Appellee Eaton Supplemental Brief MA-Eaton v FNMA

8/3/2019 Appellee Eaton Supplemental Brief MA-Eaton v FNMA

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COMMOFlWEALTH OF MaSSACHUSETTSSUPREME JUDICIAL COURT

. . . . . _ . . . . . ....... - ........... ---

HENRIETTA E AT O N ,

P l a i n L i f f / Nppcllee

v

FEDER.A.1. ATIONA L MORTGAGE A!S.C3(>CIATION andI;P,EEN TRE E SERVICING. LLC

3c Ic ndan t 5 / A p p e l l a n t s

. . . .

ON APFEAL FROM AN OKUE1R (I? PRELIMINARYINJUNCTION i l k ' 'THE S I J P E R I O R COURT DEPARTMENT

O F TI12 TP.IAL COU RT

-. .-

SWPPLEMZNTAL B R I E F O F APPELLEE

...... .......-

O n t h e D r i c L :


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TABLE OF CONTENTS

TABLE OF CONTENTS ................................... i

TABLE OF AUTHORITIES ................................ iiCases .............................................. ii

S tatutes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i iOther Authorities ................................ i i i

I. Because It Would Merely Reaffirm Existing Law aridS t a n d a r d Practices, a Ruling for Ms. Eaton ShouldNot Be Limited to Prospective Application . . . . . . 1

1I.Upho lding the Common Law Rule Will Not Have aSigni.ficant Effect on th e Commonwealth's Proper tyS ystem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

A. Title C hallen ges Ba sed on the E'oreclusingEntity's Failure to H o l d the Note W i l l BeR are . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

1. Mo st Borrowers Have 1 , i t t l e to Gain from a T i t l eS uit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2 . A Borrower Who Does S u e Will Likely L o s e . . . . . 7

B. Because A Succes sful Ti tle Challenge-or AnyChallenge at AII-, Is Ext.remely I n l i k e l y , TitleI s Not Clouded. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

C. Any Disruption Caused by Confirrainy the CommonJAaw Rule C o u l d Re Addressed by the GeneralCourt Once the C o n t o u r s of the Problem WereKnown. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5


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TABLE OF AUTHORITIES

CASESBank of N e w. York v . B a i l e y , 460 Mass. 32 7

( 2 0 1 1 ) ...................................... 8 , 9 , 13

Bank of N e w York v. Silverberq, 92 6 N.Y.S.2d 53%( N.Y. App. Div. 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

C a r p e n t e r v. L on Ta s,. 83 U . S . 2 7 1 ( 1 8 7 2 ) . . . . . . . . . . . . . . 2

Corn. v . Globe I n v. C o . , 168 Mass. 80 (1897) . . . . . . . . . 2-

D e u t s c h e B a n k N a t ' l T r u s t C o . v . Byrams,I.No. 108545, 2012-wL 130661 (Jan. 17, 2 0 1 2 ) . . . . . . . . . 2

F i r s t A f r i c a n McLhodist", . E p i s c o p a l , S o c ' y v . Brown,_1 47 Mass. 296 (1888) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

F r a n k l i n Credit Mgmt. Corp. v. N i c h o l a s , 812 A.2d 5 1 ,5 7 ( C o n n . A p p . C t . 2 0 0 2 ) ........................... 2

H o w e v . - Wilder, 77 Mass. 267 (1858) . . . . . . . . . . . . . . . . . 1

I n re Varqas, 396 B . R . 511 (Bankr. C . D . C a l . 2 0 0 8 ) _ . .Kendall ~ . , , ~ S $ l v a q q i o , 13 Mass. 6 1 9 ( 1 9 9 2 ) . . . . . . . . . . 11

M i s h a r d v . A l b i o n , 3 4 1 Mass. 652 (1961) . . . . . . . . . . . . 12

S a u n d e r s , 2 A.3d 289 (Me. 2 0 1 0 ) ' . . . . . . . . . . . . . . . . . . . . 2M or tgage. F:l.ec. R e g i s t r a t i o n. Sy,s,,,;, Inc. v.

