MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2014 ME 81
Docket: Cum-13-472
Argued: May 13, 2014
Decided: June 24, 2014
Panel: ALEXANDER, SILVER, MEAD, GORMAN, and JABAR, JJ.

U.S. BANK, N.A.

v.

DAVID SAWYER et al.

MEAD, J.

[¶1] U.S. Bank N.A. (Bank) appeals from the judgment of the Superior
Court (Cumberland County, Mills, J.) dismissing the Bank’s foreclosure complaint
with prejudice. The Bank contends that the court abused its discretion in
dismissing the complaint because there was no evidence of bad faith or of
prejudice to the mortgagor, and because the sanction it imposed is too severe. We
affirm the judgment.

I. BACKGROUND
[¶2] The following facts are taken from the unrebutted testimony of David
and Debra Sawyer offered at the September 24, 2013, show cause hearing. See
Theriault v. Murray, 625 A.2d 908, 909 (Me. 1993).

[¶3] In 2009, the Sawyers first defaulted on a mortgage held by the Bank.1
After their default, the Sawyers were approved for a modification plan under which
they were to make a reduced monthly payment for a trial period of six months.
The Sawyers met their payment obligations at the reduced rate, but at some point
the loan-servicing agency, on behalf of the Bank,2 increased their monthly payment
to a level above the predelinquency amount and the Sawyers were again unable to
make timely payments. In 2012, the Bank filed a complaint for foreclosure. At the
time the complaint was filed, J.P. Morgan Chase Bank N.A. (Chase) had taken
over as loan servicer from the servicer with whom the Sawyers had negotiated the
reduced payment schedule. After the complaint was filed, and before the first of
four court-ordered mediations took place, the Sawyers contacted Chase in an
attempt to negotiate a modification. They were told to provide Chase with a list of
documents, which they did. The Sawyers reported, however, that Chase kept
requesting additional documents or new copies of documents that they had already
submitted.

A. The First Mediation
[¶4] In October 2012, Chase and the Sawyers met at the first mediation
session. The Sawyers again expressed their interest in a modification. Chase
requested additional copies of the same documents that the Sawyers had already
submitted in the months leading up to the mediation session. Chase promised the
Sawyers that if they provided the requested documentation a second time, it would
make a decision within 30 days of submittal. The Sawyers submitted the requested
documents, but Chase did not make a decision on the modification.

B. The Second Mediation
[¶5] On February 22, 2013, the parties attended another mediation session.
Again, the Sawyers were given a list of documents to provide. This time Chase
promised to respond to the modification request by April 22. The Sawyers
hand-delivered the requested documents to Chase’s local counsel, but Chase did
not respond by April 22, and still had not done so by the date of the next scheduled
mediation, May 17.

C. The Third Mediation
[¶6] At the May mediation, Chase once again requested additional
documentation and expressly promised to respond by June 28. The mediator later
reported to the court that Chase confirmed it was in receipt of the required
documents and that it would respond with a “definite answer” by the agreed-upon
date. The Sawyers did not receive a response by June 28. After the deadline had
passed, the Sawyers attempted unsuccessfully to contact Chase. When their
housing counselor did reach Chase, he was informed that the Sawyers’
modification was in the final stages of underwriting and would be released “in just
a couple of days.” Instead of a modification, however, the Sawyers received notice
on July 17—only a few days after their housing counselor spoke with Chase and
had been promised that a modification was imminent—that their loan would be
transferred to yet another servicer, Select Portfolio Servicing (SPS).

[¶7] After the third mediation, the court held a status conference at which
the Sawyers reported that in addition to the delays perpetuated by Chase, they were
subjected to daily debt-collection calls and letters, and that new and excessive
taxes, fees, and interest were regularly added to the valuation of their debt, making
it less likely that they would be approved for a modification.3 The Sawyers
accepted that they were responsible for the initial default, but reported that the
post-default actions of Chase and other servicers were causing them severe
distress. After hearing a summary of what had occurred at the mediation sessions
(including a description of Chase’s actions and inaction), the court directed Chase
that, unless the issues were resolved at the mediation on September 10, it was to
appear on September 24 and show cause why the complaint should not be
dismissed with prejudice.

D. The Fourth Mediation
[¶8] No agreement or modification was reached at the September mediation.
Instead, the new servicer, SPS, informed the Sawyers that they would have to
submit entirely new documentation if they wished to be considered for a
modification. SPS demanded these documents within ten days.

E. The Show Cause Hearing
[¶9] On September 24, the court conducted a show cause hearing. Although
SPS had been aware of the hearing date since August 15, it retained counsel only a
few days prior to the hearing. It sent counsel to the hearing with an oral proposal
for a proprietary modification,4 but without evidence, witnesses, or any convincing
argument as to why the court should not dismiss the case with prejudice.

[¶10] Noting that the Bank had the burden of going forward, the court found
that the Bank was not prepared to proceed at the hearing “in spite of the notice to
be prepared to proceed” and dismissed the complaint with prejudice. The Bank
appeals.

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