Wilmington Sav. Fund Soc'y, FSB v. Collart

Decision Date13 November 2020
Docket NumberNo. 19-1533,19-1533
Citation980 F.3d 210
Parties WILMINGTON SAVINGS FUND SOCIETY, FSB, d/b/a Christiana Trust, not individually but as Trustee for BCAT 2015-14BTT, Plaintiff, Appellee, v. Nina B. COLLART, individually and as Trustee of the Lucien R. Collart, Jr. Nominee Trust and as Trustee of the Anne B. Collart Nominee Trust; Thomas D. Mann, Jr. as Trustee of the Nina Collart Nominee Trust, Defendants, Appellants.
CourtU.S. Court of Appeals — First Circuit

Thomas O. Moriarty, Braintree, MA, with whom David M. Rogers, Amy M. McCallen, and Moriarty Troyer & Malloy LLC were on brief, for appellants.

Marissa I. Delinks, Boston, MA, with whom Hinshaw & Culbertson LLP was on brief, for appellee.

Before Lynch and Lipez, Circuit Judges.*

LYNCH, Circuit Judge.

Wilmington Savings Fund Society, FSB brought suit in 2017 against Nina Collart and Thomas Mann, Jr. concerning a home equity line of credit ("HELOC") that had been granted in 2007 to Nina's father, Lucien, on property in Harwichport, Massachusetts. Wilmington sued Nina in her individual capacity and as the trustee of both the Lucien R. Collart, Jr. Nominee Trust (the "Lucien Trust") and the Anne B. Collart Nominee Trust (the "Anne Trust"). Mann is named in his capacity as the trustee of the Nina B. Collart Trust (the "Nina Trust").

Wilmington sought a declaratory judgment that the HELOC was valid. It also sought an equitable lien on the property, sought a constructive trust, and claimed that Nina fraudulently transferred the property to herself. Both Wilmington and the defendants filed motions for summary judgment.

The district court issued a declaratory judgment declaring the HELOC invalid. It granted Wilmington an equitable lien in the property and dismissed Wilmington's other two claims. The defendants appealed from the grant of an equitable lien.

We hold that the district court abused its discretion in granting Wilmington an equitable lien. We reverse and direct entry of judgment for the defendants.

I. Facts

In 1999, Anne Collart, together with her husband Lucien and their daughter Nina, acquired a property in Harwichport, Massachusetts (the "Harwichport Property"). Two months later, the Collarts established three almost-identical trusts: the Anne Trust, the Lucien Trust, and the Nina Trust. Each Collart was the sole beneficiary of the trust bearing his or her name. Together they deeded a one-third interest in the Harwichport Property into each trust so that the trusts owned the Harwichport Property as tenants in common. The declarations of trust, and the deed conveying the Harwichport Property to the trusts, were recorded in 1999.

Anne was the trustee for the Lucien and Nina trusts. Lucien was the trustee for the Anne Trust. Anne died in 2002. Lucien and Nina, as sole beneficiaries of their respective trusts, could appoint successor trustees to replace Anne. Nina appointed a successor trustee for her trust. Lucien did not.

Anne had named Lucien the executor of her will. She gave Lucien all of her personal property and divided the remainder of her assets between two trusts: the Tax Shelter Trust Fund and the Marital Trust Fund (collectively, the "Estate Trusts"). She appointed Lucien trustee of both trusts.

Both Lucien and Nina were beneficiaries of the Estate Trusts. Lucien was entitled to the net income from the Estate Trusts during his lifetime. Anne reserved the principal for Nina. It would pass to her upon Lucien's death. As trustee of the Estate Trusts, Lucien ignored the trusts' terms and never transferred any property into them. Instead, he liquidated Anne's assets and kept the money for himself.

Four years after Anne's death, Lucien met and had a relationship with Brenda Tri. Lucien began dividing his time between the Harwichport Property, where he lived, and Tri's nearby horse farm. He took Tri on cruises at his expense, purchased horses for her farm, and paid off her credit card bills.

A few months after meeting Tri, in April 2007, Lucien purchased a property in South Dennis, Massachusetts (the "Bass River Property") for $2.3 million. To purchase the Bass River Property, Lucien used a combination of his own assets, assets from Anne's estate, and a $500,000 home equity line of credit from Bank of America taken out against the Harwichport Property owned by the trusts in the names of Anne, Lucien, and Nina but not owned by Lucien individually. The HELOC was dated June 13, 2007 and named "LUCIEN R. COLLART JR., AN UNMARRIED PERSON" as the grantor. It did not mention any of the trusts that held title to the Harwichport Property. The HELOC was recorded in August 2007.

