Heidi Pushard v. Bank of America N.A. , 175 A.3d 103 ( 2017 )

MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2017 ME 230 Docket: BCD-16-247
Argued: February 7, 2017
Decided: December 12, 2017
Panel: ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.
HEIDI M. PUSHARD et al.
v.
BANK OF AMERICA, N.A.
HUMPHREY, J.
[¶1] Heidi M. Pushard and Jeffrey A. Pushard appeal from summary
judgments entered in the Business and Consumer Docket (Horton, J.) in favor
of Bank of America, N.A. (the Bank), on the Pushards’ claims against the Bank
for declaratory and injunctive relief, slander of title, and damages pursuant to
33 M.R.S. § 551 (2016). We do not disturb the judgments on the Pushards’
claims for slander of title, damages pursuant to section 551, and injunctive
relief. We vacate the judgment on the Pushards’ claim for declaratory relief
and remand the case for entry of summary judgment in the Pushards’ favor on
that claim.
2
I. BACKGROUND
[¶2] In October 2011, the Bank initiated a foreclosure action against the
Pushards in the Superior Court (Androscoggin County, MG Kennedy, J.). In its
amended complaint, filed in May 2013, the Bank made the following
allegations:
• In December 2006, the Pushards executed a promissory note in favor of
Countrywide Home Loans, Inc., (Countrywide) in the amount of
$145,000.
• As security for the note, the Pushards executed a mortgage on their
property in Wales in favor of Mortgage Electronic Registration Systems,
Inc. (MERS), “as nominee for” Countrywide.
• The Pushards failed to make the monthly mortgage payment due on
April 1, 2008, and have failed to make all subsequent monthly mortgage
payments.
• In 2008, MERS assigned the mortgage to Countrywide. In 2011,
Countrywide assigned the mortgage to the Bank.
• The Bank became the holder of the promissory note.
• In May 2011, the Bank sent the Pushards notice of their default and of
their right to cure the default “in conformity with Maine law.” The
Pushards received the notice in June 2011.
• The amount due “[a]s of September 6, 2011,” was $191,717.91,
including the “principal balance” of $142,882.25, an “escrow balance,”
interest, fees, and late charges.
3
[¶3] The Bank sought judicial foreclosure of the Pushards’ mortgage.1
Among other documents attached to its complaint, the Bank included copies of
the note and the mortgage. Included in the note was a provision stating:
If [the Pushards are] in default, the Note Holder may send [them]
a written notice telling [them] that if [they] do not pay the
overdue amount by a certain date, the Note Holder may require
[them] to pay immediately the full amount of Principal which has
not been paid and all the interest that [they] owe on that amount.
The mortgage contained a provision stating that the lender
may require that [the Pushards] pay immediately the entire
amount then remaining unpaid under the Note and under this
Security Instrument . . . if all of the following conditions are met:
(a) [The Pushards] fail to keep any promise or agreement
made in this Security Instrument, including the promises to
pay when due the Sums Secured;
(b) Lender sends to [the Pushards] . . . a notice that [meets
various requirements]; . . . and
(c) [The Pushards] do not correct the default stated in the
notice from Lender by the date stated in that notice.
[¶4] After a trial on the Bank’s foreclosure complaint, the court entered
a judgment in the Pushards’ favor in October 2014. The court determined that
1 With regard to the Bank’s standing, the court concluded that Countrywide’s (and, therefore,
the Bank’s) ownership interest in the mortgage was not compromised by the assignment from
MERS to Countrywide. The court determined that that assignment was superfluous because
“Countrywide was the lender named on the note[] and in the mortgage” and “was thereby the
mortgagee from the outset.” It therefore distinguished the case from Bank of Am., N.A. v. Greenleaf,
2014 ME 89, ¶¶ 13-16, 96 A.3d 700, which we decided after the trial but before the court issued the
judgment.
4
the Bank had failed to meet its burden to prove three of the eight elements of
a foreclosure action: (1) a breach of a condition of the mortgage; (2) the
amount due; and (3) that the notice of default that it sent to the Pushards
complied with statutory requirements.2 See Bank of Am., N.A. v. Greenleaf,
2014 ME 89, ¶ 18, 96 A.3d 700 (“A plaintiff seeking a foreclosure judgment
must comply strictly with all steps required by statute.”) (quotation marks
omitted). Neither the Bank nor the Pushards appealed from the judgment.
