LINDA PINTI & another vs. EMIGRANT MORTGAGE COMPANY, INC., & another.
Supreme Judicial Court of Massachusetts
July 17, 2015
472 Mass. 226 (2015)
Middlesex. January 8, 2015. - July 17, 2015. Present: GANTS, C.J., SPINA, CORDY, BOTSFORD, DUFFLY, LENK, & HINES, JJ.
This court concluded that, in order to conduct a valid foreclosure, a mortgagee was required to comply strictly with the terms of a paragraph in the mortgage concerning the mortgagee‘s provision of notice to the mortgagor of default and the right to cure, as well as the remedies available to the mortgagee upon the mortgagor‘s failure to cure the default, including the power of sale. [231-240]
This court concluded that, in a civil action seeking a judgment declaring that a mortgage foreclosure sale was void because the mortgagee failed to comply with the terms of a paragraph in the mortgage concerning the mortgagee‘s provision of notice to the mortgagor of default and the right to cure, as well as the remedies available to the mortgagee upon the mortgagor‘s failure to cure the default, including the power of sale, the judge erred in granting the mortgagee‘s motion to dismiss and in granting summary judgment in favor of the purchaser of title at the foreclosure sale, where the failure to comply strictly with the terms of the paragraph in the mortgage rendered the title obtained by the purchaser at the foreclosure sale void; further, this court concluded that this holding was prospective only. [240-244] CORDY, J., dissenting, with whom GANTS, C.J, and SPINA, J., joined.
This court did not reach a claim that, in a civil action, there was a genuine issue of material fact precluding a grant of summary judgment. [244]
CIVIL ACTION commenced in the Superior Court Department on January 31, 2013.
The case was heard by Maureen B. Hogan, J., on motions for summary judgment.
The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court.
Richard M.W. Bauer (Stefanie A. Balandis, Amanda B. Loring, & Geoffry F. Walsh with him) for the plaintiffs.
Lesley Phillips.1
Harold Wilion.2
Michael P. Robinson for Emigrant Mortgage Company, Inc.
The following submitted briefs for amici curiae:
James P. Long, pro se.
Daniel D. Bahls & Courtney Clemente for Community Legal Aid.
Grace C. Ross, pro se.
BOTSFORD, J. In 2012, the defendant Emigrant Mortgage Company, Inc. (Emigrant), foreclosed on the mortgage of the plaintiffs Lesley Phillips and Linda Pinti by exercise of the power of sale contained in the mortgage. Thereafter, the plaintiffs filed this action in the Superior Court against Emigrant and the defendant Harold Wilion, the purchaser of the property at the foreclosure sale, seeking a judgment declaring that the sale was void because Emigrant failed to comply with paragraph 22 of the mortgage, which concerns the mortgagee‘s provision of notice to the mortgagor of default and the right to cure, and also the remedies available to the mortgagee upon the mortgagor‘s failure to cure the default, including the power of sale (notice of default provisions). We agree with the plaintiffs that strict compliance with the notice of default provisions in paragraph 22 of the mortgage was required as a condition of a valid fоreclosure sale, and that Emigrant failed to meet the strict compliance requirement. Accordingly, we reverse the allowance of the defendant Emigrant‘s motion to dismiss and of the defendant Wilion‘s motion for summary judgment.3
Background.4 Phillips purchased a condominium unit (property) in Cambridge in 1982. In 2005, she transferred title to the property by quitclaim deed to herself and her spouse, Pinti, as tenants by the entirety. On March 13, 2008, Pinti and Phillips granted a mortgage on the property to Emigrant to secure a $160,000 loan.5 Paragraph 22 of the mortgage provides that, prior to acceleration of the loan following any breach of the mortgage by the plaintiffs, Emigrant is required to notify the plaintiffs of “(a) the default; (b) the action required to cure the default; (c) a date, not less than [thirty] days from the date the notice is given
In August and September of 2009, the plaintiffs failed to make the monthly mortgage payments that were due. On September 29, 2009, Emigrant sent a notice of default to the plaintiffs pursuant to paragraph 22. The notice stated that the plaintiffs had failed to make monthly mortgage payments, demanded payment of a sum sufficient to satisfy the outstanding amount by December 28, 2009, and noted that the mortgagee could invoke the statutory
In 2011, Pinti sent Emigrant a “qualified written request” (QWR) that asked Emigrant to identify the holder of the plaintiffs’ mortgage and the owner of Pinti‘s loan.7 The letter also requested copies of any assignment of the plaintiffs’ mortgage, and of Pinti‘s promissory note “in its current condition showing all endorsements and/or allonges.” Emigrant‘s response to the QWR, dated August 22, 2011, indicated that ESB-MH Holdings, LLC (ESB-MH), owned the loan, but that Emigrant held and serviced the loan. The response enclosed a copy of Emigrant‘s assignment of the plaintiffs’ mortgage and note to ESB-MH; the assignment was signed by Filippo Ruggiero, “Vice President” of Emigrant. It appears on the face of the assignment that Ruggiero executed it on November 30, 2009, but Emigrant‘s response to the QWR asserts that “the assignment transferring ownership of the note and mortgage to [ESB-MH] has not been recorded and the original note and mortgage, as well as the assignment of the mortgage[,] are in the possession of [Emigrant,] which is prosecuting the foreclosure action as the holder and servicer of the loan.” Emigrant‘s response to the QWR also enclosed Pinti‘s note with an allonge indicating that the note had been paid to the order of ESB-MH without recourse by Emigrant, and then indorsed in blank without recourse by ESB-MH.
