in the Land Court to verify that the defendants were not entitled to foreclosure protections under the Federal Servicemembers Civil Relief Act (SCRA). In their answer, the defendants did not claim entitlement to the protections of SCRA. The defendants instead asserted that Wells Fargo did not hold the mortgage or that Wells Fargo otherwise lacked standing to pursue foreclosure.⁴ A Land Court judge rejected these assertions.

Wells Fargo also sent formal notice to the defendants of its intent to conduct a foreclosure sale, at which point the defendants filed a complaint against Wells Fargo in Superior Court. The defendants' complaint alleged misconduct in connection with the mortgage, including that any assignment of the mortgage to Wells Fargo was void and that Wells Fargo thus did not hold the mortgage. Citing the prior 2011 Superior Court case and the Land Court case, a Superior Court judge concluded that the defendants were barred from relitigating claims based on these allegations.⁵ The final judgment in Wells Fargo's favor was subject to appellate review and affirmed. See Mistovich v. Wells Fargo Bank, N.A., 91 Mass. App. Ct. 1105 (2017).

By 2018, the mortgage had been assigned to the plaintiff. That year, the plaintiff conducted a foreclosure sale and filed the summary process action that is the subject of this appeal. The defendants' voluminous answer included forty-two affirmative defenses and sixteen counterclaims that again alleged misconduct in connection with the mortgage. A Housing Court judge dismissed all but one of the defendants' counterclaims,⁶ and a second Housing Court judge subsequently granted summary judgment in the plaintiff's favor as to the plaintiff's summary process claim and the defendants' sole remaining counterclaim.

Discussion. 1. The alleged defect in the origination ofthe mortgage. The defendants argue that no holder of the mortgage has standing to pursue foreclosure because Wachovia Mortgage Corporation never funded the mortgage, a third party instead provided the funding, and the mortgage is therefore void. The defendants are precluded from raising this affirmative defense on the basis of res judicata.

The doctrine of res judicata is founded on the principle that the parties and the courts are “entitled to be free from attempts to relitigate the same claim” (quotation omitted). DeGiacomo v. Quincy, 476 Mass. 38, 41 (2016). Res judicata is a “generic term” that describes both claim and issue preclusion. Id. We focus on the former, which “requires three elements: (1) the identity or privity of the parties to the present and prior actions, (2) identity of the cause of action, and (3) prior final judgment on the merits” (quotation omitted). Id. Claim preclusion “prevents relitigation of all matters that were or could have been adjudicated in the action” (quotation omitted). Id.

All of the elements of claim preclusion have been met. The Land Court case and the 2012 Superior Court case established Wells Fargo's standing, as the then holder of the mortgage, to pursue foreclosure. The plaintiff is in privity with Wells Fargo through the assignment of the mortgage.⁷ See Eastman Marble Co. v. Vermont Marble Co., 236 Mass. 138, 148 (1920); Bui v. Ma, 62 Mass. App. Ct. 553, 561-562 (2004). The causes of action, all of which pertain to whether the holder of the mortgage has standing to pursue foreclosure, are also identical. See, e.g., Santos v. U.S. Bank Nat'l Ass'n, 89 Mass. App. Ct. 687, 693 (2016). While the defendants now assert a new legal theory as to why the holder of the mortgage lacks standing to pursue foreclosure, the defendants are precluded from doing so where the legal theory on which they now rely could have been raised in the prior litigation.⁸ See, e.g., id.

2. The defendants' letter of rescission. The defendants alternatively argue that the mortgage is void because the defendants rescinded the mortgage transaction ten years after the fact, by letter dated August 25, 2014, under the Truth in Lending Act (TILA). While a mortgagor's right of rescission under TILA expires three years after a mortgage transaction is consummated,⁹ the defendants contend that their letter of rescission was timely because the mortgage transaction was never consummated. The defendants rely on the same alleged defect in the origination of the mortgage -- that a third party provided the funding for the mortgage -- that we discussed above. Because the defendants are precluded on the basis of res judicata from raising defects in the origination of the mortgage, their argument regarding their letter of rescission fails.¹⁰

3. The alleged defect in the foreclosure sale.¹¹ The defendants claim that a preforeclosure certification they received from their loan servicer regarding the plaintiff's right to foreclose failed to include required information. Specifically, the defendants argue that the certification had to include the chain of assignments of both the mortgage and the mortgage note, while the certification they received contained the chain of assignments of the mortgage but only an assertion that the plaintiff held the mortgage note. The defendants rely on 209 Code Mass. Regs. § 18.21A(2)(c) (2013), which provides as follows:

