Holden v. Salvadore

• Decision Date: 05 February 2009
• Docket Number: No. 2008-69-Appeal.,2008-69-Appeal.
• Citation: 964 A.2d 508
• Parties: Deborah HOLDEN v. Guido R. SALVADORE.
• Court: Rhode Island Supreme Court

964 A.2d 508

Deborah HOLDEN v. Guido R. SALVADORE.

No. 2008-69-Appeal.

Supreme Court of Rhode Island.

February 5, 2009.

Paul R. Crowell, Esq., Providence, for Plaintiff.

Dennis Baluch, Esq., Providence, for Defendant.

Present: WILLIAMS, C.J., GOLDBERG, FLAHERTY, SUTTELL, and ROBINSON, JJ.

OPINION

Justice FLAHERTY, for the Court.

In light of the current foreclosure crisis in this state and across the country, we are not surprised that we must consider an appeal presented by a homeowner faced with very difficult financial circumstances whose home was threatened by foreclosure proceedings. We do so with empathy for those who have found themselves in that unhappy position. This case came before the Supreme Court on December 9, 2008, pursuant to an order directing the parties to appear and show cause why the issues raised in this appeal should not summarily be decided. After hearing the arguments of counsel and reviewing the memoranda of the parties, we are satisfied that cause has not been shown. Accordingly, we shall decide the appeal at this time. For the reasons set forth in this opinion, we affirm the judgment of the Superior Court.

The plaintiff, Deborah Holden, appeals from a Superior Court judgment denying her request for equitable relief against the defendant, Guido R. Salvadore. Holden, in an attempt to save her home from foreclosure by a lending institution, made a bid at the foreclosure sale. She was the successful bidder at $265,000, and she made a deposit of $5,000; but, she had only thirty days to pay the remaining $260,000 to complete the transaction. With about two weeks left before the deadline, and after failing to obtain financing despite significant efforts, Holden contacted Guido Salvadore, an attorney who had helped her three years earlier with a problem involving the Human Rights Commission. In that matter, Salvadore had made some phone calls on Holden's behalf, and he never charged her for his assistance. Because of this, Holden believed Salvadore was a compassionate man, and she called him seeking his assistance.

Holden informed Salvadore about her financial plight, and she told him that she thought her property had a value of $379,000. She also told him that she was trying to sell the property and that she already had a realtor who had listed it for sale on her behalf. Salvadore told her he might consider buying the property and then give her a chance to repurchase it. After he reviewed the foreclosure documents, he decided to enter into such an agreement with Holden.

That agreement provided that Holden would assign Salvadore her rights under the memorandum of terms and conditions of sale that she had entered into with the mortgagee. It is significant that the agreement did not provide for any payment between the parties in exchange for the assignment. Rather, Salvadore granted Holden a ninety-day option to buy the property from him for $310,000. In the alternative, if Holden successfully found a third-party buyer for the property, Holden would be entitled to any profit from the sale that exceeded $310,000. It is also significant that Holden retained her own attorney, and the parties negotiated, drafted, and executed a written accord. Salvadore obtained a loan, with interest, paid the mortgagee the $260,000 that it was due under the agreement with Holden, and the title to the property was conveyed to him.

After taking title to the property, Salvadore permitted Holden to live in the property free of rent. Holden also collected rent from tenants in the building.¹ She continued to market the property for sale, and eventually the realtor produced a buyer who made a deposit to purchase the property for $350,000. However, Holden did not accept the offer; instead, she tried to secure financing so that she could exercise the option under her agreement with Salvadore to buy the property herself. Salvadore testified that when he learned of Holden's decision not to sell the property, he advised her against this course of action. But, she was determined to keep the property; she retained a new attorney and informed Salvadore that she was exercising her option to buy the property from him. She also requested an extension of the closing date for a few more days and asked Salvadore to reduce the purchase price to $300,000. Salvadore testified that he agreed to both of these modifications to the agreement.² Thereafter, Salvadore received no further communication from Holden or her attorney until Holden initiated litigation.

