PROF-2014-S2 Legal Title Tr. II v. Sidelinger
| Decision Date | 26 October 2020 |
| Docket Number | CIVIL NO. 2:19-CV-220-DBH |
| Parties | PROF-2014-S2 LEGAL TITLE TRUST II, BY U.S. BANK NATIONAL ASSOCIATION, AS LEGAL TITLE TRUSTEE PLAINTIFF v. DODI S. SIDELINGER, DEFENDANT AND FIRST TENNESSEE BANK, N.A. f/k/a First Horizon Home Loan Corporation; DENNIS CAREY; TYGDON, LLC, PARTIES-IN-INTEREST |
| Court | U.S. District Court — District of Maine |
This is a mortgage foreclosure dispute with a twist. The mortgagor has been through bankruptcy and obtained protection from personal liability. As a result, she agrees to foreclosure of the first mortgage on her residence. But a junior mortgagee resists the foreclosure. The junior mortgagee has moved to dismiss the first mortgagee's complaint and seeks summary judgment that he has title superior to that of the first mortgagee. The first mortgagee has filed a cross motion for summary judgment on the junior mortgagee's claim of superior title.1 I conclude that the plaintiff first mortgagee's complaint should not be dismissed, and that the junior mortgagee does not have superior title.
The junior mortgagee Dennis Carey (Carey) moves to dismiss the first mortgage foreclosure complaint on two primary grounds—that an assignment has destroyed the plaintiff's standing and the court's jurisdiction, and that litigation abuse by the plaintiff's lawyers justifies dismissal.
The mortgagee that filed the first mortgage foreclosure complaint in this Court on May 16, 2019, was "PROF-2014-S2 Legal Title Trust II, by U.S. Bank National Association, as Legal Title Trustee" (PROF-2014). On April 1, 2020, PROF-2014 assigned its interest to "1900 Capital Trust III, by U.S. Bank Trust National Association, not in its individual capacity but solely as certificate trustee" (Capital Trust III).
New counsel entered his appearance for the assignee Capital Trust III on May 5, 2020, referring to Capital Trust III as the plaintiff, but without stating that there had been an assignment (ECF No. 44). New counsel then filed a Local Rule 56 Memorandum on May 11 on behalf of "Plaintiff," listing PROF-2014 in the caption as the plaintiff and making no reference to Capital Trust III (ECF No. 46). The assignment deed was recorded in the Cumberland County Registry of Deeds on May 18, 2020. That same day, the lawyers who originally filed the foreclosure complaint moved to withdraw (ECF No. 49), and the motion wasgranted (ECF No. 50). At a telephone conference the next day before the Magistrate Judge, the successor lawyers said that the "plaintiff" had standing and the right to foreclose, and they made a similar statement in responding to Carey's motion for summary judgment. Mot. to Dismiss at 2-3 (ECF No. 59).
Carey argues that the assignment from PROF-2014 to Capital Trust III after the lawsuit was underway destroyed standing, id. at 8-9, and diversity jurisdiction, Carey Reply at 6-7 (ECF No. 69), and that the lawyers' statements to the Magistrate Judge and in written filings amounted to a lack of candor to the Court, Mot. to Dismiss at 2-3, 12-13, all of which require dismissal with prejudice.
The Federal Rules of Civil Procedure recognize that transfers of interest may occur during a federal lawsuit. Rule 25(c) provides: "If an interest is transferred, the action may be continued by . . . the original party unless the court, on motion, orders the transferee to be substituted in the action or joined with the original party." No such motion was made here, and I find no lack of candor. Thus, Rule 25 disposes of Carey's argument that the mid-litigation assignment destroyed PROF-2014's standing. If there was some prejudice to Carey's litigating position arising from the assignment, he could have moved to substitute or join Capital Trust III.2
The original complaint asserted diversity jurisdiction, Compl. ¶ 1, and Carey admitted there was diversity. Carey Answer ¶ 1. The law is clear that diversity jurisdiction is measured as of the filing of the complaint, and that later transfers do not affect it. Freeport-McMoRAN, Inc. v. K N Energy, Inc., 498 U.S. 426 (1991). In Freeport-McMoRAN, the Supreme Court reasoned that "[a] contrary rule could well have the effect of deterring normal business transactions during the pendency of what might be lengthy litigation." Id. at 428. That reasoning applies here.
In sum, the assignment does not support dismissal of the complaint.
