185 Conn. 463

Fairfield County National Bank v. John DeMichely et al.

Speziale, Peters, Healey, Parskey and Armentano, Js.

Argued October 14

decision released November 10, 1981

*464Raymond F. Ross, for the appellant (defendant).

Samuel J. Henderson, for the appellee (plaintiff).

Peters, J.

This is an action of foreclosure in which the only remaining issue between the parties is the propriety of the disbursement of mortgage funds by the mortgagee. The plaintiff, Fairfield County National Bank, brought an action against the defendant, John DeMiehely, alleging default on two mortgages on a piece of real estate in West-port, one a purchase money mortgage and the other a construction mortgage. The defendant contests neither the execution of the mortgages nor his default but alleges, by way of defense and counterclaim, that he is entitled to recoup $20,000 which was wrongly disbursed by the plaintiff to the defendant’s wife. The defendant appeals from the judgment for the plaintiff rendered after a full hearing by the trial court.

This case turns on the factual findings of the trial court which determined that the defendant had authorized the disputed disbursement. In its memorandum of decision, the trial court found that the defendant had executed two mortgages, a purchase money mortgage in the amount of $12,000 on April 14,1969, and a construction mortgage in the amount of $50,000 on October 24, 1969. At the October closing, the defendant received the first advance from the plaintiff under the construction mortgage. Because the defendant had no Connecticut checking account, he endorsed the check for this first advance to a bank officer with instructions to deposit the *465check in his wife’s account with the plaintiff hank. His wife thereupon drew a check in the same amount on her account payable to the general contractor on the construction project. The defendant does not dispute these events.

The defendant does dispute the trial court’s additional findings that he instructed the plaintiff bank, at the time of the October closing, to deposit future advances to his wife’s checking account at the bank, that he specifically repeated this instruction in March, 1970, when a second advance was due and payable, and that he received a credit memo, dated March 4, 1970, confirming disbursement of the second advance “as per your instructions.” The plaintiff bank, acting in accordance with these instructions, credited the account of the defendant’s wife with the $20,000 second advance. Those moneys were withdrawn by the defendant’s wife the following day by means of a cashier’s check which was endorsed by her and then by a third person who had no connection with the construction project.

The trial court’s findings that the disputed oral instructions had been given to the plaintiff by the defendant are binding upon this court unless they are “clearly erroneous in light of the evidence and the pleadings in the record as a whole. Practice Book § 3060D; Stelco Industries, Inc. v. Cohen, 182 Conn. 561, 564, 438 A.2d 759 (1980); Pandolphe’s Auto Parts, Inc. v. Manchester, 181 Conn. 217, 221-22, 435 A.2d 24 (1980).” Superior Wire & Paper Products, Ltd. v. Talcott Tool & Machine, Inc., 184 Conn. 10, 17, 441 A.2d 43 (1981). Our review of the evidence leaves us with no doubt that the trial court’s comprehensive memorandum of decision finds ample support in the transcript. In *466commercial cases as in others, judgments concerning the credibility of the witnesses and the resolution of conflicting factual claims fall within the province of the trial court. Superior Wire & Paper Products, Ltd. v. Talcott Tool & Machine, Inc., supra, 18; Toffolon v. Avon, 173 Conn. 525, 530, 378 A.2d 580 (1977).

The defendant maintains that, even if the disputed instructions had been given, he was still entitled to recover on five grounds: (1) the oral instructions violated the statute of frauds, General Statutes § 52-550 ;1 (2) the oral instructions were contrary to the parol evidence rule; (3) the oral instructions contravened the requirements of the statutes, General Statutes §§ 49-2 and 49-3,2 *467governing construction mortgages; (4) the oral instructions required the hank to determine the scope of the wife’s authority over the second advance; and (5) the oral instructions required the hank to ascertain whether the wife was acting heyond the scope of her limited authority.

*468The first three of these arguments maintain that, for the reasons alleged, instructions which are oral are illegal or ineffective. The defendant relies on the written terms of the construction mortgage specifying that the mortgage loan is “to be paid over to said grantor . . . .” There is no doubt that *469the defendant is the grantor. He argues that the written commitment to pay “said grantor” may not he modified except by another writing supported by new consideration. The predicate to all three arguments is the proposition that the designation of an agent to receive proceeds on *470behalf of a grantor constitutes a modification of a mortgage contract. The defendant has provided no authority in support of this proposition, nor have we been able to discover any. Unless a statute provides to the contrary; see, e.g., General Statutes § 20-325a (b) ;3 Thornton Real Estate, Inc. v. *471Lobdell, 184 Conn. 228, 230, 439 A.2d 947 (1981); principals may act through agents; Restatement (Second), Agency (1958) §17; and may appoint agents “by written or spoken words or other conduct.” Restatement (Second), Agency (1958) §26. We have held that our statute of frauds; General Statutes § 52-550; which expressly permits a principal to be bound by the action of an agent, does not require the agency itself to be memorialized by a writing. Gruskin v. Allyn, 144 Conn. 541, 543, 135 A.2d 361 (1957). In the particular context of construction mortgages, the subsequent designation of contractors and subcontractors as payees is hardly such a departure from commercial practices as to require a finding that such a designation is beyond the original contemplation of the parties. See generally Osborne, Nelson & Whitman, Real Estate Finance Law (1979) §§ 12.1, 12.7, 12.10. Similarly, in the case before us, the undisputed events surrounding the disbursement of the first advance support the conclusion that disbursement of the second advance to the defendant’s wife was not a modification but was within the contemplation of the parties ab initio.

The gravamen of the defendant’s complaint is not really that the plaintiff could not honor oral instructions but that it did not do so because it failed to police the use of the proceeds of the second advance after depositing these proceeds in the bank account of the defendant’s wife. In the defendant’s view, the plaintiff had authority to disburse funds to the defendant’s wife only for the limited purpose, implemented in the first advance, of assuring ex*472peditions payment of the general contractor. The short answer to this complaint, which is at the heart of the defendant’s fourth and fifth arguments, is that the defendant failed to prove to the trial court that he gave, or that the plaintiff accepted, such a special charge. The defendant might have requested that payment be made jointly to his wife and to the general contractor, but he did not do so. Under the modern law of negotiable instruments, even if the defendant’s wife were deemed to have taken the second advance as a trustee for the benefit of the general contractor, those dealing with the defendant’s wife as trustee would only be required themselves to pay value consistent with the terms of the trust. In the absence of actual knowledge to the contrary, they would be entitled to assume that she would honor her fiduciary obligations. Compare General Statutes §§ 42a-3-206 (4) and 42a-3-304 (4) (e).4

Finally, even if the trial court had found that the plaintiff had departed from its oral instructions, the court also found facts which would demonstrate ratification of such conduct by the defendant. See *473Hartford Accident & Indemnity Co. v. South Windsor Bank & Trust Co., 171 Conn. 63, 72, 368 A.2d 76 (1976). The defendant allegedly discovered the unauthorized disbursement to his wife in late March or April, 1970. Although he complained to the plaintiff by telephone, personally and through his attorney, he continued until August to make instalment payments on his mortgage and continued, until 1974, to live with his wife.

In light of all of the circumstances, the trial court could reasonably have concluded in fact and in law that the defendant had failed to prove his defense and counterclaim.

There is no error.

In this opinion the other judges concurred.

Fairfield County National Bank v. DeMichely
185 Conn. 463

Case Details

Name
Fairfield County National Bank v. DeMichely
Decision Date
Nov 10, 1981
Citations

185 Conn. 463

Jurisdiction
Connecticut

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