STATE OF MAINE SUPERIOR COURT CIVIL ACTION YORK, ss. DOCKET NO. RE-06-014 , _. I
- '\y3p - ,- L c. * 4 q 7
COLIN D. WOODFALL,
Plaintiff
SEACOAST ASSOCIATES, ORDER
Defendant
and
CANDACE B. CRAGIN, Trustee of THE CANDACE B. CRAGIN REVOCABLE TRUST,
T h s matter comes before the Court on Plaintiff's motion for summary judgment
pursuant to M.R. Civ. P. 56(c). Following hearing, the Motion is Denied.
BACKGROUND
Plaintiff Colin D. Woodfall ("Woodfall") is a resident of Salem, New Hampshire.
Defendant Seacoast Associates ("Seacoast") is a limited partnershp in Sanford, Maine.
The named party-in-interest is Candace B. Cragin ("Cragin"), as Trustee of the Candace
B. Cragin Revocable Trust ("the Trust"), whch is located in York County, Maine.
According to Woodfall, in November 1988, Strafford Bank initiated a $650,000 loan to
Seacoast, K.B.C. Foods, Inc., Stephen Yankosky, Patrick Cragm, and Woodfall ("the borrowers"), evidenced by a promissory note. Woodfall, Yankosky, and Cragin were
all owners of K.B.C., and Woodfall and Yankosky also served as officers of the
company. K.B.C. operated a restaurant called Woodsky's in Dover, New Hampshire, and the loan was intended as start up money for Woodsky's. That same month,
Seacoast mortgaged two units in the Long Beach Tennis Club as collateral for the note,
executing a security agreement.
The note was modified by K.B.C. Foods, Strafford Bank's successor-in-interest,
Bank of New Hampshire, and Patrick Cragin, as General Partner of Seacoast, in March
1992. At that time, the outstanding balance was $590,028.21. In November 1993,
K.B.C.'s refinancing request was approved, and the new promissory note had a
maturity date of November 22, 1994. The note was further modified and/or refinanced
in January 1995, April 1997, January 1998, July 1998, and April 2001.
In January 2002, Seacoast was granted a partial release of mortgage, which
released the lender's interest in one of the units, Long Beach Tennis Club
Condominium, Building 1, Unit D. Also in January, Seacoast mortgaged and
substituted Building 2, Unit A at Long Beach as collateral for its renewal note. In July
2002, Seacoast then allegedly conveyed the mortgaged unit to Candace Cragin via
quitclaim deed as part of a divorce settlement. The parties disagree about whether this
transfer occurred with the consent of the lender. K.B.C. Foods modified the loan
agreement in November 2002 to delay payments until the loan reached maturity, and
agreed to an 18% interest rate in the event of default. Cragin then conveyed the
mortgaged unit to the Trust in May 2003, at which time the borrowers also were in
default. The accelerated interest rate increase took effect in August 2003. At that time,
Woodfall, who had been an officer and shareholder of K.B.C. Foods, paid the amount
owing under the renewal note, and the Bank, in return, assigned the note and 2002
mortgage deed for Building 2, Unit A to h m .
Woodfall brought this complaint for foreclosure in February 2006, alleging that
Seacoast is in default of its obligations under the 2002 mortgage deed and note for refusal to pay. He alleges that Seacoast defaulted under the mortgage by failing to cure
K.B.C. Foods' default w i h n 15 days and also by transferring mortgaged property to Cragin. Woodfall calculates the amount due as of January 2006 as $63,951.61, including
the unpaid principal balance, interest, late fees, and attorney's fees. Woodfall asks h s
Court to declare a breach of condition, determine the amount due, determine the order
of priority of any other liens, and issue a judgment of foreclosure. In its answer, the
Trust raises the affirmative defenses of failure to state a claim, laches, waiver, statute of
limitations, suretyshp principles, and breach of fiduciary duty, among others. The
Trust also alleges that if the property is foreclosed, it is entitled to contribution.
Woodfall now moves for summary judgment. Seacoast opposes the summary
judgment motion on the basis that Woodfall seeks unjust enrichment because he was a
co-guarantor of the loan.
DISCUSSION
1. Summarv Tudnment Standard.
Summary judgment is proper where there exist no genuine issues of material fact
such that the moving party is entitled to judgment as a matter of law. M.R. Civ. P. 56(c);
see also Levine v. R. B. K. Caly Corp., 2001 ME 77, 'J 4, 770 A.2d 653, 655. A genuine issue is
raised "when sufficient evidence requires a fact-finder to choose between competing
versions of the truth at trial." Parrish v. Wright, 2003 ME 90, 'J 8, 828 A.2d 778, 781. A
material fact is a fact that has "the potential to affect the outcome of the suit." Burdzel v.
Sobus, 2000 ME 84, 'J 6, 750 A.2d 573, 575. At this stage, the facts are reviewed "in the
light most favorable to the nonmoving party." Lightfoot v. Sch. Admin. Dist. No. 35,2003
ME 24, q[ 6,816 A.2d 63/65. 2. Is Summarv Tudgment Warranted on the Complaint for Foreclosure?
