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Galvin v. EMC Mortgage Corp.

United States District Court, D. New Hampshire

September 25, 2014

Mark B. Galvin and Jenny Galvin
v.
EMC Mortgage Corporation et al

Page 71

For Mark B. Galvin, Jenny Galvin, Plaintiffs: Jamie Ranney, LEAD ATTORNEY, PRO HAC VICE, Jamie Ranney PC, Nantucket, MA; Paul J. Alfano, LEAD ATTORNEY, Alfano Law Office PLLC, Concord, NH.

For EMC Mortgage Corporation, Bank of New York Mellon, Defendants: Peter G. Callaghan, Preti Flaherty Beliveau Pachios LLP (Concord NH), Concord, NH.

Page 72

CORRECTED MEMORANDUM ORDER

Joseph N. Laplante, United States District Judge.

This case poses a question of statutory interpretation: what is the meaning of the term " mortgagee" in N.H. Rev. Stat. Ann. § 479:25, which allows " the mortgagee or his assignee" to conduct a foreclosure under the power of sale? Plaintiffs Mark and Jenny Galvin argue that " mortgagee" means the entity that " owns and holds both the borrower's note and mortgage interests." First Am. Petition (document no. 29) ¶ 85. They assert that none of the defendants--various entities who, at various times, held or claimed to hold (or claimed to represent the holder of) their mortgage and/or associated promissory note--is capable of showing that it presently holds either document, and accordingly seek an order enjoining any of them from foreclosing. The defendants, for their part, argue that a " mortgagee" is, simply, a party that holds the mortgage, and assert that, in any event, defendant Bank of New York Mellon (" Mellon" ), in its capacity as Trustee for the holders of shares in a pool of securitized mortgages, holds both the mortgage and the note.

This court has jurisdiction over this matter under 28 U.S.C. § 1332 (diversity) because the Galvins are citizens of New Hampshire, the defendants are citizens of other states, and the amount in controversy exceeds $75,000.[1] The defendants have moved, and the Galvins have cross-moved, for summary judgment on the Galvins' claim to enjoin foreclosure and their accompanying claim under the New Hampshire Consumer Protection Act (" CPA" ), N.H. Rev. Stat. Ann. § 358-A. Both motions are denied.

The evidence reveals that Mellon does, in fact, hold the Galvins' mortgage, by virtue of an assignment from the original mortgagee. The court cannot, however, conclude that Mellon also holds the note which that mortgage secures. The defendants have proffered a version of the note indorsed to " JPMorgan Chase Bank, as Trustee." They claim that this indorsement transferred the note to JPMorgan Chase Bank in its capacity as Trustee for the selfsame trust for which Mellon now serves as Trustee. If the defendants' claim is true, this would permit Mellon to enforce the note, as discussed in more detail infra. The defendants have not presented admissible evidence substantiating their claim, however; nor have the Galvins presented any evidence that conclusively contradicts it. So, on the current record, there is a genuine dispute of fact as to whether Mellon holds the note.

If the court is to grant summary judgment, then, it can only do so by adopting the defendants' construction of the statutory term " mortgagee," which would not require possession of the note to foreclose. The New Hampshire Supreme Court has not yet had occasion to address the meaning of that term. When confronted with such a state of affairs, this court must " make an informed prophecy of what [that] court would do in the same situation." Bartlett v. Mut. Pharm. Co., Inc., 731 F.Supp.2d 135, 154-55 (D.N.H. 2010), aff'd, 678 F.3d 30 (1st Cir. 2012), rev'd on other grounds, 133 S.Ct. 2466, 186 L.Ed.2d 607 (2013). After careful consideration, it appears that the New Hampshire Supreme Court could plausibly adopt

Page 73

either side's construction. Rather than choosing between the two constructions, or certifying the question to that court--both unappealing alternatives--the court instead elects to try the case,[2] giving the parties an opportunity to present evidence as to whether Mellon does, in fact, hold the note. If Mellon is the note holder, then it will satisfy both parties' definition of the term " mortgagee," and there will be no reason to construe that term. Construction of the statute will become necessary only if Mellon does not hold the note.