“A third party loan servicer shall certify in writing the basis for asserting that the foreclosing party has the right to foreclose, including but not limited to, certification of the chain of title and ownership of the note and mortgage from the date of the recording of the mortgage being foreclosed upon. The third party loan servicer ․ shall also include a copy of the note with all required endorsements.”12

We construe 209 Code Mass. Regs. § 18.21A(2)(c) to be consistent with its own stated purpose and with Massachusetts foreclosure law. The text of the regulation makes clear that its purpose is to provide a mortgagor “the [servicer's] basis for asserting that the foreclosing party has the right to foreclose.” Id. Under Massachusetts foreclosure law, a “mortgagee must demonstrate an unbroken chain of assignments [of the mortgage] in order to foreclose a mortgage, and ․ must also demonstrate that it holds the note (or acts as authorized agent for the note holder) at the time it commences foreclosure” (citation omitted). Sullivan v. Kondaur Capital Corp., 85 Mass. App. Ct. 202, 210 (2014). See Eaton v. Federal Nat'l Mtge. Ass'n, 462 Mass. 569, 586 (2012). There is no case, however, holding that a foreclosing party must demonstrate an unbroken chain of assignments of the mortgage note, particularly where, as here, the foreclosing party has physical possession of the note. We thus construe 209 Code Mass. Regs. § 18.21A(2)(c) as requiring a loan servicer to certify the chain of assignments of the mortgage and the current holder of the mortgage note. The certification was sufficient.¹³

Judgment affirmed.

Orders entered July 8, 2019 (docket numbers 73-79), affirmed.

FOOTNOTES

4.   The defendants appear to have argued that Wells Fargo lacked standing due to some bifurcation between the ownership of the mortgage and the mortgage note.

5.   Additional claims were dismissed on the basis of Mass. R. Civ. P. 12 (b) (6), 365 Mass. 754 (1974).

6.   Most of the defendants' counterclaims were dismissed on the basis of res judicata or Mass. R. Civ. P. 12 (b) (6). The defendants' counterclaim for violations of G. L. c. 244, which pertained to the foreclosure sale and thus could not have been raised during the prior litigation, survived the plaintiff's motion to dismiss.

7.   The defendants argue that there is no privity between the plaintiff and Wells Fargo, both because the mortgage is void and because the plaintiff did not provide a required certification showing the chain of assignments of the mortgage note. Because we reject both of these subsidiary arguments herein, the defendants' argument that there is no privity between the plaintiff and Wells Fargo also fails.

8.   To the extent the defendants argue that they could not have discovered these new facts until after the Land Court case and the 2012 Superior Court case had concluded, this argument lacks any factual basis in the record.

9.   TILA provides that an “obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms.” 15 U.S.C. § 1635(a) (2011). However, even if the information and rescission forms are never delivered to the obligor, the obligor's right of rescission expires “three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first.” 15 U.S.C. § 1635(f).

10.   The defendants also contend that the plaintiff had to seek a judicial declaration that the defendants' letter of rescission was untimely within twenty days of receipt of that letter. The legal authority that the defendants cite, however, does not support this proposition.

11.   Because this claim pertains to events that occurred after the Land Court case and the 2012 Superior Court case, it is not barred by res judicata.

11.   The defendants also argue that their loan servicer failed to include a copy of the mortgage note with all required endorsements. A copy of the mortgage note appears attached to the certification, however, and the defendants' three-sentence argument with respect to this issue does not rise to the level of appellate argument. Any differences between the copy of the note attached to the certification and other copies of the note that the defendants obtained in prior litigation are both immaterial and nonprejudicial.

13.   We note that the defendants assert various discovery violations and also argue that there are genuine issues of material fact as to (1) whether the plaintiff holds the mortgage note and (2) the date the mortgage note was accelerated. The defendants describe affidavits filed by the plaintiff, which establish that the plaintiff holds the mortgage note, as “sham affidavits.” These arguments are without merit. There is no basis for us to conclude that the affidavits are “sham affidavits,” and the record establishes that the mortgage note was accelerated on January 12, 2017. Moreover, while the defendants assert various discovery violations, they do not raise any appellate arguments with respect to those purported violations. Likewise, and although the defendants' notice of appeal refers to the orders denying their postjudgment motions, they do not raise any appellate arguments addressing those orders. We therefore deem any claims associated with those ordered to be waived. See Mass. R. A. P. 16 (a) (9) (A), as appearing in 481 Mass. 1628 (2019) (“appellate court need not pass upon questions or issues not argued in the brief”).