Casco Bank & Trust Co. v. Cloutier

• Decision Date: 16 March 1979
• Citation: 398 A.2d 1224,26 U.C.C.Rep. 499
• Parties: 26 UCC Rep.Serv. 499 CASCO BANK & TRUST COMPANY v. Dominique CLOUTIER and Carol V. Cloutier.
• Court: Maine Supreme Court

Page 1224

398 A.2d 1224

26 UCC Rep.Serv. 499

CASCO BANK & TRUST COMPANY v. Dominique CLOUTIER and Carol V. Cloutier.

Supreme Judicial Court of Maine.

March 16, 1979.

Thompson, Willard & McNaboe by David M. Hirshon, (orally), U. Charles Remmel, II, Portland, for plaintiff.

Southard, Hunt & Hebert by Stephen T. Hayes, (orally), George H. Hunt, Augusta, for defendants.

Before McKUSICK, C. J., and WERNICK, ARCHIBALD, GODFREY and NICHOLS, JJ., and DUFRESNE, A. R. J.

WERNICK, Justice.

Defendants Dominique and Carol V. Cloutier have appealed from an order of the Superior Court (Cumberland County) pursuant to which summary judgment was entered in favor of plaintiff Casco Bank & Trust Company (the Bank) on the Cloutiers' counterclaim. The appeals are limited to the part of the summary judgment that denied a claim of conversion. Arising from a loan transaction in which provision was made for a security interest in the Bank in certain property of the Cloutiers, the conversion claim challenges the Bank's right to enforce the security interest by seizing, and selling, the property. More specifically, the Cloutiers contend that the security interest was not "enforceable" because there had not been compliance with formal requisites prescribed by 11 M.R.S.A. § 9-203(1)(b) (1964).

As will more clearly appear below, we are called upon to elucidate the policies served by those formal requisites in order to determine the ultimate question raised by the appeals: whether and under what circumstances, consistently with such policies, multiple documents can be read together as the "debtor('s) . . . signed . . . security agreement which contains a description of the collateral . . . ." We also confront a preliminary procedural attack on Carol Cloutier's right to appeal, a question we address before turning to the substantive matters.

1. The Viability of Carol Cloutier's Appeal.

On July 7, 1977 the Bank instituted a civil action in the Superior Court (Cumberland County) against Dominique Cloutier to recover an unpaid balance alleged due on a promissory note. Although his answer to the complaint included a counterclaim naming him and his wife Carol as the counterclaimants, the Bank's reply treated Dominique Cloutier as the only counterclaimant. When the Bank subsequently amended its complaint to add Carol, a co-signor of the promissory note, as a defendant, her answer to the amended complaint neither newly asserted a counterclaim nor referred to the one previously filed.

On November 4, 1977, the Bank moved for summary judgment on the amended complaint. Before a decision was made on this motion, the Cloutiers moved to amend their counterclaim, to add the allegation that the Bank had "converted to its own use certain personal property belonging to Defendants . . . ." (emphasis added)

On December 15, 1977 the motion for summary judgment was granted, and in accordance with the Justice's order, judgment on the amended complaint was entered in favor of the Bank against the Cloutiers in the sum of $23,524.18.

Several months later, on May 22, 1978 the Bank moved for summary judgment in its favor "against the Defendants on Their counterclaim . . . ." (emphasis added) The motion was granted on June 30, 1978, and on the same day judgment was entered on the counterclaim against both Dominique and Carol Cloutier.

The record reveals that the Bank supported its motion for summary judgment on the counterclaim by filing an affidavit specifically addressing the issues raised by the conversion claim and, further, that the Bank participated in arguing the conversion issues to the presiding Justice. The record discloses that the Justice considered the conversion claim and that his decision on the counterclaim was intended to be an adjudication of all of the issues it raised, including the conversion cause of action alleged by the purported amendment to it. ¹

The Bank asserts that Carol Cloutier's appeal must be dismissed because she did not utilize proper procedure to become a counterclaimant. The premise of this contention is the assumption that even though Carol was named as a counterclaimant in the counterclaim included in the answer filed by Dominique, she did not thereby become a counterclaimant since she was not yet a defendant in the original action who had been served with a pleading.

We find this underlying premise erroneous and therefore reject the claim that Carol Cloutier's appeal is not viable.

Rule 13(h) M.R.Civ.P., entitled "Joinder of Additional Parties", states:

"Persons other than those made parties to the original action may be made parties to a counterclaim . . . in accordance with the provisions of Rules 19 and 20."

