Citibank, N.A., as Trustee for the MLMI Trust Series 2006-HE5 v. Mumley, No. S1087-09 CnC (Toor, J., Sept. 1, 2011) 

[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the 

accompanying data included in the Vermont trial court opinion database is not guaranteed.] 

VERMONT SUPERIOR COURT

CHITTENDEN UNIT

CIVIL DIVISION

│ 

CITIBANK, N.A., AS TRUSTEE FOR │ 

THE MLMI TRUST SERIES 2006-HE5 │ 

 Plaintiff │ 

│

 v. │ Docket No. S1087-09 CnC 

│ 

GEORGE R. MUMLEY, JR., and STACEY L. │ 

MUMLEY, MORTGAGE ELECTRONIC │ 

REGISTRATION SYSTEMS, INC. (MERS), │

AS NOMINEE FOR FIELDSTONE │

MORTGAGE COMPANY, ESTATE OF │

JANICE C. GINGRAS, AND ANY OTHER │

OCCUPANTS OF 852 ROUTE 7 SOUTH, │

MILTON, VERMONT │ 

 Defendants │ 

│ 

RULING ON MOTION TO VACATE JUDGMENT AND ON MOTION FOR SANCTIONS 

In this foreclosure case, Defendants George and Stacey Mumley (Defendants) have filed 

a motion for sanctions against Plaintiff Citibank, N.A., as trustee for the MLMI Trust Series 

2006-HE5 (Citibank), on the grounds that Citibank failed to comply with the requirements of the 

foreclosure mediation statute. Pursuant to V.R.C.P. 60(b), Defendants have also filed a motion 

to vacate the March 9, 2010 Judgment Order and Decree of Foreclosure by Judicial Sale. 

Citibank opposes both motions. Grant C. Rees, Esq. represents Citibank; Grace B Pazdan, Esq. 

represents Defendants. 

I. Procedural History 
2 

Plaintiff Citibank, N.A. (Citibank) filed its complaint for foreclosure in this case on 

August 25, 2009.1

 The complaint alleged that Defendants had executed a promissory note in 

favor of Fieldstone Mortgage Company, and included a copy of an “Adjustable Rate Note” (the 

Note) as Exhibit 1. The Note identifies the “Lender” as Fieldstone Mortgage Company 

(Fieldstone). The Note does not contain any endorsement either to Citibank or in blank. The 

complaint also alleged that the Note is secured by a mortgage deed to Mortgage Electronic 

Registration Systems, Inc. (MERS) as “nominee” for Fieldstone. The complaint goes on to 

allege that MERS assigned the Note and the mortgage deed to Citibank by an Assignment dated 

August 20, 2009. 

On February 5, 2010, this court granted Citibank’s motion for default judgment and 

issuance of a clerk’s accounting. On March 9, 2010, the court issued a Judgment Order and 

Decree of Foreclosure by Judicial Sale. On July 16, 2010, Defendant Stacey Mumley filed a 

request for foreclosure mediation pursuant to 12 V.S.A. § 4632.2

 On July 23, 2010, the court 

sent a letter to the parties requiring them to confer and agree on a mediator. In an entry filed on 

November 1, 2010, the court stayed action on Citibank’s motion for issuance of a certificate of 

non-redemption due to the ongoing mediation. 

On March 2, 2011, Stacey Mumley filed a letter seeking a sanction against Citibank, 

alleging that no one from Citibank participated in the mediation scheduled for September 23, 

 

1

 The court granted Citibank’s November 24, 2009 motion to amend the complaint to substitute the Estate of Janice 

C. Gingras (the Estate) for Defendant Janice C. Gingras. The Estate filed an answer on December 15, 2009 

asserting that Janice Gingras was dissolved of the Mortgage deed between George R. Mumley, Jr. and Stacey L. 

Mumley shortly after the purchase of the property. 

2

 Vermont’s Foreclosure Mediation Statute, 12 V.S.A. §§ 4631–4637, became effective on July 1, 2010. On certain 

conditions that were met in this case, the new legislation explicitly requires mediation in foreclosure actions even 

after judgment has been entered. See id. § 4636 (“The court shall, on request of a party prior to judgment or on 

request of a party and showing of good cause after judgment, require mediation in any foreclosure action on a 

mortgage on any dwelling house of four units or less that is occupied by the owner as a principal residence that was 

commenced prior to the effective date of this subchapter but only up to 30 days prior to the end of the redemption 

period.”). 
3 

2010. She further alleged that shortly after the scheduled mediation, Defendants received a letter 

indicating that given the recent nationwide events surrounding Bank of America and its 

mortgage practices, the mortgage servicer would be suspending mediation. She asserted that the 

mediator contacted Defendants in January 2011 to recommence mediation and set a February 16 

deadline for Citibank to respond, but Citibank did not do so. 