Carey says the first mortgagee committed litigation abuse because it served a motion for sanctions under Federal Rule 11. Mot. to Dismiss at 3-4. The first mortgagee never filed that motion with the Court.3 What the first mortgagee's lawyers served on Carey and his lawyer is a preliminary step that Rule 11 requires so as to give the other party a chance to correct challenged conduct. Fed. R. Civ. P. 11(c)(2). It is not a basis to dismiss the lawsuit. And it is not itself a violation of Rule 11, because the standard of Rule 11 is for "[r]epresentations to the Court." Fed. R. Civ. P. 11(b).
Carey also says the lawsuit should be dismissed because PROF-2014 gave him 2446 images that were not in searchable format or organized. Mot. to Dismiss at 4. But that discovery was the result of Carey's requests to theMagistrate Judge and the Magistrate Judge's Order of March 16, 2020 (ECF No. 38). There is no showing that Carey requested any different discovery format.
Finally on this topic, Carey says that after counsel had agreed to stipulations for the cross motions for summary judgment, the first mortgagee's lawyer changed the title of the allonge added to the Stipulated Record as Exhibit 2 to read "2 Exhibit Prior Allonge" on ECF. Mot. to Dismiss at 4. The first mortgagee's lawyer has responded that he did not intentionally change the title, but simply used the document's name as saved on his computer and that he is willing to rename it "to whatever reasonable alternative Carey proposes." Pl.'s Opp'n & Cross Mot. at 11 (ECF No. 66). Carey has not addressed the issue or the lawyer's offer in his Reply. The title change is obviously an insignificant error that does not affect the outcome of the motion practice and does not justify dismissal.
Carey's motion to dismiss is DENIED.
Carey seeks summary judgment against the first mortgagee on the basis that it has not produced an adequate note, mortgage, or notice of right to cure, and that Carey has superior title. The first mortgagee argues that it has produced a sufficiently adequate note, mortgage deed, and notice of right to cure to avoid summary judgment and get to a factfinder.4 It also argues that Carey does not have superior title.
Carey contends that the first mortgagee cannot foreclose because it lacks adequate evidence that it is the holder of the mortgage note. Mot. for Summ. J. at 3 (ECF No. 55).5 I disagree. The mortgagee on the original mortgage note was First Horizon Home Loan Corporation. (ECF No. 1-2). Although the note itself is indorsed in blank with the word "void" handwritten across that indorsement,6 there is also an allonge. The allonge's heading says "THIS ALLONGE IS TO BE PART OF THE NOTE"), and the allonge has an indorsement by "First Horizon Home Loans, a division of First Tennessee Bank National Association, As successor in interest by merger to First Horizon Home Loan Corporation, It's [sic] Attorney in Fact,"7 and another indorsement that says "Pay to the order of" (the payee is left blank) and "Without Recourse First Horizon Home Loans a division of First Tennessee Bank National Association." The word "void" does not appear on this allonge. If the allonge is affixed to the note, that makes the combineddocument a negotiable instrument, and it is held by the plaintiff.8 See 11 M.R.S. § 3-1204(1) (); Bank of Am., N.A. v. Greenleaf, 2014 ME 89, ¶ 10, 96 A.3d 700 ().9
Carey argues that despite its heading that "THIS ALLONGE IS TO BE PART OF THE NOTE," the allonge in fact was not affixed to the mortgage note, Mot. for Summ. J. at 6-7; Carey Statement of Material Facts (SMF) ¶ 40 (ECF No. 55-1), but he offers no evidence for that assertion. He also says the allonge does not "evidence any physical indicia of being affixed to the mortgage note," Carey SMF ¶ 41, but he has not presented the original nor asked that the first mortgagee do so.
Carey says the first mortgagee cannot prove it is the owner of the mortgage due to defects in two assignments. Mot. for Summ. J. at 8.
In June 2006, the mortgagor executed a first mortgage naming First Horizon Home Loan Corporation as the lender (ECF No. 1-3); see Stipulated R. (ECF No. 54). In May 2010, First Horizon Home Loans, a Division of First Tennessee Bank National Association, as Successor in Interest by Merger to FirstHorizon Home Loan Corporation, assigned the mortgage to Federal National Mortgage Association (ECF No. 1-4). Carey & Pl. SMFs ¶ 43 (ECF Nos. 55-1, 56).
Attached as part of the assignment exhibit is the merger agreement between First Tennessee Bank National Association and its affiliate First Horizon Home Loan Corporation. The agreement provided that First Tennessee Bank National Association would be the surviving entity and would acquire all of First Horizon Loan Corporation's property. Carey contends that the 2010 assignment was invalid because the merger agreement did not authorize First Horizon Home Loans to be designated a division of First Tennessee Bank National Association. Mot. for Summ. J. at 9; see Carey & Pl. SMFs ¶¶ 44-47.
Carey offers no legal authority, however, to support his theory that...
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