US Bank Tr. v. Tenpenny
| Decision Date | 07 March 2023 |
| Docket Number | 2:22-cv-00034-JDL |
| Parties | US BANK TRUST NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE FOR VRMTG ASSET TRUST, Plaintiff, v. LUZ ESMERALDA TENPENNY, and STANLEY TENPENNY, Defendants, TD BANKNORTH, N.A.; MIKE MCDONALD HEATING SERVICE LLC, Parties-in-interest. |
| Court | U.S. District Court — District of Maine |
ORDER ON PENDING MOTIONS
Plaintiff U.S. Bank Trust National Association, Not In Its Individual Capacity But Solely As Owner Trustee For VRMTG Asset Trust (“US Bank”) originally brought this action for equitable reformation of mortgage against Luz Esmeralda Tenpenny and Stanley Tenpenny in the Maine Superior Court (Cumberland County). In March 2022, after the case was removed to this Court, U.S. Bank amended its Complaint to include claims for unjust enrichment, quantum meruit, and equitable subrogation of mortgage (ECF No. 13).
On August 3, 2022, Luz Tenpenny filed a Motion for Judgment on the Pleadings (ECF No. 37) requesting that this case be dismissed because all of U.S. Bank's claims are barred by the six-year statute of limitations provided by 14 M.R.S.A. § 752 (West 2022). Not long after, U.S. Bank filed a Second Motion to Amend the Complaint, seeking to add a claim of judicial estoppel against Luz Tenpenny and a claim of fraud against Stanley Tenpenny (ECF No. 38). U.S. Bank also filed a Motion to Stay, seeking to stay this action so that it could receive approval from the United States Bankruptcy Court to bring the fraud claim against Stanley, who has been discharged in Chapter 7 bankruptcy (ECF No. 39). All of these motions are now pending before the Court.
For the reasons described below, I grant Luz Tenpenny's Motion for Judgment on the Pleadings, deny U.S. Bank's Second Motion to Amend the Complaint, and deny U.S. Bank's Motion to Stay.
For the purposes of the pending motions, I take U.S. Bank's well-pleaded factual allegations as true. See LaMarche v. Metro. Life Ins., 236 F.Supp.2d 50, 54 (D. Me. 2002); see also Lovell v. One Bancorp, 690 F.Supp. 1090, 1096 (D. Me. 1988) ().
Luz and Stanley Tenpenny, then a married couple, co-owned property in Cumberland County (“the Property”) beginning in 2004. In 2005, Luz and Stanley executed a mortgage (“the 2005 mortgage”) on the Property in the amount of $145,000 in favor of Banknorth, N.A.
About a year-and-a-half later, in 2006, Stanley executed a mortgage (“the 2006 mortgage”) on the Property in the amount of $162,800[1] in favor of JPMorgan Chase Bank, N.A., U.S. Bank's predecessor-in-interest. Luz did not sign the 2006 mortgage or the promissory note secured by it-both were signed by Stanley alone. She was also not listed in the granting clause of the 2006 mortgage. Luz and Stanley used the proceeds of the promissory note secured by the 2006 mortgage, both of which were signed only by Stanley, to pay off the 2005 mortgage, which was signed by both Luz and Stanley.
In 2010, Luz was awarded sole ownership of the Property by decree of divorce and a deed from Stanley.
On November 15, 2021, U.S. Bank, which had succeeded to JPMorgan Chase Bank's interest in the 2006 mortgage, filed a Complaint (ECF No. 10-15) in the Maine Superior Court (Cumberland County). The Complaint named both Luz and Stanley Tenpenny as parties, and it also named several parties-in-interest, including the United States Internal Revenue Service.[2] The Complaint sought to reform the 2006 mortgage to add Luz as a signatory based on the failure to have Luz sign the mortgage, which, U.S. Bank alleged, was an inadvertent error based on mutual or unilateral mistake. According to U.S. Bank, reforming the mortgage to add Luz as a party would “be consistent with the Defendants' original intention in granting the Premises as security, and Plaintiff's and its predecessor's intention, by accepting as collateral for a loan, by which loan Defendants directly benefitted.” ECF No. 10-15 at 5, ¶ 27.
Luz answered the Complaint (ECF No. 10-4), asserting a number of affirmative defenses, including that the action was barred by the six-year statute of limitations in 14 M.R.S.A. § 752.
