St. Jean v. Racal Mortg., Civil No. 95-416-P-C.

• Decision Date: 22 January 1997
• Docket Number: Civil No. 95-416-P-C.
• Citation: 952 F.Supp. 22
• Parties: Robin and Stephen ST. JEAN, Kathleen and Gregg Bullock, and Bruce Goulette, Plaintiffs, v. RACAL MORTGAGE, Chemical Residential Mortgage Corporation, and GE Capital Mortgage Services, Inc., Defendants.
• Court: U.S. District Court — District of Maine

Page 22

952 F.Supp. 22

Robin and Stephen ST. JEAN, Kathleen and Gregg Bullock, and Bruce Goulette, Plaintiffs, v. RACAL MORTGAGE, Chemical Residential Mortgage Corporation, and GE Capital Mortgage Services, Inc., Defendants.

Civil No. 95-416-P-C.

United States District Court, D. Maine.

January 22, 1997.

Kurt E. Olafsen, Portland, ME, for Plaintiffs St. Jean and Bullock.

John G. Connor, Portland, ME, for Plaintiff Goulette.

Richard L. O'Meara, Charles P. Piacentini Jr., Murray Plumb & Murray, Portland, ME, for Defendants.

MEMORANDUM OF DECISION AND ORDER

GENE CARTER, District Judge.

The Court now has before it four motions for summary judgment: Defendants' Motion for Summary Judgment against Kathleen and Gregg Bullock (Docket No. 3); Plaintiffs Kathleen and Gregg Bullock, and Robin and Stephen St. Jean's Motion for Partial Summary Judgment on Defendants' fifth affirmative defense (Docket No. 9); Defendants' Motion for Partial Summary Judgment (Docket No. 19); Plaintiffs' Motion for Partial Summary Judgment on Defendants' Remaining Affirmative Defenses (Docket Nos. 29 and 30). The parties contest a number of facts in the record. After reviewing the depositions, deposition exhibits, affidavits, and pleadings on file, the Court concludes that none of the parties' factual disputes is material to the resolution of this case. The Court will deal with each motion in turn.

I. FACTS

The Maine Bureau of Consumer Credit Protection is responsible for administering and enforcing the provisions of the Maine Consumer Credit Code. 9-A M.R.S.A. § 1-101 et seq. In 1991, Racal Mortgage, Inc. ("Racal") registered with the Maine Bureau of Consumer Credit Protection as a Credit Services Organization ("CSO"). M. Kilbreth Dep. at 28. Racal's registration to do business as a CSO in Maine was renewed each year through 1994. M. Kilbreth Dep. at 20.

In October 1991, Racal was notified by the Maine Bureau of Consumer Credit Protection that an advertisement it had placed in the Portland Press Herald noting that it was an "Equal Housing Lender" appeared to indicate "that [it] was a lender rather than an arranger [of credit] for these loans." M. Kilbreth Dep. at 86; Dep. Ex. 11. Racal responded to this notice in a letter dated October 28, 1991, and acknowledged that it "must eliminate the `Equal Housing Lender' logo and, in lieu of this, add a line saying `Racal Mortgage is a Maine licensed Credit Services Organization.'" M. Kilbreth Dep. Ex. 10.

In November 1991, Racal underwent its first examination in Maine by Connie Berthiaume, an examiner from the Bureau of Consumer Credit Protection. Berthiaume Dep. at 25. At the conclusion of the examination, no violations of the Consumer Credit Code were found. On January 10, 1992, the Bureau of Consumer Credit Protection sent a letter to Racal pointing out that it is not a licensed lender and, therefore, that it was inappropriate for Racal to list itself with other licensed lenders or supervised financial organizations under the "Local Mortgage Rates" column in the local paper. M. Kilbreth Dep. at 50; Dep. Ex. 3. Racal responded to this inquiry with its own letter of January 23, 1992, in which, among other things, it agreed to discontinue its listing of rates under the Local Mortgage Rates column. M. Kilbreth Dep. at 82-84; Dep. Ex. 8.

On April 30, 1992, Plaintiffs Gregg and Kathleen Bullock executed and delivered to Racal a promissory note and a mortgage deed on their residence in Auburn, Maine.¹ The Bullock loan transaction, with Racal as the "lender," was the first such transaction ever entered into by Racal in Maine. Laurier V. Kilbreth Dec. ¶ 6. On July 30, 1992, Plaintiff Bruce Goulette executed and delivered to Racal a promissory note and a mortgage deed on his residence in Turner, Maine. Goulette Aff. ¶¶ 2-3. On September 21, 1992, Plaintiffs Robin and Stephen St. Jean executed and delivered to Racal a promissory note and a mortgage deed on their residence in Auburn, Maine.² All of these loans were for the purpose of financing or refinancing Plaintiffs' residences.