[¶5] Five months later, in March 2015, the Pushards initiated the action
giving rise to this appeal.3 In an amended complaint, based on the judgment
in their favor in the Bank’s foreclosure action and the Bank’s failure to
subsequently discharge the mortgage, the Pushards averred that they owe
nothing on the note and sought a declaration that they are entitled to (1) a
discharge of the mortgage and (2) an order enjoining the Bank from enforcing
the note and mortgage and compelling the Bank to record a release of the
mortgage. They also asserted a claim for slander of title, alleging that the
Bank’s failure to discharge the mortgage prevents them from transferring
clean title to the property or using it as collateral, and a claim for damages
2 The Bank’s notice of default was defective because it did not meet the requirements found in
14 M.R.S. § 6111 (2011).
3 The Pushards filed their initial complaint in the Superior Court (Androscoggin County). The
case was transferred to the Business and Consumer Docket in May 2015.
5
pursuant to 33 M.R.S. § 551.4 The Bank counterclaimed for breach of contract,
unjust enrichment, and a declaratory judgment.
[¶6] The Pushards moved for summary judgment on all of their claims.
See M.R. Civ. P. 56(a). In their statement of material facts, see M.R. Civ. P.
56(h)(2), they described, with reference to supporting evidence, the
procedural history and outcome of the Bank’s foreclosure action. Specifically,
the Pushards asserted that (1) the Bank had “sought the entire amount due on
the note and foreclosure of the mortgage”; (2) the court had entered a
judgment in the Pushards’ favor; and (3) the Bank had not thereafter
discharged the mortgage.
[¶7] In its opposition to the Pushards’ motion, the Bank effectively
admitted all of the Pushards’ stated facts.5 The Bank submitted an opposing
statement of material facts in which it asserted, with references to supporting
evidence, that the Pushards had not made mortgage, tax, or insurance
4 Title 33 M.R.S. § 551 requires a mortgagee to record a valid and complete release of the
mortgage “[w]ithin 60 days after full performance of the conditions of the mortgage,” and provides
that a mortgagee that violates this release provision is “liable to an aggrieved party for
damages . . . .”
5 Although the Bank denied that it had “sought the entire amount due” on the note in the
foreclosure action, because it did not provide a citation to the record in support of this denial, the
fact is deemed admitted. See M.R. Civ. P. 56(h)(2), (4); Halliday v. Henry, 2015 ME 61, ¶ 7, 116 A.3d
1270.
6
payments on the property since 2008. The Bank also filed its own motion for
summary judgment on the Pushards’ claims.6
[¶8] The Pushards filed an opposing statement of material facts in
response to the Bank’s motion for summary judgment. They did not properly
controvert the Bank’s statements that they had not made mortgage, tax, or
insurance payments since 2008. See M.R. Civ. P. 56(h)(2), (4); Halliday v.
Henry, 2015 ME 61, ¶ 7, 116 A.3d 1270.
[¶9] After a hearing, by order dated March 15, 2016, the court
concluded that the Bank was entitled to a judgment as a matter of law on each
of the Pushards’ claims. See M.R. Civ. P. 56(c). The court therefore denied the
Pushards’ motion for summary judgment and granted the Bank’s motion for
summary judgment. After the Bank’s counterclaims were dismissed without
prejudice by consent of the parties , the Pushards filed this timely appeal from
the judgment in the Bank’s favor. 14 M.R.S. § 1851 (2016); M.R. App. P.
2(b)(3) (Tower 2016).7
6
The Bank captioned its motion as a “motion for judgment on the pleadings or, in the
alternative, for summary judgment on plaintiffs’ complaint.” We treat it as a motion for summary
judgments on the Pushards’ claims. See M.R. Civ. P. 12(c) (“If, on a motion for judgment on the
pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion
shall be treated as one for summary judgment and disposed of as provided in [M.R. Civ. P.] 56 . . . .”).
7 This appeal was commenced before September 1, 2017, and therefore the restyled Maine
Rules of Appellate Procedure do not apply. See M.R. App. P. 1 (restyled Rule).
7
II. DISCUSSION
A. Justiciability
[¶10] As a preliminary matter, the Bank argues that the Pushards’
claims are nonjusticiable because resolution of those claims involves
examining the res judicata effect of the judgment in the foreclosure action and
no subsequent foreclosure action has been filed.
