Antonio P. Rosano v. Mortgage Electronic Registration Systems, Inc.

Supreme Court
No. 2012-343-Appeal.
(PC 10-310)
Antonio P. Rosano :
v. :
Mortgage Electronic Registration Systems, :
Inc., et al.
NOTICE: This opinion is subject to formal revision before
publication in the Rhode Island Reporter. Readers are requested to
notify the Opinion Analyst, Supreme Court of Rhode Island, 250
Benefit Street, Providence, Rhode Island 02903, at Telephone 222-
3258 of any typographical or other formal errors in order that
corrections may be made before the opinion is published.
Supreme Court
No. 2012-343-Appeal.
(PC 10-310)
Antonio P. Rosano :
v. :
Mortgage Electronic Registration Systems, :
Inc., et al.
Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.
OPINION
Chief Justice Suttell, for the Court. The plaintiff, Antonio P. Rosano, appeals from a
final judgment dismissing his complaint against the defendants Mortgage Electronic Registration
Systems, Inc. (MERS), EquiFirst Corporation (EquiFirst), and Sutton Funding LLC c/o HomEq
Servicing (Sutton Funding) (collectively defendants). The plaintiff filed suit in the Superior
Court seeking a declaratory judgment and injunctive relief preventing the foreclosure sale of his
mortgaged property, arguing that the assignment of his mortgage through MERS was a legal
nullity. On appeal, the plaintiff asks us to address anew the question of whether a nominee of a
mortgage lender, holding legal title to the mortgage but not holding the correlative promissory
note, may exercise the statutory power of sale and foreclose on the mortgaged property. The
defendants assert that the action is controlled by our recent precedent and that the dismissal of
the plaintiff’s complaint was appropriate under Rule 12(b)(6) and (7) of the Superior Court Rules
of Civil Procedure.
This case came before the Supreme Court pursuant to an order directing the parties to
appear and show cause why the issues raised in this appeal should not be summarily decided.
After considering the parties’ written and oral submissions and reviewing the record, we
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conclude that cause has not been shown and that this case may be decided without further
briefing or argument. For the reasons set forth in this opinion, we affirm the judgment of the
Superior Court.
I
Facts and Procedural History
On June 25, 2007, Rosano executed an adjustable-rate promissory note in favor of
EquiFirst in the amount of $379,000, secured by a mortgage on real estate located at 331 High
Street in the Town of Bristol (the property). The mortgage designates EquiFirst as the Lender
and names MERS as the mortgagee and the Lender’s nominee. 1 The mortgage document
provides, in relevant part, that “Borrower does hereby mortgage, grant and convey to MERS,
(solely as nominee for Lender and Lender’s successors and assigns) and to the successors and
assigns of MERS, with Mortgage Covenants upon the Statutory Condition and with the Statutory
Power of Sale * * * .” The mortgage document also provides that “if necessary to comply with
law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the
right: to exercise any or all of those interests, including, but not limited to, the right to foreclose
and sell the Property * * * .”
1
It may be useful at this point to restate our description of MERS and its role in the mortgage
industry. In 1993, several major participants in the lending community created a national
electronic registration database to track transfers of ownership interests in mortgaged properties;
the system created is MERS. Bucci v. Lehman Brothers Bank, FSB, 68 A.3d 1069, 1072 (R.I.
2013). MERS operates to streamline the process of rapid home-loan transfers and to minimize
recording errors. Id. at 1073. In MERS transactions, a member of MERSCORP, Inc.
(MERSCORP), the parent corporation owning MERS, extends a loan. Id. The lending member
is designated on the promissory note as the lender; MERS is named in the mortgage as the
mortgagee and acts as nominee for the lender, as well as any successors and assigns of the
lender. Id. Therefore, whenever there is a transfer of a note between MERSCORP members,
there is no need to record an assignment of the mortgage, as MERS remains the mortgagee of
record and may act as nominee for all MERSCORP members. Id. When the transfer is from a
MERSCORP member to a nonmember, an assignment from MERS to the nonmember is
required. Id.
