Knope V. Green Tree Servicing, LLC.
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STATE OF YI.AIN-:E YORK, SS Sl:l'ERIOR COURT CIVil, ACTION DOCKET NO CV-14-102 WALTER KNOPE and DOROTHY K-:-IOPE Plaintiffs, ORDER GREEN TREE SERVICING, LLC, Defendant L Background A. Procedural Posture Plaintiffs Walter and Dorothy Knope ("the .Knopes"") brought this action against Green Tree Servicing, LLC ("Green Tree") seeking dcc!aratol)· relief arising out a note and mortgage on their home at 15 Hillside Drive, Eliot, Maine ("'the Eliot property'") Specifically, the Knopes demand an accounting 1 and a declaratory judgment stating how ' The Knopes seek an accountmg under 14M R S. § 6301. Any mortgagor or other per;;on havwg a 11ghtto rctl= lands mortgagod may demand of the mortgagee or pt:nmn cla1mmg under the mortgagee a rrue accounl of the sum due on the mortgage. 11nd of the rcnl' and profits. and money expende<J m repam and lillpmvemen!s. rf flrlY If the mortgagee unreasonably refu_'les 01 neglects to render such an account w wntmg. or 111 any otht::r wa} by default prevenh the plaw11ff from pcrformmg or tenden.ng perfonruwce of the uondition oi" the mortgage, the mortg•gor rna)" bnng a enol action for the re<Jemprion of the mortgaged prcmJScs w1thm the t1me hrr:uce<J 1.ll former 'ecbon 6204, and !herem offer to pay the sum found lObe cqUJlably due. or to perform aey other COildJtioo, as the case may requrre Such an offer ha. the same force as a tender of payment or pc.,-formanc:e before the commencement of the acb<Jil "tbc act10n must be sustoined W1thout such a kndcr, and thereupon the mortgagor JS entitled to judgment for redemphon arul co,ts I much they owe on the mortgage_ Prior to iiling this actioll, the Knopes tried unsuccessfully to work out payment options Wlth Green Tree_ The Knopes commenced this action May 30, 2014-less than one month after Green Tree filed an action on May 4, 2014 to foreclose on the Ehot property Green Tree failed to answer the Knopes' complaint and a default entered_ Befcre the court is Green Tree's motion to set aside the default, motion to dismiss for failure to state a claim, and the Knopes' motion for default judgment_ B. Facts The Knopes' primary residence is in Sandwich, Massachusetts and the Elim property is their second home. An oil company failed to make a ;cheduled delivery to the Eliot property and as a result the pipes burst in January 2013 The incident caused substantial water damage_ After the Knopes' insurer refused to pay their clmm, they filed an action to recover for the damages from the incident The Knopes eventually settled with the insurer for a sum less than their total loss. As a result of expenses associated with hiring legal counsel to sue the insurer and repair the Eliot property, the Knopes fell behind on the mortgage with Green Tree_ The Knopes tried without success to defer the mortgage and work out practicable payment arrangements TI. Discussion A. Compulsory Counterclaim Green Tree moves to dismiss alleging that the claims that form the suit are compulsory counterclaims in the foreclo~ure basi~ of this action ln ruling on a motion to dismiss, the court takes the allegations in the complaint as admitted and detennines 2 whether the nonmoving party states a cognizable claim_ Savage v_ lvfame Premal Servs., Inc., 2013 .ME 9, ~ 2, 58 A.Jd 1138 Rule l3(a)(l) states in relevant part "a pleading shall slate as a counterclaim any claim which at the Lime of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject mater of the opposing party's claim" M_R Civ. P U(a)(l) Because the Knopes' claims in th1s action arise out of the tr.rnsaction or occurrence as the foreclosure action-the note and mortgage on the Eliot property-Green Tree contends the Knopes arc barred from litigating the1 r claims here_ Green Tree's argument is premature In KeyRank ,Vationa/ Association v. SarJ;ent, the Law Court affirmed dismissal of claims where they should have been raised in a previous foreclosure action in which judgment already entered. 