Keybank National Assoc. v. Watson

STATE OF MAINE SUPERIOR COURT
CUMBERLAND, ss. CIVIL ACTION
DOCKET NO. RE-2018-119

KEYBANK NATIONAL )
ASSOCIATION, )
)
Plaintiff, )
)
v. )
)
CYNTHIA ANN WATSON AS )
PERSONAL REPRESENTATIVE )
OF THE ESTATE OF JOHN C. )
WATSON JR. A/K/A JOHN C. )
WATSON, )
) ORDER ON PLAINTIFF'S MOTION FOR
Defendant, ) SUMMARY JUDGMENT
)
and )
)
U.S. BANK NATIONAL )
ASSOCIATION, AS TRUSTEE )
FOR TBW MORTGAGE­ )
BACKED TRUST SERIES 2007-2, )
AND TBW MORTGAGE PASS­ )
THROUGH CERTIFICATES )
SERIES 2007-2, and STATE OF )
MAINE, MAINE REVENUE )
SERVICES, )
)
Parties in Interest. )

Before the Court is Plaintiff KeyBank National Association's ("KeyBank") Motion

for Summary Judgment on its Complaint for Foreclosure. Party in Interest U.S. Bank

National Association, as Trustee for TBW Mortgage-Backed Trust Series 2007-2 and TBW

Mortgage Pass-Through Certificates Series 2007-2 ("U.S. Bank") opposes KeyBank's
CUMB CLERKS
Motion. For the following reasons, KeyBank's Motion is granted. ~?i 1;;,,.fff:?7

I. Background

Page 1 of 8
The following facts arc undisputed, unless otherwise noted. On November 14,

2000, John C. Watson, Jr. a/k/a John C. Watson ("Borrower") executed and delivered to

KeyBank a Key Equity Options Agreement with a credit limit of $80,000 ("the KeyBank

Note"). (Pl.'s S.M.F. 'j[ 1.) The KeyBank Note provided for a fifteen-year draw period

within which advances might be made against the Key Bank Note. (Pl.'s S.M.F. 'j[ 1.)

On November 14, 2000, Borrower also executed and delivered to Key Bank a Home

Equity Line of Credit Mortgage ("the KeyBank Mortgage"), granting KeyBank a

mortgage interest in real property located at 110 Mayberry Road, Gray, Maine ("the

Property") to secure the obligations under the KcyBank Note. (Pl.'s S.M.F. 9[ 3.) The

Mortgage was recorded in the Cumberland County Registry of Deeds in Book 15879,

Page 204 on November 28, 2000. (Pl.'s S.M.F. 'l[ 4; Pl.'s Ex. B.) On December 9, 2004, the

credit limit under the KeyBank Note was increased to $140,000. (Pl.'s S.M.F. 'l[ 5.)

Key Bank is the current holder of the Key Bank Note and owner of the Key Bank Mortgage.

(Pl.'s S.M.F. '[f'l[ 2, 6.)

On March 16, 2007, Borrower executed and delivered to Taylor, Bean & Whitaker

Mortgage Corporation ("TBW") a promissory note for the amount of $174,000 ("the TBW

Note") and a mortgage granting to TBW a mortgage interest in the Property ("the TBW

Mortgage"). (U.S. Bank's S.M.F. 'ff'l[ 1, 2.) TBW disbursed $141,965.65, which was used

by Borrower to pay down to zero the sums then drawn under the KeyBank Note on or

about March 22, 2007. (U.S. Bank's S.M.F. 'l['j[ 5, 6; Pl.'s S.M.F. 'I[ 8.) Neither U.S. Bank nor

Key Bank has produced evidence of a request from Borrower or any other person to close

the line of credit and discharge the KeyBank Mortgage, and Key Bank asserts that they

never received such a request. (Pl.'s S.M. P. 'j[ 10.) On December 30, 2008, and periodically

thereafter, KeyBank again extended credit and advanced funds to Borrower under the

terms of the KeyBank Note. (Pl.'s S.M.F. 'j[ 11.)
Page 2 of 8
Borrower died testate on December 14, 2015. 1 (Pl.'s S.M.F. '[ 12.) Borrower

defaulted on the KeyBank Note when he failed to make the payment due on January 18,

2016, and all subsequent payments. (Pl.'s S.M.F. '[ 14.) On February 20, 2018, counsel for

Key Bank sent written notice to the Estate of Borrower at the Estate's last known address,

advising of the payment default and the opportunity to cure the default. (Pl.'s S.M.F '[

16; Pl.'s Ex. C.) The outstanding balance on the KeyBank Note as of May 12, 2020 was

$182,309.36, inclusive of the principal balance on the KeyBank Note, interest, late charges,

legal fees, appraisal fees, property preservation fees, and discharge/ reconvey fees. (Pl.'s

S.M.F. '[ 17.)

