United States Court of Appeals

For the First Circuit

No. 20-1321

KEVIN G. AUBEE; CARRIE A. AUBEE,

Plaintiffs, Appellants,

v.

SELENE FINANCE LP; WILMINGTON SAVINGS FUND SOCIETY, FSB, d/b/a

Christiana Trust, not individually but as trustee for Pretium
Mortgage Acquisition Trust,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. William E. Smith, U.S. District Judge]

Before

Kayatta, Howard, and Thompson,

Circuit Judges.

Todd S. Dion for appellants.

John T. Precobb, with Richard C. Demerle, Michael E. Swain,
and Demerle Hoeger LLP on brief, for appellees.

December 21, 2022

 KAYATTA, Circuit Judge. Kevin and Carrie Aubee appeal

from an order dismissing their complaint against defendants

Wilmington Savings Fund Society, FSB ("Wilmington Savings") and

Selene Finance LP. The Aubees contend that defendants' foreclosure

on their property is void because defendants failed to strictly

comply with the notice requirements in the Aubees' mortgage

contract before foreclosing. For the following reasons, we reverse

the dismissal of the Aubees' breach of contract claim against

Wilmington Savings and otherwise affirm.

I.

In 2005, the Aubees borrowed $359,650 from a bank,

granting a mortgage on their property in Smithfield, Rhode Island,

as security for the loan. Following a series of assignments,

Wilmington Savings was assigned both the note and the mortgage as

a trustee for Pretium Mortgage Acquisition Trust.

Paragraph 22 of the Aubees' mortgage contract allows the

mortgagee to accelerate the loan and invoke the statutory power of

sale if the Aubees default. But that same paragraph also imposes

certain notice requirements that the mortgagee must fulfill at

least 30 days before accelerating the loan. Most importantly for

our purposes, paragraph 22 states the following:

The notice shall further inform Borrower of

the right to reinstate after acceleration and
the right to bring a court action to assert
the non-existence of a default or any other
defense of Borrower to acceleration and sale.

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 On April 3, 2017, Selene Finance, acting on behalf of

Wilmington Savings, sent the Aubees a "Notice of Default and Intent

to Accelerate."1 The notice stated:

If you have not cured the default within

thirty-five (35) days of this notice, Selene,
at its option, may require immediate payment
in full of all sums secured by your Security
Instrument without further demand or notice,
and foreclose the Security Instrument by
judicial proceeding and sale of the property
and/or invoke the power of sale or any other
remedies permitted by applicable law, and/or
as provided within your Security Instrument.

Farther down, the notice stated:

You have the right to reinstate after

acceleration and the right to assert in the
foreclosure proceeding the non-existence of a
default and/or the right to bring a court
action to assert the non-existence of a
default or any other defense to acceleration,
foreclosure and/or sale of the property.

Thus, the notice included verbatim the language from paragraph 22

of the mortgage contract regarding the Aubees' rights, but it also

inserted additional language that we underline in the following

reproduction:

You have the right to reinstate after

acceleration and the right to assert in the
foreclosure proceeding the non-existence of a
default and/or the right to bring a court
action to assert the non-existence of a
default or any other defense to acceleration,
foreclosure and/or sale of the property.

1 The complaint did not reference or attach this notice. But

below, the Aubees conceded that Selene Finance sent the notice and
that it is authentic, and the parties agreed that the court should
consider the notice in adjudicating the motion to dismiss.

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 The added language in the second through fourth lines

provides the object of the parties' dispute.2 The reason for that

added language appears to be that Rhode Island permits both

judicial foreclosures and non-judicial foreclosures. That is, a

mortgagee can elect to foreclose either through a judicial

proceeding or through the statutory power of foreclosure without

a judicial proceeding (if allowed by the contract). See R.I. Gen.

Laws § 34-27-1 (authorizing judicial foreclosure); R.I. Gen. Laws

§ 34-11-22 (authorizing non-judicial foreclosure). Defendants

aver that they "drafted the Notice to create a letter whose content

conforms to the version of paragraph 22 used in both non-judicial

foreclosure states as well as judicial foreclosure states, with

'and/or' conjoining the two (2) advisories." The phrase "the

foreclosure proceeding" in the underlined language was therefore

intended to refer only to a judicial foreclosure proceeding, at

which mortgagors would be able to assert the non-existence of a

default.

