Wilmington Trust Company v. Karen Anne Sullivan-Thorne , 81 A.3d 371 ( 2013 )

MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2013 ME 94Docket: And-13-97
Argued: September 11, 2013
Decided: November 5, 2013
Panel: ALEXANDER, LEVY, SILVER, MEAD, GORMAN, and JABAR, JJ.
WILMINGTON TRUST COMPANY
v.
KAREN ANNE SULLIVAN-THORNE
SILVER, J.
[¶1] Wilmington Trust Company (“Wilmington”) appeals from a summary
judgment entered in the District Court (Lewiston, Lawrence, J.) in favor of Karen
Anne Sullivan-Thorne on Wilmington’s complaint seeking a judgment of
foreclosure. Wilmington argues that the District Court erred in concluding that
Wilmington’s foreclosure action was barred by the doctrine of res judicata based
on prior litigation involving insurance proceeds. We agree and vacate the court’s
judgment.
I. BACKGROUND
[¶2] The following facts are drawn from the summary judgment record.
Sullivan-Thorne is the owner of real property in Mechanic Falls. On
December 16, 2006, Sullivan-Thorne executed a note in the amount of $107,600 in
favor of IndyMac Bank, FSB (“IndyMac”). To secure the note, she executed a
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mortgage on her property in favor of IndyMac. The mortgage was recorded in the
Androscoggin County Registry of Deeds.
[¶3] In February 2009, a mass of ice slid off Sullivan-Thorne’s roof and
knocked off the vent pipes, causing water to infiltrate her home. Ultimately, toxic
mold spread throughout Sullivan-Thorne’s home and rendered it uninhabitable. In
2010, Cambridge Mutual Fire Insurance Company commenced an action against
Sullivan-Thorne in the Superior Court (“Cambridge Action”) relating to the
damage to her home. As part of that litigation, Sullivan-Thorne filed a claim
against IndyMac seeking to have all insurance proceeds payable to her alone.
IndyMac filed an answer stating as an affirmative defense that “IndyMac is entitled
to, and [Sullivan-Thorne] is obligated under the Note and Mortgage to direct
thereto, any and all funds paid or payable to [Sullivan-Thorne] arising out of [her]
breach of the Note and Mortgage terms.” Shortly thereafter, in May 2010,
IndyMac sent Sullivan-Thorne a notice of default, which stated that she had
defaulted on the mortgage by failing to pay monthly installments, and that her
failure to cure the default within thirty-five days of receipt of the notice “shall
result in the acceleration of the sums secured by the mortgage.”
[¶4] In September 2010, IndyMac filed a counterclaim against
Sullivan-Thorne asserting various breaches of the note and mortgage stemming
from the damage to the property. IndyMac alleged, inter alia, that Sullivan-Thorne
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had breached the note and mortgage by failing to maintain, protect, and repair the
property, to promptly notify IndyMac of the damage to the property, and to obtain
sufficient insurance coverage. IndyMac further alleged that Sullivan-Thorne had
caused IndyMac “to not receive payment of insurance Proceeds in an amount
sufficient to repair and restore the Property, or in an amount sufficient to pay all
the Sums Secured by the Mortgage, all of which constitute a breach of the Note
and Mortgage.” In its prayer for relief, IndyMac asked that the court
enter Judgment against [Sullivan-Thorne] . . . on all counts; direct all
Proceeds to be made payable solely to [IndyMac] and order that
further proceeds be paid in an amount sufficient to satisfy
[IndyMac’s] interest in the Property or to fully repair or replace the
Property; and grant any such other relief as the Court deems just and
proper.
Sullivan-Thorne moved to dismiss IndyMac’s counterclaim as untimely pursuant
to the court’s scheduling order and because IndyMac did not request leave to
amend its pleadings. The Superior Court (Androscoggin County,
MG Kennedy, J.), noting that no opposition had been filed, granted the motion and
dismissed IndyMac’s counterclaim “with prejudice.” The court entered a final
judgment in the Cambridge Action on March 24, 2011, ordering that Cambridge
re-issue the insurance proceeds and make them payable to Sullivan-Thorne alone.
[¶5] On October 27, 2011, Wilmington filed this action seeking a judgment
of foreclosure against Sullivan-Thorne. Wilmington’s complaint alleges that the
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mortgage has been assigned to Wilmington, and that Sullivan-Thorne has failed to
cure her default in accordance with the May 2010 notice of default and has not
made monthly payments since March 1, 2010. The complaint also states that
Wilmington “has declared the entire principal amount outstanding, accrued interest
thereon, and all other sums due under the Note and Mortgage to be presently due
and payable.” Sullivan-Thorne moved for summary judgment, arguing that the
action was barred by the doctrine of res judicata based on the Cambridge Action.
The court agreed and entered summary judgment for Sullivan-Thorne on
November 16, 2012. This appeal followed.1
II. DISCUSSION
[¶6] “We review a grant of a summary judgment on a res judicata issue
de novo, viewing the record in the light most favorable to the party against whom
judgment has been granted to decide whether the parties’ statements of material
facts and the referenced record material reveal a genuine issue of material fact.”
