Medeiros v. Bankers Trust Co.

• Decision Date: 13 March 2012
• Docket Number: No. 2010–145–Appeal.,2010–145–Appeal.
• Parties: William J. MEDEIROS et al. v. BANKERS TRUST COMPANY et al.
• Court: Rhode Island Supreme Court

38 A.3d 1112

William J. MEDEIROS et al.

v.BANKERS TRUST COMPANY et al.

No. 2010–145–Appeal.

Supreme Court of Rhode Island.

March 13, 2012.

Erica M. O'Connell, Esq., for Plaintiff.

Peter P. D'Amico, Esq., Providence, for Defendant.

Present: SUTTELL, C.J., GOLDBERG, FLAHERTY, and INDEGLIA, JJ.

OPINION

Justice INDEGLIA, for the Court.

This appeal obliges us to once again wade into the sometimes murky waters of Rhode Island's tax-sale statute, and more specifically, its redemption foreclosure process. The issue presented is whether a Superior Court judgment can “re-vest” title to property back to a prior owner after that owner has been defaulted in a petition to foreclose his right of redemption.

This case came before the Supreme Court on December 1, 2011, pursuant to an order directing the parties to appear and show cause why the issues raised in this appeal should not be summarily decided. After hearing the arguments of counsel and reviewing the memoranda submitted on behalf of the parties, we are satisfied that cause has not been shown. Accordingly, we shall decide the appeal at this time without further briefing or argument. For the reasons set forth in this opinion, we affirm the judgment of the Superior Court.

IFacts and Travel

It is necessary to begin by recounting the tangled facts and extensive proceedings that ultimately led to the present action before this Court. On May 17, 1996, the plaintiff William J. Medeiros (Medeiros) became the owner of a certain parcel of real estate at 360–362 Devil's Foot Road in the Town of North Kingstown (the property). That same day, Medeiros executed a mortgage to the property to secure a note in the amount of $68,750. The original mortgagee then assigned the mortgage to Bankers Trust Company (Bankers). Medeiros made monthly mortgage payments through Bankers's service company, Select Portfolio Servicing, Inc. (Select), until he experienced financial difficulties. At around the same time, Medeiros also failed to pay the necessary real estate taxes to the Town of North Kingstown (the town).

The Tax Lien Case

On June 4, 1999, the town held a tax sale of the property. Prior to the tax sale, the town provided notice pursuant to G.L.1956 §§ 44–9–10 and 44–9–11 ¹ to Medeiros and Fleet Bank.² Bankers, however, as mortgagee, did not receive notice of the tax sale. Fiduciary Trust Services (Fiduciary) purchased the property at the tax sale and received a tax deed executed by the town on June 16, 1999.

On June 26, 2000, Fiduciary filed a petition to foreclose Medeiros's right of redemption to the property in the Superior Court for Washington County (the tax lien case). The record indicates that Medeiros was properly notified of the petition pursuant to § 44–9–27,³ but that he failed to file an answer. On July 28, 2000, a final decree was entered in the tax lien case, foreclosing and barring all rights of redemption, including those that Medeiros had in the property.

The Notice Case

Thereafter, on October 10, 2000, Bankers filed a complaint against Medeiros, Fiduciary, and the town,⁴ seeking to invalidate the tax sale and the redemption foreclosure (the notice case). On November 24, 2000, Bankers filed an amended complaint, alleging that the tax sale of the property was void because the town failed to give it notice. As part of its requested relief, Bankers petitioned the Superior Court to order Fiduciary to issue a redemption deed in favor of Medeiros. Because Medeiros believed that his rights were adequately protected by Bankers, he did not respond or enter his appearance in the notice case, despite being named as a defendant. On December 17, 2001, the matter was presented before a justice of the Superior Court for Washington County, wherein “the [c]ourt granted summary judgment for Bankers Trust, and default judgments against Medeiros, Stephen Goldman, and Fiduciary Trust entered.”

On January 15, 2002, a judgment was entered against Medeiros and Fiduciary in the notice case (the January 2002 judgment), declaring the prior tax sale void, vacating the final decree entered in the tax lien case, and “vest[ing the property] back into William Medeiros[,] subject to the mortgage to Bankers * * *.” Medeiros received a copy of the January 2002 judgment; one was also recorded in the land evidence records of the town on March 14, 2002.