Emigrant published a notice of foreclosure sale regarding the plaintiffs’ property in the Boston Herald on June 12, 19, and 26, 2012. Wilion purchased the property at the foreclosure sale held on August 9, 2012, and obtained a foreclosure deed from Emigrant dated September 10, 2012. Wilion then initiated a summary process action against the plaintiffs in the District Court.
On January 31, 2013, the plaintiffs filed the present action against the defendants in the Superior Court. The plaintiffs’ complaint sought a judgment declaring that the foreclosure sale
Emigrant filed a motion to dismiss the plaintiffs’ complaint under
After a hearing, a judgе in the Superior Court allowed Wilion‘s motion for summary judgment and denied the plaintiffs’ cross motion. The judge rejected the plaintiffs’ argument that Emigrant‘s notice of default rendered the foreclosure void, reasoning that Emigrant was not required strictly to comply with a term of the mortgage, such as the notice of default and right-to-cure provisions of paragraph 22, that had no direct relationship to the power of sale. The judge also determined there was no genuine factual dispute that Emigrant validly held the mortgage and the note at the time of the foreclosure sale. In accordance with her decision, a judgment entered in favor of Wilion on his counterclaim that declared the foreclosure of the mortgage and the foreclosure sale were valid and, therefore, that Wilion held good title to the property. In a separate decision, the judge also allowed Emigrant‘s motion to dismiss for reasons substantially similar to those in her
Discussion. 1. Standard of review. “We review a grant of summary judgment de novo to determine ‘whether, viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to a judgment as a matter of law.’ ” Juliano v. Simpson, 461 Mass. 527, 529-530 (2012), quoting Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120 (1991). “Because our review is de novo, we accord no deference to the decision of the motion judge.” DeWolfe v. Hingham Centre, Ltd., 464 Mass. 795, 799 (2013). De novo review also applies to the judge‘s dismissal of the plaintiffs’ complaint under
2. Compliance with paragraph 22. The plaintiffs argue that Emigrant was required to conduct the foreclosure sale in strict compliance with paragraph 22. They reason that under this court‘s decisions, compliance with the terms of the mortgage describing the steps that lead up to foreclosure, beginning with the notice of default provision spelled out in paragraph 22, is a necessary component of the power of sale provided in the mortgage as well as of the statutory power of sale set out in
“Massachusetts does not require a [mortgagee] to obtain judicial authorization to foreclose on a mortgaged property.” U.S. Bank Nat‘l Ass‘n v. Ibanez, 458 Mass. 637, 645-646 (2011) (Ibanez). Accordingly, a mortgagee may conduct a foreclosure by exercise of the statutory power of sale set out in § 21, where, as here, the mortgage itself gives the mortgagee a power of sale and includes by reference the statutory power. See Ibanez, supra at 646. Under the terms of the statutory power of sale, the power may be exercised “upon any default in the performance” of a condition of the mortgage, such as the mortgagor‘s failure to pay the note underlying the mortgage.
