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U.S. Bank Trust N.A. v. Jones

United States District Court, D. Maine

June 26, 2018

JULIA L. JONES Defendant.



         A lender seeks to foreclose after a borrower defaulted on her loan payments. Because the right to cure letter overstated the amount that the borrower had to pay in order to cure her default and Maine law requires strict adherence to all statutory foreclosure requirements, including an accurate itemization of all past due amounts that caused the loan to be in default and the total amount due to cure the default, the lender is not entitled to foreclose on the property. However, the same fatal error does not apply with the lender's lawsuit on its promissory note and breach of contract counts and the Court grants the lender judgment on those counts. The Court also grants the lender's request to correct the legal description of the subject property in the mortgage deed.

         I. BACKGROUND

         A. Procedural History

         On December 14, 2016, U.S. Bank Trust, N.A., as Trustee for LSF9 Master Participation Trust (U.S. Bank), filed a civil action against Julia L. Jones, asserting that Ms. Jones had failed to pay U.S. Bank in accordance with the terms of a promissory note and demanding that the property that secured the note be foreclosed. Compl. (ECF No. 1). More specifically, U.S. Bank's Complaint contains six counts: (1) Count One-foreclosure; (2) Count Two-breach of note; (3) Count Three-breach of contract; (4) Count Four-quantum meruit; (5) Count Five-unjust enrichment; and (6) Count Six-reformation of mortgage. Id. On February 10, 2017, Ms. Jones answered the Complaint. Def.'s Answer to Pl.'s Compl. (ECF No. 5) (Answer).

         On the same day, Ms. Jones moved to dismiss counts IV and V of the Complaint. Def.'s Mot. to Dismiss Counts IV & V of Pl.'s Compl. (ECF No. 6). The Court held oral argument on June 29, 2017. Minute Entry for Motion Hearing (ECF No. 15). After oral argument and upon agreement of the parties, the Court dismissed without prejudice Counts IV and V. Order (ECF No. 16). At a pretrial conference on September 7, 2017, the parties also agreed that U.S. Bank is entitled to the reformation it sought in Count VI. Rep. of Final Pretrial Conference and Order at 1 (ECF No. 23).

         On November 6, 2017, a bench trial was held on Counts I, II, and III. Minute Entry for Bench Trial (ECF No. 29). On December 6, 2017, Ms. Jones filed a post-trial brief. Def.'s Post Trial Mem. (ECF No. 34) (Def.'s Br.). U.S. Bank filed a reply on January 12, 2018. Pl.'s Reply to the Def.'s Post Trial Mem. (ECF No. 36) (Pl.'s Reply). Contemporaneously, on December 7, 2017, U.S. Bank filed its post-trial brief. Pl.'s Post Trial Mem. (ECF No. 35) (Pl.'s Br.). Ms. Jones filed her reply on January 16, 2018. Def.'s Post Trial Reply Mem. (ECF No. 37) (Def.'s Reply).

         B. Facts

         U.S. Bank is a corporation organized under the laws of the state of Minnesota, with its principal place of business located at 425 Walnut Street, Cincinnati, Ohio. Compl. ¶ 4; Answer ¶ 4. Ms. Jones is a resident of the town of Raymond, County of Cumberland, and state of Maine. Compl. ¶ 5; Answer ¶ 5.

         On July 21, 2004, James L. Jones and Linda P. Jones conveyed property situated at 139 Conesca Road, Raymond, Maine, 04071, by Warranty Deed recorded in the Cumberland County Registry of Deeds in Book 21580, Page 18, as corrected by Corrective Warranty Deed recorded in Book 22049, Page 213. Compl. ¶ 6, 8; Answer ¶ 6, 8.

