Weiss v. JPMorgan Chase Bank, N.A. (In re Thibault)

• Decision Date: 29 September 2014
• Docket Number: Bankruptcy No. 13–31204.,Adversary No. 14–3001.
• Citation: 518 B.R. 698
• Court: U.S. Bankruptcy Court — District of Massachusetts
• Parties: In re Yvette THIBAULT, Debtor. Steven Weiss, Trustee, Plaintiff, v. JPMorgan Chase Bank, N.A. and Mortgage Electronic Registration Systems, Inc., Defendants.

518 B.R. 698

In re Yvette THIBAULT, Debtor.Steven Weiss, Trustee, Plaintiff

v.JPMorgan Chase Bank, N.A. and Mortgage Electronic Registration Systems, Inc., Defendants.

Bankruptcy No. 13–31204.

Adversary No. 14–3001.

United States Bankruptcy Court, D. Massachusetts, Western Division.

Signed Sept. 29, 2014.

Steven Weiss, Shatz, Schwartz & Fentin, P.C., Springfield, MA, for Plaintiff.

Jeffrey D. Adams, Morgan Lewis & Bockius LLP, Boston, MA, for Defendants.

MEMORANDUM OF DECISION

HENRY J. BOROFF, Bankruptcy Judge.

Before the Court are the “Defendants' Motion to Dismiss Plaintiff's Complaint” (the “Motion to Dismiss”), the “Trustee's Motion for Summary Judgment Against Both Defendants” (the “Trustee's Summary Judgment Motion”), and the “Defendants' Cross–Motion for Summary Judgment” (the “Defendants' Summary Judgment Motion”). Resolution of each of the motions requires the Court to determine a single issue: whether a mortgage recorded under a spelling of the debtor's last name that differs from the spelling asserted by the Chapter 7 trustee (the “Trustee”) to be the “correct” spelling is avoidable by the Trustee pursuant to 11 U.S.C. § 544(a).¹

I. FACTS AND TRAVEL OF THE CASE

In 1964, Yvette Thibault (the “Debtor”) and George Thibault, the Debtor's husband (now deceased), acquired real property located in Springfield, Massachusetts and used as their primary residence (the “Property”). On the deed transferring ownership of the Property (the “Deed”), the Debtor and her husband's last name is spelled “Thibe ault,” with an “e.” The Deed was recorded and indexed at the Hampden County Registry of Deeds (the “Registry”) under the last name Thibe ault.

In April 1990, the Debtor and her husband granted a mortgage on the Property to Credit Union Providence.² The mortgage documents refer to their last name as Thibe ault, and both the Debtor and her husband signed the documents using that spelling. Upon recording, the 1990 mortgage (as well as a later discharge of the mortgage) was indexed under the last name Thibe ault.

In February 1992, the Debtor and her husband refinanced the outstanding mortgage loan, granting a new mortgage on the Property to Home Credit Corp. The mortgage documents and the signatures again use the spelling Thibe ault and were thus indexed by the Registry under that spelling of the last name. A subsequent discharge of that mortgage was recorded the same way.³ Shortly thereafter, however, the Debtor and her husband executed a “Certificate of Correction in Name of Owner of Real Estate” (the “Certificate of Correction”). The Certificate of Correction refers to their ownership of property under the name Thibe ault, and states that “our present name is ‘George and Yvette Thibault.’ ” Complaint Ex. C, Jan. 7, 2014, ECF No. 1. The Certificate of Correction was recorded on March 19, 1992, and indexed in the Registry only under the name “Thibault”.

In 1993, the Debtor and her husband granted a mortgage on the Property to Beneficial Mortgage Corp. to secure a $35,000 line of credit. The Debtor and her husband signed the mortgage documents using the spelling “Thibault” (without an e ). The mortgage documents, however, refer to both spellings of the last name by identifying the Debtor and her husband as “George Thibault a/k/a/ George Thibe ault and Yvette Thibault a/k/a Yvette Thibe ault.” Def. App. 73, April 15, 2014, ECF No. 24 (emphasis supplied). The 1993 mortgage (and its later discharge) was accordingly indexed under both spellings of the last name.

In 1995, the Debtor and her husband executed yet another mortgage on the Property to Contimortgage Corp. In the 1995 mortgage documents, the last name is spelled with an e and the signatures also contain an e. The 1995 mortgage (and its later discharge) was recorded and indexed under the last name Thibe ault.

In November 2001, a Declaration of Homestead was drafted with the Debtor's last name spelled Thibe ault, and was recorded under that spelling. The Debtor's signature, however, appears to use the spelling without the e.

On April 1, 2004, the Debtor borrowed $61,000 from Webster Bank and granted the mortgage at issue here (the “Mortgage”) to Mortgage Electronic Registration Systems (“MERS”) as nominee for Webster Bank. Both the Mortgage documents and the Debtor's signature spell the Debtor's last name as Thibe ault. Consequently, the Mortgage was indexed under the last name Thibe ault in the Registry. On November 22, 2013, Webster Bank assigned its rights under the Mortgage to JPMorgan Chase Bank, N.A. (“Chase”) by an assignment of mortgage using the spelling of the Debtor's last name with an e.

