STATE OF MAINE SUr[,YfOR COURT CUMBERLAND, ss. CIVIL .\CTlON A.iE OF MA.\~~WeP0C;=Kl \T NO: CV-09r 582 cum~~rland, 55, Cler\( 5 \ ~ flC . ~ U,) /11 d D ~)
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SAVfNGS BANK OF MAINE i'}\~ 1 n 1G'~ . f/k/ 1I GARDINER SAVINGS fNST, PSB RECE.\\fEO Plaintiff, ORDER v.
EDGECOMB DEVELOPMENT, LLC, BINTUPFS RESTAURANT CORP., & ROGER GTNTLTFF,
Defendants
This case began when the plaintiff, SlIvings Bank of Mlline, brought this Clction to collect on a series of construction IOClns Cll1egedly in ddClult Clnd to exercise its flower of 5111e over certain mortgllged propel"ty. The plclintiff now ,1sks the court to tC'rmin,lte the receivership over th<lt mortgLlged property lind to disch<lrge the receiver. The pl<1intiff h<ls Cllso filed 1I motion to dismiss the defend<lnts' countC'rclClims. The defendants have filed 1I motion to lImend their answer <lnd counterclaims, c:111d oppose the !notion to dismiss.
BACKGROUND
On August 30, 2005, defendant Edgecomb Development, LLC, obt<lined
finclllcing from plClintiff SClvings Bank of Mlline f/k/ a Gardiner SlIvings Institute, FSG (the BClnk) for a combined commercilll and residentilll development project. The financing arrangement gave the Bank a mortgage and a security agreement with power of sale over the property being developed. Defendants Roger Bintliff, Edgecomb's owner, and Bintliffs Restaurant Corp. personally guaranteed the loan. Between September 30,2005, and September 25, 2008, Edgecomb obtained
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five additional loans with similar security arrangements for a toti11 borrowed amount of $14,649,785.
The cornmitment letter for the initial loan conditioned the agreernent on the following term, among others:
Borrower / CUC1fantor agrees that upon sale of ]ots/ uni ts, and after principal reductions, 50% of net sale proceeds will be deposited at Bank for the express purpose of establishing a reserve account for future repayments and project management.
The remaining 50% of net sale proceeds shall be disbursed to Borrower.
(M. Dismiss Ex. l\ at 5.)1 None of the subseCjuent loans contained this provision. [n contrast to the first loan's trC<1tnlent of sales proceeds, the commitITlent letter for the third loan, dated January 17, 2Cl07, denlanded that:
During the construction phase, interest will be due and payable monthly based on the daily principal balance. The f3ank will receive 10()% of the net sales proceeds to apply against Edgecomb Development loans. Any unpaid principal plus accrued interest will be due ond payable ilt m<lturity.
(N\. Dismiss Ex. C <It 2.) Neither the letter nor the other 10<1Il documents specify precisely how the Bank would opply the silles proceeds to the loons. Other loons merely reCjuired monthly payments of interest with the entire ilmount due at maturi ty.
The defendants allege that the Bank's agents and officers promised that credi t would be ovailable oS long oS the defendonts continued to sell the development's residentiol reol estate lots. (DeL's Countercl. (I[ 7.) The f3cmk monitored the development's progress on a monthly basis, and the Bank's president would personally evaluate the project approximotely once every three
I The commitment letters arc part of the contractual agreements from which the
defendonts' countercloims arise ond m.ay be considered without converting this motion to dismiss into a motion for summary judgment. Mooriy v. Stnte Liq/lor S Lottery Co 1/1111 'II, 2004 ME 20, err 11, 843 A.2d 43,47.
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months. (DeL's Countercl. 9[ 8.) Tn August 2005, Bank agent Richard Alden went so far as to say that the Bank was partnering with Edgecomb Development on the project and would take control of sales revenues completely, man<1ge p<1yments, escrow for future payments <1S a p<1ydown on princip<1I, ilnd reimburse the defendants for payments made to third-p<1rty contr<1ctors. (DeL's Countercl. <I[ 9.) Mr. Alden illso stated thilt the Bank WilS behind the project 100% <1nd represented th<1t the projcct had plenty of cquity. (DeL's Countl'rcl. <I[ 10.)
