Dernier et al v. U.S. Bank National Association et al

Filing 194

OPINION AND ORDER denying 176 Motion to Set Aside Judgment; denying 168 172 Motions to Dismiss; denying 177 179 181 188 Motions for Order to Show Cause and for Sanctions; denying 178 180 182 189 Motions in Limine; denying 192 Motion to Strike a Sur-reply Memorandum. Signed by Judge William K. Sessions III on 7/9/2020. (jam)

Case 2:16-cv-00230-wks Document 194 Filed 07/09/20 Page 1 of 11

UNITED STATES DISTRICT COURT
FOR THE
DISTRICT OF VERMONT
U.S. BANK NATIONAL
ASSOCIATION AS TRUSTEE FOR
CSMC MORTGAGE-BACKED PASSTHROUGH CERTIFICATES, SERIES
2006-3,

)
)
)
)
)
)
Counterclaim Plaintiff, )
)
v.
)
)
PETER A. DERNIER and NICOLE
)
H. DERNIER,
)
)
Counterclaim Defendants. )

Case No. 16-cv-230

OPINION AND ORDER
Pending before the Court is a series of motions filed by pro
se counterclaim defendants Peter and Nicole Dernier.

Those

motions included a request for the Court to vacate its earlier
ruling dismissing the Derniers’ Third Amended Complaint, and a
motion to dismiss the Counterclaims asserted by U.S. Bank
National Association (“U.S. Bank”).

U.S. Bank’s Counterclaims

allege breach of contract, the right to foreclose, and the right
to a deficiency judgment.

The Derniers have also filed motions

to show cause and for contempt against various parties for
allegedly failing to respond to subpoenas duces tecum, as well as
motions in limine to preclude the presentation of certain
evidence.

For the reasons set forth below, the pending motions

are denied.
Factual Background

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The factual and procedural background of this case has been
detailed in the Court’s prior orders, and the parties’
familiarity with the case background is assumed.

Briefly stated,

the Derniers initiated this case claiming irregularities in the
transfer of the promissory note and mortgage on their property.
Their pleadings asked the Court to quiet title and discharge the
mortgage.

They also asserted claims of unjust enrichment, common

law fraud, mail fraud, RICO violations, violations of the Fair
Debt Collections Practices Act, and violations of the Fair Credit
Reporting Act.
U.S. Bank moved for judgment on the pleadings, arguing that
a 2016 ratification confirmed the transfer of the promissory note
from Mortgage Network, Inc. (“MNI”) to U.S. Bank.

In a ruling

dated May 8, 2018, the Court granted U.S. Bank’s motion, stating
that it was “unpersuaded by [the Derniers’] attempt to argue that
no entity owns the note and that their mortgage should therefore
be completely discharged.

[The Derniers] clearly took out a

mortgage to purchase their house.”

ECF No. 153 at 10.

The Court

further noted that of the two possible owners of the note, one
has waived any claim to ownership.

“There is no other entity

besides [U.S. Bank] asserting that it owns the note.”
153 at 10-11.

ECF No.

All claims against U.S. Bank and its original co-

defendants were dismissed with prejudice.
In response to the Derniers’ Complaint, U.S. Bank initially

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filed an Answer and Counterclaim asserting that Peter Dernier has
breached the terms of the promissory note.

U.S. Bank later moved

to amend its Counterclaim to add causes of action for foreclosure
and deficiency judgment.
amend as futile.

The Derniers opposed the motion to

The Court determined that amendment would not

be futile and granted the motion to amend.
The Derniers now move the Court for relief from the May 8,
2018 Opinion and Order dismissing their claims, and to dismiss
U.S. Bank’s Counterclaims.

As noted above, the Derniers have

also moved for orders to show cause and for contempt against
third parties who have allegedly failed to comply with subpoenas
duces tecum.

Finally, the Derniers have filed a series of

motions in limine.
Discussion
I.

Motion for Relief from Judgment
The Derniers’ motion for relief from the May 8, 2018 Opinion

and Order cites Federal Rule of Civil Procedure 60.

ECF No. 176.

Rule 60 provides, in relevant part, that “[o]n motion and just
terms, the court may relieve a party or its legal representative
from a final judgment, order, or proceeding ....”
P. 60(b).

Fed. R. Civ.

There has been no final order in this case, as there

are Counterclaims still pending.

See Fed. R. Civ. P. 54(b) (“any

order or other decision, however designated, that adjudicates
fewer than all the claims or the rights and liabilities of fewer
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than all the parties does not end the action as to any of the
claims or parties”).

Accordingly, Rule 60 is not the proper

vehicle for obtaining relief.
Regardless of the applicable rule, it is clear that the
Derniers are asking the Court to reconsider its prior ruling.
Typically, pursuant to Local Rule 7(c), a motion for
reconsideration must be filed within 14 days of the ruling being
challenged.