On April 14, 2016, Mortgage Electronic Registration Systems, Inc. ("MERS"), as

nominee for TBW, assigned its interest in the TBW Mortgage to U.S. Bank. (U.S. Bank's

S.M.F. '[ 7; U.S. Bank's Ex. L.) TBW assigned its interest in the TBW Mortgage to U.S.

Bank on July 29, 2016. (U.S. Bank's S.M.F. '[ 8; U.S Bank's Ex. M.) U.S. Bank is the current

owner of the TBW Mortgage. (U.S. Bank's S.M.F. '[ 9.)

KeyBank claims that it is entitled to judgment as a matter of law pursuant to 14

M.R.S. § 6322 (2021) because the record establishes Borrower's breach of a condition of

the KeyBank Mortgage and the amount due thereon. KeyBank asserts that its interest in

the Property has priority over the interests of all parties in interest.' Party in Interest U.S.

Bank opposes KeyBank's Motion on the basis that KeyBank's interest in the Property

should be equitably subrogated to U.S. Bank's interest because Borrower used funds

advanced by TBW to pay off the KeyBank Note.

1 Defendant Cynthia Ann Watson was appointed Personal Representative of the Estate of Borrower May
31, 2016. (Pl.'s S.M.F. 'l[ 13.)
2 Keyl3ank states that Party in Interest State of Maine, Maine Revenue Services may have an interest in the

Property by virtue of a silent lien claim against the Estate ofM. Priscilla Watson, but asserts that
Key Bank's interest is superior to any interest of Maine Revenue Services. (Pl.'s S.M.F. 'l[ 20.)

Page 3 of 8
II. Legal Standard

A party is entitled to summary judgment when review of the parties' statements

of material facts and the record to which the statements refer demonstrates that there is

no genuine issue as to any material fact in dispute, and that the moving party is entitled

to judgment as a matter of law. M.R. Civ. P. 56(c); Dyer v. Dep't of Transp., 2008 ME 106,

'[ 14, 951 A.2d 821. A contested fact is material if it could potentially affect the outcome

of the case. Dyer, 2008 ME 106, '[ 14,951 A.2d 821. A genuine issue of material fact exists

if the claimed fact would require a factfinder to "choose between competing versions of

the truth." Id. (quoting Farrington 's Owners' Ass'n v. Conway Lake Resorts, Inc., 2005 ME

93, '[ 9, 878 A.2d 504).

When deciding a motion for summary judgment, the court reviews the evidence

in the light most favorable to the non-moving party. Id. The evidence offered in support

of a genuine issue of material fact "need not be persuasive at that stage, but the evidence

must be sufficient to allow a fact-finder to make a factual determination without

speculating." 3 Est. of Smith v. Cumberland County, 2013 ME 13, '[ 19, 60 A.3d 759.

III. Discussion

A. Foreclosure

To be entitled to summary judgment on a foreclosure claim, a mortgagee must

establish each of eight elements, supported by evidence of a quality that could be

admissible at trial. Chase Home Fin. LLC v. Higgins, 2009 ME 136, '['[ 9-10, 985 A.2d 508.

There must be no dispute of material fact as to any element. Id. The eight elements are:

3 Each party's statements n1ust include a reference to the record where "facts as would be admissible in
evidence" may be found. M.R. Civ. P. 56(c). A party's opposing statement of material facts "must explicitly
admit, deny or qualify facts by reference to each numbered paragraph, and a denial or qualification must
be supported by a record citation." Stanley v. Hancock Cnty. Comm'r, 2004 ME 157, 'l[ 13, 864 A.2d 169.

Page 4 of 8
1. The existence of the mortgage, including the book and page number of
the mortgage, and an adequate description of the mortgaged premises,
including the street address, if any;

2. Properly presented proof of ownership of the mortgage note and the
mortgage, including all assignments and endorsements of the note and the
mortgage;

3. A breach of condition in the mortgage;

4. The amount due on the mortgage note, including any reasonable attorney
fees and court costs;

5. The order of priority and any amounts that may be due to other parties
in interest, including any public utility easements;

6. Evidence of properly served notice of default and mortgagor's right to
cure in compliance with statutory requirements;

7. After January 1, 2010, proof of completed mediation (or waiver or default
of mediation), when required, pursuant to the statewide foreclosure
mediation program rules;

8. If the homeowner has not appeared in the proceeding, a statement, with
a supporting affidavit, of whether or not the defendant is in military service
in accordance with the Servicemembers Civil Relief Act.