The defcnd<1nts claim thilt the project was successful and th<1t the l3<1nk p<1rticip<1ted in the s<1les of all completed property. (DeL's Countercl. <1[<1113-14.) The 8<1nk took <111 of the net proceeds of the s<11es. (DeL's Countct"cl. <1114.) From the st<1rt of the parties' relationship, the B<1nk would usc these funds to reimburse the defendilnts for payments m<1de to third-pilrty contrclCtors. (DeL's COlintercl. <1115.) In 2006 the r3<1nk's ilgents begiln m<1king monthly inspections of the development to eV'llu<1te the work that had been done, discuss existing Clrld prospective sales, <1nd discuss the project's future. (DeL's Countercl. <If 20.) At these meetings the Bank representatives <1sslired the defend<1nts th'lt the r3,lllk would continue to provide funding until the project WilS complde, LInd th<1t requisitions would be p<1id as long as the completed properties continued to sell. (DeL's Countercl. <II 21.)
In 2008 the Bank appointed Mr. 13intliff to its advisory bO<1rd <1nc! gave him a check for $100,000. (DeL's Countercl. 9f 22.) In the Autullln of thilt ye<1r, the FDIC began to audit the Bank's finances <1nd banking practices. (DeL's Countercl. <1124.) As the Bank was coming under scrutiny, its 10<1n officer Katie Vickers told the defendants th<1t their credit limit for new loans had increased. (DeL's Countercl. 9125.) It was at this time tha.t the Bank stopped paying the defendants'
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requisitions, though it continued to take 100% of the project's nd proceeds. (Def.'s Countercl. err 26.) The Bank assured the defendants that payrnent of the requisitions would recommence in the near future. (DeL's Countercl. 9126.)
Between the Au tumn of 200R and the Summer of 2009, the defendants incurred between $700,000 and $ROO,OOO in construction costs \vhich they submitted to the Bank. (Def.'s Countercl. (1125.) The Bank told the defendants that it \·vas unable to cover the requisitions due to the presence of the FOre auditors, but would do so in the near future. (Def.'s Countercl. (11127.) Sales totaling approximately $1,700,000 were rnade during this period. (Def.'s Countercl. (11fll 2H-29.) The defendants did not seek to secure alternative sources of fin<lncing at any time. (Def.'s Countl'rcl. (1117.)
In April 2009, the 13ank's president, Arthur Marcos, pcll'ticipclted in the monthly site-inspection and told the defendants: "We'l-e behind youIOO'!ri. I like this project." (Dcf.'s Countel'd. ('I 30.) Two weeks later on Mclyl, 2009, the 13clnk declclred the defendants in default. (DeL's Countercl. (1131.) r'rior to the declar<ltion of default, the Bank had managed payment of the defendants' \oilns and milde the payments internally from sales' proceeds. (Def.'s Countercl. (1136.) The defendants claim that the Bank did not give them notice thclt this procedure was changing and that the defendants would be responsible for making those payments. (Def.'s Countercl. crr<JI 37-38.) In August 2009, the Bank received an Order to Cease and Desist from the Office of Thri ft Supervision. (Def.'s Countercl. 91 32.)
On October 28, 2009, the Bank filed an action to collect on the loans and exercise its power of sale over the property. A receiver was appointed on an emergency basis, and the property was sold for $7,500,000 at auction on January
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29,2010. The Bank was the only bidder. On February 16, 2010, both parties were given le<lve to amend their ple<ldings. On March 4, 2010, the B,lnk filed these motions to dismiss the defend<lnts' counterclaims and to termin<lte the recei vership. The defend<lnts oppose the motion to dismiss <lnd h<lve filed a motion to <lmend their answer.
