Summers v. Financial Freedom Acquisition LLC
- Citation:
- Summers v. Financial Freedom Acquisition LLC; Case No. 14-1930 (1st Cir. October 23, 2015)
- Tag(s):
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- Ruling:
- Plaintiff lacked standing to challenge two mortgage assignments and mortgagee's failure to file claim in decedent's probate proceeding did not bar its recovery of sums due under a reverse mortgage via foreclosure following the death of the mortgagor.
- Procedural context:
- Appeal from the United States District Court for the District of Rhode Island, which court had jurisdiction by diversity.
- Facts:
- Appellant Summers and his sister inherited a house from their mother (the "Decedent"). During her lifetime, the Decedent had obtained a reverse mortgage on the house, that remained unpaid at the time of her death and which had been assigned to MERS. The reverse mortgage in question was non-recourse in nature, such that the Decedent was not personally liable on the reverse mortgage note. The Decedent's estate was duly administered through probate proceedings and the house was therein granted to the Appellant and his sister. Approximately one year later, the mortgage was re-assigned to the mortgagee, which initiated and completed foreclosure proceedings on the home. The Appellant and his sister invoked diversity jurisdiction to challenge the validity of the assignments as well as the foreclosure itself. Appellant's sister dropped out of the case during pretrial discovery. At the close of discovery, the trial court granted favor of the mortgagee-defendant and Summers appealed.
After an examination of Rhode Island law, the First Circuit determined that a party lacks standing to challenge a mortgage assignment that render it merely voidable but otherwise effective to pass legal title to property. Finding no irregularities that would render either assignment void, the court concluded that the assignments were, at worst, merely voidable, which divested the Appellant of standing to challenge either assignment.
The court next turned to the question of whether the mortgagee's failure to participate in the probate action by filing a claim against the Decedent's estate precluded it from recovering on the reverse mortgage by way of subsequent foreclosure. Describing the foreclosure remedy as an equitable, in rem proceeding, and drawing an analogy from bankruptcy law ("a creditor may recover the deficiency on a mortgage loan through 'an action against the debtor in rem,' notwithstanding the debtor's discharge in bankruptcy"), the First Circuit held that, in Rhode Island, a mortgagee need not make a monetary claim against an estate in probate proceedings in order to retain its in rem rights to proceed against real property that secures the mortgage debt. Thus, the entry of summary judgment in favor of Financial Freedom Acquisition LLC by the trial court was upheld.
- Judge(s):
- Howard, Chief Judge; Selya and Thompson, Circuit Judges.
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