This court has recently reemphasized the point that in light of “the substantial power that the statutory scheme affords to a [mortgagee] to foreclose without immediate judicial oversight, we ad-
forever bar the mortgagor and all persons claiming under him from all right and interest in the mortgaged premises, whether at law or in equity” (emphasis added).
Wilion asserts, correctly, that in a number of our foreclosure cases requiring strict compliance with mortgage terms relating to a power of sale, the terms at issue were connected to the foreclosure sale itself. See McGreevey v. Charlestown Five Cents Sav. Bank, 294 Mass. 480, 481, 484 (1936) (although mortgaged property was located in Medford, in Middlesex County, mortgage required foreclosure sale to be advertised and held in Suffolk County; advertisement in Medford newspaper complied with statutory requirement in
Emigrant contends that cases such as Foster, Hall & Adams Co., supra; Moore, supra; and Smith, supra, arе inapplicable here because they predate the enactment of the statutory power of sale set forth in § 21, which was enacted in 1912. See St. 1912, c. 502,
In advancing their argument, the plaintiffs correctly do not contend that to effectuate a valid exercise of a power of sale contained in a mortgage, a mortgagee must demonstrate punctilious performance of every single mortgage term. As illustrated by the cases previously discussed, our decisions suggest that the mortgage terms requiring strict compliance are limited to (1) terms directly concerned with the foreclosure sale authorized by the power of sale in the mortgage, and (2) those prescribing actions the mortgagee must take in connection with the foreclosure sale - whether before or after the sale takes place.14 Insofar as the plaintiffs’ mortgage is concerned, paragraph 22 begins by requiring notice of default to be given prior to any acceleration of the sums secured by the mortgage; then specifically prescribes the contents of the notice
judicial foreclosure and nonjudicial foreclosure States. See id. at 402-403, 409, 414. Declining to require strict compliance with paragraph 22 would weaken if not defeat the consumer protection purpose of the paragraph‘s provisions.
Nevertheless, the defendants argue that our decision in Schumacher, 467 Mass. 421, controls the result in this case and signifies that strict compliance with paragraph 22 is not required as a condition of a valid foreclosure sale.21 In Schumacher, the mortgagor, who was in default, received a notice of default from a mortgage servicer that inaccurately identified the current mortgagee, id. at 423-424; the mortgagor argued that this false identification resulted in a failure to satisfy the requirements of
essentially the same reasons as just stated in the text, that a notice of default stating that a Massachusetts mortgagor “will have an opportunity to assert a defense to acceleration or foreclosure ‘in the foreclosure proceeding’ ” did not constitute substantial compliance with paragraph 22.
We recognize, as the defendants argue, that there are substantive similarities between § 35A and paragraph 22: both require notice of default, of the right to cure, of the deadline by which the default must be cured, and that failure to cure the default may result in acceleration and foreclosure by sale. But we disagree thаt Schumacher controls in this case, and signifies that a mortgagee need not comply strictly with paragraph 22. This is so because the notice provisions in paragraph 22 are “terms of the mortgage,” not terms of a statute “relating to the foreclosure of mortgages by the exercise of a power of sale.”
As Schumacher, 467 Mass. at 429, suggests, there is a well-established set of statutes relating to mortgage foreclosures ef-
cially reasonable alternative to foreclosure.”
Given our conclusion, the question presents itself whether Emigrant‘s failure to comply strictly with the default notice provisions of paragraph 22 renders the title obtained by Wilion as a result of the subsequent foreclosure sale voidable rather than void.23 See Chace v. Morse, 189 Mass. 559, 561-562 (1905), and cases cited. As the court observed in Chace, this is not always an easy question to answer:
“The distinction between the two classes of cases [void and voidable] has not been very clearly defined, and the
decisions in the different jurisdictions do not entirely agree. It has repeatedly been said that in order to make a valid sale under a power in a mortgage, the terms of the power must be strictly complied with. Roarty v. Mitchell, 7 Gray, 243 [(1856)]; Smith v. Provin, 4 Allen, 516 [(1862)] . . . . Where the sale is to foreclose a mortgage for a breach of the condition, there is no authority to sell unless there is a breach, and an attempted sale would be without effect upon the right of redemption. So, where a certain notice is prescribed, a sale without any notice, or upon a notice, lacking the essential requirements of the written power, would be void as a proceeding for foreclosure. Moore v. Dick, 187 Mass. 207 [(1905)]. But if everything is done upon which jurisdiction and authority to make a sale depend, irregularities in the manner of doing it, or in the subsequent proceedings, which may affect injuriously the rights of the mortgagor, do not necessarily render the sale a nullity. The sale will be invalid so far as to enable the mortgagor, or perhaps the purchaser, to avoid it, and still be effectual if all the parties interested desire to have it stand.”
