Bank of America, N.A. v. Marge R. Bertocki et al. (2012)

MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT

Facts

On December 30, 2008, the plaintiff, Bank of America, N.A., initiated this suit by service of process upon the defendant, Marge R. Bertocki (Marge Bertocki), as the heir and beneficiary of the decedent, Brian S. Bertocki (Brian Bertocki).   Subsequently, Marge Bertocki, as an individual, was added as a defendant, and she was served with process on February 18, 2009.

The operative complaint is the plaintiff's second amended complaint, dated August 4, 2010.   In its complaint, the plaintiff seeks to foreclose upon a mortgage to which the plaintiff and Brian Bertocki were signatories.   The mortgage is secured by property at 316 Forbes Street, East Hartford (the property), in which the decedent and Marge Bertocki were joint tenants.   The plaintiff seeks to hold Marge Bertocki liable as an obligor on the mortgage via equitable remedies.   The plaintiff brings causes of action against Marge Bertocki for equitable subrogation (count one), equitable subordination (count two) and equitable mortgage (count three).   As a result of the first three counts, the plaintiff seeks to establish that Marge Bertocki is the obligor, and based thereon, the plaintiff seeks to foreclose on the mortgage (count four).

Specifically, the plaintiff alleges that on January 12, 2000, Brian Bertocki and Marge Bertocki purchased the property as joint tenants via quitclaim deed.   On March 11, 2002, a mortgage was given to Travelers Bank & Trust, F.S.B. (Travelers) on the property, which was subsequently recorded.   On March 4, 2003, Brian Bertocki refinanced the Travelers mortgage and executed a promissory note to Fleet Bank for $85,000, and secured the note with a mortgage on the property.   The Fleet mortgage paid off the Travelers mortgage, to which both Brian and Marge Bertocki were allegedly mortgagors.   On June 4, 2008, Brian Bertocki died, with a balance remaining to be paid to the plaintiff.   On December 30, 2008, the plaintiff commenced this action to foreclose its mortgage on the property.

Presently before the court is the defendants' motion for summary judgment as to all counts on the ground that there are no genuine issues of material fact and the court should enter judgment in their favor as a matter of law.   The plaintiff has filed opposition, and both parties have supplied memoranda and supporting documentation.

Discussion

“Summary judgment shall be rendered forthwith if the pleadings, affidavits and other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law ․

“In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party ․ The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law ․ and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact.”  (Internal quotation marks omitted.)  Wilton Meadows Ltd. Partnership v. Coratolo, 299 Conn. 819, 823, 14 A.3d 982 (2011).

I

Equitable Subrogation and Subordination

As to the first two counts of the complaint, the defendants move for summary judgment on the ground that there are no issues of material fact and judgment should enter in their favor because the doctrines of equitable subrogation and subordination do not apply to an existing fee holder whose interest in the property has been properly recorded.   There is no dispute that (a) Marge Bertocki was a joint tenant in the subject property with a recorded interest and (b) Marge Bertocki was not named on the mortgage between Fleet and Brian Bertocki.   Thus, the defendants argue for summary judgment on the grounds that plaintiff failed to plead or prove that Marge Bertocki was not included in the mortgage by reason of excusable neglect, and that Marge Bertocki did not benefit from the subject mortgage and, therefore, the doctrines are not applicable.

By contrast, the plaintiff argues that the doctrines of equitable subrogation and subordination apply to fee holders and can be used whenever a party pays off a debt owed by another.   They also argue that Marge Bertocki was only left off of the Fleet mortgage by reason of excusable neglect, and further that she, despite not being named in the Fleet mortgage, benefitted from the Fleet mortgage because it paid off the Travelers mortgage, to which she was a party.

A

Equitable Subrogation

As a threshold issue, the court examines whether the doctrine of equitable subrogation is applicable to a fee holder with a prior recorded interest.   It is clear that equitable subrogation applies to disputes between lienholders.   See Deutsche Bank National Trust Co. v. DelMastro, 133 Conn.App. 669, 675, cert. denied, 304 Conn. 917, (2012).  (“The doctrine of equitable subrogation provides an exception to the first in time, first in right rule and has been applied in certain limited circumstances to rearrange the priorities of parties in a case.”  (Internal quotation marks omitted.)).

