WAYNE KNOPE et al.
GREEN TREE SERVICING, LLC
Argued: June 9, 2016
Patrick S. Bedard, Esq. (orally), Bedard & Bobrow, P.C.,
Eliot, for appellants Dorothy and Wayne Knope
A. Mohan, Esq., and Richard Briansky, Esq. (orally), McCarter
& English, LLP, Hartford, Connecticut, and Paul J.
Greene, Esq., Global Sports Advocates, LLC, Portland, for
appellee Green Tree Servicing, LLC
ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.
Dorothy and Wayne Knope appeal from a judgment of the
Superior Court (York County, O'Neil, /.),
following a non-jury trial. The judgment applied principles
of unjust enrichment to determine that the Knopes are liable
for certain charges beyond undisputed amounts of principal
and interest owed pursuant to a promissory note owned by
Green Tree Servicing, LLC. The note had been secured by a
mortgage, but an assignment failed to convey to Green Tree
all of the rights created by the mortgage.
The Knopes contend that the contractual relationship between
the parties, as established by the note, bars application of
rules of unjust enrichment to allow retention of funds that
were obligations pursuant to the ineffective mortgage but
were not obligations pursuant to the note. Because the trial
court, in its decision, did not sufficiently distinguish
charges that were obligations pursuant to the note from
charges that were obligations only pursuant to the mortgage,
we vacate the judgment and remand for the court to determine
what amount, if any, Green Tree may retain pursuant to the
The following facts were either alleged in the Knopes'
complaint and deemed admitted because a default was entered
against Green Tree, see M.R. Civ. P. 8(d);
Ireland v. Carpenter, 2005 ME 98, ¶ 18, 879
A.2d 35, or found by the trial court and supported by the
evidence in the record at trial. In November 2004, Dorothy
and Wayne Knope executed and delivered a promissory note for
$324, 940 payable to GMAC Mortgage Corporation, to purchase a
house in Eliot. The house was to be an income-producing
property, not a residence for the Knopes. To secure the debt,
the Knopes executed a mortgage deed to Mortgage Electronic
Registration Systems, Inc. (MERS), as nominee for GMAC
Mortgage Corporation. In early 2013, Green Tree purchased
various assets and mortgage servicing rights from GMAC,
including the Knopes' loan. MERS purportedly assigned the
mortgage to Green Tree in April 2013, but because MERS had
acquired only the right to record the mortgage, the
assignment to Green Tree conveyed nothing more than that
right. See Bank of America, N.A. v. Greenleaf, 2014
ME 89, ¶¶ 15-16, 96A.3d7OO.
In January 2013, the pipes in the second floor of the house
burst, resulting in severe water damage that rendered the
house uninhabitable. Faced with significant costs to repair
the house, the Knopes did not make any further mortgage
payments except for the escrow portion of two monthly
payments. In May 2014, pursuant to 14 M.R.S. § 6301
(2016), the Knopes sent Green Tree a written demand for an
accounting of their liability under the note and mortgage,
but, as with earlier attempts at contact by the Knopes, Green
Tree did not respond.
In May 2014, the Knopes filed a complaint against Green Tree,
seeking a declaratory judgment as to the amount owed to Green
Tree on their note and mortgage, an accounting pursuant to
section 6301, equitable relief, and a determination of
impracticability of performance because the Knopes had been
unable to make payments due to the loss of rental income.
Shortly after the Knopes filed this action, Green Tree
commenced a separate action for foreclosure.
Green Tree failed to file a timely answer to the Knopes'
complaint, and on the Knopes' motion, the clerk entered a
default. See M.R. Civ. P. 55(a). After Green Tree
moved unsuccessfully to set aside the default, the court
ordered that a hearing be held to determine the relief
available to the Knopes.
While this action was pending, but before the hearing was
held, the Knopes repaired and then sold the property.
Pursuant to an agreement reached by the parties, the
foreclosure action was dismissed, and the Knopes paid to
Green Tree both the undisputed portion of their debt on the
note and, subject to the outcome of this action, additional
amounts that were in dispute. Specifically, the Knopes paid
to Green Tree $338, 892.45, which included (1) the amount
that the parties agreed was owed for principal and interest
on the note, and (2) an additional amount of $19, 265.68
charged by Green Tree but contested by the Knopes. The
disputed amount represented reimbursements for payments that
had been made by Green Tree: $14, 701.49 in property taxes
and insurance on the property; $945 in property preservation
fees; $2, 769.19 in "foreclosure fees"; and $850 in
"legal fees." The parties agreed that they would
litigate the question of whether Green Tree was entitled to
retain all or part of that disputed sum.
