U.S. BANK NATIONAL ASSOCIATION,as trustee for the Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-Z v. ANTONIO IBANEZ

Introduction and Facts

The above-captioned cases, each brought pursuant to G.L. c. 240, § 6 to “remove a cloud from the title” of the properties in question, present two issues, one in common and the other in three variations. Each arises from a foreclosure sale of property in Springfield. The first issue is whether the Boston Globe, in which the notices of foreclosure sale were published, was “a newspaper with general circulation in the town where the land lies” (Springfield) within the meaning of G.L. c. 244, § 14 at the times of publication. [Note 1] The second is whether the published notices, which named the plaintiffs as the foreclosing parties even though they had no record interest in the property at the time of either publication or foreclosure, complied with G.L. c. 244, § 14.

The variations of the second issue are as follows. In Ibanez, U.S. Bank National Association, [Note 2] in whose name notice was published and sale took place, had no interest in the mortgage being foreclosed (either recorded or unrecorded) at the time of publication or sale. Complaint to Remove Cloud from Title at 2,¶ 3; 3,¶ 8 (Sept. 12, 2008) (filed in Misc. 384283) (hereinafter, the “Ibanez Complaint”). Further, there was nothing in the notice to indicate that it was acting (or purporting to act) as someone else’s agent, much less the agent of the principal. Motion for Entry of Default Judgment at 3 (Jan. 30, 2009) (filed in Misc. 384283) (hereinafter, the “Ibanez Motion”). U.S. Bank only acquired an interest in the Ibanez mortgage by assignment nearly fourteen months after the auction took place. Ibanez Complaint at 2, ¶ 3; 3, ¶ 8.

In Larace, Wells Fargo Bank, in whose name notice was published and sale took place, also had no interest in the mortgage being foreclosed (either recorded or unrecorded) at the time of publication or sale. Complaint to Remove Cloud from Title at 2, ¶ 3; 3, ¶ 8 (Oct. 23, 2008) (filed in Misc. 386755) (hereinafter, the “Larace Complaint”). There also was nothing to indicate that it was acting (or purporting to act) as someone else’s agent, much less the agent of the principal. Motion for Entry of Default Judgment at 2-3 (Feb. 2, 2009) (filed in Misc. 386755) (hereinafter, the “Larace Motion”). However, it acquired the mortgage by assignment ten months after the sale, with the assignment declaring an effective date prior to foreclosure (April 18, 2007). Larace Complaint at 2, ¶ 3.

In Rosario, LaSalle Bank, in whose name notice was published and sale took place, was the unrecorded holder of the mortgage at the time of publication and sale, but did not record the assignment reflecting that interest until over a year after the sale. Complaint to Remove Cloud from Title at 2, ¶ 3; 3,¶ 8 (Oct. 16, 2008) (filed in Misc. 386018) (hereinafter, the “Rosario Complaint”).

In each of these cases, the bank was the only bidder at the foreclosure sale. Stipulation of Walter Porr, Esq., Counsel for Plaintiffs (Feb. 11, 2009 oral argument). [Note 3] In Ibanez, the bank bought the property for $94,350, which was $16,437.27 less than the amount of the outstanding loan ($110,787.27) and $16,650 (15%) less than the bank’s calculation of the property’s actual market value ($111,000). Ibanez Complaint at 3, ¶ 8; Aff. of Walter H. Porr, Jr., Ex. G (Jan. 30, 2009). In Larace, the bank bought the property for $120,397.03, which was the amount of the outstanding loan plus “all outstanding fees and costs” and $24,602.97 (17%) less than the bank’s calculation of the property’s actual market value ($145,000). Larace Complaint at 3,¶ 8; Aff. of Walter H. Porr, Jr., Ex. E (Feb. 2, 2009). In Rosario, the bank bought the property for $136,000. Rosario Complaint at 3,¶ 8. Unlike Ibanez and Larace, the record in Rosario does not include information on the amount of the outstanding loan or the market value of the property.

