Another case arising from a premature foreclosure is headed to the SJC.  Judge Keith Long, whose Land Court decision was affirmed in U.S. Bank National Association v. Ibanez (see related commentary here), also decided Bevilacqua v. Rodriguez (pdf).  The plaintiff in Bevilacqua was an innocent third-party buyer of a property foreclosed by a bank before the bank had received an assignment of the mortgage.  In an effort to clear his title, the buyer filed an “action to try title” in the Land Court.  In short, this type of case is an attempt to force the other party to show that it has title to the land.  Judge Long ruled in a straightforward manner that, due to the defective foreclosure, the plaintiff never received title to the land.  As a result, the plaintiff could not use the try title statute to force the original mortgagor to prove his title. 

In late December 2010, just a few weeks before issuing its decision in Ibanez, the Supreme Judicial Court (SJC) granted the buyer’s request for direct appellate review in Bevilacqua.  The SJC has invited amicus briefs on the following issue:  “Whether a Land Court judge correctly dismissed a petition under G. L. c. 240, § 1, to ‘try title’, where the plaintiff held a quitclaim deed conveyed after an invalid foreclosure sale of the property by U.S. Bank National Association, which did not hold the mortgage at the time of the sale.”  

An SJC affirmance of Judge Long’s Bevilacqua decision would not leave innocent purchasers without a remedy.  We recently represented an individual who bought property from a bank that had conducted a foreclosure sale before it held an assignment (the fact that our buyer purchased before the Land Court’s Ibanez decision did not save him from the impact of that case).  Past Massachusetts cases, such as Kaufman v. Federal Nat’l Bank and Holmes v. Turner’s Falls Co., have held that a bank’s invalid deed at a foreclosure sale acts as an assignment of that bank’s rights.  Relying on these cases, we obtained a Land Court ruling that our client was now the holder of the improperly foreclosed mortgage.  This judgment has put our client in a position to foreclose correctly on the property, with the ability to bid in the outstanding balance of the mortgage note at the new foreclosure sale.  This approach is not a perfect solution for a buyer who purchases property after a botched foreclosure.  But, it does provide a way forward in the wake of Ibanez.

Oral argument of Bevilacqua is tentatively scheduled for May 2011.  According to Jeff Loeb, Bevilacqua’s counsel, this date was chosen to permit the SJC to hear that appeal along with two other cases in which it has granted direct appellate review: Federal Nat’l. Mortgage Assn. v. Nunez  (pdf) and Deustche Bank Nat’l. Trust Co. v. Matos (pdf) (the Matos appeal was dismissed voluntarily by the parties on Valentine’s Day).  Those cases address the effective date and impact of M.G.L. c. 186A, “Tenant Protections in Foreclosed Properties.”  This new statute was added by Section 6 of Chapter 258 of the Acts of 2010 and took effect on August 7, 2010.

Section 2 of the new Chapter 186A provides:  “Notwithstanding any general or special law to the contrary, a foreclosing owner shall not evict a tenant except for just cause or unless a binding purchase and sale agreement has been executed for a bona fide third party to purchase the housing accommodation from a foreclosing owner.”  Section 1 defines “eviction” as “an action, without limitation, by a foreclosing owner of a housing accommodation which is intended to actually or constructively evict a tenant or otherwise compel a tenant to vacate such housing accommodation.” 

The mortgage holders in these Housing Court cases had filed summary process actions that were pending when Chapter 186A became effective, and they argued that it should take effect only prospectively because it affected their substantive rights.  Judge Dina Fein held that Chapter 186A does not affect substantive rights, but only procedures or remedies, and therefore applies retroactively.  She also held that the statute’s bar on an owner taking “an action” to evict a bona fide tenant without just cause includes actions associated with pending litigation.  Understandably, the notices to quit that the plaintiff mortgage holders served on the tenants failed to articulate a “just cause” because they were served before the new statute that imposed such a requirement became effective.  Nonetheless, Judge Fein held that the plaintiffs could not recover possession because of this deficiency in the notices to quit.  Judge Fein’s decisions do leave open the possibility that the plaintiffs could collect from the tenants for use and occupancy.  

The SJC has solicited amicus briefs in Nunez on the following issue:  “Whether a judge of the Land Court [sic] correctly dismissed a summary process action, ruling that G. L. c. 186A (“Tenant Protections in Foreclosed Properties”), effective on August 7, 2010, as an emergency law, which imposed new notice requirements and prohibited a foreclosing owner from evicting a tenant except for “just cause”, applied to pending litigation.”  

Although Bevilacqua and Nunez both arise from the foreclosure crisis, there appears to be no other connection between them.  That the SJC plans to hear and decide these cases together is an indication of the court’s desire to stay on top of, and continue clarifying, this important and rapidly developing area of the law.