Land Court

Text Messages Enforceable As Written Contract, Court Rules

With the proliferation of email and texts as the primary method of communications in real estate negotiations, it was just a matter of time before Massachusetts courts were faced with the question of whether and to what extent e-mails and texts can constitute a binding and enforceable agreement to purchase and sell real estate. In a ground-breaking case, Land Court Justice Robert Foster ruled in a case of first impression that text messages may form a binding contract in real estate negotiations–even where a formal offer has not been signed by the seller. This is huge wake up call for the remaining industry people who still believe that electronic communications are not legally binding.

St. John’s Holdings LLC v. Two Electronics, LLC

The case (embedded below) involves a commercial real estate deal between two businesses both represented by commercial real estate brokers for the purchase and sale of an industrial park property in Danvers. Two Electronics, as seller, and St. John’s Holdings, as buyer, negotiated for several weeks exchanging two “Binding Letters of Intent” spelling out all material terms of the proposed purchase of $3.2 Million. Towards the culmination of the negotiations, the real estate brokers exchanged several emails and texts, with the seller’s agent sending an email that his client was “ready to do this,” then a text that —

“[the seller] wants you to sign first, with a check, and then he will sign. Normally, the seller signs last or second. Not trying to be stupid or to the contrary, but that’s the way it normally works. Can Rick sign today and get it to me today? Tim”

The buyer signed four copies of the final Letter of Intent and tendered the deposit check with the buyer broker, after which the buyer’s broker sent the seller’s agent another text — “Tim I have the signed LOI and check. It’s 424 [PM]. Where can I meet you?” Shortly thereafter, the two agents met, and the buyer’s broker tendered the buyer signed Letter of Intent along with the deposit check.

Unbeknownst to the buyer, that same day, the seller had received another offer on the property, and proceeded to sign that offer. The seller then refused to sign the Letter of Intent with St. John’s. St. John’s sued, claiming that the series of letters of intent, emails and text messages constituted a binding and enforceable contract.

Intersection of 17th Century Statute of Frauds with 21st Century Text Messages

In Massachusetts, the Statute of Frauds requires that contracts for the sale of real state must be in writing signed by the party (or agent) to be charged. In the old days of pen and paper, application of the Statute was quite simple. If there wasn’t a written agreement signed in wet, ink signatures, there was no binding contract. With the proliferation of e-mail and text communication, application of the Statute of Frauds has become much more nuanced.

In the case discussed here, Judge Robert Foster noted several recent judicial decisions holding that emails may be binding as well as the Uniform Electronic Transactions Act, under which parties may impliedly consent through their actions to make email and text transmissions binding and enforceable. Emphasizing the fact that the seller’s agent signed his name “Tim” at the end of the critical text message, the judge found that the text message was sufficiently “signed” under the Statute of Frauds to constitute a binding agreement at the culmination of the previous communications and unsigned letters of intent. The judge also found persuasive that the seller’s agent told the buyer’s agent to have the buyer sign the letter of intent first, and that’s exactly what the buyer did. Finding in favor of the buyer, the judge denied the seller’s motion to dismiss and issued a restraining order against the seller’s conveyance of the subject property.

Take Away: IMO, Watch What You Say!

This area of the law is really becoming a dangerous minefield. After the e-mail ruling came out a few years ago, I advised my clients to use the following disclaimer: “Emails sent or received shall neither constitute acceptance of conducting transactions via electronic means nor shall create a binding contract in the absence of a fully signed written agreement.”

The problem, however, with text messages is that they are so short and informal. It’s not practical to use a legal disclaimer on texts, and there’s no technology that I’m aware of that would insert one into every text. You could always start off a negotiation with the caveat that electronic communications will not create a binding contract until a formal offer is executed. Also, it’s always a good idea to end every email/text with “subject to seller/buyer review and approval” when negotiating an offer. But, such boilerplate language can always be waived by subsequent conduct or actions.

This case reminds me of Lomasney’s First Rule of Politics:  “Never write if you can speak; never speak if you can nod; never nod if you can wink.” — and by winking that does not mean an emoji. 😜

And always take screenshots of important texts…just in case.

This post is sponsored by Brian Cavanaugh, Senior Mortgage Banker, Mortgage Network

Cav Zillow

St. John’s Holdings LLC v. Two Electronics, LLC by Richard Vetstein

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Charlie BakerNew Law Will Resolve Thousands of Foreclosure Title Defects In Wake of U.S. Bank v. Ibanez Ruling

After a five year legislative struggle (in which I testified before the Joint Judiciary Committee), I’m very pleased to report that Governor Baker has signed into law the Act Clearing Title To Foreclosed Properties (Senate Bill 2015), embedded below. The bill will resolve potentially thousands of land titles which were rendered defective and un-transferable after the SJC’s landmark ruling in U.S. Bank v. Ibanez. The Ibanez ruling invalidated thousands of foreclosures across the Commonwealth due to lenders’ paperwork errors.

