Case Title: KeyBank National Ass'n v. Keniston

Citation: 

Docket Number: 2023 ME 38

State: maine

Court: Maine Supreme Court

Date: 2023-07-18T00:00:00Z

Document:
MAINE SUPREME JUDICIAL COURT 
Reporter of Decisions 
Decision: 
 2023 ME 38 
Docket: 
Pen-22-250 
Argued: 
April 6, 2023 
Decided: 
 July 18, 2023 
 
Panel: 
 STANFILL, C.J., and MEAD, JABAR, HORTON, CONNORS, and DOUGLAS, JJ. 
 
 
KEYBANK NATIONAL ASSOCIATION 
 
v. 
 
ELIZABETH E. KENISTON et al. 
 
 
STANFILL, C.J. 
[¶1]  KeyBank National Association appeals from a District Court 
(Bangor, Lucy, J.) judgment dismissing its complaint for foreclosure after a 
bench trial because the debtor or the debtor’s estate was a necessary party and 
was not participating in the action.  KeyBank asserts that neither the debtor nor 
the debtor’s estate was a necessary party to the action, given that KeyBank 
cannot enforce the note against either.  We agree and vacate the dismissal.  
I.  BACKGROUND 
 
[¶2]  Because KeyBank did not obtain a transcript of the trial (or a 
statement in lieu of a transcript) pursuant to Rule 5(a) or (d) of the Maine Rules 
of Appellate Procedure, “we will assume that the transcript would support the 
 
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trial court’s findings of fact and its rulings on evidence and procedure.”  
Greaton v. Greaton, 2012 ME 17, ¶ 2, 36 A.3d 913.   
[¶3]  On June 1, 2002, Frederick L. Keniston borrowed money from 
KeyBank and executed a promissory note for the loan.  Frederick was the sole 
debtor on the note.  The debt was secured by a mortgage on property in Hermon 
that was owned by Frederick and Elizabeth Keniston as joint tenants.  The 
Kenistons were married and both granted the mortgage to KeyBank to secure 
the loan.  In December 2010, Fred Kilcollins began living at the property and 
paying rent to the Kenistons.  Kilcollins has remained there since.   
 
[¶4]  In October 2011, Frederick died intestate, and his interest in the 
property passed by operation of law to Elizabeth as the surviving joint tenant.  
No administration of Frederick’s estate was ever opened, and the time to do so 
passed.  See 18-A M.R.S. § 3-108(a) (2011) (“For a decedent dying on or after 
January 1, 1981, no informal probate or appointment proceeding or formal 
testacy or appointment proceeding . . . may be commenced more than 3 years 
after the decedent’s death . . . .”).1 
 
1  At the time of Frederick L. Keniston’s death, Title 18-A was in effect.  The Probate Code has since 
been repealed, replaced, and codified in Title 18-C, which became effective on September 1, 2019.  
See P.L. 2017, ch. 402; P.L. 2019 ch. 417, §§ A-103, B-14. 
 
3 
 
[¶5]  Years later, in March 2018, KeyBank mailed a notice of default to 
Elizabeth and the “Estate of Frederick L. Keniston,”  advising that the note was 
in default and that the default could be cured by paying $4,615.45.  A little over 
two weeks later, on March 26, 2018, Elizabeth conveyed the property to 
Kilcollins by warranty deed, subject to the June 2002 mortgage from the 
Kenistons to KeyBank and any outstanding real estate taxes.   
 
[¶6]  In May 2018, KeyBank filed a complaint for foreclosure of the 
property against Elizabeth and other individuals who were identified as 
“heir[s] to the Estate of Frederick L. Keniston,”2 as well as Kilcollins and 
Seaboard Federal Credit Union as parties in interest.3  KeyBank could not name 
Frederick’s estate as a defendant because, as discussed, the deadline for 
commencing a formal or informal proceeding had long passed.   
 
[¶7]  A bench trial was held on April 5, 2022, and the court issued its 
decision on June 30, 2022.  The court dismissed KeyBank’s foreclosure action 
without prejudice, stating that either the debtor or his estate needed to be 
named as a party to the foreclosure action.  In doing so, the court relied on 
 
2  KeyBank later asked the Penobscot County Probate Court to formally determine Frederick’s 
heirs at law, and it did so by order dated March 5, 2020.   
3  Seaboard Federal Credit Union appears to have been joined as a party in interest because it may 
hold an interest in the property by virtue of a writ of execution against Frederick.   
 