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On September 4, 2009, MERS, as EquiFirst’s nominee, assigned the mortgage to Sutton
Funding, recording the assignment in the land evidence records of the Town of Bristol. Shortly
thereafter, in November 2009, the mortgage was assigned again, this time from Sutton Funding
to Bank of New York Mellon Trust Company (Bank of New York); the assignment was again
recorded in the land evidence records of Bristol. Bank of New York then sent a notice of default
for nonpayment to Rosano. 2 After Rosano failed to act to remedy his default, Bank of New York
published a notice of sale in The Providence Journal for four weeks and initiated a foreclosure
sale. The foreclosure sale occurred on January 6, 2010, with Bank of New York prevailing as
the highest bidder and recording a foreclosure deed the next month, on February 9, 2010.
On January 15, 2010, before Bank of New York recorded the foreclosure deed, plaintiff
filed suit in Superior Court challenging the validity of the two assignments of the mortgage, as
well as the foreclosure sale of the property. The defendants filed a motion to dismiss under Rule
12(b)(6) and (7).
In deciding the motion to dismiss, the hearing justice determined that plaintiff’s
allegations with respect to the invalidity of the mortgage assignment were merely conclusory
statements and that plaintiff had failed to plead facts that “raise a right to relief above the
speculative level.” Accordingly, he dismissed plaintiff’s complaint under Rule 12(b)(6). The
hearing justice also held that the assignments from MERS to Sutton Funding and from Sutton
Funding to Bank of New York were both valid. He further concluded that Bank of New York
lawfully commenced foreclosure proceedings and that, as the successful bidder, it now holds
valid title to the property.
2
Although plaintiff argues in his Rule 12A statement that Bank of New York lacked authority to
send a notice of default, he does not contend anywhere in his submission that he was not in
default.
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Additionally, the hearing justice dismissed plaintiff’s complaint under Rule 12(b)(7) for
failing to join an indispensable party, i.e., Bank of New York. The hearing justice found that the
interests of Bank of New York as the current title holder of the recorded deed in question were
inextricably tied to the adjudication of the issues presented by plaintiff’s complaint, which
specifically sought nullification of the foreclosure sale and return of title to plaintiff. The
hearing justice therefore held that Bank of New York was an indispensable party to the action
brought by plaintiff and, accordingly, he dismissed the complaint.
II
Standard of Review
Because the hearing justice predicated the judgment dismissing plaintiff’s complaint on
the alternate grounds of Rule 12(b)(6) and (7), we need affirm on only one such ground to
dispose of the issues raised in this appeal. As it is eminently clear to us that Bank of New York,
as record holder of the property in question, is an indispensable party to this litigation, we rest
our opinion upon Rule 12(b)(7).
“Like questions of statutory construction, the interpretation of court rules of procedure is
a legal question for the court.” UAG West Bay AM, LLC v. Cambio, 987 A.2d 873, 877 (R.I.
2010) (quoting McDonough v. McDonough, 962 A.2d 47, 54 (R.I. 2009)). We review questions
of law de novo. Id. “Our review is de novo because this Court is in the best position to decide
the merits of a given question of law.” Warwick Sewer Authority v. Carlone, 45 A.3d 493, 498
(R.I. 2012) (quoting N & M Properties, LLC v. Town of West Warwick, 964 A.2d 1141, 1144
(R.I. 2009)).
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III
Discussion
The plaintiff’s complaint for declaratory and injunctive relief was brought specifically
under the provisions of the Uniform Declaratory Judgments Act, G.L. 1956 chapter 30 of title 9.
Section 9-30-11 provides in part: “When declaratory relief is sought, all persons shall be made
parties who have or claim any interest which would be affected by the declaration, and no
declaration shall prejudice the rights of persons not parties to the proceeding.” As we recently
emphasized in Burns v. Moorland Farm Condominium Association, 86 A.3d 354, 358 (R.I.
2014), the command of § 9-30-11 is mandatory. “[O]rdinarily failure to join all persons who
have an interest that would be affected by the declaration is fatal.” Burns, 86 A.3d at 358
(quoting Abbatematteo v. State, 694 A.2d 738, 740 (R.I. 1997)). Moreover, Rule 19(a) of the
Superior Court Rules of Civil Procedure is abundantly clear in its requirements for joining
indispensable parties, stating that:
“A person who is subject to service of process shall be joined as a party in the
action if (1) in the person’s absence complete relief cannot be accorded among
those already parties, or (2) the person claims an interest relating to the subject of
the action and is so situated that the disposition of the action in the person’s
absence may (i) as a practical matter impair or impede the person’s ability to
protect that interest * * * .” (Emphasis added.)
