Dernier et al v. U.S. Bank National Association et al
Filing
233
OPINION AND ORDER denying 208 Motion to Dismiss With Prejudice; granting in part and denying in part 211 Motion for Summary Judgment; granting in part and denying in part 225 Cross Motion for Summary Judgment and Motion for Dismissal with Prejudice Against Plaintiff in Counterclaim. U.S. Bank shall submit a proposed Judgment of Foreclosure within 30 days. Signed by Judge William K. Sessions III on 3/8/2024. (law)
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.
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)
PETER A. DERNIER and NICOLE
)
H. DERNIER,
)
)
Counterclaim Defendants. )
Case No. 2:16-cv-230
OPINION AND ORDER
Pending before the Court is a motion for summary judgment
filed by Counterclaim Plaintiff U.S. Bank National Association
as Trustee for Credit Suisse First Boston Mortgage Securities
Corp., CSMC Mortgage-Backed Pass-Through Certificates, Series
2006-3 (“U.S. Bank”), in which U.S. Bank requests judgment as a
matter of law on its Amended Counterclaim.
ECF No. 211.
Relief
sought by U.S. Bank includes an order of foreclosure by sale.
Counterclaim Defendants Peter and Nicole Dernier, currently
representing themselves, have filed a cross-motion for summary
judgment arguing in part that the statute of limitations to
enforce their promissory note expired prior to U.S. Bank’s
initial Counterclaim.
ECF No. 225.
Also before the Court is
the Derniers’ motion to dismiss for failure to meet a show cause
deadline.
ECF No. 216.
For the reasons set forth below, the Derniers’ motion to
dismiss is denied, U.S. Bank’s motion for summary judgment is
granted in part and denied in part, and the Derniers’ crossmotion for summary judgment is granted in part and denied in
part.
Background
The factual and procedural history of this case has been
detailed in the Court’s prior orders, and the parties’
familiarity with those facts is assumed.
Briefly stated, the
Derniers filed a state court Complaint in 2011 claiming
irregularities in the transfer of the promissory note and
mortgage on their property.
ECF No. 6.
Their pleadings asked
the Court to quiet title and discharge the mortgage.
In
Id.
their Third Amended Complaint, the Derniers further alleged
unjust enrichment, common law fraud, mail fraud, RICO
violations, violations of the Fair Debt Collections Practices
Act, violations of the Fair Credit Reporting Act, and
conspiracy.
ECF No. 111-5.
U.S. Bank removed the case from state court and filed a
motion for judgment on the Derniers’ pleadings, arguing that a
2016 ratification confirmed the transfer of the promissory note
from Mortgage Network, Inc. (“MNI”).
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ECF No. 147.
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 had waived any claim to ownership. “There is no other
entity besides [U.S. Bank] asserting that it owns the note.
MNI’s ratification of the transfer of the note from MNI to [U.S.
Bank] renders each of [the Derniers’] claims implausible.”
No. 153 at 10-11.
ECF
All claims against U.S. Bank and its original
co-defendants were dismissed with prejudice.
On August 29, 2016, U.S. Bank filed an Answer and
Counterclaim asserting that Peter Dernier had breached the terms
of the promissory note.
ECF No. 4.
U.S. Bank later moved to
amend its Counterclaim to assert causes of action to quiet
title, for foreclosure of real property, and for a deficiency
judgment.
ECF No. 171.
U.S. Bank now moves for summary
judgment on those causes of action.
The Derniers have filed a cross-motion for summary
judgment, arguing that the note was accelerated in April 2010,
the limitations period for enforcing the note expired six years
later, and U.S. Bank’s initial counterclaim, filed in August
2016, was untimely.
The Derniers also argue that in 2005 the
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mortgage was assigned to a party that is not U.S. Bank; that the
entity receiving the mortgage was never registered as a trust
with the Securities and Exchange Commission; and that the
expiration of the statute of limitations denied U.S. Bank
standing to bring its Counterclaim and Amended Counterclaim.
