228 A.3d 339
R.I.2020Background
- Woel purchased 152 Waldo Street in 2007 and granted a mortgage later assigned to Christiana Trust; Selene Finance serviced the loan.
- Mortgage paragraphs at issue: Paragraph 22 (nonuniform covenant) required the lender, before acceleration, to give a default notice that, among other things, "inform[ed] Borrower of the right to reinstate after acceleration." Paragraph 19 specified conditions to reinstate after acceleration (cure default, cure other covenant breaches, pay enforcement expenses, and take actions reasonably required by lender).
- Selene sent a July 9, 2014 notice stating borrower had "the right to cure the default after acceleration" but did not use the word "reinstate." The loan was accelerated and the property sold in December 2015.
- Woel sued in Superior Court seeking a declaration that the foreclosure sale was void for deficient notice; the Superior Court ultimately declared the sale valid. Woel appealed.
- The Rhode Island Supreme Court held that strict compliance with paragraph 22 is a condition precedent to a valid foreclosure, the notice failed to inform Woel of the right to reinstate after acceleration, and therefore the foreclosure sale was void; the Court vacated the Superior Court order and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the default notice complied with mortgage Paragraph 22's requirement to inform borrower of the "right to reinstate after acceleration" | Woel: notice omitted the required "right to reinstate" language, instead saying only "right to cure after acceleration," so it failed strict contractual notice and made the foreclosure void | Defendants: "right to cure after acceleration" is equivalent to "right to reinstate" because curing was the only condition Woel needed to meet under Paragraph 19 | Court: "right to cure" is not equivalent to "right to reinstate;" notice failed to strictly comply with Paragraph 22 and foreclosure is void |
| Whether strict compliance and lack of borrower prejudice matter | Woel: strict contractual compliance required; relief appropriate | Defendants: substantial compliance or lack of prejudice (and the factual scope of default) should sustain the sale | Court: strict compliance is a condition precedent regardless of prejudice or the particular factual default; analysis focuses on notice language itself |
Key Cases Cited
- Bucci v. Lehman Brothers Bank, FSB, 68 A.3d 1069 (R.I. 2013) (mortgage power of sale is derived from the mortgage contract, not statute)
- Pinti v. Emigrant Mortgage Co., Inc., 33 N.E.3d 1213 (Mass. 2015) (Paragraph 22 requires notices that do not mislead and must inform mortgagors of their right to initiate suit to challenge foreclosure)
- Thompson v. JPMorgan Chase Bank, N.A., 915 F.3d 801 (1st Cir. 2019) (First Circuit relied on Pinti in addressing paragraph 22 notice sufficiency)
- Hedco, LTD. v. Blanchette, 763 A.2d 639 (R.I. 2000) (strict compliance with notice requirements is required and the inquiry is whether the statute or contract was complied with)
- Federal Nat’l Mortgage Ass’n v. Marroquin, 74 N.E.3d 592 (Mass. 2017) (notice that "watered down" required language is insufficient)