[¶11] “Courts can only decide cases before them that involve justiciable
controversies.” Homeward Residential, Inc. v. Gregor, 2015 ME 108, ¶ 16,
122 A.3d 947 (quotation marks omitted). “Justiciability requires a real and
substantial controversy, admitting of specific relief through a judgment of
conclusive character.” Id. (quotation marks omitted). “A justiciable
controversy involves a claim of present and fixed rights based upon an
existing state of facts. Accordingly, rights must be declared upon the existing
state of facts and not upon a state of facts that may or may not arise in the
future.” Madore v. Me. Land Use Regulation Comm’n, 1998 ME 178, ¶ 7,
715 A.2d 157 (quotation marks omitted).
[¶12] The Bank relies on our decisions in recent cases in which the
parties disputed whether a judgment in the mortgagor’s favor would bar a
future foreclosure action based on principles of res judicata, but in each case
8
we concluded that that issue did not present a justiciable controversy because
no second action had yet been filed. See U.S. Bank, N.A. v. Tannenbaum, 2015
ME 141, ¶ 6 n.3, 126 A.3d 734; Wells Fargo Bank, N.A. v. Girouard, 2015 ME
116, ¶ 10, 123 A.3d 216.8 Our holdings in those cases do not determine the
result here because this case comes to us in a different posture. Although, as
in Girouard and Tannenbaum, the Bank has not filed a second foreclosure
action, there does exist a second action—the Pushards’ action against the
Bank—that presents a live controversy. As the trial court recognized, the
Pushards’ claims are “not contingent upon the occurrence of any future
event,” and “even if the Bank were content to do nothing to enforce the loan,
the mortgage remains on record in the registry of deeds as a present
encumbrance on the Pushards’ property.” The Pushards have claimed that
they are entitled to relief based on “the existing state of facts.” Madore, 1998
ME 178, ¶ 7, 715 A.2d 157 (quotation marks omitted). We therefore conclude
that the Pushards’ claims present a justiciable controversy and turn to the
merits of their appeal. See Mass. Delivery Ass’n v. Coakley, 769 F.3d 11, 16
8 These cases are distinguishable from foreclosure cases in which a “court dismisses an action as
a sanction for a plaintiff’s misconduct” and must make clear the future effect of the order dismissing
the case, including whether the judgment bars a subsequent action. See Green Tree Servicing, LLC v.
Cope, 2017 ME 68, ¶ 22, 158 A.3d 931.
9
(1st Cir. 2014); Annable v. Bd. of Envtl. Prot., 507 A.2d 592, 595 (Me. 1986);
Me. Sugar Indus. v. Me. Indus. Bldg. Auth., 264 A.2d 1, 4-5 (Me. 1970).
B. Summary Judgments
[¶13] “We review a [trial court’s] ruling on cross-motions for summary
judgment de novo, considering the properly presented evidence and any
reasonable inferences that may be drawn therefrom in the light most
favorable to the nonprevailing party, in order to determine whether there is a
genuine issue of material fact and whether any party is entitled to a judgment
as a matter of law.” Estate of Frost, 2016 ME 132, ¶ 15, 146 A.3d 118; see M.R.
Civ. P. 56(c). “Cross motions for summary judgment neither alter the basic
Rule 56 standard, nor warrant the grant of summary judgment per se.”
Remmes v. Mark Travel Corp., 2015 ME 63, ¶ 19, 116 A.3d 466 (quotation
marks omitted). “When the material facts are not in dispute, we review
de novo the trial court’s interpretation and application of the relevant statutes
and legal concepts.” Id.
[¶14] The Pushards argue that the court erred by granting the Bank’s
motion for summary judgment and that they are entitled to judgments as a
matter of law on all four of their claims against the Bank. They contend that
any future action by the Bank to recover on the note and the mortgage would
10
be barred by principles of res judicata, the note and mortgage are therefore
unenforceable, and as a result the mortgage must be discharged. We first
address their section 551 and slander-of-title claims and conclude, without
needing to address the res judicata effects of the judgment in the foreclosure
action, that the court correctly entered summary judgments in the Bank’s
favor on those claims. We then turn to the claims for declaratory and
injunctive relief.
