Atlantic Regional Federal Credit Union v. Baizley

• Court: Superior Court of Maine
• Decided: April 24, 2006
• Docket: CUMap-05-100
• Status: Unpublished

Opinion

STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss. CIVIL ACTION

ATLANTIC REGIONAL i , , $1 - , FEDERAL CREDIT LTNION

Plaintiff

ORDER ON DEFENDANTS MOTION FOR A TRIAL ROBERT and MARY ANN OF THE FACTS BAIZLEY

Defendants

BEFORE THE COURT

Before the court is defendants Robert and Mary Ann Baizley's

("Defendants") request for a trial de novo by jury in the Superior Court,

pursuant to M.R.Civ.P. 80D(f)(2) of their 80D appeal of a December 22, 2005

District Court order granting plaintiff Atlantic Regional Credit Union ("Atlantic

Regional") possession of three items of personal property owned by Defendants.

STATEMENT OF FACTS

Defendants are owners of a 1999 Mercedes Benz ("Mercedes"), a 1999

Doral Model 185 Bow Ride boat with trailer ("Doral"), and a 1989 Mercruiser

Port motor boat ("Sea Ray"). Atlantic Regional has a security interest in all three

of these items, though its security interest in the Mercedes may extend only as far

as Robert Baizley's interest in the vehicle. On December 12, 2005, Atlantic

Regional filed a FED complaint with the District Court in Portland, pursuant to

14 M.R.S.A. § 6012, claiming that Defendants had defaulted on their loan

agreements with Atlantic Regional and that, accordingly, they were entitled to possession of these items. Atlantic Regional provided documentation of

Defendants' loan and security agreements, and a copy of a Chapter 7 bankruptcy

petition filed by Robert Baizley on June 3,2005.

On December 22,2005, after a hearing in which both parties appeared, the

District Court awarded Atlantic Regional possession of the Mercedes, the Doral,

and the Sea Ray. On December 29, 2005, Defendants appealed this decision to

the Superior Court and requested a jury trial de novo.

On appeal, Defendants claim (I), Portland was not the proper venue in

which to commence the FED action, as all three items of property are located in

New Hampshire, (2) the Sea Ray vessel is a federally documented vessel and is

subject to the exclusive jurisdiction of the federal courts, and (3) the Mercedes is

jointly owned by Defendants but only Robert Baizley granted a security interest

in the vehicle to Atlantic Regional, and consequently it does not have a security

interest in Mary Ann Baizley's half-interest.

In addition to disputing the District Court's legal determinations,

Defendants assert that they are entitled to jury trial de novo in the Superior

Court. Atlantic Regional claims that Defendants are not entitled to a trial by jury

because (1) a FED action to obtain possession of personal property is a matter in

equity for whch there is no right to a trial by jury and, (2) even if Defendants are

theoretically entitled to a trial de novo by jury, they failed on appeal to

demonstrate a genuine issue of material fact invokng the right to trial by jury.

DISCUSSION

In seeking to obtain possession of the items at issue, Atlantic Regional

6012. § 6012(2) provides for an filed a FED action pursuant to 14 M.R.S.A. €j appeal of the District Court's decision to Superior Court, and also states, "any

issue triable by right by a jury may be appealed to a trial de novo in the Superior

Court." Defendants assert that they are entitled to a trial by jury in Superior

Court on the question of whether Mary Ann Baizley granted a security interest in

her half of the Mercedes to Atlantic Regional.' Defendants are entitled to try this

question in Superior Court before a jury unless it is affirmatively shown that they

would not have been entitled to a jury trial in such a case in 1820. See North

School Congregate Housing v. Merrithew, 558 A.2d 1189,1190.

