USA v . Alex Washington, et a l . CV-10-39-JL 3/28/13
UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE
United States of America
v. Civil N o . 10-cv-39-JL Opinion N o . 2013 DNH 045 Alex D. Washington et al.
MEMORANDUM ORDER
This is an action by the government to enforce its tax liens
against proceeds from the sale of a parcel of residential real
estate previously owned by defendants Alex D. and Sharon N .
Washington. See 26 U.S.C. § 7403. In addition to the
Washingtons, the government has joined as parties a number of
entities which claimed an interest in the property, see id.
§ 7403(a), including defendants Bank of America and Bank of New
York, Mellon Trust Company, N.A. (the “Banks”). 1 This court has
subject-matter jurisdiction under 26 U.S.C. § 7403(a) (civil
actions to enforce federal tax liens).
The government has moved for partial summary judgment, see
Fed. R. Civ. P. 5 6 , arguing that there is no genuine issue of
1 Bank of America claims that it services the Washingtons’ mortgage loan on behalf of Bank of New York--and also claims that i t , rather than Bank of New York, was the holder of the promissory note the Washingtons gave when they took out their mortgage loan. Accordingly, Bank of New York’s claimed interest in the Washingtons’ property is unclear. Because it makes no difference to the analysis, however, the court has simply treated both of these banks as a single entity. material fact as to whether the Banks even held any enforceable
interest in the property at the time it was sold, so that they
are not entitled to any of the proceeds from its sale.
Specifically, the government argues, there is no evidence that
the Banks have the right to enforce the mortgage on the property,
or the accompanying promissory note, that the Washingtons gave
when they purchased the property in 1987. To the contrary, the
government says, the undisputed record evidence shows that, in
1993, the note and mortgage were assigned to defendant American
Strategic Income Portfolio, Inc.-III (“ASIP”), which has not
since subsequently assigned the note to anyone else.
The Banks claim their interest in the property through
another entity, First National Bank of Chicago. But by the time
First National obtained its assignment of the note, from the
receiver of Home Owners Federal Savings and Loan Association,
Home Owners had already assigned the note to another party,
Knutson Mortgage Corporation, which subsequently assigned the
note to ASIP. It follows that, at the time the Home Owners
receiver purported to assign the note to First National, Home
Owners no longer had any interest in the note to assign--and that
First National, in turn, had no interest to assign to the Banks.
In opposing the government’s motion for summary judgment,
the Banks do not dispute that the assignment to First National
2 post-dated the assignment to ASIP, nor do they question the
black-letter law that, as a result of this chronology, First
National would have no interest in the note to assign. Instead,
the Banks argue principally that, when Knutson obtained its
assignment of the note, it obtained only “limited powers and
rights . . . . Presumably, pursuant to a servicing agreement
between Home Owners and Knutson, these powers and rights did not
include the power of assignment.” That power, the Banks suggest,
remained with Home Owners, and was subsequently exercised by its
receiver to make a valid assignment of the note and mortgage to
First National. The Banks, however, have not come forward with
any evidence of such a servicing agreement o r , indeed, anything
but speculation to support their theory that Home Owners retained
an interest in the note or mortgage notwithstanding the
assignment to Knutson. After hearing oral argument, then, the
court grants the government’s motion for summary judgment, for
the reasons explained in full below.
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, and “material” if it
3 could sway the outcome under applicable law. See Estrada v .
Rhode Island, 594 F.3d 5 6 , 62 (1st Cir. 2010). 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” parties. Id.
Nevertheless, and of particular relevance here,
“[u]nsupported allegations and speculation do not demonstrate
. . . a genuine issue of material fact sufficient to defeat
summary judgment.” Rivera-Colon v . Mills, 635 F.3d 9, 12 (1st
Cir. 2011). Instead, “[t]o defeat a motion for summary judgment,
the nonmoving party must ‘set forth specific facts showing that
there is a genuine issue for trial.’” Welch v . Ciampa, 542 F.3d
927, 935 (1st Cir. 2008) (quoting Anderson v . Liberty Lobby,
Inc., 477 U.S. 2 4 2 , 256 (1986)).
