Bank of America, N.A. v. James A. Cloutier , 2013 Me. LEXIS 17 ( 2013 )


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  • MAINE SUPREME JUDICIAL COURT                                                          Reporter of Decisions
    Decision: 
    2013 ME 17
    Docket:   Yor-12-361
    Argued:   January 16, 2013
    Decided:  February 7, 2013
    Panel:         ALEXANDER, LEVY, SILVER, GORMAN, and JABAR, JJ.
    BANK OF AMERICA, N.A.
    v.
    JAMES A. CLOUTIER
    ALEXANDER, J.
    [¶1] The Superior Court (York County, Fritzsche, J.), acting pursuant to
    M.R. App. P. 24(a), has reported a question of law to us: “What is the proof that is
    required for a party to prove ‘ownership’ of the mortgage note and mortgage for
    purposes of foreclosure, as required by the decision of the Law Court in Chase
    Home Finance, LLC v. Higgins, 
    2009 ME 136
    , ¶ 11, 
    985 A.2d 508
    ?”
    [¶2] The question arose in an action brought by Bank of America, N.A.
    against James A. Cloutier1 for foreclosure on a residential mortgage. We accept
    the report and hold that a plaintiff in a foreclosure action must identify the owner
    or economic beneficiary of the note and provide certain other evidence as
    described in 14 M.R.S. § 6321 (2012).
    1
    Mortgage Electronic Registration Systems, Inc. is a named party-in-interest.
    2
    I. CASE HISTORY
    [¶3] The parties stipulated to the following facts for purposes of addressing
    the Superior Court’s reported question.
    [¶4] On January 27, 2006, James A. Cloutier executed a promissory note to
    American Money Centers, Inc. and a mortgage deed of property in Saco, which
    secures the note. The mortgage deed identified Mortgage Electronic Registration
    Systems, Inc. (MERS) as the mortgagee of record. MERS served as the nominee
    for American Money Centers and its successors and assigns. MERS subsequently
    assigned the mortgage to BAC Home Loans Servicing, LP.
    [¶5]   The note now reflects a series of endorsements beginning with
    American Money Centers and ending in a blank endorsement. American Money
    Centers endorsed the note to the order of Countrywide Bank, N.A., which endorsed
    it to the order of Countrywide Home Loans, Inc., which then endorsed it in blank.
    In March of 2006, the Federal Home Loan Corporation (Freddie Mac) purchased
    the note from Countywide Home Loans, which was the owner of the note at the
    time. Freddie Mac has not sold the note nor has it transferred its beneficial interest
    in the note. At present, Bank of America possesses the note, which still bears a
    blank endorsement.2
    2
    BAC Home Loans Servicing, LP took possession of the note and then merged into Bank of America,
    N.A. Bank of America was substituted as the plaintiff in this case after the merger.
    3
    [¶6] Bank of America services Cloutier’s loan on behalf of Freddie Mac.
    Bank of America, whose actions are governed by a contract between it and Freddie
    Mac, has pursued this foreclosure action in its capacity as servicer.3
    [¶7] Cloutier failed to make the payment due on January 1, 2010, and has
    not made any subsequent payments.                   Bank of America filed a complaint for
    foreclosure in the Superior Court in August of 2010. After mediation, Bank of
    America moved for a summary judgment. Before acting on the motion, the court
    reported the question to us pursuant to 4 M.R.S. § 57 (2012) and M.R. App. P.
    24(a).
    II. LEGAL ANALYSIS
    A.       Reported Question
    [¶8] When a trial court reports a question to us pursuant to M.R. App. P.
    24(a), we conduct an independent examination to decide if answering the question
    is consistent with our basic function as an appellate court, or would improperly
    place us in the role of an advisory board. Baker v. Farrand, 
    2011 ME 91
    , ¶ 7,
    
    26 A.3d 806
    . In this examination, we consider whether (1) the question reported is
    of sufficient importance and doubt to outweigh the policy against piecemeal
    3
    Servicers are responsible for the day-to-day management of mortgage loans on behalf of other
    entities. Adam J. Levitin & Tara Twomey, Mortgage Servicing, 28 Yale J. on Reg. 1, 23 (2011). For
    example, servicers send bills, collect payments, and keep track of balances. 
    Id. We do
    not attribute legal
    significance to the term “servicer.” Our analysis addresses whether an entity is empowered to bring a
    foreclosure action as a “mortgagee or any person claiming under the mortgagee” pursuant to 14 M.R.S.
    § 6321 (2012).
    4
    litigation; (2) the question might not have to be decided because of other possible
    dispositions; and (3) a decision on the issue would, in at least one alternative,
    dispose of the action. 
    Id. Rule 24
    is an exception to the final judgment rule that
    should be used sparingly. Liberty Ins. Underwriters, Inc. v. Estate of Faulkner,
    