Godsoe v. Godsoe, 2010 ME 42, ¶ 15, 995 A.2d 232 (quotation marks omitted).
Res judicata prevents “a party and its privies . . . from relitigating claims or issues
that have already been decided.” Id. “The doctrine of res judicata is grounded on
1
On November 29, 2012, Wilmington filed a motion for reconsideration in the District Court. While
that motion remained pending, on December 24, 2012, Wilmington filed a motion for extension of time to
file an appeal pursuant to M.R. App. P. 2(b)(5), arguing that it had mistakenly believed that its motion for
reconsideration had been timely and tolled the appeal period. On February 11, 2013, the District Court
denied Wilmington’s motion for reconsideration as untimely, but granted Wilmington’s motion for
extension of time to appeal.
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concerns for judicial economy and efficiency, the stability of final judgments, and
fairness to litigants.” Lewis v. Me. Coast Artists, 2001 ME 75, ¶ 9, 770 A.2d 644(quotation marks omitted); see also Beegan v. Schmidt, 451 A.2d 642, 646-47
(Me. 1982) (discussing the policy underlying the doctrine of res judicata).
[¶7] “The doctrine of res judicata . . . has two components: collateral
estoppel, also known as issue preclusion, and claim preclusion.”2 Kurtz & Perry,
P.A. v. Emerson, 2010 ME 107, ¶ 16, 8 A.3d 677. “Claim preclusion bars the
relitigation of claims if: (1) the same parties or their privies are involved in both
actions; (2) a valid final judgment was entered in the prior action; and (3) the
matters presented for decision in the second action were, or might have been,
litigated in the first action.” Guardianship of Jewel M., 2010 ME 80, ¶ 40,
2 A.3d 301. Wilmington concedes that it is in privity with IndyMac, and that the
first element of claim preclusion is therefore satisfied. We assume without
deciding that there was a valid final judgment in the Cambridge Action for
res judicata purposes. We therefore address solely the question of whether the
2
Issue preclusion “prevents a party from relitigating factual issues already decided if the identical
issue necessarily was determined by a prior final judgment, and the party estopped had a fair opportunity
and incentive to litigate the issue in the prior proceeding.” Kurtz & Perry, P.A. v. Emerson,
2010 ME 107, ¶ 16, 8 A.3d 677 (quotation marks omitted). Because Sullivan-Thorne does not argue that
issue preclusion applies in this case, we address only the claim preclusion component of res judicata.
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issues presented “were, or might have been, litigated” in the Cambridge Action.
See id.3
[¶8] “To determine whether the matter[s] presented for decision in the
instant action were or might have been litigated in the prior action, we examine
whether the same cause of action was before the court in the prior case.”
In re Kaleb D., 2001 ME 55, ¶ 8, 769 A.2d 179 (quotation marks omitted). We
define a cause of action through a “transactional test,” id., which “examin[es] the
aggregate of connected operative facts that can be handled together conveniently
for purposes of trial to determine if they were founded upon the same transaction,
arose out of the same nucleus of operative facts, and sought redress for essentially
the same basic wrong,” Sebra v. Wentworth, 2010 ME 21, ¶ 12, 990 A.2d 538(quotation marks omitted). Put another way,
[w]hat factual grouping constitutes a transaction [is] to be determined
pragmatically, giving weight to such considerations as whether the
facts are related in time, space, origin, or motivation, whether they
[form] a convenient trial unit, and whether their treatment as a unit
conforms to the parties’ expectations or business understanding or
usage.
KeyBank Nat’l Ass’n v. Sargent, 2000 ME 153, ¶ 17, 758 A.2d 528 (second
alteration in original) (quotation marks omitted). Claim preclusion may apply even
where a suit “relies on a legal theory not advanced in the first case, seeks different
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As a threshold matter, Sullivan-Thorne argues that Wilmington has waived several of the arguments
it now makes on appeal by failing to present them in the District Court and by failing to cite several of the
authorities on which it now relies. We find no merit in Sullivan-Thorne’s contentions.
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relief than that sought in the first case, or involves evidence different from the
evidence relevant to the first case.” Sebra, 2010 ME 21, ¶ 12, 990 A.2d 538(quotation marks omitted).
[¶9] Counterclaims are subject to a similar analysis pursuant to
M.R. Civ. P. 13(a). “Under principles usually analogized to res judicata, a
defendant who fails to interpose a compulsory counterclaim as required by Rule
13(a) is precluded from later maintaining another action on the claim after
rendition of judgment.” Efstathiou v. Aspinquid, Inc., 2008 ME 145, ¶ 25, 956
A.2d 110 (quoting Sargent, 2000 ME 153, ¶ 17, 758 A.2d 528). “When the second
claim arises out of the same transaction as the first, previously-litigated claim, the
second claim is barred by [Rule] 13(a)(1).” Id. (quoting Sargent, 2000 ME 153,
¶ 17, 758 A.2d 528).