Finally, the Derniers have moved to dismiss the case based upon
U.S. Bank’s alleged failure to satisfy a show cause deadline.
Discussion
I.
Motion to Dismiss
The first motion before the Court is the Derniers’ motion
to dismiss U.S. Bank’s counterclaims for failure to comply with
an order of the Court.
On March 2, 2023, after a period of
delay on the docket that included the Covid-19 pandemic, the
Court ordered U.S. Bank to show cause on or before March 16,
2023 why the case should not be dismissed for lack of
prosecution.
ECF No. 205.
On March 16, 2023, U.S. Bank timely
moved the Court for an enlargement of time to April 13, 2023 in
which to file its motion for judgment, explaining that counsel
was waiting for executed affidavits of the amounts due and
owing.
ECF No. 206.
The Court granted the motion as unopposed.
ECF No. 207.
The Derniers filed their motion to dismiss on April 17,
2023, noting that the April 13 deadline had passed.
208.
ECF No.
That same day, counsel for U.S. Bank informed the Court
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that she had been away from the office due to a family medical
issue involving her son, and requested until April 24, 2023 to
file the motion for judgment.
counsel’s request.
ECF No. 209.
ECF No. 214.
The Court granted
On April 17, 2023, one week
prior to the Court-imposed deadline, U.S. Bank filed its motion
for summary judgment.
ECF No. 211.
Although the Derniers’ motion to dismiss does not identify
a governing rule, Federal Rule of Civil Procedure 41(b) allows a
court to dismiss an action for failure to prosecute or comply
with a court order.
Fed. R. Civ. P. 41(b); See Simmons v.
Abruzzo, 49 F.3d 83, 87 (2d Cir. 1995).
Here, U.S. Bank
satisfied the Court’s initial show cause order by timely filing
a motion for extension of time.
U.S. Bank next demonstrated
good cause for a further extension, citing counsel’s family
medical situation.
summary judgment.
U.S. Bank then timely filed its motion for
Given that factual record, the Court finds no
basis for dismissal, and the Derniers’ motion to dismiss for
failure to prosecute is denied.
II.
Cross-Motions for Summary Judgment
Summary judgment is appropriate where “the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Civ. P. 56(a).
Fed. R.
A genuine dispute exists where “the evidence is
such that a reasonable jury could return a verdict for the
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nonmoving party,” while a fact is material if it “might affect
the outcome of the suit under the governing law.”
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Anderson v.
On a motion for
summary judgment, “[t]he evidence of the non-movant is to be
believed, and all justifiable inferences are to be drawn in his
favor.”
Id. at 255.
To survive summary judgment, a nonmovant must do “more than
simply show that there is some metaphysical doubt as to the
material facts.”
Caldarola v. Calabrese, 298 F.3d 156, 160 (2d
Cir. 2002) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 586 (1986)).
They must instead “offer some
hard evidence showing that [their] version of the events is not
wholly fanciful.”
D’Amico v. City of New York, 132 F.3d 145,
149 (2d Cir. 1998).
In cases involving cross-motions for
summary judgment, “the court must evaluate each party’s motion
on its own merits, taking care in each instance to draw all
reasonable inferences against the party whose motion is under
consideration.”
Coutard v. Mun. Credit Union, 848 F.3d 102, 114
(2d Cir. 2017) (quoting Schwabenbauer v. Bd. of Educ., 667 F.2d
305, 314 (2d Cir. 1981)).
Throughout this case, the Derniers have asserted a series
of challenges to U.S. Bank’s ability to enforce the note and
mortgage.
U.S. Bank’s pending motion for summary judgment
addresses one of those challenges: the Derniers’ argument that
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U.S. Bank cannot enforce the note as successor in interest to
Kittredge Mortgage Corporation.
U.S. Bank’s contention is that
under Section 3-301 of the Uniform Commercial Code, it may
enforce the note as either the “holder” or the “owner” of the
instrument, and that it need not qualify as both.
See ECF No.
