Fed. Nat'l Mortg. Ass'n v. Deschaine

• Decision Date: 07 September 2017
• Docket Number: Docket: Pen-16-316.
• Citation: 170 A.3d 230
• Parties: FEDERAL NATIONAL MORTGAGE ASSOCIATION v. Patricia W. DESCHAINE et al.
• Court: Maine Supreme Court

170 A.3d 230

FEDERAL NATIONAL MORTGAGE ASSOCIATION

v.Patricia W. DESCHAINE et al.

Docket: Pen-16-316.

Supreme Judicial Court of Maine.

Argued: May 12, 2017

Decided: September 7, 2017

Revised: December 7, 2017

Jeffrey J. Hardiman, Esq., and Dean J. Wagner, Esq., Shechtman Halperin Savage, LLP, Pawtucket, Rhode Island, and Marissa I. Delinks, Esq. (orally), Hinshaw and Culbertson LLP, Boston, Massachusetts, for appellant Federal National Mortgage Association

James F. Cloutier, Esq., Cloutier, Conley & Duffett, P.A., Portland, for appellees Patricia W. Deschaine and Paul J. Deschaine

L. Scott Gould, Esq., Cape Elizabeth, for amici curiae National Consumer Law Center and National Association of Consumer Advocates

Jeffrey Gentes, Esq., Jerome Frank Legal Services Corporation, New Haven, Connecticut, for amicus curiae Jerome Frank Legal Services CorporationThomas A. Cox, Esq. (orally), Portland, for amicus curiae Maine Attorneys Saving Homes

Catherine R. Connors, Esq., and John J. Aromando, Esq., Pierce Atwood LLP, Portland, for amici curiae Maine Bankers Association and The National Mortgage Bankers Association

Frank D'Alessandro, Esq., Pine Tree Legal Assistance, Portland, for amicus curiae Pine Tree Legal Assistance

Gerald F. Petruccelli, Esq., amicus curiae pro se

John A. Doonan, Esq., and Reneau J. Longoria, Esq., Doonan, Graves & Longoria, LLC, Beverly, Massachusetts, for amicus curiae Doonan, Graves & Longoria

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

HJELM, J.

[¶ 1] In 2012, a complaint for residential foreclosure filed by Federal National Mortgage Association (Fannie Mae) against Patricia W. Deschaine and Paul J. Deschaine was dismissed with prejudice because the parties failed to comply with the court's pretrial order. Fannie Mae did not seek post-judgment or appellate relief, and so the judgment became final. The following year, Fannie Mae filed a second complaint for foreclosure involving the same property, based on the same note and mortgage, and against the same mortgagors. The Superior Court (Penobscot County, Anderson, J. ) ultimately granted the Deschaines' motion for summary judgment on Fannie Mae's complaint and on their counterclaims to quiet title and for a declaratory judgment, and denied Fannie Mae's cross-motion for summary judgment on its complaint. Applying our decision in Johnson v. Samson Construction Co. , the court concluded that this second foreclosure action is barred as a matter of law by the judgment dismissing with prejudice the earlier foreclosure action. 1997 ME 220, ¶ 8, 704 A.2d 866. On this appeal by Fannie Mae, we conclude that the court correctly determined that this second foreclosure claim is precluded by principles of res judicata, and we affirm the judgment.¹

I. BACKGROUND

[¶ 2] The summary judgment record contains the following facts, which are not in dispute. See Harlor v. Amica Mut. Ins. Co. , 2016 ME 161, ¶ 7, 150 A.3d 793.

[¶ 3] In October 2004, the Deschaines executed a promissory note in favor of First Horizon Home Loan Corporation in the principal amount of $127,920. As security for the note, the Deschaines also executed a mortgage on residential property located in Lincoln in favor of Mortgage Electronic Registration Systems, Inc. (MERS), as "nominee" for First Horizon.² Fannie Mae eventually acquired the note endorsed in its favor. MERS purported to assign the mortgage to Fannie Mae in June 2011, but because MERS possessed only the right to record the mortgage, the assignment conveyed nothing more than that right. See Bank of Am., N.A. v. Greenleaf , 2014 ME 89, ¶¶ 15–16, 96 A.3d 700 ; Mortg. Elec. Registration Sys., Inc. v. Saunders , 2010 ME 79, ¶¶ 9–11, 2 A.3d 289.

[¶ 4] Paragraph 7(C) of the note and Paragraph 22 of the mortgage contain acceleration clauses, which provide that if the borrower fails to satisfy an obligation under either instrument and fails to timely cure the default after being notified of it, the lender may require "immediate payment in full" of the amount then remaining unpaid under the loan documents—including the total balance of principal and interest under the note and any additional fees and charges allowed by the note and mortgage.

