Opinion
BANSC-RE-16-87
10-24-2019
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. AS TRUSTEE FOR FDIC 2013-R2 ASSET TRUST Plaintiff, v. FIRST MAGNUS FINANCIAL CORPORATION, ROBERT W. GRANT, and FELANCY G. GRANT Defendants.
THE BANK OF NEW YORK MELLON TRUST CO NA - PLAINTIFF 611 JAMISON ROAD ELMA NY 14059 Attorney for: THE BANK OF NEW YORK MELLON TRUST CO NA WILLIAM B JORDAN - RETAINED 03/06/2018 KORDE & ASSOCIATES PC Attorney for: THE BANK OF NEW YORK MELLON TRUST CO NA LEONARD F MORLEY JR - RETAINED 09/08/2016 KORDE & ASSOCIATES PC Attorney for: THE BANK OF NEW YORK MELLON TRUST CO NA COREY HADLEY - RETAINED 10/16/2017 KORDE & ASSOCIATES PC
THE BANK OF NEW YORK MELLON TRUST CO NA - PLAINTIFF 611 JAMISON ROAD ELMA NY 14059 Attorney for: THE BANK OF NEW YORK MELLON TRUST CO NA WILLIAM B JORDAN - RETAINED 03/06/2018 KORDE & ASSOCIATES PC
Attorney for: THE BANK OF NEW YORK MELLON TRUST CO NA LEONARD F MORLEY JR - RETAINED 09/08/2016 KORDE & ASSOCIATES PC
Attorney for: THE BANK OF NEW YORK MELLON TRUST CO NA COREY HADLEY - RETAINED 10/16/2017 KORDE & ASSOCIATES PC
ORDER
WILLIAM ANDERSON, JUSTICE
Bank of New York Mellon Trust Company (New York Mellon) seeks a declaratory judgment declaring that it is the owner of all rights in a certain note and mortgage executed by Robert W. Grant and Felancy G. Grant. New York Mellon further seeks an order compelling First Magnus Financial Corporation to assign any interest it has in the note and mortgage to New York Mellon. A trial was held on this matter on January 23, 2019.
I. Background
The following facts are alleged in New York Mellon's complaint. On May 5, 2006 Robert W. Grant and Felancy G. Grant executed a promissory note for $134,000 listing First Magnus Financial Corporation (First Magnus) as the lender. To secure the note, the Grants executed a mortgage that identified First Magnus as the "lender" and Mortgage Electronic Registration Systems, Inc. (MERS), as "nominee" for the lender. The mortgage was recorded at the Penobscot Country Registry of Deeds in Book 10421, Page 102. The mortgage was then assigned by MERS to Residential Credit Solutions, Inc. and the mortgage was further assigned to New York Mellon. On December 8, 2017, New York Mellon filed a complaint alleging that it was the equitable owner of the mortgage because the original lender of the mortgage, First Magnus, actually intended that MERS have all rights as mortgagee, including the right to transfer all interest in the mortgage to a subsequent holder of the note. According to New York Mellon, MERS transferred all interest in the mortgage to New York Mellon and because any interest in the mortgage held by First Magnus is held in trust for New York Mellon's benefit, New York Mellon is the equitable owner of the mortgage and is entitled to an order compelling First Magnus to assign any interest it has in the mortgage to New York Mellon.
This case has been held under advisement by the Superior Court pending the Law Court's opinion in Beal Bank United States v. New Century Mortg. Corp.. 2019 ME 150, ___ A .3d ___, Now that the Law Court has rendered a decision in Beal Bank, the court will rule on the issues presented here.