Defendants accelerated the loan and sold the property

through a non-judicial foreclosure on June 18, 2018. The Aubees

then filed a complaint in Rhode Island Superior Court. They

sought, among other relief, a declaratory judgment that the

foreclosure is void. They alleged that defendants breached the

2 The Aubees do not claim that the added language in the last
line rendered the notice non-compliant.

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mortgage contract by foreclosing and conducting a sale without

providing adequate notice required by paragraph 22 of the mortgage

contract.3 Defendants removed the case to federal court in the

District of Rhode Island and moved to dismiss the complaint for

failure to state a claim.

Defendants' motion to dismiss was referred to a

magistrate judge, who issued a report and recommendation

recommending dismissal of all claims. The district court adopted

the report and recommendation in full and granted the motion to

dismiss. This appeal ensued.

II.

A.

We review de novo the district court's grant of

defendants' motion to dismiss for failure to state a claim. See

In re Celexa & Lexapro Mktg. & Sales Pracs. Litig., 779 F.3d 34,

39 (1st Cir. 2015). We accept as true the Aubees' factual

allegations and draw all reasonable inferences in their favor.

Id.

Sitting in diversity, we look to Rhode Island law to

supply the substantive rules of decision. Erie R.R. Co. v.

Tompkins, 304 U.S. 64, 78 (1938); Fithian v. Reed, 204 F.3d 306,

308 (1st Cir. 2000). Applying state law involves "interpreting

3 The Aubees also asserted a second count for violation of a

Rhode Island statute, but they abandoned that claim below.

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and applying the rules of substantive law enunciated by the state's

highest judicial authority, or, on questions to which that tribunal

has not responded, making an informed prophecy of what the court

would do in the same situation." Blinzler v. Marriott Int'l, Inc.,

81 F.3d 1148, 1151 (1st Cir. 1996). In the latter scenario, "our

task is to ascertain the rule the state court would most likely

follow under the circumstances, even if our independent judgment

on the question might differ." Id. "[W]e seek guidance in

analogous state court decisions, persuasive adjudications by

courts of sister states, learned treatises, and public policy

considerations identified in state decisional law." Id.

B.

After the district court dismissed the complaint, while

this appeal was pending, the Supreme Court of Rhode Island decided

Woel v. Christiana Trust, 228 A.3d 339 (R.I. 2020). The Rhode

Island high court held that, "[a]s a matter of contract law, strict

compliance with the requirements contained in paragraph 22 is a

condition precedent to acceleration and a valid foreclosure sale."

Id. at 345. The court further held that a foreclosure sale

conducted without strict compliance with the notice provisions is

void. Id. at 348. The parties dispute whether Woel's holding

applies to a case such as this in which the district court entered

judgment before Woel was decided.

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 In adopting the strict compliance standard, the Supreme

Court of Rhode Island acknowledged that "[o]ther states, including

Massachusetts, Alabama, and Minnesota, also require strict

compliance with paragraph 22 as a condition precedent to a valid

foreclosure," id. at 346 n.11, and that federal courts applying

Rhode Island law had "assumed that strict compliance with

paragraph 22 is a condition precedent to a valid foreclosure sale,"

id. at 344 n.9. But it viewed the case as addressing "a matter of

first impression" and creating a "new rule of law" in Rhode Island.

Id. at 344, 348. Because of "[t]he potential impact this new rule

of law could have on the finality of foreclosures," the Woel court

opted to give its new rule only prospective effect. Id. at 348.

Specifically, the court decreed that "the pronouncement in this

opinion applies to the case at bar and to cases pending in the

Superior Court in which this specific issue has been, or may be,

raised." Id.

We are bound to follow the Supreme Court of Rhode

Island's decisions regarding the prospective nature of its

rulings. See Great N. Ry. Co. v. Sunburst Oil & Refin. Co., 287

U.S. 358, 364–65 (1932); Butler v. Deutsche Bank Tr. Co. Ams., 748

F.3d 28, 39 n.10 (1st Cir. 2014).

The parties agree that the Rhode Island court's

statement that its holding shall apply "to the case at bar and to

cases pending in the Superior Court" does not preclude application

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of the holding to this case merely because this case is pending in

federal court, rather than in the Rhode Island court system.

The parties' disagreement trains, instead, on whether

the Supreme Court of Rhode Island intended Woel to apply to cases

(besides Woel itself) pending on appeal, rather than in a trial

court. Defendants' position rests on the court's description of

the pending cases to which Woel would apply, namely "the case at

bar and to cases pending in the Superior Court," with no mention

of cases pending on appeal. For three reasons, though, we think

that defendants place too much weight on this silence.

