Scott v. Fed. Nat'l Mortg. Ass'n

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VON SCOTT, Plaintiff, v. FEDERAL NATIONAL MORTGAGE ASSOCIATION, Defendant.

No. RE-2023-037

Superior Court of Maine, Cumberland

June 14, 2023

ORDER ON DEFENDANT'S MOTION TO DISMISS AND MOTION FOR SANCTIONS

MARYGAY KENNEDY, JUSTICE

Before the Court is Defendant Federal National Mortgage Association's ("Fannie Mae") Motion to Dismiss and Motion for Sanctions. For the following reasons, the Court grants Fannie Mae's Motion to Dismiss and will impose sanctions on Plaintiff Von Scott.

I. Facts

Mr Scott alleges that he owns "land called 4 Sagamore Lane Brunswick Maine" ("the Property"), "with contract date 12/30/2022."^[1] (Pl.'s Compl. ¶ 1.) On December 18, 2019, Fannie Mae commenced foreclosure proceedings against Joseph Sharpe regarding a mortgage it held on the Property. (Pl.'s Compl. ¶ 3.) Fannie Mae recorded the complaint at the Cumberland County Registry of Deeds in Book 36439, Page 90 on February 19, 2020. (Pl.'s Compl. ¶ 2.)

Judgment of foreclosure and sale was entered on May 13, 2022, in docket number WESCD-RE-2019-50. The foreclosure sale occurred on December 16, 2022, and the Property was conveyed by deed dated February 7, 2023. (Def.'s Ex. 2.)^[2] Mr. Scott asserts, in essence, that Fannie Mae did not establish standing in the foreclosure action because Fannie Mae did not produce the original mortgage recorded in the Registry of Deeds at trial. (Pl.'s Compl. ¶¶ 4-24.) Mr. Scott claims that the judgment of foreclosure has caused a cloud on his title. (Pl.'s Compl. ¶ 2.) He requests that the Court award him treble damages, totaling $1,208,636.73. (Pl.'s Compl. ¶ 27.) He also seems to request a judgment declaring that he has title to the property and that the judgment of foreclosure and sale is void because of fraud. (Pl.'s Compl. ¶ 26.)

II. Discussion

Fannie Mae has moved to dismiss Mr. Scott's Complaint. Fannie Mae also requests that the Court impose sanctions against Mr. Scott for violation of Maine Rule of Civil Procedure 11.

A. Motion to Dismiss

A motion to dismiss pursuant to M.R. Civ. P. 12(b)(6) "tests the legal sufficiency of the allegations in a complaint, not the sufficiency of the evidence the plaintiffs are able to present." Barnes v. McGough, 623 A.2d 144,145 (Me. 1993) (citation omitted). Accordingly, the Court must "consider the facts in the complaint as if they were admitted." Bonney v. Stephens Mem'l Hosp., 2011 ME 46, ¶ 16, 17 A.3d 123. The Court may also consider "official public documents, documents that are central to the plaintiff's claim, and documents referred to in tire complaint, without converting a motion to dismiss into a motion for a summary judgment when the authenticity of such documents is not challenged." Moody, 2004 ME 20, ¶ 10, 843 A.2d 43.

The Court views the complaint "in the light most favorable to the plaintiff to determine whether it sets forth elements of a cause of action or alleges facts that would entitle the plaintiff to relief pursuant to some legal theory." Bonney, 2011 ME 46, ¶ 16,17 A.3d 123 (quoting Saunders v. Tisher, 2006 ME 94, ¶ 8, 902 A,2d 830). "Dismissal is warranted when it appears beyond a doubt that the plaintiff is not entitled to relief under any set of facts that he might prove in support of his claim." Id. (quoting Saunders, 2006 ME 94, ¶ 8, 902 A.2d 830).

Mr. Scott characterizes his Complaint as an action to quiet title. His Complaint also raises a wrongful foreclosure claim and an action for a declaratory judgment regarding title to the Property. Fannie Mae argues that Mr. Scott has failed to state a claim for relief because (1) Mr. Scott does not have standing to bring these claims because his allegations establish that he has no interest in the Property, and (2) he cannot obtain relief regarding the validity of the foreclosure judgment through a separate, post-judgment action.

i. Quiet Title and Declaratory Judgment

"Standing is a threshold issue bearing on the court's power to adjudicate disputes." Lamson v. Cote, 2001 ME 109, ¶ 11, 775 A.2d 1134 (quoting Franklin Prop. Tr. v. Foresite, Inc., 438 A.2d 218, 220 (Me. 1981)). "In Maine, standing jurisprudence is prudential, rather than constitutional." Black v. Bureau of Parks & Lands, 2022 ME 58, ¶ 27, 288 A.3d 346. "'Just what particular interest or injury is required for standing purposes and the source of that requirement-whether statutory-or common law-based-varies based on the type of claims being alleged.'" Id. (quoting Bank of Am., N.A. v. Greenleaf, 2014 ME 89, ¶ 7, 96 A.3d 700).

