Coffill v. Coffill

United States Court of Appeals
For the First Circuit

No. 10-1976

PATRICIA J. COFFILL,

Plaintiff, Appellant,

v.

ROBERT G. COFFILL, JR., ET AL.,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. William J. Young, U.S. District Judge]

Before

Boudin, Circuit Judge,
Souter, Associate Justice,*
and Stahl, Circuit Judge.

James R. Knudsen, with whom Edward L. Manchur and Whittenberg
Knudsen, LLP were on brief, for appellants.
R. Bruce Allensworth, with whom Andrew C. Glass, Gregory N.
Blase, and K&L Gates LLP were on brief, for appellee.

August 31, 2011

*
The Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
 SOUTER, Associate Justice. In this suit, removed from

the Superior Court of Massachusetts, the plaintiff, Patricia

Coffill, seeks to rescind two mortgages ostensibly encumbering

titles to her residence in Andover, Massachusetts, and a retreat in

Maine, and she asks for further equitable relief against

foreclosure as well as for damages. Defendants include (without

limitation) her husband and his business partner; the original

mortgagee, Bank of Ann Arbor, Inc.; its nominee of record, Mortgage

Electronic Registration System, Inc. (MERS); the supposed current

assignee of the mortgage interest, CitiMortgage, Inc.; and a lawyer

claimed to have acted for both the husband and the mortgagee,

Sherrill R. Gould.

This appeal is brought from the dismissal under Federal

Rule of Civil Procedure 12(b)(6) of those counts upon which removal

was predicated (the remainder being remanded to the state court),

and we accordingly give the gist of the present issue on the basis

of the pleadings. Coffill’s husband needed to raise money for a

new business and asked her to sign documents he described as

attesting to her clear title to the Andover and Maine properties

and certifying a clean family credit record generally. She was

never given a chance to read the pair of two-page instruments, but

was requested to sign and acknowledge them in some haste before a

notary public on August 13, 2008. In fact, the documents were

powers of attorney purporting to authorize the husband to mortgage

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the two properties, and each included the following provision

governing the duration of the authority granted:

This power of attorney and the powers herein
granted shall terminate upon the earliest
occurrence of [various events or] the
expiration of a period of time ending May 31,
2008. It is my intention that any person or
any firm, corporation, joint venture,
association or other legal entity of any kind
or character dealing with my said attorney, or
his substitute or substitutes, shall be
entitled to rely on the provisions of this
paragraph in determining whether or not this
power of attorney has been revoked . . . .

Despite the fact that each of the powers on its face had expired

prior to its execution date, five days after their execution the

husband tendered them at the loan closing where he executed

mortgages of the two properties, on the strength of which the Bank

of Ann Arbor gave him $695,000.

So far as it concerns us here, Coffill’s prayer for

rescission rests on provisions of the federal Truth In Lending Act,

15 U.S.C. § 1635, which has a state counterpart in the

Massachusetts Consumer Credit Cost Disclosure Act, Mass. Gen. Laws

ch. 140D § 10.1 Each requires a lender to provide a borrower with

specific information about the terms of credit, as well as notice

that a borrower assailed by second thoughts may call things off by

rescinding the transaction within a limited time. See generally

McKenna v. First Horizon Home Loan Corp., 475 F.3d 418, 421 (1st

1
Applicability of the federal act to the Maine real estate is
contested.

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Cir. 2007); In re Desrosiers, 212 B.R. 716, 722 (Bankr. D. Mass.

1997). If no such notice is given to the borrower, however, the

rescission period is generally three years after the transaction

under the Truth in Lending Act, 15 U.S.C. § 1635(f), and four years

under the Massachusetts law, Mass. Gen. Laws ch. 140D § 10(f).

Coffill alleges that she never received notice of terms and

cancellation rights, which would have revealed her husband’s fraud

and led her to rescind the transactions, and so she claims a

statutory right to rescind now.

CitiMortgage moved to dismiss the counts against it and

its nominee MERS under Federal Rule of Civil Procedure 12(b)(6),

for failure to state a claim for which relief is available. They

rely on the admitted fact that the husband received timely

statutory disclosures, which are said to have sufficed as notices

to Coffill by virtue of the powers of attorney. She, in turn,

responds that the powers of attorney conveyed no authority to act

on her behalf in August 2008, given their stated expirations on May

31.

At the District Court’s hearing on the motion to dismiss,

the sole issue was the efficacy of the two powers at the August

loan closing. No evidence was taken at the brief courtroom

proceeding, and the court resolved the issue of authority at the

closing by drawing “a natural inference” that “it’s supposed to

terminate May of 2009,” that the May expiration date was “a

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scrivener’s error as a matter of law . . . . She signed the

document. The document’s effective.” Following this finding, the

court proceeded to rule on the motion to dismiss, which it granted

as to the several counts mentioned.

There is no dispute that Patricia Coffill preserved her

position that the effectiveness of the powers turned on her intent,

that her signatures were induced by fraud, that the original

mortgagee and its assignee are charged with knowledge owing to

Gould’s notice of the circumstances, and that she “was entitled to

pursue” these claims in support of her challenge. It is equally

true that CitiMortgage and MERS raise a number of other issues on

which they claim the right to ultimate judgment against Coffill.

