Author Archives: Abigail Pugliese

About Abigail Pugliese

Abigail is a third year student at Brooklyn Law School and is anticipating to graduate in May 2013 with a Real Estate Law Certificate. Abigail received her B.S. from Villanova University, majoring in Accounting with minors in Real Estate and Business Law. She has interned with CBRE, Barton LLP, the New York State Office of the Attorney General in the Real Estate Finance Bureau, and the Housing Partnership Development Corporation. She is currently interning with Abrams Garfinkel Margolis Bergson LLP.

Maine Court Vacates Summary Judgment Ruling in Favor of Bank in a Foreclosure Action Because Bank’s Affidavits Contained Irregularities

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In HSBC Mortgage Services, Inc. v. Murphy et al., 19 A.3d 815 (Me. 2011), the court held that the district court erred by granting the Bank’s summary judgment, because the Bank’s affidavits contained “serious irregularities.”

In 2005, a mortgagor executed a note and mortgage with Calusa Investments (“Calusa”). The mortgage identified Calusa as the lender and MERS as nominee for the lender. The note did not mention MERS. “On December 11, 2006, MERS executed a document purporting to assign the mortgage to HSBC. On August 24, 2009, MERS executed a document purporting to confirm the assignment of the note and mortgage to HSBC.” In 2008, HSBC filed a complaint for foreclosure against mortgagor and moved for summary judgment. HSBC’s first motion for summary judgment was denied, while its second motion for summary judgment was granted. In its second motion for summary judgment, HSBC proved ownership of the note and mortgage through an endorsement signed by Calusa’s Director of Operations and affidavits signed by HSBC’s Vice President. Mortgagor appealed.

This court concluded that the “affidavits submitted by HSBC contain serious irregularities that make them inherently untrustworthy,” in violation of M.R. Evid. 803(6). In determining trustworthiness, the courts consider many factors, and “in the setting of summary judgment practice, any substantial errors or defects in the affidavit itself submitted in conjunction with the moving party’s statement of material facts.”

Here, the affidavit swears that the confirmatory assignment of the mortgage and note dated August 24, 2009 was recorded as of that date. However, the copy of the confirmatory assignment states that it was recorded on August 27, 2009—three days after the affidavit was signed and dated. Additionally, Maria Vadney not only signed the affidavit on behalf of HSBC, but she also signed the confirmatory assignment on behalf of MERS. It is unclear if she was an officer of both parties. Other deficiencies contained in HSBC’s affidavits included (1) “the signature and jurat appear[ing] on a page separate from the body of the affidavit”; and (2) “information . . . that was not available until more than four months after the affidavit was sworn . . . .” Thus, HSBC’s affidavits did not satisfy the requirements of M.R. Evid. 803(6), and the district court erred by granting HSBC summary judgment.

Pennsylvania Court Holds Bank Has Standing to Bring Mortgage Foreclosure Action Before an Assignment to Bank is Recorded

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In US Bank v. Mallory, 982 A.2d 986 (Pa. Super. 2009), the Pennsylvania Superior Court affirmed an order of the Court of Common Pleas of Philadelphia, denying Appellant Mallory’s petition to strike and/or open the default judgment entered in favor of Appellee. Appellant alleged that the default judgment should be stricken because Appellee (1) did not “plead properly an assignment on the face of the record”; (2) did not have standing to bring the mortgage foreclosure action; and (3) “the trial court erred in denying Appellant’s petition to open default judgment.

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In 2006, Appellant executed a mortgage with MERS. In 2007, Appellee filed a complaint in mortgage foreclosure against Appellant, and received a default judgment against Appellant. The property was listed for Sheriff’s sale, before which Appellant filed a petition to strike the default judgment. The Court of Common Pleas of Philadelphia denied the petition and Appellant appealed.

