Butler v. Deutsche Bank Trust Co.

• Citation: 748 F.3d 28
• Decision Date: 04 April 2014
• Docket Number: No. 12–2108.,12–2108.
• Parties: Frank P. BUTLER, Plaintiff, Appellant, v. DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee for Rali 2007 QS3, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

748 F.3d 28

Frank P. BUTLER, Plaintiff, Appellant,
v.
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee for Rali 2007 QS3, Defendant, Appellee.

No. 12–2108.

United States Court of Appeals,
First Circuit.

April 4, 2014.

[748 F.3d 30]

Glenn F. Russell, Jr., with whom Law Office of Glenn F. Russell, Jr., was on brief for appellant.

Amy B. Hackett, with whom Richard E. Briansky and Prince Lobel Tye LLP, were on brief for appellee.

Before TORRUELLA, DYK ^* and KAYATTA, Circuit Judges.

TORRUELLA, Circuit Judge.

In the wake of the foreclosure crisis, litigants have increasingly sought out clarification regarding the validity of mortgage transfers precipitated by Mortgage Electronic Registration Systems, Inc. (“MERS”). The general contours of these claims are well known, and many of the facts underlying this case parallel past foreclosure litigation. A homeowner, Frank P. Butler (“Butler”), upon falling behind in his mortgage payments, saw his home foreclosed upon, twice. These foreclosure sales were not conducted by Butler's original lender, but by a financial institution that had received his mortgage via an assignment from MERS. Butler brought suit for wrongful foreclosure, slander of title, and unfair and deceptive business practices under Massachusetts law. Finding that the foreclosure sales were in accordance with all relevant statutory law, the district court dismissed for failure to state a claim. On appeal, Butler presents a multitude of theories as to why Deutsche Bank lacked legal possession over both his mortgage and accompanying note, making it an improper party to foreclose. Concluding, like the district court before us, that Butler's complaint states no legally cognizable claim for relief, we affirm.

I. Background

On January 31, 2007, Butler borrowed $370,000.00 from Homecomings Financial, LLC (“Homecomings”). This loan was secured with a promissory note and mortgage on his Quincy, Massachusetts home. The mortgage document listed Homecomings as “lender” and MERS as both “mortgagee” and “nominee for [Homecomings] and [Homecomings]'s successors and assigns.” The mortgage further specified that MERS held the “power of sale.”

[748 F.3d 31]

On December 1, 2009, MERS assigned Butler's mortgage to Deutsche Bank Trust Company Americas as Trustee for an unspecified trust. The assignment was signed by Jeffery Stephan (“Stephan”), acting in his capacity as a vice president of MERS, and was recorded in the Norfolk County Registry of Deeds. Six days later, Deutsche Bank, acting as trustee for the unspecified trust, filed suit in Massachusetts Land Court pursuant to the Service Members Civil Relief Act, 50 U.S.C. app. § 533, requesting authority to foreclose on Butler's property. This authority was granted on March 30, 2010.

Subsequently, MERS again assigned Butler's mortgage, this time to Deutsche Bank Trust Company Americas as Trustee for RALI 2007QS3 (“Deutsche Bank”). ¹ Although this assignment was undated, it was signed by Stephan in his capacity as Vice President of MERS and notarized on January 22, 2010. The assignment was recorded in the Norfolk County Registry of Deeds. Thereafter, on July 15, 2010, Deutsche Bank again sought authority to foreclose from the Massachusetts Land Court. This authority was granted on February 7, 2011.

On March 2, 2011, Butler's mortgage was assigned a third time. Deutsche Bank Trust Company Americas as Trustee assigned the mortgage to Deutsche Bank Trust Company Americas as Trustee for RALI 2007QS3. This assignment was labeled “confirmatory” and signed by Michelle Swaim for Deutsche Bank. It too was recorded in the Norfolk County Registry of Deeds.

Deutsche Bank conducted a foreclosure sale on May 25, 2011, ultimately purchasing Butler's property for $230,327.77. On November 30, 2011, Deutsche bank filed a foreclosure deed at the Norfolk County Registry of Deeds. Later determining that this first foreclosure sale may have been void for failure to provide Butler with the required fourteen days' notice, seeMass. Gen. Laws ch. 244, § 14, Deutsche Bank conducted a second foreclosure sale on March 8, 2012. Deutsche Bank was again the highest bidder, purchasing Butler's home for $200,000.00. An executed deed of foreclosure was recorded on April 18, 2012.

Butler's complaint, originally filed in state court, included four counts: (1) unfair and deceptive business practices pursuant to Mass. Gen. Laws § 93A (“Chapter 93A”); (2) wrongful foreclosure based on the May 25, 2011 foreclosure sale; (3) wrongful foreclosure based on the March 8, 2012 foreclosure sale; and (4) slander of title. In support of these claims, Butler presented a bevy of theories as to why Deutsche Bank did not validly possess either his mortgage or his mortgage note, making it unable to foreclose. Finding each of these theories lacking, the district court dismissed the suit for failure to state a claim.

