Reformation of Mortgage to Correct Mutual Mistake: Aligning Security Interest with True Borrower Intent

Introduction

In Deutsche Bank National Trust Company, as Trustee for the Registered Holders of CBA Commercial Assets, Small Balance Commercial Mortgage Pass-Through Certificates, Series 2006-1 v. Alebia, Inc., No. 2023-44-Appeal (R.I. April 17, 2025), the Rhode Island Supreme Court confronted a dispute over a defective mortgage executed by individual officers rather than by their corporation. The plaintiff, Deutsche Bank (successor in interest to Equity One Mortgage Company), sought to reform the mortgage so that it would correctly identify Alebia, Inc. as the mortgagor and secure the note obligation. The defendant, Alebia, Inc., argued that reformation was improper and that parallel reformation of the note was required. Key issues included the standards for admitting business records and authenticating a photocopy of the promissory note, the sufficiency of evidence to establish mutual mistake, and the propriety of holding a bench “trial” by remote hearings without the defendant’s consent.

Summary of the Judgment

The Supreme Court affirmed the Superior Court’s entry of a Rule 54(b) partial final judgment reforming the mortgage. Chief Justice Suttell, writing for a unanimous bench, held:

The evidence supported the finding that both parties intended to secure the promissory note by a first-priority mortgage on the property, but a clerical error had caused the mortgage to be signed only by the officers in their individual capacities.
Under the doctrine of mutual mistake, equitable reformation was appropriate to correct the mortgage without voiding the security interest or requiring parallel amendment of the note.
The hearing justice did not abuse his discretion in admitting the testimony of a senior loan analyst and a chain-of-custody witness to authenticate the photocopy of the note.
Although bench trials by remote means required the consent of all parties under Superior Court Administrative Order No. 2021-05, the remote hearings did not deprive the defendant of due process, and any procedural error was harmless.

Analysis

Precedents Cited

The Court relied on and distinguished several well-established authorities:

Evidence and Authentication: Estrella v. Janney Montgomery Scott LLC, 296 A.3d 97 (R.I. 2023) and Cappuccilli v. Carcieri, 174 A.3d 722 (R.I. 2017) confirmed that evidentiary rulings—including foundation for business records and authentication—are reviewed for abuse of discretion. O’Connor v. Newport Hospital, 111 A.3d 317 (R.I. 2015) held that document authentication is a low hurdle under Rule 901 of the Rhode Island Rules of Evidence.
Findings of Fact vs. Questions of Law: Luis v. Gaugler, 185 A.3d 497 (R.I. 2018) and Town Houses at Bonnet Shores Condominium Ass’n v. Langlois, 45 A.3d 577 (R.I. 2012) reaffirmed that factual findings by a justice sitting without a jury are afforded great deference, while legal conclusions are reviewed de novo.
Mortgage and Debt Separation: Bucci v. Lehman Brothers Bank, FSB, 68 A.3d 1069 (R.I. 2013) (quoting Culhane v. Aurora Loan Services, 708 F.3d 282 (1st Cir. 2013)) recognized that legal and beneficial interests in a mortgage may be separated, and a mortgage may secure a note held by another party without rendering the security void.

Legal Reasoning

The Court’s reasoning can be distilled into three core components:

Authentication of the Note: A senior loan analyst’s testimony about the business-record files of successive servicers (PHH and Ocwen) and a closing-attorney’s recollection of the original signing combined with a paralegal’s chain-of-custody testimony satisfied Rule 901’s low threshold. Chain-of-custody evidence goes to weight, not admissibility. The hearing justice did not abuse his discretion in admitting a photocopy of the note.
Mutual Mistake and Reformation: The record contained uniform references to the individual officers as “borrowers” and to the property as the intended “collateral.” The absence of a corporate mortgagor on the mortgage was a mutual mistake. Equity demands correction when the parties’ true intent is clear. Reformation of the mortgage alone sufficed because a mortgage is merely the security device for the underlying debt, and the security interest remained enforceable.
Remote Bench Hearings: Administrative orders allowed many remote proceedings but required party consent for remote bench trials. Here, counsel objected, yet the hearings proceeded remotely. The Court concluded any error was harmless—public access was maintained, the plaintiff offered to produce the original note in chambers, and the defendant faced no prejudice.

Impact

This decision clarifies and establishes several guiding principles for future commercial-mortgage litigation:

Courts will readily reform instruments to reflect parties’ unambiguous intent when clerical errors produce unenforceable security interests.
Reformation of a mortgage does not require parallel amendment of the note so long as the security device and debt instrument remain analytically distinct.
Authentication of historic loan documents through successive servicer testimony and chain-of-custody evidence is sufficient under Rhode Island law.
Procedures for remote bench trials demand strict compliance with administrative orders concerning party consent; parties should remain vigilant about preserving their procedural rights.

Complex Concepts Simplified

Mutual Mistake: When both parties to a contract share a wrong belief about a basic fact—here, who was actually mortgaging the property—equity allows the court to reform the document so it matches the parties’ original intent.
Reformation: An equitable remedy permitting a court to rewrite a contract or instrument that mistakenly fails to reflect the true agreement of the parties.
Authentication (Rule 901): The proponent must produce enough evidence—often chain-of-custody or witness testimony—to support a finding that the document is what it claims to be. This is not a demanding standard.
Business Records Exception: Hearsay within a business record may be admitted if it was prepared in the regular course of business, by a person with knowledge, and it was the regular practice to make the record.
Remote Bench Trial Procedures: Under Superior Court Administrative Order No. 2021-05, bench trials may be held remotely only with the consent of all parties. Failure to secure consent may constitute procedural error but is subject to harmless-error analysis.

Conclusion

Deutsche Bank v. Alebia establishes a clear precedent that Rhode Island courts will correct defective security instruments to honor the parties’ true bargain. By reaffirming the low bar for document authentication, endorsing equitable reformation under mutual mistake without necessitating parallel note amendment, and examining the proper framework for remote bench proceedings, the Court has provided practitioners with concrete guidance for structuring evidence, drafting loan documents, and safeguarding procedural rights in future mortgage-reformation disputes.