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Green Tree Servicing, LLC v. Cope

Supreme Court of Maine

April 11, 2017


          Argued: December 14, 2016

         Reporter of Decisions

          Joshua Klein-Golden, Esq. (orally), Clifford & Golden, PA, Lisbon Falls, for appellant Thelma J. Cope

          Leonard F. Morley, Jr., Esq., William B. Jordan, Esq., and Corey S. Hadley, Esq. (orally), Shapiro & Morley, LLC, South Portland, for appellee Green Tree Servicing, LLC

          Thomas A. Cox, Esq., Portland, for amicus curiae National Consumer Law Center

          Decided: April 11, 2017 Panel: ALEXANDER, MEAD, GORMAN, JABAR, and HJELM, JJ.

          HJELM, J.

         [¶1] Green Tree Servicing, LLC, commenced this residential foreclosure action against Thelma J. Cope even though it did not own the mortgage on Copes property and therefore did not have standing. Shortly before the trial was to be held, Green Tree moved to dismiss its complaint without prejudice for lack of standing. See M.R. Civ. P. 41(a)(2). The Superior Court (Cumberland County, Mills, J.) dismissed the complaint but ordered that the dismissal was with prejudice as a sanction for Green Trees pretrial conduct. Green Tree moved for reconsideration, see M.R. Civ. P. 59(e), and the court entered an amended order that dismissed the action without prejudice based on its conclusion that it did not have the authority to impose a dismissal with prejudice, even as a sanction, because Green Tree did not have standing to bring the foreclosure complaint in the first place.

         [¶2] On this resulting appeal by Cope, [1] we clarify that, when the circumstances warrant, a trial court retains the authority to dismiss a foreclosure complaint with prejudice as a sanction, even when the plaintiff lacks standing. We therefore vacate the judgment and remand for further proceedings.

         I. BACKGROUND

         [¶3] In May 2014, Green Tree Servicing, LLC, filed a complaint against Cope to foreclose on her residential property located in Portland.[2] Green Tree alleged that Cope had executed a promissory note in favor of First Magnus Financial Corporation in July 2005; that the note was secured by a mortgage in favor of Mortgage Electronic Registration Systems, Inc. (MERS), as "nominee" for First Magnus Financial Corporation; that Green Tree had acquired an interest in the mortgage through a series of assignments beginning with an initial assignment from MERS; that Green Tree possessed the original note endorsed in blank; and that Cope had not made any payments on the note since June 2009.

         [¶4] After an unsuccessful mediation session held in September 2014, the court issued a scheduling order that established a discovery deadline of March 16, 2015, and a deadline for motions fourteen days after the close of discovery. In late May, the parties were notified that a trial would be held on July 21. On July 1-three months after the court-ordered deadline to file motions-Green Tree moved to amend its complaint to join First Magnus Financial Corporation Liquidating Trust, the successor to the original lender, as a defendant, and to add a claim for a declaratory judgment that would determine the parties respective interests in the note and mortgage. See M.R. Civ. P. 15(a). These proposed amendments related to Green Trees deficient interest in the mortgage-a problem that can be traced to an initial assignment by MERS as "nominee" for the original lender, ultimately resulting in Green Tree not having standing to foreclose on the property. See Bank of Am., N.A., v. Greenleaf, 2014 ME 89, ¶¶ 12-17, 96 A.3d 700 (holding that a bank did not have the requisite standing to foreclose on the defendants property because the bank had acquired the mortgage from MERS, as "nominee" for the original lender, and therefore had only the right to record the mortgage, but no other rights-including the right to seek foreclosure).[3] The court denied the motion because it was untimely.

         [¶5] On July 13, Green Tree filed a motion to dismiss its foreclosure complaint without prejudice pursuant to M.R. Civ. P. 41(a)(2), acknowledging that it lacked standing to proceed with the action. Cope opposed the motion, arguing that the action should be dismissed with prejudice or alternatively that the court should enter a judgment in her favor. At a hearing on Green Trees motion, [4] the court ordered Green Tree to submit an affidavit describing its efforts to locate the original lender and remedy the standing defect. Green Tree filed the requested affidavit in August 2015.

         [¶6] In January 2016, the court issued an order denying Green Trees motion to dismiss its complaint without prejudice, instead dismissing the complaint with prejudice. In its order, the court identified two bases for that decision. First, the court found that this was the third foreclosure complaint filed against Cope based on the same note and mortgage.[5] The first complaint had been voluntarily dismissed without prejudice based on a stipulation of the parties to that action pursuant to Rule 41(a)(1), and the second complaint had been dismissed without prejudice by court order on the plaintiffs motion pursuant to Rule 41(a)(2).[6] The court reasoned that because two foreclosure actions against Cope had been dismissed previously, "[f]airness dictates" that Green Tree should not receive more favorable treatment than it would have been allowed pursuant to Rule 41(a)(1), which ...

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