First Tracks Invs. v. Sunrise Schoolhouse

• Court: Superior Court of Maine
• Decided: April 13, 2012
• Docket: CUMcv-11-31
• Status: Unpublished

Opinion

STATE OF MAINE

Cumberland, ss.

FIRST TRACKS lNVRST~~~~~, lLC, Plaintiff

v. Docl{et No. BCD-CV-11-s1 /

SUNRISE SCHOOLHOUSE, LLC, AND SALLY MERRILL,

Defendants

ORDER ON PLAINTIFF'S MOTION TO DISMISS AND MOTION FOR SUMMARY JUDGMENT

Tlus is an action arising out of a commercial foreclosure conducted pm·suant

to a power of sale under :3:3 M.R.S. § 501-A and 14· M.R.S. § 620:3-A. The

mot·tgagee, Plaintiff First Tracks Investments, LLC ("First Tracl{s"), commenced

the action to recover a deficiency judgment against the mortgagor, Defendant

Sunrise Schoolhouse, LLC ("Sumise Schoolhouse"), and a guarantor, Defendant

Sally Merrill. In response, the Defendants filed counterclaims fm· damages based on I alleged irregularities in the Plaintiffs power of sale foreclosure process.

Before the court are Plaintiffs motion to dismiss and motion for sununary I judgment; Defendants' filings in opposition thereto, and Plaintiffs reply. The court i

held oral argument on the motions Apt·il 5, 2012, and made oral rulings that are

reflected in this Order. 1 I I

I t The court's orall'lllings are incorporated by reference in this Order. However, any I discrepancy or conflict between the ot·al rulings and this Ordet· shall be resolved in favor of the contents of this Order. I 1 E~tered on lha Oockat:1./·I,g./~ Copies sent via Mall_ Electronically~ II ! The parties present very different pictures of the underlying sequence of

events.

From the Plaintiffs perspective, Defendants have utterly failed to live up to

their loan and guarantee oblig·ations and had ample opportunity to avoid the

foreclosure sale ofwhich they complain. Plaintiff defends the foreclosure sale

procedw·e it pursued as sufficient Lmder applicable law, and argues that there is no

evidence that a foreclosure sale conducted as the Defendants say this one should

have been would have resulted in a different outcome--a bid higher than what

Plaintiffbicl as the sole bidder at the sale.

Defendants characterize the entire sequence of events in essence as a

predatory scheme by Eric Cianchette, the principal ofPlaintiffFirst Tracks. The

Defendants say he acquired First Tracks at the inception of the foreclosure process

in order to acquire its interest in the loan and mortgage to Sunrise Schoolhouse as i guaranteed by Ms. Merrill. The Defendants say First Tracks then orchestrated a I stealth foreclosure sale by means of a misleading notice of sale and a secretive sale

procedme, in order to acquire the Sunrise Acres Farm property for far less than its I I

! real value. I Some aspects of the tmdisputed record-the mistal{es, omissions and I I vagueness in the notice of sale, and the decision to hold the sale in a place that did ! not comply with the "on site" location indicated in the notice--lend support to the I troubling pictw·e painted by Defendants. II I

On the other hand, First Tt·acks denies any such scheme, and other aspects of ! I the record do not support the Defendants' theot·y. The histm·y of this case confirms I I I

2 II that the Defendants failed to honor their loan and guarantee obligations for eighteen

months. Their theory about First Tracks's motives is based on inference rather than

any direct evidence. Moreover, First Tracks has waived any deficiency claim against

either Defendant.

Case History

The following summary of the facts is based on the parties' statements of

material fc1ct. The material facts set forth below m·e lm·gely undisputed.

Plaintiff First Tracks and Defendm1t Stmrise Schoolhouse are Maine limited

liability corporations, and Defendant Sally Merrill is the only member of Sunrise

Schoolhouse. On April 18, 2008 Sunrise Schoolhouse obtained a mortgage lom1 for I $800,000 fi·om First Tracks. The lom1 was suppot·ted by a mortgage gum·anty fi·om

Sally Merrill. On July 1, 2008 First Tracks lom1ed Stmrise Schoolhouse an I additional $50,000, as reflected by the first allonge to the promissory note and first I amendment to the mortgage, and on September 2, 2008 First Tracks loaned Sunrise