Fiduciary Moves to Vacate

On June 21, 2002, Fiduciary filed a motion to vacate the January 2002 judgment, asserting that it was not properly served with the complaint filed against it in the notice case, and, that it did not receive notice of Bankers's motions for default judgment and summary judgment. Medeiros here contends that he never received notice of this motion to vacate. Nevertheless, in an order entered on September 6, 2002, the Superior Court vacated the default judgment and summary judgment against only Fiduciary.⁵ No copy of this order was sent to Medeiros, nor was the order recorded in the land evidence records of the town.

At some point in 2004, unaware of any potential cloud on the property, Medeiros entered into negotiations with Select (Bankers's service company) in an attempt to settle the amount owed based on the mortgage note. In a letter dated April 29, 2005, Select indicated to Medeiros that to effectively discharge the mortgage, a payoff amount of $69,893.53 was required on or before May 6, 2005. Medeiros's sister, Margaret E. Cambra (Cambra),⁶ agreed to provide the necessary funds to satisfy the outstanding mortgage, as well as $5,106.47 to satisfy all outstanding real estate taxes in exchange for title to the property. On May 2, 2005, Cambra wired the $69,893.53 to Select in satisfaction of the mortgage and also paid to the town the delinquent taxes. Thereafter, without knowledge of the order vacating the default judgment and summary judgment against Fiduciary in the notice case, Medeiros executed a warranty deed conveying the property to Cambra on May 31, 2005.

The Stipulation Order in the Notice Case

Concurrently, on May 31, 2005, and prior to the recordation of the property transfer from Medeiros to Cambra in the land evidence records, a stipulation between Bankers, Fiduciary, and the town was entered as an order of the Superior Court (stipulation order) in the notice case and was recorded that day in the land evidence records of the town. The stipulation order vacated the December 17, 2001 summary judgment in favor of Bankers, and vested title to the property in Fiduciary dating to December 17, 2001, and no longer subject to the mortgage held by Bankers. Furthermore, the stipulation order dismissed with prejudice all claims, counterclaims, and cross-claims of the parties.⁷

Medeiros did not receive any notice of the stipulation or subsequent order. Instead, Medeiros first learned of the stipulation order on June 3, 2005, when a final title search of the property was performed prior to the recording of the deed from Medeiros to Cambra. Despite the existence of the recorded stipulation order, plaintiffs went ahead and recorded the warranty deed to the property.

The Instant Action

In an attempt to clear the title to the property, Medeiros and Cambra filed the instant action in the Superior Court for Washington County on June 17, 2005, seeking a declaratory judgment invalidating the May 31, 2005 stipulation order.⁸ The complaint also requested that all clouds on the property be removed and that Cambra be adjudged the fee simple owner of the property by virtue of the warranty deed from Medeiros. The matter was tried on October 14, 2008, and November 18, 2008, before a justice of the Superior Court, sitting without a jury.

In a written decision issued on December 28, 2009, the Superior Court determined that as a result of the stipulation order, Fiduciary and its assigns were the proper record title holders of the property. In reaching this decision, the trial justice found that the stipulation order adequately adjudicated the issue of whether Bankers received notice of the tax sale in the notice case. Therefore, the trial justice found that Medeiros was barred from challenging the stipulation order based on Bankers's lack of notice because “any claims regarding Bankers Trust's lack of notice [was] precluded by the doctrine of res judicata.” Additionally, she found that Medeiros failed to protect his interest in the property—and his right to receive notice of the stipulation—by defaulting in both the tax lien case and the notice case. Because of his “willful failure to answer, or appear, in two separate proceedings,” the trial justice therefore found no violation of Medeiros's due process rights.

Final judgment entered on January 20, 2010. Medeiros filed a timely notice of appeal on February 2, 2010. On appeal, Medeiros asserts that this Court's analysis should begin with the Superior Court's January 2002 judgment in the notice case, in which the lower court declared the tax sale void, vacated the final decree entered in the tax lien case, and vested the property back into Medeiros subject to Bankers's mortgage. Medeiros argues that the Superior Court decision on December 28, 2009, in the instant action should be reversed because he received no notice of Fiduciary's motion to vacate the January 2002 judgment, the order granting that motion, or the 2005 stipulation order, in violation of his due process rights.

Furthermore, in regard to his prior default in the notice case, Medeiros contends that the stipulation order was a “new or additional claim[ ] for relief” in the notice case. Thus, in his view, Rule 5(a) of the Superior Court Rules of Civil Procedure also entitled him to receive notice of (1) Fiduciary's motion to vacate the January 2002 judgment in the notice case, (2) the court's order granting that motion, and (3) the subsequent stipulation order.⁹

In response, Fiduciary argues that because Medeiros defaulted in the tax lien case, the issue presented in the notice case initiated by Bankers was limited to...