GIROUARD et al v. WELLS FARGO BANK NA

Filing 43

ORDER ON PLAINTIFFS' MOTION TO DISMISS COUNTERCLAIMS re 30 Motion to Dismiss Counterclaims By JUDGE GEORGE Z. SINGAL. (lrc)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
ANTOINE A. GIROUARD and
JESSICA A. GIROUARD,
Plaintiffs,
v.
WELLS FARGO BANK, N.A.,

Defendant.

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ORDER ON PLAINTIFFS’ MOTION TO DISMISS COUNTERCLAIMS
Before the Court is Plaintiffs’ Motion to Dismiss Counterclaims (ECF No. 30) as to
Defendant’s Counterclaim Count II, which the Court treats as a Motion for Summary Judgment
on Plaintiffs’ Third Amended Complaint for Declaratory Relief (ECF No. 27) and Defendant’s
Counterclaim Count II (see ECF No. 28). For the reasons briefly explained below, the Court
GRANTS IN PART the remaining portion of the Motion and enters judgment in favor of Plaintiffs.

I. FACTUAL BACKGROUND
The relevant background for this matter was described by the Maine Supreme Judicial
Court, sitting as the Law Court, as follows:
The Girouards own property located in Lewiston. In September 2004, they
executed a note and mortgage deed in favor of a third party [Corestar Financial
Group, LLC], and after several transactions, all rights created by the instruments
were assigned to Wells Fargo. In December 2012, Wells Fargo issued to the
Girouards a notice of default and right to cure. See 14 M.R.S. § 6111 (2014). The
notice informed the Girouards that, in order to cure the default, they were required
to pay $8,848.81, “plus any additional monthly payments, late charges and other
charges that may be due under applicable law after the date of [the] notice and on
or before thirty-five (35) days from the date of [their] signed receipt of [the notice].”

When the Girouards failed to cure the default, Wells Fargo purported to accelerate
the mortgage, and in July 2013 it initiated [an] action for foreclosure.
More than a year later, on July 14, 2014, shortly after we issued our decision
in Bank of Am., N.A. v. Greenleaf, the Girouards moved for summary judgment,
arguing that the notice of default did not comply with section 6111 as interpreted
in Greenleaf. See 2014 ME 89, ¶¶ 29-31, 96 A.3d 700 (holding that to comply with
the statute, a notice of default must state the precise amount that the mortgagor must
pay to cure the default, without allowing for accrual of any additional amount
during the cure period). Wells Fargo filed a “limited opposition” to the Girouards’
motion, agreeing that the demand letter did not meet the requirements of section
6111 and stating that “defendants’ Motion for Summary Judgment should be
granted for failure to properly accelerate the loan and this matter dismissed without
prejudice.” In September 2014, the court granted the Girouards’ motion and
entered summary judgment for them. In the same order, however, the court also
dismissed the foreclosure action without prejudice.
The Girouards then filed three post-judgment motions [and] [t]he court issued an
amended order granting the motions in part, concluding that Wells Fargo had not
complied with section 6111 as interpreted in Greenleaf because the notice of
default did not state the precise amount of the payment needed to cure the default.
The court [further] stated that a party’s failure to comply with a “statutory
requirement” leaves the court without subject matter jurisdiction. On this basis, the
court amended its previous order so that summary judgment now was granted “in
part” but that the foreclosure action was still “dismissed without prejudice.”
From that amended order, the Girouards filed a timely appeal.
Wells Fargo Bank, N.A. v. Girouard, 123 A.3d 216, 217-18 (Me. 2015) (footnotes omitted).
Before the Law Court, the Girouards “contend[ed] that the [district] court erred when it
dismissed the foreclosure action and ultimately granted only partial summary judgment in their
favor.” Girouard, 123 A.3d at 218. After determining that the Girouards had standing to appeal
the partial summary judgment, the Court concluded that
because the notice of default issued by Wells Fargo did not meet the applicable
requirements of law, the court properly entered summary judgment in favor of the
Girouards, but the court erred when it characterized the disposition of the claim as
a dismissal. We therefore vacate the court’s orders of partial summary judgment
and dismissal of the foreclosure action, and we remand to the trial court for
reinstatement of the entry of full summary judgment in favor of the Girouards.

