Case Title: Federal National Mortgage Ass’n v. Marroquin

Citation: 

Docket Number: SJC-12139

State: massachusetts

Court: Massachusetts Supreme Court

Date: 2017-05-11T00:00:00Z

Document:
NOTICE:  All slip opinions and orders are subject to formal 
revision and are superseded by the advance sheets and bound 
volumes of the Official Reports.  If you find a typographical 
error or other formal error, please notify the Reporter of 
Decisions, Supreme Judicial Court, John Adams Courthouse, 1 
Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-
1030; SJCReporter@sjc.state.ma.us 
 
SJC-12139 
 
FEDERAL NATIONAL MORTGAGE ASSOCIATION  vs.  
ELVITRIA M. MARROQUIN & others.1 
 
 
 
Essex.     January 9, 2017. - May 11, 2017. 
 
Present:  Gants, C.J., Lenk, Hines, Gaziano, Lowy, & Budd, JJ. 
 
 
Mortgage, Foreclosure, Real estate.  Real Property, Mortgage, 
Sale.  Notice, Foreclosure of mortgage. 
 
 
 
 
Summary process.  Complaint filed in the Northeast Division 
of the Housing Court Department on June 18, 2012. 
 
 
The case was heard by David D. Kerman, J., on motions for 
summary judgment. 
 
 
The Supreme Judicial Court granted an application for 
direct appellate review. 
 
 
 
Cody J. Cocanig for the plaintiff. 
 
Dayne Lee (Eloise P. Lawrence also present) for Elvitria M. 
Marroquin. 
 
Joshua T. Gutierrez, Daniel D. Bahls, & Andrew S. Webman, 
for Lewis R. Fleischner & another, amici curiae, submitted a 
brief. 
 
 
                     
 
1 Julio E. Vasquez and Christopher Vasquez. 
 
 
2 
 
GANTS, C.J.  In Pinti v. Emigrant Mtge. Co., 472 Mass. 226, 
227, 232 (2015), we held that a foreclosure by statutory power 
of sale pursuant to G. L. c. 183, § 21, and G. L. c. 244, §§ 11-
17C, is invalid unless the notice of default strictly complies 
with paragraph 22 of the standard mortgage, which informs the 
mortgagor of, among other things, the action required to cure 
the default, and the right of the mortgagor to bring a court 
action to challenge the existence of a default or to present any 
defense to acceleration and foreclosure.  We applied this 
holding to the parties in Pinti but concluded that our decision 
"should be given prospective effect only."  Id. at 243.  We 
therefore declared that the decision "will apply to mortgage 
foreclosure sales of properties that are the subject of a 
mortgage containing paragraph 22 or its equivalent and for which 
the notice of default required by paragraph 22 is sent after the 
date of this opinion," which was issued on July 17, 2015.  Id.  
We did not reach the question whether our holding should be 
applied to any case pending in the trial court or on appeal.  
Id. at 243 n.25.  We reach that question here, and conclude that 
the Pinti decision applies in any case where the issue was 
timely and fairly asserted in the trial court or on appeal 
before July 17, 2015.  Because we conclude that the defendants 
timely and fairly raised this issue in the Housing Court before 
that date, and because the notice of default did not strictly 
 
 
3 
comply with the requirements in paragraph 22 of the mortgage, we 
affirm the judge's ruling declaring the foreclosure sale void. 
 
Background.  In December, 2005, the defendants2 secured a 
mortgage loan in the amount of $312,000 from American Mortgage 
Express Corporation (American Mortgage) and, as security for the 
loan, granted a mortgage on their home to Mortgage Electronic 
Registration Systems, Inc. (MERS), which American Mortgage had 
designated as the mortgagee in a nominee capacity.  MERS 
subsequently assigned the mortgage to Bank of America, N.A. 
(Bank of America), as successor by merger to BAC Home Loans 
Servicing, LP, formerly known as Countrywide Home Loans 
Servicing, LP. 
After the defendants failed to make their mortgage 
payments, the loan servicer, Countrywide Home Loans Servicing, 
LP, on October 17, 2008, mailed the defendants a notice of 
intention to foreclose (notice of default).  The notice informed 
the defendants that they were in default and set forth the 
amount due to cure the default.  The notice warned in relevant 
part: 
                     
 
2 The mortgage loan was secured by the defendants Elvitria 
M. Marroquin and Julio E. Vasquez.  The limited record before us 
suggests that Christopher Vasquez is Marroquin's son, and that a 
motion filed by the Federal National Mortgage Association to 
amend the summons and complaint to include him was granted by 
the Housing Court judge.  For convenience, we refer to "the 
defendants" throughout this opinion. 
 
