Guru Jiwan Singh Khalsa v. Sovereign Bank, N.A.

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14-P-1898 Appeals Court

GURU JIWAN SINGH KHALSA & another1 vs. SOVEREIGN BANK, N.A.

No. 14-P-1898.

Suffolk. November 2, 2015. - January 11, 2016.

Present: Milkey, Carhart, & Massing, JJ.

Mortgage, Foreclosure, Real estate. Real Property, Mortgage.
Negotiable Instruments, Note. Agency, What constitutes.

Civil action commenced in the Superior Court Department on
January 8, 2013.

The case was heard by Robert B. Gordon, J., on motions for
summary judgment.

James L. Rogal for the defendant.
Leonard M. Singer for the plaintiffs.

MASSING, J. To effect a valid foreclosure sale, the

foreclosing mortgage holder must also hold the underlying note

or be acting on behalf of the note holder. Eaton v. Federal

Natl. Mort. Assn., 462 Mass. 569, 571 (2012) (Eaton). This

appeal requires us to consider how a mortgagee may show that it

1
Gunbhushan Kaur.
2

is acting "as the authorized agent of the note holder," id. at

586, for summary judgment purposes.

On cross motions for summary judgment, a judge of the

Superior Court judge entered a declaratory judgment in favor of

the plaintiff borrowers, Khalsa and Kaur, and against the

defendant mortgagee, Sovereign Bank, N.A. (Sovereign), declaring

that the foreclosure sale of the plaintiffs' residence was void

because Sovereign had failed to show that it was acting as the

authorized agent of the note holder, Federal Home Loan Mortgage

Corporation (Freddie Mac). Sovereign appeals. Because the

summary judgment materials create a genuine issue of fact

concerning Sovereign's authorization to foreclose on Freddie

Mac's behalf, we vacate the judgment and remand the case for

further proceedings.

Background. On April 2, 2008, the plaintiffs executed a

promissory note payable to Sovereign in the original principal

amount of $274,000 to finance the purchase of their home in

Millis. To secure the note, the plaintiffs granted Sovereign a

mortgage on the property. Shortly thereafter, Freddie Mac

purchased the note from Sovereign, retaining Sovereign as

servicer of the note and mortgage.

On April 22, 2011, Sovereign notified the plaintiffs that

they were in default on their loan for nonpayment. Sovereign

held a foreclosure sale on January 18, 2013. Although Sovereign
3

held itself out as the "Lender" in the default notice, the note

had been indorsed in blank, and at the time of the sale, Freddie

Mac had physical possession of the note. See G. L. c. 106, § 3-

205(b), inserted by St. 1998, c. 24, § 8 ("When indorsed in

blank, an instrument becomes payable to bearer and may be

negotiated by transfer of possession alone until specially

indorsed"). Sovereign purchased the property at the foreclosure

auction and sold its bid to Freddie Mac.

Meanwhile, the plaintiffs had filed a complaint in the

Superior Court on January 8, 2013, seeking to enjoin the

foreclosure sale and a declaration that Sovereign was not

entitled to foreclose because, among other alleged deficiencies,

"Sovereign Bank does not have authority from the holder of the

mortgage note given by the plaintiffs." After a hearing on the

plaintiffs' application for a preliminary injunction on January

17, 2013, a judge denied relief, and the foreclosure sale went

forward the following day. On November 5, 2013, a different

judge denied Sovereign's first motion for summary judgment.

Acting on subsequently-filed cross motions for summary judgment,

on September 9, 2014, a third judge allowed the plaintiffs'

motion, denied Sovereign's motion, and declared the foreclosure

void.