Id. See Bevilacqua v. Rodriguez, 460 Mass. 762, 778 (2011) (“Generally, the key question in this regard is whether the transaction is void, in which case it is a nullity such that title never left possession of the original owner, or merely voidable, in which case a bona fide purchaser may take good title“).
As the quoted passage from Chace, supra, suggests, a bona fide purchaser‘s “title is not to be affected by mere irregularities in executing a power of sale contained in a mortgage, of which irregularities he has no knowledgе, actual or constructive.” Rogers, 169 Mass. at 183-184. As applied to this case, therefore, the question of void versus voidable may be reframed to ask whether the failure of Emigrant, as the mortgagee, to send the plaintiffs a notice of default providing the actual information required by the terms of the mortgage concerning the plaintiffs’ right “to bring a court action” in order to raise any defense to the foreclosure sale is a “mere irregularity” that does not affect the validity of the property‘s title. As previously discussed, in a nonjudicial foreclosure jurisdiction like Massachusetts, misstating this information in a way to suggest that a mortgagor with a defense does not need to initiate a lawsuit but may wait to respond to a foreclosure lawsuit filed by the mortgagee can have disastrous consequences
The position taken by the dissent is that strict compliance by Emigrant with the notice of default provisions in paragraph 22 was required, but that Emigrant‘s failure to do so did not render the foreclosure sale void. See post at 250-251. In the dissent‘s view, the result in this case is essentially controlled by our decision in Schumacher. See post at 247. The dissent reasons that § 35A, the subject of Schumacher, and the notice of default provisions in paragraph 22 are birds of a feather in terms of purpose and operation; that for the same reasons Schumacher concludes § 35A was not a statute relating to the foreclosure by sale, so paragraph 22 is not a term of the mortgage concerned with foreclosure by sale; and, consequently, as was the case in
We disagree. The dissent fails to take into account the distinction - reflected in our cases and in the language of § 21 - between the “terms of the mortgage” instrument relating to foreclosure by exercise of the power of sale, and “statutes” relating to foreclosure by the power of sale. But this distinction is a critical one. As discussed previously, that § 35A is not one of the statutes relating to foreclosure by the power of sale to which § 21 refers does not answer whether the provisions of paragraph 22 qualify as “terms of the mortgage” relating and integrally connected to the power of sale under § 21. And as to that question, this court‘s decisions about mortgage terms indicate that by structure and content, the notice of default required to be given under paragraph 22 is integrally connected, and operates as a prerequisite, to the proper exercise of the mortgage instrument‘s power of sale. Emigrant‘s strict compliance with the notice of default required by paragraph 22 was necessary in order for the foreclosure sale to be valid; Emigrant‘s failure to strictly comply rendered the sale void.
We turn to the question whether our decision in this case should be given prospective effect only, because the failure of a mortgagee to provide the mortgagor with the notice of default required by the mortgage is not a matter of record and, therefore, where there is a foreclosure sale in a title chain, ascertaining whether clear record title exists may not be possible. We confronted the same issue in Eaton, 462 Mass. at 586-587. As Eaton also indicates, in the property law context, we have been more willing to apply our decisions prospectively than in other contexts. See id. at 588. We conclude that in this case, because of the possible impact that our decision may have on the validity of titles, it is appropriate to give our decision prospective effect only: it will apply to mortgage foreclosure sales of properties that are the subject of a mortgage containing paragraph 22 or its equivalent and for which the notice of default required by paragraph 22 is sent after the date of this opinion. As in Eaton, however, and for the reasons stated there, we will apply our ruling to the parties in the present case. See id. at 589, and cases cited.25
The dissent questions the efficacy of prospective relief to alleviate the consequences of this decision for future purchasers
3. Mortgage and note. Given our conclusion that the foreclosure sale was void, we need not decide the plaintiffs’ alternative claim that the motion judge erred in allowing Wilion‘s motion for summary judgment because there was a genuine issue of material fact in dispute concerning whether Emigrant was actually the mortgagee at the time of the foreclosure sale or had previously assigned the mortgage to ESB-MH.