II. Background
A. Execution and assignments of the note and mortage
In 1987, the Washingtons purchased a parcel of land in
Londonderry, New Hampshire, now known and numbered as 6 Autumn
Lane. They financed the purchase with a loan from Camelot
Financial Services. In exchange for the loan, the Washingtons
gave Camelot a promissory note in the amount of $177,000, dated
September 3 0 , 1987. To secure the debt, they simultaneously gave
4 Camelot a mortgage on the Autumn Lane property. The mortgage was
promptly recorded in the Rockingham County Registry of Deeds.
Camelot immediately assigned the note and the mortgage to
Home Owners. The assignment of the note was accomplished by
indorsing i t , on behalf of Camelot, “without recourse, pay to the
order of Home Owners Federal Savings and Loan Association.” The
assignment of the mortgage was accomplished through an instrument
entitled “Assignment of Mortgage,” also signed on behalf of
Camelot. This instrument was promptly recorded in the Rockingham
County Registry of Deeds.
Later, on October 2 7 , 1987, Home Owners assigned the note to
Knutson. This was accomplished by indorsing i t , on behalf of
Home Owners, “pay to the order of Knutson Mortgage Corporation
without recourse.” The government and the Banks agree that, at
the time of this assignment, Knutson was a subsidiary of Home
Owners. The only record evidence of this fact, though, consists
of two news articles submitted by the government. See Ingrid
Sundstrom, Boston firm wants to sell Knutson Mortgage Co.,
Minneapolis-St. Paul Star Tribune, Feb. 2 3 , 1990, at 3D; Karen
Cord Taylor, Being bigger is no small matter: Massachusetts’
largest S&L relies on its size and rigorous management, Am.
Banker, Oct. 2 6 , 1986, at 2 0 .
5 Relying solely on one of these articles, the Banks state
that Knutson acted on Home Owners’ behalf as a servicer, whose
role was “to collect the mortgage payments, . . . escrow funds
for insurance and real estate taxes, and otherwise monitor
borrowers’ accounts.” The Banks also state, as noted at the
outset, that “Knutson possessed limited powers and rights on [the
Washingtons’] note and mortgage. Presumably, pursuant to a
servicing agreement between Home Owners and Knutson, these powers
and rights did not include the power of assignment.” This
statement is unsupported by anything in the record, including the
news articles, and, indeed, is unaccompanied by any citation.2
In any event, Knutson later executed an assignment of both
the note and mortgage to ASIP. Like the earlier assignments of
the note, this assignment was executed by indorsing i t , on behalf
of Knutson, “pay to the order of American Strategic Income
2 Instead, the Banks assert that “[s]uch a scheme has become commonplace, because it allows the pooling, packaging, marketing, and rapid transfer of real property debt to be carried out without the administrative burden of re-assigning the real property interest with every transaction.” While that is undoubtedly true, it does not follow that this sort of arrangement (i.e., transferring the servicing rights to a mortgage loan without transferring the loan itself) was “commonplace” some 25 years ago, when the Home Owners-Knutson assignment occurred. Moreover, even if the fact that such an arrangement were “commonplace” in 1987 could be established by competent evidence (as opposed to an assertion in a brief as to what is “commonplace” n o w ) , that would not create a genuine issue as to whether the Washingtons’ note was assigned to Knutson pursuant to such an arrangement. See infra Part III.
6 Portfolio Inc.-III without recourse.” Knutson also executed an
“assignment of mortgage” to AMSI, dated March 2 6 , 1993, which was
recorded in the Rockingham County Registry of Deeds on February
1 8 , 1994. There is no record evidence that AMSI subsequently
assigned either the note or the mortgage to anyone else.
In the meantime, the parties agree, the federal government
seized control of Home Owners in 1990, placing both it and
Knutson, its subsidiary, into the receivership of the Resolution
Trust Corporation (“RTC”). The parties further agree that RTC
sold Knutson to a private buyer in 1992. The only record
evidence of these facts consists of news articles submitted by
the government. See Tony Cariedo, Two big business deals: one’s
in health care, the other in mortgage banking, Minneapolis-St.
Paul Star Tribune, Nov. 3 , 1992, at 2D; Phil Roosevelt, Many vie
to buy mortgage servicer, Am. Banker, Feb. 7 , 1992, at 6.
