Ibanez Revisited: Massachusetts Court Voids Trustee’s Deed


Henry Chuang

by Henry Chuang on November 14, 2011

in Foreclosure

Earlier this year, the Massachusetts Supreme Court voided a foreclosure sale due to the lender’s inability to prove that it had obtained the right to foreclose.  (See my article on Ibanez for an analysis of the case and impact on California.)  After that decision, the foreclosure investor in the Ibanez case, Frank Bevilacqua, attempted “try title”, an action to determine the ownership of the property.

In Bevilacqua, once again Mr. Rodriguez, the previous landowner, did not appear.  However, even without his appearance, the Court ruled in his favor.  The Mass. Supreme Court held that because the foreclosure sale itself was void, Mr. Bevilacqua had no claim of title and therefore had no standing to challenge competing ownership claims.  Additionally, the Supreme Court determined that Mr. Bevilacqua was not a bona fide purchaser for value because he was on notice that the lender who foreclosed did not have the right to foreclose on the property.  While Mr. Bevilacqua may have relied on the lender’s representation that it had the authority to foreclose, the court concluded that the recorded assignments of the deed of trust were sufficient to put him on notice that the foreclosing lender did not have an interest in the property.

Although the Court sympathized with Mr. Bevilacqua’s plight, its suggestion was to re-foreclose on the property.  However, this solution is fraught with perils.  First, the foreclosure investor had already spent hundreds of thousands of dollars on improving the property.  If the previous owner returned and reinstated the loan, it would likely lead to another round of litigation for Mr. Bevilacqua to recoup his investment.  Second, Mr. Bevilacqua had already resold some of the units.  The shakeout from this case will likely lead to substantial difficulties for all the parties involved to resolve these problems, even with title insurance.

As with Ibanez, this decision is unlikely to be followed in California.  In this case, the Court followed a very literal interpretation of the law.  In California, the courts have largely been siding with lenders, even if there have been technical violations of the foreclosure statutes.  Instead of requiring lenders to follow a strict interpretation of the law, the California courts have instead focused on promoting the finality of a foreclosure sale.

While the ruling is not binding in California, it does highlight issues that will need to be addressed in California.  However, given the law and posture of the court in California, it seems unlikely that California will follow this decision.  If you are facing problems with contentious homeowners or other problems with foreclosures, please contact us so that we can help you manage those issues.

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{ 6 comments… read them below or add one }

avatar Tony Scott November 15, 2011 at 3:29 pm

This is what I love about America. There is no absolute justice or injustice. Many great minds but also many confused people.

avatar Pamie November 16, 2011 at 12:10 pm

How about homeowners insurance – did you have any that would cover toxic mold? My aunt’s double wide had a severe case and also had children very ill. The homeowners insurance agent came out, assessed the situation, moved them immediately to a hotel for about two months. The ins. company removed the home and placed a new one on and had them pay the difference between what was owed and the new place as they were going to total out the other one.

I would call a legal consultant regarding the credit situation and mortgage as the answers vary greatly from state to state and bank to bank. Best wishes…

avatar Smith John November 16, 2011 at 2:27 pm

Well, In california the courts have largely been siding with lenders, even if there has been a violations of foreclosure statues, thanks for the information, keep sharing.

avatar Mark December 5, 2011 at 12:36 pm

This is the kind of situation where it is difficult to choose which side. The law may sometimes feel unfair but it still needs to be followed. I hope the system in California improve on this matter.

avatar David Willa December 6, 2011 at 7:41 am

Very valuable post i think this is good for those who intrested in valuable resorces, keep up good work.

avatar Karan June 1, 2012 at 3:35 pm

I have been facing a very similar problem here in India.

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