On May 6, 2019, the Massachusetts Appeals Court issued its decision in Ithaca Finance, LLC v. Wanda E. Lopez, et al. This case deals with the redemption of tax takings in Massachusetts, including how and when they must be redeemed. It also represents a prime example of how failing to follow statutory law in this area of practice could result in a mortgagee’s interest being extinguished without recourse.
In 2005 Wanda Lopez (“Lopez”) granted a mortgage on her property located in Lawrence, Massachusetts (the “Property”) in favor of Wells Fargo Financial Massachusetts, Inc. (“Wells Fargo”). Lopez failed to pay the 2008 and 2009 taxes on the Property resulting in a tax taking (the “Taking”). The Taking was subsequently assigned by the City of Lawrence to Plymouth Park Tax Services, LLC (“Plymouth Park”). In 2010, Plymouth Park recorded the Taking with the Essex (North) Registry of Deeds. In 2014 Plymouth Park assigned the Taking to Ithaca Finance, LLC (“Ithaca Finance”). Later in 2014, Ithaca Finance filed an action with the Land Court to foreclose the right of redemption associated with the Taking.
Despite the action to foreclose being sent to Lopez and Wells Fargo, neither party appeared in the case. Instead, Wells Fargo contacted Plymouth Park (Ithaca Finance’s predecessor in interest) and obtained a Certificate of Redemption (the “Redemption”). It should be noted that Wells Fargo did not pay the unpaid taxes, but a Redemption was obtained nonetheless. The Redemption was recorded by Wells Fargo in May of 2016, but it failed to inform Ithaca Finance or the Land Court of the same.
In June of 2016, Ithaca Finance obtained judgment in its Land Court action forever barring the right of redemption to the Property, which extinguished Wells Fargo’s mortgage. More than a year after judgment was issued by the Land Court, Wells Fargo attempted to vacate the judgment. It was unsuccessful in doing so, resulting in this appeal.
The primary issue before the court was whether obtaining and recording a certificate of redemption is a remedy that remains available after an action to foreclose the right of redemption has been filed. Once such an action has been filed, the court has exclusive jurisdiction over the matter pursuant to M.G.L. c. 60, sec. 64, meaning it is the only entity capable of allowing redemption – neither the municipality nor its assignees have any ability to do so on their own.
The court held that the certificate of redemption being recorded by Wells Fargo after the action to foreclose had been filed runs “contrary to [the] statutory scheme.” It relied in part, on M.G.L. c. 60, sec. 62 for making that determination, quoting the statute within the case, as follows:
“Any… person [having an interest in land taken or sold for nonpayment of taxes] may…redeem [the same] by paying or tendering to a purchaser…or [its] assigns,…at any time prior to the filing of such petition for foreclosure, in the case of a purchaser the original sum and intervening taxes and costs paid by him and interest on the whole at said rate…. He may also redeem the land by paying or tendering to the treasurer the sum which he would be required to pay to the purchaser….”
The judgment foreclosing the right of redemption in favor of Ithaca Finance was upheld despite Wells Fargo’s contention that the Redemption operated to invalidate the judgment. Similarly, Ithaca Finance’s ownership of the Property was confirmed free and clear of Wells Fargo’s mortgage. Since Wells Fargo could not point to a procedural defect in the action, its mortgage was extinguished without recourse.
The following remedial action must be taken by the firm and its clients when dealing with recorded tax takings:
- If an action to foreclose the right of redemption has not been filed with the court, an immediate undertaking to redeem the property must occur. The unpaid taxes must be paid, and a certificate of redemption must be recorded with the registry of deeds.
- If an action to foreclose the right of redemption has been filed, immediate action to join in the litigation must occur. Within the litigation, the lender may be able to redeem the property so long as the court allows it to do so. If successful, a dismissal of the case must be obtained, and any judgment of the court must be recorded with the registry of deeds to effectuate redemption. A separate certificate of redemption from the municipality or its assignees may also need to be recorded depending on the court’s judgment.
The full text of the case may be viewed HERE.
Please contact the undersigned with any questions.
Matthew Magliozzi, Esq.