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Cadle Co. v. LCM Assoc.

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MAINE SUPREME JUDICIAL COURT						Reporter of Decisions
Decision:	2000 ME 73
Docket: 	Yor-99-414
on Briefs:	March 29, 2000
Decided:	April 25, 2000




	[¶1]  LCM Associates, a general partnership, appeals the deficiency
judgment entered against it and in favor of The Cadle Company by the
Superior Court (York County, Brennan, J.) in this foreclosure action.  LCM
contends that Cadle is not entitled to a deficiency judgment because it failed
to follow the requirements of 14 M.R.S.A. § 6323 (1980 & Supp. 1999).  We
vacate the judgment.


	[¶2]  LCM granted a mortgage to a predecessor of Cadle on a
condominium unit in Kennebunkport to secure a loan in the amount of
$104,000.  The mortgage was assigned several times, and eventually it was
obtained by Cadle.  LCM defaulted on its obligations, and Cadle filed a
foreclosure action.  See 14 M.R.S.A. § 6321 (Supp. 1999).  The Superior
Court (Brodrick, J.) issued a foreclosure judgment on August 23, 1995, in
which it was determined that LCM owed Cadle $120,511.70.  LCM did not
exercise its right of redemption, and Cadle published a notice of sale of the
property on January 10, 17, and 24, 1996.  See 14 M.R.S.A. § 6323.  The
public sale was held on February 2, 1996, and Cadle purchased the property
for $17,000.
	[¶3]  Over a year later, Cadle requested a writ of execution.  LCM
objected to the request on the grounds that Cadle failed to file a report of
sale or obtain an independent appraisal of the property.  Cadle thereafter
filed a report of sale but without an appraisal.  LCM objected to the report of
sale, and Cadle withdrew its request for a writ of execution.  Cadle then filed
a motion to extend the time in which a foreclosure sale could be held.  The
Superior Court (Crowley, J.) denied the motion and also denied Cadle's
motion for relief from judgment.
	[¶4]  On March 31, 1998, Cadle again requested a writ of execution,
which was again objected to by LCM.  The court (Crowley, J.) held that Cadle
had not complied with 14 M.R.S.A. § 6324 (Supp. 1999), and that no writ of
execution was to issue.  The parties stipulated to an order stating that title
to the mortgaged property rested solely in Cadle and that the parties were
free to pursue any possible deficiency or assert any objections to a deficiency
request.  Finally, on March 10, 1999, Cadle filed a report of sale with an
appraisal.  LCM objected to the report, on the grounds that Cadle had failed
to follow the time requirements of section 6323 and that Cadle's three-year
delay in filing the report of sale and appraisal made the report untimely
under section 6324.{1}  After a hearing, the court issued a deficiency
judgment of $106,433.70.