Schoolhouse an additional $25,000 as reflected by the second allonge to the I I pwmissot·y note and second amendment to the mortgage. The total loan from First j Tracks to Stmt·ise Schoolhouse totaled $87 5,000. I The property subject to the mortgage consisted of a lm·ge farm of about 14·6 I J

acres in the Town of Cumberland, with more than a mile of road fi·ontage on Winn I I

l Road, Range Road, m1d Cross Road. l\nown as the Sunrise Acres Farm, the property ) comprises fom· sepm·ately described pm·cels. The property is mostly fields and i I woods, but the1·e m·e also several structures, including a large barn located on Winn

Road that set·ves as the functional central location for the farm. A sign identifying II l i ! ! 3 r • I f the property as the Sumise Acres Farm is at the barn. The bru·n, which sits on a

J'ise, affords a view of much of the property's acreage. The barn is the largest and

most prominent building on the mortgage property, and is the only location that has

parking for multiple vehicles.

Aside fi·om interest payments from an escrow ftmd, the Defendants did not

make any payments on the debt to First Tracks. As a result, First Tracks sent a

notice of default to the Defendants on June 25, 2009, and sent a notice of sale, as well

as a deficiency notice, to the Defendants on December 9, 2009. The notice of sale

was also published in compliance with the Maine power of sale statute. See 14

M.R.S. § 6203-A( 1).

The notice of sale provided fot· the property to be sold as a whole, despite the

fact that it consisted of four parcels. The notice provided that the sale of the

property would be held Januru·y 4, 2010 "on site," but for unexplained reasons did

not specify a more precise location on the 14<5-acre site. Because of the barn's

prominence, the Defendants say that the vague "on site" location mentioned in the

notice must reasonably be taken to refer to the barn, as opposed to anywhere else on I the property, and the record indicates that they are right. II I The notice of sale was inaccurate or incomplete in several respects. It

incorrectly identified the address of the antique schoolhouse as being part ofthe sale I property, for instance, although it did exempt the schoolhouse property fi·om the II i description of property being sold. It failed to mention the acreage involved ot· the

fact that the property being sold consisted of the Sunrise Acres Farm. I I

The notice of sale set forth requirements for pmspective bidders-in order to

4 qualify to submit a bid, for example, a prospective bidder would be required to

present $50,000 in cash or certified check. The notice also p•·ovided contact

information for interested persons to obtain more information from First Tracks's

leg-al counsel. There is no indication that anyone made such an effort before the sale.

In preparation for the sale, First Tracks did no advertising beyond publishing

the notice of sale three times, placed no signs before or on the day of sale, and made

no effort to publicize the sale or generate interest in the property.

The sale was conducted as scheduled, at about 8:30 a.m. on January 4, 2010,

by the attorney representing First Tracks at the time. (Counsel for the pa1·ties in

this case are not the counsel who represented the parties at the time). He went to

the intersection where Cross Road, Range Road, and Winn Road meet, and where

the eponymous antique schoolhouse owned by Sunrise Schoolhouse st

the schoolhouse nm· the roadway beside it was part of the mortgaged property. The

schoolhouse is clown the road fi·om the large b

farm, but cannot actually be seen fi·om the parking area at the barn. There is little, if

any parking, at the schoolhouse.

The First Tracks attorney parked his vehicle in the road beside the

schoolhouse, next to a snowbank that had accrued after a major snowstonn a couple I I of days before, and conducted the sale while standing alone in the roadway beside his I i vehicle." No one else participated or stopped to observe. As the sole bidder at the

sale, First Tracl{s purchased the propet·ty for $850,000. The total amount of the debt I owed to First Tracks by the Defendants as of January 4, 2010 was $990,023.97. I 2 Defendants evidently are unwilling to concede that Fit·st Tracks's attomey actually appeared I in the vicinity of the schoolhouse to conduct the sale, but they have not proffered any evidence contravening First Tracb's account of how the sale was conducted. I I 5 ! I

I Meanwhile, back at the Sunrise Acres barn, several interested persons had

gathered, based on the !'easonable assumption that the sale would be held there.

However, no one waiting at the barn was pl'epared to present $50,000 in the form of

cash or certified check at the sale in order to qualify to bid. At least one of those

waiting at the barn had come intending to bid on the prope1·ty and had brought a

personal check to make a deposit. Howevel', the check was not certified, and he did

not have enough funds in his checking account to issue a check for $50,000.

