You are on page 1of 5

Zullo v. HMC Assets, LLC (Mass. App.

, 2015)

JOHN F. ZULLO Page 2


v.
HMC ASSETS, LLC, trustee.1 petition fails as a matter of law, although for
reasons that differ somewhat from those
14-P-1696 relied on by the judge.

COMMONWEALTH OF Background. Except as otherwise noted,


MASSACHUSETTS APPEALS COURT the facts are undisputed. When Zullo
borrowed the money, he executed both a
December 30, 2015 promissory note made out to Lime and a
mortgage in the name of Mortgage Electronic
NOTICE: Summary decisions issued by the Registration Systems, Inc. (MERS), as
Appeals Court pursuant to its rule 1:28, as nominee for Lime. The mortgage was
amended by 73 Mass. App. Ct. 1001 (2009), recorded on the Wayland property's
are primarily directed to the parties and, certificate of title.
therefore, may not fully address the facts of
the case or the panel's decisional rationale. After Zullo defaulted, MERS assigned the
Moreover, such decisions are not circulated to mortgage to DLJ Mortgage Capital, Inc.
the entire court and, therefore, represent only (DLJ), and that assignment was noted on the
the views of the panel that decided the case. A certificate of title on December 4, 2008. In
summary decision pursuant to rule 1:28 preparation for foreclosure, DLJ initiated an
issued after February 25, 2008, may be cited action pursuant to the Servicemembers Civil
for its persuasive value but, because of the Relief Act to establish that Zullo was not
limitations noted above, not as binding entitled to the benefits of that act. Although
precedent. See Chace v. Curran, 71 Mass. App. that action resulted in a Land Court judgment
Ct. 258, 260 n.4 (2008). favorable to DLJ on May 27, 2009, DLJ held
off foreclosing on the property (for reasons
MEMORANDUM AND ORDER PURSUANT that do not appear in the record).
TO RULE 1:28
A foreclosure sale eventually was
In 2007, the plaintiff, John F. Zullo, scheduled for January of 2011, and two days
borrowed over one million dollars from Lime prior to that scheduled sale, Zullo brought an
Financial Services, Ltd. (Lime). The loan was action in Superior Court against DLJ and
secured by a mortgage on registered land others seeking to prevent it. In that action,
Zullo owned in Wayland. Zullo defaulted on Zullo challenged DLJ's status as the current
the note in June of 2008. This resulted in holder of the mortgage. Although that action
many years of litigation in numerous judicial resulted in the postponement of the
forums, most of which Zullo himself brought foreclosure sale, a Superior Court judge
in preemptive efforts to avoid foreclosure. In dismissed it with prejudice by judgment
the current action, Zullo sought to expunge dated March
two mortgage assignments from his
certificate of title. On summary judgment, a Page 3
Land Court judge declined such relief and
dismissed Zullo's petition, ruling in favor of 18, 2011. With respect to the question
the current record owner of the mortgage, whether DLJ was the then-current mortgage
defendant HMC Assets, LLC (HMC), as holder, the judge ruled that Zullo's alleged
trustee of the CAM III Trust. For the reasons "ignorance of who holds his mortgage [is] . . .
set forth below, we agree with the Land Court wholly without merit and frivolous and
judge that Zullo's advanced in bad faith."
-1-
Zullo v. HMC Assets, LLC (Mass. App., 2015)

Zullo took no appeal from the Superior assignment of the Mortgage


Court judgment. Instead, he sought the dated August 22, 2008[,] and
protection of the Bankruptcy Court through a noted as Document No.
filing initiated on June 8, 2011. Some months 01487689 on certificate of title
later (January 31, 2012), DLJ assigned its number 236444, on December
mortgage to HMC. That assignment was 4, 2008, was validly registered,
noted on the certificate of title on June 14, (b) the assignment of the
2012. Mortgage dated January 31,
2012[,] and noted as Document
Zullo's bankruptcy action eventually No. 1803914 on said certificate
terminated on January 7, 2013, after various on August 14, 2012, was validly
twists and turns. His efforts to block registered, and (c) HMC is the
foreclosure having foundered in both the holder of the Mortgage."
Superior Court and the Bankruptcy Court,
Zullo brought the current action in the Land There was no separate judgment disposing of
Court on February 19, 2013. Styling this the case, only a docket entry stating "Case
action as a petition to amend title to Dismissed by Order of the Court."
registered land, Zullo sought to expunge the
two mortgage assignments from the In the body of the judge's summary
certificate of title, thereby precluding HMC judgment order -- but not reflected in the
from foreclosing on the mortgage.2 relief granted -- the judge discussed whether
HMC could proceed with foreclosure based
The Land Court judge ruled that the on a showing that it either possessed the
doctrine of claim preclusion barred Zullo underlying note or had been authorized to act
from litigating any claims it did bring, on the noteholder's behalf. See Eaton v.