Evidence of Sovereign's authority to foreclose. The only

contested issue in this case is whether Sovereign, which was the
4

holder of the mortgage but not the note, acted with Freddie

Mac's authority to conduct the foreclosure sale. On this point,

in connection with its first motion for summary judgment,

Sovereign submitted the affidavit of Alan L. Norris, a default

operations analyst at Sovereign.2 Based on his review of

Sovereign's file concerning the plaintiffs' mortgage, Norris

stated "to the best of [his] knowledge and belief" that Freddie

Mac purchased the plaintiffs' loan on May 13, 2008, "with

Sovereign retaining the servicing of the Loan." He added,

"Sovereign is the mortgagee of record, the servicer of the Loan,

and the holder of the Note."3 He asserted in his affidavit that

"[t]he relationship between Freddie Mac and the Seller/Servicers

of its loans is governed by the Freddie Mac Single Family

Seller/Servicer Guide . . ." (guide).4 He further stated,

2
The Norris affidavit, dated January 17, 2013, was the same
document that Sovereign had filed in its successful opposition
to the plaintiffs' application to preliminarily enjoin the
foreclosure sale.
3
Norris's representation that Sovereign was the holder of
the note was incorrect. The judge who denied the plaintiffs'
motion for a preliminary injunction relied in part on this
statement in allowing the foreclosure to proceed. Sovereign
later contradicted Norris's representation with its admission
that Freddie Mac, not Sovereign, had physical possession of the
note at the time of the sale.
4
The affidavit included a reference to a Web site address
for the Seller/Servicer Guide that is no longer valid. The
judge who denied Sovereign's first motion for summary judgment
commented that Sovereign's "suggestion that the Guide is
available online is absurd." He continued, "In any event,
5

"Freddie Mac, as owner of the Note, has authorized Sovereign to

act on its behalf."

Norris did not refer to any particular document in the

file, nor did Sovereign submit any documentary evidence to

support this assertion. The judge who denied Sovereign's first

motion for summary judgment declined to credit Norris's

"unsupported statement, based on no apparent personal

knowledge."

In its second motion for summary judgment, Sovereign

supplemented the Norris affidavit with the affidavit of Dean

Meyer, an assistant treasurer of Freddie Mac, who also based his

affidavit "on a review of the loan records for the property."

Regarding Sovereign's authorization to act on Freddie Mac's

behalf in the foreclosure sale, Meyer also cited the guide,

which, he repeated, "governs the relationship between a

Seller/Servicer and Freddie Mac relating to the sale and

servicing of mortgages." Meyer stated in paragraph five of the

affidavit, "When a borrower defaults, Freddie Mac authorizes a

servicer to initiate foreclosure proceedings in accordance with

the Guide." Meyer concluded in paragraph six, "As a result of

the plaintiffs' default on their mortgage, Sovereign, as a

making it ostensibly available online is no substitute for
including it, or any relevant excerpts, in the summary judgment
record."
6

Freddie Mac servicer, was authorized to conduct foreclosure

proceedings against the Plaintiffs."

The guide is 2,799 pages long. Meyer's affidavit did not

identify exactly where in the guide Freddie Mac authorized

Sovereign in particular, or any seller/servicers in general, to

act on its behalf to initiate foreclosure proceedings or conduct

foreclosure sales. In his memorandum and order allowing the

plaintiffs' cross motion for summary judgment, the judge

commented that "one is left to speculate as to how (if at all)

Mr. Meyer has any personal knowledge of the facts he asserts."

Because Meyer purported to state the content of the guide

without producing the relevant pages, the motion judge allowed

plaintiffs' motion to strike paragraph five as violating the

best evidence rule. See Mass. G. Evid. § 1002 (2015).

The record on Sovereign's second motion for summary

judgment included two pages from the guide, which Norris,

testifying as Sovereign's designee in a deposition conducted

pursuant to Mass.R.Civ.P. 30(b)(6), 365 Mass. 780 (1974), stated

were "the only thing in the seller/servicer guide that Sovereign

Bank is relying upon as authority to foreclose the [plaintiffs']

mortgage." As Sovereign conceded at oral argument on appeal,

neither page establishes that Sovereign was acting on behalf of

Freddie Mac. The motion judge ruled that Sovereign had failed

to present any competent evidence establishing that Sovereign
7

was authorized to act as Freddie Mac's agent when it initiated

the foreclosure sale. Accordingly, the judge denied Sovereign's

motion for summary judgment and allowed the plaintiffs' motion.

