Deutsche Bank National Trust Company v. City of Providence, P.C. No. 10-1240 (R.I. Super 5/17/2010)

• Court: Rhode Island Superior Court
• Writing for the Court: Lanphear
• Decision Date: 17 May 2010
• Docket Number: P.C. No. 10-1240.
• Citation: Deutsche Bank National Trust Company v. City of Providence, P.C. No. 10-1240 (R.I. Super 5/17/2010), P.C. No. 10-1240. (R.I. Super. May 17, 2010)
• Parties: DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee under Pooling and Servicing Agreement dated as of November 1, 2005, Morgan Stanley Home Equity Loan Trust 2005 — 4 Mortgage Pass-through Certificates, Series 2005-4 v. CITY OF PROVIDENCE; JOHN A. MURPHY, in his capacity as Acting Recorder of Deeds

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DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee under Pooling and Servicing Agreement dated as of November 1, 2005, Morgan Stanley Home Equity Loan Trust 2005 — 4 Mortgage Pass-through Certificates, Series 2005-4 v. CITY OF PROVIDENCE; JOHN A. MURPHY, in his capacity as Acting Recorder of Deeds

P.C. No. 10-1240.

Superior Court of Rhode Island, Providence, Sc.

Filed: May 17, 2010.

DECISION

LANPHEAR, J.

This case is before the Court on the complaint of Deutsche Bank National Trust Company ("Deutsche Bank"). The complaint seeks a declaration that certain City of Providence's Ordinances are preempted by state and federal law. Deutsche Bank also seeks a writ of mandamus directing the City's Recorder of Deeds to record the foreclosure deeds presented by Deutsche Bank. For the reasons set forth below, the Court grants Deutsche Bank's request for declaratory relief with respect to certain portions of the Ordinances but denies its petition for a writ of mandamus.

FACTS AND QUESTIONS PRESENTED

Over the past year, the City of Providence ("the City") enacted several ordinances to combat the current climate of increasing real estate foreclosures. Specifically, the City added sections 13-213 through 13-220 to its Code of Ordinances.¹ These sections require a foreclosing lender to provide the City and the borrower with written notice of its intent to foreclose and to participate in a conciliation conference with the borrower in an attempt to renegotiate the loan and avoid foreclosure. The Ordinances allowed fines to be imposed for the lender's failure to follow these procedures, and indicate that "[n]o deed offered by a lender/mortgagor to be filed with the recorder of deeds shall be accepted and/or recorded in the land evidence records of the city if it is determined that the lender/mortgagor has failed in any respect with the requirements and provisions of this article." Section 13-217.

The present dispute challenges the legality of these Ordinances. Deutsche Bank argues that they are preempted by state law because the Rhode Island General Assembly intended to occupy the entire field of mortgage foreclosure laws. Similarly, Deutsche Bank avers that— because the field of mortgage foreclosures is of statewide concern—the Ordinances deal with an impermissible category for municipal regulation. Notably, the City's Recorder of Deeds refused to accept a number of foreclosure deeds for recording based on noncompliance with the Ordinances.

Briefly, "[a] `mortgage' is a conveyance of title to property that is given as security for the payment of a debt." 54A Am.Jur. 2d Mortgages § 1 (2010). Mortgages typically confer upon upon the lender the power to sell the mortgaged property in the event of a default. See id. Notably, "[e]very conveyance of lands . . . by way of mortgage . . . shall be void unless . . . recorded in the records of land evidence in the town or city where the lands . . . are situated . . . ." G.L. 1956 § 34-11-1. "The general purpose of land-recording statutes is to provide a public record of transactions affecting title to land." In re Barnacle, 623 A.2d 445, 447 (R.I. 1993).

ANALYSIS

Pursuant to G.L. 1956 § 9-30-1, Rhode Island's enactment of the Uniform Declaratory Judgment Act, the Superior Court has the "power to declare rights, status, and other legal relations" upon petition. Town of Barrington v. Williams, 972 A.2d 603, 608 (R.I. 2009). While the Court has the authority to issue declaratory judgments, it has no duty to do so. Cruz v. Wausau Insurance, 866 A.2d 1237, 1240 (R.I. 2005). For the following reasons, this Court declares that the portions of the Ordinances which prohibit the recording of certain deeds have been preempted by state law and cannot stand.