4 
MTGLQ Investors, L.P. v. Alley, 2017 ME 145, ¶¶ 4, 8, 166 A.3d 1002, which 
dismissed a foreclosure action without prejudice because either the debtor or 
her estate was a necessary party to that action.  The court further stated that, 
even if KeyBank was not seeking a deficiency judgment, the debtor was a 
necessary party to the litigation.  KeyBank timely appealed the decision.  See 14 
M.R.S. § 1901(1) (2023); M.R. App. P. 2B(c)(1).   
 
[¶8]  Before oral argument, we invited interested persons or entities to 
submit briefing as amici curiae in response to two questions regarding 
foreclosure when the debtor is deceased, the time for probate has passed, and 
the property has passed to a surviving joint tenant who is not liable on the 
note.4  We appreciate the perspectives of the amici curiae, and their briefs were 
of great assistance to us in deciding this matter. 
II.  DISCUSSION 
[¶9]  The issue is whether the debtor is a necessary party to a foreclosure 
action when the debtor is deceased and there is no estate available to be joined 
 
4  Here, the surviving joint tenant, Elizabeth, had conveyed the property to Kilcollins.  The 
questions we posed to the amici were as follows: 
 
1. 
Under these circumstances, what enforceable interest, if any, does the mortgagee have in the 
subject property? 
 
2. 
Is formal administration of an estate or appointment of a special administrator required in 
order to foreclose when the debtor is deceased? 
 
5 
as a party.  KeyBank now concedes that Frederick’s heirs should not have been 
named as parties.  As previously noted, Frederick and Elizabeth owned the 
property as joint tenants.  Accordingly, when Frederick died, his interest in the 
property terminated, and Elizabeth, as the surviving joint tenant, remained 
seized of the entire property.  See Strout v. Burgess, 144 Me. 263, 279-80, 68 
A.2d 241 (1949).  Thus, the heirs were not proper parties because they never 
had an interest in the property, nor could they be liable on the debt.  
[¶10]  At oral argument, KeyBank asserted the trial court erred in relying 
on Alley to determine that either Frederick or his estate was a necessary party 
to this case.5  KeyBank argued that because there is no one to stand in the place 
of the sole deceased debtor, it may proceed with a foreclosure that is in rem in 
nature so long as it does not attempt to collect on the note.  We agree. 
[¶11]  We apply a de novo standard in reviewing the dismissal of an 
action for failure to join a necessary party.  See Caron v. City of Auburn, 567 A.2d 
66, 68 (Me. 1989) (“Though the trial court was correct in its determination that 
SSA was a necessary party to the action, its dismissal on that basis contravenes 
the purpose of Rule 19(a).”); Larrabee v. Town of Knox, 2000 ME 15, ¶¶ 1, 11, 
 
5  KeyBank’s position at oral argument aligned with most of the briefs submitted by the amici 
curiae.   
 
6 
744 A.2d 544 (“The court erred by dismissing the inverse condemnation claim 
based on the failure of Geneva to join necessary parties, therefore we must 
vacate the dismissal.”). 
[¶12]  “In Maine, foreclosure is a creature of statute.”  Bank of Am., N.A. v. 
Greenleaf, 2014 ME 89, ¶ 8, 96 A.3d 700; see 14 M.R.S. §§ 6101-6327 (2023).  
Maine’s foreclosure statute provides that “[a]fter breach of condition in a 
mortgage of first priority, the mortgagee . . . may proceed for the purpose of 
foreclosure by a civil action against all parties in interest.”  14 M.R.S. § 6321.  It 
specifies that “‘[p]arties in interest’ includes mortgagors, holders of fee interest, 
mortgagees, lessees pursuant to recorded leases or memoranda thereof, lienors 
and attaching creditors.”  Id.  Notably, the statute does not require that the 
debtor be joined in every foreclosure action.  Further, it states that a “[f]ailure 
to join any party in interest does not invalidate the action nor any subsequent 
proceedings as to those joined.”  Id.  Thus, the foreclosure statute does not 
require administration of an estate or appointment of a special administrator 
for a foreclosure to proceed. 
[¶13]  In Alley, however, we vacated a foreclosure judgment in the 
mortgagee’s favor when the mortgagee failed to join either the debtor or her 
estate in the proceeding.  See 2017 ME 145, ¶¶ 3-4, 6-8, 166 A.3d 1002.  In that 
 