    2008 ME 149
    , ¶ 5, 
    957 A.2d 94
    .
    [¶9] Applying these standards, the Superior Court determined that reporting
    this question was appropriate. The Superior Court noted that the reported question
    has been presented to multiple trial courts with different results, which caused it to
    believe that the question was of sufficient doubt and importance to seek our
    guidance. Further, given the plaintiff’s pending motion for summary judgment,
    and the apparent absence of disputed facts in the record, it did not appear that
    resolution of the question could be avoided through other dispositions. Finally, the
    court stated that our answer, in at least one alternative, would finally dispose of the
    case.
    [¶10] Our independent review of the record leads us to concur with the
    Superior Court’s conclusions.      See Baker, 
    2011 ME 91
    , ¶ 7, 
    26 A.3d 806
    .
    Accordingly, we accept the reported question. See 
    id. ¶ 14.
                                                                                                         5
    B.       Proof of Ownership
    [¶11]   The Superior Court’s question arises from a single sentence in
    14 M.R.S. § 6321,4 the foreclosure by civil action statute:
    The mortgagee shall certify proof of ownership of the mortgage note
    and produce evidence of the mortgage note, mortgage and all
    assignments and endorsements of the mortgage note and mortgage.
    The Legislature added this sentence to the foreclosure by civil action statute as part
    of comprehensive foreclosure reform in 2009.                   See P.L. 2009, ch. 402, § 17
    (effective June 15, 2009). Section 6321, which is lengthy, is reprinted as an
    attachment following this opinion.
    [¶12] We interpret the meaning of a statute de novo by analyzing its plain
    language in the context of the whole statutory scheme. Fuhrmann v. Staples the
    Office Superstore E., Inc., 
    2012 ME 135
    , ¶ 23, --- A.3d ---. If the statute’s
    meaning is unambiguous, and not illogical or absurd, that meaning controls, and
    we do not look beyond its words. Russell v. ExpressJet Airlines, Inc., 
    2011 ME 123
    , ¶ 16, 
    32 A.3d 1030
    . Only when a statute’s meaning is ambiguous do we
    consider other evidence of legislative intent. Michalowski v. Bd. of Licensure in
    Med., 
    2012 ME 134
    , ¶ 24 n.6, --- A.3d ---.
    4
    The Superior Court referenced Chase Home Finance LLC v. Higgins, 
    2009 ME 136
    , ¶ 11, 
    985 A.2d 508
    , in its question. In Higgins, we described this section as requiring a “mortgage holder” to submit
    “properly presented proof of ownership of the mortgage note and the mortgage, including all assignments
    and endorsements of the note and the mortgage.” 
    Id. 6 [¶13]
      The plain language at issue creates two requirements: that the
    mortgagee “certify proof of ownership of the mortgage note” and that the
    mortgagee “produce evidence” of various documents and transactions. 14 M.R.S.
    § 6321. Our cases citing this sentence have applied only the second requirement
    related to evidence of ownership. In Wells Fargo Bank, NA v. deBree, we vacated
    a summary judgment in favor of a bank when the bank “failed to supply evidence
    that it owns the deBrees’ note and mortgage.” 
    2012 ME 34
    , ¶¶ 7-11, 
    38 A.3d 1257
    . Similarly, in HSBC Bank USA, N.A. v. Gabay, we vacated a summary
    judgment when the plaintiff failed to cite evidence satisfying the requirement in its
    statement of material facts. 
    2011 ME 101
    , ¶¶ 1, 12-18, 
    28 A.3d 1158
    . In addition,
    we acknowledged, but did not apply, this sentence in Mortgage Electronic
    Registration Systems, Inc. v. Saunders, 
    2010 ME 79
    , ¶ 12 n.4, 
    2 A.3d 289
    .
    [¶14] The requirement in section 6321, paragraph 3 that a plaintiff “certify
    proof of ownership of the mortgage note” is the basis for Cloutier’s contention that
    only the economic beneficiary of a mortgage note may sue for foreclosure.
    Cloutier argues that only an “owner” and not a “holder” or other entity entitled to
    enforce the note may bring a foreclosure action. Title 11 M.R.S. § 3-1301 (2012)
    7
    lists who is entitled to enforce an instrument pursuant to Article 3-A of Maine’s
    version of the Uniform Commercial Code (UCC)).5
    [¶15] Additionally, the first sentence in section 6321 clarifies that it is
    consistent with section 3-1301 of the UCC. It provides: “After breach of condition
    in a mortgage of first priority, the mortgagee or any person claiming under the
    mortgagee may proceed for the purpose of foreclosure . . . .” 14 M.R.S. § 6321
    (emphasis added). This sentence, in the first paragraph, suggests that the “certify
    proof of ownership of the mortgage note” requirement, in the third paragraph, does
    not impose a standing requirement, because standing to bring a foreclosure action
    has been addressed in the first paragraph. The “proof of ownership” language
    appears in the middle of a long paragraph concerning procedural requirements and
    adjoins another phrase concerning evidentiary requirements. As between the first
    5
    Title 11 M.R.S. § 3-1301 (2012) provides:
    “Person entitled to enforce” an instrument means:
    (1). The holder of the instrument;
    (2). A nonholder in possession of the instrument who has the rights of a holder; or
    (3). A person not in possession of the instrument who is entitled to enforce the
    instrument pursuant to section 3-1309 or 3-1418, subsection (4).
    A person may be a person entitled to enforce the instrument even though the person is
    not the owner of the instrument or is in wrongful possession of the instrument.
    An “instrument” can include a “note.” See 11 M.R.S. § 3-1104(5) (2012).
    8
    and third paragraphs, the first controls standing and the third addresses procedural
    prerequisites that an entity with standing must satisfy to maintain an action.
    [¶16] The requirement that a plaintiff “certify proof of ownership of the
    mortgage note” does require that a plaintiff do more than provide the evidence
    described in the second half of the sentence. 14 M.R.S. § 6321. The statute does
    not define “ownership.” In this context, we interpret “certify proof of ownership”
    to require the plaintiff to identify the owner or economic beneficiary of the note
    and, if the plaintiff is not the owner, to indicate the basis for the plaintiff’s
    authority to enforce the note pursuant to Article 3-A of the UCC. See 11 M.R.S.
    § 3-1301. We have previously connected a party’s right to bring an action for
    foreclosure to its right to enforce pursuant to 11 M.R.S. § 3-1301. See Saunders,
    
