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Peoples Heritage Bank v. Pease (revised 5-22-02)
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MAINE SUPREME JUDICIAL COURT					Reporter of Decisions
Decision:	2002 ME 82
Docket:	Pen-01-716
    On Briefs:	April 18, 2002
Decided:	May 21, 2002




	[¶1]		Rodney and Constance Pease{1} appeal from the District Court's
(Bangor, Russell, J.) entry of a default judgment against Constance and
summary judgments against Rodney on Peoples Heritage Savings Bank's
foreclosure complaint and on Rodney's counterclaim.  The Peases contend that
the court erred in entering a default judgment against Constance because she
was not served properly.  The Peases also contend that the court erred in
entering the summary judgments because:  a Peoples agent illegally notarized
the mortgage deeds, there are genuine issues of material fact regarding whether
Peoples entered into and then breached a renegotiated agreement with the
Peases, and there are genuine issues of material facts as to whether Peoples
correctly stated the amount required to cure the defaults on the loans.  We
affirm the entry of the default judgment and vacate the summary judgments in
	[¶2]		The Peases and Peoples executed five notes secured by mortgage
deeds on May 31, 1991; July 26, 1991; August 30, 1994; January 6, 1995; and
August 22, 1995.  All mortgage deeds were notarized by Peoples employees.
	[¶3]		The Peases failed to make a number of payments, and in June
of 2000, Peoples sent them, for each note, a notice of default and a notice of
their right to cure by paying the amount of the arrearage.  The notice for the
August 22, 1995, loan stated that the arrearage in monthly payments was
$7,944.75, that no other charges or fees applied, and that the total due was
$9,036.76. None of the other notices included mathematical inconsistencies,
but the notice for the July 26, 1991, loan reported the arrearage in monthly
payments and the total amount due to cure the default as $9,036.76.
	[¶4]		Rodney sent a letter to Peoples in which he disputed the
amount due on each loan and requested verification of the debts.  Peoples sent
the Peases a letter outlining options available to avoid foreclosure if they acted
before July 28, 2000.  The three options were: (1) a forbearance agreement
mortgaging all the Peases' real property to the bank, (2) payment of the full
amount demanded, or (3) signing over their deeds for liquidation in lieu of
foreclosure.  The bank filed its foreclosure complaint on all five notes on July
	[¶5]		Thomas M. Davis, an employee in the Recovery Department of
Banknorth Group, Inc.,{2} sent letters dated August 8 to the Peases verifying an
agreement that he had reached with them to pay off the August 30, 1994, and
August 22, 1995, loans with $570 and $575 monthly payments beginning on
August 15, 2000.  A summons for each of the Peases was served by hand to
Rodney at the parties' Brewer address on August 15, 2000.  Two days later,
Peoples sent the Peases a check for $1390 representing a refund of the Peases'
payments on the three loans not renegotiated with Davis.  Peoples stated that
it would accept a full lump sum payment only.
	[¶6]		Acting pro se, Rodney filed an answer and counterclaim;
Constance did not sign the answer, although it purports to be the answer of
both Peases.  The counterclaim alleges that Peoples supplied inaccurate
information, failed to credit payments, and breached its new agreement.  The
counterclaim seeks money damages, the discharge of all liability to Peoples,
costs, and interest. 
	[¶7]		Peoples moved for a summary judgment on its complaint,
attaching a statement of material facts supported by copies of the notes,
mortgages, and notices authenticated by the affidavit of Catherine E. Melville,
Assistant Vice President of Peoples.  Rodney, again purporting to act for
himself and Constance, opposed the motion with a statement of facts that
disputed the amounts stated in the notices of default, and provided the details
of the new agreement with Davis.  He provided copies of the letters Davis sent
to the Peases confirming their agreement.  These documents were presented as
exhibits attached to Rodney's affidavit, which fails to include a statement that
it is based on personal knowledge.
	[¶8]		Although Peoples did not file a reply statement of material
facts,{3} it did provide a "statement of facts" in its responsive memorandum of
law that includes the statement that Davis lacked the authority to bind the
bank.   Peoples attached the affidavit of Nicholas H. Penfield, Assistant Vice
President of Peoples, in which he avers that the bank returned checks
numbered 1555 and 1556 tendered pursuant to the Peases' agreement with
Davis; the attached letter submitted to establish this fact, however, purports to
return payments tendered by checks numbered 1558, 1559, and 1560, on the
three notes not renegotiated by Davis.
	[¶9]		The court held a hearing on November 21, 2000, at which
Rodney presented a document entitled "SPECIAL POWER OF ATTORNEY,"
purporting to authorize Rodney to represent both himself and Constance in the
foreclosure proceeding.  The form lists Rodney and Constance's address in
Brewer.  The court entered a summary judgment against Rodney, and a default
judgment against Constance because Rodney may not legally represent her in
court.{4}  Rodney moved for findings of fact and conclusions of law, but the
court denied the motion.  Rodney appealed to the Superior Court (Penobscot,
Hjelm, J.), which dismissed his appeal for lack of a final judgment on the
	[¶10]		After the case was remanded to the District Court, Peoples
moved for a summary judgment on the counterclaim based on the Penfield
affidavit.  Peoples did not submit a statement of material facts with its motion
on the counterclaim.{5}  Rodney filed an opposition to the motion and included
a statement of disputed facts with supporting documentation.  The statement
is identical to the statement submitted in opposition to the motion on the
complaint, except that it also includes statements that the bank employees
supplied erroneous information and that the Peases paid some interest.  The
account histories Rodney submitted acknowledge that the Peases made some
interest payments on each loan, but the account statements reveal that they
were nonetheless thousands of dollars in arrears on the May 31, 1991, and
January 6, 1995, loans at the time of foreclosure.{6}  The Peases did not submit
account statements disclosing whether they were in arrears on the other three
loans.  Peoples responded to Rodney's affidavit paragraph by paragraph and
referred to pleadings and exhibits submitted in connection with the motion for
summary judgment on the complaint.  The court entered a summary judgment. 
Rodney appeals from the entry of the summary judgments and Constance
appeals from the entry of the default judgment in this consolidated appeal. 
The court amended the Docket Sheet to reflect Constance's Orrington address
on the day she filed her notice of appeal. 
A. Default Judgment Against Constance

