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Rhode Island: Mortgagor Standing to Challenge Assignments Still in Flux

Posted By USFN, Monday, March 31, 2014
Updated: Monday, October 12, 2015

March 31, 2014


by David J. Pellegrino & Christopher M. Wildenhain
Partridge Snow & Hahn, LLP – USFN Member (Massachusetts)

In recent months, the Rhode Island Supreme Court issued its long-anticipated decision on whether a mortgagor has standing to challenge assignments of mortgage: Mruk v. Mortgage Electronic Registration Systems, Inc. (MERS), 82 A.2d 527 (R.I. 2013). Although Mruk appears to follow the mortgagor standing exception announced in Culhane v. Aurora Loan Services of Nebraska, 708 F.3d 282, 291 (1st Cir. 2013), Chhun v. Mortgage Electronic Registration Systems, Inc., 84 A.3d 419 (R.I. 2014), a decision subsequent to Mruk, overlooks the distinction between a “void” and a “voidable” challenge to an assignment and, arguably, erases it altogether. As a result, Rhode Island law governing the standing of mortgagors to challenge assignments extends at least as far as it does in Massachusetts, if not further.

In Mruk, the Rhode Island Supreme Court affirmed the grant of summary judgment to the defendants, but held that the lower court erred in concluding that mortgagors lacked standing to challenge assignments. In doing so, the court adopted the framework for mortgagor standing established in Culhane. Like the Culhane court, the court in Mruk confined standing “to the circumstances of a mortgagor challenging an ‘invalid, ineffective, or void’ assignment of the mortgage” and concluded that a “mortgagor does not have standing to challenge the shortcomings in an assignment that render it merely voidable at the election of one party but otherwise effective to pass legal title.” Mruk, at 536. The defendants were ultimately entitled to summary judgment because MERS was a valid mortgagee and no factual issues remained.

In Chhun, the Rhode Island Supreme Court potentially extended mortgagor standing by concluding that a mortgagor had standing without first conducting the “void/voidable” analysis discussed in Mruk. In reversing a 12(b)(6) dismissal, the court commented that allegations regarding a signatory’s lack of authority to make an assignment for a corporation, “if proven, could establish that the mortgage was not validly assigned ...” Chhun, at 423.

This statement contradicts Rhode Island law providing that unauthorized corporate officer actions are voidable and may be ratified by the corporation, Duncan Shaw Corp. v. Standard Mach. Co., 196 F.2d 147, 152-154 (1st Cir. 1952), and the First Circuit’s interpretation of Culhane in Wilson v. HSBC Mortgage Services, Inc., No. 13-1298, 2014 WL 563457, at *6-8 (1st Cir. Feb. 14, 2014). This discrepancy has prompted the Chhun defendants to seek reargument. Contrary to what was suggested in Mruk, the question of Rhode Island mortgagor standing to challenge assignments of mortgage may go well beyond Culhane. As the state’s high court hears further appeals in this area, it will likely be asked to reconcile these contradictions.

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