A quiet title action is appropriately brought by a "person in possession of real property ... or a person who has conveyed such property ... if he or those under whom he claims or those claiming under him have been in uninterrupted possession of such property for 4 years or more .. . ." 14 M.R.S. § 6651 (2023). The Law Court has described "uninterrupted possession of [the] property for 4 years or more" as an "essential prerequisite to bringing an action to quiet title." Harrington v. Garland, 381 A.2d 639, 641 (Me. 1978) (quoting 14 M.R.S. § 6655); see Levis v. Konitzky, 2016 ME 167, ¶ 24, 151 A.3d 20.

Mr. Scott has not alleged uninterrupted possession of the Property for four years or more. Mr. Scott's own allegations demonstrate that he received his interest in the Property from Joseph Sharpe on July 13, 2020, at the earliest. Moreover, as discussed in the next section, Mr. Scott's allegations do not establish that he has any interest-at all- in the Property. He does not have standing to bring a quiet title action.

ii. Declaratory Judgment

The Declaratory Judgments Act, 14 M.R.S. §§ 5951-5963 (2023), does not create any new cause of action. Rather, the purpose of the Declaratory Judgments Act is to "provide a more adequate and flexible remedy in cases where jurisdiction already exists." Colquhoun v. Webber, 684 A.2d 405, 411 (Me. 1996). To have standing to maintain a declaratory judgment action, the plaintiff must have "a claim of right, buttressed by a sufficiently substantial interest to warrant judicial intervention." Passamaquoddy Water Dist. v. City of Eastport, 1998 ME 94, ¶ 8, 710 A.2d 897 (quoting Annable v. Bd. of Env't Prot., 507 A.2d 592, 595 (Me. 1986)).

Mr. Scott asserts that he has an interest in the Property, either by virtue of a "verbal transfer" of Joseph Sharpe's interest on July 13, 2020, or by a contract dated December 30, 2022. The problem, however, is that either of these acquisitions would post-date the filing of the foreclosure complaint by Fannie Mae in the Registry of Deeds on February 19, 2020. (Pl.'s Compl. ¶ 2.) 14 M.R.S. 6321 (2023) provides, in relevant part:

Any other party having a claim to the real estate whose claim is not recorded in the registry of deeds as of the time of recording of the copy of the complaint or the clerk's certificate need not be joined in the foreclosure action, and any such party has no claim against the real estate after completion of the foreclosure sale, except that any such party may move to intervene in the action for the purpose of being added as a party in interest at any time prior to the entry of judgment.

Mr. Scott's interest, whether obtained by verbal transfer or subsequent contract, would have been foreclosed upon as well. The Property has been conveyed following the foreclosure sale authorized by the foreclosure judgment. Mr. Scott, therefore, has no substantial interest in the Property to bring a declaratory judgment action regarding title to the Property.

iii. Wrongful Foreclosure

Finally, Mr. Scott asks the Court to declare that the foreclosure judgment and sale were void and award damages therefor. Fannie Mae argues that there is no independent cause of action for this claim and that the proper means to raise a challenge to the foreclosure judgment and sale is through a motion for relief from judgment in the foreclosure action. As at least one other Maine court has noted, the viability of a "wrongful foreclosure" cause of action in Maine is an open question. See First Tracks Invs. v. Schoolhouse, No. BCD-CV-11-31, 2012 Me. Bus. &Consumer LEXIS 43, at *26 n.4 (Apr. 13, 2012).

Some jurisdictions have such a cause of action, although the elements vary. See, e.g., Reeder v. Specialized Loan Servicing LLC, 266 Cal.Rptr.3d 578, 586 (Cal.Ct.App. 2020) ("The basic elements of a cause of action for wrongful foreclosure are that the trustee has caused 'an illegal, fraudulent, or wil[l]fully oppressive sale' under the power of sale in a deed of trust; the trustor or other party challenging the sale was prejudiced or harmed; and the trustor tendered the amount of the secured indebtedness or was excused from doing so." (alteration in original) (quoting Miles v. Deutsche Bank Nat'l Tr. Co., 186 Cal.Rptr.3d 625, 636 (Cal.Ct.App. 2015))); Facione v. CHL Mortg. Tr., 628 Fed.Appx. 919, 921 (6th Cir. 2015) (discussing Michigan law, which permits a post-redemption period challenge by a mortgagor upon a "clear showing of fraud, or irregularity" in the foreclosure proceedings); Sauceda v. GMAC Mortg. Corp., 268 S.W.3d 135,139 (Tex. App. 2008) ("The elements of a wrongful foreclosure claim are: (1) a defect in the foreclosure sale proceedings; (2) a grossly inadequate selling price; and (3) a causal connection between the defect and the grossly inadequate selling price.").

Mr Scott makes no allegations regarding the foreclosure sale proceedings or selling price. The only "irregularity" or evidence of "fraud" that Mr. Scott alleges is that Fannie Mae offered, and the District Court (West Bath, Rushlau, J.) admitted, copies of the mortgage and note rather than the originals at trial. As Mr. Scott himself alleges, the mortgagor, Joseph Sharpe, raised these arguments at hearing in the foreclosure action. As shown in the...