two (A1074067).jpgIn the last few weeks the Supreme Judicial Court (SJC) decided two more cases dealing with the effects of botched foreclosure sales. 

The more important decision is U.S. Bank National Association v. Schumacher (pdf).  Schumacher arises from M.G.L. c. 244, §35A, which the Legislature enacted in 2007 in response to the foreclosure crisis.  This statute requires foreclosing banks

This morning the Supreme Judicial Court (SJC) issued its decision in Fannie Mae v. Hendricks (pdf), a summary process case that raised the issue of whether the Massachusetts statutory form of foreclosure affidavit – which has been in use for 100 years – is sufficient to show compliance with a power of sale, thereby entitling a foreclosing mortgagee to possession of the premises.  The SJC held

The Supreme Judicial Court (SJC) this morning issued its decision in Bank of New York v. Bailey (pdf) (see our prior commentary here).  In this case the defendant homeowner sought to stave off eviction from his Boston home after a foreclosure initiated by Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for the lender, and consummated by

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.

Continue Reading SJC to Follow Up on Ibanez and Also Address Rights of Tenants in Foreclosed Properties

In Massachusetts, the legal process for evicting commercial and residential tenants is governed not by the common law but by a statute (a very old statute – parts of it date from the 1700s), M.G.L. c. 239.  Chapter 239 gives a landlord an expedited judicial procedure, called summary process, to recover possession of its property from a tenant whose tenancy has been terminated – in other words, to evict the tenant.  The statute also allows landlords to recover damages from the tenant for unpaid rent, use and occupancy, and, if the lease permits, rent going forward and fees.

In Cummings Properties, LLC v. Cepoint Networks, LLC (pdf), the Appeals Court was asked if a landlord in a summary process action could sue – in addition to the tenant – a guarantor of the lease.  Cummings Properties leased commercial space to Cepoint Networks.  Bernard Adama executed the lease on behalf of Cepoint, and also signed a personal guaranty of the lease.  Cepoint defaulted on its rent payments, and Cummings brought a summary process action to recover possession and rent from Cepoint.  Cummings also named Mr. Adama as a defendant, seeking to recover the unpaid rent from him under his guaranty.  The District Court entered a default judgment against Cepoint, but dismissed Mr. Adama on the ground that a guarantor is not a proper defendant in a summary process action.  The Appellate Division of the District Court affirmed.

The Appeals Court agreed.  It found the answer as to whether a guarantor could be a defendant in a summary process action in the language of chapter 239, section 1, which provides that “if the lessee . . . holds possession without right . . . , the person entitled to the land or tenements may recover possession thereof under this chapter.”  Thus, the Appeals Court reasoned, summary process under Chapter 239 can only be brought against the party in possession of the premises.  Since a guarantor is not in possession, he is not a proper defendant in a summary process action.  The Appeals Court rejected the landlord’s arguments that guarantors should be defendants because (1) the statute provides for damages, (2) the Massachusetts Rules of Civil Procedure provide for joinder, and (3) judicial economy warrants joinder.  In essence, the Appeals Court’s response was that the statute’s language means what it says, and it’s up to the legislature to change it. 

Continue Reading Appeals Court Rules That Summary Process Can Only Be Used Against Parties In Possession