         On April 17, 2007, Ms. Jones, in return for a loan, executed and delivered to Downeast Mortgage Corporation a note in the amount of $160, 000.00 (the Note). Compl. ¶ 7; Answer ¶ 7; Pl.'s Ex. 1. On April 18, 2007, to secure the Note, Ms. Jones executed a Mortgage Deed in favor of Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for Downeast Mortgage Corporation, securing the property located at 139 Conesca Road. Compl. ¶ 8; Answer ¶ 8; Pl.'s Ex. 2. The mortgage deed is recorded in the Cumberland County Registry of Deeds in Book 25033, Page 312. Id. On September 1, 2011, Ms. Jones executed a Home Affordable Modification Agreement which decreased the principal balance of the Note to $159, 019.35. Compl. ¶ 9; Answer ¶ 9; Pl.'s Ex. 3.

         On June 7, 2013, MERS, as nominee for Downeast Mortgage, assigned the mortgage to Bank of America, N.A. and recorded the assignment in the Cumberland County Registry of Deeds in Book 30753, Page 215. Pl.'s Ex. 4. On April 1, 2015, the mortgage was further assigned to U.S. Bank, as recorded in Book 32188, Page 91. Pl.'s Ex. 5. The transfers were confirmed and title clarified by an order of the Maine Superior Court on July 19, 2016. Pl.'s Ex. 6.

         On August 3, 2016, Caliber Home Loans, Inc., as servicer on behalf of U.S. Bank, sent Ms. Jones a Notice of Right to Cure (Demand Letter). Compl. ¶ 13; Answer ¶ 13; Pl.'s Ex. 7. Ms. Jones failed to make the monthly payments beginning with the one due on November 1, 2012, and Ms. Jones did not make further payments after receiving the Demand Letter. Compl. ¶ 15, 24; Answer ¶ 15, 24.

         At trial, U.S. Bank sought to establish the amount due on the loan, including interest and fees, by introducing an account summary and a spreadsheet of transactions. Pl.'s Ex. 8. According to those records, as of November 1, 2017, Ms. Jones owed $155, 409.02 in unpaid principal, $21, 888.86 for an escrow account for tax and insurance payments, $43, 566.78 in uncollected interest, and $5, 593.62 in other fees and costs, for a total amount due of $226, 458.28. Id. The spreadsheet was admitted after testimony from a records custodian from Caliber Home Loans, Inc., Letycia Lopez.

         Ms. Jones is still in possession of the subject property. Compl. ¶ 19; Answer ¶ 19.


         A. Julia L. Jones' Position

         Ms. Jones argues that judgment must be entered against U.S. Bank because the Notice of Default and Right to Cure Letter was defective for several reasons. Def.'s Br. at 1; Def.'s Reply at 1-2. First, Ms. Jones claims that Maine law and the terms of the mortgage require the mortgagee-not the servicer-send the notice. Def.'s Br. at 2. Second, she contends that the figures in the demand letter were incorrect because the total included $2638.32 in a “Corporate Advance Balance” line item, which she maintains was for attorney's fees and costs that U.S. Bank had no right to recoup from her. Id. at 2-3.

         Ms. Jones also asserts that U.S. Bank's Exhibit 8, the spreadsheet of transactions for her loan, was not properly admitted into evidence or should be accorded no weight for several reasons. Id. at 3. First, Ms. Jones argues that Ms. Lopez's testimony about the “boarding”-or records transfer-of Ms. Jones' loan from a previous servicer must be disregarded and stricken as hearsay because the boarding occurred on November 11, 2014, more than a year before Caliber hired her. Id.; Def.'s Reply at 2. Second, she contends that U.S. Bank has not adequately authenticated the document because there was no testimony about the fidelity of the printout to the electronic database and the blacked out account number on the printout indicates it does not “accurately reflect the electronic information it purported to demonstrate.” Def.'s Br. at 4.

         Ms. Jones sees a number of discrepancies in the loan records which undermine their reliability. Ms. Jones says that Caliber's late charges total $432.81 in its demand letter but total $1442.70 in its September 13, 2017 spreadsheet, Def.'s Ex. 1, even though the charges should cover the same period. Def.'s Br. at 4-5. Ms. Jones suggests there is also a discrepancy between the per diem interest rates on Caliber's spreadsheets, Pl.'s Ex. 8, Def.'s Ex. 1, and a letter from the previous servicer, Seterus, Def.'s Ex. 2, and says the interest totals for the period are mathematically incorrect because they are not even multiples of the per diem interest amount. Def.'s Br. at 5-6; Def.'s Reply at 3.

