Cooper v. Cooper

• Decision Date: 21 September 2001
• Docket Number: No. 99-421.,99-421.
• Citation: 783 A.2d 430
• Court: Vermont Supreme Court
• Parties: Beatrice COOPER v. Karen Wenig COOPER, Brian Cooper and Herman Cooper.

783 A.2d 430

Beatrice COOPER v. Karen Wenig COOPER, Brian Cooper and Herman Cooper.

No. 99-421.

Supreme Court of Vermont.

September 21, 2001.

James C. Foley, Jr., of Deppman & Foley, P.C., Middlebury, for Plaintiff-Appellant.

James A. Dumont of Dumont & Lee, P.C., Middlebury, for Defendant-Appellee.

Frank H. Langrock of Langrock Sperry & Wool, LLP, Middlebury, for Defendant-Appellant.

Present: AMESTOY, C.J., DOOLEY, MORSE, JOHNSON and SKOGLUND, JJ.

SKOGLUND, J.

This case, which began as a foreclosure action and which culminated in a jury award to an original mortgagor for emotional distress, lost income and punitive damages, illustrates the fundamental concept that co-tenants to real estate bear fiduciary obligations to each other. We affirm the trial court's decision to grant summary judgment to Karen Wenig in the foreclosure action, and affirm its holding that Herman Cooper committed a breach of fiduciary duty against Karen Wenig, his co-tenant. Further, we affirm the jury award of damages for emotional distress against both Herman Cooper and his wife, Beatrice Cooper, and the punitive damages award against Herman Cooper. We reverse and remand on the issue of Herman Cooper's contribution claim.

I. Procedural History

The property involved was purchased in April of 1983 by Herman Cooper, his son Brian Cooper and Brian's now ex-wife, Karen Wenig, as joint tenants. In May of 1994, Beatrice Cooper, wife of Herman and mother to Brian, purchased the mortgage on this property and, in July of 1996, instituted foreclosure proceedings against the owners. Karen counterclaimed against Beatrice and cross-claimed against her co-tenants. The trial court granted Karen's motion for summary judgment in the foreclosure action, finding that Herman and Beatrice acted together to purchase the mortgage on behalf of the remaining co-tenants. The court granted partial summary judgment to Karen on her violation of fiduciary duties counterclaim and cross-claims. It found, as a matter of law, that Herman violated his duty to his co-tenant and that, as a matter of law, Beatrice was acting as Herman's agent when she purchased the mortgage. The court also found that Karen and Brian owed to Beatrice and Herman a duty of contribution with respect to the amounts paid by Beatrice and Herman to buy the mortgage, but reserved the contribution claim until after trial on Karen's claim for damages. The matter proceeded to trial on Karen's claim for damages for Herman's breach of fiduciary duty as a result of the commencement of the foreclosure action; on the claim that Beatrice was liable for aiding Herman's breach of fiduciary duty; and on whether Brian had breached his fiduciary duty to Karen. At trial the court directed a verdict in favor of Brian on Karen's claims against him. With respect to Herman, the case went to the jury on damages for emotional distress, lost income and punitive damages. As to Beatrice, the case went to the jury on the issue of her liability for aiding Herman's breach of fiduciary duty and on the emotional distress and lost income damage claim.

As against Herman, the jury awarded Karen $20,000 for emotional distress damages and $239,000 in punitive damages. Karen was awarded $20,000 from Beatrice for her participation in Herman's breach of fiduciary duty and for the emotional harm suffered by Karen. This appeal followed.

On appeal, Beatrice claims that the trial court erred in denying her request for a directed verdict on the claim that she knowingly participated in the breach of Herman's fiduciary duty and in denying her claim for contribution or reimbursement. Herman claims on appeal that the court erred in its summary judgment decision in finding that he breached his fiduciary duty to his co-tenant, Karen, and that the co-tenant was entitled to a trial on damages. Further, he argues that the trial court erred in instructing the jury on the issue of emotional distress and on punitive damages. Finally, he argues that the trial court erred in deferring to a New York divorce court the question of his right to contribution from his co-tenants.

II. Ownership and Relational History

A history of the litigants is required to understand the land ownership and contribution issues presented in this case. Brian and Karen were married in the early 1980's. In early 1983, Karen and Brian, who lived in New York City, decided they wanted a second home and located property in Lincoln, Vermont. Herman helped Brian and Karen purchase the Lincoln property by providing a portion of the purchase price. Title to the property was deeded to all three, with Herman having a 50% interest as a joint tenant with rights of survivorship as to Brian and Karen, who held their 50% share as tenants by the entirety.