The court held a non-jury trial in July 2015, where the
Knopes pressed only their claim for a judgment declaring that
Green Tree was not entitled to retain the disputed sum. The
evidence included a copy of the promissory note, which the
Knopes agreed had been owned by Green Tree before it was
discharged. The note provided that in the event of a default,
the holder of the note would be entitled to recover the costs
and expenses of enforcing the note, including reasonable
attorney fees. A mortgage deed was also admitted into
evidence. The mortgage deed specified that the lender would
be entitled to reimbursement for its payment of property
taxes; hazard and property insurance; costs to secure and
protect the property; and, in the event of nonpayment on the
note, attorney fees and costs to foreclose.
The Knopes argued at trial that the mortgage assignment from
MERS to Green Tree was not effective to convey the
mortgage-based rights for reimbursement of expenses paid by
Green Tree and that Green Tree was therefore not entitled to
retain payments for expenses that were allowed only by the
mortgage. Because the Knopes had not previously raised a
question regarding the effectiveness of the assignment, and
in light of Green Tree's assertion of surprise, the court
granted Green Tree leave to submit additional evidence on the
issue and granted the parties leave to file post-trial
In September 2015, the court issued a judgment in favor of
Green Tree based on a theory of unjust enrichment. The court
determined that the mortgage assignment from MERS to Green
Tree was not sufficient to give Green Tree "contractual
authority to enforce rights created by the mortgage."
"[T]o avoid unjust enrichment, " the judgment
allowed Green Tree to retain the entire disputed amount
because Green Tree had paid expenses that were the
Knopes' responsibility under the mortgage to protect
Green Tree's "security interest, " and to keep
the property saleable while the Knopes were in default. The
Knopes timely appealed.
The Knopes challenge the court's application of unjust
enrichment to award Green Tree the right to retain the
disputed sum. We review both a default judgment and a
declaratory judgment for abuse of discretion. See Richter
v. Ercolini, 2010 ME 38, ¶ 18, 994 A.2d 404;
Linnehan Leasing v. State Tax Assessor, 2006 ME 33,
¶ 30, 898 A.2d 408.
To prevail on a claim for unjust enrichment, the complaining
party must show that "(1) it conferred a benefit on the
other party; (2) the other party had appreciation or
knowledge of the benefit; and (3) the acceptance or retention
of the benefit was under such circumstances as to make it
inequitable for it to retain the benefit without payment of
its value." Maine Eye Care Assocs., P.A. v.
Gorman, 2008 ME 36, ¶ 17, 942 A.2d 707 (citation
omitted). In this way, the doctrine of unjust enrichment
allows "recovery for the value of the benefit retained
when there is no contractual relationship, but when, on the
grounds of fairness and justice, the law compels performance
of a legal and moral duty to pay." Paffhausen v.
Balano, 1998 ME 47, ¶ 6, 708 A.2d 269.
The existence of a contractual relationship between the
parties that addresses the sums in dispute "precludes
recovery on a theory of unjust enrichment." Nadeau
v. Pitman,1999 ME 104, ¶ 14, 731 A.2d 863;
Paffhausen,1998 ME 47, ¶ 6, 708 A.2d 269.
Thus, a limiting principle on the availability of restitution
based on unjust enrichment is that "[a] valid contract
defines the obligations of the parties as to matters
within its scope, displacing to that extent any
inquiry into unjust enrichment." Restatement (Third) of
Restitution & Unjust Enrichment § 2(2) (Am. Law
Inst. 2011) (emphasis added). The rationale behind this rule
is that courts should not intervene to redefine rights and
obligations that parties have already defined for themselves
through a voluntary contract. See Wal-Noon Corp. v.
Hill,119 Cal.Rptr. 646, 651 (Cal.Ct.App. 1975)
("[W]here the parties have freely, fairly and
voluntarily bargained for ...