Law Suits & Courts

Supreme Judicial Court of Massachusetts.

Posted on Friday, January 07, 2011

U.S. BANK NATIONAL ASSOCIATION, trustee
FN1
v.
Antonio IBANEZ (and a consolidated case FN2 ).
For ABFC 2005-OPT 1 Trust, ABFC Asset Backed
Certificates, Series 2005-OPT 1.FN3).
No. SJC-10694.
October 7, 2010.
January 7, 2011.
Real Property, Mortgage, Ownership, Record title.
Mortgage, Real estate, Foreclosure, Assignment.
Notice, Foreclosure of mortgage.
CIVIL ACTIONS commenced in the Land Court
Department on September 16 and October 30, 2008.
Motions for entry of default judgment and to vacate
judgment were heard by Keith C. Long, J.
The Supreme Judicial Court granted an application
for direct appellate review.
R. Bruce Allensworth (Phoebe S. Winder & Robert
W. Sparkes, III, with him) for U.S. Bank National
Association & another.
Paul R. Collier, III (Max W. Weinstein with him)
for Antonio Ibanez.
Glenn F. Russell, Jr., for Mark A. LaRace & another.
The following submitted briefs for amici curiae:
Martha Coakley, Attorney General, & John M.
Stephan, Assistant Attorney General, for the Commonwealth.
Kevin Costello, Gary Klein, Shennan Kavanagh &
Stuart Rossman for National Consumer Law Center
& others.
Ward P. Graham & Robert J. Moriarty, Jr., for
Real Estate Bar Association for Massachusetts, Inc.
Marie McDonnell, pro se.
Present: Marshall, C.J., Ireland, Spina, Cordy,
Botsford, & Gants, JJ. FN4
GANTS, J.
*1 After foreclosing on two properties and purchasing
the properties back at the foreclosure sales,
U.S. Bank National Association (U.S.Bank), as
trustee for the Structured Asset Securities Corporation
Mortgage Pass-Through Certificates, Series
2006-Z; and Wells Fargo Bank, N.A. (Wells
Fargo), as trustee for ABFC 2005-OPT 1 Trust,
ABFC Asset Backed Certificates, Series 2005-OPT
1 (plaintiffs) filed separate complaints in the Land
Court asking a judge to declare that they held clear
title to the properties in fee simple. We agree with
the judge that the plaintiffs, who were not the original
mortgagees, failed to make the required showing
that they were the holders of the mortgages at
the time of foreclosure. As a result, they did not
demonstrate that the foreclosure sales were valid to
convey title to the subject properties, and their requests
for a declaration of clear title were properly
denied.FN5
Procedural history. On July 5, 2007, U.S.
Bank, as trustee, foreclosed on the mortgage of
Antonio Ibanez, and purchased the Ibanez property
at the foreclosure sale. On the same day, Wells
Fargo, as trustee, foreclosed on the mortgage of
Mark and Tammy LaRace, and purchased the
LaRace property at that foreclosure sale.
In September and October of 2008, U.S. Bank
and Wells Fargo brought separate actions in the
Land Court under G.L. c. 240, § 6, which authorizes
actions “to quiet or establish the title to land
situated in the commonwealth or to remove a cloud
from the title thereto.” The two complaints sought
identical relief: (1) a judgment that the right, title,
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and interest of the mortgagor (Ibanez or the
LaRaces) in the property was extinguished by the
foreclosure; (2) a declaration that there was no
cloud on title arising from publication of the notice
of sale in the Boston Globe; and (3) a declaration
that title was vested in the plaintiff trustee in fee
simple. U.S. Bank and Wells Fargo each asserted in
its complaint that it had become the holder of the
respective mortgage through an assignment made
after the foreclosure sale.
In both cases, the mortgagors-Ibanez and the
LaRaces-did not initially answer the complaints,
and the plaintiffs moved for entry of default judgment.
In their motions for entry of default judgment,
the plaintiffs addressed two issues: (1)
whether the Boston Globe, in which the required
notices of the foreclosure sales were published, is a
newspaper of “general circulation” in Springfield,
the town where the foreclosed properties lay. See
G.L. c. 244, § 14 (requiring publication every week
for three weeks in newspaper published in town
where foreclosed property lies, or of general circulation
in that town); and (2) whether the plaintiffs
were legally entitled to foreclose on the properties
where the assignments of the mortgages to the
plaintiffs were neither executed nor recorded in the
registry of deeds until after the foreclosure sales.
FN6 The two cases were heard together by the
Land Court, along with a third case that raised the
same issues.
*2 On March 26, 2009, judgment was entered
against the plaintiffs. The judge ruled that the foreclosure
sales were invalid because, in violation of
G.L. c. 244, § 14, the notices of the foreclosure
sales named U.S. Bank (in the Ibanez foreclosure)
and Wells Fargo (in the LaRace foreclosure) as the
mortgage holders where they had not yet been assigned
the mortgages.FN7 The judge found, based
on each plaintiff's assertions in its complaint, that
the plaintiffs acquired the mortgages by assignment
only after the foreclosure sales and thus had no interest
in the mortgages being foreclosed at the time
of the publication of the notices of sale or at the
time of the foreclosure sales. FN8
The plaintiffs then moved to vacate the judgments.
