Scolardi v. Hayward et al
Filing
41
ORDER denying 22 Motion for Summary Judgment. So Ordered by Judge Steven J. McAuliffe.(vln)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Daniel Scolardi, Trustee of the
Daniel Scolardi Living Revocable Trust
and
Paul and Kathleen Fowler,
Consolidated Plaintiffs
Case N o . 11-cv-298-SM
Opinion N o . 2012 DNH 129
v.
Paul Hayward,
Paul and Kathleen Fowler,
v.
Gary J. Wood, Esq., and
Barbara Serafini, Individually and
as Trustee of the Barbara Serafini
Revocable Trust,
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Consolidated Defendants
O R D E R
These consolidated civil cases arise out of a real estate
transaction, in which Paul and Kathleen Fowler purchased property
from Paul Hayward and Barbara Serafini. The property was
encumbered by a mortgage deed held by Daniel Scolardi, as Trustee
of the Daniel Scolardi Living Revocable Trust (the “Scolardi
Trust”).
The mortgage deed secured a loan from the Scolardi
Trust to Hayward in the principal amount of $73,500.00. Because
the Scolardi Trust claims the loan remains unpaid, the trustee
(Scolardi) has refused to discharge the mortgage that encumbers
the Fowlers’ recently-purchased property.
The Fowlers, joined by Gary Wood (their attorney) and
Barbara Serafini (one of the sellers) move for summary judgment,
asserting that they are entitled to an order compelling Scolardi,
as trustee, to discharge the mortgage. Scolardi objects. For
the reasons discussed, the motion is denied.
Standard of Review
When ruling on a motion for summary judgment, the court must
“view the entire record in the light most hospitable to the party
opposing summary judgment, indulging all reasonable inferences in
that party’s favor.”
(1st Cir. 1990).
Griggs-Ryan v . Smith, 904 F.2d 1 1 2 , 115
Summary judgment is appropriate when the record
reveals “no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
P. 56(a).
Fed. R. Civ.
In this context, “a fact is ‘material’ if it
potentially affects the outcome of the suit and a dispute over it
is ‘genuine’ if the parties’ positions on the issue are supported
by conflicting evidence.”
Int’l Ass’n of Machinists & Aerospace
Workers v . Winship Green Nursing Ctr., 103 F.3d 196, 199-200 (1st
Cir. 1996) (citations omitted).
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Background
On October 8 , 2008, Daniel Scolardi, as Trustee of the
Daniel Scolardi Living Revocable Trust, loaned to Paul S . Hayward
the principal amount of $73,500.00, repayable with interest at a
fixed rate of eighteen percent (18%) per annum.
Absent demand,
the loan was to be repaid in full in 24 months. During the term
of the loan, Hayward was obligated to make monthly interest
payments of $1,102.50. The loan was evidenced by a promissory
note (document n o . 2 6 - 2 ) , subject to the terms of a loan
agreement (document n o . 2 2 - 1 ) , and secured by a mortgage deed to
property jointly owned by Hayward and Barbara Serafini, Trustee
of the Barbara Serafini 1998 Revocable Trust (document n o . 2 6 - 2 ) .
That property is known both as “Lot 57.1 Sunset Hill, Grafton
County, New Hampshire,” and “Lot 2 on a plan entitled ‘Major
Subdivision Plan, land of Barbara Serafini, Paul Hayward, Sugar
Hill, New Hampshire.’”
no. 22-1) at 7 .
See Exhibit A to Loan Agreement (document
For convenience, the court will refer to it
simply as “Lot 2.”
According to Scolardi, an organization known as C , L and M ,
Inc. (“CLM”) “identified this loan opportunity to [him],”
Scolardi Affidavit (document n o . 26-2) at para. 6, and somehow
facilitated the loan that was extended to Hayward.
But, he
denies that he authorized CLM to act as the Trust’s agent to
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collect payments under the loan. Id. at para. 7 .
Neither the
promissory note nor the loan agreement discusses CLM’s role or
responsibility in administering the loan, nor does either
document specifically vest CLM with any authority to act as agent
for the Trust or the trustee. The only reference to CLM in
either document is found in the “Notices” section of the loan
agreement, which provides that:
All notices, demands and communications provided for
herein or made hereunder shall be delivered, or sent by
certified mail, return receipt requested, addressed in
each case as follows, until some other address shall
have been designated in a written notice to the other
party hereto given in like manner,
BORROWER(S):
PAUL S . HAYWARD
10 Sunset Hill Road
Sugar Hill, N.H. 03586
SERVICER:
C , L and M , Inc.
8595 Southeast Palm Street 1633
Hobe Sound, FL 3345553 [sic]
LENDER:
DANIEL SCOLARD [sic], TRUSTEE OF THE DANIEL
SCOLARDI LIVING REVOCABLE TRUST
8595 Southeast Palm Street
Hobe Sound, FL 33455
Id. at 5 .