1. Section 551
[¶15] Title 33 M.R.S. § 551 provides that a mortgagee is “liable to an
aggrieved party for damages” if the mortgagee fails to record a release of the
mortgage “[w]ithin 60 days after full performance of the conditions of the
mortgage.” The Pushards argue that the judgment in their favor on the Bank’s
foreclosure action means that their “performance under the note and
mortgage was effectively fully performed.” (Emphasis added.) We are not
persuaded.
[¶16] Because the Pushards did not properly controvert the Bank’s
statement that they have failed to make monthly mortgage payments since the
spring of 2008, that fact is deemed admitted. See M.R. Civ. P. 56(h)(2), (4). In
order for the Pushards to be entitled to relief pursuant to section 551,
11
therefore, we would need to hold that they have “full[y] perform[ed] . . . the
conditions of the mortgage,” 33 M.R.S. § 551, even though they have not made
monthly payments as required by the mortgage. This would be an illogical
result. See MaineToday Media, Inc. v. State, 2013 ME 100, ¶ 6, 82 A.3d 104 (“[W]e interpret [statutory] provisions according to their unambiguous
meaning unless the result is illogical or absurd.”) (quotation marks omitted).
The judgment in the Pushards’ favor in the Bank’s foreclosure action
established that the Bank was not entitled to a foreclosure judgment; it did
not establish that the Pushards had fully performed the conditions of the
mortgage. The trial court did not err by granting the Bank’s motion for
summary judgment on the Pushards’ section 551 claim.
2. Slander of Title
[¶17] The Pushards’ argument regarding their claim for slander of title
also warrants little discussion. In order to succeed on that claim, the Pushards
would need to prove that “(1) there was a publication of a slanderous
statement disparaging [their] title; (2) the statement was false; (3) the
statement was made with malice or made with reckless disregard of its falsity;
and (4) the statement caused actual or special damages.” Harvey v. Furrow,
2014 ME 149, ¶ 25, 107 A.3d 604 (quotation marks omitted). The Pushards
12
argue that the “continued publication without a discharge” of the mortgage
“constitutes a false publication of a slanderous statement disparaging [their]
title.” Even if we were to assume that the undischarged mortgage constitutes
a “slanderous statement” that was “false” and that “the statement caused
actual or special damages,” there is nothing in the summary judgment record
that could induce a fact-finder to determine that the Bank failed to discharge
the mortgage with malice or a “reckless disregard” of the “falsity” of the
encumbrance. Id. (quotation marks omitted); see Morgan v. Kooistra, 2008 ME
26, ¶ 34, 941 A.2d 447; Onat v. Penobscot Bay Med. Ctr., 574 A.2d 872, 874-75
(Me. 1990). We therefore do not disturb the court’s entry of a summary
judgment in the Bank’s favor on the Pushards’ slander-of-title claim.
3. Declaratory and Injunctive Relief
[¶18] In order to resolve the question of whether either party is
entitled to a judgment on the Pushards’ claims for declaratory and injunctive
relief, we must examine the effect of the judgment in the Pushards’ favor in
the foreclosure action. The Pushards argue that any further action by the
Bank to recover on the note or mortgage would be barred by principles of res
judicata, that the Bank therefore has no enforceable legal interest in the note
or the property designated as collateral according to the mortgage, and that
13
the Bank therefore must discharge the mortgage to remove the unenforceable
encumbrance on the property.
[¶19] “The doctrine of res judicata . . . is a court-made collection of rules
designed to ensure that the same matter will not be litigated more than once.”
Beegan v. Schmidt, 451 A.2d 642, 643-44 (Me. 1982). The term “res judicata”
encompasses two different legal theories: claim preclusion, or “bar”; and issue
preclusion, or “collateral estoppel.” Id. at 644; see Wilmington Tr. Co. v.
Sullivan-Thorne, 2013 ME 94, ¶ 7, 81 A.3d 371. Claim preclusion “prohibits
relitigation of an entire ‘cause of action’ between the same parties or their
privies, once a valid final judgment has been rendered in an earlier suit on the
same cause of action”; and issue preclusion “prevents the reopening in a
second action of an issue of fact actually litigated and decided in an earlier
case.” Beegan, 451 A.2d at 644; see Macomber v. MacQuinn-Tweedie, 2003 ME
121, ¶ 22, 834 A.2d 131 (“The collateral estoppel prong of res judicata is
focused on factual issues, not claims . . . .”). Because the Pushards’ argument
depends on the legal effect of the Bank’s unsuccessful foreclosure cause of
action, as opposed to particular factual issues litigated in connection with that
claim, the question here involves claim preclusion.