First, as best we can tell, there were no cases involving

paragraph 22 notice other than Woel that were on appeal to the

Rhode Island Supreme Court at the time Woel was decided, and

defendants do not contend otherwise. Rhode Island also has no

intermediate appellate court. Therefore, by applying the new rule

to Woel itself and to all cases then pending in the Rhode Island

Superior Court in which the issue has been or could be raised, the

Rhode Island Supreme Court covered the entire universe of pending

cases in the Rhode Island court system in which the adequacy of

paragraph 22 notice was or could be at issue. There was no reason

for the court to mention cases (besides Woel) pending on appeal,

because there were no such cases in the Rhode Island court system.

So we do not read into Woel's silence regarding cases pending on

appeal an implicit intent to exclude such cases. Rather, we see

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no good reason why the court would have wanted to exempt cases

pending on appeal from its universal inclusion of pending claims.

After all, Woel itself was a case pending on appeal.

Second, Rhode Island generally applies new rules of law

"in the manner best suited to serve the interests of justice and

to avoid hardship." Woel, 228 A.3d at 348 (quoting State v. Arpin,

410 A.2d 1340, 1347 (R.I. 1980)). It would not serve the interests

of justice to allow the litigants in Woel to benefit from the rule

while denying that benefit to other litigants who made similar

arguments in cases pending on appeal, merely because Woel happened

to be the case that set forth the rule. See, e.g., Fed. Nat'l

Mortg. Ass'n v. Marroquin, 74 N.E.3d 592, 596 (Mass. 2017)

("[W]here multiple cases await appellate review on precisely the

same question, it is inequitable for the case chosen as a vehicle

to announce the court's holding to be singled out as the 'chance

beneficiary' of an otherwise prospective rule." (quoting Galiastro

v. Mortg. Elec. Registration Sys., Inc., 4 N.E.3d 270, 277 (Mass.

2014))). And applying Woel to a pending, not-yet-final challenge

to a foreclosure creates no more hardship for the mortgagee than

does applying the rule to Woel itself.

Third, we find further support for our interpretation of

Rhode Island law in the Massachusetts Supreme Judicial Court's

treatment of the same issue. In Pinti v. Emigrant Mortg. Co., 33

N.E.3d 1213 (Mass. 2015) -- Massachusetts's analog to Woel -- the

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Massachusetts high court held that strict compliance with notice

requirements was a necessary condition precedent for foreclosure.

Id. at 1214, 1226. In Pinti, like in Woel, the court stated that

its decision would apply prospectively and to the case at bar due

to concerns about the finality of past foreclosures. Id. at 1227.

But it expressly did not reach the question whether its holding

should apply to other cases pending on appeal. Id. at 1227 n.25.

The Massachusetts high court later answered that question in

Marroquin, concluding that "the Pinti decision applies in any case

where the issue was timely and fairly asserted in the trial court

or on appeal before" Pinti was decided. 74 N.E.3d at 593.

We think that the Supreme Court of Rhode Island would

proceed in tandem with Massachusetts in this regard. The Rhode

Island high court found Pinti "instructive" in adopting the strict

compliance standard for Rhode Island. Woel, 228 A.3d at 346. And

it followed Massachusetts's lead in making the strict compliance

standard prospective. There is no reason to think it would not

similarly track Massachusetts in applying that standard to cases

pending on appeal. Indeed, the opinion in Woel cites Marroquin

favorably, and nowhere disagrees with its treatment of cases

pending on appeal. Id. at 347. It would be odd if the Supreme

Court of Rhode Island intended to implicitly depart from

Massachusetts case law on the specific issue of application to

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cases pending on appeal, while at the same time following

Massachusetts in all other respects.

For these reasons, we conclude that the rule in Woel

applies to this case and that a failure to strictly comply with

the notice requirements in paragraph 22 would render the

foreclosure void. We now turn to whether the Aubees have plausibly

alleged that the notice they received failed to satisfy the strict

compliance standard.

C.

At first blush, the notice sent to the Aubees might

appear to have complied with the paragraph 22 notice requirements.

Paragraph 22 required that the notice "inform Borrower of the right

to reinstate after acceleration and the right to bring a court

action to assert the non-existence of a default or any other

defense of Borrower to acceleration and sale." The notice, in

turn, included all of those words in describing the Aubees' rights.