However, the doctrine has been applied broadly.  “The object of [equitable] subrogation is the prevention of injustice.   It is designed to promote and to accomplish justice, and is the mode which equity adopts to compel the ultimate payment of a debt by one who, in justice, equity, and good conscience, should pay it ․ As now applied, the doctrine of ․ equitable subrogation is broad enough to include every instance in which one person, not acting as a mere volunteer or intruder, pays a debt for which another is primarily liable, and which in equity and good conscience should have been discharged by the latter ․ (Emphasis added.)  Allstate Ins. Co. v. Palumbo, 296 Conn. 253, 259–60, 994 A.2d 174 (2010).   Therefore, the doctrine of equitable subrogation may apply to fee holders.

However, the court must also examine the bounds of the doctrine.  “Although [s]ubrogation is a highly favored doctrine ․ which courts should be inclined to extend rather than restrict ․ [T]here is no general rule to determine whether a right of subrogation exists.   Thus, ordering subrogation depends on the equities and attending facts and circumstances of each case ․ The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court.”  (Internal quotation marks omitted.)  Allstate Ins. Co. v. Palumbo, supra, 296 Conn. 260.

“In dealing with equitable subrogation claims, excusable ignorance must be pleaded and proven before relief can be granted ․ In light of this, [the Superior Court] granted a motion to strike on the grounds that the defendant failed to plead a key element of equitable subrogation.   It is because of the ignorance of intervening rights that, in appropriate cases, equitable subrogation may be available to provide relief.”  (Internal quotation marks omitted.)   Bank of Smithtown v. PRA at Norwich, Superior Court, judicial district of New London, Docket No. CV 10 6005315 (July 1, 2011, Devine, J.) (52 Conn. L. Rptr. 184, 185).

The court must then determine whether the plaintiff has pleaded excusable neglect or ignorance to the defendants' prior interest in the property.   The only paragraph in the complaint that pleads any negligence or ignorance states:  “Due to an error at the closing of said mortgage, Marge R. Bertocki, a record owner of said property, neglected to execute said mortgage.”   The defendants have attached the affidavit of Jo–Ann Sensale, an attorney for plaintiff's counsel, that demonstrates that the plaintiff was aware of Marge Bertocki's interest in the property at the time the mortgage was executed.

Nothing in the complaint, nor any evidence submitted by the plaintiff addresses why the plaintiff's neglect was excusable or that the plaintiff was excusably ignorant of Marge Bertocki's interest in the property.   Also, there is no indication in any piece of evidence that Marge Bertocki was intended to be a party to the mortgage.   Her name is not on any of the documents, nor is there any evidence that she was even aware that the mortgage had been given.   Simply because Marge Bertocki had an interest in the property, does not require that she was a party to the mortgage.   In fact, our legislature has contemplated the circumstance in which one joint tenant gives a mortgage for his interest in the property, without binding another joint tenant.  General Statutes § 47–14e states:  “A mortgage or lease executed by less than all of the joint tenants is a severance only to the extent that, upon the death of any joint tenant joining in the mortgage or lease, the mortgage or lease will continue to encumber the interest accruing to the surviving joint tenant or tenants by reason of that death.”

Further, the court in Deutsche Bank National Trust Co. v. DelMastro, supra, 133 Conn.App. 678, struck a claim for equitable subrogation where the plaintiff could not plead ignorance to a prior lien because “regardless of whether there was a lack of actual notice, the plaintiff had constructive notice because the lien was recorded.”   Likewise, here, Marge Bertocki's interest was recorded and the plaintiff has failed to provide any excuse for why it was ignorant of it or why it failed to include her on the mortgage.

Additionally, there is no evidence that Marge Bertocki benefitted from the mortgage.   While she is listed on the Travelers mortgage, she is listed as a nonobligor.   As previously stated:  “equitable subrogation is broad enough to include every instance in which one person, not acting as a mere volunteer or intruder, pays a debt for which another is primarily liable.”  Allstate Ins. Co. v. Palumbo, supra, 296 Conn. 259.   Here, there is no evidence that Marge Bertocki was primarily liable on the Travelers mortgage.   Simply because she owned a joint tenancy in the property and is referenced in the Travelers mortgage does not mean that she was obligated to pay it.   In fact, she is specifically listed as a non-obligor.

For the foregoing reasons, there are no genuine issues of material fact and summary judgment is granted in the defendants' favor as to count one.

