Rafael Genao v. Litton Loan Servicing, L.P.
108 A.3d 1017
| R.I. | 2015Background
- Genao obtained a commercial mortgage loan on July 31, 2006, secured by property at 701 Cranston Street, Providence.
- The note was made payable to Equity One, with MERS as mortgagee and nominal lender for the note holder; MERS had a statutory power of sale.
- Equity One transferred the note to CBA Commercial, LLC, which then transferred it to Deutsche Bank; Litton serviced the loan for Deutsche Bank.
- MERS assigned its interest to Deutsche Bank in 2008; a 2009 modification affirmed Genao’s indebtedness to Deutsche Bank.
- Foreclosure proceedings were initiated after default; Genao filed suit in Superior Court seeking various remedies and challenging the MERS assignment’s authority.
- A Superior Court judge granted discovery-related relief over MERS’ objections; this Court later granted certiorari and addressed Genao’s standing and the assignment issue on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Genao have standing to challenge the assignment to Deutsche Bank? | Genao asserts defective authority behind the assignment; seeks to contest foreclosing entity’s authority. | Genao lacks standing to challenge an assignment in which he is not a party; the assignment is at most voidable. | Genao lacks standing to challenge the assignment; dismissal affirmed for protective-order grounds. |
| Was MERS' authority to assign the mortgage properly contested, affecting summary judgment? | Questions remain about MERS’s authority to assign the mortgage and to foreclose. | Authorities hold MERS can assign as mortgagee/nominee and MERS’s authority is supported by Bucci/Mruk decisions. | Even assuming standing, summary judgment upheld; MERS could assign and foreclose consistent with controlling authorities. |
| Does the residential-mortgage standing exception apply to a commercial property owner? | Genao challenges authority under a remedy-limiting theory; residential exception should extend. | Mruk exception limited to private residential mortgagors; not applicable to commercial property. | The residential standing exception does not apply; no standing based on commercial property. |
| Should the protective order against MERS be sustained? | Discovery topics about MERS’s authority should proceed; protective order unwarranted. | Genao lacks standing and scope; protective order appropriate to limit discovery. | Protective order affirmed; Genao’s challenges to standing were not meritorious. |
Key Cases Cited
- Bucci v. Lehman Brothers Bank, FSB, 68 A.3d 1069 (R.I. 2013) (MERS can be mortgagee/nominee; mortgage and note may be separated in certain contexts)
- Mruk v. Mortgage Electronic Registration Systems, Inc., 82 A.3d 527 (R.I. 2013) (Homeowners may challenge mortgage assignments to contest foreclosing authority; narrow scope)
- Culhane v. Aurora Loan Services of Nebraska, 708 F.3d 282 (1st Cir. 2013) (Distinctions between legal interest in mortgage and beneficial interest in debt; authority to assign)
- Wilson v. HSBC Mortgage Services, Inc., 744 F.3d 1 (1st Cir. 2014) (First Circuit: challenge to officer’s authority yields voidable—not void—contract basis)
- Breggia v. Mortgage Electronic Registration Systems, Inc., 102 A.3d 636 (R.I. 2014) (Affirms MERS authority in similar mortgage contexts)
- DePetrillo v. Belo Holdings, Inc., 45 A.3d 485 (R.I. 2012) (Third-party standing limitations in mortgage-related challenges)