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Fraser Emp. F.C.U. v. Labbe
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MAINE SUPREME JUDICIAL COURT				Reporter of Decisions
Decision: 	1998 ME 71
Docket:	Aro-97-257
Submitted 
 on Briefs:	March 9, 1998
Decided:	April 6, 1998

Panel:  WATHEN, C.J., and ROBERTS, CLIFFORD, RUDMAN, DANA, LIPEZ, and SAUFLEY, JJ.


FRASER EMPLOYEES FEDERAL CREDIT UNION v. LYMAN LABBE

PER CURIAM	

	[¶1]  Lyman Labbe appeals from a judgment entered in the Superior
Court (Aroostook County, Marsano, J.) finding him liable to Fraser
Employees Federal Credit Union (FEFCU) on various secured and unsecured
promissory notes, and ordering the foreclosure and sale of certain real and
personal property.   Labbe argues that the court erred by not discharging
him from liability on the promissory notes, and that the court exceeded the
bounds of its discretion by imposing sanctions on him pursuant to M.R. Civ.
P. 11.   We affirm the judgment. 
I.
	[¶2]  The pertinent facts can be summarized as follows.  In February
1990 Lyman Labbe executed and delivered to Fraser Employees Federal
Credit Union (FEFCU) a $50,000 note and real estate mortgage.  In June
1990 Labbe executed and delivered to FEFCU five additional promissory
notes, four of which were secured by various pieces of personal property. 
One of the notes was unsecured.
	[¶3]  In June 1995 FEFCU commenced a foreclosure action pursuant
to 14 M.R.S.A. §§ 6321-6325 (1980 & Supp. 1997), alleging Labbe had
defaulted on the real estate loan and had breached conditions of the
mortgage by failing to make timely payments.  Several weeks later FEFCU
commenced an action to recover on the five personal property notes, which
it alleged were also in default.{1}  Labbe's answers asserted a total of twenty
affirmative defenses to the real estate foreclosure action,{2} as well as three
affirmative defenses to the action on the personal property loans.{3}  Labbe
also filed a seven-count counterclaim in the real estate action{4} and a four-
count counterclaim in the action on the personal property loans.{5}
	[¶4]  At his jury-waived trial, Labbe testified about three issues which
now form the primary basis of his appeal.  First, each of the personal
property notes contains a signature line, which Labbe admitted signing and
dating.  Each note also contains a separate section, entitled "Credit
Insurance Application," in which the borrower must indicate whether he
wishes to purchase credit insurance.  Labbe admitted that he signed the
credit insurance section, but he denied having written the date "4/7/93"
and his date of birth next to his signature.{6}  Second, to perfect its security
interest in several personal property items, FEFCU filed two UCC-1
financing statements with the Secretary of State. Although Labbe
acknowledged that he signed and understood the security agreements, he
denied having signed either financing statement.  
	[¶5]  Third, Labbe testified about a meeting he had with FEFCU's
president and loan manager in November 1994 to discuss his loans, which
were in default.  According to Labbe, the parties reached an agreement
during the meeting to consolidate his existing loans, and FEFCU did not
inform him that approval of the loan was subject to any contingencies until
after the meeting had concluded.  According to FEFCU's loan manager,
however, the parties reached only a tentative agreement at the November
1994 meeting, and Labbe was informed during the meeting that the
consolidated loan was conditioned upon satisfactory credit and title
examinations.
	[¶6]  The court entered a judgment in favor of FEFCU on both actions
and on Labbe's counterclaims, and imposed a $1,200 sanction on Labbe
pursuant to M.R. Civ. P. 11 based on its finding that Labbe's counterclaims
and affirmative defenses were "without factual basis or merit" and were
interposed for delay.  This appeal followed.
II.
	[¶7]  Labbe contends that the court erred by failing to conclude that
he had been discharged from liability on the promissory notes as a result of
FEFCU's unauthorized insertion of dates on the notes, its unauthorized
reproduction of his signature on the financing statements, and its November
1994 agreement to consolidate his existing loans.  His arguments are utterly
without merit.  First, FEFCU's insertion of the date "4/7/93" and his date of
birth next to his signature in the credit insurance portion of the notes had
no effect on his obligations and did not discharge him from liability.  See 11
M.R.S.A. § 3-1407 (1995 & Supp. 1997) (alteration of negotiable
instruments).  Second, Labbe's liability on the promissory notes was
unaffected by the alleged deficiencies in the UCC-1 financing statements,
which govern the relative rights of competing creditors.  See id. § 9-203
(attachment and enforceability of a security interest); id. §§ 9-301 to 9-318
(rules of priority).  Finally, the record provides ample support for the trial
court's conclusion that the consolidated loan discussed at the November
1994 meeting was expressly contingent upon a satisfactory title
examination.  See Liberty Group v. 73 India Street Assocs., 642 A.2d 1344,
1345 (Me. 1994) (trial court's findings of fact will not be overturned unless
clearly erroneous).
III.
	[¶8]  Labbe argues that the court exceeded the bounds of its discretion
in imposing sanctions pursuant to M.R. Civ. P. 11 based on its conclusion
that Labbe's affirmative defenses and counterclaims were interposed for
delay.{7}  We review a trial court's imposition of sanctions only for an abuse of
discretion.  See Chiappetta v. LeBlond, 544 A.2d 759, 760 (Me. 1988).  
	[¶9]  Labbe filed a total of 23 affirmative defenses and 11 counterclaim
counts, some of which he agreed to withdraw about five months after the
actions were commenced.{8}  See supra notes 2-5.  The court expressly found
that Labbe had failed to present any evidence in support of many of his
affirmative defenses and counterclaims, and that they were interposed solely
for the purpose of delaying the foreclosure proceedings.  Contrary to Labbe's
contention that Rule 11 sanctions must be limited to reimbursement for
attorney fees or expenses incurred as a result of the improper pleading,
Rule 11 contains no such requirement.   Rather, the rule authorizes the
court to impose "an appropriate sanction," which may include attorney fees
and expenses.  The court acted well within the bounds of its broad
discretion by imposing a $1,200 sanction on Labbe.  
IV.
	[¶10]  Finally, FEFCU asks us to award it additional costs pursuant to
M.R. Civ. P. 76(f).{9}  We will exercise this power when "an appeal is obviously
without any merit and has been taken with no reasonable likelihood of
prevailing, and results in delayed implementation of the judgment of the
lower court; increased costs of litigation; and a dissipation of the time and
resources of the Law Court." Auburn Harpswell Ass'n v. Day, 438 A.2d 234,
238-39 (Me. 1981); see International Silver Co. v. DiGirolamo, 475 A.2d
1143, 1145 (Me. 1984).  Labbe has filed a frivolous appeal intended only for
delay.  We award to FEFCU treble costs plus $500, to be applied to FEFCU's
attorney fees.  See 14 M.R.S.A. § 1802 (1980 & Supp. 1997); M.R. Civ. P.
76(f).    
	The entry is:
		Judgment affirmed.  Further ordered that defendant
pay to plaintiff treble costs and $500, to be applied
toward FEFCU's attorney fees.