This Court has defined “an indispensable party as one ‘whose interests could not be
excluded from the terms or consequences of the judgment * * * as where the interests of the
absent party are inextricably tied in to the cause * * * or where the relief really is sought against
the absent party alone.’” Root v. Providence Water Supply Board, 850 A.2d 94, 100 (R.I. 2004)
(quoting Anderson v. Anderson, 109 R.I. 204, 215, 283 A.2d 265, 271 (1971) (emphasis
omitted)).
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In the case under review, Bank of New York is the current title holder of the property,
after foreclosing on the property and prevailing at the foreclosure sale as the highest bidder. It is
difficult to imagine a scenario in which the complete relief sought—the quieting of title to the
property—could be accorded to plaintiff where the current title holder is not named as a party.
Even if we were to take all of plaintiff’s allegations as true and assume that the assignment to
Bank of New York was invalid, Bank of New York would nevertheless be a party claiming an
interest that would be affected by the declaratory relief sought by plaintiff.
In his papers submitted to this Court, plaintiff “concurs with the conclusion that the
interests of all parties in a title clearing action must be protected.” He urges us, however, to
adopt a “pragmatic approach” and conclude that Bank of New York was sufficiently on notice
and suffered no prejudice. He asserts that the purported assignment from Sutton Funding was to
“The Bank of New York Mellon Trust Company, National Association as grantor trustee of the
Protium Master Grantor Trust, c/o Homeeq. [sic], 4837 Watt Avenue, Suite 100, MC: CA3501,
North Highlands CA, 95660.” As HomEq “was the contact for the Trust,” he posits, HomEq was
clearly standing in the shoes of Bank of New York. Thus, he contends that he believed in good
faith that naming HomEq in the complaint and having it served with process was “sufficient to
put Bank of New York on notice of the fact that its interest would be impacted by this lawsuit.”
He concludes by alleging that “Bank of New York is in this case by virtue of its incestuous
relationship with [HomEq] and that its interests are being protected by [HomEq].”
We cannot accept plaintiff’s premise that naming HomEq in the complaint and serving it
with process satisfies the clear requirements of Rule 19(a) or § 9-30-11. Bank of New York was
clearly an interested party in plaintiff’s claim for declaratory relief. “All parties who have an
interest that would be affected by a declaration are indispensable and must be joined in a
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declaratory judgment action.” Meyer v. City of Newport, 844 A.2d 148, 152 (R.I. 2004); see
Burns, 86 A.3d at 358. “A court may not assume subject-matter jurisdiction over a declaratory-
judgment action when a plaintiff fails to join all those necessary and indispensable parties who
have an actual and essential interest that would be affected by the declaration.” Meyer, 844 A.2d
at 152 (quoting Sullivan v. Chafee, 703 A.2d 748, 754 (R.I. 1997)).
Because the plaintiff has failed to join Bank of New York to the action, we are of the
opinion that the hearing justice’s dismissal of the action on Rule 12(b)(7) grounds was entirely
appropriate. We need not reach, therefore, the questions presented regarding the sufficiency of
the plaintiff’s complaint under Rule 12(b)(6).
IV
Conclusion
For the reasons set forth in this opinion, we affirm the judgment of the Superior Court.
The record in this case shall be returned to the Superior Court.
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RHODE ISLAND SUPREME COURT CLERK’S OFFICE
Clerk’s Office Order/Opinion Cover Sheet
TITLE OF CASE: Antonio P. Rosano v. Mortgage Electronic Registration Systems,
Inc., et al.
CASE NO: No. 2012-343-Appeal.
(PC 10-310)
COURT: Supreme Court
DATE OPINION FILED: June 2, 2014
JUSTICES: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.
WRITTEN BY: Chief Justice Paul A. Suttell
SOURCE OF APPEAL: Providence County Superior Court
JUDGE FROM LOWER COURT:
Associate Justice Allen P. Rubine
ATTORNEYS ON APPEAL:
For Plaintiff: George E. Babcock, Esq.
For Defendants: Charles C. Martorana, Pro Hac Vice
David J. Pellegrino, Esq.