Wayne Knope v. Green Tree Servicing, LLC
161 A.3d 696
Me.2017Background
- Dorothy and Wayne Knope executed a $324,940 promissory note to GMAC and a mortgage naming MERS as nominee; Green Tree later purchased the loan and servicing rights.
- MERS assigned the mortgage to Green Tree, but under Maine precedent that form of MERS assignment conveyed only recording rights, not the substantive mortgage enforcement rights.
- After the property was damaged and rental income ceased, the Knopes defaulted; Green Tree paid property taxes, insurance, preservation fees, foreclosure fees, and legal fees.
- The Knopes sued for a declaratory judgment and accounting; Green Tree failed to timely answer, default was entered, and the parties agreed the Knopes would pay undisputed principal/interest plus a disputed sum of $19,265.68 to be litigated.
- The Superior Court allowed Green Tree to retain the entire disputed sum on an unjust enrichment theory because Green Tree had paid expenses that the mortgage (if effective) would have required the Knopes to pay.
- The Maine Law Court affirmed recovery for taxes, insurance, and preservation fees ($16,646.49) as unjust enrichment, but vacated and remanded to reconsider foreclosure and legal fees and to determine what sums, if any, are recoverable under the note.
Issues
| Issue | Knope's Argument | Green Tree's Argument | Held |
|---|---|---|---|
| Whether unjust enrichment can supply recovery for mortgage-based expenses when the mortgage assignment to Green Tree was ineffective | Mortgage-based charges are contractual and cannot be recovered in unjust enrichment because parties’ bargain should control | Green Tree argued it reasonably paid those expenses to protect security and should recover to avoid unjust enrichment | Court: Unjust enrichment can apply where the parties’ existing contract (the note) does not address the benefit; affirmed recovery for taxes, insurance, preservation fees ($16,646.49) but remanded on other items |
| Whether the promissory note bars equitable recovery for expenses not addressed in the note but covered by the (ineffectively assigned) mortgage | The note plus mortgage form an integrated transaction occupying the parties’ financial relationship, so unjust enrichment is precluded | Green Tree: note does not address taxes/insurance/preservation; unjust enrichment is available for benefits not covered by the note | Court: Where the contract (note) does not address the specific benefit, unjust enrichment is not barred; but remanded to determine sums recoverable under the note itself |
| Whether Green Tree’s knowledge of MERS assignment defects precludes equitable relief | Knopes: because Saunders/Greenleaf put assignee on notice, Green Tree cannot invoke equity to recover mortgage-based benefits it knew it lacked the right to claim | Green Tree: it was not a volunteer and reasonably believed it could protect its security interest | Concurrence/Dissent (HJELM, J.) disagreed with majority: argued unjust enrichment is barred by the contractual framework and by Green Tree’s notice of MERS limitations; majority nonetheless allowed recovery for certain benefits |
| Whether attorney/foreclosure fees are recoverable in unjust enrichment | Knopes: such fees did not confer a benefit on them and thus cannot support unjust enrichment | Green Tree: sought entire disputed sum including those fees | Court: remanded to reexamine foreclosure and legal fees and to determine what is recoverable under the note; concurrence would bar mortgage-based fees and says attorney/foreclosure fees cannot be justified by unjust enrichment |
Key Cases Cited
- Bank of Am., N.A. v. Greenleaf, 96 A.3d 700 (Me. 2014) (MERS-assignment conveyed only recording rights; assignee did not acquire mortgage enforcement rights)
- Mortg. Elec. Registration Sys., Inc. v. Saunders, 2 A.3d 289 (Me. 2010) (MERS as nominee acquired only bare recording title; mortgage covenants not made to MERS)
- Maine Eye Care Assocs., P.A. v. Gorman, 942 A.2d 707 (Me. 2008) (elements of unjust enrichment articulated)
- Paffhausen v. Balano, 708 A.2d 269 (Me. 1998) (unjust enrichment recovers value where no contractual remedy exists)
- Nadeau v. Pitman, 731 A.2d 863 (Me. 1999) (existence of contract precludes unjust enrichment as to matters within its scope)
- Fed. Ins. Co. v. Me. Yankee Atomic Power Co., 183 F. Supp. 2d 76 (D. Me. 2001) (contracting parties may still pursue unjust enrichment where contract does not address the specific benefit conferred)