Lina Cruz v. Mortgage Electronic Registration Systems, Inc.
108 A.3d 992
| R.I. | 2015Background
- Cruz executed a $334,400 promissory note and a mortgage on her Johnston, Rhode Island property in 2007, with MERS named as the mortgagee acting as nominee for the lender and its successors and assigns.
- The note allowed transfer to the Note Holder, and the mortgage granted MERS a statutory power of sale and authority to foreclose.
- The note and mortgage were assigned along the chain from New Century to ACT Properties (via MERS) and then to USA Residential; Rushmore later served as loan servicer.
- Cruz challenged the validity of the MERS-to-ACT Properties assignment, arguing the signer lacked authorization and that the foreclosing entity lacked standing.
- Foreclosure proceedings were started by Rushmore on behalf of USA Residential after Cruz defaulted; Cruz sought declaratory relief, injunctive relief, quiet title, and damages.
- The Superior Court denied Cruz’s request for a protective order shielding discovery, and the matter proceeded to this Court on MERS’s petition for certiorari.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge the assignment | Cruz has standing to challenge the assignment to ACT Properties. | Cruz lacks standing as she is not a party to the assignment. | Assignment challenge barred; Cruz lacks standing to challenge voidable assignments. |
| Void vs voidable determination of the assignment | If Nolan lacked authority, the assignment is void for lack of authority. | Even with authority lacking, the assignment is voidable, not void. | The assignment is voidable, not void; standing to challenge it is limited. |
| Allowing discovery on authority issues | Discovery should proceed to prove authority of Nolan. | Discovery regarding authority is improper if no standing to challenge the assignment exists. | Court should have granted protective order restricting discovery on authority. |
| Fraud allegations and discovery specificity | Fraud allegations should be explored with particularity. | Fraud allegations lack specificity; discovery may be improper. | Fraud claims insufficiently alleged; remand for further proceedings with heightened specificity. |
Key Cases Cited
- Mruk v. Mortgage Electronic Registration Systems, Inc., 82 A.3d 527 (R.I. 2013) (standing to challenge mortgage assignments; carve-out for homeowners)
- Culhane v. Aurora Loan Services of Nebraska, 708 F.3d 282 (1st Cir. 2013) (void vs voidable contract analysis in assignments)
- Wilson v. HSBC Mortgage Services, Inc., 744 F.3d 1 (1st Cir. 2014) (void vs voidable assignments; standing limits for voidable challenges)
- Moura v. Mortgage Electronic Registration Systems, Inc., 90 A.3d 852 (R.I. 2014) (adopts void/voidable framework in RI context)
- Bucci v. Lehman Brothers Bank, FSB, 68 A.3d 1069 (R.I. 2013) (contextual guidance on MERS and foreclosure)
- Bishop v. Kent & Stanley Co., 41 A. 255 (1898) (authority-based contract enforceability; voidable when exceeded)