14
[¶20] “Claim preclusion bars the relitigation of claims if: (1) the same
parties or their privies are involved in both actions; (2) a valid final judgment
was entered in the prior action; and (3) the matters presented for decision in
the second action were, or might have been, litigated in the first action.”
Sullivan-Thorne, 2013 ME 94, ¶ 7, 81 A.3d 371 (quotation marks omitted). At
issue in this case is the third element—whether, given the judgment in the
foreclosure action, the Bank could bring an action on the note or mortgage
other than one that would present matters that were, or might have been,
litigated in the foreclosure action.9 See id.
[¶21] To analyze this third element, we “examine whether the same
cause of action was before the court in the prior case.” Id. ¶ 8 (quotation
marks omitted). We define the parameters of the phrase “cause of action” by
applying a “transactional test, which examines the aggregate of connected
operative facts that can be handled together conveniently for purposes of trial
to determine if they were founded upon the same transaction, arose out of the
same nucleus of operative facts, and sought redress for essentially the same
9 The parties present no argument related to the first two elements of claim preclusion. We
conclude that those elements are met here because the judgment in the Bank’s foreclosure action
was a final judgment on the merits and the issue raised by the Pushards’ claims involves the same
parties as the foreclosure action.
15
basic wrong.” Id. ¶ 8 (alteration omitted) (citation omitted) (quotation marks
omitted).
[¶22] As we discussed in Federal National Mortgage Ass’n v. Deschaine,
2017 ME 190, ¶¶ 19-21, 170 A.3d 230, we previously addressed this element
of claim preclusion in the context of a mortgage foreclosure in Johnson v.
Samson Construction Corp., 1997 ME 220, 704 A.2d 866. In Johnson, the trial
court concluded that the mortgagee’s second foreclosure action was
precluded by the dismissal, with prejudice, of an earlier foreclosure action. Id.
¶¶ 3-8. In the earlier foreclosure action, the mortgagee, Johnson, had claimed
he was entitled to the entire amount of the unpaid principal pursuant to the
note’s acceleration clause. Id. ¶¶ 3, 8. We affirmed the judgment, explaining
that
Johnson’s first cause of action . . . demanded payment of the entire
unpaid principal balance. This suit was an action for the
accelerated debt. Once Johnson triggered the acceleration clause
of the note and the entire debt became due, the contract became
indivisible. The obligations to pay each installment merged into
one obligation to pay the entire balance on the note. . . . [The
judgment in the first action] bars the complaint in this action
which alleges precisely what the complaint in the first action
alleged: that Samson defaulted on the note and that Johnson is
entitled to a judgment for the amount due under the note.
Johnson cannot avoid the consequences of his procedural default
in this second lawsuit by attempting to divide a contract which
became indivisible when he accelerated the debt in the first
lawsuit.
16
Id. ¶ 8 (footnote omitted).10
[¶23] Recognizing the ramifications of our holding in Johnson, the Bank
argues that our reasoning in that case does not apply here because it did not
“effectively” trigger the acceleration clauses of the note and mortgage in its
foreclosure action against the Pushards. The Bank relies principally on the
language of 14 M.R.S. § 6111 and the acceleration clauses at issue. We are not
persuaded by these arguments.
[¶24] It is helpful to review the ways in which acceleration clauses
operate before we turn to the Bank’s specific arguments. An acceleration
clause is a “loan-agreement provision that requires the debtor to pay off the
balance sooner than the due date if some specified event occurs, such as
failure to pay an installment or to maintain insurance.”11 Acceleration Clause,
Black’s Law Dictionary (10th ed. 2014). “Automatic” acceleration clauses are
self-executing and render the entire indebtedness due immediately upon
10 In 2008, the Supreme Court of Ohio held, similarly, that res judicata barred a third foreclosure
action after the mortgagee voluntarily dismissed two prior actions, concluding that after
acceleration “each missed payment under the promissory note and mortgage did not give rise to a
new claim . . . .” U.S. Bank Nat’l Ass’n. v. Gullotta, 899 N.E.2d 987, 990 (Ohio 2008).
