The Statutory Power of Sale in Massachusetts Incorporation by Reference
James B. Nutter & Company Vs. Estate Of Barbara A. Murphy & Others
Decided On January 18, 2018
On January 18, 2018, the Massachusetts Supreme Judicial Court issued an opinion in James B. Nutter & Company Vs. Estate of Barbara A. Murphy & Others, interpreting the definition and incorporation by reference of the Statutory Power of Sale, pursuant to M. G. L. c. 183, §21, in mortgage instruments in Massachusetts.
Orlans PC, Attorney Effie Gikas Tchobanian represented the Plaintiff, James B Nutter & Company (“Nutter”), in front of the Massachusetts Supreme Judicial Court, both in the appellate pleadings and at the Oral Argument. The representation by Orlans PC and its attorneys was instrumental in securing a positive ruling in favor of the lender.
Holding of the Case:
Paragraph 20[1] of Nutter’s reverse mortgages incorporates the Statutory Power of Sale as defined in G. L. c. 183, § 21 by reference in the mortgage to the “Power of Sale”.
The result of this ruling will allow Nutter to proceed with non-judicial foreclosures on all its reverse mortgages with the same or similar language, without further judicial intervention.
The Court also held generally, that “in Massachusetts there is no power of sale except the statutory power of sale” (emphasis in the original).
The Court’s specific findings were as follows:
- The Nutter mortgage paragraph 20 language is ambiguous because it omits the word “statutory”;
- A reverse mortgage is a contract of adhesion;
- Because the mortgage paragraph 20 has more than one potential meaning and is a contract of adhesion, the ambiguity is construed against the drafter;
- The alternative interpretation of the alleged ambiguity must be reasonable and practical;
- In the Nutter mortgage, the alternative interpretation is NOT reasonable and practical;
- The only reasonable and practical interpretation is that the mortgage incorporates the “statutory” power of sale, by reference to the “power of sale”.
Although the Court did not explicitly state that the decision applies to all forms of mortgages[2], the conclusion reached by the Court that there is no power of sale in Massachusetts, except the statutory power of sale was an unqualified statement of the Court’s conclusion on the definition of the Power of Sale in Massachusetts.
The decision appears to clarify that failure of a mortgage to contain the word “Statutory” in reference to the “Power of Sale” in a Massachusetts mortgage, has only one reasonable and practical interpretation – that the “Statutory Power of Sale is being referenced.” [3]
For a more detailed analysis of the Court’s decision, see below
Further Analysis:
In reaching a decision on the incorporation of the Statutory Power of Sale, the Court took a winding path to its conclusion. In parts seeming to contradict the ultimate holding in the case. The Court concluded that that the Nutter mortgage was an ambiguous form contract, and that it should be construed against the lender with the interpretation that a reasonable consumer would apply. However, the Court ultimately concluded that no reasonable borrower in Massachusetts would understand that this power of sale would be anything other than a statutory power of sale.
The Court based its conclusion on a number of factors, including, the legislative history and intent of the statutory power of sale in Massachusetts, the interpretation of a reasonable person as to the reference to a power of sale, and general principals of contract interpretation. The Court expounded on the history of the legislature’s intent in enacting the statutory power of sale under c. 183, §21, when it stated that the purpose behind the enactment was to shorten the length of contractual documents and to create a short-hand that could be used instead. The Court also stated that the power of sale is Massachusetts is more than mere short-hand, but is a statutory framework of requirements, which the legislature has decided to fully regulate, leaving no ability for a party to contractually agree to a privately regulated power of sale.
The Court also reviewed the various other methods of foreclosure authorized in Massachusetts, explicitly stating that the other options available, specifically foreclosure by action, are “rarely used”, implying a rarely used method is not a reasonable interpretation of the language in the mortgage, thereby supporting their final conclusion on the incorporation of the statutory power of sale in the mortgage.
Finally, the court looked to the principals of contract interpretation, discussing the types of contractual forms, and the determination and interpretation of the existence of ambiguity in contracts. The Court’s analysis applied these principals by first looking to the section of the contract where the dispute exists, and then to the contract as a whole to resolve the ambiguity.
Having concluded that the ambiguity was not resolved by the provisions or the contract as a whole, the Court then looked to the reasonableness of the interpretation that was being proffered by both parties, and as to the plain language of the document in relation to the law.
The Court concluded that there is no other power of sale in Massachusetts, except the statutory power of sale because “to read the term “power of sale”… as referring to anything other than the statutory power of sale would…render the provision a nullity [and] it is neither reasonable nor practical to interpret [a] clause as being meaningless.” Therefore, the only conclusion is that reference to the term “power of sale” “can only be referring to the “statutory power of sale”.
[1] Paragraph 20 of the JBN mortgage states as follows:
” 20. Foreclosure Procedure. If Lender requires immediate payment in full under Paragraph 9, Lender
may invoke the power of sale and any other remedies permitted by applicable law. lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Paragraph 20, including, but not limited to, reasonable attorneys’ fees and costs of title evidence. At this sale Lender or another person may acquire the Property. this is known as “foreclosure and sale.” In any lawsuit fur foreclosure and sale, Lender will have the right to collect all costs allowed by law. Lender may require immediate payment in full under this Paragraph 20 only if all of the following conditions are met:…”
[2] The Court did mention the differences between reverse mortgages and other conventional mortgages, but the Court did not specify whether their conclusion that no reasonable person would interpret the “power of sale” to mean anything other than the statutory power of sale was limited to reverse mortgages only.
[3] The Court concluded that there is no private power of sale in Massachusetts, however, there is no limitation on parties’ ability to contract to include requirements in addition to those contemplated and required by c. 183 §21
Erika J. Hoover, Senior Operations Attorney, Orlans PC Northeast
P 781 790 7806 | M 781 790 7800 | ehoover@orlans.com