Bordetsky v. Charron

• Decision Date: 17 August 2011
• Docket Number: Docket No: BCD-RE-10-8
• Parties: DAVID BORDETSKY, Plaintiff/ Counterclaim Defendant v. MARLENE CHARRON, Defendant/ Counterclaim Plaintiff, and PALISADES COLLECTIONS, LLC and PINNACLE CREDIT SERVICES, LLC, Parties-in-Interest MARLENE CHARRON Third-party Plaintiff v. PNF REALTY, INC., LAWRENCE P. MCMANUS, JR., GREGORY KOUTRELAKOS, JANE M. DUGAS, WALTER W. CHENEY, Trustee of the FLOROS REALTY TRUST, and THOMAS J. MCSHERA, Trustee of the KATHLEEN M. MCSHERA 1994 TRUST, Third-party Defendants
• Court: Maine Supreme Court

DAVID BORDETSKY, Plaintiff/ Counterclaim Defendant

v.MARLENE CHARRON, Defendant/

Counterclaim Plaintiff, and

PALISADES COLLECTIONS,

LLC and PINNACLE CREDIT SERVICES, LLC, Parties-in-Interest

MARLENE CHARRON Third-party Plaintiff

v.PNF REALTY, INC., LAWRENCE P. MCMANUS, JR., GREGORY KOUTRELAKOS,JANE M. DUGAS, WALTER W. CHENEY, Trustee of the FLOROS REALTY TRUST,and THOMAS J. MCSHERA,Trustee of the KATHLEEN M. MCSHERA 1994 TRUST, Third-party Defendants

Docket No: BCD-RE-10-8

BUSINESS AND CONSUMER COURT STATE OF MAINE Cumberland

Dated: August 16, 2011

Entered on the Docket: August 17, 2011

Location: Portland

DECISION AND ORDER

David Bordetsky initiated this foreclosure action against Marlene Charron in York District Court in May of 2009. Charron filed a counterclaim against Bordetsky and an identicalthird-party complaint against his investors¹ for statutory violations of: 1) the Home Ownership and Equity Protection Act of 1994 (HOEPA), Pub. L. No. 103-325, 108 Stat. 2190 (1994), codified and incorporated into the Truth in Lending Act (TILA), 15 U.S.C.S. §§ 1601-1667f (LexisNexis 2005);² 2) the Maine Consumer Credit Code (the "Code"), 9-AM.R.S. §§ 8-101 to -403 (2006);³ Before trial, the parties stipulated that, subject only to Charron's counterclaims and affirmative defenses, Bordetsky had met the requirements for his foreclosure action. Thus, the only issues at the one-day trial conducted in February of 2011 related to Charron's aforementioned counterclaims and affirmative defenses: unclean hands, unconscionability, illegality, commercial impracticability, and accord and satisfaction. In lieu of closing arguments, the parties submitted proposed judgments and the court held post-trial oral argument on May 13, 2011.

STIPULATIONS OF FACT AND PROCEDURE⁴

Cecile J. Charron, Charron's mother, died in 1994; Charron was the personal representative of her mother's estate ("the Estate"). (Stip. ¶ 10.) At the time of her death, Cecile Charron owned encumbered property at 456 Atlantic Avenue in Wells (the "Wells property"); Charron and her brother David Charron were to inherit the property. (Stip. ¶¶ 10-11.) TheEstate defaulted on the mortgage in 2005 and the mortgagee sought foreclosure against Charron, David Charron, and the Estate. (Stip. ¶ 10.)

In order to avoid the foreclosure, Charron and David Charron were put into contact with Bordetsky to pay off the loan on the property. (Stip. ¶11.) Charron and David Charron closed on the loan, known as the "Prior Bordetsky Loan," on February 3, 2006. (Stip. Exhs. A, B.) In connection with the loan, the Charrons received a deed to the Wells property that conveyed the property to them from the Estate. (Stip. ¶ 16.) The Prior Bordetsky Loan was a 5-year loan with a principal amount of $130,000 at the rate of 16.5% per year, interest-only monthly payments of $1787.50, and a balloon payment of all outstanding amounts due at the end of the term. (Stip. ¶ 13.) In addition, $26,812.50 of the principal amount of the loan was placed in an escrow account, and the money was to be used to make the first 15 monthly payments of the Prior Bordetsky Loan. (Stip. ¶ 14.) The escrow account was not a condition of the loan, and Charron and her brother had the right to withdraw funds from the escrow account, which they did in the amount of $16,200 between February 21, 2006 and April 18, 2006. (Stip. ¶ 14.)

Because the Charrons withdrew payments from the escrow account, there were insufficient funds to make the monthly interest payments. (Stip. ¶ 18.) Bordetsky "offered to advance the Charrons additional sums so that they could continue to make interest only payments to him while they attempted to sell the [Wells p]roperty." (Stip. ¶ 18.) The Charrons agreed and closed on the loan, known as the "First Mortgage Loan," on May 9, 2006. (Stip. ¶ 19.) The First Mortgage Loan, secured by the First Mortgage Note, was a 5-year loan with a principal amount of $180,000 at the rate of 16.5% per year, interest-only monthly payments of $2475, and a balloon payment of all outstanding amounts due at the end of the term. (Stip. ¶ 21.) This time, $37,125 of the principal amount of the loan was placed in an escrow account to make the first 15monthly payments. (Stip. ¶ 18.) In addition, $7500 was paid to Bordetsky from the principal as an origination fee. (Stip. ¶ 22.) The creation of the escrow account was a condition of the First Mortgage Loan, and the Charrons did not have the right to withdraw any funds from the account. (Stip. ¶ 18.) While money remained in the First Mortgage Loan Escrow, as each monthly payment came due under the terms of the First Mortgage Loan, it was taken out of the escrow account and paid over to Bordetsky by his counsel. (Stip. ¶ 18.)

