Maine Supreme Judicial Court Upholds Entry of Default and Default Judgment Sanction Against Consumer Debtor

Daniel J. Eichorn, Esq. obtained an order instructing the clerk to enter a consumer debtor’s default and granting default judgment against the debtor as a sanction for the debtor’s failure to respond to discovery requests. The debtor appealed and Attorney Eichorn filed a brief in opposition. In a memorandum of decision, the Maine Supreme Judicial Court upheld the lower court’s entry of default judgment. The Supreme Judicial Court noted that it was not an abuse of discretion for the trial court to direct the clerk to enter the debtor’s default after the debtor failed to file an answer, despite multiple opportunities to do so and multiple warnings that the failure to file an answer could result in an entry of default. The Court also noted that it was not an abuse of discretion for the trial court to grant default judgment against the debtor as a sanction for failure to respond to discovery requests, after multiple extensions of the discovery deadline and multiple warnings that the failure to respond could result in a default judgment. See LVNV Funding LLC v. Jesse Field, Mem-17-58 (June 1, 2017).

$140k Verdict Won in Successor Liability, UFTA and Piercing Corporate Veil Case

David R. Dubord, Esq. won a $140,000 verdict for a client against a Maine limited liability company based on successor liability and against the two members of the limited liability company for fraudulent transfers as defined by the Maine Uniform Fraudulent Transfer Act and for individual liability based on piercing the corporate veil. The trial was held in the Business Court on December 14, 2016 and the verdict was issued on February 7, 2017.

Recent Court Decision Impacts Mortgage Release Distribution Requirement and Statutory Interpretation Process

In 2011, 33 M.R.S. § 551 was amended to require that mortgagees mail the recorded mortgage release to the mortgagor within 30 days of receipt from the registry of deeds. Many mortgagees assumed that mailing a copy of the recorded release was sufficient. In Sabina v. JPMorgan Chase Bank, N.A., 2016 ME 141, the Supreme Judicial Court of Maine held that the statute requires that a mortgagee mail the actual recorded release document received from the registry to the mortgagor, not a copy.

Failure to comply with this statute exposes mortgagees to a claim for $500.00 in damages, plus the claimant’s attorney’s fees and costs. To avoid this potential liability, all mortgagees should immediately review their procedures to ensure that they are sending the actual recorded release returned by the registry to the mortgagors, not a copy.

This opinion is also of interest to anyone required to comply with statutory requirements. The opinion in this case could be interpreted to mean that the use of unambiguous language in a statute is always intentional by the Legislature, and therefore the unambiguous meaning of that language must always be applied, regardless of whether or not the result appears to be illogical or absurd. Because the majority position is unclear as to the applicability of this analysis, the safest strategy for anyone that is responsible for ensuring statutory compliance is to follow the unambiguous meaning of unambiguous language in a statute at all times, unless the costs of doing so are greater than the risk of adverse litigation.

The real estate attorneys at Gosselin & Dubord, P.A. are experienced practitioners whose clients include credit unions, banks, finance companies, buyers and sellers from all over the country. If you have any questions regarding real estate transactions or need representation in connection with any real estate matter in Maine, please contact Gosselin & Dubord, P.A. at 207-783-5261 or jjandreau@gosselindubord.com.

Court Skirts Issue of the Impact of Bankruptcy on Divorce Debt Enforcement by Creditor of Spouses

It is fairly common for a divorce judgment to order that one ex-spouse be solely responsible for certain joint debts, and pay those debts directly to the creditor. Such an order has no impact on the creditor, who still has the right to pursue collection of the debt from both ex-spouses. If the responsible ex-spouse (“payor”) subsequently receives a bankruptcy discharge, the creditor is then only able to seek payment from the other ex-spouse (“non-payor”).

