101 A.3d 869
R.I.2014Background
- In 2006 Leone executed a $241,000 note to Equity One secured by a mortgage naming MERS as mortgagee (as nominee for Equity One and successors) and granting MERS and its successors the statutory power of sale. The mortgage was recorded.
- Equity One transferred the loan; ARC purchased loan assets and received a limited power of attorney from Equity One in April 2009 authorizing ARC to act on the loan sale agreement.
- MERS assigned the mortgage to ARC in April 2009; that assignment was recorded later in 2009. Leone defaulted and ARC foreclosed; the property was sold at a foreclosure sale in November 2009.
- Leone filed suit in Feb. 2010 seeking declaratory relief and to quiet title, alleging the MERS-to-ARC assignment was invalid and foreclosure improper.
- Defendants moved to dismiss under Rule 12(b)(6) and attached the note and the limited power of attorney; plaintiff filed additional materials. The motion was converted to summary judgment because the court considered matters outside the pleadings.
- The Superior Court granted summary judgment for defendants, finding ARC a valid assignee with power of sale, ARC held a power of attorney for the note holder, and Leone was in default. The Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether conversion of Rule 12(b)(6) motion to summary judgment complied with Rule 12(b) | Leone: conversion was improper and he lacked notice | Defendants: both sides submitted extra-pleading materials; conversion automatic and notice adequate | Court: conversion proper because parties submitted outside materials and plaintiff had opportunity to respond; no transcript defect alters result |
| Whether MERS had authority as mortgagee to assign mortgage and confer power of sale to assignee | Leone: MERS lacked statutory power of sale because it was only nominee and did not hold the note; assignment invalid | Defendants: mortgage expressly named MERS (as nominee) with statutory power; MERS may validly assign mortgage and convey power of sale | Court: MERS was a valid mortgagee with power of sale; assignment to ARC valid under Rhode Island precedent |
| Whether ARC lawfully foreclosed | Leone: foreclosure by ARC was improper because assignment and power of attorney were invalid | Defendants: ARC was assignee and held a limited power of attorney from Equity One authorizing enforcement | Held: ARC lawfully held statutory power of sale and authority to foreclose; no disputed material facts rebutting default or documents' authenticity |
| Whether factual disputes precluded summary judgment | Leone: disputed issues of fact exist (assignment authenticity, POA validity) | Defendants: no genuine dispute; documents authenticated and plaintiff admitted default and did not contradict mortgage/assignment | Held: No genuine issue of material fact; summary judgment appropriate as matters were legal determinations and plaintiff failed to produce competent contrary evidence |
Key Cases Cited
- Bucci v. Lehman Brothers Bank, FSB, 68 A.3d 1069 (R.I. 2013) (upholding MERS as mortgagee with statutory power of sale when mortgage so provides)
- Mruk v. Mortgage Electronic Registration Systems, Inc., 82 A.3d 527 (R.I. 2013) (MERS need not hold the note to validly assign the mortgage and confer power of sale on assignee)
- Multi-State Restoration, Inc. v. DWS Properties, LLC, 61 A.3d 414 (R.I. 2013) (when court considers evidentiary matters outside complaint, Rule 12(b)(6) conversion to summary judgment is required)
- Bowen Court Associates v. Ernst & Young, LLP, 818 A.2d 721 (R.I. 2003) (party supplying matters outside the pleadings cannot complain of conversion to summary judgment)
- Ingram v. Mortgage Electronic Registration Systems, Inc., 94 A.3d 523 (R.I. 2014) (submission of extra-pleading materials suffices as notice for conversion)
- Sentas v. Sentas, 911 A.2d 266 (R.I. 2006) (appellant’s failure to provide trial transcript on appeal is risky and limits review)