The mediator filed a mediation report on March 9, 2011, stating that no settlement was 

reached. The report indicates that neither the mortgagee nor the mortgage servicer were present, 

although Attorney Rees was present as mortgagee’s counsel. The report also indicates that there 

was no one present with authority to agree to a proposed settlement, loan modification, or 

dismissal of the foreclosure action, nor was there real-time access to the mortgagors’ account 

information or records relating to consideration of the Home Affordable Modification Program 

(HAMP). Finally, the report states that (1) the lender’s representative failed to attend the 

mediation; (2) the lender failed to mediate in good faith by failing to attend and by failing to 

participate in any subsequent mediation session; and (3) the lender failed to provide the 

documentation required by the Foreclosure Mediation Statute. 

Attorney Pazdan entered her appearance for Defendants on April 11, 2011, and filed a 

supplemental motion for sanctions. The court held a hearing on the mediator’s report and on the 

request for sanctions on April 13, 2011. On May 2, Defendants filed a motion to vacate the 

judgment. 

II. Defendants’ Motion to Vacate 
4 

 Defendants’ motion to vacate is filed pursuant to V.R.C.P. 60(b)(4), (5), and (6).3 The 

court discusses each potential ground for relief from judgment in turn. 

 

3

 Defendants initially sought relief pursuant to V.R.C.P. 60(b)(1) (excusable neglect), but now concede that that 

excusable neglect cannot form the basis for relief from judgment in this case because their motion was filed on 

May 2, 2011—more than one year from the date of judgment. 
5 

A. Rule 60(b)(4): Standing 

In their motion to vacate, Defendants assert that Citibank failed to plead or establish 

standing to foreclose on their home. They argue that, at most, Citibank alleged that MERS had 

assigned the mortgage to Citibank, but that such an assignment is legally insufficient to transfer 

ownership of a mortgage note. In opposition, Citibank contends that its complaint was “typical” 

of foreclosure complaints filed in Vermont prior to events that had brought current issues of 

foreclosure to the forefront. Citibank argues that Defendants’ standing claim “dissipate[s]” 

because Citibank can, in its opposition to Defendants’ motion, show a chain of possession and 

negotiation of the Note. Citibank also argues that it should be permitted to correct any 

deficiency pursuant to V.R.C.P. 17 and Korda v. Chicago Insurance Co., 2006 VT 81, ¶ 16, 180 

Vt. 173. 

Specifically, Citibank asserts that a “client imaging system” contained more than one 

copy of the Note: one included a stamped blank endorsement from Fieldstone and one did not. 

Citibank acknowledges that it attached the un-endorsed version to its complaint. Attached to 

Citibank’s opposition is what appears to be the same document, except that it bears an 

endorsement in blank. There is no indication as to the date of the endorsement. Citibank has 

also attached the affidavit of Justin Wilson, a “Litigation Specialist” with Citibank’s servicer 

BAC Home Loans Servicing (BAC), who states he has personal knowledge of the servicing of 

the Defendants’ loan based on his review of books and records kept in the course of BAC’s 

business. Wilson says that Citibank is in possession of the original Note and that the Note was 

endorsed in blank in conjunction with a Pooling and Servicing Agreement. Wilson says that 

Citibank is in possession of the original Note and that the Note was endorsed in blank in 

conjunction with a Pooling and Servicing Agreement on September 1, 2006. 
6 

In a reply filed May 27, 2011, Defendants argue that the foreclosure judgment against 

them is void because Citibank did not have standing to foreclose. Defendants maintain that 

Citibank has presented no evidence that it was the holder of the note at the time it filed its 

complaint. Defendants argue that Wilson cannot have personal knowledge of Citibank’s alleged 

acquisition of the Note in September 2006 because BAC was not involved with the mortgage 

loan until May 2010. Defendants conclude that the judgment should be vacated pursuant to 

V.R.C.P. 60(b)(4). In a letter filed August 1, 2011, Defendants call the court’s attention to the 

recent decision in U.S. Bank National Ass’n v. Kimball, 2011 VT 81. 