After Nina learned of the HELOC, her counsel sent a letter to Bank of America in September 2007 disputing its validity. The letter said that the trusts, not Lucien individually, held title to the Harwichport Property and that neither Nina nor the trustee of the Nina Trust consented to the HELOC.

In October 2007, Nina became concerned about her father's capacity and his relationship with Tri. She petitioned the probate court to appoint a guardian for Lucien. Her initial petition was denied, but almost a year later the court appointed John Conathan as Lucien's temporary guardian on July 30, 2008. The guardianship became permanent on September 25, 2008.

In his role as guardian, Conathan negotiated the sale of the Bass River Property for $1.75 million in April 2009.1 Conathan petitioned the probate court for a license to sell the property, and the court appointed a guardian ad litem who determined that the sale was in Lucien's best interest. The guardian ad litem's report said that the proceeds from the sale should be used to repay Anne's estate, pay off the HELOC, and provide for Lucien's living expenses. The probate court approved the sale. Conathan used the sale proceeds to replenish Anne's estate and provide for Lucien's living expenses. He stopped making payments on the HELOC in July 2010 after he was informed by his counsel that the HELOC was invalid.

Lucien died in August 2013. Nina became the trustee of the Anne and Lucien trusts. Almost two years after Lucien's death, the probate court entered an Order of Final Settlement granting all of Lucien's estate -- about $1 million -- to Nina in June 2015. Bank of America assigned the HELOC to Wilmington through transactions in October 2015 and January 2016. In November 2016, Nina requested that Wilmington discharge the HELOC because Lucien did not hold legal title to the property when it was created. Wilmington was thus on notice of Nina's objections and assertions that the HELOC was not valid. In June 2017, Nina, acting as the trustee of the Lucien and Anne Trusts and together with the trustee of the Nina Trust, conveyed the Harwichport Property to herself.

II. Procedural History

Wilmington brought suit against the defendants in November 2017. It sought (1) a declaration that the HELOC was a valid encumbrance on the Harwichport Property, (2) an equitable lien against the Harwichport Property, (3) a constructive trust on the assets of Lucien's estate, and (4) an attachment of the Harwichport Property due to Nina's fraudulent conveyance of the Harwichport Property to herself. Both parties moved for summary judgment.

On March 29, 2019, the district court held that the HELOC was invalid because Lucien obtained it in his individual capacity. The Harwichport Property was owned by the Anne, Lucien, and Nina Trusts. Lucien, individually, did not have title to the property. He did not validly execute the HELOC because he did not act through the Lucien or Anne Trusts.

Next, the district court held that Wilmington was entitled to an equitable lien against the Harwichport Property. It found that after the sale of the Bass River Property, the proceeds from the $500,000 HELOC were returned to Lucien. Nina inherited these proceeds when Lucien died. The court held that "[t]o allow Nina to retain these funds would result in an unjust enrichment."

On Wilmington's last two claims, the district court held that a constructive trust "would be inappropriate because the defendants did not obtain the assets of Lucien's estate or the [Harwichport] Property through fraud or mistake" and that "Wilmington ha[d] no basis to allege fraudulent transfer" because the HELOC "was not a valid encumbrance."

The defendants appeal from the district court's grant of an equitable lien on the Harwichport Property.2

III. Legal Analysis

We review a district court's decision to grant or withhold equitable relief for abuse of discretion, even when, as here, the equitable relief is granted through a motion for summary judgment. See, e.g., Ortega Candelaria v. Orthobiologics LLC, 661 F.3d 675, 678 (1st Cir. 2011). This standard is deferential but "not unbridled." Corp. Techs., Inc. v. Harnett, 731 F.3d 6, 10 (1st Cir. 2013). The standard is "not a monolith: within it, abstract legal rulings are scrutinized de novo, factual findings are assayed for clear error, and the degree of deference afforded to issues of law application waxes or wanes depending on the particular circumstances." T-Mobile Ne. LLC v. Town of Barnstable, 969 F.3d 33, 38 (1st Cir. 2020). When the district court's decision involved "the application of restitution ‘rules,’ such as those articulated in [a Restatement] rather than purely equitable judgments as to the fair or just result[,]... a less deferential standard of review is arguably appropriate." Invest Almaz v. Temple-Inland Forest Prod. Corp., 243 F.3d 57, 66 n.13 (1st Cir. 2001).

In this diversity case, whether an equitable lien is a proper remedy is governed by Massachusetts law. Here, the parties dispute whether Massachusetts law allowed the district court to grant an equitable lien when no owner of the Harwichport Property agreed to encumber the property and the proceeds of the transaction did not benefit the property or its true owners.

The defendants argue the district court erred by granting the equitable lien on these facts.

When, as here, there is no on-point precedent from ...

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