Maine Bar Journal
Winter 2012 #1.
Foreclosure Cases: The Reawakening Of Strict Pleading
Maine Bar JournalVOLUME 27 , NUMBER 1, WINTER 2012Foreclosure Cases: The Reawakening Of Strict Pleadingby Robert S. HarkIn the course of the past year, the jurisprudence from the Law Court regarding the process of judicial foreclosure proceedings has offered a continuous procession of cases.(fn1) In decades past, it was typical of counsel for foreclosure defendants to begin discussing the bankruptcy option as the first resort, rather than the last, at the initial consultation. This has all changed.
In writing this compendium of the errors committed by foreclosing plaintiffs, I note that the lion's share are errors made by the mortgagees and their seriatim assignees, rather than by the hapless counsel who find themselves in the position of defending these flawed transactions. I venture to suggest that much of this sea change in case law derives from the implementation of the Foreclosure Diversion Program instituted by the Law Court in the past several years, along with its implementing statutes. At the very least, this program has served to focus attention upon the standing of the plaintiff to bring its foreclosure action, both by forcing some extra sets of eyes upon the key documents, and also by slowing down the process sufficiently to permit the underlying documents to be thoroughly and timely reviewed.
Prior to the implementation of the Foreclosure Diversion Program, the typical foreclosure plaintiff would commence the action, and shortly after issue was joined, would file a motion for summary judgment. All of this while the defendants were attempting to raise the money for an attorney and to decide whether the funds would be better expended for (what was considered to be) the inevitable bankruptcy filing.
In addition to the diversion program, the courts now evaluate motions for summary judgment with a checklist,(fn2) which creates a uniform review of the matters required to be proven by the plaintiff. This checklist and the Diversion Program, are collectively akin to new sets of grates on a meat-grinder, or a sewage treatment plant, changing significantly, in either case, the ultimate product.
The Plaintiffs Burden
In Chase Home Fin. LLC v Higgins(fn3) (Higgins), the Law Court listed the elements necessary to obtain a judgment of foreclosure:
* 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; * properly presented proof of ownership of the mortgage note and the mortgage, including all assignments and endorsements of the note and the mortgage; * a breach of condition in the mortgage; * the amount due on the mortgage note, including any reasonable attorney fees and court costs; * the order of priority and any amounts that may be due to other parties in interest, including any public utility easements; * evidence of properly served notice of default and mortgagor's right to cure in compliance with statutory requirements; * 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 * 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 Service-members Civil Relief Act.(fn4)
This article focuses upon three broad categories of these cases: those with (1) standing issues, (2) procedural non-compliance with Rule 56, and (3) evidentiary issues. A number of the recent cases address several of these issues.
It is elementary that the plaintiff in a mortgage foreclosure case should be the owner of the mortgage and note. However, the untidiness and sloppiness with which many of these mortgages have been treated is simply breathtaking. The carelessness often begins immediately upon the closing, when the mortgage originator transfers the mortgage into the pipeline of securitization. Thereafter, perhaps as long as the borrower continues making payment on the note secured by the mortgage, any infirmities in the assignment process seem not to float to the surface. When the mortgage is transferred to a new entity to process the foreclosure, the sins of the past residing in the documentation too often go unregarded. Let's take a look at a recent case.
In Kondaur Capital Corporation v Hankins,(fn5) the original mortgage and note were given by Hankins to Option One Mortgage Corporation; and attached to the note was an allonge showing Kondaur Capital Corporation as payee. In 2006, Option One assigned the mortgage and note to Deutsche Bank National Trust Company. In 2007, a loan modification agreement was executed by Hankins and Liquidation Properties, Inc., which then began a foreclosure action. However, only later did Deutsche Bank assign the mortgage and the note to Liquidation Properties, which subsequently assigned the mortgage and note to Kondaur.
It was not problematic for the Law Court to conclude that Liquidation Properties lacked standing when it commenced the foreclosure.(fn6) Ultimately, however, the Law Court upheld the trial court's substitution of parties to cure that problem.(fn7)
Other courts may not be so quick to allow substitution. In litigating mortgage foreclosure cases, both sides need to look at the chain of assignments and make certain that the plaintiff(fn7) owns both the mortgage and the promissory note the mortgage secures.(fn8) If a mortgage is assigned, but the note is not also assigned...