Stamatakos v. Wells Fargo Bank, N.A. et al

Filing 44

ORDER accepting Report and Recommendations re 35 Report and Recommendations.; granting in part and denying in part 21 Motion to Dismiss for Failure to State a Claim; Counts III and IV shall be dismissed. So Ordered by Chief Judge William E. Smith on 3/22/2018. (Urizandi, Nisshy)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
)
)
Plaintiff,
)
)
v.
)
)
WELLS FARGO BANK, NATIONAL
)
ASSOCIATION; and U.S. BANK NATIONAL)
ASSOCIATION, AS TRUSTEE FOR
)
STRUCTURED ASSET INVESTMENTS LOAN )
TRUST 2006-3,
)
)
Defendants.
)
___________________________________)
EVERETT W. STAMATAKOS,

C.A. No. 17-062 WES

MEMORANDUM AND ORDER
WILLIAM E. SMITH, Chief Judge.
Before the Court is Magistrate Judge Patricia A. Sullivan’s
Report and Recommendation (“R&R”) (ECF No. 35) recommending that
the Motion To Dismiss (ECF No. 21) filed by Defendants Wells Fargo
Bank, National Association and U.S. Bank National Association, as
Trustee

for

Structured

Asset

Investments

Loan

Trust

2006-3

(collectively, “Defendants”) be granted as to Counts III and IV of
Plaintiff’s Complaint (ECF No. 1-4) but denied as to Counts I and
II. 1

Defendants

(“Objection”).

1

timely

objected

to

the

R&R

(ECF

No.

42)

After careful review of the R&R and the relevant

Defendants only challenge Magistrate Judge Sullivan’s
recommendation that Counts I and II of Plaintiff’s complaint move
forward.

papers, 2 the Court accepts the R&R and adopts its recommendations
and reasoning.

See 28 U.S.C. § 636(b)(1).

First, Defendants challenge Magistrate Judge Sullivan’s Count
I recommendation and suggest that Plaintiff fails to plausibly
allege entitlement to a permanent loan modification.
to R. & R. 2-3, ECF No. 42.)

(Defs.’ Obj.

Defendants posit that, because the

complaint “expressly acknowledges” that making the three trial
payments was only “part” of the contract, and because Plaintiff
does not allege what those other “parts” were, it must be that
Plaintiff has not satisfied his other contractual obligations.
Defendants

made

this

same

argument

before

Sullivan, who appropriately rejected it.

Magistrate

Judge

(See R. & R. 6 (“The

argument turns the analysis proper at the 12(b)(6) phase on its
head; in considering a motion under Fed. R. Civ. P. 12(b)(6), the
Court must draw all reasonable inferences in favor of the claimant,
not the movant.”).

Defendant’s argument is no more persuasive now

than it was before. And the Court agrees that it is not appropriate
for a motion to dismiss.

“[T]he most that defendants’ arguments

have done is inject a degree of ambiguity into the contract.

They

fall far short of showing that the only reasonable interpretation

2

The Court reviews de novo a properly filed objection to an
R&R addressing a dispositive motion. See Emissive Energy Corp. v.
SPA-Simrad, Inc., 788 F. Supp. 2d 40, 42 (D.R.I. 2011); Fed. R.
Civ. P. 72(b)(3).
2

of [it] supports their position.” Young v. Wells Fargo Bank, N.A.,
717 F.3d 224, 235 (1st Cir. 2013).

At this motion-to-dismiss

stage, the Court may not upend the applicable standard and pile
inference upon inference against Plaintiff, particularly when that
Plaintiff is pro se.

See Foley v. Wells Fargo Bank, N.A., 772

F.3d 63, 75-76 (1st Cir. 2014) (“And we construe pro se complaints
. . . liberally.”) (citing Erickson v. Pardus, 551 U.S. 89, 94
(2007)).

Instead, the Court must resolve ambiguities in favor of

Plaintiff.

See Lass v. Bank of America, N.A., 695 F.3d 129, 137

(1st

2012)

Cir.

(reversing

plaintiff-homeowner’s

district

proposed

court’s

interpretation

rejection
of

of

ambiguous

mortgage and reinstating her breach-of-contract claim).
Defendants’ suggestion that Plaintiff fails to state a claim
for breach of the implied covenant of good faith and fair dealing
is similarly unavailing.