Discussion. Under Eaton, 462 Mass. at 571, "a foreclosure

by power of sale pursuant to G. L. c. 183, § 21, and G. L.

c. 244, §§ 11-17C, is invalid unless a foreclosing party holds

the mortgage and also either holds the underlying mortgage note

or acts on behalf of the note holder." Galiastro v. Mortgage

Electronic Registration Sys., Inc., 467 Mass. 160, 161 (2014).5

The question before us is whether a genuine factual dispute

exists as to whether Sovereign was acting "as the authorized

agent of the note holder." Eaton, supra at 586. While the

judge did not err in identifying the shortcomings in Sovereign's

materials and, accordingly, denying Sovereign's motion for

summary judgment, these shortcomings did not entitle the

plaintiffs to summary judgment in their favor.

General agency principles apply in the context of mortgage

foreclosure sales. Ibid. An agency relationship "arises 'from

the manifestation of consent by one person to another that the

other shall act on his behalf and subject to his control, and

5
This rule applies only to mortgage foreclosure sales for
which the mandatory notice of sale was given after June 22,
2012, the date of the Eaton decision, and to cases pending on
appeal on that date in which the issue had been preserved. See
Eaton, supra at 589; Galiastro v. Mortgage Electronic
Registration Sys., Inc., supra. This includes the case before
us.
8

consent by the other so to act.'" Harrison Conference Servs. of

Mass., Inc. v. Commissioner of Rev., 394 Mass. 21, 24 (1985),

quoting from Restatement (Second) of Agency § 1(1) (1958).

Where the mortgage holder and note holder are not the same,

the mortgage holder can demonstrate that it was authorized to

act as the note holder's agent in a variety of ways. The task

is simple if the mortgage holder can produce an instrument

executed by the note holder prior to the foreclosure proceedings

that expressly authorizes the mortgage holder to foreclose on

the particular loan. Sufficient proof would be similarly

straightforward if the mortgage holder could produce a document

from the note holder, predating the foreclosure, generally

authorizing the mortgage holder to act in its discretion as the

note holder's agent for the purpose of foreclosing on a series

of mortgages that included the borrower's. Providing the

requisite proof is more challenging where, as here, a loan-

specific preforeclosure authorization apparently does not exist.

Through its affidavits, Sovereign attempted to show that

its seller/servicer relationship with Freddie Mac included the

authority to act on Freddie Mac's behalf to initiate and conduct

foreclosure proceedings with respect to all the loans Sovereign

serviced on Freddie Mac's behalf (which included the

plaintiffs'). We agree with Sovereign that such proof could

satisfy Eaton; that is, Sovereign could have shown that it
9

possessed the requisite authority without pointing to any

preforeclosure instrument expressly authorizing it to foreclose.

To prevail on its motion for summary judgment, however,

Sovereign had to establish that no genuine issue of material

fact existed concerning such an agency relationship with Freddie

Mac and that it was therefore entitled to judgment as matter of

law. DeWolfe v. Hingham Centre, Ltd., 464 Mass. 795, 799

(2013). The affidavits that Sovereign produced in an effort to

support its assertions did not satisfy the requirements of

Mass.R.Civ.P. 56(e), 365 Mass. 824 (1974), which requires

affidavits "made on personal knowledge" that "set forth such

facts as would be admissible in evidence." See Polaroid Corp.

v. Rollins Envtl. Servs. (NJ), Inc., 416 Mass. 684, 696 (1993)

("bare assertions and conclusions regarding a company officer's

understandings, beliefs, and assumptions are not enough to

withstand a well-pleaded motion for summary judgment"); Haverty

v. Commissioner of Correction, 437 Mass. 737, 754 (2002), S.C.,

440 Mass. 1 (2003) ("generalized statements . . . devoid of

specific details" insufficient). For example, as noted, the

judge ruled that Meyer's affidavit failed adequately to

demonstrate the basis of his personal knowledge and violated the
10

best evidence rule.6 Norris's affidavit was similarly deficient.