Here, the Derniers filed their motion nearly two

years after the Court docketed its Opinion and Order.
Nonetheless, given their pro se status and their reliance upon
newly-discovered evidence, the Court will consider the motion.
See Tang v. Visnauskas, No. 19-CV-508 (PKC) (PK), 2019 WL
6716741, at *1 (E.D.N.Y. Dec. 10, 2019) (“Although filed after
the 14-day period provided for under Local Rule 6.3, given
Plaintiff’s pro se status, the Court has considered . . .
[Plaintiff’s] motion[.]”
“A motion for reconsideration should be granted only when
the [movant] identifies ‘an intervening change of controlling
law, the availability of new evidence, or the need to correct a
clear error or prevent manifest injustice.’”

Kolel Beth Yechiel

Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, 729 F.3d 99,
104 (2d Cir. 2013) (quoting Virgin Atl. Airways, Ltd. v. Nat’l
Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992)).

This

standard is “strict,” and “reconsideration will generally be

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denied unless the moving party can point to controlling decisions
or data that the court overlooked.”

Shrader v. CSX Transp.,

Inc., 70 F.3d 255, 257 (2d Cir. 1995).

A motion for

reconsideration “is not a vehicle for relitigating old issues,
presenting the case under new theories, securing a rehearing on
the merits, or otherwise taking a ‘second bite at the apple.’”
Sequa Corp. v. GBJ Corp., 156 F.3d 136, 144 (2d Cir. 1998)
(citing the legal standard under Federal Rule of Civil Procedure
59).
Here, the Derniers claim to have new evidence supporting
their Third Amended Complaint.

That evidence reportedly confirms

that the promissory note was delivered by MNI to Select Portfolio
Service, Inc. (“SPS”) in November 2005.

The evidence also

includes 2015 correspondence between counsel for Wells Fargo Bank
(as servicer for U.S. Bank) and counsel for MNI about the
Derniers’ allegations, with a demand by Wells Fargo/U.S. Bank for
payment and indemnification.
was ever withdrawn.

It is unclear whether the demand

It is clear, however, that MNI provided a

ratification in 2016, confirming that it was fully compensated
and was not claiming any rights in the promissory note.
The Derniers now argue that the communications between
counsel show that MNI did not sell the note to Wells Fargo or
U.S. Bank.

They also contend that the 2016 ratification was

invalid because MNI delivered the note to SPS in 2005.

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These

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arguments echo the claims asserted by the Derniers in their
opposition to U.S. Bank’s motion to dismiss.

Specifically, the

Derniers argued that the ratification was invalid without
evidence of a payment by U.S. Bank, and that a prior endorsement
stamp had been forged.

The Court reviewed those arguments and,

for the reasons set forth in its Opinion and Order, found that
the Derniers’ Third Amended Complaint failed to state a plausible
claim for relief.

Pursuant to the exacting standard for

reconsideration cited above, the Court sees no reason to
reconsider that ruling in light of the Derniers’ latest evidence.
Accordingly, the motion for reconsideration (ECF No. 176) is
denied.
II.

Motion to Dismiss Counterclaims
The Derniers also move to dismiss U.S. Bank’s Counterclaims.

ECF Nos. 168, 172.

Their first argument in support of dismissal

is that U.S. Bank’s servicer accelerated the promissory note in
2010, and that the statute of limitations for bringing a
foreclosure action has since expired.

Under Vermont law,

“enforcement of a mortgage is an action in land with a
fifteen-year statute of limitations.”

Huntington v. McCarty, 174

Vt. 69, 70 (2002) (citing 12 V.S.A. § 502).

Even if the

limitations period on enforcing the underlying note has expired,
“[t]he mortgage is enforceable beyond the barring of the note
because . . . the statute of limitations bars the remedy alone on

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the note, and not the underlying debt.”

Id. at 72.

The

foreclosure action is, therefore, still timely.
The Derniers further contend that after the Court granted
leave to amend the Counterclaim, U.S. Bank failed to do so within
a reasonable time and has therefore committed “willful
noncompliance.”

The Court’s order granting leave to amend did

not set a deadline for filing an amended pleading.

Accordingly,

there was no willful noncompliance with a Court order.
The Derniers next assert bad faith.

Specifically, they

claim that U.S. Bank has initiated a separate foreclosure
proceeding in state court.

The Court previously held that U.S.

Bank has a plausible foreclosure claim, and nothing in the
Court’s ruling barred a state foreclosure action.
In their most recent motion to dismiss, the Derniers argue
that certain documents have been forged.

As the Court explained

previously, U.S. Bank’s factual allegations, including the
assertion of a valid ratification, must be accepted as true at
this stage in the case.

Consequently, arguments for dismissal

premised upon claims of forgery and fraud will not be considered
at this time.
Finally, the Derniers move to dismiss on the ground that
U.S. Bank has failed to state a claim for which relief can be
granted.

For the reasons asserted by the Court in its prior

rulings, U.S. Bank has stated plausible claims for relief.

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The

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motions to dismiss U.S. Bank’s Counterclaims (ECF Nos. 168, 172)
are therefore denied.
III. Motions for Orders to Show Cause and for Contempt
The Derniers have filed several motions to show cause and
for contempt related to subpoenas issued to third parties.

Two

of the subpoenas were issued to loan servicers SPS and
Specialized Loan Services (“SLS”).

