UMB BANK v. GAUTHIER

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
U.S. BANK TRUST NATIONAL 	)
ASSOCIATION, Not in Its Individual 	)
Capacity, but Solely as Owner Trustee of 	)
BRAVO RESIDENTIAL FUNDING TRUST 	)
2021-C, 	)
Plaintiff, 	)
)
v. 	) 	No. 2:23-cv-00380-JAW
)
MARGARET GAUTHIER, 	)
)
Defendant. 	)
ORDER TO PRODUCE
On March 25, 2024, Plaintiff U.S. Bank Trust National Association, not in its
individual capacity, but solely as owner trustee of BRAVO Residential Funding Trust
2021-C (Bravo), moved to appoint Benjamin P. Camp, Jr., Esq. as receiver for the
property that is the subject of this foreclosure action. Mot. to Appoint Receiver (ECF
No. 12). 	Defendant Margaret Gauthier responded in opposition on April 3, 2024.
Resp. in Opp’n (ECF No. 13). Bravo replied on April 9, 2024. Reply to Resp. to Mot.
(ECF No. 14).
The United States Magistrate Judge filed her Recommended Decision with the
Court 	on 	May 	3, 	2024. 	Report 	and 	Recommended 	Decision 	(ECF 	No. 	16)
(Recommended Decision). 	Ms. Gauthier filed an objection to the Recommended
Decision on May 17, 2024. 	Def.’s Obj. to the Magistrate Judge’s Report and
Recommended Decision (ECF No. 17) (Def.’s Obj.). Bravo responded to Ms. Gauthier’s
objection on May 31, 2024. Pl.’s Resp. to Obj. to Report and Recommended Decision
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(ECF No. 19) (Pl.’s Resp.). Ms. Gauthier replied on June 3, 2024. Def.’s Reply to Pl.’s
Resp. to Def.’s Objs. To Magistrate’s Recommendations (ECF No. 21) (Def.’s Reply).
The Court reviewed and considered the Magistrate Judge's Recommended
Decision, and before ruling on whether it will accept the recommendation, the Court
orders Bravo to produce evidence that it holds the Note in question.
I. 	THE MAGISTRATE JUDGE’S RECOMMENDED DECISION
The Magistrate Judge first relays that this Court has the equitable power to
appoint a receiver, that that decision lies within the Court’s discretion, and a list of
factors typically considered in making that decision. Recommended Decision at 2.
The Magistrate Judge then synthesizes the parties’ arguments. Bravo argues
appointment of a receiver is warranted because the property at issue is an investment
rental; “Gauthier lives out of state and is receiving the rent proceeds without making
mortgage payments or footing the bills for taxes and insurance”; Bravo having spent
over $8,000 for taxes and insurance; Ms. Gauthier not being liable given her Chapter
7 bankruptcy discharge; and one of the rental units being vacant, depriving Bravo of
rental payments to defray the property’s costs. Id. at 4. In opposition, Ms. Gauthier
claims that Bravo “lacks standing to bring this case and is not the real party in
interest and that the appointment of a receiver is both unnecessary and premature.”
Id. at 5.
Regarding standing, the Magistrate Judge found there is no issue because after
Residential Mortgage, the original lender and entity holding Ms. Gauthier’s note,
executed a Quitclaim Assignment on April 27, 2017 conveying its rights to FNMA,
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which held the mortgage at the time, FNMA gained a full bundle of rights, which it
then assigned to Bravo. Id.
The Magistrate Judge then concluded that the appointment of a receiver was
warranted “on several bases: that BRAVO has a contractual right to appoint a
receiver and collect rent, is likely to succeed on the merits of its claim, has shown
ongoing harm to its protectible interest in the Property, and has no adequate
alternative remedy to redress that harm.” Id. at 7.
II. 	THE PARTIES’ POSITIONS
A. 	Margaret Gauthier’s Objection to the Recommended Decision
Ms. Gauthier argues that “the extraordinary and drastic remedy of appointing
a receiver is not warranted by the facts of this case . . . nor by existing law.” Pl.’s Obj.
at 1. She adds that a receiver “should not be appointed because Plaintiff will not be
able to prevail on the merits of its foreclosure action.” Id. (emphasis in original).
Ms. 	Gauthier 	takes 	issue 	with 	the 	Magistrate 	Judge’s 	conclusion 	that
Residential’s 	Quitclaim 	Assignment 	to 	FNMA 	on 	April 	27, 	2017 	resolved 	the
Greenleaf problem. Id. at 3-4 (discussing Bank of Am., N.A. v. Greenleaf, 2014 Me 89,
96 A.3d 700). She avers that “Residential did not own any rights under the mortgage
when it executed that Quitclaim Assignment.” Id. at 4 (emphasis in original).
To support this argument, Ms. Gauthier walks through a timeline of the Note
being transferred, in an attempt to show that the Mortgage and Note were bifurcated,
rendering future transfers a nullity with no legal effect. Id. at 4-6 (citing Carpenter
v. Longan, 83 U.S. 271 (1872) for the proposition that separating a mortgage and a
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note is improper). She argues that “[t]he use of nominees, or third parties to hold, or
record a mortgage, when the mortgagee retains possession of the note, splits the
mortgage and note and conflicts with the decision in Longan.” Id. at 7.
