Parties Make A Federal Case Out Of An Eviction

The First Circuit Court of Appeals appears to have put to rest a foreclosure and eviction more than 16 years after the borrowers/homeowners stopped paying their mortgage. As described In Emigrant Mortgage Company, Inc., and Retained Realty, Inc. v. Donelyn Bourke and William Hayward, Sr., two owners of a property on Nantucket (Bourke and Hayward) borrowed $950,000 from Emigrant in April 2008, as part of a refinancing, and granted Emigrant a mortgage on that property. Bourke and Hayward missed their mortgage payment one year later, in April 2009, and did not make any payment thereafter.

In March 2011, Emigrant foreclosed by two distinct methods governed by two different statutes: under the power of sale; and by entry. On December 14, 2012, Emigrant filed the certificate of entry and the foreclosure deed to Retained Realty Inc. (“RRI”), with the Nantucket Registry District of the Land Court (this being registered land). RRI paid just under $800,000 for the property.

RRI, as the new owner, filed an eviction action against Bourke and Hayward in March 2013. After a bench trial (i.e., non-jury), the Nantucket District Court entered a judgment for possession in favor of RRI, thereby confirming the validity of the foreclosure by Emigrant. That judgment entered in November 2017—more than seven years after Bourke and Hayward stopped paying their mortgage.

Bourke and Hayward appealed the judgment, and the Massachusetts Appellate Division issued a decision ruling that while Emigrant’s foreclosure under the power of sale was void due to a deficient pre-foreclosure notice, the foreclosure by entry was valid. The Appellate Division issued its decision on December 23, 2019. Up to that point, Bourke and Hayward had lived in the Nantucket property for 10 ½ years without paying their mortgage.

Bourke and Hayward were not finished yet. They filed with the Registry a “Statement of Adverse Claim,” alleging that they still had an interest in the property. At that point, Emigrant and RRI filed an action in the U.S. District Court for the District of Massachusetts seeking a judgment establishing RRI as the owner of the property and seeking use and occupancy payments from Bourke and Hayward for the time they remained in possession post-foreclosure by entry. Emigrant and RRI invoked the federal court’s diversity jurisdiction (granted by a federal statute) as basis for filing the case in the U.S. District Court, which was appropriate because the dispute was between citizens of different states and the amount in controversy exceeds $75,000, exclusive of interest and costs.

In the U.S. District Court case, Bourke and Hayward challenged the federal court’s authority to enter a judgment of possession because, under the applicable Massachusetts statute, the Land Court has exclusive jurisdiction over most title claims involving registered land. The U.S. District Court ruled that, as a court of general jurisdiction, it had authority to hear claims involving registered land. The First Circuit Court of Appeals agreed, stating that a Massachusetts statute can certainly restrict the scope of other state courts’ jurisdiction, but a “grant of exclusive jurisdiction by a state legislature cannot divest a federal court of subject matter jurisdiction” granted under a federal statute.

The First Circuit opinion was issued on January 29, 2025, more than 16 years after Bourke and Hayward stopped paying their mortgage. The First Circuit noted that the use and occupancy that Bourke and Hayward owe to RRI is now $1,068,564.38. In addition, RRI now owns the property which has a fair market value of $1,850,000. So, while the title issue lingered for 16 years, the harm incurred by RRI being prevented from taking possession for all those years was at least mitigated by the fact that the property value is now about double the amount paid by RRI for the foreclosure deed. RRI is entitled to the use and occupancy payments from Bourke and Hayward as well, but collectability seems doubtful.

Post Date: 2/4/2025