Conclusion. The declaratory judgment of the Superior Court and the orders allowing Wilion‘s motion for summary judgment and dismissing the plaintiffs’ complaint are reversed. The case is remanded to the Superior Court for proceedings consistent with this opinion.
So ordered.
CORDY, J. (dissenting, with whom Gants, C.J., and Spina, J., join). In U.S. Bank Nat‘l Ass‘n v. Schumacher, 467 Mass. 421,
appeal. See Galiastro v. Mortgage Elec. Registration Sys., Inc., 467 Mass. 160, 167-170 (2014).
The distinction between void and voidable foreclosure sales is one of profound significance for mortgagors, mortgagees, and subsequent purchasers of foreclosed property. Where a foreclosure sale is void, no title passes to the purchaser or the purchaser‘s successors. Rogers v. Barnes, 169 Mass. 179, 184 (1897). Such a result is particularly concerning where, as here, the defect is contained in a notice that is not required to be recorded. Practically speaking, this means that a mortgagor may successfully unwind sales to innocent third parties years after the foreclosure, when the property has been conveyed to bona fide purchasers two, three, or four times removed from the foreclosure sale. See, e.g., Moore v. Dick, 187 Mass. 207, 212-213 (1905) (mortgagor redeemed property nineteen years after void foreclosure salе).
Conversely, where a foreclosure sale is voidable, legal title passes to the purchaser, Bevilacqua v. Rodriguez, 460 Mass. 762, 777-778 (2011), and a mortgagor may unwind the sale only by showing that the defect “rendered the foreclosure so fundamentally unfair that she is entitled to affirmative equitable relief.” Schumacher, 467 Mass. at 433 (Gants, J., concurring). The mortgagor may obtain such relief against the mortgagee and purchasers having notice of the defect, but she will not prevail in equity against a bona fide purchaser. See Restatement (Third) of Property (Mortgages) § 3.2 comment g (1997) (“a bona fide purchaser of legal title terminates equitable rights“). “The question in such cases [involving bona fide purchasers] is which of two innocent persons should suffer a loss which must be borne by one of them. The principle which is applied in courts of equity is that they will
In discerning whether a foreclosure sale is void or voidable, “we adhere to the familiar rule that ‘one who sells under a power [of sale] must follow strictly its terms. If he fails to do so, there is no valid execution of the power, and the sale is wholly void.’ ” U.S. Bank Nat‘l Ass‘n v. Ibanez, 458 Mass. 637, 646 (2011) (Ibanez), quoting Moore, 187 Mass. at 211. The terms integral to thе power of sale include the existence of a default or breach of the mortgage, Rogers, 169 Mass. at 184; assignment of the mortgage at the time of foreclosure, Ibanez, supra at 648; assignment of the note or authority to act on behalf of the note holder at the time of foreclosure, Eaton v. Federal Nat‘l Mtge. Ass‘n, 462 Mass. 569, 584-586 (2012); proper advertisement of the foreclosure sale, McGreevey v. Charlestown Five Cents Sav. Bank, 294 Mass. 480, 483-484 (1936); and execution of the foreclosure sale on or near the premises, Tamburello v. Monahan, 321 Mass. 445, 446-447 (1947).
If, on the other hand, “there has been a literal compliance with the power, so that the legal title to the land passed to the purchaser, but for some reason as, for instance, a failure to act with due fidelity to the trust imposed by the power, there are equitable reasons why the sale should be set aside[,] . . . the sale, being in law valid, is voidable only in equity, and the owner of the right to redeem must apply for relief in equity within a reasonable time.” Moore, 187 Mass. at 212. Another circumstance in which a foreclosure sale may be deemed voidable in equity, rather than void ab initio, arises where a mortgagee fails to comply with a term of the mortgage that is not part of the power of sale. See Wayne Inv. Corp. v. Abbott, 350 Mass. 775, 775 (1966) (“Legal title is established in summary process by proof that the title was acquired strictly according to the power of sale provided in the mortgage; and that alone is subject to challenge. If there are other grounds to set aside the foreclosure the defendants must seek affirmative relief in equity“). One such term is a рreacceleration notice of default. Cf. Schumacher, 467 Mass. at 432-433 (Gants, J., concurring) (defect in statutory notice of default not related to exercise of power of sale rendered foreclosure sale voidable in equity).