 
4 
 
"If the default is not cured on or before January 15, 
2009, the mortgage payments will be accelerated with the 
full amount remaining accelerated and becoming due and 
payable in full, and foreclosure proceedings will be 
initiated at that time.  As such, the failure to cure the 
default may result in the foreclosure and sale of your 
property. . . .  You may, if required by law or your loan 
documents, have the right to cure the default after the 
acceleration of the mortgage payments and prior to the 
foreclosure sale of your property if all amounts past due 
are paid within the time permitted by law. . . .  Further, 
you may have the right to bring a court action to assert 
the non-existence of a default or any other defense you may 
have to acceleration and foreclosure." 
 
The defendants did not cure the default, and in March, 
2012, Bank of America gave notice and conducted a foreclosure 
sale by public auction of the mortgaged home.  Bank of America 
was the high bidder at the foreclosure auction and subsequently 
assigned its winning bid to the Federal National Mortgage 
Association (Fannie Mae or plaintiff), which properly recorded 
the foreclosure deed conveying title of the property in May, 
2012.  On June 18, 2012, Fannie Mae initiated a summary process 
action in the Housing Court to evict the defendants from the 
property.  On June 19, 2012, the defendants, representing 
themselves but assisted by counsel, filed an answer in which, by 
checking a box, they proffered as a defense to the eviction that 
"[t]he plaintiff's case should be dismissed because it does not 
have proper title to the property and therefore does not have 
standing to bring this action and/or cannot prove a superior 
right to possession of the premises." 
 
 
5 
For reasons not apparent from the record, Fannie Mae did 
not move for summary judgment until June, 2015, where, among 
other arguments, it contended that Bank of America had complied 
with the terms of the mortgage in exercising the power of sale, 
and specifically asserted that the notice of default had 
complied with paragraph 22 of the mortgage.3  On September 23, 
2015, the defendants filed a cross motion for summary judgment 
in which they argued that the notice of default failed to 
strictly comply with the terms of paragraph 22 of the mortgage 
and that the defendants should be entitled to the benefit of our 
decision in Pinti even though the notice of default was sent 
well before the issuance of that opinion. 
In October, 2015, the judge granted the defendants' cross 
motion for summary judgment and denied the plaintiff's motion.  
                     
3 Paragraph 22 of the mortgage provides that in the event 
the borrower commits a breach of any term of the mortgage, prior 
to acceleration of the loan the lender must notify the borrower 
of 
 
"(a) the default; (b) the action required to cure the 
default; (c) a date, not less than [thirty] days from the 
date the notice is given to [the defendants], by which the 
default must be cured; and (d) that failure to cure the 
default on or before the date specified in the notice may 
result in acceleration of the sums secured by [the 
mortgage]." 
 
Paragraph 22 further provides that such notice must inform the 
borrower "of the right to reinstate after acceleration and the 
right to bring a court action to assert the non-existence of a 
default or any other defense of the borrower to acceleration and 
sale."  It also declares that, if the default is not timely 
cured, the lender "may invoke the statutory power of sale." 
 
 
6 
The judge found that the issue in Pinti had been "timely and 
fairly raised," and concluded that our decision in Pinti should 
apply to all cases similarly situated that were pending in the 
trial court or on appeal where the issue had been timely and 
fairly raised before July 17, 2015.  The judge also concluded 
that the notice of default failed to strictly comply with the 
requirement in paragraph 22 of the mortgage that the notice 
shall inform the borrower "of the right to reinstate after 
acceleration and the right to bring a court action to assert the 
non-existence of a default or any other defense of the borrower 
to acceleration and sale."  The judge found that, by stating, 
"You may, if required by law or your loan documents, have the 
right to cure the default after the acceleration of the mortgage 
payments and prior to the foreclosure sale of your property 
. . . ," and "you may have the right to bring a court action to 
assert the non-existence of a default or any other defense you 
may have to acceleration and foreclosure" (emphasis added), the 
notice "significantly, and inexcusably, differed from, watered 
. . . down, and overshadowed the notice that was contractually 
and legally required by the mortgage."  He added that "there was 
no excuse for the difference in language" and that it was 
impossible to imagine any purpose for drafting a notice that 
failed to track the language of the mortgage "unless, of course, 
 