According to the plaintiffs, despite their successful bids and their subsequent recording of all the relevant documents, they cannot obtain title insurance for the properties — making them effectively unsaleable — unless and until these issues are resolved in their favor. They have thus brought these actions seeking such relief. In each of these cases, the defendants (the mortgagors/equity holders of the properties at issue) have been served, failed to respond, and have been defaulted. The plaintiffs have moved for entry of default judgment. The issues were clearly identified before those motions were heard and the parties were given full opportunity to submit whatever affidavits or other admissible materials they believed necessary for adjudication of those issues. Notice of Docket Entry (Jan. 7, 2009) (filed in each case).

Based on the record before me and for the reasons discussed below, I find and rule that the Boston Globe was “a newspaper of general circulation” in Springfield at the time of the notices and sales and thus meets that requirement of G.L. c. 244, § 14. I also find and rule that LaSalle Bank’s foreclosure in Rosario was not rendered invalid by its failure to record the assignment reflecting its status as the 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. [Note 4] Finally, I find and rule, however, that the other two foreclosures (U.S. Bank’s in Ibanez and Wells Fargo Bank’s in Larace) are invalid because the notices that named those entities failed to name the mortgage holder as of the date of the sale as required by G.L. c. 244, § 14. Neither U.S. Bank nor Wells Fargo Bank had been assigned the mortgages at the time notice was published and sale took place. Neither an intention to do so in the future nor the backdating of a future assignment meets the statute’s strict requirement that the holder of the mortgage at the time notice is published and auction takes place be named in the notice.

Analysis

Whether Publication in the Boston Globe Was Sufficient to Meet the Requirements of G.L. c. 244, § 14

G.L. c. 244, § 14 requires notification of a foreclosure sale to be published “in a newspaper, if any, published in the town where the land lies or in a newspaper with general circulation where the land lies” for that sale to be valid. See Bottomly v. Kabachnick, 13 Mass. App. Ct. 480 , 484 (1982) (“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.”). The purpose behind that requirement is easily discerned and simply stated. It is to ensure, for the benefit of the mortgagor whose equity interest is about to diminish or disappear and who may face personal liability for the full amount of any deficiency, that a sufficient number of likely bidders learn of the sale so that competition, and thus the highest price, will result. See Roche v. Farnsworth, 106 Mass. 509 , 513 (1871) (“There is the more reason for this [requiring strict adherence to the statute’s notice provisions], where the power [of sale] is made to a mortgagee, who is interested merely for himself, and has opportunities for collusion and for taking unfair advantage of the mortgagor.”). Underlying the notice requirement is the notion that most of the interested and likely bidders will either live or work locally or, if from afar, expect the local newspapers to carry the relevant notices.

The plaintiffs in these cases did not choose “a newspaper . . . published in the town where the land lies” or even, for that matter, the newspaper with the greatest local circulation. That would have been, for both these criteria, the Springfield Republican. Instead, they chose the Boston Globe for reasons of cost and convenience. According to plaintiffs’ counsel, the Globe has competitive advertising rates and its legal notices advertising department is able to receive electronically-transmitted notices from foreclosing parties, immediately acknowledge that receipt, and promptly publish notices. The record does not indicate, and counsel did not know, if the Springfield Republican has similar rates or capacities.

G.L. c. 244, § 14, however, does not require publication in a locally-published newspaper, in the newspaper with greatest circulation, or even on the day with the greatest circulation. [Note 5] It is enough to publish in “a newspaper with general circulation in the town where the land lies . . . .” G.L. c. 244, § 14. The statute does not contain an explicit definition of “general circulation,” none appears anywhere in the relevant statutory provisions (those governing foreclosures), and counsel has not directed the court’s attention to any relevant decisions of our appellate courts. Thus, the familiar tools of statutory interpretation must be employed.

