Source: http://www.courts.state.me.us/opinions_orders/opinions/2005_documents/05me108fi.htm
Timestamp: 2014-04-25 07:38:45
Document Index: 799110604

Matched Legal Cases: ['§ 1021', '§ 1021', '§ 3', '§ 1023', '§ 1023', '§ 1023', '§ 1022', '§ 1021', '§ 3', '§ 3', '§ 3']

Decision: 2005 ME 108
Docket: Pen-04-613
R. CURTIS III et al.
[¶1] First Union National Bank appeals from
a judgment entered in the Superior Court (Penobscot County, Hjelm, J.). It
contends that the court erred when it held that the Improvident Transfers of
Title Act, 33 M.R.S.A. §§ 1021‑1025 (1999 & Supp 2004), impaired
its mortgage in real estate. Because we agree, we vacate the judgment.
[¶2] In June 1998, Melissa Curtis was conveyed real property at
33 Fruit Street in Bangor subject to a life estate in her grandmother, Eleanor
Reilly, who had lived there since 1978.[1] Melissa and her husband, Richard,
sought to mortgage the Fruit Street property as security for a loan from
Crossland Mortgage Company. Due to
Reilly's life estate Crossland notified the Curtises that it could not approve
the loan. Crossland had no
dealings with Reilly. Melissa,
however, enticed Reilly to release her life interest so they could mortgage the
property. The day after the
Curtises executed a mortgage deed in favor of Crossland, the Curtises created a
new life estate in favor of Reilly that was now inferior to Crossland's first
mortgage. [¶3] Crossland assigned the Curtises'
mortgage to BNC in February 2000. In June 2000, the Curtises defaulted. In late July, Option One, a company servicing BNC's loans,
initiated foreclosure proceedings. The Curtises filed for bankruptcy
protection, stalling the foreclosure. In August 2001, Option One, acting under a power of attorney from BNC,
formalized an assignment of the Curtises' mortgage to First Union. Because Option One also serviced this
loan for First Union, the trial court found that First Union had either actual
or constructive knowledge that the loan was in default before it acquired it. [¶4] The day after the formal assignment,
First Union initiated this foreclosure action against the Curtises, naming
Reilly as a party in interest. Because the Curtises did not defend the action, the trial court (Mead,
J.) entered a default judgment against
them. The default, however,
reserved to Reilly her right to pursue her counterclaim that the original
release of her life estate was void pursuant to the Improvident Transfers of
Title Act, 33 M.R.S.A. §§ 1021-1025. The court found, and none of the parties dispute, that the release of
the life estate violated the Act.[2] The court also found that "Reilly's
claim for relief under the [Improvident Transfers of Title Act] [did] not
implicate Crossland as a source for relief."[3]
[¶5] First Union argued that, pursuant to section
1023(2), it was a good faith purchaser obtaining an interest in the property
for value. The court found that
First Union's argument tended to equate the notion of good faith with the
concept of a holder in due course.[4] Because a party can achieve a status of
holder in due course only if it takes an instrument "[w]ithout notice that the
instrument is overdue[,]" 11 M.R.S.A. § 3-1302(1)(b)(iii) (1995), and
because First Union knew the loan was in default, the court found that First
Union was not a holder in due course. [¶6] The court also found that First Union likely acquired this
mortgage from BNC as part of a pool of accounts. Because there are good and bad accounts in such a pool, and
because there was "no evidence of the value of the account when First Union
purchased it, the amount of consideration paid by First Union for it, or the
nature of any influence it may have had in the consideration paid by First
Union for a collection of mortgages[,]" there was no evidence that would
"support a finding that First Union in fact paid 'value' for the Curtis account
specifically." Accordingly, the
court avoided the initial conveyance of the life estate to Melissa and
reinstated Reilly's life estate as an interest superior to First Union's
mortgage. This appeal followed.
[¶7] First Union contends that mortgagees are expressly exempt
from the Improvident Transfers of Title Act. Reilly contends that the plain language of the statute states
that all parties exempted from
the Act are required to prove that they obtained their interest for value after
the transfer from the elderly dependent person, and that there was no error in
the court's factual finding that First Union failed to meet its burden of
establishing that it paid value for the mortgage.
[¶8] Statutory construction is a question of law entitled to de
novo review. City of Bangor v.
Penobscot County, 2005 ME 35,
¶ 9, 868 A.2d 177, 180. "Our main objective in statutory interpretation is to give
effect to the Legislature's intent." Id. (quotation marks
omitted). In ascertaining the
Legislature's intent we first determine the statute's plain meaning. Thompson v. Shaw's Supermarkets,
Inc., 2004 ME 63, ¶ 7, 847 A.2d 406,
409. If there is any ambiguity, we
then look to extrinsic sources such as the statute's history and underlying
policy. Id. "We consider
the whole statutory scheme for which the section at issue forms a part so that
a harmonious result, presumably the intent of the Legislature, may be
achieved." City of Bangor, 2005 ME 35, ¶ 9, 868 A.2d at 180 (quotation marks omitted).
[¶9] The pertinent portion of the Act provides:
No relief obtained or granted under this section may
in any way affect or limit the right, title and interest of good faith
purchasers, mortgagees, holders of security interests or other 3rd parties who
obtain an interest in the transferred property for value after its transfer
from the elderly dependent person. No relief obtained or granted under this section may affect any mortgage
deed to the extent of value given by the mortgagee.
