Opinion
No. CV-08-5004121 S
September 28, 2011
MEMORANDUM OF DECISION
The plaintiff, Wells Fargo Bank, N.A., brought this action in six counts seeking, primarily, reformation of a mortgage signed by defendant Mark Robinson ("Robinson"). Other defendants are The Maidenstone Trust ("Maidenstone") and Roswell Sedona Associates, Inc. ("RSA, Inc."). The plaintiff alleges that it loaned money to Robinson based on a promissory note signed by Robinson and it did so believing that Robinson held title to real property in Sharon, Connecticut. The plaintiff claims that it holds a mortgage that was intended to secure its interest in the Sharon property.
RSA, Inc. did not file an appearance. By motion dated June 25, 2008, the plaintiff moved to default RSA, Inc., for failure to appear (#101). That motion was granted on June 30, 2008.
The plaintiff seeks an order (a) reforming the mortgage to include RSA, Inc. as a mortgagor; (b) determining that the plaintiff has an equitable mortgage on the Sharon property and ensuring that it has a first mortgage position on the Sharon property; and (c) estopping Maidenstone or RSA, Inc. from challenging either the plaintiff's mortgage or its position. The plaintiff also claims that Robinson acted as an agent for RSA, Inc.
This matter came before the court for trial, and was heard, on April 26, 2011, through April 28, 2011, The parties filed simultaneous post-trial briefs on June 22, 2011, and simultaneous reply briefs on or before July 8, 2011. On August 5, 2011, the parties came before the court to argue their relative positions. The court finds for the plaintiff on counts one, three, four and six.
Maidenstone filed its opening brief on June 23, 2011. No other party objected to the untimely filing, and so the court will consider Maidenstone's brief. Maidenstone elected not to file a reply brief. The court also considered supplemental post-trial briefs filed by each of the three parties (##147, 148 and 149).
Count five is the plaintiff's allegation that the promissory note is in default and that the plaintiff is entitled to foreclose upon the Sharon property. The court bifurcated the foreclosure count pending the outcome of the trial on the remaining counts. The plaintiff did not brief its claim, set forth in count two, that the plaintiff has an equitable mortgage on the property. Therefore, it is not necessary to address count two. See In re Haley B., 81 Conn.App. 62, 67-68, 838 A.2d 1006 (2004). Nonetheless, the court notes that the findings set forth, infra, support such a claim. See Nelson v. Catalano, Superior Court, judicial district of Hartford, Docket No. CV 03 0824431 (April 3, 2007, Satter, J.T.R.) ( 43 Conn. L. Rptr. 788, 790).
I FACTUAL BACKGROUND
This case involves a relatively complicated set of facts that relate to multiple business entities. The inherent complications are compounded by, inter alia, clear evidence that forged signatures appear on at least some of the paperwork related to the transaction at issue. The key players in the various entities involved in this case include brothers, Mark Robinson and Kenneth Robinson ("Robinson brothers"), and, most particularly, the moving force behind all of the entities, Thomas Killackey ("Killackey").
Kenneth Robinson played a minimal role in the events that are at issue in this case. All references to "Robinson" throughout this opinion are references to Mark Robinson, Kenneth Robinson's brother.
1. The Property. The property at issue is known as Lot 23-14 on Route 7 in Sharon, Connecticut ("the property" or "the Sharon property"). It is an area of land made up of approximately fifty-two acres that was initially offered to the plaintiff as security for a $140,000 loan from the plaintiff. Killackey first owned the property in 1989.
As will be discussed, infra, 39.912 acres of the fifty-two acres were, ultimately, to be offered as security in the mortgage transaction that is at issue. All references to "the property," unless specifically noted otherwise, are references to the sub-forty-acre parcel.
2. Maidenstone. The property thereafter passed to Maidenstone. Killackey is a trustee and was the grantor of Maidenstone.
3. RSA, Inc. In 1997, RSA, Inc. took title to the property from Maidenstone. RSA, Inc. is a corporation that was set up by Killackey for the purpose of developing residential properties. By 2002, the property was subject to a $260,000 mortgage held by Maidenstone. In 2002, Killackey was the president of RSA, Inc. and Robinson was RSA, Inc.'s corporate secretary.
