Dernier v. Mortgage Network, Inc.
87 A.3d 465
Vt.2013Background
- Plaintiffs Dernier sought a declaratory judgment that U.S. Bank cannot enforce the note or mortgage due to alleged irregularities and fraud in transfers, CFA violation, and attorney’s fees; they also sought default against MERS.
- The note originated with Kittredge Mortgage, loan of $242,250, and a mortgage executed October 7, 2005; both instruments were transferred into a trust overseen by U.S. Bank.
- Plaintiffs alleged multiple improper transfers: note and mortgage moved through MNI and MERS, with questionable signatures, dates, and PSA provisions, and claimed the trust’s governing documents were inconsistent with the actual instruments.
- U.S. Bank moved to dismiss and later to amend; the trial court dismissed for failure to state a claim, and the court of appeals treated the case as an amended complaint seeking relief only against U.S. Bank.
- The appellate court held plaintiffs lacked standing to challenge the PSA under Vermont law, but allowed counts addressing alleged defects in the transfer of the note and mortgage to proceed to remedies not inconsistent with the decision; it also addressed the CFA claim and the default judgment against MERS.
- The disposition affirmed dismissal of some counts, reversed and remanded for other counts, and clarified that the declaratory judgment action could proceed given an actual controversy present.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge PSA violations | Dernier can challenge PSA breaches as to void/voidable transfers | Plaintiffs lack standing as nonparties to PSA | Plaintiffs lack standing to challenge PSA unless violations render assignment absolutely invalid |
| Prematurity/ripe controversy for declaratory relief | There is an actual controversy due to acceleration and default threats | Foreclosure action not yet filed makes relief premature | Declaratory relief permissible due to present controversy and acceleration actions |
| Validity of note/mortgage transfer (fraud/irregularities) | Fraudulent endorsements and mis-timed transfers render enforcement voidable/invalid | Enforcement rights attach to holder or transferee despite defects | Some claims about irregularities in transfer survive; the note may be enforceable by a holder, with potential defenses limited by UCC rules allowing certain defenses to be asserted by obligors |
| Vermont CFA claim viability | Defendant’s statement of its right to enforce was deceptive under CFA | No injury shown nor private CFA remedy established | Standing defect and lack of injury require dismissal of CFA claim; analysis limited to standing, with other aspects reserved on remand |
| Default judgment against MERS | Desire for default to penalize MERS failure to appear | Rule requires all parties joined and served before default; no renewed motion | No default entered against MERS; decision affirmed on other grounds |
Key Cases Cited
- Kimball v. Wells Fargo Bank, N.A., 2011 VT 81 (Vt. 2011) (standing to enforce when foreclosure filed; pre-foreclosure posture clarified)
- Rouleau v. Wells Fargo Bank, N.A., 2012 VT 19 (Vt. 2012) (holder of note can enforce guaranty; no need to prove chain of title in certain actions)
- Culhane v. Aurora Loan Servs., 708 F.3d 282 (1st Cir. 2013) (mortgagor standing to challenge assignment to foreclosing entity where necessary to contest status as mortgagee)
- Bassman v. Bank of America, N.A., 981 N.E.2d 1 (Ill. App. 2012) (trustee actions in contravention of PSA are voidable, not void; standing to challenge assignments varies by context)
- Gifford Mem’l Hosp. v. Town of Randolph, 119 Vt. 66 (1955) (declaratory relief appropriate where controversy exists; purpose of act to resolve uncertainty)