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case, the sole debtor had died shortly before the note went into default and the 
mortgagee brought the foreclosure action roughly two years later.  Id. ¶¶ 1, 4.  
We concluded that the debtor or the debtor’s estate was a necessary party to 
the foreclosure action: 
Among the necessary elements for foreclosure in Maine are 
the plaintiff’s proof, by a preponderance of the evidence, of both a 
breach of condition in the mortgage and the amount due on the 
mortgage note, including any reasonable attorney fees and court 
costs.  Here, as in most foreclosure cases, [the mortgagee] alleged—
and the court found—that the mortgage was breached by the 
default on the payment obligations of the note.  The crux of the 
dispute is therefore whether and to what extent the debtor met her 
contractual obligations to the [mortgagee] (i.e., those set out in the 
note).  Although a person with an interest in the property subject 
to the mortgage has standing to defend the matter by virtue of her 
interest in the property, the person with an interest in the property 
is unable to do so effectively as to the nonpayment on the note 
because the person is not—and, as here, may never have been—a 
party to the note. . . . 
 
Thus, without the debtor—and more particularly, in the 
absence of notice to the debtor and an opportunity for the debtor 
to be heard—the court cannot fully and fairly decide the 
contractual dispute on which the creditor’s entitlement to reach 
and sell the property depends. 
 
Id. ¶¶ 6-7 (citations, footnote, and quotation marks omitted); see 14 M.R.S. 
§ 6322; M.R. Civ. P. 19(a).  We raised the issue of whether the debtor was a 
necessary party and noted that “[i]n short, this litigation is missing a debtor 
(presumably, the Estate of Linda Shelley).”  2017 ME 145, ¶¶ 3-4, 166 A.3d 
 
8 
1002.  It is unclear from the opinion whether the estate could have been made 
a party, but we appear to have assumed it was at least a possibility. 
[¶14]  In this case, the court interpreted Alley to mean that either the 
debtor or, when the debtor is deceased, the debtor’s estate is always a 
necessary party to a foreclosure action.  Although we agree that the court 
reasonably interpreted Alley, we conclude that Alley is distinguishable and 
overrule it to the extent it implies the debtor or the debtor’s estate must be a 
party to every foreclosure case. 
[¶15]  A mortgage deed secures the debt established by the promissory 
note.  See Buck v. Wood, 85 Me. 204, 209, 27 A. 103 (1892) (“A mortgage secures 
a debt, and not the note, or bond, or other evidence of it.” (quotation marks 
omitted)).  Maine is a title theory state, and “[a] mortgage is a conditional 
conveyance vesting the legal title in the mortgagee, with only the equity of 
redemption remaining in the mortgagor.”  Johnson v. McNeil, 2002 ME 99, ¶ 10, 
800 A.2d 702 (quotation marks omitted).  Thus, legal title “passes [to the 
mortgagee] immediately upon the delivery of the mortgage; and the mortgagee 
 
9 
is regarded as having all the rights of a grantee in fee, subject to the defeasance.”  
Id. ¶ 11 (quotation marks omitted).   
 
[¶16]  Moreover, after the United States Supreme Court’s decision in 
Johnson v. Home State Bank, 501 U.S. 78, 82-83 (1991), we recognized that a 
foreclosure action is in rem in nature and may proceed when the debtor is 
discharged or otherwise protected from liability on the note.  See Fed. Nat’l 
Mortg. Ass’n v. Deschaine, 2017 ME 190, ¶ 3 n.2, 170 A.3d 230 (“Because a 
discharge in bankruptcy does not extinguish a valid lien on a property, 
however, that discharge does not preclude Fannie Mae from enforcing its 
security interest in an in rem foreclosure proceeding.”); Knope v. Green Tree 
Servicing, LLC, 2017 ME 95, ¶ 22, 161 A.3d 696 (“Actions under the mortgage 
may be treated as separate and distinct from actions under the note because 
notes are unsecured and separate from mortgages, presenting differing issues 
that may, sometimes, be adjudicated in separate proceedings.”); see also 
Johnson, 2002 ME 99, ¶ 1, 800 A.2d 702 (holding that a mortgagee may bring a 
foreclosure action on the mortgage even if an action on the note is barred by 
the statute of limitations).  When a foreclosure is in rem in nature, the action 
“proceed[s] against the real property that secures the mortgage debt” and 
results in a foreclosure sale.  Summers v. Fin. Freedom Acquisition LLC, 807 F.3d 
 
