In a recent unpublished opinion, Mackey v. Santander Bank, N.A., the Appeals Court vacated the Superior Court’s decision to declare valid a mortgage on a former marital home after the mortgagor, Santander Bank, was provided with a trustee certificate by the plaintiff’s ex-husband, who was not actually a trustee of the trust that owned the home. While the plaintiff, Lisa, and her ex-husband, James, were married, James established a trust, designated himself the trustee of said trust, and transferred the title of the marital home from his construction company to the trust. Lisa and James were beneficiaries of the trust, and James was the trustee. The terms of trust provided that if James was unable or unwilling to serve as trustee, Lisa would serve as successor trustee. In the event of a vacancy of the original and succeeding trustee, the beneficiaries were to appoint a new trustee. The deed and trust were recorded with the Registry of Deeds.
Without Lisa’s knowledge, James resigned as trustee, and he and his sister then signed documents purporting to appoint the sister of the successor trustee. James’ resignation and the documents appointing his sister as successor trustee were recorded with the Registry of Deeds, and a title search would have revealed that James was no longer the trustee. However, James failed to note his resignation on the margin of the trust document that was on record. Almost eight years later, James applied for a $400,000 line of credit with Santander Bank secured by a mortgage on the former marital home. Santander employed a vendor to perform a limited title search, but the vendor, in its search, missed the fact that James had resigned as trustee and, in error, advised Santander that the mortgage should be signed by James as trustee with a certificate attesting to James’ authority. Even though he had resigned nearly eight years prior, James provided Santander with a trustee certificate falsely attesting that he was the current trustee of the trust and was authorized by the trust beneficiaries to grant the mortgage. Santander executed the line of credit, and James purported to execute the mortgage as trustee.
More than three years later, James’ sister “resigned” as trustee, and she and James signed and recorded documents to “reappoint” James as trustee. About four years later, James stopped making payments on the loan, a foreclosure on the loan was imminent, and he and Lisa were divorced. As part of Lisa and James’ divorce, the Probate and Family Court ordered that the property was to be sold and the proceeds to be divided between the parties. The Probate and Family Court order and the foreclosure proceedings were stayed when Lisa filed suit to declare the mortgage invalid because James was not the trustee at the time he authorized it.
Santander obtained a judgment in its favor in the Superior Court, declaring that the mortgage was valid by virtue of the doctrine of estoppel by deed. However, in the first appeal of this matter, the Appeals Court vacated that judgment on grounds that James was not a trustee of the trust holding title to the real estate at the time the mortgage was granted or any time thereafter. The Appeals Court did not address an argument by Santander that was based upon § 34 of G.L. c. 184 (which provides that purchasers of real estate in good faith may rely on a recorded instrument that purports to affect an interest in real estate executed by a person who is or appears to be a trustee of a trust, even if the trustee has resigned unless the resignation is recorded and noted in the margins of the registered trust document), having concluding the appellate record was not adequate for it to decide the issue. The Court remanded the case for further proceedings consistent with its opinion.
On remand, Santander moved to reopen expert discovery such that it could make an argument pursuant to § 34 of G.L. c. 184, but the Superior Court judge denied its request. In its subsequent motion for summary judgment, Santander argued that the mortgage was valid under § 34, relying upon an affidavit of the Register of Deeds, which described the Registry’s practices for marginal references and trustee resignations. Lisa objected to the consideration of the affidavit, as it was submitted after discovery had closed, and because the affidavit constituted legal opinion. Santander also argued that § 34 of G.L. c. 184, § 35 allowed it to rely on the trustee certification. The Superior Court judge found that Santander’s § 34 argument failed but ruled in Santander’s favor under § 35 (which provides a third party may rely on a trustee’s certificate where the signature on that certificate is that of “a person who from the records of the registry of deeds for the county or district in which real estate owned by a nontestamentary trust lies, appears to be a trustee thereunder”), because Santander had no actual knowledge that James had resigned as trustee. After Lisa’s motion for reconsideration was denied, she appealed.
In this, the second appeal, the Appeals Court found that § 35 does not apply where the Registry records show that a signatory is not the trustee, and it was undisputed at the trial level that Santander could have readily discovered James’ resignation had its vendor taken more than a cursory look. Further, a person or entity can be charged with constructive notice of a document recorded with the Registry if the document would have been discovered by a reasonably diligent title search. The Appeals Court ruled that the fact that Santander had no actual notice that James had resigned did not allow it to rely on the false certification, as the purpose of § 35 is to protect good faith purchasers or mortgages in the event a change of trustee is not recorded. With respect to Santander’s argument that the Superior Court should have re-opened discovery to enable it to support its § 34 argument, the Appeals Court found that it was within the Trial Court’s discretion whether or not to re-open discovery and, without a record to support the § 34 argument, Santander was not entitled to summary judgment based on same. As such, the Appeals Court vacated the judgment declaring the mortgage valid, again remanded the case for further proceedings and instructed the Superior Court to enter a judgment in favor of Lisa if Santander could not timely raise any other defenses that would support the validity of the mortgage.