Federal National Mortgage Association v. Onewest Bank

• Court: Superior Court of Maine
• Decided: September 22, 2017
• Docket: CUMre-16-0310
• Status: Unpublished

Opinion

STATE: OF MAl~JE Cumbe:-ian:i, :,,2 C 12:k's Office

STATE OF MAINE SUPERIOR COURT

Cumberland, ss.

FEDERAL NATIONAL MORTGAGE ASSOCIATION

Plaintiff

v. Docket No. PORSC-RE-16-0310

ONEWEST BANK, N.A. et als.

Defendahts

ORDER ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

This is a foreclosure/ quiet title case brought by Federal National Mortgage

Association (FNMA) to remove a cloud on its title to property located in Gorham,

Maine. This action is necessary because several entities and individuals who may

hold or claim interests in the property were not joined as parties in a previous

foreclosure action commenced by FNMA's predecessor in interest.

Plaintiff FNMA has filed a motion for summary judgment that has been

opposed only by Defendant Bank of America, N.A. (BANA), which FNMA's

amended complaint identifies as a junior mortgage holder. BANA contends that

FNMA's ownership interest is subject to BANA's mortgage interest under the

doctrine of equitable subrogation. Specifically, BANA contends that, although its

predecessor's mortgage is junior to FNMA's predecessor's mortgage, BANA's

predecessor paid off a mortgage that was senior to FNMA's predecessor's mortgage,

so BANA is subrogated to the position of the prior mortgagor and its interest takes priority over FNMA's interest. The issue of priority as is the sole contested issue

addressed in the motion filings.

Oral argument on FNMA's summary judgment motion was held August 29,

2017, at which point the court took the motion under advisement.

For the reasons set forth below, the court is granting the Plaintiffs Motion.

Factual Background

The underlying facts are convoluted, if not confusing. The following

summary is taken from the parties' respective statements of fact.

In 2005, Sondra Allen acquired a parcel of about eight acres located on Middle

Jam Road in the Town of Gorham, Maine, by virtue of a deed from Clarice Allen,

recorded at Book 22483, Page 322, Cumberland County Registry of Deeds. 1 Clarice

Allen obtained her title through a deed to her from the Estate of Ernest Marsh dated

January 9, 1984 and recorded at Book 6371, Page 332.

Neither the 1984 deed to Clarice Allen nor the 2005 deed from Clarice Allen

to Sondra Allen contains a metes and bounds description of the property conveyed.

Instead, the two deeds incorporate by reference the property conveyed in two deeds

recorded in 1909 and 1916, neither of which is in the record

In 2006, Sondra Allen executed two deeds to herself relating to the Middle

Jam Road property.

One deed, dated September 21, 2006 and recorded September 28, 2006 at

Book 24412, Page 43, contains 11 calls, and is said to describe property four acres in

1 All book and page references herein refer to the Cumberland County Registry of Deeds .

2 area constituting a portion of the property conveyed to Sondra Allen by Clarice

Allen in 2005. The Town tax assessment material included in BANA's opposition

identifies the property as being 6.2 acres in area. The property conveyed in this deed

is described as being at 10 Middle Jam Road. The deed covering this property is

referred to herein as "the 10 Middle Jam Road deed."

The other deed, dated July 14, 2006 and recorded September 28, 2006, 1s

recorded at Book 24412, Page 45. This deed contains a metes and bound description

in six calls and is said to describe property four acres in area. The Town tax

assessment material included in BANA's opposition identifies the property as being

only 2.0 acres in area. This deed asserts that it is intended to convey what Sondra

Allen acquired from Clarice Allen in 2005, but that appears to be a mistake. The

deed describes a parcel adjoining the lot described in the 10 Middle Jam Road deed.

The second call in both deeds-821.3 feet "along the land of the Grantor"-­

indicates that the two deeds were meant to divide Sondra Allen's property into two

lots. Because her 2005 deed from Clarice Allen does not contain a metes and bounds

description, however, the record does not enable the court to confirm that the two

2006 deeds describe all of what Sondra Allen had acquired under the 2005 deed.

Around the same time, Sondra Allen took out a $129,000 mortgage loan from

a lender called America's Wholesale Lender (AWL). The record contains a

corrective mortgage recorded September 29, 2006 at Book 24415, Page 1. The

property description annexed to the mortgage is the same as that shown in the 2005

3 Clarice Allen deed to Sondra Allen, meaning that the AWL mortgage apparently

covers both of the lots created by the two deeds she had just recorded.

In March 2007, Sondra Allen took out another mortgage loan, this time with

IndyMac Bank, FSB (IndyMac). The mortgage is dated March 6, 2007 and

recorded in the Cumberland County Registry of Deeds in Book 24925, Page 114

("the IndyMac Mortgage"). The property description attached to the mortgage is

the same as that contained in the 10 Middle Jam Road deed at Book 24412, Page 43.

