Editor: David Reiss
Brooklyn Law School

January 31, 2013

Rhode Island Court Denies Plaintiff’s Claim to Invalidate Foreclosure Sale

By Karl Dowden

In Porter v. First NLC Financial Services LLC, No. PC 10-2526 (R.I. Sup. March 31, 2011), the plaintiff challenged the validity of a foreclosure sale conducted by MERS. The defendant’s motion for summary judgment was addressed in this opinion.

The plaintiff argued that the original lender, First NLC, terminated its agency relationship with MERS by filing for bankruptcy protection. The plaintiff alleged that First NLC failed to affirm its contract with MERS which was required under Section 365 of the Bankruptcy Code. However, the court noted that the plaintiff failed to include affidavits or any evidence to support her allegations, as required to successfully oppose a summary judgment motion.

In addition, the plaintiff alleged that MERS was not the holder of the note or mortgage deed on the date of the foreclosure sale, MERS was not acting as an agent of the lender, and there was no chain of title to MERS or valid assignment of the note to the lender. The court found the plaintiff’s these objections to the foreclosure sale as substantially similar to Bucci v. Lehman Bros. Bank and adopted the reasoning to dismiss these claims. The plaintiff similarly claimed these actions were violations under both the mortgage agreement and Rhode Island’s statutes.

The court found the language in the mortgage agreement was unambiguous and clear in granting MERS status as both nominee for the First NLC and as mortgagee under the agreement. As a result, the statutory power of sale was specifically granted to MERS as mortgagee and lender’s nominee.

A statutory challenge to the authority of MERS was similar rebuffed. Since adopting the plaintiff’s argument would result in mortgagees and lenders being unable to use a mortgage servicer, the court rejected the argument.

Finally, a claim of tortious interference based on the plaintiff’s tenants who broke their leases and terminated their tenancy at the property as a result of the foreclosure was addressed. A claim of tortious interference requires the plaintiff to show an existence of a contract, the alleged wrongdoer’s knowledge of the contract, and the intentional improper interference of the contract along with damages as a result. The court found the foreclosure to be proper, which resulted in the tortious interference claim being dismissed since the interference must be improper in order to succeed.

The court ultimately granted the defendant’s motion to dismiss the case.

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