June 7, 2013
Rhode Island Superior Court Finds MERS has Standing and Assignment to Deutsche Bank Post-Foreclosure was Unchallengeable by Property Owners
In Deutsche Bank v. Falconer (R.I. Sup. May 1, 2012) three actions were consolidated into one opinion. Deutsche prevailed on its possession of property claim in the Sixth Division District Court and Falconer appealed the decision and also filed a separate claim to quiet title. All claims are consolidated here since they hinge upon whether MERS had standing to foreclose and assign its interest to Deutsche post-foreclosure.
In June 2007, the falconers obtained a $252,000 note with Fremont Investment and a mortgage designating MERS, “solely as nominee for Lender and Lender’s successors and assigns,” as the mortgagee with the “statutory power of sale.” In 2009, MERS provided notice of foreclosure to the Falconers and publicized a foreclosure sale for twelve consecutive weeks and at the sale MERS prevailed as the highest bidder. After the foreclosure sale, MERS assigned all of its title in the property to Deutsche Bank.
Foreclosure was proper: The court found that MERS had standing for the foreclosure because of the clear language of the mortgage, Rhode Island statute §34-11-24, as well as jurisprudence from Rhode Island. Relying on Bucci ( WL 3328373, 2009), the court found that the language of the original mortgage provided that MERS was the mortgagee and the nominee for the lender and therefore could exercise all rights to the property, including its sale. Furthermore, §34-11-24 specifically provides that the assignment of a mortgage will be followed by the assignment of the note and any debt secured. Therefore, MERS must have the power of sale given that MERS has the power to assign the mortgage as well as the note under §34-11-24. MERS had standing to foreclose.
Transfer to Deutsche was proper: The court rejects the Falconer’s argument that since MERS was the holder of only the mortgage they could not assign any interest to Deutsche. Rather the court relies on Bucci ( WL 3328373, 2009) and Payette for support that MERS was mortgagee as well as nominee to the lender and could transfer both the mortgage and the note. The court also relies upon the “gravel rule” which cuts off a debtor’s right to cure an assignment at the foreclosure sale. Therefore, even if the assignment were invalid Falconers did not have a valid action to rescind the foreclosure because “a foreclosure conducted by statutory power of sale shall forever be a perpetual bar against the mortgagor.” The assignment to Deutsche fulfilled the two statutory requirements of §34-11-24 because it was in the form entitled “Assignment of Mortgage” and was duly executed.
Furthermore the court determined that the sale to Deutsche had no effect on property title because it occurred after the foreclosure and Deutsche therefore holds all rights which were previous held by MERS, post-foreclosure. The court finds it is a well-established principle that at a foreclosure sale the purchaser obtains a title free and clear of all interests that were junior to the lien that was foreclosed and any presumptions should be in favor of the legal title holder, Deutsche in this case. The transfer to Deutsche was proper.
As to the quiet title action, judgment is in favor of defendants and both of Falconer’s District Court Appeals are dismissed and remanded for a decision consistent with that determined by the court.
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