Although this case involves a number of factual circumstances similar to those in 

Kimball, there is one significant difference: the issue of standing in Kimball was raised in a 

motion for summary judgment prior to the entry of judgment. In this case, by contrast, a final 

judgment has already been entered. Defendants move to vacate that judgment pursuant to 

V.R.C.P. 60(b)(4) on the grounds that Citibank was not entitled to enforce the Note at the time it 

brought its complaint and therefore lacked standing, thus depriving the court of jurisdiction and 

rendering the judgment void. 

Whatever the merits of Defendants’ claim that Citibank was not entitled to enforce the 

Note when it brought its complaint, Defendants cannot now collaterally attack the March 9, 2010 

judgment on jurisdictional grounds. See Nemaizer v. Baker, 793 F.2d 58, 65 (2d Cir. 1986) 

(“Even if a court does not expressly rule on matters relating to its exercise of jurisdiction, if the 

parties could have challenged the court’s power to hear a case, then res judicata principles serve 

to bar them from later challenging it collaterally.”); Donley v. Donley, 165 Vt. 619, 620 (1996) 

(mem.) (“A judgment is not void on standing or jurisdictional grounds when a party had a prior 

opportunity to contest on those grounds but failed to do so.”); 11 Wright, Miller, Kane & 
7 

Marcus, Federal Practice and Procedure: Civil 3d § 2862 (“[A] court’s determination that it has 

jurisdiction of the subject matter is binding on that issue, if the jurisdictional question actually 

was litigated and decided, or if a party had an opportunity to contest subject-matter jurisdiction 

and failed to do so.” (footnotes omitted)); 13B Wright et al., Federal Practice and Procedure: 

Juris. 3d § 3531.15 (“[I]t is possible that a final judgment might be subject to a motion to vacate 

or collateral attack for want of standing. Ordinarily such attacks should be rejected, even if the 

Article III requirements of standing were not met. Other defects of federal subject-matter 

jurisdiction do not establish that a judgment is void, and standing should be no different.” 

(footnotes omitted)). The court therefore does not reach Citibank’s argument premised on 

V.R.C.P. 17 and Korda.4

B. Rules 60(b)(5) and 60(b)(6): Alleged Injustice 

 Defendants argue that they are entitled to relief from judgment under V.R.C.P. 60(b)(5) 

and 60(b)(6) because they say that Citibank’s servicing agents willfully violated the federal 

HAMP guidelines and Vermont’s Foreclosure Mediation Statute. Citibank maintains that 

allegations of improper participation in the HAMP mediation process are insufficient to warrant 

vacating the judgment because Defendants have made no showing that they are eligible for a 

HAMP loan modification and because Defendants have themselves refused to participate in 

mediation and have taken actions calculated to frustrate a proper HAMP resolution. Citibank 

also asserts that Defendants’ argument regarding Citibank’s allege failure to participate in 

HAMP mediation pursuant to Vermont’s Foreclosure Mediation Statute fails because (1) there is 

no cause of action afforded to borrowers under HAMP and (2) the federal HAMP program 

preempts the Vermont Mediation Statutes. In reply, Defendants contend that they do not seek 

 

4

 The court does note, however, that the Kimball Court seemed to suggest that such an argument might gain traction 

where, unlike in that case, the mortgagee does not squander its opportunity to raise it. See Kimball, 2011 VT 81, 

¶ 19. 
8 

redress under HAMP, and that HAMP explicitly requires participating servicers to comply with 

all federal, state and local laws related to HAMP. 

 Although Defendants seek relief under both V.R.C.P. 60(b)(5) and 60(b)(6), it is not clear 

that Rule 60(b)(5) applies in this case. See Annotation, Construction and Application of Rule 

60(b)(5) of Federal Rules of Civil Procedure, Authorizing Relief from Final Judgment where its 

Prospective Application is Inequitable, 117 A.L.R. Fed. 419, § 6[c] (1994) (collecting cases in 

which courts held that judgments or orders requiring forfeiture or foreclosure are not prospective, 

and hence are not subject to review under the inequitable–prospective–application clause of Rule 

60(b)(5) of the Federal Rules of Civil Procedure). Even assuming that Rule 60(b)(5) does apply, 

however, Defendants’ “injustice” argument is the same under both Rule 60(b)(5) and 60(b)(6), 

and thus it makes sense to perform the analysis under the latter subsection. 

 Under Rule 60(b)(6), relief from judgment is available for “any other reason justifying 

relief from the operation of the judgment.” V.R.C.P. 60(b)(6). This is a “catch-all provision” 

that is “designed to give the court flexibility to see that the rule serves the ends of justice.” 