The parties also agree that, on September 1 , 1995, RTC,
acting as receiver for Home Owners, executed an assignment of the
Washingtons’ note and mortgage to First National. This was
accomplished by way of an allonge referring to the note and
stating “pay to the order of” First National “without recourse,”
and an “assignment of mortgage” instrument reciting a date of
September 1 , 1995, bearing signatures dated October 1 0 , 1995, and
recorded with the Registry of Deeds on April 1 6 , 1996. A
7 “satisfaction of mortgage” was later recorded in the Registry, on
September 2 1 , 2005. This instrument stated that the Federal
Deposit Insurance Corporation, which “succeeded the [RTC] as
receiver” for Home Owners, “acknowledge[d] satisfaction” of the
Washington’s note and mortgage.
Nevertheless, the Banks maintain, by way of an affidavit
from a Bank of America employee, that “[t]he loan has not been
paid in full, nor has the mortgage securing the note been
discharged of record in the registry.” In fact, the employee
states, the Washingtons owed more than $132,000 on the loan as of
late August 2012. The employee further states that, since
November 1 3 , 2006, Bank of America has “service[d] the loan of
the Washingtons for Bank of New York Mellon” and that “[b]ased
upon the business records of Bank of America, N.A., the original
note came into the possession of Bank of America, N.A., on or
before November 1 6 , 2009.”
But, in their answers to the government’s interrogatories in
this action, see Fed. R. Civ. P. 3 3 , the Banks have acknowledged
that the note “subsequently was lost.” A Bank of America vice
president, in fact, executed an “affidavit of lost note” to that
effect, dated December 2 3 , 2011. The Banks also stated in their
interrogatory responses that Bank of America “is in the process
of obtaining an assignment from the last mortgage holder of
8 record, The First National Bank of Chicago.” At oral argument,
however, the Banks acknowledged that they have yet to obtain such
an assignment.
B. Procedural history
The government claims that the Washingtons owe more than
$329,000 in income taxes, penalties, and interest, dating back to
1998. In both April 2002 and March 2009, the government filed a
notice of federal tax lien against the Washingtons’ property for
their alleged liabilities for the tax years encompassing, first,
1998-2000, and, then, 2001-2007. In February 2010, the
government commenced this action against the Washingtons, seeking
to collect these alleged liabilities. See 26 U.S.C. § 7403(a).
The government then filed an amended complaint seeking to
foreclose on its liens against the Washingtons’ property and
naming, as additional defendants, AMSI and Bank of America. See
id. § 7403(b). The Clerk later defaulted both AMSI and Bank of
America for failing to answer or otherwise respond. See Fed. R.
Civ. P. 55(a).
The case was then stayed, as to the Washingtons only, after
they sought bankruptcy protection in the Bankruptcy Court for the
District of New Hampshire. In re Washington, N o . 10-12227
(Bkrtcy. D.N.H. May 1 0 , 2010). The government then moved for
entry of default judgments in this action against both AMSI and
9 Bank of America, but this court subsequently granted Bank of
America’s motion to set aside the entry of default, see Fed. R.
Civ. P. 55(c), which the government did not oppose. Order of
Aug. 1 7 , 2010. This court did, however, grant the government’s
motion for entry of a default judgment against AMSI,
extinguishing any right, title, or interest it had in the
Washingtons’ property. Order of Sept. 1 4 , 2010.
In the meantime, the Bankruptcy Court discharged the
Washingtons’ debts, In re Washington, N o . 10-12227 (Bkrtcy.
D.N.H. Aug. 2 3 , 2010), and closed the case, In re Washington, N o .
10-12227 (Bkrtcy. D.N.H. Sept. 1 0 , 2010). Apprised of these
developments, this court lifted the stay of this case against the
Washingtons. Order of Sept. 2 7 , 2010. The court then granted
the government’s motion, which was not opposed, to amend its
complaint again. Order of Feb. 1 0 , 2011. The government’s
second amended complaint added Bank of New York as a defendant.
The amended complaint also added a claim against the Washingtons
that their discharge in bankruptcy had not relieved them of their
federal income tax liabilities because they had willfully evaded
them. See 11 U.S.C. § 523(a)(1)(C). When the Washingtons moved
to dismiss this claim as inadequately pled, see Fed. R. Civ. P.
12(b)(6), the government responded, in part, that it was “willing
to put off litigating the dischargability issue until after the
10 [Washingtons’] property is sold so that the parties will know the
extent of the remaining liability and will have an opportunity to
consider a settlement at that time.”
After this court ordered the parties to confer as to this
proposal, Order of Mar. 2 8 , 2011, the Washingtons indicated their
assent to i t , resulting in another stay of this action, this time
so that the Washingtons could attempt to sell the property.