DISCUSSION
The Gcl1lk's unopposed motion to termin<lte the receivership <lnd dischc1rge the receiver is gr<lnted as the property h<ls been sold at auction. The defend<lnts' lllotion to amend their <lnswer pursuant to Rule 'IS is granted as well. Rule 15(a) c<llis for courts to free Iy give le<lve to <llllend "when justice so reClui res," M.R. Civ. (II. '15(,1), particul<lrly when the <lmendment is necessary to cure <I defective plee1ding. SCI' Pol/cr, Prcscoll, JOl/lieso/l [or' Nelsol/, P.A. v. COII/Jlllell, 199B M ~ 70, (II W, 70B A.2d 2BJ, 2S6-S7 (citing Barkley v. Coorf Will [-lol/Il' I\s:;'l/, 495 A.2d '12JS (Me.19S5)). The defend<lnts seck to <ldd a counterclaim for fr,lud to their <lllswer with the f<lcts Ilecessewy to meet Rule 9(b)'s heightened ple<lding ste1lldard. This litige1tioll is still in the e<lrly st<lges of discovery <lnd the B<lnk will not be pn.'iudiced by the <llllendment.
The defend<lnts helVe lodged eight countercl<lims <lg,linst the Belllk: BrC<lch of Or<ll COlltr<lct; Gre<lch of the UCC's Duty of Good F<lith c1nd F<1ir Dealing; Bre<1ch of FiduciClry Duty; Negligent Misrepresentation; Negligence; Promissory Estoppel; Unjust Enrichment; <1nd Fraud or Fraudulent Misrepresentation.
On a motion to dismiss, the court examines "the complaint in the light most favorable to the rcounterclaim) plaintiff to determine whether it sets forth elements of Cl cause of action or alleges facts that would entitle the kounterclc1imJ pl<linti ff to relief pursuant to some legal theory." Moorf,l/ v. Stote tii]l/or t..'"-r' Lottery
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COIIIIIl'II, 2004 ME 20, err 7,843 A.2d 43, 46 (quoting III rc Wngc PnYl/lcllt Litig., 20ClO ME 162, err 3, 759 A.2d 217, 220). The complaint's material allegations "must be taken as cldn1itted," and "dismissal should only occur when it appears beyond a doubt that CI plaintiff is entitled to no relief under any set of fact.e; that he might prove in support of his claims." Moony v. Slnte Liqllor t-:r Lottery COllI/II 'II, 2004 ME 20, ~r 7, 843 A.2d 43, 47 (quoting Livollin v. Tawil of ROllle, 1998 I\!ll~ 39, (If 5, 7Cl7 A.2d 83, 85; McAfei' v. Cole, 637 A.2d 463,465 (Me. 19(4)) (intern<11 quot<1tions omi tted). 1. Breach of Oral Contract The [)clnk contends th<1t the ClpplicClb1c stCltute of frm](.is, 1Cl fVI.RS.A.
§ '1146, Clnd the parol evidence rule preclude consider<1tion of extrinsic evidence relClting to the parties' contr,lctua] relCltiollships. The dcfendilnts counter th<1t the st,ltue of fr<luds hilS been met <1nd th<lt extrinsic evidence of unwritten contr,lctuzl1 terms or conditions mClY be <ldmissib1c. lf proven, the dcfend<lnts 'lrgue th<lt this extrinsic evidence will show that the 13Clnk breached its contrClct.
The StCltu te of frauds requires thClt "any agreement to lend money, extend credit forbe<lr from co]]ection of CI debt or m<lke any othe," ClccommOLi,ltion for the repClyment of ,1 debt for more thCln $ 250,000" be evidenced by CI writing signed by the party to be ch<lrged.lO M.R.5.!\. § 1146 (2009). The statute is w<li ved, however, when the "person to be chClrged wi th the promise, contrClct or agreement fClil[s] to notify the borrower th<lt the promise, contr,lCt or agreement must be in wri ting for an action to be m<lintClined." § 1146(2). Almost <lny writing or series of wri tings can suffice to prove thClt the pClrties did in fClct hClve Cl contractual rclCltionship. BrowII Del!. Corp. v. HClllOlln, 20Cl8 ME 146, 9f 12, 956 A.2d
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104, 108 (ci ting Vlclls Fnrgo HOllie lv'Iortgngc, Tllc. (I. Spnllldillg, 2007 [vlE 11 (-i, CJ! 20, 930 A.2d 1025, 1030).
