Opinion
19-P-1509
02-25-2022
BANK OF NEW YORK MELLON [1] v. MICHAEL ORLA & another. [2]
Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule 23.0, as appearing in 97 Mass.App.Ct. 1017 (2020) (formerly known as rule 1:28, as amended by 73 Mass.App.Ct. 1001 [2009]), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass.App.Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 2 3.0
The plaintiff, the Bank of New York Mellon as trustee for the Novastar Mortgage Funding Trust, Series 2005-1 (BNY Mellon), brought this declaratory judgment action to establish that it was entitled to enforce the terms of a lost note secured by a mortgage on property owned by defendants Michael Orla and Joan P. Lewis-Orla, pursuant to G. L. c. 106, § 3-309, a provision of the Massachusetts Uniform Commercial Code. This appeal presents, primarily, an evidentiary issue -- whether an affidavit was properly considered on summary judgment. The affidavit was submitted by BNY Mellon in support of its argument that it held the original note before it was lost and therefore had the powers conferred by G. L. c. 106, § 3-309. The Orlas moved to strike, arguing that the affidavit contained hearsay and was not properly before the court. The judge denied the motion and, relying in part on facts established by the contested affidavit, granted summary judgment to BNY Mellon. This appeal followed. Concluding that the statements within the affidavit were admissible under the business records exception to the hearsay rule, G. L. c. 233, § 78, and therefore could be considered for purposes of summary judgment, see Mass. R. Civ. P. 56 (e), 365 Mass. 824 (1974), we affirm.
Background.
The undisputed material facts are as follows. In December 2004, Michael Orla executed a note payable to Novastar Mortgage, Inc. (Novastar), secured by a mortgage on property located at 5 Overlook Road, Quincy, which was owned by the Orlas. The mortgage was subsequently indorsed by Novastar to JPMorgan Chase Bank, National Association; together with the note, it was pooled with other loans into the Novastar Mortgage Funding Trust, Series 2005-1, and became subject to that trust's pooling and service agreement, with JPMorgan Chase Bank as trustee. In January 2009, the mortgage was assigned to the Bank of New York as successor trustee to JPMorgan Chase. The Bank of New York is now BNY Mellon. BNY Mellon cannot produce the original note.
Discussion.
"We review the disposition of a motion for summary judgment de novo to determine whether all material facts have been established such that the moving party is entitled to judgment as a matter of law" (citation omitted). American Int'l Ins. Co. v. Robert Seuffer GMBH & Co. KG, 468 Mass. 109, 113, cert, denied, 574 U.S. 1061 (2014). To establish facts at summary judgment, a party may rely on affidavits that are "made on personal knowledge," "set forth such facts as would be admissible in evidence," and "show affirmatively that the affiant is competent to testify to the matters stated therein." Mass. R. Civ. P. 56 (e). Affidavits must be supported by attached sworn or certified copies of papers referred to by the affiant. Id.
a. BNY Mellon's foreclosure effort.
BNY Mellon sought to foreclose the mortgage on the Orlas' property, which was secured by the note. To do so, BNY Mellon was required to establish that it held "the mortgage and also either [held] the mortgage note or [acted] on behalf of the note holder." Eaton v. Federal Nat'l Mtge. Assn., 462 Mass. 569, 571 (2012). BNY Mellon did not produce the original note, which it maintained was lost. A lost note is not an insurmountable hurdle to foreclosure of a mortgage; under G. L. c. 106, § 3-309 (a.), a person not in possession of an instrument who seeks to enforce it may do so if "(i) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred, (ii) the loss of possession was not the result of a transfer by the person or a lawful seizure, and (iii) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process."
BNY Mellon argues, in supplemental briefing requested by the panel, that it seeks only to enforce its in rem foreclosure rights under the mortgage and that, under such circumstances, the enforceability of its right to seek payment on the note is not relevant. We need not reach this argument because it was neither briefed on summary judgment nor decided by the motion judge.
b. The affidavit.
To establish its right to enforce the terms of the note under G. L. c. 106, § 3-309 (a), BNY Mellon submitted an affidavit from a senior loan analyst at Ocwen Loan Servicing, BNY Mellon's loan servicer. The affidavit explained, as required by the statute, that (i) the note had been in the possession of BNY Mellon's loan servicer at the time it was lost, (ii) it had not been transferred or lawfully seized, and (iii) it could not be found. The Orlas moved to strike the affidavit, arguing that it contained inadmissible hearsay and therefore could not be considered for purposes of the summary judgment motion, see Mass. R. Civ. P. 56 (e). The judge disagreed, as do we.
The affidavit met the requirements of Mass. R. Civ. P. 56 (e) because it was based on the personal knowledge of a senior loan analyst responsible for reviewing loans, including the Orlas' loan, at Ocwen. The affiant averred that she was familiar with Ocwen's procedures for creating and maintaining business records and that she had reviewed business records held by BNY Mellon and by Ocwen; she also had access to earlier loan servicers' records. See First Nat'1 Bank v. North Adams Hoosac Sav. Bank, 7 Mass.App.Ct. 790, 794 (1979) ("The affidavit was made on the basis of personal knowledge of the . . . practices of the parties as well as a review of business records and it was sufficient" [footnote omitted]).
Under the business records exception to the hearsay rule, G. L. c. 233, § 78, records are admissible nonhearsay when made (1) in good faith, (2) in the regular course of business, (3) before the action began, and when (4) it was the regular course of the business to make such records. See McLaughlin v. CGU Ins. Co., 445 Mass. 815, 819 (2006). See also Mass. G. Evid. § 803(6)(A) (2021). The statements within the affidavit were admissible under the business records exception because the affiant recited that the records upon which she relied were made at or near the time of the occurrence of the matters in the records, by persons with personal knowledge of the information in the record, or from information transmitted by such persons, and kept in the regular course of business. See McLaughlin, supra; Mass. G. Evid., supra. Therefore, the judge properly considered the statements in the affidavit because they were based on the affiant's personal knowledge and met the requirements of the business records exception to the rule against hearsay.
c. BNY Mellon met the requirements of G. L. c. 106, § 3-309 (a) .
In support of its motion for summary judgment, BNY Mellon produced undisputed facts that the note was indorsed to JPMorgan Chase Bank as trustee for the series of Novastar asset-backed certificates including the Orlas' loan, and that BNY Mellon was the successor trustee. A successor trustee may enforce a note that was specifically indorsed to a prior trustee. See G. L. c. 106, § 3-110 (c) (2) (i). See also Galvin v. EMC Mtge. Corp., 27 F.Supp.3d 224, 233 (D.N.H. 2014) (interpreting in same way New Hampshire statute with same language). Because this statutory language is unambiguous, we interpret the provisions according to their plain meaning, see Thurdin v. SEI Boston, LLC, 452 Mass. 436, 444 (2008), and BNY Mellon was "entitled to enforce" the note when it was lost, G. L. c. 106, § 3-309 (a) (i).
Because the affidavit and the facts it established were properly part of the summary judgment record, the judge did not err in concluding that BNY Mellon was entitled to enforce the note pursuant to G. L. c. 106, § 3-309 (a.) (i)-(iii), and the mortgage, including the power of sale.
Judgment affirmed.
Wolohojian, Kinder & Hershfang, JJ.
The panelists are listed in order of seniority.