United States District Court, D. Maine
ORDER ON PLAINTIFF'S MOTION FOR DEFAULT
A. WOODCOCK, JR. UNITED STATES DISTRICT JUDGE.
April 16, 2019, Freedom Mortgage Corporation (Freedom) filed
a foreclosure complaint against Zachary D. Payne.
Compl. (ECF No. 1). On July 15, 2019, Freedom filed
proof of service showing that it served Mr. Payne on May 22,
2019. Affidavit of Service as to Zachary D. Payne
(ECF No. 7).
August 15, 2019, Freedom moved for the entry of default
against Mr. Payne, and the Clerk of Court entered default
against him on the same day. Pl.'s Mot. for Entry of
Default as to Zachary D. Payne (ECF No. 8); Order
Granting Mot. for Entry of Default (ECF No. 9). Freedom
filed a motion to extend its time to file a motion for
default judgment by thirty days on September 16, 2019, and
the Magistrate Judge granted the motion the following day.
Pl.'s Mot. to Extend Time for Filing of Mot. for
Default J. (ECF No. 10); Order Granting Mot. to
Extend Time (ECF No. 11). On October 16, 2019, Freedom
filed a motion for default judgment in regard to Mr. Payne.
Pl.'s Mot. for Default J. as to Def., Zachary D.
Payne (ECF No. 12) (Pl.'s Mot.).
context of foreclosures, once the Clerk of Court enters a
default, the Court is obligated to schedule a hearing to
determine whether there has been a breach of condition in the
plaintiff's mortgage, the amount due thereon, including
reasonable attorney's fees and court costs, the order of
priority and those amounts, if any, that may be due to other
parties that may appear and whether any public utility
easements held by a party in interest survive the
14 M.R.S. § 6322. If the Court is satisfied that a
breach exists, the Court issues a judgment of foreclosure and
sale subject to the right of redemption and also sets forth
the amount due and payable under the mortgage so that the
mortgagor may effect the redemption. Id. Freedom
includes in its motion for default judgment a request for a
section 6322 hearing. Pl.'s Mot. at 2
(requesting that the court “schedule a hearing on the
assessment of damages to determine the order of priority and
related matters”). The Court grants Freedom's
Court considered whether Freedom has standing to enforce the
original note and mortgage and finds that Freedom has
standing to enforce the mortgage but may not have standing to
enforce the note. Under Maine law, if Freedom has standing to
enforce the mortgage, but not the note, it is fatal to its
right to foreclose the mortgage. Bank of Am., N.A. v.
Greenleaf, 2014 ME 89, ¶ 9, 96 A.3d 700, 705. The
Maine Supreme Judicial Court has written that
“[w]ithout possession of or any interest in the note,
[a party] lack[s] standing to institute foreclosure
proceedings and [may] not invoke the jurisdiction of our
trial courts.” Id. (quoting Mortg. Elec.
Registration Sys., Inc. v. Saunders, 2010 ME 79, ¶
15, 2 A.3d 289, 297) (alternations in original).
Court turns to the record to assess whether Freedom has an
interest, as required by Maine law, in both the mortgage and
the note. On December 8, 2016, Mr. Payne indorsed the
original note to Norwich Commercial Group, Inc. D/B/A Norcom
Mortgage, a corporation (Norwich), which is named as the
lender. Compl., Attach. 2, Note at 1.
Norwich made the note payable without recourse to First
Guaranty Mortgage Corporation (First Guaranty). Id.
at 3. In its Complaint, Freedom alleged the indorsement of
the note and its current possession of the note.
Compl. ¶ 15 (stating that Freedom “is the
present holder of the Note pursuant to endorsement by the
previous holder (if applicable), payment of value and
physical possession of the Note”).
on this record, there is no confirmation that the promissory
note Mr. Payne executed was ever assigned or indorsed to
Freedom or indorsed in blank. See U.S. Bank Trust, N.A.,
as Tr. for LSF11 Master Participation Tr. v. Cunningham,
No. 2:19-cv-00306-JAW, 2019 WL 6464619, at *2 (D. Me. Dec. 2,
2019) (stating that in a case with multiple indorsements
ending with an indorsement in blank, “[u]nder 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'” (quoting Bank of Am., N.A.
v. Greenleaf, 2014 ME 89, ¶ 10, 96 A.3d 700, 705)).
