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

• Decision Date: 17 March 2020
• Docket Number: Docket: And-19-325
• Citation: 227 A.3d 577
• Parties: U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR STRUCTURED ASSET SECURITIES CORPORATION MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-EQ1 v. Jim A. GORDON
• Court: Maine Supreme Court

227 A.3d 577

U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR STRUCTURED ASSET SECURITIES CORPORATION MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-EQ1

v.Jim A. GORDON

Docket: And-19-325

Supreme Judicial Court of Maine.

Submitted On Briefs: February 26, 2020

Decided: March 17, 2020

Frank D’Alessandro, Esq., Maine Equal Justice, Augusta, for appellant Jim A. Gordon

Morgan T. Nickerson, Esq., K&L Gates LLP, Boston, Massachusetts, for appellee U.S. Bank, N.A.

Panel: GORMAN, JABAR, HUMPHREY, and HORTON, JJ.

Majority: GORMAN, JABAR, and HUMPHREY, JJ.

Concurrence: HORTON, J.

GORMAN, J.

[¶1] Jim A. Gordon appeals from a judgment of foreclosure entered by the District Court (Lewiston, Martin, J. ) in favor of U.S. Bank, N.A. Gordon argues that U.S. Bank did not own the mortgage and, therefore, lacked standing to foreclose. We affirm the judgment.

I. BACKGROUND

[¶2] The following facts are either undisputed or taken from the judgment and are viewed in the light most favorable to U.S. Bank as the prevailing party. See M & T Bank v. Plaisted , 2018 ME 121, ¶ 5, 192 A.3d 601. In December of 2006, Gordon executed a promissory note in the amount of $136,000 to EquiFirst Corporation. The note was later endorsed to U.S. Bank. On the same day that he executed the note, Gordon signed a mortgage on property in Lisbon Falls to secure that debt. The mortgage listed EquiFirst as the "lender" of the money and named Mortgage Electronic Registration Systems, Inc. (MERS) as EquiFirst’s "nominee" to record the mortgage.

[¶3] In March of 2009, MERS executed and recorded a document (the 2009 assignment) stating that MERS, "as nominee for EquiFirst ..., hereby assigns" the mortgage to U.S. Bank. In July of 2016, EquiFirst executed and recorded a "Ratification of Assignment" (the 2016 ratification) stating, in part, that EquiFirst "does hereby ratify the transfer of [the] mortgage as memorialized by" the 2009 assignment.

[¶4] In November of 2016, U.S. Bank filed a complaint for foreclosure. At a testimonial hearing, the court admitted, over Gordon’s objection, a copy of the 2016 ratification pursuant to M.R. Evid. 803(14). By decision dated April 16, 2019, the court concluded that U.S. Bank had standing to foreclose pursuant to the 2016 ratification, and entered a judgment of foreclosure in favor of U.S. Bank.

[¶5] Gordon timely appealed. See M.R. App. P. 2B(c)(2).

II. DISCUSSION

[¶6] Gordon argues that U.S. Bank lacked standing to foreclose because (1) the 2016 ratification was inadmissible hearsay, and (2) even if the 2016 ratification were admissible, it was insufficient to prove U.S. Bank’s ownership of the mortgage.¹ We address these issues in turn.

A. Admissibility

[¶7] "We review a court’s decision to admit or exclude alleged hearsay evidence for an abuse of discretion." State v. Sweeney , 2019 ME 164, ¶ 13, 221 A.3d 130 (alteration omitted) (quotation marks omitted). The trial court admitted the 2016 ratification pursuant to M.R. Evid. 803(14), which provides that a "record of a document that purports to establish or affect an interest in property" is admissible if, inter alia, "[t]he record is admitted to prove the content of the original recorded document, along with its signing and its delivery by each person who purports to have signed it."

[¶8] The plain language of Rule 803(14) allowed the court to admit the copy of the 2016 ratification. The 2016 ratification "purports to ... affect an interest in property," id. , by purporting to effectuate an assignment of the mortgage. Furthermore, contrary to Gordon’s contentions, the copy of the 2016 ratification was admitted "to prove the content of the original recorded document"—in this case, to prove the content of the ratification itself, along with its having been signed by EquiFirst. Id. The court did not abuse its discretion by admitting the copy of the 2016 ratification.

B. Ownership of the Mortgage

[¶9] Gordon challenges the court’s legal conclusion that the 2016 ratification effectively transferred the mortgage’s ownership to U.S. Bank, a question of standing that we review de novo. See Mortg. Elec. Registration Sys., Inc. v. Saunders , 2010 ME 79, ¶ 7, 2 A.3d 289.

[¶10] An effective ratification of a prior act generates the legal consequences that would have resulted if the prior act had been carried out by a person acting with actual authority. See Estate of Frost , 2016 ME 132, ¶ 19, 146 A.3d 118 ; Restatement (Third) of Agency §§ 4.01(1), 4.02(1) & cmt. b (Am. Law Inst. 2006). A prior act may be ratified "if the actor acted or purported to act as an agent on the [later ratifier’s] behalf." Restatement (Third) of Agency § 4.03.