On appeal, Butler argues that Deutsche Bank could not legally foreclose because: (1) MERS lacked legal authority to transfer his mortgage and, moreover, admits that it only “tracks” the sale of mortgage notes, but does not undertake assignments; (2) Stephan, a “robo-signer,” could not validly serve as signatory on the assignments;

[748 F.3d 32]

(3) the assignments violated the RALI 2007QS3 trust's pooling and servicing agreement (“PSA”); (4) Deutsche Bank did not legally possess Butler's promissory note at the time of foreclosure; and (5) Deutsche Bank admitted that the first foreclosure sale was invalid.

II. Discussion

We review a district court's grant of a motion to dismiss de novo. Clark v. Boscher, 514 F.3d 107, 112 (1st Cir.2008). We take all facts pled, as well as all reasonable inferences to be drawn therefrom, in the light most favorable to the non-movant. Id. (citing Ramos–Piñero v. Puerto Rico, 453 F.3d 48, 51 (1st Cir.2006)). This deferential review, however, does not require that we accept the complaint wholesale; “bald assertions” and “unsupportable conclusions” are properly disregarded. Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir.1996). We affirm the grant of a motion to dismiss only where the facts, presumed to be true, fail to state a claim for which relief may be granted. Fed.R.Civ.P. 12(b)(6).

All four counts of Butler's complaint rest on the shared presumption that Deutsche Bank lacked the power to foreclose, either because it did not legally possess Butler's mortgage or because it had not unified that mortgage with its underlying promissory note at the time of foreclosure. In resolving this case, therefore, we begin by reviewing the common theories underlying all counts.

A. Deutsche Bank's possession of Butler's mortgage

Butler presents several theories as to why Deutsche Bank lacked legal possession of his mortgage. We treat each theory in turn.

1. MERS's authority to assign the mortgage

Butler first attempts to challenge the legality of MERS head-on, arguing that under Massachusetts law it lacks the ability to transfer his mortgage. He theorizes that MERS, as “nominee” for the noteholder, Homecomings, holds the mortgage only as equitable trustee. In consequence, being able to act solely pursuant to Homecoming's authority, MERS cannot independently undertake a mortgage transfer. That MERS is also the mortgagee of record, Butler asserts, does not expand the limited nature of its authority as “nominee.” In consequence of the fact that MERS possesses no separately assignable interest, Butler theorizes, any transfer in which MERS purports to act as the assignor, or any subsequent transfer arising thereafter, is necessarily void.

Our court has previously considered, and found wanting, this precise challenge to MERS's ability to serve as assignor of a mortgage. Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282, 291–93 (1st Cir.2013) (analyzing Massachusetts mortgage law to determine that MERS, as nominee and mortgagee of record, possesses the ability to transfer its interest in a mortgage); see also Woods v. Wells Fargo Bank, N.A., 733 F.3d 349, 355 (1st Cir.2013) (“Culhane made clear that MERS's status as an equitable trustee does not circumscribe the transferability of its legal interest.”). Because Culhane has previously done the heavy lifting of engaging with the intricacies of Massachusetts mortgage law, see Culhane, 708 F.3d at 291–93, we will not repeat its detailed explication here. Suffice it to say, Massachusetts allows a mortgage to be split from its underlying note,²see

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U.S. Bank Nat'l Ass'n v. Ibáñez, 458 Mass. 637, 652, 941 N.E.2d 40, 53–54 (2011), and where, as here, MERS possesses a legal interest in that mortgage, such an interest is transferable. See Culhane, 708 F.3d at 292;Woods, 733 F.3d at 355.

Butler further challenges the validity of the transfers based on a theory that MERS only “tracks” the assignment of mortgage notes, but does not undertake assignments of the accompanying mortgages. Citing to the 2011 “MERS Case Law Outline”—a document prepared by MERS to familiarize users with its legal structure—Butler asserts that MERS itself disclaims any role as an assignor. This argument both misconceives MERS's business model and misconstrues the language of the “MERS Case Law Outline.”

For one, that MERS separately tracks the transfer of promissory notes does not call into question the sufficiency of written assignments duly recorded in a county registry of deeds. Woods, 733 F.3d at 355. In fact, crucial to MERS's business model is its ability to remain mortgagee of record, possessing a legal interest in a homeowner's mortgage, while the beneficial interest in that accompanying note is transferred among MERS's member institutions. See Culhane, 708 F.3d at 287 (explaining MERS's functioning). That MERS electronically records these transfers of a mortgage note does not affect, much less invalidate, its ability to separately assign the mortgage. Woods, 733 F.3d at 355 (“[T]he MERS registry electronically tracks transfers of a mortgagor's promissory note, a process which is...