Aurora Loan Servs., LLC v. Kirkpatrick, No. S0498-0 9 CnC (Crawford, J., June 18, 2013)

[The text of this Vermont trial court opinion is un official. It has been reformatted from the origina l. The accuracy of the text and the accompanying data included in the Vermont trial cou rt opinion database is not guaranteed.] STATE OF VERMONT

SUPERIOR COURT CIVIL DIVISION

Chittenden Unit Docket No.: S0498-09 CnC

Aurora Loan Services, LLC

Plaintiff

v.

Thomas M. Kirkpatrick, John Poratti and Occupants residing at 20-22 Ward Street, Burlington, Vermont

Defendants

DECISION ON DEFENDANT’S MOTION TO DISMISS

AND ON PLAINTIFF’S MOTION FOR SUBSTITUTION OF PARTI ES

In a complaint dated April 16, 2009 and filed Apri l 20, 2009, plaintiff Aurora Loan Services, LLC (Aurora) brought this foreclosure sui t against defendant-mortgagor Thomas M. Kirkpatrick. 1 The court entered a final judgment and decree of foreclosure in January 2012. In June 2012, after a hearing on Mr. Kirkpatrick’s mot ion for an emergency stay or extension of the redemption period, the court ordered mediation purs uant to V.R.C.P. 16.3. 2 Mediation occurred on August 30, 2012, and did not result in a settlem ent. On February 11, 2013, the court accepted the mediation report. This completed the mediation portion of this case. On February 27, 2013, the lender issued a notice of sale. On March 11, 2 013, Mr. Kirkpatrick, who represents himself,

filed a motion to dismiss and halted the sale until the motion could be resolved. 3

FACTUAL AND PROCEDURAL BACKGROUND

When Aurora filed its complaint in 2009, it include d a copy of the original note dated June 30, 2006 and payable to Aegis Wholesale Corpor ation in the amount of $285,000, as well as a copy of the mortgage deed naming Mortgage Elec tronic Registration Service, Inc. (MERS) as the mortgagee. The final page of the note—the a llonge—shows two endorsements. The first is from Aegis Wholesale Corporation to Aegis Mortga ge Corporation. The second is an

1 Aurora also named as defendants John Poratti, a se cond mortgagee, and any occupants of the mortgaged premises.

2 Defendant did not qualify for HAMP mediation becau se the property was not owner-occupied.

3 As a preliminary matter, the court notes that, ins ofar as Mr. Kirkpatrick alleges that a lack of stan ding deprives the court of subject matter jurisdiction, his defense i s technically raised pursuant to V.R.C.P. 60(b)(4) (void judgments) rather than Rule 12, since a final judgment has alr eady been entered. See 5C Wright et al., Federal P ractice and Procedure: Civil 3d § 1393 (WL updated Apr. 2013) ( defense of lack of subject matter jurisdiction may be interposed as a motion for relief from a final judg ment under Rule 60(b)(4)). Therefore, for the purp oses of the factual background that follows, the court goes bey ond the pleadings and considers the materials in th e record presented by the parties.2

endorsement in blank executed by Aegis Mortgage Cor poration. In its complaint, Aurora alleged that MERS, acting as nominee for Aegis Wholesale Co rporation, assigned the note and mortgage to Aurora in April 2009. However, Aurora did not s pecifically allege that the original note was in its possession and control, or that it was other wise entitled to enforce the note pursuant to the

Uniform Commercial Code. 4 Because the version of Rule 80.1 that applied in April 2009 did not require Aurora to demonstrate its right to enforce the note at the pleading stage, the complaint did not make a clear allegation that Aurora was in possession of the note that Aegis Mortgage Corporation had endorsed in blank. 5 However, Mr. Kirkpatrick never challenged Aurora’ s right to enforce the note until he filed the pending post -judgment motion.

In his motion to dismiss, Mr. Kirkpatrick argues, a mong other things, that Aurora lacked standing when the case was filed because Aurora has not alleged that it possessed the note at the time suit was filed. He also contends that, in any event, Aurora no longer has standing because, since filing, Aurora has transferred its interest t o another entity. On April 19, 2013—after receiving an extension of time to respond to Mr. Ki rkpatrick’s motion to dismiss—Aurora filed a Rule 25 motion to substitute Wells Fargo Bank, Nati onal Association, Not in its Individual or Banking Capacity, but Solely as Trustee for SRMOF I I 2011-1 Trust (Wells Fargo) to be substituted as a party plaintiff. In support of it s motion to substitute, Aurora attached the affidavit of Gina Gray, a Vice President for Wells Fargo, who states that Wells Fargo “is the holder of the original Promissory Note and has the original Promissory Note, with Allonge(s) attached thereto, and Mortgaged Deed referenced her ein in its possession.” Gray Aff. ¶ 7, Apr. 2, 2013. Aurora has also supplied copies of a seri es of assignments of the mortgage—each dated April 15, 2013—beginning with Aurora and ending wit h Wells Fargo. 6

