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Adley v. Burns

United States District Court, D. Massachusetts

May 15, 2018

KEVIN M. ADLEY, Plaintiff,




         On November 10, 2016, the plaintiff Kevin M. Adley ("Adley") brought this action against his sister, Kathleen A. Burns ("Mrs. Burns"), and her husband, Thomas M. Burns ("Mr. Burns, " and collectively, the "Defendants"), alleging breach of fiduciary duty, fraud and deceit, intentional misrepresentation, and unjust enrichment stemming from the joint ownership of a vacation property (the "Property"). Pl.'s V. Compl. ("Compl.") ¶¶ 40-57, ECF No. 1. Adley sought damages and the imposition of a constructive trust on the Property. Id. ¶ 58. The Defendants asserted a statute of limitations defense, as well as counterclaims of breach of contract and unjust enrichment. Defs.' Answer & Countercls. 6, 11-12, ECF No. 11.

         During the two-day bench trial on November 15 and 16, 2017, the Court heard testimony from Adley, Mrs. Burns, and Mr. Burns. After hearing closing arguments, the Court announced its preliminary findings of fact and rulings of law pursuant to Rule 52 of the Federal Rules of Civil Procedure. See Electronic Clerk's Notes, ECF No. 43; 11/21/17 Trial Tr. at 32, ECF No. 44. It rejected the Defendants' statute of limitations defense and imposed a constructive trust on the Property. 11/21/17 Trial Tr. at 32. The Court ruled that a real estate broker will be appointed as a special master to ensure that the Property is sold in a commercially reasonable manner and that the proceeds will go to each party according to their relative percentage interests in the Property. 11/21/17 Trial Tr. at 32-34.

         The Court then asked the parties to submit briefs addressing the appointment of a broker and the calculation of each party's relative interest in the Property. Id. The parties having done so, the Court now makes the following findings of fact and explains its rulings of law.


         A. Initial Purchase of the Property

         In or around June 1992, Adley and the Defendants decided to purchase the Property, which is located at 90 Uncle Barney's Road in West Dennis, Massachusetts, in order to build a shared vacation home. List of Facts Established by Pleadings ("Admitted Facts'') ¶ 2, Trial Ex. B15. On July 16, 1992, the parties purchased the Property as tenants in common, with Adley having an undivided fifty percent interest and the Defendants having an undivided fifty percent interest and the right of survivorship. Id. ¶ 5.

         In addition to agreeing that Adley and the Defendants would each respectively possess an undivided fifty percent ownership interest in the Property, id. ¶ 3, the parties also agreed equally to divide all expenses and costs, such as mortgage payments, property taxes, insurance, utilities, and maintenance. Id. ¶ 4. Because Adley resided in California, and the Defendants resided in Massachusetts, it was contemplated by the parties that Adley would use this home a few times a year, whereas the Defendants would enjoy use of the house more regularly. Pl.'s Requests Findings of Fact ("Pl.'s Statement of Facts") ¶ 4, ECF No. 36; Defs.' Requests Findings of Fact ("Defs.' Statement of Facts") ¶¶ 13-14, ECF No.34.

         At this time, according to the parties' oral agreement, Adley began making monthly payments of $1, 000 to the Defendants. Defs.' Statement of Facts ¶ 10. These payments were intended to cover Adley's half of the monthly mortgage payments as well as his portion of other expenses and costs. Pl.'s Statement of Facts ¶ 12. The payments were deposited into a joint "reserve" account. Id.; Defs.' Statement of Facts ¶¶ 15-16. Adley made these contributions monthly from July 1992 through December 1998 pursuant to the parties' agreement. Admitted Facts ¶ 10. Adley continued to reside in California, using the Property a few times a year. Id. ¶ 9.

         The Defendants managed the Property's finances, maintaining the joint bank account and handling the payment of all expenses such as the mortgage, property taxes, homeowners insurance, and utilities. Id. ¶ 19. Mr. Burns handled all of the Property's bookkeeping and accounting. Id. ¶ 20. As part of this duty, he provided annual statements to Adley confirming that Adley was a fifty percent owner of the Property and setting forth the amount of mortgage interest and property taxes paid each year so that Adley could deduct these amounts from his federal and state income taxes. Id. ¶ 17.

         B. Mortgages and Refinancings of the Property

         At the time of the initial purchase of the Property in 1992, in order to finance the purchase and the construction of a house on the Property, the parties jointly acquired a mortgage in the amount of $135, 000. Id. ¶ 6. The parties refinanced this mortgage in 1993, granting Plymouth Mortgage, Inc. a mortgage in the amount of $132, 000. Id. ¶ 7.