Reporter’s Notes, V.R.C.P. 60. The rule “is intended to prevent hardship or injustice and thus 

[is] to be liberally construed and applied.” Sandgate Sch. Dist. v. Cate, 2005 VT 88, ¶ 7, 178 Vt. 

625 (mem.) (internal quotation omitted). On the other hand, out of concern for certainty and 

finality of judgments, there are limits on when relief is available. Richwagen v. Richwagen, 153 

Vt. 1, 4 (1989). Thus Rule 60(b)(6) may not be used to relieve a party from a free, calculated, 

and deliberate choice. Sandgate, 2005 VT 88, ¶ 7. Rule 60(b)(6) is to be used “sparingly” to 

accomplish justice in “extraordinary situations.” Riehle v. Tudhope, 171 Vt. 626, 627 (2000) 

(mem.). 
9 

 The court concludes that this is not such an “extraordinary situation.” Defendants seek to 

vacate the judgment on equitable grounds because they say that Citibank has failed to participate 

in mandatory mediation. Defs.’ Reply at 5 (filed May 27, 2011). Vermont statutory law already 

provides a process for addressing noncompliance with Vermont law governing mediation in 

foreclosure actions. See 12 V.S.A. § 4635. Indeed, Defendants simultaneously seek sanctions 

pursuant to § 4635. The court believes the allegations of noncompliance and any remedy for 

such noncompliance should be analyzed under the framework of § 4635. The court therefore 

turns now to that analysis. 

III. Defendants’ Motion for Sanctions 

 The court begins with some additional factual background drawn from the parties’ 

competing motions on the issue of sanctions. After Stacey Mumley filed a request for 

foreclosure mediation, the parties agreed to use Brian P. Hehir, Esq. as mediator. Mediation was 

scheduled for September 23, 2010. On September 13, 2010, Defendants sent the financial 

documents required by statute to the mediator. Defendants went to the September 23 mediation 

session, as did the mediator and Attorney Rees. At that session, Attorney Rees informed 

Defendants and the mediator that he had been unable to secure a representative of his client with 

settlement authority to participate in the mediation session. As a result, the parties agreed to 

reschedule the session. Defendants worked with the mediator to try to reschedule the mediation 

session, but Citibank declined to participate in any subsequent mediation. 

 On or about February 23, 2011, Citibank’s servicing agent, BAC Home Loans, sent 

Defendants a HAMP denial letter. The letter stated that Defendants were not eligible for a 

HAMP loan modification because “[b]ased on the NPV results the owner of your loan has not 

approved a modification.” Defendants assert that BAC Home Loans used several incorrect 
10 

figures in the HAMP-related net-present-value (NPV) test that it ran, and that the use of incorrect 

NPV inputs likely skewed the NPV test results in favor of foreclosure and against loan 

modification. 

 In a letter dated April 23, 2011, BAC Home Loans Servicing wrote to the Mumleys 

advising them to disregard the February 23, 2011 letter because it contained incorrect 

information. With the errors allegedly fixed, BAC Home Loans sent Defendants a revised 

HAMP denial letter, also dated April 23, 2011, which again concluded that Defendants were not 

eligible because “[b]ased on the NPV results the owner of your loan has not approved a 

modification.” Defendants did not appeal the April 23 denial. Citibank asserts that Defendants 

have not disputed the information contained in the April 23 denial. Defendants maintain that the 

NPV inputs used in the corrected NPV test are still faulty. Defendants believe that they would 

qualify for a HAMP loan modification if BAC Home Loans used the correct inputs, including a 

lower arrearage to account for what Defendants say is BAC’s unjustified delay in processing the 

application. 

 On May 4, 2011, Attorney Rees emailed Attorney Pazdan and requested an opportunity 

to participate in a further attempt to achieve a mediated resolution either through a proper and 

thorough HAMP analysis or through another “in house” program. On May 5, 2011, Attorney 

Pazdan emailed attorney Rees and stated that “[t]he Mumleys are not interested in mediation 

given the tortured history of this case. If your clients want to make a reasonable loan 

modification offer, they would consider it.” 