[A] statute must be interpreted according to the intent of the Legislature ascertained from all its words construed by the ordinary and approved usage of the language, considered in connection with the cause of its enactment, the mischief or imperfection to be remedied and the main object to be accomplished, to the end that the purpose of its framers may be effectuated. Courts must ascertain the intent of a statute from all its parts and from the subject matter to which it relates, and must interpret the statute so as to render the legislation effective, consonant with sound reason and common sense. Words that are not defined in a statute should be given their usual and accepted meanings, provided that those meanings are consistent with the statutory purpose. We derive the words’ usual and accepted meanings from sources presumably known to the statute’s enactors, such as their use in other legal contexts and dictionary definitions.

Seideman v. City of Newton, 452 Mass. 472 , 477-78 (2008) (internal quotations and citations omitted).

Black’s Law Dictionary is such a source. See id. at 478; Thurdin v. SEI Boston, LLC, 452 Mass. 436 , 453 (2008) (both citing Black’s). It defines “newspaper” as “a publication for general circulation, usually in sheet form, appearing at regular intervals, usually daily or weekly, and containing matters of general public interest, such as current events.” Black’s Law Dictionary at 1069 (8th ed. 2004). “Newspaper of general circulation” is defined as “a newspaper that contains news and information of interest to the general public, rather than to a particular segment, and that is available to the public within a certain geographic area.” Id. The Boston Globe met each of these tests in Springfield at the time the notices were published. It was a “publication for general circulation” in Springfield. [Note 6] It “contain[ed] matters of general public interest,” such as national and international news, sports, and business coverage. And it was available in Springfield on a daily basis during the times in question, both through subscription and single-copy sales at stores and by vendors.

The Globe also was a newspaper that, for the times in question, met the statute’s intent of reaching a broad audience of likely bidders. While it had a fraction of the Springfield Republican’s circulation (the Republican sold somewhere between 21,959 and 24,733 copies in Springfield on an average weekday during the relevant time period), [Note 7] the Globe’s figures (somewhere between 1,400 and 1,600 copies in Springfield during the relevant time period) [Note 8] were nonetheless significant and sufficiently “general” in the context of Springfield’s overall population at the times in question. [Note 9] The Globe’s status as one of New England’s major newspapers also makes it likely to reach a large, additional audience of institutional and other bidders. [Note 10], [Note 11]

In short, while far from the best alternative, the Globe was good enough to meet the statutory test at the times in question. It was “a newspaper with general circulation in the town where the land lies” when the notices were published and thus sufficed under G.L. c. 244, § 14. [Note 12]

Whether Publication Occurred in the Name Required by G.L. c. 244, § 14

G.L. c. 244, § 14 requires that notice of a foreclosure auction be given not only to the mortgagor and “all persons of record” holding junior interests in the property (by registered mail), but also by publication in a newspaper of general circulation at least “once in each of three successive weeks, the first publication to be not less than twenty-one days prior to the date of sale.” The purpose of such publication, as previously noted, is to ensure, for the benefit of the mortgagor whose equity interest is about to diminish or disappear and who may face personal liability for the full amount of any deficiency, that a sufficient number of likely bidders learn of the sale so that competition, and thus the highest price, will result. [Note 13] See Roche, 106 Mass. at 513. It is thus, broadly speaking, a consumer protection statute and, as the courts have repeatedly made clear, one that requires “strict compliance” with its notice provisions. Bottomly v. Kabachnick, 13 Mass. App. Ct. 480 , 484 (1982) and cases cited therein.

