U.S. Bank Nat'l Ass'n v. Curit

• Decision Date: 21 January 2016
• Docket Number: Docket No. Sag–14–464.
• Citation: 131 A.3d 903
• Parties: U.S. BANK NATIONAL ASSOCIATION, as Trustee for the Registered Holders of Aegis Asset Backed Securities Trust Mortgage Pass–Through Certificates, Series 2005–4 v. Christopher J. CURIT et al.
• Court: Maine Supreme Court

131 A.3d 903

U.S. BANK NATIONAL ASSOCIATION, as Trustee for the Registered Holders of Aegis Asset Backed Securities Trust Mortgage Pass–Through Certificates, Series 2005–4

v.Christopher J. CURIT et al.

Docket No. Sag–14–464.

Supreme Judicial Court of Maine.

Argued: Nov. 4, 2015.

Decided: Jan. 21, 2016.

As Corrected May 12, 2016.

David W. Merritt, Esq., and Andrew C. Feldman, Esq. (orally), Houser & Allison, APC, Boston, MA, for appellant U.S. Bank National Association.

Joshua Klein–Golden, Esq. (orally), Clifford & Golden, PA, Lisbon Falls, for cross-appellants Christopher and Karen Curit.

Panel: ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.

HUMPHREY, J.

[¶ 1] This appeal, another in a line of foreclosure cases in which the purported mortgagee lacks standing, presents us with challenges to the trial court's initial judgment of dismissal with prejudice and its authority, pending this appeal, to change that outcome to a dismissal without prejudice. We conclude that the court reached a result that is correct but erred in the process used to achieve that result.

[¶ 2] U.S. Bank¹ filed a motion to dismiss its own foreclosure complaint, without prejudice, because it lacked standing, and the District Court (West Bath, Field, J. ) granted the motion but dismissed the action with prejudice. M.R. Civ. P. 41(a)(2). The bank appealed that decision. While its appeal was pending, the bank filed with the trial court a motion to correct or modify the record, pursuant to M.R.App. P. 5(e). It asked the court to supplement the record on appeal to reflect the court's intention, expressed on the record during the hearing on its motion to dismiss but not recited in the judgment, to allow the bank to re-file a foreclosure action in the event of a future default if standing issues are resolved. After a hearing on the bank's Rule 5(e) motion, the court issued an order changing the judgment of dismissal with prejudice to a dismissal without prejudice. Christopher and Karen Curit, the mortgagors, cross-appeal from that order.

[¶ 3] Although the court correctly recognized that it erred when it dismissed U.S. Bank's action with prejudice, and that a dismissal without prejudice was the proper result, it erred as a matter of law in the process used to achieve that result. Accordingly, we vacate the judgments of dismissal with and without prejudice and remand with instruction to dismiss U.S. Bank's action without prejudice.

I. BACKGROUND

[¶ 4] The Curits executed a promissory note for the purchase of real property in Freeport, Maine, in July 2005. The property was secured by a mortgage that identified Aegis Lending Corporation as the "Lender" and Mortgage Electronic Registration Systems, Inc. ("MERS") as the "nominee for Lender and Lender's successors and assigns" for the purpose of recording the mortgage. On August 23, 2007, MERS purported to assign the mortgage to U.S. Bank. On September 1, 2012, the Curits defaulted on the mortgage.

[¶ 5] On March 13, 2013, the bank filed a complaint for foreclosure pursuant to 14 M.R.S. § 6321 (2013).² The trial was originally scheduled for August 13, 2014, but on July 23, 2014, following our decision in Bank of America, N.A. v. Greenleaf (Greenleaf I ), 2014 ME 89, 96 A.3d 700, the bank filed an "emergency motion" to continue the bench trial. The court (Dobson, J. ) granted the motion and rescheduled the trial for October 14, 2014. A week before the trial, the bank filed an "emergency motion" to voluntarily dismiss the foreclosure action without prejudice, pursuant to M.R. Civ. P. 41(a)(2),³ on the ground that it did "not wish to prosecute without further review as to the impact of the Greenleaf decision."

[¶ 6] On October 14, 2014, the court (Field, J. ) held a hearing on the bank's motion to dismiss. The bank argued that it could not proceed with the foreclosure because it did not have a mortgage assignment from the original lender, which had filed for bankruptcy over four years prior, and thus it did not have standing to pursue the action. The Curits argued that the motion should be dismissed with prejudice so that they could be awarded attorney fees pursuant to 14 M.R.S. § 6101 (2015). The bank countered that it preferred a dismissal without prejudice so there would be no bar to re-filing a foreclosure action. The court stated that a dismissal with prejudice "doesn't mean [the bank] can't come back. It just means they have to file a new notice to quit signed by someone who has the authority to sign it and then, start again." Finding no "significant difference one way or the other," the court granted the bank's motion, but dismissed the case with prejudice. During the motion hearing, the court indicated on the record that it intended to allow the bank to re-file a foreclosure complaint in the event of a future default if the standing issue was resolved; however, the court did not include this statement in its written decision. The bank filed a timely notice of appeal on October 31, 2014. See 14 M.R.S. § 1901 (2015) ; M.R.App. P. 2.

