Lina CRUZ v. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., et al.
No. 2012-136-M.P.
Supreme Court of Rhode Island.
Jan. 13, 2015.
108 A.3d 992
Justice INDEGLIA, for the Court.
“Our system of justice does not encompass ex parte determinations on the merits of cases in civil litigation.” Association for Reduction of Violence v. Hall, 734 F.2d 63, 67 (1st Cir.1984) (quoting Kinoy v. Mitchell, 67 F.R.D. 1, 15 (S.D.N.Y.1975)); see also Vining v. Runyon, 99 F.3d 1056, 1057 (11th Cir.1996).6 “The right to due process ‘encompasses the individual‘s right to be aware of and refute the evidence against the merits of his case.‘” Vining, 99 F.3d at 1057 (quoting Application of Eisenberg, 654 F.2d 1107, 1112 (5th Cir.1981)). Although a trial justice may examine materials in camera, in order “to prevent the discovery or use of evidence, consideration of in camera submissions to determine the merits of litigation is allowable only when the submissions involve compelling national security concerns or the statute granting the cause of action specifically provides for in camera resolution of the dispute.” Id. None of those circumstances are present in this case.
Here, the trial justice apparently conditioned the order granting summary judgment upon his review—in camera—of a document that had been previously deemed protected and nondiscoverable. The trial justice failed to provide defense counsel with an opportunity to review the document, even though the document had been redacted so that only information pertaining to the transfer of Main and West‘s loan was included. When finally granting plaintiff‘s motion, the trial justice stated that, “[b]ased on the submissions and reviewing the entire document, [in camera,] the [c]ourt is satisfied that the bank has shown that this loan was, in fact, transferred.” The trial justice reiterated that, “based on the [c]ourt‘s in camera review, the summary judgment motion is granted.” We deem this error.
Because it was inappropriate for the trial justice to review and rely on a document not shown to defense counsel, we deem it necessary to vacate the summary judgment and remand the case to the Superior Court. After counsel has been provided access to the redacted document reviewed in camera by the trial justice, the Superior Court is to conduct a new hearing on summary judgment.
Conclusion
For the reasons stated above, we vacate the judgment and remand this case to the Superior Court with directions for the Superior Court to conduct a new hearing on the plaintiff‘s summary judgment motion, after defense counsel is afforded an opportunity to review the redacted document previously viewed in camera. The papers in this case may be remanded to the Superior Court.
Present: SUTTELL, C.J., GOLDBERG, FLAHERTY, ROBINSON, and INDEGLIA, JJ.
OPINION
Justice INDEGLIA, for the Court.
We granted the defendant Mortgage Electronic Registration Systems, Inc.‘s (MERS or defendant) petition for a writ of certiorari, which sought review of a Superior Court decision denying its motion for a protective order as to discovery sought by the plaintiff, Lina Cruz (Cruz or plaintiff).1 This case came before the Supreme Court for oral argument on December 2, 2014, pursuant to an order directing the parties to appear and show cause why the issues raised in this petition should not be decided without further briefing and argument. After considering the parties’ submitted memoranda and oral arguments, we are satisfied that cause has not been shown. Accordingly, we shall decide the petition at this time without further briefing or argument. For the reasons set forth herein, we quash the order denying MERS’ motion for a protective order.
I
Facts and Travel
On February 23, 2007, Cruz executed a promissory note (the note) in favor of New Century Mortgage Corporation (New Century) in the amount of $334,400, plus interest.2 The note stated in relevant part: “I understand that Lender may transfer this Note. Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the ‘Note Holder.‘” To secure payment obligations under the note, Cruz executed a mortgage (the mortgage) on her real estate located at 24 Janet Drive, Johnston, Rhode Island (the property). The mortgage deed denominated Cruz as the borrower and mortgagor and specified that MERS was the mortgagee, acting as nominee for lender New Century, and lender‘s successors and assigns. The mortgage deed included the statutory power of sale in favor of MERS as well as its “successors and assigns.” In the event that Cruz failed to fulfill her obligations under the note, it was provided that MERS had the right to enforce its interests, “including, but not limited to, the right to foreclose and sell the Property.” The mortgage deed was duly executed and recorded in the Land Evidence Records for the Town of Johnston on February 26, 2007.
