Weisman v. Kaspar

• Decision Date: 20 June 1995
• Docket Number: No. 15141,15141
• Citation: 661 A.2d 530,233 Conn. 531
• Court: Connecticut Supreme Court
• Parties: Barbara WEISMAN, Trustee v. Mary KASPAR et al.

Page 530

661 A.2d 530

233 Conn. 531

Barbara WEISMAN, Trustee v. Mary KASPAR et al.

No. 15141.

Supreme Court of Connecticut.

Argued March 16, 1995.

Decided June 20, 1995.

Joel M. Ellis, with whom was Donald E. Weisman, for appellant (plaintiff).

Jerome M. Griner, for appellee (substitute defendant).

Before PETERS, C.J., and CALLAHAN, BORDEN, KATZ and PALMER, JJ.

CALLAHAN, Associate Justice.

This appeal requires that we determine whether the trial court properly concluded that the plaintiff, Barbara Weisman, Trustee (BWT), a mortgage lending partnership, acted fraudulently with respect to a certain mortgage transaction with the named defendant, Mary Kaspar. BWT brought an action against Kaspar seeking to foreclose a mortgage that it held on real estate owned by Kaspar in East Hartford. Kaspar subsequently paid the entire amount allegedly due on the mortgage note, and BWT withdrew its complaint. Thereafter, Kaspar filed a three count substitute counterclaim alleging that BWT had acquired its mortgage interest through a series of fraudulent dealings with Kaspar and that BWT was unjustly enriched by Kaspar's payment. On January 22, 1992, and for several days thereafter, Kaspar's counterclaim ¹ was tried to the court, Burns, J. The trial court filed a memorandum of decision awarding Kaspar damages in the amount of $298,707.15, plus interest, on her counterclaim. BWT appealed from the judgment of the trial court to the Appellate Court, and we transferred the appeal to this court pursuant to Practice Book § 4023 and General Statutes § 51-199(c). We conclude that the evidence adduced at trial does not support the trial court's findings that BWT acted fraudulently with respect to Kaspar, or that BWT was unjustly enriched by Kaspar's payment, and we therefore reverse the judgment of the trial court.

The trial court found the following facts. In 1987, Kaspar owned three parcels of real estate in East Hartford. Two of the parcels were two-family residential properties, and the third was used as a commercial rooming house. Kaspar was an elderly widow who had managed the properties on a day-to-day basis until her health began to fail after she suffered a stroke.

In April, 1987, Kaspar realized that she was no longer physically able to oversee the management of the properties, and therefore listed the three parcels for sale with a local real estate agency. On April 14, 1987, Gerald S. Haymond, a real estate broker and investor, submitted a formal purchase offer to Kaspar. Haymond's offer was in part a standard form one page real estate purchase and sale agreement and was in part a four page typewritten addendum, and proposed the following terms of purchase: a total price of $375,000, to be paid to Kaspar by means of a $500 cash deposit upon the parties' execution of the purchase and sale agreement, owner financing of $285,000 extended to Haymond by Kaspar, with such financing to be secured by a purchase money second mortgage given by Haymond to Kaspar, and cash at the closing in the amount of $89,500. The addendum to the purchase offer further provided that Haymond was contemplating certain changes to the existing structure of the properties and that Kaspar would agree to subordinate her purchase money second mortgage to a first mortgage in a principal amount no greater than $200,000. On the advice of her real estate agents, Kaspar rejected this offer.

After further negotiations, on April 29, 1987, Kaspar and Haymond executed a one page purchase and sale agreement wherein Kaspar agreed to sell her three properties to Haymond, or his corporate nominee, for a total purchase price of $400,000. The agreement provided that Kaspar would provide owner financing to the purchaser in the amount of $280,000, and that the remainder of the purchase price was due in cash at the closing. While the parties were negotiating the terms of an addendum that were to be similar in substance to those terms initially proposed by Haymond, Kaspar retained attorney Philip P. Apter to conduct further bargaining with Haymond on her behalf.