E<lch development loan W<lS governed by rnultiple signed wri tings. These writings satisfy the st<ltute of frauds as <lpplied to e<lch lO<ln <lgreement. While the dcfendelllts do not claim th<lt the Bank breached the written terms of these contr<lcts, they do <lrgue th<lt the Bank breached certain oral conditions and provisions appended to the writings. When the statute of frauds has been satisfied, the court may consider extrinsic evidence to resolve elll clmbiguity in the writing. Villns hy tllC Sen OWllers Ass 'II v. Cnrrity, 2000 ME 48, (II 10,748 A.2d 457, 4(-il. The court mclY <llso consider parol or other extrinsic evidence varying or adding to the writing if the <lgreelllent is not fully integrtltcd. DrowlI Ol'V. COlp., 2008 ME 140, (11(11 '12-13,956 A.2d at 108.
These exceptions to the genertll exclusion of "extrinsic evidence offered to v,lry, tldd to, or contrtldict the terms of on integrated written agreement" could apply here. Td. (1113, 95(-i J\.2d at 108. Drawing all retlsontlble inferences in the defendants' ftlvor, it is entirely possible that the written contr<lcts could be tlmbiguous or unintegrated. For example, the written provision requiring the Btlnk to <lpply sales' proceeds to the defendcl11ts' lOcl11s docs not specify whether the proceeds would be applied over time or in one lump sum. (Sec M. Dismiss Ex. A at 5, Celt 2.) Without deciding that it is so, this could be <In incomplete or ambiguous provision. Tn this gap, the defendants' allegtltions th<lt the pClrties had or<l]]y <lgreed for the Bank to apply these sums to the defendants' monthly payments, but failed to do so, could show that the Bank did breach tln oral provision of the contract.
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Alternatively, the defendants contend that the p<lfties had an unwritten contrtlct by which the Bank vvas bound to continue extending credit so long tiS the defendants continued to develop and sell property. If all of the defendants' tlllegations tire true, the Bank's words and conduct could have given rise to a uni!tltel"tI] contract on which the defendants ha.d begun to perform. SCI' To/ienlo v. Port/olin W. NeiglllJorllOon Plollllillg COlIlICil, 1997 ME 194, err ] 7 n.2, 705 A.2d 696, 701 n.2 (Lipez, J., dissenting) (citing 1 Arthur L. Corbin et a1., Corbin on Contrtlcts § 1.23, at 89 (rev. cd. 1993)) (explaining tl1e elements of a unilateral contract). 'rhe sttltute of frauds would not necessarily preclude such a contract in this case because the Bank allegedly failed to give notice thtlt it would be unenfol"ce<lble if not in writing. 5cc W M.R.5.A. § 1146(2); 5.5. Novigolioll Co. v. COlllnclI Not'! Balik, 2006 ME 11, <117,889 A.2d 1014,10'17 (section 1'146 notice given for one IOelll does not provide <ldequate statutory notice for other [O<ln <lgreements between the same parties).
l3cc<luse the defendants' pletlding shows that they might be <lble to recover fOI" bree1ch of contract under some legtll theory, Count r of their countercltlim survIves. 2. Breach of the veC's Duty of Good Faith and Fair Dealing While a creditor-debtor rel<ltionship does not itself impose e1 fiduci<lry duty on either p<lrty, the Uniform Commercial Code docs impose <l duty of good bith <llld fc1ir dealing on lending b<lnks. Firsl NH BOllks Gmllile 51011' v. ScnrlJorDllgll, 615 A.2d 248,250 (Me. ]992) (citing 11 M.R.s.A. § 1-203 (1964)). "Good faith" reCJuires "honesty in f<lct in the conduct or transaction concerned." 11 M.R.S.A. § 1-201 (19) (2009).
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Accepting thClt the dcfendClnts l1lCly be Clble to prove the BClnk breClched the pCldies' contrClct, the defendClnts Cll1ege thClt this breClch WClS intentiontll C1nd mtllicious. The dcfendClnts claim thClt between 2008 and 2009 the Bank knew it could no longer extend credit or reimburse the defendants' construction expenses, but fCilsely assured the defendClnts thC1t it would continue to do both. These false assurClnces induced the defendClnts to make Cldditional expenditures improving the valuc of the property shortly before foreclosure. This, if true, could constitute Cl breach of the implied duty of good fClith ClS well ClS Cl breClch of the tllleged contrClct.
