Today the SJC issued its decision in an important case to those following the fallout of the mortgage foreclosure crisis. The Court in Abate v. Fremont Investment & Loan, et al., SJC-11638, effectively eliminated one of the methods homeowners have used to challenge allegedly invalid foreclosures of their homes. Despite his claimed ownership of his home post-foreclosure, the Court determined that Thomas Abate couldn’t challenge the foreclosure through a try title action. The valid foreclosure of his property meant he no longer owned the property, and only property owners may bring a try title action. The Court also determined that a try title action cannot be brought to challenge the majority of impending foreclosures. After this decision, homeowners who wish to challenge the foreclosure of their property must seek an alternate route.
This case concerns a foreclosure challenged after the fact by the former owner, Mr. Abate. Abate alleged that the assignment between the original mortgagee, Fremont Investment & Loan, and the foreclosing entity, Deutsche Bank National Trust Company, as trustee for Carrington Mortgage Loan Trust, Series 2005-FRE1, Asset Backed Pass-Through Certificates, was invalid, for the long list of reasons set forth in the complaint and discussed at length in the Land Court decision. Abate filed his complaint in the Land Court seeking to force the foreclosing entity, and purchaser at the foreclosure auction, Deutsche Bank, to try title to the property.
The try title statute, G.L. c. 240, §§ 1-5, provides a method by which a petitioner with record title to and possession of a parcel of land may ask a court to require those with a potential adverse interests in said property to bring suit to litigate ownership. The analysis is a “two-step” process whereby 1) the petitioner demonstrates standing and 2) the adverse claimant brings an action to assert the claim to title, or to disclaim an interest in the property. Here, the defendants, rather than bringing an action to assert their claim to title, brought a motion to dismiss pursuant to Mass. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief could be granted.
In an extremely thorough decision, Abate v. Freemont Inv. & Loan, 20 LCR 630 (Mass. Land Ct. 2012), the Land Court judge granted the defendants’ motion to dismiss with prejudice, holding that:
To state a claim under the try title statute against Deutsche Bank and Carrington upon which relief can be granted, Abate was required to allege that he has possession of and effective record title in the Property and that Deutsche Bank and Carrington are claiming superior title. Abate has attempted to plead his effective record title by allegations and legal claims that Deutsche Bank and Carrington did not validly foreclose his equity of redemption because they did not hold a valid Assignment of the Mortgage. None of these allegations and legal claims states a claim that the Assignment was invalid. Therefore, as a matter of law, Deutsche Bank held a valid Assignment, had the power to foreclose, and did so. The foreclosure eliminated Abate’s record title in his equity of redemption. He does not have effective record title to the Property, and has not stated a claim against Deutsche Bank and Carrington under the try title act.
Abate appealed, and the SJC transferred the case on its own initiative for review.
The Court took the case to determine “whether a respondent in a try title action brought pursuant to G. L. c. 240, §§ 1-5, may test the substantive merits of a petitioner’s claims in the ‘first step’ of such an action.” Upholding the Land Court decision, the SJC clarified the requirements for bringing a try title action. The Court stated that the first step of analysis in a try title action, whether the petitioner has standing, must consider who has “better title” to the property. Notwithstanding that there may be some overlap between this analysis and the analysis which would occur should the court reach the second step of the analysis, this analysis of the petitioner’s record title and possession must be done to ensure that the court has jurisdiction.
Building on its decision in Bevilacqua v. Rodriguez, 460 Mass. 762 (2011), the Court set the following standard for challenging a try title complaint:
a petitioner must allege three jurisdictional elements in the first step of a try title claim: (1) record title, (2) possession, and (3) an actual or possible adverse claim. The jurisdictional facts required for standing — record title and possession – are subject to challenge through the introduction of other evidence negating the petitioner’s claim. If the jurisdictional facts required for standing are factually challenged by an adverse party or by the court, the petitioner bears the burden to prove those facts by a preponderance of the evidence. Conversely, allegations regarding the third jurisdictional fact, adverse claim, are entitled to a presumption of truth regardless of a factual challenge because determining the merits of an adverse claim in the first step would compress the two-step structure of the try title statute.
Therefore, to determine whether Abate had standing to bring the try title action, the court had to consider at least in part, the arguments regarding the validity of the mortgage assignment, although typically those would be considered only in the second step of the analysis. The Land Court judge having properly determined that none of the alleged invalidities in the assignment would negate the assignment such that the foreclosure, which foreclosed Abate’s equitable title under the mortgage, was invalid, the SJC affirmed the decision to grant the motion to dismiss.
The SJC also addressed a split in Land Court decisions as to whether the requisite adversity for a try title action exists between a mortgagor and mortgagee prior to a foreclosure, resolving the split between Abate (“try title act may be used to challenge a party’s claim to hold a mortgage only after that party has foreclosed, because it is only after foreclosure that the mortgagee has a claim of superior title”), and Varian vs. Bank of N.Y. Mellon, 21 LCR 490 (Mass. Land Ct. 2013) (“uncertainty as to the holder of a mortgage” provides required adversity for mortgagor to bring try title action prior to foreclosure”). The Court determined that the requisite adversity for a try title action does not arise until after foreclosure, except in instances where the very existence of a mortgage is questioned. That not being the case here, the dismissal of the action was affirmed.
For more, see the Decision.