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Massachusetts Agencies

Purchase by Borrower: Revival

Foreclosure

If a mortgagee forecloses its loan and thereby "wipes out" a subordinate mortgage, that subordinate mortgage will be revived if the borrower reacquires the property. The reason this happens is because the subordinate mortgage contains warranty covenants (mortgage covenants are warranty covenants with a defeasance clause) and the subordinate mortgage is thereby revived under the theory of estoppel by deed. See the memo, Revival of Second Mortgage, in Estoppel by Deed.

In Huzzey v. Heffernan, 143 Mass. 232 (1887) the court refused to extend the doctrine of revival where the subordinate mortgage contained within its covenants an exception for the prior, superior mortgage. In that case A gave a mortgage to M-1 and a second mortgage to M-2. The mortgage to M-2 specifically excepted from the covenants of warranty the mortgage that had been given to M-1. M-1 foreclosed its mortgage and sold the property to a stranger who reconveyed the property to A. The question was whether the mortgage to M-2 was revived. The court recited the general rule:

If a man convey, with full covenants of warranty, land to which he had not title, and he afterwards acquires a good title, his after-acquired title inures to the benefit of his grantee in the prior deed, upon the ground that he is estopped to say that he was not seized in fee to the estate which he has conveyed with warranty.

The court, however, put great weight on the exception in the covenants in M-2's mortgage as to the prior mortgage that was granted to M-1, and said:

[t]o give the doctrine of estoppel operation [in this case] . . . would be to enlarge [the] covenant [given in M-2's mortgage] to a general covenant of warranty.

The result is that there is revival only if there is no mention of the first mortgage in the body[1] of the second mortgage. M-2's, lien, in such a case, would not be revived, although M-2 could still sue on the underlying note. 

1 In Huzzey the exception or reference to the prior mortgage was actually in the covenants of the subordinate mortgage. However, in Eno and Hovey, Massachusetts Practice – Real Estate Law with Forms, Thomson West (Fourth Edition, 2004), the authors state, "In [Huzzey] the mortgage was on the former form that warranted against all claims except the first mortgage. The result should be no different under the present form reciting that the second mortgage is subject to the first mortgage."