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Id. at 219. The Law Court, however, declined to opine “about the effect of the summary judgment
order on any future action that Wells Fargo might initiate to seek the same relief based on the same
rights.” Id. After remand, the state District Court entered full summary judgment for the Girouards
on November 19, 2015. (See ECF No. 30-2.)
In December 2016, the Girouards filed a Complaint in state Superior Court requesting, in
relevant part, a declaratory judgment that Wells Fargo has an obligation to discharge the mortgage.
(ECF No. 1-2.) The case was removed to this Court and Wells Fargo filed a Motion to Dismiss
for failure to state a claim (ECF No. 5). After a series of delays and procedural maneuvers not
directly relevant to the matter presently before this Court, the Girouards filed a substantially
amended Complaint in early 2018. The current operative Complaint states a single claim for
declaratory relief against Wells Fargo seeking a declaratory judgment that, in relevant part, the
“note and mortgage are unenforceable and that [Plaintiffs] own the property free and clear of Wells
Fargo’s mortgage encumbrance.” (Third Am. Compl. (ECF No. 27), PageID # 155.)
In its Answer, Wells Fargo brought counterclaims for (1) unjust enrichment (“Count I”)
and (2) declaratory judgment/quiet title (“Count II”). (Answer (ECF No. 28), PageID #s 160-64.)
Per Counterclaim Count II, Defendant specifically requests that the Court “grant judgment against
Plaintiffs . . . including declaring unequivocally that Wells Fargo holds title to the Property,
deeding the [P]roperty to Wells Fargo.” (Id., PageID # 163.) Plaintiffs subsequently moved to
dismiss the counterclaims for failure to state a claim. (ECF No. 30.) The Court heard oral
argument on Plaintiffs’ Motion to Dismiss on May 10, 2018. On May 14, 2018, the Court denied
Plaintiffs’ Motion as to the unjust enrichment counterclaim but provided notice to the parties that
it would consider Plaintiffs’ claim for declaratory judgment and Defendant’s mirror image

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counterclaim for declaratory judgment under a summary judgment standard. (See ECF No. 38.)
The parties have supplemented the record and provided additional briefing. (See ECF Nos. 39-42.)

II.

DISCUSSION

Generally, a party is entitled to summary judgment if, on the record before the court, it
appears “that there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). In this case, there are no factual disputes
regarding Plaintiffs’ Claim or Defendant’s Counterclaim Count II; the Court must only consider
whether either party is entitled to judgment as a matter of law.1
After carefully considering the record and the parties’ arguments, the Court determines that
the outcome for the present issue is governed by the Maine Law Court’s recent decision in Pushard
v. Bank of America, N.A., 175 A.3d 103 (Me. 2017). In Pushard, the Law Court examined a
mortgagee bank’s interest in a mortgaged property after it had lost a foreclosure action in which it
purported to accelerate payments on the debt under the note and mortgage. The Law Court
determined that the bank’s failure to properly accelerate the loan under Maine law did not change
the fact that the bank had, by its election to accelerate, merged all payments due under the note
into a unitary debt obligation that it placed in issue in the foreclosure action. Pushard, 175 A.3d
at 113-16. Therefore, the Law Court concluded, based on general res judicata principles, that
“because the Bank failed to prove its claim to the unitary obligation that it placed in issue in the