4. RSA, LLC. Roswell Sedona Associates, LLC ("RSA, LLC") is the final entity involved in the events that are the subject of this case. RSA, LLC is another entity set up by Killackey. Killackey was the manager of RSA, LLC, and RSA, Inc. was a member of RSA, LLC.
The general plan of operation for the three partners had been to develop a residential property, sell it at a profit and then divide the profits in thirds. The general allocation of responsibilities called for the Robinson brothers to provide the necessary funding for the projects and for Killackey to create and carry out the development plans.
In 2002, Killackey and the Robinson brothers were working on several residential projects. Progress was flagging on one of those projects, a house that Killackey was building in Kent, Connecticut ("the Kent project"). Faced with a need for an infusion of cash to finish the Kent project, Killackey explained to Robinson that it had become necessary to mortgage the Sharon property in order to obtain a loan of $140,000. Killackey assured Robinson that, with the $140,000 loan, Killackey could complete the Kent project, sell the finished home, and there would be more than enough in profits to repay the loan. All of this, Killackey assured Robinson, would be accomplished within one year of taking the loan.
Killackey was compelled to enlist Robinson's aid in the 2002 funding issue because Killackey's credit was poor while Robinson's was far more acceptable to lending institutions. Although Killackey initially planned to offer all of the property as collateral for the loan, he revised the plan after the plaintiff rejected his attempt to have RSA, Inc. give a mortgage to the plaintiff in return for a $140,000 loan.
Killackey then decided that the most desirable way to raise the needed funds was to have Robinson apply for a home equity line of credit ("HELOC"). This plan was hampered by two complications. First, Robinson, with his desirable credit history, would have to be the applicant for the HELOC, but Robinson did not own the property in 2002. Second, the plaintiff would not agree to a HELOC on real estate that was in excess of forty acres. Killackey solved the second problem first. On May 15, 2002, Killackey executed an affidavit that designated 11.658 acres of the property as "greenspace" which could not be developed. The remaining property was now slightly less than 40 acres, and, thus, qualified for the HELOC.
The ownership problem was more complex. RSA, Inc., not Robinson, owned the property. In a document dated February 27, 2002, RSA, Inc. purportedly agreed to sell the property to Robinson for $240,000 ("the agreement"), an amount nearly equal to a mortgage that was on the property at that time. The agreement further provided that Robinson would pay $100,000 to RSA, Inc. for the property. Robinson never paid the deposit, let alone the balance, as set forth in the agreement.
The mortgage that was already on the property prior to the closing that is at issue was a $260,000 mortgage in favor of Maidenstone.
Killackey, alone, admitted to having signed the agreement. However, the agreement also purports to carry Robinson's signature and, where handwritten changes were made, Robinson's initials appear. Robinson denies having signed or initialed the document, and the court credits that testimony. Indeed, all parties agreed that there are forgeries on the agreement, but no one purports to know who carried out the forgeries. It is of interest that the agreement carries evidence that, in March 2002, it was faxed to the plaintiff from Killackey's fax machine. Killackey denies having faxed the fully executed (and partially forged) agreement to the plaintiff. The court finds that Killackey's testimony on the latter issue is irreconcilable with other physical and testimonial evidence. The court, having heard Killackey's testimony, having considered his demeanor and that of the other witnesses who testified, and having examined all exhibits introduced at trial, finds that Killackey's testimony regarding the agreement is not credible. The agreement, if believed by the plaintiff, would have served to assure the plaintiff that Robinson owned the property prior to mortgaging it to the plaintiff later in 2002. It was after the agreement was faxed to the plaintiff that Killackey chose to pursue financing by having Robinson seek a HELOC from the plaintiff.
Killackey retained Attorney Martha Miller to represent Robinson at the HELOC closing, which proceeded on May 23, 2002. Miller gave responsibility for the closing to her new associate, Joanne Scully. Scully had little practical experience as an attorney, and virtually no experience handling real estate closings. Scully had previously handled "one or two" real estate closings for another employer, but those closings had taken place more than ten years prior to the Robinson/RSA, Inc. closing. The Robinson/RSA, Inc. closing was the first closing that Scully handled while in Miller's employ.
