Challenge to foreclosure sale barred by statute of repose
Judge gives effect to plain language of ‘Clear Title’ Act
Two plaintiffs challenging the validity of the 2007 foreclosure sale of their Greenfield home could not satisfy the filing requirements of the recently amended statute of repose by recording an affidavit reflecting the alleged title defect within the time period set by the act, a Land Court judge has determined.
The plaintiffs argued that even though amended G.L.c. 244, §15 expressly calls for the timely filing of a copy of the complaint challenging a foreclosure sale with the Registry of Deeds, the timely recording of their affidavit provided sufficient notice of their claim to satisfy the intent of the statute.
But Judge Robert B. Foster found the plain language of §15 controlled.
“The language of the Statute is conjunctive,” Foster wrote. “It requires both the commencement of an action in court and the recording of the complaint or pleading with the registry before the deadline. The recording requirement is not surplusage. It is not simply a notice provision, but rather an additional requirement necessary to file a timely suit.”
Because the plaintiffs failed to comply with §15’s requirement to record their amended complaint within one year of the effective date of the act, Dec. 31, 2016, the judge concluded that their wrongful foreclosure claims were barred.
The 23-page decision is Kenney, et al. v. Brown, et al., Lawyers Weekly No. 14-064-17. The full text of the ruling can be ordered here.
‘Great ruling’ for conveyancers
Boston attorney Meredith A. Swisher represented the defendant homeowners. Swisher did not respond to a request for comment. The plaintiffs’ Northampton attorney, Mark A. Tanner, also did not respond.
But Framingham attorney Richard D. Vetstein, who testified before the Legislature in favor of the passage of amended §15, said Kenney is a “great ruling” for the conveyancing bar. Specifically, Vetstein said, the decision furthers the underlying purpose of the statute to provide clarity of title in the wake of the foreclosure crisis and the Supreme Judicial Court’s 2011 decisions on wrongful foreclosure in Bevilacqua v. Rodriguez and U.S. Bank National Association v. Ibanez.
“The whole purpose of the act is to slowly clear away these defective foreclosure titles,” Vetstein said.
He also said it was important for Foster to clarify that so-called “5B affidavits” do not satisfy the act’s recording requirements.
“The statute is very clear,” Vetstein said. “You have to file an actual lawsuit and record the lawsuit. Anyone can file a 5B affidavit, but when you file a lawsuit, with it goes the obligation under Rule 11 that everything has to be filed in good faith.”
Braintree attorney Thomas O. Moriarty also applauded Foster’s ruling.
“It’s probably the best news for arm’s-length purchasers who bought completely innocently, even those who bought pre-Bevilacqua and pre-Ibanez like these folks did,” said Moriarty, a former president of the Real Estate Bar Association.
Moriarty added that Kenney importantly makes clear that §15 is a statute of repose that is not waived should a party fail to plead it as an affirmative defense.
According to Tyler E. Chapman, a real estate litigator in Boston, while Kenney has limited impact with respect to the narrow class of claims subject to the one-year time limit measured from the effective date of amended §15, it provides important guidance to claims in the future under the statute’s general three-year time limit.
“The decision lends some certainty to the idea that you have to record your amended complaint within three years of the foreclosure affidavit,” Chapman said. “And what [the decision] probably does do is save a lot of future arguments about waiver and whether notice was satisfactory.”
“The statute is very clear. You have to file an actual lawsuit and record the lawsuit.”
— Richard D. Vetstein, Framingham
The plaintiffs purchased a home in Greenfield in October 2005. In connection with the sale, the plaintiffs granted two mortgages to Mortgage Electronic Registration Systems as nominee for their lender, HomeComings Financial Network. The first mortgage was in the amount of $152,000, and the second mortgage was in the amount of $38,000.
The plaintiffs defaulted on their first mortgage, and in late 2006 U.S. Bank National Association as trustee initiated foreclosure proceedings. In January 2007, U.S. Bank conducted a foreclosure sale, and the property was conveyed to U.S. Bank for $162,000 by a foreclosure deed.
In May 2007, MERS assigned the first mortgage to U.S. Bank, which subsequently sold the property to Geoffrey Brent Barkin for $160,000. The next year, Barkin sold the property to the defendants.
The plaintiffs sued in September 2016, challenging the original foreclosure sale. According to the plaintiffs, the foreclosure sale was invalid because U.S. Bank did not hold the mortgage by assignment as required by the SJC’s decisions in Bevilacqua and Ibanez.
The defendants moved to dismiss, contending that the plaintiffs’ claims were barred by G.L.c. 244, §15.
