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Countrywide Bank, N.A. v. Donahue

Superior Court of Rhode Island

July 9, 2015

LINDSEY M. DONAHUE, ELIZABETH A. DONAHUE, and LISA DONAHUE, Individually and as heirs beneficiaries, successors, and/or assigns of Margaret A. Cappello (deceased)
LISA M. COTE a.k.a. Lisa M. Donahue et al, and THOMAS FRANCO

Providence County Superior Court.

For Plaintiff: James P. Marusak, Esq.

For Defendant: Mark B. Laroche, Esq.; Lisa Cote a.k.a. Lisa M. Donahue, pro se and Thomas Franco, pro se



Before this Court for decision are simultaneous requests, pursuant to G.L. 1956 §§ 9-30-1 et seq., for declaratory relief regarding title to real estate located at 84 Farm Street in Providence (the Providence Property). Plaintiffs Countrywide Bank, N.A. (Countrywide) and Mortgage Electronic Registration Systems, Inc. (MERS) (collectively Plaintiffs) are the holders of a mortgage on the Providence Property, obtained by the now-deceased borrower, Margaret A. Cappello. In 1999, Ms. Cappello had recorded a deed purporting to give a future interest in the Providence Property to her granddaughters, Defendants Lindsey M. Donahue and Elizabeth A. Donahue (collectively Defendants), while reserving a life estate for herself.[1] The parties dispute the validity of this deed as well as the mortgage.

Plaintiffs ask this Court to declare the 1999 deed invalid for insufficient delivery and acceptance. Alternatively, Plaintiffs seek to reform the mortgage to add the names of the Defendants. Plaintiffs also claim they are entitled to relief pursuant to the doctrines of equitable subordination and unjust enrichment. Conversely, Defendants ask this Court to declare that the 1999 deed is valid and that Plaintiffs' mortgage is discharged. Jurisdiction is pursuant to § 9-30-2 of the Uniform Declaratory Judgments Act (UDJA).


Facts and Travel

On or about November 7, 1997, Margaret A. Cappello, the Defendants' grandmother, bought the Providence Property and owned it in fee simple. (Pls.' Pre-Trial Mem., Ex. 7.) At various times between 2004 and the present, Third-Party Defendant Lisa M. Cote, Ms. Cote's long-time boyfriend, Third-Party Defendant Thomas Franco, and the Defendants also lived at the Providence Property.[2] Ms. Cote is Ms. Cappello's daughter. (Defs.' Resp. to Pls.' Req. for Admis., ¶ 6.) The Defendants are the daughters of Ms. Cote, and the granddaughters of Ms. Cappello. Id. at ¶¶ 4, 6.

On December 22, 1999, Ms. Cappello recorded a warranty deed (the 1999 Deed) granting the Defendants "a future interest" in the Providence Property while Ms. Cappello "retain[ed] a life interest." (Pls.' Pre-Trial Mem., Ex. 6). At the time the 1999 Deed was recorded, Defendant Lindsey was about twelve years old, and Elizabeth was about eleven years old. (Ex. 18, Lindsey Dep. Tr. 6.)

At her deposition, Elizabeth testified that she first learned of the 1999 Deed sometime in 2001 when she found it among Ms. Cappello's belongings. (Ex. 19, Elizabeth Dep. Tr. 17). Elizabeth testified that she also showed the 1999 Deed to her sister. Id. at 20. Elizabeth stated that she was not surprised that her name was on the 1999 Deed because her grandmother had previously told her that "if anything happened [to Ms. Cappello] the house would be left to both [Defendants]." Id. At her deposition, Lindsey also testified as to her same understanding that she and her sister would "inherit" the house at their grandmother's death. (Lindsey Dep. Tr. 55.)

Thereafter, on February 9, 2007, Ms. Cappello mortgaged her interest in the Providence Property to Plaintiffs to secure a loan in the amount of $140, 000 (the Loan).[3] (Defs.' Resp. to Pls.' Req. for Admis., ¶ 7.) The loan funds were to be secured by a priority mortgage (the Mortgage) in Plaintiffs' favor, encumbering the Providence Property in the amount of the loan. (Compl., ¶ 9). On the date of the closing, the Providence Property was encumbered by an Execution in the amount of $8, 299.57 (Pls.' Pre-Trial Mem., Ex. 3.) However, at the closing, Countrywide paid off this existing debt and delivered the entirety of the Loan proceeds to Ms. Cappello. (Defs.' Resp. to Pls.' Req. for Admis., ¶ 21.) The application for the Loan was made in Ms. Cappello's name whereby she indicated that she held title to the Providence Property"solely by [her]self." (Pls.' Pre-Trial Mem., Ex. 2.) In a Survey Affidavit, Ms. Cappello also attested that she "has conveyed no portion of the premises. . . ." Id. at Ex. 5.