Because the schoolhouse cannot be seen fi·om the barn pm·king area, none of

those waiting at the bru·n was awm·e that First Tt·acks's attorney was conducting a

foreclosm·e sale down the road. After the group had waited fo1· some time at the

bam, the Defendants' attorney at the time was notified that no sale had taken place,

and he contacted First Tracks's counsel via e-mail to ask what had happened. At

least one other person, not identified in this record, contacted First Tracks's counsel

by telephone to complain about not having been able to find the sale.

First Tracks's cmmsel filed a post-sale affidavit ru1d First Tracks tool<

possession of the p1·operty. The record does not indicate that either Defendant

commenced legal action to contest the sale or seek to set it aside. First Tracl

began making significant improvements to the property.

First Tracks filed a complaint against the Defendants for the amount of I deficiency on Jtme 16, 2010. The Defendants' answer on July 6, 2010 contained no l affirmative defenses or counterclaims, but on Januru·y 13, 2011, more than a year I after the sale, the Defendants filed a motion to amend as well as to assert I counterclajms. The Defendants' motion to amend was granted on March 7, 2011.

I

6 I II The Defendants have t·aised five counterclaims: I) breach of contract, II) wrongful

foreclosure, III) unjust enrichment, IV) conversion, and V) trespass.

The Plaintiffs pending· motion is presented as both a motion to dismiss under

Rule 12(b)(6) of the Maine Rules of Civil Procedure and a motion fot· summary

judgment under Rule 56. The Rule 12(b)(6) motion applies to all of the amended

counterclaims of Sally Merrill, as well as Counts II, III, and IV of the amended

counterclaims of Sunl'ise Schoolhouse. The Plaintiffs motion seeks summary

judgment on the issue of whether the deficiency claim arises out of a lawful

commercial foreclosme and valid exet·cise of a statutory power of sale, and also seeks

stunmary judgment on any and all counts of both Defendants' counterclaims that ru·e

not dismissed under Rule 12(b)( 6).

At oral argument Plaintiff withdrew its deficiency claims. Plaintiffs waiver

of cleficiency was explicitly premised and conditioned on the court's stated.intention

to rule in Plaintiff's favor, meaning that the claims could be reinstated if sunnnary

judgment for Plaintiff were not granted or did not stand on appeal.

The Defendants have voluntarily withdrawn Count IV (conversion) ru1d

Count V (trespass) of their amended counterclaims. Defendants' Memorandum in

Opposition at 7 n.3. In addition, the Defendants have stated that the counterclaims

in Counts I (breach of contract) and Count II (wrongfi.tl foreclosure) ru·e brought by I i Sunrise Schoolhouse only, rather than by both it a11cl Sally Merrill. Id. at 8 n.4•, 22

n.?. Thus, the only claims left to be decided are Sunrise Schoolhouse's Il counterclaims fm· breach of contract, wrongful foreclosure and unjust enrichment, I I I and Sally Merrill's unjust enrichment counterclaim.

I I

7 I 1 I Discussion

1. Standards ofReview

Because Plaintiffs motion is brought under both Rule 12(b)(6) and Rule 56 of

the Maine Rules of Civil Procedure, it invol{es the differing standards of review

Lmder the two different rules.

A Rule 12(b)(6) motion to dismiss does not address factual issues and instead

tests the legal sufficiency of the pleading to which it is directed, taldng all material

allegations of the pleading to be true fo1· purposes of the motion. See Livonia v.

To'Wll ofRome, 1998 ME 39, ~ 5, 707 A.2d 83, 85. "Dismissal of a civil action is

proper when the complaint fc'lils 'to state a claim upon which relief can be granted."'

Bean v. Cummings, 2008 ME 18, ~7, 939 A.2d 676, 679 (citing M.R. Civ. P. 12(b)(6)).

In determining whether a motion to dismiss should be granted, the court

considers "the allegations in the complaint in relation to any cause of action that

may reasonably be inferred fl'Om the complaint." Saunders v. Tisher, 2006 ME 94,

1J8, 902 A.2d 8:30, 832. The fc1cts alleged are treated as admitted for purposes of the

motion, and they are viewed "in the light most favomble to the [non-moving

party]." !d. The court should dismiss a claim only "when it appears beyond a doubt

that the [non-moving party] is not entitled to relief under any set of facts that he I [or she] might prove in support of his [or her] claim." !d. (quoting Johanson v. !I I Dumdngton, 2001 ME 169, ~ 5, 785 A.2d 1244•, 12'1·6).