In an action under 14 M.R.S.A. § 6012, "the plaintiff shall produce the best

available evidence under which the plaintiff claims an interest in the personal

property" and "the defendant then shall show why possession of the property

should not be delivered immediately to the plaintiff." Atlantic Regional contends

that this statutory proceeding, which was codified in 1973, most closely

resembles an action for "equitable replevin," for which no trial by jury has

hstorically been available. See Farnsworth v. Whiting, 106 Me. 430,435, 76 A. 909,

911 (1910); see also Cyr v. Cote, 396 A.2d 1013, 1020 fn. 8 (stating, "Farnsworth v.

Whiting stands for the unassuming proposition that [an equitable replevin suit]

does not entitle the parties to a jury trial.") This argument ignores the fact that

Atlantic Regional chose to proceed under the FED statute, rather than under the

equitable replevin statute, which is found at 14 M.R.S.A. § 6051 (11). These two

actions, under § 6012 and § 6051, require different proof and prescribe different

procedures for obtaining personal property. Atlantic Regional elected the FED

' Defendants also contend that they are entitled to a trial by jury on the question of whether Mary Ann Baizley oivned an undivided half-interest in the Mercedes. However, Atlantic Regional does not dispute that Mary Ann Baizley jointly owned the Mercedes with Robert Baizley. See Plaintiff's Response at p. 4. Accordingly, there is no need for a jury trial on this issue, as it was not determined by the District Court and it is conceded by Atlantic Regional. Any legal implications of this fact are to be determined by the court on appeal, not by a jury. action over the equitable replevin action, which allowed it to obtain an order for

immediate possession of the Defendants' property in a summary proceeding

before the District Court. By contrast, the equitable replevin statute requires

proceedings before the Superior Court, and apparently would require Atlantic

Regional to offer proof that they cannot obtain satisfaction of their debt through

attachment or writ in order to obtain equitable relief. See 14 M.R.S.A. § 6051(11).

Atlantic Regional either could not or chose not to proceed before the Superior

Court under this requirement. Accordingly, the court rejects Atlantic Regional's

assertion that this action is the equivalent of equitable replevin. Nor has the

court uncovered any other affirmative evidence that Defendants, in the year-1820

equivalent of this action, would have not had the right to a jury trial. See

Merrithew, 558 A.2d at 1190. Defendants have shown that there exists a genuine

issue of material fact, and the court can find no affirmative basis to deny a right

to trial by jury concerning this fact. See id.

The entry is:

Defendants' request for a trial de novo by jury is GRANTED as to the question of whether Mary Ann Baizley granted a security interest in her half of the Mercedes to Atlantic Regional.

Justice, Superior kourt STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss. CIVIL ACTION DOCKET NO: AP-05-1 Kf c - C C i : 15, - , , - ATLANTIC REGIONAL FEDERAL CREDIT UNION

Plaintiff ORDER ON DEFENDANTS' APPEAL PURSUANT TO M.R. Civ. P. 76D & 80D(f)(l)

DONALD r.. GAQRRECHT j d:,A' : ! ? P A ? \ ROBERT and MARY ANN BAIZLEY Defendants MAY 1 5 2007

This case comes before the Court for decision on Defendants' appeal of a

district court judgment of forcible entry and detainer per M.R. Civ. P. 76D and

BACKGROUND

Plaintiff Atlantic Regional Federal Credit Union ("ARFCU") is a federal

credit union doing business in Brunswick, Maine. Defendants Robert and Mary

Ann Baizley ("the Baizleys") reside in Portland, Maine. In January 2003, Mr.

Baizley arranged to borrow money from ARFCU to purchase a 1999 Mercedes

Benz via a purchase money security agreement. Under the agreement, ARFCU

would disburse money for the purchase and it would acquire a security interest

in the Mercedes. In March 2004, the Baizleys both executed a second purchase

money security agreement with ARFCU to buy a 1989 Sea Ray boat. When it

provided funding for the purchase, ARFCU also acquired a security interest in

the boat, w h c h it perfected by filing it with the Secretary of State. In May 2003,

Mr. Baizley also executed a third purchase money security agreement with ARFCU to purchase a 1999 Doral boat. ARFCU now contends that Mr. Baizley is

in default under the first and third agreements, and that both Mr. and Mrs.

