Massachusetts 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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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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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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220px-OldSuffolkCoCtThe Real Estate Specialty Court

Established in 1898 and still staffed with only a handful of judges, the Massachusetts Land Court is the smallest of all the Massachusetts trial courts. But for real estate practitioners, it is the most important court in the Commonwealth.

The Land Court is known for its real estate expertise, and is the starting place for almost all foreclosures. Its judges, most of whom were practicing real estate attorneys, are widely regarded as experts in the intricacies of Massachusetts real estate law. Indeed, the diminutive Land Court has recently been at the forefront of national foreclosure law with Judge Keith Long’s seminal decision in U.S. Bank v. Ibanez which made national front page news for several days.

Registered Land

The Land Court was originally established to oversee the Massachusetts land registration system. Approximately 15-20% of all property in Massachusetts is registered land. Non-registered land is referred to as recorded land.

The purpose of the registered land system — modeled after the Australian Torrens system — is to make land titles as clear and defect-free as possible. To register land, property owners have to go through a fairly rigorous process where a land court title examiner searches and certifies title and a formal plan of the land is approved. All defects and title issues are fully vetted and resolved, if possible, and upon registration, the land is deemed free of defects except noted by the examiner, including claims of adverse possession.

Registered land is freely transferable, and there is no discernible difference in examining title to registered land, other than recording which involves a few more steps than non-registered land.

Foreclosures

The Land Court is widely known as the starting point for the vast majority of foreclosures in Massachusetts. Although Massachusetts is considered a “non-judicial” foreclosure state — that is, where a mortgage holder does not need a court order to foreclosure — the state has held onto the U.S. Soldier’s and Sailor’s Civil Relief Act which gives military members protections against foreclosure. In Massachusetts, mortgage holders bring a “Soldier’s and Sailor’s Act” proceeding in the Land Court to ensure that the property owner is not an active military member. Once the Land Court issues a judgment, the foreclosure can move forward. A Soldier’s and Sailor’s proceeding is not the forum in which to challenge a foreclosure. A homeowner needs to file a separate lawsuit in Superior Court or Land Court to do so.

Quiet Title, Partition and Title Disputes

In the last 20 years, lawmakers have widely expanded the Land Court’s jurisdiction to hear more types of cases. Today, the Land Court regularly hears cases involving zoning and subdivision appeals, quiet title and actions to try title, disputes involving mortgage priorities, tax takings, adverse possession, real estate contract disputes, petitions to partition, and more. I do most of my litigation work in the Land Court’s civil session.

Strategically, certain cases are better off in the Land Court and vice-versa. An important distinction with Land Court is that there are no jury trials. Thus, if you want a jury trial, the case should be filed in Superior Court, not Land Court. For cases which are based on the interpretation of contractual language or complex real estate legal issues, Land Court is probably a good choice. For cases which have an “emotional” component and less complex, a Superior Court jury session is probably the better choice.

New Permitting Session

Most recently, in 2007, the Legislature created a special Land Court permitting session to hear zoning and subdivision appeals for larger projects involving over 25 units or over 25,000 square feet of gross floor area. With the goal to expedite zoning disputes which have roadblocked development, cases in the new session will be assigned to a single judge for the life of the case and will be assigned one of three expedited tracks. For the first time, these tracks provide deadlines for both getting to trial (ranging from six to 12 months) and for receiving a decision after trial or summary judgment (ranging from two months to four months).

Land Court decisions aren’t widely available, but recent rulings can be found here.

If you have a complicated real estate dispute, your attorney should always seriously consider bringing the claim in the Land Court where the judge will understand the issues and keep tight control over the case.

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Richard D. Vetstein, Esq. is an experienced Massachusetts Land Court Attorney who has litigated numerous cases in the Massachusetts Land Court. For further information you can contact him at info@vetsteinlawgroup.com.

