(CN) – The Rhode Island Supreme Court rejected a woman’s contract claim against an attorney who helped rescue her house from foreclosure and gave her the option of buying it back.
Justice Flaherty ruled that, because both parties stood to profit from the arrangement, the transaction was not a “loan in disguise.”
The situation started with Deborah Holden bidding on her own house at auction, fearing she would lose it. She didn’t have the money to close the sale, so she called Guido Salvadore, an attorney who had helped her in another case without charging her. She allegedly turned to him because she thought he was a “compassionate man.”
Salvadore paid the closing price of $260,000 and gave Holden a 90-day opportunity to repurchase the house for $310,000. Holden insisted the property had a market value of $379,000.
During the first few months, Salvadore allowed Holden to continue living in the house rent-free. She kept the house on the market, and even turned down an offer of $350,000, saying she wanted to buy the property herself.
Facing pressured to sell, Holden hired an attorney, told Salvadore that she was exercising her buy-back option, and asked him to extend the closing date and reduce the sale price by $10,000.
Salvadore allegedly agreed to both modifications. He said he didn’t hear from Holden or her attorney until he found out that he was being sued for usury, fraud, misrepresentation, and violations of the Mortgage Foreclosure Consultant Regulation Act and the Deceptive Trade Practices Act. Holden also sought a temporary restraining order barring Salvadore from evicting her or selling the house.
The trial court found that the transaction was never meant to be a loan, citing the fact that Holden had hired her own attorney and had filed for bankruptcy in September 2006 without listing Salvadore as a creditor or the house as an asset.
The state high court agreed.
“All Holden relinquished to Salvadore was her right, as the highest bidder, to purchase the property and take the title in her own name,” Justice Flaherty wrote. “In exchange, Holden secured the option to buy the property from Salvadore, or in the alternative, an opportunity to make a profit from a third-party sale.”
The justices concluded: “[W]e see no evidence of an actual debt or a transfer of property for inadequate consideration that would have served as security for a debt.”
The high court also tossed Holden’s claim that Salvadore had acted as an improper mortgage consultant.