2000 .ME ]53,~ 25,758 A 2d 528 Judgment has not yet entered in the foreclosure action Addil!Onally, the language of the rule exphc1tly contemplates a pleading as the vehicle for asserting a compulsory counterclaim 'MR. Civ P l3(a)(l) C'[AJ pleadmg shall state as a counterclaim _.. ") The Knopes apparently have not yet been served with a pleading in which to assert the claims; the rule would therefore not apply Yet even assuming the claims are compulsory counterclaims, Green Tree's motion to dismiss is moot if the court declines to set aside the default_ B. Default Judgmcot The court has the power under Rule 55(b)(2) to enler a default judgment. Prior to judgment, a party may move to set aside an entry of default "[fJor good cause shown." 3 MR Civ P 55( c) "Good came'' requires "a good excuse for his or her untimelmess Levme v. KeyBank .';'at. Ass'n, 2004 Ml:: 131, ~ 13, 86! A.2d 678 (c1tation omitted) Green Tree cites "inadvertence'' as an excuse. Green Tree acknowledges receipt, but asserts the complaint "was never identified or transferred properly to Green Tree's legal department for processing_-, (De f.'s -'vfot. Set Aside Default 4.) According to Crreen Tree, this "administrative error" was not willful or intentional and is therefore ·'good cause" sufficient to set aside the default. (Def. 's Mot. Set As1de Default 4-6) An administrative error is not a good excuse. In Levine v. KeyBank l•iatmnal Association, KeyBank misplaced a trustee summons, failed to timely respond, and a default entered The court rejected Key Bank's argument that losing a summons on nne occasion w1thin a high-volume judgment processing system with a "generally miniscule error rate" constituted ''good cause.'' Levine, 2004 ME 13 I, mf 16, 21-22, 861 A .2d 678 Green Tree, like KeyBank, uses processing protocols whereby complaints are forwarded between different departments within the company Also like KeyBank. Green Tree offers no reasonable explanation for why the complaint was never forwarded to the appropriate department to respond.' Levine, 2004 ME 131, ~ 21, 861 A.2d 678. Once the error was discovered, Green Tree did respond expeditiously By this time, however, the deadline had already passed Green Tree cites federal cases and cao;es from other jurisdictions to urge this court to consider whether the default was "willful or intentional" as pari of the "good cause" ' There 1s a d1vergence between Green Treo's motion and the supportmg affidavit as to "hert !he complaint was lost m the process. The motion slates there was an error '" transferring the complamt "from the process group to the coordinator of legal defense at Green Tree." (Def.'s Mot Set As1de Default 2) The affidav1t cla!Ills that the complaint was m fact transferred to the coordinator of legal defense, but "as never forwarded to out< ide counsel in Marne. (Aff. Da>id Schwartz 1MI5-6.) The difference mav not be material:. it docs further evidence confusion in this . processing system 4 inquiry See, e.g_, Bergeron v. Henderso11, 185 FRD. ]0. 12 (D_ Me_ 1999): Gorski v_ Dep't of Corr , 204 F RD 23, 25 (D N H 2000). These caocs construed the federal version of Rule 55( c). Where the Jvlaine rule i> modeled on the federal rule, federal law can provide "valuable guidance"' Mondello v. Gen_ F./ec Co .. 650 A2d 941, 944 nJ (Me_ 1994) In light of Levine, however. whether Green Tree willfully or intentionally failed to respond docs not remedy the fact there was no reasonable excuse and thus no good cause for the default. Green Tree fails to meet its burden under Rule 55( c) and a default judgment is warranted M R m. c;,_ p_ 55(b)(2). 3 Judgment, Impracticability of Performance, and Conclusion In light of the foregoing, the Knopcs are entitled to judgment by defaWL Ha . . ing resolved the water damage and insurance issues with the Eliot property, the Knopes wish to bring the mortgage current_ From this record, however, the court is unable to enter a declaratory judgment ao to the amounts owed under the note and mortgage The court therefore will conduct a hearing to detennine the nature and extent of the appropriate remedy before entering the judgment _ _M_R C1v p_ 55(b)(2); McNutt v_ Johansen, 477 A2d 738, 740-41 (Me 1984) (holding the court has discretion 10 hold an e~identiary hearing prior to entering a default judgment) The factual allegations in the Knopes' complaint are now findings of fact and not subject to challenge at the hearing_ McAlister v SlosberR, 658 A 2d 658, 660 (Me_ 1995). In entering judgment, the court is not bound by any legal conclusions contained in the pleading_ Larrabee v. Penobscot Frozen Foods, Inc., 486 A 2d Y7, 98 & n.2 (Me_ 1984). J Although Green Tree emphas1~cs the strength of the defense to the claims and the lack of preJudice t.o the Knopes, the court need not reach lhcse is.