A motion for summary judgment must establish that there are no g·enuine Ii issues of material f.1ct and that the moving party is entitled to judgment as a matter I oflaw. M.R. Civ. P. 56( c); Leviue v. R.B.K. Caly Corp., 2001 ME 77, 1J4·, 770 A.2d 653, l' 1 ! I 8 .f 655. An issue of "fact exists when there is sufficient evidence to require a fact-finder

to choose between competing versions of the truth at trial." Iukell v. Livingston, 2006

ME 4·2, ~ 4•, 869 A.2d H5, H7 (quoting Lever v. Acadia Hosp. Corp., 20()4. ME .'35, ~ 2,

845 A.2cl 1178, 1179). Any ambiguities "must be resolved in favor of the non-moving

party." Beaulieu v. The Aube Cmp., 2002 ME 79, ~ 2, 796 A.2d 683, 685 (citing· Green

v; Cessna Aircrafl Co., 673 A.2d 216, 218 (Me. 1996)). Sununary judgment is

appropriate on issues such as motive or intent "if the non-moving party rests merely

upon conclusory allegations, impt·obable inferences, and unsupported speculation."

Dyer v. Dept. ofTrausp., 2008 ME 106, ~ H, 951 A.2d 821, 825 (quoting Vives v. 1

Fajardo, 472 F.sd 19,21 (1st Cir. 2007)) (quotations omitted). I I To survive a motion for summary judgment on a claim as to which the non- I moving party has the burden of persuasion, the non-moving party must make out a I' I

prima facie case on each element of the claim that the motion puts into contention. I See Quirion v. Gerou:r:, 2008 ME 4•1, ~ 9, 942 A.2d 670, 673 (negligence claim); I Reliance Nat'! Indem. v. Knowles Indus. Servs. Inc., 2005 ME 29, ~ 9, 868 A.2d 220

(subrogation); Rippett v. Bemis, supra, 672 A.2d at 84 (defc1.111ation). I Maine's civil n:ues provide for a motion made under Rule 12 to be Ii "converted" into a RLile 56 motion in certain circumstances. See Beaucage v. City of I Rockland, 2000 ME 184, ~ 5, 760 A.2d 1054•, 1056; In re J\IIagro, 655 A.2d 341, 3':1<2 l! (Me. 1995). See also M.R. Civ. P. 12(b) (''If, on a motion asserting the defense

numbered (6) to clismjss for failure of the pleading to state a claim upon which relief I t can be granted, matters outside the pleading are presented to and not excluded by

the colll't, the motion shall be treated as one for summary judgment .... "). I I I I 9 f

I However, the conversion dynamic seems less meaningful when a party makes one

motion under both rules.

The Rule 12(b)(6) component ofPlaintiffs motion has practical application

only to the wrongful foreclosure cause of action in Count II of the counterclaim.

Because breach of contract and unjust enrichment are clearly recognized causes of

action, viewed in a light most favorable to the Defendants, Cmmts I and III state

cognizable claims. Mainly for that reason, the court elects to focus on the summary

judgment argwnent because it is applicable to all of the counterclaims.

2. T!te Validity qf tile Sale

Plaintiffs motion not only addresses the counterclaims; it also seeks a

determination of the validity ofthe sale. Plaintiffs waiver ofits deficiency claim

would make it unnecessary to decide that question, but it remains in contention as a

result of the Defendants' counterclaims.

The general t·ule is that, "[f]or a mortgagee to legally fot·eclose, all steps

mandated by statute must be strictly perfonned." Camden Nat' I Bank v. Peterson,

2008 ME 85, ~ 21, 94·8 A.2d 1251, 1257, citing Keybank Nat' I Ass'u v. Sargent, 2000

ME 153, ~36, 758 A.2d 528, 537.

In a case involving a foreclosure by civil action, the Law Court has indicated

that "the 'strict compliance' doctrine is limited to those procedures leading to the

fot·eclosure judgment" and does not extend to the sale procedure. Keybank National

Association v. Sargent, supra, 2000 ME 153 at ~ 38, 785 A.2cl at 538 (mortgagee's use

ofthe wrong photo of a property in a notice ofpublic sale constituted harmless

error). However, the court's stated rationale fm· not requiring strict compliance in

10 the post-judgment foreclosure sale procedure is that, in a foreclosure by civil action,

the mortgagee's right of redemption has already expired when the foreclosure sale

takes place. See id., citiug 14• M.R.S.A. § 632.'3( 1) ("all rights of the mortgagor to

possession te1·minate" when right of redemption expires).