Order of Mar. 1 2 , 2011. The parties later entered a stipulation
for the sale of the property, at a price to be approved by both
the government and the Banks, with the proceeds to be deposited
into court and distributed according to the parties’ relative
priorities. Nearly a year later, after the Washingtons had
received an offer on the property, the court entered a proposed
consent decree allowing the sale to proceed according to the
stipulation. Order of Dec. 1 0 , 2012. The sale took place, and
the net proceeds ($185,380.08, after payment of the broker’s fee
and real estate taxes) have been deposited with this court.
In the meantime, the court lifted the stay as to the
government’s claim against the Banks, Order of June 1 , 2012, and
the government moved for summary judgment. The Banks filed an
objection, to which both the government and the Washingtons filed
a reply. The court then heard oral argument on the motion.
11 III. Analysis
A federal tax lien “shall not be valid as against any . . .
holder of a security interest” in the property, 26 U.S.C.
§ 6323(a), provided, in relevant part, “the interest has become
protected under local law against a subsequent judgment lien
arising out of an unsecured obligation,” id. § 6323(h)(1)(A).
Under this statute, “‘security interest’ means any interest in
property acquired by contract for the purpose of securing payment
or performance of an obligation,” id. § 6323(h)(1), such a s , in
this case, a mortgage.
In moving for summary judgment, the government argues that
there is no genuine issue of material fact as to whether the
Banks are the “holder of a security interest” in the Washingtons’
property at the time it was sold, so that this court should
decree that the Banks have no claim to the proceeds of the sale.
In their answers to the government’s interrogatories, the Banks
identify the sole basis of their interest in the property as the
mortgage that the Washingtons gave Camelot. The Banks explain
that “[t]he note received [sic] by the mortgage has been assigned
to [Bank of America]. Under New Hampshire common law the
mortgage follows the note. Since [Bank of America] is the holder
of the note it is the holder of the mortgage.”
12 As already discussed, though, the Banks have admitted that,
as of December 2011 at the latest, they no longer had possession
of the Washingtons’ note. That means that neither of the Banks
is in fact the “holder” of the note under New Hampshire’s version
of the Uniform Commercial Code, which defines “holder” in
relevant part as “the person in possession of a negotiable
instrument.”3 N.H. Rev. Stat. Ann. § 382-A:1-201(b)(21)(A). As
the government points out, “[a] person not in possession of [an]
instrument is entitled to enforce the instrument,” but only i f ,
among other things, he “was entitled to enforce the instrument
when the loss of possession occurred.” N.H. Rev. Stat. Ann. §
382-A:3-309(a). Furthermore, “[a] person seeking enforcement of
an instrument under [§ 382-A:3-309(a)] must prove . . . the
person’s right to enforce the instrument.” Id. § 382-A:3-309(b).
The government argues that the Banks have failed to show a
genuine issue of material fact as to whether they had the right
to enforce the Washingtons’ note at the time the Banks say they
lost possession of i t . As noted at the outset, the Banks claim
to have received an assignment of the note from First National,
which is identified as the transferee of the note on the allonge
3 The parties agree that state law, specifically, that of New Hampshire, governs the question of the Banks’ interest in the Washingtons’ property (now, its proceeds). See United States v. Lebanon Woolen Mills Corp., 241 F. Supp. 393, 395 (D.N.H. 1 64
13 executed by RTC as the receiver for Home Owners and dated
September 1 , 1995. See Part II.A, supra. Before that date,
however, Home Owners had already transferred the note to Knutson
(on October 2 7 , 1987), which then, in turn, transferred the note,
and assigned the mortgage, to ASIP (on March 2 6 , 1993). See id.
New Hampshire follows the rule that, as between successive
assignments, the first in time is first in right. See Am. Emp’rs
Ins. C o . v . Sch. Dist., 99 N.H. 1 8 8 , 192 (1954); see also, e.g.,
6A C.J.S. 2d Assignments § 9 8 , at 490-91 (2004). Because Home
Owners, in 1987, “had divested itself of its rights by the
assignment to” Knutson, Home Owners “had nothing to assign to”
First National in 1995. Am. Emp’rs Ins. Co., 99 N.H. at 192.