At a hearing on the motions on April 17,
2009, the plaintiffs conceded that each complaint
alleged a postnotice, postforeclosure sale assignment
of the mortgage at issue, but they now represented
to the judge that documents might exist that
could show a prenotice, preforeclosure sale assignment
of the mortgages. The judge granted the
plaintiffs leave to produce such documents,
provided they were produced in the form they existed
in at the time the foreclosure sale was noticed
and conducted. In response, the plaintiffs submitted
hundreds of pages of documents to the judge, which
they claimed established that the mortgages had
been assigned to them before the foreclosures.
Many of these documents related to the creation of
the securitized mortgage pools in which the Ibanez
and LaRace mortgages were purportedly included.
FN9
The judge denied the plaintiffs' motions to vacate
judgment on October 14, 2009, concluding that
the newly submitted documents did not alter the
conclusion that the plaintiffs were not the holders
of the respective mortgages at the time of foreclosure.
We granted the parties' applications for direct
appellate review.
Factual background. We discuss each mortgage
separately, describing when appropriate what
the plaintiffs allege to have happened and what the
documents in the record demonstrate.FN10
The Ibanez mortgage. On December 1, 2005,
Antonio Ibanez took out a $103,500 loan for the
purchase of property at 20 Crosby Street in Springfield,
secured by a mortgage to the lender, Rose
Mortgage, Inc. (Rose Mortgage). The mortgage was
recorded the following day. Several days later,
Rose Mortgage executed an assignment of this
mortgage in blank, that is, an assignment that did
not specify the name of the assignee.FN11 The
blank space in the assignment was at some point
stamped with the name of Option One Mortgage
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Corporation (Option One) as the assignee, and that
assignment was recorded on June 7, 2006. Before
the recording, on January 23, 2006, Option One executed
an assignment of the Ibanez mortgage in
blank.
*3 According to U.S. Bank, Option One assigned
the Ibanez mortgage to Lehman Brothers
Bank, FSB, which assigned it to Lehman Brothers
Holdings Inc., which then assigned it to the Structured
Asset Securities Corporation, FN12 which
then assigned the mortgage, pooled with approximately
1,220 other mortgage loans, to U.S. Bank, as
trustee for the Structured Asset Securities Corporation
Mortgage Pass-Through Certificates, Series
2006-Z. With this last assignment, the Ibanez and
other loans were pooled into a trust and converted
into mortgage-backed securities that can be bought
and sold by investors-a process known as securitization.
For ease of reference, the chain of entities
through which the Ibanez mortgage allegedly
passed before the foreclosure sale is:
Rose Mortgage, Inc. (originator)
Option One Mortgage Corporation (record holder)
Lehman Brothers Bank, FSB
Lehman Brothers Holdings Inc. (seller)
Structured Asset Securities Corporation (depositor)
U.S. Bank National Association, as trustee for the
Structured Asset Securities Corporation Mortgage
Pass-Through Certificates, Series 2006-Z
According to U.S. Bank, the assignment of the
Ibanez mortgage to U.S. Bank occurred pursuant to
a December 1, 2006, trust agreement, which is not
in the record. What is in the record is the private
placement memorandum (PPM), dated December
26, 2006, a 273-page, unsigned offer of mortgagebacked
securities to potential investors. The PPM
describes the mortgage pools and the entities involved,
and summarizes the provisions of the trust
agreement, including the representation that mortgages
“will be” assigned into the trust. According
to the PPM, “[e]ach transfer of a Mortgage Loan
from the Seller [Lehman Brothers Holdings Inc.] to
the Depositor [Structured Asset Securities Corporation]
and from the Depositor to the Trustee [U.S.
Bank] will be intended to be a sale of that Mortgage
Loan and will be reflected as such in the Sale and
Assignment Agreement and the Trust Agreement,
respectively.” The PPM also specifies that “[e]ach
Mortgage Loan will be identified in a schedule appearing
as an exhibit to the Trust Agreement.”
However, U.S. Bank did not provide the judge with
any mortgage schedule identifying the Ibanez loan
as among the mortgages that were assigned in the
trust agreement.
On April 17, 2007, U.S. Bank filed a complaint
to foreclose on the Ibanez mortgage in the Land
Court under the Servicemembers Civil Relief Act
(Servicemembers Act), which restricts foreclosures
against active duty members of the uniformed services.
See 50 U.S.C. Appendix §§ 501, 511, 533
(2006 & Supp. II 2008).FN13 In the complaint,
U.S. Bank represented that it was the “owner (or assignee)
and holder” of the mortgage given by
Ibanez for the property. A judgment issued on behalf
of U.S. Bank on June 26, 2007, declaring that
the mortgagor was not entitled to protection from
foreclosure under the Servicemembers Act. In June,
2007, U.S. Bank also caused to be published in the
Boston Globe the notice of the foreclosure sale required
by G.L. c. 244, § 14. The notice identified
U.S. Bank as the “present holder” of the mortgage.
*4 At the foreclosure sale on July 5, 2007, the
Ibanez property was purchased by U.S. Bank, as
trustee for the securitization trust, for $94,350, a
value significantly less than the outstanding debt
and the estimated market value of the property. The
foreclosure deed (from U.S. Bank, trustee, as the
purported holder of the mortgage, to U.S. Bank,
trustee, as the purchaser) and the statutory foreclosure
affidavit were recorded on May 23, 2008. On
September 2, 2008, more than one year after the
sale, and more than five months after recording of
the sale, American Home Mortgage Servicing, Inc.,
“as successor-in-interest” to Option One, which
was until then the record holder of the Ibanez mort-
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gage, executed a written assignment of that mortgage
to U.S. Bank, as trustee for the securitization
trust.FN14 This assignment was recorded on
September 11, 2008.
