Castle v. Dimugno

• Decision Date: 01 September 2020
• Docket Number: AC 41607
• Citation: 237 A.3d 731,199 Conn.App. 734
• Court: Connecticut Court of Appeals
• Parties: AnnMarie CASTLE, Trustee v. Katherine DIMUGNO

199 Conn.App. 734

237 A.3d 731

AnnMarie CASTLE, Trustee

v.Katherine DIMUGNO

AC 41607

Appellate Court of Connecticut.

Argued December 3, 2019

Officially released September 1, 2020

Mario Cerame, Hartford, with whom, on the brief, were Juri E. Taalman and Timothy Brignole, Hartford, for the appellant (plaintiff).

Rowena A. Moffett, New Haven, for the appellee (defendant).

DiPentima, C. J., Bright and Devlin, Js.^*

BRIGHT, J.

This appeal arises out of the plaintiff's action to collect on a promissory note (note) executed by the defendant, Katherine DiMugno, and to foreclose on the mortgage securing the defendant's obligations under the note. The plaintiff, AnnMarie Castle, as trustee for the Mary DiMugno Irrevocable Trust (trust), appeals from the judgment of the trial court rendered in favor of the defendant following its granting of the defendant's motion for summary judgment on the plaintiff's complaint. The plaintiff claims that the court (1) misinterpreted the defendant's payment obligations under the note, (2) improperly considered parol evidence regarding the meaning of certain language in the note, and (3) incorrectly concluded that there are no genuine issues of material fact regarding the defendant's alleged default under the note. In response, in addition to defending the analysis of the trial court, the defendant reasserts her claim that the plaintiff lacks standing to enforce the note and to foreclose on the corresponding mortgage, and that the court, therefore, should have dismissed the action. We agree with the defendant that the plaintiff lacks standing, and, therefore, we reverse the judgment of the trial court and remand the case to the trial court with direction to render a judgment of dismissal.

The following undisputed facts and procedural history are relevant to our analysis. On July 28, 2005, the court dissolved the defendant's marriage to Donald DiMugno (Donald). Incorporated into the judgment of dissolution rendered by the court was a stipulation entered into by the defendant and Donald. Relevant to this dispute, the defendant and Donald stipulated: "The husband shall transfer to the wife all of his right, title and interest in the real estate located at 11 Billow Road, Old Saybrook, Connecticut [ (property) ] .... In consideration for the transfer the wife shall execute a Promissory Note in the principal amount of $160,000 together with simple interest at the rate of 2 [percent] per annum, which Note shall be payable on the first of the following events: the sale of said premises by the wife and/or death of the wife." On August 24, 2005, upon Donald's transfer of his interest in the property to her, the defendant executed the note in favor of Donald in the principal amount of $160,000. In conformity with the stipulation, the note provides for simple interest to accrue at the rate of 2 percent per year. The note further provides in its second paragraph: "The undersigned promises to pay the said principal and interest as follows: 1. The sale of the [property]; or 2. The death of the [m]aker hereof." Under the note, the defendant also is responsible to pay all taxes and mortgage obligations associated with the property and is required to keep the property insured and free of mechanic's liens. The note further provides, in its penultimate paragraph, that "[i]f any payment due hereunder shall not have been paid within [fifteen] days after the same is due ... or if title to said property is transferred, then the entire unpaid principal, with accrued interest, shall, at the option of the holder hereof, become due and payable forthwith." The defendant's obligations under the note are secured by a mortgage on the property, which she executed contemporaneously with the note.¹

