Southbridge RE, LLC v. Kiavi Funding Inc.
| Decision Date | 29 March 2023 |
| Docket Number | 3:21-cv-30061-KAR |
| Parties | SOUTHBRIDGE RE, LLC, Plaintiff, v. KIAVI FUNDING INC. & CHRISTIANA TRUST, A DIVISION OF WILMINGTON SAVINGS FUND SOCIETY, FSB, NOT IN ITS INDIVIDUAL CAPACITY BUT AS TRUSTEE FOR VICTORIA CAPITAL TRUST, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
MEMORANDUM AND ORDER ON PLAINTIFF'S CROSS MOTION FOR SUMMARY JUDGMENT & DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (DKT. NOS. 28 & 32)
This case arises out of foreclosure proceedings on two commercial properties purchased by Southbridge RE, LLC (Plaintiff) in 2018. Plaintiff obtained loans from Defendant LendingHome Funding Corporation (LendingHome) now known as Kiavi Funding (Kiavi), to purchase the real estate at 103 Prospect Street in Springfield (Springfield Property) and 25 Pleasant Street in Westfield (Westfield Property).[1]The loans were secured by mortgages on the properties in favor of LendingHome. Plaintiff contends that LendingHome's assignments of the mortgages to Defendant Christiana Trust, a division of Wilmington Savings Fund, FSB, not in its individual capacity but as trustee for Victoria Capital Trust (Christiana Trust) which foreclosed on the properties, were not valid because LendingHome had previously assigned the mortgages to Toorak Capital Partners (Toorak). Before the court are the parties' cross-motions for summary judgment (Dkt. Nos. 28 & 32). The parties have consented to this court's jurisdiction (Dkt. No 11). See 28 U.S.C. § 636(c); Fed.R.Civ.P. 73. For the reasons set forth below, the court denies Plaintiff's cross-motion for summary judgment and grants in part and denies in part Defendants' summary judgment motion.
Plaintiff acquired the deed to the Springfield Property on September 7, 2018 (PSOF ¶ 10; Def. Resp. ¶ 10). On September 5, 2018, Plaintiff executed a promissory note in the amount of $155,700 to LendingHome for the purchase of the Springfield Property (Springfield Note) (DASOF ¶ 2; Pl. Resp. ¶ 2). Plaintiff secured the note by granting LendingHome a commercial mortgage on the Springfield property (Springfield Mortgage) (DASOF ¶ 3; Pl. Resp. ¶ 3). On September 14, 2018, the Springfield Mortgage was recorded in the Hampden County Registry of Deeds in book 22357, at page 427 ).
On September 19, 2018, a LendingHome closing team leader appeared before a notary public and executed an Assignment of Deed of Trust on the Springfield Property in blank, meaning that the document did not identify an assignee, as security for a private funding agreement between LendingHome and Toorak (DASOF ¶ 52; Pl. Resp. ¶ 52; Dkt. No. 35-5 at 32).
Plaintiff defaulted under the terms of the Springfield Mortgage by failing to make the September 1, 2019 payment and all subsequent payments (DASOF ¶ 4; Pl. Resp. ¶ 4).
On December 13, 2019, LendingHome executed an assignment of the Springfield Mortgage to Christiana Trust (DASOF ¶ 6; Dkt. No. 35-1 at 51-52). The assignment was recorded in the Hampden County Registry of Deeds on December 13, 2019 in book 22999, at page 307 (Dkt. No. 35-1 at 51-52).
Although Plaintiff disputes that Christiana Trust held the Springfield Note and the Springfield Mortgage on that date, on October 14, 2020, James Missell, a LendingHome portfolio manager, representing LendingHome as the servicer of the Springfield Mortgage, executed a Certification Pursuant to Massachusetts 209 CMR § 18.21A(2)(c)[3]and an Affidavit Regarding Note Secured by a Mortgage to be Foreclosed stating that LendingHome assigned the mortgage to Christiana Trust and that Christiana Trust held the Springfield Note (DASOF ¶¶ 9, 10; Pl. Resp. ¶¶ 9, 10, 20, 21; Dkt. No. 35-1 at 53-56).