	[¶5]  LCM argues that because Cadle held the public sale of the
foreclosed property several days before it should have, it is not entitled to a
deficiency judgment.  Section 6323 requires the mortgagee to publish the
notice of public sale "once in each of three successive weeks," and the sale
must be held "not less than 30 days nor more than 45 days after the first
date of that publication."  The parties do not dispute the fact that the sale
was held six days sooner than the statute allows.{2}  We have not been called
upon previously to determine the effect of a sale held prior to the statutory
time period. 
	[¶6]  This foreclosure was initiated by civil action pursuant to section
6321, and this relatively new means of foreclosure is presently the most
utilized form of foreclosure.  The older methods of foreclosure are
foreclosure by possession, see 14 M.R.S.A. § 6201 (1980 & Supp. 1999);
foreclosure without possession, also known as foreclosure by publication or
by notice, see 14 M.R.S.A. § 6203 (1980 & Supp. 1999); and foreclosure by
sale, which is available only in limited circumstances, see 14 M.R.S.A.
§ 6203-A (Supp. 1999).  Our decisions hold that the statutory requirements
for these older types of foreclosures be strictly followed.  See Winter v. Casco
Bank and Trust Co., 396 A.2d 1020, 1022-24 (Me. 1979) (vacating judgment
and holding statutory requirement of attestation of copy of notice to
mortgagor not satisfied by mere appearance of word "attested"); Higgins v.
Smith, 118 Me. 312, 313, 108 A. 102, 103 (1919) (holding foreclosure by
publication invalid because certificate of publication failed to state that
newspaper was "published and printed" in county where real estate was
located); Freeman v. Atwood, 50 Me. 473, 474-75 (1862) (holding right of
redemption not barred because certificate did not state time of entry of
possession as required by statute).
	[¶7]  We have also held that courts do not have the power to extend
the time limits in the foreclosure statutes.  See Stafford v. Morse, 97 Me.
222, 224-27, 54 A. 397, 398-99 (1902) (holding undated certificate of
publication insufficient under the statute and because 30-day time period for
recording certificate had expired it could not be amended to add date); Carll
v. Kerr, 111 Me. 365, 369, 89 A. 150, 151 (1914) (holding court could not
extend one-year period of redemption because parties had "a right to stand
upon the terms of the law").  Although the foreclosure in this case employed
a civil action rather than an older, nonjudicial method, we can discern no
principled basis to stray from the proposition established in the above cases
that strict adherence to the statutory mandates is required.
	[¶8]  Cadle argues that it is entitled to the deficiency judgment
because LCM failed to show that the early sale resulted in any prejudice to
LCM.  In support of this argument, Cadle relies on cases from two
jurisdictions in which the courts refused to void foreclosure sales because
the mortgagee did not adhere to the statutory sale requirements.  The
Michigan Court of Appeals held that a sale which took place earlier than the
statute allowed rendered the foreclosure sale voidable, but not void.  See
Jackson Inv. Corp. v. Pittsfield Prod., Inc., 413 N.W.2d 99, 101 (Mich. Ct.
App. 1987).  The court affirmed the validity of the foreclosure sale, but it did
not vacate the trial court's extension of the period of redemption to the
mortgagor.  See id.  New York courts have refused to set aside a foreclosure
sale unless the mortgagee showed prejudice caused by a defective sale
notice.{3}  See Hanover Funding Co. v. Keri Assoc., Inc., 580 N.Y.S.2d 530, 531
(N.Y. App. Div. 1992) (finding that de minimis irregularities which cause no
prejudice do not void the sale).  These cases, relied on by Cadle, differ from
the instant case in that LCM is not requesting that the sale be voided. 
Indeed, the parties agreed that Cadle held title to the real estate.  LCM's
request is that Cadle be denied any deficiency resulting after the sale.{4}
	[¶9]  The Legislature had a purpose in enacting the time periods in
section 6323.  The time period between publication and sale gives the
public a sufficient interval to consider a purchase of property by viewing the
property or arranging potential financing or investigating any of the
numerable factors that bear upon a purchase of real estate.  The time period
provides the likelihood that more members of the public will be able to
react to the notice by actually bidding on the property.  This is a benefit to
the mortgagor because of the potential that the property will be sold for a
higher price than it would if the mortgagee was the only bidder, thus
providing protection against a self-dealing mortgagee.  To accept the
position of Cadle and require the mortgagor, who is the beneficiary of the
statutory notice requirement, to prove prejudice when the mortgagee is the
party who violates the statute, renders the time limit virtually meaningless. 
Proving prejudice, by demonstrating that the sale price would have been
higher if the time limits had been followed, is an onerous burden because of
the difficulty in finding people who would have bid at the sale if it had been
held at the required time.  We hold that a mortgagee must adhere to the
statutory time requirements of section 6323 if it intends to seek a
deficiency judgment, absent unusual or exceptional circumstances, which
are not present in this case.{5}
	The entry is:
			Deficiency judgment vacated.

Attorneys for plaintiff: James L. Audiffred, Esq. P O Box 1005 Saco, ME 04072 Sanford Roberts, Esq. P O Box 4608 Portsmouth, NH 03802-4608 Attorney for defendants: Mark A. Kearns, Esq. P O Box 1528 Wells, ME 04090
FOOTNOTES******************************** {1} . LCM also objected on the ground that the foreclosure judgment itself allowed for a writ of execution to issue for any deficiency "provided that the statutory requirements are met." LCM argues that one of the statutory requirements is the time period in section 6323 within which the sale must occur and even if the statutory language is deemed not mandatory, the incorporation of the statutory language into the foreclosure judgment indicates that the court mandated strict adherence to the time period. {2} . LCM does not claim that the sale was held on a different date from that stated in the notices. {3} . Cadle also relies upon an Illinois case in which the court denied the mortgagor's motion to set aside the sale because of defects in the publication and notice of sale. See Cragin Fed. Bank for Sav. v. American Nat'l Bank and Trust Co. of Chicago, 633 N.E.2d 1011 (Ill. App. Ct. 1994). That court, however, relied upon a statute providing that no sale was to be set aside because of defects in the notice or its publication except upon a showing of good cause. See id. at 1013. The court noted that prior to the enactment of the statute, sales were vacated when a mortgagee failed to follow the statutory requirements. See id. at 1014. {4} . Because LCM contests only the deficiency determination, the question of the validity of the sale is not before us. {5} . Because we vacate the deficiency judgment on the ground that Cadle failed to adhere to the section 6323 time requirements, we do not reach LCM's other issue on appeal which is that Cadle's delay of three years in submitting a report of sale with an appraisal should deprive it from obtaining a deficiency judgment. See Brickyard Assoc. v. Auburn Venture Partners, 626 A.2d 930, 932-33 (Me. 1993) (holding that 17-month delay in submitting report of sale was not unreasonable).