The non-payor often points to the divorce judgment as a defense against the creditor, only to be informed that the divorce judgment is not a defense, and only gives the non-payor a right to pursue reimbursement from the payor. Due to the cost of further divorce litigation, on top of payment of the debt itself, the non-payor often does not pursue reimbursement. The recent decision by the Maine Supreme Court in Collins v. Collins, 2016 ME 51, 136 A.3d 708, gives the non-payor an additional option beyond reimbursement.

Richard Collins was ordered in a divorce judgment to pay debts owed to a credit union on which he and Suzan Collins were jointly liable. Id. at ¶ 3. Richard obtained a Chapter 7 bankruptcy discharge, and did not make the ordered payments. Id. at ¶¶ 5-6. At a show cause hearing, the trial court held that although Richard’s obligations directly to the credit union were discharged, his responsibility to Suzan to pay those debts was not, and therefore he was still required to make the direct payments to the credit union as ordered. Id. at ¶ 7.

On appeal, Richard argued he was only liable to the extent that Suzan made payments to the credit union. Id. at ¶ 8. The Law Court did not agree, stating that the divorce judgment established a parallel obligation from Richard to Suzan with regard to his payment of the credit union debt, as Richard’s payments would reduce and eliminate Suzan’s liability to that creditor. Id. at ¶ 14. As debts owed to a former spouse incurred in a divorce judgment are non-dischargable under bankruptcy law, the Court found that Richard “remains responsible for making payments directly to the creditor under that judgment notwithstanding the bankruptcy discharge.” Id. at ¶ 16.

The Collins decision declined to state whether or not a creditor would be able to directly enforce a debt against a discharged payor ex-spouse. Id. at note 3. Based on the significant penalties for attempting collection of a discharged debt, no creditor would want to be the test case on that point. However, rather than simply informing a non-payor that the divorce judgment has no impact on the creditor’s actions, in certain situations a creditor may want to recommend that the non-payor consult with an attorney regarding the rights the non-payor has to require payments be made by the discharged payor.

The creditors’ rights attorneys at Gosselin & Dubord, P.A. are experienced litigators whose consumer debt collection clients include credit unions, banks, finance companies, lessors and debt buyers from all over the country. If you have any questions regarding collection of consumer debts or need representation in connection with any creditor matter in Maine, please contact Gosselin & Dubord, P.A. at 207-783-5261 or collections@gosselindubord.com.

Sale of Property is Required in Mechanic’s Lien Enforcement Orders

Maine’s mechanic’s lien statutes (10 M.R.S.A. §§ 3251-3269) grant an automatic security interest to contractors, suppliers, surveyors and others in land and/or buildings for which they performed work or provided materials, so long as it was done pursuant to a contract with or by consent of the owner of the land and/or buildings. A court action to enforce the lien must be commenced within 120 days of ending work or providing materials.

Settlement discussions regarding this sort of litigation usually focus on how much money the property owner needs to pay to satisfy the claimant. However, owners and contractors alike should note that if the litigation results in a judgment for the claimant, the statute requires that the court orders at least a portion of the owner’s land and/or buildings be sold to satisfy the judgment.

The Maine Supreme Court made this clear in Cote Corp. v. Kelley Earthworks, Inc., 2014 ME 93, 97 A.3d 127. In that case, the lower court had initially ordered the sale of the property in question. After reviewing a motion to set aside filed by Kelley that included evidence that the property was worth over 33 times more than the principal judgment amount, the lower court amended its judgment to remove the sale order and instead awarded Cote a money judgment. Both parties appealed.

After reviewing the relevant statutes, the Court said “[w]e conclude that the mechanic’s lien statutes require a sale of Kelley’s property in order to satisfy Cote’s lien, but they do not necessarily require a sale of the entire parcel.” Id. at ¶ 17, 97 A.3d at 133. The Court pointed out that 10 M.R.S.A. § 3259 requires an order of sale but allows the court to describe “a suitable lot” to be sold, and that § 3260 allows a claimant to obtain a money judgment for any deficiency still owed after the sale of the lot.