 
7 
the purpose was to discourage [b]orrowers from asserting their 
rights."4 
After the judge issued his decision, the Appeals Court held 
in Aurora Loan Servs., LLC v. Murphy, 88 Mass. App. Ct. 726, 727 
(2015), that the Pinti decision applies to cases pending on 
appeal where the claim that the notice of default failed to 
strictly comply with the notice provisions in the mortgage had 
been "raised and preserved" before the issuance of the decision.  
Although the issue was not before it, the Appeals Court declared 
that "the Pinti rule" did not extend to cases pending in the 
trial court.  Id. at 732.  Relying on this dictum, the plaintiff 
moved to vacate the judgment under Mass. R. Civ. P. 60 (b), 365 
Mass. 828 (1974).  The judge denied the motion, and the 
plaintiff appealed.  We allowed the defendants' application for 
direct appellate review. 
 
Discussion.  1.  Application of the Pinti decision to 
pending cases.  Our decision in Pinti was grounded in the 
requirement in G. L. c. 183, § 21, that, before a mortgagee may 
                     
 
4 The judge analogized the warning in the notice of default 
to a Miranda warning that informed a suspect before 
interrogation: 
 
 
"You [may] have the right to remain silent.  If you 
give up the right [and if you have that right], anything 
you say or do [may] can and will be used against you in a 
court of law.  You [may] have the right to an attorney.  If 
you cannot afford an attorney [and if you have that right], 
one [may] will be appointed for you.  Do you understand 
these rights as they have been read to you?" 
 
 
8 
exercise the power of sale in a foreclosure, it must "first 
comply[] with the terms of the mortgage and with the statutes 
relating to the foreclosure of mortgages by the exercise of a 
power of sale."  Because the power of sale is a "substantial 
power" that permits a mortgagee to foreclose without judicial 
oversight, we followed the traditional and familiar rule that 
"'one who sells under a power [of sale] must follow strictly its 
terms'; the failure to do so results in 'no valid execution of 
the power, and the sale is wholly void.'"  Pinti, 472 Mass. at 
232-233, quoting U.S. Bank Nat'l Ass'n v. Ibanez, 458 Mass. 637, 
646 (2011).  See Pryor v. Baker, 133 Mass. 459, 460 (1882) ("The 
exercise of a power to sell by a mortgagee is always carefully 
watched, and is to be exercised with careful regard to the 
interests of the mortgagor"). 
 
Although it had long been established in law that the 
failure to strictly comply with the terms of a mortgage renders 
void an otherwise valid foreclosure sale, we gave our decision 
"prospective effect only, because the failure of a mortgagee to 
provide the mortgagor with the notice of default required by the 
mortgage is not a matter of record and, therefore, where there 
is a foreclosure sale in a title chain, ascertaining whether 
clear record title exists may not be possible."  Pinti, 472 
Mass. at 243.  Our concern was that a third party who purchases 
property that had once been sold at a foreclosure auction would 
 
 
9 
not, through a title search, be able to determine whether the 
notice of default strictly complied with the terms of the 
mortgage.  It would therefore be nearly impossible to eliminate 
the risk that the foreclosure sale would later be declared void 
and that the title would be returned to the foreclosed property 
owner.  See id.  We presumed that, after our decision in Pinti, 
mortgagees "as a general matter" would address this uncertainty 
by executing and recording "an affidavit of compliance with the 
notice provisions of paragraph 22 that includes a copy of the 
notice that was sent to the mortgagor pursuant to that 
paragraph."  Id. at 244.  However, we applied our ruling to the 
parties in Pinti, id. at 243, citing Eaton v. Federal Nat'l 
Mtge. Ass'n, 462 Mass. 569, 589 (2012), and deferred the 
question whether our holding "should be applied to any other 
class of cases pending on appeal."  Id. at 243 n.25. 
 
In Galiastro v. Mortgage Elec. Registration Sys., Inc., 467 
Mass. 160, 167-170 (2014), we addressed that same issue in a 
closely parallel context.  In Eaton, 462 Mass. at 571, we 
declared that a foreclosure by power of sale is invalid unless a 
foreclosing party holds the mortgage and also either holds the 
underlying note or acts on behalf of the note holder.  We 
applied this rule to the parties in Eaton, but otherwise gave 
the ruling prospective effect only.  Id.  In Galiastro, supra at 
168, we extended the benefit of our decision in Eaton to 
 