The problem, say the Aubees, is that the notice informed them of

those rights in a misleading manner that could cause a reasonable

borrower to misunderstand how to assert them. This argument raises

two questions: Does a notice that informs a borrower of rights

fail to strictly comply if the notice can be reasonably read in a

manner that causes the borrower to misunderstand how to assert

those rights? And, if so, was this particular notice written in

a manner that could cause such a misunderstanding?

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 The first question is easily answered. Interpreting the

Massachusetts Supreme Judicial Court's decision in Pinti, we have

stated that "Massachusetts law requires that the paragraph 22

notice given to the mortgagor be accurate and not deceptive --

note the possible difference between the two concepts -- and the

Supreme Judicial Court has made clear that inaccuracy or deceptive

character can be fatal." Thompson v. JPMorgan Chase Bank, N.A.,

982 F.3d 809, 812 (1st Cir. 2020). And the Massachusetts Supreme

Judicial Court "agree[d] with the First Circuit that Massachusetts

law under Pinti . . . requires that any notice given pursuant to

paragraph 22 of the GSE Uniform Mortgage, regardless of whether

hybrid, must be accurate and not deceptive." Thompson v. JPMorgan

Chase Bank, N.A., 158 N.E.3d 35, 41 (Mass. 2020). In Pinti, for

example, the notice failed to strictly comply because borrowers

"could be misled into thinking that they had no need to initiate

a preforeclosure action against the mortgagee but could wait to

advance a challenge or defense to foreclosure as a response to a

lawsuit initiated by the mortgagee -- even though, as a practical

matter, such a lawsuit would never be brought." 33 N.E.3d at 1222.

We think it likely that the Supreme Court of Rhode Island

would join Massachusetts in holding that notices fall short of

strict compliance when they inform borrowers of their rights but

do so in a manner likely to cause a reasonable borrower to

misunderstand how to assert those rights. An important rationale

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for Rhode Island's adoption of the strict compliance standard was

that "[s]trict compliance with paragraph 22 is essential to

ensuring that mortgagors are fully informed of their rights and

will not be misled by a default notice provided by a mortgagee."

Woel, 228 A.3d at 346. And, in adopting that standard, the court

found the Pinti decision "instructive," and that it "soundly

reasoned that mortgagors could be misled into thinking that they

had no need to initiate a lawsuit against the mortgagee and could

instead advance a claim or defense in response to a lawsuit

initiated by the mortgagee." Id. Moreover, the court found the

notice in Woel problematic because it was "misleading, inaccurate,

and, at best, incomplete." Id. Thus, we conclude that under Rhode

Island law, as under Massachusetts law, a default notice fails to

strictly comply with paragraph 22 if it is reasonably likely to

mislead borrowers about how to assert their rights, even as it

informs them of those rights.

That brings us to the question whether the notice given

to the Aubees is reasonably likely to be read in a manner that

would cause borrowers to misunderstand how to assert their rights.

We agree with the Aubees that it has this potential.

The use of "and/or" to connect the rights described in

the notice renders the notice easily susceptible to confusion.

See William Strunk Jr. & E.B. White, The Elements of Style 40 (3d

ed. 1979) (describing "and/or" as "[a] device, or shortcut, that

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damages a sentence and often leads to confusion or ambiguity").

We think it likely that many borrowers would read the notice, as

the Aubees do, to mean that they can choose to assert their

defenses in a foreclosure proceeding or, alternatively, in their

own court action. And the use of the word "the" preceding

"foreclosure proceeding" implies that there will in fact be a

foreclosure proceeding at which the borrowers will be able to

assert defenses in all circumstances. Naturally, many borrowers

would elect to skip the hassle of bringing a court action and opt

instead to assert their defenses "in the foreclosure proceeding."

This would work out fine for the borrowers whose mortgagees decide

to go the judicial foreclosure route. But borrowers whose

mortgagees utilize non-judicial foreclosures could be surprised to

learn that they cannot in fact assert defenses "in the foreclosure

proceeding," because a non-judicial foreclosure proceeding

provides no opportunity to assert defenses. The only opportunity

for those borrowers to assert their defenses would be in a court

action that they brought themselves. For these reasons, the notice

is misleading and fails to strictly comply with paragraph 22. See,

e.g., Pinti, 33 N.E.3d at 1222.

Defendants contend that "the additional language in the

Notice does not discourage the Appellants to assert their rights

but, rather, explains that they may have different avenues to do

so depending on what route Selene and Wilmington Savings took

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towards foreclosure." They point to language farther up in the

notice stating that "Selene, at its option, may . . . foreclose

the Security Instrument by judicial proceeding and sale of the

property and/or invoke the power of sale or any other remedies

permitted by applicable law, and/or as provided within your

Security Instrument." They argue that this language provides

context for the later sentence informing borrowers of their rights.