Rule 13(h) M.R.Civ.P. is identical to Rule 13(h) F.R.C.P., and Rules 19 and 20 M.R.Civ.P. are in substance the same as Rules 19 and 20 F.R.C.P. Accordingly, we deem the decision of the United States District Court in Lanier Business Products v. Graymar Company, 342 F.Supp. 1200 (D.Md.1972), which is based on reasoning that we find most persuasive, to be strong authority against the Bank's position.

Although the ambiguity in the words "be made" in Rule 13(h) may indicate need of a motion for leave of court and a court order of joinder, the ambiguity is resolved by the authorization in Rule 20(a) for "all persons" to join "as plaintiffs" to assert

"any right to relief . . . in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences",

provided that the assertion of such right will give rise to a "question of law or fact common to all" the persons so joining. As Lanier Business Products, supra, clarifies, such permissive joinder of parties as "plaintiffs" does not apply exclusively to joining in the complaint by which a civil action is commenced. Relative to a counterclaim, the claiming party is regarded as a "plaintiff." Accordingly, the authorization in Rule 20(a) for the joinder of "plaintiffs" extends to counterclaimants who, therefore, are authorized to join in the bringing of a counterclaim in the same manner as persons are authorized to join in a complaint as "plaintiffs"; leave of court and a court order of joinder are not requirements in either instance.

Here, then, pursuant to Rules 13(h) and 20(a) in combination, the counterclaim included in the answer of Dominique effectively joined Carol as a counterclaiming party, despite the absence of an order of court, ² provided that the other requirements of Rule 20(a) were satisfied. It is not disputed that these other requirements were met; the rights asserted by the Cloutiers plainly arose out of the "same transaction, occurrence, or series of transactions or occurrences" and give rise to a "question of law or fact common to . . ." both of them.

The appeal of Carol V. Cloutier is properly before us.

2. The Merits of the Appeals.

Since the appeals are from a summary judgment, we are concerned with the undisputed facts that relate to the conversion claim. They are as follows.

On September 4, 1975, Dominique Cloutier signed and filed with Casco-Northern National Bank, a Small Business Administration (SBA) loan application in which he requested approval of a loan in the principal amount of $25,000.00. The application stated as further information that the loan was to provide money for the purchase of a laundromat operation situated in Winthrop, Maine, and that a lending institution would be participating with the SBA in the loan. The application also listed, as contemplated collateral for the loan, business machinery and equipment as well as accounts receivable and supplies.

On November 28, 1975, Dominique and Carol Cloutier signed a promissory note in the principal amount of $25,000.00 payable to Casco-Northern National Bank. The note was delivered to Casco-Northern, which subsequently assigned it to Casco Bank & Trust Company. On November 28, 1975 Dominique Cloutier also signed, as did an officer of Casco-Northern, a standard form financing statement containing the information that (1) Dominique Cloutier was the debtor, (2) Casco-Northern National Bank was the secured party, and (3) the property covered by the financing statement was

"(a)ll machinery and equipment (excluding automotive) furniture and fixtures now owned, acquired through loan proceeds and hereafter acquired located in or . . . (appurtenant) to property commonly known as Norge Village in Winthrop, Maine."

This financing statement was filed on December 1, 1975 in the office of the Secretary of State.

Using the proceeds of the loan that was evidenced by their promissory note, the Cloutiers purchased, on November 28, 1975, the "Norge Village" laundromat in Winthrop, Maine. They received a bill of sale transferring ownership to them of the machinery, equipment, furniture and fixtures involved in that operation.

Of all the documents relating to this case defendant Carol V. Cloutier signed only one, the promissory note.

The Cloutiers subsequently ceased making the payments required by their promissory note. On March 21, 1977, Casco Bank & Trust Company notified them that they were in default on their promissory note, seized the contents of their "Norge Village" laundromat operation and, later, after notification to Dominique Cloutier, sold the seized property at public auction. Applying the net proceeds realized from the sale, $2,623.25, toward payment of the promissory note, the Bank brought this action to recover the deficiency balance remaining due on the note.

The gravamen of the counterclaim for conversion is that the Bank's seizure, and sale, of the contents of the laundromat was wrongful because, say the Cloutiers, there had been a failure to comply with the formal requisites prescribed by 11 M.R.S.A. § 9-203(1)(b) as minimally necessary conditions of the Enforceability of a "security interest."

As it read at the times relevant here, 11 M.R.S.A. § 9-203(1)(b) provided in pertinent part:

"(A) security interest is not...