The court “conclude[d] that there was not a fatal defect apparent on the record such that the trial court erred in denying Appellant’s petition to strike.” Appellee stated in its mortgage complaint that “Plaintiff is now the legal owner of the mortgage and is in the process of formalizing an assignment of same,” whereby “sufficiently put[ting  Appellant] on notice of Appellee’s claim of interest with regard to the subject mortgage.” First, Pa.R.C.P. 1147(a)(1) does not require “a recorded assignment as a prerequisite to filing a complaint in mortgage foreclosure.” Second, Appellee’s statement in the complaint excused Appellee from attaching a copy of the written assignment required under Pa.R.C.P. 1019. Third, the Appellee had standing to bring the foreclosure complaint because it was a real party in interest under Pa.R.C.P. 2002(a) since recordation of the assignment was a not a prerequisite. Regardless, Appellant’s petition to open the default judgment was properly denied, because Appellant’s petition was not promptly filed.

Maryland District Court Dismisses Mortgagor’s Claims to Invalidate Foreclosure

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In Parillon v. Fremont Investment & Loan, et al., Civil No. L-09-3352, 2010 WL 1328425  (D. Md. March 25, 2010), the court granted bank/MERS’s motion to dismiss with respect to all of mortgagor claims, because Plaintiff mortgagor “filed a conclusory complaint that fails to state any grounds upon which the loan to him might be invalidated or the foreclosure enjoined.”

In 2006, Plaintiff obtained a loan from Defendant Fremont Investment & Loan (“Fremont”) and granted Defendants a lien against his residence, with Defendants Fremont as Trustee and MERS as beneficiary. Defendant Litton Loan Servicing LP (“Litton”) sent Plaintiff a Notice of Foreclosure, with the foreclosing parties being Defendant HSBC and Defendant Ace Securities Corp. Home Equity Loan Trust. Plaintiff filed a complaint and Defendants Fremont, Litton, MERS, and Wells Fargo moved to dismiss.

Defendant Wells Fargo’s motion to dismiss was granted, because the complaint contained “no specific information regarding Wells Fargo’s role in the events at issue.”

With respect to all other Defendants, the court dismissed Plaintiff’s claim for quiet title because Plaintiff “executed a deed of trust granting the mortgagee an interest in his property,” and so his residence was not vested in him alone. The court similarly dismissed Plaintiff’s rescission based on fraud claim, breach of contract claim, and his claims under the Maryland Protection of Homeowners in Foreclosure Act and the Home Ownership and Equity Protection Act, because all failed to allege any elements or facts regarding such claims.

Meanwhile, Plaintiff’s claim under the Fair Debt Collection Practice Act was dismissed, because it “specifically exempts defendants attempting to collect their own debts, mortgagors, and mortgage servicing companies.” Plaintiff’s Real Estate Settlement Procedures Act and Truth in Lending Act claims were also dismissed because they were (1) time-bared with respect to damage and (2) conclusory with respect to equitable relief.

Lastly, the court dismissed Plaintiff’s breach of fiduciary duty claim, because “Maryland courts don’t recognize a separate tort of breach of fiduciary duty.”

Pennsylvania Court Denies MERS Motion to Dismiss and Rules that a Recorder of Deeds May Bring a Quiet Title Action to Compel MERS to Record Mortgage Assignments

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In Montgomery County, Pennsylvania v. MERSCORP, INC., No. 11 CV 6968, 2012 WL 5199361 (E.D. Pa. Oct. 19, 2012), the court denied MERS’s motion to dismiss because 21 Pa. Stat. 351 requires recordation of all conveyances and because the “Legislature intended to create the quiet title claim” to enforce 21 Pa. Stat. 351.

The Montgomery County Recorder of Deeds brought a putative class action seeking to compel Defendants to record past, present, and future mortgage assignments. MERS filed a motion to dismiss stating “that the Plaintiff fails to state a claim because the Pennsylvania recording statute, 21 Pa. Stat. 351 does not make recording of conveyances compulsory.” However, the text of that statute clearly states that “all . . . conveyances. . . shall be recorded in the [relevant] office for the recording of deeds.” Further, the statute “appears under the heading “NECESSITY OF RECORDING AND COMPULSORY RECORDING.” Other statutes state “may be recorded” and appear under the heading “INSTRUMENTS SUBJECT TO RECORD.” which words would make filing permissive. That is not the case here.

