Eaton v. Federal National Mortgage Ass'n, 462 Mass. 569

Eaton faced eviction after a foreclosure sale conducted by Green Tree, which held Eaton's mortgage but allegedly did not hold the note at the time of sale.
Green Tree assigned the mortgage to MERS, which later assigned to Green Tree; the note was indorsed in blank but its current holder at sale time is unknown.
Fannie Mae purchased Green Tree's bid after the foreclosure and commenced eviction proceedings in Housing Court, with Eaton counterclaiming the sale was invalid for lack of note ownership.
A Superior Court judge granted a preliminary injunction enjoining eviction, on the theory that a valid sale requires the foreclosing mortgagee to hold the note at sale.
The Appeals Court single justice denied relief, and the case was transferred to the Supreme Judicial Court for decision.
The Court holds that a foreclosing mortgagee may foreclose by sale though not physically in possession of the note, so long as the mortgagee acts on behalf of the note holder and complies with statutory notice requirements.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Must foreclosing mortgagee hold the note at sale?	Eaton contends Green Tree lacked authority to foreclose without the note.	Green Tree argues statutory power of sale permits foreclosure without physical possession of the note.	Mortgagee may foreclose if authorized to act for note holder; not required to hold note physically.
What is the meaning of 'mortgagee' in the statute?	Mortgagee must hold note to foreclose; title theory supports unity of mortgage and note.	Statutes allow foreclosure by power of sale by 'mortgagee' regardless of note possession.	Court adopts a nuanced meaning: 'mortgagee' includes one who holds or acts for the note holder; but limits to prospective application with notice after decision.
Does agency law allow non-note-holders to foreclose on behalf of note holders?	Eaton argues no authority without note holder or its agent.	Defendants rely on agency and statutory structure to permit foreclosures by such agents.	Yes, if acting as authorized agent of the note holder; agency permits foreclosure without the note in hand.
Should the new interpretation apply retroactively or prospectively?	Not explicit; seeks retroactive application to aid Eaton.	New interpretation should apply retroactively to avoid inequities.	Interpretation applies prospectively to mortgage foreclosures with notice after the decision date.

U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637 (Mass. 2011) (foreclosure by sale requires notice and corporate authority; concurrent jurisdiction noted in Ibanez)
Wolcott v. Winchester, 15 Gray 461 (Mass. 1860) (mortgagee with bare title cannot foreclose without the underlying debt)
Crowley v. Adams, 226 Mass. 582 (Mass. 1917) (possession of the note essential to foreclosure under traditional view)
Weinberg v. Brother, 263 Mass. 61 (Mass. 1928) (note security; mortgage cannot be attached by trustee process without note holder)
Barnes v. Boardman, 149 Mass. 106 (Mass. 1889) (split mortgage and note may occur; equitable rights of note holder asserted)
Bevilacqua v. Rodriguez, 460 Mass. 762 (Mass. 2011) (context for mortgage foreclosure and note-holder relationship)