Here, paragraph 22 fulfils the same purpose and operates in the same manner as § 35A. As the court recognizes, the purpose of paragraph 22 is to give homeowners increased protection from acceleratiоn and foreclosure without prior notice. See generally Forrester, Fannie Mae/Freddie Mac Uniform Mortgage Instruments: The Forgotten Benefit to Homeowners, 72 Mo. L. Rev. 1077, 1090 (2007); Jensen, Mortgage Standardization: History of Interaction of Economics, Consumerism and Governmental Pressure, 7 Real Prop. Prob. & Tr. J. 397, 409, 414 (1972). In view of the similarities in purpose and effect, it would defy logic to hold that, on the one hand, the notice required by § 35A is not related to the exercise of the power of sale, but, on the other hand, the notice required by paragraph 22 is related to the exercise of the power of sale.1 Yet, that is precisely what the court holds in this case.
It is important to appreciate the context in which the Foster, Hall & Adams Co. case arose, particularly the fact that the plaintiff was a buyer with notice of a potential title defect. Id. at 321-322. We have long said that “[t]he law goes a great way in protecting the title of a purchaser for value without notice or knowledge of any defect in the power of the vendor to sell.” Bevilacqua, 460 Mass. at 777, quoting Rogers, 169 Mass. at 183. The law does not go a great way, however, in protecting the title of those who do have notice of defects in the seller‘s title. See Bevilacqua, supra at 778 (“a factual prerequisite - purchase by [the plaintiff] without notice of the defects in [the mortgagee‘s] title - does not exist“).
The upshot is that, had the plaintiff in Foster, Hall & Adams Co. gone forward with the transaction, it would have been unprotected by bona fide status had the foreclosure sale later been set aside as a result of the defect. It was unnecessary to decide whether the foreclosure sale was void or voidable because, in either circumstance, the complete failure to provide a notice of default and the right to cure would have created a reasonable doubt as to the title being taken by the plaintiff. We have never interpreted this century-old case to mean that any defect in a notice of default required by a mortgage instrument renders a foreclosure sale void ab initio, cf. Costello v. Tasker, 227 Mass.
confirms that such a rationale does not exist. Section 35A provides, in relevant part, that the “mortgagee, or anyone holding thereunder, shall not . . . enforce the mortgage because of a default . . . until at least 150 days after the date a written notice is given by the mortgagee to the mortgagor.” If that language does not create a condition precedent or integral connection to the valid exercise of the power of sale - and it does not, see U.S. Bank Nat‘l Ass‘n v. Schumacher, 467 Mass. 421, 431 (2014) (Schumacher) - the substantially similar language of paragraph 22 does not either.
The prospective character of the court‘s ruling does little to alleviate these consequences for future purchasers because the paragraph 22 notice is not required to be recorded. Consequently, the notice ordinarily will not be discovered during an examination of the record title. Although some prospective purchasers may be able to obtain copies of the notice by scouring the documents filed in the Land Court in connection with Servicemembers Civil Relief Act (servicemember) proceedings, a servicemember action is not part of the mortgage foreclosure proceedings and does not create a basis for a mortgagor to challenge the validity of foreclosure sale. See Eaton, 462 Mass. at 580 n.14. See also Beaton v. Land Court, 367 Mass. 385, 390 (1975). Moreover, requiring purchasers to engage in such a treasure hunt is contrary to the purposes of the recording system, which was intended to be “self-operative and to notify purchasers of existing claims . . . [through] a public record from which prospective purchasers of interests in real property may ascertain the existence of prior claims that might affect their interests.” Selectmen of Hanson v. Lindsay, 444 Mass. 502, 507 (2005), quoting 14 R. Powell, Real Property § 82.01[3], at 82-14 (M. Wolf ed. 2000).