Pursuing a mechanic’s lien claim is sometimes the only way that a contractor or supplier can get paid, and defending against a mechanic’s lien claim is sometimes required for an owner to challenge the amounts billed by a contractor or supplier. The fact that a sale of at least part of the property in question is required if the claimant obtains judgment makes this an even more effective tool for contractors and suppliers. Based on the potential risk, property owners should pay all such valid claims, and only challenge claims that the owner believes cannot be proven.

The attorneys at Gosselin & Dubord, P.A. are experienced litigators whose clients include contractors and subcontractors as well as property owners. If you have any questions regarding mechanic’s liens or need representation in connection with any such matter in Maine, please contact Gosselin & Dubord, P.A. at 207-783-5261 or collections@gosselindubord.com.

Maine’s Limitation Period Process Changed for Debt Collectors

Most of the statutory revisions made by the most recent session of the Maine Legislature went into effect on October 15, 2015. One of these revisions changed the process for determining the limitation period for actions taken against consumer debtors by debt collectors.

Pursuant to 32 M.R.S.A. § 11013(8), debt collectors may not commence a lawsuit or arbitration against a consumer debtor more than 6 years after the date of the consumer’s last activity on the debt (unless a shorter period is provided by Maine law, in which case the shorter period would apply). As 6 years was the standard limitation period prior to the enactment of this statute, the only significant change made by this portion of the statute is that debt collectors may no longer apply the 20-year limitation period when collecting on a witnessed note.

The more significant change is found later in subsection 8, which states that once the applicable limitation period expires, no subsequent activity by the consumer on the debt can revive the right of a debt collector to commence a lawsuit or arbitration regarding the debt. The limitation period was previously based solely on the date of the consumer’s last activity, regardless of the frequency of that activity.

This change only applies to debt collectors that commence a lawsuit or arbitration to collect a consumer debt. However, the definition of debt collector includes attorneys who collect debts on behalf of clients as a primary part of their practice. Therefore, although original creditors will still only need to establish the date of the most recent consumer activity if pursuing an action on their own or when represented by an attorney who does not normally collect debts, original creditors will be subject to this new statute if they choose to be represented in a collection action by an attorney who maintains a debt collection practice.

This process change will not have an immediate impact, because this statute is not retroactive. Accounts with a last consumer activity date prior to October 15, 2015 will not have to prove that the limitations period did not expire at some point during the history of the account. As time passes and accounts in collection begin to have a last activity date after October 15, 2015, debt collectors will need to ensure they obtain a complete payment history from the original creditor so they can prove that the limitation period did not expire prior to the last activity date.

The creditors’ rights attorneys at Gosselin & Dubord, P.A. are experienced litigators whose consumer debt collection clients include credit unions, banks, finance companies, lessors and debt buyers from all over the country. If you have any questions regarding collection of consumer debts or need representation in connection with any creditor matter in Maine, please contact Gosselin & Dubord, P.A. at 207-783-5261 or collections@gosselindubord.com.

Attorney Eichorn to Speak at Collection Law Seminar

Attorney Daniel J. Eichorn will speak at a seminar intended for attorneys, paralegals, bankers and collection managers entitled “Advanced Collection Law.” Attorney Eichorn will speak on the topic of recent case law and its impact on the collection process, including a thorough review of recent decisions involving debt collector liability under the Fair Debt Collection Practices Act. The seminar, sponsored by the National Business Institute, will be held in Portland on December 8, 2015. Those interested in attending can find more information here.

Attorney Eichorn has been practicing law in Maine for over fifteen years. He has represented creditors in all aspects of debt collection including foreclosures, repossessions, unsecured collections and creditor bankruptcy representation. Attorney Eichorn’s clients include credit unions, banks, finance companies, lessors and debt buyers from all over the country. If you need assistance with debt collection and/or judgment enforcement in the State of Maine, please contact Attorney Daniel J. Eichorn at 207-783-5261 or dje@gosselindubord.com.