Accordingly, an electronic search of the Registry under each spelling of the Debtor's last name returns the following results:

Thibeault
5/22/1964	Deed to George and Yvette Thibeault
	4/25/1990	Mortgage (Credit Union Providence)
	2/10/1992	Mortgage (Home Credit Corp.)
	3/31/1992	Discharge of Mortgage (Credit Union Providence)
	5/7/1993	Mortgage (Beneficial Mortgage Co.)
	7/28/1995	Mortgage (Contimortgage Corp.)
	8/17/1995	Discharge of Mortgage (Beneficial Mortgage Co.)
	9/19/1995	Discharge of Mortgage (Contimortgage Corp.)
	11/1/2001	Declaration of Homestead
	4/6/2004	Mortgage (MERS as Nominee for Webster Bank)
	5/11/2004	Discharge of Mortgage (Manufacturers and Traders)

	Thibault
3/19/1992	Certificate of Correction
	5/7/1993	Mortgage (Beneficial Mortgage Co.)
	8/17/1995	Discharge of Mortgage (Beneficial Mortgage Co.)

On October 30, 2013, the Debtor filed for protection under Chapter 7 of the Bankruptcy Code. In the box calling for the “Name of Debtor,” the Debtor's last name is spelled Thibault (without an e ). Directly beneath, in the section requiring the Debtor to list all other names used by the Debtor in the last 8 years, it states “AKA Yvette Thibeault.” According to the Trustee, at the initial meeting of creditors, the Debtor presented a Massachusetts driver's license on which her last name was spelled Thibault, without an e.

On January 7, 2014, the Trustee commenced this adversary proceeding against Chase and MERS (the “Defendants”) in which he seeks avoidance of the Mortgage pursuant to § 544 and preservation of the Mortgage for the bankruptcy estate under § 551. The Defendants filed their Motion to Dismiss, and the Trustee followed with his Summary Judgment Motion. The Defendants responded with their own request for summary judgment. After a hearing on the Motion to Dismiss and the Summary Judgment Motions held April 23, 2014, the Court took the matter under advisement.

II. POSITIONS OF THE PARTIES

The Trustee argues that the Mortgage may be avoided pursuant to the “strong-arm” powers of § 544, because the Mortgage was not recorded under the name “Thibault”—which, the Trustee maintains, is the “legally correct” spelling of the Debtor's last name. According to the Trustee, his only duty was to search the Registry under Debtor's “true” surname, a search which would not have revealed the existence of the Mortgage. The Trustee asserts that “the Mortgage does not correctly identify the Debtor,” “does not provide notice to a bona fide purchaser without actual notice of the Mortgage,” is therefore avoidable under § 544(a)(3), and may be preserved for the benefit of the estate pursuant to § 551. Complaint 4, ¶ 19.

The Defendants respond with the assertion that the spelling of the Debtor's last name with an e —as Thibe ault—is not a material defect, but rather a slight variation or scrivener's error. Relying on Massachusetts case law, as well as the Real Estate Bar Association's Title Standard Number 21, the Defendants say that this type of minor variation does not preclude the Mortgage from providing constructive notice to perspective bona fide purchasers. According to the Defendants, therefore, the recording of the Mortgage was sufficient to constitute constructive notice of its existence.

The Defendants further argue that, even if the variation in the Debtor's name were material, the Trustee had constructive notice of the Mortgage on account of the three filings indexed under the name Thibault—the Certificate of Correction, the 1993 mortgage, and the associated release of that mortgage. Relying on Agin v. JPMorgan Chase Bank, N.A. (In re Adams), 462 B.R. 1 (Bankr.D.Mass.2011), the Defendants say that because those three documents provide information, within the chain of title, that the Debtor was also known by the last name Thibe ault, they provide constructive notice of the Mortgage.⁴

III. DISCUSSION

A. Jurisdiction

The Court has jurisdiction over this core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (K), and (O).

B. Summary Judgment Standard

“In order to prevail on a motion for summary judgment, the moving party must show ‘that there is no genuine dispute as to any material fact’ and that it ‘is entitled to judgment as a matter of law.’ ” OneBeacon Am. Ins. Co. v. Commercial Union Assur. Co. of Canada, 684 F.3d 237, 241 (1st Cir.2012) (quoting Fed.R.Civ.P. 56(a) ). Here, the material facts are not in dispute and the Court may rule on the issues raised by the cross-motions for summary judgment as a matter of law.

C. Avoidance of the Mortgage under § 544(a)

By reason of the so-called “strong-arm” clause of 11 U.S.C. § 544(a)... the Trustee [may] avoid a transfer of an interest in real property of the Debtor to the extent a bona fide purchaser of the property may avoid the transfer. The Trustee has these powers “without regard to the knowledge of the [T]rustee or of any creditor.” The Trustee nevertheless takes the property subject to any constructive knowledge imposed upon creditors and purchasers under applicable state law.

Collins v. Bank of New England–West, N.A. (In re Daylight Dairy Products, Inc.), 125 B.R. 1, 3 (Bankr.D.Mass.1991) (quoting 11 U.S.C. § 544(a) ) (additional citations omitted).⁵ In other words, the avoidance powers contained in § 544(a) cannot defeat a security interest if the trustee “is charged with notice by a statute or rule of law.” Dwyer v. Rockland Trust Co. (In re Mammola), 474 B.R.

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