Porst v. Deutsche Bank Nat'l Trust Co. (In re Porst)

ALBERT J. PORST, JR., Debtor.ALBERT J. PORST, JR., Plaintiff-Appellant, v. DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for Argent Securities Inc.,Asset-Backed Pass-Through Certificates, Series 2006-M1,ARGENT MORTGAGE CO. LLC, ABLITT SCOFIELD, P.C.,and CITI RESIDENTIAL LENDING, INC., Defendants-Appellees.

BAP NO. MW 12-080

Bankruptcy Case No. 11-42759-MSH

Adversary Proceeding No. 11-04137-MSH

UNITED STATES BANKRUPTCY APPELLATE PANEL FOR THE FIRST CIRCUIT

November 20, 2013

NOT FOR PUBLICATION

Appeal from the United States Bankruptcy Court

for the District of Massachusetts

(Hon. Melvin S. Hoffman, U.S. Bankruptcy Judge)

Before

Lamoutte, Haines, and Deasy,

United States Bankruptcy Appellate Panel Judges.

Sara Discepolo, Esq., on brief for Appellant, Albert J. Porst, Jr.

Gregory Blase, Esq., Phoebe Winder, Esq., on brief for Appellees,

Citi Residential Lending, Inc. and Argent Mortgage Co. LLC.

Stephen Gordon, Esq., and Todd Gordon, Esq., on brief for Appellee Ablitt Scofield, P.C.

Thomas Looney, Esq., Howard Brown, Esq., and Hale Yazicioglu, Esq. on brief for

Appellee Deutsche Bank National Trust Company, as Trustee for Argent Securities Inc.,Asset-Backed Pass-Through Certificates, Series 2006-M1.

Deasy, U.S. Bankruptcy Appellate Panel Judge.

The debtor, Albert J. Porst, Jr., appeals the October 4, 2012 orders: (1) granting the motions to dismiss of Deutsche Bank National Trust Company, as Trustee for Argent Securities Inc., Asset-Backed Pass-Through Certificates, Series 2006-M1, Ablitt Scofield P.C., Citi Residential Lending Inc., and Argent Mortgage Co. LLC (respectively hereinafter, Deutsche Bank, Ablitt, Citi, and Argent); and (2) denying the debtor's motion for summary judgment. For the reasons set forth below, we AFFIRM.

BACKGROUND

A. Factual Background

In 1992, Frances Porst, the debtor's mother, created a trust that provided her with a life estate in any trust property, upon her death a similar life estate for the debtor, and upon his death the termination of the trust and a distribution to the designated remainderman. In addition to being the grantor and sole lifetime beneficiary of the trust, Mrs. Porst was also the sole trustee. Article VII, Section A provided, in part, that the trustee "shall have and may exercise the following powers: (1) To sell . . . all or any part of the trust property, real and personal, at public or private sale, for such consideration and upon such terms . . . as she deems advisable . . . ." Article XI provided that the grantor retained the right "to amend or revoke this instrument at any time by delivering to the Trustee a written instrument signed and acknowledged by the Grantor." Mrs. Porst transferred her home to the trust in 1992.

As grantor, trustee, and beneficiary, Mrs. Porst executed an invalid trust revocation on August 19, 2003.¹ Both on that date and in 2004, Mrs. Porst, as trustee, executed deeds transferring the property to the debtor for $1.00. These two deeds were notarized and filed withthe registry of deeds in July 2010 and June 2004, respectively. The debtor's mother died in May 2005. In April 2006, the debtor granted Argent a mortgage on the property to secure a note for $75,000.00. The boilerplate language of the mortgage provides that the debtor "covenants that [he] is lawfully seised of the estate hereby conveyed and has the right to mortgage, grant and convey the Property. . . ."

The debtor filed for relief in June 2011.² Deutsche Bank filed a proof of claim, attaching the note, mortgage, and a copy of the assignment of the mortgage from Argent to Deutsche Bank. The notarized assignment is dated January 15, 2009, and is signed by a vice president of Citi. The assignment references a power of attorney which was recorded on April 11, 2008.

In October 2011, the debtor filed a multi-count complaint against the appellees. After dismissing several counts, the debtor pursued Counts I, V, and VI. By Count I, the debtor sought a determination under 11 U.S.C. § 506(d) that Deutsche Bank was not a secured creditor. As grounds, the debtor asserted that because the transfer of the property from the trust to the debtor was invalid due to the trustee's lack of authority to transfer title, he was not the owner of the property at the time of the mortgage, and therefore the mortgage was void. By Count V, the debtor sought relief under Mass. Gen. Laws ch. 93A (the Massachusetts Consumer Protection Act) and Mass. Gen. Laws ch. 93, § 49 (the Massachusetts Fair Debt Collection Act) because Deutsche Bank, Citi, and Ablitt knew or should have known that the debtor could not have mortgaged the property as a life tenant and that the assignment was invalid. Lastly, by Count VI, the debtor sought relief against Ablitt and Deutsche Bank for negligent infliction of emotional distress due to the steps they took to foreclose on the property.