In 2012, the plaintiff, both as trustee of the trust and conservator of Mary DiMugno, brought an action against Donald for breach of fiduciary duty, civil theft and fraud for actions that Donald had taken when he acted as the original trustee of the trust and as a fiduciary of Mary DiMugno, his mother. Following a trial, the court, on August 30, 2013, rendered judgment in favor of the plaintiff and against Donald. Following the entry of judgment, the plaintiff filed a motion for postjudgment modification of the prejudgment attachment that previously had been granted in favor of the plaintiff. At the hearing on the motion, the plaintiff's counsel expressed his concern that Donald had secreted certain assets that could be used to satisfy the plaintiff's judgment against him. Consequently, he asked the court to order that "someone in trust take them and hold them until the end [of] this case." In granting the plaintiff's motion, on September 27, 2013, the court made clear that the plaintiff could "take [the assets], you can hold them, but you can't sell them. ... And the same thing with any bank accounts. You can put a hold on them. You can put an attachment on something, but you can't execute on it unless and until ... a final judgment." With respect to the note, the plaintiff's counsel argued that he "should be entitled to receive the [original] promissory note. So when the trigger of the contingency occurs, the money gets paid and we hold on to it ." (Emphasis added.) When the court ordered that a copy of the note be turned over to the plaintiff, the plaintiff's counsel interceded by saying, "[a]gain, that would be the original of the promissory note. I can only execute against the original ." (Emphasis added.) The court agreed. When Donald's attorney stated that he had a copy of the note but was unsure as to the location of the original, the court replied: "See what you can do." As part of its order, issued following the hearing, the court ordered that "the plaintiff shall garnish the promissory note from [the defendant], with a copy of the original promissory note to be turned over to the plaintiff within seven days on or before October 5, 2013." (Emphasis added.) Although the record is unclear as to whether Donald delivered a copy of the note to the plaintiff, there is no dispute that Donald never delivered the original note to the plaintiff or that the plaintiff has never had possession of the original note.

On January 23, 2014, the defendant quitclaimed title to the property to her daughter, Michele Rossignol, for the consideration of love and affection, and retained a life use of the property (life use deed). The defendant executed the life use deed so that the property would not have to go through probate if she died and to protect it from seizure by the state if she went into a convalescent home. The life use deed did not purport to release or extinguish Donald's mortgage on the property.

After learning of the defendant's transfer of title to the property to Rossignol, the plaintiff, relying on the language in the note that "if title to said property is transferred, then the entire unpaid principal, with accrued interest, shall, at the option of the holder hereof, become due and payable forthwith," on May 4, 2015, filed a judgment lien on the property, claiming that the defendant's transfer of title to the property to Rossignol triggered her obligation to pay the note in full. The judgment lien noted that the plaintiff, in her action against Donald, had secured a one million dollar attachment of all of Donald's assets, including the note. On May 5, 2015, the plaintiff's counsel sent the defendant and Rossignol a letter notifying them of the judgment lien attaching the debt the defendant owed to Donald, and stating his intention "to try and work with you for the payment of said note ... before we attempt on foreclosing on the judgment lien." On September 28, 2015, Rossignol, by way of a quitclaim deed, transferred title to the property back to the defendant for no consideration. The defendant did not otherwise respond to the plaintiff's demand that she make full payment on the note.

By complaint dated October 23, 2015, the plaintiff instituted the underlying action against the defendant. In count one of the complaint, the plaintiff sought payment on the note. In that count, she alleged that the court in her action against Donald "assigned the [note] to the [plaintiff] for payment." The plaintiff further alleged that she "is now the HOLDER of the negotiable instrument of the [note]," and described herself as the "court-ordered holder of the [note] ...." She sought, as a remedy, "money damages for the repayment of principal and interest under the terms of the [n]ote, plus attorney's fees, in accordance with the terms [of] the [note]."

In count two, the plaintiff incorporated her allegations from count one, including that the note was assigned to her and that she is the holder of the note. She sought to foreclose on the mortgage securing the note but did not seek to foreclose on the judgment lien, as suggested in her counsel's earlier letter.

The defendant moved to dismiss the action on the ground that the plaintiff lacks standing because she is not the holder of the note. In opposition to the motion, the plaintiff argued that she was entitled to enforce the note pursuant to the court's postjudgment order of attachment issued in her action against Donald. She further argued that she did not need to have possession of the original note because it had been lost and its whereabouts were unknown. The court denied the motion to dismiss because "[t]here is an issue of fact as to whether the note was lost."

Thereafter, the defendant filed a motion to strike both counts of the complaint on the basis that the note required payment only if one of two events occurred—the defendant sold the property or she died. The defendant argued that because the complaint did not allege either of the events, the plaintiff failed to state a claim on which relief could be granted and both counts of the complaint should be stricken. In response, the plaintiff argued that the defendant's transfer of title to Rossignol triggered the defendant's...