The problem addressed by the legislation is that scores of innocent buyers purchased these foreclosed properties, fixing them up, renting them out, etc., but they were unaware of the title defects — only to discover them once they went to refinance and sell. Title insurance companies have been bogged down trying to solve these defects, and in the meantime, many of these innocent folks are left with homes which cannot be sold or refinanced. The same bill passed the Legislature last year, but former Gov. Patrick, bowing to housing activists, vetoed it with a poison pill. After several amendments addressing housing activists’ concerns, a new bill was again passed, and just signed into law by Gov. Baker on November 25, 2015.

The bill, which is effective on Dec. 31, gives foreclosed owners a three (3) year statute of limitations to file a challenge to a foreclosure, after which the foreclosure is deemed to have been conducted legally. For foreclosures which have already been concluded, the new law has a one year waiting period, so that a defective foreclosure would be considered non-defective on Dec. 31, 2016. The bill does retain a homeowner’s right to seek compensatory and punitive damages for a wrongful foreclosure, provided it is within the statute of limitations. The bill also requires the Attorney General’s Office to spearhead more robust foreclosure prevention solutions with the HomeCorps Program and housing activists groups.

The passage of the bill is fantastic news for both owners and potential buyers/investors of foreclosure properties. There is a  shadow inventory of defective title properties which will be able to go on the market.

The bill was sponsored by Millbury Democrat Michael Moore whose office (especially Julie DelSobral) worked tirelessly for the passage of the Act.

MA Act Clearing Title to Foreclosed Properties by Richard Vetstein

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Cape Cod Attorney Jennifer Roberts and Boston Attorney Howard Speicher Add Expertise At The Land Court

The Land Court is Massachusetts’ specialized court dealing with all things real estate and title. Established in 1898 and staffed with seven judges, the Land Court is the smallest of all the Massachusetts trial courts, but for real estate LSL_Pros_JenniferRobertspractitioners, it is the most important court in the state. Its judges, all of whom were practicing real estate attorneys, are widely regarded as experts in the intricacies of Massachusetts real estate law. The last year has seen a new justice appointed and another one on the way.

Recently nominated by Gov. Baker is Cape Cod attorney Jennifer S.D. Roberts. Ms. Roberts is Of Counsel at Orleans based firm of La Tanzi, Spaulding & Landreth, P.C., and has more than 30 years experience in civil litigation at both the trial and appellate level in construction, real estate, condominium, small business and probate litigation. Ms. Roberts also serves on the board of directors of Cape Cod Healthcare, Inc., the Cape Cod Foundation, and is the past president of the Barnstable County Bar Association. I don’t HowardP.-Speicher-3452271*220know Ms. Roberts personally, but judging by her resume and Cape Cod experience (see, e.g, the Cape Wind dispute), she seems like another fine choice for the Court. She appears to be the first woman from the Cape to be appointed to the Court. Roberts’ appointment must be approved by the Governor’s Council in the coming months.

Former Boston attorney, Howard P. Speicher, was confirmed last Fall, and now has almost one year on the Land Court bench. Judge Speicher previously practiced for 30 years at the Boston law firm of Davis, Malm & D’Agostine, P.C., where he focused on zoning, land use and permitting matters, and real estate transactions. Judge Speicher began his career with the City of Boston Law Department. Before becoming a judge, I met Mr. Speicher a few times at his firm and at bar events, and he’s very smart and generally a nice guy. I have not appeared before him yet at the court. I know he has deep knowledge of the complex maze of Boston Zoning which will be an asset to the court and to practitioners alike.

I’ll be keeping tabs on Ms. Roberts’ confirmation at the Governor’s Council which can sometimes be an unpredictable place for judicial nominees.

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title-insurance

Policy Changes Make It Harder To Insure Foreclosed/REO Properties

In the aftermath of the Supreme Judicial Court’s July 17th ruling in Pinti v. Emigrant Mortgage Company, which voided a foreclosure over a defective notice of default, two leading title insurance companies — First American Title and Fidelity/Chicago — have announced that they will be significantly changing the manner in which they underwrite foreclosed properties. These new policies will make it much harder to insure foreclosed properties, and may dramatically affect the sale and marketability of foreclosed/REO/bank owned properties.

