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

• Decision Date: 22 July 2011
• Docket Number: No. 10–169.,10–169.
• Citation: 27 A.3d 1087,75 UCC Rep.Serv.2d 100,2011 VT 81
• Parties: U.S. BANK NATIONAL ASSOCIATIONv.Christine KIMBALL.
• Court: Vermont Supreme Court

27 A.3d 1087

75 UCC Rep.Serv.2d 100

2011 VT 81

U.S. BANK NATIONAL ASSOCIATION

v.Christine KIMBALL.

No. 10–169.

Supreme Court of Vermont.

July 22, 2011.

Andre D. Bouffard of Downs Rachlin Martin PLLC, Burlington, for Plaintiff–Appellant.Grace B. Pazdan, Vermont Legal Aid, Inc., Montpelier, for Defendant–Appellee.Present: REIBER, C.J., DOOLEY, JOHNSON, SKOGLUND and BURGESS, JJ.BURGESS, J.

¶ 1. Plaintiff U.S. Bank National Association, as trustee for RASC 2005 AHL1, appeals from a trial court order granting summary judgment for defendant homeowner and dismissing with prejudice U.S. Bank's foreclosure complaint for lack of standing. On appeal, U.S. Bank argues that it had standing to prosecute the foreclosure claim and the court's dismissal with prejudice was in error. Homeowner cross-appeals, arguing that the court erred in not addressing her claim for attorney's fees. We affirm the dismissal and remand for consideration of homeowner's motion for attorney's fees.

¶ 2. On appeal from a grant of summary judgment, “the nonmoving party receives the benefit of all reasonable doubts and inferences.” Samplid Enters., Inc. v. First Vt. Bank, 165 Vt. 22, 25, 676 A.2d 774, 776 (1996). We review the decision de novo under the same standard as the trial court. Id. Summary judgment is appropriate if there is no genuine issue of material fact and a party is entitled to judgment as a matter of law. Id.; see V.R.C.P. 56(c)(3).

¶ 3. So viewed, the record reveals the following facts. Homeowner purchased property on June 16, 2005. To finance the purchase, she executed an adjustable rate promissory note in favor of Accredited Home Lenders, Inc. (Accredited) in the amount of $185,520. The note was secured by a mortgage deed to Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for Accredited.

¶ 4. On January 12, 2009, U.S. Bank filed a foreclosure complaint for homeowner's failure to make required payments. The complaint alleged that the mortgage and note were assigned to U.S. Bank by MERS, as nominee for Accredited, by an instrument dated January 6, 2009. Attached to the complaint was a copy of the instrument entitled “Assignment of Mortgage,” signed by Jeffrey Stephan, identified therein as Duly Authorized Agent and Vice President of MERS. The promissory note was also attached to the complaint, and appended to it was an undated allonge ¹ signed by a corporate officer of Accredited, endorsing the note in blank.

¶ 5. Homeowner initially filed a pro se answer. After procuring counsel, homeowner filed an amended answer, claiming, among other things, that U.S. Bank failed to present sufficient evidence that it held homeowner's note and corresponding mortgage. Homeowner also filed a counterclaim alleging consumer fraud. In March 2009, homeowner filed a motion for summary judgment arguing that U.S. Bank lacked standing to bring the foreclosure complaint because it failed to establish that it held an interest in the debt secured by homeowner's property. Homeowner argued that U.S. Bank had not established proper assignment of the mortgage because MERS as nominee for Accredited lacked authority to assign the mortgage. Homeowner further argued that U.S. Bank failed to demonstrate that it held or had a right to enforce the promissory note. In July 2009, in support of the motion for summary judgment, homeowner submitted an affidavit, averring that in mid-June 2009 she received a letter from her mortgage servicer, Homecomings Financial, notifying her that the servicing rights to her loan were being assigned not to U.S. Bank, but to GMAC Mortgage, LLC effective July 1, 2009. She also averred that she received a concurrent letter from GMAC, confirming that it was servicing the loan on behalf of Residential Funding Corporation (RFC). The letters referred to in the affidavit were attached.

¶ 6. U.S. Bank opposed the request and responded with its own cross-motion for summary judgment on the merits, claiming that whatever deficiencies were present in its original complaint were now resolved because it had produced and sent to homeowner “a copy of the fully endorsed note specifically payable to [U.S. Bank].” In its statement of undisputed facts, U.S. Bank asserted that it had the original note, and that it was endorsed from Accredited to RFC and then to U.S. Bank. No dates, however, were provided for these endorsements. In support, U.S. Bank attached an affidavit attesting to these facts, but still devoid of any dates for the purported assignments. The affidavit was signed by Jeffrey Stephan, the same man who had signed the assignment attached to original complaint, but this time identifying himself as a “Limited Signing Officer” for GMAC, the mortgage servicer for homeowner's loan. In the affidavit, Stephan claims that he has “familiarity with the loan documentation underlying the mortgage loan entered at issue in the present foreclosure case.” The copy of the note attached had an allonge, appearing to be the same allonge previously submitted as endorsed in blank, but this time with “RFC” stamped in the blank spot and containing a second endorsement from RFC to U.S. Bank. Neither endorsement was dated.

