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Note Capital Group, Inc. v. Perretta

Supreme Court of Rhode Island

May 23, 2019

Note Capital Group, Inc., et al.
v.
Michele Perretta et al.

          Providence County Superior Court (PC 14-5678), Richard A. Licht Associate Justice.

          For Plaintiff: Michael R. Hagopian, Esq.

          For Defendants: John B. Ennis, Esq., Bernard J. Lemos, Esq.

          Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.

          OPINION

          Gilbert V. Indeglia Associate Justice.

         In this foreclosure action, the defendants, Michele Perretta[1]and Anna M. Perretta (the Perrettas), appeal from a Superior Court order granting partial summary judgment in favor of the plaintiff, Note Capital Group, Inc. (Note Capital). First, the Perrettas argue that their appeal from the Superior Court's interlocutory order is appropriate because the grant of partial summary judgment had an element of finality, as that order allowed Note Capital to foreclose on the Perrettas' property. Second, the Perrettas contend that Note Capital was not entitled to enforce the note because the chain of title to the note was tainted by an improper transfer. Third, the Perrettas aver that Note Capital was not entitled to enforce the note secured by a mortgage on their property because the note had been lost by the previous holder of the note, American Residential Equities, LIX, LLC (ARELIX), [2] prior to the assignment of the mortgage to Note Capital. This matter came before the Supreme Court on March 28, 2019, after full briefing of the issues. Upon due consideration of the parties' arguments, the order of the Superior Court is vacated, and we remand the case for further proceedings consistent with this opinion.

         I Facts and Travel

         The pertinent facts of this case are as follows. In 1984, the Perrettas obtained title to property located at 380 Pippin Orchard Road in Cranston, Rhode Island (the property). On October 25, 2006, they executed and delivered a promissory note to Zurich Mortgage Solutions, LLC (Zurich), in the amount of $971, 750 (the note). To secure the note, the Perrettas executed a mortgage on the property in favor of Zurich. On November 28, 2006, Zurich transferred the note and mortgage to American Residential Equities (American Residential)[3] through an allonge and assignment.[4] See In re Perretta, No. 10-13531, 2011 WL 6305552, at *1 (Bankr. D.R.I. Dec. 16, 2011). However, two weeks prior to the transfer from Zurich to American Residential, on November 14, 2006, American Residential assigned the note and mortgage to GMAC Mortgage, LLC (GMAC). Id.

         The Perrettas eventually defaulted on the note, and, on July 29, 2009, GMAC instructed its attorneys at the law firm of Orlans Moran PLLC (Orlans Moran) to foreclose on the mortgage. This action was stayed when the Perrettas filed for bankruptcy in the United States Bankruptcy Court for the District of Rhode Island. See In re Perretta, 2011 WL 6305552, at *1. Later, on May 4, 2010, GMAC transferred the note and mortgage to ARELIX via an allonge and assignment recorded in the Cranston land evidence records. Despite vigorous opposition from the Perrettas, ARELIX sought and obtained relief from the temporary stay in the Bankruptcy Court to enforce its interest in the property.[5] Id. at *3.

         In July 2013, ARELIX discovered that the note had become lost after ARELIX had given the note to Orlans Moran for purposes of prosecuting the foreclosure.[6] On July 30, 2013, ARELIX purported to assign its interest in the mortgage and lost note to Note Capital, and an assignment was recorded in the Cranston land evidence records on August 5, 2013. Additionally, Orlans Moran prepared and delivered a lost note affidavit in accordance with G.L. 1956 § 6A-3-301, outlining the steps it had taken to attempt to recover the note. On November 11, 2014, Note Capital filed a complaint in Providence County Superior Court seeking to foreclose on the Perrettas' mortgage, naming the Perrettas, among others, as defendants.[7] Note Capital also joined ARELIX as a plaintiff in the matter.

         On June 24, 2015, Note Capital filed a motion for partial summary judgment to allow it to foreclose on the property. In support of its motion, Note Capital attached an affidavit executed by Jeffrey Kirsch (Kirsch), who identified himself as an authorized signatory of ARELIX and someone familiar with the company's business records. In that affidavit, Kirsh detailed the chain of assignments of the mortgage loan from Zurich to Note Capital. Additionally, Kirsch averred that ARELIX had given Note Capital express authority to act on its behalf in the foreclosure process.

