715 A.2d 925 (Me. 1998), Fed-98-63, Reagan v. Racal Mortg., Inc.

Docket Nº:Docket No. Fed-98-63.
Citation:715 A.2d 925, 1998 ME 188
Opinion Judge:WATHEN,
Party Name:Margo REAGAN, et al. [1] v. RACAL MORTGAGE, INC., et al. [2]
Attorney:John G. Connor (orally), Portland, for Bruce Goulette. Kurt Olafsen, (orally), Olafsen & Butterfield, Portland, for Robin & Stephen St. Jean. Richard L. O'Meara (orally), Murray, Plumb & Murray, Portland, for defendants.
Judge Panel:Before WATHEN, C.J., and ROBERTS, CLIFFORD, RUDMAN, DANA, and SAUFLEY, JJ.
Case Date:July 27, 1998
Court:Supreme Judicial Court of Maine

Page 925

715 A.2d 925 (Me. 1998)

1998 ME 188

Margo REAGAN, et al. 1

v.

RACAL MORTGAGE, INC., et al. 2

Docket No. Fed-98-63.

Supreme Judicial Court of Maine.

July 27, 1998

Argued June 9, 1998.

Page 926

John G. Connor (orally), Portland, for Bruce Goulette.

Kurt Olafsen, (orally), Olafsen & Butterfield, Portland, for Robin & Stephen St. Jean.

Richard L. O'Meara (orally), Murray, Plumb & Murray, Portland, for defendants.

Before WATHEN, C.J., and ROBERTS, CLIFFORD, RUDMAN, DANA, and SAUFLEY, JJ.

WATHEN, Chief Justice.

¶1 Following defendants' appeal to the First Circuit Court of Appeals from summary judgments entered in the United States District Court for the District of Maine (Carter, J.), the First Circuit, pursuant to 4 M.R.S.A. § 57 (1989) and M.R.Civ.P. 76B, certified to us the following questions of Maine law:

(1) For purposes of Me.Rev.Stat.Ann. tit. 1, § 302, does a violation of Maine Consumer Credit Code section 9-405(4) constitute a "penalty" incurred at the moment the violation occurred?

(2) If the answer to Question 1 is no, do the 1994 amendments to the Maine Consumer Credit Code have retroactive effect under the common law of Maine?

(3) If the answer to Question 1 is yes, or the answer to Question 2 is no, can an error of law constitute a "bona fide error" for purposes of Maine Consumer Credit Code section 9-405(7)?

¶2 The undisputed facts may be summarized as follows: In 1992, Racal Mortgage, Inc. (hereinafter referred to as "Racal") entered into certain mortgage loan transactions with plaintiffs Bruce Goulette and Robin and Stephen St. Jean (hereinafter individually referred to by name or collectively referred to as "debtors") for the purpose of financing the purchase of debtors' respective residences. The loans were closed in Racal's name, as lender, but were "table-funded" by Chemical Residential Mortgage Corporation, i.e., Chemical provided the funds that Racal lent to the debtors. Racal immediately assigned the loans to Chemical. Thereafter, Chemical serviced the loans and collected the amounts due from the debtors.

¶3 At the time of the closings in 1992, Racal was registered with the Maine Bureau of Consumer Credit Protection as a credit services organization, 9-A M.R.S.A. § 10-102(1) (1997 & Supp.1997), but not as a licensed supervised lender, 9-A M.R.S.A. § 1-

Page 927

301(39) (Supp.1997). Pursuant to the Maine Consumer Credit Code, only supervised financial organizations or licensed lenders may engage in the business of making supervised loans, 9-A M.R.S.A. § 2-301 (1997), and the loans made by Racal to the debtors were "supervised loans" as defined by the Code. 9-A M.R.S.A. § 1-301(40) (Supp.1997).

¶4 In 1995, Goulette and the St. Jeans each brought a separate action for sanctions pursuant to 9-A M.R.S.A. § 9-405(4) against Racal for making unauthorized supervised loans. The actions were consolidated in the United States District Court, and summary judgment was granted in favor of the debtors. St. Jean v. Racal Mortgage, Inc., 952 F.Supp. 22, 31 (D.Me.1997). Racal appealed to the First Circuit Court of Appeals, which concluded that Racal violated the Code by making supervised loans without being licensed to do so. Reagan, 135 F.3d at 41. The unresolved issue concerns the applicable sanction provision--the law in effect at the time the loans were made in 1992 or the current law in effect at the time the debtors filed their complaints. To answer these questions, the First Circuit certified the three questions of law. Reagan v. Racal Mortgage, Inc., 135 F.3d 37, 46 (1st Cir.1998).

¶5 Former section 9-405(4), in effect in 1992, provides in relevant part as follows: "If a creditor has violated the provisions of this article applying to authority to make supervised loans, section 9-201, the debtor is not obligated to pay the loan finance charge." P.L.1987, ch. 396, § 12 (emphasis added). Current section 9-405(4), amended effective July 14, 1994, provides for a lesser penalty, described in relevant part as follows: "If a creditor has violated the provisions of this article applying to authority to make supervised loans, section 9-201, the debtor is not obligated to pay any application fee, prepaid finance charge or closing cost, nor the loan finance charge owed for the first 12 months of the loan." P.L.1993, ch. 496, § 4 (emphasis added). Section 9-405(7) of the 1992 law provides an affirmative defense, however, in the following terms:

If the creditor establishes by a preponderance of evidence that a violation is unintentional or the result of a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such violation or error, no liability is imposed under subsections 1, 2 and 4, the validity of the transaction is not affected, and no liability is imposed under subsection 3, except for refusal to make a refund.

P.L.1987, ch. 396, § 12 (emphasis added). Current section 9-405(7), amended effective July 14, 1994, deletes reference to subsection 4, which is the subsection at issue in this case, thereby eliminating the defense for such violations, and also amends the language "unintentional or the result of a bona fide error" to "unintentional and the result of a bona fide error." P.L.1993, ch. 496, § 4 (emphasis added).

  1. General Savings Statute

¶6 The debtors argue that the general savings statute, 1 M.R.S.A. § 302 (1989), applies to this case and that therefore the harsher sanction provided by the 1992 law applies. We agree. Section 302 provides in relevant part as follows:

The repeal or amendment of an Act or ordinance does not affect any punishment, penalty or forfeiture incurred before the repeal or amendment takes effect, or any action or proceeding pending at the time of the repeal or amendment, for an offense committed or for recovery of a penalty or forfeiture incurred under the Act or ordinance repealed or amended.

Id. (emphasis added).

¶7 The test pursuant to section 302 is two-pronged: (1) there must be a punishment, penalty, or forfeiture; and (2) the punishment, penalty, or forfeiture must have been incurred before the amendment. When interpreting a statute, we first look at the plain meaning of the statutory language, seeking to give effect to legislative intent, and consider the particular language in...

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