                                                                Supreme Court

                                                                No. 2013-190-Appeal.
                                                                (PC 11-4645)


          Ann Marie DiLibero                :

                   v.                       :

Mortgage Electronic Registration Systems,   :
               Inc. et al.




             NOTICE: This opinion is subject to formal revision before publication in
             the Rhode Island Reporter. Readers are requested to notify the Opinion
             Analyst, Supreme Court of Rhode Island, 250 Benefit Street, Providence,
             Rhode Island 02903, at Tel. 222-3258 of any typographical or other
             formal errors in order that corrections may be made before the opinion is
             published.
                                                                          Supreme Court

                                                                          No. 2013-190-Appeal.
                                                                          (PC 11-4645)

              Ann Marie DiLibero                 :


                       v.                        :


    Mortgage Electronic Registration Systems,    :
                   Inc., et al.


              Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.


                                         OPINION

        Justice Flaherty, for the Court. The plaintiff, Ann Marie DiLibero, appeals from a

judgment dismissing her complaint against the defendants Mortgage Electronic Registration

Systems, Inc. (MERS), 1 UBS Real Estate Securities, Inc. (UBS), USA Residential Properties

(USA Residential), and Rushmore Loan Management Services, LLC (Rushmore). On November

6, 2014, this case came before the Supreme Court pursuant to an order directing the parties to

show cause why the issues in this appeal should not be summarily decided. After hearing the

arguments of the parties and examining the memoranda that they submitted, we are of the

opinion that cause has not been shown, and we proceed to decide the appeal at this time without

further briefing or argument. For the reasons set forth in this opinion, we vacate the judgment of

the Superior Court.




1
 For a detailed explanation on the function of MERS in the mortgage industry, see Bucci v.
Lehman Brothers Bank, FSB, 68 A.3d 1069, 1072-73 (R.I. 2013).

                                                -1-
                                               I

                                      Facts and Travel

        On January 31, 2007, plaintiff purchased a home at 9 Jencks Road in Foster. To finance

that transaction, plaintiff executed an adjustable-rate note, payable to New Century Mortgage

Corporation (New Century), in the amount of $255,000. The note was secured by a mortgage on

the property denominating plaintiff as borrower and MERS as mortgagee, acting as a “nominee

for Lender and Lender’s successors and assigns.” Both the note and the mortgage designated

New Century as the lender.     Further, the mortgage provided that “[b]orrower does hereby

mortgage, grant and convey to MERS, (solely as nominee for Lender and Lender’s successors

and assigns) and to the successors and assigns of MERS * * * with the Statutory Power of Sale.”

The mortgage was recorded in the land evidence records of the Town of Foster on February 4,

2007.

        On April 2, 2007, New Century filed for bankruptcy in the United States Bankruptcy

Court for the District of Delaware. On March 19, 2008, during the course of the bankruptcy

proceedings, New Century filed a notice of rejection of executory contract regarding its

membership agreement with MERS and its status as a MERS member.

        Subsequently, on July 20, 2009, MERS, claiming to act as New Century’s nominee,

purportedly assigned the mortgage to UBS, recording the assignment in the land evidence

records of Foster. However, on December 28, 2010, UBS assigned the mortgage to USA

Residential. Once again, that assignment was recorded in the land evidence records of Foster.




                                             -2-
Thereafter, USA Residential and its loan servicer, Rushmore, commenced foreclosure

proceedings against plaintiff. Apparently, a foreclosure sale took place on August 2, 2011. 2

       On August 11, 2011, plaintiff filed an action against defendants in the Superior Court,

seeking injunctive relief and a declaration that the mortgage assignments were void and the

foreclosure sale was invalid. The plaintiff also sought to quiet title to the property and enjoin

defendants from instituting any further foreclosure or eviction actions. Attached to plaintiff’s

complaint were several documents, including copies of the note, mortgage, purported

assignments of the mortgage, New Century’s notice of rejection of executory contract, and the

MERS bylaws.