In order to fund the First Mortgage Loan, Bordetsky borrowed funds from the Floras Realty Trust, Kathleen M. Mcshera as Trustee of the Kathleen M. McShera 1994 Trust, Jane M. Dugas, Lawrence P. McManus, Jr., and Gregory Koutrelakos. (Stip. ¶ 29.) In exchange, Bordetsky issued a promissory note to each of the above persons or entities and assigned a security interest in a pro rata portion of the First Mortgage Note and First Mortgage Loan.⁵ (Stip. ¶ 30.)

In July of 2007, the Charrons were past due on amounts owed to the Town of Wells for property taxes, and Bordetsky again offered to advance the Charrons additional money while they attempted to sell the Wells property. (Stip. ¶ 23.) The new loan, known as the "Second Mortgage Loan," closed on July 30, 2007. (Stip. ¶ 24.) The Second Mortgage Loan, secured by the Second Mortgage Note, was a 5-year loan with a principal amount of $50,000 at the rate of 13.4% per year, interest only monthly payments of $558.33, and a balloon payment of all outstanding amounts due at the end of the term. (Stip. ¶ 26.) In this final loan, $36,399.96 of the principal amount was placed in an escrow account in order to make 12 monthly interest payments on both the First Mortgage Loan and the Second Mortgage Loan. (Stip. ¶ 27.) In addition, $7500 was paid to Bordetsky from the loan principal as an origination fee. (Stip. ¶ 27.)The Charrons had the right to withdraw all amounts remaining in the Second Mortgage Loan Escrow at any time. (Stip. ¶ 23.) While money remained in the Second Mortgage Loan Escrow, as each monthly payment came due under the terms of the First Mortgage Loan and the Second Mortgage, it was taken out of the escrow account and paid over to Bordetsky by his counsel. (Stip. ¶ 23.) In order to fund the Second Mortgage Loan, Bordetsky borrowed $50,000 from PNF Realty, Inc., issued a promissory note to PNF Realty, Inc., and assigned a security interest in the Second Mortgage Note and Second Mortgage Loan to PNF Realty, Inc.⁶ (Stip. ¶ 31.)

Bordetsky has not received any payment on the First Mortgage Loan or Second Mortgage Loan since August 9, 2008. (Stip. ¶¶ 32-33.) On November 6, 2008, David Charron conveyed his one-half interest in the equity of redemption in the property to Bordetsky in a deed in lieu of foreclosure. (Stip. ¶ 35.) In exchange for the deed in lieu, Bordetsky released David Charron from any personal liability on the First Mortgage Loan and Second Mortgage Loan. (Stip. ¶ 35.) Any payments made on the First Mortgage Loan and Second Mortgage Loan were paid out of the proceeds of the loans, and not from any funds otherwise belonging to the Charrons. (Stip. ¶46.)

Bordetsky initiated this foreclosure action by filing a complaint in York District Court on May 21, 2009, and Marlene Charron properly responded, most recently by filing an amended answer and counterclaim on February 25, 2010. (Stip. ¶ 39.) On January 26, 2010, Charron's counsel sent a letter to Bordetsky seeking, pursuant to 9-A M.R.S. § 8-208 and 15 U.S.C.S. § 1635, purporting to rescind the First Mortgage Loan and Second Mortgage Loan.⁷ (Stip. ¶ 44.)Charron moved to transfer the case to the Business and Consumer Court on January 12, 2010, which motion was granted on February 24, 2010. The court conducted a one-day bench trial on this matter on February 3, 2011. The court held post-trial oral argument on May 13, 2011.

Subject to the counterclaims raised by Charron, the parties have stipulated that the order of priority of the claims of the parties who have appeared in this action is as follows:

FIRST PRIORITY: Bordetsky, by virtue of the First Mortgage Loan, for a total of $213,660 as of August 9, 2009, with additional interest accruing on the principal balance of $180,000 from that date at the rate of 16.5% per year, which is equal to $81.37 per day. Furthermore, the First Mortgage secures all costs, including, but not limited to, reasonable attorneys fees, incurred by Bordetsky in enforcing his rights under the terms of the First Mortgage Note and the First Mortgage. (Stip. ¶¶ 36,38.)

SECOND PRIORITY: Palisades by virtue of the judgment lien arising from the recordation of the Palisades Execution in the Registry for the amount of $3408.89 as of September 16, 2009, plus interest accruing on this obligation at the rate of $0.68 per day after that date. (Stip. ¶38.)

THIRD PRIORITY: Bordetsky by virtue of the Second Mortgage Loan, for a total of $57,258.29 as of August 30, 2009, with additional interest accruing on the principal balance of $50,000 from that date at the rate of 13.4% per year, which is equal to $21.02 per day. Furthermore, the Second Mortgage secures all costs, including, but not limited to, reasonable attorneys fees, incurred by Bordetsky in enforcing his rights under the terms of the Second Mortgage Note and the Second Mortgage. (Stip. ¶¶ 37-38.)

FOURTH PRIORITY: One half of the surplus to Charron and one half of the surplus to Bordetsky.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

I. CHARRON'S AFFIRMATIVE DEFENSES

Charron pleads five affirmative defenses to Bordetsky's foreclosure action⁸ : unclean hands, unconscionability, illegality, commercial impracticability, and accord and satisfaction. Despite the identification of the defenses of unclean...