Scolardi says he insisted that his home address in
Florida be listed as the mailing address for him and CLM, so he
could ensure that he would receive any notices that might
otherwise be provided to a loan “servicer.”
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In the addendum to the loan agreement (which was executed on
the same day as the loan agreement), the parties agreed as
follows:
Pursuant to paragraph 1 of the Commercial Loan
Agreement a portion of the funds advanced under this
Agreement may be used by the Borrower to pay
administrative and other related costs incurred in this
transaction. Borrower and Lender agree that the
monthly payment amount of $1,102.50 shall be paid
directly from the proceeds of the Loan for a period of
twenty four (24) months. Borrower hereby authorizes
the Lender and any future holder of the Note or
successor in interest to Lender and any servicer of the
Loan to pay the amount of $1,102.50 to the holder of
said Note.
Id. at 8 (emphasis supplied).
According to Scolardi, “After
closing, the sole role of [CLM] was to act as the agent for the
borrower. [CLM] held an escrow of $26,460.00. The sole
authority granted to it was to pay that money to me on a monthly
basis pursuant to the Addendum to the Loan Agreement.”
Affidavit at para. 8 (emphasis supplied).
Scolardi
Attorney Wood, the
Fowlers, and Serafini, on the other hand, assert that the
reference to CLM as “servicer” in the loan agreement vested it
with at least apparent authority to act as Scolardi’s agent.
Approximately six weeks after Hayward borrowed the money
from the Scolardi Trust and encumbered Lot 2 with the mortgage
deed, Paul and Kathleen Fowler signed an agreement to purchase
the property from Hayward and Serafini for $117,000.00. In
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exchange for that sum, the Fowlers were to receive a warranty
deed to Lot 2 , free of all liens. As part of the transaction,
Hayward and Serafini hired an attorney to represent their
interests, and the Fowlers hired Attorney Gary Wood to represent
theirs.
Attorney Wood acted as the “settlement agent” and, as
such, determined the various parties to whom distributions would
be made from the sale proceeds (e.g., the first mortgage holder;
the second mortgage holder; e t c . ) , as well as the various taxes
and fees that had to be paid as part of the closing (e.g.,
recording fees; real estate transfer tax stamps; current use
penalties; bank wire transfer fees; e t c . ) .
See, e.g., Exhibit D
to Defendants’ Memorandum, Borrower’s Closing Statement (document
no. 22-1) at 2 5 ; Seller’s Closing Statement, id. at 2 6 .
According to Wood, Hayward’s attorney told him that CLM “was
the servicer of the Scolardi mortgage.”
Exhibit B to Defendants’
Memorandum, Affidavit of Gary Wood, at para. 5 .
And, says Wood,
M s . Serafini told him that one of the principals of CLM had
“negotiated the payoff of the mortgage on behalf of the lender.”
Id. at para. 6.
S o , believing that CLM was the Scolardi Trust’s
duly authorized servicing agent, Wood contacted CLM to determine
the loan payoff amount. He did not, however, contact CLM at the
address specified in the loan agreement (which, because that was
actually Scolardi’s address, would have put the Scolardi Trust on
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notice of the impending sale of Lot 2 and allowed Scolardi to
make arrangements to accept the payoff on the loan).
Instead,
Attorney Wood contacted CLM at its New Hampshire office.
Attorney Wood says representatives of CLM informed him that
the payoff on the Scolardi loan was approximately $52,600.
Relying upon those representations, Wood transferred proceeds
from the closing in that amount into CLM’s bank account,
apparently expecting that CLM would then secure a discharge of
the mortgage deed to Lot 2 from the Scolardi Trust.
CLM,
however, never transferred those funds to Scolardi. And, Wood
never obtained a discharge of the Trust’s mortgage, which remains
as an encumbrance on Lot 2 - hence the Fowlers’ understandable
displeasure.
Subsequently, the Securities and Exchange Commission charged
CLM and a related entity, and their principals, with financial
fraud.
See, e.g., SEC v . Scott D. Farah, et a l . , N o . 10-cv-135-
PB (D.N.H. 2010), Complaint (document n o . 1 ) (“From at least
2005, Defendants Farah and Dodge, acting through their businesses
FRM and CLM, operated a fraudulent ponzi scheme that defrauded at
least $10 million from at least 150 investors. The scheme
involved raising investor money to fund purported loans to
specific real estate projects and other businesses.”).
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In a
separate criminal proceeding, those principals - Scott Farah and
Donald Dodge - were charged with multiple counts of wire fraud.
Both men pleaded guilty and were sentenced to lengthy terms of
imprisonment.
It has, then, been demonstrated that CLM engaged
in a far-reaching fraudulent financial scheme, and it is clear
that the funds intended to pay off the loan were misappropriated
and were not paid to the Scolardi Trust.
Pending before the court is a motion for summary judgment
filed jointly by Attorney Wood, Paul and Kathleen Fowler, and
Barbara Serafini, (collectively, “defendants”) in which they
assert that, as a matter of law, CLM was vested with authority to
act as the Scolardi Trust’s agent and that the loss occasioned by
CLM’s misappropriation should fall on the Trust.