II. Discussion
The Law Court's rulings in Bank of America. N.A. v. Greenleaf, 2014 ME 89, 96 A.3d 700 and Beal Bank control the outcome of this case. According to Greenleaf. a party seeking a foreclosure must present proof of its status as a holder of the note and owner of the mortgage to establish its standing. Bank of America. N.A. v. Greenleaf, 2014 ME 89. 96 A.3d 700. In Greenleaf. the Law Court interpreted a mortgage and a purported assignment of the mortgage by MERS to Bank of America. Id. ¶¶ 12-17. The language interpreted by the Law Court in Greenleaf is the same language found in the mortgage at issue in this case. The Law Court held that the assignment only provided MERS with the right to record the mortgage as the lender's nominee. Greenleaf. 2014 ME 89, Id. ¶¶ 12-17, 96 A.3d 700. Because MERS had only acquired the right to record the mortgage as nominee and not ownership of the mortgage, MERS could not assign ownership of the mortgage to Bank of America. Id. ¶¶ 12-17; see also Beal Bank. 2019 ME 150, ¶ 9, ___ A.3d ___. The Law Court further rejected Bank of America's argument that, even if the mortgage was not formally assigned, it still became the mortgagee and obtained the right to enforce the note once it took possession of the note. Id. ¶¶ 12-17; see also Beal Bank. 2019 ME 150, ¶ 10, ___A.3d ___.
The mortgage states as follows:
(C) "MERS" is Mortgage Electronic Registration Systems, inc. MERS is a separate corporation that is acting solely as a nominee for Lender and Lender's successors and assigns. MERS is organized and existing under the laws of Delaware, and has an address and telephone number of P.O. Box 2026, Hint, MI 48501-2026, tel. (888) 679-MERS. FOR PURPOSES OF RECORDING THIS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD.
(D) "Lender" means FIRST MAGNUS FINANCIAL CORPORATION
[Borrowers] mortgage, grant and convey the Property to MERS (solely as nominee for Lender and Lender's successors and assigns), with mortgage covenants, subject to the terms of this Security Instrument, to have and to hold all of the Property to MERS (solely as nominee for Lender and Lender's successors and assigns) and to its successors and assigns, forever... . [Borrowers] understand and agree that MERS holds only legal title to the rights granted by [Borrowers] in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right:
(A) to exercise any or all of those rights, including, but not limited to, the right to foreclose and sell the Property; and
(B) to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument.
[Borrowers] grant and mortgage to MERS (solely as nominee for Lender and Lender's successors in interests) the Property described [below].(Pl's Compi. Ex. B, at 2-4). This same language was interpreted by the Law Court in Greenleaf. See Greenleaf. 2014 ME 89, ¶ 13, 96 A.3d 700.
After Greenleaf. financial institutions in Maine have continued to argue that a holder of a note secured by a mortgage has an equitable pre-foreclosure right to compel an assignment of the mortgage. The Law Court addressed this argument directly in Beal Bank where the Law Court reviewed a Superior Court decision that denied an action to compel assignment of a mortgage based on an equitable right. In that case, the owners of a property signed a promissory note and mortgage that identified the defendant as the lender and MERS as the "nominee" for the lender. The note was transferred multiple times and eventually obtained by the plaintiff. The plaintiff filed a complaint alleging that, as the holder of the note, it was the equitable owner of the mortgage. According to the plaintiff, because New Century held any interest it had in the mortgage in trust for the plaintiff's benefit, it had the right to an order compelling New Century to assign "any interest" it held in the mortgage to the plaintiff. The Law Court affirmed the Superior Court and held that although the holder of a note may retain "some equitable interest in the accompanying mortgage, any such interest, standing alone, does not equate to actual ownership of mortgage nor is it sufficient to establish a pre-foreclosure right to compel its assignment." Beal Bank. 2019 ME 150, ¶ 15, ___A.3d ___. In its ruling, the Law Court expressly rejected the equitable trust doctrine in the context of foreclosure actions because its application would be "fundamentally at odds" with the court's holding in Greenleaf Id. ¶ 14; see also. Greenleaf. 2014 ME 89, ¶¶ 10-17, 96 A.3d 700.
