New Maine Nat. Bank v. Gendron, Civ. No. 90-0181 P-C.

• Decision Date: 18 December 1991
• Docket Number: Civ. No. 90-0181 P-C.
• Citation: 780 F. Supp. 52
• Parties: NEW MAINE NATIONAL BANK, Plaintiff, v. John and Elisabeth GENDRON, Defendants.
• Court: U.S. District Court — District of Maine

780 F. Supp. 52

NEW MAINE NATIONAL BANK, Plaintiff, v. John and Elisabeth GENDRON, Defendants.

Civ. No. 90-0181 P-C.

United States District Court, D. Maine.

December 18, 1991.

Thomas A. Cox, Friedman & Babcock, Portland, Me., for plaintiff.

Charles Kadish, Portland, Me., for defendants.

ORDER GRANTING MOTION FOR SUMMARY JUDGMENT OF PLAINTIFF NEW MAINE NATIONAL BANK

GENE CARTER, Chief Judge.

This case is based on a dispute arising from a loan transaction that Defendants John and Elizabeth Gendron (hereinafter "Defendants" or "the Gendrons") entered into with old Maine National Bank (hereinafter "OMNB"). The transaction involved a note for $175,619 and a mortgage on the Gendrons' home securing that note. The Gendrons attempted to rescind the transaction on July 9, 1990.

On July 27, 1990, OMNB filed a Complaint in this Court, seeking a declaratory judgment that the Gendrons were not entitled to rescind the transaction, or, alternatively, that any such rescission be conditioned upon the contemporaneous return of the loan proceeds that the Gendrons had received.

The Gendrons responded with a counterclaim, averring that the rescission and disclosure procedures used by OMNB violated certain provisions of the federal Truth-in-Lending Act (hereinafter "TILA" or "the Act"), 15 U.S.C. §§ 1601 et seq., and the Maine Consumer Credit Code (hereinafter "MCCC"), 9-A M.R.S.A. §§ 1-101 et seq., thus enabling the Gendrons to rescind on July 9, 1990 and rendering OMNB liable for statutory damages as well as other fees and expenses. The Court dismissed the Gendrons' counterclaim without prejudice on June 17, 1991.

With respect to Plaintiff's Complaint, the Gendrons filed a motion for summary judgment on November 1, 1990. On January 6, 1991, subsequent to the filing of Defendants' motion for summary judgment, OMNB was declared insolvent and the Federal Deposit Insurance Corporation (hereinafter "FDIC") was appointed its receiver on that date pursuant to 12 U.S.C. sections 191 and 1821(c). Thereafter, New Maine National Bank (hereinafter "NMNB"), the Plaintiff herein,¹ was created and chartered to perform the function of a "bridge bank" under the statutory format. The bridge bank deals with assets and liabilities of the original bank in the carrying out of the receivership.²

A final pretrial conference of the Court and counsel was held on April 30, 1991. Defendants' pending motion for summary judgment was discussed at the conference, and the parties agreed that this matter would be in order for dispositive action on cross-motions for summary judgment after supplemental briefing. Counsel indicated that, in all likelihood, the Court's ruling on the cross-motions for summary judgment would resolve all issues in the case.

After examination of the pleadings, Defendants' original motion for summary judgment, and the supplemental briefing submitted in response to the Court's Final Pretrial Conference and Order, the Court found it inappropriate to resolve the matter on cross-motions for summary judgment. Because of the significant new factual and legal issues generated by Plaintiff's supplemental briefing and affidavit, the Court ordered the parties to file new cross-motions for summary judgment. See Procedural Order dated May 23, 1991 at 3-4.

The Court now has before it the Motions for Summary Judgment filed by Plaintiff and Defendants on June 19, 1991. The Court acts on the motions on the basis of the written submissions of the parties.

I. Summary Judgment

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.

Fed.R.Civ.P. 56(c). 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 2510-2516.

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

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

II. Facts

The undisputed facts are as follows. In October of 1989, John Gendron approached OMNB in an effort to secure a loan so that he and his brother Richard and their wives could satisfy state and federal income taxes that were due on October 15, 1989.

In order to expedite the immediate needs of Defendants, Plaintiff issued a temporary, unsecured loan in the amount of $275,000 to John Gendron.³ Several days later, OMNB replaced that unsecured note with two secured notes, one in the amount of $175,619 to John and Elisabeth Gendron, and one in the amount of $100,000 to Richard and Sandra Gendron. The former note forms the basis of this action.

Among the documents provided by OMNB to the Gendrons was a "Notice of Right to Cancel" (hereinafter "Notice"), which they dated and signed. Plaintiff's Complaint, Exhibit C (hereinafter "Ex."). The Notice indicated that their right to rescind the transaction would expire within three business days after occurrence of the last of: (1) the date of the transaction (October 20, 1989); (2) the date on which the defendants received their truth in lending disclosure (October 20, 1989); or (3) the date on which the defendants received the "Notice of Right to Cancel." The bank officer charged with the duty of filling out the Notice for the secured note failed to fill in the date on which the Gendrons' statutory right to rescind expired. That date was never filled in.

On October 24, 1989, the Gendrons signed a document entitled "Confirmation of Nonexercise of Right to Cancel" (hereinafter "Confirmation") in which they acknowledged receipt of their Notice and indicated their intention not to exercise that right. Plaintiff's Complaint, Ex. E.⁴ After receipt of this document, Plaintiff disbursed the proceeds of the secured loans to the Gendrons on the same date.

On July 9, 1990, OMNB delivered to the Gendrons another "Notice of Right to Rescind," which designated June 8, 1990 as the expiration date for the Gendrons' right to rescind — a date that had already passed by almost a month when the new document was delivered. Upon receipt of this second Notice, the Gendrons notified OMNB of their decision to rescind the loan transaction.⁵ Prior to their attempt to rescind the loan transaction, the Gendrons had informed Plaintiff that they were insolvent.⁶ Defendants never tendered any part of the loan proceeds to Plaintiff, but insisted that Plaintiff take the necessary steps to record the release of its security interest in the loan collateral. Plaintiff did not discharge the mortgage on the Gendrons' home, within twenty days of receiving notification of the Gendrons' decision to rescind or at any time thereafter. Instead, it filed the instant action for declaratory judgment on July 27, 1990.⁷

On September 11, 1991, Defendant John Gendron filed a voluntary petition for bankruptcy under Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Maine. See Notice of Bankruptcy Filing. MNB filed a petition to lift the stay in the United States Bankruptcy Court, which was granted by the Bankruptcy Court on December 17, 1991.

III. Discussion

A.

Plaintiff originally sought a declaratory judgment in its Complaint, requesting that the Court "declare that the Gendrons are not entitled to rescind their loan agreement with Maine National" or "order, pursuant to 12 C.F.R. § 226.23(d)(4), that if the Gendrons are entitled to rescind their loan agreement, the return of funds advanced to the Gendrons and the return of collateral received by Maine National must be contemporaneous." Complaint at 3. In its subsequent pleadings, however, Plaintiff admits that "in every transaction where `technical' violations of the rescission notice requirements occur the right to rescind is extended until the violations are cured."⁸ Memorandum of Law of Plaintiff in Support of Motion for Summary Judgment at 3 (hereinafter "Plaintiff's Memorandum for Summary Judgment"). In effect, Plaintiff acknowledges that Defendants have a right to rescind the loan transaction. See Memorandum in Opposition to Defendants' Second Motion for Summary Judgment ...