Opinion ID: 3149118
Heading Depth: 2
Heading Rank: 3

Heading: The Effect of the Probate Process.

Text: The appellant's lack of standing to challenge the validity of the mortgage assignments does not end our journey. The appellant also contends that Financial Freedom lost its right to foreclose by failing to file a claim in the probate proceedings. See R.I. Gen. Laws § 33-11-5. This is a challenge to the enduring effectiveness of the mortgage itself (no matter who owns it) and, on the facts of this case, the appellant has standing to maintain that challenge. We explain briefly. The appellant inherited an interest in the Property following the completion of probate. Financial Freedom subsequently sought to foreclose on the same Property — and that attempted foreclosure constitutes a concrete and particularized injury to the appellant. After all, there is a direct causal link between the challenged action (the attempt to foreclose) and the threatened harm (the loss of the Property through foreclosure). - 10 - Rhode Island law controls here, so the appellant, who has a personal stake in the outcome, has the right to ensure that the foreclosure conforms with the law. See Culhane, 708 F.3d at 291; Mruk, 82 A.3d at 536. We review the district court's entry of summary judgment on this claim de novo, taking the facts and all reasonable inferences therefrom in the light most flattering to the nonmovant (here, the appellant). See Houlton Citizens' Coal. v. Town of Houlton, 175 F.3d 178, 184 (1st Cir. 1999). We are not married to the district court's rationale but may validate its summary judgment order on any ground made manifest by the record. See Culhane, 708 F.3d at 291. Because the Rhode Island Supreme Court has not addressed whether probate extinguishes a real estate mortgage, our task is to vaticinate how that court would likely rule if faced with the issue. See Wheeling & Lake Erie Ry. Co. v. Keach (In re Montreal, Me. & Atl. Ry., Ltd.), 799 F.3d 1, 10 (1st Cir. 2015). In predicting the path that a state court would probably follow, we start with settled principles of state law and fill the gaps by considering supplementary sources, such as persuasive authority from other jurisdictions and the teachings of learned treatises. See id.; Bos. Reg'l Med. Ctr., Inc. v. Reynolds (In re Bos. Reg'l Med. Ctr., Inc.), 410 F.3d 100, 108 (1st Cir. 2005). - 11 - The appellant's contention requires us to explore the intersection (if any) between mortgage foreclosures and the probate process. The Rhode Island Supreme Court frequently has looked to the common law for guidance with respect to issues of property jurisprudence, see, e.g., Zuba v. Pawtucket Credit Union, 941 A.2d 167, 171 (R.I. 2008); Ruffel v. Ruffel, 900 A.2d 1178, 1188 (R.I. 2006), so we begin our analysis by tracing how the common law historically has characterized foreclosure. Foreclosure is an equitable remedy. See Benitez v. Bank of Nova Scotia, 125 F.2d 519, 520 (1st Cir. 1942); Walsh v. Morgan, 198 A. 555, 562 (R.I. 1938). The land is the real defendant in [a foreclosure] proceeding. Hunt v. Darling, 59 A. 398, 399 (R.I. 1904). A foreclosure, though not literally a proceeding in rem,4 is in the nature of such a proceeding, and is not intended ordinarily to act in personam. Burgess v. Souther, 2 A. 441, 443 (R.I. 1885). Absent a statute to the contrary, a mortgagee can both sue the parties to the mortgage at common law and pursue foreclosure. See Hunt, 59 A. at 399. If a deficiency results 4 Strictly speaking, it may be more appropriate to classify a foreclosure as a quasi in rem proceeding rather than an in rem proceeding. See, e.g., Freeman v. Alderson, 119 U.S. 185, 187 (1886). Here, however, linguistic precision is not at a premium. Hence, we use a shorthand and refer throughout to foreclosure as an in rem proceeding. - 12 - from a foreclosure sale, an action on the mortgage note normally will lie to recover that deficiency. See Burgess, 2 A. at 443. We find much the same dichotomy between the encumbered property and the underlying debt in the venerable structures of maritime law. Admiralty long has recognized the feasibility of separating the mortgage res from the associated debt. See, e.g., 46 U.S.C. § 31325(b)(1) (authorizing enforcement of mortgage through in rem action against the ship). These hoary tenets have persisted substantially intact to the present