Mass. SC rules against lenders in foreclosure cases

Jessica M. Karmasek Jan. 12, 2011, 1:10pm


BOSTON (Legal Newsline) - The Massachusetts Supreme Court, in a ruling last week, agreed with a lower court judge that U.S. Bank and Wells Fargo did not demonstrate they were the holders of two mortgages when they foreclosed on the properties.

On July 5, 2007, U.S. Bank foreclosed on the mortgage of Antonio Ibanez, and purchased the property at the foreclosure sale. On the same day, Wells Fargo foreclosed on the mortgage of Mark and Tammy LaRace, and purchased the property at that foreclosure sale.

After foreclosing on the two properties and purchasing the properties back, U.S. Bank and Wells Fargo filed separate complaints in the Land Court Department, asking a judge to declare that they held clear title to the properties.

The two complaints sought identical relief: a judgment that the right, title and interest of the mortgagor in the property was extinguished by the foreclosure; a declaration that there was no cloud on title arising from publication of the notice of sale in the Boston Globe; and a declaration that title was vested in the plaintiff trustee in fee simple.

U.S. Bank and Wells Fargo each asserted in their complaints that they 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: 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; and 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.

The two cases were heard together by the Land Court, along with a third case that raised the same issues.

On March 26, 2009, judgment was entered against the plaintiffs.

The judge ruled that the foreclosure sales were "invalid" because 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.

The judge found, based on each plaintiff's assertions, that the banks 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.

The banks 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 two banks 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.

On Oct. 14, 2009, the judge denied the plaintiffs' motions to vacate judgment, 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.

The state's high court then granted the parties' applications for direct appellate review.

According to Friday's opinion, the justices agreed that the banks "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," it said.

Justice Ralph D. Gants, who authored the Court's opinion, wrote that "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."

The Land Court judge, the Court wrote, 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."

Therefore, it said, the judge did not err in rendering judgments against the two banks and in denying their motions to vacate the judgments.

From Legal Newsline: Reach Jessica Karmasek by e-mail at

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San Francisco, CA 94104

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