Id. 'l[ 10 (citations omitted); Bank of Am., N.A. v. Greenleaf, 2014 ME 89, 'l[ 18, 96 A.3d 700.

The fifth element is the only element in dispute. KeyBank has satisfied the

remaining elements. Thus, KeyBank will be entitled to summary judgment if there is no

dispute of material fact as to the order of priority and U.S. Bank is not entitled to equitable

subrogation.

B. Priority and Equitable Subrogation

It is undisputed that the KeyBank Mortgage was recorded before the TBW

Mortgage was recorded. It is also undisputed that the KeyBank Mortgage and Key Bank

Note provided for the possibility of future advances. 33 M.R.S. § 505(5) (2021) provides:

Future advances secured by a mortgage have priority over the rights of all
persons who, subsequent to the recording of such a mortgage, acquire any
rights in or liens upon the mortgaged real estate to the extent that the
aggregate amount of all debts or obligations secured at any one time,
Page 5 of 8
including future advances but excluding protective advances, does not
exceed the total amount stated in the mortgage ....

Pursuant to§ 505(5), advances made by KeyBank after the TBW Mortgage was recorded

are entitled to priority over U.S. Bank's interest because the KeyBank Mortgage securing

those advances was recorded prior to the TBW Mortgage.

U.S. Bank nonetheless argues that the Court should apply the doctrine of equitable

subrogation to substitute U.S. Bank's interest in the Property for KeyBank's interest in the

Property. Derived from principles of restitution and unjust enrichment, 4 equitable

subrogation is "the substitution of one person in place of another, whether as a creditor

or as the possessor of any other rightful claim, so that he who is substituted succeeds as

to the rights of the other in relation to the debt or claim and its rights, remedies or

securities." Associated Hosp. Serv. of Me. v. Me. Bonding & Cas. Co., 476 A.2d 189, 190 (Me.

1984); see N.E. Ins. Co. v. Concord Gen. Mui. Ins. Co., 433 A.2d 715, 719 (Me. 1981). "The

doctrine requires that the equities of the parties be weighed and balanced." United

Carolina Bank v. Beesley, 663 A.2d 574, 576 (Me. 1995). Thus, equitable subrogation may

not be applied "so as to work injustice, or defeat a legal right, or to overthrow a superior

or perhaps equal equity, or to displace an intervening right or title." Id. (quoting Fed.

Land Bank of Springfield v. Smith, 129 Me. 233, 238, 151 A. 420,422 (1930)).

As support for its equitable subrogation argument, U.S. Bank relies on United

Carolina Bank v. Beesley, 663 A.2d 574 (Me. 1995), and Federal National Mortgage Association

v. OneWest Bank, N.A., No. RE-16-310, 2017 Me. Super. LEXIS 260 (Sept. 25, 2017). In

Beesley, two married couples each purchased a one-half interest in a property. 663 A.2d

4
See Nappi v. Nappi Dis/ribs., 1997 ME 54, 'l[ 8 n.1, 691 A.2d 1198 ("Where property of one person is used in
discharging an obligation owed by another ... m1der such circumstances that the other would be unjustly
enriched by the retention of the benefit thus conferred, the former is entitled to be subrogated to the
position of the obligee or lien-holder." (quoting Restatement of Restitution§ 162 (Am. Law Inst. 1937))).

Page 6 of 8
at 575. All four owners executed and delivered a mortgage to Eastern Mortgage

Company ("Eastern"). id. Later, one couple executed and delivered a promissory note

and mortgage to ComFed Mortgage Company ("ComFed") and used part of the proceeds

to discharge the Eastern mortgage. Id. The couple misrepresented to ComFed that they

owned the property in its entirety. Id. ComFed then assigned the note to United Carolina

Bank ("United Carolina"). Id. The couple defaulted on the ComFed note, and United

Carolina brought an action to foreclose on the property, at which point it discovered the

couple's misrepresentation. Id.

The Law Court ruled that United Carolina should be equitably subrogated to the

rights of Eastern. Id. at 576. The Court reasoned that ComFed had paid a debt owed by

both couples when it paid off the Eastern mortgage, thereby providing a benefit to the

couple who had not executed the mortgage to which the couple was not entitled. Id.

In Federal National Mortgage Association v. One West Bank, N.A., the predecessors-in­

interest to Federal National Mortgage Association ("FNMA") and Bank of America, N.A.