AI though also regulated by statute, a power of sale foreclosure differs from a

foreclosm·e by civil action in two critical respects: it is controlled by the mortgag·ee

without the judicial oversight inherent in a foreclosure by civil action, and the sale

itself operates to terminate the mortgagor's rights in the property. See 33 M.R.S. §

501-A ("such sale shall forever bar the mortgagor and all persons claiming under it lI I

from allrig·ht and interest in the mortgaged premises, whether at law ot· in equity"). I Thus, the rationale for dispensing with the rule of strict compliance in the sale I procedure is absent in a power of sale foreclosme.

Strict compliance with applicable law and the mortgage instrument is I I! required of a mortgagee throughout the entire power of sale foreclosure process. See i Slu'llaber v. Robinsou1 97 U.S. 68, 78 ( 1877) ("the validity of the sale being wholly I dependent on the power conferred by the instrument, a strict compliance with its l terms is essential"); U1tifed States Bank Nat'l Ass'n v. Ibanez, 4•58 Mass. 637, 64·6, 94·1

N.E.2d <1·0, 4•9-50 (2011) (''Recog·nizing the substantial power that the statutory I scheme affords to a mortgage holder to foreclose without immediate judicial lI ! oversight, we adhere to the f.uniliar rule that 'one who sells under a power [of sale] I must follow strictly its terms. If he fails to do so there is no valid execution of the I I

power, and the sale is wholly voicl.' 11 ) (quotiug Jltloore v. Dick, 187 Mass. 207, 211, 72

N.E. 967 (1905)).

11 The Defendants' counterclaims focus on the power of sale procedure that

First Tracks employed in this case, including the notice, the sale and the post-sale

affidavit. "When the challenge is to the procedures used to conduct the foreclosure

sale, the p1·oper analysis for the trial colu·t is whether it would be equitable to set

aside the sale given the procedures that were employed by the mortgagee." Keybank

National Association v. Satgent, supra, 2000 ME 153 at ~ 38, 785 A.2d at 538, citing

Farm Credit qfAroostook v. Sandstrom, 634 A.2d 961, 962-63 (Me. 1993) (action to set

aside foreclosure sale "presumably relies on the equitable power granted to the comt

in actions to foreclose mot·tgages 11 ).

In this case, the Defendants are not seeking to set aside the sale. Instead, the

Defen~dants are seeking an award of damages for the loss of their equity in the I property that they assert resulted fi·om the irregularities in the Plaintiffs sale. The I I

Defendants seek damages in the amount they claim they should have realized from I the sale over and above their debt to First Tracks, had the property sold fot· an I amount closer to the estimated fair market value of the property. I Although the just-quoted reference to how a com·t analyzes a challenge to a

foreclosure sale suggests that the focus is on an equitable remedy, there appears no I I reason why a power of sale foreclosure sale conducted in violation of law or in I I

b1·each of the mortgage instrument could not be the basis for a damages claim. See I f I 4•-37 Powell on Real Property §37.4·2 ("a wrongful sale is actionable at law and the

mortgagor may recover damages, measured by the value of his lost equity"). I However, the fact that the Defendants seek a legal remedy in the form of II damages rather than equitable relief is crucial to this case, because it means that the l I I

! I

12 I i I i f Defendants have to prove more than inequity in the tbrecloslU'e sale procedure

sufficient to justify setting aside the sale-they have the btu·den as well to prove

their damages, and also to prove a causal connection between irreg·ularities in First

Tracks's sale procedure on the one hand and their damages on the other.

The Defendants have raised issues regarding the notice of sale, the location

and manne1· of the sale, the decision to sell the property as a whole, the bid price in

relation to the value of the property at the time, and the post-sale affidavit.