Defendants imply that because they described the mortgagee's

choice of foreclosure procedures, a borrower would understand the

relationship between the mortgagee's choice and the borrower's

rights as follows: If and only if the mortgagee brings a judicial

foreclosure action, the borrower will be able to assert defenses

in that proceeding; otherwise, the borrower will have to bring a

court action to assert defenses.

The problem with defendants' argument is that the notice

does not explain any of this. All the notice says is that "[y]ou

have . . . the right to assert in the foreclosure proceeding the

non-existence of a default and/or the right to bring a court action

to assert the non-existence of a default or any other defense."

It does not match up those rights with the mortgagee's election of

judicial foreclosure or non-judicial foreclosure in a manner that

makes clear that the right to assert defenses "in the foreclosure

proceeding" is unavailable in a non-judicial foreclosure. Said

differently, merely stating that the mortgagee can choose between

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judicial foreclosure and non-judicial foreclosure does not inform

borrowers how that decision affects their rights. And, as

described above, borrowers could easily be misled into thinking

that they have the option to choose between asserting their

defenses in a foreclosure proceeding initiated by the mortgagee or

asserting their defenses in their own court action, regardless of

which type of foreclosure the mortgagee chooses. Thus, the notice

is "misleading . . . and, at best, incomplete." Woel, 228 A.3d at

346.

Defendants' argument suffers from another defect. Their

argument necessarily depends on their interpretation that the

notice informs borrowers that they do not have the right to assert

defenses "in the foreclosure proceeding" in every circumstance.

But this same logic would apply to the right to bring a court

action, because the rights are connected by "and/or" without

further explanation. Said differently, defendants' reading of the

notice is that, depending on the circumstances, borrowers may have:

(1) only "the right to assert in the foreclosure proceeding the

non-existence of a default"; (2) only "the right to bring a court

action to assert the non-existence of a default or any other

defense to acceleration, foreclosure and/or sale of the property";

or (3) both of those rights. See H.W. Fowler, A Dictionary of

Modern English Usage 29, (Sir Ernest Growers ed., 2d ed. 1965)

(describing "[t]he ugly device of writing x and/or y to save the

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trouble of writing x or y or both of them"). Borrowers who read

the notice this way would understand that there may be some

circumstances (i.e., situation (1)) in which they do not have the

right to bring a court action. This is problematic because

paragraph 22 requires that the notice inform borrowers that they

have the right to bring a court action -- not that they might have

the right to bring a court action, depending on the circumstances.

See Marroquin, 74 N.E.3d at 594 (holding that a notice stating

"you may have the right to bring a court action to assert the non-

existence of a default or any other defense you may have to

acceleration and foreclosure" did not strictly comply with

paragraph 22 (emphasis added)). Thus, under either interpretation

of the notice, it is fatally defective.

In sum, the Aubees have stated a claim that the notice

of default failed to strictly comply with the requirements of

paragraph 22.4 Therefore, dismissal of their claim against

Wilmington Savings was improper.

4 The Aubees make an additional argument that the added

language renders the notice inaccurate because it falsely suggests
that the Aubees had to wait until the mortgagee initiated a
foreclosure proceeding to bring a court action asserting the non-
existence of a default. This is plainly incorrect. The notice
describes "the right to assert in the foreclosure proceeding the
non-existence of a default" and "the right to bring a court action
to assert the non-existence of a default" as two separate rights.
It does not suggest that the existence or timing of the right to
bring a court action is contingent on the occurrence of a
foreclosure proceeding.

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 III.

The magistrate judge's report and recommendation

-- which the district court adopted in full -- recommended that

the case against Selene Finance be dismissed on the alternative

ground that Selene Finance was not a party to the mortgage contract

and therefore was not bound by its notice provisions. The Aubees

do not challenge this alternative ground on appeal. Accordingly,

we affirm the dismissal as to Selene Finance.

IV.

For the foregoing reasons, and with the benefit of Rhode

Island case law post-dating the district court's decision, we

reverse the dismissal of Count I of the Aubees' complaint (breach

of contract) against Wilmington Savings. We affirm the dismissal

of Count I against Selene Finance and the dismissal of Count II

(the abandoned statutory claim) against both defendants. Costs

are taxed in favor of appellants and against appellee Wilmington

Savings.

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