Aurora also filed an opposition to Mr. Kirkpatrick’ s motion to dismiss on May 3, 2013. In support of its opposition, Aurora attached the a ffidavit of Cassandra Leet, a Vice President for Aurora, who states that, on April 14, 2009, Aurora received a collateral file from Bank of America—Merrill Lynch, and that the file included t he June 30, 2006 note. Leet Aff. ¶¶ 4–7, Apr. 18, 2013. Ms. Leet states that Aurora had the promissory note in its possession on April 16,

2009. Id . ¶ 10. Additional factual background is set forth as necessary below.

4 Such an allegation is required under the Rules tha t are currently in effect. See V.R.C.P. 80.1(b)(1) (Cum. Supp. 2012) (“The plaintiff shall attach to the complaint copies of the original note and mortgage deed and proof of ownership thereof, including copies of all original endorsements and assignments of the note and mortg age deed. The plaintiff shall plead in its complaint that the originals are in the possession and control of the plaintiff or that the plaintiff is otherwise entitled to enforce the mort gage note pursuant to the Uniform Commercial Code.” ). However, those requirements were not effective until July 1, 2010—well after the date on which Aurora filed its complaint.

5 The complaint did allege that MERS had assigned th e note to Aurora, although it is unclear how MERS c ould have assigned the note given that the documents in the r ecord show that MERS never acquired anything more t han bare legal title to the mortgage deed (and certainly no interest in the note).

6 The court has some difficulty understanding how, o n April 2, 2013, Gina Gray could testify that Wells Fargo possessed the note and the mortgage, when the docum ents indicate that Wells Fargo did not acquire any interest until April 15, 2013. That observation ultimately has no impact on the outcome of the case.3 ANALYSIS

I. Aurora’s “Standing”

Aurora asserts that the court should reject as unti mely Mr. Kirpatrick’s post-judgment attack on Aurora’s standing. In support, Aurora cit es Citibank, N.A. v. Mumley , No. S1087-09 CnC (Vt. Super. Ct. Sept. 1, 2011) (Toor, J.), avai lable at http://www.vermontjudiciary.org/ 20112015%20Tcdecisioncvl/2011-9-12-2.pdf. In that case, the defendants moved to vacate a foreclosure judgment pursuant to Rule 60(b)(4) on t he grounds that the bank was not entitled to enforce the Note at the time it brought its complai nt, and therefore lacked standing, thereby depriving the court of jurisdiction and rendering t he judgment void. The court concluded that, since final judgment had been entered, the defendan ts could not collaterally attack the judgment on jurisdictional grounds. For the reasons articul ated in Mumley , the court holds that Mr. Kirkpatrick cannot collaterally attack the March 31 , 2011 amended judgment.

Moreover, even if Rule 60(b) did authorize a chall enge like the one that Mr. Kirkpatrick now raises, he would not prevail on the merits for the reasons described below. The court doubts that Mr. Kirkpatrick’s challenge actually implicate s the court’s subject matter jurisdiction. His invocation of the standing doctrine is not necessar ily correct for a case involving only private claims. As the leading treatise notes, when partie s and courts use the language of the standing doctrine in such cases, they create “conceptual con fusions [that] make unnecessary work” and may cause incorrect conclusions regarding a court’s subject matter jurisdiction, the availability of substitution to correct a real party in interest defect, capacity, intervention, etc. 13A Wright e t al., Federal Practice and Procedure: Jurisdiction 3 d § 3531 (WL updated Apr. 2013). Nevertheless, parties in foreclosure cases have not infrequently labeled challenges to a bank’s alleged right to enforce a note and mortgage as cha llenges to “standing.” E.g., Wells Fargo Bank Minnesota, N.A. v. Rouleau , 2012 VT 19, ¶ 1, 191 Vt. 302; U.S. Bank Nat’l Ass’n v. Kimball

, 2011 VT 81, ¶ 1, 190 Vt. 210.

Although Mr. Kirkpatrick relies heavily on Kimball , that case does not control the result here. Mr. Kirkpatrick attempts to fault Aurora for providing insufficient proof of the time that Aurora possessed the note and acquired the endorsem ents, noting the Kimball Court’s apparent application of the standing doctrine and the fact t hat “standing is to be determined as of the commencement of suit.” 2011 VT 81, ¶ 12 (quoting Lujan v. Defenders of Wildlife , 504 U.S. 555, 570 n.5 (1992)); see also id . ¶ 14 (stating that the bank in that case “was req uired to show

that at the time the complaint was filed it possessed the original note either made payable to bearer with a blank endorsement or made payable to order with an endorsement specifically to [the bank]” (emphasis added)); id . ¶ 17 (“The additional affidavit submitted with th e motion to reconsider did nothing to establish the timing of t he endorsement to U.S. Bank . . . .”). As described above, this court is skeptical about the application of the standing doctrine in a case that, like this one, involves only private claims.