The Defendants alternatively argued that Plaintiff is not entitled to bring an implied right of act under 21 Pa. Stat. § 351, because Plaintiff is not the present owner of the property. “In Pennsylvania, a quite title action ‘may be brought . . . to compel an adverse party to . . . record . . . any document, obligation or deed affecting any right, lien, title, or interest in land.’” Under Pa. R. Civ. P. 1061(b)(3). The court states, with reference to Pennsylvania legislative history and predecessor statutes,  that “a plaintiff states a claim for quiet title relief by pleading, among other elements, that she is ‘the present owner of such premises, or…any other person, or persons, in any manner interested in any such…conveyances.” Act of April 1, 1863, P.L. 188, § 1, P.L. 188, § 1, repealed in part by 42 Pa. Cons. Stat. § 20002(a)[414]. “A plaintiff must still show an interest of some type in the land at issue or some pecuniary interest which is affected by the status of the relevant documents as recorded or unrecorded.” Plaintiff pleaded that Plaintiff’s office collects no fee when MERS, as nominee for the mortgage owner, assigns mortgages. Further, since Plaintiff has recorded “At least 10,000 mortgages” for MERS, it would be entitled to fees if these mortgages were in fact recorded. Therefore, Plaintiff (1) is a party that may bring an implied right of action and (2) has pleaded sufficient facts to establish a pecuniary interest affected by the assignment recordation.

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Plaintiff’s claim of unjust enrichment was not dismissed because Plaintiff adequately stated in its complaint the requisite three elements for such claim. (1) “Defendants availed themselves of the benefits of the recording system by recording mortgages in the name of MERS as nominee, (2) Defendants, by tracking the transfer of beneficial interests in a MERS-as-nominee mortgage, have evaded recording fees that the beneficial owners would otherwise owe based on these transfers, and (3) Defendants, by recording mortgages in the name of MERS-as-nominee but continuing to transfer the beneficial interest in these mortgages, artificially and unlawfully created gaps in the chain of title of these mortgages.”

Plaintiff’s claim of civil conspiracy was dismissed because Plaintiff did not plead that Defendants “acted with the specific intent to harm the Plaintiff,” and therefore the third element, requiring malice, was absent from the claim.

Pennsylvania Court Voids Default Judgment and Sets Aside Sheriff’s Sale

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In Wells Fargo Bank, N.A. v. Lupori, 8 A.3d 919 (Pa. Super. 2010), the court “reverse(d) the trial court’s order denying the [Plaintiff’s] petition to strike the default judgment against them and set aside the sheriff’s sale.”

The court cited U.S. Bank v. Mallory, 982 A.2d 986 (Pa. Super. 2009), which stated “where a fatal defect or irregularity is apparent from the face of the record, the prothonotary will be held to have lacked the authority to enter [a] default judgment and the default judgment will be considered void.” According to Pa.R.C.P. 1147(a)(1), a plaintiff in a foreclosure action shall state in its complaint “the parties to and the date of the mortgage, and of any assignments, and a statement of the place of record of the mortgage and assignments.” The bank in Mallory “stated in its complaint in foreclosure that ‘it was the legal owner of the mortgage and was in the process of formalizing the assignment thereof.’” Mallory held this was sufficient notice to the owner that the bank was the legal owner of the mortgage, despite the assignment still being processed.

Here, however, in its complaint in the foreclosure action, Wells Fargo refers to the assignment from First Franklin to First Franklin Financial Corporation, but does not refer to an assignment to Wells Fargo nor does it allege it was the owner of the mortgage. Thus, the Plaintiff here was not put on notice that Wells Fargo was the legal owner of the mortgage note, and Wells Fargo’s complaint does not comply with Pa.R.C.P. 1147(a)(1).

Pennsylvania Court Holds that a Homeowner May Bring Suit in Federal Court After State Court Issued a Judgment of Default against Homeowner

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In Straker v. Deutsche Bank National Trust, et al., No. 3:09 CV 338, 2011 WL 398374 (M.D. Pa. Feb. 3, 2011), the district court held that a homeowner’s case would not be dismissed, as requested by Defendants, due to subject matter jurisdiction, issue preclusion, claim preclusion, or the statute of limitations. Claims regarding the Real Estate Settlement Procedures Act (RESPA) as to Homeq would not be dismissed, while claims involving the Racketeer Influenced and Corrupt Organizations Act (RICO), RESPA as to Deutsche Bank and MERS were dismissed.

