Massachusetts Land Court Dismisses Bank’s Action Against Defendant to Reform Mortgage

In a recent case, the Massachusetts Land Court ruled on whether a bank could reform an existing mortgage it held with the defendant.  In JP Morgan Chase Bank, N.A. v. Niakaros (Mass. Land Ct. Dec. 13, 2016), the defendant had sought a personal loan in 2007 to pay off an existing mortgage on property owned by his trust, without having to grant a new mortgage on the property.  The bank agreed to the personal loan, and at the closing, the defendant confirmed to the closing attorney that he did not intend to grant a mortgage.  The mortgage was never recorded.

The bank failed and was placed in receivership in 2008, and the loan was eventually sold to the plaintiff.  Realizing that both the note and the mortgage on the property were given to the defendant individually, rather than by the trust that owns the property, and that the mortgage was never registered, the plaintiff brought an action to reform the mortgage to name the trust as mortgagor and have it registered.  The primary issues for the land court were whether there was a mutual mistake in the naming of the defendant personally as mortgagor, and whether the defendant would be so unjustly enriched that the mortgage should be reformed.

In Massachusetts, a court has broad power to reform, rescind, or cancel written instruments, including mortgages, on grounds such as fraud, mistake, accident, or illegality.  A reformation based on a mistake will only be allowed if there is full, clear, and decisive proof that the mortgage failed to express the intent that both parties had in making it.  In JP Morgan Chase Bank, the land court ruled that the plaintiff failed to establish that the bank and the defendant made a mutual mistake in executing the mortgage from the defendant individually.  The court credited the testimony of the defendant, in that he communicated his intent to acquire a personal loan and not encumber his trust’s rental property to representatives of the bank as well as the closing attorney.  The court also noted that the note and the mortgage were consistent with the defendant’s description of an individual loan.

Unjust enrichment is defined as the retention of money or property of another party against the fundamental principles of justice or equity and good conscience.  To determine whether a benefit is just, courts look at the reasonable expectations of the parties.  In JP Morgan Chase Bank, the court found that the bank, on several occasions, expressly stated to the defendant that he was receiving a personal loan, thus indicating the intention and expectation of both parties that the loan was individually issued.  Accordingly, the court concluded that the defendant was not unjustly enriched.  The land court therefore dismissed the plaintiff’s complaint, finding no grounds for reforming the mortgage.

The experienced attorneys at Pulgini & Norton provide legal guidance to individuals seeking real estate solutions in Massachusetts.  We regularly represent clients in matters such as purchase and sale agreements, mortgages and foreclosures, zoning and building permits, and many other property transactions.  Schedule an appointment with one of our qualified lawyers to discuss your real estate issue by calling (781) 843-2200 or contacting us through our website.

More Blog Posts:

Massachusetts Appeals Court Reviews Summary Process Action in Foreclosure Dispute, Massachusetts Real Estate Lawyer Blog, published May 23, 2016

Massachusetts Property Owner Brings Lawsuit to Recover Rental Income Appropriated by Bank after Invalid Foreclosure, Massachusetts Real Estate Lawyer Blog, published November 21, 2016

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