There is evidence that someone in Miller's office obtained a title search relative to the property, although no one could locate the title search prior to trial. No one disputes, however, that a title search was done, and such a search would have revealed that RSA, Inc. owned the property prior to the closing.
On May 23, 2002, Robinson, following all of Scully's directions, signed a promissory note in the amount of $140,000 in favor of the plaintiff. Robinson also mortgaged the property to the plaintiff, even though he did not have title of record. Killackey was present at the closing and knew that Robinson did not have title to the property.
In order to complete the closing, it was necessary to subordinate Maidenstone's $260,000 mortgage on the property to the interest being given to the plaintiff. Killackey and Scully understood that unless Maidenstone's interest was subordinated to the plaintiff's interest, the plaintiff would not have made the HELOC loan to Robinson. On May 24, 2002, Killackey sent a memo to Scully in which he referred to RSA, Inc. as having purchased the property in 1997. That same memo referred to Robinson as the new owner of the property, even though Robinson did not own the property.
Both Miller and Scully understood that a subordination agreement had to be drafted, but neither attorney acknowledged having prepared the agreement that was ultimately executed. The subordination agreement is dated May 24, 2002, and thus, post-dates the closing. The subordination agreement represents that RSA, Inc. owned the property, and it states that RSA, Inc. is "about to execute and deliver to Wells Fargo Bank, N.A . . . a mortgage to secure the principal sum of $140,000 and interest, covering premises . . ." The subordination agreement further provides that the Maidenstone mortgage would be subordinated to the plaintiff's interest in the property. Killackey, a trustee for Maidenstone, had the authority to sign the subordination agreement on behalf of Maidenstone. Maidenstone's counsel stipulated that, in 2002, Killackey had the authority to subordinate any interest Maidenstone had in the property to any interest that the plaintiff had in that same property. Maidenstone does not challenge the validity of the subordination agreement.
The loan proceeds were disbursed on May 29, 2002. Although Miller wrote a check for the loan proceeds to the borrower, Robinson, on May 28, 2002, she thereafter voided that check, and on May 29, 2002, wrote a second check for the proceeds, this time to "Roswell-Sedona Assoc." Miller testified that Robinson instructed her, via letter, to write the proceeds check to "Roswell Sedona," but that she does not have a copy of the letter. Miller acknowledged that this letter "purported" to be from Robinson. Robinson denies writing such a letter, and the court credits that testimony. Robinson testified that he never received any proceeds as a result of the transaction.
Killackey's testimony regarding the letter was equivocal, at best. At trial, he was reminded of his deposition testimony as follows: "So, clearly, Mark Robinson — this is not something that was done by, you know, naughty Tommy by himself. This is something that the group all agreed, if we did it. If we did it, and I don't know that for a fact, but it just seems logical." Trial Tr. 159, April 26, 2011.
The evidence shows that Killackey deposited the net loan proceeds in the RSA, LLC account. The parties agree that RSA, Inc. was a member of RSA, LLC, and that only RSA, LLC, as opposed to the corporation, had a bank account. Further, the parties agree that only Killackey, the president of RSA, Inc., had signatory authority on the RSA, LLC account. Killackey was also the manager for RSA, LLC. On May 30, 2002, the plaintiff's mortgage and the subordination agreement were recorded on the Sharon land records.
The legal work provided by Miller's office did not address all of the issues associated with the HELOC. Indeed, there was considerable confusion within Miller's office relative to the closing. That confusion is well-illustrated by the conflicting and irreconcilable testimony regarding the responsibilities that Miller and Scully thought they had relative to the closing. For example, Scully did not understand that there was any material difference between RSA, Inc. and RSA, LLC. Scully thought she represented "the partnership" and that Robinson was a "partner" in the LLC. Miller agreed that, although Robinson was the nominal borrower, the closing was really a "Roswell Sedona" closing. Miller also believed that her "office" represented the plaintiff, although there is no evidence that the plaintiff considered Miller's "office" to be its counsel, as opposed to its settlement agent; Scully, on the other hand, believed that Miller's office was serving as settlement agent to the plaintiff.