[¶ 7] On January 7, 2015, while the bank's appeal was pending before us, the bank filed with the trial court a motion to correct or modify the record on appeal, pursuant to M.R.App. P. 5(e), asserting that the court unintentionally omitted from its judgment of dismissal "with prejudice" language indicating an intention to allow the bank to re-file. At the motion hearing on February 11, 2015, the bank argued that, pursuant to our decision in Johnson v. Samson Construction Corp., 1997 ME 220, ¶ 8, 704 A.2d 866, a dismissal with prejudice of a foreclosure action on an accelerated debt barred a later action and was res judicata as to the entire debt.

[¶ 8] On February 13, 2015, the court issued a "correction of the record" order, stating that there was a discrepancy between what the court "enunciated on the record as its finding and the end result." The court acknowledged that it was "unaware of the teachings of Johnson v. [Samson] Construction Company" and thus was unaware that a dismissal with prejudice would bar all future action on the note. The court ordered that "the record be corrected to note that the dismissal of Plaintiff's action on 14 October, 2014 is WITHOUT PREJUDICE." The Curits timely cross-appealed from this order. See 14 M.R.S. § 1901 ; M.R.App. P. 2.

II. DISCUSSION

A. The Bank's Appeal from Initial Dismissal With Prejudice

[¶ 9] While this lawsuit was pending, the bank filed a motion to dismiss the action without prejudice because it had not yet been able to reach behind MERS and acquire an assignment of the mortgage from the original lender, and thus recognized that it did not have standing to bring this action against the Curits.⁴ On appeal, the bank argues that the trial court abused its discretion when it granted the motion, but dismissed the action with prejudice, because the court did not understand the law applicable to the exercise of its discretion, as demonstrated by the court's admission that it was "unaware of the teachings" of Johnson v. Samson Construction Corp. See State v. Bickart, 2009 ME 7, ¶ 15, 963 A.2d 183.

[¶ 10] Ordinarily, we review a court's dismissal of an action with prejudice for abuse of discretion. U.S. Bank Nat'l Ass'n v. Manning, 2014 ME 96, ¶ 12, 97 A.3d 605. Here, however, we need not conduct this analysis. The trial court did not have the discretion to dismiss the action with prejudice because the bank had not received an assignment from the original lender, and a court may not rule on the merits of a claim if the plaintiff does not have standing to bring the complaint.⁵ See Bank of Am., N.A. v. Greenleaf (Greenleaf II ), 2015 ME 127, ¶¶ 8–9, 124 A.3d 1122 (stating that a plaintiff's lack of standing renders that plaintiff's complaint nonjusticiable); Johnson, 1997 ME 220, ¶ 8, 704 A.2d 866 (explaining that a dismissal of an action with prejudice is an adjudication on the merits of a claim); see also Homeward Residential, Inc. v. Gregor, 2015 ME 108, ¶ 24, 122 A.3d 947 (stating that if the plaintiff does not have standing to proceed in a foreclosure action, the court can dismiss the action only without prejudice). The trial court demonstrated an implicit understanding of these principles when it attempted to correct the outcome with its subsequent judgment of dismissal without prejudice.

B. Curits' Cross–Appeal from Subsequent Dismissal Without Prejudice

[¶ 11] In apparent recognition that the court could not modify its judgment pending appeal, the bank's draft order on its motion to correct or amend the record, pursuant to M.R.App. P. 5(e), requested that the trial court "correct" its order to dismiss the action "with prejudice but with leave to refile." On appeal, the Curits argue that the court misapplied the appellate rule and erred as a matter of law when it granted the motion and issued its "correction of the record" order changing the dismissal designation from "with prejudice" to "without prejudice." We review the interpretation of a court rule de novo. Brown v. Habrle, 2006 ME 115, ¶ 7, 908 A.2d 640.

[¶ 12] Trial courts may take no further action in civil cases pending the disposition of an appeal to us, except as provided in, inter alia, M.R.App. P. 5(e), which permits a trial court to "supplement the record to correct [an] omission or misstatement" if any "difference arises as to whether the record on appeal truly discloses what occurred in the trial court or if anything material to either party is omitted from the record on appeal." M.R.App. P. 3(b), 5(e).⁶

[¶ 13] Cases examining Rule 5(e), its predecessors, M.R. Civ. P. 74(e) and 76F(b), and the analogous federal rule, Fed. R.App. P. 10(e), illustrate that the purpose of such a rule is to ensure that the record accurately reflects events that occurred during the hearing or trial, "not to provide an opportunity for retroactive alteration of those events." 16A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3956.4 (4th ed.2008) ; see Estate of...