1st Circuit To Home-Inheriting Siblings: Nice Try, But No Dice...Pay The Piper! Reverse Mortgage Lender's Failure To File Probate Claim Upon Death Of Homeowner/Borrower Does Not Extinguish Lien

From a client alert from the law firm Maurice Wutscher:

• The U.S. Court of Appeals for the First Circuit recently held that a failure to file a probate claim does not extinguish a mortgage lien under Rhode Island law. In so ruling, the Court held that "the piper must be paid."
  
  The plaintiffs, a brother and sister, inherited their mother's house. During her lifetime, the mother had taken out a reverse mortgage secured by the house. The mortgage securing the loan contained an acceleration clause and power of sale and became due and payable upon the mother's death.
  
  The mother died intestate. Her son and daughter commenced a probate proceeding in Rhode Island state court. Notice was given to creditors, including the mortgagee, but the mortgagee did not file a claim in the probate proceeding. The probate case was administered and closed, with the court granting the decedent's interest in the property to the plaintiffs.
  
  In late 2010, the plaintiffs received a notice of foreclosure, which was published pursuant to Rhode Island law. A foreclosure proceeding followed and the mortgagee recorded the foreclosure deed granting the Property to it in November of 2011.
  
  The plaintiffs filed suit in federal district court, invoking diversity jurisdiction, challenging the validity of the mortgage assignments and the foreclosure. After the close of discovery, the mortgagee moved for summary judgment, which the trial court granted. This appeal followed.
  
  ***
  The First Circuit rejected the heirs' [] argument that "the failure to submit a claim to the probate court within the statutorily prescribed period … bars [the mortgagee] from later foreclosing against the Property to satisfy the underlying debt" because "the statute of limitations applicable to foreclosures in Rhode Island is the general 20-year statute of limitations" and the "limitations period associated with the probate claim-filing statute … does not apply."

For more, see: 1st Cir holds failure to file probate claim does not void mortgage under RI law.

For the ruling, see Summers v. Financial Freedom Acquisition LLC, No. 14-1930 (1st Cir. October 23, 2015).