On this score, Defendants argue that

Magistrate Judge Sullivan “conflated the standards for breach of
contract, and for breach of the covenant of good faith and fair
dealing” by suggesting that she recommended that because Plaintiff
pleaded

a

breach-of-contract

claim,

he

necessarily

pleaded

breach of the implied covenant of good faith and dealing.

a

(Defs.’

Obj. to R. & R. 5.)

Defendants mischaracterize Magistrate Judge

Sullivan’s analysis.

And the case they suggest Magistrate Judge

Sullivan overlooked, Miller v. Wells Fargo Bank, N.A., 160 A.3d
3

975 (R.I. 2017), is inapposite.

There, the Rhode Island Supreme

Court’s holding that plaintiff’s claim for breach of the implied
covenant of good faith and fair dealing did not pass muster hinged
on it adopting the trial justice’s factual finding that there was
no “contractual obligation on behalf of the lender to either modify
the mortgage loan or exercise discretion in evaluating a potential
modification . . . .”

Miller, 160 A.3d at 980-81.

Here, at this

early stage of the case, the Court cannot draw such an inference
in Defendants’ favor. And, in any event, based on Magistrate Judge
Sullivan’s reasoning, Defendants’ concern for conflation between
the two standards is unfounded.

Rather than hold that Plaintiff

necessarily pleaded a plausible claim for breach of good faith and
fair dealing because Plaintiff pleaded a plausible breach-ofcontract claim, Magistrate Judge Sullivan focused on Plaintiff’s
“described conduct,” which she concluded amounted to a viable
arbitrary and unreasonable claim in light of Defendants’ plausible
contractual obligations.

(See R. & R. 7.)

Plaintiff’s Count I

claim survives Defendants’ motion to dismiss.
Finally, Defendant’s attack on Magistrate Judge Sullivan’s
Count II recommendation is no more compelling.
8.)

(Defs.’ Obj. 6-

Defendants suggest Magistrate Judge Sullivan’s treatment of

the promissory-estoppel claim was inappropriate because “[g]iven
Plaintiff’s ongoing payment obligations, the Complaint fails to
4

plausibly allege that by making the three trial period payments
Plaintiff changed his position or did anything that he would not
have done in the absence of the alleged promise” and “also fails
to allege Plaintiff suffered harm from making the trial period
payments.” 3

(Id. at 7-8.)

Once again, Defendants’ averment is

premature at the motion-to-dismiss stage and requires the Court to
draw inferences adverse to Plaintiff, which it is not willing to
do at this juncture.

For the reasons outlined by Magistrate Judge

Sullivan, the Court is satisfied that Plaintiff alleges a plausible
claim for detrimental reliance sufficient to clear Defendants’
motion to dismiss.
Accordingly, the R&R (ECF No. 35) is ACCEPTED.

Defendants’

Motion To Dismiss (ECF No. 21) is GRANTED as to Counts III and IV
and DENIED as to Counts I and II.
IT IS SO ORDERED.

William E. Smith
Chief Judge
Date: March 22, 2018

3

Besides a general restatement of the elements of promissory
estoppel, the cases Defendants rely on do not apply Rhode Island
law. (See Defs.’ Obj. 6-8.)
5

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
EVERETT W. STAMATAKOS,
Plaintiff,
v.
WELLS FARGO BANK, NATIONAL
ASSOCIATION; and U.S. BANK
NATIONAL ASSOCIATION, AS TRUSTEE
FOR STRUCTURED ASSET INVESTMENTS
LOAN TRUST 2006-3,
Defendants.

:
:
:
:
:
:
:
:
:
:
:

C.A. No. 17-062WES

REPORT AND RECOMMENDATION
PATRICIA A. SULLIVAN, United States Magistrate Judge.
This matter is before the Court on the motion to dismiss (ECF No. 21) filed by
Defendants Wells Fargo, National Association, (“Wells Fargo”) and U.S. Bank National
Association, as Trustee for Structured Asset Investments Loan Trust 2006-3 (“U.S. Bank”),
seeking the dismissal of Plaintiff’s Complaint (ECF No. 1-4) in its entirety. Plaintiff,
represented by counsel, filed his four-count complaint in Rhode Island Superior Court to
challenge the foreclosure of his home, located at 322 Branch Avenue, Providence, Rhode Island.
Defendants removed the litigation to this Court based on diversity jurisdiction pursuant to 28
U.S.C. § 1332. Shortly after removal, Plaintiff’s counsel moved to withdraw (ECF No. 4), which
motion was granted by this Court on March 20, 2017. With leave of the Court, Plaintiff now
proceeds pro se. Consequently, the Court has afforded Plaintiff’s subsequent filings the measure
of leniency that is appropriate under applicable law. Erickson v. Pardus, 551 U.S. 89, 94 (2007).
I.

