Summers v. Financial Freedom, 1st Cir. (2015)
Summers v. Financial Freedom, 1st Cir. (2015)
Before
Howard, Chief Judge,
Selya and Thompson, Circuit Judges.
SELYA,
Circuit
Judge.
Plaintiff-appellant
Steven
Summers and his sister Brinah Court inherited a house from their
mother, Rosalie Summers (the decedent).
her lifetime, the decedent had obtained and reaped the benefits of
a reverse mortgage. That mortgage, which contained an acceleration
clause and power of sale, became due and payable upon her death.
After they inherited the property, the plaintiffs sought
to take it free and clear of the mortgage lien even though the
mortgage debt remained unpaid.
Ruling on this
BACKGROUND
The relevant facts are, for all intents and purposes,
undisputed.
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that the full amount of the debt would become due and payable upon
the death of the borrower.1
On September 25, 2009, Financial Freedom Senior Funding
Corp. assigned the mortgage to Mortgage Electronic Registration
Systems,
Inc.
Acquisition.2
(MERS)
as
nominee
of
Financial
Freedom
Freedom
proceedings.
MERS
filed
claim
in
the
Neither
probate
and closed, and the Warwick Probate Court granted the decedent's
interest in the Property to the plaintiffs.
In
late
2010,
the
plaintiffs
received
notice
of
the
mortgage
to
Financial
Freedom,
and
Financial
During pretrial
P. 41(a).
After the close of discovery, Financial Freedom moved
for summary judgment.
The district
ANALYSIS
The appellant's challenge is two-fold: first, he argues
framework) and to state law (here, Rhode Island law) for the
substantive rules of decision.
Reverse Mortgages.
and payable in full when the borrower dies, sells the home, or no
longer uses the home as her principal residence.
See generally
this
foundation
in
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place,
we
confront
the
See
The existence of
(1st Cir. 2013) (quoting Me. People's All. & Nat. Res. Def. Council
v. Mallinckrodt, Inc., 471 F.3d 277, 283 (1st Cir. 2006)).
Id.
mortgagee not only obtains a lien upon the real estate by virtue
of the grant of the mortgage deed but also obtains legal title to
the property subject to defeasance upon payment of the debt.'"
Id. (quoting Bucci v. Lehman Bros. Bank, FSB, 68 A.3d 1069, 1078
(R.I. 2013)).
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(1st Cir. 2014); Woods v. Wells Fargo Bank, N.A., 733 F.3d 349,
354 (1st Cir. 2013); Culhane, 708 F.3d at 291; Mruk v. MERS, 82
A.3d 527, 536 (R.I. 2013).
this
void/voidable
estate mortgages.
with
respect
to
real
39, 42 (R.I. 1927); Bishop v. Kent & Stanley Co., 41 A. 255, 257
(R.I. 1898); see also Clark v. MERS, 7 F. Supp. 3d 169, 175 (D.R.I.
2014).
In the first instance, then, we must determine whether
the challenged mortgage assignments are void or voidable. In Rhode
Island, a valid mortgage or any of its assignments must be signed,
acknowledged by notarization, delivered, and recorded.
Gen. Laws 34-11-1.
See R.I.
See Bucci,
68 A.3d at 1088.
In the case at hand, two assignments of the mortgage
took place. The summary judgment record shows that each assignment
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distinguished
recordation.
assignments
by
signature,
notarization,
delivery,
and
them
as
valid.
Although
the
appellant
See
On this record,
It
follows that the district court did not err in concluding that the
appellant lacked standing to challenge them.
The appellant demurs, suggesting that the Rhode Island
Supreme Court's decision in Chhun v. MERS, 84 A.3d 419 (R.I. 2014),
requires a different result.
We think not.
See id.
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heavier.
appellant's
lack
of
standing
to
challenge
the
effectiveness of the mortgage itself (no matter who owns it) and,
on the facts of this case, the appellant has standing to maintain
that challenge.
We explain briefly.
the
completion
of
probate.
Financial
Freedom
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this
claim
de
novo,
taking
the
facts
and
all
reasonable
inferences therefrom in the light most flattering to the nonmovant (here, the appellant).
See
See Wheeling & Lake Erie Ry. Co. v. Keach (In re Montreal,
Me. & Atl. Ry., Ltd.), 799 F.3d 1, 10 (1st Cir. 2015).
In
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(if
probate process.
any)
between
mortgage
foreclosures
and
the
of Nova Scotia, 125 F.2d 519, 520 (1st Cir. 1942); Walsh v. Morgan,
198 A. 555, 562 (R.I. 1938).
both sue the parties to the mortgage at common law and pursue
foreclosure.
If a deficiency results
U.S.C.
31325(b)(1)
(authorizing
enforcement
See, e.g.,
of
mortgage
of bankruptcy law.
Couture v.
Pawtucket Credit Union, 765 A.2d 831, 833 (R.I. 2001) (citing
Johnson v. Home State Bank, 501 U.S. 78, 84 (1991)); see 11 U.S.C.
522(c)(2).
We add, moreover, that the Rhode Island Supreme Court
has often consulted the Restatements to bring clarity to state
law, see, e.g., Bucci, 68 A.3d at 1088; Jerome v. Probate Court of
Barrington,
922
A.2d
119,
122
(R.I.
2007),
and
we
think
it
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1.1 (1997).
Johnson, 501
U.S. at 84.
The case law elsewhere, see, e.g., Mortg. Invs. Corp. v.
Battle Mtn. Corp., 70 P.3d 1176, 1181 (Colo. 2003); Bank of Tokyo
Co. v. Urban Food Malls Ltd., 650 N.Y.S.2d 654, 661 (App. Div.
1996); Stephens v. LPP Mortg., Ltd., 316 S.W.3d 742, 746 (Tex.
App. 2010); Bank of Sun Prairie v. Marshall Dev. Co., 626 N.W.2d
319, 323 (Wis. Ct. App. 2001), confirms our intuition that the
Rhode Island Supreme Court, if faced with the question, would hold
that the right to foreclose should be treated as separate and
distinct from the right to collect the underlying debt. The upshot
is that though the failure to file a claim in probate proceedings
may extinguish personal liability on the note secured by the real
estate mortgage, that failure does not extinguish the mortgage
itself.
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In other words,
App. 1968).
In a last-ditch endeavor to efface the force of this
reasoning,
the
appellant
jerry-rigs
statute
of
limitations
argument.
The statute
1-17; see also Wallbaum v. Martin, 234 A.2d 369, 370 (R.I. 1967).
The limitations period associated with the probate claim-filing
statute, see R.I. Gen. Laws 33-11-5, does not apply. Cf. Higgins
v. Mycroft, 92 A.2d 727, 729 (R.I. 1952) (indicating that mortgage
enforcement
proceedings
are
separate
and
apart
from
probate
proceedings).
We summarize succinctly.
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It properly
estate
mortgage
rather,
only
extinguishes
personal
CONCLUSION
We need go no further.
its
eschewal
Freedom
of
the
retained
the
probate
right
Affirmed.
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claim-filing
to
enforce
its
process,
reverse