Bank of Am., N.A. v. Diamond Fin., LLC.

• Decision Date: 20 October 2015
• Docket Number: No. 14–P–1315.,14–P–1315.
• Citation: 88 Mass.App.Ct. 564,42 N.E.3d 1151
• Parties: BANK OF AMERICA, N.A. v. DIAMOND FINANCIAL, LLC.
• Court: Appeals Court of Massachusetts

88 Mass.App.Ct. 564
42 N.E.3d 1151

BANK OF AMERICA, N.A.¹
v.
DIAMOND FINANCIAL, LLC.

No. 14–P–1315.

Appeals Court of Massachusetts, Suffolk.

Argued June 12, 2015.
Decided Oct. 20, 2015.

42 N.E.3d 1152

George E. Sousa, Woburn, for the defendant.

Howard S. Goldman, Needham, for the plaintiff.

Present: COHEN, GREEN, & TRAINOR, JJ.

Opinion

TRAINOR, J.

Bank of America (BOA), the plaintiff, brought suit against Diamond Financial, LLC (Diamond),² seeking equitable subrogation of a mortgage it holds on property located at 18 Eastwood Road, in the town of Shrewsbury. The parties filed cross motions for summary judgment. In granting the plaintiff's summary judgment motion, the judge found that BOA “is entitled to be equitably subrogated to the priority position” for $330,368.29 of the previously recorded mortgage, which was discharged. The defendant, Diamond, appeals.

Background. We review the relevant undisputed facts. Milton J. Miranda and Solange D. Miranda purchased a property in Shrewsbury

on July 31, 2002. The purchase was financed for the most part with a mortgage loan from Moneyone Corporation. On August 24, 2004, the Mirandas refinanced with a $336,150 mortgage loan from Argent Mortgage Company, LLC (Argent).³ This mortgage was recorded.

On or about June 28, 2006, the Mirandas borrowed $50,000 from the defendant and granted the defendant a mortgage on the Shrewsbury property and on a property in the city of Worcester.⁴ On September 29, 2006, the Mirandas refinanced the Argent mortgage with a mortgage loan of $344,000 from Equity Advantage (Equity). As part of the refinancing, $330,368.29 of the Equity loan was used to pay the full balance of the Argent mortgage. The Equity mortgage was recorded on October 12, 2006,

42 N.E.3d 1153

and the discharge of the Argent mortgage was recorded on October 30, 2006. The closing of the Equity mortgage was conducted by a closing attorney and Closeline, LLC. The Diamond mortgage was not identified during the refinancing process and Equity did not enter into a subrogation agreement. The closing attorney issued a title insurance policy through TICOR Title Insurance Company (TICOR).

There is no evidence that Diamond learned of the change in the record order of liens prior to this action. There also is no evidence that Diamond extended additional credit or changed the terms of its loan to the Mirandas at any time after the initial loan. BOA is the current holder of the Equity mortgage. BOA began foreclosure proceedings due to the Mirandas' default, but stopped the proceedings when the Diamond mortgage was discovered.

Discussion. The defendant's underlying argument appears to be that the plaintiff is barred from receiving an equitable subrogation because BOA could make a title insurance claim, and therefore has a remedy at law.⁵

Over the long history of our equity jurisprudence the general rule has maintained a limitation on the exercise of equity jurisdiction if an adequate remedy existed at law. Prior to 1857, the equity jurisdiction of the Supreme Judicial Court consisted of specified topics, each of which were generally qualified by the phrase “when the parties have not a plain, adequate, and complete remedy at the common law.” Acts of 1817, c. 87, and Revised Statutes 1836, c. 81, § 8. When full equity jurisdiction was given to the Supreme Judicial Court in 1857, it was expressly limited to matters “where there is not a full, adequate and complete remedy at law.” Acts of 1857, c. 214. This limitation upon equity jurisdiction was removed in 1877 but a similar limitation was retained in 1882 for specific equity cases enumerated in the statute. Compare Acts of 1877, c. 178, § 1, with Public Statutes of 1882, c. 151, § 4. See Public Statutes of 1882, c. 151, § 2. The 1882 act employed particular topics of jurisdiction that are still employed in G.L. c. 214, § 3. The limiting language is no longer included in the statute. See G.L. c. 214, § 3.⁶ However, after the limiting language in the statute

42 N.E.3d 1154

was removed, there was still a continuing limitation expressed in our case law. When a remedy at common law is full, adequate, and complete, “a party is still remitted to the law court, unless a remedy in equity is given expressly by statute.” Maguire v. Reough, 238 Mass. 98, 99, 130 N.E. 270 (1921). See Jones v. Newhall, 115 Mass. 244, 251 (1874). This limitation is grounded in the fundamental right to a trial by jury guaranteed by our State Constitution. See Proctor v. MacClaskey, 278 Mass. 238, 242, 179 N.E. 600 (1932).