One of those requirements is that the notice identify “the holder of the mortgage.” Id. at 483. Failure to do so renders the “sale void as a matter of law.” Id. at 484. The purpose of this requirement and the need for “strict compliance” is readily discerned. As even a cursory glance at the current caseload of this court reveals, titles arising from mortgage foreclosures can have many problems. These include the most fundamental: Did the party conducting the foreclosure have the authority to do so and, if challenged, can it prove that it had such authority? In short, will a purchaser at the foreclosure sale get good title and will get it in prompt fashion? These are increasingly important questions in the current deteriorating real estate market and are not small concerns. It is increasingly rare for a mortgage to remain with its originating lender. Often, as here, mortgages are assigned to other entities, and then assigned yet again into large securitized pools. [Note 14] Often, as here, the paperwork lags far behind. Sometimes mistakes are made. [Note 15] Mistakes can only be corrected, if at all, through confirmatory documents (which the borrower may not so easily agree to) or litigation. With so many foreclosed properties available for purchase, why bid on a property with even the possibility for such trouble? Why bid on a property when the foreclosing party cannot produce all the documents (including proper mortgage assignments in recordable form) that would give good title? Why take the risk that the foreclosing party will be able to produce the documents promptly after the auction takes place, that those documents will be complete and in proper form, or even (in this era of failed and failing institutions) that the foreclosing party will still be in existence, with intact files and knowledgeable employees able to find those files so that the proper paperwork can be completed? Since these concerns affect the ability to obtain clear, marketable title, why bid a reasonable market value instead of a discount price to account for that risk?

None of this is the fault of the mortgagor, yet the mortgagor suffers due to fewer (or no) bids in competition with the foreclosing institution. Only the foreclosing party is advantaged by the clouded title at the time of auction. It can bid a lower price, hold the property in inventory, and put together the proper documents at any time it chooses. And who can say that problems won’t be encountered during this process? It is interesting that it took the plaintiff (the foreclosing party and successful bidder) almost fourteen months after the auction to obtain its assignment in Ibanez and ten months after the auction in Larace. [Note 16] Would any reasonable third-party bidder have been willing to wait that long, trusting that no other issues would arise? [Note 17] Only in Rosario was the assignment (showing that the foreclosing party held the mortgage and could convey title as a result of the sale) in hand and ready for recording at the time of the auction sale.

The plaintiffs defend the validity of their post-foreclosure assignments (in Ibanez and Larace) and post-foreclosure recording of their assignments (in all cases), making essentially three arguments. First, they say that the language of G.L. c. 244, § 14 does not require that the notice name the holder of the mortgage. They agree that the form of foreclosure notice included in the statute contains that requirement explicitly (the signature line on that form is labeled “Present holder of said mortgage” and its text contains both the representation “of which mortgage the undersigned is the present holder” and the command “if by assignment, or in any fiduciary capacity, give reference”), but contend that these are not statutory requirements because the statute permits “alter[ation] [of the form] as circumstances require” and does not “prevent the use of other forms.” G.L. c. 244, § 14 (Form).

This argument is unpersuasive, for three reasons. First, it ignores Bottomly v. Kabachnick, which states that the notice in that case “was defective because it failed to identify the holder of the mortgage, thereby rendering the first foreclosure sale void as a matter of law.” 13 Mass. App. Ct. at 483-84 (citing Roche v. Farnsworth, 106 Mass. 509 (1871)) (emphasis added). [Note 18], [Note 19] Second, it ignores the “fundamental precept[]” that “[c]ourts must ascertain the intent of a statute from all its parts and from the subject matter to which it relates . . . .” DeGiacomo v. Metropolitan Property & Casualty Ins. Co., 66 Mass. App. Ct. 343 , 346 (2006) (emphasis added). The form of foreclosure notice included in G.L. c. 244, § 14 is a part of that statute, indicative of its intent, and clearly contemplates (as Bottomly holds) that the present holder of the mortgage be identified in the notice. There is nothing to indicate that this aspect of the notice could be “altered.” [Note 20] See G.L. c. 244, § 14. Indeed, at oral argument, plaintiffs’ counsel conceded that the current practice is to obtain and record all assignment documents before publication and commencement of foreclosure proceedings. Third, the language in the body of the statute clearly contemplates that the “holder of the mortgage” is the entity to give notice, as indicated by its reference to notices to be mailed “to the last address of the owner or owners of the equity of redemption appearing on the records of the holder of the mortgage . . . .” G.L. c. 244, § 14 (emphasis added).