New Century subsequently endorsed and transferred the note to USA Residential Properties, LLC (USA Residential), and on August 1, 2010, Rushmore Loan Management Services, LLC (Rushmore) became the servicer for Cruz‘s loan. On August 8, 2008, MERS, as nominee for the original lender, New Century, assigned its interest in the mortgage to ACT Properties, LLC (ACT Properties); and, on April 13, 2010, ACT Properties assigned its interest in the mortgage to USA Residential.
When Cruz failed to make timely payments, Rushmore, acting on behalf of USA Residential, initiated foreclosure proceedings, sending notice of default to Cruz and scheduling a foreclosure sale for February 18, 2011. On February 15, 2011, Cruz
On July 28, 2011, MERS filed a motion for summary judgment on the grounds that, among other things, Cruz did not have standing to challenge the assignments of the mortgage. On July 29, 2011, pursuant to
On January 26, 2012, Cruz filed a fourth
II
Standard of Review
“Our review of a case on certiorari is limited to an examination of ‘the record to determine if an error of law has been committed.‘” State v. Poulin, 66 A.3d 419, 423 (R.I.2013) (quoting State v. Greenberg, 951 A.2d 481, 489 (R.I.2008)). This Court will reverse the lower court decision only when it “find[s] pursuant to the petition that the [hearing justice] committed an error of law.” Huntley v. State, 63 A.3d 526, 531 (R.I.2013) (quoting State v. Shepard, 33 A.3d 158, 163 (R.I.2011)).
III
Discussion
Before us, MERS argues that the hearing justice erred in failing to restrict discovery because plaintiff has no standing to challenge the validity of an assignment to which she is neither a party nor a third-party beneficiary. MERS asserts that any
“Standing is a threshold inquiry into whether the party seeking relief is entitled to bring suit.” Narragansett Indian Tribe v. State, 81 A.3d 1106, 1110 (R.I.2014) (citing Blackstone Valley Chamber of Commerce v. Public Utilities Commission, 452 A.2d 931, 932, 933 (R.I.1982)). When one party challenges standing, “the focal point shifts to the claimant, not the claim, and a court must determine if the plaintiff ‘whose standing is challenged is a proper party to request an adjudication of a particular issue and not whether the issue itself is justiciable’ * * *.” Id. (quoting McKenna v. Williams, 874 A.2d 217, 226 (R.I.2005)). “[T]he essence of the question of standing is whether the party seeking relief has alleged such a personal stake in the outcome of the controversy as to ensure concrete adverseness that sharpens the presentation of the issues * * *.” Id. (quoting Blackstone Valley Chamber of Commerce, 452 A.2d at 933).
The determination of whether a party has standing “begins with the pivotal question of whether the party alleges that the challenged action has caused him or her injury in fact.” Narragansett Indian Tribe, 81 A.3d at 1110 (citing Pontbriand v. Sundlun, 699 A.2d 856, 862 (R.I.1997)). It is required that the alleged injury in fact be “an invasion of a legally protected interest which is (a) concrete and particularized * * * and (b) actual or imminent, not ‘conjectural’ or ‘hypothetical.‘” Pontbriand, 699 A.2d at 862 (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). In addition, “standing is generally limited to those plaintiffs asserting their own rights, not the rights of others.” Mruk v. Mortgage Electronic Registration Systems, Inc., 82 A.3d 527, 535 (R.I.2013) (citing Rhode Island Ophthalmological Society v. Cannon, 113 R.I. 16, 27, 317 A.2d 124, 130 (1974)). This Court has rejected the proposition that “an individual who is not a party to a contract may assert the rights of one of the contracting parties in order to void a contract or have it declared unenforceable.” Sousa v. Town of Coventry, 774 A.2d 812, 815 n. 4 (R.I.2001); see also DePetrillo v. Belo Holdings, Inc., 45 A.3d 485, 492 (R.I.2012) (rebuffing a third party‘s attempt to invalidate a contract).
