Murphy v. Wachovia Bank of Delaware, N.A., et al. (Lawyers Weekly No. 11-108-15)
NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us 13-P-1943 Appeals Court HAROLD B. MURPHY, trustee,[1] vs. WACHOVIA BANK OF DELAWARE, N.A., & another.[2] No. 13-P-1943. Middlesex. November 12, 2014. – August 13, 2015. Present: Kafker, Cohen, & Milkey, JJ. Mortgage, Real estate, Foreclosure, Assignment, Junior lien. Real Property, Mortgage. Judicial Estoppel. Civil action commenced in the Superior Court Department on May 29, 2008. The case was heard by Dennis J. Curran, J. David M. Bizar for Wachovia Bank of Delaware, N.A. John C. Elstad for the plaintiff. COHEN, J. This case concerns the proper distribution of surplus funds after a foreclosure sale initiated and conducted by the holder of a second mortgage. After a jury-waived trial, a judge of the Superior Court ruled that defendant Wachovia Bank of Delaware, N.A. (Wachovia), erroneously distributed surplus funds to the holder of the first mortgage, Wells Fargo Bank, N.A. (Wells Fargo), instead of to the mortgagor, Nigel Thorpe. The judge therefore ordered Wachovia to pay $ 178,626.61, plus interest and costs, to the plaintiff, Harold B. Murphy, as trustee of the bankruptcy estate of Thorpe (trustee). On appeal, Wachovia argues that it was entitled to disburse the funds to Wells Fargo, but even if it was not, it had valid equitable defenses to the trustee’s claims.[3] For the reasons that follow, we affirm. Background. We summarize the judge’s findings, supplemented by additional undisputed facts.[4] Prior to the foreclosure sale, Thorpe was the owner of residential property in Wilmington. The property was encumbered by two mortgages: a first mortgage dated March 23, 1999, held by Wells Fargo, and a second mortgage, dated July 26, 2000, held by Wachovia. In March, 2006, Thorpe defaulted on the payment obligations secured by the second mortgage, and Wachovia exercised its statutory power of sale to foreclose on the property.[5] The notice of sale to Thorpe and to any potential buyers provided that “[b]y virtue and in execution of the Power of Sale contained in [the second mortgage], . . . [t]hese premises will be sold and conveyed subject to . . . all unpaid . . . liens or existing encumbrances of record which are in force and are applicable, having priority over said mortgage.” On July 25, 2006, Wachovia conducted a foreclosure auction. At that time, the outstanding debt secured by the Wachovia mortgage was $ 130,000, and the outstanding debt secured […]