Page 4 Page 5

or could have brought, in the 2011 Superior Federal Natl. Mort. Assn., 462 Mass. 569, 571
Court case, including any challenges to the (2012) (Eaton).3 In short, the judged stated
validity of the mortgage or of its assignment his view that a lost note affidavit in HMC's
from MERS to DLJ. The judge recognized possession provided sufficient proof to satisfy
that claim preclusion could not bar Zullo from the rule that Eaton established. Additional
raising claims based on actions that occurred facts related to HMC's rights with regard to
after the Superior Court judgment entered, the note and to the adjudication of Eaton
including those involving the assignment issues below are reserved for later discussion.
from DLJ to HMC. He rejected those later
claims on the merits (as discussed further Discussion. Dismissal of the petition. We
below). In his order allowing HMC's motion begin by reviewing whether the judge
for summary judgment, the judge ordered the properly dismissed Zullo's petition and then
following disposition: turn to the judge's discussion of the Eaton
issues. As noted, the judge dismissed much of
"For the foregoing reasons, the the petition based on claim preclusion. Zullo
Summary Judgment motion is argues that the Land Court judge should not
ALLOWED. The Petition to have given preclusive effect to the Superior
amend Certificate of Title is Court action, because that court lacked
DISMISSED WITH subject matter jurisdiction to determine the
PREJUDICE. It is hereby validity of the mortgage and of its assignment
DECLARED that (a) the
-2-
Zullo v. HMC Assets, LLC (Mass. App., 2015)

since these involved interests in registered Corp. v. Wain, 85 Mass. App. Ct. 498, 503
land.4 See Sullivan (2014) (Wain). Contrast Kondaur Capital,
supra at 206-208 (mortgage assignment can
Page 6 be challenged where assignor did not comply
with G. L. c. 183, § 54B). To the extent that
v. Kondaur Capital Corp., 85 Mass. App. Ct. Zullo argues that the MERS system cannot be
202, 204 (2014) (Kondaur Capital) (noting used in the context of registered land, such a
that a Superior Court judge transferred an claim has been put to rest. See id. at 208-210.
action challenging the validity of a mortgage To the extent Zullo seeks to challenge the
on registered land to Land Court "because the mortgage assignments on other grounds, such
complaint concerned claims of title to as his claim that HMC and the trust on whose
registered land over which the Land Court behalf HMC holds title to the mortgage have
has exclusive jurisdiction"), citing G. L. c. 185, not complied with applicable trust law, he has
§ 1(a 1/2), and Feinzig v. Ficksman, 42 Mass. no standing to do so. See Wain, supra at 502-
App. Ct. 113, 115-117 (1997) (Superior Court 503. Because we agree with the judge that
lacks jurisdiction over cases that affect title to Zullo's petition to amend title to registered
registered land). land fails as a matter of law, the judge's
dismissal of that petition was proper.
However, even if the Superior Court
lacked jurisdiction, this does not necessarily Eaton issues. Much of the appellate
mean that Zullo now gets a second chance at briefing addresses the judge's comments
deciding issues that were addressed in the regarding whether HMC was in a position to
earlier litigation. See Harker v. Holyoke, 390 satisfy the Eaton rule. As an initial matter,
Mass. 555, 559 (1983) (in some Zullo argues that such issues were not
circumstances, a plaintiff who chose a properly before the judge. We therefore turn
particular forum and had a "full and fair" first to how those issues arose in the current
opportunity to try his action there can be case.
precluded from retrying the matter in a
different court regardless of whether the At the time Zullo filed his petition, no
initial court had subject matter jurisdiction). foreclosure proceedings had commenced.
We need not resolve whether the Superior Whether for that reason, or because
Court judgment has preclusive effect over the
current Land Court action, because we agree Page 8
with HMC that Zullo's petition, in its entirety,
fails as a matter of law for other reasons. of the limited nature of petitions to amend
certificates of title, the petition did not raise
Although Zullo has standing to claim that an Eaton claim. Instead, the petition narrowly
the two mortgage assignments are void, he targeted whether HMC held a valid mortgage
has no basis on this record for doing so here, on the property.
where both assignors complied with the
dictates of When it filed for summary judgment,
HMC itself unsurprisingly did not raise the
Page 7 question whether it was in a position to
satisfy the Eaton rule. Nor did Zullo raise the
G. L. c. 183, § 54B (the statute governing the issue in his opposition to that motion (with
assignment of mortgages), and where HMC the one qualification that Zullo noted his view
otherwise demonstrated a simple chain of that the lost note affidavit was illegible). At
title that well established its record ownership the hearing on the summary judgment
of the mortgage. See Bank of N.Y. Mellon motion, the judge and the parties touched on
-3-
Zullo v. HMC Assets, LLC (Mass. App., 2015)