11 “Acceleration” means, in general terms, the “act or process of quickening or shortening the
duration of something, such as payments or other functional activities.” Acceleration, Black’s Law
Dictionary (10th ed. 2014). More specifically, as applied in the context of a secured loan,
acceleration means the “advancing of a loan agreement’s maturity date so that payment of the
entire debt is due immediately.” Id.
17
some specified default; by contrast, where the acceleration clause is
“optional,” the lender must affirmatively exercise its option to declare the
entire indebtedness due. See Mullins v. IBCS Mining, Inc., No. 10-93-ART, 2011
U.S. Dist. LEXIS 116083, at *6 (E.D. Ky. Oct. 6, 2011) (“The optional
acceleration clause [gave the lender] the right, but not the obligation, to
accelerate payments on the Note.”); Snow v. Wells Fargo Bank, N.A., 156 So. 3d 538, 541 (Fla. Dist. Ct. App. 2015); Found. Prop. Invs., LLC v. CTP, LLC, 186 P.3d
766, 771-72 (Kan. 2008); Note, Acceleration Clauses in Notes and Mortgages,
88 U. Pa. L. Rev. 94, 95-96 (1939-40).
[¶25] An optional acceleration clause is therefore a bargained-for
contract term that gives a lender, upon specified conditions such as the
borrower’s uncured default, the right to demand immediate payment of any
remaining debt under the note and mortgage, including installment payments
that would not otherwise have come due until a later date. An acceleration
clause does not, on its own, entitle the lender to the sums to which it claims it
has a legal right. Instead, it allows the lender to elect to hasten the due date of
sums to which it is otherwise legally entitled.
[¶26] It has long been understood that it is the mortgagee’s choice, or
“election,” whether—and when—to exercise its right under an optional
18
acceleration clause. See, e.g., Me. Sav. Bank v. Chee, 576 A.2d 1358, 1358
(Me. 1990) (referring to “the Bank’s election to exercise the acceleration clause
of a promissory note secured by the mortgage”) (emphasis added); Mitchell v.
Fed. Land Bank, 174 S.W.2d 671, 676 (Ark. 1943) (“The right to accelerate the
indebtedness is exercised by the unilateral act of the creditor . . . .”) (emphasis
added); Note, Acceleration Clauses in Notes and Mortgages at 95-98. In
Johnson, for example, we repeatedly referred to the fact that it was the
mortgagee who had the power to accelerate the debt—he “demanded
payment of the entire unpaid principal balance,” he “triggered the acceleration
clause of the note and the entire debt became due,” and he therefore
“accelerated the debt in the first lawsuit.” 1997 ME 220, ¶ 8, 704 A.2d 866.
[¶27] Bearing these principles in mind, we turn to the Bank’s argument
that it could not have triggered the acceleration clauses of the note and
mortgage in the foreclosure action in this case. Title 14 M.R.S. § 6111
provides that, with respect to residential mortgages, a mortgagee “may not
accelerate maturity of the unpaid balance of the obligation or otherwise
enforce the mortgage because of a default” without first giving the mortgagor
adequate notice of the default as described in the statute. The Bank relies on
this statutory language to contend that because, as the foreclosure court
19
determined, it failed to give adequate notice of the default, it could not
“effectively accelerate” the debt in its foreclosure action.12 Although section
6111 contains the term “accelerate,” we conclude that the Legislature could
not have intended for the statute to carry the meaning that the Bank
propounds. See Farris v. Libby, 141 Me. 362, 365, 44 A.2d 216 (1945) (“[W]e
must assume that the [L]egislature did not intend an absurd result . . . .”).
[¶28] Compare, for example, the case at hand to a hypothetical case
with identical facts except that the mortgagee sent to the mortgagor, and the
mortgagor received, a notice of the default and right to cure that complied
flawlessly with section 6111. After the mortgagor failed to cure the default,
the mortgagee initiated a foreclosure action in which it demanded, pursuant
to an acceleration clause, immediate payment of the entire remaining balance
on the note. After hearing evidence, the foreclosure court concluded that the
mortgagee had not proved its claim and entered a judgment accordingly,
because even though the mortgagee met its burden to prove that it had
provided adequate notice of the default pursuant to section 6111, it failed to
prove the amount due, or that a breach of condition of the mortgage had
12 The Bank does not explain what, according to its theory, would trigger an acceleration clause.
20
occurred, or one or more other substantive elements of proof in a foreclosure
action. See, e.g., Greenleaf, 2014 ME 89, ¶ 18, 96 A.3d 700.