Although Miller knew that the property had to be conveyed to Robinson to complete the closing, she never determined whether there was any such conveyance. Scully took no action that would convey the property to Robinson; she simply assumed that Robinson owned the property. It appears that, of those present at the closing, only Killackey clearly understood that it was necessary that RSA, Inc. convey the property to Robinson in order to complete the closing. Killackey testified that Robinson was the secretary for RSA, Inc. and so had the authority to bind RSA, Inc. with regard to borrowing funds and pledging RSA, Inc. property as collateral.
At the closing, Scully gave Robinson a borrower's affidavit that asserted that he owned the property. Robinson signed the affidavit, which was not accurate, but testified that he signed everything that the attorney put in front of him because he trusted her and he trusted Killackey. He acknowledged that he had very little understanding as the nature and operation of the documents he signed at the closing. Robinson testified that he knew that, beyond Maidenstone and the RSA entities, Killackey created entities named "Capistrano" and "Appletree." Regardless of whether the property was owned by Killackey individually or by any of the foregoing entities, Robinson thought the property belonged to Killackey because, in Robinson's mind, all of those entities "equaled" Killackey.
The plaintiff, Robinson and Killackey all intended that the plaintiff would have a security interest in the property. Killackey, himself, intended that the property be conveyed to Robinson in order to effect the HELOC loan. He asked Scully to consult with Miller for the purpose of carrying out such a conveyance. Although Robinson and Scully testified that Killackey was present throughout the closing, Killackey claimed that he left before the closing was completed and so, he testified, he did not find out until several years later that the property had never been conveyed to Robinson. By the end of May 2002, Robinson, Killackey and the plaintiff all believed that the plaintiff held a valid mortgage for the property. To the extent that it did not, Robinson, Killackey and the plaintiff were equally and mutually mistaken.
After the closing and the disbursement of the proceeds to RSA, LLC, Robinson began making the payments on the loan. Although Killackey had assured Robinson that the loan proceeds would permit Killackey to finish and sell the Kent project within one year, Killackey's promise went unfulfilled. Instead of having to make no more than twelve monthly payments, Robinson made fifty-eight payments. He had excellent credit at the time of the closing, and, in an attempt to maintain that credit, Robinson drew on all of his resources to keep the loan current, draining his 401K account, his regular savings account and all other sources of income available to him. In May 2007, Robinson learned — to his surprise — that a balloon payment of $132,000 was due on the loan. He was unable to make that payment, or any other payments, after the balloon payment came due.
Eventually Robinson fired Killackey from the Kent project. When the Kent house was eventually sold, Robinson lost more money on the transaction, having to pay $50,000 at the closing.
Killackey testified that, in 2005 after Robinson had fired him, he discovered that the property had never been conveyed to Robinson. At this point, Killackey could have contacted Robinson and explained that a mistake had been made at the 2002 closing. It was a mistake that either person could have corrected, since both had the authority to convey the RSA, Inc. property. That course of action would have protected the remainder of Robinson's assets, which had been greatly diminished at that point due to the combination of Killackey's machinations and Robinson's naiveté. Killackey, if he ever considered taking such an approach, did not do so. Instead, Killackey made sure that Robinson was current with the payments to the plaintiff, which he was. Thus assured, Killackey knew that he was free to place the property out of reach of both the plaintiff and Robinson. Killackey then took steps to transfer the property from RSA, Inc. This plan, consistent with Killackey's method of operation, was structured in a manner that did not reveal the extent of his personal involvement. On December 31, 2005, Killackey resigned as president from RSA, LLC and asked a successor, Robert Kenney, to close the company. Killackey testified that the primary task for Kenney was to transfer the property in lieu of foreclosure, based on the $260,000 loan owed to Maidenstone.
The warranty deed in lieu of foreclosure, signed on May 25, 2006, shows that the property was transferred to Maidenstone subject to, first, real estate taxes that were owed and, second, to "Wells Fargo Bank, N.A." At trial, Killackey attempted to argue that the words "subject to" were "nebulous" and that they did not constitute recognition of the obligation owed to the plaintiff, since the word "mortgage" did not appear in relation to the words "Wells Fargo Bank, N.A." Killackey's theory is both incorrect and irrelevant, since all parties agree that, in 2002, the Maidenstone mortgage was subordinated to the plaintiff's interest.