Although holding that a paragraph 22 notice defect renders the sale voidable would mean that a mortgagor could not defeat a bona fide purchaser by virtue of the defect, the mortgagor would nonetheless retain the ability to defeat a bona fide purchaser (and the mortgagee) on any of the substantive grounds relating to the exercise of the power of sale. For example, in this case, the plaintiffs argue that Emigrant Mortgage Company, Inc. (Emigrant), transferred the mortgage and note prior to the foreclosure and therefore lacked the authority to foreclose. The court does not reach this argument, but if the plaintiffs were to prevail on it, they would defeat Harold Wilion‘s summary process action because the foreclosure sale would be void as a matter of law - irrеspective of the paragraph 22 issue. See Eaton, 462 Mass. at 584-586; Ibanez, 458 Mass. at 647-648. In other words, the fact
Indeed, the plaintiffs’ delay in asserting their claims is better attributed to the five bankruptcy petitions they filed between September, 2010, and July, 2012,
This is not to say, however, that the notice sent by Emigrant in this case was sufficient to fulfil its obligations under the mortgage instrument. Our cases have required strict compliance with contractual provisions that call for notice of important rights adverse to the person required to provide the notice. See, e.g., Sweeney v. Morey & Co., 279 Mass. 495, 500 (1932) (“There must be strict compliance with requirements . . . [that] relate to matters where the essential facts to be embodied in the notice are known to the person required to give the notice, and the notice is designed to draw the attention of his adversary to those facts“). As the court points out, because the plaintiffs entered into their mortgage with Emigrant in Massachusetts, a nonjudicial foreclosure State, the language in paragraph 22 requiring Emigrant to inform the plaintiffs of “the right to bring a court action to assert the non-existence of a default or any other defense of [the plaintiffs] to acceleration and sale” was particularly important. Thеrefore, I agree with the court that Emigrant was required to strictly comply with the provisions of paragraph 22.
Nonetheless, because, in my view, the notice required by paragraph 22 - like the notice required by § 35A - is not a component of the power of sale, a mortgagor who has received a defective notice should be required to establish that he or she was prejudiced by the defect. Schumacher, 467 Mass. at 433 (Gants, J., concurring). Once the property has been conveyed to a bona fide purchaser, however, the mortgagor is limited to either an action for breach of contract against the mortgagee or an action
the most recent of which was dismissed after a judge in the United States Bankruptcy Court for the District of Massachusetts concluded that it was filed as “part of a scheme by [one of the plaintiffs in the instant action] to delay Emigrant and was filed without a reasonable prospect of saving the property from foreclosure.” In re Leslie Phillips, U.S. Bankr. Ct., No. 12-15749-FJB, slip op. at 1, 3, (Bankr. D. Mass. Aug. 8, 2012).
Notes
“Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower‘s breach of any covenant or agreement in this Security Instrument. . . . The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than [thirty] days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the non-existence of a default or any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke the STATUTORY POWER OF SALE and any other remedies permitted by Applicable Law. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Section 22, including, but not limited to, reasonable attorneys’ fees and costs of title evidence.
“If Lender invokes the STATUTORY POWER OF SALE, Lender shall mail a copy of a notice of sale to Borrower, and to other persons prescribed by Applicable Law, in the manner provided by Applicable Law. Lender shall publish the notice of sale, and the Property shall be sold in the manner prescribed by Applicable Law. Lender or its designee may purchase the Property at any sale. The proceeds of the sale shall be applied in the following order: (a) to all expenses of the sale, including, but not limited to, reasonable attorneys’ fees; (b) to all sums secured by this Security Instrument; and (c) any excess to the person or persons legally entitled to it.”
“The following ‘power’ shall be known as the ‘Statutory Power of Sale‘, and may be incorporated in any mortgage by reference:
“(POWER.)
“But upon any default in the performance or observance of the foregoing or other condition, the mortgagee or his executors, administrators, successors or assigns may sell the mortgaged premises or such portion thereof as may remain subject to the mortgage in case of any partial release thereof, either as a whole or in parcels, together with all improvements that may be thereon, by public auction on or near the premises then subject to the mortgage, or, if more than one parcel is then subject thereto, on or near one of said parcels, or at such place as may be designated for that purpose in the mortgage, first complying with the terms of the mortgage and with the statutes relating to the foreclosure of mortgages by the exercise of a power of sale, and may convey the same by proper deed or deeds to the purchaser or purchasers absolutely and in fee simple; and such sale shall
“[A]n affidavit made by a person claiming to have personal knowledge of the facts therein stated and containing a certificate by an attorney at law that the facts stated in the affidavit are relevant to the title to certain land and will be of benefit and assistance in clarifying the chain of title may be filed for record and shall be recorded in the registry of deeds where the land or any part thereof lies.”
It bears noting that