The LaRace mortgage. On May 19, 2005, Mark
and Tammy LaRace gave a mortgage for the property
at 6 Brookburn Street in Springfield to Option
One as security for a $103,200 loan; the mortgage
was recorded that same day. On May 26, 2005, Option
One executed an assignment of this mortgage
in blank.
According to Wells Fargo, Option One later assigned
the LaRace mortgage to Bank of America in
a July 28, 2005, flow sale and servicing agreement.
Bank of America then assigned it to Asset Backed
Funding Corporation (ABFC) in an October 1,
2005, mortgage loan purchase agreement. Finally,
ABFC pooled the mortgage with others and assigned
it to Wells Fargo, as trustee for the ABFC
2005-OPT 1 Trust, ABFC Asset-Backed Certificates,
Series 2005-OPT 1, pursuant to a pooling and
servicing agreement (PSA).
For ease of reference, the chain of entities
through which the LaRace mortgage allegedly
passed before the foreclosure sale is:
Option One Mortgage Corporation (originator and
record holder)
Bank of America
Asset Backed Funding Corporation (depositor)
Wells Fargo, as trustee for the ABFC 2005-OPT 1,
ABFC Asset-Backed Certificates, Series 2005-OPT
1
Wells Fargo did not provide the judge with a
copy of the flow sale and servicing agreement, so
there is no document in the record reflecting an assignment
of the LaRace mortgage by Option One to
Bank of America. The plaintiff did produce an unexecuted
copy of the mortgage loan purchase agreement,
which was an exhibit to the PSA. The mortgage
loan purchase agreement provides that Bank
of America, as seller, “does hereby agree to and
does hereby sell, assign, set over, and otherwise
convey to the Purchaser [ABFC], without recourse,
on the Closing Date ... all of its right, title and interest
in and to each Mortgage Loan.” The agreement
makes reference to a schedule listing the assigned
mortgage loans, but this schedule is not in
the record, so there was no document before the
judge showing that the LaRace mortgage was
among the mortgage loans assigned to the ABFC.
Wells Fargo did provide the judge with a copy
of the PSA, which is an agreement between the ABFC
(as depositor), Option One (as servicer), and
Wells Fargo (as trustee), but this copy was downloaded
from the Securities and Exchange Commission
website and was not signed. The PSA provides
that the depositor “does hereby transfer, assign, set
over and otherwise convey to the Trustee, on behalf
of the Trust ... all the right, title and interest of the
Depositor ... in and to ... each Mortgage Loan identified
on the Mortgage Loan Schedules,” and “does
hereby deliver” to the trustee the original mortgage
note, an original mortgage assignment “in form and
substance acceptable for recording,” and other documents
pertaining to each mortgage.
*5 The copy of the PSA provided to the judge
did not contain the loan schedules referenced in the
agreement. Instead, Wells Fargo submitted a schedule
that it represented identified the loans assigned
in the PSA, which did not include property addresses,
names of mortgagors, or any number that
corresponds to the loan number or servicing number
on the LaRace mortgage. Wells Fargo contends
that a loan with the LaRace property's zip code and
city is the LaRace mortgage loan because the payment
history and loan amount matches the LaRace
loan.
On April 27, 2007, Wells Fargo filed a complaint
under the Servicemembers Act in the Land
Court to foreclose on the LaRace mortgage. The
complaint represented Wells Fargo as the “owner
(or assignee) and holder” of the mortgage given by
the LaRaces for the property. A judgment issued on
behalf of Wells Fargo on July 3, 2007, indicating
that the LaRaces were not beneficiaries of the Ser-
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vicemembers Act and that foreclosure could proceed
in accordance with the terms of the power of
sale. In June, 2007, Wells Fargo caused to be published
in the Boston Globe the statutory notice of
sale, identifying itself as the “present holder” of the
mortgage.
At the foreclosure sale on July 5, 2007, Wells
Fargo, as trustee, purchased the LaRace property
for $120,397.03, a value significantly below its estimated
market value. Wells Fargo did not execute
a statutory foreclosure affidavit or foreclosure deed
until May 7, 2008. That same day, Option One,
which was still the record holder of the LaRace
mortgage, executed an assignment of the mortgage
to Wells Fargo as trustee; the assignment was recorded
on May 12, 2008. Although executed ten
months after the foreclosure sale, the assignment
declared an effective date of April 18, 2007, a date
that preceded the publication of the notice of sale
and the foreclosure sale.
Discussion. The plaintiffs brought actions under
G.L. c. 240, § 6, seeking declarations that the
defendant mortgagors' titles had been extinguished
and that the plaintiffs were the fee simple owners of
the foreclosed properties. As such, the plaintiffs
bore the burden of establishing their entitlement to
the relief sought. Sheriff's Meadow Found., Inc. v.
Bay-Courte Edgartown, Inc., 401 Mass. 267, 269,
516 N.E.2d 144 (1987). To meet this burden, they
were required “not merely to demonstrate better
title ... than the defendants possess, but ... to prove
sufficient title to succeed in [the] action.” Id. See
NationsBanc Mtge. Corp. v. Eisenhauer, 49
Mass.App.Ct. 727, 730, 733 N.E.2d 557 (2000).
There is no question that the relief the plaintiffs
sought required them to establish the validity of the
foreclosure sales on which their claim to clear title
rested.