When Kenney transferred the property to Maidenstone, Killackey was no longer trustee of Maidenstone. However, Maidenstone had been taken over by "a relative of [Killackey's wife's] sister." At some point after the property had been transferred to Maidenstone, Killackey again became Maidenstone's trustee.
In summary, Robinson borrowed $140,000 at the direction of Killackey. In return for the loan, Robinson pledged the property, which he did not own, and attempted to pay off the loan for the next five years, even though Killackey had told Robinson that Killackey's efforts would generate the funds needed to pay off the loan within one year of the closing. In May 2006, about one year before Robinson's financial assets were depleted, Killackey seized on Scully's failure, in 2002, to ensure that the property had been transferred to Robinson. Killackey maneuvered a transfer of the property from RSA, Inc., from which he had resigned, to Maidenstone, an entity he had created. At some point after Maidenstone acquired the property, Killackey resumed his position as trustee for Maidenstone. This left Killackey with the property, Robinson with the debt, and the plaintiff with no collateral.
The evidence presented revealed that Killackey created a variety of plans to profit from residential development at various locations. In the end, neither the Robinsons nor Killackey realized the profits they envisioned. Killackey appeared to operate in a disorganized, uncontrolled fashion that he characterized as "broken field running." In his youth, Killackey had been the object of hero worship by the Robinson brothers. As children, the Robinson brothers had admired Killackey's athletic skills and his intellect; as adults, they appear to have been eager to become his business partners, and they trusted him with their financial futures. Unfortunately, it appears that neither of the Robinson brothers had a meaningful grasp of Killackey's various maneuvers and operations. Following the 2002 closing on the property, and after several years of trying to meet the resulting financial obligations, Robinson realized that Killackey's grandiose plans would never come to fruition. By then, however, Robinson's financial resources were largely dissipated.
Killackey described himself as "creative financial person." An example of his creativity emerged when he was questioned about the evolution of RSA, Inc., which began as a Nevada corporation. Eventually RSA, Inc. was re-domiciled to St. Kitts and Nevis, an island country in the West Indies. Killackey acknowledged that he made that change because "I was thinking ahead . . . [M]y dream was to make lots of money, and I wanted to have lawyers like you [counsel for the plaintiff] not available to jump on me and get in my way. I'm just being honest. What can I tell ya?" Trial Tr. 117, April 26, 2011.
II DISCUSSION
The action before the court is a foreclosure action in which the plaintiff also seeks to reform the mortgage in order to correct a mistake, to achieve the goals of the parties to the 2002 closing, and to avoid a windfall to Maidenstone. See Farmers Mechanics Savings Bank v. Sullivan, 216 Conn. 341, 354, 579 A.2d 1054 (1990).
A Reformation
In the first count of the complaint, the plaintiff seeks reformation of the mortgage it holds to include RSA, Inc. as a mortgagor based on RSA, Inc.'s status as the record title holder at the time of closing the Wells Fargo Mortgage loan as well as the recipient of the proceeds of that loan. "A cause of action for reformation of a contract rests on the equitable theory that the instrument sought to be reformed does not conform to the real contract agreed upon and does not express the intention of the parties and that it was executed as the result of mutual mistake, or mistake of one party coupled with actual or constructive fraud, or inequitable conduct on the part of the other . . . Reformation is not granted for the purpose of alleviating a hard or oppressive bargain, but rather to restate the intended terms of an agreement when the writing that memorializes that agreement is at variance with the intent of both parties . . . The remedy of reformation is appropriate in cases of mutual mistake — that is where, in reducing to writing an agreement made or transaction entered into as intended by the parties thereto, through mistake, common to both parties, the written instrument fails to express the real agreement or transaction." (Citations omitted; internal quotation marks omitted.) Lopinto v. Haines, 185 Conn. 527, 531-32, 441 A.2d 151 (1981).
"A mutual mistake is one that is common to both parties and effects a result that neither intended . . . Whether there has been such mistake is a question of fact." (Citation omitted.) Inland Wetlands Watercourses Agency v. Landmark Investment Group, Inc., 218 Conn. 703, 707, 590 A.2d 968 (1991).
