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Fryzel v. Mortgage Electronic Registration Systems Inc.

United States Court of Appeals, First Circuit

June 14, 2013

RUDOLF F. FRYZEL AND RUTH E. FRYZEL, Plaintiffs, Appellees,
v.
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., ET AL., Defendants, Appellants. IN RE: CERTAIN DEFENDANTS TO THE IN RE: MORTGAGE FORECLOSURE CASES, ET AL., Petitioners. THOMAS D. GAMMINO, Plaintiff, Appellee,
v.
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., ET AL., Defendants, Appellants. JULIO FONSECA, ET AL., Plaintiffs, Appellees,
v.
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., ET AL., Defendants, Appellants. FRITZ BARIONNETTE, ET AL., Plaintiffs, Appellees,
v.
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., ET AL., Defendants, Appellants. COLLETTE P. FITZPATRICK, Plaintiff, Appellee,
v.
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., ET AL., Defendants, Appellants.

APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND [Hon. John J. McConnell, Jr., U.S. District Judge]

Maura K. McKelvey, with whom Richard E. Brianksy and Amy B. Hackett were on brief, for appellants.

Mark Ladov, with whom Matthew Menendez, Steven Fischbach, John Rao, and Geoff Walsh were on brief, for amici curiae Rhode Island Legal Services, Inc., Brennan Center for Justice at New York University School of Law, National Consumer Law Center, Inc., Direct Action for Rights and Equality, and Housing Network of Rhode Island.

Corey J. Allard, with whom George Babcock was on brief, for appellees.

Before Howard, Circuit Judge, Souter, [*] Associate Justice, and Lipez, Circuit Judge.

SOUTER, Associate Justice.

The plaintiff-appellees in this consolidated interlocutory appeal are defaulted mortgagors of Rhode Island real estate. They have brought suit to prevent foreclosure or eviction, on the shared ground that ostensible assignments of their mortgagees' legal titles are invalid, leaving the assignees without the right to foreclose. In most cases, the assigning mortgagee was the Mortgage Electronic Registration System, Inc. (MERS).[1] The defendant-appellants are the corresponding mortgagees, their agents or assignees ("mortgagees"), who apparently hold Rhode Island mortgagees' legal titles and assert the right to foreclose for default on mortgage terms. By appeal and mandamus petition, they claim error in the district court's failure to provide notice and hearing before issuing successive orders imposing a stay in the nature of a preliminary injunction against foreclosure and possessory proceedings, and in its failure to set limits of time and cost when referring the mortgagors' cases challenging foreclosure to a Special Master for mandatory mediation. We remand with instructions to hold a prompt hearing with reasonable notice on the question whether the injunction should be continued, in belated compliance with Federal Rule of Civil Procedure 65(a)(1), and to establish specific limits of time and expense if the reference for mediation is to remain in effect.

I

Although at the time of briefing there were nearly 700 cases in the district court subject to the challenged orders (not all of them subject to this appeal), they began in the state courts with a trickle, from which some of them were removed to federal court based on diversity jurisdiction. In 2011, a magistrate recommended dismissal in two of those cases on the ground that the mortgagors had no standing to challenge the assignments of the original mortgagees' interests, see J.A. 226-27, 264-65, but the district court has not to this day acted on the recommendations, [2]and instead has established a Foreclosure Docket for managing the cases in what has become a deluge of those removed to the district court or originally brought there in the aftermath of the court's orders staying the foreclosures and appointing the Special Master to mediate the claims.

The orders imposing a stay did not in terms forbid non-judicial foreclosure by mortgagees acting under a power of sale mortgage contract as authorized by Rhode Island law, but when one of them took that action in a case on the docket, the court issued an order in that case providing that the stay "prevents defendants from foreclosing on properties that are subject of a pending complaint in the In Re: Mortgage Foreclosure Master Docket." J.A. 367. When a new docket-wide order was then issued continuing the "stay" in effect in all cases, it was clear from the sequence of the orders that the stay was meant to bar power of sale foreclosures otherwise requiring no prior judicial approval, or any other foreclosure or possessory action for that matter. This consolidated appeal by some of the defendant mortgagees followed, objecting to that order and to the failure of the mandatory mediation order to set limits of time and expense.

II

The first contested issue here is over the jurisdiction of this court to review what the district court calls the stay order, although on the face of the record jurisdiction seems obvious. 28 U.S.C. § 1292(a)(1) provides a court of appeals with authority to entertain appeals from "interlocutory orders of the district courts . . . granting . . . or refusing to dissolve . . . injunctions, " and the sequence of orders already quoted shows that the "stay" "prevents [mortgagees] from foreclosing."

In attempting to support their contrary position that the stay is not an injunction, the mortgagors rely repeatedly on the district court's choice of a word in calling the order a "stay, " which they describe as one that merely "halts and delays" foreclosure or eviction by process outside this litigation. Appellee's Br. 4. But these are not substantial arguments. The nature of an order is the product of its operative terms and effect, not its vocabulary and label. See Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 287-88 (1988); Manchester Knitted Fashions, Inc. v. Amalgamated Cotton Garment & Allied Indus. Fund, 967 F.2d 688, 690 (1st Cir. 1992). As against a stay, which is "simply related to court procedures, " an injunction, by whatever name, directs or forbids a party to act, with serious consequences, enforceable by the contempt power, and it grants some or all of the relief requested by the favored party. Bogosian v. Woloohojian Realty Corp., 923 F.2d 898, 901, 903-04 (1st Cir. 1991). The order here can only be read as forbidding mortgagees to foreclose even in the exercise of a statutorily sanctioned power of sale that requires no authorizing court order. To enforce its ban on mortgagees' obtaining a remedy agreed upon (or provided by state law) for the purpose of securing mortgage indebtedness, the court has explicitly threatened sanctions for violations, and in halting foreclosure for whatever the duration of the mediation process may turn out to be, the order grants some of what the plaintiff mortgagors seek. Its character as an injunction is unmistakable, and obviously it is no answer to say that it merely halts or delays the course of action a mortgagee means to take; this is the sort of thing that a preliminary injunction under Fed.R.Civ.P. 65(a) does.

The only remaining question is timeliness of the appeal under Federal Rule of Appellate Procedure 4(a), requiring a notice of appeal to be filed within 30 days of an order such as this. Although the court issued two generally applicable stay orders whose 30 day appeal periods expired long before the mortgagees' notice of appeal was filed, the notice was filed within the allowable period after issuance of the new general order that followed the definition of "stay" to mean "injunction." From the issuance of the new general order in which "stay" clearly ...


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