Summary
holding that, when a mortgage is unenforceable due to fraud, the "[lender] maintains an equitable lien on the property only to the extent that the loan proceeds paid off [defendant's] first mortgage"
Summary of this case from Wilmington Sav. Fund Soc'y v. CollartOpinion
No. 11–P–864.
2012-11-2
BANK OF NEW YORK, trustee, v. Itohan MORGAN & another (and a companion case ).
By the Court (MEADE, SIKORA & WOLOHOJIAN, JJ.).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
Itohan Morgan appeals from a summary judgment entered in favor of Bank of New York (BNY), Full Spectrum Lending, Inc. (FSL), and Countrywide Home Loans, Inc. (Countrywide). On appeal, Morgan claims the judge's award to BNY of damages against her and an equitable lien on her property was improper because the underlying mortgage assigned to BNY was fraudulently obtained as a result of misconduct by Morgan's former husband Sylvester Omuemu. In addition, Morgan claims that assigning BNY an equitable lien would result in unjust enrichment for BNY and should be prevented for equitable purposes. We affirm.
1. Dismissal of FSL and Countrywide. After BNY filed its initial action against Morgan and Omuemu in Superior Court, Morgan filed a separate action in that court on November 22, 2006, against FSL, Countrywide, and Omuemu, in which she asserted claims of fraud, negligence, and violations of G.L. c. 93A. After the judge consolidated the actions, FSL and Countrywide moved for summary judgment on all three claims in May, 2010. That motion was allowed in July, 2010, and a judgment entered dismissing all of Morgan's claims with prejudice in October, 2010. The same judgment, which followed the allowance of BNY's summary judgment motion in its action, also awarded BNY damages of $196,740.16 and an equitable lien on Morgan's property. On appeal, Morgan does not address the dismissal of her claims against FSL and Countrywide at any point, instead challenging the judge's award of damages and the equitable lien to BNY. Because Morgan has chosen not to pursue review of her claims against FSL and Countrywide on appeal, these claims are waived. Mass.R.A.P. 16(a)(4), as amended, 367 Mass. 921 (1975). See McLean Hosp. Corp. v. Belmont, 56 Mass.App.Ct. 540, 541 n. 4 (2002).
Morgan does, however, challenge the dismissal of her fraud claim against Omuemu. Omuemu did not defend below and has not appeared in this appeal. There was no dispositive motion as to this fraud claim, and no explanation for its dismissal appears in the record. Under the circumstances, we will vacate the dismissal of this claim and remand it for further proceedings.
2. The equitable lien. Morgan challenges the judge's imposition of a $196,740.16 damages award and an equitable lien on her property, arguing that Omuemu's fraud while incurring the second loan obviates her obligation to satisfy the terms of the mortgage. We disagree.
The imposition of an equitable remedy is reviewed for an abuse of discretion. Demoulas v. Demoulas, 57 Mass.App.Ct. 456, 463 (2003). Morgan bears the burden of showing that “no conscientious judge, acting intelligently, could honestly have taken [such action] .” Twin Fires Inv., LLC v. Morgan Stanley Dean Witter & Co., 445 Mass. 411, 425 (2005), quoting from Bartley v. Phillips, 317 Mass. 35, 43 (1944). The remedy of an equitable lien arises where a defendant is unjustly enriched by a transaction in which the claimant's assets or services are applied in a manner that “enhance[s] or preserve[s] the value of particular property to which the defendant has legal title.” Restatement (Third) of Restitution and Unjust Enrichment § 56(1)(a) (2011). We have recognized the availability of an equitable lien as a remedy when a mortgage held by the mortgagee is unenforceable due to fraud. See Keville v. McKeever, 42 Mass.App.Ct. 140, 159 (1997).
Here, BNY lacked any available remedies at law as a result of the fraud perpetuated by Omuemu. Despite the forgery, FSL conferred a benefit to Morgan when it paid off her original mortgage, allowing her to remain living on the property even though she was past due on the original mortgage at the time of payment. Morgan stated in her deposition that she indeed accrued a significant benefit from FSL's payment of her existing mortgage, and such payment was necessary to secure this benefit. Morgan stands in no worse position that she stood in prior to the execution of the second mortgage, and the remedy does not impose any punishment on her for FSL's failure to ensure the signatures on the second mortgage were genuine. Morgan has not been made to bear any increased financial burden as a result of FSL's mistake. The judge used his broad equitable powers to ensure Morgan did not receive an inequitable windfall as a result of Omuemu's fraud. The balance of equities clearly tilts in favor of holding Morgan to her preexisting obligation, and BNY maintains an equitable lien on the property only to the extent that the loan proceeds paid off Morgan's first mortgage. Without the equitable remedy imposed, Morgan would obtain substantial unjust enrichment, a result that clearly falls within the judge's discretion to rectify if necessary. There was no abuse of discretion.
So much of the judgment as dismisses Morgan's fraud claim against Omuemu is vacated. The judgment is otherwise affirmed.
So ordered.