[¶29] Plainly, the mortgagee in our hypothetical case could raise no
argument that section 6111 prevented it from “effectively” triggering the
acceleration clause, because that argument is based entirely on its own
noncompliance with the statute. According to the Bank’s logic, the
hypothetical mortgagee has triggered the acceleration clause, placing in issue
all of the contractual installments as one indivisible debt obligation, and a
subsequent action to recover on the note and mortgage would be precluded
by the judgment in the mortgagor’s favor. In other words, the Bank’s
interpretation would mean that a mortgagee that loses on the merits in its
foreclosure action based—even in part—on an inadequate notice of default
has not triggered the acceleration clause and a subsequent action is not
precluded. But if the same mortgagee had lost on the merits due only to a
failure of proof on one or more other elements of its foreclosure action, a
subsequent action on the note and mortgage is precluded.
[¶30] This would be an absurd result. We cannot hold that the reason
for a mortgagee’s loss on the merits in its foreclosure action is dispositive of
whether the judgment precludes a subsequent action on the same debt. The
21
Bank has provided no reason why the Legislature would have created such a
distinction. We therefore interpret section 6111 as we have since we decided
Chase Home Financial LLC v. Higgins, 2009 ME 136, ¶ 11, 985 A.2d 508, as
setting forth a required element of proof in a foreclosure action by providing
that a mortgagee must give notice in accordance with section 6111 in order to
obtain a foreclosure judgment. See, e.g., Girouard, 2015 ME 116, ¶¶ 7-8 & n.3,
123 A.3d 216. We do not interpret section 6111 as a prohibition on a
mortgagee’s choice to exercise an acceleration clause.
[¶31] The language of the acceleration clauses at issue here does not
alter our conclusion. It is true, as the Bank points out, that the acceleration
provisions at issue here are optional, unlike the automatic acceleration clause
in Johnson. The Bank does not explain why this distinction matters to the
issue presented here, however, nor is any significance evident to us. An
optional acceleration clause that has been exercised is no different—legally—
than a self-executing acceleration clause. The essential inquiry, in examining
whether claim preclusion applies, is what the mortgagee chose to litigate—or
could have litigated—in the first action. See Sullivan-Thorne, 2013 ME 94, ¶ 7,
81 A.3d 371. That the acceleration provisions here are optional does not
change the fact that the Bank could have—and indeed did—exercise its option
22
to put the entire remaining balance in issue in its foreclosure action, instead of
simply demanding payment of past due amounts. When the Bank chose to do
so, “the contract became indivisible” and “[t]he obligations to pay each
installment merged into one obligation to pay the entire balance on the note.”
Johnson, 1997 ME 220, ¶ 8, 704 A.2d 866.13
[¶32] As we recently explained in Deschaine, the “filing of a foreclosure
complaint constitutes a valid exercise of a mortgagee’s acceleration right and
is sufficient to provide notice to the mortgagor.” Deschaine, 2017 ME 190,
¶ 26, 170 A.3d 230 (quotation marks omitted); see also Sullivan-Thorne, 2013
ME 94, ¶ 12 n.4, 81 A.3d 371; Chee, 576 A.2d at 1358 (concluding that “the
allegations of the complaint constituted a sufficient pleading that acceleration
[pursuant to an optional acceleration clause] had occurred”); Strong v.
Stoneham Co-op. Bank, 260 N.E.2d 646, 649 (Mass. 1970) (“[T]he
commencement of an action before the tender of the amount due was one way
in which [the] option [to declare the whole debt due] could be exercised.”)
(quotation marks omitted); see also Nationstar Mortg., LLC v. Nelson, No.
2:14-cv-00507-JDL, 2016 U.S. Dist. LEXIS 136660, at *12-18 (D. Me. Oct. 3,
13 We also do not see the relevance of the note’s provision, highlighted by the Bank, stating that
“[e]ven if, at a time when [the Pushards are] in default, the Note Holder does not require [them] to
pay immediately in full as described above, the Note Holder will still have the right to do so if [they
are] in default at a later time.” (Emphasis added.) This anti-waiver provision does not inform the
inquiry here because the Bank did require payment immediately in full in the foreclosure action.