This Court first addressed the issue of standing to challenge the assignment of a mortgage in Mruk, where we carved out an exception to the general rule espoused in DePetrillo that third parties do not have standing to challenge a contract. In Mruk, we recognized that our jurisprudence appeared to be dispositive on this issue, but we concluded that those cases were “paint[ed] with too broad a brush.” Mruk, 82 A.3d at 536 (quoting Culhane v. Aurora Loan Services of Nebraska, 708 F.3d 282, 290 (1st Cir.2013)). Distinguishing Mruk from the typical third party standing case, we reasoned that “the homeowners here are not attempting to assert the rights of one of the contracting parties; instead, the homeowners are asserting their own rights not to have their homes unlawfully foreclosed upon.” Id. Consequently, we found that the homeowners had standing to “challenge the assignment of mortgages on their homes to the extent necessary to contest the foreclosing entity‘s authority to foreclose.” Id. We cautioned, however, that this holding
The United States Court of Appeals for the First Circuit recently limited standing to challenges of assignments that are void, as opposed to voidable, in Wilson v. HSBC Mortgage Services, Inc., 744 F.3d 1 (1st Cir.2014).5 In Wilson, the First Circuit explained that a plaintiff has standing to challenge an “assignment as void because success on the merits would prove the purported assignee is not, in fact, the mortgagee and therefore lacks any right to foreclose on the mortgage.” Id. at 9. The First Circuit acknowledged, however, that a homeowner does not have standing “to claim the assignment is voidable because the assignee still would have received legal title vis-[à]-vis the homeowner.” Id. As a result, even successfully proving that an assignment is voidable “would not affect the rights as between those two parties or provide the homeowner with a defense to the foreclosure action.” Id.
Our case law regarding the distinction between void and voidable contracts is consistent with the First Circuit‘s reasoning in Wilson. We have long held that a void contract is a nullity, but that a voidable contract affects only one party and “may be either ratified or rescinded at that party‘s election.” Moura v. Mortgage Electronic Registration Systems, Inc., 90 A.3d 852, 857 (R.I.2014). In Bishop v. Kent & Stanley Co., 20 R.I. 680, 684-85, 41 A. 255, 257 (1898), we held that a contract executed beyond the scope of the signer‘s authority was not void, but instead that it was voidable at the election of the corporation. The Bishop Court applied that principle to mortgage assignments and concluded that a mortgage is voidable only by the mortgagee even in the absence of signer authority. Id.
Distinguishing void from voidable contracts, the First Circuit similarly reasoned that a corporate officer acting outside the scope of his or her authority creates a voidable contract that can legally be ratified by the corporation. Wilson, 744 F.3d at 10. A void contract is one that cannot be enforced, and in the mortgage context, a void assignment “is one in which the putative assignor ‘never properly held the mortgage and, thus, had no interest to assign.‘” Id. (quoting Culhane, 708 F.3d at 291). In Wilson, the First Circuit further acknowledged that a challenge to a mortgage assignment on the ground that the assignor “never possessed a legally transferrable interest” alleges a void, as opposed to voidable, assignment. Id. (quoting Woods v. Wells Fargo Bank, N.A., 733 F.3d 349, 354 (1st Cir.2013)).
It is in the context of adopting the First Circuit‘s rationale in Wilson that we apply the void versus voidable analysis to the facts of the present case. In her notices to depose, Cruz made it clear that she intended to obtain information relating to the authority of certain officials, specifically Mr. Nolan, to execute the mortgage assignment from MERS to ACT Properties on behalf of MERS. However, even assuming that Cruz can prove that Mr.
We are of the opinion that the hearing justice‘s endorsement of standing through a denial of the defendant‘s motion for a protective order was an error of law. The challenge to Mr. Nolan‘s authority should have been treated as an allegation that the assignment was, at most, voidable. As such, it is our opinion that the hearing justice should have granted the motion for a protective order.
IV
Conclusion
Accordingly, the hearing justice‘s denial of the motion for a protective order is quashed, and the matter is remanded to the Superior Court for further proceedings in accordance with this opinion.