A trustee sought a declaratory judgment confirming its right to enforce a lost promissory note by foreclosing on the mortgage securing the note. The borrower signed the note, which was secured by the mortgage, with the lender. The lender’s successor then endorsed the note to the bank. However, the bank lost the original note. The bank executed an affidavit attesting its prior possession, stating that the note could not be reasonably obtained, and also stating that the loss of the note did not result from transfer or seizure. The bank later assigned the mortgage to the trustee and granted the trustee authority to enforce the note and mortgage as its agent. The trustee properly served the borrower and the subordinated lienholder, both of whom defaulted by failing to appear.
In U.S. Bank Trust Nat’l Ass’n v. Murray, No. 3:24-cv-30046-JEK, 2025 WL 1071655, 2025 U.S. Dist. LEXIS 52425 (D. Mass. Feb. 27, 2025) (unpublished opinion), the magistrate court recommended that the district court grant the motion for entry of default judgment in favor of the trustee. Because the borrower and the subordinated lienholder had defaulted, the court accepted the verified complaint’s allegations as true but still independently verified that the trustee stated a plausible claim for declaratory relief. The court explained that Massachusetts state law allows a party to enforce a “lost, destroyed, or stolen” note with an affidavit if: (1) the party actually possessed the note when the loss occurred; (2) the loss was not the result of any transfer or lawful seizure; and (3) the note could not reasonably be obtained because it was destroyed, it cannot be found, or it is in the wrongful possession of an unknown party that cannot be found or served upon. Mass. Gen. Laws ch. 106, § 3-309(a). The court looked at the trustee’s verified complaint and the bank’s affidavit, which was supported by the bank’s business records and a true copy of the note, and found that, at the time the bank authorized the trustee to act on its behalf, the bank was entitled to enforce the lost note because all the elements had been met to enforce by an affidavit. The court further ruled that common-law agency principles permitted the trustee to enforce the note and foreclose as the bank’s authorized agent, even without physical possession of the note. Finally, the court found the bank’s indemnity agreement supplied the adequate protection required by § 3-309(b) against any risk of multiple enforcement claims, particularly given the note’s limited chain of title. Therefore, the court recommended that the district court grant default judgment in favor of the trustee.
By Deanna Dulske [email protected]
Edited By Olivia Lewis [email protected]
Edited By Kristin Meurer [email protected]
Edited By Hayden Mariott [email protected]