On November 2, 2020, LendingHome caused Plaintiff to be served with a Notice of Default and Election to Sell Property pursuant to paragraph 4.3(a) of the Springfield Mortgage (DASOF ¶ 11). Section 5 of the promissory note contained a waiver of notices of default (Dkt. No. 35-1 at 8). Section 7 of the Springfield Note indicated the means by which notices should be delivered to Plaintiff at 47 Harvard Street, Worcester, Massachusetts (Dkt. No. 35-1 at 8). Section 6.31.3(c) of the Springfield Mortgage, the provision that was specific to Massachusetts, stated that section 4.3(a) of the mortgage, entitled "Declaration and Notice of Default," was deleted in its entirety and replaced with the following: "Lender shall have the right to cause the Property to be sold under the power of sale contained in this Mortgage in any manner permitted by applicable law" (Dkt. No. 35-1 at 49). The Notice of Default and Election to Sell Property was sent by certified mail, return receipt requested, to Plaintiff, c/o Hunter Foote[4] at 103 Prospect Street, Springfield, MA; 14 Main Street, Wales, MA; 25 Pleasant Street, Westfield, MA; 47 Harvard Street, Suite 200, Worcester, MA;[5],[6]and 9 Central Street, Southbridge, MA. The notice was also sent to Plaintiff, c/o Hunter Foote, 119 Forest Street, Worcester, MA (Dkt. No. 35-1 at 57-80).[7] When Plaintiff failed to cure its default by November 9, 2020, the date stated in the notice, Christiana Trust scheduled a foreclosure sale of the Springfield Property on December 17, 2020 (DASOF ¶ 12; Pl. Resp. ¶ 12). Christiana Trust published a Notice of Mortgagee's Sale of Real Estate (Notice of Sale) in the Springfield Republican for three consecutive weeks on November 17, November 24, and December 1, 2020. The notice indicated that LendingHome had assigned the mortgage to Christiana Trust on December 13, 2019 (Dkt. No. 35-1 at 81; Dkt. No. 35-5 at 48-49 ¶ 7).
On November 23, 2020, Christiana Trust mailed Plaintiff a Notice of Intention to Foreclose Mortgage and Intent to Pursue Deficiency after Foreclosure along with the Notice of Sale and Certification Pursuant to Massachusetts 209 C.M.R. § 18.21A(2)(c) (DASOF ¶ 14; Pl. Resp. ¶ 14). On that date, Defendants' attorney executed an affidavit certifying that the Notice of Intention to Foreclose Mortgage and Intent to Pursue Deficiency were mailed to Plaintiff and others, postage prepaid, by registered mail with return receipt requested within twenty-one days of the sale (DASOF ¶ 15; Pl. Resp. ¶ 15).
Meanwhile, at some point not disclosed in the record, Toorak filled in its name and address as the assignee on the September 19, 2018 assignment in blank, and added the number assigned to the Springfield Mortgage by the Hampden County Registry of deeds, the book and page numbers of the recorded mortgage, and the recording date (Dkt. No. 35-5 at 31-32 and at 55 ¶ 10). The assignment to Toorak was recorded in the Hampden County Registry of Deeds on November 30, 2020 in book 23560, at page 35 .
On December 11, 2020, Plaintiff caused a Notice of Lease on the Springfield property to be recorded in the Hampden County Registry of Deeds in book 23584, at page 439 ). The notice stated that Plaintiff entered into a six-year lease with Cia Recovery Services, LLC, on December 1, 2020. Cia Recovery Services, LLC, was owned and operated by Michelle Ngila, who was involved in a relationship with Foote, the former manager and registered agent for Plaintiff who executed the Springfield Note and Mortgage (DASOF ¶¶ 17, 18; Pl. Resp. ¶¶ 17, 18; Dkt. No. 35-2 at 95).
The foreclosure sale of the Springfield Property was postponed by public proclamation from December 17, 2020 to January 21, 2021 after Foote made a down payment on an approved short sale of the property (Dkt. No. 39 at 1-2 ¶¶ 3, 4). On January 21, Ngila entered the highest bid of $141,000. Because Ngila failed to close within the time provided by the Memorandum of Sale Contract, Christiana Trust terminated the purchase and sale contract and offered the Springfield Property to Ruby Realty, the second highest bidder at the foreclosure sale. Ruby Realty contracted to purchase the Springfield property for $140,900 but has not closed on the sale due to the title dispute. Plaintiff owes a total of $266,811.10 under the terms of the Springfield Mortgage (DASOF ¶¶ 19, 20, 22-25; Pl. Resp. ¶¶ 19, 20, 22-25).
On June 1, 2021, representatives of LendingHome, Toorak, and Christiana Trust executed an affidavit under Mass. Gen. Laws ch. 183, § 5B (5B Affidavit) explaining the reasons why the mortgage assignment in which Toorak appeared as the assignee was invalid and stating that the affiants elected to void this assignment (Dkt. No. 30-9). This affidavit was recorded in the Hampden County Registry of Deeds in book 23943, at page 530 .
Plaintiff purchased the Westfield Property on October 4, 2018 (PSOF ¶ 1; Def. Resp. ¶ 1). On October 11, 2018 Plaintiff executed a promissory note to LendingHome in the amount of $175,000 to finance the purchase of the Westfield Property (Westfield note) (DASOF ¶ 26; Pl. Resp. ¶ 26). Plaintiff secured the note by granting LendingHome a commercial mortgage on the Westfield Property in the amount of $175,000 (Westfield Mortgage) (DASOF ¶ 27; Pl. Resp. ¶ 27). On October 11, 2018, the Westfield Mortgage was recorded in the Hampden County Registry of Deeds in book 22401, at page 130 ).
On October 16, 2018, a LendingHome representative executed an assignment of the Westfield Mortgage before a notary public. Like LendingHome's September 19, 2018 assignment of the Springfield Mortgage, the assignment of the Westfield Mortgage was in blank, meaning that, again, no assignee was identified in the document at the...
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