Some of their concems merit little discussion. For example, the issues they

raise with the post-sale affidavit likely are not valid-nothing in the statutes

requires the post-sale affidavit to be based on personal knowledge, fm· instance--and

also the post-sale affidavit has no real beru·ing on the equities of the sale or on

damages. The Defendants' claim that the sale should have been postponed as a

result of a snowstorm that was well over by the time of sale is also wanting in merit. I I I I Other issues have more bearing, but, standing alone at least, do not lend I substantial support to the Defendants' position. The amount of Fair Tracks's bid, I ! l standing alone, does not call into doubt the validity of First Tracks's sale procedure, I

because the bid price was close to the total amount of outstanding debt, and about II halfwhat the Defendants say was the market value of the property at the time. The I I

i Law Court has held "price inadequacy is generally an insufficient basis on which to I challenge the reasonableness of a sale unless other factors exist, such as fi·aud, It j

unf.1irness, or other irregularity." Bar Harbor Bauk & Tmst v. Tlte !Foods at lvfoody, ! I i I

LLC, 2009 ME 62, ~ 20, 974< A.2d 934. I Ii

13 Lil{ewise, First Tracks's decision to sell the property as a whole, standing

alone, is insufficient because divisible property need not always be sold piecemeal in

a powe1· of sale foreclosw·e, although a foreclosing mortgagee cannot sell more of the

property than is necessary to satisfy the clebt:

As a general rule,. it is the duty of a trustee or mm·tgagee under a power of sale not to sell more ofthe property than is necessary to satisfy the debts and costs, tmless the interest of the owner demands it or the owner requests it. \Vhere a deed of trust gives the trustee the discretion to sell as a whole or in parcels, this discretion must be exercised in good faith for the best interests of the beneficiaries including not only the creditor, but the debtm· and his or her successors in interest. A sale en masse will not be distmbed simply because the land was not sold in parcels; there must be, in addition, evidence of fi·aud, unfai1· dealing, or of abuse of confidence.

55 Am. Jw·. 2d Mortgages§ 530.

The Maine statute permits the selling mortgagee to exercise the power of

sale by selling the mortgaged property eithe1· as a whole ot· by parcels. See 33

M.R.S. § 50 1-A. Maine has not adopted any rule of preference for divisible parcels

to be sold separately, as have other jurisdictions. See Applefield v. Fid. Fed. Sav. &

Loan Ass'n ofTampa, 137 So. 2d 259, 261 (Fla. App. 1962)(''the rule in Florida that a

sale in parcels is preferred over a sale en masse where the former is practical and

equitable to all parties"). Also, section 3.10(b) of the mortgage in this case

authorized First Tracks to sell the property either as a whole or in parcels. I I Similarly, First Tracks is cot·rect in asserting that it had no legal duty to

adve1·tise the sale or make other efforts to genet·ate interest in the property, beyond I! the statutory requirements. ! ! I l Mm·eover, the fact that the notice of sale referred to the sale being "on site,"

does not violate the statute, despite the £'let that such a locale does not track the I i ! I 14 i II f language of the form set forth in 14• M.R.S.A. § 620.3-A(s). Nothing in the statute or

the mot·tgage required the sale to be held in any particular location. What is more

problematic is that the "site" encompasses 145 acres. To publish notice of an "on

site" foreclosure sale of a quarter-acre lot is one thing; to publish such a notice for

sale of a 145-acre fc1t·m is another.

In other words, although the foregoing circumstances-the decision to sell

the property as a whole; the absence of advertising beyond the statutorily required

minimum; the vagueness of the advertised location of the sale, and the bid amount-

are factors to be evaluated in determining the overall reasonableness of the

foreclosm·e sale process, they would likely not be sufficient, singly or in combination,

to justify setting it aside.

However, the one undisputed fact that would change that conclusion is the

fact that the foreclosure sale did not take place anywhere "on site," in direct

contravention of the published notice. Given the requirement of strict compliance in

a power of sale foreclosure that in and of itself terminates the debtor's rights in the

property without any judicial oversight, it is difficult to see how a sale that was

scheduled in a statutorily required published notice to be held "on site" but that in

fc1ct was held somewhere else could be declared valid.

Indeed, the fact that the actual location of the sale was contrary to the

published location, coupled with the other fc1ctors just emunerated, wou]d justify a

finding that the sale was commercially unreasonable. Such a finding might not, in

15 and of itself: be sufficient to warrant aside the sale on equitable grounds, but it

would be a factor weighing in favor of such an outcome. 3

In this case, howeve1·, such a finding is unnecessary fot· two reasons. First,

the Plaintiff has waived the deficiency claims that were the sole basis for its

complaint, there being no declaratmy judgment or quiet title cmmt in the complaint.

