Martinez v. Waldstein

• Decision Date: 29 April 2016
• Docket Number: No. 15–P–455.,15–P–455.
• Parties: Francisco MARTINEZ, trustee, & another v. Thomas G. WALDSTEIN.
• Court: Appeals Court of Massachusetts

89 Mass.App.Ct. 341

49 N.E.3d 245

Francisco MARTINEZ, trustee¹ & another²

v.Thomas G. WALDSTEIN.

No. 15–P–455.

Appeals Court of Massachusetts, Middlesex.

Argued Jan. 13, 2016.

Decided April 29, 2016.

Peter S. Brooks, Boston, for the plaintiffs.

Damian R. LaPlaca, Boston, for the defendant.

Present: CYPHER, MEADE, & NEYMAN, JJ.

Opinion

NEYMAN, J.

Francisco Martinez, trustee of the Baystate Portfolio Trust (trust), and Eric AmRhein (collectively, plaintiffs), appeal from a judgment of the Superior Court dismissing their complaint alleging misrepresentation and violation of G.L. c. 93A, § 11, against the defendant, attorney Thomas G. Waldstein, on the basis of issue preclusion. This is the second appeal to this court arising out of the plan to purchase the mortgage and foreclose on a property located at 3 Ronald Road in Sudbury (the property) in order to eliminate junior mortgages on the property. See U.S. Bank, N.A. v. Martinez, 86 Mass.App.Ct. 1111, 2014 WL 4450424 (2014) (Baystate I ). The plaintiffs' claims in the present action hinge on their allegation that

they reasonably relied on Waldstein's representations in an affidavit regarding mortgage priorities on the property. A Superior Court judge (motion judge) granted Waldstein's motion for judgment on the pleadings, concluding that the plaintiffs could not establish that they reasonably relied on Waldstein's representations because a different Superior Court judge (trial judge) had found otherwise in Baystate I.³ The plaintiffs contend that the motion judge erred in applying issue preclusion because the issue of reasonable reliance was not actually litigated in Baystate I , and thus was neither identical to any issues raised in Baystate I nor essential to the judgment in Baystate I . We affirm.

1. Background. We first summarize the relevant facts from the motion judge's decision on Waldstein's motion for judgment on the pleadings, taking those facts stated by the plaintiffs as true. See Mass.R.Civ.P. 12(c), 365 Mass. 754 (1974); Jarosz v. Palmer, 436 Mass. 526, 530, 766 N.E.2d 482 (2002) (Jarosz ). We then look to the entire record of Baystate I , with a view toward comparing the issues adjudicated therein with the issues raised by the plaintiffs in the present action. See Boyd v. Jamaica Plain Co–op. Bank, 7 Mass.App.Ct. 153, 160, 386 N.E.2d 775 (1979) (when asked to determine whether issue has been previously litigated, and thus precluded, “we look to the entire record ... to ascertain what issues were tried and determined and were essential to the judgment”).

a. The present action. In September, 2004, Peter Venuto purchased the property and gave a $745,000 mortgage to Countrywide Financial Corporation (Countrywide). In early 2005, Waldstein aided Venuto in transferring ownership of the property to King R.E., LLC, which subsequently granted a $2.65 million mortgage of the property to First Trade Union Bank (First Trade). The First Trade mortgage was subordinate to the Countrywide mortgage.

In November, 2006, Waldstein helped Venuto refinance the Countrywide mortgage, representing both Venuto and Countrywide in the transaction, and serving as agent for the title insurer. Waldstein failed to obtain a subordination of the First Trade mortgage, and thus the refinanced Countrywide mortgage became subordinate to the First Trade mortgage. On or about February 11, 2010, Countrywide assigned its mortgage of the property to U.S.

Bank, N.A. (U.S. Bank). Shortly thereafter, First Trade and U.S. Bank began foreclosure proceedings on the property. In June of that year, U.S. Bank commenced Baystate I , seeking equitable subrogation and a declaration that First Trade's mortgage was subordinate to U.S. Bank's mortgage. Venuto provided to Waldstein a copy of the papers regarding Baystate I , thus giving Waldstein notice of the legal proceedings.

In July, 2011, while Baystate I was pending, Venuto approached his friend, AmRhein, with a plan for AmRhein to purchase the First Trade promissory note and an assignment of the First Trade mortgage. On or about July 7, 2011, Waldstein provided to AmRhein an affidavit (the affidavit)⁴ that stated, inter alia, that the First Trade mortgage was in “First position” and the Countrywide mortgage was in “Second position”; “[a] subordination of mortgage was prepared subordinating said First Trade ... mortgage to the ... Countrywide mortgages ^{[ 5 ]} but was never executed and does not exist to [Waldstein's] knowledge”; and a purchaser of the First Trade promissory note could rely on the representations contained in the affidavit.