In other words, Sovereign's efforts to demonstrate its own

entitlement to summary judgment failed not as a matter of theory

but as a matter of proof.

Of course, Sovereign's failure to show that it was entitled

to summary judgment does not mean that the plaintiffs were

entitled to the allowance of their cross motion for summary

judgment. See, e.g., Curly Customs, Inc. v. Bank of Boston,

N.A., 49 Mass. App. Ct. 197, 199 (2000). With respect to their

motion for summary judgment, the plaintiffs as the moving party

had "the burden of demonstrating affirmatively the absence of a

genuine issue of material fact on every relevant issue,

regardless of who would have the burden on that issue at trial."

Arcidi v. National Assn. of Govt. Employees, Inc., 447 Mass.

616, 619 (2006).7 "This burden need not be met by affirmative

6
Sovereign does not argue on appeal that the motion judge
abused his discretion in striking paragraph five of Meyer's
affidavit.
7
The Supreme Judicial Court has not addressed whether, in
an action challenging the validity of a nonjudicial foreclosure
under Eaton, the mortgagor who initiates the action carries the
burden of proving at trial that the mortgagee is neither the
holder of the note nor acting on behalf of the note holder, or
whether the foreclosing mortgagee carries the burden of proving
that it holds the note or is the note holder's authorized agent.
In the preliminary injunction context, the mortgagor is required
"to show that she has a reasonable likelihood of establishing
that, at the time of the foreclosure sale, [the mortgage holder]
neither held the note nor acted on behalf of the note holder."
Eaton, 462 Mass. at 590. See Chartrand v. Newton Trust Co., 296
Mass. 317, 320 (1936) ("The burden of proving that the sale was
11

evidence negating an essential element of the plaintiff's case,

but may be satisfied by demonstrating that proof of that element

is unlikely to be forthcoming at trial." Flesner v. Technical

Communications Corp., 410 Mass. 805, 809 (1991), citing

Kourouvacilis v. General Motors Corp., 410 Mass. 706 (1991).

Applied to this case, to prevail on summary judgment the

plaintiffs had the burden to show that Sovereign's materials

could not support an inference that its seller/servicer

relationship with Freddie Mac included the authority to

foreclose on the plaintiffs' loan.

In evaluating whether the plaintiffs met their burden on

this point, "we review the record in the light most favorable to

the party against whom the judge allowed summary judgment, here

[Sovereign]." Marhefka v. Zoning Bd. of Appeals of Sutton, 79

Mass. App. Ct. 515, 516 (2011). "Any doubts as to the existence

of a genuine issue of material fact are to be resolved against

improperly conducted rested on the plaintiffs"). However,
because the facts concerning the relationship between the
mortgagee and the note holder are far more readily available to
them, and because the statutory requirements governing
nonjudicial foreclosures must be strictly adhered to, see U.S.
Bank Natl. Assn. v. Ibanez, 458 Mass. 637, 646 (2011), it can be
argued that once the mortgagor makes a plausible showing that
the mortgagee does not hold the note and is not acting on behalf
of the note holder, the mortgagee should carry the burden of
proving that the foreclosure is valid under Eaton. We need not
decide this issue, as the moving party carries the burden of
proving the absence of any genuine issue of material fact for
the purposes of summary judgment.
12

the party moving for summary judgment." Milliken & Co. v. Duro

Textiles, LLC, 451 Mass. 547, 550 n.6 (2008).

The plaintiffs presented affirmative proof that Sovereign

did not hold the note when it foreclosed on the mortgage.

Sovereign, in turn, presented materials intended to show that it

possessed authority to act on the note holder's behalf. For the

reasons set forth above, Sovereign's apparent inability to

produce a preforeclosure instrument from Freddie Mac expressly

authorizing it to foreclose on the plaintiffs' mortgage is not

fatal to Sovereign's claim that it had the requisite authority.

Although Sovereign failed at the summary judgment stage to

identify the precise language in the complex seller/servicer

agreement establishing conclusive proof of its authority, this

does not mean that it would be unable to provide the requisite

proof at trial.