As 	a 	result, 	Ms. 	Gauthier insists 	that Bravo 	is 	unable 	to demonstrate
ownership of both the mortgage and the underlying note, as required by Greenleaf.
Id. at 10-11 (citing Fed. Nat’l Mortg. Ass’n v. Quinn, No. 1:19-cv-00097-JAW, 2019
U.S. Dist. LEXIS 212661 (D. Me. Dec. 6, 2019)). 	Therefore, she posits that Bravo
lacks standing. Id. at 10 (citing Homeward Residential Inc. v. Gregor, 2015 ME 108,
122 A.3d 947).
Given this purported lack of standing, Ms. Gauthier says the Court lacks
subject matter jurisdiction over this case and therefore the requisite jurisdiction to
appoint a receiver. Id. at 14-16.
B. 	Bravo’s Response
Bravo says that “[a] person or entity may be ‘entitled to enforce the instrument
even though the person is not the owner of the instrument.’” 	Pl.’s Resp. at 2 (citing
11 M.R.S. § 3-1301(3)). 	Therefore, Bravo argues, “[a] holder of the Note, as defined
as a person or entity entitled to pursue an instrument pursuant to 11 M.R.S. § 3-
1301, has standing to initiate, pursue and prevail in a foreclosure action.” Id. Bravo
contends that since it holds the Note through its agent, and the Note has “clearly
been endorsed from the original lender,” ultimately to “blank,” that is sufficient to
allow it to enforce the Note. 	Id. (citing Mortg. Elec. Sys. Inc. v. Saunders, 2010 ME
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79, ¶ 12, 2 A.3d 289, 296; and Deutsche Bank Nat’l Trust Co. v. Wilk, 2013 ME 79, 76
A.3d 363).
Bravo adds that the “assignment is valid since it was from the original lender,
has been recorded more than two years,” and recites the requisite succession of
interest. Id. at 3. Therefore, Bravo argues, that assignment transfers the Mortgage
title interest. 	Id. (citing U.S. Bank v. Gordon, 2020 ME 33, ¶ 8, 227 A.3d 577, 580;
and Nationstar Mortg., LLC v. Halfacre, 2015 ME 97, 143 A.3d 136). Therefore, Bravo
avers that “[i]n this case, the Plaintiff ‘has both possession of the Note endorsed in
blank and ownership over the Mortgage, [Plaintiff] has standing to foreclose.’” 	Id.
(second alteration in original) (quoting Greenleaf, 2014 ME 89, ¶ 9, 96 A.3d at 705).
Bravo then discusses the Erie doctrine to argue that “the case cited by
Defendant in support of her Opposition (Carpenter v. Longan, 83 U.S. 271 (1872))
which was interpreting Colorado territorial law or federal common law is inapplicable
since it was not interpreting Maine real estate law.” Id. at 4 (citation omitted).
C. 	Margaret Gauthier’s Reply
Ms. 	Gauthier 	contends 	that 	“Plaintiff’s 	Response 	fails 	to 	address 	the
fundamental defects in its foreclosure case that [she] identified in her Objection.”
Def.’s Reply at 1. 	She says that “[i]nstead of engaging with the merits of Ms.
Gauthier’s thoroughly documented arguments regarding the repeated separations of
the mortgage and note, Plaintiff resorts to mischaracterizing her Objection and
attacking her pro se status.” Id.
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Ms. Gauthier then largely reiterates her previous arguments, insisting that
the 	“U.S. 	Supreme 	Court 	has 	long 	recognized that 	a 	mortgage 	and note 	are
inseparable, and an assignment of the mortgage alone, without the note is a nullity.”
Id. at 2. 	By her estimation, this principle is a “fundamental tenet of mortgage law
that has been applied by courts across jurisdictions,” including Maine in Greenleaf.
Id. at 3. She then repeats her argument that “a foreclosure plaintiff must establish
an unbroken chain of assignments of both the mortgage and note to demonstrate
standing.” Id. at 3 (citing U.S. Bank Trust, N.A. v. Jones, 925 F.3d 5354, 539 (1st Cir.
2019)). Additionally, she says her documentation shows “repeated separations of the
mortgage and note through a series of invalid assignments,” which deprive Bravo of
standing to foreclose. Id.
Ms. Gauthier then says, “a quitclaim deed is insufficient to establish standing
where there are defects in the underlying assignments.” 	Id. at 4. 	As such, she
believes, Bravo’s “attempt to paper over the clear gaps in its chain of mortgage
assignments with a purported quitclaim deed is unavailing.” Id.