BACKGROUND
Plaintiff bought the property at 322 Branch Avenue in January 2006, executing a

mortgage and note to First Horizon Home Loan Corporation (“First Horizon”) for $210,000.

ECF No. 1-4 ¶¶ 1, 8; ECF No. 21-2. Soon after, First Horizon assigned the mortgage to
Defendant U.S. Bank. ECF No. 21-3. At the time of the assignment, Defendant Wells Fargo,
operating as “America’s Servicing Company” or “ASC” (collectively “Wells Fargo”), took over
the servicing of the loan. With their opposition, Defendants have submitted copies of the
versions of the mortgage and assignment filed in the land records; as clarified during a phone
conference with the Court held in connection with this motion, Plaintiff does not challenge the
authenticity of these documents. 1 However, Plaintiff does challenge the validity of the
assignment alleging that it was not executed by an officer of the assignor with the necessary
authority. ECF No. 1-4 ¶¶ 36-37.
On or around August 21, 2009, according to Plaintiff, he and Wells Fargo entered into a
verbal contract, subsequently confirmed in writing, 2 pursuant to which he claims that Wells
Fargo agreed to permanently modify the terms of the mortgage if he complied with certain
requirements during a trial period. ECF No. 1-4 ¶ 12; see Young v. Wells Fargo, N.A., 717 F.3d
224, 229 (1st Cir. 2013) (U.S. Treasury Department guidelines direct loan servicers to offer

1

Guided by the First Circuit, this Court has considered these documents in connection with this motion to dismiss –
they are referenced in the complaint, are integral to the claims and are a matter of public record and their
authenticity is undisputed. A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013); Freeman v. Town
of Hudson, 714 F.3d 29, 36 (1st Cir. 2013); see Pimental v. Wells Fargo Bank, N.A., CA No. 14-cv-494S, 2015 WL
5243325, at *4 (D.R.I. Sept. 4, 2015), adopted, 2016 WL 70016 (D.R.I. Jan. 6, 2016) (“it is generally accepted that
‘the Court . . . can take judicial notice of . . . the underlying mortgage documents’”). Similarly, Defendants
submitted copies of the recorded versions of the foreclosure deed and the limited power of attorney, which are
referenced in the complaint. ECF Nos. 21-4, 21-6. During the phone conference, Plaintiff confirmed that he does
not dispute their authenticity; accordingly, the Court has also considered them.
2

Based on this reference to a writing memorializing the agreement, Defendants submitted a purported copy of
correspondence with Plaintiff relating to the proposed loan modification. ECF No. 21-5. For his part, Plaintiff’s
objection to the motion was accompanied by almost two hundred pages of communications between the parties.
Because none of these documents are a matter of public record, because the two batches of submissions are not
identical and neither side’s submission appears to be complete, and because, during the phone conference with the
Court, Plaintiff, acting pro se, was uncomfortable acquiescing to the authenticity of Defendant’s document, this
Court has not considered any of this material in connection with this motion. Trans-Spec Truck Serv., Inc. v.
Caterpillar, Inc., 524 F.3d 315, 322 (1st Cir. 2008) (“it was well within the district court’s discretion to decline to
consider the [warranty] document in deciding the motion to dismiss”). This determination is without prejudice to
these materials being used at a subsequent stage of the case; for example, if properly authenticated, Defendants’
document may well be appropriate for consideration in connection with a motion for summary judgment.

