Today the Supreme Judicial Court issued its decision in Bevilacqua v. Rodriguez (pdf).  We have discussed this case in prior posts (see comments here and here).  The decision was authored by Justice Spina and, in our view, demonstrates a good grasp of the legal principles at issue.  The SJC affirmed the Land Court’s dismissal of an “action to try title” filed by the plaintiff buyer from a bank following a foreclosure sale that was invalid under the SJC’s ruling in the Ibanez case (pdf).  The foreclosure was invalid because the sale and advertising took place before the bank had received an assignment of the mortgage. 

An action to try title is governed by G.L. c. 240, § 1.  Under that statute, the plaintiff must be in possession of the disputed property and must hold “record title” to it.  In addition, the parties must have adverse claims.

Although lengthy, the SJC’s Bevilacqua decision rests on the following key points.

The SJC rejects outright Bevilacqua’s claim that his deed from the bank gave him the required record title.  Under M.G.L. c. 240, § 1, the plaintiff’s deed must be effective, not merely existent in the registry of deeds.

The SJC also rejects Bevilacqua’s claim based on his chain of title:  “Bevilacqua is necessarily asserting that the power of sale was not complied with, that the purported sale was invalid, and that his grantor’s title was defective. . . . In light of its defective title, the intention of U.S. Bank to transfer the property to Bevilacqua is irrelevant and he cannot have become the owner of the property pursuant to the quitclaim deed.”  The court continues,

Bevilacqua’s try title action based on ownership of the property faces an insurmountable obstacle. A try title action may be brought only where record title is “clouded by an adverse claim, or by the possibility thereof.” G.L. c. 240, § 1. However, the very fact that raises the possibility of an adverse claim – U.S. Bank’s lack of authority to foreclose at the time it purported to foreclose – is fatal to Bevilacqua’s claim to “own” the property. The basic problem is that, instead of presenting a potentially viable claim and seeking to test it against the claims of a rival, Bevilacqua effectively admits that he does not presently have record title. . . .

Bevilacqua further argued that he had standing to bring the try title action because he was the mortgagee.  However, the SJC notes the problems associated with this position:

a litigant who asserts that he or she is the holder of a mortgage necessarily asserts that the mortgage continues to exist and that the mortgagor’s claims to the property remain valid. . . . For a plaintiff to both claim record title as holder of a mortgage and to dispute the respondent’s continuing equitable title or equity of redemption would be oxymoronic. . . . To assert that he holds legal title as mortgagee, Bevilacqua must necessarily accept that Rodriguez has a complementary claim to either equitable title (if there has been no default) or an equity of redemption (if default has occurred). In either case . . . Bevilacqua cannot be heard to argue that Rodriguez’s claim is adverse to his own.

The SJC also holds that Bevilacqua is not a bona fide purchaser for value.  After reaffirming its holding in Ibanez that a premature foreclosure sale was void, the court relies on the fact that, “Bevilacqua must have attempted to purchase the property from U.S. Bank . . . either when the registry’s records showed the bank to be a complete stranger to title, when the registry’s records showed the bank to be no more than an assignee of the mortgage, or when the registry’s records showed that the bank conducted the foreclosure sale before receiving assignment of the mortgage. In none of these circumstances could we conclude that Bevilacqua is a bona fide purchaser for value and without notice that U.S. Bank’s title was doubtful.”

Lastly – in a minor victory for Bevilacqua – the SJC holds that the dismissal for lack of subject matter jurisdiction should not have been with prejudice, and remands the case to the Land Court for entry of a dismissal without prejudice.

Bevilacqua was a Hail Mary pass to avoid the consequences to a buyer of a botched foreclosure sale.  That pass has now been knocked to the ground forcefully, in a decision based on solid and largely well-settled principles.

The decision leaves open only one route for such a buyer to proceed:  re-foreclosure of the property after establishing a proper chain of title as a mortgage holder.  However, footnote 10 expressly leaves open the question discussed in a recent post, of whether the buyer also must hold the underlying promissory note that the mortgage secures.  That question should be answered early next year when the SJC issues its decision in Eaton v. Federal National Mortgage Association.  Stay tuned.