Town of Edgecomb Petitioners / Plaintiffs Counsel: Erik Stumpfel, Esq.
Edgecomb Development, LLC, Roger Bintliff, Respondents / Defendants Counsel: John d. Clifford, Esq. Joshua Klein-Golden, Esq.
The Bank of Maine, and SBM Property A. Inc. Respondents / Defendants Counsel: Mark A. Porada, Esq. Merrils Warf
ORDER AND JUDGMENT
A. M. Horton Justice
The core issue in this case is, which party is entitled to receive payments pursuant to a Credit Enhancement Agreement (CEA) that Plaintiff Town of Edgecomb entered into with Defendant Edgecomb Development, LLC. The issue is presented by virtue of the Motion for Summary Judgment filed by Defendant The Bank of Maine. Defendant SBM Property A, Inc. has adopted the Bank's motion and also seeks judgment in its favor. Edgecomb Development opposes the motion.
The Bank asserts that Edgecomb Development's rights under the CEA were sold at a public sale after Edgecomb Development defaulted on its obligations to the Bank, and were thereafter transferred by the Bank to SBM Property A, Inc. The Bank also asserts that Edgecomb Development's arguments are barred by the doctrines of release and res judicata. In support of its claim that it remains entitled to receive payments due under the CEA, Edgecomb Development asserts that the CEA was never transferred to any other party, and that the doctrines of release and res judicata in fact run against the Bank's claim.
Although the Bank and Edgecomb Development disagree on which of them should prevail on the Bank's motion, they do agree that summary judgment for one or the other is appropriate. See M.R. Civ. P. 56.
The facts in this case are largely undisputed.
The relevant agreements. In November of 2004, the Town established a tax increment financing (TIF) district applicable to the Sheepscot River Inn properties located on Davis Island. (S.S.M.F. ¶ 1; O.S.M.F. ¶ 1.) In accord with the TIF district, Town and Edgecomb Development entered into the CEA on July 18, 2005. (S.S.M.F. ¶ 2; O.S.M.F. ¶ 2.) Edgecomb Development was designated the "Developer" in the CEA. (S.S.M.F. ¶ 3; O.S.M.F. ¶ 3.) The purpose of the CEA was to facilitate the construction of certain infrastructure improvements by Edgecomb Development at the Davis Island Project, primarily the construction of sewer and water mains and related improvements. (S.S.M.F. ¶ 4; O.S.M.F. ¶ 4.) In exchange for Edgecomb Development completing those improvements, the CEA provided that the Town would pay Edgecomb Development a percentage of tax receipts by the Town on the increased assessed value of the Davis Island project above the assessed value of the property at the outset of the agreement, prior to any infrastructure improvements. (S.S.M.F. ¶ 5; O.S.M.F. ¶ 5.) The payments were intended to help defray project development costs and payments that would be owed by Edgecomb Development on project financing. (S.S.M.F. ¶ 5; O.S.M.F. ¶ 5.)
Between August 2005 and September 2008, Edgecomb Development and the Bank entered into a series of loans, collectively totaling $14, 649, 785 in original principal amounts, the proceeds of which were applied by Edgecomb Development toward the development of the Davis Island Project (the "Loans"). (S.S.M.F. ¶ 7; O.S.M.F. ¶ 7.) In connection with each of the Loans, Edgecomb Development executed a Security Agreement and Chattel Mortgage. (S.S.M.F. ¶ 8; O.S.M.F. ¶ 8.) The Security Agreements provided in part that Edgecomb Development granted the Bank a security interest in
any and all accounts and accounts receivable and general intangibles of Edgecomb Development, LLC, including but not limited to trade names, trade marks, service marks, patents, copyrights, now owned or hereafter acquired and wherever located. Also a security interest in any and all tangible property and intangible property of Edgecomb Development, LLC, including but not limited to consumer goods, inventory, machinery and equipment, instruments, documents, chattel paper, and general intangible now owned or hereafter acquired and wherever located and the proceeds thereof and fixtures and accession thereto; whether any of the foregoing is owned now or acquired later; all accession, additions, replacements, and substitutions relating to any of the foregoing; all records of any kind relating to any of the foregoing; all proceeds relating to any of the foregoing (including insurance, general intangibles and accounts proceeds).