2

permanent loan modifications to borrowers who comply with terms set forth during trial period).
On his part, Plaintiff promised to make three monthly payments to Wells Fargo. Id. ¶ 12.
Plaintiff alleges that he fulfilled his end of the bargain, while Defendants “breached the
agreement with Plaintiff by failing and refusing to permanently modify the Stamatakos
mortgage.” Id. ¶ 13. Instead of complying, Defendants turned the matter over to Harmon Law
Offices, P.C., which proceeded to sell the house at a foreclosure sale, first to an individual buyer
in 2011 who failed to follow through with the purchase, and then to U.S. Bank on April 19,
2012. See id. ¶¶ 14-15. Plaintiff alleges that the foreclosure deed is void because the person
who executed it lacked the proper power of attorney; he challenges the viability of the related
power of attorney based on its failure specifically to identify the mortgage loan to be foreclosed.
Id. ¶ 34. Since the foreclosure sale, Plaintiff has been fighting his eviction in the Superior Court
and now in this Court. 3 See ECF Nos. 10, 16, 32; R.I. Superior Court Case No. PD-2017-1431.
In Count I, Plaintiff alleges that he was, and remains, ready, willing and able to perform
under the modification agreement and that Defendants’ breach of that agreement resulted in the
foreclosure sale. He alleges that this breach also constitutes a breach of the implied covenant of
good faith and fair dealing inherent in every contract. In his alternative Count for promissory
estoppel, Plaintiff alleges that he detrimentally relied on Defendants’ false promises to
permanently modify his loan, resulting in the foreclosure of his home. In a third Count, Plaintiff
alleges that Defendants’ breach was a violation of Rhode Island’s deceptive trade practices act,
R.I. Gen. Laws § 6-13.1-1, et. seq. (“DTPA”). And in a fourth Count, Plaintiff alleges that the

3

In an Amended Report and Recommendation dated April 20, 2017, this Court denied Plaintiff’s motion to enjoin
Defendant U.S. Bank’s Superior Court action to evict him. ECF No. 16, adopted, ECF No. 22 (D.R.I. June 19,
2017). Plaintiff withdrew his motion after the report and recommendation issued, explaining that it was moot. ECF
No. 17. According to the state court record, as confirmed by Plaintiff during the Court’s phone conference, Plaintiff
continues to reside at the property and is paying a use and occupancy fee into the Rhode Island Superior Court
registry. See ECF Nos. 10, 16, 32; R.I. Superior Court Case No. PD-2017-1431.

3

foreclosure deed is void and seeks a judgment to quiet title declaring him to be the lawful owner
of the property.
For the reasons that follow, I recommend that Defendants’ motion be granted in part,
dismissing Plaintiff’s Counts alleging deceptive trade practices and seeking to quiet the title, and
denied in part, preserving the two Counts alleging breach of contract and promissory estoppel for
future judicial activity.
II.

STANDARD OF REVIEW
As required by Fed. R. Civ. P. 12(b)(6), a complaint must give the defendant fair notice

of what the claim is and the grounds on which it rests, and allege a plausible entitlement to relief.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 559
(2007). The plausibility inquiry requires the court to distinguish “the complaint’s factual
allegations (which must be accepted as true) from its conclusory legal allegations (which need
not be credited).” Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012). The Court
must then determine whether the factual allegations are sufficient to support “the reasonable
inference that the defendant is liable for the misconduct alleged.” Haley v. City of Boston, 657
F.3d 39, 46 (1st Cir. 2011) (quoting Iqbal, 556 U.S. at 678). The complaint should not be read
“too mechanically”; rather, it should be considered as a whole, along with a heavy dose of
common sense. Rodriguez-Vives v. P.R. Firefighters Corps of P.R., 743 F.3d 278, 283 (1st Cir.
2014). All well-pled facts must be taken as true and all reasonable inferences drawn in the
plaintiff’s favor. Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st Cir. 2014).
This case was removed to federal court from Rhode Island Superior Court, which has not
adopted the stricter Iqbal/Twombly federal pleading standard. The State continues to adhere to
the standard set forth in Conley v. Gibson. 355 U.S. 41, 45-48 (1957). For purposes of this case,

4

however, this discrepancy in the standard of review is immaterial; 4 the Court’s recommendation
would be the same under either standard.
III.

ANALYSIS
A.