.~

S chro t t r r, an ........ - B a r n i . c l e , 386 Mass , 6 2 7 ( 1 9 8 2 ) . . . . . . . . . 1

S t u r d i v a n t v . R A C florric Loans S e r v i c i n g , ,,=, o.2100245; 2021 WL 6 2 7 5 6 3 7 ( A l a . C i v. - ' A p p . 13ec. 1 6 ,2 0 11 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

( 2 0 1 1 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 3, 5, 13

G . L . c. 183, App., fo rm (9) . . . . . . . . . . . . . . . . . . . . . . . . . 4

U . S . Bank Nat . Ass'n,,.-. v. I b a n e z ,,,.., ". 45 8 Mass . 63.7

STATUTES

G . L . c . 185, 5 46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

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G.L. c. 185, 5 5 6 A .................................. 10G.L. c. 185, 5 4 6 . . ................................. 10G.L. C. 240, 2 1 - 2 2 . .............................. 11

G.L. c. 244, 14................. . . . . . . . . . . . . . . . . . . 13

G.L. c. 2 4 4 , 5 3 5 A .................................. 13

Mich. Comp. L a w s Ann. c. 600 s . 5801(1) . . . . . . . . . . . . 14

Other Authorities

"Frequently Asked Questions," Middlesex South D i s t r i c tRegistry of Deeds, http: //www.sec.state.ma.us/rod/r odmidsth/msfaq.htm (last visi ted Jan. 21, 2012) . 10

1 W. Blackstone, Commentaries . . . . . . . . . . . . . . . . . . . . . . . 1

50 Ways to Lose Your Home, and Only O n e Way to ProtectIt., T i . t l e Insurance, Mass Real Estate Law Blog (Sept ,28, 2010), h ttp://www.massrealestatelawblog.corn/ 2010/09/2R/50-ways-to-lo~e-~our-home-and-only-one-way-to-protect-it-ari-owners-titlE:-insurance-policy/Z3

. ..

"..

A. Brams and W. Southworth, "Assignment of Mortgage,"CROCI MA-CLE 7-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Amicus Letter of John I,. O ' B r i e n a't 7 . . . . . . . . . . . . . . . . 5

Binyamin Applebaum, Title Insurers Face C r i . t i ci.srn OverPriciny, The Bostor; Globe, April 13, 2 0 0 8 . . . . . . . . . 11 -

F a n n i e Mae Document Custodian Guide, E Fannie Mae,7 .1 (June 28, 2013.), https://wwW':-~.fanniem~e.com/i s / d o c c u s t o d i a n s / p d f / d c r e q d o c . p d f . . . . . . . . . . . . . . . . . . 9

F a n n i e Mae Single Family 2011 Servicing Guide, EF annie Mae, 102-36 (June 10, 2011), https://.w w w . e f a n n i e m a e . c o m / s f / y u i d e s / s s g / s v c g p d f . j s p . . . . . . . 3

-First.... ." Nat. Bank of Cape Cod v . N. A d a m s Hoosac Sav.. ---- ......Bank, 7 Mass. App. Ct . 790 (1979) . . . . . . . . . . . . . . . . . 5
http://www.massrealestatelawblog.corn/http://www.massrealestatelawblog.corn/


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F r e d d i e Mac S i n g l e Family" S e l l e r / S e r v i c e r Gu ide ,F r e d d i e Mac, S e c t i o n 4 6 .2 ( S e p t . 2 4 , 2007j,h ttp://www.freddjemac.com/sell/guide/ . . . . . . . . . . . . . . 4

G . L . C . 1 0 6 , 5 3 - 3 0 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Hon. Gordon H . P i p e r and Diane C. T i l l o t s o n ,Litigat-l iy Real. E s t a t e........ D i s p u t e s in T,and C o u r t , LRREVMA-CLE 2 2 - 1 ( 2 0 0 7 ) ................................ 10

-. a n n a c c h i n o_l v . F o r d Motor C o . , 4 5 1 Mass. 623 (2008).. 9

K a t h e r i n e P o r t e r , M i s be h av i or an d M i s t a k e inB a n k r u p t c y Mortgage C l a i m s , 87 Te x . L . Rev. 121( 2 0 0 8 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

P h y l l i s K . Slesinger & D a n i e l Mcla iugh l in , Mor tgage

E l e c t r o n i c R e g i s t r a t i o n S y s t e m , 3 1 I d a h o L . Rev. 805,8 0 8 ( 1 9 9 5 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

REBA Title S t a n d a r d 5 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

R e s t a t e n l e n t ( T h i r d ) o f P r o p e r t y ( M o r t g a g e s ) 5 5 + 4(1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

S . B . 8 3 0 , 1 8 7 t h G e n e r a l C o u r t (Mass. 2012), An a c tc l e a r i n g t i t l e s t o f o r e c l o s e d p r o p e r t i e s . " . . . . 1 4 , 1 5

Solomont v .- ,

-lowe. -- K e a 1 E s t a t e~ .