Finally, Ms. Gauthier argues that Bravo’s “invocation of the Erie doctrine is
entirely misplaced.” 	Id. at 7. 	She advances that “Erie provides no support for
Plaintiff’s position; if anything, it confirms that Maine law governs the standing
inquiry here. And as detailed above, Maine law could not be clearer that a foreclosure
plaintiff must establish a complete chain of title for both the note and the mortgage
to have standing.” Id.
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III. 	ANALYSIS
To foreclose on a property in Maine, the plaintiff must prove interest in both
the note and mortgage. 	Bank of Am., N.A. v. Greenleaf, 2014 ME 89, ¶ 12, 69 A.3d
411, 415. 	A note is a negotiable interest, so a plaintiff that “merely holds or
possesses—but does not necessarily own—the note satisfies the note portion of the
standing analysis.” Id. “Unlike a note, a mortgage is not a negotiable instrument,”
therefore “the mortgage portion of the standing analysis requires the plaintiff to
establish ownership of the mortgage.” Id. (emphasis in original).
The Court’s task, then, is determining whether Bravo, the entity which seeks
to foreclose on the property at issue, has demonstrated ownership of the underlying
Mortgage and that it holds, possesses, or owns the Note. The original owner of both
the Mortgage and Note is Residential Mortgage Services (Residential). 	See Compl.,
Attachs. 2, InterestFirst NOTE; Id., Attach. 3, MORTGAGE. 	Over a decade later,
Residential conveyed and assigned “any all rights it had under the Mortgage” to
Federal National Mortgage Association (FNMA) through a Quitclaim Assignment.
See Compl., Attach. 7, Quitclaim Agreement; Def.’s Objs., Attach. 10, Quitclaim
Agreement. At this time, FNMA became the owner of the Mortgage.
A few years later, FNMA conveyed, granted, assigned, transferred, and set
over the Mortgage “with all interest secured thereby, all liens, and any rights due or
to become due thereon” to U.S. Bank Trust as trustee for LSRMF, a private equity
fund. Compl., Attach. 8, Assignment of Mortgage. At this time, LSRMF became the
owner of the Mortgage.
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Nearly two years later, through a corporate assignment, U.S. Bank Trust as
trustee for LSRMF assigned its mortgage to U.S. Bank Trust as owner trustee of
Bravo Residential Funding Trust (Bravo). 	Id., Attach. 9, Corporate Assignment of
Mortgage. At this time, Bravo became the owner of the Mortgage. With this, Bravo
meets the mortgage part of the standing analysis.
The next question is whether Bravo also has an interest in the Note, by either
holding, possessing, or owning the Note. In her analysis, the Magistrate Judge says
the Greenleaf problem—that is the plaintiff not having both an interest in the
mortgage and note—"was resolved when Residential Mortgage, the original lender in
the chain of transactions in this case, executed a Quitclaim Assignment on April 27,
2017, conveying and assigning ‘any and all rights it may have under the Mortgage’ to
FNMA, which at that time held Gauthier’s mortgage.” Recommended Decision at 5.
To support this conclusion, the Magistrate Judge pointed to another case where the
Court held that the Greenleaf problem was solved when the original lender assigned
the mortgage with a quitclaim assignment. See id. (citing Fed. Nat’l Mortg. Ass’n v.
Quinn, No. 1:19-cv-00097-JAW, 2019 U.S. Dist. LEXIS 212661 (D. Me. Dec. 6, 2019)).
While the Greenleaf problem was solved in Quinn when the original lender
assigned the mortgage with a quitclaim assignment, that was under a different
record. In Quinn, the record demonstrated that plaintiff had possession of the note.
See Quinn, 2019 U.S. Dist. LEXIS 212661, at *4-5. Thus, when the plaintiff had both
ownership of the mortgage and possession of the note, there was no longer a Greenleaf
problem.
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Here, Bravo owns the Mortgage and avers that it “holds the Note through its
agent, Doonan, Graves & Longoria, LLC, [that] a copy of the original was attached as
Exhibit B to this complaint, and [that] the original will be produced at trial . . .. 	It
has clearly been endorsed from the original lender, Residential Mortgage Services,
Inc. to SunTrust Mortgage, Inc. and then to [FNMA] and finally to ‘blank.’” Pl.’s Resp.
at 2. 	However, there is no evidence in the record that Bravo is in possession of the
Note. Ownership of both the Mortgage, which exists, and interest in the Note, which
there is no evidence of, are required to solve the Greenleaf problem. 	Consequently,
the Court orders Bravo to produce evidence that it holds the Note that has been
endorsed to blank within two weeks of the docketing of this order.
IV. 	CONCLUSION
The 	Court 	ORDERS 	U.S. 	Bank 	Trust 	National 	Association, 	not 	in 	its
individual capacity, but solely as owner trustee of BRAVO Residential Funding Trust
2021-C, to produce evidence that it holds the Note for the Property located at 14-16
Melvin Ave, Old Orchard Beach, Maine 04064 within two weeks of the date of this
Order.
SO ORDERED.
/s/ John A. Woodcock, Jr.
JOHN A. WOODCOCK, JR.
UNITED STATES DISTRICT JUDGE
Dated this 23rd day of July, 2024
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