Count I – Breach of Contract and Breach of Covenant of Good Faith and Fair
Dealing

In Count I, Plaintiff alleges that he and Wells Fargo “entered into a verbal contract,
which subsequently was confirmed in writing by letter,” according to which Wells Fargo agreed
to modify his mortgage. ECF No. 1-4 ¶ 12. Plaintiff claims to have fulfilled his obligations
under the contract by making three monthly payments in an agreed-upon amount, but that Wells
Fargo breached, resulting in the foreclosure of Plaintiff’s mortgage and the sale of his property;
relatedly, he alleges that Wells Fargo’s failure permanently to modify the mortgage constituted a
breach of the covenant of good faith and fair dealing implicit in every contract. Id. ¶¶ 13-15, 1620. Relying on the unauthenticated document attached to their motion as the putative
embodiment of the agreement, 5 Defendants challenge the viability of Count I, arguing that it
must be dismissed because Plaintiff has failed to make a “viable” claim that there was an
enforceable contract that required Wells Fargo to modify the terms of the loan. ECF No. 21-1 at
8. Alternatively, Defendants argue that Plaintiff failed to fulfill his side of the bargain because
the pleading permits the inference that he “had obligations in addition to making the three Trial

4

In cases where the difference is material, this Court has consistently held that the Iqbal/Twombly standard must be
applied to removed pleadings; however, the Court has also been lenient in allowing the claimant to amend a
factually deficient Conley-compliant complaint drafted to meet the state court standard. Pemental v. Bank of New
York Mellon for Holders of Certificates, First Horizon Mortg. Pass-Through Certificates Series FHAMS 2004-AA5,
No. CV 16-483S, 2017 WL 3279015, at *2 (D.R.I. May 10, 2017), adopted, 2017 WL 3278872 (D.R.I. Aug. 1,
2017); Avedisian v. Select Portfolio Servicing, Inc., & U.S. Bank, NA, No. CV 16-654S, 2017 WL 6334123, at *7
(D.R.I. Aug. 29, 2017), adopted, 2017 WL 6343644 (D.R.I. Dec. 11, 2017).
5

In addition to having none of the indicia that would permit the Court to take judicial notice of it, this document
introduces matters outside of the complaint and is not appropriate for consideration in connection with a motion to
dismiss pursuant to Fed. R. Civ. P. 26(b)(6). See n.2, supra.

5

Period payments, yet Plaintiff does not allege that he fulfilled any of them.” Id. (italics in
original).
For a valid contract, Rhode Island law requires “competent parties, subject matter, a legal
consideration, mutuality of agreement, and mutuality of obligation.” DeAngelis v. DeAngelis,
923 A.2d 1274, 1279 (R.I. 2007) (citing R.I. Five v. Med. Assocs. of Bristol Cty., Inc., 668 A.2d
1250, 1253 (R.I. 1996)). Plaintiff has more than sufficiently alleged these essential elements
with his allegations that Wells Fargo offered to modify his loan if he made three trial period
payments, that Plaintiff made the payments, and that Wells Fargo failed to modify the loan.
Defendants contend that Plaintiff’s pleading alleges that his agreement to pay the three trial
payments was “part of said contract,” permitting the inference that there were other obligations
assumed by Plaintiff with which he did not comply. ECF No. 1-4 ¶ 12. The argument turns the
analysis proper at the 12(b)(6) phase on its head; in considering a motion under Fed. R. Civ. P.
12(b)(6), the Court must draw all reasonable inferences in favor of the claimant, not the movant.
Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir. 1996). So viewed, Plaintiff’s pleading permits the
inference that he fully performed by making the trial payments as agreed. Based on the 12(b)(6)
mandate that the Court must assume that the facts as pled are true and must draw all inferences in
favor of Plaintiff, these allegations are sufficient to state a facially plausible claim for relief.
Young v. Wells Fargo Bank, N.A., 717 F.3d 224, 235 (1st Cir. 2013) (because loan modification
agreement “could plausibly be read in [plaintiff’s] favor, and the complaint’s allegations indicate
that defendants breached the contract by failing to provide a permanent modification agreement
by the modification effective date, she has done enough to survive a motion to dismiss”).
Plaintiff’s related claim for breach of the requirement of good faith and fair dealing
implied in every contract is equally viable. Rhode Island law recognizes such a claim “so that