A d v i s o r s , LLC, No. 11MISC 448092 G H P ) , 2 0 11 WL 4 4 8 3 3 6 0 ( M a s s . Land Ct.. ,S e p t . 2 8 , 201.1.) ( P i p e r , LJ.) . . . . . . . . . . . . . . . . . . . . . . . . 9

.T i t l e., 1 n s . i i r a n c e : Actions Nceded ,L o I m p r o v e O v e r s i x h L. - .o f t h e T i t l e I n d u s t r y ............. rid B e t t e r F r o t e c t C o n s u m e r s ,,.[ J . S . Government A c c o m L a b i l ~ A p ~3 0 0 7 ) , http:/ /www.gao.gov/new.items/d074~l.pdf) . . 11

4 .3 (MCLE 7010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Ward P . Graham, T i t l e I n s u ~ : a n c e , RETITLE MA-CI,F: 4 - 1 , 5
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ARGUMENT

Appellee Henrietta Eaton respectfully submits the

following in re sp on se to t he Court's regiiest of

January 6, 2012:

I. Because It Would Merely Reaffirm Existing Law andStandard P r a c t i c e s , a Ruling for Ms . E a t o n S h o u l dNot B e L i m i t e d to P r o s p e c t i v e Application.

There is no legal basis for applying a

longstanding rule prospectively. "A prospective ruling

is only approp riate , in li mited circumstance's, when w e

make a significant change in the common l aw." U . S .

Bank N a t . Ass'n v. Ibanez, 458 Mass. 637, 654 (2011)

(internal ci tat ions omitted). The rationale

underpinning t his axiom is simple-"courts are said to

find and declare law, rather t han to create new law

t h a t might surprise past actors." Sckrottman v.

Barnicle, 3 8 6 Mass. 627, 631 (1982) c i t i n g , inter

~alia, 1 W . Blackstone, Commentaries.

Here it is Fannip Mae and Green Trcc, not M s .

E a t o n , wh o seek a change iri thc comnon law.

Massachusetts courts have required u n i t y of thc note

and mortgage since at least 1858. See Howe v. Wilder,

77 Mass. 267 (1858). No appellate decision has

overt-urned, o r even questioned, this rule. Moreover,

jurCsd iction s across t.he count ry h a v e required unity

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of t h e n o t e a nd mo r t ga ge f o r a t l e a s t a c e n t u r y . A s

e a r l y a s 1 87 2, t h e U n i t e d S t a t e s S u p r e m e C o u r t f o u n d

t h a t " [ a l l 1 t h e a u t h o r i t i e s ag ree t h a t : t h e d e b t i s t h e

p r i n c i p a l t h i n g an d t h e mo rt ga ge a n a c c e s s o r y . "

C a r p e n t e r v . Longan , 8 3 U.S . 2 7 1 , 2 7 5 ( 1 8 7 2 ) ( c i t e d i.n

Corn. v . G l o b e I r i v. C o . , 1 6 8 Mass. 8 0 , 8 1 ( 1 8 9 7 ) ) . Many

r e c e n t d e c i s i o n s , i n c l u d i n g i n t i t l e t h e o r y and non-

j u d i c i a l f o r e c l o s u r e j u r i s d i c t i o n s , h a v e a l s o

r e c o g n i z e d t h e r u l c . A s t h e Oklahoma Supreme Cour t

h e l d t h i s month , " I t i s a f u n d a m e n t a l p r e c e p t 01 the

law L o e x p e c t a ' f o r e c l o s i n g p a r t y t o a c t u a l l y b e i n

p o s s e s s i . o n o f i t s c l a i m e d i n t e r e s t i n t h e n o t e . . . .

Deut-sche Bank Nat'l T r u s t C o . v . Hyrams, No. 108545,

2012 WL 130661, a t * 4 (Jan. 1 7 , 2 0 1 2 ) . See a l s o. ... -

Mortxage E l e c . K e q i s t r a t i Sy". I n c . v . Saunc le r s , 2

A . 3 d 2 8 9 ( M e . 2 0 1 0 ) ; Sturdivant. v . HAC H o m e L o a n s

S e r v i c i n g , . ." .LP,- No. 2 1 0 0 2 4 5 , 2 0 11 WL 62.15697 (Ala. C i v .