         In or about late 2001, Mrs. Burns informed Adley that Mr. Burns was having trouble sleeping because of $80, 000 in credit card debt he had accrued. Id. ¶ 11. She asked Adley if he would be willing to have the Defendants take some equity out of the Property through refinancing so that Mr. Burns could pay off the debt, and she indicated that she and Mr. Burns would increase their monthly contribution to pay back over time the equity taken out of the property. Id. Adley agreed to the proposal. Id.

         On February 22, 2002, the Property was transferred by deed from Adley and the Defendants as tenants in common to the Defendants as tenants by the entirety for zero consideration. Id. ¶ 12. The same day, the Defendants granted GMAC Mortgage Corporation ("GMAC Mortgage") a mortgage in the amount of $225, 000, refinancing the property and paying off the existing mortgage balance of approximately $120, 000. Id. ¶ 13. In March 2002, Mr. Burns sent Adley a check for $10, 000 from the proceeds of the refinancing, and the Defendants kept $85, 000 from the proceeds. Pl.'s Statement of Facts ¶ 28-29; Defs.' Answer & Countercls. 10 at ¶ 24.

         On June 6, 2003, the Defendants refinanced the mortgage again, granting GMAC Mortgage a mortgage in the amount of $224, 000 and paying off the existing mortgage. Admitted Facts ¶ 14.

         In 2004, the Defendants obtained a home equity line of credit ("HELOC") on the Property without informing Adley. Pl.'s Statement of Facts ¶ 32. This HELOC eventually was rolled into another HELOC in 2006. Id. ¶ 33. The Defendants used the proceeds from the 2006 HELOC to pay for their daughter's college education. Id. ¶ 33; Defs.' Statement of Facts ¶ 43.

         On July 15, 2016, the Defendants granted TD Bank a mortgage in the amount of $281, 000 refinancing the subject property yet again and paying off the 2003 mortgage and 2006 HELOC. Admitted Facts ¶ 18. The Defendants did not advise Adley that they were refinancing the subject property. Id.

         C. 2015 Events

         In or around February 2015, a frozen water pipe burst at the Property, causing damage that required repairs. Id. ¶ 15. The Defendants reported the incident to the homeowners' insurance company, hired contractors, and monitored repair work. Id. Adley did not visit the property during the repairs. Id. In or around April 2015, Adley and Mr. Burns began to discuss necessary and extensive repairs to the Property, and whether they would pay for the repairs, buy each other out, or sell the Property. Id. ¶ 16.

         Adley claims that around this time, he asked Mr. Burns for a copy of the Property's title for the purpose of demonstrating residence in Massachusetts to obtain a license to carry a firearm. Pl.'s Statement of Facts ¶ 36. He "became suspicious'' when Mr. Burns failed to provide him with a copy of the title, and he then ordered a title search that showed that he had not been a titled owner of the Property since February 2002. Id. ¶ 36-37.

         D. Adley's Knowledge and Mr. Burns's Intent

         The parties dispute the extent of Adley's knowledge as to the deed transfer. Adley claims that when he agreed to the 2002 refinancing, he granted a limited power of attorney to a Massachusetts attorney for the purpose of executing documentation to achieve the refinancing, but expressly told Mr. Burns that the limited power of attorney was "[f]or refinance purposes only" and did not authorize any changes in title to the Property. Pl.'s Statement of Facts ¶¶ 23-24. He claims that as a result, he was unaware of (and did not consent to) the deed transfer. Id. ¶¶ 26-27. The Defendants claim that Adley, facing financial strain of his own, had requested that his name not be included on the new mortgage. Defs.' Statement of Facts ¶¶ 22, 25. According to the Defendants, Adley understood that this meant there was a possibility that title would need to change hands to complete the transaction, but never thereafter asked whether the deed had been transferred. Id. ¶¶ 26, 32-33.

         It is undisputed that even after the 2002 title change, Mr. Burns continued to provide annual statements to Adley detailing the amounts of mortgage interest and property taxes paid so that Adley could take advantage of the relevant tax deductions. Admitted Facts ¶ 17. Considering this fact together with Adley's testimony, this Court finds that Adley was unaware of the deed transfer. The Court also finds, however, that Mr. Burns was at the time unaware of the possibility that the United States Tax Code might not allow non-titled owners to take these deductions. The Court finds that Mr. Burns continued ...

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