Heard: September 11, 2018.
action commenced in the Superior Court Department on
January 19, 2016. The case was heard by James F.
Lang, J., on motions for summary judgment. Summary
process. Complaint filed in the Peabody Division of the
District Court Department on March 7, 2016.
transfer to the Northeast Division of the Housing Court
Department, the case was heard by Timothy F.
Sullivan, J., on a motion for summary judgment.
Kristin L. Thurbide (Josef C. Culik also present) for Kenneth
Ivester, III, & another.
Hermann for Federal National Mortgage Association. Edward J.
Fallman for Property Acquisition Group, LLC.
Present: Vuono, Agnes, & Henry, JJ.
primary issue in this case is whether the mortgagee, Federal
National Mortgage Association (Fannie Mae), exercised good
faith and reasonable diligence to protect the interests of
the mortgagors, Kenneth Ivester and Susan Ivester (Ivesters),
by obtaining the highest possible price at an auction sale.
We hold that on this summary judgment record, which contains
evidence of an inadequate price as well as evidence that
Fannie Mae (1) failed to take any steps to determine the
current fair market value of the property before the auction
sale and (2) did not take any steps other than compliance
with statutory mandates, the mortgagors raised material
disputes of fact as to whether the mortgagee complied with
its duty to exercise good faith and reasonable diligence.
consolidated cases arise from the foreclosure of the
Ivesters' property. The winning bidder at that
foreclosure auction was Property Acquisition Group, LLC
(PAG). The Ivesters appeal from a Superior Court judgment
dismissing their claim that the mortgagee, Fannie Mae, did
not exercise good faith and reasonable diligence in
conducting the foreclosure sale. That appeal has been
consolidated with the
appeal from the amended judgment entered against them on
PAG's summary process action in the Housing Court. Both
cases were resolved against the Ivesters on summary judgment.
We summarize the undisputed facts drawn from the summary
judgment record; to the extent the record includes disputed
evidence, we consider that evidence in the light most
favorable to the Ivesters, against whom summary judgment
entered. See Ritter v. Massachusetts Cas. Ins. Co.,
439 Mass. 214, 215 (2003) .
Purchase, mortgage, and foreclosure.
Ivesters purchased the property located at 245 Salem Street,
Lynnfield (property) for $399, 000 in October, 2003. They
refinanced in 2006 with a $302, 000 loan from CitiMortgage,
Inc., secured by a mortgage on the property, and a second
loan for $50, 000 from Citibank Federal Savings
Ivesters admit that they stopped making payments on their
$302, 000 loan in 2013 and that, as of July, 2015, were in
arrears in the amount of $65, 228.38. They also concede that
Fannie Mae, the assignee of the mortgage, was both authorized
and justified in exercising its right under the mortgage to
sell the property for nonpayment and that Fannie Mae
satisfied all of the statutory requirements pertaining to
foreclosure by sale contained in G. L. c. 244, §§
behalf of PAG, Richard Damiano attended the foreclosure
auction, which was conducted by Fannie Mae's
agent. The opening bid price was set at $329,
000. Damiano and two other bidders entered bids.
Damiano's bid prevailed at $355, 000, and the foreclosure
deed was recorded on January 8, 2016.
property consists of 4.57 acres, approximately 103, 000
square feet (2.36 acres) of which is buildable. At the time
of the foreclosure auction, the property was improved with a
single family home. The Ivesters contend that facts existed
that might have alerted Fannie Mae and did alert bidders to
the development potential of the property. At the time of the
foreclosure, local zoning bylaws required 30, 000 square feet
per lot and continuous frontage of 150 feet. Although the
property had only noncontinuous frontage of 143.41 feet and
42.26 feet on Salem Street, the Ivesters contend that
installation of a new road could open the property to further
development, as demonstrated by conceptual plans created for
PAG shortly after it acquired the property. Moreover, while
the property is located in a single-family residential
district, there are restaurants and businesses in the
immediate neighborhood, including adjacent to the property.
The property, however, does contain wetlands, and any
development proposals likely would require an order of
conditions from the Lynnfield conservation commission.
Value of the property.
parties dispute the fair market value of the property at the
time of the auction. Fannie Mae admits it did not obtain any
appraisals, evaluations, or expert opinions to determine the
value of the property prior to the auction. Fannie Mae did
not answer an interrogatory asking what amount it had
authorized as the starting bid for the foreclosure auction.
The record does not otherwise reflect how Fannie Mae or its
auctioneer valued the property or arrived at a minimum or
opening bid for the auction. Indeed, Fannie Mae answered
interrogatories inquiring as to "every effort [Fannie
Mae] engaged in ... to determine the . . . fair market
value" of the property prior to the foreclosure auction
by stating only that it did not obtain any
appraisals. In response to an interrogatory
inquiring as to each action that would demonstrate reasonable
diligence to protect the interests of its mortgagors, Fannie
Mae answered, in relevant part, that "after providing
the required notices to Plaintiffs, a foreclosure auction was
held on November 13, 2015 and the . . . [p]roperty was sold
to PAG for $355, 000." There is no suggestion in the
record that Fannie Mae considered the property's
development potential in establishing the opening bid or in
advertising the property for auction.
Mae's discovery responses do not suggest it was aware of
or relied on the property's 2015 assessed value for tax
purposes (assessed value). On appeal, however, Fannie Mae
relies on the property's 2015 assessed value, which was
$361, 900. The Ivesters and PAG rely on appraisals valuing
the property as of the date of the auction. The Ivesters'
expert appraised the property at $975, 000,  and PAG
submitted an expert appraisal valuing the property at $385,
000. All of the ...