 
10 
litigants who had preserved this issue and whose cases were 
pending on appeal at the time that Eaton was decided.  We 
declared that "[w]here multiple cases await appellate review on 
precisely the same question, it is inequitable for the case 
chosen as a vehicle to announce the court's holding to be 
singled out as the 'chance beneficiary' of an otherwise 
prospective rule."  Galiastro, supra at 167-168, citing United 
States v. Johnson, 457 U.S. 537, 555 n.16 (1982), and 
Commonwealth v. Pring-Wilson, 448 Mass. 718, 736 (2007).  
Limiting the application of prospective rulings to such a  
"chance beneficiary" would mean that something as arbitrary as 
the speed at which a case is litigated might determine its 
outcome, as only the first case raising this issue to reach the 
Supreme Judicial Court would get the benefit of the ruling.  It 
would also greatly diminish the "incentive to bring challenges 
to existing precedent" by depriving similarly situated litigants 
"of the benefit for the work and expense involved in challenging 
the old rule."  Galiastro, supra at 169, quoting Powers v. 
Wilkinson, 399 Mass. 650, 664 (1987). 
 
The same principles underlying our decision in Galiastro to 
extend the Eaton rule to cases pending on appeal cause us to 
extend the Pinti rule to cases pending in the trial court where 
the Pinti issue was timely and fairly raised before we issued 
our decision in Pinti.  In such cases, the homeowner-mortgagors 
 
 
11 
are similarly situated to the plaintiffs in Pinti, because they 
presented the same arguments in the trial court that the Pinti 
plaintiffs presented to this court on appeal.  All that 
distinguishes the homeowners in Pinti from the homeowners in 
this case is the pace of the litigation.  The summary process 
complaint in this case was first filed in June, 2012; the 
complaint in Pinti seeking a judgment declaring that the 
foreclosure sale was void was filed in January, 2013.  If this 
case had proceeded to judgment more promptly in the Housing 
Court, this appeal, rather than Pinti, might have been the one 
that established the so-called Pinti rule.5 
 
Having so ruled, we now consider whether the homeowner 
defendants in this case timely and fairly raised a Pinti defense 
before the issuance of our Pinti decision.  The judge found that 
they had, and we conclude that he was not clearly erroneous in 
so finding. 
 
We recognize that the defendants did not specifically 
allege that the mortgagee's notice of default failed to strictly 
comply with the terms of paragraph 22 of the mortgage until they 
filed their cross motion for summary judgment on September 23, 
                     
 
5 We recognize that this ruling will increase the impact our 
Pinti decision may have on the validity of titles, but we expect 
the increase to be modest and that it will simply be part of the 
inherent "unevenness [that] is an inevitable consequence of any 
change in doctrine."  Galiastro v. Mortgage Elec. Registration 
Sys., Inc., 467 Mass. 160, 170 (2014), quoting Johnson Controls, 
Inc. v. Bowes, 381 Mass. 278, 283 n.4 (1980). 
 
 
12 
2015, more than two months after the issuance of our opinion in 
Pinti.  But more than three years before that opinion, in June, 
2012, they filed an answer as self-represented litigants where 
they checked the box proffering as a defense to the eviction 
that the plaintiff did not have "superior right to possession of 
the premises."6  We need not consider whether the assertion of 
this affirmative defense alone was sufficient to give fair 
notice of a Pinti defense, because it is apparent from the 
plaintiff's memorandum in support of its motion for summary 
judgment, which was filed one month before the issuance of our 
Pinti decision, that the plaintiff recognized that the 
defendants had alleged that the notice of default failed to 
comply with the terms of paragraph 22 of the mortgage.  In that 
memorandum, the plaintiff argued that it had complied with the 
requirements of paragraph 22 and that it would be "irrational 
and fundamentally unfair" to declare the foreclosure proceeding 
void because of the purported minor differences between the 
language of the notice of default and that of the mortgage.  
                     
 
6 The full text of the defense, marked box no. 67 on the 
answer, states: 
 
 
"The plaintiff's case should be dismissed because it 
does not have proper title to the property and therefore 
does not have standing to bring this action and/or cannot 
prove a superior right to possession of the premises.  
Wayne Inv. Corp. v. Abbott, 350 Mass. 775 (1966) (title 
defects can be raised as defense in summary process); G. L. 
c. 239, § 1 (summary process available to plaintiff only if 
foreclosure carried out according to law)." 
 
 
13 
Where the plaintiff recognized that the defendants had raised 
the Pinti issue as a defense before our Pinti decision, the 
judge did not err in finding that the defendants fairly and 
timely raised the issue and therefore were entitled to the 
benefit of the Pinti decision. 
 