\

I,

App. Dec. 16, 7011); Bank of, . , .-New. York v . S i l v e r b e r g ,

926 N.Y.S.7d 5 3 2 , (N.Y. App . D iv. 20 11 ) ; F'rank1i.n

Cred1 . t M q m t . C o r p ., ,"... v . N i c h o l , a s , 8 1 2 A.2d 5 1 , 5.1 (COnIl.

App. C t . 2 0 0 2 ) ; I n r e Vargas , 396 B.R. 511, 520

(Bankr. C . D . Cal.. 2 0 0 8 ) ; R e s t a t e n e r t ( T h i r d ) of

P r o p e r t y ( M o r t g a g e s ) 5 5 . 4 ( 1 9 9 7 ) (App. 2 4 ) .

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Even the industry's ow n statements and guidelines

demonstrate that upholding t he common law rule will

not upset settled expectations. The Real Estate Bar

Association ("REBA"), which aims to provide

authoritative guidance a s to the application of

Massachusetts real estate law, recognized the rule as

recently as last year: "The transferor of a n o t e ' o r

debt obligation wh o. fa il s to simultaneously deliver a

completed assignment o f the mortgage security does n o t

retain the right to execute the power of t h e mortyage

. . .includiny the power t o foreclose." Brief for theReal Estate Bar Association for Massachusetts as

Amicus Curiae Supporting elaintiff-Appellant, Ibanez,

45 8 Mass. at 637. The lendinq industry has also

recognized, and constructed its internal guidelines

around, t.his r i l l e . Both Fannie Mac and Freddie Mac,

1

for example, require servicecs to possess the note

prior to foreclosurc. ...See Fannie Mae Single Family

I While the real estate bar has long recognized that amortgagee needs t h e note to foreclose, prior to Ibanez _they did n o t recognize a similar requirement for themortyaye. See . REBA Title Standard 58 . T h u s , pre-Ibanezforeclosures were far more likely to have beenconducted without the mortyaye tha n w i . t h o u t the not.e,and the impact of .a ruling f o r Ms. Eaton should b esiqnificant.1.y maller than t he impac t of the Ibanezruling.

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2011 Servicing Guide, E Fannie Mae, 102.-36 (June 10,

2011), h ttps://www.efanniemae.com/sf/guides/ssg/

svcgpdf.jsp (requi ring s'ervicer to have possession of

the mortgage note) ( A p p . 17); Freddie Mac Sinqle . .

Family Seller/Servicer Guide, Freddie Mac, Section

4 6 . 2 (Sept. 24, 3 0 0 7 ) , h ttp://www.freddiernac.corn/sell/

guide/ (same) (App . 27). The founders of the MERS

system also understood this to b e the rule: "As for

mortgages, i t is a legal maxim that the mortgage

depends on the n o t e f o r enforceability." Phyllis K.

Slesinqer & Daniel Mclaughlin, Mortgag e Electronic

Registration.".,l Syst.em, 31 Idaho L. R e v . 805, 808 (19Y5)

(App . 3 1 ) .

Moreov er, inform ation about. note t ransfe rs will

often appear in the recorded documents. For over a

century, the statutory form mortgage assignment h a s

recited transfer o f "the note and claim s'ecurcd

thereby.. " , arid th er e i s rea so n to b c l i c v e i t h a s

h e e n widely used. G.L. c . 183, A p p . , fo rm (9) App.

25). See also Sample Assiynment (App. 26); A . B r a r n s

and W. Southworth, "Assignment o f Mortqage, Crocker' s

Notes on Common Forms 5 5 4 8 7 - 5 0 3 (MC:I.F: 2010) (describing

the hist.ory of the statutoi-y form and instructing tha t

" [t.] e not-e should be endorsed and transferred Lo the

4
https://www.efanniemae.com/sf/guides/ssghttp://www.freddiernac.corn/sellhttp://www.freddiernac.corn/sellhttps://www.efanniemae.com/sf/guides/ssg


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assignee.") (App. 52); First Nat. Bank of CapeC--- Co d v .

N. Adams Hoosac S a v. Bank, 7 Mass. App. Ct. 790 (1979)_l--_l-

(discussing how n otes are transferred). See a l so

Amicus Letter o f Jo hn L. O'Brien at 7 ("nearly all"

pre-2010 MERS assignments i n Southern E s s e x Registry

of Deeds reference both note and mortgage). For both

mortgages and notes, there is no legal requirement to

record assignments, but "recording i s likely the

b e t t e r practice." Ibanez, 458 Mass. at 651.

