Galiastro v. Mortgage Electronic Registration Systems, Inc., 467 Mass. 160

The Galiastros obtained a Fremont-originated mortgage in 2006; MERS was named as mortgagee/nominee and initiated nonjudicial foreclosure in 2010 after default.
The Galiastros sued MERS and its counsel Harmon in Superior Court, alleging MERS lacked standing to foreclose because it did not hold the promissory note or act for the noteholder; they sought injunction and damages.
The Superior Court dismissed the complaint under Mass. R. Civ. P. 12(b)(6); the Galiastros appealed to the Appeals Court in February 2011; that appeal was stayed pending this court’s decision in Eaton v. Federal Nat’l Mortgage Ass’n.
This court in Eaton (rescript June 22, 2012) held that a valid statutory power-of-sale foreclosure requires the foreclosing party to hold the mortgage and either hold the note or act on behalf of the noteholder; Eaton announced that rule prospectively for most cases but applied it to the Eaton litigants.
The Supreme Judicial Court here extended Eaton’s benefit to cases that were pending on appeal in the Appeals Court on June 22, 2012, and which had preserved the issue that the foreclosing mortgagee did not hold the note.
Applying Eaton, the court vacated dismissal of the Galiastros’ claim for damages based on lack of authority to foreclose (remanding for further proceedings), but affirmed dismissal of their G.L. c. 93A, civil conspiracy, and fraud claims; injunctive relief was moot.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Retroactive effect of Eaton	Eaton should apply to cases pending on appeal that preserved the note-holder issue	Eaton should be prospective only; not apply to other pending appeals	Eaton’s rule applies to cases on appeal in Appeals Court on June 22, 2012, that preserved the claim
Standing to foreclose / meaning of “mortgagee”	MERS lacked standing because it did not hold the note and was not agent of noteholder	MERS argued its structure/nominee status conferred authority; contested Eaton’s interpretation	Allegations that MERS neither held the note nor acted as agent state a plausible claim; dismissal vacated as to damages claim
G.L. c. 93A claim based on violation of Fremont order	MERS failed to notify Attorney General as required by Fremont injunction and acted deceptively	MERS contended no violation; foreclosure need not be delayed absent criteria met	Complaint failed to allege mortgage met Fremont’s four presumptions; c.93A claim dismissed
Civil conspiracy and fraud	Harmon conspired with MERS to obscure note holder and avoid Fremont order	Harmon maintained mere representation or lawful conduct; invoked litigation privilege	Conspiracy and fraud allegations were conclusory; dismissal affirmed

Eaton v. Federal Nat’l Mtge. Ass’n, 462 Mass. 569 (Mass. 2012) (statutory power-of-sale foreclosure invalid unless mortgagee also holds note or acts for noteholder; generally prospective rule but applied to Eaton parties)
Commonwealth v. Fremont Inv. & Loan, 452 Mass. 733 (Mass. 2008) (AG’s injunction imposing notice and workout conditions on certain Fremont-originated loans)
Iannacchino v. Ford Motor Co., 451 Mass. 623 (Mass. 2008) (motion-to-dismiss standard: accept well-pleaded facts and reasonable inferences; plausibility requirement)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility pleading standard for federal complaints cited for persuasive pleading principle)
Powers v. Wilkinson, 399 Mass. 650 (Mass. 1987) (discussion of prospective application of new rules and discretion to apply to parties)
Griffith v. Kentucky, 479 U.S. 314 (U.S. 1987) (new rules should be applied to all similar cases pending on direct review)
Barnes v. Boardman, 149 Mass. 106 (Mass. 1889) (under Massachusetts law, transfer of note does not automatically transfer mortgage)