LIMITATIONS ON CHILD SUPPORT COLLECTORS

Maine law places certain limitations on any person or entity (including an attorney), other than the Department of Health and Human Services, who seeks to collect child support debt on behalf of another.  If the debt collector provides the child support collection services on a contingent fee basis, then the contingent fee can only be based on the amount of the child support debt owed at the time that the contingent fee agreement is entered into.  Contingent fees cannot be charged for collecting current or future child support payments nor can collection fees be charged for any child support payments collected primarily through the efforts of a governmental agency.

Whether the collection services are provided on a contingent fee basis or on some other basis, such as hourly or flat fee, the collection agreement must be in a writing which is dated and signed by the person who is owed the past due child support.  The collection agreement must contain a full and detailed description of the services to be performed for the support obligee and the terms and conditions of payment. The collection agreement may not contain a penalty for termination at any time by the person who is owed child support.  The statute which imposes all of these restrictions on child support collectors can be found at 19-A M.R.S. § 2109.

Lastly, Maine law provides that child support collectors are subject to the provisions of the Maine Fair Debt Collections Practices Act.

The creditors rights attorneys at Gosselin & Dubord, P.A. are experienced litigators who have successfully prosecuted child support collection cases.  If you have any questions regarding collection of past due child support or need representation in connection with any creditor matter in Maine, please contact Attorney David R. Dubord at 207-783-5261, extension 212 or drd@gosselindubord.com.

WHEN CAN A WORKERS’ COMPENSATION INSURER ASSERT A SUBROGATION CLAIM AGAINST AN UNINSURED MOTORIST POLICY?

Workers’ compensation insurers often pay compensation or benefits under Maine’s Workers’ Compensation Act of 1992, 39-A M.R.S. § 101 et seq., to or on behalf of workers whose injuries are caused by third parties. In those cases where the third party is legally liable for the worker’s injuries, Maine law gives to the workers’ compensation insurer the subrogated right to recover the compensation or benefits paid by the insurer from the third party liable for the worker’s injuries. 39-A M.R.S. § 107. What happens, however, when the third party responsible for the worker’s injuries is judgment proof and has no insurance to cover the insurer’s claims against him? In some cases, the insurer may be able to recover from uninsured/underinsured motorist coverage available to the injured worker.

In the case of Wallace v. City of South Portland, 592 A.2d 1076 (Me. 1991), the Maine Law Court held that the statute allowing a workers’ compensation insurer to recover from a “third person liable for the injury” included the right to recover from an uninsured motorist insurer and not just from the third party responsible for the injury. However, in the Wallace case, the insurance policy providing the uninsured motorist coverage was one that had been purchased by the injured worker’s employer, not by the injured worker himself. The Court distinguished between insurance policies purchased by the injured worker, which are exempt by statute from any subrogation claim by the workers’ compensation insurer, and policies which are purchased by third parties which may provide coverage to the injured worker. Hence, a workers’ compensation insurer’s subrogation claim extends only to insurance policies that are not purchased by the injured worker.

The Wallace case predates Maine’s current workers’ compensation act, which went into effect in 1992. However, the relevant wording of two statutes relied upon by the Wallace Court in reaching its decision were carried over into the current workers’ compensation act verbatim. See 39-A M.R.S. § 107 and § 221(3)(F). There have been no reported decisions in Maine regarding the extent of a workers’ compensation insurer’s claim against uninsured motorist coverage since the Wallace decision.

If you are an insurer in need of assistance regarding subrogation claims for insureds located in the State of Maine, the attorneys at Gosselin & Dubord, P.A. located in Lewiston, Maine have extensive experience with insurer representation and stand ready to assist you. Please contact Attorney David R. Dubord at (207) 783-5261 or drd@gosselindubord.com.