the issue whether HMC held both the motion and dismissing Zullo's petition. In
mortgage and the rights to the note. At one that order,
point, the judge asked Zullo, "[y]ou're not
making any allegations about the note, are Page 10
you?" Zullo responded, "[w]ell, I am. There's
some issues with the note in the opposition. the judge expressed his views on the Eaton
They've produced a lost note affidavit that is issue even though neither party had raised or
basically illegible." Zullo then explained that briefed the issue in the context of the
this was only a "secondary argument" because summary judgment motion.
in the context of a petition to amend a
certificate of title, he "didn't know how far The Eaton issues fall outside the narrow
that argument was relevant." Later in the scope of Zullo's petition, which was never
hearing, the judge mentioned that "[t]he note amended. Some argument can be made that
and the mortgage can travel separately [even the judge could have treated the pleadings
if t]hey have come together before the notice effectively as having been amended once
of sale." After Zullo misinterpreted the judge Zullo raised the Eaton issues in the
as saying that the note and mortgage here had preliminary injunction context.7 However, the
come into common ownership, the limited scope of the relief that the judge
ordered confirms that he did not consider the
Page 9 pleadings as having been amended in this
manner. Instead, the judge confined his
judge provided a clarifying response as disposition of the case to the scope of the
follows: "They haven't come together. No . . . . current pleadings. Because the Eaton issues
I don't even care if they've come together. My were not resolved by the judgment, we do not
point is I don't have to care. There's no notice address them on appeal. Therefore, we do not
of sale." In other words, the judge expressed consider the judge's discussion of how Eaton
his view that the issue whether HMC could applies in circumstances where, as here, the
satisfy the Eaton rule was not before him. current

Several months after the parties had Page 11


argued the motion for summary judgment,
but before that motion had been resolved, holder of the note apparently cannot be
HMC began foreclosure proceedings. Seeking ascertained (the note allegedly having been
to block the foreclosure sale, Zullo filed a lost or destroyed). We note that deferring
motion for preliminary injunction in the consideration of how an entity in HMC's
current action (without amending his position can satisfy Eaton will allow such
underlying petition).5 In that motion, Zullo, issues to be reviewed on a more fully
for the first time, pressed the Eaton issues, developed trial court record.8
arguing that HMC could not foreclose because
it had not demonstrated either that it held the Judgment affirmed.
note or was authorized by the note holder to
By the Court (Katzmann, Milkey &
foreclose.6 The judge's consideration of that
Hanlon, JJ.9),
motion was mooted by an agreement between
the parties postponing the foreclosure sale for
/s/
two months so long as Zullo complied with
Clerk
certain conditions. Just before those two
months had expired, the judge issued his
Entered: December 30, 2015.
order allowing HMC's summary judgment

-4-
Zullo v. HMC Assets, LLC (Mass. App., 2015)

-------- 7.We are not unsympathetic to HMC's


protest that Zullo should not be allowed serial
Footnotes: opportunities to challenge HMC's right to
foreclose. At the same time, countervailing
1. Of the CAM III Trust.
fairness concerns would be raised by
2.While the new Land Court action was considering the Eaton issues as having been
pending, a mortgage servicer, acting on behalf resolved by the judge's ruling on HMC's
of HMC, sent Zullo a 150-day notice of right summary judgment motion. Cf. Packaging
to cure letter pursuant to G. L. c. 244, § Indus. Group, Inc. v. Cheney, 380 Mass. 609,
35A(g). Zullo did not cure the default by the 616-617 & n.10 (1980) (hearing on
cure date (March 20, 2014). A prior mortgage preliminary injunction cannot be
servicer, acting on behalf of HMC's consolidated with trial on the merits "in such
predecessor, DLJ, had previously sent Zullo a a manner as to deprive a party of 'clear and
ninety-day demand letter in 2008. unambiguous notice' and 'a full opportunity'
to present [his] case") (citation omitted);
3.Prior to Eaton, a mortgage holder could Federal Deposit Ins. Corp. v. Grupo Girod
foreclose without any showing that at the Corp., 869 F.2d 15, 17-18 (1st Cir. 1989)
time of the foreclosure it also held the rights (cautioning against a trial court judge's
to the underlying debt. See Sullivan v. resolving an issue on summary judgment
Kondaur Capital Corp., 85 Mass. App. Ct. unless the parties had due notice that the
202, 209 (2014), citing Eaton, supra at 587- issue was in play, especially where the issue
588. In Eaton, the Supreme Judicial Court arose in an "unsettled area of the law").
established a prospective rule that in order to
foreclose, a mortgagee must also demonstrate
8. Perhaps because the summary
either that it holds the underlying note or that judgment record was not developed with an
it has been authorized to act on the note eye toward Eaton, it includes next to nothing
holder's behalf. See Eaton, supra at 586-588. about what happened to the original note. For
Application of Eaton to this controversy is example, the affiant of the lost note affidavit,
complicated by the fact that the original note an officer of one of the entities that had
is apparently missing. serviced the Zullo loan on behalf of DLJ
(HMC's predecessor), stated that his company
Zullo raised this issue in his summary
4. "believe[d]" the original note had been
judgment brief, and both parties discussed it destroyed, though he does not actually state
at the hearing on the motion for summary that the note was ever in his company's or
judgment. However, the judge did not DLJ's possession.
address it in his ruling, and we therefore do
not have the benefit of his thinking on
9.The panelists are listed in order of
whether the Land Court's jurisdiction was seniority.
exclusive.
--------
Zullo also filed a related motion for a lis
5.

pendens.

6.Zullo's motions and any supporting


materials, and HMC's responses, have not
been included in the record appendices.
However, the nature of Zullo's arguments can
be gleaned from the transcript of the hearing
on the motions.

-5-