The most drastic change comes from First American, which has the largest market share in Massachusetts. Under FATICO’s new policy (embedded below), lenders must obtain a judicial decree that the foreclosure was conducted in compliance with the Pinti ruling. (This applies only to foreclosures conducted after July 17, 2015). Because Massachusetts is a non-judicial foreclosure state (i.e, lenders do not need a judge’s approval to foreclose except for confirmation that the borrower is not in the active military), getting court approval for a foreclosure will require either a Superior Court or Housing Court action and will be expensive, lengthy and burdensome for lenders.

Fidelity/Chicago’s new policy requires closing attorneys to “verify that any preforeclosure default notices were sent by the foreclosing Mortgagee on or before July 17 [and] verify that the attorney for the foreclosing Mortgagee has included a statement to that effect in a recorded Affidavit that is part of the foreclosure documentation.” Closing attorneys must also “determine that the mortgagors, or any parties claiming under them, are no longer in possession of the premises or otherwise asserting any rights.”

The question is whether the other title insurance companies will follow suit. As of this writing, Stewart, CATIC, Old Republic and Westcor have not adopted a new foreclosure underwriting policy. I will monitor if that changes.

Act Clearing Title To Foreclosed Properties

These underwriting changes only underscore the importance of the Legislature passing the Act Clearing Title to Foreclosed Properties, Senate Bill 1981. The bill would protect arm’s length third party purchasers for value, and those claiming under them, who purchase at the foreclosure sale or in a subsequent REO transaction. It is the result of years of negotiation, and represents an honest effort to balance the interests of third party purchasers with mortgagors who legitimately believe they have been wrongfully foreclosed upon. Lenders who have conducted defective foreclosures would remain liable to the mortgagors. This is the same bill that was passed by both branches of the legislature at the end of the legislative session last fall, but was sent back with poison pill amendments by Governor Patrick and died. The bill should be voted on by the Senate soon after Labor Day. If passed, it will be considered by the House shortly afterward.

First American Mass. Foreclosure Policy

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I was honored to talk about boundary line disputes on this week’s Real Estate Radio Boston broadcast on WBZ 1030, hosted by Rick Scherer and Ali Alavi, Esq. The broadcast is below. Just click the Play button to listen! Or click on this link:  Real Estate Radio Boston | Richard Vetstein.

Tune into the broadcast every Saturday night from 8pm-9pm on WBZ 1030 AM. It’s a fantastic show!

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stop20foreclosure1Court Uses Novel Equitable Assignment of Mortgage Theory 

In what could be the first test case of a new theory to clear up defective foreclosure titles — and much welcome news for property owners stuck with toxic titles — Massachusetts Land Court Judge Gordon Piper has ruled that the theory of equitable assignment of an improperly foreclosed mortgage can be used to clear title of an improperly foreclosed property.

The case is Cavanaugh v. GMAC Mortgage LLC, et al., 11 MISC 447901 (embedded below) and was recently appealed by noted foreclosure attorney, Glenn Russell, Esq., who represented the prevailing homeowners in the landmark U.S. Bank v. Ibanez case. The case will now go up to the Massachusetts Appeals Court, or, given its importance, perhaps taken up by the Supreme Judicial Court on direct appellate review.

In this case, GMAC Mortgage foreclosed a mortgage given by Maureen Cavanaugh of Fairhaven, then granted a foreclosure deed to Fannie Mae. The foreclosure, however, was defective because notice of the foreclosure sale was not published in the local newspaper as required by Massachusetts foreclosure law. Fannie Mae later sold the property to Timothy Lowney.

Ms. Cavanaugh sued the lenders and Mr. Lowney in a Land Court “quiet title” action to re-claim her property back. This is essentially the same situation as presented in the Bevilacqua vs. Rodriguez case where a property owner was stuck with a defective foreclosure title. The Court in Bevilacqua suggested an alternative theory to solve the defective title by using the conveyance of the foreclosure deed as an equitable assignment of the original mortgage, so the new property owner could foreclose and obtain clear title in the process.

Judge Piper used this equitable assignment theory in the Cavanaugh case, ruling that Lowney, the new buyer, holds the GMAC Mortgage through equitable assignment, and may now foreclose upon Ms. Cavanaugh, thereby clearing the way to get clean title. Equally important, Judge Piper ordered GMAC and Fannie Mae to assign the underlying promissory note from Ms. Cavanaugh to Lowney so that he holds both the note and the mortgage as required by after the important Eaton v. Fannie Mae case several months ago.

