Opinion
No. CV03-0348912 S
May 11, 2004
MEMORANDUM OF DECISION
A. SKELETAL SIMPLIFIED FACTS
Present and former title holders to a home ask this court to determine that a mortgage arranged on said realty by a recent interim title holder, whose ownership was of arguably questionable legitimacy, be deemed invalid or unenforceable against the present legitimate title holders. The lending bank, holding that mortgage, seeks the opposite, that is, a holding that its mortgage can be enforced against the present owners, who were not involved in the loan, which had been arranged by the interim holder. Each party fails to persuade the court on these cross motions for summary judgment. As to a portion of the money, however, the bank presents a compelling equitable argument.
The skeletal facts are chronologically set forth:
— aged or infirm owner grants power of attorney to stepson;
— so armed, stepson quitclaims the owner's property to himself;
— son becomes conservator for original owner, and sues stepson, seeking to set aside the quitclaim deed;
— contemporaneously, however, the stepson was mortgaging the property he had quitclaimed to himself for $180,000 and pays off the older $50,000 mortgage from the new proceeds;
— scant days before the new lender-to-stepson recorded its mortgage, the conservator-son places a lis pendens on the land records;
— stepson pays the new mortgage for a period of time, but largely dissipates the residue via an admixture of expenditures, licit and illicit;
— the lawsuit filed by the conservator-son against the power-of-attorney stepson is somewhat judicially resolved against the stepson in action;
— the court in said underlying suit ruled that the evidence failed to support the notion that the stepson's power of attorney was the result of undue influence and/or grantor's lack of capacity; however, the court did find that the stepson breached his fiduciary duty and ordered reconveyance of the property to the conservator-son (accomplished) and repayment of the moneys (not accomplished);
— the lending bank was not a party to the underlying action; apparently learning of the conservator-son's unwillingness to pay off the loan given the stepson, the bank indicated it would sue; the conservator-son brought this action seeking to preclude said bank, which then counterclaimed, seeking to validate its loan, noting that, in the underlying action, the court did not strike down the validity of the power-of-attorney to the borrowing stepson.
This footnoted factual recitation is more detailed. In 1997, the father, Alexander B. Williams, Sr. (Williams, Sr.), owned a family home that was subject to an existing mortgage. On August 20, 1998, Williams, Sr. executed a durable power of attorney, naming his stepson, William C. Perkins, as attorney-in-fact. On January 13, 1999, pursuant to the power of attorney, Perkins executed a quitclaim deed on the property to himself.
On March 9, 2001, the Probate Court appointed Alexander B. Williams, Jr. (Williams, Jr.) conservator of Williams, Sr.'s estate. On April 2, 2001, Williams, Jr., as conservator of the estate and person of Williams, Sr., commenced an action against Perkins to set aside the quitclaim deed. On the same day, April 2, 2001, First Franklin Financial Corporation, the defendant in the current matter, entered into a rescissionable mortgage transaction whereby it agreed to loan Perkins the sum of $180,000 provided Perkins did not rescind the transaction within three business days. Shortly thereafter, on April 4, 2001, Williams, Jr. filed and recorded a lis pendens with regard to the property. On a date not known to the court, but between the April 4 lis pendens and the April 9, 2001 recordation of lender's mortgage, the funds were provided to stepson-borrower. Subsequently, on April 9, 2001, the deed to the property was duly recorded by the mortgagee, First Franklin, in the Danbury land records.
On August 13, 2002, a judgment was entered by the Superior Court in the Judicial District of Danbury in favor of Williams, Jr. ordering Perkins to convey his interest in the property back to Williams, Sr. On January 29, 2003, Perkins complied with the court order and executed a quitclaim deed of his interest in the property back to Williams, Sr. On April 22, 2003, Williams, Jr. initiated the current action.
Williams, Jr. avers that First Franklin is bound by the April 13, 2002 judgment and as such, its mortgage is invalid. On December 31, 2002, Williams alleges to have sent First Franklin a letter, by certified mail, notifying them of the judgment and requesting release of the mortgage. Williams, Jr. alleges that First Franklin refused to release the mortgage, thus compelling him to file suit in the instant action. The first count in the amended complaint seeks an order declaring First Franklin's mortgage on the property invalid as a lien against real estate pursuant to General Statutes § 49-13 as well as money damages, attorneys fees and other appropriate relief. The second count seeks an order compelling First Franklin to execute and deliver to Williams, Sr. a release of its mortgage on the property as well as money damages, attorneys fees and other appropriate relief pursuant to General Statutes § 49-8(c). The third count seeks an order declaring the imposition of a constructive trust upon the property for the benefit of Williams, Sr., thereby rendering First Franklin's mortgage invalid.