I. State Preemption

A city ordinance may be preempted in a number of ways. "First, a municipal ordinance is preempted if it conflicts with a state statute on the same subject." Town of Warren v. Thornton-Whitehouse, 740 A.2d 1255, 1261 (R.I.1999) (citing State v. Pascale, 86 R.I. 182, 186-87, 134 A.2d 149, 152 (1957)). "[A] municipal ordinance is [also] preempted if the Legislature intended that its statutory scheme completely occupy the field of regulation on a particular subject." Id. Notably, "Rhode Island, unlike some states, recognizes implied preemption and does not require a clear statement by the legislature of intention to preempt." Rhode Island Cogeneration Associates v. City of East Providence, 728 F. Supp. 828, 834, n.12 (D.R.I. 1990) (citing Wood v. Peckham, 80 R.I. 479, 482, 98 A.2d 669, 670 (1953)). "[L]ocal legislation embodied in charter, ordinance or other regulation is pre-empted by statewide legislation `if it disrupts the state's overall scheme of regulation'" Munroe v. Town of East Greenwich, 733 A.2d 703, 710 (R.I. 1999) (quoting Town of East Greenwich v. O'Neil, 617 A.2d 104, 109 (R.I.1992)). When addressing implied preemption, the U.S. District Court for the District of Rhode Island summarized that an "[o]rdinance will be declared invalid if [it] inhibits the enforcement of the state's . . . laws, threatens to disrupt the state's overall scheme of regulation on [a certain] issue[], or, instead of filling a gap in the state's regulatory scheme, provides a different regulatory scheme." Rhode Island Cogeneration Associates, 728 F. Supp. at 834.

G.L. 1956 § 34-13-1 states:

"Any of the following instruments shall be recorded or filed by the town clerk or recorder of deeds, in the manner prescribed by law, on request of any person and on payment of the lawful fees therefor:

. . . .

(7) All instruments required by statute to be recorded, including deeds, mortgages and transfers and discharges thereof, leases or memoranda thereof, and transfers and cancellations thereof, and the covenants, conditions, agreements and powers therein contained." (emphasis added.)

In contrast, the Providence Ordinances prohibit a lender from recording a foreclosure deed until the lender first satisfies the notice and loan conciliation conference requirements prior to the foreclosure sale. The Ordinances are invalid to the extent that they "disrupt[] the state's overall scheme" of regulating the transfer of real estate and specifically the recording of instruments. Munroe, 733 A.2d at 710 (quoting O'Neil, 617 A.2d at 109). "[T]he Legislature has prescribed the duties of a recorder of deeds to record instruments and has specified what is required for a deed to be a legally sufficient instrument." Bionomic Church of Rhode Island v. Gerardi, 414 A.2d 474, 476 (R.I. 1980). Our Courts have stated that "a recorder of deeds is a purely ministerial officer who, when presented with a deed executed in compliance with controlling statutes, must receive and record the instrument." Id. at 476 (citing Redelsperger v. Redelsperger, 71 R.I. 203, 206-07, 43 A.2d 305, 306 (1945) (emphasis added)).

The General Assembly's use of mandatory rather than suggestive language in § 34-13-1 demonstrates the legislature's goal of occupying the entire field of the state's recording system. State law sets specific obligations indicative of preemptive intent. For example, the General Assembly directs the town clerk or recorder of deeds to write the exact date and time of receipt on the instrument and in a receiving book. See § 34-13-4. Other statutory sections indicate that each deed presented for recording must have the name and address of the grantee, and that mortgage deeds must have the name and address of the mortgagor and mortgagee. See §§ 34-11-.11-1.3. Moreover, "each city and town within the state" must keep an alphabetical index of all recorded instruments. § 34-13-5 (emphasis added). The General Assembly established a uniform fee schedule to be followed by every city and town, and it has apportioned the distribution of those fees. See § 34-13-7. The state's statutory scheme even specifies the cost to be charged for photocopies of a record. See § 34-13-9. Notably, these fees and costs are set by state statute and are the same for each municipality. With such an expansive and comprehensive framework, this Court finds that the General Assembly intended to occupy the entire field of regulation with respect to the recording of instruments.

Allowing an array of recording systems across our small state would create conflicting obligations and confuse individuals who are attempting to comply. Ordinances such as the one at bar would "disrupt the state's overall scheme of regulation" by creating additional hurdles which must be overcome before a foreclosure deed can be recorded. Munroe, 733 A.2d at 710. "[I]nstead of filling a gap in the state's regulatory scheme," the City's Ordinances "provide[] a different regulatory scheme" which must be declared invalid. Rhode Island Cogeneration Associates, 728 F. Supp. at 834.

II. Home Rule

"The dueling issues of local authority and state preeminence often intersect because home rule requires an analysis of whether the issue is of local or statewide concern, whereas preemption requires an analysis of whether the issue is implicitly reserved within the state's sole domain." Amico's Inc. v. Mattos, 789 A.2d 899, 908 (R.I. 2002). According to Deutsche Bank, the Ordinances purport to govern an impermissible area for municipal regulation because the Home Rule Amendment to the Rhode Island Constitution prevents a city from enacting laws which attempt to legislate over a matter of statewide concern. (See Pl.'s mem. at 7.) The Ordinances at issue here were enacted in violation of the Home Rule Amendment to the Rhode Island Constitution. (R.I. Const. art. XIII, § 2.)

"The state constitution was amended in 1951 to grant home rule to the state's municipalities. . . . The home-rule amendment to the constitution . . . empower[ed] cities and towns to legislate with regard to all local matters." Viveiros v. Town of Middletown, 973 A.2d 607, 611 (R.I. 2009) (internal citations and quotation omitted). Under the Rhode Island...