County Superior Court, (KD 18-549) Associate Justice Brian P.
Plaintiff: Daniel E. Burgoyne, Esq.
Defendants: Stephen F. Del Sesto, Esq.
Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia,
case came before the Supreme Court for oral argument on April
4, 2019, pursuant to an order directing the parties to appear
and show cause why the issues raised in this appeal should
not be summarily decided. The defendants, Unetixs Vascular,
Inc. and Criticare Technologies, Inc. (collectively, the
tenants), appeal from a Kent County Superior Court
justice's entry of summary judgment in favor of the
plaintiff, CFS 915, LLC (plaintiff or CFS), on July 25, 2018.
The tenants were parties to written but unrecorded leases
with MCH Realty, LLC (MCH) (the original owner of the
property). MCH had granted a mortgage on the
property to DBS Bank, Ltd. (DBS), which mortgage was recorded
on January 30, 2015. DBS thereafter assigned that mortgage to
CFS, which assignment was recorded on October 5, 2015. CFS
eventually foreclosed on the mortgage and bought the property
at the subsequent foreclosure sale.
January 23, 2018, CFS (in its capacity as owner of the
property) sent a letter to the tenants directing them to
vacate by January 31, 2018 the premises that they had been
occupying pursuant to the above-referenced unrecorded leases.
The tenants did not do so, and CFS filed a complaint in
District Court to evict the tenants. The parties entered into
a consent judgment, whereby judgment was entered for the
tenants for possession and for CFS for back rent.
consent judgment also preserved CFS's right to appeal,
and it did appeal to the Superior Court. Then, on June 18,
2018, CFS moved for summary judgment.
issue before the Superior Court when it addressed CFS's
motion for summary judgment was whether the recorded mortgage
upon which CFS had foreclosed had priority as a matter of law
over the tenants' unrecorded leases. A justice of the
Superior Court held a hearing on CFS's motion for summary
judgment and granted the motion on July 25, 2018; judgment in
favor of CFS for possession of the property entered the same
day. The hearing justice held that the tenants were tenants
at sufferance because "their unrecorded lease agreements
do not have priority under the mortgage * * *." He held
that CFS's recorded mortgage complied with G.L. 1956
§§ 34-25-2 and 34-25-10, that the recorded mortgage
"is superior to any unrecorded interest," and that
"foreclosure of such mortgage extinguish[ed] the
leases." Finally, he determined that the tenants had
"failed to show any genuine issue of material fact that
CFS had notice or knowledge of any relevant conveyance prior
to its acquisition of the mortgage * * *."
tenants timely appealed from the Superior Court to this
Court, and then filed an emergency motion for a stay of
execution pending the appeal, which stay was granted.
this Court, the tenants contend that the question of
CFS's notice of the leases vel non is a genuine
issue of material fact and that, therefore, summary judgment
was improperly granted. They additionally contend that their
unrecorded leases were not extinguished by the recorded
mortgage because they contend that CFS had notice of those
leases, and they argue that "notice is the key factor
and recording is merely one form of notice." In
contrast, plaintiff asserts that the hearing justice was
correct in granting summary judgment because: (1) the tenants
did not establish a genuine issue of material fact that CFS,
as assignee of the mortgage, had notice of the unrecorded
leases; and (2) notice is irrelevant under the applicable
hearing the arguments of counsel and reviewing the memoranda
of the parties, we have concluded that cause has indeed been
shown and that this appeal should proceed to full briefing
and argument. The parties are directed to brief the issue of
the applicability vel non of any relevant Rhode
Island statutes (especially G.L. 1956 §§ 34-11-1,
34-25-2, and 34-25-10) and such Rhode Island decisional law
that they deem to be pertinent; they should also brief any
other relevant issues that they may wish to bring to the
attention of the Court.
parties are further directed to provide the Court with
discussion of pertinent appellate decisions, if any, from
other jurisdictions regarding:
(1) Whether notice to an assignor of a mortgage of the
existence of an unrecorded lease on a property is sufficient
to constitute notice to the assignee;
(2) Whether any such notice to an assignee is sufficient to
overcome a mortgage's priority over unrecorded leases as
outlined in statutes that provide that a mortgage has full
priority over unrecorded conveyances and ...