6

the contractual objectives may be achieved.” Ide Farm & Stable, Inc. v. Cardi, 297 A.2d 643,
645 (R.I. 1972). The complaint complies with the principle that this duty does not give rise to an
independent cause of action, but must be tethered to a contractual duty. A.A.A. Pool Serv. &
Supply, Inc. v. Aetna Cas. & Sur. Co., 395 A.2d 724, 725-26 (R.I. 1978). The complaint also is
consistent with “[t]he applicable standard in determining whether one has breached the implied
covenant of good faith and fair dealing[, which] is whether or not the actions in question are free
from arbitrary or unreasonable conduct.” Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 66 F.
Supp. 2d 317, 329 (D.R.I. 1999). If, as Plaintiff alleges, Wells Fargo entered into a contract to
permanently modify Plaintiff’s loan if he made three monthly payments and then refused to
honor its side of the bargain after Plaintiff made the payments, Plaintiff has described conduct
that is plausibly arbitrary and unreasonable. Consequently, Plaintiff’s claim for a breach of the
implied covenant of good faith and fair dealing must survive this threshold challenge.
Defendants’ arguments in support of their motion rely on their challenge to the factual
viability of Plaintiff’s pleading, which is not cognizable at the 12(b)(6) phase as long as
Plaintiff’s facts are plausible, a threshold that is plainly met by the pleading. Accordingly, I
recommend that Defendants’ motion to dismiss Count I of the Complaint be denied.
B.

Count II – Promissory Estoppel

Alternatively, Plaintiff alleges that he was induced to make the three monthly payments
by Defendants’ representations that, in exchange, they would permanently modify his mortgage
loan. ECF No. 1-4 ¶ 22. He claims that these representations were intended to induce him to
make the payments, and did so induce him, and he relied on those representations. Id. ¶ 23. He
pleads that Defendants’ failure to follow through with their representations was the direct and
proximate cause of the foreclosure of his mortgage and the foreclosure sale of his house. Id. ¶¶

7

24-25. Defendants argue that the estoppel Count must be dismissed because Plaintiff has failed
plausibly to allege that Defendants unambiguously promised to modify the loan, as well as that
he did not “adequately pled a plausible detriment that was caused by his reasonable reliance on
an alleged promise.” ECF No. 21-1 at 15 (italics in original).
According to the Rhode Island Supreme Court, the doctrine of promissory estoppel is
generally used as a substitute for consideration, thereby “rendering a gratuitous promise
enforceable as a contract.” E. Providence Credit Union v. Geremia, 239 A.2d 725, 727 (R.I.
1968). The Rhode Island Supreme Court has identified three requisite elements:
1. A clear and unambiguous promise;
2. Reasonable and justifiable reliance upon the promise; and
3. Detriment to the promisee, caused by his or her reliance on the promise.
Cote v. Aiello, 148 A.3d 537, 547 (R.I. 2016) (citing Filippi v. Filippi, 818 A.2d 608, 626 (R.I.
2003)). In his pleading, Plaintiff alleges that Defendants made a clear promise to him that they
would permanently modify the terms of his mortgage loan if he made the three payments.
Consequently, Plaintiff, presumably in some financial distress, scraped together the money and
made the payments, in plausible reasonable reliance on Defendants’ promise. And Defendants
reneging on their side of the bargain plausibly was to Plaintiff’s detriment in that he was left
without his money, and without his house. Based on these allegations, I find that Plaintiff has
made out a sufficient and plausible claim for promissory estoppel. Cf. Adamson v. Mort. Elec.
Registration Sys., Inc., 29 Mass. L. Rptr. 33, 2011WL 4985490, *5 (Mass. Super. Ct. Oct. 19,
2011) (applying Massachusetts law, estoppel claim dismissed because denial letter attached to
amended complaint was clear that it was not reasonable for mortgagee to expect that failed
attempt to modify would protect him from foreclosure).
I recommend that Defendants’ motion to dismiss Count II be denied.

8

C.