       On November 8, 2011, defendants, in lieu of an answer, filed a motion to dismiss the

complaint pursuant to Rule 12(b)(6) of the Superior Court Rules of Civil Procedure, asserting

that plaintiff should be barred from challenging the foreclosure sale because it already had been

conducted, that plaintiff lacked standing to challenge the validity of the assignments, and that

USA Residential could properly foreclose on the property despite not being the original lender or

note holder. The plaintiff objected to defendants’ motion, averring that she had met her burden

of stating a claim upon which relief could be granted.

       On April 24, 2012, defendants’ motion to dismiss was heard by a justice of the Superior

Court. The hearing justice issued a written decision, finding that plaintiff lacked standing to

challenge the assignments of the mortgage, but that even if she did, the assignments were valid,

and the foreclosure proper. Further, the hearing justice found that the complaint was rife with

conclusory statements and erroneous legal theories, all of which he discredited. On November 8,




2
  There are no documents in the record that confirm whether a foreclosure sale was, in fact,
conducted on August 2, 2011.

                                               -3-
2012, a judgment was entered, dismissing plaintiff’s action. The plaintiff filed a timely appeal to

this Court.

                                                 II

                                       Standard of Review

       “[T]he sole function of a motion to dismiss is to test the sufficiency of the complaint.”

Narragansett Electric Co. v. Minardi, 21 A.3d 274, 277 (R.I. 2011) (quoting Laurence v. Sollitto,

788 A.2d 455, 456 (R.I. 2002)). “In passing on a Rule 12(b) dismissal, this Court applies the

same standard as the trial justice.” Id. at 278 (citing Barrette v. Yakavonis, 966 A.2d 1231, 1233

(R.I. 2009)). “We thus are confined to the four corners of the complaint and must assume all

allegations are true, resolving any doubts in plaintiff’s favor.” Id. (citing Laurence, 788 A.2d at

456). “A motion to dismiss may be granted only ‘if it appears beyond a reasonable doubt that a

plaintiff would not be entitled to relief under any conceivable set of facts[.]’” Id. (quoting Estate

of Sherman v. Almeida, 747 A.2d 470, 473 (R.I. 2000)).

                                                III

                                            Discussion

       On appeal, plaintiff advances a number of arguments in an attempt to demonstrate why

the dismissal of her complaint was premature. First, plaintiff argues that the hearing justice did

not use the correct legal standard when deciding the motion to dismiss. Specifically, plaintiff

avers that the hearing justice erroneously relied upon the standard articulated in Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009). 3 By contrast, defendants argue that the hearing justice used the



3
  In Ashcroft v. Iqbal, 556 U.S. 662 (2009), the United States Supreme Court explained that in
the federal courts, the standard of review applicable to a motion to dismiss had been modified,
requiring a complaint to contain “sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’” Id. at 678 (quoting Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 570 (2007)). Under the Court’s newly articulated “plausibility standard,” the plaintiff

                                                -4-
proper standard and merely ignored the legal conclusions contained in plaintiff’s complaint as

required under Rhode Island law. After a review of the hearing justice’s decision, it appears that

he relied upon the standard articulated in Iqbal, despite the fact that this Court has yet to adopt

that standard. Chhun v. Mortgage Electronic Registration Systems, Inc., 84 A.3d 419, 422-23

(R.I. 2014) (“This Court has not yet addressed whether continued adherence to our traditional

Rhode Island standard is appropriate or whether the new Federal guide of plausibility should be

adopted.”). Instead, under Rhode Island law, the hearing justice was required to “assume all

allegations [contained in the complaint] are true, resolving any doubts in [the] plaintiff’s favor.”

Minardi, 21 A.3d at 278 (citing Laurence, 788 A.2d at 456). However, “[a]llegations that are

more in the nature of legal conclusions rather than factual assertions are not necessarily assumed

to be true.”    Doe ex rel. His Parents and Natural Guardians v. East Greenwich School

Department, 899 A.2d 1258, 1262 n.2 (R.I. 2006). Applying the standard of review established

by our case law, we shall turn our attention to the arguments on appeal.