On July 8, 2011, AmRhein directed Martinez (as trustee of the trust) to purchase the First Trade promissory note and an assignment of the First Trade mortgage. The plaintiffs alleged in their complaint that soon after the purchase of the First Trade note and mortgage, the plaintiffs obtained knowledge of Baystate I and assumed First Trade's defense. They further alleged that they reasonably relied upon the affidavit “certifying that the First Trade Mortgage was a first priority or senior mortgage” and that “if Waldstein had disclosed [Baystate I ] that was then pending by U.S. Bank against First Trade, [p]laintiffs would not have acquired the First Trade Promissory Note and the First Trade Mortgage.”

b. Baystate I . Nearly eleven months before the plaintiffs filed their complaint in the present action, U.S. Bank, in an equitable subrogation action, sought a declaration that its mortgage interest should be in the first priority position, which would relegate the

First Trade mortgage owned by the plaintiffs to the second priority position. In Baystate I , the trial judge, proceeding without a jury, made extensive factual findings and granted U.S. Bank's request to hold the first priority position on the property. The trial judge found that AmRhein was aware, or should have been aware, of the claim of Countrywide (the predecessor-in-interest to U.S. Bank) to the first priority position. He further found that AmRhein planned with Venuto to take advantage of Waldstein's mistake in order to extinguish the junior mortgages, and thus the trust was not a bona fide purchaser such that it should be shielded from the doctrine of equitable subrogation. A panel of this court affirmed the judgment in an unpublished decision issued pursuant to our rule 1:28. See U.S. Bank, N.A. v. Martinez, 86 Mass.App.Ct. 1111, 2014 WL 4450424 (2014).

Several findings of the trial judge in Baystate I are particularly critical to the present case, including the following:

“AmRhein was aware, or should have been aware, of the claim of Countrywide to the first lien position. Venuto came to AmRhein, his close friend, with the plan for him (AmRhein) to buy the First Trade Mortgage, for AmRhein to foreclose on Venuto's house, and thereby wipe out the junior mortgages. AmRhein was aware that it was only through Waldstein's mistake or negligence that First Trade was in the superior position and he knew, or should have known, that Countrywide or its assignee would pursue its claim to first priority. I do not find credible AmRhein's testimony that he was not aware of this lawsuit.”

The trial judge further found that AmRhein was aware from the first meeting with Venuto that there was a dispute between the banks over which had the priority lien position, and he (AmRhein) was aware that there should have been a subordination by First Trade to the Countrywide mortgage, which had not occurred. The trial judge found that AmRhein knew of Baystate I , and that AmRhein, with the help of his attorney, formed the trust to acquire the First Trade mortgage. The trial judge determined that prior to the purchase of the First Trade mortgage, AmRhein's attorney had drafted the affidavit for Waldstein's signature (see note 4, supra ), which contained statements regarding the first and second lien positions that “were known already and were easily ascertainable.” Finally, the trial judge found that

AmRhein, through the trust, paid $204,000 for the assignment of the mortgage and the loan, which had a balance of $1.4 million and an apparent first lien priority.

2. Standard of review. “A defendant's rule 12(c) motion is ‘actually a motion to dismiss ... [that] argues that the complaint fails to state a claim upon which relief can be granted.’ ” Jarosz, 436 Mass. at 529, 766 N.E.2d 482, quoting from Smith & Zobel, Rules Practice § 12.16 (1974). As we would with a motion to dismiss, we review the judge's ruling de novo. Ridgeley Mgmt. Corp. v. Planning Bd. of Gosnold, 82 Mass.App.Ct. 793, 797, 978 N.E.2d 799 (2012). “In deciding a rule 12(c) motion, all facts pleaded by the nonmoving party must be accepted as true.” Jarosz, supra at 529–530, 766 N.E.2d 482, citing Minaya v. Massachusetts Credit Union Share Ins. Corp., 392 Mass. 904, 905, 467 N.E.2d 874 (1984). However, a judge is “not required to accept as true those ‘facts which the court could take judicial notice are not true.’ Hargis Canneries, Inc. v. United States, 60 F.Supp. 729, 729 (W.D.Ark.1945).” Jarosz v. Palmer, 49 Mass.App.Ct. 834, 836, 733 N.E.2d 164 (2000), S.C., 436 Mass. 526, 766 N.E.2d 482 (2002). See Jarosz, supra at 530, 766 N.E.2d 482 (“[W]e see no reason that a judge may not also consider on a rule 12 [c] motion those facts of which judicial notice can be taken. Further, a judge may take judicial notice of the court's records in a related action”).

3. Issue preclusion. “The doctrine of issue preclusion provides that when an issue has been ‘actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties whether on the same or different claim.’ ” Id. at 530–531, 766 N.E.2d 482, quoting from Cousineau v. Laramee, 388 Mass. 859, 863 n. 4, 448 N.E.2d 756 (1983). Here, the plaintiffs challenge the motion judge's conclusion that the issue of reasonable reliance was actually litigated in ...