Because, however, none of them was considered by the District

Court, we confine our attention to the sole issue that was resolved

and look to the controlling local law of Massachusetts to review

the soundness of concluding without evidence that the powers were

effective as judicially corrected for what the court saw as

apparent scrivener’s error. We believe that the ruling as a matter

of law without evidentiary hearing and evidentiary basis was error.

Although the motion before the District Court was one to

dismiss, the court in effect took an intermediate step before

acting on that motion, for in concluding that the powers of

attorney suffered from identical scrivener’s error and should be

read as if their expiration dates were May 31, 2009 (not 2008) the

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court was relying on its equity power to reform a written

instrument to “conform [it] to the parties’ intent.” OneBeacon Am.

Ins. Co. v. Travelers Indem. Co., 465 F.3d 38, 41 (1st Cir. 2006)

(summarizing Massachusetts law). Its authority to make such a

correction thus turns on finding a mutual mistake by both Patricia

and Robert Coffill about the intended effective date of the powers

of attorney,2 that is, it depends on findings of fact.

The District Court apparently reasoned that evidence was

unnecessary on the strength of the rule that proof of a maker’s

intent at odds with the document is ineffective to defeat a third

party’s good faith reliance on a power of attorney valid on its

face. See Malaguti v. Rosen, 262 Mass. 555, 160 N.E. 532, 536

(1928); Strunk v. Strunk, No. 320966(LJL), 2007 WL 1559486, at *4

(Mass. Land Ct. May 31, 2007). We understand this to be the point

of the court’s mentioning that “[s]he signed the document.” But

the document in this case is of no effect on its face, being

limited by an expiration date long past before its purported

exercise (or even execution), and thus apparently worthless.

The correct approach is illustrated by another case

involving a wife-to-husband power of attorney, cited by Patricia

2
In Massachusetts, powers of attorney are subject to rules of
interpretation and reformation like those that govern standard
contracts. See McQuade v. Springfield Safe Deposit & Trust Co.,
333 Mass. 229, 129 N.E.2d 923, 925-26 (1955); Malaguti v. Rosen,
262 Mass. 555, 160 N.E. 532, 535-36 (1928); Grabowski v. Bank of
Boston, 997 F. Supp. 111, 125 (D. Mass. 1997).

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Coffill. In Malaguti v. Rosen, an otherwise plenary grant of

authority to the husband nonetheless reserved a discretionary power

on the part of the wife that was patently at odds with the overall

tenor of the instrument. 160 N.E. at 535-36. The document was

reformed to provide the husband with full discretion, not merely as

an inference from the facial disharmony of terms, but on the basis

of evidence showing that his wife meant to reserve no powers. As

in Malaguti, the issue here is one of intent, intent is a matter of

fact, Seaco Ins. Co. v. Barbosa, 435 Mass. 772, 761 N.E.2d 946, 951

(2002), and like other contested matters of fact it is to be

resolved on the basis of evidence, Lordi v. Lordi, 443 Mass. 1006,

820 N.E.2d 813, 814 (2005). Hence, the general rule of applicable

Massachusetts law that the evidence necessary for reformation must

be “full, clear, and decisive proof” of the mutual mistake alleged.

See Polaroid Corp. v. Travelers Indem. Co., 414 Mass. 747, 610

N.E.2d 912, 917 (1993). And although we will assume there are

cases in which a mutual mistake is so patent on the face of the

instrument, and the possibility for correction so manifestly

exclusive, that reformation may be ordered without evidentiary

hearing, this is not one of them.

Indeed, the proposal to reform the powers of attorney in

this case raised not one, but potentially two distinct issues of

fact that would have to be resolved in the mortgagees’ favor before

the trial court’s conclusion could be sustained. The first arises

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as a consequence of the threshold legal question implicated by any

proposal to reform the powers, given the pleadings in the case: is

it possible to reform the durational provision of a facially

nugatory power of attorney if the party making it had no intent to

confer any authority of any duration (let alone, if that person’s

signature was induced by fraud)? If the pleadings here are true in

fact, this question of law would have to be answered in the

defendants’ favor before any reformation may be decreed, but just

as surely the question should not even be considered unless

material allegations about the plaintiff’s execution of the powers

are shown to be true. We need to say no more here, since we do not

know whether the facts as found will actually present the question

for decision. But if that question drops away, or is posed but

answered in the affirmative, then a second issue of fact will be

ripe for resolution: did Coffill and her husband have a different

date mutually in mind?

Before closing, a word must be said about Davidson v.

Reznikow, No. 295820, 2005 WL 774047 (Mass. Land. Ct. Apr. 6,

2005), on which CitiMortgage and MERS placed heavy reliance at

argument, but which we do not think supports a contrary resolution

of this appeal. Although the execution of the power of attorney

there was dated after the date of the acknowledgment, the power was

held to be effective when exercised at a time subsequent to both

dates. Id. at *1 & n.3, *4. Because the fact of acknowledgment at

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some point was not contested, and the document contained no

indication that its authority had expired after the later of the

acknowledgment and execution dates, see id., the case is better

seen as one about the materiality of error than about requirements

for reformation.

The order dismissing four counts and remanding to the

state courts will be vacated, and the case remanded to the district

court for further proceedings. As mentioned, we mean to imply no

opinion on the issues raised by way of defense but not previously

considered, or on the significance of the fraud claims, either in

resolving any request to reform the powers in question, or on the

creditor’s rights of the assignee.

Vacated and remanded. Costs are taxed against the

appellees.

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