That some mortgagees c h o s e to deviate from

h i s t o r i c a l industry practice does not justify

prospective applic ation. Unity of the note a n d

mortgage is n o t a new rule; "[all1 t h a t has chari

the [lenders'] apparent failure to abide by t.hose

principles a n d requirements in the rush to s e l l

mortyagc-backed securities " Id. t 655 .

11. Upholding the Common Law Rule Will Not Have aSignificant Effect on th e Commonwealth's P r o p e r t ysys ern.

Affirming the order of the Trial Court will n o t

create a cloud over a l a r g e number of t.itles in the

Commonwealth. A cloud wou1.d arise only if a defect

appeared on the record-which foreclosure without th e

note wou ld not.-or were lik ely t o l . e a d , a t some future

date, to an unexpected challenqe by an adverse


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claimant. But in most cases such a challenge will be

exceedingly improbable, for a variety of legal and

practical reasons. Borrowers no longer livinq in their

homes w i l l have little incentive to try to rec1ai.m

properties that are merely headed or re-foreclosure,

even assuming they h a v e the r e z o u c c e s and the legal

assistance needed to mount a lawsuit. Moreover, anyone

who does sue is unlike ly to succee d, giver] t h a t most

foreclosures are probably legal , the burdens of

pleadi ng and pro of wil.1 be diffic ult to surmount, and

many titles are protected by adverse possession,

registration, or the res judicata effect of surrunary

process judgments. .En the unlikely event that

confirming the comori la w ru1.e led t o disr upt ion s in

the market, t h e G c n e r a l Court wauld be able to

determine the contours of the p r o b l e m and craft a

tailored solution that balanced th e r i y h t s and

in.terests of the msriy parties I.nvol.ved.

A . Title Challenges Based on the ForeclosingEntitys Failure to Hold t h e N o t e Will BeRare.

1. M o s t Borrowers Have Little to Gain f r o ma Title Suit .

A borrower w h o failed to pay his mortgage,

cxpcricnced foreclosure, a n d then moved o n with his


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l ife would h a v e l i t t le incentive t o bring a t i t le

challenge based solely on the f act that the wrong

entity coriducted the forecl osure .2 Even if t he

mortgagor could surmount the substantial pleadin g and

proof b u r d e n s , h e would not win th e property free and

clear, but subject t o an unpaid mortgage. T he

mortgagor would then face re-foreclosure by the

noteholder (who could obtai n equitable assignment of

the mortgage if necessary). Iba nez did not inspire a

rash of at.tempts to secure such P y r r h i c vi,ctories, and

a ruling for Ms. Eaton would not either

2 . A Borrower Who Does Sue Will LikelyL o s e .

Borrowers ar e also unlikely to bring title suits

becaus e they are un1.ikely to w i n them. I f lenders and

securitizers have b e e n following their own guidance

and indust ry s tandards, see s u s a Part I .B., then

examples of mortgagees forecl.osjng wi t-hout the note

T h e situation would be different if failure toilccourit f o r t h e note led to improper charges, fees, ordeficiency actions. See generally, Katherine Porter,MisbehaviorI..._ and Mistake i n Bankruptcy Mortqage Claims,87 Tex. L. Rev. 121, 147 (2008) " A note i. s necessary'to establish the existence of a debt., its k e y terms,and the creditor's standi ng to collect. the debt.Despite its importance, a not.e was not attached to4 1 . 1 2 of [bankru ptcy] claims." Missing documentationled to widespread irreqularities.) (App. 3 3 ) .


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will be rare. In the many cases where assignors used

and recorded the statutory form assignment of

mortgage, which recites concurrent transfer of the

note, then information about the validity of the

foreclosure sal e will be o n r e c o r d a t the Registry o f

Deeds. horrowers w i l l b e a w a r e of t h e l i k e l i h o o d t h a t

the foreclosure was proper, and potential purchasers,

lenders, and ti.tle n s u r e r s will g a i , n t h e same m e a s u r e

of c o m f o rt t h a t a n y r e c o r d e d d oc um en t c a n p r o v i d e .

Henrietta Eaton is the exception that proves the

rule. S he was s till l.iv;ng in her home w he n Fa nnie Mae

sued h e r , in H o u s i n g C o u r t . When F a n n i p Mae r e f u s e d t o

s a y wh e th e r t h e foreclosure through which i t claimed

ownership of the p t - o p e r t y had been conducted by

someone with a n actual i n t e r e s t i n t h e d e b t , p r e -~. a i l g concerr is about the Housing Court's jurisdiction

drove Ms . Eaton t.o fi.1.e a n affirmative action in

Superior Court. Se e H a n k o f New Yo r k v. Bailey, 460

Mass. 327 ( 2 0 1 1 ) . C v e r i Chun, s h e o b t a i n e d a

p r e l i m i n a r y injunction o n l y after Appellants

stipul ated that. Green ' I ' r ee foreclosed without t h e

note. Brief o f Appellants 26.