[¶10] Wilmington argues that IndyMac, its predecessor in interest, could not
have brought a foreclosure claim in the Cambridge Action because a foreclosure
action may be initiated only by complaint, not by counterclaim. The foreclosure
statute provides that a foreclosure “must be commenced in accordance with the
Maine Rules of Civil Procedure.” 14 M.R.S. § 6321 (2012); see also Sargent,
2000 ME 153, ¶ 20, 758 A.2d 528. The Civil Rules, in turn, provide that a
foreclosure action “shall be commenced by complaint and service of summons as
in other civil actions.” M.R. Civ. P. 80A(b), (g). The statute also appears to
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contemplate the filing of a complaint. See 14 M.R.S. § 6321 (requiring that the
mortgagee record “the complaint” and that “the complaint” contain certain
allegations).
[¶11] Some of our past opinions can be read to suggest that foreclosure
proceedings may be instituted by counterclaim. See, e.g., Morris v. Resolution
Trust Corp., 622 A.2d 708, 711, 715 (Me. 1993) (stating that the mortgagee
“properly pursued a counterclaim for foreclosure on [the] note”). These cases,
however, predate significant changes to our foreclosure statutes and Rules of Civil
Procedure, including new service, notice, and mediation requirements. See
14 M.R.S. § 6111(1-A) (2012) (setting forth information that must be provided to
the mortgagor before the mortgagee may institute foreclosure proceedings in
certain cases involving residential property); 14 M.R.S. § 6321-A (2012) (creating
foreclosure mediation program); M.R. Civ. P. 93 (implementing sections
6111(1-A) and 6321-A); see also P.L. 2009, ch. 402, §§ 11, 18 (emergency,
effective June 15, 2009) (codified as amended at 14 M.R.S. §§ 6111(1-A), 6321-A
(2012)). In light of the specialized procedure the Legislature and our Rules have
established in this context, we conclude that foreclosure proceedings may be
instituted only by complaint and not by counterclaim. IndyMac therefore could not
have brought a foreclosure claim in the Cambridge Action.
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[¶12] Even if IndyMac could have initiated a foreclosure claim in the
Cambridge Action, it would only have been required to do so based on claim
preclusion principles if the Cambridge Action involved the same “cause of action”
according to our “transactional test.” See Beegan, 451 A.2d at 644-45. Here, the
“basic wrong” for which IndyMac sought relief in the Cambridge Action was
Sullivan-Thorne’s alleged conduct in failing to protect, repair, and adequately
insure the property, thereby reducing the value of IndyMac’s security. IndyMac
did not allege that Sullivan-Thorne had breached the note or mortgage by failing to
make payments. Although IndyMac alleged a breach of the same note and
mortgage pursuant to which Wilmington now seeks relief, Wilmington alleges a
breach of a different term of the mortgage based on wholly separate conduct.
Cf. Singleton v. Greymar Assocs., 882 So. 2d 1004, 1008 (Fla. 2004) (“We can find
no valid basis for barring mortgagees from challenging subsequent defaults on a
mortgage and note solely because they did not prevail in a previous attempted
foreclosure based upon a separate alleged default.”); Afolabi v. Atl. Mortg. & Inv.
Corp., 849 N.E.2d 1170, 1175 (Ind. Ct. App. 2006) (concluding that “subsequent
and separate alleged defaults under [a] note create[] a new and independent right in
the mortgagee to accelerate payment on the note in a subsequent foreclosure
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action.”).4 Sullivan-Thorne’s alleged failure to make payments—the “nucleus of
operative facts” at issue in this case—was not litigated in the Cambridge Action.
[¶13] Because Wilmington’s foreclosure claim does not present matters
which “were, or might have been, litigated” in the Cambridge Action, the court
erred as a matter of law in entering summary judgment for Sullivan-Thorne on
claim preclusion grounds.
The entry is:
Judgment vacated. Remanded for further
proceedings consistent with this opinion.
On the briefs:
Jay S. Gregory, Esq., Patrick T. Voke, Esq., and Matthew M. O’Leary, Esq.,
LeClairRyan, Boston, Massachusetts, for appellant Wilmington Trust
Company
Henry I. Shanoski, Esq., Portland, for appellee Karen Anne Sullivan-Thorne
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Sullivan-Thorne argues that because the mortgage contained an acceleration clause, IndyMac’s prior
counterclaim bars any future action to foreclose on the property pursuant to Johnson v. Samson
Construction Corporation, 1997 ME 220, 704 A.2d 866. In that case, we held that once a mortgagee
“trigger[s] the acceleration clause of [a] note,” the contract becomes “indivisible” and the mortgagee’s
procedural default in a foreclosure action precludes any later suit on the note. Id. ¶ 8. Contrary to
Sullivan-Thorne’s contentions, the summary judgment record, viewed in the light most favorable to
Wilmington as the nonprevailing party, does not establish that Wilmington or IndyMac accelerated the
debt, but rather only that IndyMac sent Sullivan-Thorne a notice of default stating that it would accelerate
the debt if Sullivan-Thorne failed to cure her default. Johnson is therefore inapposite.
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At oral argument:
Matthew M. O’Leary, Esq. for appellant Wilmington Trust Company
Henry I. Shanoski, Esq., for appellee Karen Anne Sullivan-Thorne
Lewiston District Court docket number RE-2011-239
FOR CLERK REFERENCE ONLY