The Banks do not question that this is the law, nor do they
claim to have received an assignment from ASIP or its successors
in interest (if any; again, there is no record evidence that ASIP
assigned either the note or the mortgage to anyone, and the Banks
admit that they have not received any assignment of the mortgage
from ASIP). Instead, as discussed supra, the Banks say that,
“[i]n fact, Knutson possessed limited powers and rights on the
note and mortgage,” which “did not include the power of sale or
assignment.” While the Banks do not fully explain the
significance of this point, the court takes it to mean that, in
the transfer of the note to Knutson from Home Owners, Knutson did
14 not obtain the right to transfer the note further, thus voiding
Knutson’s subsequent transfer of the note, and assignment of the
mortgage, to ASIP. But there is no record support for the
asserted “fact” that Knutson’s rights in the note did not include
the right of transfer.
Under New Hampshire’s version of the Uniform Commercial
Code, “[t]ransfer of an instrument, whether or not the transfer
is a negotiation, vests in the transferee any right of the
transferor to enforce the instrument, including any right as a
holder in due course.” N.H. Rev. Stat. Ann. § 382-A:3-203(b).
Here, Home Owners transferred the note to Knutson by way of
negotiation, indorsing the note “pay to the order of” Knutson.
See id. § 382-A:3-201. This vested in Knutson all the rights
that Home Owners enjoyed as holder of the note, including the
right to transfer i t . In New Hampshire, as elsewhere, “an
assignee obtains the rights of the assignor at the time of the
assignment.” YYY Corp. v . Gazda, 145 N.H. 5 3 , 61 (2000)
(applying this rule to the transfer of a promissory note); see
also, e.g., 5A Ronald A . Anderson, Anderson on the Uniform
Commercial Code § 3-201:16, at 454 (3d ed. 1994) (“Commercial
15 paper may be assigned in which case the assignee stands in the same position as the assignor.”).4
It is true, of course, that a transferor may transfer less
than all of its rights in an instrument. See N.H. Rev. Stat.
Ann. § 382-A:3-203(d). Again, though, on the face of the note,
Home Owners transferred all of its rights to Knutson by indorsing
it over to Knutson, and the Banks have offered nothing but
speculation to support their theory that a servicing agreement
between Home Owners and Knutson nevertheless restricted Knutson’s
rights in the note. See note 2 and accompanying text, supra.
As an initial matter, there is no competent evidence of a
servicing relationship between those entities, only news
articles, which are hearsay, see Fed. R. Evid. 8 0 1 , that cannot
be considered on summary judgment, see, e.g., Hannon v . Beard,
645 F.3d 4 5 , 49 (1st Cir. 2011). Even putting that aside,
however, the mere fact that Knutson acted as a servicer for
mortgage loans held by Home Owners does not create a genuine
issue as to whether, in endorsing the Washingtons’ note to
4 While “[a]n assignment is a transfer . . . [t]he transfer of rights in commercial paper by assignment, as distinguished from negotiation, is not regulated by the Code,” but by “pre-Code law.” 5A Anderson, supra, § 3-201:13, at 452-53 (footnotes omitted). But that distinction is unimportant here because all transfers of the note were accomplished by negotiation. Thus, the court uses the terms “assignment” and “transfer” interchangably in referring to the note.
16 Knutson, Home Owners was reserving for itself the right to make
further transfers of the note. Unsupported speculation--or, as
the Banks themselves call their theory, “presum[ption]”--does not
create a genuine issue of material fact capable of defeating
summary judgment. See Part I , supra.
In a similar vein, the Banks state that, “[g]iven the
evidence [the government] has itself presented, it is entirely
possible that Knutson never owned the mortgage.” While the
government has not come forward with an instrument assigning the
Washingtons’ mortgage from Home Owners to Knutson, it is
undisputed, as just discussed, that Home Owners transferred the
underlying note from Home Owners to Knutson. Under New Hampshire
law, as the Banks acknowledge, “a transfer of the debt, ipso
facto, transfers the mortgage,” so that a separate assignment of
the mortgage “by deed or writing is not necessary.”5 Whittemore
v . Gibbs, 24 N.H. 4 8 4 , 487 (1852). S o , just as the Banks have
failed to show a genuine issue of fact as to whether Home Owners
transferred its rights in the note to Knutson, they have also
5 As a recent decision by the New Hampshire Superior Court explains, “the intention of the parties to the transaction can override the common law principle that the debt and mortgage are inseparable.” Dow v . Bank of N.Y. Mellon Trust Co., N o . 218- 2011-CV-1297, slip o p . at 14-16 (N.H. Super. C t . Feb. 7 , 2012) (Delker, J . ) . Here, however, there is nothing in either the note or the mortgage instrument suggesting such an intention. Indeed, the Banks themselves claim their interest in the mortgage solely through their alleged interest in the note.
