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Aubee v. Selene Finance, LP

United States District Court, D. Rhode Island

December 27, 2019

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 ...


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