When a mortgage of first priority has been breached, "the mortgagee or any
person claiming under h m may proceed for the purpose of foreclosure by a civil
action." 14 M.R.S.A. 5 6321 (2003). When contract language is ambiguous,
interpretation of the language is not for t h s Court to undertake at the summary
judgment stage. See Kandlis v. Huotari, 678 A.2d 41/43 (Me. 1996).
Here, Woodfall points to two respects in which Seacoast breached conditions -
failure to cure the default of K.B.C. Foods because Seacoast was the guarantor of the
loan, and improper transfer of the mortgaged premises to Candace Cragin. He argues
there is no genuine issue of material fact as to the breach of conditions and, therefore, he
is entitled to judgment. Seacoast, however, argues that the note for whch it was a
guarantor is already paid in full, so it has no further obligation with respect to that
particular debt.
A threshhold issue is whether Woodfall may recover from Seacoast, which
argues that because he was an obligor on the note as well, he is not entitled to relief.
Seacoast claims that, if any amount is owed, the most Woodfall could recover is a pro-
rated share on a theory of contribution. Woodfall cites Poulos v. Mendelson for the
proposition that he can sue Seacoast to enforce the guaranty despite formerly being an
obligor. 491 A.2d 1172, 1175 (Me. 1985). There, the Law Court held that the plaintiff
could sue the defendants by virtue of their "unconditional guaranty contracts." Id. As
bankruptcy trustee, the assignment of creditors' rights of action had made him the "real
party in interest" regardless of whether a note was actually assigned to h m . Id.
Poulos, however, was an ancillary proceeding that was part of a Chapter XI
bankruptcy in federal court. Id. at 1173. The procedural posture of that case, involving
a bankruptcy trustee, differs markedly from the instant case, where problems arose between former business partners over time. Genuine issues of fact remain at h s stage
regarding the understanding between the parties as to what share of debt each would
bare in the event of default on the principal obligation. It is therefore premature for
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STATE OF MAINE SUPERIOR COURT CIVIL ACTION YORK, ss. DOCKET NO. RE-06-014 , _. I
- '\y3p - ,- L c. * 4 q 7
COLIN D. WOODFALL,
Plaintiff
SEACOAST ASSOCIATES, ORDER
Defendant
and
CANDACE B. CRAGIN, Trustee of THE CANDACE B. CRAGIN REVOCABLE TRUST,
T h s matter comes before the Court on Plaintiff's motion for summary judgment
pursuant to M.R. Civ. P. 56(c). Following hearing, the Motion is Denied.
BACKGROUND
Plaintiff Colin D. Woodfall ("Woodfall") is a resident of Salem, New Hampshire.
Defendant Seacoast Associates ("Seacoast") is a limited partnershp in Sanford, Maine.
The named party-in-interest is Candace B. Cragin ("Cragin"), as Trustee of the Candace
B. Cragin Revocable Trust ("the Trust"), whch is located in York County, Maine.
According to Woodfall, in November 1988, Strafford Bank initiated a $650,000 loan to
Seacoast, K.B.C. Foods, Inc., Stephen Yankosky, Patrick Cragm, and Woodfall ("the borrowers"), evidenced by a promissory note. Woodfall, Yankosky, and Cragin were
all owners of K.B.C., and Woodfall and Yankosky also served as officers of the
company. K.B.C. operated a restaurant called Woodsky's in Dover, New Hampshire, and the loan was intended as start up money for Woodsky's. That same month,
Seacoast mortgaged two units in the Long Beach Tennis Club as collateral for the note,
executing a security agreement.
The note was modified by K.B.C. Foods, Strafford Bank's successor-in-interest,
Bank of New Hampshire, and Patrick Cragin, as General Partner of Seacoast, in March
1992. At that time, the outstanding balance was $590,028.21. In November 1993,
K.B.C.'s refinancing request was approved, and the new promissory note had a
maturity date of November 22, 1994. The note was further modified and/or refinanced
in January 1995, April 1997, January 1998, July 1998, and April 2001.
In January 2002, Seacoast was granted a partial release of mortgage, which
released the lender's interest in one of the units, Long Beach Tennis Club
Condominium, Building 1, Unit D. Also in January, Seacoast mortgaged and
substituted Building 2, Unit A at Long Beach as collateral for its renewal note. In July
2002, Seacoast then allegedly conveyed the mortgaged unit to Candace Cragin via
quitclaim deed as part of a divorce settlement. The parties disagree about whether this
transfer occurred with the consent of the lender. K.B.C. Foods modified the loan
agreement in November 2002 to delay payments until the loan reached maturity, and
agreed to an 18% interest rate in the event of default. Cragin then conveyed the
mortgaged unit to the Trust in May 2003, at which time the borrowers also were in
default. The accelerated interest rate increase took effect in August 2003. At that time,
Woodfall, who had been an officer and shareholder of K.B.C. Foods, paid the amount
owing under the renewal note, and the Bank, in return, assigned the note and 2002
mortgage deed for Building 2, Unit A to h m .