However, the lClW docs not creClte Cl sepClrClte CCluse of action for breach of the UCC's implied duties. U.C.C; § 1-304 clllt.l (2004) (enClcted as 1'1 M.R.s.A. § 1-203 (2009)). 'TJ'lhe doctrine of good fClith merely directs , 1 court tovvards interpreting contrClcts within the colllmerciCl] context in which they Me cre'1ted, performed, ,1nd enforced, Clnd docs not create a sepClr,1te duty of fairness 'lIld reClsonClbleness which can be independently brcClched." Id. While till' UCC's implied duties IllCly guide the court's interpretCltion of the contrClcts Clnd Clffect the remedies ClvClilable to a pClrty in the event of breClch, it docs not SUPPOI't Cl SCpClr<1.te c]Clim independent of that for breach. Id. The defendClnts' Count r[ is dismissed Clccordingly. 3. Breach of Fiduciary Duty The creditor-debtor relCltionship generCllly does not impose fiduciClry duties on either pClrty. First NH Bnl/ks Gml/ite Stnte, 615 A.2d Clt 250; 5('(' Cnllldell Nnt'l Bnllk v. Crest COllstr., [11C., 2008 ME 113, cIT 11, 952 A.2d 213, 216 (sClme for 11l0rtgClgee-nlOrtgClgor reICltionship). Absent Cl stCitus or agreement thtlt imposes Cl fiduciary relationship, such duties may still exist where one party actually places
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trust Clnd confidence in the other and "a great disparity of position Clnd influence" exists between the parties. Cn/llriCll Nflt'! Bflllk, 200R rvrE 113, (lI 13, 952 A.2d CIt 217 (quoting RIIe!JSfllllCll v. Mflrirfocks, 340 A.2d 31, 35 (Me. 1975)) (internCll quotCltions omitted); sec Morris v. Rcsollltioll Tntst Corp., 622 A.2d 70R, 712 (Me. 1(93).
While the pClrties in this case trusted each other to bithfully perform their contractual duties, the defendClnts have not alleged facts thClt, if proven, could creClte CI fiduciClry relationship. First, the defendants have not shown Clny "greClt dispClfity of position Jnd influence" between themselves Clnd the BClnk. All porties were sophisticJted business entities. While the defendants' COITectly point out thClt the 13C1llk WclS in CI better position to know whether it could mClke good on its promises, this Jdvantage is common to most pJrties in most contrClcts. Similclrly, the only trust the dcfendJnts J1lege to hClve placed in the BClnk WClS the trust thClt it would honor the contr<lcts. Finding fiduciClry duties under these circumstJnces would essenti<llly impose fiduciary duties between all contrJctuJlly bound creditors and debtors. The court will not do this. Count III of the defend,lIlts' counterclJim is dismissed. 4. Negligent Misrepresentation & Promissory Estoppel The dcfendClnts claim thJt the BJnk neglip;ently misrepl'esented its Jbility cl1ld vvillingness to continue financing the project, Clnd thClt they reclson<lbly relied on these misrepresentations to their detriment. Alternatively, the defendClnts argue that their reasonable reliance on the B,mk's statements was foreseeable and they should thus be allowed to recover under the theory of promissory estoppel.
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Maine has adopted the Restatement (Second) of Torts' standard for negligent misrepresentation. Rnllrl v. BntlJ [roll '!\forks Corp., 20m ME 122, (l[ 13, 832 A.2d 771, 774. Section 552(a)(1) of the Restatement states:
One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reaso!lC1ble care or competence in obtaining or communicating the information.
[ri. (C]uoting Restaternent (Second) of Torts § 552(a)(1) (1977)) (el1lphasis removed). Maine has also C1dopted the Restatement (Second) of Contracts' definition of promissory estoppel C1S:
A promise which the promisor should reasonably expect to induce action or forbeclfance on the part of the promisee or C1 third person ,md which docs induce such C1ction or forbearC1nce is binding if injustice can be C1voided only by enforcement of the promise. The remedy grclnted for breC1ch may be Ii mited as justice reC] Ut res.
J-[nrvl'.'! V. Dow, 2008 ME '192, (II l'l, 962 A2d 322, 325 (quoting Restatement (Second) of Contracts § 90(1) (1981)).
