Summers v. Financial Freedom Acquisition LLC
2015 U.S. App. LEXIS 18507
| 1st Cir. | 2015Background
- Rosalie Summers (decedent) held a reverse mortgage on a Warwick, RI home that became due on her death; reverse mortgage was non-recourse and typical in form.
- The reverse mortgage was assigned twice (to MERS as nominee and back to Financial Freedom); assignments were notarized, delivered, and recorded.
- Decedent died intestate in December 2009; probate was opened, notices given, but Financial Freedom/MERS did not file a claim in probate; estate closed and title to the property was granted to decedent’s children (Steven Summers and Brinah Court).
- Financial Freedom later published foreclosure notice, proceeded with foreclosure, and recorded a foreclosure deed in November 2011; Summers sued in federal court (diversity) contesting assignments and foreclosure.
- District court granted summary judgment for Financial Freedom; Summers appealed, challenging (1) his standing to attack the assignments and (2) whether failure to file a probate claim precluded foreclosure.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge mortgage assignments | Summers: assignments were invalid/void so he can contest them | Financial Freedom: assignments complied with formalities and are at most voidable, so Summers lacks standing | Court: Assignments were valid on record and at worst voidable; Summers lacks standing to challenge them |
| Effect of failure to file probate claim on right to foreclose | Summers: because lender did not file a probate claim within statutory period, it lost right to enforce mortgage/foreclose | Financial Freedom: probate claim rules affect personal liability on the note, not the in rem mortgage lien or right to foreclose | Court: Failure to file in probate may extinguish personal claim on debt but does not extinguish mortgage or bar foreclosure; foreclosure is an in rem equitable remedy independent of probate |
| Applicability of statute of limitations tied to probate claim | Summers: probate filing deadline precludes later foreclosure enforcement | Financial Freedom: different limitations govern foreclosure (20-year general rule) and probate filing period does not bar foreclosure | Court: Probate claim period does not apply to foreclosure; general 20-year limitations govern |
| Relevance of Chhun v. MERS to standing at summary judgment | Summers: Chhun allows assignment challenges to proceed | Financial Freedom: Chhun was a motion-to-dismiss context and factually different | Court: Chhun distinguishable; summary judgment record lacked facts showing assignments invalid, so Chhun does not help Summers |
Key Cases Cited
- Lister v. Bank of Am., N.A., 790 F.3d 20 (1st Cir. 2015) (explains Rhode Island as a title-theory state for mortgages)
- Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282 (1st Cir. 2013) (mortgagor has standing only to challenge assignments that render mortgage void)
- Bucci v. Lehman Bros. Bank, FSB, 68 A.3d 1069 (R.I. 2013) (mortgage and note need not be held by same entity; formal requirements for assignments)
- Mruk v. MERS, 82 A.3d 527 (R.I. 2013) (standing limits to contest mortgage validity)
- Chhun v. MERS, 84 A.3d 419 (R.I. 2014) (assignment challenge allowed at motion-to-dismiss stage; distinguishable on facts)
- Johnson v. Home State Bank, 501 U.S. 78 (1991) (recognizes lender’s right to foreclosure as separate equitable remedy)