I. Applicable legal standard

Summary judgment is appropriate where " the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A dispute is " genuine" if it could reasonably be resolved in either party's favor at trial. See Estrada v. Rhode Island, 594 F.3d 56, 62 (1st Cir. 2010) (citing Meuser v. Fed. Express Corp., 564 F.3d 507, 515 (1st Cir. 2009)). A fact is " material" if it could sway the outcome under applicable law. Id. (citing Vineberg v. Bissonnette, 548 F.3d 50, 56 (1st Cir. 2008)). In analyzing a summary judgment motion, the court " views all facts and draws all reasonable inferences in the light most favorable to the non-moving party." Id. On cross-motions for summary judgment, the court applies this standard to each party's motion separately. See, e.g., Am. Home Assurance Co. v. AGM Marine Contractors, Inc., 467 F.3d 810, 812 (1st Cir. 2006).

II. Background

In August 2005, Mark Galvin executed a promissory note in the amount of $2,900,000, payable to Metrocities Mortgage, LLC. Affixed to the note, on a separate page, is an undated allonge indorsing the note to " JPMorgan Chase Bank, as Trustee." [3]

The note was secured by a mortgage on property in Rye, New Hampshire, belonging to Galvin and his wife Jenny. Both Galvins executed the mortgage, which identifies defendant Mortgage Electronic Registration Systems, Inc. (" MERS" ), as the mortgagee in its capacity " as nominee for [Metrocities and its] successors and assigns." In the mortgage, the Galvins acknowledge that " MERS is a separate corporation" from Metrocities, and agree

Page 74

to " mortgage, grant and convey" the Rye property " to MERS . . . and to the successors and assigns of MERS with mortgage covenants, and with power of sale." They further express

understand[ing] and agree[ment] that MERS holds only legal title to the interests granted . . . in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for [Metrocities and its] successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property.

Mr. Galvin initially stopped making payments on the note in mid-2009. In an effort to cure this default, the Galvins resumed making monthly payments to their loan servicer, defendant EMC Mortgage Corporation, later that year. At some point, however, the Galvins again stopped making payments, and, in March 2010, EMC sent them an acceleration warning and notice of intent to foreclose, asserting that Mr. Galvin had " failed to pay the required monthly installments commencing with the payment due" for October 2009 and was nearly $90,000 in arrears. Not long thereafter, Harmon Law Offices wrote Mr. Galvin to advise him that EMC had retained it to foreclose on the mortgage. Harmon scheduled a foreclosure auction for June 2010, but this auction was postponed while the Galvins discussed a loan modification or forbearance with EMC.

Ultimately, these discussions were not fruitful, and in June 2012, Harmon sent the Galvins another letter informing them that it had scheduled another foreclosure sale for August 1, 2012, on behalf of defendant Bank of New York Mellon as Trustee for the Certificate holders of Structured Asset Mortgage Investments II Trust 2005-AR7 Mortgage Pass-Through Certificates, Series 2006-AR7 (" Mellon" ). By an instrument dated May 5, 2010, and recorded in the Rockingham County Registry of Deeds two weeks later, MERS assigned the Galvins' mortgage to Mellon. The assignment recites that Mellon is " successor trustee to JPMorgan Chase Bank, N.A."

Harmon's letter prompted the Galvins to file this action in Rockingham County Superior Court. The defendants removed to this court, see 28 U.S.C. § 1441, and moved to dismiss, see Fed.R.Civ.P. 12(b)(6). In a lengthy order, the court dismissed fourteen of the fifteen counts of the Galvins' original complaint, including their claim that Mellon lacked " standing" to foreclose because, among other things, it did not possess the Galvins' note. See Galvin v. EMC Mortg. Corp., 2013 DNH 053. The Galvins later moved the court to vacate this order and to amend the complaint; the court denied the request to vacate as both untimely and meritless, Order of May 14, 2013, but permitted the Galvins to amend the complaint to assert claims for (as is pertinent here) a declaratory ...


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