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U.S. Bank N.A. v. Tuttle

United States District Court, D. Maine

December 16, 2019

U.S. BANK, NATIONAL ASSOCIATION, AS SUCCESSOR TRUSTEE TO BANK OF AMERICA, N.A., AS SUCCESSOR BY MERGER TO LASALLE BANK, N.A., AS TRUSTEE FOR THE CERTIFICATEHOLDERS OF MLMI TRUST, MORTGAGE LOAN ASSET-BACKED CERTIFICATES, SERIES 2006-MNLI Plaintiff,
v.
MICHAEL S. TUTTLE, Defendant, JPMORGAN CHASE BANK, N.A., BANK OF AMERICA, N.A., KAMCO SUPPLY CORP. OF BOSTON, and MAINE DEPARTMENT OF HEALTH AND HUMAN SERVICES, DIVISION OF SUPPORT AND ENFORCEMENT AND RECOVERY, Parties-in-Interest.

          ORDER ON MOTION TO DISMISS

          JOHN A. WOODCOCK, JR. UNITED STATES DISTRICT JUDGE

         A lender loaned a residential property owner $760, 000 and obtained a promissory note from the borrower but failed to obtain title to the legally-enforceable mortgage to secure payment of the promissory note. When the borrower failed to pay in accordance with the terms of the promissory note, the lender's successor attempted to foreclose on the residential property asserting that the circumstances created an equitable mortgage on the borrower's property. The Court grants the borrower's motion to dismiss the equitable mortgage count because the Maine Supreme Judicial Court does not recognize the concept of equitable mortgage in these circumstances.

         I. BACKGROUND

         A. Procedural Background

         On June 19, 2019, U.S. Bank, National Association, as Successor Trustee to Bank of America, N.A., as Successor by Merger to LaSalle Bank, N.A., as Trustee for the Certificateholders of MLMI Trust, Mortgage Loan Asset-Backed Certificates, Series 2006-MNLI (U.S. Bank) filed a complaint against Michael S. Tuttle and Tamara Lea Tuttle, naming as parties-in-interest JPMorgan Chase Bank, N.A.; Bank of America, N.A.; KAMCO Supply Corp. of Boston; and the Maine Department of Health and Human Services, Division of Support and Enforcement and Recovery. Compl. (ECF No. 1). The Complaint asserted five counts against each defendant: breach of note; breach of contract, money had and received; quantum meruit; unjust enrichment; and equitable mortgage. Compl. ¶¶ 25-69.

         On September 5, 2019, Mr. Tuttle answered the Complaint, Def.'s Answer to Pl.'s Compl. (ECF No. 16), and filed a motion to dismiss for failure to state a claim. Def.'s Mot. to Dismiss Counts II, III, IV & V of Pl.'s Compl. (ECF No. 17) (Def.'s Mot.).[1] On September 26, 2019, U.S. Bank filed a consent motion to extend its time to respond to Mr. Tuttle's Motion to Dismiss, stating that “[t]he Parties have engaged in extensive negotiating to limit the issue[s] before the Court which will be reflected in an Amended Complaint and Partial Opposition to Motion to Dismiss which will be filed on September 30, 2019.” Consented Mot. to Extend (ECF No. 21).

         On September 30, 2019, U.S. Bank filed a response to Mr. Tuttle's motion. Opp'n to Def.'s Mot. to Dismiss Count V of Pl.'s Compl. (ECF No. 23) (Pl.'s Opp'n). On October 10, 2019, Mr. Tuttle filed a reply. Def.'s Reply to Pl.'s Obj. to Def.'s Mot. to Dismiss (ECF No. 24) (Def.'s Reply). On October 18, 2019, U.S. Bank filed a consent motion to amend its complaint, Consented to Mot. to Amend Compl. (ECF No. 25), and on the same day the Magistrate Judge granted U.S. Bank's consent motion to amend the complaint. Order Granting Mot. to Am. Compl. (ECF No. 27). On October 21, 2019, U.S. Bank filed an amended complaint asserting only two counts against Mr. Tuttle: breach of note and equitable mortgage. Am. Compl. ¶¶ 24-43 (ECF No. 28). On the same day, Mr. Tuttle answered the Amended Complaint. Def.'s Answer to Pl.'s Am. Compl. (ECF No. 29).

         B. Factual Background [2]

         Ms. Tuttle conveyed the property at 15 Ocean Avenue, town of Cape Elizabeth, Cumberland County, state of Maine, to Mr. Tuttle by a warranty deed on March 28, 2018. Am. Compl. ¶ 10. On May 25, 2006, Mr. Tuttle “executed and delivered to Mortgage Lenders Network USA, Inc. [MLNUS] a certain Note in the amount of $760, 000.” Id. ¶ 11. This amount was “significantly below the property's value at that time . . ..” Id. ¶ 36. The Amended Complaint is imprecise about how exactly U.S. Bank came to be the holder of the promissory note, but U.S. Bank alleges that it is “the proper holder of the Note and is entitled to enforce the terms and conditions of the Note due to its breach by the Defendant, Michael S. Tuttle.” Id. ¶ 27.

         Mr. Tuttle also “executed a Mortgage on May 25, 2006, which particularly referenced exactly the same property address of 15 Ocean Avenue, Cape Elizabeth, ME 04107, which was referenced on the aforesaid Promissory Note.” Id. ¶ 38. U.S. Bank acknowledges in the Amended Complaint that the “aforesaid Mortgage is arguably unenforceable under current Maine Law pursuant to the Greenlea[f] decision.” Id. ¶ 39 (citing Bank of Am., N.A. v. Greenleaf, 2014 ME 89');">2014 ME 89, 96 A.3d 700; Fed. Nat'l Mortg. Ass'n v. Deschaine, 2017 ME 190, 170 A.3d 230; Pushard v. Bank of Am., N.A., 2017 ME 230, 175 A.3d 103).[3]

         On March 19, 2019, the law firm of Doonan, Graves & Longoria, LLC on behalf of U.S. Bank sent Mr. Tuttle a notice of mortgagor's right to cure, or demand letter. Id. ¶ 12; Compl., Attach. 3 (Demand Letter). This demand letter informed Mr. Tuttle of “the payment due date, the total amount necessary to cure the default, and the deadline by which the default must be cured . . ..” Am. Compl. ¶ 13; see also Demand Letter at 1-2. Mr. Tuttle failed to cure the default prior to the expiration of the deadline for cure specified in the demand letter. Am. Compl. ¶ 14. U.S. Bank is the present holder and lawful owner of the note, id. ¶¶ 15-16, which is indorsed in blank by Mortgage Lenders Network USA.[4] See Compl., Attach. 2 at 4 (Note). The total debt owed under the note as of May 17, 2019, was $1, 023, 328.20. Am. Compl. ¶ 21. Mr. Tuttle was, at the time of the filing of the Amended Complaint, in possession of the property secured by the note, and was not in the military. Id. ¶¶ 22-23.

         II. POSITIONS OF THE PARTIES

         A. Michael S. Tuttle's Motion to Dismiss [5]

         Mr. Tuttle asserts that “[a]n equitable mortgage arises when a property owner borrows money from another party and gives a deed (or possibly some sort of assignment in the case of personal property) to that lender.” Def.'s Mot. at 4. “It is not, ” in Mr. Tuttle's view, “a concept which has any meaning in this case, ” because “[u]nder an equitable mortgage theory involving the giving of a deed, if the parties have agreed that upon payment of the debt the ...


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