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Maine: Proving Authority to Enforce the Note

Posted By USFN, Friday, October 4, 2013
Updated: Monday, November 23, 2015

October 4, 2013


by Katie Hawkins & Lauren Thomas
Bendett & McHugh, P.C. – USFN Member (Connecticut, Maine, Vermont)

Recently, the Law Court took steps towards settling the widely-discussed and often-litigated question of what proof is required for a plaintiff to prove “ownership” of the mortgage and mortgage note as required by 14 M.R.S.A. § 6321 and Chase Home Finance v. Higgins, 2009 Me. 136, 985 A.2d 508.

The Law Court interprets the requirement that a plaintiff “certify proof of ownership” to require only that a plaintiff identify the “owner or economic beneficiary of the note” and, where the plaintiff is not the owner, to “indicate the basis for the plaintiff’s authority to enforce the note” pursuant to 11 M.R.S.A. § 3-1301. [Bank of America v. Cloutier, 2013 Me. 17, 61 A.3d 1242]. This confirms the standing of a servicer to foreclose, so long as any investor is identified.

The court came to this conclusion by distinguishing two requirements of 14 M.R.S.A. § 6321: (1) the standing requirement found in paragraph one; and (2) the evidence requirement found in paragraph three. Earlier decisions by the Law Court have addressed the paragraph three requirements. Wells Fargo v. deBree, 2012 Me. 34, 38 A.3d 1257; HSBC Bank USA, N.A. v. Gabay, 2011 Me. 101, 28 A.3d 1158; Mortgage Electronic Registration Systems, Inc. v. Saunders, 2010 Me. 79, 2 A.3d 289. Cloutier addresses the paragraph one standing requirement and “harmonizes” it with Article 3-A of the UCC to define who may enforce a promissory note. With this reading, the court found that Bank of America, the servicer of the subject loan, can enforce the note and foreclose as a “holder.” However, the “owner or economic beneficiary” (here, Freddie Mac) must be identified in order to comply with the requirements of Section 6321. 2013 Me. 17, ¶ 13-14.

The Law Court has since applied Cloutier to vacate a judgment in favor of the homeowners in U.S. Bank, National Association as Trustee for the MLMI Surf Trust Series 2006-BC2 v. Thomes, 2013 Me. 60. At trial, the court required the foreclosing bank to establish that it owned the note and mortgage. On the appeal of Thomes, however, the Law Court clarified that under Cloutier, the bank is required to identify the owner or economic beneficiary of the note and demonstrate that it is entitled to enforce the note, not prove that the bank itself owns the note and mortgage. Because the bank provided evidence of a note, which had been specially endorsed to the bank, accompanied by an allonge endorsing the note in blank, an assignment of mortgage to the bank, and testimony that U.S. Bank was the holder of the note and had physical possession of the note, the Law Court determined that the bank had met its burden under Cloutier and vacated the judgment for the homeowners.

Practically speaking, the Cloutier case and the decisions that follow from it establish yet another element that a foreclosing plaintiff must establish before the court will issue a judgment of foreclosure and sale. Whether judgment is sought through a motion for summary judgment or at trial, the foreclosing plaintiff must identify the owner or economic beneficiary of the note and introduce into evidence business records supporting that identification. Frequently, the owner or economic beneficiary identified will be the investor or investors. It is expected that Maine courts will continue to address issues of ownership as the Law Court’s decisions in Cloutier and Thomes are applied and analyzed.

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