Under ordinary ci.rcumstances, a borrower would

find it difficu1.t t.o siirvive a motion to djsrniss. ~ See

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lanna cchino v. Ford Motor Co., 451 Mass. 623 (2008).

If she did, she would face an uphill. battle in her

quest to prove the mortgagee did not hold the note.

Lenders reta in document custodians charged with

keeping records o f vital documents, including the

promissory n o t e . See, e . g . , Fannie Mae Document

Custodian Guide, . E Fannie Mae, 7.1 (June 28, 2011),

https://www.ef~nniemae.com/is/doccustodians/~df/dcreqd

oc.pdf (App. 35) . .Eve n a lost note can support a valid

foreclosure. -ee G.L. c. 106, 5 3-309 (App. 22). T hesheer difficulty of meeting the pleadinq and proof

burdens shoul d deter most would-he plaintiffs.

Even if someone were to find evidence of a void

f o r e c l o s u r e and bring a title suit aiter leaving the

proper ty, .the c u r r e n t record owner would in many cases

be protect-ed by adverse possession, registration,

confirmation, or th e preclusive e f f e c t of a summary

process judgment. Compliance with the power of sa1.e is

adjudicated in post-foreclosure evictions. .~ ailey 4 6 0

Mass. a t 334. Thus foreclosed homeowners who were

evicted in summary process-after trial or by th e

settlement mechanism o f an agreement for judgment.-

may be estopped from challenging t h e v a 1 i d i . t . y of t.he

foreclosure sale. See Solomont v. Howe Real. Est.ate-

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Advisors, LLC, No . 11 MISC 448092(GHP), 2011 WL

4483960 (Mass. Land Ct.., Sept. 28 , 2011) (Piper, J .)

(summary process judgment precludes subsequent quiet

t i t le action).

As an additional bar to suits, owners of

registered land h a v e indefeasible t i t le so long as

they purchased for value and without knowledge of any

defect.3 G.L. c. 185, 46 (App. 14) 4 Th e number of

registered properties i n the Commonwealth is

significant; in Middlesex C o u n t y, for example,

registered l a n d comprises 20% o f the t - o t a l parcels in

the count y. " Freque ntly A sked Ques tioris, Middle sex

South District Registry of Deeds,

http:/ /www.sec.state.ma.us/rod/rodmidsth/nis~a~.~i~In

(las t visited Jan. 21, 2012) ( A p p . 37) . These owners

enjoy virtually complete protection.

Finally, adverse pcssession wil l protect Lilrnosi

any homeowner who has l i v e d in h c r home for more than

20 years, or who has succeeded other adverse

Confirmation, too, will definitively rulc out sometit le dcfccts . A judgmerit fo r confiririaLior1 clearsti t le of a l l encumbrances in exisLcricc at the t'ime ofthe confirmation. G.L. c . 185, 56A.'registration process, _-ee Hon. Gordon H. Piper ? n dDiane C. Till.otson, Litigakin g . . . . . . . . . . . . . . . . eal Estate Disputes j nLand... Court, LHKED MA-CLE 22-1 (2007) .

3

For a more comprehensive description of the

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possessors for an aggregate period of 20 years. G.L.

c. 240, 5 5 21-22 (App. 11): Kendall v . S e l v g u , 413

Mass. 619 (1992) . Thus, foreclosures that are more

than 2 0 years old-those in which proof of note-holding

would be most impaired by t he passage of time-will

generally have c l e a r t i t le.

--"."..-.l--"ll- .

For homeowners not protected by adverse

possession, registration, or res j u d i c a t a , title

insurance will provide a solution in t h e unlikely

event o f a problem. A title insurer, liable for any

litigation c o s t s or monetary losses, would be highly

motivated Lo settle any claim by an ear lier mortgagor

who has identified a faulty foreclosure. Clearing the

ti t le through sett lement should be relativel,y

straightforward.

