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Firm Successfully Argues Foreclosure Barred by Lost Note, In Zullo v. HMC Assets, 16 MISC 000413 Serving Families Throughout Massachusetts and Connecticut

After a four and one-half year battle, on July 06, 2017, the Firm successfully achieved a ruling from the Land Court that the foreclosing entity HMC Assets, as Trustee for The CAM III Trust, failed to meet the strict statutory requirements in order to use the Massachusetts non judicial foreclosure process under G.L. c. 244, §14, and G.L. c. 183, §21, and therefore could not hold the foreclosure auction sale. The case is titled Zullo v. HMC Assets, 16 MISC 000413 (Mass. Land Court 2017- Foster, J.)., see the recent article about this case in the July 10, 2017 issue of Massachusetts Lawyers Weekly:

The Plaintiff (Zullo) had previously faced foreclosure, and engaged in a series of pro-se challenges to the attempted foreclosure of his residence at 51 Claypit Hill Road, Wayland, Massachusetts. The Plaintiff had filed a pro se complaint at the Middlesex County Superior Court, where his complaint was dismissed under Mass. R. Civ. P., R. 12(b)(6). Zullo also subsequently filed a series of pro-se bankruptcies in order to forestall various impending statutory foreclosure auction sales.

In February 2013, the Plaintiff Zullo contacted the Firm, in which we undertook an extensive examination of his note, mortgage, title, and also identified the fact that his land was "Registered Land" governed by G.L. c. 185, et. seq..

After determining that Mr. Zullo was possessed of "Registered Land", the firm filed in the Land Court, a "Subsequent Petition" ("S-Petition") under case number 13 SBQ 39742 02 - 001. An S-Petition is an action that specifically challenges purported entries upon a certificate of title to registered land, under G.L. c. 185, §112, §114, and §115. Under G.L. c. 185,§1(a1/2), the Land Court has exclusive subject matter jurisdiction to hear cases regarding "Registered Land".

Mr. Zullo filed this S-Petition in response to the publication of foreclosure auction sale by HMC Assets. The first "publication" of sale is deemed to be the "initiation" of the statutory foreclosure process within this Commonwealth. In Zullo's Petition, he did not seek any injunctive relief, or any other affirmative relief, other than under the relevant sections of G.L. c. 185. Opposing counsel [Doonan Graves, & Longoria] introduced claimed defenses to foreclosure, which became incorporated into the argument, but not as a result of Zullo's claims. Thereafter, HMC Assets filed its Motion for Summary Judgment, to which Zullo defended under Mass. R. Civ. P., R. 56(c), which allows judgment to be entered in favor of the non moving party where the record supports judgment in their favor, even if no cross motion for summary judgment was filed by the Plaintiff.

The Land Court ruled for HMC Assets, and further stated in its opinion, that "this resolves all claims and the foreclosure can go forward". Zullo timely filed, and perfected, his appeal to the Massachusetts Appeals Court, see Zullo v. HMC Assets, LLC, 88 Mass. App. Ct. 1119 [Full 2015 Opinion at link above]

The Appeals Court Affirmed the ruling of the Land Court in an unpublished non-precedential Rule 1:28 Opinion, however, it did reverse the part of the Land Court decision regarding the allowance of "the foreclosure to go forward". The Appeals Court stated that no record had been developed with regard to whether HMC Assets was possessed of right of enforcement of the Zullo Note, and further that under the myopically focused S-Petition action, issues related to the "foreclosure" were outside the scope of what was presented to the Land Court. The Appeals Court openly queried as to the dearth of evidence related to HMC Assets' claims regarding the Note, which could only be decided on a more "fully developed record".

Subsequent to the Appeals Court ruling, HMC Assets, through Doonan Graves, & Longoria, dutifully, and immediately, again published a renewed statutory auction sale. In response, Zullo, through the Firm, filed an emergency Motion for Preliminary Injunction, with Memorandum In Support, and accompanied by an underlying verified Complaint, with attached Exhibits.

After reviewing the pleadings, the Land Court agreed with the Firm's argument and restrained the scheduled foreclose auction sale. Thereafter HMC Assets immediately filed a Motion for Summary Judgment, accompanied by a copious Record of Documents. The Firm Opposed said Motion, and raised significant issues related to HMC Assets sole reliance upon a "lost note affidavit". The Firm pointed out that where attempting to use such "lost note affidavit" the Uniform Commercial Code Section 3-309 is clear that it must be established that the entity named within said affidavit actually possessed or owned the note at the time it as "lost" or "destroyed". In the copious document production adduced by HMC Assets, no such proof was ever proffered. Instead HMC Assets continued to solely rely upon the Affidavit itself.

The Land Court made findings that agreed with the Firm's position, i.e. there was never any proffer that HMC Assets, purported predecessor DLJ Mortgage, Inc ever held or owed Plaintiff's note when it was "lost" or "destroyed".

This case is important, as it may be the first case that has examined the issues raised regarding the note under the "post Eaton" construction of G.L. c. 244, §14. Under "Eaton", the Massachusetts Supreme Judicial Court, redefined the interpretation of the statutory definition of a "mortgagee" to no longer be the "holder of the mortgage" [singly]. but also either to be the note owner, or authorized agent. "Eaton" is also a "prospective only" ruling, that only applies to fact patterns in which the first publication of auction sale takes place after June 22, 2012, see Eaton v. Fed. Nat'l Mortgage Ass'n, 462 Mass. 569, 588-589 (2012).

The financial bar has either intentionally, or through the failure to fully understand the ruling itself, continually relies upon cases DECIDED after June 22, 2012, however reading those cases clearly evidences that these matters all involved first publications of auction that took place prior to June 22, 2012. No case has examined the post Eaton construction of statute, and its effect on the "assignment of mortgage" Indeed, "post Eaton", the inquiry is not merely was the mortgage transferred or assigned, but rather was the power of sale assigned. Post Eaton it is possible to "hold" a mortgage [singly], but not simultaneously possess the power of sale, unless connected to a note owner/agent. See Footnote 10 of Eaton.

Indeed, under the "pre Eaton" construction of statute, HMC Assets would most likely have succeeded in its argument, as issues related to the note were never previously examined. This decision illustrates the force of the Eaton ruling.

The appellate courts of this Commonwealth have yet to address the impact of Eaton upon purported assignments of mortgage [singly] an issue clearly involving "MERS", even where this Firm has placed matters specifically raising this issue before the Massachusetts Appeals Court, the SJC [under Further Appellate Review], and the U.S. Court of Appeals For The First Circuit. The case decisions continue to rely upon the "pre-Eaton" construction of statute, which arguably may create constitutional concerns .


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