The defendants filed motions to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), applicable to adversary proceedings pursuant to Fed. R. Bankr. P. 7012. The debtor opposed the motions and filed a motion for partial summary judgment as to Count I. The bankruptcy court granted the motions to dismiss, denied the motion for summary judgment, and entered a Judgment for the defendants. In its corresponding memorandum of decision,³ the bankruptcy court indicated that the facts were not in dispute and explained that it drew them from the complaint, documents incorporated therein by reference, and documents of public record or susceptible to judicial notice.

With respect to Count I, after addressing the revocation issue, the court explained why it rejected the debtor's three grounds for claiming that the transfer of the property from the trust to him was ineffective. First, the trustee did not breach her fiduciary duty when she sold the property to the debtor for $1.00 because the trustee of a revocable trust does not have the same fiduciary duty as a trustee of an irrevocable trust.⁴ Second, the court explained that the transfer was not void due to insufficient compensation for the trustee as the trust's compensation provision was not applicable. Lastly, the court rejected the argument that the sale was void because it involved the family home given that the argument was not supported by the provisions of the trust and was similarly belied by the debtor's own actions.⁵ The court rejected the debtor's argument under Count V, premised on state consumer protection laws, because themortgage was not void and the assignment was valid under Massachusetts law. With respect to Count VI, the court rejected the debtor's argument regarding the assignment because it determined the assignment was valid.

The debtor appealed.

JURISDICTION

A panel may consider appeals from final orders. 28 U.S.C. § 158(a)(1). An order granting a motion to dismiss an adversary proceeding is a final order. Gonsalves v. Belice (In re Belice), 480 B.R. 199, 203) (B.A.P. 1st Cir. 2012). Although an order denying summary judgment is typically not a final order, it is appropriate to consider the appeal of such an order when it is evident that the litigation has ended. See, e.g., Pro Fin., Inc. v. Spriggs (In re Spriggs), 219 B.R. 909, 911 (B.A.P. 10th Cir. 1998). Thus, the Panel has jurisdiction to consider this appeal.

STANDARD OF REVIEW

Orders dismissing a complaint and denying summary judgment are subject to de novo review. See, e.g., Banco Santander de P.R. v. López-Stubbe (In re Colonial Mortg. Bankers Corp.), 324 F.3d 12, 15 (1st Cir. 2003); Buckeye Ret. Co. v. Swegan (In re Swegan), 383 B.R. 646, 649 (B.A.P. 6th Cir. 2008).

In considering a motion to dismiss, a court must "accept all well-pleaded facts as true, draw reasonable inferences in favor of [the debtor], and affirm only if the averments in the complaint augur no hope of recovery under any theory set forth therein." Gonsalves v. Belice (In re Belice), No. MB 10-030, 2011 WL 4572003, at *4 (B.A.P. 1st Cir. March 7, 2011) (explaining vague, meager, or conclusory allegations are insufficient).⁶ A court must grant amotion for summary judgment if the applicable pleadings demonstrate there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In re Swegan, 383 B.R. at 652.

DISCUSSION

I. Count I (11 U.S.C. § 506(d))

The debtor brought this count under 11 U.S.C. § 506(d) which provides, with inapplicable exceptions, "[t]o the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void." The bankruptcy court rejected the three arguments the debtor offered in support of this count. On appeal, the debtor addresses only one of those arguments: whether the bankruptcy court erred in ruling that the trustee did not breach her fiduciary duty when she sold the property to the debtor for $1.00.⁷

In his brief, the debtor argues that the bankruptcy court erred in ruling that the trustee had the authority to convey the property for de minimis consideration as the conclusion was contrary to Clune v. Norton, 28 N.E.2d 229 (Mass. 1940). At oral argument, the debtor supported his argument by alternating between the terms of the trust, specifically the power of sale, and a different case, Phelps v. State St. Trust Co., 115 N.E.2d 382 (Mass. 1953). Deutsche Bank counters that because the terms of the trust authorized the trustee to sell the property and because the trust was revocable, the debtor's arguments are meritless. Deutsche Bank also contends thatthe principles of Massachusetts trust law, such as estoppel, consent, and ratification, prevent the entity who has received the benefit of the transfer from thereafter complaining.

In Clune, the Supreme Judicial Court ruled that the power of sale contained in an irrevocable trust "conferred no authority upon the trustee to give the trust estate away." 28 N.E.2d at 231. In Phelps, it ruled that a revocable trust could only be revoked or amended "in strict conformity to its terms." 115 N.E.2d at 383. The debtor...