In the present case, it is abundantly clear that, in May 2002, the plaintiff, Robinson (who was both the mortgagor and the secretary of RSA, Inc., which owned the property), and Killackey (the president of RSA, Inc.) intended that the plaintiff have a security interest in the closing in return for the $140,000 loan that was to be used to further RSA, Inc. and RSA, LLC interests. All of the foregoing parties expected that the property was being used as collateral for the loan. Maidenstone has so stipulated. August 4, 2011 Trs. at 16-17. In 2002, RSA, Inc., through its president, believed that the property had been conveyed to Robinson so that Robinson could pledge it as collateral in return for the loan from the plaintiff. Killackey assumed that either Scully or Miller, or both of them, had carried out his intentions and conveyed the property to Robinson so that it could be pledged as collateral for the loan. It is clear that, based on Robinson's good credit, the plaintiff intended to make a loan to Robinson, personally. It is equally clear that the plaintiff wanted a security interest in the property.
All of the foregoing facts compel the conclusion that all parties to the closing made a mutual mistake. Reformation of the mortgage is thus warranted, thereby making RSA, Inc. the mortgagor to the plaintiff. The court so finds. Even if the mistakes were viewed as unilateral mistakes on the part of the plaintiff, reformation is still appropriate due to the inequitable conduct on the part of RSA, Inc., through its president. There is no justification for Killackey's decision to engineer the transfer of the property from RSA, Inc. to Maidenstone through the steps that were taken in 2005-06. Further, the court rejects Killackey's effort to argue that Maidenstone's interest in the property is not subject to the plaintiff's interest.
Indeed, Maidenstone agreed that the fact that the plaintiff did not have the security interest it expected was the result of a mutual mistake. Transcript of Court Questions 32-33, August 5, 2011.
Reformation is also appropriate when the intent of the parties was not accomplished due to an error "by the attorney who prepared the mortgage documents." Derby Savings Bank v. Oliwa, 49 Conn.App. 602, 603, 714 A.2d 1278 (1998). In Derby Savings Bank, "[t]he trial court granted reformation of the mortgage deed so that it described the property that the parties had intended it to cover. Thereafter, the trial court granted strict foreclosure of the reformed mortgage." Id. In the present case, as in Derby Savings Bank, the lender, i.e., the plaintiff, intended to have a security interest in the property, and the borrower, Robinson, intended that the plaintiff have a security interest in the property. Robinson signed a borrower's affidavit that reflects the latter conclusion, and common sense supports the latter conclusion. If the plaintiff were to have no recourse against the property, then Robinson, alone, would remain solely responsible for the debt. Indeed, in 2002, even Killackey expected that the plaintiff would have a security interest in the property. Scully or Miller, or both of them, erred in failing to prepare the documents necessary to convey the property to Robinson, thus frustrating the intent of all the parties to the transaction. Therefore, reformation is also appropriate in order to effect the intent of the parties and to correct an error by the attorney who prepared the mortgage documents.
B Equitable Subordination.
In count three, the plaintiff asks the court to find that the plaintiff's mortgage is prior in right to the interests of defendants RSA, Inc. and Maidenstone by reason of equitable subordination. RSA, Inc. did not appear in this case and has no claim of priority of interest over the plaintiff. Maidenstone stipulates that Killackey had the authority to subordinate Maidenstone's interest in the property to that of the plaintiff. Thus, Maidenstone's interest in the property was actually subordinated to the plaintiff's interest in 2002.
Transcript of Court Questions 4, August 5, 2011.
In addition, the parties agree that when the property was transferred to Maidenstone in 2006, any security interest that Maidenstone had in the property disappeared pursuant to the doctrine of merger. See Bassett v. Mason, 18 Conn. 131, 136-37 (1846). Maidenstone agrees that the doctrine of merger applies in this case, and further, it does not question the validity of the subordination agreement.
Transcript of Court Questions 3.
Based upon all of the evidence presented, the court finds that Maidenstone's interest in the property, to the extent it has or had any such interest, is subordinate to the plaintiff's interest.
