Article courtesy of Kevin Braun (Morgan Lewis)
Bank of New York Mellon v. Gosset, 307 A.3d 861, 863–64 (R.I. 2024)
In August 2006, Ronald A. Gosset (“Father”) signed a promissory note in exchange for a loan secured by a mortgage on real property in Newport, Rhode Island, which Father owned as a joint tenant with his two daughters (collectively, “Daughters”). Daughters did not sign the underlying promissory note but did sign the mortgage alongside Father, mortgaging their interest in the property. Father and each Daughter were designated as “Borrowers” under the terms of the mortgage. The mortgage provided that:
“any Borrower who co-signs this Security Instrument but does not execute the Note (a ‘co-signer’): (a) is co-signing this Security Instrument only to mortgage, grant and convey the co-signer’s interest in the Property under the terms of this Security Instrument; (b) is not personally obligated to pay the sums secured by this Security Instrument; and (c) agrees that Lender and any other Borrower can agree to extend, modify, forbear or make any accommodations with regard to the terms of this Security Instrument or the Note without the co-signer’s consent”[.]
Father died in 2011. In 2019, the Bank of New York Mellon (“BNYM”), as assignee of the mortgage, filed a complaint with the Providence County Superior Court alleging Father and Daughters had been in payment default of the note and mortgage since July 2017 and requesting to proceed with a foreclosure sale. Daughters moved to stay the foreclosure proceedings, arguing that BNYM was not entitled to judgment as a matter of law because Daughters cannot be in default with respect to a note that they are not party to and therefore have no contractual or financial obligations to BNYM. During the live hearing, BNYM clarified and claimed that Daughter’s alleged default was not on the note, but on the mortgage. The court ultimately granted BNYM’s motion for summary judgment and authorized BNYM to conduct a foreclosure sale and Daughters appealed.
On appeal to the Supreme Court of Rhode Island, the court found that while the mortgage provides that, unlike Father, Daughters are “not personally obligated to pay the sums” under the note, Daughters did agree to “mortgage, grant and convey” their interest in the property under the mortgage, which BNYM would have the right to foreclose on if there is a default. The Court affirmed the lower court’s ruling, finding that the note and mortgage were both in default and that BNYM was entitled to summary judgment and to proceed with the foreclosure proceedings.