Second, by fi·aming the relief sought in their counterclaims in terms of an award of

damages rather than an order setting aside the sale, the Defendants have assumed a

burden that the record before the court demonstrates they cannot meet-the bm·den

ofpet·suasion on causation and damages common to all of their cotmterclaims. Even

were the sale not valid, a reasonable factfinder could not award damages to the

Defendants on the basis of the prima facie showing that they were required to mal{e

in response to Plaintiffs motion for smnmary judgment.

3. Evideuce on. Causation and Amount f!!Damages

·1 \.Yhether a foreclosure sale should stand or be set aside hinges on equitable considerations, [(eybt~nk Nation11l Ass'u v. Sargent, supm, 2000 ME 153 at 1f 38, 785 A.2d at 538, but commercial reasonableness clearly can be a factor-albeit perhaps not a determining factor--in that analysis. See Bar H11rbor Bank & Trust v. Tile lf7oods at J'1oody, LLC, 2009 ME 62, 1[20, 974- A.2d 9:H, 938 (applying commercial reasonableness standard to power of sale foreclosure procedm·e). "The court declines to graft a rule of commercial reasonableness onto the statutory fi·amework for real estate foreclosures which the Legislature saw fit to enact without including an explicit reasonableness requirement. That is not to say, however, that real estate foreclosure sales may be conducted in a conunercially unreasonable manner, because the court retains the option of [ exercising its equitable powers in any proceeding involving a challenge to the circumstances of the sale and the ensuing repot·t." Peoples Herilt~ge Bt111k v. Bic!ifbrd, 1999 Me. Super. LEXIS 181, 1[5 11.2. I ·were the Defendants asking the court to set aside the sale, some of the equities would favor I i their cause but some plainly would not-they did not challenge the sale in court immediately ! and Plaintiffhas made significant improvements to the property since the sale. Cf. Farm Credit ofAroostook v. Sandstrom, 6tH A.2d 961, 962 n.l (Me. 1993) (mortgagor's challenge to I foreclosure sale "should have been a separate, plenary action"). I 16 II I All of the Defendants' counterclaims t·equire the Defendants to prove

damages for their "lost equity." Because the Defendants do not contest First

Tracks's legal right to conduct a power of sale foreclosw·e and are instead asserting

an improper foreclosure sale, their "lost equity" claim is not measm-ed in terms of the

fair market value of the property as of January 4•, 20 lO. Instead, it is measured by

the difference between the bid price that would have been realized in the foreclosure

sale without the irregularities and the bid price actually submitted by First Tracks.

To prevail on their counterclaims, the Defendants would have to prove both

causation and damages-first, that the it•regularities of which they complain

negatively affected the sale price, and second, that as a t·esult, they suffered damages

in a reasonably specific amount.

Defendants' damages need not be proved to a mathematical certainty, but

they cannot be left to speculation. See Titcomb v. Saco Mobile Home Sales, Inc., 544

A.2d 754<, 758 (Me. 1988). Money damages must "be grounded on established

positive facts or on evidence from which their existence and amount may be

determined to a probability." I d., (quoting 1\tlic/wud v. Steckiuo, 390 A.2cl 524, 530 (Me.

1978) (emphasis in original); accord, Decesere v. Thayer, 4•68 A.2d 597, 598 (Me. 1983).

As noted above, when a motion fm· summary judgment calls into question

one or more elements ofproofas to which the non-moving party has the burden of I production and/or persuasion, the non-moving party can avoid summary judgment

only by presenting what amounts to a primafacie case regarding the contested I I

element. The Plain tim' motion challenges the sufficiency of Defendants' proof as to I l I 17 II ' ; both the amount of their damages and the causal connection between theil' damages

and any of the irregularities identified in the Defendants' counterclaims.

In the face ofPlaintiff's motion, the Defendants have not proffered evidence

on the basis of which a 1·easonable factfinder could find in their favor on either

causation or damages.

Had the sale been held "on site" at the barn, instead of off site in fi·ont of the

schoolhouse, there is nothing in this record to suggest the outcome would have been

different. None ofthe people who showed up at the barn on the day of sale was

qualified to bid, and there is nothing in the record that affinnatively suggests any of

them would have bettered First Track's $850,000 bid. Defendants have not shown

there was any qualified bidder looldng for the sale, or any qualified bidder who

expressed interest, before or after the sale. See Fann. Credit qfAroostook v. Sandstrom,

supra, 6.'H A.2d at 962 (upholding denial of mortgagor's challenge to foreclosm·e sale based in part on absence of a qualified bidder).

