United States District Court, D. Rhode Island
KEVIN G. AUBEE and CARRIE A. AUBEE, Plaintiffs,
v.
SELENE FINANCE, LP, and WILMINGTON SAVINGS FUND SOCIETY, FSB, d/b/a Christiana Trust, not individually but as trustee for Pretium Mortgage Acquisition Trust, Defendants.
REPORT AND RECOMMENDATION
Patricia A. Sullivan, United States Magistrate Judge.
In
2005, Plaintiffs Kevin G. and Carrie A. Aubee (the
“Aubees”) borrowed $359, 650 secured by a
mortgage on their home in Smithfield, Rhode Island. Their
mortgage contains Paragraph 22, [1] which provided, among other
things, that the mortgagee could accelerate in the event of
default, but first the mortgagee must give notice by
informing the Aubees of their “right to reinstate after
acceleration” and their “right to bring a court
action to assert the non-existence of a default or any other
defense . . . to acceleration and sale.” ECF No. 1-1 at
7. After the Aubees defaulted in 2017, on April 3, 2017, the
mortgagee, Defendant Wilmington Savings, [2] acting through
its agent, Defendant Selene Finance, LP, (“Selene
Finance”) sent the Aubees a Notice of
Default[3] advising that:
You have the right to reinstate after acceleration and the
right to assert in the foreclosure proceeding the
non-existence of a default and/or the right to bring a court
action to assert the non-existence of a default or any other
defense to acceleration, foreclosure and/or sale of the
property.
Ex. C at 2 & Ex. D at 3 (“Notice of
Default”). On June 18, 2018, Defendant Wilmington
Savings foreclosed and sold the property at the
mortgagee's foreclosure sale.
After
the Aubees filed this action in state court, it was removed
to this Court on January 28, 2019. Based on their breach of
contract claim in Count I, [4] they allege that the Notice of
Default's addition of the phrase “the right to
assert in the foreclosure proceeding the non-existence of a
default, ” particularly with the link of this phrase to
the required reference to “the right to bring a court
action to assert the non-existence of a default” by the
conjunctive “and/or, ” amounts to a breach of the
mortgage contract because it is a misleading deviation from
strict compliance with Paragraph 22 of the Aubee mortgage. In
reliance on a case from Massachusetts, Pinti v. Emigrant
Mortg. Co., 33 N.E.3d 1213 (Mass. 2015), they contend
that the mortgagee's failure strictly to comply with
Paragraph 22 amounts to a failure to comply with conditions
precedent to exercise of the statutory power of sale and
renders the foreclosure sale void.
Defendants
Selene Finance and Wilmington Savings have moved to dismiss
the Aubees' complaint pursuant to Fed.R.Civ.P. 12(b)(6).
They contend that the pleading fails to state a plausible
claim because the Notice of Default conforms to Paragraph 22
and the unnecessary reference to a foreclosure proceeding
does not affect or undermine Wilmington Savings'
compliance with its contractual duty. Defendant Selene
Finance also argues that it should be dismissed because it is
not a party to the mortgage contract, which is the foundation
for the Aubees' claim. Their motion has been referred to
me for report and recommendation pursuant to 28 U.S.C. §
636(b)(1)(B). For the reasons that follow, I recommend that
it be granted.
I.
STANDARD OF REVIEW
In
considering this Fed.R.Civ.P. 12(b)(6) motion, the Court must
accept as true all plausible factual allegations in the
complaint and draw all reasonable inferences in
Plaintiffs' favor. Aulson v. Blanchard, 83 F.3d
1, 3 (1st Cir. 1996). In so doing, the Court is guided by the
now-familiar standard requiring the inclusion of facts
sufficient to state a claim for relief that is plausible:
To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim
to relief that is plausible on its face. A claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged. The
plausibility standard is not akin to a probability
requirement, but it asks for more than a sheer possibility
that a defendant has acted unlawfully.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(internal citations and quotations omitted). Put differently,
for a complaint to survive a motion to dismiss, its
“[f]actual allegations must be enough to raise a right
to relief above the speculative level.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007). Consistent
with Erie R. Co. v. Tompkins, 304 U.S. 64 (1938),
federal courts must apply the Twombly/Iqbal standard
even in cases where state law controls the substantive
claims. This includes cases like this one that were removed
from state court. Reilly v. Cox Enters., Inc., No.
CA 13-785S, 2014 WL 4473772, at *3 (D.R.I. Apr. 16, 2014).
II.
APPLICABLE LAW
Rhode
Island has long been a state that permits a mortgagee to rely
on the statutory power of sale pursuant to R.I. Gen. Laws
§§ 34-11-21 to 22, by initiating a non-judicial
foreclosure to recover its security in the event of default.
R.I. Gen. Laws § 34-11-22. In nonjudicial foreclosure
jurisdictions like Rhode Island and Massachusetts, the
standard mortgage form contains a version of Paragraph 22
entitled “Acceleration; Remedies, ” which
contractually mandates in relevant part that:
Lender shall give notice to Borrower prior to acceleration
following Borrower's breach of any covenant or agreement
in this Security Instrument. . . . The notice shall further
inform Borrower of the right to reinstate after
acceleration and the right to bring a court
action to assert the non-existence of a default or any
other defense of Borrower to acceleration and sale.
ECF No. 1-1 at 7 (emphasis supplied). This language is in
Paragraph 22 of the mortgage contract that was signed by the
Aubees. Id. ΒΆ 12. Based on this language in
Paragraph 22, Rhode Island courts, both state and federal,
have strictly required the notice ...