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Banker and Tradesman is reporting that Wells Fargo and U.S. Bank will appeal the controversial U.S. Bank v. Ibanez Massachusetts Land Court decision that stung the lenders earlier this year by invalidating two foreclosures in Springfield because of improperly recorded mortgage assignments.Massachusetts Foreclosure Ibanez decision

Lenders filed the appeal on Oct. 29, according to Lawrence Scofield, a senior real estate attorney at Ablitt Law Offices of Woburn, who represented the lenders in the Land Court case. Scofield said Ablitt Law Office would not handle the appeal, but would work with an unnamed “downtown law office” that will be retained to argue in Appeals Court. Scofield said the lenders, lawyers, and parties that filed amicus briefs in the Land Court will meet this week to discuss the more substantive details of the appeal. The disputed decision has raised questions in the mortgage industry regarding potentially thousands of clouded titles, as the practice of back-dating mortgage assignments had been widely used in recent years. “This is a big deal,” Scofield said. “I hope in the worst case situation, the court will recognize the public policy impact this would have, and make this prospective decision and not a retroactive decision, which could really mitigate some of the collateral damage.”

My prior posts on this very important and far-reaching decision can be found here.

If the appeal takes the typical course in the Appeals Court, a decision may not come for up to one year. Given the importance of the decision, I had originally predicted that the lenders would file a direct appeal to the Massachusetts Supreme Judicial Court, the highest appellate court in the state. There’s no indication that the case is going up to the Supreme Judicial Court.

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Breaking News (1.7.11): Mass. Supreme Court Upholds Ibanez Ruling, Thousands of Foreclosures Affected

Click Here For Our Entire Series Of Post On the Ibanez Case

Update (2/25/10)Mass. High Court May Take Ibanez Case

Today, Massachusetts Land Court Judge Keith Long reaffirmed his controversial ruling made back in March 2009 that invalidated foreclosure proceedings involving two Springfield homes because the lenders did not hold clear titles to the properties at the time of sale. A copy of the decision can be found here.

As I outlined in my prior post on this case, the problem the Land Court dealt with in this case is what happens when modern securitized mortgage lending practices meets outdated foreclosure laws. When mortgages are packaged to Wall Street investors, the ownership of a mortgage loan may be divided and freely transferred numerous times on the lenders’ books. But the mortgage loan documentation actually on file at the Registry of Deeds often lags far behind.

Here is a diagram of the securitized mortgage process (click to enlarge):

The Ruling

Judge Long ruled that foreclosures were invalid when the lender failed to bring  the ownership documentation (known as an assignment) up-to-date until after the foreclosure sale had already taken place. An assignment is a legal document confirming that a mortgage loan has been transferred from one lender to another. Assignments must be recorded with a registry of deeds so anyone researching a property’s title can track the loan’s origin and ownership. Oftentimes, as in the Ibanez case, lenders will sell bundles of loan and record backdated assignments with an effective date before the first foreclosure notice. Judge Long effectively prohibited this practice.

Despite the lender’s attempt to convince him otherwise, Judge Long came out (again) in favor of consumers:

The issues in this case are not merely problems with paperwork or a matter of dotting i’s and crossing t’s. Instead, they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts legislature. To accept the plaintiffs’ arguments is to allow them to take someone’s home without any demonstrable right to do so, based upon the assumption that they ultimately will be able to show that they have that right and the further assumption that potential bidders will be undeterred by the lack of a demonstrable legal foundation for the sale and will nonetheless bid full value in the expectation that that foundation will ultimately be produced, even if it takes a year or more. The law recognizes the troubling nature of these assumptions, the harm caused if those assumptions prove erroneous, and commands otherwise.

Judge Long also had some choice words for lenders:

[T]he problem the [lenders] face (the present title defect) is entirely of their own making as a result of their failure to comply with the statute and the directives in their own securitization documents… What the plaintiffs truly seek is a change in the foreclosure sale statute (G.L. c. 244, § 14), which can only come from the legislature.

What Now?

That’s a good question and one not readily answerable. To be sure, the current state of flux and confusion surrounding foreclosure titles affected by an Ibanez issue will remain intact until an appellate court considers the case or some action by the Legislature (which may be unlikely). Given the importance of the decision, I predict that the Massachusetts Supreme Judicial Court will take the unusual step of taking the case directly from the Land Court.

As for what happens in the year or so the case may be in appellate limbo, I asked an in house counsel for a leading title insurance company, and his response was essentially that it’s going to take a fair amount of time and research to figure this one out. If there’s an existing title insurance policy on the property, some but not all of the title companies may be willing to insure over the problem. If there’s no title policy in place, affected parties are going to have to ride this one out for awhile.

Once title insurance companies offer some further guidance, I will post it here.