The only evidence about the promissory note in this case is
that Mr. Payne executed the note in favor of Norwich and that
Norwich made the note payable without recourse to First
Guaranty. The transactional history of the note seems to stop
with First Guaranty.
on December 8, 2016, the same date Mr. Payne signed the
promissory note, he executed a mortgage to Mortgage
Electronic Registration Systems, Inc. (MERS).
Compl., Attach. 3, Mortgage at 1, 14.
Norwich is listed as the lender, and MERS is described as the
“nominee for Lender and Lender's successors and
assigns.” Id. at 1-2. On June 28, 2018, MERS
executed an assignment of the mortgage to Freedom.
Compl., Attach. 5, Corporate Assignment of
Mortgage at 1. This assignment is invalid. See Bank
of America, N.A. v. Greenleaf, 2014 ME 89, ¶¶
16-17, 96 A.3d 700. Subsequently, on January 17, 2019,
Norwich assigned the mortgage to Freedom with a quitclaim
assignment signed by Philip DeFronzo, President of Norwich,
Compl., Attach. 6, Quitcl. Assignment,
which is sufficient to grant Freedom ownership of the
mortgage. See JPMorgan Chase Bank, N.A. v. Lowell,
2017 ME 32 ¶ 2 n.2, 156 A.3d 727, 728 n.2 (noting that
where there had been a previous assignment of a mortgage via
MERS followed by a subsequent quitclaim assignment,
“[a]s a result of the quitclaim assignment, it
appear[ed] that [plaintiff's] standing to pursue th[e]
foreclosure action [was] not at issue”).
record suggests that Freedom has a mortgage but not a note
and, if true, under Maine law, Freedom may not proceed with
foreclosure. If Freedom does not have a right to proceed with
the foreclosure because it does not have a legal right to the
note, its right to proceed under the other theories in the
Complaint is questionable. In addition to the foreclosure
count, Freedom alleged under Count II, Breach of Note, Count
III, Breach of Contract, Money Had and Received, Count IV,
Quantum Meruit, and Count V, Unjust Enrichment, and these
counts are all premised on Freedom's right to proceed on
the note. Compl. ¶¶ 30-60. At the hearing,
the Court will give Freedom an opportunity to address whether
it has standing to enforce the original note and how it is
entitled to proceed if it does not have standing.
addition to this fundamental question, the Court will give
Freedom an opportunity to address the absence of any demand
for sale in the Complaint. See 14 M.R.S.A. §
6321 (stating that a foreclosure complaint must “demand
a foreclosure and sale”). At present, Freedom's
Complaint only demands a foreclosure. See Compl.
¶ 27 (“By virtue of the Defendant's breach of
condition, the Plaintiff hereby demands a foreclosure on said
real estate”). This omission seems at best highly
technical because a foreclosure typically results in a sale.
At the same time, the Maine Supreme Judicial Court has
repeatedly emphasized that Maine's foreclosure statute
must be strictly construed. Greenleaf, 2014 ME
the Court will give Freedom an opportunity to address the
absence in this record of a copy of Complaint or a
Clerk's Certificate of Foreclosure filed with the
Registry of Deeds within sixty days of commencing
foreclosure. See 14 M.R.S. § 6321 (“[T]he
mortgagee shall within 60 days of commencing the foreclosure
also record a copy of the complaint or a clerk's
certificate of the filing of the complaint in each registry
of deeds in which the mortgage deed is or by law ought to be
the Court notes that there are two potential errors in the
record. First, the demand letter Freedom sent to Mr. Payne
stated that he had a right to cure within thirty-eight days,
rather than thirty-five days. See Compl., Attach. 7,
Demand Letter at 4 (“You have the right to
cure the default by paying the Total Amount Due within 38
days . . . after we have given you this notice”).
Second, the address listed on the demand letter says
“25 Smith's Farm Lane” rather than “25
Smith Farm Lane.” See Id. The first error, if
it is an error, favors Mr. Payne and the second appears to
have occurred because Freedom failed to notice that the
mortgage was re-recorded to correct the property address from
Smith's Farm Lane to Smith Farm ...