I always stated that a bone fide third party purchaser has a lot of rights when they purchase a property in a foreclosure auction sale. They should have a lot of rights because they did nothing wrong in the transaction and they have every right to assume that they will get good and marketable title. Of course, they should always perform their own due diligence.
However, recently, The Massachusetts Supreme Court ruled against Francis Bevilacqua. Mr Bevilacqua purchased his home at a foreclosure auction in 2006, but the Court ruled that he never had legal title to the property since the lender had no right to foreclose on it in the first place! Five years after the purchase, the robo-signing bank’s “dubious practices” stand to cost Bevilacqua. Realize that he purchased the home long before the issues with title associated with robo-signing came to light and he reasonably believed that the title was clear!
Bevilaqua’s attorney commented that this is “scary” and he added that people with this new type of cloud on their title “don’t know they have this problem.” Prior to the state’s U.S. Bank vs. Ibanez decision, in which the Supreme Court ruled that the prior owner of a property has claim to a property if the foreclosure process is proved invalid, Bevilacqua would have been considered to have clear title. However, the Ibanez case changed the game because, according to the decision, if “the bank held nothing [due to improper foreclosure], Bevilacqua acquired nothing and had no standing as a result”.
Although Bevilacqua attempted to clear the title upon learning of the issue recently, his petition, based on a statute “designed to allow the holder of a clouded title to clear that title,” was denied by the state Land Court. The court ruled – and the Supreme Court upheld the ruling – that Bevilacqua did not have the necessary “plausible claim to the title” since he acquired the title following an invalid foreclosure. The ruling makes it clearer, at least in Massachusetts, how courts will respond when ownership of properties that were foreclosed on during the “robo-signing era” comes in question. They will likely rule in favor of the former homeowner.
There is still a possibility that Bevilacqua will be able to keep his home via a foreclosure proceeding on the prior owner. His lawyer has stated that they will proceed with this option. There is currently no information available on how the former owner of the home plans to respond to the news.
I wonder what would have been the result if Bevilacqua had purchased via a short sale as opposed to a foreclosure auction sale…..
Everyone have a wonderful Thanksgiving!!
Padraic Deighan Esq
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