My Two Cents

While I see both sides of the argument, the decision is troubling to me because Judge Long gave short shrift to the fundamental legal principle that the mortgage follows the note. A valid mortgage is security for some type of underlying obligation, whether it’s a loan or the promise to do something in the future. There’s no question that the millions (or billions) of dollars in loans secured by all these mortgages were validly transferred from one bank/lender to securitized lenders. The money was lent and it didn’t just evaporate into the ether. If the lenders can ultimately demonstrate ownership of the underlying loan which follows the mortgage and produce a valid assignment (albeit late), why isn’t this enough? The borrowers owe the money, and now after this ruling they are immunized from foreclosure by what many folks in the real estate industry view as elevating form over substance.

“For many years, real estate attorneys in Massachusetts have understood that the assignment of a mortgage can be recorded at any time and be effective,” Christopher S. Pitt, chairman of the Title Standards Committee of the Real Estate Bar Association tells Massachusetts Lawyers Weekly.

Now that doesn’t mean lenders don’t need to get their act together. They do. The net effect of this decision will be that lenders must get loan documentation up to date and recorded promptly. Indeed, the Ibanez loan changed ownership at least four times prior to foreclosure — without any of this appearing on the public record.  Two of those entities (Lehman Brothers and its subsidiary) are currently in bankruptcy and a third (Option One) has ceased operations. This is a huge wake up call to the securitized lending industry.

But the question remains, what about all the foreclosures that have already been conducted? And the new homeowners who own these properties and are now saddled with unresolvable title defects? What about these “innocent victims” and the neighborhoods blighted by foreclosed properties which cannot be sold? I guess we can all blame Wall Street once again…

The Consumer Advocate’s Point of View

Attorney Meyer Potashman of Greater Boston Legal Services which filed a brief in the Ibanez case offers this analysis:

This case has the potential to do a lot of damage (or rather reveal the damage that foreclosing lenders did over the past few years), but I think Judge Long was completely right about the law.  Both the statute and all of the securitization documents were clear, and these foreclosures violated both of them. These banks had sophisticated lawyers who knew real estate law when they planned to securitize these loans, but they never bothered to consult their own agreements when the time came to actually securitize, or foreclose, on the loans.  As a result, mortgages were never properly transferred, and the foreclosing lenders never had the right to foreclose.

As with any controversial legal decision, there’s always compelling arguments for both points of view.

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Breaking News (1.7.11). Mass. High Court Affirms Ibanez Ruling

Boston Globe reporter Jenifer McKim today is reporting that Massachusetts Land Court Judge Keith Long’s much anticipated ruling in the Ibanez v. U.S. Bank case, which invalidated thousands of foreclosures across the state, could come as early as today.HomeForeclosure-main_Full

Previously, in late March of this year Judge Long issued one of the most controversial rulings in recent years which has called into question hundreds if not thousands of foreclosure titles because lenders failed to show proof they held titles to the properties through valid assignments. Click here for my prior post on the case. A copy of the case can be found here.

The Globe reports that the decision is “imminent” and could come as early as today. The Globe also has interesting commentary from a number of affected sources:

Among those watching the case are Boston city officials, who say they hope Long will clarify title issues for homes that have already gone into foreclosure. In the meantime, the judge’s actions have stymied the city’s effort to buy as many as 20 bank-owned properties, hurting much-needed redevelopment efforts in neighborhoods plagued by foreclosure, officials said.

“There are thousands and thousands of titles that have gone through foreclosures with these late filed’’ ownership records, said Lawrence Scofield, an attorney with Ablitt Law Offices in Woburn, who represented plaintiffs in three consolidated Springfield cases ruled on by Long. “Judge Long is saying you don’t really own it. That is the real, overwhelming, economic effect.’’

Locally, the Massachusetts decision has pitted advocates trying to revive neighborhoods against others trying to help homeowners stave off foreclosures. Gary Klein, a consumer law attorney who filed a friend of the court brief in the case, said the real estate system placed “expedience and convenience’’ before the law. Providing home buyers with a “full set of procedural protections,’’ he said, is more important than comforting lenders who ignored the law.

Indeed, since March, the number of foreclosure deeds has slowed, according to Warren Group, a Boston company that provides real estate data. “There are probably at least a thousand families who are getting at least some period of temporary delay while lenders go back and get a proper paper trail,’’ said Klein, an attorney with the Boston-based law firm Roddy, Klein and Ryan. “Slowing foreclosures down allows people to get loan modifications and other relief.’’

