United States District Court, D. Massachusetts
KEVIN M. ADLEY, Plaintiff,
KATHLEEN A. BURNS and THOMAS M. BURNS, Defendants.
FINDINGS OF FACT, RULINGS OF LAW, AND ORDER FOR
WILLIAM G. YOUNG DISTRICT JUDGE.
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.
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.
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.
FINDINGS OF FACT
Initial Purchase of the Property
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.
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.
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.
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.
Mortgages and Refinancings of the Property
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.
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.
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.
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 ¶
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.
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.
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.
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. ¶
Adley's Knowledge and Mr. Burns's Intent
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.
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 ...