appellee eaton supplemental brief ma-eaton v fnma
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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
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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
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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
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