In any case, the court notes that Aurora has come forward with evidence that it held the note at the time the complaint was filed. Moreover , Aurora would prevail on the argument that U.S. Bank attempted to make in Kimball . Namely, even without evidence that Aurora held t he note on April 16, 2009, any such shortcoming should be overlooked because Wells Fargo—the4

party Aurora seeks to have substituted as plaintiff —is the real party in interest. This is not a

situation where the bank failed to come forward wit h evidence once the issue was raised. Cf. id

. ¶¶ 18–19 (U.S Bank failed to timely supply the nece ssary documentation even though it had notice of the alleged “standing” deficiency from th e start of the litigation). Here, as described above, Aurora came forward with documentation immed iately after Mr. Kirkpatrick raised the “standing” issue in his motion to dismiss.

The court is satisfied that all of the elements de monstrating Wells Fargo’s current interest in the note and the mortgage are present. There is now evidence that Aurora possessed the note at the time it filed the complaint, and there is al so evidence that Wells Fargo is now in possession

of the note. 7 Since the note is endorsed in blank, Wells Fargo is a “[p]erson entitled to enforce” the note under 9A V.S.A. § 3-301. As for the mortg age deed, it went from MERS to Aurora on April 1, 2009, and then, via the series of April 15 , 2013 assignments, went to Wells Fargo. The

note and the deed have therefore been reunited with Wells Fargo. The court will therefore deny Mr. Kirkpatrick’s motion to dismiss to the extent i t raises the issue of “standing,” and will grant

Aurora’s motion for substitution. 8

II. Remaining issues in Mr. Kirkpatrick’s motion t o dismiss

Mr. Kirkpatrick makes two alternative arguments in his motion to dismiss. First, he argues that the plaintiff acted in bad faith during the mediation process by refusing to consider the current interest rate of the promissory note wh en it offered a proposed loan. Second, he argues that, following the mediation process and Mr . Kirkpatrick’s acceptance of a loan modification, plaintiff improperly withdrew the off er. The court concludes that, even assuming these claims are cognizable under Rule 60(b), they are not meritorious for the reasons discussed

below.

The following additional background is necessary to understand Mr. Kirkpatrick’s arguments. The June 30, 2006 note that Mr. Kirkpat rick executed was an adjustable rate note. 9

Under the terms of the note, the initial rate was 7 .875%, and the rate changed every six months, calculated as the six-month LIBOR rate plus 2.25%, rounded to the nearest one-eighth percentage point, and subject to certain limits on interest rate changes. At the time of the August 30, 2012 mediation, Mr. Kirkpatrick had recently re ceived a notice of rate change dated July 2, 2012 and indicating an interest rate of 3.00%, effe ctive with Mr. Kirkpatrick’s August 1, 2012

payment.

7 Because the evidence is that Wells Fargo is now in possession of the note, Wells Fargo does not need to prove that Aurora ever possessed it. See Wells Fargo Bank Minnesota, N.A. v. Rouleau , 2012 VT 19, ¶ 11, 191 Vt. 302 (holding that a plaintiff to whom a promissory note or mortgage was not originally issued need not pro ve chain of title to enforce a personal guaranty of those princ ipal obligations).

8 Even though final judgment has already been entere d, substitution is still authorized because there i s no time limit on moving to substitute under the provisions of Rul e 25(c). 7C Wright et al., Federal Practice and Pr ocedure: Civil 3d § 1958 (WL updated Apr. 2013).

9 The note also provided that the first 120 monthly payments would be interest-only payments.5

In an email sent on October 31, 2012, plaintiff off ered Mr. Kirkpatrick a modification agreement, subject to a November 15, 2012 deadline to accept or reject the offer. See Opp’n

Ex. 2. 10 Plaintiff outlined the terms of the offer as foll ows:

This will be a full debt recapture plan. After cap italization of all arrearages, the new unpaid principal balance will be approximately $401,676.13. The interest

rate will be reduced from 7.875 to 6.00%. There wi ll be a six month trial period. The current principal, interest, tax and insurance payment is $2,089.03. The new principal, interest, tax and insurance payment will be $3,045.08. It will be necessary to escrow your taxes and insurance. The term of the loan will be 405 months. The first payment will be due December 1, 2012. Upon timely receipt of the six trial payments, a permanent loan modificati on will be generated for your

execution.

Id . In an email reply sent on November 7, 2012, Mr. Kirkpatrick responded:

I am willing to agree to Selene’s 11 terms with one request. Since Selene is changing my interest rate to a FIXED rate and not a n ARM where I could take advantage of the very low prime rate, I would like to [] at least be within the current mortgage rates of 4% for a fixed loan.