Count III – Violation of DTPA, R.I. Gen. Laws § 6-13.1-1

Plaintiff alleges that Well Fargo’s conduct – “inducing Plaintiff’s beliefs (and consequent
action) relating to the attainment of a permanent modification of the Stamatakos mortgage” –
amounts to “a violation of R.I.G.L. Chapter 6-13.1.” ECF No. 1-4 ¶ 28. Defendants argue that
Count III should be dismissed because DTPA does not apply to mortgage loans. The challenge
is well founded. While DTPA broadly provides that, “[u]nfair methods of competition and
unfair or deceptive acts or practices in the conduct of any trade or commerce are declared
unlawful,” R.I. Gen. Laws § 6-13.1-2, Rhode Island courts have consistently interpreted it as not
applicable to mortgage loans. Miller v. Wells Fargo Bank, N.A., No. KC-11-0600, 2015 WL
1515942, at *8 (R.I. Super. Ct. Mar. 30, 2015) (“the Rhode Island DTPA statute does not apply
to mortgage loans”), aff’d on other grounds, 160 A.3d 975 (R.I. 2017); De Simone v. Warwick
Fed. Savings & Loan Ass’n, No. C.A. 80-822, 1981 WL 386509, at *1 (R.I. Super. Ct. Oct. 20,
1981) (same). These decisions rely on DTPA’s express limitation to afford protection only to a
“person who purchases or leases goods or services,” which both a mortgage loan and a loan
modification are not. Miller, 2015 WL 1515942, at *7-8 (DTPA does not apply to consideration
of loan modification applications). This Court is bound by state court decisions interpreting a
Rhode Island statute. Accordingly, I recommend that Defendants’ motion to dismiss Count III
be granted.
D.

Count IV – Quiet Title

Plaintiff’s fourth and final Count traces a tangled course, concluding with his allegation
that, as between his claim and U.S. Bank’s claim to the subject property, his title, based on the
prior-recorded deed, is the superior one. Therefore, he asks the Court to quiet title in his favor.
To reach the destination, Plaintiff begins with the allegation that the foreclosure deed is void

9

because it was executed by someone with a faulty power of attorney in contravention of R.I.
Gen. Laws § 34-11-34 in that the power (1) fails to specifically identify the mortgage loan and
(2) fails to specify that the person executing the foreclosure deed is the person authorized by the
power of attorney. Next, Plaintiff argues that the 2006 assignment of the mortgage from First
Horizon to U.S. Bank is void because “it was not executed by an officer, employee or agent of
the assignor having the requisite authority, personal knowledge and intent.” ECF No. 4-1 ¶ 36.
Because of the alleged unlawfulness of these two underlying transactions, Plaintiff concludes
that the foreclosure and the foreclosure sale are void and of no force or effect; “Defendant U.S.
Bank could not have stood in the shoes of the lender or mortgagee for purposes of proceeding
with a foreclosure process or invoking a mortgagee’s power of sale.” Id. ¶ 37. Consequently,
Plaintiff concludes, he is entitled to a judgment declaring that he is the lawful owner of the
property.
On the first (chronologically-speaking) issue (the 2006 assignment from First Horizon to
U.S. Bank), Defendants correctly point out that Plaintiff lacks standing to make the argument.
The law of Rhode Island is clear that, even if the signatory to an assignment (or other contract)
lacks the proper authority, the assignment is rendered voidable rather than void. Clark v. Mortg.
Elec. Registration Sys., Inc., 7 F. Supp. 3d 169, 176-77 (D.R.I. 2014) (“mortgage is only
voidable by the mortgagee even if the agent of the mortgagee acted without authority”). A
voidable contract may be voided only “at the election of one of the parties to the contract.” Cruz
v. Mortg. Elec. Registration Sys., Inc., 108 A.3d 992, 997-98 (R.I. 2015). This means that only
the parties to the assignment, that is U.S. Bank and First Horizon, have standing to contest its
validity. See Oum v. Wells Fargo, N.A., 842 F. Supp. 2d 407, 413 n.12 (D. Mass. 2012)
(collecting cases). Even assuming that Plaintiff is correct that the signatory to the assignment