Massachusetts does not require a mortgage
holder to obtain judicial authorization to foreclose
on a mortgaged property. See G.L. c. 183, § 21;
G.L. c. 244, § 14. With the exception of the limited
judicial procedure aimed at certifying that the mortgagor
is not a beneficiary of the Servicemembers
Act, a mortgage holder can foreclose on a property,
as the plaintiffs did here, by exercise of the statutory
power of sale, if such a power is granted by
the mortgage itself. See Beaton v. Land Court, 367
Mass. 385, 390-391, 393, 326 N.E.2d 302, appeal
dismissed, 423 U.S. 806, 96 S.Ct. 16, 46 L.Ed.2d
27 (1975).
*6 Where a mortgage grants a mortgage holder
the power of sale, as did both the Ibanez and
LaRace mortgages, it includes by reference the
power of sale set out in G.L. c. 183, § 21, and further
regulated by G.L. c. 244, §§ 11-17C. Under
G.L. c. 183, § 21, after a mortgagor defaults in the
performance of the underlying note, the mortgage
holder may sell the property at a public auction and
convey the property to the purchaser in fee simple,
“and such sale shall 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.” Even where there is a dispute as to
whether the mortgagor was in default or whether
the party claiming to be the mortgage holder is the
true mortgage holder, the foreclosure goes forward
unless the mortgagor files an action and obtains a
court order enjoining the foreclosure.FN15 See
Beaton v. Land Court, supra at 393, 326 N.E.2d
302.
Recognizing the substantial power that the statutory
scheme affords to a mortgage holder to foreclose
without immediate judicial oversight, 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.” Moore v. Dick,
187 Mass. 207, 211, 72 N.E. 967 (1905). See Roche
v. Farnsworth, 106 Mass. 509, 513 (1871) (power
of sale contained in mortgage “must be executed in
strict compliance with its terms”). See also Mc-
Greevey v. Charlestown Five Cents Sav. Bank, 294
Mass. 480, 484, 2 N.E.2d 543 (1936).FN16
One of the terms of the power of sale that must
be strictly adhered to is the restriction on who is en-
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titled to foreclose. The “statutory power of sale”
can be exercised by “the mortgagee or his executors,
administrators, successors or assigns.” G.L. c.
183, § 21. Under G.L. c. 244, § 14, “[t]he mortgagee
or person having his estate in the land mortgaged,
or a person authorized by the power of sale,
or the attorney duly authorized by a writing under
seal, or the legal guardian or conservator of such
mortgagee or person acting in the name of such
mortgagee or person” is empowered to exercise the
statutory power of sale. Any effort to foreclose by a
party lacking “jurisdiction and authority” to carry
out a foreclosure under these statutes is void. Chace
v. Morse, 189 Mass. 559, 561, 76 N.E. 142 (1905),
citing Moore v. Dick, supra. See Davenport v. HSBC
Bank USA, 275 Mich.App. 344, 347-348, 739
N.W.2d 383 (2007) (attempt to foreclose by party
that had not yet been assigned mortgage results in
“structural defect that goes to the very heart of defendant's
ability to foreclose by advertisement,” and
renders foreclosure sale void).
A related statutory requirement that must be
strictly adhered to in a foreclosure by power of sale
is the notice requirement articulated in G.L. c. 244,
§ 14. That statute provides that “no sale under such
power shall be effectual to foreclose a mortgage,
unless, previous to such sale,” advance notice of the
foreclosure sale has been provided to the mortgagee,
to other interested parties, and by publication
in a newspaper published in the town where the
mortgaged land lies or of general circulation in that
town. Id. “The manner in which the notice of the
proposed sale shall be given is one of the important
terms of the power, and a strict compliance with it
is essential to the valid exercise of the power.”
Moore v. Dick, supra at 212, 72 N.E. 967. See
Chace v. Morse, supra (“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”).
See also McGreevey v. Charlestown Five
Cents Sav. Bank, supra. Because only a present
holder of the mortgage is authorized to foreclose on
the mortgaged property, and because the mortgagor
is entitled to know who is foreclosing and selling
the property, the failure to identify the holder of the
mortgage in the notice of sale may render the notice
defective and the foreclosure sale void. FN17 See
Roche v. Farnsworth, supra (mortgage sale void
where notice of sale identified original mortgagee
but not mortgage holder at time of notice and sale).
See also Bottomly v. Kabachnick, 13 Mass.App.Ct.
480, 483-484, 434 N.E.2d 667 (1982) (foreclosure
void where holder of mortgage not identified in notice
of sale).
*7 For the plaintiffs to obtain the judicial declaration
of clear title that they seek, they had to
prove their authority to foreclose under the power
of sale and show their compliance with the requirements
on which this authority rests. Here, the
plaintiffs were not the original mortgagees to whom
the power of sale was granted; rather, they claimed
the authority to foreclose as the eventual assignees
of the original mortgagees. Under the plain language
of G.L. c. 183, § 21, and G.L. c. 244, § 14,
the plaintiffs had the authority to exercise the
power of sale contained in the Ibanez and LaRace
mortgages only if they were the assignees of the
mortgages at the time of the notice of sale and the
subsequent foreclosure sale. See In re Schwartz,
366 B.R. 265, 269 (Bankr.D.Mass.2007)
(“Acquiring the mortgage after the entry and foreclosure
sale does not satisfy the Massachusetts statute”).