17 failed to show a genuine issue of fact as to whether Home Owners
transferred its rights in the mortgage to Knutson.
In their objection to the summary judgment motion, the Banks
advance three other arguments. First, they say that the
government has adduced no competent evidence on “RTC’s sale of
Knutson,” even though its theory that First National (and hence
the Banks) held no interest in the Washingtons’ note depends on
the premise that “RTC, and then Knutson, had previously
transferred the Washingtons’ mortgage to ASIP.” But the
government’s position--and, for that matter, the undisputed
evidence--is not that RTC assigned the note or mortgage to ASIP.
It is that Knutson assigned the note and mortgage to ASIP. While
the news articles report, and the parties agree, that Knutson was
already in receivership by that point, the Banks do not seem to
be arguing that this fact has any effect on the validity of the
assignment from Knutson to ASIP. Moreover, even if it did, that
would not change the fact that, well before the receivership,
Home Owners had transferred the note to Knutson--a transfer that
itself predates, and voids, RTC’s later transfer of the note (on
behalf of Home Owners) to First National. So the Banks are
incorrect that “the fact of what exactly RTC sold when it sold
Knutson is necessarily material.”
18 Second, the Banks argue that this court did not discharge
the mortgage encumbering the Washingtons’ property by entering a
default judgment against ASIP. Even if that is correct, it is
irrelevant to whether summary judgment should enter against the
Banks on their claim to a mortgage interest in the property (or
the proceeds of its sale). As discussed more than once already,
the Banks do not claim any interest through ASIP. To the
contrary, the Banks say that ASIP never held any interest in the
Washingtons’ mortgage in the first place because Knutson, ASIP’s
transferee, lacked the power to make that transfer. So the
status of ASIP’s interest in the Washingtons’ property is
immaterial to the Banks’ claim to an interest in that property
and, therefore, to the government’s motion for summary judgment on that claim.6
Third, the Banks argue that the government “lacks standing”
to challenge the validity of the assignment from RTC, as the Home
Owners receiver, to First National. The government, however, has
6 All that said, this court’s default judgment against ASIP, on its face, “extinguished” all of ASIP’s “rights, titles, claims, liens, and interests” in the Washingtons’ property. Order of Sept. 1 4 , 2010. The Banks are simply wrong to say that this court lacked the power to enter such a judgment. See 26 U.S.C. § 7403(c) (directing this court, “after all the parties have been duly notified of [an] action” by the government to foreclose on tax liens, to “adjudicate the matters involved therein and finally determine the merits of all claims to and liens upon the property”).
19 an interest in the Washingtons’ property by virtue of its tax
liens--an interest that would be diminished, if not eviscerated,
if the Banks can enforce the competing interest in the property
they claim through the Home Owners-First National assignment.
That gives the government “standing” to challenge that
assignment, at least on the basis the government asserts, i.e.,
that Home Owners had previously assigned its interest in the
Washingtons’ note, and hence their mortgage, to Knutson. See
Drouin v . Am. Home Mtg. Servicing, Inc., 2012 DNH 089, 7-10
(recognizing mortgagors’ standing to challenge an alleged
assignment of their mortgage to a foreclosing defendant on the
grounds that the assignor did not hold the mortgage at the time);
accord Culhane v . Aurora Loan Servs. of Neb., 708 F.3d 2 8 2 , 291
(1st Cir. 2013) (recognizing mortgagor’s standing, as a matter of
both Article III of the Constitution and Massachusetts law, “to
challenge a mortgage assignment as invalid, ineffective, or void
(if, say, the assignor had nothing to assign . . . ) ” ) .
