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Johnson v. McNeil
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MAINE SUPREME JUDICIAL COURT					                                      Reporter of Decisions
Decision:	2002 ME 99
Docket:	   Kno-01-776
Argued:	   May 8, 2002
Decided:	June 21, 2002


                                                  DEBORAH J. AMES JOHNSON


                                                    WILLIAM McNEIL JR. et al.


	[¶1]  Deborah J. Ames Johnson appeals from a summary judgment entered
in the Superior Court (Knox County, Marden, J.) in favor of William McNeil Jr.
and Eric McNeil.  The Superior Court concluded that Johnson could not proceed
with a mortgage foreclosure action against the McNeils because the statute of
limitations barred a suit on the underlying note.  Because we agree with Johnson's
contention that a real estate mortgagee is not precluded from foreclosing on a
mortgage deed even though a separate action on the note evidencing the debt is
barred, and because the undisputed facts in this case establish that Johnson is
entitled to a summary judgment on her foreclosure, we vacate the judgment and
remand for entry of a judgment of foreclosure in favor of Johnson.

	[¶2]  In October of 2000, pursuant to 14 M.R.S.A. §§ 6321-6325 (Supp.
2001), Johnson brought a claim against Movita Horton, f/k/a Movita McNeil,
William McNeil Jr., and Eric McNeil (collectively, the "McNeils"), seeking to
foreclose her mortgage on a parcel located on Matinicus Island.{1}  The McNeils
answered the complaint, pled affirmative defenses, and counterclaimed for a
judgment declaring that Johnson's foreclosure claim was time barred and that Eric
McNeil was the true record owner.  Both parties asserted that they were entitled to
a judgment as a matter of law and moved for a summary judgment.  

	[¶3]  The M.R. Civ. P. 56(h) statements filed by the parties establish the
following undisputed facts:  In October of 1980, William McNeil and Horton
purchased an interest in real estate on Matinicus Island from Johnson.  As
consideration for the conveyance, William and Horton executed and delivered to
Johnson a promissory note in the principal amount of $1232.59, with a thirteen
and one-half percent (13.5%) interest rate.  The note calls for monthly installment
payments of $18.75, and payment in full within ten years.  No payment on the
note was ever made.

	[¶4]  The note was secured by a real estate mortgage on the Matinicus
Island property.  The mortgage deed, which was properly recorded, was dated and
acknowledged on October 31, 1980.  The mortgage deed states that it secures a
promissory note "bearing even date" made out for an amount equal to $1232.59. 
	[¶5]  The mortgage deed's defeasance clause states in pertinent part:

Provided [n]evertheless, that if [the grantors] pay to the
[grantee] the sum of [$1232.59] with interest thereon at the rate set
forth in a certain promissory note of even date herewith and secured
hereby, all in accordance with the provisions of said note . . . then
this Deed, as also one certain promissory note bearing even date with
these presents, given by the [grantors] to the [grantee] to pay the sum
and interest at the time aforesaid, shall be void, otherwise shall
remain in full force.

	[¶6]  One year prior to the commencement of this suit, William McNeil
transferred the mortgaged real estate to his son Eric McNeil.

	[¶7]  Based on these facts the Superior Court entered a summary judgment
in favor of the McNeils, reasoning that, because the limitations period for the
enforcement of the note had expired, Johnson is barred from bringing this action
to foreclose the mortgage.  Johnson's appeal followed the entry of the judgment.

	[¶8]  On appeal from a summary judgment, we consider only the portions
of the record referred to and the material facts set forth in the Rule 56(h)
statements "to determine whether 'there was no genuine issue as to any material
fact and that the successful party was entitled to a judgment as a matter of law.'" 
Levine v. R.B.K. Caly Corp., 2001 ME 77, ¶ 4, 770 A.2d 653, 655 (quoting
Handy Boat Serv., Inc. v. Prof'l Servs., Inc., 1998 ME 134, ¶ 16, 711 A.2d 1306,
1310).  We examine these facts in the light most favorable to the nonmoving
party.  Johnson v. Carleton, 2001 ME 12, ¶ 11, 765 A.2d 571, 575.


	[¶9]  Both parties concede that an action on the note is barred by the
applicable statute of limitations.  See 11 M.R.S.A. § 3-1118(1) (1995) (six-year
limitations period for actions to enforce a note payable at a definite time). 
Johnson, however, contends that she, as a mortgagee, may bring a civil
foreclosure action pursuant to 14 M.R.S.A. §§ 6321-6325, even though an action
on the note evidencing the debt that the mortgage secures is barred by the
applicable statute of limitations.  We agree.

	[¶10]  Maine follows the title theory of mortgages.  See First Auburn Trust
Co. v. Buck, 137 Me. 172, 173, 16 A.2d 258, 260 (1940) (the title theory of
mortgages "has been the accepted doctrine in this State since it became a separate
[state]").  A mortgage is "a conditional conveyance vesting the legal title in the
mortgagee," with only the equity of redemption remaining in the mortgagor. 
Martel v. Bearce, 311 A.2d 540, 543 (Me. 1973).