The defend,lnts argue thC1t the Bank expressly told them that it would continue to finance the project so long as completed properties continued to sell, even though the !3,mk should have known that this WC1S not troue. The BC1nk's statement allegedly induced the defendants to enter the now-disputed contrC1cts, by which the defendants hC1ve been harmed. The only hC1rm alleged under Counts TV ,md VI is thC1t the contracts entitle the Bank to take 100% of the net sales proceeds from the project and C1pply those funds to the defendants' loans. The defendC1nts clClim thC1t they would not have agreed to this term if they had known that the BC1nk would not be C1ble to finance the project through its completion.
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The defendants' negligent misrepresentation claim must fail for the sirnplc reason that the Bi1nk's alleged statenlent was not a representation of fact. It was, instead, an expression of the Bank's intended future action, or a promise to tClke certClin Clctions in the future. On the surface this mi1Y appear to support the defendants' claim of promissory estoppel, but that too must fail. The defendClnts claim that they were harmed by unfClvorablc contract terms they agreed to in reliClnce upon the Bank's promise of future financing. Stated a different way, the defendants Clrgue that they understood the Bank's promise to be Cl part of the parties' bargain despite the fact that it was not included in the written agreement. This is the issue of contri1ct interpretation raised in the defendants' Count I. The defendants have failed to plead independent prima facie c1<1ims for negligent misrepresentation and promissory estoppel, and both Counts IV and
vr i1re dismissed. 5. Negligence
The defendi1nts' COLlnt V asserts negligence on the s<lme i1llegcd fi1cts underlying their claim lor negligent misrepresentation. They claim th<lt the p<lrties' business relationship oblig<lted the B<lnk to exercise re<lsonablc care to prevent pecuniary loss to the defendants. Neither a creditor-debtor nor a mortgclgee-mortgilgor rcJ<ltionship imposes a duty of care between the parties. CnllldclI Nnt'l Bn/lk, 2008 ME 113, 9111,952 A.2d 213, 216 (citing Morris, 622 A.2d i1t 712). The defendants have not pleaded any facts that would create <In extra contractual duty between the parties and their claim for negligence is dismissed. 6. Unjust Enrichment Count vn of the defendants' counterclaim alleges that the Bank retained a benefit from the 1000n transi1ctions at the defend<lnts' expense, <lnd that this makes
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the Bank's failure to extend credit inequitable. The doctrine of "unjust enrichnient describes recovery for the value of the benefit retained when there is no contractual relationship, but when, on the grounds of fairness and justice, the lilV\! compels perfonnilnce of a legal ilnd moril] duty to PilY." Top (:l tI,C Tmck Assocs. v. Lcwistoll Rn(cwnys, 654 A.2d 1293, 1296 (Me. 1(95) (quoting AF.A.B., Tllc. v. Town ofOlri Orc!Jnrrl Bcnell, 639 A.2d 103, 105 n.3 (Me. 1(94)) (internal quotiltions omitted). Here the loan transactions were cleClrly governed by il contnict. While the contours of that contract may be in dispute, its unchallenged existence precludes the defendants from recoveri ng undel" the theory of unjust enrichment in connection with the IOZlns. The dcfendilnts' Count vir is dismissed. 7. Fraud Count vrrr alleges fraud. Frcll1d must be proven by cleZlr Zlnd convincing evidence. nf7llrl, 2003 ME '122, (If 9, H32 A.2d Zlt 773. The defencbnts must show:
('I) that the IBZlnkl made Zl fcilse representation, (2) of a mc1terial fZlct, (3) with knowledge of its falsity or in reckless disregZlrd of whether it is true or folse, (4) for the purpose of inducing the IdefendZlnts] to oct in relionce upon it, and, (5) the rdefendontsj justifiably relied upon the representation as true and acted upon it to the [defendants'] damage.
Tri.
The defendants claim that in the Autumn of 200H the Bank knew it WilS under investigation by the FDIC, WZlS in il precClrious financiClI situation, c1nd would probably not be able to continue extending credit. (Def.'s Counterc1.