As part of the purchase, the parties assumed a note and mortgage to the Lomas and Nettleton Company, a mortgage company. Initially Herman paid the monthly mortgage, taxes and expenses associated with the property, but sometime in 1986, Brian commenced making these payments for the three owners.

In 1992, Karen and Brian began divorce proceedings in New York City. At approximately the same time, Brian stopped paying the mortgage on the Lincoln property. In 1993, Cateret Savings Bank, the mortgagee of the Lincoln property as successor in interest to Lomas and Nettleton, commenced foreclosure proceedings on the property. Karen, through her attorney, filed a motion to dismiss the foreclosure action, challenging the validity of the mortgage. Co-tenant Herman consulted with his wife and their attorney about how to respond to the foreclosure action, and it was decided by the three that Beatrice should purchase the mortgage in her name, which she did for $75,000 in May of 1994. The foreclosure action initiated by Cateret terminated. At this time, Herman and their attorney executed a straw transfer, to the effect of converting the joint tenancy to a tenancy in common, thus destroying Karen's right of survivorship in Herman's interest.

Upon learning that Beatrice had purchased the mortgage, Karen, through her attorney, sent two letters to Beatrice's attorney. The first requested information and documentation regarding Beatrice' purchase of the mortgage, and queried as to what claims, if any, were retained by the previous mortgagee against Karen and the extent of any claims Beatrice had against Herman, Brian and Karen. Karen's second letter, dated three months later, requested a meeting to discuss the property. Karen received no response to either letter. During this period, no demand for payment on the mortgage was made to Karen.

Then, in July 1996, Beatrice notified Herman, Brian and Karen that the mortgage was in default and that the total due on the mortgage, $97,177.70, was due and payable within thirty days. When payment was not forthcoming, Beatrice filed the foreclosure action.

Other facts pertinent to the case will be provided in the decision that follows.

III. Breach of Fiduciary Duty

We first address Herman's claim that the court erred in granting Karen's motion for partial summary judgment against him and determining that he was liable for damages for a breach of fiduciary duty to his co-tenant because of his participation in the foreclosure action.

On appeal, we review a court's disposition of a summary judgment motion by applying the same standard as the trial court. Rennie v. State, 171 Vt. ___, ___, 762 A.2d 1272, 1274 (2000) (mem.). A grant of summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." V.R.C.P. 56(c)(3). "In determining whether material facts exist for trial, we must resolve all reasonable doubts in favor of the party opposing summary judgment." Rennie, 171 Vt. at ___, 762 A.2d at 1274.

Herman does not appeal from the court's finding that he and Beatrice acted together in purchasing the mortgage, that he and Beatrice purchased the mortgage on behalf of the co-tenants, and that they are entitled to contribution from Brian and Karen. See Laura v. Christian, 88 N.M. 127, 537 P.2d 1389, 1391 (1975) (where one co-tenant is found to have acted on behalf of the remaining co-tenants, those co-tenants must contribute to the expenses). Herman claims that the purchase of the mortgage by Beatrice and himself was "a benefit to Karen." He argues, however, that the only action attributed to him that the court found to be tortious was the commencement of the foreclosure action, and that the only possible claim available to Karen with respect to the foreclosure action was one of malicious prosecution, which could not be sustained on the evidence.

However, Herman failed to raise this argument to the trial court in the summary judgment action, and we will not consider it on appeal. See Lane v. Town of Grafton, 166 Vt. 148, 153, 689 A.2d 455, 457 (1997) (failure to raise at trial a reason why summary judgment should not be granted precludes raising that issue on appeal). This argument also misconstrues the court's summary judgment ruling, which we address in some detail, as it provides the basis for the trial on damages.

IV. Fiduciary Duty of Co-Owners

The Restatement (Second) of Torts § 874, comment a (1979) states: "A fiduciary relation exists between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation." When a joint tenancy or tenancy in common is created, the co-tenants enter into a fiduciary relationship with each other as to the joint property. See Adams v. Adams, 512 So.2d 1150, 1152 (Fla.Dist.Ct.App.1987); Jolley v. Corry, 671 P.2d 139, 141 (Utah 1983) (special relationship of confidence and trust exists among co-tenants); Bartz v. Heringer, 322 N.W.2d 243, 244 (N.D.1982) (recognizing...