Indeed, Sovereign's summary judgment materials included

multiple indicators that it was acting as Freddie Mac's agent.

The guide included detailed instructions on how to conduct

foreclosures on Freddie Mac's behalf, strongly suggesting that

Sovereign, as a seller/servicer, generally possessed the power

to conduct foreclosures. In addition, the summary judgment

record shows that after Sovereign was the highest bidder at the

foreclosure sale, Freddie Mac purchased Sovereign's bid. Based

on that course of events, a fact finder could infer that Freddie
13

Mac had authorized Sovereign to go forward with the foreclosure.8

While Sovereign's materials may amount to "at best a toehold to

establish" its authority to act on Freddie Mac's behalf, "[a]

toehold . . . is enough to survive a motion for summary

judgment." Marr Equip. Corp. v. I.T.O. Corp. of New England, 14

Mass. App. Ct. 231, 235 (1982).9

8
Sovereign suggests that Freddie Mac "ratified" Sovereign's
agency status after the fact by purchasing Sovereign's bid. The
ratification doctrine is inapt here, as it presumes, contrary to
the requirements of Eaton, that at the time of the foreclosure
sale, Sovereign was not authorized to act for Freddie Mac. See
Licata v. GGNSC Malden Dexter LLC, 466 Mass. 793, 802 (2014),
quoting from Linkage Corp. v. Trustees of Boston Univ., 425
Mass. 1, 18, cert. denied, 522 U.S. 1015 (1997) ("Where an agent
lacks actual authority" to act on a principal's behalf, the
principal is nonetheless bound "if the principal acquiesces in
the agent's action, or fails promptly to disavow the
unauthorized conduct after disclosure of material facts").
9
The summary judgment record includes a third affidavit
signed by Kristy Kochenash, a banking officer of Sovereign, who
stated based on "personal knowledge" and her review of
Sovereign's business records, "the Foreclosing Mortgagee was
. . . [a]uthorized by the owner of the promissory note secured
by the above mortgage to conduct the foreclosure sale."
Kochenash's affidavit was titled an "Eaton Affidavit" and was
filed in the registry of deeds three months after the
foreclosure sale. See Eaton, supra at 589 & n.28 (suggesting
that, prospectively, foreclosing mortgagees could clarify the
chain of title for subsequent purchasers by filing an affidavit
pursuant to G. L. c. 183, § 5B, in the registry of deeds stating
that the mortgagee "either held the note or acted on behalf of
the note holder at the time of the foreclosure sale"). The
motion judge did not consider this affidavit because Sovereign
never brought it to the judge's attention. See Dziamba v.
Warner & Stackpole LLP, 56 Mass. App. Ct. 397, 399 (2002)
(noting that Superior Court Rule 9A[b][5], the "anti-ferreting"
rule, is designed to prevent "throw[ing] a foot-high mass of
undifferentiated material at the judge"). Accordingly, we
14

Conclusion. The judgment is vacated, and the case is

remanded to the Superior Court for further proceedings.

So ordered.

decline to consider what effect this affidavit would have had on
the cross motions for summary judgment.

We note that under "An Act preventing unlawful and
unnecessary foreclosures," St. 2012, c. 194, effective November
1, 2012, foreclosing mortgagees must file an affidavit in the
registry of deeds "[p]rior to publishing a notice of foreclosure
sale," certifying compliance with G. L. c. 244, § 35B, regarding
good faith efforts to avoid foreclosure, and G. L. c. 244,
§ 35C, regarding the mortgagee's status as either the holder of
the note or the authorized agent of the note holder. These
affidavits may be relied upon by "an arm's-length third party
purchaser for value," but do not relieve the affiant from
liability for failure to comply with these sections. G. L.
c. 244, §§ 35B(b), (f), 35C(b). See St. 2015, c. 141, "An Act
clearing titles to foreclosed properties" (allowing conclusive
effect to affidavits demonstrating foreclosure complied with
requirements of statutory power of sale three years after
recording of affidavit, unless challenged in court).