Reacquisition of Title by Cotenant Mortgagor After Foreclosure of First Mortgage
by John Sadoski, Esq.
Question: My title exam discloses the following. Title is held by A and B, as tenants in common. A and B grant a mortgage to C. Subsequently, A and B grant a second mortgage, and creditors of A and B record multiple attachments that encumber the locus. C then forecloses its mortgage. A is the high bidder at the sale and a foreclosure deed from C to A is recorded. Does A hold good title at this point?
Answer: No, for two reasons.
First, a cotenant mortgagor who purchases at a foreclosure sale is presumed to have purchased for the benefit of all cotenants. Salter v. Quinn, 334 Mass. 220 (1956). In that case, the SJC held that the co-tenant who purchased at the foreclosure sale could not convey good marketable and record title since the interest of the other cotenant (B, in our case) clearly appeared in the records of the registry of deeds.
Second, if a mortgagor purchases at a foreclosure sale, or subsequently reacquires title, junior mortgages and other liens purportedly wiped out by a properly conducted foreclosure of a first mortgage are revived. In Ayer v. Philadelphia B. Face Brick Co., 157 Mass. 57 (1892), the SJC held that the re-acquisition of title by a mortgagor after his first mortgage was foreclosed revived a second mortgage from the mortgagor. The second mortgage in Ayer
stated that it was subject to the first mortgage. Nonetheless, the court applied the doctrine of estoppel by deed, as the warranty covenants contained within the second mortgage did not include a specific exception for the first mortgage. The fact that the existence of the first mortgage was disclosed within the same document that granted the warranty covenants was not sufficient to limit the general covenant of warranty granted therein. The SJC reached a different result in Huzzey v. Heffernan, 143 Mass. 232 (1887). In
Huzzey, the mortgagor in the second mortgage also re-acquired title after the foreclosure of his first mortgage. The SJC held that the second mortgage was not revived in this case due to the fact that the covenant of warranty in the second mortgage contained an exception for those claiming under the first mortgage. The important distinction to be made is that unless the covenant itself contains a specific exception for those claiming by through and under the first mortgage, estoppel by deed will apply and the second mortgage will be revived should a mortgagor re-aquire title subsequent to foreclosure of the first mortgage.
While the doctrine of estoppel by deed would not apply to junior attachments or other junior liens, it is safe to assume a Massachusetts court would hold on equitable grounds that such junior attachments and liens would be revived when a mortgagor reacquires title after the foreclosure of his or her first mortgage. Otherwise, a mortgagor intentionally could allow a first mortgage to go to foreclosure, bid in at the foreclosure sale or subsequently re-acquire title after the foreclosure sale and fraudulently wipe out all junior encumbrances.
In this situation, A would not hold good title unless he obtained the interest of B by deed and recorded discharges for the second mortgage and junior attachments.
|