In 2006, MERS sold Plaintiff two subprime loans. MERS assigned one mortgage to Deutsche Bank, “who instituted a foreclosure action in state court, which resulted in a judgment by default against Plaintiff.” The homeowner Plaintiff then filed a complaint in federal court, claiming RICO and RESPA violations, civil conspiracy, unjust enrichment, and fraudulent inducement. The Defendants moved to dismiss the complaint, and Plaintiff moved to strike part of Defendants’ motion.

The district court reviewed the Magistrate Judge’s report and recommendation de novo. With regard to subject matter jurisdiction, the district court determined that “the Rooker Feldman doctrine did not divest this Court of jurisdiction” because Plaintiff was complaining of injuries that existed before the state court foreclosure actions, and were not caused by the state court proceedings. Further, the court ruled issue preclusion does not estop Plaintiff from relitigating in federal court since “the state court judgment against [Plaintiff] was by default.” Notably, claim preclusion did not estop Plaintiff from bringing suit at this point in litigation since Plaintiff alleged she was not served with a complaint in the foreclosure action, which voids a judgment in Pennsylvania.

Plaintiff’s common law claims and RESPA claim under 12 U.S.C. 2607 were not time-barred. The statute of limitations for common law claims runs from the time “plaintiff learns of the injury and its cause.” Plaintiff claimed she discovered her claims within this time span, and so, the claims cannot be dismissed under a 12(b)(6) motion. With respect to the RESPA claim, the statute of limitations was “not evident on the face of the amended complaint” and so the claim cannot be dismissed under a 12(b)(6) motion.

The court also ruled that Plaintiff’s RICO claims should be dismissed because plaintiff failed to state a claim under 18 U.S.C. 1964. Plaintiff “fail[ed] to allege sufficient facts to support her claims and lacks the requisite level of precision required in civil claims based on underlying fraud under Federal Rule of Civil Procedure 9(b).”

Claims under 12 U.S.C. 2605(e) were dismissed in part. Plaintiff claims that Deutsche Bank failed to sign its response to a qualified written request, but there is no requirement under RESPA for this, and so Plaintiff fails to state a claim under 2605(e). However, with respect to Defendant Homeq, Plaintiff states a claim, because she alleged Homeq failed to timely respond, which is indeed a violation of 2605(e).

All claims relating to MERS were dismissed since Plaintiff failed “to allege that MERS took any actions leading to [Plaintiff’s] alleged harm.”

Pennsylvania Superior Court Rules that Appellant’s Claim Against MERS is Time-Barred

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In Mortgage Electronic Registration Systems, Inc., et al. v. Ralich, 2009 PA Super 163 982 A.2d 77, the Superior Court affirmed the Court of Common Pleas’s holding granting MERS’s motion to strike Appellant’s, Ralich, petition to set aside the sheriff’s sale and to dismiss foreclosure proceedings, because the Appellant’s petitions were untimely and not excused by any exception.

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Pursuant to Pennsylvania Rules of Civil Procedure 3135(a) and 3132, a party in interest must petition the court to set aside a sheriff’s sale within 20 days “after the filing of the schedule of distribution or the execution sale” and before the sheriff issues a sheriff’s deed. A court only excuses an untimely petition if the petitioner shows there was either fraud or lack of authority to make the sale.

Here, Appellant’s petition was untimely because it was filed three months after the sheriff issued a deed. Appellant claimed that the untimely petition should be excused because (1) “various procedural irregularities plagued the sale,” (2) there was fraud, and (3) MERS lacked authority to complete the sheriff’s sale. The Trial Court, with the Superior Court affirming, dismissed each of these claims, respectively, stating that (1) a sheriff’s sale cannot be set aside because of procedural deficiencies, (2) Appellant’s failed to state fraud with particularity, and (3) MERS had authority because the mortgage itself “vest(ed) MERS, as nominee, to enforce the loan.”