Consistent with Practice Book § 17-44, Williams, Jr. moved for summary judgment as to counts two and three arguing that there is no genuine issue of material fact and that, as a matter of law, he is entitled to judgment in his favor. First Franklin opposed the motion for summary judgment and filed a cross motion seeking the same relief in its favor.
In the original action, Williams v. Perkins, Superior Court, judicial district of Danbury, Docket No. CV 01 0342329 (August 13, 2002, Radcliffe, J.), Williams, Jr. sought to invalidate Perkins' power of attorney alleging, inter alia, undue influence and lack of capacity. The court, Radcliffe, J., ruled that the evidence presented failed to support allegations of undue influence or lack of capacity, however did find that Perkins breached his fiduciary duty and accordingly ordered reconveyance and repayment to Williams, Jr. as conservator of Williams, Sr.'s estate.
B. DISCUSSION
The plaintiff-conservator argues an absence of material fact and seeks declaratory relief against the bank. Specifically, plaintiff asserts that stepson's heavier encumbrance of the property is invalid because the property should be deemed subject to a constructive trust for the benefit of Williams, Sr. when the stepson's mortgage was consummated. The plaintiff contends, therefore, that the lender's refusal to release the mortgage was illegal as a matter of law. In support, plaintiff has submitted a copy of the notice of right to cancel the rescindable mortgage contract signed by borrowing stepson, and a duly sworn affidavit of conservator-son, attesting to the fact that the lender was provided and thus put on notice of the court decision in the underlying action.
"A constructive trust arises contrary to intention and in invitum, against one who, by fraud, actual or constructive, by duress or abuse of confidence, by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either has obtained or holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy . . . A constructive trust arises whenever another's property has been wrongfully appropriated and converted into a different form . . . [or] when a person who holds title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it." (Internal quotation marks omitted.) Cadle Co. v. Gabel, 69 Conn. App. 279, 288 (2002).
"The elements of a constructive trust are the intent by a grantor to benefit a third person, the transfer of property to another who stands in a confidential relationship to the grantor with the intent that the transferee will transfer the property to the third person, and the unjust enrichment of the transferee if the transferee is allowed to keep the property. A constructive trust is created by operation of law when these elements are present." Deborah Ide v. Dawn O'Dell, Superior Court, judicial district of New London, Docket No. CV 03 559927 (May 19, 2003, Martin, J.).
In opposition, the lender notes that the court's judgment in the underlying action did not invalidate the power of attorney, urging that therefore the quitclaim deed (stepson to himself) was a valid conveyance. Accordingly, lender argues its mortgage is legally attached to the property, enforceable against the original and current owners despite that they were no part of the loan transaction. Lender denies that there was a constructive trust imposed on the property via the underlying action, which is, literally speaking, true.
A determination as to whether a constructive trust was created by the power of attorney necessarily requires an examination of the grantor's intent, which is most often inappropriate in a summary judgment setting. Suarez v. Dickmont Plastics Corp., 229 Conn. 99, 111 (1994).
Each party has asked this court to make an outcome-determinative ruling in a setting where the court would feel profoundly uninformed as to many facts which would illuminate where the equities lie and what law governs. (This is particularly true regarding the son's lis pendens. See footnote 4.)
Inherent in this discomfort is this court's unwillingness to be bound by law-of-the-case suggestions urged here by lender based on the resolution by another judge of the conservator-son's suit to set aside the quitclaim deed. This court believes it is best to regard that court's April 2002 decision as somewhat in the nature of dicta as to the specific issue of the legitimacy of the power-of-attorney to the stepson. That opinion merely held that the conservator-son failed to meet his burden of proving that the father lacked capacity and/or that the power of attorney was the product of undue influence. That is to say, the court having decided that the stepson should return the new mortgage money and, indeed, "return" the property to the conservator (estate) can hardly be deemed to have bound a later court to accept the notion that the precipitating grant of the power of attorney was, in any later different context, unassailable. Indeed, there is an intellectual tension between that court's ordered return of money and property and any suggestion of legitimacy as to the issuance/procurement of the power of attorney and the loan arranged under it. If anything, a new court would have to regard the court-ordered actions as at least intellectually consistent with illegitimacy regarding the power of attorney.