         Finally, Ms. Jones urges the Court to avoid a cursory analysis of the business records exception, particularly because “the party offering the records did not actually create those records, ” but merely received them from a separate entity without “knowledge of the transmitting entity's recordkeeping practices . . . .” Def.'s Br. at 6-9; Def.'s Reply at 3. She is skeptical of so-called “integration” of business records, whereby some courts admit business records of a previous entity because a subsequent entity incorporated those records and relied upon them. Def.'s Br. at 6-9; Def.'s Reply at 3 (citing Keybank N.A. v. Quint, 2017 ME 237, 176 A.3d 717).

         B. U.S. Bank's Position

         U.S. Bank maintains that its demand letter gave proper notice under Maine law. Pl.'s Br. at 6-7; Pl.'s Reply at 1-2. It suggests, “Maine courts have neither discussed nor adopted” a requirement that the lender specifically, as opposed to the lender's servicer as its agent, mail the letter to the borrower. Pl.'s Br. at 6-7; Pl.'s Reply at 1-2. U.S. Bank asserts that it has met all of the elements for foreclosure, but that even if the court determines otherwise, it is still entitled to relief on its underlying contract claims contained in Counts II and III. Pl.'s Br. at 7-9.

         Regarding the per diem interest calculation, U.S. Bank explains that it “can be calculated by multiplying the principal amount of the loan . . . by [the] (annual percentage rate of interest), and dividing by 365.” Id. at 9 (quoting Frazier v. HSBC, 401 Fed.Appx. 436, 468 n. 2 (11th Cir. 2010). U.S. Bank maintains that the $23.42 figure in its spreadsheets is correct. Id.

         Regarding the redaction of the financial account number, U.S. Bank insists that it was only complying with Federal Rule of Civil Procedure 5.2 to protect the plaintiff's privacy, and that U.S. Bank should not be penalized because that would lead to an absurd result. Pl.'s Reply at 3. It argues that there is no genuine question that the duplicate document accurately reflects Caliber's original electronic records. Id. at 3-4.

         U.S. Bank contends that its spreadsheet was properly admitted into evidence pursuant to Federal Rule of Evidence 803(6), the business records exception to the hearsay prohibition. Pl.'s Br. at 5-6. It explains that Ms. Lopez can testify about the reliability of the records even though she was not yet employed at Caliber when the documents were created, because the witness need not be the person who actually prepared the record, so long as the witness can explain and be cross examined concerning the manner in which the records are made and kept. Pl.'s Reply at 2-3.


         A. Maine's Foreclosure Requirements

         There are eight elements of proof that a plaintiff must meet in order to support a judgment of foreclosure under 14 M.R.S. § 6321:

[1] the existence of the mortgage, including the book and page number of the mortgage, and an adequate description of the mortgaged premises, including the street address, if any;
[2] properly presented proof of ownership of the mortgage note and evidence of the mortgage note and the mortgage, including all assignments and endorsements of the note and the mortgage;
[3] a breach of condition in the mortgage;
[4] the amount due on the mortgage note, including any reasonable attorney fees and court costs;
[5] the order of priority and any amounts that may be due to other parties in interest, including any public utility easements;
[6] evidence of properly served notice of default and mortgagor's right to cure in compliance with statutory requirements;
[7] after January 1, 2010, proof of completed mediation (or waiver or default of mediation), when required, pursuant to the statewide foreclosure mediation program rules; and
[8] if the homeowner has not appeared in the proceeding, a statement, with a supporting affidavit, of whether or not the defendant is in military service in accordance with the Servicemembers Civil Relief Act.

Bank of Am., N.A. v. Greenleaf, 2014 ME 89, ¶ 18, 96 A.3d 700 (internal modifications and footnotes omitted) (numbering supplied) (quoting Chase Home Finance LLC v. Higgins, 2009 ME 136, ¶ 11, 985 A.2d 508. The Maine Supreme Judicial Court has also repeatedly emphasized that “[a] plaintiff seeking a foreclosure judgment ...

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