¶ 7. The court held a hearing on the summary judgment motions. Following the hearing, the court issued a written order on October 27, 2009. The court concluded that to enforce a mortgage note, “a plaintiff must show that it was the holder of the note at the time the Complaint was filed,” and here there was “simply no evidence of an assignment to a party in interest.” Because neither note submitted by U.S. Bank was dated, the court concluded that there was no evidence that the note was endorsed to U.S. Bank before the complaint was filed. Therefore, the court held that U.S. Bank lacked standing to bring the foreclosure action. The court granted homeowner's motion for summary judgment, dismissed the foreclosure action, and set the matter for hearing on homeowner's counterclaim.

¶ 8. On November 23, 2009, U.S. Bank moved for reconsideration.² U.S. Bank acknowledged that it had created “confusion” by attaching to the complaint “an outdated copy of the note prior to its transfer to [U.S. Bank], and a mortgage assignment that purports to assign the note along with the mortgage.” It claimed, however, that because it now held the original note, it was entitled to enforce it. Homeowner did not dispute that U.S. Bank possessed what appeared to be the original note, but she insisted U.S. Bank was required to authenticate the endorsements through credible affidavits and to demonstrate that it had possession when the complaint was filed. As to this timing issue, U.S. Bank contended that homeowner's mortgage had been endorsed to it in September 2005. In support, U.S. Bank submitted an affidavit signed by Scott Zeitz, who is identified as a litigation analyst with GMAC. In the affidavit, Zeitz avers that homeowner's mortgage note was endorsed to RFC and then to U.S. Bank in September 2005. The affidavit does not explain the obvious inconsistencies with the prior affidavits offered by U.S. Bank or with the letter homeowner received from GMAC identifying RFC as the holder of her note in June 2009. It also does not explain how Zeitz obtained this knowledge given that GMAC did not begin servicing the loan until July 1, 2009. In the alternative, U.S. Bank argued that, even if did not hold an interest in the note at the time the complaint was filed, it could cure the deficiency by now substituting itself as the real party in interest under Rule of Civil Procedure 17(a). U.S. Bank also filed a motion to amend its complaint to properly reflect the manner in which it now alleged that it acquired an interest in homeowner's note and mortgage.

¶ 9. Homeowner opposed the motions, contending that the numerous inconsistencies in the information offered by U.S. Bank made it unreliable. In addition, homeowner argued that the Zeitz affidavit was not based on personal knowledge and therefore insufficient to support the motion. Homeowner moved for reasonable attorney's fees under Rule 56(g), claiming that U.S. Bank acted in bad faith by filing affidavits lacking a basis in personal knowledge and contradicting undisputed evidence.³ Homeowner explained that as a result her attorney “spent numerous hours responding to and refuting the validity of the affidavits.”

¶ 10. Following a hearing, the court denied the motions for reconsideration and to amend the complaint. The court concluded that U.S. Bank had submitted a defective complaint and the deficiencies therein were not mere technicalities, but essential items, without which the case could not proceed. The court held that U.S. Bank lacked standing when the complaint was filed, and dismissed the complaint “with prejudice.” U.S. Bank appeals.

¶ 11. On appeal, U.S. Bank argues that the court erred in (1) dismissing the complaint with prejudice; (2) concluding there was no standing when there was evidence demonstrating that U.S. Bank was the holder of the note before the complaint was filed; and (3) denying U.S. Bank's request to substitute itself as the real party in interest. Homeowner cross-appeals, arguing that the court failed to address her request for attorney's fees and requesting a remand.

¶ 12. We begin with the issue of standing. “[O]ur review of dismissal for lack of standing is the same as that for lack of subject matter jurisdiction. We review the lower court's decision de novo, accepting all factual allegations in the complaint as true.” Brod v. Agency of Natural Res., 2007 VT 87, ¶ 2, 182 Vt. 234, 936 A.2d 1286. We have the same standing requirement as the federal courts in that our jurisdiction is limited to “actual cases or controversies.” Parker v. Town of Milton, 169 Vt. 74, 76–77, 726 A.2d 477, 480 (1998). Therefore, to bring a case “[a] plaintiff must, at a minimum, show (1) injury in fact, (2) causation, and (3) redressability.” Id. at 77, 726 A.2d at 480 (citing Lujan v....