2.  Obligation of strict compliance.  Having determined 
that the defendants are entitled to the benefit of our holding 
in Pinti, we must now address whether the notice of default 
strictly complied with paragraph 22 of the mortgage.  It did 
not. 
 
Once a borrower has defaulted on a mortgage, G. L. c. 183, 
§ 21, authorizes the mortgagee to foreclose and sell the 
premises, provided it "first compl[ies] with the terms of the 
mortgage and with the statutes relating to the foreclosure of 
mortgages by the exercise of the power of sale."  Pinti, 472 
Mass. at 232, quoting G. L. c. 183, § 21.  As we explained in 
Pinti, supra at 236, "the 'terms of the mortgage' with which 
strict compliance is required -- both as a matter of common law 
under this court's decisions and under § 21 -- include not only 
the provisions in paragraph 22 relating to the foreclosure sale 
itself, but also the provisions requiring and prescribing the 
preforeclosure notice of default" (footnote omitted).  See 
Foster, Hall & Adams Co. v. Sayles, 213 Mass. 319, 322-324 
(1913). 
 
 
14 
 
The notice of default in this case communicated much of 
what paragraph 22 requires but fell short in several crucial 
respects.  Paragraph 22 requires that the notice "inform [the 
borrower] of the right to reinstate after acceleration and the 
right to bring a court action to assert the non-existence of a 
default or any other defense of [the borrower] to acceleration 
of sale."  Despite this language in the plaintiff's own uniform 
mortgage instrument, the notice declared that the borrower "may, 
if required by law or [the borrower's] loan documents, have the 
right to cure the default after the acceleration of the mortgage 
payments and prior to the foreclosure sale of [the borrower's] 
property if all amounts past due are paid within the time 
permitted by law" (emphasis added).  Similarly, the notice 
declared that the borrower "may have the right to bring a court 
action to assert the non-existence of a default or any other 
defense [the borrower] may have" (emphasis added).  We agree 
with the judge that this language in the notice "significantly, 
and inexcusably, differed from" the language in paragraph 22 of 
the mortgage, and "watered . . . down" the rights provided in 
that paragraph to the mortgagor homeowner. 
 
The phrase, "you may, if required by law or your loan 
documents, have the right to cure the default after 
acceleration," suggests that the right to cure and reinstate is 
not available to every mortgagor, and that any such right is 
 
 
15 
contingent upon the law or the provisions of other loan 
documents.  But paragraph 19 of the mortgage specifically grants 
a mortgagor the right to reinstatement after acceleration, and 
sets forth the steps required to do so.  This phrase instead 
suggests that the homeowner may need to perform legal research 
and analysis to discern whether the right to cure and reinstate 
is available. 
 
Similarly, rather than unequivocally inform the borrower of 
the right to bring a court action to attempt to prevent a 
foreclosure by asserting that there was no default or by 
invoking another defense, the notice of default stated that the 
borrower may have the right to bring such an action.  Here, too, 
the implication is that the right is merely conditional, without 
specifying the conditions, and that the mortgagor may not have 
the right to file an action in court.  The defendant contends 
that it accurately informed borrowers that they "may have" the 
right to bring a court action because they would have no such 
right if their court action lacked a good faith basis.  But 
neither paragraph 22 of the mortgage nor the notice identified a 
bad faith exception to this right and we cannot reasonably infer 
that a borrower would understand that the "may have" language 
referenced such an exception.7 
                     
 
7 Because we find that the notice of default was not in 
strict compliance with paragraph 22, we need not address the 
 
 
16 
 
We agree with the judge that, because the Pinti decision 
applies to this case and because the notice of default did not 
strictly comply with the requirements of paragraph 22 of the 
mortgage, the foreclosure sale is void.8 
 
Conclusion.  The allowance of the defendants' cross motion 
for summary judgment, as well as the denials of the plaintiff's 
motions for summary judgment and for relief from judgment, are 
affirmed. 
 
 
 
 
 
 
 
So ordered. 
                                                                  
defendants' contention that the plaintiff waived its argument 
that the notice was in strict compliance when it conceded that 
it was only in substantial compliance in the memorandum in 
support of its motion for summary judgment and at the hearing in 
the Housing Court. 
 
 
8 Nothing bars the plaintiff from reinitiating the 
foreclosure process with a notice of default that strictly 
complies with paragraph 22 of the mortgage.