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

United States District Court, D. Maine

December 2, 2019

U.S. BANK TRUST, N.A., AS TRUSTEE FOR LSF11 MASTER PARTICIPATION TRUST, Plaintiff,
v.
AARON CUNNINGHAM and LISA CUNNINGHAM, Defendants, MAINE REVENUE SERVICES and MAINE DEPARTMENT OF HEALTH AND HUMAN SERVICES DIVISION OF SUPPORT ENFORCEMENT AND RECOVERY, Parties-in-Interest.

          ORDER ON PLAINTIFF'S MOTION FOR APPROVAL OF CONSENT JUDGMENT

          JOHN A. WOODCOCK, JR. UNITED STATES DISTRICT JUDGE

         Having concluded that mortgagee in this foreclosure case has complied with Maine law in demonstrating that it holds the promissory note and is the owner of the mortgage, the Court still defers final approval of the consent judgment of foreclosure to allow the mortgagee to correct a typographical error, clarify whether attorney's fees are included in the judgment, explain the order of priority and amounts due to the parties-in-interest or other parties, provide an interest rate for the post-judgment interest, and differentiate between that interest and the pre-judgment interest.

         I. BACKGROUND

         On July 1, 2019, U.S. Bank Trust, N.A., as Trustee for LSF11 Master Participation Trust (U.S. Bank), filed a foreclosure complaint against Defendants Mr. Aaron Cunningham and Ms. Lisa Cunningham and Parties-in-Interest Maine Revenue Services (MRS) and Maine Department of Health and Human Services Division of Support Enforcement and Recovery (Maine DHHS). Compl. (ECF No. 1). U.S. Bank served Mr. Cunningham on July 6, 2019, Ms. Cunningham on July 8, 2019, and Jeanne Lambrew, a commissioner designated by law to accept service of process on behalf of Maine DHHS, on July 9, 2019, and filed proof of service for the three parties on August 1, 2019. Proof of Service as to Aaron Cunningham at 2 (ECF No. 8); Proof of Service as to Lisa Cunningham at 2 (ECF No. 9); Proof of Service as to Maine Department of Health and Human Services Division of Support Enforcement and Recovery at 2 (ECF No. 11). U.S. Bank served Lisa Marchese, a deputy attorney general designated by law to accept service of process on behalf of MRS, on July 9, 2019, and filed proof of service on September 3, 2019. Proof of Service as to Maine Revenue Services at 2 (ECF No. 13).

         On July 12, 2019, Ms. Cunningham filed an answer to U.S. Bank's Complaint. Answer of Lisa Cunningham (ECF No. 5). On July 28, 2019, Maine DHHS filed an answer to the Complaint. Answer of Party-in-Interest State of Maine Department of Health and Human Services (ECF No. 6). Maine DHHS filed an amended answer to the Complaint on September 5, 2019. Am. Answer of Party-in-Interest, State of Maine Department of Health and Human Services (ECF No. 17).

         On September 3, 2019, U.S. Bank filed a motion for entry of default as to Aaron Cunningham, which the Deputy Clerk of Court granted the same day. Pl.'s Mot. for Entry of Default as to Aaron Cunningham (ECF No. 14); Order Granting Motion for Entry of Default as to Aaron Cunningham (ECF No. 15). On October 3, 2019, U.S. Bank filed a motion for entry of default as to MRS, which the Deputy Clerk of Court granted the same day. Pl.'s Mot. for Entry of Default as to Party-in-Interest, Maine Revenue Services (ECF No. 18); Order Granting Motion for Entry of Default as to Maine Revenue Services (ECF No. 19).

         On October 31, 2019, U.S. Bank moved for the Court's approval of a “Consent Judgment of Foreclosure and Sale” between U.S. Bank, Ms. Cunningham, Mr. Cunningham, and Maine DHHS. Mot. to Approve Consent J. of Foreclosure and Sale ¶¶ 3-5 (ECF No. 21). U.S. Bank attached the proposed consent judgment to the motion. Id., Attach. 1, Consent J. of Foreclosure and Sale (Consent J.).

         II. DISCUSSION

         A. Standing Issues

         1. Promissory Note

         The Court examined the documents in this case to determine whether U.S. Bank has standing to foreclose against Mr. and Ms. Cunningham. The Maine Supreme Judicial Court explained that “standing to foreclose involves the plaintiff's interest in both the note and the mortgage.” Bank of Am., N.A. v. Greenleaf, 2014 ME 89, ¶ 9, 96 A.3d 700. The Court first turns to the promissory note.

         On September 14, 2017, Mr. and Ms. Cunningham indorsed the original note in the amount of $98, 000.00 payable to Domestic Bank, a federal savings bank, which is named as the lender. Compl., Attach. 2, Note at 1. Domestic Bank made the note payable without recourse to Credit Northeast, Inc. Id. at 3. Credit Northeast, Inc. made the note payable without recourse to Countrywide Bank, FSB. Id. Countrywide Bank, FSB made the note payable without recourse in blank. Id.

         In its Complaint, U.S. Bank asserts that “the object of this litigation is a Note executed under seal currently owned and held by U.S. Bank Trust, N.A., as Trustee for LSF11 Master Participation Trust, in which the Defendants, Aaron Cunningham and Lisa Cunningham, are the obligor . . . .” Compl. ¶ 2. In Count I of the Complaint, U.S. Bank claims that it is “the holder of the Note . . . pursuant to indorsement by the previous holder (if applicable) and physical possession of the aforesaid Note in conformity with Title 11, section 3-1201, et seq. of the Maine Revised Statutes and Simansky v. Clark, 147 A. 205, 128 Me. 280 (1929), ” and that “[a]s such, [U.S. Bank] has the right to foreclosure upon the subject property.” Id. ¶ 29. U.S. Bank adds that it is “the current owner and investor of the aforesaid Mortgage and Note.” Id. ¶ 30.

         Under Maine law, section 3-1301 of title 11 “permits a party to enforce a note if it is the ‘holder' of the note, that is, if it is in possession of the original note that is indorsed in blank.” Greenleaf, 2014 ME 89, ¶ 10. The Court accepts U.S. Bank's evidence that it has “possession of the original note that is indorsed in blank, ” and is the “‘holder' of the note, ” and therefore U.S. Bank “enjoys the right to enforce the debt.” Id. ¶¶ 10-11. That Domestic Bank and Credit Northeast indorsed the note without recourse is of no moment, because Countrywide subsequently indorsed the note in blank and U.S. Bank has possession of the note. Fed. Nat'l Mortg. Ass'n v. First ...


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