88 N.E.3d 1133
Mass.2018Background
- Three elderly borrowers obtained Nutter reverse mortgages (2007–08); two died and one left her home; Nutter sought to foreclose claiming default.
- Nutter filed separate declaratory-judgment actions in Land Court seeking a judicial declaration that it may foreclose by the mortgage's "power of sale."
- Nutter’s standard reverse-mortgage form: paragraph 9 (acceleration on death or vacancy); paragraph 10 (nonrecourse; no deficiency judgments); paragraph 20 ("Lender may invoke the power of sale and any other remedies permitted by applicable law").
- The Land Court granted Nutter partial judgment on the pleadings that paragraph 20 incorporates the statutory power of sale (G. L. c. 183, § 21); cases reported and transferred to SJC.
- Massachusetts permits nonjudicial foreclosure only pursuant to the statutory power of sale; § 21 may be incorporated by reference but imposes mandatory procedural requirements and strict compliance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether paragraph 20 incorporates the statutory power of sale (G. L. c. 183, § 21) | Paragraph 20’s phrase "power of sale and any other remedies permitted by applicable law" incorporates the statutory power of sale | Language omits "statutory" and is ambiguous; surrounding references suggest judicial foreclosure, so it does not incorporate § 21 | Yes; ambiguous adhesion language construed against drafter and reasonably read to incorporate the statutory power of sale |
| If incorporated, whether the mortgagee’s power is the statutory (regulated) power or an independent contractual power | Nutter contends the power of sale granted is enforceable to foreclose | Estates argue a private, unregulated power of sale cannot be assumed from ambiguous language | The only reasonable interpretation is the statutory power; Massachusetts recognizes no other power of sale |
| Whether ambiguity should be resolved by extrinsic evidence or construed against drafter in standardized adhesion contract | Nutter: plain language suffices; no need for contra proferentem | Estates: ambiguous — resolve against Nutter | Court applies adhesion-contract rules: ambiguous terms construed against drafter; adopts borrower‑reasonable interpretation |
| Effect of holding: limits on foreclosure process and required compliance | Nutter: incorporation allows foreclosure by statutory power of sale if § 21 complied with | Estates: incorporation would subject lender to statutory strictures (and potential defects) | Holding confirms foreclosure only allowed if lender strictly complies with § 21 and related statutes |
Key Cases Cited
- Summers v. Financial Freedom Acquisition LLC, 807 F.3d 351 (1st Cir. 2015) (describing reverse mortgages as typically nonrecourse loans)
- U.S. Bank Nat'l Ass'n v. Ibanez, 458 Mass. 637 (Mass. 2011) (nonjudicial foreclosure requires compliance with statutory power-of-sale requirements)
- Eaton v. Federal Nat'l Mtge. Ass'n, 462 Mass. 569 (Mass. 2012) (statutory power of sale must be complied with in foreclosure sales)
- Pinti v. Emigrant Mtge. Co., 472 Mass. 226 (Mass. 2015) (default-notice language that suggests judicial process can mislead borrowers in nonjudicial foreclosure State)
- Starr v. Fordham, 420 Mass. 178 (Mass. 1995) (contracts should be construed to give effect as rational business instruments)
- Beaton v. Land Court, 367 Mass. 385 (Mass. 1975) (describing foreclosure by entry and action as alternatives to power of sale)
- Shea v. Bay State Gas Co., 383 Mass. 218 (Mass. 1981) (ambiguities in contracts construed against drafter when reasonable alternative interpretation exists)
- Balles v. Babcock Power, Inc., 476 Mass. 565 (Mass. 2017) (contract interpretation is question of law reviewed de novo)