<;ues because there was no good excuse for the underly1ng default LI!Vine, 2004 ME 131, ~ 22, 861 A_2d 678 (declming to address whether Key Bank had a meritonous defense where it failed to first establish ·'good cause")_ 5 The complaint alleges "charges for late fees and other charges that arc not properly attributable to the l\'ote and Ylortgage" (CompL ~ 12) It is unclear exactly what charges these allegations concern and the court will require further clarification prior to entry of judgment_ The complaint also alleges "there are other charges attributable to th1s Note and Mongage that 5hould not be allowed due to the damage to the Knopes' home and other circumstances that prevented [them] from performing the ]\'ole and Mortgage" (Compl. ~ on 13) This allegation is fleshed out in Count III, where the Knopes assert they should be excused from certain fees under a theory of impracticability of performance-a legal wnclusion that is not rendered binding by the default Under this count, the Knopcs seek a declaration that they did not breach their obligations under the note and mortgage The Knopes request that they be excllsed from the fees assessed by Green Tree during the time they tried to rectifY the water damage and 1nsurance coverage issue~- This claim is, as a matter of law, doubtful for three reasons. First, the Knopes assert impracticability offensively Impracticability of performance is a defense that entirely discharges a party's contractual obligations due to ''the occurrence of an event the nonoccurrence of which was a basic assumption on which the contract was made unless the language or the circumstances indicate the contrary" Bouchard v. Blunt, 579 A2d 261, 264 n 3 (M:e. 1990) (quoting Restatement (Second) of Contracts§ 261 (1981)). Tn the few cases in which the defense was raised, the Law Court has yet to recognize it See, e.g., Coastal Ventures v_ A/sham Plaza, IIC, 2010 ME 63, ~ 19 n.6, 1 A.Jd 416; Bouchard, 579 A.2d at 264 n.3_ 6 Second, the Knopes do not seek to discharge the entire mortgage abligation, they appear to assert only that the contract was impracticable for a finite period oftJme_ While the Restatement recognizes temporary impnLct1cability, once the Circumstances giving rise to impracticability cease, the parry must perform in full Restaremem (Second) of Contracts § 269_ Thus even assuming the mortgage contract was temporarily impracticable, any defense to payments of fees is now unavailable because the Knope> resolved the in,urance dispute and repaired the property Third, the note and mortgage term, expressly contemplate damage to the property, the need for insurance coverage, and the Knopes' responsibility for securing insurance coverage. The risk of loss from a denial of insurance coverage and the subsequent financial consequences re;ted with the Knopes, who contrncted for their own insurance Restatement (Second) of Contracts § 261 cmL (b) ("[M]erc financial inability do not usually effect discharge under the [impracticability of performance] rule stated in this Section_")_ Under the terms of the note and mortgage, the Knopes may well be responsible for costs properly incurred by Green Tree in trying to protect ils secunty interest While the court Lmderstands the Knopes' frustration Mth their insurance company that precipitated the1r financial difficulties, Green Tree was not responsible for that dispute and not obligated to provide forbearance or deferment of the mortgage. Notwithstanding the above analysis, the Knopes' theory of impracticabiliry of performance and Green Tree's response will be considered at the hearing prior to entry of judgment The entry shall be- 7 The Defendant's motion to di~miss is DFNII:D The Plaintills motion for default judgment is at this time DENIED pending a hearing to determine the amounts currently due and owing under the note and mortgage_ SO ORDERED DATE Novemb_2Q_, 2014 John O'Neil, Jr Ju~tice, Superior Court 8 CV-14-102 ATTORNEY fOR PLAINJIFFS: PATRJCK BEDARD LAW OFFICE BEDARD & BOBROW PO BOX 366 ELIOT ME 03903 ;\ITORNEYS FOR DEFF.NDAl'IT: CATHERINE A MOHAN .\1CCARTER & E:"<GLJSH CITYPLACE I 185 ASYLUM ST fi>\RTFORD CT 06103 RICHARD BR.J.AASKY (PRO HAC VICE) MCCARTER & ENGLISH LLP 265 FRANKLr.-1 STREET BOSTONMA 02110-3113
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