Title insurers have a l w a y s insured titles aqainstclaims that do no t a p p e a r on the record, like forgery,or i r i s u r c d over known ti t le defects where th e r i s k ofloss scerncd remote. See, e . g . , Ward P. Graham, --i t le-

n s u r a n c e ,., . , RETITLE MA-CLE 4-1, 5 4.3 (MCLE 2010) A p p .39). Moreover, t i t . l e i . n s u r a n c e is a profitablebusiness: Massachusetts insurers have historicallypaid out o n l y 5% of pr emiums in cl.airns, wit h 70 t o 80%of premiums p a i d a s commissions to s a l e s "agents",often the closing attorney who seLects t h e t i t leinsurer. ~See Rinyamin Applehaurn, Title Insurers FaceC r i , t i , c i s m Over f'ri,cinq, The Bost-on Globe, April. 13,2 0 0 0 ; Tj.t.1.e Insura nce: Act-ions Needed to ImproveOversight. o f the Title Industry and Better ProtectConsumers (App. 42) , U . S . Government AccountabilityOffice, 39 (April 2 0 0 . 1 ) ,

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B . Because A Successful Title C h a l l e n g - r AnyChallenge at A1L-16 Extremely Unlikely,Title Is Not Clouded.

Because t i t l e c h a l l e n g e s w i l l be r a r e , a d e c i s i o n

u p h o l d i n g t h e common l a w r u l e w i l l n o t c r e a t e a

g e n e r a l c l o u d on titles w i t h f o r e c l o s u r e s i n t h e i r

h i s t o r i e s . [Mlere a p p r eh e n s io n t h a t a p e r s o n m i g h t

someday come forward t o c h a l l e n g e an o1.d f o r e c l o s u r e

s a l e d o e s n o t c l o u d a p u r c h a s e r s t i t l e a b s e n t some

e v i d e n c e o f an a c t u a l d e f e c t o r i r r e g u l a r i t y . Gil.man

v . G i l m a n , 1 7 1 Mass . 4 6 , 4 7 (1898). The mere

p o s s i b i l i t y of a d e f e c t i n t i t le i s l e g a l l y

i n s i g n i f i c a n t . M is ha ra v . A l b i o n , 3 4 1 Mass. 6 5 2 , 65 5

( 1 9 6 1 ) ( r u l i n g t h a t t i t l e r e m a i ns m a r k e t a b l e a b s e n t

o b v i ou s d e f e c t s o r s u b s t a n t i a l d o u b t s r e y a r d i n g

i t s v a l i d i t y ) ( i n t c r n a l c i t a t i o n s omiktcd) A f t e r a l l ,

[i] would b e seldom t h a t a c a s e c o u l d occi i r where

some s t a t e of f a c t s m i g h t n o t b e i m a q i n e d w h i c h , i f i t

e x i s t e d , w ou ld d c f e a t a t i t l e . F i r s t. . A f r i c a n.

M e t h o d i s t . p i s c o p a l S o c y v . Brown, 1 4 7 Mass. 2 9 6 ,

297-98 ( 1 R R 8 ) .

h t t p : / w w w . g a o . gov /new. i . t e r n s / d 0 7 4 0 ? . p d f )a v c r a g e c o m m i s s i o n s t o a g e n t s b e tw e en 7 0 % a n d 90% o fpremiums) ( A p p . 4 5 ) . Premiums coul .d be r e a l l o c a t e d a sn e c e s s a r y t o c o v e r a n y i . n c r e a s e d c o s t s .

(showinq

I.2


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No standard set of recorded foreclosure documents

demonstrates with certainty that the sale was valid.

The mortgagee may not have complied with the pre-

foreclosure notice requirements. See G.L. c. 244, 5 5

14 and 35A (App. 15); Bailey, 460 Mass. at 327 (where

homeowner alleged notices were sent to wrong address);

G.L. c. 244, 1 5 (recorded affidavit is only prima

facie evidence of proper notice). Alternatively, an

assignment may not have been recorded, making

compli ance wit.h the rule confir med in Ihanez

unknowab1.e from t he record. See 4 5 8 Mass. at 651

(2011). ee also Richard D. Vetstein, Esq. , 50 Ways to

Lose Your Home, and Only One Way to Protect It, Title

Insurance, Mass Real Estate Law Blog (Sept. 28, 2010),

h t t p : / / w w w . m a s s r e a l c s ~ a t ~ l ~ ~ w ~ l o y . c o m / 2 0 1 ~ / 0 9 / ~ 8 / 5 0 -

ways-to-lose-your-home-and-on1y-one-way-to-protect-i.t-

a n - o w n e r s - t i t . l e - i n s i i r a n c e - p o l icy/ 1 ist.ing 50 title

defect .^ that. are not rev eal ed b y a typical title

examination) (App. 48).

