Fleet Bank of Maine v. Steeves, Civ. No. 91-0076-P-C.

• Decision Date: 12 February 1992
• Docket Number: Civ. No. 91-0076-P-C.
• Citation: 785 F. Supp. 209
• Parties: FLEET BANK OF MAINE, Plaintiff, v. Joan T. STEEVES and James L. Swartz, D.O., Defendants, and Pond Cove Millwork Co., et al., Parties-in-Interest, and Federal Deposit Insurance Corporation, Counterclaim Defendant.
• Court: U.S. District Court — District of Maine

785 F. Supp. 209

FLEET BANK OF MAINE, Plaintiff, v. Joan T. STEEVES and James L. Swartz, D.O., Defendants and Pond Cove Millwork Co., et al., Parties-in-Interest and Federal Deposit Insurance Corporation, Counterclaim Defendant.

Civ. No. 91-0076-P-C.

United States District Court, D. Maine.

February 12, 1992.

William Shumaker, Andrew Horton, Verrill & Dana, Alexandra Treadway, Portland, Me., for plaintiff.

Sidney Thaxter, John Gleason, Curtis, Thaxter, Stevens, Broder & Micoleau, William Leete, Beagle, Pearce, Feller & Ridge, Portland, Me., for parties-in-interest.

Anthony Perkins, Peter Rubin, Bernstein, Shur, Sawyer & Nelson, Portland, Me., for defendants.

Alexandra Treadway, Andrew Horton, Verrill & Dana, Portland, Me., for counterclaim defendant.

ORDER GRANTING SUMMARY JUDGMENT OF PLAINTIFF FLEET BANK OF MAINE

GENE CARTER, Chief Judge.

This case involves the claims of Plaintiff Fleet Bank of Maine (hereinafter "Fleet Bank" or "Plaintiff") for foreclosure of two mortgages under Title 14 M.R.S.A. section 6321 et seq. and for collection of amounts due under a promissory note (hereinafter "Note") and an Equity Line of Credit agreement (hereinafter "Equity Line") that are in default. The Note and Equity Line were signed by Defendants Joan T. Steeves and James L. Swartz.¹ Fleet Bank, as the successor-in-interest to Maine Savings Bank (hereinafter "MSB")² is the present holder of the Note in the original principal amount of $350,000 and the Equity Line sought to be foreclosed in this action.

Plaintiff originally brought its Complaint before the Superior Court in and for the County of Cumberland and State of Maine on September 13, 1990. It was removed to this Court on March 1, 1991 pursuant to 12 U.S.C. section 1819(b) and 28 U.S.C. section 1441 et seq. This removal arose from the FDIC's appointment as Receiver MSB upon the Maine Superior Court's issuance of an Order dated February 1, 1991, finding that MSB was insolvent.³

Defendant Steeves raised an affirmative defense of setoff to MSB's claims, and counterclaimed against MSB in a single count, based on a construction loan agreement (hereinafter "Agreement") dated January 5, 1987.⁴ Her defense and counterclaim are based on the alleged failure of MSB to withhold ten percent of the loan proceeds from the general contractor pending successful completion of the project.

The Court now has before it Plaintiff's and Counterclaim Defendant's Motion for Summary Judgment⁵ on Count I ("Foreclosure of Real Estate Mortgage") and Count III ("Personal Action Against Joan T. Steeves as Co-Maker of the First Note and Equity Line") of its Complaint,⁶ filed on December 19, 1991.⁷ The Court acts on these motions on the basis of the written submissions of the parties.

I. Summary Judgment

Pursuant to Federal Rule of Civil Procedure 56(c), a motion for summary judgment must be granted 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." The Court of Appeals for the First Circuit has articulated the legal standard to be applied in deciding motions for summary judgment:

The movant must adumbrate `an absence of evidence to support the nonmoving party's case.' Celotex Corp. v. Catrett, 477 U.S. 317, 325 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). When that is accomplished, the burden shifts to the opponent to establish the existence of a fact issue which is both `material,' in that it might affect the outcome of the litigation, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert. denied, 425 U.S. 904 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976), and `genuine,' in that a reasonable jury could, on the basis of the proffered proof, return a verdict for the opponent. Anderson, 477 U.S. at 248 106 S.Ct. at 2510; Oliver v. Digital Equipment Corp., 846 F.2d 103, 105 (1st Cir.1988). It is settled that the nonmovant may not rest upon mere allegations, but must adduce specific, provable facts demonstrating that there is a triable issue. `The evidence illustrating the factual controversy cannot be conjectural or problematic; it must have substance in the sense that it limns differing versions of the truth which a factfinder must resolve at an ensuing trial.' Mack v. Great Atlantic and Pacific Tea Co., 871 F.2d 179, 181 (1st Cir.1989). As the Supreme Court has said:

There is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be entered.