C Equitable Estoppel
In count four, the plaintiff alleges that RSA, Inc. and Maidenstone are equitably estopped from disputing the validity and priority of the plaintiff's mortgage. "There are two essential elements to an estoppel — the party must do or say something that is intended or calculated to induce another to believe in the existence of certain facts and to act upon that belief; and the other party, influenced thereby, must actually change his position or do some act to his injury which he otherwise would not have done . . . Moreover, it is the burden of the person claiming the estoppel to show that he exercised due diligence to ascertain the truth and that he not only lacked knowledge of the true state of things but had no convenient means of acquiring that knowledge." (Citations omitted; internal quotation marks omitted.) Pet Car Products, Inc. v. Barnett, 150 Conn. 42, 53-54, 184 A.2d 797 (1962).
In the present case, at the closing, Robinson (the secretary of RSA, Inc.) represented in a borrower's affidavit that he owned the property. He signed this affidavit, not in bad faith, but on advice of counsel and for the purpose of obtaining the $140,000 loan from the plaintiff. The president of RSA, Inc., Killackey, acquiesced in Robinson's actions. The attorneys handling this matter for the plaintiff failed to advise the plaintiff that the conveyance of the property to Robinson never took place. The plaintiff, relying on the attorneys to ensure that the borrower had record title, thus relied to their detriment on Robinson, RSA, Inc. and the attorneys to ensure that it had a security interest in the property. The plaintiff relied to its detriment because it did, in fact, loan $140,000 to Robinson. The existence of the borrower's affidavit, as well as the plaintiff's justified reliance on the attorneys, compels the conclusion that the plaintiff exercised due diligence in this matter.
Maidenstone and RSA, Inc., through Killackey, were fully aware that the plaintiff's security interest in the property had not been perfected due to the errors made by Robinson, Scully and Miller, yet Maidenstone, through the efforts of Killackey, took record title to the property. Moreover, RSA, Inc. transferred the property to Maidenstone with a warranty deed in lieu of foreclosure that specifically stated that the property was subject to the plaintiff's interest in it. Thus, Maidenstone is estopped by deed from contesting the plaintiff's priority interest in the property. See generally Smith v. Groton, 147 Conn. 272, 276, 160 A.2d 262 (1960).
For all of the foregoing reasons, Maidenstone is equitably estopped, and estopped by deed, from disputing the validity of the plaintiff's mortgage.
D Agency
In count six, the plaintiff claims that, at all relevant times, Robinson was acting as agent for RSA, Inc., and therefore, Robinson should be found to have pledged the RSA, Inc. property at the closing. Although Robinson was not aware that, as secretary for RSA, Inc., he had the power to convey RSA, Inc. property, Killackey testified, and no one disputes, that Robinson did have such authority. Robinson also made clear that he borrowed the money from the plaintiff solely and specifically to benefit Roswell Sedona, in that the funds were needed to complete the Kent project which was, in the end, a Roswell Sedona project. If the project was successful, the profits were to be used to pay off the loan, and any additional profits were to be distributed to the three partners in RSA, LLC, which included Robinson. Killackey, acting on behalf of both RSA, Inc. and RSA, LLC, accepted the proceeds of the loan and used them to further the Kent project.
As was discussed, supra, Robinson never understood the difference, or that there was a difference, between RSA, Inc. and RSA, LLC. He considered both of those entities, and others, to be "Killackey."
Thus, Robinson knew he was borrowing money as a nominal borrower, he knew that the loan was for the benefit of Roswell Sedona, he believed he properly executed whatever documents were necessary to complete the transaction, and he had the authority to convey the property, which belonged to RSA, Inc. See Lettieri v. American Savings Bank, 182 Conn. 1, 11-12, 437 A.2d 822 (1980). Consequently, Robinson, as agent for RSA, Inc., gave the plaintiff a mortgage interest in the property that was owned by RSA, Inc. See Gordon v. Tobias, 262 Conn. 844, 849, 817 A.2d 683 (2003).
III CONCLUSION
For all of the foregoing reasons, and based on evidence that the court finds to be clear, substantial, and convincing, the court finds in favor of the plaintiff on counts one, three, four and six.
So ordered.