The Massachusetts Supreme Judicial Court (the “SJC”) has released its long-awaited decision in the case of Bevilacqua v. Rodriguez (“Bevilacqua”), a ruling which presents a plethora of title issues for purchasers of foreclosed properties, lenders who hold mortgages on foreclosed properties and title insurers who insured titles to foreclosed properties. In Bevilacqua, the SJC essentially held that foreclosure sales that were noticed prior to the foreclosing entity obtaining title to the mortgage are “void,” as opposed to “voidable,” and are therefore incapable of passing title to even a bona fide third party purchaser without notice of the defect. The lone silver lining in the decision is that the SJC did not preclude the possibility that, in certain circumstances, the purchaser could be deemed to have received from the lender an assignment of mortgage which would then entitle the purchaser to foreclose.

In Bevilacqua, the original mortgagee, Mortgage Electronic Registration Systems, Inc. (“MERS”), failed to assign its mortgage to the foreclosing lender until after the foreclosure had taken place and the foreclosure deed had been executed. The foreclosing lender, which also purchased the property at the sale, then executed a “confirmatory foreclosure deed” to itself and then sold the property to Mr. Bevilacqua. Mr. Bevilacqua subsequently filed a petition with the Massachusetts Land Court to compel the “former” homeowner, Mr. Rodriguez, to “try title” to the property. The “try title” claim is a Massachusetts statutory procedure whereby someone with possession and record title to a piece of property may have all adverse claims to the property disposed of. Mr. Rodriguez failed to appear and could not be located. The Land Court, on its own, dismissed Mr. Bevilacqua’s petition based on the “invalid foreclosure.” The SJC granted Mr. Bevilacqua’s application for direct appellate review.