    2010 ME 79
    , ¶ 12, 
    2 A.3d 289
    ; see also JPMorgan Chase Bank v. Harp, 
    2011 ME 5
    , ¶ 9 n.3, 
    10 A.3d 718
    .
    [¶17] Cloutier argues that although Article 3-A controls the right to enforce
    a promissory note, section 6321 further limits Article 3-A.         If we could not
    harmonize section 6321 and Article 3-A, section 6321 would govern because it
    deals specifically with the subject of foreclosure. Michalowski, 
    2012 ME 134
    ,
    ¶ 12, --- A.3d ---. The two statutes can be read in harmony, however, because, as
    discussed above, paragraph three of section 6321 does not impose a standing
    9
    requirement. In contrast, paragraph one of section 6321 can be read consistently
    with Article 3-A to specifically define who may enforce a promissory note.
    [¶18] The parties do not dispute that Bank of America is a holder entitled to
    enforce the note. Bank of America currently has possession of the note, which is
    endorsed in blank. The definition of “holder” includes “[t]he person in possession
    of a negotiable instrument that is payable . . . to bearer.”               11 M.R.S.
    § 1-1201(21)(a) (2012).      A holder of an instrument is entitled to enforce it.
    11 M.R.S. § 3-1301(1). The statute expressly notes, “A person may be a person
    entitled to enforce the instrument even though the person is not the owner of the
    instrument . . . .” 
    Id. § 3-1301.
    [¶19] Although the plain language of the statute unambiguously produces
    this result, we are mindful of the legislative history of this provision. It is apparent
    from the committee file that one of the problems brought to the Legislature’s
    attention as it drafted the bill was the inability of some foreclosure defendants to
    make contact with an entity with authority to settle the case when the plaintiff is
    merely a servicer working on behalf of another entity. Nevertheless, it does not
    appear that the specific provision at issue in this case was aimed at remedying that
    problem.
    [¶20] Some scholarly literature describes how the use of loan servicers
    increased the difficulty for mortgagors in distress at the time the Legislature
    10
    enacted its amendments.             See Kathleen C. Engel & Patricia A. McCoy, The
    Subprime Virus: Reckless Credit, Regulatory Failure, and Next Steps 84-85
    (2011).      For example, complicated financial incentives may have pressured
    servicers to avoid loan modifications and push for foreclosure.6 See 
    id. at 130-32.
    Servicers sometimes did not have the skill to negotiate modification terms or the
    infrastructure to handle the volume of foreclosures. 
    Id. at 130-31.
    These problems
    may have motivated the Legislature when it sought to improve the ability of
    foreclosure defendants to directly communicate with an entity with authority to
    negotiate a settlement.
    [¶21] However, the plain language of the clause requiring the mortgagee to
    “certify proof of ownership of the mortgage note” does not link these policy goals
    to a rule that only the economic beneficiary of a mortgage note may sue for
    foreclosure. See 14 M.R.S. § 6321. Those goals can be satisfied if the owner or
    economic beneficiary of the note is identified. The plain language of the statute
    best supports the conclusion that the phrase “certify proof of ownership of the
    mortgage note” requires only that a foreclosure plaintiff identify the owner or
    6
    The amici briefs extensively discuss these abuses and debate whether or not Freddie Mac’s servicers
    have appropriate incentives to avoid foreclosures. We appreciate the contributions of the amici curiae,
    but these arguments are largely irrelevant to the narrow question of statutory interpretation before us.
    Even if we concluded that that statutory language was ambiguous, we would only consider the statute’s
    underlying policy to the extent that the policy illuminated the Legislature’s intent. See Fuhrmann v.
    Staples the Office Superstore E., Inc., 
    2012 ME 135
    , ¶ 31, --- A.3d. ---. Thus, the only alleged abuses that
    could be relevant to our analysis are those that occurred in the industry generally and when the statute was
    enacted, not within Freddie Mac specifically or when the statute is being applied.