Attorney for the Plaintiff: Robert Bellefleur, Esq. 490 Main St. Madawaska, Maine 04756 Attorney for the Defendant: Richard C. Cleary, Esq. CLEARY & GORDON, P.A. 21 Military St. Houlton, Maine 04730
FOOTNOTES******************************** {1} These actions were later consolidated for the purposes of trial. {2} Labbe's affirmative defenses consisted of the following: (1) failure to state a claim for which relief can be granted; (2) failure to mitigate damages; (3) laches; (4) "failure to abide by and conform to all conditions precedent to the assertion of this cause of action"; (5) payment in full; (6) accord and satisfaction; (7) statute of frauds; (8) failure to provide a notice of right to cure pursuant to 9-A M.R.S.A. § 5-110; (9) failure of consideration; (10) fraud; (11) estoppel; (12) unconscionability; (13) waiver; (14) illegality; (15) license; (16) "arbitration and award"; (17) failure "to aver that the principal sum claimed by the Plaintiff may not be computed by the exhibits incorporated into the Plaintiff's complaint"; (18) payment; (19) "breach of duties under the contract"; and (20) "failure to plead compliance with all conditions precedent." Following an ADR conference in November 1995, Labbe withdrew affirmative defenses #1, 3, 6, 7, 12, 13, 15, and 16. {3} Labbe's affirmative defenses consisted of the following: (1) failure to state a claim for which relief can be granted; (2) statute of frauds; and (3) that "title to said tractor vested in the Defendant at the time of said conveyance." Following an ADR conference in November 1995, Labbe withdrew these affirmative defenses. {4} Labbe's original counterclaim alleged (1) that FEFCU had violated 15 U.S.C. § 1640 by improperly changing the method of calculating interest; (2) abuse of process; (3) fraudulent misrepresentation; (4) breach of fiduciary duty; (5) libel; (6) intentional infliction of emotional distress; and (7) negligent infliction of emotional distress. Following an ADR conference in November 1995, Labbe agreed to dismiss the libel and emotional distress counts. {5} Labbe's counterclaim alleged fraud and deceit; interference; impairment of credit; and slander of title. {6} A FEFCU representative acknowledged that FEFCU employees were instructed by federal bank examiners to insert the missing dates in red ink in such circumstances, and that the insertion of dates in the credit insurance section was intended to have no effect on the terms of the notes. {7} M.R. Civ. P. 11 provides in pertinent part: The signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading or motion; that to the best of the signer's knowledge, information, and belief there is good ground to support it; and that it is not interposed for delay. . . . If a pleading or motion is signed with intent to defeat the purpose of this rule, the court, upon motion or upon its own initiative, may impose upon the person who signed it, upon a represented party, or upon both, an appropriate sanction, which may include an order to pay the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading or motion, including a reasonable attorney's fee. {8} Although Labbe eventually withdrew some of his affirmative defenses and counterclaims before trial, see supra notes 2-4, FEFCU was nevertheless required to research, prepare for, and respond to Labbe's allegations during the interim. {9} M.R. Civ. P. 76(f) provides in pertinent part: If the Law Court determines that an appeal . . . is frivolous or instituted primarily for the purpose of delay, it may award to the opposing parties or their counsel treble costs and reasonable expenses, including attorney's fees, caused by such action.