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Massachusetts Property Owner Brings Lawsuit to Recover Rental Income Appropriated by Bank after Invalid Foreclosure

In some cases, there may be grounds to defend against a foreclosure on your home and bring a counterclaim to recover damages. In Fitchburg Capital, LLC v. Bourque (Mass. Land Ct. Nov. 14, 2016), the Massachusetts Land Court decided an appeal concerning issues related to the mortgage foreclosure on the defendant’s property. The plaintiff initially brought an action against the defendant to clear a cloud on title attributable to its mortgage foreclosure without having first obtained a judgment under the Soldiers and Sailors Civil Relief Act against the defendant. In related proceedings, the Supreme Judicial Court invalidated that foreclosure, finding that the mortgages on the property were obsolete and deemed discharged. The remaining issue for the land court in Fitchburg Capital concerned the defendant’s counterclaims against the plaintiff, one of which was for the conversion of rental income that the plaintiff had allegedly appropriated while it had possession of the property following the foreclosure sale.apartment for rent

The plaintiff argued that the defendant should be barred by the doctrine of judicial estoppel from seeking a claim for the conversion of rental income generated by the property because the defendant failed to report the claim he had against the plaintiff during his bankruptcy proceedings. Judicial estoppel is an equitable doctrine that precludes a party from asserting a position in one legal proceeding that is contrary to a position it had previously asserted in another proceeding. A defense of judicial estoppel requires that the position being asserted in litigation must be directly inconsistent with the position asserted in prior proceedings, and the party must have succeeded in convincing the court to accept its prior position.

In Fitchburg Capital, the land court agreed that the defendant had a duty to make known all of his claims and assets to the bankruptcy court, including his claim against the plaintiff for rental income. The court found that, by failing to disclose his claim in the bankruptcy action, the defendant essentially took the position that he had no other potential claims against the plaintiff regarding the property. As a result, the court held that the defendant was barred by judicial estoppel from taking an opposite position and bringing a claim seeking recovery for rental income from the plaintiff.

The land court went on to explain that the plaintiff is also entitled to the common law defense of recoupment against the defendant’s claim for rental income. This legal mechanism would reduce the defendant’s claim in order to offset his liability to the plaintiff arising out of the default of his loans secured by the property at issue. Since the plaintiff’s recoupment far exceeded the rental income claimed by the defendant, the court found the defendant had no ability to recover that amount or his reasonable expenses in maintaining and managing the property. Accordingly, the defendant’s counterclaims were dismissed.

If your bank or mortgage company has initiated foreclosure proceedings against you, a skilled attorney can help protect your rights in court. At Pulgini & Norton, our Massachusetts real estate lawyers understand the nuances involved in this area of law. We advise individuals in a range of legal issues, including purchase and sale agreements, land use and zoning matters, easements, and other property transactions. To learn more from one of our experienced attorneys, call Pulgini & Norton at (781) 990-2200 or contact us online.

More Blog Posts:

Massachusetts Land Court Vacates Foreclosure Judgment on Basis of Health Issues and Due Process Rights, Massachusetts Real Estate Lawyer Blog, published August 1, 2016

Massachusetts Land Court Holds Petition to Vacate Foreclosure Untimely, Massachusetts Real Estate Lawyer Blog, published July 12, 2016

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