	[¶11]  "A mortgage of land, as usually drawn, is in form a deed of warranty
with a condition subsequent defining the means by which the grantor may defeat
the conveyance.  The legal title, therefore, passes immediately upon the delivery
of the mortgage; and the mortgagee is regarded as having all the rights of a
grantee in fee, subject to the defeasance."  Gilman v. Wills, 66 Me. 273, 275

	[¶12]  In Joy v. Adams, 26 Me. 330, 332-33 (1846), we decided the same
issue presented in this case.  In Joy, the mortgagor gave the mortgagee a mortgage
to secure three separate promissory notes.  Id. at 332.  After the death of the
mortgagee, the mortgagee's executrix attempted to foreclose on the mortgage due
to the debtor's default on the three notes.  Id.  The limitations period for actions
on the notes had expired.  Id.  Even though the mortgagor could not be held liable
in a suit on the notes, we concluded that the mortgagee's executrix could still
foreclose on the mortgage by taking possession of the collateral and holding it
until the debt was paid, or if the debt was not paid within the expiration of the
redemption period, by keeping the property in satisfaction of the debt.  Id. at 333.

	[¶13]  Thus, the running of the period of limitations during which the
provisions of the note may be enforced does not eliminate the existence of the
debt obligation itself, nor does it abrogate the mortgage securing the debt or affect
the foreclosure remedies available to the mortgagee.  Id.  See also Nelson &
Whitman, Real Estate Finance Law § 16.11, at 572 (2002) ("[T]he running
of the statute of limitations upon the mortgage debt has no effect upon the
existence of or remedies upon the mortgage . . . [because] the statute of
limitations bars merely the remedy on the debt, not the right to collect it or the
remedies on the mortgage that secures it. . . .  Since the debt remains, the
mortgage is not extinguished indirectly upon any theory that a destruction of the
obligation secured necessarily destroys the mortgage securing it.").  Not only has
this been the law in Maine, it is consistent with the common law rule in effect in
the majority of jurisdictions, even the majority of lien theory jurisdictions.  See
id. § 16.11, at 572-73 (explaining that title theory jurisdictions hold that the
running of the statute of limitations upon the debt does not affect the mortgagee's
remedies on the mortgage, and that the majority of lien theory jurisdictions follow
the reasoning of the courts in title states). 

	[¶14]  This does not mean, however, that a real estate mortgage may be
foreclosed without any time limitations.  Title 14 M.R.S.A. § 6104 (1980)
provides a procedure for limiting the enforcement of the provisions of a mortgage
by a mortgagee:

When the record title of real estate is encumbered by an
undischarged mortgage, and the mortgagor and those having his
estate in the premises have been in uninterrupted possession of such
real estate for 20 years after the expiration of the time limited in the
mortgage for the full performance of the conditions thereof, he or
they . . . may apply to the Superior Court . . . by complaint setting
forth the facts and asking for a decree as hereinafter provided. If
after notice to all persons interested as provided in section 6107, no
evidence is offered of any payment within said 20 years or of any
other act within said time, in recognition of its existence as a valid
mortgage, the Superior Court . . . may enter a decree setting forth
such facts and its findings in relation thereto . . . . Thereafter no
action shall be brought by any person to enforce a title under said

	[¶15]  Because Johnson filed her claim on October 30, 2000, less than
twenty years from the "time limited in the mortgage for the full performance of
the conditions there[in]," this action for judicial foreclosure has been timely
commenced.  Id.


	[¶16]  Johnson also contends that the undisputed facts establish that she is
entitled to a summary judgment on her claim for foreclosure.  In order to be
entitled to a summary judgment, Johnson must establish that "there [i]s no genuine
issue as to any material fact and that [she] [i]s entitled to a judgment as a matter
of law."  Levine v. R.B.K. Caly Corp., 2001 ME 77, ¶ 4, 770 A.2d 653, 655.   

	[¶17]  A plaintiff must prove the following elements in order to be entitled
to a judgment of foreclosure:

(1) a breach of condition in the plaintiff's mortgage;

(2) the amount due on the mortgage, including reasonable attorney's
fees and court costs; and,

(3) the order of priority and those amounts, if any, that may be due
to other parties of interest.

14 M.R.S.A. 6322.

	[¶18]  The following facts are undisputed: the McNeils have never made
any payments on the note secured by the mortgage; Johnson's mortgage is prior in
time to any other liens on the mortgaged property; and, the note unambiguously
requires the McNeils to pay off the principal amount with interest.  Although
Johnson concedes that she is not entitled to recover any deficiency from the
McNeils should there be one following a sale, the amount of the unpaid debt is
certain.  These facts establish that Johnson is entitled to a judgment for

	The entry is:

Judgment vacated. Remanded for the entry of a
judgment of foreclosure in favor of Johnson.


Attorney for appellant:

Randal E. Watkinson, Esq.   (orally)
Strout & Payson
P.O. Box 248 
Rockland, Maine 04841

Attorney for appellees:

Frederick M. Newcomb, III	(orally)
Newcomb, Reynolds & Wells, PA
P.O. Box 1115
Rockland, Maine 04841

FOOTNOTES******************************** {1} . The details of the history of this suit are more extensive than our recitation of the facts suggests, but they are not relevant to this appeal and are not elaborated upon further.