Guru Jiwan Singh Khalsa v. Sovereign Bank, N.A.
88 Mass. App. Ct. 824
| Mass. App. Ct. | 2016Background
- In 2008 plaintiffs executed a note payable to Sovereign and granted Sovereign a mortgage; Freddie Mac purchased the note soon after and Sovereign remained servicer.
- The note had been indorsed in blank and Freddie Mac had physical possession at the time of the foreclosure.
- Sovereign mailed a default notice, held a foreclosure sale on Jan 18, 2013, purchased the property at auction, and then sold its bid to Freddie Mac.
- Plaintiffs sued to enjoin the sale and sought a declaration that Sovereign lacked authority because it did not hold the note and had not shown it acted for the note holder.
- On cross motions for summary judgment, the trial court declared the foreclosure void, finding Sovereign failed to prove it was acting as Freddie Mac’s authorized agent; Sovereign appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a foreclosure is valid when the mortgagee holds the mortgage but not the note | Sovereign did not hold the note and failed to prove it acted as Freddie Mac's authorized agent, so foreclosure is invalid | Eaton requires either possession of the note or acting as authorized agent; Sovereign argued its servicer relationship (per Freddie Mac Guide) authorized foreclosure | Under Eaton, mortgagee must hold note or act as authorized agent; summary judgment for plaintiffs was premature because genuine fact issue existed about agency |
| What suffices to show a mortgagee acted as authorized agent of the note holder | Plaintiffs argued Sovereign’s affidavits were conclusory and insufficient to show agency | Sovereign relied on servicer relationship and affidavits (Norris, Meyer) and Guide excerpts to show authority to foreclose on Freddie Mac’s behalf | Court held general servicer authorization can suffice but Sovereign’s summary judgment proof was inadequate to eliminate factual dispute |
| Admissibility/persuasiveness of affidavits about authorization | Plaintiffs challenged affidavits as lacking personal knowledge and violating best-evidence rule | Sovereign submitted affidavits by its analyst and Freddie Mac assistant treasurer describing authority under the Guide | Court found Meyer’s affidavit subject to striking under best-evidence rule and Norris’s affidavit unsupported; affidavits insufficient for summary judgment but could support claim at trial |
| Whether plaintiffs were entitled to summary judgment given record | Plaintiffs argued Sovereign produced no loan-specific preforeclosure authorization and thus summary judgment appropriate | Sovereign argued course of events and Guide create an inference of authority sufficient to defeat plaintiffs’ motion | Court vacated plaintiffs’ summary judgment: plaintiffs failed to show absence of any genuine issue of material fact; remanded for further proceedings |
Key Cases Cited
- Eaton v. Federal Natl. Mort. Assn., 462 Mass. 569 (Mass. 2012) (a foreclosing party must hold the mortgage and either hold the note or act as the note holder's authorized agent)
- Galiastro v. Mortgage Elec. Registration Sys., Inc., 467 Mass. 160 (Mass. 2014) (applies Eaton rule to pending cases)
- U.S. Bank Natl. Assn. v. Ibanez, 458 Mass. 637 (Mass. 2011) (statutory requirements for nonjudicial foreclosures must be strictly followed)
- DeWolfe v. Hingham Centre, Ltd., 464 Mass. 795 (Mass. 2013) (summary judgment standards — moving party must show no genuine issue of material fact)
- Marr Equip. Corp. v. I.T.O. Corp. of New England, 14 Mass. App. Ct. 231 (Mass. App. Ct. 1982) (a minimal showing — a "toehold" — can be enough to survive summary judgment)