[¶ 5] Additionally, Paragraph 19 of the mortgage is a reinstatement provision, stating that "even if [the l]ender has required immediate payment in full, [the borrower] may have the right to have enforcement of [the mortgage] discontinued" if, among other things, the borrower "pay[s] to [the l]ender the full amount that then would be due under [the mortgage] and the [n]ote as if immediate payment in full had never been required" before the earliest of the date a foreclosure judgment is issued, five days prior to the sale of the property, or "such other period as [a]pplicable [l]aw might specify for the termination of [the] right to reinstate." Paragraph 19 further provides that if the borrower exercises her right of reinstatement, "the [n]ote and this [s]ecurity [i]nstrument will remain in full effect as if immediate payment in full had never been required."

[¶ 6] In September 2011, Fannie Mae issued to the Deschaines a notice of default and right to cure because, among other things, they had not made any monthly payments on the note since January 2011. The Deschaines failed to pay the stated amount due—$7,719.33—by the date specified in the notice. As a result, in December 2011 Fannie Mae filed a foreclosure complaint in the District Court (Lincoln). In its complaint, Fannie Mae alleged, "[I]n accordance with the terms of the [l]oan [d]ocuments, [Fannie Mae] has declared the entire outstanding principal amount, accrued interest thereon, and all other sums due under the [l]oan [d]ocuments to be presently due and payable." Specifically, Fannie Mae alleged that the amount due included a principal balance of $122,712.93, which, together with accrued interest, fees, and other charges, resulted in a total amount due of $131,944.56.

[¶ 7] In June 2012, the court (Stitham, J. ) issued a trial management order stating that neither party had complied with an earlier order that had established a deadline for the parties to exchange witness and exhibit lists, and warning the parties that sanctions would be imposed if they did not comply with a revised deadline. See M.R. Civ. P. 16A(a), (d) (authorizing a court to dismiss an action with prejudice for a party's failure to comply with a pretrial order). The following month, the court issued a judgment stating that there had been "no filings by either party," and dismissed Fannie Mae's foreclosure complaint "with prejudice." Fannie Mae did not seek any type of relief from the dismissal through a post-judgment motion or an appeal, and so the judgment became final.

[¶ 8] In September 2013—more than one year after the first foreclosure action had been dismissed—Fannie Mae sent a new notice of default to the Deschaines, this time stating that, among other grounds for a default, the Deschaines had failed to make payments on the note since February 2011. The Deschaines did not take the actions specified in the notice to cure the purported default, and in December 2013 Fannie Mae filed a complaint in the Superior Court (Penobscot County), which, as later amended, requested a judgment of foreclosure and other relief based on theories of equitable mortgage and unjust enrichment.³ In both the original and amended complaints, Fannie Mae alleged, "[I]n accordance with the terms of the [n]ote and [m]ortgage, [Fannie Mae] has declared the entire outstanding principal amount, accrued interest thereon, and all other sums due under the [n]ote and [m]ortgage to be presently due and payable."

[¶ 9] After an unsuccessful mediation session held in the summer of 2014, the Deschaines filed an answer that denied many of the allegations in the amended complaint and asserted, among others, the affirmative defenses of lack of standing and res judicata. The Deschaines' responsive pleading included counterclaims to quiet title and for a declaratory judgment that, as a result of the dismissal with prejudice of Fannie Mae's prior foreclosure complaint, Fannie Mae was no longer entitled to enforce the mortgage and so the Deschaines held title to the property unencumbered by the mortgage in favor of Fannie Mae.

[¶ 10] In January 2015, Fannie Mae obtained an assignment of the mortgage from the successor-in-interest to First Horizon, the original lender, and thus acquired standing to pursue this second foreclosure action against the Deschaines, which had already been pending for over a year. See Greenleaf , 2014 ME 89, ¶ 17, 96 A.3d 700.

[¶ 11] In November 2015, the Deschaines moved for summary judgment on their counterclaims and on all counts of Fannie Mae's complaint. See M.R. Civ. P. 56. With the motion, the Deschaines filed a statement of material facts, see M.R. Civ. P. 56(h)(1), in which they asserted that the notice of default issued by Fannie Mae in September 2011 "resulted in the acceleration of the mortgage debt." In support of this assertion, the Deschaines cited to the 2011 foreclosure complaint as one of several record references. See M.R. Civ. P. 56(h)(4). Based on that assertion and our decision in Johnson , the Deschaines argued that Fannie Mae was barred from bringing a second foreclosure claim and that they were therefore entitled to a judgment as a matter of law on that claim and on their counterclaims.

[¶ 12] In its opposition to the Deschaines' motion, Fannie Mae disputed the assertion that the debt was accelerated in the 2011 action, characterizing it as a legal conclusion that did not require a response. Fannie Mae simultaneously filed its own motion for summary judgment on each count of its complaint. In its statement of material facts, Fannie Mae reiterated allegations it had made in its complaint, including the Deschaines' failure, since February 2011, to make principal and interest payments due pursuant to the note, among other grounds for default. Fannie Mae argued that it...