    11
    economic beneficiary and, if it is not itself the owner, prove that it has power to
    enforce the note. See 
    id. This unambiguous
    meaning, which is not illogical or
    absurd, controls, and we do not look beyond the statute’s words. See ExpressJet
    Airlines, Inc., 
    2011 ME 123
    , ¶ 16, 
    32 A.3d 1030
    .
    The entry is:
    Report accepted.        Remanded for        further
    proceedings consistent with this opinion.
    On the briefs:
    Elizabeth Papez, Esq., Winston & Strawn LLP, Washington, District of
    Columbia; and Corin R. Swift, Esq., and Jeff Goldman, Esq., Bingham
    McCutchen LLP, Portland, for Bank of America, N.A.
    L. Scott Gould, Esq., Cape Elizabeth; Thomas A. Cox, Esq., Portland; and
    Andrea Bopp Stark, Esq., Molleur Law Office, Biddeford, for James A.
    Cloutier
    Catherine R. Connors, Esq., John A. Aromando, Esq., and Michelle Bush, Esq.,
    Pierce Atwood LLP, Portland, for amicus curiae Federal Home Loan Mortgage
    Corporation
    Peter L. Murray, Esq., Murray, Plumb & Murray, Portland, for amici curiae
    Legal Services Center of Harvard Law School and National Consumer Law
    Center
    At oral argument:
    Elizabeth Papez, Esq., for Bank of America, N.A.
    Thomas A. Cox, Esq., for James A. Cloutier
    York County Superior Court docket number RE-2010-196
    FOR CLERK REFERENCE ONLY
    12
    ATTACHMENT
    Title 14 M.R.S. § 6321 (2012) (emphasis added) provides:
    Commencement of foreclosure by civil action
    After breach of condition in a mortgage of first priority, the
    mortgagee or any person claiming under the mortgagee may proceed
    for the purpose of foreclosure by a civil action against all parties in
    interest in either the Superior Court or the District Court in the
    division in which the mortgaged premises or any part of the
    mortgaged premises is located, regardless of the amount of the
    mortgage claim.
    After breach of condition of any mortgage other than one of the
    first priority, the mortgagee or any person claiming under the
    mortgagee may proceed for the purpose of foreclosure by a civil
    action against all parties in interest, except for parties in interest
    having a superior priority to the foreclosing mortgagee, in either the
    Superior Court or the District Court in the division in which the
    mortgaged premises or any part of the mortgaged premises is located.
    Parties in interest having a superior priority may not be joined nor will
    their interests be affected by the proceedings, but the resulting sale
    under section 6323 is of the defendant or mortgagor’s equity of
    redemption only. The plaintiff shall notify the priority parties in
    interest of the action by sending a copy of the complaint to the parties
    in interest by certified mail.
    The foreclosure must be commenced in accordance with the
    Maine Rules of Civil Procedure, and the mortgagee shall within 60
    days of commencing the foreclosure also record a copy of the
    complaint or a clerk’s certificate of the filing of the complaint in each
    registry of deeds in which the mortgage deed is or by law ought to be
    recorded and such a recording thereafter constitutes record notice of
    commencement of foreclosure. The mortgagee shall further certify
    and provide evidence that all steps mandated by law to provide notice
    to the mortgagor pursuant to section 6111 were strictly performed.
    The mortgagee shall certify proof of ownership of the mortgage note
    and produce evidence of the mortgage note, mortgage and all
    assignments and endorsements of the mortgage note and mortgage.
    13
    The complaint must allege with specificity the plaintiff’s claim by
    mortgage on such real estate, describe the mortgaged premises
    intelligibly, including the street address of the mortgaged premises, if
    any, which must be prominently stated on the first page of the
    complaint, state the book and page number of the mortgage, if any,
    state the existence of public utility easements, if any, that were
    recorded subsequent to the mortgage and prior to the commencement
    of the foreclosure proceeding and without mortgagee consent, state
    the amount due on the mortgage, state the condition broken and by
    reason of such breach demand a foreclosure and sale. If a clerk’s