Baizley are in default under the second agreement, because they did not make

timely payments or maintain insurance. ARFCU demanded that the Baizleys

return the property, but they did not do so; therefore, ARFCU alleged that the

terms of all three plans allow it to retake possession of the vehicles.

In June 2005, Mr. Baizley filed for Chapter 7 bankruptcy. In his voluntary

petition, ARFCU is listed as the secured priority creditor for all three of the above

loans. The Baizleys state that after granting Mr. Baizley a discharge of

indebtedness, the bankruptcy estate returned the boat to them.' ARFCU then

brought a complaint for forcible entry and detainer in December 2005 in Portland

District Court. The trial court granted a judgment for forcible entry and detainer

of the Mercedes and both boats on December 22, 2005.2 On December 29, the

Baizleys filed this appeal. They argue that the action for forcible entry and

detainer should not have been brought in state court as to the Sea Ray because it

is a federally documented vessel, and federal law applies to federally

documented vessel^.^ Additionally, they contend that the Mercedes should not

be subject to repossession because only Mr. Baizley granted a security interest in

the vehcle, but the couple owns it jointly.

This Court granted a stay of execution of the writ for forcible entry and

detainer whle this appeal was pending. After consideration of the Baizleys'

argument that they were entitled to a jury trial de novo per M.R. Civ. P 80D(f)(2),

The bankruptcy trustee was William Howison, BK Docket No. 05-21021. No documents from the bankruptcy proceedings are in the record, with the exception of the original petition. 2 There is no transcript of this proceeding in the record. The Baizleys have conceded that ARFCU has the right to possess the Doral and have made arrangements to transfer possession of the boat.

2 t h s Court found that the issue of jurisdiction over the boat is a legal question

and the Baizleys were not entitled to a jury trial on that claim. Although the

Court found that there was a genuine issue of material fact as to Mrs. Baizley's

ownership interest in the Mercedes, the parties stipulated to that fact for

purposes of appeal, leaving another purely legal issue for this Court to resolve -

whether the trial court erred when it found that AWCU was entitled to

possession of the Mercedes.

1. Standard of Review.

A party may appeal a judgment of the district court to the superior court.

M.R. Civ. P. 76D. When the appeal is from a judgment of forcible entry and

detainer, "either party may appeal . . . on questions of law." M.R. Civ. P.

80D(f)(l). Absent a transcript, the appellate court will presume that the record

would support the trial court's "findings and discretionary choices." Rothsteilz v.

Maloney, 2002 ME 179, q[ 11,816 A.2d 812,813.

The parties have agreed that this Court's review will be limited to

determining whether the district court's order for forcible entry and detainer was

proper as to the Mercedes and Sea Ray. These questions of law are subject to de

novo review on appeal. Francis v. Pleasant Point Passamaquoddy Hous. Auth., 1999

ME 164, ¶ 5,740 A.2d 575,577; Town of Carmel v. McSorley, 2002 ME 33, qI 5,791

A.2d 102, 105.

2. Did the trial court err in granting possession of the iointlv owned Mercedes to ARFCU if only Mr. Baizley granted it a securitv interest?

The Baizleys contend that the court should not have ordered possession of

the Mercedes because, while they are jointly listed on the title to the velucle, only Mr. Baizley granted ARFCU a security interest in the vehicle. For purposes of

this appeal only, the parties have agreed to assume that Mrs. Baizley did not

grant ARFCU a security interest in her undivided one-half interest in the

Mercedes. Nevertheless, ARFCU argues that even though only Mr. Baizley

signed the loan documents, Mrs. Baizley knew that ARFCU was entitled to a

security interest in the vehcle and acquiesced in that interest.