This is an important and much-needed judicial development for assisting homeowners who have been unable to refinance or sell their properties due to “Ibanez” and other foreclosure related title defects. This case also illustrates the importance of obtaining an owner’s policy of title insurance which appears to have provided coverage to Mr. Lowney in this matter.

Cavanaugh v. GMAC Mortgage — Massachusetts Land Court by

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Court Will Consider Mortgage Servicer/MERS Standing and Statutory Foreclosure Affidavits

The Supreme Judicial Court has a busy Fall Term with several important foreclosure cases on the docket. Here’s a quick summary.

HSBC Bank v. Jodi Matt (SJC-11101)

The SJC is considering whether a mortgage servicer holding a securitized mortgage has standing to even begin a foreclosure action in the Land Court under the Servicemembers Civil Relief Act–one of the first steps in the Massachusetts foreclosure process. I wrote about this case in a prior post here. This ruling will affect just about every conventional mortgage foreclosure in the state. The lower court Land Court opinion can be read here.  The court asked for friend-of-the-court briefs, and the Real Estate Bar Association filed a brief supporting the foreclosing lenders. Glenn Russell’s brief for the appellant Jodi Matt can be read here.

Oral arguments were held in early September, but unfortunately the webcast is unavailable. One of my sources told me that the justices were very active and peppered both attorneys with lots of questions.

Following the recent Eaton v. FNMA case, which held that a mortgage servicer may foreclosure upon a showing of proper agency and authority, I predict that the Court will ultimately hold that servicers and lenders holding rights to securitized mortgages have legal standing to start the Servicemembers Civil Relief Act proceeding, even if they merely hold a contractual right to the actual mortgage. The most compelling rationale for such a ruling is that the only purpose of the Servicemember proceeding is to ascertain whether the borrower is in active military service. It is not intended to be a forum to litigate issues relating to the propriety of securitized mortgage transfers and contractual standing.

Federal National Mortgage Ass’n v. Hendricks (SJC 11234)

This case has the potential to change Massachusetts foreclosure practice. The issue presented is whether the long-standing Massachusetts statutory form foreclosure affidavit that the foreclosing lender has complied with the foreclosure laws is on its face sufficient. The case will also decide whether the statutory power of sale form, originally drafted in 1912, is also facially sufficient. The docket and briefs filed in the case can be found here.

The case originated from the Boston Housing Court where Hendricks fought his post-foreclosure eviction by Fannie Mae, asserting that the affidavits filed by Fannie Mae reciting compliance with the foreclosure statute were inadmissible and insufficient. A Housing Court judge disagreed, and upheld the foreclosure and the eviction.

With the well-publicized robo-signing controversy looming in the background, I would not be surprised if the SJC rules in favor of Hendricks here and in the process tightens up the requirements for filing foreclosure affidavits. Indeed, that is the trend with the Legislature’s recent passing of the Foreclosure Prevention Act. As with the Eaton v. FNMA ruling, the Court should likely make its ruling prospective and not retroactive so as to not disrupt titles in the Commonwealth.

Galiastro v. MERS (SJC DAR 20960)

The SJC just accepted direct appellate review from the Appeals Court in this interesting case. This case will finally decide whether Mortgage Electronic Registration Systems (MERS) has standing to foreclose in its own name. The case, however, is somewhat mooted because MERS no longer forecloses in its own name, but there are plenty of MERS foreclosures in back titles. The SJC has announced that it will solicit friend-of-the-court briefs on the issue of “whether MERS “has standing to pursue a foreclosure in its own right as a named ‘mortgagee’ with ability to act limited solely as a ‘nominee’ and without any ownership interest or rights in the promissory note associated with the mortgage; whether the prospective mandate of Eaton v. Federal National Mortgage Association, 462 Mass. 569 (2012), applies to cases that were pending on appeal at the time that case was decided.” This case will be argued in April 2013. I will have analysis after that.

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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney with an expertise in foreclosure related issues. You can contact him at info@vetsteinlawgroup.com.

 

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Great news from the Land Court — its new online public case information system is now live!

The Land Court is pleased to announce the availability of publicly available case information via the internet. It is called eAccess and the website address is www.masscourts.org. Be sure to bookmark this important tool!

The site allows users to conduct searches by case name, case type and case number. No passwords are necessary. Electronic access to Land Court case information continues to be available at designated public access computers in the Land Court’s public lobby, at the local county Registry of Deeds and Probate sites, and at many District Court, BMC and Probate and Family Courts.

Instructions for use of the Land Court Public Access Site pdf

A screen shot of the search page is below.

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