Although the IndyMac mortgage appears to cover part of the property that

Sondra Allen had previously mortgaged to AWL in 2006, the record does not

indicate that any of the IndyMac loan proceeds were used to pay off or pay down the

AWL mortgage.

In 2010, Sondra Allen conveyed to Scott Davies property described in a deed

recorded at Book 27757, Page 80 on May 7, 2010. That property is referred to as

"the Davies lot." The address assigned to the Davies lot appears to be 12 Middle

Jam Road. The metes and bounds description for the Davies lot does not match the

description of either of the two lots Sondra Allen created in 2006-the 10 Middle

Jam Road lot and the adjoining lot. Thus, in deeding over the Davies lot, Sondra

Allen created a new lot.

It is not possible on this record to determine where the new Davies lot lies in

relation to the two lots she created in 2006. There are no surveys in the record and

the deed for the Davies lot does not refer to either of the two lots created in 2006.

The Davies lot might lie entirely within one or the other of the two 2006 lots or it

4 might straddle the two. FNMA and BANA both seem to assume that there is some

overlap between the Davies lot and the 10 Middle Jam Road lot; otherwise, there

would be no priority issue between them, so the court will proceed on that basis. 2

Scott Davies financed his purchase of the Davies lot by means of a mortgage

loan from Merrimack Mortgage in the amount of $171,428. Merrimack's mortgage

covers the same property described in the deed to Scott Davies. A portion of the

proceeds of the Merrimack loan to Scott Davies was used to pay off the AWL loan.

The payoff figure was $146,958.43. BANA now holds the mortgage on the Davies

lot and BANA's equitable subrogation claim is based on Merrimack's payoff of the

AWL loan.

Also m 2010, OneWest Bank, the successor to IndyMac, commenced a

foreclosure action based on the IndyMac loan and later obtained a foreclosure

judgment. See OneWest Bank, FSB v. Sondra Allen, Me. Super. Ct., Cum. Cty., Docket

RE-10-48. OWB was the high bidder at the foreclosure auction, and has since

assigned its rights to FNMA. Because OneWest did not name Scott Davies, BANA

2 If there is no overlap between the 10 Middle Jam Road lot that FNMA owns and the Davies lot on which BANA holds a mortgage, then there is nothing in dispute between BANA and FNMA. However, if the two lots do overlap, relief not raised or sought in this case may be needed to resolve all issues between FNMA and BANA, such as an alignment of boundaries, partition or other resolution of the overlap. Because FNMA and BANA have neither raised those issues nor given this court a basis on which to address them, they will be left to the future. All that the judgment that the court is issuing in this case does is say that FNMA's ownership interest in the 10 Middle Jam Road lot takes priority over BANA's interest in whatever part of the 12 Middle Jam Road lot overlaps with the 10 Middle Jam Road lot.

5 and other defendants, FNMA as successor to OneWest has brought this case to clear

its title. 3

Standard ofReview

"The function of a summary judgment is to permit a court, prior to trial, to

determine whether there exists a triable issue of fact or whether the question[s]

before the court [are] solely ... of law." Bouchard v. American Orthodontics, 661 A.2d

1143, 44 (Me. 1995).

Summary judgment 1s appropriate where there are no genume issues of

material fact and the moving party is entitled to judgment as a matter oflaw. M.R.

Civ. P. 56(c); see also Levine v. R.B.K. Cary Corp., 2001 ME 77, , 4, 770 A.2d 653. A

"material fact" is one that can affect the outcome of the case, and a genuine issue

exists when there is sufficient evidence for a fact finder to choose between competing

versions of the fact. Lougee Conservancy v. City-Mortgage, Inc., 2012 ME 103, , 11, 48

A.sd 774.

Maine Rule of Civil 56 requires that motions for and opposition to summary

judgment must be supported by separate, short, and concise statements of material

facts. M.R. Civ. P. 56(h)(l)-(2). Each assertion of fact set forth in a statement of

material facts must be supported by a citation to the specific page or paragraph of

3 Both the IndyMac mortgage from which FNMA's interest derives and the Merrimack mortgage from which BANA's interest derives involved MERS as nominee for the mortgage lenders. Neither FNMA nor BANA has raised any issue in this case as to the validity of assignments of mortgages by or to MERS. See Bank efAmerica v. Greenleaf, 2014 ME 89, ~ 12, 96 A.sd 700; Mortgage Electronic Registration System, Inc. v. Saunders, 2010 ME 79, ~ ~ 10-11, 2 A.sd 289 . Accordingly, the issue will be deemed waived.

6 identified record evidence supporting the assertion. M.R. Civ. P. 56(h)(4). The

record evidence cited must be "of a quality that could be admissible at trial." Levine

v. R.B.K. Cal:y Corp., 2001 ME 77, ~ 6, 770 A.2d 653. The court may disregard any

assertions of fact not properly supported. M.R. Civ. P. 56(h)(4).

When deciding a motion for summary judgment, the court reviews the

evidence in the light most favorable to the non-moving party. Id.