23
2016) (addressing the issue presented here and concluding that the
mortgagee triggered the acceleration clause when it filed its foreclosure claim
seeking the entire remaining balance due on the note); C.T. Drechsler,
Annotation, What is Essential to Exercise of Option to Accelerate Maturity of Bill
or Note, 5 A.L.R. 2d 968, § 5a (2017) (“The institution of a suit for the whole
debt is, of course, the most solemn form in which the holder can exercise his
option.”). As one court explained,
the filing of suit for foreclosure amounts to exercise of the option
of the mortgagee to declare the whole of the principal sum and
interest secured by the mortgage due and payable. And the filing
of suit to foreclose operates as notice to the mortgagor of the
election to accelerate, where the election to do so is declared in
the complaint . . . or, in the absence of such declaration, where the
complaint on its face shows that foreclosure for the entire
mortgage indebtedness is sought therein.
Campbell v. Werner, 232 So. 2d 252, 254 n.1 (Fla. Dist. Ct. App. 1970) (citations
omitted).
[¶33] In sum, notwithstanding that the foreclosure court determined
that the Bank failed to prove that its notice of default complied with section
6111, we conclude that the Bank triggered the acceleration clauses of the note
and mortgage when it filed the foreclosure action demanding immediate
payment of the entire remaining debt.
24
[¶34] Because this case is not distinguishable from Johnson, which
settles the question of the res judicata consequence of the Bank’s failure to
prove its foreclosure claim, we must address the Bank’s argument that we
should revisit our holding in that case.
[¶35] As we explain in more detail in Deschaine, 2017 ME 190, ¶ 33,
170 A.3d 230, and for the reasons expressed in that opinion, an alteration of
the approach we expressed in Johnson is not warranted because we identify
no legal reason to adopt different res judicata rules for foreclosure cases than
those that apply in every other type of case. Pursuant to Johnson, because the
Bank failed to prove its claim to the unitary obligation that it placed in issue in
the foreclosure action, it no longer has any enforceable interest in the note or
in the property set up as security for the note, and the Pushards have no
further obligation to make payments on the note. 1997 ME 220, ¶ 8, 704 A.2d
866; see Deschaine, 2017 ME 190, ¶ 35, 170 A.3d 230 (“[T]here could be no
new breaches of the [mortgagors’] obligations following acceleration because,
once the contract became unified as a result of that acceleration, the
[mortgagors] did not have any continuing responsibility to make monthly
installment payments.”).
25
[¶36] Because the Bank is precluded from seeking to recover on the
note or enforce the mortgage, the Pushards are entitled, as a matter of law, to
the declaratory relief they seek. We therefore must vacate the judgment in
the Bank’s favor on the Pushards’ claim for declaratory relief and remand the
case to the trial court to enter a judgment declaring that the note and
mortgage are unenforceable and that the Pushards hold title to their property
free and clear of the Bank’s mortgage encumbrance. See Deschaine, 2017 ME
190, ¶ 37, 170 A.3d 230.14 Further, because a declaratory judgment “is a
particularly efficacious method for quieting title to real property,” Welch v.
State, 2004 ME 84, ¶ 6 n.3, 853 A.2d 214 (quotation marks omitted), that can
be recorded on the land records, we need not address the Pushards’ claim for
injunctive relief.
The entry is:
Judgment in favor of the Bank on the Pushards’
claim for declaratory relief is vacated.
Remanded for entry of judgment in favor of
Pushards consistent with this opinion.
Judgment affirmed in all other respects.
14 Because the Bank’s counterclaim for unjust enrichment was dismissed without prejudice and
is not before us, we do not address any issues regarding the justiciability or merit of that claim, nor
the availability of any process pursuant to M.R. Civ. P. 4A or 4B. See, e.g., Girouard, 2015 ME 116,
¶ 10, 123 A.3d 216.
26
Joshua Klein-Golden, Esq. (orally), Clifford & Golden, PA, Lisbon Falls, for
appellants Heidi M. Pushard and Jeffrey A. Pushard
John J. Aromando, Esq., and Catherine R. Connors, Esq., Pierce Atwood LLP,
Portland, and Elizabeth P. Papez, Esq. (orally), Winston & Strawn LLP,
Washington, D.C., for appellee Bank of America, N.A.
Business and Consumer Docket docket number CV-2015-28
FOR CLERK REFERENCE ONLY