To the extent the Court’s treatment of Plaintiffs’ Claim and Defendant’s Counterclaim Count II is akin to treatment
of cross-motions for summary judgment, the presence of cross-motions does not materially affect the summary
judgment analysis. See First Am. Title Ins. Co. v. Lane Powell PC, 764 F.3d 114, 118 (1st Cir. 2014) (“Crossmotions
for summary judgment require us to determine whether either of the parties deserves judgment as a matter of law on
facts that are not disputed.”) (quotation marks omitted). Technically, a court evaluates each cross-motion for summary
judgment “independently.” Matusevich v. Middlesex Mut. Assur. Co., 782 F.3d 56, 59 (1st Cir. 2015). However,
adherence to this “independent” review is not strictly necessary where, as in this case, the facts are entirely undisputed
and the Court need not draw any factual inferences in order to determine whether either party is entitled to judgment
as a matter of law.
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foreclosure action, it no longer has any enforceable interest in the note or in the property set up as
security for the note.” Id. at 116. The Law Court vacated the judgment in the bank’s favor on the
plaintiffs’ claim for declaratory relief and remanded the case for the trial court “to enter a judgment
declaring that the note and mortgage are unenforceable and that the [plaintiffs] hold title to their
property free and clear of the Bank’s mortgage encumbrance.” Id.
Defendant does not appear to contest that the salient conditions present in Pushard are also
present in this case, including Defendant’s election to accelerate the debt in its prior unsuccessful
foreclosure action. Rather, Defendant attempts to side-step Pushard with an argument grounded
in Maine’s status as a “title theory” state. In a title theory state, a mortgage is considered “a
conditional conveyance vesting the legal title in the mortgagee, with only the equity of redemption
remaining in the mortgagor.” Johnson v. McNeil, 800 A.2d 702, 704 (Me. 2002) (quotation marks
omitted). Defendant essentially argues that because (a) Maine is a title theory state, (b) the plain
language of the mortgage “expressly conveyed title to the Property” to Defendant’s predecessor in
interest, and (c) Plaintiffs have not exercised their equity of redemption, Defendant “currently
holds title to the Property.”

(Def.’s Supp. Br. In Support of Summ. J. (ECF No. 39),

PageID #s 228-29; Ex. A (ECF No. 39-1), PageID # 235.)
Maine’s status as a title theory state is not addressed in Pushard. However, the Court sees
no indication in Pushard or related cases that the Law Court would accept Defendant’s argument,
especially in light of the Law Court’s emphasis on not creating exceptions to general res judicata
principles for foreclosure actions. See, e.g., Pushard, 175 A.3d at 116. Accepting Defendant’s
argument would logically mean that a mortgagee could always pursue a successive action on a
mortgaged property after a failed foreclosure so long as the mortgage contains boilerplate, and
likely ubiquitous, language conveying title to the mortgagee.

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Furthermore, the cases cited by Defendant are inapposite. In Johnson v. McNeil, the Law
Court simply explained that a mortgagee can foreclose on a mortgage where the statute of
limitations has run on the underlying promissory note. 800 A.2d at 704-05. In Joy v. Adams, the
Law Court similarly held that a mortgagee can foreclose or enter upon a property even where an
action on the note is statutorily barred. 26 Me. 330, 332-33 (1846). These cases simply do not
stand for the proposition that a mortgagee retains an interest in a property after it has elected to
accelerate the debt in an unsuccessful foreclosure action. Because the Court can discern no
meaningful distinction between this case and Pushard regarding Defendant’s interest in the subject
property, the Court concludes that Plaintiffs are entitled to judgment as a matter of law on their
claim for declaratory relief and declares that “the note and mortgage are unenforceable and that
[Plaintiffs] hold title to [the] property free and clear of [Defendant]’s mortgage encumbrance.”
Pushard, 175 A.3d at 116. For the same reasons, Defendant’s counterclaim for a declaration that
it “unequivocally . . . holds title to the Property” necessarily fails.

III. CONCLUSION
For the foregoing reasons, to the extent that the Court reserved ruling on a portion of
Plaintiffs’ Motion to Dismiss Counterclaims and notified the parties of its intention to treat that
portion as a Motion for Summary Judgment on Plaintiffs’ Claim and Defendant’s Counterclaim
Count II, the Court now GRANTS IN PART the Motion (ECF No. 30). As a result, judgment
shall enter in favor of Plaintiffs on their Complaint and against Defendant on its Counterclaim
Count II.

Defendant’s Counterclaim Count I (Unjust Enrichment) remains pending for

independent adjudication in accordance with the Scheduling Order.

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SO ORDERED.
/s/ George Z. Singal
United States District Judge
Dated this 12th day of June, 2018.

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