Anal:ysis

Based on a review of the various deeds and mortgages referred to above, as

well as the parties' legal memoranda, the following observations are in order:

Because Sondra Allen's two 2006 deeds conveyed property to herself, she still

owned all of what she acquired from Clarice Brown in 2005. Because the property

description in the AWL mortgage is the same as that in the 2005 deed by which

Sondra Allen acquired the Middle Jam Road property, AWL's 2006 mortgage

covered all of what Sondra Allen owned.

The IndyMac mortgage covered only the 10 Middle Jam Road lot created by

virtue of the 2006 deed recorded at Book 24412, Page 43. However, because the

AWL mortgage covered both that lot and the other lot created by the other 2006

deed, the IndyMac mortgage was junior to the AWL mortgage.

Why IndyMac made the loan to Sondra Allen in 2007 without requiring the

AWL mortgage to be paid off is unexplained in the record. The Merrimack

mortgage now held by BANA covered only what Sondra Allen conveyed to Scott

7 Davies. Why Merrimack made the loan to Scott Davies without requiring the

IndyMac loan to be paid off is also unexplained in the record.

The court is inclined to think, contrary to FNMA's argument, that the

doctrine of equitable subrogation applies in principle to these facts. See United

Carolina Bank v. Beesley, 663 A.2d 574 (Me. 1995). The Beesley case involved a lender

being equitably subrogated to a prior lender's claim against borrowers but the

doctrine applies equally to priority among mortgage lenders and lienholders.

BANA's predecessor, Merrimack, paid off the AWL loan. Had that loan not been

paid off, FNMA's ownership interest would be subordinate to the AWL loan. Thus,

BANA has shown that FNMA did benefit from the payoff The fact that the

IndyMac mortgage and the Merrimack mortgage involved different borrowers does

not, in this court's view, defeat BANA's claim, because the doctrine can apply to give

a junior creditor who satisfies a prior encumbrance the priority assigned to the prior

encumbrance. See G.E. Capital Mortgage Services, Inc. v. Levenson, 338 Md. 227, 657

A.2d 1170 (Md. 1995); Dodge City of Spartanburg, Inc. v. Jones, 317 S.C. 491, 454

S.E.2d 918 (S.C. Ct. App. 1995); Metropolitan Life Insurance Co. v. Craven, 164 Ore.

274, 101 P.2d 237 (Ore. 1940).

On the other hand, the court concludes that BANA's equitable subrogation

claim is untimely. BANA's answer to FNMA's Amended Complaint was docketed

January 27, 2017. BANA was on notice through the Amended Complaint that

FNMA was asking the court to adjudicate priorities as between FNMA and BANA

and the other Defendant creditors or lienholders. BANA's answer did not raise any

8 affirmative defenses and did not in any way raise any issue regarding priority.

Arguably, any subrogation claim is an affirmative claim that has to be raised in a

complaint, counterclaim or similar pleading seeking affirmative relief However, at a

minimum it is an affirmative defense to an opposing creditor's claim of priority, and

it should have been raised in BANA's answer, at minimum.

The court's February 28, 2017 scheduling order set a discovery deadline of

June 1, 2017. Had BANA's answer identified equitable subrogation as an affirmative

defense or otherwise indicated that BANA was claiming priority over FNMA's

ownership interest, FNMA could have pursued discovery. FNMA's Motion for

Summary Judgment was filed in May 2017, before the discovery deadline, so even

then, BANA could have asked for discovery to be extended. Instead, as far as the

record shows, the first BANA indicated it was claiming priority based on equitable

subrogation was in the opposition papers it filed after the discovery deadline.

Resolution of the motion was delayed so oral argument could be held-not

any party's fault but a factor that argues against re-opening discovery, which the

court in fairness would have to allow on FNMA's request, if the court were to allow

BANA's untimely equitable subrogation claim to defeat FNMA's Motion.

Under these circumstances, the court declines to consider the equitable

subrogation claim that BANA raises. Because that is the only basis for BANA's

opposition, Plaintiff's Motion will be granted.

Accordingly, it is ORDERED: Plaintiff's Motion for Summary Judgment is

granted. A separate judgment is being issued herewith.

9 I •

Parties & Counsel:

Plaintiff: Federal National Mortgage Association Counsel: Santo Longo, Esq.

Defendant: Onewest Bank NA Counsel: Pro Se

Defendant: each LLC Counsel: Pro Se

D.e fendant: Midland Funding LLC Counsel: Pro Se

Defendant: Dept of Treasury Internal Revenue Service Counsel: Andrew Lizotte, Esq

Defendant: State of Maine, Maine Revenue Services Counsel: Pro Se

Defendant: Mortgage Electronic Registration System Counsel: Pro Se

Defendant: Merrimack Mortgage Company Inc. Counsel: Christopher Hawkins, Esq.

Defendant: Scott H. Davies Counsel: Pro Se

Defendant: Bank of America NA Counsel: James Coughenour Jr., Esq.