Nationsbanc Mortgage Corp. v. Eisenhauer

• Decision Date: 18 March 1999
• Docket Number: P-2061
• Citation: 49 Mass.App.Ct. 727,733 N.E.2d 557
• Court: Appeals Court of Massachusetts
• Parties: (Mass.App.Ct. 2000) NATIONSBANC MORTGAGE CORPORATION vs. PAUL K. EISENHAUER & another. <A HREF="#fr1-1" name="fn1-1">1 No.: 97- Argued:

733 N.E.2d 557 (Mass.App.Ct. 2000)

NATIONSBANC MORTGAGE CORPORATION vs. PAUL K. EISENHAUER & another.¹

No.: 97-P-2061.

Massachusetts Court of Appeals

Argued: March 18, 1999.

Decided: July 27, 2000.

Suffolk County.

Civil action commenced in the Land Court Department on April 28, 1992.

Mortgage, Discharge. Mistake. Practice, Civil, Findings by judge. Negotiable Instruments, Note, Discharge. Evidence, Hearsay, Business record. Guardian, Incompetent person.

Kevin P. Scanlon for the plaintiff.

Eric A. Smith for the guardian ad litem.

Mary E. Eisenhauer, pro se.

Present: Warner, C.J., Smith, & Gillerman, JJ.²

The case was heard by Leon J. Lombardi, J.

SMITH, J.

On April 28, 1992, Resolution Trust Corporation (RTC), as conservator for ComFed Savings Bank (ComFed), brought an action in the Land Court against Paul K. Eisenhauer (Paul), Mary E. Eisenhauer (Mary), John W. Kelleigh, Charles Farrell, and the Internal Revenue Service (IRS), to remove a cloud on the title to certain real property owned by the Eisenhauers located at 45 Woodland Drive, Marlborough. The complaint alleged that a mortgage on the property securing a note had been discharged in error and that a judgment should therefore issue stating that the mortgage discharge was void and the obligations under the mortgage remained outstanding.

On April 14, 1995, the complaint was amended by substituting KeyCorp Mortgage, Inc. (KeyCorp), for RTC and on June 14, 1995, an assented to second amended complaint substituted NationsBanc Mortgage Corporation (NationsBanc), for KeyCorp. Kelleigh, the holder of an attachment on the property, was later removed as a party; Farrell did not participate after filing an answer, and the IRS was defaulted pursuant to Mass.R.Civ.P. 55(a), 365 Mass. 822 (1974).

On June 14, 1995, at a pretrial conference, Mary represented that Paul was incompetent because of a mental illness and therefore was unable to defend the action brought by NationsBanc. As a result of an investigation into Paul's condition, a judge, on August 11, 1995, appointed Henry H. Thayer as guardian ad litem (guardian) for Paul. The guardian later reported that Paul, as a result of several problems concerning his mental processes, was "unable to provide information on any important subject, including the matter of [NationsBanc's] complaint."

A trial was held before a Land Court judge. After the trial, the judge issued a decision that included his findings of fact and rulings. Based on his findings, the judge ruled that the mortgage and note were discharged and cancelled respectively and that the plaintiff failed to prove that either act was done by mistake. He ordered the complaint dismissed. NationsBanc filed a timely notice of appeal from the judgment of dismissal.

On November 8, 1996, the guardian filed a motion requesting that NationsBanc be required to pay his "reasonable expenses including compensation and counsel fees." NationsBanc filed an opposition to that motion on December 16, 1996. On February 20, 1997, the judge ordered NationsBanc to pay the guardian's counsel fees and expenses of $25,589.00. NationsBanc then appealed from that order, and, on March 13, 1997, filed a "Motion for Entry of Final Judgment or in the Alternative to Stay the Court's February 20, 1997 Order Pending Appeal." On May 8, 1997, the judge stayed his February 20, 1997, judgment pending appeal, but ordered NationsBanc to pay six percent interest per year on the amount awarded by the order.

1. Background of the dispute. We summarize the judge's findings of fact, which we supplement with undisputed evidence in regard to the matter set forth in the complaint.

In 1972, the Eisenhauers purchased the subject property for $57,000. On April 17, 1984, they refinanced existing mortgages on the property with a $100,000 loan from ComFed. The adjustable rate note was secured by a mortgage on their property for the same amount. In conjunction with the transaction, the Eisenhauers executed the note, an adjustable rate rider, and the mortgage. The mortgage was recorded with the Middlesex South District registry of deeds.

Paul was a real estate appraiser for thirty-five years until the end of 1984. During the mid 1980's, Mary worked for Paul's real estate business, Paul K. Eisenhauer & Associates. From the end of 1984 through 1988, Paul was a partner with Joseph Ferro in a real estate investment partnership called F & I Realty Trust (F & I). F & I maintained a checking account at the First National Bank of Marlborough.