B

Equitable Subordination

This court recently ruled that courts should be wary of applying the doctrine of equitable subordination outside of a bankruptcy context.   People's United Bank v. Wetherill Associates, Superior Court, judicial district of Hartford, Docket No. HHD 09 6005763 (January 4, 2011, Robaina, J.) (51 Conn. L. Rptr. 377).   There the court noted that, “[w]hether the doctrine of equitable subordination may be used outside of bankruptcy proceedings is an issue of first impression for Connecticut ․

“The court is persuaded by the reasoning of courts that have declined to use equitable subordination outside of a bankruptcy context.”  (Citations omitted;  internal quotation marks omitted.).  Id., 382.   Because this is not a bankruptcy action, and for the reasons cited under the discussion of equitable subrogation, the court finds that the doctrine does not apply to these facts, and summary judgment is granted in the defendants' favor as to count two.

II

Doctrine of Equitable Mortgage

As to the third count of the complaint, the defendants move for summary judgment on the ground that there are no issues of material fact and judgment should enter in their favor because the doctrine of equitable mortgage does not apply unless there is a writing between the parties from which the intention to create a lien can be shown.

“An equitable mortgage may be enforced between the parties to [an] agreement ․ Specifically, [a]n equitable mortgage may be constituted by any writing from which the intention to create a lien on specific real property as security for a debt is shown ․ Such a mortgage may arise by (1) an attempt to create a mortgage, though imperfectly executed;  (2) by an agreement to charge described property as security for money advanced;  and (3) where the plaintiff advanced the sum of money to the defendant on the condition that the defendant would execute and deliver a mortgage and defendant failed to do so ․

“[T]he essential fact given rise in equity to what is called an equitable mortgage is the lending of money or giving of credit in reliance upon the agreement that the property involved be security for such loan or debt.”   (Internal quotation marks omitted.)   Saxon Mortgage Services, Inc. v. Aguinaldo, Superior Court, judicial district of Stamford–Norwalk at Stamford, Docket No. CV 09 5011567 S (June 8, 2010, Mintz, J.).

As previously stated, there is no pleading or evidence of excusable neglect or ignorance on the part of the plaintiff.   Also, the defendants have correctly argued that, as stated in Saxon, a writing is required to establish an equitable mortgage.   Here, no such writing exists.   The only writing is between Brian Bertocki and Bank of America.   There is no evidence that the mortgage was imperfectly executed.   Simply because Marge Bertocki owned a joint tenancy in the property does not mean that she was a party to this mortgage.   Nor does it mean that she was a party to the mortgage that was released as a result of the Fleet mortgage.   The plaintiff has argued that the value of the mortgage was for the entire property and they would not have given such a generous mortgage if they were not clear that the mortgage was to Brian and Marge Bertocki.   The plaintiff has not presented evidence on this point.   Therefore, summary judgment is granted in the defendants' favor as to count three.

III

Equitable Subrogation and Subordination & Doctrine of Equitable Mortgage

As to each of the first three counts, the defendants move for summary judgment on the ground that they are barred by the statute of limitations.   Because each of these claims has been disposed of on other grounds, the court need not discuss whether the statute of limitations would bar them.

IV

Foreclosure

As to the fourth count of the complaint, the defendants move for summary judgment on the ground that there are no genuine issues of material fact and judgment should enter in their favor because the plaintiff may not foreclose on Marge Bertocki's interest of the property.   The plaintiff argues that it does not seek to recover against the defendants based on the property passing through probate to Marge Bertocki, in her capacity as heir and beneficiary.   Rather, the plaintiff argues that it seeks to hold Marge Bertocki, as an individual, liable as an obligor through the equitable remedies previously discussed.   The plaintiff argues that if it successfully establishes that Marge Bertocki is an obligor through equitable remedies, it may then foreclose on the interest in the property that she held before the death of the decedent.

The plaintiff has not succeeded in establishing through equity that Marge Bertocki is obligated to the mortgage as to the portion of the joint tenancy that she held before the death of the decedent.   Therefore, they may not foreclose on the mortgage in this manner.

Finally, the defendants have correctly noted that this property was held in joint tenancy and was not subject to probate.   Therefore, Marge Bertocki, as heir and beneficiary to Brian Bertocki, has no liability because, in her official capacity, because she never had any interest in or control over Brian Bertocki's share of the property.   His share transferred to his joint tenant, Marge Bertocki in her individual capacity, upon his death.   For the foregoing reasons, there are no genuine issues of material fact and the motion for summary judgment is granted in favor of the defendants on count four.

Conclusion

Based on the foregoing, the motion for summary judgment is granted as to all counts.

Robaina, J.

Robaina, Antonio C., J.