Anderson, 477 U.S. at 249-59 106 S.Ct. at 2510-16.

Brennan v. Hendrigan, 888 F.2d 189, 191-92 (1st Cir.1989).

The Court now looks to the supporting papers on the motion and the citations to materials of evidentiary quality in support of the issues which the Court must consider as a basis for its action upon the motion.

II. Facts

In October, 1987, MSB made a loan to Defendants evidenced by a promissory note in the amount of $350,000 (hereinafter "First Note"). As security for the First Note, Defendants executed a mortgage in favor of MSB (hereinafter "First Mortgage"). In February, 1989, MSB extended a second loan to Defendants under an Equity Line in a maximum amount of $25,000. As security for the Equity Line, Defendants executed a second mortgage in favor of MSB (hereinafter "Second Mortgage"), reconveying the mortgaged premises under the First Mortgage.⁸

On or about February 23, 1990, MSB notified Defendants in writing that the First Note and Equity Line were in default and demanded that the defaults be cured within thirty days. Later, on or about September 4, 1990, MSB, through its attorney, again notified Defendants in writing of the defaults and breach of conditions and demanded payment in full of all sums due under the First Note and Equity Line. Defendants are currently in default on the First Note and Equity Line, the last payment having been made in July of 1989 on the First Note and in April of 1989 on the Equity Line.

Parties-in-Interest Pond Cove Millwork Co., Bay Electric Company, and Equity Plumbing and Heating filed mechanic's-lien actions on the construction site property, naming MSB as a party-in-interest. These actions were consolidated in the Maine Superior Court, and the liens were declared invalid in an opinion issued by the Maine Supreme Judicial Court on October 30, 1991. See Pond Cove Millwork Co., et al. v. Steeves, et al., 598 A.2d 1181 (Me.1991).

Defendant Steeves' counterclaim is based on a construction loan agreement between Steeves and Fleet Bank, dated January 5, 1987. The Agreement was made pursuant to a promissory note for $332,000 given to Fleet Bank and signed by Steeves on that date. Paragraph 1, on pages 2 and 3, of the Agreement states that Fleet Bank agreed to disburse ninety percent of the construction costs approved by the Bank, but that ten percent would be withheld pending final completion of the project. The Agreement also states that "the Mortgagee (Fleet Bank), at its discretion, may waive said 10% retainage upon any periodic inspection."⁹

This Agreement was neither referenced nor incorporated in the Note and Equity Line at issue in Plaintiff's Complaint. No written agreement exists between Defendant Steeves and MSB which was executed contemporaneously with the Note and Equity Line stating that these loans could not be enforced if the Agreement were breached. Similarly, there is no official record of MSB with respect to the January 5, 1987 Agreement which would incorporate the terms of this Agreement in the Note or Equity Line.

As early as February 1987, Defendant Steeves began to have problems with the construction being performed by IBIS Construction Company (hereinafter "IBIS"). During that month, an MSB inspector came to Defendant's house under construction, and he and Defendant walked around the construction site. During that visit, Defendant told him about some of the problems that they were having on the job. The inspector also pointed out some things that he questioned, including delays in the work. He stated to Defendant that he "should have been out here before this." MSB, however, failed to retain ten percent of each advance after receiving notice that IBIS was not meeting its obligations under its construction contract.

By the spring of 1987, substantial problems were occurring with the property's construction. Defendant Steeves told her loan officer at MSB that she was having problems on the job, and the officer told her that she was not the only one having trouble with IBIS. These problems led to the contractor stopping work in June or July 1987 and the parties negotiating an amendment to the construction contract in order for construction to proceed.

III. Discussion

A.

Pursuant to Maine law, the Court shall determine (1) whether there has been a breach of condition of the mortgage; (2) the amount due thereon, including reasonable attorney's fees and court costs; and (3) the order of priority and the amount due, if any, to other parties that may appear. 14 M.R.S.A. § 6322 (Supp.1990). The Court concludes that no genuine issue of material fact exists as to any of these elements under Maine law.

Here, first, the First and Second Mortgages were given to secure the First Note and the Equity Line, respectively. Defendant does not deny that she has failed to pay the amounts due under the Note and Equity Line. In this regard, no genuine issue of material fact exists as to whether Defendant is in default under the Note. As a result, Defendant is in breach of conditions of the mortgages.

Second, Defendant Steeves has failed to make the required payments of the principal and accrued interest due under the Note and Equity...