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HSBC Bank v. Matt

HSBC Bank v. Matt

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Published by Richard Vetstein

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Published by: Richard Vetstein on Jan 14, 2013
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NOTICE: The slip opinions and orders posted on this Web site are subject toformal revision and are superseded by the advance sheets and bound vol-umes of the Official Reports. This preliminary material will be removed fromthe Web site once the advance sheets of the Official Reports are published. If you find a typographical error or other formal error, please notify the Re-porter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1Pemberton Square, Suite 2500, Boston, MA 02108-1750; (617) 557-1030;SJCReporter@sjc.state.ma.usHSBC BANK USA, N.A., trustee, [FN1]
vs.
Jodi B. MATT.SJC-11101.Suffolk. Sept. 6, 2012. - Jan. 14, 2013.
Mortgage,
Foreclosure.
Practice, Civil,
Standing.
Federal ServicemembersCivil Relief Act. Massachusetts Soldiers' and Sailors' Civil Relief Act.
CIVIL ACTION commenced in the Land Court Department on January 27,2010. The case was heard by
Keith C. Long,
J.The Supreme Judicial Court on its own initiative transferred the case fromthe Appeals Court.
Glenn F. Russell, Jr.,
for the defendant.
Nathalie K. Salomon
for the plaintiff.The following submitted briefs for amici curiae:
Robert P. Marley,
pro se.
Paul J. Mulligan
for Real Estate Bar Association for Massachusetts, Inc., & an-other.
Grace C. Ross,
pro se.Present: Ireland, C.J., Spina, Cordy, Botsford, Gants, Duffly, & Lenk, JJ.LENK, J.
 
The plaintiff, HSBC Bank USA, N.A. (HSBC), claiming to be the holder of amortgage given by the defendant, Jodi B. Matt, filed a complaint in equity inthe Land Court, under the Massachusetts Soldiers' and Sailors' Civil Relief Act (Massachusetts act or act), to determine if Matt was entitled to foreclo-sure protections under the Federal Servicemembers Civil Relief Act (FederalSCRA or SCRA), 50 U.S.C. app. §§ 501 et seq. (2006). The Massachusettsact, which provides a procedural framework for ascertaining whether mort-gagors are entitled to protections under the SCRA, expressly permits onlythose defendants who assert entitlement to such rights to appear in equi-table proceedings brought pursuant to the SCRA (servicemember proceed-ings). See St.1943, c. 57 (1943), as amended through St.1998, c. 142.While conceding that she is not entitled to protection under the SCRA, Mattnonetheless moved to dismiss the complaint on the ground that HSBC lackedstanding to bring a servicemember proceeding because it was not the clearholder of either her note or her mortgage. After ordering discovery, a LandCourt judge denied Matt's motion, concluding that HSBC had standing byvirtue of its right to purchase Matt's mortgage.Because Matt was not entitled to appear or be heard at the servicememberproceeding, the court should not have accepted or entertained Matt's filings.Nonetheless, the judge having undertaken to examine HSBC's standing, thequestion before us is whether he properly applied the correct standard inconcluding that HSBC had established standing. Because standing to bring aservicemember proceeding is limited to plaintiffs who satisfactorily establishthat they are mortgagees or agents thereof, we conclude that the judge'sdetermination of HSBC's standing on the basis of a different standard is in-correct.1.
Statutory framework.
The Federal SCRA, passed in 1940, is modeled afterthe Soldiers' and Sailors' Civil Relief Act of 1918, which in turn was based onState civil relief acts passed during the American Civil War. See Folk, Tollingof Statutes of Limitations Under Section 205 of the Soldiers' and Sailors' CivilRelief Act, 102 Mil. L.Rev. 157, 159 (1983). In its current form, and consis-tent with its history, the SCRA "provide[s] for the temporary suspension of  judicial and administrative proceedings and transactions that may adverselyaffect the civil rights of servicemembers during their military service." 50U.S.C. app. § 502. Among the protections granted to servicemembers, theSCRA provides that a "sale, foreclosure, or seizure of property for a breachof an obligation" conducted while a party is in the military [FN2] "shall notbe valid ... except ... (1) upon a court order granted before such sale, fore-closure, or seizure; or (2) if made pursuant to an agreement [between theparties]." 50 U.S.C. app. § 533(c).
 
In Massachusetts, a mortgagee [FN3] seeking to assure compliance with theSCRA prior to commencing foreclosure proceedings could bring an action inequity to obtain an appropriate court order. [FN4] See
Lynn Inst. for Sav.
v.
 Taff,
314 Mass. 380, 386 (1943);
Great Barrington Sav. Bank v. Brown,
239Mass. 546, 547 (1921). In 1941, the Legislature, concerned that service-members were not receiving adequate notice of servicemember proceedings,passed the Massachusetts act, which set forth certain procedural require-ments for such equitable actions. [FN5] St.1941, c. 25, preamble. The actwas thereafter amended on multiple occasions to provide additional proce-dural and substantive limitations. See St.1943, c. 57.Prominent among these are the jurisdictional limitations, which provide:"In proceedings under this section,
no person
who is not a record owner of the equity of redemption in the mortgaged property and
who is not entitledto the benefit of the [SCRA]
...
shall be entitled to appear or be heard in suchproceeding,
except on behalf of a person so entitled, or unless an affidavitby the claimant, ... stating that he is entitled to the benefits of [the SCRA],is filed with the appearances.
Such proceedings shall be limited to the issuesof the existence of such persons and their rights if any.
" (Emphasis added.)St.1943, c. 57, § 1, as amended through St.1990, c. 496, § 1. In concertwith the limited subject matter of the proceeding, the act now limits the re-lief granted at proceedings where a defendant is not entitled to the benefitsof the SCRA to a "decree by the court that no person is then subject to or isentitled to the benefits of the [SCRA], [which] shall forever bar the personsnamed in the bill or complaint from complaining that such foreclosure orseizure is invalid under said act." [FN6]
Id.
Servicemember proceedings "occur independently of the actual foreclosureitself and of any judicial proceedings determinative of the general validity of the foreclosure."
Beaton v. Land Court,
367 Mass. 385, 390, appeal dis-missed, 423 U.S. 806 (1975) (
Beaton
). See
Akar v. Federal Nat'l Mtge.Ass'n,
845 F.Supp.2d 381, 396-397 (D.Mass.2012) ("the Land Court [ser-vicemember] action [does] not mark the commencement of foreclosure pro-ceedings"). "If a foreclosure were otherwise properly made, failure to complywith the [SCRA] would not render the foreclosure invalid as to anyone notentitled to the protection of that act."
Beaton, supra
at 390. Failure to bringa servicemember proceeding, however, will leave the title vulnerable to achallenge that the foreclosure sale was defective due to the possibility that itviolated a mortgagor's rights under the SCRA. See
id.
Thus, a servicemem-ber proceeding is neither a part of nor necessary to the foreclosure process;it simply ensures that a foreclosure will not be rendered invalid for failure toprovide the protections of the SCRA to anyone so entitled, an assurance that

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