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Allegations on 'Information and Belief' Not Enough to Stop Mortgage Foreclosures

One less-discussed but important aspect of the Supreme Judicial Court's ("SJC's") decision in Eaton v. National Federal Mortgage Association, 462 Mass. 569 (2012), is found in its most narrow ruling.  Even though the Court held that the named plaintiff, Henrietta Eaton, could benefit from the SJC's pronouncements despite an otherwise prospective application, the Court nonetheless struck down the preliminary injunction that brought Ms. Eaton to the SJC in the first place.

The primary holding of Eaton - that a foreclosing mortgagee must either possess the promissory note secured by the mortgage or act on behalf of the note holder - did not go quite so far as the decision of the hearing judge.  The Superior Court entered a preliminary injunction on the ground that the law required the note and mortgage to be physically united in the hands of the foreclosing mortgagee for an effective foreclosure, and that Ms. Eaton would likely be able to show that they were not.  Because the SJC found that physical unity of mortgage and note is not required, however, the Superior Court's preliminary injunction could not be sustained on the ruling of the trial court.

Interestingly, the SJC noted that Ms. Eaton's Complaint did not rely only on a theory requiring physical unity of note and mortgage, but also alleged that the foreclosing entity was not "authorized by the holder of the note to carry out the foreclosure."  This later allegation was made solely on "information and belief."  

Because Ms. Eaton's allegation that there was no agency relationship between the note holder and the mortgagee was made only on "information and belief" it was insufficient to sustain the injunction.  Citing a 1986 Appeals Court decision, Alexander & Alexander v. Danahy, 21 Mass. App. Ct. 488, 493-94 (1986), the SJC wrote:  "As a general rule, an allegation that is supported on 'information and belief' does not supply an adequate factual basis for the granting of a preliminary injunction."  Accordingly, the Court vacated Ms. Eaton's preliminary injunction and held that on remand she could renew her request for an injunction, but would be required to show that she has "a reasonable likelihood of establishing that, at the time of the foreclosure sale, [the foreclosing mortgagee] neither held the note nor acted on behalf of the note holder."

The Court's analysis of the preliminary injunction in Eaton is significant because it clarifies that a mortgagor will not be able to stop foreclosure proceedings with allegations made only on "information and belief."  It would appear that this is the case not only where the claim is based on an Eaton-style issue about whether the requisite nexus between note and mortgage exists, but also where the plaintiff alleges that statutory notice was not properly given (see Bank of New York v. KC Bailey, 460 Mass. 327 (2011)), or that the purported mortgagee was not assigned the mortgage prior to giving statutory notice (see U.S. Bank National Association v. Ibanez, 458 Mass. 637 (2011)).

To view author Jennifer E. Greaney's biography or find her contact information, click here

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