Approximately one month before the closing, Ms. Cappello executed a Land Purchase and Sale Agreement, dated January 11, 2007, for the purchase of real property designated as Lot 2, West Thompson Road in Thompson, Connecticut (the Connecticut Property). Id. at Ex. 12. Ms. Cappello's name is listed as the buyer, while the signature line lists the signatures of both Ms. Cappello and Ms. Cote. Alongside Ms. Cote's signature is the notation "POA 1/11/07."[4] Id. In their depositions, Defendants both testified as to their belief that their grandmother, Ms. Cappello, and their mother, Ms. Cote, had taken out the Loan with the intention of buying the Connecticut Property and building a "log cabin" for the family. (Elizabeth Dep. Tr. 33-35; Lindsey Dep. Tr. 28.) Lindsey testified at her deposition that Ms. Cote and Ms. Cappello wanted to move the family to Connecticut, but it was unclear whether they would sell the Providence Property prior to moving. (Lindsey Dep. Tr. 65.) Lindsey also stated that she was "uncomfortable" with the move because "no one had brought it to [Defendants'] attention." Id. On February 23, 2007, a deed to the Connecticut Property was recorded listing only Ms. Cote as the owner.[5] (Defs.' Third-Party Compl., Ex. C).

Approximately a year later, on February 8, 2008, Ms. Cappello died. (Defs.' Resp. to Pls.' Req. for Admis., ¶ 22.) It is undisputed that she kept the 1999 Deed in her possession until her death.

After Defendants refused to make payments on the Mortgage, the Plaintiffs instituted the present case against Defendants and Ms. Cote, on or about May 12, 2010, by filing a complaint requesting the following relief: (1) Declaratory Judgment, (2) Equitable Subrogation and Subordination, (3) Injunctive Relief, (4) Action on the Note, (5) Unjust Enrichment. (Agreed Travel of the Case, ¶ 1.) On June 16, 2010, Defendants answered and raised counterclaims seeking declaratory relief and/or a discharge of the Mortgage. Id. at ¶ 2. A default judgment entered against Ms. Cote on November 23, 2010 for her failure to answer the complaint. Id. at ¶ 3. On or about March 7, 2013, Defendants filed a Second Amended Counterclaim against Plaintiffs containing the following five counts: (1) declaratory judgment, (2) equity, (3) unjust enrichment, (4) injunctive relief.[6]

On or about June 4, 2012, Defendants filed a third-party complaint against their mother, Ms. Cote, and Mr. Franco.[7] Id. at ¶ 5. Ultimately, on March 20, 2013, Elizabeth dismissed her Third-Party Complaint against Ms. Cote and Mr. Franco. On October 2, 2013, Lindsey obtained an order of default against Ms. Cote and Mr. Franco for their failure to provide certain documents. Id. at ¶¶ 10-11.

On April 17, 2015, the matter was reached for trial. In lieu of live testimony, the parties submitted memoranda, the deposition of each Defendant, the deposition of attorney Thomas Hetherington, an agreed statement of facts, as well as numerous exhibits.


Standard of Review

Super. R. Civ. P. 52(a) states that "in all actions tried upon the facts without a jury . . . the court shall find the facts specially and state separately its conclusions of law thereon. . . ." Accordingly, in non-jury trials, "the trial justice sits as a trier of fact as well as of law." Hood v. Hawkins, 478 A.2d 181, 184 (R.I. 1984). "When rendering a decision in a non-jury trial, a trial justice 'need not engage in extensive analysis and discussion of all the evidence. Even brief findings and conclusions are sufficient if they address and resolve the controlling and essential factual issues in the case.'" Parella v. Montalbano, 899 A.2d 1226, 1239 (R.I. 2006) (quoting Donnelly v. Cowsill, 716 A.2d 742, 747 (R.I. 1998)).

The Rhode Island Supreme Court has stated that "a declaratory judgment proceeding 'is neither an action at law nor a suit in equity but a novel statutory proceeding . . . .'" Northern Trust Co. v. Zoning Bd. of Review of Town of Westerly, 899 A.2d 517, 520, n.6 (R.I. 2006) (quoting Newport Amusement Co. v. Maher, 92 R.I. 51, 53, 166 A.2d 216, 217 (1960)). Accordingly, the UDJA, § 9-30-1, gives this Court the "power to declare rights, status, and other legal relations whether or not further relief is or could be claimed." Sec. 9-30-1. This Court's power pursuant to the UDJA "is broadly construed, to allow the [Court] to 'facilitate the termination of controversies.'" Bradford Assocs. v. R.I. Div. of Purchases, 772 A.2d 485, 489 (R.I. 2001) (quoting Capital Props., Inc. v. State, 749 A.2d 1069, 1080 (R.I. 1999)). Thus, the purpose of the UDJA is remedial-"to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations; and is to be liberally construed and administered." Sec. 9-30-12.



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