("BANA") owned mortgages on overlapping parcels. 2017 Me. Super. LEXIS 260, at *4­

6. BANA's mortgage was junior to FNMA's mortgage, and both mortgages were junior

to a mortgage owned by America's Wholesale Lender(" AWL"). BANA paid off the AWL

mortgage. Id. at *6. By so doing, 13ANA bestowed a benefit on FNMA (elevating its

position in the order of priority) to which it was not entitled. Id. at *9. The Superior Court

(Cumberland County, Horton, J.) agreed with 13ANA's argument for equitable

subrogation, but held that it was untimely made because 13ANA failed to raise it as an

affirmative defense in its answer. Id. at *10.

This matter is readily distinguishable from Federal National Mortgage Association

and Beesley. Unlike FNMA's predecessor or the Beesleys, KeyBank did not receive a

benefit to which KeyBank was not otherwise entitled when Borrower used funds
Page 7 of 8
advanced by TBW to pay off the balance then incurred on the KeyBank Note. There is no

evidence that KeyBank or Borrower made misrepresentations as to the status of the

KeyBank Mortgage or breached an agreement to discharge the KeyBank Mortgage.

Key Bank was not unjustly enriched.

Moreover, if the Court applied the doctrine of equitable subrogation, the result

would be inequitable. The KeyBank Note provided for a fifteen-year draw period, and

KeyBank properly advanced funds throughout that period. Although U.S. Bank (or

TBW) may have expected to obtain priority by paying the debt owed on the Key13ank

Note, it failed to take all steps to ensure that the expectation came to fruition. Displacing

KeyBank from its priority position because of TBW' s mistake would work injustice under

these circumstances. Therefore, the Court declines to apply the doctrine of equitable

subrogation.

Because Key Bank has established that there is no genuine issue as to the existence

of each of the Chase Home Finance elements, KeyBank is entitled to judgment as a matter

of law.

IV. Conclusion

For the foregoing reasons, Key13ank is entitled to summary judgment on its

Complaint for foreclosure.

The entry is:

Plaintiff's Motion for Summary Judgment is GRANTED.

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

reference pursuant to Maine Rule of Civil Procedure 79(a).

Page 8 of 8
STATE OF MAINE SUPERIOR COURT
CUMBERLAND, ss. CIVIL ACTION
DOCKETNO: RE-18-119

KEYBANK NATIONAL )
ASSOCIATION, )
)
Plaintiff, )
) ORDER
v. )
)
CYNTHIA ANN WATSON, )
Personal Representative of the )
Estate of John C. Watson, Jr., a/k/a
John C. Watson,

Defendant, and

U.S. BANK NATIONAL
ASSOCIATION, AS TRUSTEE FOR
TBW MORTGAGE BACKED
TRUST SERIES 2007-2, TBW
MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 2007-2, and
STATE OF MAINE-MAINE
REVENUE SERVICES,

PARTIES IN INTEREST

Before the Court is Plaintiff's Motion for Summary Judgment. After due

consideration, the court declines to rule on the pending Motion and orders that the parties

submit supplemental briefs regarding the matters discussed herein.

I. Factual Background

Plaintiff, Key Bank National Association, is the current owner and holder of both

a Promissory Note and Mortgage in the property located at 110 Mayberry Rd., in Gray

Maine. (PSOMF 'II 1-6). Both the Note and Mortgage were executed and delivered by

John C. Watson Jr., ("Borrower") on November 14, 2000. (PSOMF 'II 1-5.) The Note

provided the Borrower with a Home Equity Line of Credit ("HELOC") in the amount of

$80,000. (PSOMF 'l[ 1.) The Note granted the Borrower a fifteen-year "draw period" in

Page 1 of 5
which Key Bank agreed to advance funds to the Borrower up to the $80,000 line of credit,

upon request. (PSOMF 'II 1.) The Note is secured by the November 14, Mortgage.

(PSOMF 'II 3.) The line of credit on the Note was increased to $140,000 on December 9,

2004. (PSOMF 5.)

On February 20, 2007, the borrower owed $139,910.18 to Key Bank under the terms

of the original Note. (Pl's. Mot. Sum. Judg., Exhibit G.) On March 16, 2007, the Borrower

executed and delivered to Taylor, Bean, and Whitaker Mortgage Corporation

("TBWMC") a promissory note in the amount of $174,000. (PIISOMF 'II 1.) The Note to

TBWMC was secured by a mortgage on the same property subject to the HELOC Note

and Mortgage. (PIISOMF 'II 2). The Borrower used funds from the TBWMC loan to pay

off his balance owed to Key Bank. (PIISOMF 'II 6.) TBWMC indicated in a U.S.