10

lacked authority – as the Court must for purposes of this motion – Plaintiff has no legal standing
to challenge the validity of the assignment.
Plaintiff’s challenges to the foreclosure deed and the power of attorney utilized in
connection with the recording of the foreclosure deed are also legally deficient. Defendants
correctly rely on the Rhode Island statute providing that a recorded foreclosure deed supported
by a power of attorney that conforms to the statutory requirements is presumptively legitimate:
Conveyances executed by attorney – Recording of power. Any conveyance
executed by attorney shall be as valid as if executed by the grantor himself,
providing that a power of attorney be given by such grantor for this purpose;
which power and the deed executed by the attorney thereunder shall be signed,
acknowledged, delivered and recorded with like formalities prescribed by law
concerning deeds from grantors in person.
R.I. Gen. Laws § 34-11-34. Defendants are also right that this statute does not contain the
requirements, invoked by Plaintiff, that the power of attorney must specifically identify the
foreclosed mortgage loan to which it appertains or must expressly specify that the person
executing the foreclosure deed was the person authorized by the power of attorney. Id.
In this instance, the power of attorney (ECF No. 21-6) is signed by two vice presidents
for U.S. Bank, a trust officer, two witnesses, is notarized by a Minnesota notary public, operates
to appoint Wells Fargo as attorney-in-fact for U.S. Bank, and was received and recorded in the
Land Records office for the City of Providence on May 15, 2006. In short, it conforms to the
requirements of § 34-11-34. Similarly, the foreclosure deed itself is duly signed, dated, notarized
and recorded; therefore, pursuant to R.I. Gen. Laws § 34-11-34, it constitutes “presumptive
evidence” of title to the property after foreclosure. Deutsche Bank Nat. Trust Co. v. Monegro,
No. KC 2011-1345, 2013 WL 372646, at *4 (R.I. Super. Ct. Jan. 24, 2013) (Trial Order); see
Southwick v. Mort. Elec. Registration Sys., Inc., No. KC 2010-0290, 2013 WL 1496526, at *3
n.4 (R.I. Super. Ct. Apr. 5, 2013) (“[I]t may be assumed that the individuals executing
11

[foreclosure deeds] were the officers they purported to be where the instrument is executed and
acknowledged in proper form.”). Such a properly acknowledged foreclosure deed “will not be
set aside absent clear and convincing evidence that the certificate of acknowledgment is false.”
Hoecke v. First Franklin Fin. Corp., No. KC 2009-0743, 2013 WL 1088825, at *4 (R.I. Super.
Ct. Mar. 7, 2013). Plaintiff’s complaint does not purport to meet this standard.
While these shortcomings are sufficient in that they are fatal to the viability of Count IV,
the Court must acknowledge yet another reason grounded in Rhode Island law why title cannot
be quieted in Plaintiff. It is well settled that proof of legal title to the property is an essential
element of a quiet title action. Lister v. Bank of Am., N.A., 790 F.3d 20, 24 (1st Cir. 2015). The
Rhode Island Supreme Court has held that the mortgagee continues to hold legal title to a
mortgaged property until the mortgage debt is paid in full. Bucci v. Lehman Bros. Bank, FSB,
68 A.3d 1069, 1078 (R.I. 2013). In accordance with title theory, the mortgagor (the homeowner) holds only equitable title to the property until the mortgage debt is paid off. Lemelson v.
U.S. Bank Nat’l Ass’n, 721 F.3d 18, 23 (1st Cir. 2013) (mortgage splits title to property into two
parts). These interests are deemed to be “complementary and separate claims; one party’s
interest (legal or equitable), as a general rule, does not interfere with the other’s.” Lister, 790
F.3d at 25; Lemelson, 721 F.3d at 24. In this case, Plaintiff surrendered legal title to his property
when he initially entered into the mortgage. His later efforts to obtain a loan modification
demonstrate that the mortgage loan has not yet been paid in full. Therefore, Plaintiff has not
successfully reacquired the defeasible legal title to the property, and may not assert a claim to the
property that is adverse to Defendants. Avedisian v. Select Portfolio Servicing, Inc., & U.S.
Bank, NA, No. CV 16-654S, 2017 WL 6334123, at *7 (D.R.I. Aug. 29, 2017), adopted, 2017

12

WL 6343644 (D.R.I. Dec. 11, 2017) (because they hold only equitable title, mortgagors’ quiet
title claim is subject to dismissal).
Based on the foregoing, I recommend that Count IV be dismissed.
IV.

CONCLUSION
For the foregoing reasons, I recommend that Defendants’ Motion to Dismiss (ECF No.

21) be granted as to Counts III and IV, and denied as to Counts I and II.
Any objection to this report and recommendation must be specific and must be served
and filed with the Clerk of the Court within fourteen (14) days after its service on the objecting
party. See Fed. R. Civ. P. 72(b)(2); DRI LR Cv 72(d). Failure to file specific objections in a
timely manner constitutes waiver of the right to review by the district judge and the right to
appeal the Court’s decision. See United States v. Lugo Guerrero, 524 F.3d 5, 14 (1st Cir. 2008);
Park Motor Mart, Inc. v. Ford Motor Co., 616 F.2d 603, 605 (1st Cir. 1980).

/s/ Patricia A. Sullivan
PATRICIA A. SULLIVAN
United States Magistrate Judge
January 5, 2018

13