Accordingly,
they say, the “loan payoff” made to CLM constituted full payment
of the Scolardi Trust’s loan, and Scolardi (as trustee) is
obligated to discharge the mortgage that encumbers Lot 2 .
The
Trust objects.
Discussion
Defendants advance a single argument in support of their
motion for summary judgment: “As the loan servicer, [CLM] was M r .
Scolardi’s agent, and the payment made to the Scolardi Trust in
accordance with [CLM’s] instructions by the Fowlers satisfied the
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mortgage, entitling the mortgagors to a discharge in full of the
mortgage obligation.”
at 3-4.
Defendants’ memorandum (document n o . 22-1)
Although defendants do not seriously contend that CLM
was acting as the Scolardi Trust’s actual agent, they do assert
that “[a]s a matter of law, [CLM] was vested with apparent
authority as an agent of Scolardi [as trustee].”
Id. at 4 .
Under New Hampshire law, whether an agency relationship
exists is a question of fact. See VanDeMark v . McDonald’s Corp.,
153 N.H. 753, 761 (2006); Herman v . Monadnock PR-24 Training
Council, Inc., 147 N.H. 7 5 4 , 758 (2002).
As the New Hampshire
Supreme Court has observed,
[T]he necessary factual elements to establish agency
involve: (1) authorization from the principal that the
agent shall act for him or her; (2) the agent’s consent
to so act; and (3) the understanding that the principal
is to exert some control over the agent’s actions.
. . . Like actual authority, a finding of apparent
authority incorporates the three factual elements
listed above and exists where the principal so conducts
itself as to cause a third party to reasonably believe
that the agent is authorized to act.
Dent v . Exeter Hosp., Inc., 155 N.H. 7 8 7 , 792 (2007) (citations
and internal punctuation omitted) (emphasis supplied).
Here, the sole fact upon which defendants rely to establish
that CLM was vested with apparent authority to act on behalf of
the Scolardi Trust is the reference in the loan agreement to CLM
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as “servicer.”
See Defendants’ memorandum at 4 (“Apparent
authority was conferred by Scolardi when he signed the Loan
Agreement designating [CLM] as the servicer.”).
Based upon that
reference, defendants claim that, “Attorney Wood reasonably
believed that [CLM], in its capacity as servicer, had the
authority to act on behalf of Scolardi, the principal.”
Id.
But, several uncontested facts tend to undermine the
“reasonableness” of Attorney Wood’s conduct. First, Wood
concedes that he did not look at the documents evidencing the
loan to Hayward, including the loan agreement. Rather, he simply
accepted the statement made by Hayward’s attorney (and, perhaps,
a similar statement by M s . Serafini) that CLM was acting as
Scolardi’s agent. Had Wood looked at the loan agreement, he
would have seen that the mailing address listed for CLM was the
same as Scolardi’s - a curious fact that might well have called
for further investigation, particularly before a disbursement was
sent to a different address. Moreover, as Scolardi’s expert
points out, Attorney Wood never made any attempt to contact
Scolardi and verify that CLM was, indeed, acting as the Trust’s
authorized agent - something he probably should have done.
See
generally Expert Report of J. Jefferson Davis, Esq. (document n o .
26-3).
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While the court has little doubt that CLM held itself out as
the Scolardi Trust’s authorized agent, that is not dispositive.
The New Hampshire Supreme Court has stated that, “the focus of
the apparent-authority inquiry is upon the representations of the
alleged principal, not the alleged agent.”
(citations omitted).
Dent, 155 N.H. at 794
See also Restatement (Third) of Agency
§ 2.03, comment c (2006) (“The doctrine [of apparent authority]
applies to any set of circumstances under which it is reasonable
for a third party to believe that an agent had authority, so long
as the belief is traceable to manifestations of the principal.
. . . An agent’s success in misleading the third party as to the
existence of actual authority does not in itself make the
principal accountable.”).
Conclusion
For the foregoing reasons, as well as those set forth in
Scolardi’s memorandum in opposition to defendants’ motion
(document n o . 2 6 - 1 ) , the existence of genuinely disputed material
facts precludes the entry of judgment as a matter of law in favor
of defendants. Whether Scolardi conducted himself in such a way
as to warrant Attorney Wood’s apparent belief that CLM was
authorized to act as the Trust’s agent is a factual matter that,
at least on this record, cannot be resolved as a matter of law.
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Defendants’ motion for summary judgment (document n o . 22) i s ,
therefore, denied.
SO ORDERED.
Steven J. McA ____________
lited States District Judge
August 16, 2012
cc:
Stephen Lawrence Boyd, Esq.
Edmond J. Ford, Esq.
Richard K. McPartlin, Esq.
Emily G. Rice, Esq.
Frank P. Spinella, Jr., Esq.
James C . Wheat, Esq.
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