FN18 See also Jeff-Ray Corp. v. Jacobson,
566 So.2d 885, 886 (Fla.Dist.Ct.App.1990) (per
curiam) (foreclosure action could not be based on
assignment of mortgage dated four months after
commencement of foreclosure proceeding).
The plaintiffs claim that the securitization documents
they submitted establish valid assignments
that made them the holders of the Ibanez and
LaRace mortgages before the notice of sale and the
foreclosure sale. We turn, then, to the documentation
submitted by the plaintiffs to determine whether
it met the requirements of a valid assignment.
*8 Like a sale of land itself, the assignment of
a mortgage is a conveyance of an interest in land
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that requires a writing signed by the grantor. See
G.L. c. 183, § 3; Saint Patrick's Religious, Educ. &
Charitable Ass'n v. Hale, 227 Mass. 175, 177, 116
N.E. 407 (1917). In a “title theory state” like Massachusetts,
a mortgage is a transfer of legal title in a
property to secure a debt. See Faneuil Investors
Group, Ltd. Partnership v. Selectmen of Dennis,
458 Mass. 1, 6, 933 N.E.2d 918 (2010). Therefore,
when a person borrows money to purchase a home
and gives the lender a mortgage, the homeownermortgagor
retains only equitable title in the home;
the legal title is held by the mortgagee. See Vee Jay
Realty Trust Co. v. DiCroce, 360 Mass. 751, 753,
277 N.E.2d 690 (1972), quoting Dolliver v. St.
Joseph Fire & Marine Ins. Co., 128 Mass. 315, 316
(1880) (although “as to all the world except the
mortgagee, a mortgagor is the owner of the mortgaged
lands,” mortgagee has legal title to property);
Maglione v. BancBoston Mtge. Corp., 29
Mass.App.Ct. 88, 90, 557 N.E.2d 756 (1990).
Where, as here, mortgage loans are pooled together
in a trust and converted into mortgage-backed securities,
the underlying promissory notes serve as
financial instruments generating a potential income
stream for investors, but the mortgages securing
these notes are still legal title to someone's home or
farm and must be treated as such.
Focusing first on the Ibanez mortgage, U.S.
Bank argues that it was assigned the mortgage under
the trust agreement described in the PPM, but it
did not submit a copy of this trust agreement to the
judge. The PPM, however, described the trust
agreement as an agreement to be executed in the future,
so it only furnished evidence of an intent to
assign mortgages to U.S. Bank, not proof of their
actual assignment. Even if there were an executed
trust agreement with language of present assignment,
U.S. Bank did not produce the schedule of
loans and mortgages that was an exhibit to that
agreement, so it failed to show that the Ibanez
mortgage was among the mortgages to be assigned
by that agreement. Finally, even if there were an
executed trust agreement with the required schedule,
U.S. Bank failed to furnish any evidence that
the entity assigning the mortgage-Structured Asset
Securities Corporation-ever held the mortgage to be
assigned. The last assignment of the mortgage on
record was from Rose Mortgage to Option One;
nothing was submitted to the judge indicating that
Option One ever assigned the mortgage to anyone
before the foreclosure sale. FN19 Thus, based on
the documents submitted to the judge, Option One,
not U.S. Bank, was the mortgage holder at the time
of the foreclosure, and U.S. Bank did not have the
authority to foreclose the mortgage.
Turning to the LaRace mortgage, Wells Fargo
claims that, before it issued the foreclosure notice,
it was assigned the LaRace mortgage under the
PSA. The PSA, in contrast with U.S. Bank's PPM,
uses the language of a present assignment (“does
hereby ... assign” and “does hereby deliver”) rather
than an intent to assign in the future. But the mortgage
loan schedule Wells Fargo submitted failed to
identify with adequate specificity the LaRace mortgage
as one of the mortgages assigned in the PSA.
Moreover, Wells Fargo provided the judge with no
document that reflected that the ABFC (depositor)
held the LaRace mortgage that it was purportedly
assigning in the PSA. As with the Ibanez loan, the
record holder of the LaRace loan was Option One,
and nothing was submitted to the judge which
demonstrated that the LaRace loan was ever assigned
by Option One to another entity before the
publication of the notice and the sale.
*9 Where a plaintiff files a complaint asking
for a declaration of clear title after a mortgage foreclosure,
a judge is entitled to ask for proof that the
foreclosing entity was the mortgage holder at the
time of the notice of sale and foreclosure, or was
one of the parties authorized to foreclose under
G.L. c. 183, § 21, and G.L. c. 244, § 14. A plaintiff
that cannot make this modest showing cannot justly
proclaim that it was unfairly denied a declaration of
clear title. See In re Schwartz, supra at 266 (“When
HomEq [Servicing Corporation] was required to
prove its authority to conduct the sale, and despite
having been given ample opportunity to do so, what
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it produced instead was a jumble of documents and
conclusory statements, some of which are not supported
by the documents and indeed even contradicted
by them”). See also Bayview Loan Servicing,
LLC v. Nelson, 382 Ill.App.3d 1184, 1188, 322
Ill.Dec. 21, 890 N.E.2d 940 (2008) (reversing grant
of summary judgment in favor of financial entity in
foreclosure action, where there was “no evidence
that [the entity] ever obtained any legal interest in
the subject property”).