It has been generally held that Massachusetts courts have no inherent equitable authority and, since their creation, exercise

purely common law authority.⁷ Any equitable power they may exercise is because of an express grant of such power by the terms of a statute. Our courts have generally employed this restrictive method of interpretation and have limited even express grants of equitable authority to situations where there is no “plain, adequate and complete remedy at law.”⁸ Cadigan v. Brown, 120 Mass. 493, 494 (1876). See Black v. Black, 21 Mass. 234, 4 Pick. 234, 237–238, (1826) ; Bowditch v. Banuelos, 67 Mass. 220, 1 Gray 220, 228 (1854) ; Jones v. Newhall, supra; and Suter v. Matthews, 115 Mass. 253, 255 (1874).

Since the merger of the procedure for bringing suits in equity and at law in 1974, some of our modern authorities have determined that, “[a]s a practical matter today, the adequacy of a remedy at law is anachronistic because of the merger of law and equity. All actions, whether formerly at law or in equity, are commenced as civil actions in a uniform manner.” Nolan & Sartorio, Equitable Remedies § 4.18 (3d ed. 2007). See Mass.R.Civ.P. 2, 365 Mass. 733 (1974). The Reporter's Notes to rule 2, however, emphasize that “ ‘[m]erger’ of [l]aw and [e]quity, refers only to the procedure involved, i.e., the manner of framing and trying the issues, and the type of relief. ‘Merger’ does not alter the traditional substantive distinctions between legal and equitable remedies. Although the once separate procedures have been merged, the right to equitable remedies still exists; now, however, a party may seek legal and equitable relief simultaneously.”⁹ We are reminded that even in our desire and enthusiasm for ease and simplicity of practice and procedure, “[t]he controlling reason why the boundaries of general equity

jurisdiction ought not to be widened by judicial decision beyond those indicated by established principles, is that the constitutional right of trial by jury would thereby become correspondingly narrowed.” Parkway, Inc. v. United

42 N.E.3d 1155

States Fire Ins. Co., 314 Mass. 647, 651, 51 N.E.2d 436 (1943).¹⁰

Notwithstanding this limitation on the exercise of equity jurisdiction in our common law, commentators have long maintained that “exclusive equitable jurisdiction, or the power of the courts to adjudicate upon the subject matters coming within that jurisdiction, exists independently of the adequacy or inadequacy of the legal remedies obtainable under the circumstances of any particular case.” Pomeroy, Equity Jurisprudence, § 218 (4th ed. 1918). Pomeroy maintains that exclusive equity jurisdiction exists in the areas of equitable estates, mortgages, and liens: specifically in the context of “[s]ubstituted [l]iens” (subrogation). See Pomeroy & Symons, Equitable Jurisprudence, § 719a (5th ed. 1941). At least one of our appellate decisions agrees that some plaintiff rights are purely equitable in nature and the existence of an adequate and complete remedy at law is irrelevant. See Boston v. Santosuosso, 298 Mass. 175, 180, 10 N.E.2d 271 (1937). As a practical matter however, this claim of exclusive jurisdiction is neither incompatible nor inconsistent with our application of equitable remedies only in the absence, or inadequacy, of an available legal remedy. It is with this history and these considerations in mind that we address the argument made by the defendant in this case.

Massachusetts courts have long exercised broad powers over

mortgages including the power of equitable subrogation.¹¹ “It is the general rule that, where a mortgage has been discharged by mistake, equity will set the discharge aside and reinstate the mortgage to the position the parties intended it to occupy, where the rights of intervening lienors have not been affected.” North Easton Co-op. Bank v. MacLean, 300 Mass. 285, 292, 15 N.E.2d 241 (1938). Cf. Bates v. Boston Elev. R.R. Co., 187 Mass. 328, 341, 72 N.E. 1017 (1905) (“The court of law has no jurisdiction to inquire into and adjust the equitable rights, if any, between the several mortgagees where the mortgage debts are also secured by liens on other funds. If such rights exist they must be enforced by a court of general equity jurisdiction”). Subrogation allows “the substitution of one

42 N.E.3d 1156

person in place of another ... so that he who is substituted succeeds to the rights of the other.” Provident Co-op. Bank v. James Talcott, Inc., 358 Mass. 180, 188, 260 N.E.2d 903 (1970), quoting from...