	[¶11]		Constance contends that Peoples failed to serve a summons on
her at her Orrington residence, which is her dwelling house and usual place of
abode, and that she had no knowledge of the action until December 10, 2001. 
She also contends that Rodney attended the November 21, 2000, hearing with
her power of attorney but that she was unrepresented at the hearing because
the court did not permit Rodney to represent her.
	[¶12]		Peoples contends that it properly served Constance's summons
by handing it to Rodney, a person of appropriate age and discretion, at the
Peases' Brewer address.  According to Peoples, the power of attorney form
Rodney presented to the court listed his and Constance's address in Brewer,
and the record suggests Constance knew about the court proceedings and failed
to appear personally or through counsel.  Finally, Peoples contends that
Constance waived this issue by a failing to allege a defense of insufficient
service of process pursuant to M.R. Civ. P. 12.
	[¶13]		The foreclosure statute provides that "[s]ervice of process on all
parties in interest and all proceedings must be in accordance with the Maine
Rules of Civil Procedure."  14 M.R.S.A. § 6321 (Supp. 2001); see also  LaFosse v.
Champagne, 2000 ME 81, 750 A.2d 1254.  The Rules permit service upon a
competent adult by leaving a copy of it "at the individual's dwelling house or
usual place of abode with some person of suitable age and discretion then
residing therein . . . ."  M.R. Civ. P. 4(d)(1).  A defense of insufficient service of
process must be raised in a responsive pleading or by motion or it is not
preserved.  M.R. Civ. P. 12(b) & (h).{7}
	[¶14]		The court did not err in entering a default judgment against
Constance because Constance had actual notice of the foreclosure,{8} service
was made in hand to her spouse, and she failed to file a motion to dismiss for
insufficient service.  See 1 Field, McKusick & Wroth, Maine Civil Practice, § 4.5
at 69 (2d ed. 1970) ("If the defendant has received actual notice by the method
of service used, the court should hesitate in finding the service insufficient for
some technical noncompliance with Rule 4(d)(1).").  We affirm the entry of the
default judgment.