At the time the loans to Plaintiffs closed, Racal was registered as a CSO in Maine. L. Kilbreth Dec. ¶ 4; M. Kilbreth Dep. at 28. During the same time frame, Racal also held various mortgage lender and/or loan broker licenses in the state of New Hampshire and Commonwealth of Massachusetts.³ M. Kilbreth Dep. at 96-101; Dep. Ex. 16-21. The loans from Racal to Plaintiffs were "table funded;" that is, Chemical Residential Mortgage Corporation ("Chemical") provided all of the funds to be loaned to Plaintiffs and the loans were, immediately after closing, assigned to Chemical. M. Kilbreth Dep. at 50; L. Kilbreth Dec. ¶ 5; Cassell Dep. at 25-26. It is not disputed that after the closing, Chemical undertook the obligation to service the loans and to collect any amounts due from the borrowers.⁴ Racal had never engaged in this type of transaction during 1991 or anytime prior to 1991. Kilbreth Dec. ¶ 6. Racal had previously arranged table-funded loans in which it closed loans not in its own name but in the name of a investor, such as Chemical. M. Kilbreth Dep. 51.

II. DISCUSSION

The Court of Appeals for the First Circuit has recently explained once again the workings and purposes of the summary judgment procedure:

Summary judgment has a special niche in civil litigation. Its "role is to pierce the boilerplate of the pleadings and assay the parties' proof in order to determine whether trial is actually required." Wynne v. Tufts Univ. Sch. of Med., 976 F.2d 791, 794 (1st Cir.1992), cert. denied, 507 U.S. 1030, 113 S.Ct. 1845, 123 L.Ed.2d 470 (1993). The device allows courts and litigants to avoid full-blown trials in unwinnable cases, thus conserving the parties' time and money, and permitting courts to husband scarce judicial resources.

A court may grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c)....

Once a properly documented motion has engaged the gears of Rule 56, the party to whom the motion is directed can shut down the machinery only by showing that a trial-worthy issue exists. See National Amusements [v. Town of Dedham], 43 F.3d [731,] 735 [(1st Cir.1995)]. As to issues on which the summary judgment target bears the ultimate burden of proof, she cannot rely on an absence of competent evidence, but must affirmatively point to specific facts that demonstrate the existence of an authentic dispute. See Garside [v. Osco Drug, Inc.], 895 F.2d [46,] 48 [(1st Cir. 1990)]. Not every factual dispute is sufficient to thwart summary judgment; the contested fact must be "material" and the dispute over it must be "genuine." In this regard, "material" means that a contested fact has the potential to change the outcome of the suit under the governing law if the dispute over it is resolved favorably to the nonmovant. See [United States v.] One Parcel [of Real Property with Buildings], 960 F.2d [200,] 204 [(1st Cir.1992)]. By like token, "genuine" means that "the evidence about the fact is such that a reasonable jury could resolve the point in favor of the nonmoving party...." Id.

When all is said and done, the trial court must "view the entire record in the light most hospitable to the party opposing summary judgment, indulging all reasonable inferences in that party's favor," Griggs-Ryan [v. Smith], 904 F.2d [112,] 115 [(1st Cir.1990)], but paying no heed to "conclusory allegations, improbable inferences, [or] unsupported speculation," Medina-Munoz [v. R.J. Reynolds Tobacco Co.], 896 F.2d [5,] 8 [(1st Cir.1990)]. If no genuine issue of material fact emerges, then the motion for summary judgment may be granted.

... [T]he summary judgment standard requires the trial court to make an essentially legal determination rather than to engage in differential factfinding....

McCarthy v. Northwest Airlines, Inc., 56 F.3d 313, 314-15 (1st Cir.1995).

A. Claims of Kathleen and Gregg Bullock

The Court will first address Defendants' Motion for Summary Judgment against Kathleen and Gregg Bullock (Docket No. 3). Defendants move for summary judgment against the Bullocks, arguing that Racal was not a "creditor" within the meaning of Article 9 of the Maine Consumer Credit Code when it lent money to the Bullocks and, thus, that it was not subject to the licensure requirements of the Code. The Bullocks disagree, arguing that because Racal lent money more than five times during the 1992 calendar year, it is subject to the Code's licensure standards.

The Bullock loan was the first ever made by Racal as a lender in Maine. Although Racal was licensed as a CSO at the time of the loan (and not as a supervised lender), it did not violate the Maine Consumer Credit Code in the course of the Bullock loan transaction. Section 9-101 establishes the scope of transactions governed by the requirements of Article 9. That section specifically provides that Article 9 "applies to all consumer credit transactions made by creditors that are not supervised financial organizations, that are secured by a first lien mortgage on real estate." 9-A M.R.S.A. § 9-101 (emphasis added). The requirements of Article 9, therefore, apply only to "creditors," as that term is defined by the Code. Racal relies on the Code, which defines "creditor," in part, as one who "regularly extends credit in the consumer credit transactions." 9-A M.R.S.A. § 1-301(17)(A). That section goes on to specify that:

[a] person regularly extends credit only if that person extended credit more than 25 times, or more than five times for transactions secured by a dwelling, in the preceding calendar year. If a person did not meet these numerical standards in the preceding calendar year, the numerical standard must be applied to the current calendar year.

9-A ...