PROMPT CREDITOR ACTION NECESSARY TO PRESERVE CLAIMS AGAINST DECEASED DEBTOR’S ESTATE

Lenders, credit card companies, debt buyers, and other creditors often hold claims against individuals who have died. In Maine, the process for enforcing claims against deceased debtors is governed by the Maine Probate Code, which is codified in Title 18-A of the Maine Revised Statutes. If the decedent’s estate is solvent, then creditors will receive full or partial payment of their claims, but only if the creditors act in a timely fashion to preserve their claims against the decedent’s estate.

As a rule, a claim against a deceased debtor is not extinguished simply because the debtor has died. Section 3-817 of the Maine Probate Code provides that “[n]o personal action or cause of action is lost by the death of either party, but the same survives for and against the personal representative of the deceased, except that actions or causes of action for the recovery of penalties and forfeitures of money under penal statutes do not survive the death of the defendant.” 18-A M.R.S. § 3-817. Claims which survive the debtor’s death must nevertheless be asserted against the decedent’s estate in a timely manner or be forever barred.

Under Maine’s Probate Code, creditor claims which arose before the decedent’s death must be “presented” (a term used in the Probate Code) within certain time limits in order to be considered for payment in the administration of the estate. The creditor’s claim can be presented in one of two ways: the creditor can send to the personal representative of the estate or file with the appropriate Probate Court a written statement of claim containing basic information required by statute, or the creditor may commence an action against the personal representative of the estate in an appropriate state court. 18-A M.R.S. § 3-804. Whichever method of presenting the claim is used, the creditor must present the claim within the strict time limits specified in the Maine Probate Code or the claim will be barred and therefore not paid by the personal representative of the estate. The time limit for presentation of claims set forth in the Probate Code is the earlier of the following: 1. Four months from the date of the first publication of notice to creditors in the newspaper; 2. Sixty days after the personal representative’s mailing of a notice to the creditor to present its claim; or 3. Nine months after the decedent’s death. 18-A M.R.S. § 3-803.Given the short time period for presenting claims against a decedent’s estate, creditors must be vigilant and take action as soon as possible after the decedent’s death to present claims against the estate. The claim presentation deadline is not extended because the creditor was not aware of the decedent’s death, putting the onus on creditors to constantly inquire concerning the possibility that a debtor has died. Although information concerning probated estates is easily obtained by conducting a search on the Maine Probate Courts’ website, www.maineprobate.net, it is not as easy to obtain information about deceased individuals whose estates have not yet been probated. Claims against deceased persons whose estates have not yet been admitted to probate can be presented and preserved by filing the claim with the appropriate Maine Probate Court along with a demand for notice 18-A M.R.S. § 3-804(4), but this presumes that the creditor has learned that the debtor has died.

The Maine Probate Code’s deadlines for presentation of claims do not apply to certain classes of claims, e.g., secured claims where the creditor wishes to proceed against the collateral only or claims covered by insurance up to the limits of the insurance policy only. 18-A M.R.S. § 3-803(c). Additionally, other statutes of limitation or out of state claims barring statutes may bar a creditor’s claim even before the Maine Probate Code’s bar dates have passed. 18-A M.R.S. § 3-802; 18-A M.R.S. § 3-803(a-1). Different bar dates apply to claims arising after the date of the decedent’s death.

Lastly, even if a claim is presented in a timely fashion, additional action may be required on the part of the creditor to preserve the claim. For example, if the personal representative of the estate disallows a claim, the creditor must initiate a proceeding to enforce the claim within sixty days of the personal representative’s mailing of a notice of disallowance to the creditor. 18-A M.R.S. § 3-804(3). Failure to take such action will also result in the claim being barred and therefore unpaid by the personal representative of the estate.

If you are a creditor holding a claim against a deceased debtor who resided in the State of Maine at the time of his or her death, the attorneys at Gosselin & Dubord, P.A. located in Lewiston, Maine have extensive experience with creditor representation in connection with probate claims. Please contact Attorney David R. Dubord at (207) 783-5261 or drd@gosselindubord.com.