The IRS then removed the case to federal court pursuant to 28 U.S.C.A. §§ 1442 and 1444 (West 2022). After the case was removed, U.S. Bank filed, without opposition, an Amended Complaint. The Amended Complaint added counts for unjust enrichment, quantum meruit, and equitable subrogation of mortgage. Luz answered the Amended Complaint, again raising the statute-of-limitations defense. Stanley and two of the parties-in-interest did not file answers, and default was entered against them at U.S. Bank's request. Two other parties-in-interest, the IRS and Maine Revenue Services, were later dismissed from the case.[3]
Luz Tenpenny filed a Motion for Judgment on the Pleadings (ECF No. 37) pursuant to Fed.R.Civ.P. 12(c), asserting that all of U.S. Bank's claims are barred by the six-year statute of limitations in 14 M.R.S.A. § 752. U.S. Bank filed an objection (ECF No. 44), contending, among other things, that (1) the twenty-year statute of limitations in 14 M.R.S.A. § 751 (West 2022) applies to its Complaint; (2) even if the six-year statute of limitations applies, the cause of action did not accrue until Luz had stopped making payments on the mortgage; and (3) Luz must be precluded from asserting any defense in this case, including that U.S. Bank's claims were barred by the statute of limitations, based on the doctrine of judicial estoppel. With respect to its last argument, U.S. Bank asserts that in a previous proceeding in the Bankruptcy Court, Luz represented that her interest in the Property was subject to the mortgage and that no portion of the Property was not subject to the mortgage.
US Bank then filed a Second Motion to Amend the Complaint (ECF No. 38), requesting to amend the Amended Complaint to add facts supporting its assertion of judicial estoppel. The Second Motion to Amend also requests that U.S. Bank be permitted to add a claim of fraud against Stanley and include facts supporting that claim. U.S. Bank asserts that it discovered Stanley's fraud while conducting a title search in 2021.
Luz opposes the Second Motion to Amend the Complaint to the extent that it seeks to assert judicial estoppel against her, arguing that the claims that she made in her bankruptcy case are not actually inconsistent with either (1) her representation in this case that an undivided one-half interest in the Property was not subject to the 2006 mortgage or (2) her representation in this case that all of the counts of U.S. Bank's Amended Complaint were barred by the statute of limitations. She also argues that her representations in this case would not give her an unfair advantage, which weighs against the application of judicial estoppel. Therefore, Luz argues, it would be futile for U.S. Bank to amend the Amended Complaint.
Stanley appeared in the case to object (ECF No. 46) to the Second Motion to Amend the Complaint. In addition to joining in Luz's arguments, Stanley asserts that amending the Amended Complaint would be futile because U.S. Bank's predecessor-in-interest knew, or should have known, that Stanley and Luz co-owned the property because Stanley disclosed his marital status in his 2006 mortgage application and the deed establishing the joint tenancy between Luz and Stanley was a matter of public record. Additionally, Stanley argues that the joint ownership- and, presumably, any alleged fraud-should have been discovered when the mortgage was signed, when U.S. Bank's predecessor-in-interest brought a foreclosure complaint, or when U.S. Bank's predecessor-in-interest participated in Stanley's bankruptcy case.
Finally, U.S. Bank filed a Motion to Stay (ECF No. 39), which is related to its request to amend the Amended Complaint to add a claim of fraud against Stanley. U.S. Bank states that because Stanley has been discharged in Chapter 7 bankruptcy, “it may be necessary for the Plaintiff to obtain relief in his bankruptcy before it can amend the complaint in this action to allege fraud.” ECF No. 39 at 2, ¶ 7. U.S. Bank does not explain precisely what relief may be necessary or why it is uncertain that such relief would be necessary. Because obtaining such relief would take time, U.S. Bank requests that this matter be stayed.
Luz opposes the Motion to Stay, contending that she would be significantly prejudiced by a stay because it would deny her “the timely resolution of her motion.” ECF No. 43 at 2. She further notes that it “strains credibility” for U.S. Bank to assert that the fraud was not discovered until 2021 because U.S. Bank's predecessor-in-interest already brought a foreclosure claim against Stanley over ten years ago, and the alleged fraud should have been discovered during the title search that was conducted as part of that action. ECF No. 43 at 3. She further argues that considerations of equity, hardship, and judicial economy weigh in favor of denying the request for a stay.
After oral argument, all three pending motions are ready for decision.[4]
A motion for judgment on the pleadings under Rule 12(c) is “treated much like a Rule 12(b)(6) motion to dismiss.” Perez-Acevedo v. Rivero-Cubano, 520 F.3d 26, 29 (1st Cir. 2008). A Rule 12(c) motion “calls for an assessment of the merits of the case at an...
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