February 14, 2013
In Cafua v. Mortgage Electronic Registration Systems, et al., C.A. No. PC 2009-7407, (R.I. Super. June 20, 2012), the plaintiff alleged defaults in the foreclosure process prevented the foreclosing party (HSBC) from having the statutory power of sale. Specifically, the plaintiff challenged the assignment of the note from MERS to HSBC on multiple grounds.
The plaintiff interpreted various statutes to require the note and mortgage to be held by the same entity at the time of foreclosure or at the time MERS assigned a mortgage to another entity. However, the court rejected the plaintiff’s interpretation and found that “Section 34-11-24 provides that an assignment of the mortgage shall also be deemed an assignment of the debt secured thereby.” As a result, the court found the assignment of the note from MERS to HSBC was valid. Additionally, the court stated that the plaintiffs “knew or should have known that foreclosure was the ultimate consequence of default by the [p]laintiffs under the clear, unambiguous language of the [m]ortgage instrument.”
The plaintiff then challenged the assignment based on a lack of authority. The plaintiff alleged that the party who executed the assignment on behalf of MERS was not an officer of MERS and held no authority to execute the assignment. Additionally the plaintiff alleged that the original lender did not authorize MERS to assign the mortgage. However, the court dismissed this theory because the plaintiff lacked standing to challenge the validity of the assignments. Since the plaintiff was not a party to the actual assignment, the plaintiff cannot challenge validity of the transaction on behalf of the assignee.
The plaintiff also alleged that the endorsement of the note in blank from MERS to HSBC was false and intentionally fabricated. Plaintiff argued that the failure of the endorsement to reference a date or he loan itself supports the allegation. However, the court found that in order to prove ownership, the note holder need only produce the note and that it payable or endorsed to the note holder. The only exception is if the borrower can show evidence of bad faith or fraud. In this case, the court found that the borrower did not introduce sufficient evidence to show bad faith or fraud. The court also relied on the UCC which states the signatures on an instrument is presumed to be authentic and authorized.| Permalink