B. Summary Judgments

	[¶15]		Rodney contends that Peoples employees notarized the mortgage
deeds in violation of 4 M.R.S.A. § 954 (1989).  Peoples contends that its
employees acted legally because neither of them were parties to the instrument
individually or as bank representatives.
	Section 954 provides, in pertinent part:
	Any notary public who is a[n] . . . employee of a bank or
other corporation may take the acknowledgment of any party to
any written instrument executed to or by such
corporation . . . . It shall be unlawful for any notary public to
take the acknowledgment of an instrument by or to a
bank . . . . of which he is a[n] . . . employee where such notary
is a party to such instrument, either individually or as a
representative of such bank . . . .
	[¶16]		The statute does not prohibit a bank employee from taking the 
acknowledgement on a mortgage deed to the bank unless the notary is a party to the
instrument individually or as a bank representative.  Because the Peases alone
executed the mortgage deeds, the bank employees who signed as notaries and
witnesses were not "part[ies] to such instrument[s]" either individually or as
Peoples representatives.  The statute prevents bank employees from notarizing
their own signatures; it does not prevent them from notarizing the signatures
of borrowers on mortgage deeds.  The documents were validly notarized.

	2. Davis's Apparent Authority

	[¶17]		Rodney contends that he entered into an agreement with
Peoples, through Davis, that Peoples has not honored.  According to Rodney,
the complaint was not served until August 15, 2000, after the parties had
already reached an agreement regarding two of the loans.
	[¶18]		Peoples contends that Davis lacked the authority to enter into
negotiations with the Peases.  According to Peoples, Davis lacked express or
apparent authority because Peoples had already informed the Peases in writing
that they were not to make any further payments and provided a list of their
options.  Peoples contends that it refused to accept the Peases' checks,
returning them within ten days in compliance with 14 M.R.S.A. § 6204 (Supp.
2001), and making clear that Davis lacked the authority to bind the bank to an
agreement with them.
	[¶19]		Section 6204 provides, in pertinent part:
	The acceptance, before the expiration of the right of
redemption and after the commencement of foreclosure
proceedings of any mortgage of real property, of anything of
value to be applied on or to the mortgage indebtedness by the
mortgagee . . . constitutes a waiver of the foreclosure, unless
an agreement to the contrary in writing is signed by the person
from whom the payment is accepted or, with regard to
foreclosures commenced by civil action . . . unless the bank
returns the payment to the mortgagor within 10 days of receipt.
. . .

	The mortgagee and the mortgagor may enter into an
agreement to allow the mortgagor to bring the mortgage
payments up to date with the foreclosure process being stayed
as long as the mortgagor makes payments according to the
agreement.  If the mortgagor does not make payments according
to the agreement, the mortgagee may, after notice to the
mortgagor, resume the foreclosure process at the point at
which it was stayed.
	[¶20]		Whether an agency relationship exists is a question of fact. 
Steelstone Indus., Inc. v. N. Ridge Ltd. P'ship, 1999 ME 132, ¶ 12, 735 A.2d 980,
983.  A person has apparent authority to act for a principal if the principal
knowingly permits the agent to exercise authority or holds the agent out as
possessing authority.  Id. ¶ 13.  Thus, the principal's conduct must cause a
party reasonably to believe a person acts as an agent of the principal.  Id.
[A]pparent authority can be created by appointing a person to a
position, such as that of manager or treasurer, which carries
with it generally recognized duties; to those who know of the
appointment there is apparent authority to do the things
ordinarily entrusted to one occupying such a position,
regardless of unknown limitations which are imposed upon the
particular agent.
Restatement (Second) of Agency § 27 cmt. a (1958).  An agent has apparent
authority to do what an employee in his position would customarily do, if the
third party knows of his position with the principal, but not of what the
employer actually authorized him to do in that position.  Id. cmt. d.  For
instance, a teller for a savings and loan association has apparent authority to
bind the association by accepting tender of a late payment.  Sav. & Loan Ass'n
of Bangor v. Tear, 435 A.2d 1083, 1085 (Me. 1981).
	[¶21]		The letters from Davis suggest that, notwithstanding Peoples'
earlier letter listing the Peases' options, Davis agreed to a new payment
schedule for two of the five loans at issue in the present case.  This evidence
gives rise to genuine issues of material fact regarding whether Davis acted for
Peoples in forming a new contract and whether Peoples breached the agreement
if it was made.{9}  The court erred in granting the summary judgments on these
two notes, especially because the evidence did not establish that the checks
tendered on the two renegotiated loans were refused or the proceeds returned. 
As to the two notes negotiated by Davis, we vacate the court's summary
judgments on the complaint and on the counterclaim for breach of contract.

