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Bordetsky v. JAK Realty Trust

Supreme Court of Maine

March 9, 2017

DAVID BORDETSKY
v.
JAK REALTY TRUST

          On Briefs: February 10, 2017

          Adam J. Shub, Esq., Preti Flaherty Beliveau & Pachios, LLP, Portland, for appellant David Bordetsky

          Mark A. Kearns, Esq., and Mark L. Randall, Esq., Portland, for appellee JAK Realty Trust.

          Panel: ALEXANDER, MEAD, GORMAN, HJELM, and HUMPHREY, JJ.

          GORMAN, J.

         [¶1] David Bordetsky appeals from a judgment in favor of JAK Realty Trust entered in the Superior Court (Kennebec County, Mullen, J.) after a nonjury trial on Bordetsky's foreclosure complaint. Bordetsky argues that the court erred by applying the requirements for a notice of default and right to cure contained in 14 M.R.S. § 6111 (2012)[1] to his attempt to foreclose. We agree and vacate the judgment.

         I. BACKGROUND

         [¶2] On October 3, 2013, Bordetsky filed a complaint for foreclosure against the Trust, alleging that on April 13, 2009, Gregory O'Halloran-as trustee of the Trust-executed a promissory note in the amount of $140, 000, secured by a mortgage on property located in Benton; that the Trust had defaulted on the note as of August 13, 2011; and that the total amount due on the note, including principal, interest, and late charges, was $193, 625.42.[2]

         [¶3] After a nonjury trial, the court issued a judgment dated April 15, 2016, containing the following findings of fact, which are supported by competent record evidence. O'Halloran is trustee of the JAK Realty Trust; the Trust's beneficiaries are O'Halloran's four daughters. On April 13, 2009, the Trust-through O'Halloran, as trustee-executed a document entitled "COMMERCIAL NOTE" in the amount of $140, 000 in favor of Bordetsky. The note states that it is secured by a mortgage on real estate located at 157Wyman Road in Benton, and lists the same address as the "Borrower's Address." 157 Wyman Road, Benton, is O'Halloran's address. The note also states, "This note evidences a loan for business and commercial purposes and not for personal, household, or family purposes."

         [¶4] On the same day, the Trust executed a mortgage in favor of Bordetsky on real property at 157 Wyman Road in Benton. The mortgage mentions no commercial purposes, and states only that the mortgage is to secure payment "in accordance with the terms of a certain promissory note of even date."

         [¶5] The court determined that "the language of the agreement between the parties was ambiguous" as to whether it was residential or commercial in nature, and therefore considered extrinsic evidence- O'Halloran's testimony in particular-regarding the parties' intent in executing the note and mortgage. Based on O'Halloran's testimony, the court further found that, at the time the note and mortgage were executed, Bordetsky knew that O'Halloran and his children were residing at the Wyman Road property. O'Halloran has continued to reside there. Of the $140, 000 loaned to the Trust, $67, 421.68 was used to purchase the "Beckris, LLC loan, " a "business involvement" in which the Trust was purchasing a different note and mortgage from Bordetsky. Most of the remaining loan proceeds- $61, 491.89-were used to pay O'Halloran as trustee; of that amount, O'Halloran used roughly $30, 000 to $40, 000 to fix up the Wyman Road property, and the remainder was used for O'Halloran's living expenses, including food, utilities, and clothing. Bordetsky was aware when the note and mortgage were executed that O'Halloran intended to use the loan proceeds for both commercial and household purposes. On these facts, the court concluded that Bordetsky was required to-but did not- comply with the requirements for a notice of default and right to cure contained in 14 M.R.S. §6111, and issued a judgment in favor of the Trust. Bordetsky timely appeals.

         II. DISCUSSION

         [¶6] A party seeking to foreclose a mortgage on a residential property pursuant to 14 M.R.S. § 6111 must first comply with certain notice requirements.[3] More particularly, "[a] mortgagee may not accelerate maturity of the unpaid balance of [an] obligation or otherwise enforce [a] mortgage because of a default" unless and until a notice of default and right to cure has been provided to the mortgagor. 14 M.R.S. § 6111(1); see Bank of Am., N.A. v. Greenleaf, 2014 ME 89, ¶¶ 18, 29, 96 A.3d 700 (requiring, as an element of a foreclosure, "evidence of [a] properly served notice of default and mortgagor's right to cure" in compliance with 14 M.R.S. § 6111 (quotation marks omitted)); Chase Home Fin. LLC v. Higgins, 2009 ME 136, ¶ 11, 985 A.2d 508 (same).

         [¶7] Not all attempts to foreclose are subject to section 6111, however; pursuant to 14 M.R.S. § 6111(1), only "[w]ith respect to mortgages upon residential property located in this State when the mortgagor is occupying all or a portion of the property as the mortgagor's primary residence and the mortgage secures a loan for personal, family or household use" must a mortgagee satisfy the requirements for a notice of default and right to cure contained in 14 M.R.S. § 6111. In short, section 6111(1) applies when three discrete facts are true: (1) the mortgage is on residential property in Maine; (2) the mortgagor occupies the property as his primary residence; and (3) the mortgage secures a loan for personal, family, or household ...


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