--

If this Court were to affirm the Sup erio r Court's

order, foreclosure sales would remain what they have

always b e e n , s1ightl.y r i s k . y property conveyances that

are, nonetheless, extremely 1 i.,kely .6 st.and ?.he t e s t

of t ime. See Gilman, 171 Mass. a t 48 (recognizing, h u t

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d o w n p l a y i n g , i n h e r e n t r i s k s i n a n y s a l e a g a i n s t t h e

w i l l o f t h e f o r me r o w n e r ) .

C. m y Disruption Caused by Confirming theC m Q n Law Rule Could Be Addressed by theGeneral Court Once +he Contours of theProblem W e r e Known.

W hateve r t h e p r o b a b i l i t i e s , i t i s p o s s i b l e t h a t a

r u l i n g i.n Ms. E a t o n ' s f a v o r c ou l d h a v e a n e y a t i v e

i m p a c t on s o m e p r o p e r t y o wn er s. T he b e s t way t o

a d d r e s s a n y s u c h impact would b e t o w a i t u n t i l i t s

c o n t o u r s were known a n d a l l o w t h e L e g i s l a t u r e t o c r a f t

a s u r g i c a l s o l u t i o n ; t h e Co u r t ne ed n o t p re em pt it. b y

a d o p t i n g a r u l e t h a t prC) t ec t s p a s t i 11 . e g a l

f o r e c l o s u r e s . Among o t h e r t h i n y s , t h e G e r i c r a l C o u r t

c o u l d , and in s o m e i n s t a n c e s has a l r e a d y begu n t o :

imitations or m a r k e t a b i l i t y

Mich . Comp. Laws A n n . c . 6 0 0 s .

v e- ye ar s t a t u t e o f 1 i r n i . t a t i . o n s

f o r c a s e s s c e k i n g t h e r e co v e r y o r p o s s e s s i o n o f

l a n d s ) (App. 2 3 ) . L n d e e d , s u c h a b i l l i s c u r r e n t l y

p e n d i n g . ~Se e S . B . 8 3 0 , 1 8 7 t h G e n e r a l C o u r t (Mass.

2 0 1 2 ) , "A n a c t c l e a r i n g t i t l e s t o f o r e c l o s e d

p r o p e r t i e s , " ( t i t l e of good f a i t h p u r c h a s e r at.

f o r e c l o s u r e s a l e p r o t e c t e d a f t . e r 90 d a y s ) (App. 50).

E n a c t a s t a t u t e o f

s t a t u t e . S e e , e - g . ,

5 R O l . ( l ) ( i m p o s i n y f


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Insulate owner-occupants from displacement while

enabling t i t le suits to proceed a s to vacant or real

estate owned properties.

Protect "good faith purchasers," even where a sale

i s void. See, S . B . 830, supra at 14 .~

0 Adjust the standing or proof requirements for try

ti t le or quiet t i t le actions to provide remedies for

homeowners who were anxious a b o u t p a s t foreclosures

but l a c k e d proof of a likely defect.

Adopt mandatory pre-foreclosure mediation by t h e

party with the note and mortgage, post-sale

confirmation hearings at the election of the

borrower, or judicial foreclosure,

CONCLUSION

Widespread disru ption in the residential t-ea1

estate market a s a result of a r u l i n g for Ms. Eaton is

a p u r e ' y theore tical possibility, arid-a rcrnoke one at

that . i f il pro ble m eme rge s, it. ca n he sol.ved wit.h a

legislative scalpel rather than w i t h . the s1,edgehammer

of prospective applicati,on or a change in a n otherwise

sound common law ru1.e. Appellee therefore respectfully

requests that t . h e Court simply affirm t h e o r d e r of Lhc

S u p e i i . o r Court.

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R e s p e c t f u l l y submit ted ,

H E N R I E T TA EATON

By h e r a t t o r n e y s ,

H. Esme Caramello, BBO#600896D a v i d G r o s s m a n , B B 0 # 5 5 3 4 6 6I l a r v a r d Legal Aid Bureau23 E v e r e t t S t r e e tCambr idge , MA 0 2 1 3 8( 6 1 7 ) 4 9 5 - 4 4 0 8e c a r a m e l l o e l a w. h a r v a r d . c d u

Documents

Appellee Eaton Supplemental Brief MA-Eaton v FNMA