The equitable trust doctrine states that
one who takes a mortgagee's title holds it in trust for the owner of the debt to secure [the debt for] which the mortgage was given. If a mortgage is given to secure negotiable promissory notes, and the notes are transferred, the mortgagee and all claiming under him will hold the mortgaged property in trust for the holder of the notes.Beal Bank United States v. New Century Mortg, Corp.. 2019 ME 150, ¶ 7, ___A.3d ___; see also Jordon v. Cheney, 74 Me. 359, 361 (1883).
According to the Law Court, accepting the argument that the equitable trust doctrine effectively establishes ownership of a mortgage in the holder of the accompanying note
would require us to hold that, once a party becomes the "holder" of a note secured by a mortgage, that status would operate to automatically transfer ownership of the mortgage to that party, a construct that we implicitly rejected in Greenleaf and which would render our bifurcated standing analysis of the holder of the note and the owner of the mortgage entirely superfluous.Beal Bank. 2019 ME 150, ¶ 14, ___A.3d ___.
In this case, Felancy Grant and Robert Grant executed a note and mortgage that identified First Magnus as the lender and MERS as the "nominee" of the mortgage. The language in this mortgage assignment contains the same language that the court in Greenleaf held to mean that MERS acquired only the right to record as nominee and not ownership of the mortgage. When MERS assigned the mortgage, it was only able to effectively assign the right to record the mortgage as a nominee. Therefore, when the mortgage was eventually assigned to New York Mellon the assignment provided no more than these same nominee rights. New York Mellon's allegation that First Magnus intended to assign all rights in the mortgage to MERS is controverted by the plain and obvious language of the mortgage submitted to this court.
The mortgage in this case states as follows:
(Q "MERS" is Mortgage Electronic Registration Systems, Inc. MERS is a separate corporation that is acting solely as a nominee for Lender and Lender's successors and assigns. MERS is organized and existing under the laws of Delaware, and has an address and telephone [**707] number of P.O. Box 2026, Hint, MI 48501-2026, tel. (888) 679-MERS. FOR PURPOSES OF RECORDING THIS MORTGAGE, [***13] MERS IS THE MORTGAGEE OF RECORD.
(D) "Lender" means FIRST MAGNUS FINANCIAL CORPORATION
[Borrowers] mortgage, grant and convey the Property to MERS (solely as nominee for Lender and Lender's successors and assigns), with mortgage covenants, subject to the terms of this Security Instrument, to have and to hold all of the Property to MERS (solely as nominee for Lender and Lender's successors and assigns) and to its successors and assigns, forever. ... [Borrowers] understand and agree that MERS holds only legal title to the rights granted by [Borrowers] in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right:
(A) to exercise any or all of those rights, including, but not limited to, the right to foreclose and sell the Property; and
(B) to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument.
[Borrowers] grant and mortgage to MERS (solely as nominee for Lender and Lender's successors in interests) the Property described [below].(Pl's Compl. Ex. B, at 2-4). This same language was interpreted by the Law Court in Greenleaf. See Bank of Am.. N.A. v. Greenleaf, 2 014 ME 89.¶ 13, 96 A.3d 700.
The court also rejects Plaintiff's allegation that it is entitled to an order compelling assignment because Plaintiff is the equitable owner of the mortgage and First Magnus holds any interest it has in trust for the Plaintiff. However, the Law Court expressly rejected this proposition in Beal Bank when it rejected the equitable trust doctrine and ruled that, although the holder of a note may retain some equitable interest in the accompanying mortgage, "any such interest, standing alone, is insufficient to establish a pre-foreclosure right to compel assignment." Beal Bank. 2019 ME 150, ¶ 15, ___ A.3d ___. Under Beal Bank. Federal National has no right to compel an assignment of this mortgage. Applying the Law Court's ruling in Beal Bank and Greenleaf. the court denies New York Mellon's request for an order compelling assignment of the mortgage.
Entry:
New York Mellon's request for an order compelling assignment is denied. The clerk shall incorporate this order upon the docket by reference.