10 
351, 357-58 (1st Cir. 2015) (discussing foreclosures that are in rem in nature 
in Rhode Island, another title theory state).  In such cases, the debtor is not a 
necessary party because the mortgagee is not seeking to enforce the debtor’s 
personal obligations.  See Johnson-Toothaker v. Bayview Loan Servicing LLC, 
No. 2:20-cv-00371-JDL, 2022 U.S. Dist. LEXIS 143186, at *12-14 (D. Me. Aug. 11, 
2022); M.R. Civ. P. 19(a).6  Even if the debtor cannot be named as a defendant, 
however, any mortgagor or successor in interest who can be named as a party 
and parties in interest must still be named in the action because the mortgagor 
or successor in interest has a right of redemption that must be exercised or 
extinguished and parties in interest may have some other interest in the 
property.  See Johnson-Toothaker, 2022 U.S. Dist. LEXIS 143186, at *11-12; M.R. 
Civ P. 19(a). 
 
[¶17]  In Johnson-Toothaker, the United States District Court for the 
District of Maine applied Maine law and distinguished Alley from a foreclosure 
case that was factually similar to the one at bar.  2022 U.S. Dist. LEXIS 143186, 
at *10-17.  The court held that Alley’s requirement that the debtor be joined as 
 
6  In MTGLQ Investors, L.P. v. Alley, we were concerned that if the debtor was not a party to the 
action, there would be no one able to defend the matter effectively as to the element of nonpayment 
on the note.  See 2017 ME 145, ¶ 6, 166 A.3d 1002.  Although it may be true that no one other than 
the debtor may have personal knowledge of the status of payment, this is not a reason to prohibit the 
foreclosure if the debtor cannot be made a party. 
 
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a necessary party did not apply to foreclosures that are in rem in nature.  Id. at 
*12.  Accordingly, the court determined that the mortgagee could proceed with 
foreclosure even though the mortgagee was unable to enforce the promissory 
note because it did not file a claim against the debtor’s estate within the 
prescribed time period.  Id. at *10, *12, *16.   
 
[¶18]  We agree.  If a deficiency judgment is sought, then the debtor is a 
necessary party to the foreclosure action.  If, however, a foreclosure does not 
include a claim for a deficiency judgment and is therefore solely in rem in 
nature, then any mortgagor or successor in interest is a necessary party but a 
deceased debtor is not.  To the extent that Alley broadly implies that the debtor 
must be a party to every foreclosure case, it is overruled.  As the First Circuit 
aptly put it: “The upshot is that though the failure to file a claim in probate 
proceedings may extinguish personal liability on the note secured by the real 
estate mortgage, that failure does not extinguish the mortgage itself.  
Consequently, such a failure does not interfere with the mortgagee’s right to 
foreclose.”  Summers, 807 F.3d at 358.  To hold otherwise would leave the title 
to the real estate in limbo in a situation like this, where neither the debtor nor 
the debtor’s estate can be joined as parties. 
 
12 
 
[¶19]  In sum, the trial court erred in holding that KeyBank needed to 
enforce the note against Frederick’s estate and that either Frederick or his 
estate was a necessary party.  This action may proceed in rem against the 
property, joining as parties all who have any interest in the mortgage or 
property. 
The entry is: 
 
Judgment vacated.  Remanded for further 
proceedings consistent with this opinion. 
 
 
 
 
 
 
John Michael Ney, Jr., Esq. (orally), Brock and Scott, PLLC, Pawtucket, Rhode 
Island, for appellant KeyBank National Association 
 
Kirk D. Bloomer, Esq., and William J. Johnson, Esq. (orally), Bloomer Russell 
Beaupain, Bangor, for appellee Fred Kilcollins 
 
Daniel L. Cummings, Esq., Norman, Hanson & DeTroy, LLC, Portland, for amicus 
curiae Maine Credit Union League 
 
William Fogel, Esq., Bendett & McHugh, P.C., Portland, for amicus curiae USFN 
 
Ryan P. Dumais, Esq., and Micah A. Smart, Esq., Eaton Peabody, Portland, for 
amicus curiae Maine Bankers Association 
 
Reneau J. Longoria, Esq., Doonan, Graves & Longoria LLC, Beverly, 
Massachusetts, for amicus curiae Doonan, Graves & Longoria LLC 
 
 
Bangor District Court docket number RE-2018-60 
FOR CLERK REFERENCE ONLY