We do not suggest that an assignment must be
in recordable form at the time of the notice of sale
or the subsequent foreclosure sale, although recording
is likely the better practice. Where a pool of
mortgages is assigned to a securitized trust, the executed
agreement that assigns the pool of mortgages,
with a schedule of the pooled mortgage
loans that clearly and specifically identifies the
mortgage at issue as among those assigned, may
suffice to establish the trustee as the mortgage holder.
However, there must be proof that the assignment
was made by a party that itself held the mortgage.
See In re Samuels, 415 B.R. 8, 20
(Bankr.D.Mass.2009). A foreclosing entity may
provide a complete chain of assignments linking it
to the record holder of the mortgage, or a single assignment
from the record holder of the mortgage.
See In re Parrish, 326 B.R. 708, 720
(Bankr.N.D.Ohio 2005) (“If the claimant acquired
the note and mortgage from the original lender or
from another party who acquired it from the original
lender, the claimant can meet its burden through
evidence that traces the loan from the original
lender to the claimant”). The key in either case is
that the foreclosing entity must hold the mortgage
at the time of the notice and sale in order accurately
to identify itself as the present holder in the notice
and in order to have the authority to foreclose under
the power of sale (or the foreclosing entity must be
one of the parties authorized to foreclose under
G.L. c. 183, § 21, and G.L. c. 244, § 14).
The judge did not err in concluding that the securitization
documents submitted by the plaintiffs
failed to demonstrate that they were the holders of
the Ibanez and LaRace mortgages, respectively, at
the time of the publication of the notices and the
sales. The judge, therefore, did not err in rendering
judgments against the plaintiffs and in denying the
plaintiffs' motions to vacate the judgments.FN20
*10 We now turn briefly to three other arguments
raised by the plaintiffs on appeal. First, the
plaintiffs initially contended that the assignments in
blank executed by Option One, identifying the assignor
but not the assignee, not only “evidence[ ]
and confirm[ ] the assignments that occurred by virtue
of the securitization agreements,” but “are effective
assignments in their own right.” But in their
reply briefs they conceded that the assignments in
blank did not constitute a lawful assignment of the
mortgages. Their concession is appropriate. We
have long held that a conveyance of real property,
such as a mortgage, that does not name the assignee
conveys nothing and is void; we do not regard an
assignment of land in blank as giving legal title in
land to the bearer of the assignment. See Flavin v.
Morrissey, 327 Mass. 217, 219, 97 N.E.2d 643
(1951); Macurda v. Fuller, 225 Mass. 341, 344,
114 N.E. 366 (1916). See also G.L. c. 183, § 3.
Second, the plaintiffs contend that, because
they held the mortgage note, they had a sufficient
financial interest in the mortgage to allow them to
foreclose. In Massachusetts, where a note has been
assigned but there is no written assignment of the
mortgage underlying the note, the assignment of the
note does not carry with it the assignment of the
mortgage. Barnes v. Boardman, 149 Mass. 106,
114, 21 N.E. 308 (1889). Rather, the holder of the
mortgage holds the mortgage in trust for the purchaser
of the note, who has an equitable right to obtain
an assignment of the mortgage, which may be
accomplished by filing an action in court and obtaining
an equitable order of assignment. Id. (“In
some jurisdictions it is held that the mere transfer
of the debt, without any assignment or even mention
of the mortgage, carries the mortgage with it,
so as to enable the assignee to assert his title in an
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action at law.... This doctrine has not prevailed in
Massachusetts, and the tendency of the decisions
here has been, that in such cases the mortgagee
would hold the legal title in trust for the purchaser
of the debt, and that the latter might obtain a conveyance
by a bill in equity”). See Young v. Miller,
72 Mass. 152, 6 Gray 152, 154 (1856). In the absence
of a valid written assignment of a mortgage
or a court order of assignment, the mortgage holder
remains unchanged. This common-law principle
was later incorporated in the statute enacted in 1912
establishing the statutory power of sale, which
grants such a power to “the mortgagee or his executors,
administrators, successors or assigns,” but
not to a party that is the equitable beneficiary of a
mortgage held by another. G.L. c. 183, § 21, inserted
by St.1912, c. 502, § 6.
Third, the plaintiffs initially argued that postsale
assignments were sufficient to establish their
authority to foreclose, and now argue that these assignments
are sufficient when taken in conjunction
with the evidence of a presale assignment. They argue
that the use of postsale assignments was customary
in the industry, and point to Title Standard
No. 58(3) issued by the Real Estate Bar Association
for Massachusetts, which declares: “A title is not
defective by reason of ... [t]he recording of an Assignment
of Mortgage executed either prior, or subsequent,
to foreclosure where said Mortgage has
been foreclosed, of record, by the Assignee.” FN21
To the extent that the plaintiffs rely on this title
standard for the proposition that an entity that does
not hold a mortgage may foreclose on a property,
and then cure the cloud on title by a later assignment
of a mortgage, their reliance is misplaced because
this proposition is contrary to G.L. c. 183, §
21, and G.L. c. 244, § 14. If the plaintiffs did not
have their assignments to the Ibanez and LaRace
mortgages at the time of the publication of the notices
and the sales, they lacked authority to foreclose
under G.L. c. 183, § 21, and G.L. c. 244, § 14,
and their published claims to be the present holders
of the mortgages were false. Nor may a postforeclosure
assignment be treated as a pre-foreclosure
assignment simply by declaring an “effective date”
that precedes the notice of sale and foreclosure, as
did Option One's assignment of the LaRace mortgage
to Wells Fargo. Because an assignment of a
mortgage is a transfer of legal title, it becomes effective
with respect to the power of sale only on the
transfer; it cannot become effective before the
transfer. See In re Schwartz, supra at 269.