         In their opposition to Note Capital's motion, the Perrettas claimed that the chain of title to the note and mortgage was defective because American Residential had no interest in the note and mortgage on November 14, 2006, when the assignment from American Residential to GMAC was executed. The Perrettas also claimed that an issue of fact existed because different versions of the promissory note had been provided to them or filed in various courts. As to the lost note, the Perrettas argued that § 6A-3-309 prevents the transferee or assignee of a lost note from enforcing the note.[8] The Perrettas also filed a motion for summary judgment or, in the alternative, motion for judgment on the pleadings.

         Subsequently, the Perrettas served a subpoena duces tecum upon Orlans Moran, seeking to depose a person with knowledge of the lost note. Orlans Moran designated Erika Hoover (Hoover), a senior operations attorney at Orlans Moran, as its agent for purposes of the deposition. After taking Hoover's deposition, the Perrettas submitted a supplemental memorandum, attaching the deposition. In response, Note Capital filed a memorandum attaching a separate affidavit executed by Hoover, along with numerous pages of documentation. The Perrettas objected to the filing of the documents, contending that Note Capital should have been prohibited from presenting additional material within ten days of the summary-judgment hearing, pursuant to Rule 56 of the Superior Court Rules of Civil Procedure.

         A hearing on Note Capital's motion for partial summary judgment was held on May 10, 2016. After the parties had presented their arguments, the hearing justice observed that Note Capital was essentially seeking judicial foreclosure of the mortgage on the Perrettas' property and found that the Perrettas' default on the note was not in dispute. The hearing justice next addressed the issue of the lost note and whether Note Capital was entitled to enforce the note. Because this Court had not yet ruled on the issue of whether the assignee of a lost note may enforce the note, the hearing justice surveyed cases from other jurisdictions, determining that there was a split of authority.[9]

         Eventually, the hearing justice found that "[i]t would be inequitable for the plaintiff as a valid assignee not to stand in the shoes of the assignor. To hold otherwise would unjustly enrich the defendants because the note could never be enforced." He pointed to G.L. 1956 § 34-11-24, finding that the rights that the note granted to assignees of mortgages were not in conflict with the provisions of § 6A-3-309 and that an assignee of a lost note could enforce the note as a successor-in-interest to the assignor. In conclusion, the hearing justice found that there was "no genuine issue of fact that [ARELIX] was in possession and had the right to enforce it at the time the note was lost and that it validly assigned the note and mortgage to Note Capital." In addition, in order to protect the Perrettas' interests, the hearing justice stated that the order would "terminate any rights of [ARELIX] and any other person to the note other than Note Capital and Note Capital will indemnify the defendants against any claims made pursuant to the note by anyone other than it."

         After granting Note Capital's motion for partial summary judgment, the hearing justice determined that it was "not a final judgment[, ]" and he stayed the order for forty days to afford the Perrettas time to file a petition for writ of certiorari with this Court. On June 5, 2016, the Perrettas filed an objection to the proposed order granting partial summary judgment in the Superior Court, and they also moved for entry of final judgment in accordance with Rule 54(b) of the Superior Court Rules of Civil Procedure. On July 12, 2016, an order entered granting partial summary judgment in favor of Note Capital and, inter alia, authorizing Note Capital to foreclose on the property; the order also defaulted ARELIX for failure to comply with discovery. The next day, on July 13, 2016, an order was entered denying the Perrettas' motion for entry of final judgment in accordance with Rule 54(b). Eschewing the writ, the Perrettas instead filed a timely notice of appeal on August 1, 2016.

         II Standard of Review

         "A motion for summary judgment 'is designed to decide in an expeditious fashion cases presenting groundless claims.'" Hexagon Holdings, Inc. v. Carlisle Syntec Incorporated, 199 A.3d 1034, 1038 (R.I. 2019) (deletion omitted) (quoting Gallo v. National Nursing Homes, Inc., 106 R.I. 485, 487, 261 A.2d 19, 21 (1970)). "When we review a hearing justice's grant of a motion for summary judgment, we conduct our analysis de novo." Id. "If we determine that 'there exists no genuine issue of material fact and the moving party is entitled to judgment as a matter of law,' then we will affirm the grant of the motion." Id. (alteration omitted) (quoting Sisto v. America Condominium Association, Inc., 68 A.3d 603, 611 (R.I. 2013)). "In this endeavor, 'we view the evidence in the light most favorable to the nonmoving party.'" Id. (alteration omitted) (quoting Narragansett Indian Tribe v. State, 81 A.3d 1106, 1109 (R.I. 2014)). "However, once the moving party establishes 'the absence of a material factual issue, the ...


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