The plaintiffs’ second argument is that the statute should be read “in its practical application, purpose and effect [to] uphold the exercise of the power of sale even though the assignment of the mortgage was recorded afterwards.” Second Supplemental Memorandum of Law in Support of Motion for Entry of Default Judgment at 5 (Feb. 16, 2009) (filed in Larace). This argument is made in two parts. First, the plaintiffs argue that the mortgagor “had ample time and opportunity to exercise his rights in equity to challenge the foreclosure at the time it was ongoing and failed to do so.” This contention (which places the burden and expense of a lawsuit on the mortgagor and allows a statutory violation with potentially severe adverse consequences to proceed unchecked if a lawsuit is not brought) is contrary to the “consumer protection” nature of the statute. The defaulting mortgagor is often a layperson, unfamiliar with law and legal proceedings, and often financially distressed and thus without resources to hire counsel. [Note 21] Second, the plaintiffs’ argument that the mortgagor already knows the identity of the assignee of his mortgage from his RESPA notices [Note 22] and thus cannot credibly complain, Id., completely misses the point of the publication requirement. As noted above, its purpose is to notify potential bidders who do not have that information and whose bids may be chilled by concerns over the foreclosing party’s inability to show, in recordable form, an assigned interest in the mortgage it purports to foreclose. Based upon the facts of these cases, such chilling is not speculative. In each of the two cases for which market value information was provided (Ibanez and Larace), the plaintiff purchased the property at the foreclosure auction for significantly less than that value (15% and 17%, respectively). See discussion, supra at 3-4.

Even the plaintiffs’ argument premised on a general notion of “practical application, purpose and effect” fails. As current practice shows, there is nothing difficult or inhibitive in a requirement that assignment documents be in place at the time of notice and auction. That is precisely what the plaintiffs do now. Those documents must be created, executed and recorded before title can pass in any event, so no additional time or expense is incurred by having them ready at the time of publication and auction sale. Having the assignments in place in recordable form at the time of publication and auction avoids the chilling effects on bidding described above. Interpreting the statute in this manner thus not only comports with its language and the intent inferred from that language, but also with common sense and a rational policy objective. See DiGiacomo, 66 Mass. App. Ct. at 346 (statutes to be interpreted “so as to render the legislation effective, consonant with sound reason and common sense”).

The plaintiffs’ third argument is that both case law and prevailing title practice support their contention that post-notice/post-auction assignment, so long as the ultimate assignee was the foreclosing party, suffices under G.L. c. 244, § 14. I disagree and discuss each of this argument in turn.

Bottomly is the most recent case construing the notice provisions of the statute and is the starting point for the proper interpretation of the earlier cases and proper title practice. As noted above, Bottomly unequivocally holds that a notice that fails to identify the holder of the mortgage is defective, thereby rendering the “foreclosure sale void as a matter of law.” 13 Mass. App. Ct. at 483-84. None of the cases cited by the plaintiffs either hold or suggest the contrary.

The first case plaintiffs cite is Montague v. Dawes, 12 Allen 397 (1866). Montague predates the publication provisions of G.L. c. 244, § 14, which were not enacted until 1877, so it is unclear what, if any, guidance it gives on the notice issue. [Note 23], [Note 24] What it does hold, and only holds, is that title derived from a foreclosure sale by an assignee of a mortgage in possession of that assignment at the time of the auction is not defeated by the fact that the assignment was not recorded until after the foreclosure took place, so long as the mortgagor is aware of the assignment and it is “unaccompanied with the suggestion that it was not recorded from improper motives, or that in some way the circumstance actually affected the sale by misleading purchasers or otherwise . . . .” [Note 25] Id. at 400. Thus, it is directly applicable to Rosario (where the foreclosing party, LaSalle Bank, was correctly named in the notice as the holder of the mortgage and was ready, willing and able to produce its assignment, in recordable form, at the time of auction) and inapplicable to Ibanez and Larace (where the named foreclosing party had not been assigned the mortgage at the time of notice and auction, either on or off record).