The Banks also argue that the government is attempting to
“enforce” Knutson’s assignment of the note and mortgage to ASIP,
and that the government lacks standing to do that as well. But
the government does not derive its claimed interest in the
Washingtons’ property (or, now, the proceeds of its sale) from
the Knutson-ASIP assignment. As just noted, the governments’
20 claimed interest comes from its federal tax liens. Relying on
the Knutson-ASIP assignment to show that the subsequent Home
Owners-First National assignment was void is not tantamount to
trying to “enforce” the Knutson-ASIP assignment. See Culhane,
708 F.3d at 290 (refusing to apply the rule that “a nonparty who
does not benefit from a contract generally lacks standing to
assert rights under that contract” to deny a mortgagor the “right
to challenge a foreclosing entity’s status qua mortgagee” by
“challenging the validity of an assignment that purports to
transfer the mortgage to a successor mortgagee”).
IV. Conclusion
In short, the government has demonstrated, through the
Washingtons’ note and the endorsement transferring it from Home
Owners to Knutson, that there is no genuine issue of fact as to
whether the Banks have an interest in the Washingtons’ property
or the proceeds of its sale. The Banks claim that interest
solely through an entity, First National, that did not receive an
assignment of Home Owners’ interest in the Washingtons’ note or
mortgage until after Home Owners had assigned its interest in the
note and the mortgage to someone else. The Banks have failed to
show any genuine issue of fact material to this chronology or the
validity of Home Owners’ initial assignment. Accordingly, the
government’s motion for summary judgment on the Banks’ claim to
21 an interest in the proceeds of the sale of the Washingtons’ property7 is GRANTED.
Remaining claim
The only claim remaining in the case, then, is the
government’s claim against the Washingtons, which is stayed at
the moment (as it has been for much of the pendency of this
litigation, see Part II.B, supra). At oral argument, the
government represented that settlement with the Washingtons would
be greatly facilitated by the certainty ensuing from this court’s
resolution of the summary judgment motion. This court’s entry of
a default judgment against ASIP, together with its entry of
summary judgment against the Banks, leave the government as the
exclusive claimant to those proceeds (which are considerably less
than the Washingtons’ alleged federal tax liabilities at this
point). The Banks, however, are entitled to appeal this court’s
entry of summary judgment against them, which would reintroduce
the uncertainty as to the government’s ability to recover from
the proceeds.
Under these circumstances, this court concludes that “there
is no just reason for delay” in directing the entry of final
judgment on the government’s claim against the Banks, even though
7 Document n o . 5 5 .
22 final judgment cannot enter on the government’s claim against the
Washingtons. See Fed. R. Civ. P. 54(b). So far as this court
can tell, there is no overlap between the factual and legal
issues underlying those two claims. If the Banks elect to appeal
the judgment against them, proceedings on the appeal can occur
simultaneously with proceedings in this court on the government’s
claim against the Washingtons (should the government decide to
proceed on that claim rather than settle it in light of the
possibility that the appeal would succeed, potentially reducing
the government’s share of the proceeds).
That process strikes the court as considerably more
efficient, and just, than forcing the government and the
Washingtons to resolve their dispute, either through litigation
or settlement, before knowing whether or not the Banks will
appeal the entry of summary judgment against them (which, in that
scenario, they would not have to decide until after the
resolution of the government’s claim against the Washingtons
enables this court to enter final judgment on all claims). These
concerns are particularly important here, where continued
litigation between the government and the Banks would consume, on
one side, the resources of the public, and, on the other side,
the resources of debtors who have just recently emerged from a
no-asset bankruptcy. Finally, as already noted, the government’s
23 claim against the Washingtons has been stayed for nearly the
entirety of the pendency of this action; the parties have not
conducted discovery. So forcing them to resolve that claim even
though (if the Banks do not appeal) they may very well choose not
to do would result in substantial, and potentially unnecessary,
expense to both the government and the Washingtons.
Accordingly, the clerk shall enter final judgment on the
government’s claim against the Banks. The government’s claim
against the Washingtons shall remained stayed until the earlier
of (1) the Banks’ filing of a notice of appeal or (2) the
expiration of their time for doing s o . Within 45 days of the
earlier of those two events, the government and the Washingtons
shall file a joint report informing the court of the status of
their settlement negotiations, if any (including an estimate of
how much longer they expect the negotiations to continue) or
seeking the lifting of the stay so that litigation of the claim
can resume. If the parties cannot agree on a course of action,
they shall schedule a telephone conference with the court.
SO ORDERED.
United States District Judge
Dated: March 2 8 , 2013
24 cc: Edward J. Murphy, Esq. Patricia E.S. Gardner, Esq. William Philpot, Jr., Esq.