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Re-foreclosure as a Remedy: Bevilacqua and Eaton

Last fall, in Bevilacqua v. Rodriguez, 460 Mass. 762 (2011), the Supreme Judicial Court (the "SJC") quashed the hopes of many that a "try title" action available by statute in Massachusetts would provide a mechanism to clear the title of a post-foreclosure owner whose predecessor failed to obtain a mortgage assignment prior to conducting a foreclosure sale.  (See U.S. Bank National Association v. Ibanez, 458 Mass. 637 (2011) for discussion of this particular title defect.)

The Court held that a "confirmatory deed" issued by the foreclosing entity after the post-sale assignment of the mortgage was not sufficient to confer the "record title" necessary to supply standing to a plaintiff bringing a try title action pursuant to G.L. c. 240, ยงยง 1-5.  The Court also held: (i) that Mr. Bevilacqua could not proceed on a theory that he held title as a mortgagee (with the foreclosure deed operating as a mortgage assignment) because a title conferred upon him as mortgagee would be of no assistance since it would imply a present title interest held by the mortgagor; and (ii) Mr. Bevilacqua did not have standing as a bona fide third party purchaser because the title defect was apparent from the record available in the Registry of Deeds.

The SJC did not, however, leave Mr. Bevilacqua entirely without a remedy.  Instead, the Court provided the following dicta in footnote 10 of the opinion:

Foreclosure . . . is the appropriate remedy for a mortgagee seeking to resolve an outstanding equity of redemption.  Nothing contained herein is intended to limit Bevilacqua's right, if he can show himself to be mortgagee of the property, to pursue foreclosure under the appropriate statutes.

The SJC took away as quickly as it gave, however, offering the following caveat in footnote 10 of Bevilacqua:

The record does not disclose if Bevilacqua presently holds the promissory note secured by Rodriguez's mortgage.  Whether the holder of a mortgage may foreclose the equity of redemption without also holding the note is a question that is not before us.

The SJC recently answered that question in a case called Eaton v. Federal National Mortgage Association, 462 Mass 569 (2012).  There, the Court held that a foreclosing mortgagee must either hold the promissory note or act on the behalf of the note holder based on general agency principles.  Thus, in order to effectively re-foreclose, Mr. Bevilacqua would have to hold the note or to act at the direction of the note holder as principal.  

Accordingly, it seems to us at Fitch Law Partners LLP that re-foreclosure is unlikely to be an attractive remedy for post-foreclosure owners like Mr. Bevilacqua facing an Ibanez-type problem - unless they began the foreclosure process before Eaton was decided, since Eaton applies "only to mortgage foreclosure sales for which the mandatory notice of sale has been given after [June 22, 2012]."

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

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