Fay v. Federal Nat. Mortg. Ass'n

• Decision Date: 23 March 1995
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: Claire M. FAY v. FEDERAL NATIONAL MORTGAGE ASSOCIATION & another. 1

Page 422

647 N.E.2d 422

419 Mass. 782

Claire M. FAY v. FEDERAL NATIONAL MORTGAGE ASSOCIATION & another.¹

Supreme Judicial Court of Massachusetts,

Middlesex.

Argued Jan. 12, 1995.

Decided March 23, 1995.

Richard H. Gens, East Dennis, for plaintiff.

Gordon M. Orloff, Boston, for Federal Nat. Mortg. Assn.

Michael D. Lurie, Boston, for Triad Finance Corp.

Before LIACOS, C.J., and WILKINS, NOLAN, LYNCH and GREANEY, JJ.

NOLAN, Justice.

The plaintiff appeals from a summary judgment in favor of the defendants. The defendants, Federal National Mortgage Association (Fannie Mae) and Triad Finance Corporation (Triad), hold mortgages on property located at 10 Prentiss Street in Cambridge (property). The plaintiff filed the present action seeking to enjoin Fannie Mae from foreclosing on the property and to set aside the defendants' mortgages on the basis that a deed in the chain of title to the property is forged. The judge granted summary judgment in favor of the defendants ruling that the plaintiff's claims were barred by the doctrine of judicial estoppel. We granted the plaintiff's application for direct appellate review, and now affirm.

We begin by setting out the facts of this and other related cases. On February 28, 1981, the plaintiff; her two sons, James Daniel Fay and Timothy J. Fay; and Edward Paul Silva created T.J. Realty Trust. Silva was designated as sole trustee, and the plaintiff's two sons were declared equal beneficiaries. The title to six properties, including 10 Prentiss Street, was conveyed to the trust, and the declaration of trust was duly recorded in the registry of deeds.

On the same day that the trust was established, the parties entered into a written side agreement which provided, in part, that the plaintiff would "consult with and direct the [t]rustee in the operation of [the trust] properties." The agreement also provided that "notwithstanding the terms of the recorded trust, the terms and conditions of this [a]greement shall control the operation of the [t]rust." This agreement was never recorded.

Approximately two years later, in a deed dated January 14, 1983, Silva purportedly conveyed the property to Richard E. Lenza. After obtaining title, Lenza gave Century Bank and Trust Company, Fannie Mae's predecessor, a first mortgage on the property. That mortgage was duly recorded in the registry of deeds and is currently being held by Fannie Mae. Several years later, Lenza granted to Triad a second mortgage on the property. This mortgage was also duly recorded. On September 1, 1988, Lenza conveyed the property from himself individually to himself as trustee of the Prentiss Street Trust. Several months later Lenza was replaced as trustee by the plaintiff's son, James Daniel Fay.

The Silva case. In June, 1989, Silva, as trustee, commenced an action against Lenza, James Daniel Fay, and various lenders including Triad, seeking to invalidate the conveyance of the property from Silva to Lenza. ² In his complaint, Silva alleged that his purported signature appearing on the deed was forged, and that the mortgages held by Triad and others were therefore invalid. During the course of the litigation, a settlement was proposed, but was rejected by Silva. Timothy J. Fay and James Daniel Fay, as beneficiaries of the T.J. Realty Trust, then removed Silva as trustee, named themselves as cotrustees, and accepted the settlement.

The Bristol County case. In October, 1990, approximately two and one-half years prior to commencement of the present action, the plaintiff commenced an action against Lenza, Timothy Fay, James Daniel Fay, Philip McCourt, Triad, and other lenders which claimed to hold mortgages on the property. ³ The plaintiff alleged that (1) James Daniel Fay and Timothy J. Fay breached the unrecorded side agreement by failing to consult the plaintiff before conveying or mortgaging the property; (2) Philip McCourt, an attorney, forged Silva's name on the deed to Lenza, which allowed the property fraudulently to be conveyed; (3) Lenza participated in the fraudulent conveyance of the property to himself; (4) Triad and the other lenders had knowledge and notice of the side agreement and thereby should be held liable for facilitating the breach of the agreement; and (5) all parties in the Silva case settlement, having knowledge of the side agreement, interfered with the plaintiff's rights under that agreement.

The judge granted summary judgment to Triad and the other lenders, ruling that there was no evidence to support the plaintiff's claim that the lenders knew or should have known of the existence of the side agreement giving the plaintiff an interest in the business of the trust. In relation to the claims brought against the other defendants, however, the judge denied the motion of summary judgment, ruling that several issues, including the legal effect of the agreement and the actual validity of the conveyances, needed to be resolved.