Woodfall brought this complaint for foreclosure in February 2006, alleging that
Seacoast is in default of its obligations under the 2002 mortgage deed and note for refusal to pay. He alleges that Seacoast defaulted under the mortgage by failing to cure
K.B.C. Foods' default w i h n 15 days and also by transferring mortgaged property to Cragin. Woodfall calculates the amount due as of January 2006 as $63,951.61, including
the unpaid principal balance, interest, late fees, and attorney's fees. Woodfall asks h s
Court to declare a breach of condition, determine the amount due, determine the order
of priority of any other liens, and issue a judgment of foreclosure. In its answer, the
Trust raises the affirmative defenses of failure to state a claim, laches, waiver, statute of
limitations, suretyshp principles, and breach of fiduciary duty, among others. The
Trust also alleges that if the property is foreclosed, it is entitled to contribution.
Woodfall now moves for summary judgment. Seacoast opposes the summary
judgment motion on the basis that Woodfall seeks unjust enrichment because he was a
co-guarantor of the loan.
DISCUSSION
1. Summarv Tudnment Standard.
Summary judgment is proper where there exist no genuine issues of material fact
such that the moving party is entitled to judgment as a matter of law. M.R. Civ. P. 56(c);
see also Levine v. R. B. K. Caly Corp., 2001 ME 77, 'J 4, 770 A.2d 653, 655. A genuine issue is
raised "when sufficient evidence requires a fact-finder to choose between competing
versions of the truth at trial." Parrish v. Wright, 2003 ME 90, 'J 8, 828 A.2d 778, 781. A
material fact is a fact that has "the potential to affect the outcome of the suit." Burdzel v.
Sobus, 2000 ME 84, 'J 6, 750 A.2d 573, 575. At this stage, the facts are reviewed "in the
light most favorable to the nonmoving party." Lightfoot v. Sch. Admin. Dist. No. 35,2003
ME 24, q[ 6,816 A.2d 63/65. 2. Is Summarv Tudgment Warranted on the Complaint for Foreclosure?
When a mortgage of first priority has been breached, "the mortgagee or any
person claiming under h m may proceed for the purpose of foreclosure by a civil
action." 14 M.R.S.A. 5 6321 (2003). When contract language is ambiguous,
interpretation of the language is not for t h s Court to undertake at the summary
judgment stage. See Kandlis v. Huotari, 678 A.2d 41/43 (Me. 1996).
Here, Woodfall points to two respects in which Seacoast breached conditions -
failure to cure the default of K.B.C. Foods because Seacoast was the guarantor of the
loan, and improper transfer of the mortgaged premises to Candace Cragin. He argues
there is no genuine issue of material fact as to the breach of conditions and, therefore, he
is entitled to judgment. Seacoast, however, argues that the note for whch it was a
guarantor is already paid in full, so it has no further obligation with respect to that
particular debt.
A threshhold issue is whether Woodfall may recover from Seacoast, which
argues that because he was an obligor on the note as well, he is not entitled to relief.
Seacoast claims that, if any amount is owed, the most Woodfall could recover is a pro-
rated share on a theory of contribution. Woodfall cites Poulos v. Mendelson for the
proposition that he can sue Seacoast to enforce the guaranty despite formerly being an
obligor. 491 A.2d 1172, 1175 (Me. 1985). There, the Law Court held that the plaintiff
could sue the defendants by virtue of their "unconditional guaranty contracts." Id. As
bankruptcy trustee, the assignment of creditors' rights of action had made him the "real
party in interest" regardless of whether a note was actually assigned to h m . Id.
Poulos, however, was an ancillary proceeding that was part of a Chapter XI
bankruptcy in federal court. Id. at 1173. The procedural posture of that case, involving
a bankruptcy trustee, differs markedly from the instant case, where problems arose between former business partners over time. Genuine issues of fact remain at h s stage
regarding the understanding between the parties as to what share of debt each would
bare in the event of default on the principal obligation. It is therefore premature for
this Court to determine what effect Woodfall's status as a guarantor may have.
Breach of Conditions
Woodfall argues that Seacoast breached the conditions of the 2002 note and
mortgage. He voluntarily stepped in to pay off the debt, which was then assigned to
him, but Seacoast has pointed to genuine issues of material fact regarding the
circumstances following the payoff. For instance, the parties dispute how payments
that K.B.C. made after that were allocated against the balance owed. Although Woodfall claims that the payments were applied to late charges, there is no
documentation to support this, which bears on the amount, if any, that Seacoast would
owe to Woodfall. The record merely contains a ledger listing transactions, dates,
amounts, and subsequent balances, but it does not include information about who
made the payment or whether it was applied to principal, interest, or both.
The entry will be as follows:
Plaintiff's Motion for Summary Judgment is Denied.
Dated: March,@,2007
James J. Shirley, Esq. - PL Kenneth D. Keating, Esq. - PL Sean O'Connell, Esq. - DEF ( Justice, Superior Court Durward Parkinson, Esq. - PI1 Danielle West-Chuhta, Esq. - PI1