Defendants argue that they have been seriously prejudiced by Citibank’s failure to 

participate in the statutorily-mandated foreclosure mediation process, resulting in delay of their 

HAMP application and accrued interest, fees, and costs, a reduction in the likelihood that they 
11 

will qualify for a HAMP loan modification or other foreclosure prevention options, and an 

increased difficulty in curing their mortgage default. They also assert that Citibank’s failure to 

participate in mediation meant they did not have an opportunity to correct alleged inaccuracies in 

the NPV test inputs. Defendants seek one of two sets of relief. The first set or relief they seek 

consists of (1) an order requiring Citibank to reduce their mortgage arrears by one-half; (2) an 

order requiring Citibank to modify their mortgage note according to the HAMP guidelines; and 

(3) attorney’s fees and costs. Alternatively, Defendants seek (1) an order tolling interest, fees 

and costs on their account after September 23, 2010 and an order requiring the parties to 

participate in foreclosure mediation. 

 Citibank acknowledges that the HAMP evaluation process was protracted, but argues that 

sanctions are not available to Defendants because (1) Defendants have unclean hands because 

Defendants refused to participate in the very mediation process that they now demand; (2) no 

cause of action inures to Defendants under HAMP; and (3) Vermont’s statutes addressing 

HAMP mediation are preempted by the federal HAMP program. In reply, Defendants argue 

that: (1) they rejected Citibank’s most recent offer to mediate because Citibank’s servicing agent 

had consistently failed to follow through on its obligations under HAMP and its obligation to 

participate in mediation, and Defendants did not believe Citibank would actually engage in 

mediation in a timely manner and in accordance with the statute; (2) Defendants seek sanctions 

under 12 V.S.A. § 4635 and are not raising a cause of action under HAMP; and (3) HAMP 

explicitly requires participating servicers to comply with all federal, state and local laws related 

to HAMP. 

 The court concludes that sanctions are available to Defendants. Under Vermont law, the 

court may impose sanctions if the court makes a determination of noncompliance or if the 
12 

mediator’s report includes a statement under 12 V.S.A. § 4634(b)(6)5 that a person required to 

attend the mediation failed to attend, make a good faith effort to mediate, or supply required 

documentation. See 12 V.S.A. § 4635(b). Both of those conditions are met in this case. Here, 

the court need not hold a hearing to determine that the mortgagee and servicer did not comply 

with the obligations under 12 V.S.A. § 4633(a). It is undisputed that Citibank did not use or 

consider the NPV calculations “during” any mediation, but only produced those calculations 

after the scheduled mediation dates. In any case, the mediator’s report in this case includes all 

three of the statements listed in 12 V.S.A. § 4634(b)(6)(A). 

 Citibank’s arguments to the contrary are unconvincing. To the extent that Citibank 

asserts that Defendants’ later refusal to mediate calls into question whether their motivation is 

obtaining a proper HAMP outcome or just obtaining sanctions in hopes of reducing their 

mortgage debt, the court believes that sanctions are appropriate and will put the parties on a path 

toward the “proper” HAMP outcome. The court agrees with Defendants that it is irrelevant 

whether HAMP itself creates a cause of action for sanctions. The court also agrees with 

Defendants that Vermont’s Foreclosure Mediation Statutes are not preempted by the federal 

HAMP program. Citibank cites no case specifically so holding. To the extent Citibank is 

concerned that Vermont’s Foreclosure Mediation Statute requires overly burdensome real-time 

live interaction with lenders and thus creates an obstacle to the accomplishment of HAMP’s 

purposes, the court disagrees. Requiring mediation is designed to assure the application of 

HAMP, not to undermine it. See 12 V.S.A. § 4631(a). Nor does the court believe that requiring 

mediation—especially where the mediator may authorize appearance by telephone or 

 

5

 Section 4635(b)’s reference to subdivision 4704(b)(6) is plainly intended to be a reference to § 4634(b)(6). See

Historical and Statutory Notes, 12 V.S.A. § 4634 (noting that § 4634 was added as § 4704, but was redesignated as 

§ 4634 by Legislative Counsel). 
13 

videoconference, 12 V.S.A. § 4633(e)—is so burdensome that it obstructs national banks’ 

powers to conduct activities authorized under federal law. 

 The court concludes that the appropriate sanction in this case is to toll interest, fees and 

costs on Defendants’ account after September 23, 2010, and to order the parties to participate in 

foreclosure mediation. 

Order 

 Defendants’ motion to vacate is denied. Defendants’ motion for sanctions is granted. 

Interest, fees and costs on Defendants’ account after September 23, 2010 are tolled, and the 

parties are ordered to participate in foreclosure mediation within 60 days. A status conference 

will be scheduled after that date. 

Dated at Burlington this 1st day of September 2011.

 ______________________________ 

 Helen M. Toor 

 Superior Court Judge