During the period of time between the signing of the purchase and sale agreement and the closing, Haymond approached Jack L. Rosenblit, a principal in BWT, ² from whom Haymond had obtained financing on prior occasions, and inquired whether BWT would be interested in providing funds for his purchase of Kaspar's properties. After touring the properties and discussing the terms of the proposed transaction with Haymond, Rosenblit, on behalf of BWT, verbally agreed to provide Haymond with financing in the amount of $200,000 and to take back a first mortgage on the properties bearing a 24 percent interest rate. The trial court found that when Rosenblit agreed to provide Haymond with this financing, Rosenblit was aware that: (1) the rental incomes generated by the properties would not support the interest payments required by the mortgage; (2) no improvements to the properties were contemplated by Haymond; and (3) because BWT's loan was to be for $200,000 and Kaspar's was to be for $280,000, Haymond would be left with approximately $80,000 in cash at the closing. The trial court also found that Rosenblit was aware that Haymond intended to use the excess cash to pay interest on both loans until he could resell the properties for a quick profit.

After speaking with Rosenblit, Haymond suggested to Kaspar that in order for the transaction to proceed, she would be required to subordinate her purchase money mortgage to a $200,000 first mortgage. The trial court also found that Haymond assured Kaspar that the excess cash generated by this financing arrangement would be utilized in making improvements to the properties. The trial court further found, however, that both Haymond and Rosenblit knew that Haymond did not intend to use the excess cash to improve the properties, but intended to use it to pay interest on the BWT loan, while trying to resell the properties as soon as possible.

The closing took place on May 8, 1987. On that day, an addendum to the purchase and sale agreement was prepared by Apter that was similar in form and content to the addendum produced by Haymond and submitted to Kaspar with Haymond's original purchase offer. The addendum, which was signed by both Haymond and Kaspar, contained a clause stating that Kaspar was aware that the buyer was contemplating structural improvements to the properties, and that she would agree to subordinate her $280,000 purchase money mortgage to a mortgage not to exceed $200,000.

Title to Kaspar's properties was transferred to Christopher Claire, Ltd., a corporation that Haymond had formed for the purpose of taking title to the Kaspar property. Contemporaneously with the Kaspar-Christopher Claire, Ltd. closing, the mortgage given by Christopher Claire, Ltd., to BWT to secure BWT's $200,000 loan was closing in another room in the same office. The trial court found that neither Kaspar nor Apter knew that the other closing was taking place. Haymond was represented by attorney Edward N. Lerner with respect to both transactions, and Lerner subsequently recorded both mortgage documents on the East Hartford land records. BWT's mortgage was recorded prior to the Kaspar mortgage.

In September, 1987, Kaspar notified Apter that Christopher Claire, Ltd., had missed a payment on the mortgage. In anticipation of a possible foreclosure action, Apter reviewed the land records and discovered, for the first time, that the BWT mortgage was recorded prior to the Kaspar mortgage, and that it carried a 24 percent interest rate. When Apter revealed his discovery to Kaspar, she was "flabbergasted."

In April, 1988, Christopher Claire, Ltd., again defaulted, and Apter commenced a foreclosure action on Kaspar's mortgage against Haymond and Christopher Claire, Ltd., listing in the complaint BWT's mortgage as an encumbrance prior in right to Kaspar's mortgage. The foreclosure proceeded and resulted in a judgment of strict foreclosure for Kaspar in October, 1988. Because there was no redemption, title to the East Hartford properties subsequently revested in Kaspar.

BWT commenced the present foreclosure action against Kaspar in March, 1989, and Kaspar subsequently filed her substitute counterclaim. When Kaspar paid over the entire amount demanded as due, BWT gave Kaspar a release of its mortgage interest and withdrew its complaint. Kaspar thereafter sold the properties to a third party for $430,000, and proceeded to trial on her counterclaim.

On the basis of these findings of fact, the trial court concluded that "[i]t is clear that Kaspar has established all of the elements of fraud.... Kaspar was induced to sell her property on the false representation by both Haymond and Rosenblit that any additional financing was for improvement at the property, which both knew was untrue and she was forced to pay under duress almost $300,000 to obtain a release of the BWT mortgage. Kaspar has established all of the elements of duress.... All of the elements of fraud have been proven by clear and satisfactory evidence." The trial court also concluded that "[i]n the present action ... the court has found that, to the detriment of Kaspar, BWT obtained money from Kaspar to which BWT was not entitled. Further, the court has found that BWT was not entitled to receive payment on the mortgage to [Christopher Claire, Ltd.,] because that mortgage was obtained through fraud. The court has found that Haymond induced Kaspar to agree to subordinate her priority purchase money mortgage by stating that he was to use the proceeds to improve the property when both Haymond and Rosenblit knew that the proceeds would be used for part of the purchase price and to make the high monthly interest payments on the BWT mortgage while Haymond attempted to convey the property as quickly as possible. This false statement of fact benefitted BWT in that BWT took a mortgage with an unusually high interest rate upon which...