Maine has adopted the provisions of the Uniform Commercial Code. The

code provides that "[a] security interest attaches to collateral when it becomes

enforceable against the debtor with respect to the collateral," unless otherwise

provided. 11M.R.S. 5 9-1203(1) (2005). Enforceability is generated when

"[vlalue is given, [tlhe debtor has rights in the collateral," and other conditions

are met, including a "security agreement." Id. at § 9-1203(2). In some

circumstances, documents outside of the security agreement may be considered

with other documents "as parts of the same transaction." See Casco Bank & Trust

Co. v. Cloutier, 398 A.2d 1224,1231 (Me. 1979) (addressing enforceability of a

security interest by considering the relationship between a financing statement,

loan application, and promissory note).

Here, Mr. Baizley signed the loan agreement and is therefore bound by its

terms, which included that the vehicle would be collateral for the loan. The loan

agreement was executed approximately two weeks before the State issued the

title jointly in the Baizleys' names. Although Mrs. Baizley did not sign the

agreement, the title to the vehicle recognizes ARFCU as the first and only

lienholders, putting her on notice that the Mercedes was encumbered. As

ARFCU contends, it makes sense to consider the loan application and application

for title to the vehicle as parts of the "same transaction" under Cloutier. It is illogical to imagine that Mrs. Baizley would not know that a vehicle of which she

was a joint owner was obtained via a financing arrangement, especially where

the title itself recognizes the lien. It is also illogical to suggest that the bank is

only entitled to recover one-half of the value of the car when Mr. Baizley

received a loan for the full purchase price and executed a loan document offering

the vehicle as security for that debt. At any rate, ARFCU's interest preceded any

partial ownership transfer that occurred between the Baizleys and cannot be

overridden by any such t r a n ~ f e r . ~

Because it cannot be said that the trial court erred in determining that

ARFCU was entitled to possession of the Mercedes, its judgment against the

Baizleys regarding this vehicle is affirmed.

3. Did the trial court lack subject matter iurisdiction to rule on the right of possession of the Sea Rav because the boat was a federallv documented vessel?

The Baizleys also argue that because they filed federal papers to register

the Sea Ray, Maine state courts do not have jurisdiction over the vessel per the

Ship Mortgage Act of 1920 ("the Act"). ARFCU contends that the state courts do

have jurisdiction over this default, that the federal registration expired prior to

the filing of this action, and that it was not required to bring suit in federal court

because it did not have a preferred mortgage under the federal statute.

This Court first addresses whether it can assume jurisdiction of this case in

light of the Act. Despite the original jurisdiction of the federal courts, some

federal courts have held that the Ship Mortgage Act was not intended to

4 The Law Court has noted that conveyances between spouses "are to be closely scanned when the rights of his [the husband's] creditors are concerned." Maxwell v. Adains, 130 Me. 230,235,154 A. 904,907 (1931). preclude state remedies for defaulting on boat loans. See Dietrich v. Key Bank, 72

F.3d 1509, 1517 (11th Cir. 1996). In Dietrich, the United States Court of Appeals

for the Eleventh Circuit faced an issue almost identical to that currently

confronting t h s Court: whether federal law is the sole remedy for vessel lien

enforcement, or whether "state self-help repossession and resale procedures" are

also available when they are part of a contract. Id. at 1511. There, the plaintiff

had purchased a fishing vessel and executed an agreement granting the

defendant bank a security interest in it. Id. After the plaintiff defaulted, the bank

took possession of the boat and sold it; ultimately, the plaintiff sued the bank. Id.

Her subsequent appeal of a deficiency judgment following the sale gave the

court occasion to determine whether her remedy rested with federal or state law.

Id. at 1512.