211-3 (citing 9A V.S.A. § 3-203, cmt. 1 (the “right to enforce
an instrument and ownership of an instrument are two different
concepts”)).
Questions of whether U.S. Bank is the “holder” or “owner”
of the note have been addressed in previous Court rulings.
The
dispute focuses primarily upon the validity of the assignment to
U.S. Bank.
As discussed above, that assignment has since been
ratified, the transferor acknowledged that it was fully
compensated, and the Court dismissed the Derniers’ causes of
action against U.S. Bank in light of that ratification.
ECF No.
153 at 10-11, 13.
In support of its motion for summary judgment, U.S. Bank
has submitted the affidavit of Steven B. Ross, an employee of
Specialized Loan Servicing LLC (“SLS”).
the Derniers’ loan.
SLS is the servicer for
The Ross affidavit states that U.S. Bank,
“directly or through an agent, has possession of the promissory
note.
The promissory note has been duly endorsed in blank.
[U.S. Bank] is assignee of the security instrument for the
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subject loan.”
ECF No. 211-5 at 2. 1
Mr. Ross also attests that
the loan is in default and that as March 28, 2023, the
outstanding balance was $330,734.78.
The Derniers oppose the summary judgment motion and have
filed their own cross-motion, relying in part upon new evidence
to argue that the trust named by U.S. Bank was never registered
with the Securities and Exchange Commission (“SEC”).
The
Amended Counterclaim identifies the trust as “Credit Suisse
First Boston Mortgage Securities Corp., CSMC Mortgage-Backed
Pass-Through Certificates, Series 2006-3.”
ECF No. 171 at 1.
A
communication from the SEC confirmed that it has no registration
for an entity with that precise name, but that it does have a
registration number for “CSMC Mortgage-Backed Trust Series 20063,” ECF No. 232-5 at 2.
The Derniers view the registered entity
as different from the trust in this case.
ECF No. 232 at 3.
Notwithstanding the name differences, registration of a
trust has no relevance to the validity of the debt.
“Whether a
mortgage-backed security trust is registered with the SEC has
nothing at all to do with its legal existence, and deregistering the Trust does not terminate the Trust’s existence.”
Ross’s sworn statements refer to the party seeking to
foreclose as the “Plaintiff.” The caption of the affidavit,
however, names Peter Dernier as the Plaintiff. The affidavit’s
references to “Plaintiff” clearly intend to apply to U.S. Bank,
the Counterclaim Plaintiff, and not Mr. Dernier.
1
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Tucker v. Charles Schwab Bank, No. 12-CV-3399, 2013 WL 1337329,
at *2 (N.D. Ill. Mar. 29, 2013) (dismissing allegation that
trust was dissolved as “specious”).
Accordingly, even assuming
the entity registered with the SEC is not the trust at issue in
this case, lack of registration does not undermine U.S. Bank’s
claims.
The Derniers also argue that U.S. Bank’s Counterclaim was
untimely.
The general statute of limitations for bringing a
civil action in Vermont is six years.
See 12 V.S.A. § 511.
The
record indicates that the Derniers defaulted on the mortgage in
early 2010, and their loan was accelerated on or about April 20,
2010.
ECF No. 232-3.
On August 22, 2016, U.S. Bank filed its
Counterclaim asserting breach of contract.
ECF No. 4.
U.S.
Bank moved for leave to file its Amended Counterclaim seeking
foreclosure on September 3, 2018.
ECF No. 156.
Because the
foreclosure action was commenced more than six years after the
note acceleration, the Derniers argue that U.S. Bank cannot
foreclose.
U.S. Bank responds that the six-year limitations period
applies only to in personam actions, including an action for a
deficiency judgment.
A foreclosure action, as an in rem action,
is governed by a 15-year statute of limitations.
v. McCarty, 174 Vt. 69, 70 (2002).
See Huntington
As the Vermont Supreme Court
explained in Huntington, a “promissory note and a mortgage are
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individually governed by different statutes of limitations — the
enforcement of a note is a civil action with a six-year statute
of limitations, 12 V.S.A. § 511, whereas enforcement of a
mortgage is an action in land with a fifteen-year statute of
limitations.