The plaintiffs next cite the Rule 1:28 Memorandum and Order in Federal Deposit Corporation v. Kefelas, 62 Mass. App. Ct. 1121 , 2005 WL 277693 (2005), for the proposition that the foreclosure notice need not contain the name of the holder of the mortgage in order for the sale to be valid. As a pre-February 26, 2008 unpublished opinion, Federal Deposit Corporation has no precedential value. Order Amending Appeals Court Rule 1:28 (Nov. 25, 2008). Even so, when closely examined, Federal Deposit Corporation does not reflect the holding plaintiffs argue. The notice in that case stated that the Bank of New England (“BNE”) was the mortgage holder when, in fact, that bank had failed and substantially all of its assets (including the Kefelas mortgage) had transferred to a “bridge bank,” New Bank of New England (“NBNE”). Federal Deposit Corp., 2005 WL 277693 at *1. The Appeals Court failed to see why, under these circumstances, “the change in name was significant” and thus refused to invalidate the foreclosure sale. Id. at 2-3. This is completely consistent with Bottomly. NBNE was, for foreclosure purposes, effectively the same entity as BNE and, given the general knowledge that BNE had failed and its assets acquired by NBNE, likely no one could have been confused or had their bid chilled.

The plaintiffs’ final citation is REBA Title Standard No. 58, “Out of Order Recording of Mortgage Discharges and Assignments.” [Note 26] It provides, in relevant part, “[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.” REBA Title Standard No. 58. The accompanying note states that this portion of the standard “is based on Montague v. Dawes, 12 Allen 397 (1866).” Id. (Comment). No explanation is given and no authority other than Montague is cited or discussed. So far as I can tell, this aspect of REBA Title Standard No. 58 has never been reviewed or ruled upon by a court at any level. I have great respect for REBA and the work of its committees, and the initial portion of its standard is certainly a correct reading of G.L. c. 244, § 14 and Montague (“[a] title is not defective by reason of . . . [t]he recording of an Assignment of Mortgage executed . . . prior . . . to foreclosure . . . .”). But the latter portion (relating to assignments made after notice is published and sale has occurred) misconstrues the statute, the holding in Montague, and the teachings of Bottomly and Roche. As discussed above, G.L. c. 244, § 14 requires publication in the name of the holder of the mortgage for the foreclosure sale to be valid. Bottomly, 13 Mass. App. Ct. at 483-84. It does so to assure potential bidders that the foreclosing party can promptly deliver good title and to prevent “opportunities for collusion and for taking unfair advantage of the mortgagor.” See Roche, 106 Mass. at 513. The best practice, of course, is to put the assignment on record prior to notice publication so it is available for all to examine. At the very least, the assignment should be fully executed and available, in recordable form, at the time of the foreclosure sale. Montague, 12 Allen at 400. To allow a foreclosing party, without any interest in the mortgage at the time of the sale (recorded or unrecorded), to conduct the sale in these circumstances, bid, and then acquire good title by later assignment is completely contrary to G.L. c. 244, § 14’s intent and commands.

Conclusion

For the foregoing reasons, none of the three foreclosures at issue in these lawsuits were rendered invalid because notice was published in the Boston Globe. LaSalle Bank’s foreclosure in Rosario 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. The other two foreclosures (U.S. Bank’s in Ibanez and Wells Fargo Bank’s in Larace) are invalid because the notices (which named those entities) failed to name the mortgage holder as required by G.L. c. 244, § 14. Judgment shall enter accordingly.

SO ORDERED.

By the court (Long, J.)