9f9f 84-85.) Nonetheless, at this time Bank representative Richard Alden told the defendants that the Bank was behind the project "md would conti nue to extend
new loans as long as finished properties continued to sell. (Dei.'s Countercl. (If 87.) Furthermore, Bank loan officer Katie Vickers told the defendants that their credit limit had been increased due to the Ba.nk's recent acquisition of other
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financiC1[ institutions. (Def.'s Counterc1. 9I 25.) Tn April 2009, Bank president Arthur MC1rcos mC1de simi[C1r statements expressing his C1nd the BC1nk's C1bsolute finC1nciC1l support for the defendants' enterprise. (Def.'s Counterc1. 1r 88.)
While the BC1nk's representatives were !1IC1king these statements, the Bank hC1d stopped reirnbursing the defend C1n ts for construction costs. It hC1d been the pC1rties' practice for the Bank to disburse funds covering such costs from the SC1[es' proceeds under its control. (Def.'s CountercJ. ([r(lr 27-28.) When C1sked about the chC1nge, the Bank promised thC1t the disbursements would resume in the neilr future llnd encouraged the defendants to continue expending their own funds on developing the project. (Dct.'s Countercl. <jf(lr 27-28.) Relying on the B,lnk's expressions of fin,11lciC1] C1ssurance, the defendC1nts did expend C1n C1dditionlll $700,000 to $800,000 of their own funds on project improvements. (Def.'s Countcrcl. (II 94.) The BC1nk stopped making internC1] pC1yments to service the defendants' !o,l1lS C1nd foreclosed shortly thereC1fter. (Def.'s Countercl. (11(11 :10-:11.)
The ddend'lnts C1l1ege thC1t the BC1nk, knowing it WC1S in finllnciC11 trouble llnd intending to foreclose on the project, purposefully misrepresented its willingness llnd C1bility to PC1y the defendC1nts' expenses llnd extend new finC1ncing. (Def.'s CountercJ. 9r 93.) The BC1nk's purpose WC1S to induce the defendC1nts to invest their own money on improving the tot'll v,l]ue of the project bdore the Bclnk took it through foreclosure. (Def.'s Countercl. (Ir 93.) The misstcltements illso prevented the dcfendC1nts from finding C1Iternative sources of funding thC1t would have C1llowed them to refinance their debt C1nd ,woid foreclosure. (Def.'s Countcrcl. (j[ 95.)
The defendants have alleged a colorilble claim for frC1ud wi th reCJuisi te specificity. If the defendants are able to prove their allegations, the Bank's actions
15
could be found to constitute fraud. It misrepresented facts about its own financia.l posi tion in order to obtain an economic advantage by deceiving the dcfendclnts. The Bank's Clbility and willingness to provide future funding WClS mClterial to the defendants' conduct of their own business, and the defendants' reliance on the BClnk's rcpresentCltions Clbout its own economic position could hClve been n.'Clsonable. At this emly stage of the litigation, the court cannot say the clClim is barred ClS a matter of lClw and the defendants' Count VITI survives. The entry is:
The BClnk's motion to terminate receivership is granted, as is the defendClnts' motion to amend their answer. The Bank's motion to dismiss the defendClnts' counterc1Clims is grClnted on Counts II through VII for breach of the UCC's duty of good fClith Clnd fair deClling, breClch of fiduciClry duty, negligent misrepresentCltion, negligence, promissory estoppel, cllld motion to dismiss is denied on Counts! Clnd VlH, b Clnd fraud.
DATE: 4u~1 201 0
~w
SAVINGS BANK OF MAINE VS EDGECOMB DEVELOPMENT LLC ET ALS UTN:AOCSsr -2009-0118939 CASE #:PORSC-CV-2009-00582
01 0000007826 COLLINS, NATHAN 30 MILK STREET PO BOX 449 PORTLAND ME 04112-0449 F EDGECOMB DEVELOPMENT LLC DEF RTND 12/14/2009 -
-F BINTLIFFS RESTAURANT CORPORATION DEF RTND 12/14/2009 F ROGER BINTLIFF DEF RTND 12/14/2009
02 0000003304 MANHEIMER, JACOB ONE MONUMENT SQUARE PORTLAND ME 04101 F SAVINGS BANK OF MAINE PL RTND 10/28/2009