33 M.R.S.A. § 1023(2) (Supp.
2004). Accordingly, an improvident
transfer cannot affect a mortgagee's interest in a mortgage deed.
[¶10] First Union is the assignee of the
mortgagee that received the mortgage note and deed at issue by assignment. A valid assignment "gives to the
assignee of the contract all the rights and remedies enjoyed by the assignor." Lazarovitch v. Tatilbum, 103 Me. 285, 290, 69 A. 275, 277 (1907) (quotation marks
omitted). Accordingly, First Union's
claim that it holds a valid mortgage on the property is dependant on whether
Crossland held a valid mortgage on the property. The record indicates that the original mortgage was for
value: Crossland provided the Curtises with a loan. Because "[n]o relief obtained or granted under [the
Act] may in any way affect or limit the right, title and interest of
. . . mortgagees," 33 M.R.S.A.
§ 1023(2), Crossland's mortgage was exempt from
the Act. Had Crossland held on to
the mortgage, the preceding improvident transfer could not have voided its
security interest.[5] Because Crossland held a valid and
enforceable mortgage, First Union, as its assignee for value, holds a valid and
enforceable mortgage.[6]
[¶11] Reilly contends that, for First
Union to rely on the limitation in section 1023(2), it is limited to the amount
First Union paid for the assignment, and it must establish that amount, which
it has not done. Reilly
misinterprets the statute. The act
limits the recovery to the "value given by the mortgagee." 33 M.R.S.A.
§ 1023(2). The "value given by the mortgagee" refers to the amount
given in exchange for the note and mortgage deed. The act plainly limits the amount that can be recovered from
the mortgagor to the amount "given by the mortgagee," here Crossland. [¶12] Additionally, Reilly's
interpretation of the statute would also frustrate the very purpose of the
exclusion, which is to protect security interests. If, for example, First Union had shown, to the satisfaction
of the trial court, what it paid for the assignment, Reilly's interpretation of
the statute would mean that First Union's security interest would only protect
it up to that amount. If that were
so, First Union would never purchase the note and mortgage if the most it could
recover is the amount it paid Crossland, because with the delays and costs
associated with foreclosure, it would always come out behind. [¶13] Because the Act only requires
First Union to show that it paid value for the assignment and not the amount,
and because there is no dispute that First Union paid something for a group of
mortgages, of which at least one was in default, First Union steps into the
shoes of Crossland. See Hills
v. Eliot, 12 Mass. (1 Tyng) 26, 30-31
(1815) ("[W]hen a mortgagee makes a deed of assignment upon the back of
the mortgage deed, or by a separate instrument referring to it, the assignee is
put in the place of the mortgagee, to all intents and
purposes . . . .").[7]
Judgment vacated. Remanded to the Superior Court for further proceedings
Benjamin P. Campo Jr., Esq.
Philip R. Foster, Esq.
That same day, Melissa conveyed the property by warranty deed to her husband and herself as joint tenants. [2]
At the heart of the Improvident Transfers of Title Act is a presumption of undue influence. The Act provides: In any transfer of
real estate or major transfer of personal property or money for less than full
consideration or execution of a guaranty by an elderly person who is dependent
on others to a person with whom the elderly dependent person has a confidential
or fiduciary relationship, it is presumed that the transfer or execution was
the result of undue influence, unless the elderly dependent person was represented
in the transfer or execution by independent counsel. When the elderly dependent
person successfully raises the presumption of undue influence by a
preponderance of the evidence and when the transferee or person who benefits
from the execution of a guaranty fails to rebut the presumption, the elderly
dependent person is entitled to avoid the transfer or execution and entitled to
the relief set forth in section 1024.
33 M.R.S.A. § 1022(1)
(Supp 2004). The Act defines an
elderly person as any person over sixty years old. 33 M.R.S.A. § 1021(2) (1999). Reilly was older than sixty, she was dependent, she received
less than full consideration for subordinating her rights to those of
Crossland, the transaction was made in the context of a confidential relationship,
Reilly was not represented by counsel, and there was no evidence at trial
rebutting the presumption of undue influence. See 33 M.R.S.A. §
Reilly's answer and counterclaim included claims against Crossland alleging various torts. The court found that Reilly failed to establish these claims because she had not established that Crossland did anything wrong. [4]
First Union also raised the argument that it was, pursuant to the terms of the Improvident Transfers of Title Act, excluded from its provisions.
Crossland was not a party to the improvident transfer. The court found that Crossland did nothing wrong and those findings are not challenged on appeal.
First Union purchased an overdue note. The general rule is that a purchaser of an overdue note and mortgage, with notice that the note was overdue, cannot be a holder in due course and is subject to defenses. See 11 M.R.S.A. §§ 3-1302(1)(b)(iii), 3-1305 (1995). Because there are no defenses available against the original mortgagee, Crossland, there are none available against the assignee, First Union.
First Union's reliance on a holder in due course analysis is misplaced because the record indicates that there were no defenses, real or personal, to the mortgage, as between the mortgagor and original mortgagee. See generally 11 M.R.S.A. §§ 3-1302(1), 3-1305(1). Even if a holder in due course analysis is appropriate, the "shelter rule" would protect First Union's interest. See 11 M.R.S.A. § 3-1203(2) (1995) ("Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument. . . .").