Department of Housing and Urban Development "Settlement Statement" that it

specifically distributed $141,965.65 to the borrower for "First Mortgage Payoff to Key

Bank." (PII R. to Pl's. Mot. Sum. Judg., ExhibitK.) There isno evidence that the borrower

made any attempt to terminate his HELOC account with Key Bank. (PSOMF 'II 10.) The

Borrower subsequently and periodically received funds on the HELOC account and has

a current outstanding balance of $182,309.36 on the original Note. (PSOMF 'II 17.)

The Borrower died on December 14, 2015. (PSOMF 'II 12.) Both the HELOC Note

and Note issued to TBWMC are now in default. (PSOMF 'II 14.) The Party-in-Interest,

U.S. Bank National Association, is the current owner and holder of the 2007 Mortgage.

(PIISOMF 'II 9.) Key Bank instituted this foreclosure action on the subject property and

has filed for summary judgment, alleging that it's 2000 Mortgage holds priority. U.S.

Bank argues that the 2007 Mortgage holds priority over Key Bank's HELOC Mortgage by

virtue of "equitable subrogation."

II. Summary Judgment Standard
Page 2 of 5
Summary judgment is granted to a moving party where "there is no genuine issue

as to any material fact" and the moving party "is entitled to judgment as a matter of

law." M.R. Civ. P. 56(c). "A material fact is one that can affect the outcome of the case,

and there is a genuine issue when there is sufficient evidence for a fact-finder to choose

between competing versions of the fact." Lougee Conservancy v. CiiyMortgage, Inc.,

2012 ME 103, 'l[ 11, 48 A.3d 774 (quotation omitted). On summary judgment, the court

considers reasonable inferences that may be drawn from the facts. Curtis v. Porter, 2001

ME 158, 'l[ 9, 784 A.2d 18. Additionally, the nonmoving party benefits from all "favorable

inferences that may be drawn from the facts presented." Id. (quotation marks

omitted). "When facts or reasonable inferences are in dispute on a material point,

summary judgment may not be entered." Id. "Summary judgment, when appropriate,

may be rendered against the moving party." M.R. Civ. P. 56(c).

III. Discussion

To be entitled to Summary Judgment on a foreclosure claim, a mortgagee must

establish that there are no disputed material facts for each of the following elements: (1)

the existence of the mortgage, including the book and page number of the mortgage and

an adequate description of the mortgaged premises, including the street address; (2)

ownership of the mortgage note and mortgage, including all assignments and

endorsements of the note and mortgage; (3) a beach of condition of the mortgage; (4) the

amount due on the mortgage note, including any reasonable attorney fees and court costs;

(5) the order of priority and any amounts that may be due to other parties in interest,

including any public utility easements; (6) evidence of properly served notice of default

and mortgagor's right to cure in compliance with statutory requirements; (7) proof of

mediation, when required; and (8) if the homeowner has not appeared in the proceeding,

a statement, with a supporting affidavit, of whether or not the defendant is in military
Page 3 of 5
services in accordance with the Servicemembers Civil Relief Act. Chase v. Home Fin. LLC

v. Higgins, 2009 ME 136, 'l[ 11, 985 A.2d 508. U.S. Bank argues that Key Bank is not entitled

to summary judgment because U.S. Bank's 2007 Mortgage should be equitably

subrogated in place of Key Bank's prior recorded mortgage because it provided the funds

to satisfy the Borrower's debt owed to Key Bank.

A. Open Ended Mortgage

The mortgage held by KeyBank appears to have been open-ended because it was

designed to secure a line of credit upon which Watson could draw from, rather than

secure a set loan amount. Under Maine law, "debts or obligations secured by a mortgage

that arise subsequent to the execution and recording of the mortgage, ... have priority

over the rights of all persons who, subsequent to the recording of such a mortgage,

acquire any rights in or liens upon the mortgaged real estate[.]" 33 M.R.S. §§ 505(1)(B),

5. Neither party addressed this statutory provision in the summary judgement record.

Accordingly, the court finds that it would be inappropriate to rule on the present Motion

for Summary Judgment.

The court orders that the parties provide supplemental briefs addressing 33

M.R.S. § 505 and its effect on the present dispute. The parties shall have sixty days from

the entry of this order to submit their briefs to the court.

The entry is:

The parties are ORDERED to submit supplemental briefs to the court discussing

the matters addressed herein.

The parties hall have SIXTY (60) days from the entry of this Order to submit their

briefs.

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

pursuant to Maine Rule of Civil Procedure 79(a).
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