Those subpoenas request

documents related to the Derniers’ promissory note and mortgage
as well as the loan servicing history.

Another subpoena,

submitted to Vermont law firm Downs Rachlin Martin (“DRM”), seeks
loan information and any relevant retainer agreements with Wells
Fargo.

A fourth subpoena addressed to K&L Gates, LLP also seeks

loan documents and retainer agreements.

Only SLS has responded.

Beginning with the subpoena issued to DRM, the only service
appears to have been by certified mail.

Rule 45 of the Federal

Rules of Civil Procedure states that “[s]erving a subpoena
requires delivering a copy to the named person.”
45.

Fed. R. Civ. P.

Several courts have interpreted this language as requiring

personal service.

See e.g., King v. Crown Plastering Corp., 170

F.R.D. 355, 356 (E.D.N.Y. 1997) (noting that “the majority of
cases seem to agree that service under Rule 45 of the Federal
Rules of Civil Procedure must be done in person”); 9A Charles
Alan Wright et al., Fed. Prac. and Proc. § 2454 (3d ed. 2017)
(“[t]he longstanding interpretation of Rule 45 has been that

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personal service of subpoenas is required”).

Some courts have

held that leave may be granted for service by alternate means,
but in such cases “courts typically require the serving party to
. . . demonstrate a prior diligent attempt to personally serve.”
Kenyon v. Simon & Schuster, Inc., No. 16 MISC. 327 (P1), 2016 WL
5930265, at *3 (S.D.N.Y. Oct. 11, 2016).

Here, the Derniers have

not received leave to serve by mail, and have not shown efforts
to personally serve DRM.

Their motion with respect to DRM (ECF

No. 177) is therefore denied without prejudice.
As to K&L Gates and SPS, in addition to a lack of personal
service, there is an issue with respect to the geographic reach
of the subpoena.

Rule 45(c)(2)(A) states that a subpoena can

require “production of documents . . . at a place within 100
miles of where the person resides, is employed, or regularly
transacts business.”
Massachusetts.

K&L Gates is located in Boston,

A subpoena was mailed to SPS in Utah.

The

subpoenas require production of documents at the Derniers’ home
in Weston, Vermont.

The Court takes judicial notice of the fact

that Boston and Utah are over 100 miles from Weston.

The motion

to show cause and for contempt with respect to K&L Gates (ECF No.
188) and SPS (ECF No. 181) is denied without prejudice.
SLS, as U.S. Bank’s loan servicer and through counsel for
U.S. Bank, has opposed the Derniers’ motion.

SLS contends that

the requests set forth by the Derniers are unreasonable, unduly

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burdensome, and harassing.

The subpoena issued to SLS makes

eight production requests.

Most of the requests concern the

transfer of loan servicing duties.

The Derniers also request

production of any cover letters accompanying the transfer.

SLS

first submits, without explanation, that “[a] significant portion
of the requested documentation cannot possibly exist.”
185 at 4.

ECF No.

SLS later contends that “[i]t is not [SLS’s]

responsibility to attempt to produce potentially thousands of
documents in order to allow Dernier a chance to ransack its
files.”

Id.

SLS has not moved to quash, and there is no

indication in the record that counsel provided the Derniers with
any written objections.

See Fed. R. Civ. P. 45(d)(2)(B).

The Court will not hold SLS in contempt at this time.

SLS

implicitly confirms that it has been served with the subpoena,
and its objections are substantive.

Counsel for U.S. Bank, who

also appears to represent SLS, shall confer with the Derniers to
try to reach agreement as to a reasonable document production.
If no agreement is reached, SLS may file a motion to quash within
14 days of the date of this Opinion and Order.

The current

motion to show cause and for contempt (ECF No. 179) is denied
without prejudice.
IV.

Motions In Limine
Finally, the Derniers have filed a series of motions in

limine, asking the Court to bar the presentation of certain
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evidence.

The motions are effectively a request for sanctions

arising out of the alleged failures by DRM, SPS, SLS, and K&L
Gates to respond to subpoenas.

For reasons discussed above, no

sanctions are warranted at this time.
limine are premature.

Moreover, the motions in

See, e.g., Jones v. Harris, 665 F. Supp.

2d 384, 404 (S.D.N.Y. 2009) (denying a motion in limine without
prejudice as premature because “[i]n limine motions deal with
evidentiary matters and are not to be filed until the eve of
trial”).

The motions in limine (ECF Nos. 178, 180, 182, 189) are

denied.
Conclusion
For the reasons set forth above, the pending motion to set
aside judgment (ECF No. 176), motions to dismiss (ECF Nos. 168,
172), motions for an order to show cause and for contempt (ECF
Nos. 177, 179, 181, 188), and motions in limine (ECF Nos. 178,
180, 182, 189) are denied.

The pending motion to strike a sur-

reply memorandum (ECF No. 192) is also denied.
DATED at Burlington, in the District of Vermont, this 9th
day of July, 2020.

/s/ William K. Sessions III
William K. Sessions III
U.S. District Court Judge

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