*11 However, we do not disagree with Title
Standard No. 58(3) that, where an assignment is
confirmatory of an earlier, valid assignment made
prior to the publication of notice and execution of
the sale, that confirmatory assignment may be executed
and recorded after the foreclosure, and doing
so will not make the title defective. A valid assignment
of a mortgage gives the holder of that mortgage
the statutory power to sell after a default regardless
whether the assignment has been recorded.
See G.L. c. 183, § 21; MacFarlane v. Thompson,
241 Mass. 486, 489, 135 N.E. 869 (1922). Where
the earlier assignment is not in recordable form or
bears some defect, a written assignment executed
after foreclosure that confirms the earlier assignment
may be properly recorded. See Bon v. Graves,
216 Mass. 440, 444-445, 103 N.E. 1023 (1914). A
confirmatory assignment, however, cannot confirm
an assignment that was not validly made earlier or
backdate an assignment being made for the first
time. See Scaplen v. Blanchard, 187 Mass. 73, 76,
72 N.E. 346 (1904) (confirmatory deed “creates no
title” but “takes the place of the original deed, and
is evidence of the making of the former conveyance
as of the time when it was made”). Where there is
no prior valid assignment, a subsequent assignment
by the mortgage holder to the note holder is not a
confirmatory assignment because there is no earlier
written assignment to confirm. In this case, based
on the record before the judge, the plaintiffs failed
to prove that they obtained valid written assignments
of the Ibanez and LaRace mortgages before
their foreclosures, so the postforeclosure assignments
were not confirmatory of earlier valid assignments.
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Finally, we reject the plaintiffs' request that our
ruling be prospective in its application. A prospective
ruling is only appropriate, in limited circumstances,
when we make a significant change in the
common law. See Papadopoulos v. Target Corp.,
457 Mass. 368, 384, 930 N.E.2d 142 (2010) (noting
“normal rule of retroactivity”); Payton v. Abbott
Labs, 386 Mass. 540, 565, 437 N.E.2d 171 (1982).
We have not done so here. The legal principles and
requirements we set forth are well established in
our case law and our statutes. All that has changed
is the plaintiffs' apparent failure to abide by those
principles and requirements in the rush to sell mortgage-
backed securities.
*12 Conclusion. For the reasons stated, we
agree with the judge that the plaintiffs did not
demonstrate that they were the holders of the
Ibanez and LaRace mortgages at the time that they
foreclosed these properties, and therefore failed to
demonstrate that they acquired fee simple title to
these properties by purchasing them at the foreclosure
sale.
Judgments affirmed.
CORDY, J. (concurring, with whom Botsford, J.,
joins).
I concur fully in the opinion of the court, and
write separately only to underscore that what is surprising
about these cases is not the statement of
principles articulated by the court regarding title
law and the law of foreclosure in Massachusetts,
but rather the utter carelessness with which the
plaintiff banks documented the titles to their assets.
There is no dispute that the mortgagors of the properties
in question had defaulted on their obligations,
and that the mortgaged properties were subject to
foreclosure. Before commencing such an action,
however, the holder of an assigned mortgage needs
to take care to ensure that his legal paperwork is in
order. Although there was no apparent actual unfairness
here to the mortgagors, that is not the
point. Foreclosure is a powerful act with significant
consequences, and Massachusetts law has always
required that it proceed strictly in accord with the
statutes that govern it. As the opinion of the court
notes, such strict compliance is necessary because
Massachusetts is both a title theory State and allows
for extrajudicial foreclosure.
The type of sophisticated transactions leading
up to the accumulation of the notes and mortgages
in question in these cases and their securitization,
and, ultimately the sale of mortgaged-backed securities,
are not barred nor even burdened by the requirements
of Massachusetts law. The plaintiff
banks, who brought these cases to clear the titles
that they acquired at their own foreclosure sales,
have simply failed to prove that the underlying assignments
of the mortgages that they allege (and
would have) entitled them to foreclose ever existed
in any legally cognizable form before they exercised
the power of sale that accompanies those assignments.
The court's opinion clearly states that
such assignments do not need to be in recordable
form or recorded before the foreclosure, but they do
have to have been effectuated.
What is more complicated, and not addressed
in this opinion, because the issue was not before us,
is the effect of the conduct of banks such as the
plaintiffs here, on a bona fide third-party purchaser
who may have relied on the foreclosure title of the
bank and the confirmative assignment and affidavit
of foreclosure recorded by the bank subsequent to
that foreclosure but prior to the purchase by the
third party, especially where the party whose property
was foreclosed was in fact in violation of the
mortgage covenants, had notice of the foreclosure,
and took no action to contest it.
FN1. For the Structured Asset Securities
Corporation Mortgage Pass-Through Certificates,
Series 2006-Z.
FN2. Wells Fargo Bank, N.A., trustee, vs.
Mark A. LaRace & another.
FN3. The Appeals Court granted the
plaintiffs' motion to consolidate these
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cases.
FN4. Chief Justice Marshall participated in
the deliberation on this case prior to her retirement.
FN5. We acknowledge the amicus briefs
filed by the Attorney General; the Real Estate
Bar Association for Massachusetts,
Inc.; Marie McDonnell; and the National
Consumer Law Center, together with Darlene
Manson, Germano DePina, Robert
Lane, Ann Coiley, Roberto Szumik, and
Geraldo Dosanjos.