The plaintiff's remaining claims against Lenza, McCourt, James Daniel Fay, and Timothy J. Fay were tried to a jury. During the course of the litigation, the plaintiff alleged that the deed purporting to convey title to the property from Silva to Lenza was forged, and that Philip McCourt was responsible for the forgery. ⁴ At trial, the plaintiff called a handwriting expert and examined that expert regarding whether Silva had executed the deed. In addition, the plaintiff argued to the jury that the deed from Silva to Lenza was forged, and that this forgery constituted the basis for her claims that the defendants either breached or tortiously interfered with the agreement. The jury returned a verdict against the plaintiff on all the claims, and the plaintiff did not appeal.

The present action. On January 29, 1993, Fannie Mae held a foreclosure sale of the property, at which the plaintiff was the high bidder. After executing a memorandum of sale by which she agreed to purchase the property for $175,000, the plaintiff refused to close and filed the present action seeking to enjoin Fannie Mae from foreclosing on the property. ⁵ In her complaint, the plaintiff also sought to invalidate the defendants' mortgages alleging that a deed in the chain of title to the property was forged. ⁶

The Haley case. During the course of the present action, the plaintiff became embroiled in yet another lawsuit brought by one Alan Haley. As part of that action, the plaintiff, as defendant therein, filed with the court a motion asserting that, by virtue of her beneficial interest in the Prentiss Street Trust, she was the owner of the premises at 10 Prentiss Street. In support of her motion, the plaintiff filed, among other documents, Lenza's deed from himself individually to himself as trustee of the Prentiss Street Trust, the documents by which Lenza was replaced by James Daniel Fay, and the schedule of beneficiaries of that trust. ⁷ In order to prove ownership of the property, the plaintiff necessarily relied on the validity of the deed that she currently claims is forged.

The judge denied the plaintiff's motion and the case was tried without a jury. On September 14, 1993, judgment was entered without prejudice against the plaintiff after the judge found that in 1993 the plaintiff had attempted to establish her residence at 10 Prentiss Street in order to claim the property as an "owner-occupied" building, but that this attempt failed when the Cambridge rent control board concluded that she neither owned nor occupied the property. The judge then enjoined the plaintiff from interfering with the tenants' occupancy of the building unless or until she could prove ownership of the property.

After learning of the plaintiff's assertions in the Haley case, Fannie Mae moved for summary judgment in the present action, arguing that the plaintiff was barred by the doctrine of judicial estoppel from asserting that the deed from Silva to Lenza was invalid. ⁸ The judge granted the motion ruling that the plaintiff was judicially estopped from asserting inconsistent positions in separate court proceedings. See note 1, supra.

1. Judicial estoppel. The plaintiff contends that the judge erred in applying the doctrine of judicial estoppel because (1) the Haley case did not involve the same parties or their privies, and (2) the plaintiff was not successful in asserting her position in the prior proceeding. The defendants, on the other hand, argue that the doctrine should be employed whenever a litigant is "playing fast and loose with the courts." Patriot Cinemas, Inc. v. General Cinema Corp., 834 F.2d 208, 212 (1st Cir.1987), quoting Scarano v. Central R.R., 203 F.2d 510, 513 (3d Cir.1953).

Judicial estoppel, or "preclusion of inconsistent positions," is an equitable doctrine which precludes a party from asserting a position in one legal proceeding which is contrary to a position it has already asserted in another. Patriot Cinemas, Inc. v. General Cinema Corp., supra. The specific requirements of the doctrine are rather vague and vary among the States and the United States Courts of Appeals. Id. See 1B Moore's Federal Practice par. 0.405 (2d ed. 1994); Boyers, Precluding Inconsistent Statements: The Doctrine of Judicial Estoppel, 80 Nw.U.L.Rev. 1244, 1258 (1986). Some courts have refused to apply the doctrine unless the court in the prior proceeding adopted the inconsistent assertion in some manner. See Astor Chauffeured Limousine Co. v. Runnfeldt Inv. Corp., 910 F.2d 1540, 1547-1548 (7th Cir.1990); Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 599 (6th Cir.1982); Allen v. Zurich Ins. Co., 667 F.2d 1162, 1167 (4th Cir.1982); Bates v. Long Island R.R., 997 F.2d 1028, 1038 (2d Cir.), cert. denied, 510 U.S. 992, 114 S.Ct. 550, 126 L.Ed.2d 452 (1993); United States ex rel. Am. Bank v. C.I.T. Constr. Inc. of Tex., 944 F.2d 253, 258-259 (5th Cir.1991). Other courts have applied the doctrine whenever it is determined that a litigant is playing "fast and loose" with the courts. See, e.g., AFN,...