Statute of repose
In 2015, the Legislature amended G.L.c. 244, §15 through the enactment of “An Act Clearing Title to Foreclosed Properties.” The act was intended to provide protections to bona fide subsequent purchasers of foreclosed properties.
Amended §15 provides that its effective date is Dec. 31, 2015. Section 15(c) of the act sets a time period after which an affidavit of sale will provide clear title to an arm’s length, third-party purchaser of foreclosed property, even if the underlying foreclosure contained certain defects.
Specifically, to challenge the validity of a foreclosure sale, a plaintiff must commence an action in court and record a copy of the complaint or pleading asserting the challenge in the county registry of deeds within a specific time period.
The statute sets a deadline of three years following the recording of an affidavit of sale, or one year after the act’s stated effective date — Dec. 31, 2016 — whichever is later. Claims challenging a foreclosure brought after the expiration of the time period are barred.
The plaintiffs’ complaint was filed in court before the Dec. 31, 2016, deadline set by the statute. However, the plaintiffs did not record their complaint with the registry until Jan. 19, 2017.
The plaintiffs argued that they satisfied §15’s recording requirement by recording an affidavit in the registry pursuant to G.L.c. 183, §5B, which authorizes the filing of affidavits in the registry that provide facts clarifying chain of title.
The plaintiffs filed their “5B” affidavit on June 29, 2016, before §15’s Dec. 31, 2016, deadline. The plaintiffs’ affidavit disclosed that the foreclosure sale of their property took place before the assignment of the first mortgage to U.S. Bank, specifically averring that “U.S. Bank was not the holder of record … when the foreclosure deed was executed.”
But Foster concluded that the plaintiffs’ 5B affidavit failed to satisfy the requirements of §15.
“The decision lends some certainty to the idea that you have to record your amended complaint within three years of the foreclosure affidavit.”
— Tyler E. Chapman, Boston
“Section 15 requires that a ‘copy of the complaint or pleading asserting a challenge’ be recorded,” Foster wrote. “The 5B Affidavit is not a complaint, nor can it be considered a pleading. While it sets forth the factual claims at issue, the 5B Affidavit does not contain claims for relief, defenses, or affirmative defenses. It makes no reference to the present Land Court action and has no case name or docket number, no doubt because the Complaint had not yet been filed.”
Foster rejected the plaintiffs’ argument that, even though their affidavit may not have met §15 technical requirements, their complaint should not be dismissed because the affidavit provided the defendants ample notice of the complaint before the deadline, meaning no actual harm occurred from the recording delay.
“The plain language of §15 is unambiguous,” Foster wrote. “The action must be filed and the complaint or pleading must be recorded prior to the deadline. The court does not need to look at any extrinsic evidence to determine the legislative intent.”
In the alternative, the plaintiffs argued that §15’s one-year deadline was Feb. 23, 2017, rather that Dec. 31, 2016, making the Jan. 19, 2017, recording of their complaint timely. The plaintiffs premised their argument on the fact that under the Massachusetts Constitution, an act passed by the General Court goes into effect 90 days after it has been signed into law. Gov. Charlie Baker signed the bill amending §15 on Nov. 25, 2015.
Foster concluded that the act fell within the exception to the 90-day rule for laws that are not subject to a referendum petition. Specifically, the judge found applicable the state constitution’s prohibition of an initiative petition that “expressly confers or restricts a court’s jurisdiction.”
The judge wrote that “the Act must be viewed as a whole to determine if it is excluded from the referendum petition process. Looking at the Act in its entirety, because §1 broadens the scope of Housing Court jurisdiction, the Act cannot be subject to a referendum petition. Since the Act is not subject to a referendum petition based on the ‘power of the courts’ exclusion, the Act is not subject to the 90-day effective date provision, and the effective date of the Act remains December 31, 2015.”
Finally, Foster rejected the plaintiffs’ argument that the defendants had waived §15 as a defense by failing to raise it as an affirmative defense in their answers to the plaintiffs’ complaint. In that regard, the judge agreed with the defendants’ contention that §15 is a statute of repose that is not waived if not raised as a defense.
Because it places a time limit on a challenge to contest the validity of a foreclosure, after which such claims are barred and cannot be brought, §15 is a statute of repose rather than a statute of limitations, Foster said.
Kenney, et al. v. Brown, et al.
THE ISSUE: Could plaintiffs challenging the validity of the 2007 foreclosure sale of their home satisfy the filing requirements of the recently amended statute of repose by recording an affidavit reflecting the alleged title defect within the time period set by the act?
DECISION: No (Land Court)
LAWYERS: Mark A. Tanner of Bacon Wilson, Northampton (plaintiffs)
Meredith A. Swisher and Matthew A. Gens, of Bernkopf Goodman, Boston (defense)