In 1983, Paul had open heart surgery. Thereafter, he became increasingly forgetful, and by the late 1980's, he was becoming incapable of conducting his normal business affairs. Mary was primarily responsible for paying the household bills, including payments on the mortgage, although she occasionally asked Paul to make a payment. Mary used a joint checking account maintained at Marlborough Savings Bank to make payments on the mortgage. Mary made those payments on the mortgage sporadically from 1984 to 1990 or 1991.

Because of their poor payment history, ComFed informed Paul and Mary by letter dated April 3, 1987, that their loan was in default and that the bank intended to foreclose. On July 24, 1990, ComFed filed a complaint in the Land Court under the provisions of the Soldiers and Sailors Civil Relief Act of 1940 for permission to foreclose on the mortgage. After obtaining a judgment authorizing entry and sale, a sale was scheduled for April 3, 1992.

In January or February 1991, Mary received notice that ComFed was seeking to foreclose on the property. As a result, she began searching for any documents that would forestall the proposed foreclosure. In early February 1991, Mary discovered an envelope in Paul's desk drawer from ComFed postmarked August 6, 1986. The envelope contained the 1984 note stamped "Paid November 25, 1985," and a fully executed mortgage discharge dated August 4, 1986. Mary recorded the discharge in the Middlesex South District registry of deeds on February 4, 1991.

Just prior to the foreclosure sale (after the RTC had become conservator for ComFed), the RTC was notified that a discharge of the mortgage had been recorded. On January 31, 1992, the RTC recorded an affidavit pursuant to G. L. c. 183, 5B, stating that the mortgage had been discharged in error and that an outstanding principal balance of $96,142.08 existed. RTC then filed the complaint against the Eisenhauers.

2. The discharge of the mortgage and the cancellation of the note. "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."³ North Easton Co-Op. Bank v. MacLean, 300 Mass. 285, 292 (1938).

Because NationsBanc filed the complaint and seeks to change the status quo, it bears the burden of proving by "'full, clear, and decisive' proof" that ComFed issued the mortgage discharge by mistake. Mickelson v. Barnet, 390 Mass. 786, 792 (1984), quoting from Stockbridge Iron Co. v. Hudson Iron Co., 107 Mass. 290, 317 (1871). Loeser v. Talbot, 412 Mass. 361, 365 (1992). Moreover, because NationsBanc is seeking to quiet title, it "has the burden of establishing its title and not simply by demonstrating the weaknesses or nonexistence of the defendants' title." Sheriff's Meadow Found., Inc. v. Bay-Courte Edgartown, Inc., 401 Mass. 267, 269 (1987). The judge ruled that NationsBanc failed to meet its burden of showing mistake.

NationsBanc challenges many of the judge's findings of fact and claims that it did submit sufficient evidence showing that the discharge of the mortgage and the cancellation of the note were the result of a mistake.

"On appeal, we may not set aside findings of fact 'unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses.' Mass.R.Civ.P. 52(a), 365 Mass. 816 (1974).'" First Pa. Mort. Trust v. Dorchester Sav. Bank, 395 Mass. 614, 621 (1985). "If the trial judge makes one of several possible choices of what facts are supported by the evidence, the judge's choice is not clearly erroneous." W. Oliver Tripp Co. v. American Hoechst Corp., 34 Mass. App. Ct. 744, 751 (1993). Further, two other principles have particular relevance to the issues in this appeal. First, "[i]f the [trial] court's account of the evidence is plausible in light of the record viewed in its entirety, the [appellate court] may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous." Edinburg v. Edinburg, 22 Mass. App. Ct. 199, 203 (1986), quoting from Anderson v. Bessemer City, 470 U.S. 564, 573-574 (1985). Second, "the burden is squarely on the appellant to show an appellate court that a finding is clearly erroneous." Edinburg v. Edinburg, supra at 203, quoting from First Pa. Mort. Trust v. Dorchester Sav. Bank, supra at 621-622.

A key finding made by the judge was that, at the time of the mortgage discharge and the cancellation of the note, ComFed had several procedures in place to ensure that any mortgage discharge would be issued only after the underlying indebtedness had been paid. That finding was supported by the deposition testimony of Virginia S. Landers (then Hanrahan) who was employed by ComFed from September, 1985, until September, 1986. From April, 1986, to September, 1986, she was assistant vice-president of ComFed. Her duties included being in charge of ComFed's customer services, payoff, collection, and foreclosure departments. Landers was the only person at the bank responsible for executing discharges. Landers executed the mortgage discharge in her official capacity as assistant vice-president. The judge...