    certificate of the filing of the complaint is presented for recording
    pursuant to this section, the clerk’s certificate must bear the title
    “Clerk’s Certificate of Foreclosure” and prominently state,
    immediately after the title, the street address of the mortgaged
    premises, if any, and the book and page number of the mortgage, if
    any. Service of process on all parties in interest and all proceedings
    must be in accordance with the Maine Rules of Civil Procedure.
    “Parties in interest” includes mortgagors, holders of fee interest,
    mortgagees, lessees pursuant to recorded leases or memoranda
    thereof, lienors and attaching creditors all as reflected by the indices
    in the registry of deeds and the documents referred to therein affecting
    the mortgaged premises, through the time of the recording of the
    complaint or the clerk’s certificate. Failure to join any party in
    interest does not invalidate the action nor any subsequent proceedings
    as to those joined. Failure of the mortgagee to join, as a party in
    interest, the holder of any public utility easement recorded subsequent
    to the mortgage and prior to commencement of foreclosure
    proceedings is deemed consent by the mortgagee to that easement.
    Any other party having a claim to the real estate whose claim is not
    recorded in the registry of deeds as of the time of recording of the
    copy of the complaint or the clerk’s certificate need not be joined in
    the foreclosure action, and any such party has no claim against the
    real estate after completion of the foreclosure sale, except that any
    such party may move to intervene in the action for the purpose of
    being added as a party in interest at any time prior to the entry of
    judgment. Within 10 days of submitting the complaint for filing with
    the court, the mortgagee shall provide a copy of the complaint or of
    the clerk’s certificate as submitted to the court that prominently states,
    immediately after the title, the street address of the mortgaged
    premises, if any, and the book and page number of the mortgage, if
    14
    any, to the municipal tax assessor of the municipality in which the
    property is located and, if the mortgaged premises is manufactured
    housing as defined in Title 10, section 9002, subsection 7, to the
    owner of any land leased by the mortgagor. The failure to provide the
    notice required by this section does not affect the validity of the
    foreclosure sale.
    For purposes of this section, “public utility easements” means
    any easements held by public utilities, as defined in Title 35-A,
    section 102; sewer districts, as defined in Title 38, section 1251; or
    sanitary districts, as formed under Title 38, chapter 11.
    The acceptance, before the expiration of the right of redemption
    and after the commencement of foreclosure proceedings of any
    mortgage of real property, of anything of value to be applied on or to
    the mortgage indebtedness by the mortgagee or any person holding
    under the mortgagee constitutes a waiver of the foreclosure unless an
    agreement to the contrary in writing is signed by the person from
    whom the payment is accepted or unless the bank returns the payment
    to the mortgagor within 10 days of receipt. The receipt of income
    from the mortgaged premises by the mortgagee or the mortgagee’s
    assigns while in possession of the premises does not constitute a
    waiver of the foreclosure proceedings of the mortgage on the
    premises.
    The mortgagee and the mortgagor may enter into an agreement
    to allow the mortgagor to bring the mortgage payments up to date
    with the foreclosure process being stayed as long as the mortgagor
    makes payments according to the agreement. If the mortgagor does
    not make payments according to the agreement, the mortgagee may,
    after notice to the mortgagor, resume the foreclosure process at the
    point at which it was stayed.
    (Footnote omitted.)
    

Document Info

Citation Numbers: 2013 ME 17, 61 A.3d 1242, 2013 WL 453976, 2013 Me. LEXIS 17

Judges: Alexander, Levy, Silver, Gorman, Jabar

Filed Date: 2/7/2013

Precedential Status: Precedential

Modified Date: 10/26/2024

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