The doctrine of law of the case "expresses the practice of judges generally to refuse to reopen what has been decided and is not a limitation on their power. Where a matter has previously been ruled upon interlocutorily, the court in a subsequent proceeding in the case may treat that decision as the law of the case, if it is of the opinion that the issue was correctly decided, in the absence of some new or overriding circumstance. In Wagner v. Clark Equipment Co., 259 Conn. 114, 130-31 (2002), the court stated that [a] judge is not bound to follow the decisions of another judge made at an earlier stage of the proceedings, and if the same point is again raised he has the same right to reconsider the question as if he had himself made the original decision . . . [O]ne judge may, in a proper case, vacate, modify, or depart from an interlocutory order or ruling of another judge in the same case, upon a question of law." (Citations omitted; internal quotation marks omitted.) Gagne v. Vaccaro, 80 Conn. App. 436, 449 (2003).
Lender would have this court transform the earlier ruling into an affirmative determination of competency and legitimacy. As noted, it is less than that. It is possible for two different parties, in two cases, to strive to establish opposite conclusions and for each to fail. Thus, it seems to this court that the lender seeks to run too far on the argued strength of the earlier court finding, which at its essence, held only that the borrowing stepson breached his fiduciary duty.
Appropriate resolution of this matter may require a hugely more detailed exploration of issues surrounding the power of attorney, and the contemplation of and the granting of the loan to the stepson. For example, did the bank know (or inquire) of the conservator's acquiescence in or ignorance of the stepson's borrowing? Did it know of the conservator? Need it have explored the background of the power of attorney? Was the bank acting diligently in lending to the stepson against the backdrop of there being a conservator for an owner, the nature of whose need for a conservator was unknown? Should the bank have sought a co-signature from the conservator? Do loan documents address a broader lender recourse where power of attorney-borrower to be legally dispossessed?
The above paragraph is not meant to set out the entirety of the possibly relevant issues or even a partial catalog of correct issues. It is rather an illustration of the breadth of the informational void which prompts this court to refuse at this time to determine the outcome. This is particularly difficult where lender urges law of the case regarding the underlying determinations as to the power of attorney, but ignores that the legally approved current owner was not the lender's obligee.
C. THE STEPSON'S PAYOFF OF THE ORIGINAL MORTGAGE
The bank has argued that, regardless of whether the conservator-son's effort to invalidate the mortgage is successful, the bank is entitled to $50,000 of the money used by borrowing-stepson to pay off the original mortgage. This point seems well taken. To explain:
It is one thing for this court to experience apprehension regarding the rights of the lender to security (in the real estate "owned" by stepson when it loaned him $180,000) for the CT Page 7666 full amount loaned. But it is entirely another when one considers that conservator-son has greatly benefited from $50,000 of lender's money, which was used by borrowing stepson to lift such a burden from the conservator. Equity notions of unjust enrichment would clearly suggest an entitlement in lender to a return of that from the conservator-son. This court has not made a determination as to how said entitlement of the lender is to be honored and will leave it to the parties to resolve within thirty (30) days of the issuance of this decision. A logical format would be for papers to be drawn obliging conservator to terms extant at the time this lender loaned. Such a transaction would be without prejudice to either side as to the unresolved arguments throughout, regarding the balance of the loan amount.
The court is, of course, aware that opinion (like that of the prior court in the underlying opinion) leaves unresolved the issues raised by each party surrounding the significance of the lis pendens filed by conservator-son on April 4, 2002, days before lender recorded its mortgage with stepson. Having committed the judicial department to a full-blown exposure of the entire range of fact issues, a resolution of this one would be to undertake unnecessarily this heavy lifting involved without being dispositive. The bank's arguments against meaning or efficacy of the son-conservator's lis pendens specifically depends upon whether the bank was obliged to investigate any issues motivating the lis pendens during a three-day period (imposed by law) during which borrowing stepson could have refused the loan. It seems to this court that such an inquiry (obviously not undertaken by the lender) now need be accomplished by a court. Thus, this issue is heavily dependent upon the legitimacy of the power-of-attorney which moved the realty in the first place. Hence, nothing is advanced by a gratuitous effort to resolve the lis pendens arguments at this time. Obviously, the conservator-son's argument that the bank should have balked or hesitated upon the filing of the lis pendens, leads one to the same inquiry into underlying legitimacy of the power-of-attorney and the following quitclaim.
Nadeau, J.