day. A compelling analogy can be found in the realm of bankruptcy law. There, a creditor may recover the deficiency on a mortgage loan through an action against the debtor in rem, notwithstanding the debtor's discharge in bankruptcy. Couture v. Pawtucket Credit Union, 765 A.2d 831, 833 (R.I. 2001) (citing Johnson v. Home State Bank, 501 U.S. 78, 84 (1991)); see 11 U.S.C. § 522(c)(2). We add, moreover, that the Rhode Island Supreme Court has often consulted the Restatements to bring clarity to state law, see, e.g., Bucci, 68 A.3d at 1088; Jerome v. Probate Court of Barrington, 922 A.2d 119, 122 (R.I. 2007), and we think it noteworthy that this splitting of in rem and in personam liability is consonant with the Restatement's declaration that a mortgage is enforceable whether or not any person is personally liable for that performance. Restatement (Third) of Property: Mortgages - 13 - § 1.1 (1997). This dichotomy is also consistent with section 3- 814 of the Uniform Probate Code, which authorizes payment of a mortgage even if a claim has not been filed in the decedent's estate. And, finally, no less an authority than the United States Supreme Court has noted that the lender's right to foreclose on the mortgage can be viewed as a 'right to an equitable remedy' for the debtor's default on the underlying obligation. Johnson, 501 U.S. at 84. The case law elsewhere, see, e.g., Mortg. Invs. Corp. v. Battle Mtn. Corp., 70 P.3d 1176, 1181 (Colo. 2003); Bank of Tokyo Co. v. Urban Food Malls Ltd., 650 N.Y.S.2d 654, 661 (App. Div. 1996); Stephens v. LPP Mortg., Ltd., 316 S.W.3d 742, 746 (Tex. App. 2010); Bank of Sun Prairie v. Marshall Dev. Co., 626 N.W.2d 319, 323 (Wis. Ct. App. 2001), confirms our intuition that the Rhode Island Supreme Court, if faced with the question, would hold that the right to foreclose should be treated as separate and distinct from the right to collect the underlying debt. The upshot is that though the failure to file a claim in probate proceedings may extinguish personal liability on the note secured by the real estate mortgage, that failure does not extinguish the mortgage itself. Consequently, such a failure does not interfere with the mortgagee's right to foreclose. We believe it follows that, in Rhode Island, a mortgagee need not make a monetary claim against an estate in probate - 14 - proceedings in order to retain its in rem rights to proceed against the real property that secures the mortgage debt. In other words, it is immaterial that the holder of [an] encumbrance does not present a claim against the estate but prefers to look to the future enforcement of his lien against the specific encumbered property only. In re Estate of Dolley, 71 Cal. Rptr. 56, 61 (Ct. App. 1968). In a last-ditch endeavor to efface the force of this reasoning, the appellant jerry-rigs a statute of limitations argument. He asserts that the failure to submit a claim to the probate court within the statutorily prescribed period, see R.I. Gen. Laws § 33-11-5, bars Freedom Financial from later foreclosing against the Property to satisfy the underlying debt. The appellant is fishing in an empty pond. The statute of limitations applicable to foreclosures in Rhode Island is the general 20-year statute of limitations. See R.I. Gen. Laws § 9- 1-17; see also Wallbaum v. Martin, 234 A.2d 369, 370 (R.I. 1967). The limitations period associated with the probate claim-filing statute, see R.I. Gen. Laws § 33-11-5, does not apply. Cf. Higgins v. Mycroft, 92 A.2d 727, 729 (R.I. 1952) (indicating that mortgage enforcement proceedings are separate and apart from probate proceedings). We summarize succinctly. After the decedent passed away and the mortgage balance remained unpaid, it was to the scaffold - 15 - of property law that Financial Freedom turned. It properly exercised its right of foreclosure, and that in rem proceeding was wholly independent of the probate process. For the reasons elucidated above, we predict that the Rhode Island Supreme Court, were it confronted with the question, would conclude that the failure to file a claim in the probate court would not bar a mortgagee holding a reverse mortgage on real property from collecting the balance due through the equitable remedy of foreclosure. The probate process does not extinguish a real estate mortgage but, rather, only extinguishes personal liability for the underlying debt.