FN6. The uncertainty surrounding the first
issue was the reason the plaintiffs sought a
declaration of clear title in order to obtain
title insurance for these properties. The
second issue was raised by the judge in the
LaRace case at a January 5, 2009, case
management conference.
FN7. The judge also concluded that the
Boston Globe was a newspaper of general
circulation in Springfield, so the foreclosures
were not rendered invalid on that
ground because notice was published in
that newspaper.
FN8. In the third case, LaSalle Bank National
Association, trustee for the certificate
holders of Bear Stearns Asset Backed
Securities I, LLC Asset-Backed Certificates,
Series 2007-HE2 vs. Freddy Rosario,
the judge concluded that the mortgage
foreclosure “was not rendered invalid by
its failure to record the assignment reflecting
its status as holder of the mortgage prior
to the foreclosure since it was, in fact,
the holder by assignment at the time of the
foreclosure, it truthfully claimed that status
in the notice, and it could have produced
proof of that status (the unrecorded assignment)
if asked.”
FN9. On June 1, 2009, attorneys for the
defendant mortgagors filed their appearance
in the cases for the first time.
FN10. The LaRace defendants allege that
the documents submitted to the judge following
the plaintiffs' motions to vacate
judgment are not properly in the record before
us. They also allege that several of
these documents are not properly authenticated.
Because we affirm the judgment
on other grounds, we do not address these
concerns, and assume that these documents
are properly before us and were adequately
authenticated.
FN11. This signed and notarized document
states: “FOR VALUE RECEIVED, the undersigned
hereby grants, assigns and transfers
to _______ all beneficial interest under
that certain Mortgage dated December
1, 2005 executed by Antonio Ibanez....”
FN12. The Structured Asset Securities
Corporation is a wholly owned direct subsidiary
of Lehman Commercial Paper Inc.,
which is in turn a wholly owned, direct
subsidiary of Lehman Brothers Holdings
Inc.
FN13. As implemented in Massachusetts, a
mortgage holder is required to go to court
to obtain a judgment declaring that the
mortgagor is not a beneficiary of the Servicemembers
Act before proceeding to
foreclosure. St.1943, c. 57, as amended
through St.1998, c. 142.
FN14. The Land Court judge questioned
whether American Home Mortgage Servicing,
Inc., was in fact a successor in interest
to Option One. Given our affirmance
of the judgment on other grounds, we need
not address this question.
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FN15. An alternative to foreclosure
through the right of statutory sale is foreclosure
by entry, by which a mortgage
holder who peaceably enters a property
and remains for three years after recording
a certificate or memorandum of entry forecloses
the mortgagor's right of redemption.
See G.L. c. 244, §§ 1, 2; Joyner v. Lenox
Sav. Bank, 322 Mass. 46, 52-53, 76 N.E.2d
169 (1947). A foreclosure by entry may
provide a separate ground for a claim of
clear title apart from the foreclosure by execution
of the power of sale. See, e.g.,
Grabiel v. Michelson, 297 Mass. 227,
228-229, 8 N.E.2d 764 (1937). Because the
plaintiffs do not claim clear title based on
foreclosure by entry, we do not discuss it
further.
FN16. We recognize that a mortgage holder
must not only act in strict compliance
with its power of sale but must also “act in
good faith and ... use reasonable diligence
to protect the interests of the mortgagor,”
and this responsibility is “more exacting”
where the mortgage holder becomes the
buyer at the foreclosure sale, as occurred
here. See Williams v. Resolution GGF Oy,
417 Mass. 377, 382-383, 630 N.E.2d 581
(1994), quoting Seppala & Aho Constr.
Co. v. Petersen, 373 Mass. 316, 320, 367
N.E.2d 613 (1977). Because the issue was
not raised by the defendant mortgagors or
the judge, we do not consider whether the
plaintiffs breached this obligation.
FN17. The form of foreclosure notice
provided in G.L. c. 244, § 14, calls for the
present holder of the mortgage to identify
itself and sign the notice. While the statute
permits other forms to be used and allows
the statutory form to be “altered as circumstances
require,” G.L. c. 244, § 14, we do
not interpret this flexibility to suggest that
the present holder of the mortgage need
not identify itself in the notice.
FN18. The plaintiffs were not authorized
to foreclose by virtue of any of the other
provisions of G.L. c. 244, § 14: they were
not the guardian or conservator, or acting
in the name of, a person so authorized; nor
were they the attorney duly authorized by a
writing under seal.
FN19. Ibanez challenges the validity of
this assignment to Option One. Because of
the failure of U.S. Bank to document any
preforeclosure sale assignment or chain of
assignments by which it obtained the
Ibanez mortgage from Option One, it is unnecessary
to address the validity of the assignment
from Rose Mortgage to Option
One.
FN20. The plaintiffs have not pressed the
procedural question whether the judge exceeded
his authority in rendering judgment
against them on their motions for default
judgment, and we do not address it here.
FN21. Title Standard No. 58(3) issued by
the Real Estate Bar Association for Massachusetts
continues: “However, if the Assignment
is not dated prior, or stated to be
effective prior, to the commencement of a
foreclosure, then a foreclosure sale after
April 19, 2007 may be subject to challenge
in the Bankruptcy Court,” citing In re
Schwartz, 366 B.R. 265
(Bankr.D.Mass.2007).
Mass.,2011.
U.S. Bank Nat. Ass'n v. Ibanez
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