The proposition that some effort beyond the statutorily required published

notice to advertise the sale and generate interest might well have produced qualified

bidders is plausible, but it does not substitute for evidence of damages. Moreover, i i Plaintiff was under no affirmative duty to make any effort to publicize the property I or the sale beyond publishing the statutorily required notice. The same two points I hold true for the proposition that the property should have been sold in parcels

rather than as a whole. I i I

The Defendants' filings include a detailed analysis of First Tracks's sale

process, in the fo1·m ofboth an affidavit and deposition testimony, from an I l l I 18 I ! experienced auctioneer who no doubt would qualify to testify as an expet·t in such

matters. F o1· all of the criticisms that his analysis makes of First Tracks's sale

procedw·e, it does not include an opinion as to what bid price should have been

t·ealized, or even an opinion that the bid price in this case would more likely than not

have been higher thru1 it was. The closest his analysis comes to such an opinion is

this: "In my experience, the winning bid at an auction usually falls in the range of

70% to a figure in excess of market value, depending on the desirability of the

property in question." Def. Ex. 14, Affidavit ofPaul Mcinnis at ~21.

Defendants' burden ofpersuasion is to establish more than that-to recover

damages, Defendants have the burden to show what the bid price for the pt·operty at

issue here more lilwly than not would have be~n had the sale been conducted as they

claim it should have been. This is not to detract fi·om the auctioneer's analysis-in

fact, the absence of such speculation lends it credibility.

However, the £1ct remains that the Defendants have not made a prima facie

showing regarding either the amount of their damages or their causal burden-in I other words, a showing that the errors and omissions they have identified in the

Plaintiffs foreclosure process more likely than not resulted in any reasonably I I specific amount ofloss to them. Plaintiff is entitled to sununary judgment on all of l the Defendants' several counterclaims. I ! Conclusion I Defendants have not presented admissible evidence upon which a reasonable

factfincler could conclude to a probability that Defendants should be awarded I l

19 damages in a reasonably specific amount as a J"esult of any irregularities in the

process. The other issues raised by the pm·ties need not be decided:•

IT IS HEREBY ORDERED AS FOLLOWS:

Plaintiff's Motion to Dismiss and for Summary Judgment is granted

regarding Counts I, II and III of the Defendants' counterclaims to the extent set

fot·th herein and otherwise denied. Judgment shall be entered for Plaintiff on all

counts ofthe Defendru1ts' counterclaim.

Counsel are requested to confer on whether any party is entitled to (or is

seeldng) an award of costs, and to submit either a joint proposed judgment (without

prejudice to any right of appeal) or separate pmposed judgments, within twenty

days of this Order.

The Clerk is directed to incorporate this Order into the docket by reference

pursuant to M.R. Civ. P. 79(a).

Dated 1:3 April 2012

Justice, Business and Consumer C01. u·t

1 ':Vith the waiver of deficiency, there is no claim in the Plaintiffs complaint to be decided. Also, this outcome obviates resolution of the Rule 12(b)(6) component of Plaintiffs motion as it relates to the Defendants' wrongful foreclosure claim. The viability of such a claim is an open question: Maine has not, at least as of yet, recognized any independent cause of action for wrongful fm·eclosure "as a means of challenging foreclosures of real property ...." Ramsey v. Pepperell Bank & Trust, 2007 Me. Super. Lexis 1<, 10-11, a.ffd. 2008 Me. Unpub. LEXIS 76 (mortgagee's failure to LlSe a licensed auctioneer, as well as "f.1ulty advertising", and an aJJegedly inadequate bid price, did not constitute wrongful foreclosure).

20 First Tracks Investments, LLC v. Sunrise Schoolhouse et al BCD-CV-11-31

For Plaintiff:

U. Charles Remmell, II. Esq. Lauri Boxer-Macomber, Esq. Kelly Remmel & Zimmerman 53 Exchange St PO Box 957 Portland ME 04112-0597

For Defendants: Kelly McDonald, Esq. Christopher Branson, Esq. Murray Plumb & Murray 75 Pearl St PO Box 9785 Portland ME 04104-5085