Once the decision is released I will post it here with my analysis and commentary.

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Breaking News (1.7.11): Mass. Supreme Court Upholds Ibanez Ruling, Thousands of Foreclosures Affected

Update (2/25/10)Mass. High Court May Take Ibanez Case

Breaking News (10/14/09)–Land Court Reaffirms Ruling Invalidating Thousands of Foreclosures. Click here for the updated post.

In late March of this year in the case of U.S. Bank v. Ibanez, Massachusetts Land Court Judge Keith C. Long issued one of the most controversial rulings in recent years which has called into question hundreds if not thousands of foreclosure titles across Massachusetts. The Ibanez decision is what happens when you mix equal parts of a deteriorating real estate market with Wall Street’s insatiable demand for mortgage back securities with sloppy lending practices and outdated state foreclosure statutes.

The Facts

In the Ibanez case, the Land Court invalidated two foreclosure sales because the lenders failed to show proof they held titles to the properties through valid assignments. In modern securitized mortgage lending practices, the ownership of a mortgage loan may be divided and freely transferred numerous times on the lenders’ books, but the documentation (i.e., the assignments) actually on file at the Registry of Deeds often lags far behind. The Land Court ruled that foreclosures were invalid when the lender failed to bring  the ownership documentation (the assignments) up-to-date until after the foreclosure sale had already taken place. This was true even if the lender possessed an assignment with an effective date (i.e., backdated) before the first foreclosure notice.

The net effect of the Ibanez decision is to call into serious question the validity of any foreclosure where the lender did not physically hold the proper paperwork at the time it conducted its auction. This has already caused significant uncertainty in the ownership of many properties that have already been foreclosed and are awaiting foreclosure.

In deciding the case, Judge Long took a very pro-consumer approach to the foreclosure law, persuaded that the apparent title defect would chill a foreclosure sale and harm debtors:

None of this is the fault of the [debtor], yet the [debtor] suffers due to fewer (or no) bids in competition with the foreclosing institution. Only the foreclosing party is advantaged by the clouded title at the time of auction. It can bid a lower price, hold the property in inventory, and put together the proper documents any time it chooses. And who can say that problems won’t be encountered during this process?

Also of significance was that Judge Long rejected a customary Massachusetts conveyancing standard which provides that recording out of order assignment documents does not create a title defect. I think Judge Long got it wrong as he elevated form over substance and didn’t give enough credence to the legal principle that the note follows the mortgage, but hey, I’m just a lowly attorney.

What now?

The Ibanez ruling is not final as the lenders have filed a motion to reconsider with the Land Court. And now the heavy hitters have gotten involved. The Real Estate Bar Association of Massachusetts has taken the unusual step of filing a friend of the court brief, urging the Land Court to reconsider its decision.

On the consumer side, the National Consumer Law Center and well known consumer class action attorney Gary Klein have joined the fray and filed a brief. Attorney Klein has also filed a class action in federal court to challenge completed foreclosures and future foreclosures on the same facts as the two foreclosures voided in Ibanez.

As of now, Judge Long of the Land Court has not made a final decision which should come in a matter of weeks. I will update you when the ruling comes down. Either way, in my opinion, given the widespread impact of this case, it is destined for the Massachusetts Supreme Judicial Court. It’s hard to say how the SJC will come down on this.

What can you if you are affected by the Ibanez ruling?

Well, if you are a homeowner facing foreclosure, consider Ibanez an early Christmas present. You now have a powerful tool to argue for the invalidation of the foreclosure sale. (I won’t comment on the fact that you still owe the lender money).

If you are contemplating purchasing a property out of foreclosure or are selling a previously foreclosed property, pray that there’s an existing title insurance policy on the property, and ask the title company to insure over the issue. Some are willing to do this. Others are not. The other option (albeit expensive) is to hire an attorney to file a Land Court “quiet title” action to validate the proper assignment of the mortgage loan, assuming you can track the documents down and they were not backdated. In Ibanez, the lender couldn’t produce the assignment until 14 months after the auction. The last option, and unfortunately probably the safest bet, is to sit, wait and see how the Land Court and appellate courts will rule ultimately. Not the answer you probably want to hear, but it’s reality.

Please contact Richard D. Vetstein, Esq. for more information.

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