In Dietrich, the court explained that prior to the existence of the Ship

Mortgage Act of 1920, "vessel mortgage liens could not be enforced in admiralty

court," leaving creditors virtually unprotected because at the time, it was

difficult to enforce liens at the state level. Id. The Act, therefore, created a

remedy in admiralty courts, which the legislature believed would "encourage

investment in shipping." Id. at 1513. Addressing the plaintiff's federal

preemption argument, the Court stated that the Act's only reference to

preemption pertained to state statutes that provided a civil action "in rem against

the vessel for necessaries." Id. (citing 46 U.S.C. § 31307). Because there is no

language in the federal statute evincing legislative intent to completely preempt

state law remedies, the court then assessed whether preemption could still apply

due to a conflict between the Act and state law, or due to Congress's intent to

occupy the field. Id. (citing Cipollone v. Liggett Grotlp, Inc., 499 U.S. 935 (1992)). According to the Dietriclz court, neither circumstance indicated that the Act

preempted state law. Id. at 1514. Specifically, the court determined that the Act

was intended to "promote ship financing," and that allowing a creditor to pursue

state law remedies against a debtor "does not undermine this purpose." Id.

In a more recent case, the United States District Court for the District of

Massachusetts stated that federal jurisdiction under 5 31325 "is not exclusive,

indicating that Congress did not intend that all actions involving mortgages on

vessels be resolved in federal court." Sovereign Bank v. Bowditch Boat Holdings,

LLC, 376 F. Supp. 2d 3, 6 (D. Mass. 2005). There, the bank had filed suit in state

court "to enforce a commercial promissory note," and the defendant removed

the case to federal court because it believed that court had jurisdiction under 5

31325. Id. at 4. Because it found that § 31325 did not confer exclusive jurisdiction

on federal courts, the Court remanded the case to the state court. Id. at 6. It also

explained that because the bank chose not to foreclose or to sue under federal

law, the "defendant may not, by citing . . . federal statutes upon which the

complaint could have been based, transform this action into one over which this

Court has jurisdiction." Id.

This Court finds the reasoning of the Dietriclz and Bowditch courts to be

persuasive, and it is dispositive of this issue. It is true that the Act provides a

federal procedure for lien enforcement when a preferred mortgage is involved;

however, as noted above, t h s remedy is not the sole remedy of a lender who is

. ~ jurisdiction under § 31325(c) to be "exclusive pursuing a defaulting d e b t ~ r For

This Court need not address ARFCU's argument that it did not have a "preferred mortgage" within the meaning of 5 31325 because, as previously discussed, it was permitted to seek redress in state courts. It is important to note, however, that failure to perfect the lien at a federal level

7 of the courts of the states," ARFCU would have had to pursue a civil action in

rem against the boat in federal court, whch it did not. While ARFCU could have

exercised its option to address the default in federal court, it properly elected to

pursue remedies for default under Maine law. Accordingly, the trial court had

jurisdiction to address the Baizleys' default on the boat lien even though the Sea

Ray may at some point have been a federally documented vessel. Due to the

Baizleys' admission of default, the district court correctly determined that

ARFCU was entitled to possession of the Sea Ray because the boat secured the

debt.

Defendants' appeal is DENIED. The stay of issuance of the writ of possession is terminated. The matter is remanded to the district court for issuance of the writ of possession.

The clerk shall incorporate this Order into the docket by reference pursuant to M.R. Civ. P. 79(a).

DATE: 3[2Bs? J

Justice, Superior Court

does not render ARFCU's lien invalid, as federal recordation is not required when the mortgage is "against. . . the grantor, mortgagor, or assignor." 46 U.S.C. 5 31321(a)(l)(A). Date F i l e d 1 2 / _ 2 9 / 0 5 County

Action APPFT-CT CNTRT

ATLANTIC REGIONAL FEDERAL CREDIT UNION ROBERT BLAIZLEY MARY ANN BLAIZLEY

VS.

Plaintiff's Attorney Defendant's Attorney DANIEL CUMMINGS, ESQ. JQHPI-CANZBEbL,-ESQ--- w/d PO BOX 4600 PQ-gBX-369 PORTLAND, ME 04112-4600 ~QRTbA.rJB7-DI~-84112

NICHOLAS WALSH ESQ

Date of Entry 7nn5