A New, Albeit Unsuccessful, Case Challenging Attorneys' Authority to Foreclose on behalf of the Mortgagee

In a new decision, the Supreme Judicial Court has analyzed another provision of the mortgage foreclosure by power of sale statute, G.L. c. 244, § 14, in a challenge by a former homeowner to such a foreclosure sale.  Specifically, the Court considered the difference between “the attorney duly authorized by a writing under seal” and a “person acting in the name of such mortgagee,” each of whom may, “upon breach of condition and without action, perform all acts authorized or required by the power of sale” in foreclosing upon a mortgage, and whether the attorneys who conducted the relevant foreclosure sale, attorneys with the firm of Orlans Moran, were authorized to do so under the statute.

The case commenced as a summary process action in the Housing Court, brought by Federal National Mortgage Association (“Fannie Mae”) against Edward M. Rego and Emanuela R. Rego, former owners of a home purchased by Fannie Mae at a duly-noticed foreclosure sale.  The Regos challenged the summary process action, alleging, among other arguments, that the foreclosure sale was void because Fannie Mae’s attorneys, who conducted the foreclosure sale on behalf of the mortgagee, were not “authorized by a writing” such that they lacked authority to conduct the sale on behalf of the mortgagee.  The Regos also raised an equitable defense and counterclaims pursuant to G. L. c. 93A.

The Housing Court judge allowed Fannie Mae's motion for summary judgment “as to possession only,” and scheduled a trial on the 93A counterclaims.  Fannie Mae then moved to dismiss the counterclaims for lack of subject matter jurisdiction, which motion was allowed with limited explanation.  The Regos appealed, and the SJC transferred the case from the Appeals Court on its own initiative.

The Regos’ argument is summarized thusly: G.L. c. 244, § 14, authorizing foreclosure under the power of sale in a mortgage, requires that the foreclosure, if not conducted by the mortgagee itself, be conducted by “the attorney duly authorized by a writing” (both parties appeared to acknowledge that “under seal” is no longer a valid requirement) - there being no writing authorizing Orlans Moran to undertake any of the statutory acts necessary to conduct a foreclosure sale, the sale subsequently conducted was therefore defective and void.  Fannie Mae, unsurprisingly, took a contrary view of the situation.

The SJC turned to the well-worn principles of statutory interpretation to determine what precisely is required for an attorney to act on behalf of the mortgagee in conducting a foreclosure sale.  The Court looked to the “usual and accepted meaning” of the phrase “the attorney duly authorized by a writing under seal” in 1906, the year the pertinent language was added to the statute.  Distinguishing between an “attorney in fact,” who operates under a power of attorney, and an “attorney at law,” who is an officer of the court licensed to practice law, and comparing the pertinent language to further the further statutory authorization of “the legal guardian or conservator of such mortgagee,” the Court concluded that “‘the attorney duly authorized by a writing under seal’ means an attorney in fact.” 

Although there was no power of attorney authorizing Orlans Moran as attorney in fact for the mortgagee, the foreclosure sale was not void.  The last category of those who may conduct a foreclosure sale as set forth in c. 244, § 14, is “person[s] acting in the name of such mortgagee.”  The Regos’ argument “ignored” this category, which, the Court concluded, was likely included to “reflect[] the Legislature's intent to preserve the long-standing practice that a mortgagee may delegate its authority to perform the acts required by the power of sale.”  Because the attorneys at law with the firm of Orlans Moran acted on behalf of the mortgagee in taking the steps necessary to conduct the foreclosure sale, the sale was not void.

As to the c. 93A claims, the SJC found that the Housing Court had jurisdiction to address the Regos’ counterclaims and remanded the matter because the Court was “unable to ascertain on this record whether, in the context of the summary process action, the judge determined that the Regos’ G. L. c. 93A counterclaims and defenses did not entitle them to equitable relief affecting the right to possession, or whether he intended to consider that form of equitable relief, along with all other potential forms of equitable and monetary relief, in the separate proceeding but erroneously concluded that he lacked jurisdiction to do so.”