[¶11] When MERS executed the 2009 assignment to U.S. Bank, stating that it did so "as nominee for EquiFirst," it was purporting to act as EquiFirst’s agent. See id. In 2016, when EquiFirst executed the ratification, it gave effect to the previously ineffective 2009 assignment. See id. § 4.01(1), 4.02(1). One legal consequence was the transfer of EquiFirst’s ownership interest in the mortgage—including the right to foreclose—to U.S. Bank. See Estate of Frost , 2016 ME 132, ¶ 19, 146 A.3d 118 ; Greenleaf , 2014 ME 89, ¶¶ 12-17, 96 A.3d 700. The court did not err in concluding that U.S. Bank had standing.²

The entry is:

Judgment affirmed.

HORTON, J., concurring.

[¶12] I concur in the result but would affirm for a different reason.

[¶13] The majority concludes that U.S. Bank established standing by showing that EquiFirst ratified the March 2009 assignment of the mortgage from Mortgage Electronic Registration Systems, Inc. (MERS) to U.S. Bank. See Court’s Opinion ¶¶ 10-11.

[¶14] Assuming any assignment of the mortgage was necessary to establish U.S. Bank’s standing, I would affirm on the ground that the assignment from MERS to U.S. Bank conveyed legal title to the mortgage and was sufficient to confer standing. The majority’s reasoning is based on recent decisions that depart substantively from our longstanding precedent and from the modern rule regarding transfer of mortgages.

[¶15] Beginning in the nineteenth century and until recently, Maine law was clear that ownership of a real estate mortgage automatically followed the note that was secured by the mortgage. See Holmes v. French , 70 Me. 341, 344-45 (1879) ("The purchaser and owner of the mortgage debt is the equitable owner and assignee of the mortgage. The mortgage is incident and collateral to the debt secured by it, and an assignment of the debt carries with it, in equity, the mortgage. This rule is too well settled to require the citation of authorities in its support."); Wyman v. Porter , 108 Me. 110, 120-21, 79 A. 371, 375 (1911) ; Farnsworth v. Kimball , 112 Me. 238, 243, 91 A. 954, 956 (1914) ; Pratt v. Bank of America, N.A., 2013 WL 5724136, at *5, 2013 U.S. Dist. LEXIS 151671, at *13-15 (D. Me. Sept. 4, 2013) adopted by 2013 U.S. Dist. LEXIS 150644 (D. Me. Oct. 21, 2013).

[¶16] Before the merger of law and equity, our decisions spoke in terms of equitable and legal title, but the underlying principle was clear—the party entitled to enforce the note was entitled to enforce the mortgage, even if some other entity held legal title to the mortgage. See Jordan v. Cheney , 74 Me. 359, 361-62 (1883). Under those pre-merger cases, assignment of the note automatically transferred equitable title to the mortgage, and no separate assignment of legal title to the mortgage was necessary. See id. at 361 ("[I]t is not necessary that there should be any recorded transfer of the notes or mortgage. Nor is an assignment of the mortgage necessary.").

[¶17] Our mortgage law jurisprudence reflected the mainstream view. See Carpenter v. Longan, 83 U.S. 271, 275, 16 Wall. 271, 21 L.Ed. 313 (1872) ("The transfer of the note carries with it the security, without any formal assignment or delivery, or even mention of the latter.").

[¶18] When one entity owned the note and another held legal or record title to the mortgage, the record owner of the mortgage held legal title in trust for the owner of the note under the equitable trust doctrine. See Jordan , 74 Me. at 361. Moreover, no transfer of legal title was necessary in order for the party entitled to enforce the note to maintain a judicial foreclosure action on the mortgage. See Holmes , 70 Me. at 345 ("When the mortgage is not legally assigned with the debt, the assignee of the debt has a right to use the name of the mortgagee in a suit to enforce the mortgage; and he is not required to resort to the court in equity for that purpose unless the mortgagee refuses to permit his name to be used."); Averill v. Cone , 129 Me. 9, 12, 149 A. 297, 299 (1930).

[¶19] The modern majority rule on the transfer of mortgages dispenses with the distinction between equitable and legal title and provides simply that a transfer of ownership of the note transfers ownership of the mortgage unless otherwise agreed. See Restatement (Third) of Property: Mortgages § 5.4(a) (Am. Law Inst. 1997) ("A transfer of an obligation secured by a mortgage also transfers the mortgage unless the parties to the transfer agree otherwise."). The Restatement makes clear that no separate assignment of the mortgage is necessary in order for an assignment of the note to transfer ownership of the mortgage.³ Id. § 5.4 cmt a.

[¶20] Our foreclosure statute reflects the same principle by requiring "proof of ownership" of the mortgage note and only "evidence" of the mortgage. 14 M.R.S. § 6321 (2018). Similarly, we have said that a "mortgagee" with standing under section 6321 to bring a foreclosure action is "a party that is entitled to enforce the debt obligation that is secured by a mortgage." Mortg. Elec. Registration Sys., Inc. v. Saunders , 2010 ME 79, ¶ 11, 2 A.3d 289 (emphasis omitted).

[¶21] In 2010, we held that MERS is not a "mortgagee" or a "person claiming under the mortgagee" as those terms are used in 14 M.R.S. § 6321. See Saunders , 2010 ME 79, ¶¶ 10-15, 2 A.3d 289. We said that MERS was a "nominee" with "bare...