Borrower fighting post-foreclosure eviction must pay rent
Borrower fighting post-foreclosure eviction must pay rent
But appeal bond may be waived
By: Eric T. Berkman July 1, 2020 Lawyers Weekly
The Supreme Judicial Court has ruled that a residential borrower appealing post-foreclosure eviction could waive his appeal bond provided he paid for use and occupancy of the premises while his appeal was pending.
The borrower, defendant Alton King, sought to challenge his eviction on grounds that the lender, plaintiff Bank of New York Mellon, did not strictly comply with notice-and-cure requirements in the standard mortgage, rendering the foreclosure void under the SJC’s 2015 decision in Pinti v. Emigrant Mortgage.
A single justice of the Appeals Court ruled that in light of King’s indigency and non-frivolous grounds for appeal, the Housing Court properly waived the appeal bond required by G.L.c. 239, §5, when challenging a summary process action but erroneously ordered King to pay $4,000 a month for use and occupancy.
Specifically, the single justice deemed such payments part of the waived bond and noted that §5(e) of the statute was inapplicable because King and BNY had no landlord-tenant relationship. Section 5(e) requires a defendant to pay “all or any portion of any rent which shall come due” when a bond has been waived.
The SJC reversed, finding that §6 of the same statute, which further defines the conditions of bonds in post-foreclosure actions, provides for such payments in those circumstances.
“Because the provisions of §5(e) apply to defendants whose bond conditions are governed by §6, and because payment of rent under §5(e) is paid in lieu of a bond, we conclude that courts may order postforeclosure mortgagors like the defendant to pay use and occupancy ‘as rent’ to the purchaser of the premises during the pendency of their appeal when the mortgagor’s bond has been waived,” Justice Scott L. Kafker wrote for the unanimous court.
The SJC also said the amount of such payments should represent a “fair balancing of interests,” as opposed to the fair market value.
The 27-page decision is Bank of New York Mellon v. King, et al., Lawyers Weekly No. 10-108-20.
‘Discouraging’ decision?
King’s attorney, Lucas B. McArdle of Lawrence, said the $4,000 use and occupancy payments could be an insurmountable barrier for his client in fighting his eviction.
“Relief is often unattainable without the opportunity to appeal, so a determination from the highest court in the commonwealth that places further obstacles in obtaining justice, especially for indigent litigants like King, only further tips the balance of justice in favor of big banking interests,” McArdle said.
McArdle said his client had what he characterized as a predatory loan: a negative amortization loan with an initially affordable payment that ballooned to payments of more than $10,000 a month while continually stripping equity from the home.
“I implore the readers to … decide if justice has been served in potentially denying King the ability to be heard on the merits,” McArdle said, adding that his elderly client has a winning Pinti argument that could otherwise rescind the foreclosure and allow him to sell the property and obtain alternative housing.
BNY’s attorney, Carl E. Fumarola of Boston, declined to comment.
But Jeffrey B. Loeb, a Boston attorney who submitted an amicus brief on behalf of an individual who had bought property at a foreclosure auction and was denied use and occupancy payments during the borrower’s appeal, said the SJC is simply applying the law as commonly understood before last year’s Bank of New York Mellon v. Dundon decision.
In Dundon, a single justice of the Appeals Court ruled that because §5(e) only requires payment of “rent which shall become due,” §6 — which sometimes requires periodic payments from borrowers fighting post-foreclosure eviction as a “condition of the bond” — did not apply where the bond was waived. The single justice in King applied Dundon when he denied use and occupancy to BNY while King’s appeal was pending.
“Without this [SJC] decision, I don’t think you would have had post-foreclosure eviction cases settle,” Loeb said. “There would have been no incentive for the person occupying the property to take a settlement, cash for keys, or anything else along those lines because they could just stay for the duration of the appeal without paying.”
Maura K. McKelvey of Boston, who represents lenders, said the decision should curtail frivolous appeals while giving judges flexibility to limit the amount of use and occupancy where appropriate.
“I think the decision is fair in that respect,” she said. “The SJC left enough of an opening to allow for individual circumstances to be taken into consideration while applying the law as written.”
Jane A. Sugarman, senior staff attorney with South Coastal Counties Legal Services in Hyannis and co-author of an amicus brief filed on behalf of several legal aid organizations, was similarly encouraged by the court’s finding that use and occupancy could be based on multiple factors beyond fair market rent.
“The trial court has routinely ordered payments pursuant to §5(e) in an amount equal to fair market rent or fair market value without any consideration of factors like the appellant’s ability to pay,” Sugarman said. “This will make the appeals process more accessible to a lot of people who might not have been able to afford fair market value but are nevertheless able to pay something.”
On the other hand, Sarah McKee of Amherst, a volunteer with the Massachusetts Alliance Against Predatory Lending and a former member of the Legislature’s Registry of Deeds Commission, called the ruling a “breathtaking dereliction of judicial responsibility.”
Specifically, McKee said, by holding that courts may price indigent homeowners out of access to appeals courts, regardless of the foreclosing party’s violation and the homeowner’s likelihood of success, the SJC has carved out an exception to the Massachusetts Indigent Court Costs Law.
“This is structural classism [and], to an extent, structural racism,” McKee said. “The SJC’s hostility to such homeowners’ constitutional property rights could not be more clear.”
Fighting eviction
In October 2015, King’s wife, who was dismissed from the case, defaulted on the mortgage encumbering their Longmeadow property.
BNY notified King of the default. King apparently failed to cure and BNY foreclosed in August 2018.
The bank then obtained a post-foreclosure summary process judgment, though King asserted that BNY did not comply with notice requirements under paragraph 22 of the standard mortgage, rendering the foreclosure void under Pinti.
King appealed the judgment, and Housing Court Judge Robert G. Fields waived the appeal bond based on his indigency and his non-frivolous grounds for appeal.
However, Fields also ordered King to pay $4,000 a month for use and occupancy after hearing testimony from a real estate broker that the 7,450-square-foot, five-bedroom home had a fair rental value of $5,000 a month.
King appealed further, and Appeals Court Judge Peter W. Sacks, sitting as a single justice, held that with bond being waived, §6 — which allows for use and occupancy in post-foreclosure eviction appeals as a “condition of the bond” — was inapplicable.
Sacks then reported the case to the full court, at which point the SJC took it up on its own initiative.
Use and occupancy
The SJC found that §6 does indeed provide for use and occupancy payments during the pendency of a post-foreclosure eviction appeal, even when the appeal bond is waived, rejecting the reasoning of Dundon.
Similarly, the court found that “rent” as contemplated by §5(e) should be read broadly to include use and occupancy in bond-waived post-foreclosure eviction appeals.
“[J]ust as there are due process implications when a tenant remains in possession without paying rent, so too are there due process implications when a tenant at sufferance in the postforeclosure context remains in possession without paying use and occupancy,” Kafker wrote.
Nonetheless, the amount of rent must reflect a “fair balancing of interests,” he added.
“Such a fair balancing occurred here, where the amount of use and occupancy was based on the fair market rental value of the property and was less than the mortgage payments the defendant would have otherwise been required to make, and where those mortgage payments had not been paid for years, indicating foreclosure was inevitable even if the defendant had a meritorious defense,” Kafker wrote.