       At the outset, defendants contend that plaintiff lacked standing to challenge the mortgage

assignments. This Court previously has had the opportunity to address whether a mortgagor has

standing to challenge the validity of the assignment of his or her mortgage. Mruk v. Mortgage

Electronic Registration Systems, Inc., 82 A.3d 527, 534-36 (R.I. 2013). In Mruk, we held that

“homeowners in Rhode Island have standing to challenge the assignment of mortgages on their

homes to the extent necessary to contest the foreclosing entity’s authority to foreclose.” Id. at

536. We see no reason to veer from our holding in Mruk in this case.

       The plaintiff argues that the hearing justice erred in dismissing her complaint because she

adequately alleged that the assignments of the mortgage, from MERS to UBS and from UBS to


must plead “factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).

                                               -5-
USA Residential were invalid. In her complaint, the plaintiff alleged that, during the course of

New Century’s bankruptcy, it filed a notice of rejection of executory contract regarding its

membership agreement with MERS and its status as a MERS member.                    To support that

allegation, the plaintiff attached to the complaint a copy of the notice of rejection that had been

filed in New Century’s bankruptcy. 4        The plaintiff contends that New Century’s MERS

membership had been terminated, thereby prohibiting MERS from continuing to act as its

nominee. Consequently, the plaintiff concludes that MERS lacked the authority to assign the

mortgage to UBS. Conversely, the defendants argue that the facts, as alleged by the plaintiff,

would not render the assignments void ab initio; rather, they would make the assignments

voidable at the election of the parties thereto. However, in view of New Century’s actions in the

Bankruptcy Court rejecting its relationship with MERS, “the rejection of an executory contract

or unexpired lease of the debtor constitutes a breach of such contract or lease.” 11 U.S.C. §

365(g). Therefore, crediting the allegations of the plaintiff’s complaint as true, as we must in

this analysis, when New Century filed its rejection of the executory contract with MERS, the

contract was breached and its relationship with MERS was terminated. See id. Thus, the

subsequent assignment of the mortgage executed by MERS to UBS would be void ab initio

because the assignor, MERS, had nothing to assign. See Culhane v. Aurora Loan Services of

Nebraska, 708 F.3d 282, 291 (1st Cir. 2013); 17A Am. Jur. 2d. Contracts § 10 at 45-46 (2004)

(“A void contract is void as to everybody whose rights would be affected by it if it were valid.”).

Based upon the facts as alleged in the complaint, it is our opinion that the plaintiff has adequately

stated a claim upon which relief may be granted.




4
  When deciding a motion to dismiss, the hearing justice may refer to any documents attached to
the complaint or deemed incorporated therein by reference. Bowen Court Associates v. Ernst &

                                                -6-
                                              IV

                                          Conclusion

       For the foregoing reasons, we vacate the judgment of the Superior Court, to which the

papers in the case may be remanded.




Young, LLP, 818 A.2d 721, 725-26 (R.I. 2003) (citing Super. R. Civ. P. 10(c)).

                                             -7-
                            RHODE ISLAND SUPREME COURT CLERK’S OFFICE

                                 Clerk’s Office Order/Opinion Cover Sheet




TITLE OF CASE:        Ann Marie DiLibero v. Mortgage Electronic Registration Systems,
                      Inc. et al.

CASE NO:              No. 2013-190-Appeal.
                      (PC 11-4645)

COURT:                Supreme Court

DATE OPINION FILED: January 14, 2015

JUSTICES:             Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.

WRITTEN BY:           Associate Justice Francis X. Flaherty

SOURCE OF APPEAL:     Providence County Superior Court

JUDGE FROM LOWER COURT:

                      Associate Justice Allen P. Rubine

ATTORNEYS ON APPEAL:

                      For Plaintiff: John B. Ennis, Esq.

                      For Defendants: Jennifer J. Normand, Esq.
