207 A.3d 998
R.I.2019Background
- The Perrettas borrowed $971,750 in 2006 and secured the loan with a mortgage on 380 Pippin Orchard Road; the promissory note and mortgage were transferred among multiple entities (Zurich → American Residential → GMAC → ARELIX → Note Capital).
- The Perrettas defaulted; foreclosure efforts began in 2009, were stayed by bankruptcy, and proceeded after various transfers; ARELIX later discovered the original note was lost while it had given the note to its counsel for foreclosure work.
- ARELIX assigned its mortgage and the (lost) note to Note Capital in 2013; Note Capital and ARELIX (later defaulted in the Superior Court) sued to foreclose in 2014; Note Capital moved for partial summary judgment in 2015 seeking authorization to foreclose.
- The Superior Court granted partial summary judgment authorizing Note Capital to foreclose and required Note Capital to indemnify the Perrettas against competing claims; the court treated the order as interlocutory but the Perrettas timely appealed.
- The Perrettas challenged (1) the chain-of-title (arguing American Residential lacked title when it assigned to GMAC), (2) which version of the note is authentic, and (3) whether Note Capital may enforce a lost note under R.I. UCC § 6A-3-309 when the transferee was not in possession when loss occurred.
Issues
| Issue | Plaintiff's Argument (Note Capital) | Defendant's Argument (Perrettas) | Held |
|---|---|---|---|
| Appellate jurisdiction over interlocutory order authorizing foreclosure | Appeal should be allowed; dismissal would delay justice | Order was interlocutory and not appealable | Appeal allowed: order authorized a sale of real property under § 9-24-7, so interlocutory appeal permitted |
| Standing to challenge chain of assignments (American Residential → GMAC) | Perrettas lack standing because that assignment was at most voidable, not void | Assignment was defective/void and tainted the chain of title | Perrettas lack standing; estoppel by deed made the November 14 assignment voidable, not void, so mortgagors cannot attack it |
| Whether genuine factual issues precluded summary judgment on authenticity/validity of the note | Record (affidavits, assignments, lost-note affidavit) supported summary judgment that ARELIX had right to enforce when note was lost | Multiple versions of the note and competing evidence create genuine issues of material fact about which instrument is authentic | Vacated summary judgment: Perrettas raised a genuine issue about the note’s validity, so factual determination must be resolved at trial or further proceedings |
| Enforceability of a lost note by a transferee who was not in possession when loss occurred (R.I. UCC § 6A-3-309) | Note Capital may enforce as successor-in-interest and Superior Court erred to preclude enforcement | § 6A-3-309 bars enforcement by a transferee unless the transferee (or its transferor) was in possession and entitled to enforce when loss occurred | Court remanded for consideration in light of this Court’s later decision in SMS Financial XXV, LLC v. Corsetti, which restricts enforcement of lost notes to the entity in possession and entitled to enforce when loss occurred |
Key Cases Cited
- Bucci v. Lehman Brothers Bank, FSB, 68 A.3d 1069 (R.I. 2013) (distinguishes note as borrower’s obligation and mortgage as security; Rhode Island is a title-theory state)
- SMS Financial XXV, LLC v. Corsetti, 186 A.3d 1060 (R.I. 2018) (interprets R.I. UCC § 6A-3-309 to restrict enforcement of a lost note to the entity that was in possession and entitled to enforce when the loss occurred)
- Cruz v. Mortgage Electronic Registration Systems, Inc., 108 A.3d 992 (R.I. 2015) (mortgagors have narrow standing to challenge assignments that are void, but not to challenge merely voidable assignments)
- Mruk v. Mortgage Electronic Registration Systems, Inc., 82 A.3d 527 (R.I. 2013) (explains limits on mortgagors’ standing to contest assignments)
- IDC Properties, Inc. v. Goat Island South Condominium Ass'n, Inc., 128 A.3d 383 (R.I. 2015) (discusses estoppel by deed and its application to transfers made before the grantor obtained interest)