	3. Accuracy of statements

	[¶22]		Rodney contends that the affidavit accompanying the motion
for summary judgment on the complaint demonstrates that Peoples' records
inconsistently report the amounts due on the loans.  He further contends that
on three of the loans, he and Constance were required to make interest
payments only, which they did.
	[¶23]		As to the summary judgment entered on its complaint, Peoples
contends that Rodney failed to produce any documentary evidence setting forth
a genuine issue of material fact regarding the amounts due on his loans. 
Peoples further contends that many of Rodney's statements are overly general
and not presented in affidavit form because he does not aver personal
knowledge.  As a result, Peoples contends that Rodney has admitted the facts
listed in its statement of material facts, which support the court's judgment.
	[¶24]		As to the summary judgment entered on the counterclaim,
Peoples contends that Rodney failed to show that there was a genuine issue for
trial.  According to Peoples, Rodney merely reproduced the evidence from the
first motion and added "random copies of account history on all the loans, all
of which predate the Complaint for Foreclosure."
	[¶25]		An affidavit submitted in opposition to a motion for summary
judgment must show affirmatively that it is based on the affiant's personal
knowledge.  Bahre v. Liberty Group, Inc., 2000 ME 75, ¶ 12, 750 A.2d 558, 561
(citing M.R. Civ. P. 56(e)).  If it is apparent from the content of an affidavit that
the affiant had personal knowledge of the facts averred, the court will consider
the affidavit and the documents attached to it.  Casco N. Bank, N.A. v. Estate
of Grosse, 657 A.2d 778, 781 (Me. 1995).  If a party fails to object to an
improper affidavit as unsupported by the affiant's personal knowledge, the
issue is not preserved for appellate review.  Biette v. Scott Dugas Trucking &
Excavating, Inc., 676 A.2d 490, 495 (Me. 1996).
	[¶26]		Peoples has failed to preserve this issue on appeal because,
although it challenged the specificity and relevance of the statements and
materials Rodney submitted, it did not raise the issue of his personal
knowledge in the District Court.  Even if the issue were preserved, however,
Rodney's affidavit reveals that he had personal knowledge of his dealings with
Peoples and of the documents that he submitted with his affidavit.
	[¶27]		Nonetheless, Rodney has failed to produce evidence establishing
the inaccuracy of Peoples' calculations, other than the clerical error in one
notice of default, which Rodney does not contend was perpetuated in the
judgment.  He has failed to offer any comprehensive evidence of what he has
paid or actually owes on the accounts.  On this issue, the court did not err
because Rodney failed to raise a genuine issue of material fact regarding the
amount of damages.
	The entry is:
Default judgment against Constance affirmed. 
Summary judgment on the complaint vacated as
to the notes executed on August 30, 1994, and
August 22, 1995, but in all other respects,
affirmed.   Summary judgment on the
counterclaim vacated as to the breach of
contract claim on the notes executed on August
30, 1994, and August 22, 1995, but in all other
respects, affirmed.  Remanded to the District
Court for further proceedings consistent with
this opinion.

Attorney for plaintiff: Philip K. Jordan, Esq. P O Box 246 Houlton, ME 04730-0246 For defendants: Constance L. Pease 120 Rocky Shore Drive Orrington, ME 04474-3904 Rodney E. Pease 464 South Main Street Brewer, ME 04412
FOOTNOTES******************************** {1} . The other named defendant, Jeffrey Small, d.b.a. Electrical Installation and Design, is not a party to this appeal. {2} . The parties do not dispute that Davis is an employee of Peoples. {3} The Peases do not challenge this procedural deficiency on appeal. {4} See 4 M.R.S.A. § 807 (Supp. 2001) (entitled "Unauthorized practice of law"). {5} The Peases do not challenge this procedural deficiency on appeal. {6} Rodney's affidavit introducing his exhibits on the counterclaim avers that he has personal knowledge. {7} Rule 12 provides, in pertinent part: (b) . . . Every defense, in law or fact, to a claim for relief in any pleading . . . shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion: . . . (5) insufficiency of service of process . . . . (h) Waiver or Preservation of Certain Defenses. (1) A defense of . . . insufficiency of service of process is waived . . . (B) if it is neither made by motion under this rule nor included in a responsive pleading or an amendment thereof . . . . {8} Although Constance contends that she lacked notice of this foreclosure proceeding before December of 2001, it is clear from the "special power of attorney" she signed that she had actual notice of the foreclosure proceeding before the November 21, 2000, hearing. {9} If the parties entered into a new and valid contract, the bank's return of the checks within ten days of receipt has no effect because the foreclosure proceeding based on the original (superseded) agreements is stayed unless and until the Peases default on the new agreement. 14 M.R.S.A. § 6204.