12 V.S.A. § 502.”
Id.
The Huntington court held
that although the mortgagee had failed to bring an action on the
note within six years, “[t]he mortgage is enforceable beyond the
barring of the note because ... the statute of limitations bars
the remedy alone on the note, and not the underlying debt.”
at 72.
Id.
U.S. Bank thus contends, and the Court agrees, that even
if the action on the note is untimely, U.S. Bank may continue to
pursue its remedies with respect to the mortgage.
U.S. Bank also argues, without legal citation, that the
relevant event for stopping the limitations clock was not the
filing of the Counterclaim in 2016, but rather the date of the
Derniers’ initial Complaint in 2011.
support this contention.
The case law does not
In Estate of Alden v. Dee, for
example, the Vermont Supreme Court analyzed the statute of
limitations based upon the date the defendants filed their
counterclaim, and not upon the date on which the case was
commenced.
2011 VT 64, ¶¶ 2, 20; see also Perkins v. Euro-Dec.,
Inc., No. 2010-095, 2010 WL 7791744, at *3 (Vt. Aug. 20, 2010)
(“Defendant acknowledges that the statute of limitations for
such claims is six years, and that six years had plainly passed
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by the time the counterclaim was filed.”). 2
Accordingly, the
Court finds that U.S. Bank’s action on the promissory note was
not timely, and the Derniers are entitled to judgment as a
matter of law on the note. 3
The Derniers’ remaining arguments pertain to the assignment
of the note and mortgage.
Those issues were previously resolved
by the Court at the pleadings stage.
The assignment was
ratified, and the Court has before it an affidavit swearing that
U.S. Bank is the “assignee of the security instrument for the
subject loan.”
ECF No. 211-5 at 2.
Moreover, the Vermont
Supreme Court has held that “a plaintiff to whom a promissory
note or mortgage was not originally issued need not prove chain
of title to enforce a personal guaranty of these principal
One treatise has noted that “if plaintiff institutes an action
one day before the applicable statute of limitations has run on
defendant’s counterclaim, then defendant, although not able to
interpose the claim in the form of a counterclaim before the end
of the limitations period, will be permitted to assert the
claim, if it is compulsory, within the time provided by Rule
12(a) for serving a responsive pleading.” Wright & Miller,
Compulsory Counterclaims—Statute of Limitations, 6 Fed. Prac. &
Proc. Civ. § 1419 (3d ed.). That rule would not apply here, as
U.S. Bank filed its counterclaim six years after the Derniers
filed their Complaint.
2
The Derniers claim that because the promissory note is barred
as untimely, U.S. Bank had no standing to file its initial
Counterclaim for breach of contract. They also argue that U.S.
Bank’s alleged lack of standing at the outset prevented it from
amending its Counterclaim. The Court disagrees, as U.S. Bank
was entitled to bring an action on the underlying debt at any
time prior to the expiration of the 15-year statute of
limitations.
3
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obligations.”
Wells Fargo Bank Minnesota, N.A. v. Rouleau, 2012
VT 19, ¶ 11 (rejecting claims that enforcement is barred because
“Wells Fargo cannot prove that it was assigned the note and
mortgage”).
U.S. Bank is therefore entitled to summary judgment
on the mortgage.
Conclusion
For the reasons set forth above, the Derniers’ motion to
dismiss (ECF No. 208) is denied.
U.S. Bank’s motion for summary
judgment (ECF No. 211) is denied with respect to the promissory
note, and is otherwise granted.
The Derniers’ cross-motion for
summary judgment (ECF No. 225) is, correspondingly, granted with
respect to the promissory note and otherwise denied.
U.S. Bank
shall submit to the Court a proposed Judgment of Foreclosure
within 30 days of this Opinion and Order.
DATED at Burlington, in the District of Vermont, this 8th
day of March, 2024.
/s/ William K. Sessions III
William K. Sessions III
U.S. District Court Judge
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