Eastern Bank v. Benton (In re Benton)

563 B.R. 113
CourtUnited States Bankruptcy Court, D. Massachusetts
DecidedJanuary 4, 2017
DocketCase No. 16-11385-JNF; Adv. P. No. 16-1101
StatusPublished
Cited by2 cases

This text of 563 B.R. 113 (Eastern Bank v. Benton (In re Benton)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Eastern Bank v. Benton (In re Benton), 563 B.R. 113 (Mass. 2017).

Opinion

MEMORANDUM

Joan N. Feeney, United States Bankruptcy Judge

I. INTRODUCTION

The matters before the Court are Cross-Motions for Summary Judgment filed by David B. Madoff, the Chapter 7 Trustee and Plaintiff in Counterclaim (the “Trustee”) and Eastern Bank (the “Bank”), Plaintiff, and Defendant in Counterclaim.1 In addition to the Chapter 7 Trustee, in its Complaint, the Bank named Seterus, Inc. and The Cooperative Bank of Cape Cod as parties in interest.

The Bank filed a two-count Complaint for the following purpose:

[T]o correct the metes and bounds description in the mortgage granted by Debtors ... in favor ... [of the] Bank. The metes and bounds description incorrectly describes the real property commonly referred to 15 Oak Neck Road, Unit No. 2, Hyannis, MA. The metes and bounds description should be consistent with the mortgage reference to the Debtors’ homestead, the real property commonly referred to as 75 Old [sic] Homestead Drive, Marston [sic] Mills, MA.

Specifically, the Bank sought reformation of the mortgage on the property located at 75 Olde Homestead Drive, Marstons Mills, Massachusetts (the “Marstons Mills Property”) and a declaratory judgment that the mortgage on the Marstons Mills Property would be reformed “effective December 8, 2015, to grant Eastern Bank a security interest in the Marston [sic] Mills Property as more fully described in the Registry in the Quitclaim Deed (Book 5893, Page 194) and Exhibit A to the Cape Cod Bank Mortgage [sic] (Book 22198, Page 11).”

Although the Bank did not formally serve the Trustee with the summons and Complaint, the Trustee filed an Answer, and a two-count Counterclaim. Pursuant to his Counterclaim, the Trustee seeks to avoid the mortgage held by the Bank with respect to the Marstons Mills Property pursuant to 11 U.S.C. § 544(a)(3) and to preserve the mortgage for the benefit of the bankruptcy estate pursuant 11 U.S.C. § 551. Specifically, he alleges that the Bank’s mortgage deed contains a material defect and fails to provide constructive notice of the mortgage on the Marstons Mills Property to a bona fide purchaser for value because the metes and bounds description in the Bank’s mortgage references the Debtors’ property located at 15 Oak Neck Road, Unit 2, Hyannis, Massachusetts (the “Hyannis Condominium”) instead of the Marstons Mills Property.

The Bank initially filed a Motion to Dismiss the Trustee’s Counterclaim, which the Trustee opposed. The Court heard that motion on October 14, 2016. At the hearing, the Court directed the parties to file motions for summary judgment as they agreed that the material facts necessary to resolve the issues of reformation or avoidance were not in dispute.

The issue presented is whether the mortgage granted by the Debtors to the Bank on the Marstons Mills Property may be avoided by the Trustee because it con[116]*116tains the correct street address for that property but legally describes the Hyannis Condominium in an attached Exhibit A. The issue, according to the Bank, is “whether a patent ambiguity [in the Mar-stons Mills Property] between the granting clause and metes and bounds description on the face of a legally recorded mortgage provides a Chapter 7 Trustee with constructive notice as to both properties under 11 U.S.C. § 544(a)(3).”2 A subsidiary issue, if the answer is “no,” is whether the Bank is entitled to retain- its mortgage interest as to the Hyannis Condominium because there is no dispute it is adequately described by metes and bounds in the mortgage.

II. FACTS

On April 15, 2016, the Debtors filed a voluntary petition under Chapter -7 of the Bankruptcy Code, and the Trustee was appointed by the United States trustee on April 18, 2016. On Schedule A/B: Property, the Debtors listed an ownership interest in the Marstons Mills Property, which serves as their residence, pursuant to a deed recorded in the Barnstable County Registry of Deeds, Book 5893, Page 194, as well as an ownership interest in the Hyannis Condominium pursuant to a deed recorded in Book 16527, Page 302.3 According to the Debtors in their Schedules, which were filed with the Bankruptcy [117]*117Court on April 15, 2016 together with their petition, the Marstons Mills Property had a value of $399,400, and was subject to a mortgage held by The Cooperative Bank of Cape Cod in the amount of $250,000, which, upon the information and belief of the Trustee, was recorded with the Barnstable County Registry of Deeds on July 19, 2007. The Debtors listed the Bank, Bank of America, and Seterus, Inc. as holders of claims secured or partially secured by the Hyannis Condominium. The Debtors claimed a homestead exemption in the Marstons Mills Property in the sum of $149,400 pursuant to Mass. Gen. Laws ch. 188, § 3.4

On November 17,2015, the Debtors submitted a “Home Equity Application” to the Bank requesting a $300,000 loan. On December 8, 2015, the Debtors executed a mortgage, characterized in bold letters as a “Future Advance Mortgage,” in favor of the Bank, which was recorded in the Barnstable County Registry of Deeds (the “Registry”) in Book 29344, Page 3 (the “Mortgage”) to secure a Home Equity Line Agreement in the maximum amount of $225,000. The Home Equity.Line Agreement defined the collateral as “the property you have pledged to secure your Account as evidenced by the Mortgage you have granted to Lender in connection with this Agreement. The Mortgage secures the property located at 75 Old [sic] Homestead Dr [sic] Marstons Mills MA 02648 Barnstable.” Indeed, the Mortgage, at page 2, provided that the mortgaged property has an address of “75 Old [sic] Homestead Dr [sic], Marstons Mills, Massachusetts 02648.” The Mortgage incorporated a Schedule A, which referred to property described in a deed dated March 7, 2003 and recorded in Book 16527, Page 302 [the same deed reference set forth on Schedule A/B for the Hyannis Condominium], and a specific description of the Hyannis Condominium, not' the Marstons Mills Property. Schedule A to the Mortgage also contained a reference to the Oak View Condominium created by Master Deed recorded in the Registry in Book 2020, Page 251, as amended, as well as the Declaration of Trust of the Oak View Condominium recorded in the Registry in Book 2020, Page 224.5

The Land Document Abstract for the Mortgage displays an address of “75 Old [sic] Homestead Dr.” (the “Abstract”). Counsel to the Trustee submitted an Affidavit in which he represented the following:

On or about August 9, 2016,1 conducted a search of the grantor/grantee index of the records of the Barnstable County Registry of Deeds. My search of those records indicated that Eastern Bank held a mortgage on the debtors’ property designated as “UNIT 2, Barnstable”, and is a reference to the Debtors’ ... Hyannis Condominium.... Such review of the grantor/grantee records did not reflect that Eastern Bank held a mortgage on the Debtors’ ... Marstons Mills Property.... Thus, according to the grantor/grantee index, Eastern Bank

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Bluebook (online)
563 B.R. 113, Counsel Stack Legal Research, https://law.counselstack.com/opinion/eastern-bank-v-benton-in-re-benton-mab-2017.