(S.S.M.F. ¶ 9; O.S.M.F. ¶ 9.) The Security Agreements further state that the Bank was given a security interest in
all monies due or to become due to the Debtor under all contracts for the sale, lease or rental of goods and/or the performance of services in connection with the operation of the Edgecomb Development, LLC (whether or not yet earned by performance on the part of the Debtor), now in existence or hereafter arising, including, without limitation, the right to receive the Proceeds of such purchase orders and contracts and all collateral security and guarantees of any kind given by any Person with respect to any of the foregoing;
All contracts, instruments, undertakings, documents or other agreements in or under which the Debtor may now or hereafter have any right, title or interest in connection with the Premises and operation by the Debtor of the Edgecomb Development, LLC.
(S.S.M.F. ¶ 10; O.S.M.F. ¶ 10.) .
On April 20, 2009, Edgecomb Development and the Bank executed a Collateral Assignment of the CEA, in which assignment Edgecomb Development "assigns, transfers and sets over to the [Bank] all of the right, title and interest of Edgecomb Development] in to and under" the CEA. (S.S.M.F. ¶ ¶ 11-12; O.S.M.F. ¶ ¶ 11-12; A.S.M.F. ¶ 1; R.S.M.F. ¶ 1.) Under the terms of the collateral assignment, Edgecomb Development could collect payments pursuant to the CEA from the Town when due as long as there was no default of any of the Loans. (S.S.M.F. ¶ 13; O.S.M.F. ¶ 13.) Upon default by Edgecomb Development of any of the Loans, the Bank could then without notice or demand collect and receive the payments from the Town under the CEA. (S.S.M.F. ¶ 13; O.S.M.F. ¶ 13; A.S.M.F. ¶ 2; R.S.M.F. ¶ 2.) The Town consented to the collateral assignment. (S.S.M.F. ¶ 14; O.S.M.F. ¶ 14.) On May 1, 2009, the Bank issued a notice of default under the Loans to Edgecomb Development. (S.S.M.F. ¶ 15; O.S.M.F. ¶ 15; A.S.M.F. ¶ 3; R.S.M.F. ¶ 3.)
The public auctions. On December 11, 2009, the Bank published notice in the Kennebec Journal of its intent to sell the personal property and the real property of Edgecomb Development as an entirety. (A.S.M.F. ¶ ¶ 5-6; R.S.M.F. ¶¶ 5-6.) On December 28, 2009, the Bank held a public sale of all personal property of Edgecomb Development pursuant to the UCC, and a public sale of the real property of Edgecomb Development pursuant to the power of sale foreclosure statutes. (S.S.M.F. ¶ 17; O.S.M.F. ¶ 17.) The Bank was the highest bidder at the December auction in the amount of $7, 500, 000. (S.S.M.F. ¶ 18; O.S.M.F. ¶ 18; A.S.M.F. ¶ 9; R.S.M.F. ¶ 9.) The parties dispute the import and consequences of the December auction, but do not dispute the fact of the notice, sale, and highest bid.
Because the affidavit and notice of sale from the December 2009 auction were not recorded in the registry of deeds within the time period specified by 14 M.R.S. § 6203-B (2013), the Bank noticed and conducted a second auction of the real estate in January 2010. (A.S.M.F. ¶¶ 7-8; R.S.M.F. ¶¶ 7-8.) The Bank again had the highest bid of $7, 500, 000 at the second auction for the real estate. (A.S.M.F. ¶ 10; R.S.M.F. ¶ 10.) Again, although the parties dispute the import and consequence of the January auction, the parties do not dispute the fact of the notice, sale, and highest bid. The parties also agree that no interest in the CEA was sold at the January auction. (A.S.M.F. ¶ 12; ...