Holden filed a verified complaint in which she alleged usury (count 1) and fraud and misrepresentation (count 2), and she requested relief in the form of both monetary damages and a preliminary and permanent injunction. Holden later amended her complaint to include additional counts, alleging that the defendant violated the Mortgage Foreclosure Consultant Regulation Act, G.L.1956 chapter 79 of title 5, and the Deceptive Trade Practices Act, G.L.1956 chapter 13.1 of title 6 (count 3). She also included a count requesting declaratory judgment under the Uniform Declaratory Judgments Act, G.L. 1956 chapter 30 of title 9 (count 4), and added a claim for relief in the form of a constructive trust.

Holden also filed a motion for a temporary restraining order and a preliminary injunction to preclude Salvadore from evicting tenants, transferring title, or otherwise alienating or encumbering the property, located at 10-12 Mill Street in the Town of Warren. The request for a temporary restraining order was denied by a justice of the Superior Court.³ The parties subsequently appeared before a trial justice for a hearing on Holden's motion for a preliminary injunction. After hearing testimony, and over Holden's objection, the trial justice consolidated Holden's request for a preliminary and permanent injunction pursuant to Rule 65 of the Superior Court Rules of Civil Procedure.

Holden testified that she contacted Salvadore, as well as some other people, in an effort to obtain financing to enable her to buy her property at the foreclosure sale.⁴ She said that when she spoke to Salvadore, he told her that he would be involved only if he obtained title to the property. She testified that she did not accept the $350,000 offer procured by the real estate broker because she wished to exercise the option to purchase the property herself. She said that she was interested in retaining the property because she needed a roof over her head and she felt that this was her home.⁵ In her testimony, she conceded that she filed a petition for bankruptcy in September 2006, but that her bankruptcy petition did not list Salvadore as a creditor, nor did it claim any ownership interest in the property as an asset of her estate.

Salvadore testified that after he spoke to Holden, he realized that they each might have the opportunity to profit from the transaction and so he entered into the agreement with her, which he saw as a business opportunity. Salvadore said that he learned that Holden had filed for bankruptcy in September 2006 and that the petition listed neither Salvadore as a creditor nor the property as an asset.

At the close of the evidence, the trial justice rendered a bench decision in which he determined that Holden had failed to present a prima facie case and that she had failed to meet the burden necessary for a grant of equitable relief. Significantly, the trial justice concluded that the transaction was not a loan. He found that Salvadore viewed the arrangement as a business opportunity, and he also found that Holden was making a business decision when she entered into the agreement with Salvadore. The trial justice found that both Salvadore and Holden reasonably expected to make a profit. Salvadore credited Holden's estimation of the property's value at $379,000, and he therefore expected that he would engender a profit of about $50,000 and that Holden also expected to profit to the extent of about $50,000 to $60,000. The trial justice was also strongly persuaded by the fact that Holden was represented by independent counsel and also that Holden acknowledged in the agreement that Salvadore had advised her to retain counsel of her own. The trial justice also considered it important that the agreement was in writing and executed by the parties, that it contained provisions that the agreement was a "joint effort," and that it professed to be the entire agreement between the parties. The trial justice concluded that in making the agreement, Salvadore did not enjoy a distinct advantage over Holden. The court also found it material that in September 2006, with the assistance of an attorney, Holden filed for bankruptcy protection but that she did not list the transaction between herself and Salvadore as a loan, nor did she claim an interest in the property as an asset of her estate. This, to the trial justice, constituted compelling evidence that the transaction was not a loan. The court also reasoned that this demonstrated that Holden did not believe that she owned the property any longer. The court further found it significant that Holden had passed on what appeared to be a concrete opportunity to sell the property.

With respect to Holden's claim that Salvadore's activities came within the ambit of the Mortgage Foreclosure Consultant Regulation Act, the court concluded that Salvadore was not a mortgage foreclosure consultant. The trial justice found that Holden did not consult Salvadore, Salvadore was not her lawyer, and he was not hired by her. Rather, the court found that "[s]he came to him because she was desperate, and he took on the situation and said I'll agree under the following terms." The court found that the contract between the parties was an arms-length transaction and not a consultation, and therefore, the court concluded that the Mortgage Foreclosure Consultant Regulation Act did not apply. The court further determined that there was no violation of a fiduciary duty or...