Could you also give me more specifics on what the a ctual payment will be and what is included in the payment[?]

I also would like to request that should I accept S elene’s offer that my first payment start on January 01, 2013 as no decision or final numbers have been presented to me as of yet. I would like to have ti me to review Selene’s offer. . . .

Id . Ex. 3. Plaintiff replied by email on November 14 , 2012:

The payment breakdown is as follows: $2315.57 PI, $ 657.51 Taxes, $72.00 Insurance, $3045.08 Total

Selene has denied the request for a 4% rate and ind icated that we need to set this up for payment 12/01/12. As indicated previously, the offer is open for acceptance up until the close of business tomorrow 11/15/2012.

Id . Ex. 4. Mr. Kirkpatrick wrote back on November 15 , 2012, stating, in pertinent part:

I will agree to the terms Selene has offered under the following conditions:

10 To the extent the exchanges reproduced below might be considered “mediation communications” as define d in 12 V.S.A. § 5713(3) and subject to a privilege purs uant to 12 V.S.A. § 5715, it appears that all parti es waive the privilege by asking the court to consider the conte nt of the communications. See 12 V.S.A. § 5716 (wa iver of privilege).

11 The court understands that, at the time of the off er, Aurora had assigned the mortgage to Selene Fina nce, LP (Selene).6

1. I am given ample time to seek legal counsel so I can understand the agreement and [its] legal obligations.

2. I receive a breakdown of the principal amount o wed on the loan. (what charges, costs that have been added to final princi pal loan total) . . . .

[C]ould you see if Selene will extend the loan term to 40 years? This will lower my payment and help in saving for property maintena nce.

Id . Neither party has presented evidence of further communications in this email chain.

A. Bad faith

According to Mr. Kirkpatrick, plaintiff acted in ba d faith during the mediation process

because it refused to use the 3% rate in the notice of rate change he had received as the foundation for determining the new interest rate fo r a loan modification. Mot. to Dismiss at 4. Plaintiff maintains that the July 2, 2012 notice of rate change “had nothing to do with the mediation process and was simply a statement of the adjustment to his variable rate loan which would have taken place on August 1, 2012 had the lo an been current.” Opp’n at 3. The court agrees with plaintiff on this point. Moreover, the mediator expressly found that both sides made a good faith effort to mediate.

B. Offer and acceptance

Mr. Kirkpatrick’s second argument is that he did accept plaintiff’s loan modification offer, and that plaintiff refused to accept his acc eptance and instead withdrew the offer. There seems to be no dispute that Mr. Kirkpatrick’s Novem ber 7 email was not an acceptance, since it conditioned acceptance on changed terms, including a lower rate and a different start date. 12 See Okemo Mountain, Inc. v. Okemo Trailside Condos., In c. , 139 Vt. 433, 435 (1981) (“[A]n acceptance of an offer, to be good, must in every r espect meet and correspond with the offer . . . . An acceptance on terms varying from those proposed is, in effect, a counter proposal, and is not binding until it is itself accepted.” (quotation om itted)).

The court concludes that Mr. Kirkpatrick’s November 15 email—sent on the day of plaintiff’s deadline—was also not an acceptance. T hat email purported to agree to the 6% rate and the December 1, 2012 start date, but also inclu ded a request to extend the loan term as well as a “condition” that Mr. Kirkpatrick be given more time to review the offer. The “condition” that Mr. Kirkpatrick sought rendered his purported acceptance equivocal, and therefore plaintiff was not bound. See Restatement (Second) of Contrac ts § 57 (“Where notification is essential to acceptance by promise, the offeror is not bound by an acceptance in equivocal terms unless he reasonably understands it as an acceptance.”). Pla intiff was “entitled to know in clear terms whether the offeree accepts his proposal.” Restate ment (Second) of Contracts § 57 cmt. b. Here, plaintiff required Mr. Kirkpatrick to accept no lat er than November 15, and Mr. Kirkpatrick’s

12 The November 7 email also sought more time to revi ew the offer. In its November 14 reply, plaintiff reiterated that the offer was open for acceptance only until t he close of business on November 15.7

November 15 email did not supply clear terms that h e was accepting the proposal. Since plaintiff was under no obligation to keep the offer open past November 15, and since there is no evidence of a clear acceptance, the court concludes that the parties never formed a contract to modify the loan.

CONCLUSION

Aurora’s motion for substitution (filed Apr. 19, 2 013) is granted. Mr. Kirkpatrick’s
motion to dismiss (filed Mar. 11, 2013) is denied.

Dated at Burlington this ___ day of June 2013.

_________________ Geoffrey Crawford, Superior Court Judge