Sharpe v. Helmer, No. 727-11-10 Wrcv (DiMauro, J., Mar. 28, 2012)

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                                                       STATE OF VERMONT

SUPERIOR COURT                                                                                         CIVIL DIVISION
Windsor Unit                                                                                           Docket No. 727-11-10 Wrcv

Mary Sharpe
      Plaintiff

v.

Jill Barber Helmer and Nancy Hartman Sperling
        Defendants


                              Decision on Defendants’ Motion for Summary Judgment

        At issue in this case is the scope of the reservation in an “enhanced life estate deed.” The
essential facts are that Isabel Barber quitclaimed her interest in a condominium unit to her
caretaker while reserving for herself (1) a life estate in the condominium and (2) the right to
convey the entire property “in fee simple absolute or any lesser fee” without the grantee’s
consent. Ms. Barber then mortgaged the fee-simple interest several years later to her nieces as
security for several loans. Ms. Barber has since passed away.

        Plaintiff Mary Sharpe is the caretaker-grantee, and she is seeking to sell the condominium
unit. She has asked the court for a declaration regarding the validity of the mortgage asserted
against the fee-simple interest by the nieces, defendants Jill Barber Helmer and Nancy Hartman
Sperling. Plaintiff argues first that the mortgage is void because defendants did not obtain
“lender licenses” from the Vermont Department of Banking, Insurance, Securities, and Health
Care Administration before lending money to their aunt. Plaintiff argues second that the
mortgage is ineffective because the language of the “enhanced life estate deed” does not include
a reservation of the right to mortgage or encumber the condominium unit. Defendants have
moved for summary judgment on both arguments.

         The first question is whether defendants were required to obtain a license from BISHCA
under the Vermont Licensed Lender Act, 8 V.S.A. § 2201 et seq. In general terms, the VLLA is
part of a series of banking laws meant to ensure that “the business of organizations that offer
financial services and products” is regulated in a manner “to assure the solvency, liquidity,
stability and efficiency of all such organizations, to assure reasonable and orderly
competition, . . . [and to] protect consumers against unfair and unconscionable practices.” 8
V.S.A. § 10(1)–(2); In re Gorman, 274 B.R. 351, 357 (D. Vt. 2002). Specifically, the VLLA
prohibits any person from “engag[ing] in the business of making loans of money” without first
obtaining a license from BISHCA. 8 V.S.A. § 2201(a)(1). Among the various penalties that
may be imposed for a knowing and willful violation of the licensing requirements is a civil
remedy voiding the unlicensed loan in its entirety. 8 V.S.A. § 2215(d)(1). Plaintiff seeks that
remedy here.
        Even aside from the fact that there is no evidence of a “knowing and willful” violation in
this case, the VLLA does not require a license for “single or isolated” loans when there is no
evidence that the lending individual is engaged in an ongoing business of offering loans or other
financial services to the general public. By its own terms, the VLLA licensing requirement
applies only to persons who “engage in the business” of moneylending. 8 V.S.A. § 2201(a)(1)
(emphasis added). As Judge Hayes persuasively explained in a recent opinion from this court,
professional-licensing statutes using this language have long been interpreted as not applying to
persons who engage in single or isolated acts related to the licensed activity, because such
isolated activities do not constitute a “business” subject to administrative regulation. A person
does not “engage in the business” of moneylending, therefore, merely by offering one or two
isolated loans to friends or family members, but rather a person “engages in the business” of
moneylending by performing a series of acts that would fairly lead to the conclusion that the
person is offering loans or other financial services to the general consumer marketplace. See
Hawk Resorts Int’l, L.P. v. Colburn, No. 90-2-10 Wrcv, slip op. at 2–6 (Mar. 23, 2011)
(attached) (citing, e.g., Currier v. Tuck, 287 A.2d 625, 627 (N.H. 1972)).

        In this case, there is no evidence that defendants have held themselves out as offering
loans or other financial services to anyone in the general consumer marketplace, or even to other
family members. All that the evidence shows is that the defendants made several loans, secured
by one mortgage, to their aunt during the last year of her life. The court is not persuaded that the
legislature intended for the banking laws and administrative regulations to apply to these
circumstances.

         Plaintiff argues that a license was nevertheless required because there is a specific
statutory exemption in 8 V.S.A. § 2201(d)(14) for residential mortgage loans between
“immediate family members”—a defined term which does not include the relationship between
aunt and niece. Plaintiff argues that because defendants do not fall within the exemption, a
license is required. It must be noted, however, that the exemptions from licensing in § 2201(d)
apply only if the person is otherwise “engage[d] in the business of making loans of money” such
that a license is required in the first instance under § 2201(a)(1). It would not make sense to
interpret the exemption in § 2201(d)(14) as expanding the scope of the licensing requirement in §
2201(a)(1) to include family members who make a single or isolated loan to a beloved aunt or
cousin but who have not otherwise engaged in the “business” of moneylending. It would not
serve the purposes of the statute to extend administrative oversight to situations where there are
no institutional or consumer interests at stake.1 See R&G Properties, Inc. v. Column Financial,
Inc., 2008 VT 113, ¶¶ 41–45, 184 Vt. 494 (explaining that the scope of the exemptions from
licensing under VLLA must be determined with reference to the purposes of the licensing
requirements as a whole). For these reasons, the court is not persuaded that the VLLA applies to
this case.



         1
            Put another way, it would be remarkable if the commissioner of BISHCA found it appropriate to impose
administrative penalties on defendants under § 2215(a) for lending money to their aunt during the last year of her
life. It may be noted that there are other procedures available for the protection of the personal interests at stake in
intra-family end-of-life financial transactions, but that in this case there is no suggestion that defendants took
advantage of their aunt or that Ms. Barber otherwise lacked the capacity to understand her financial affairs.

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        Plaintiff argues second that the mortgage is ineffective because Ms. Barber did not retain
the right to mortgage the fee-simple estate as part of her “enhanced life estate.” As mentioned
above, the quitclaim deed at issue in this case granted the condominium unit to plaintiff while
reserving a life estate and the “right to convey all or any portion of the premises . . . during [the
grantor’s] natural life in fee simple absolute or in any lesser fee, without the consent of the
grantee.” Although the legal treatment of such deeds has been relatively sparse over the years,
the basic structure has been recognized as effective for more than a century, and is generally
understood as conveying either a present defeasible interest in the fee or a future contingent
interest in the fee. See John C. Newman and Ron R. Morgan, Tax and Medicaid Planning
Aspects of the Standard Vermont Estate Plan—2007 Update, 33 Vt. B. J. 28 (Winter 2007/2008)
(discussing various characteristics of the “life estate with power to sell”). The most important
issue for purposes of this case is determining whether the life tenant’s reserved rights with
respect to the fee-simple estate are “exercised in accordance with the conditions set forth in the
granting document.” Weed v. Weed, 2008 VT 121, ¶ 12, 185 Vt. 83; Stasieczko v. Nichols, 137
Vt. 112, 112–13 (1979).

        Plaintiff argues that the grantor did not reserve the right to mortgage the property because
she reserved only the right to “convey” a “fee interest” in the property. A number of cases
discussing “enhanced life estates,” however, have recognized a general principle that a life
tenant’s reservation of the power to convey the property in fee simple “includes a power to
mortgage.” Kent v. Morrison, 26 N.E. 427, 428 (Mass. 1891); McLane v. Silver Bros., Inc., 31
A.2d 305, 307 (N.H. 1943); In re Stannert’s Estate, 15 A.2d 360, 363 (Pa. 1940). The basic
reasoning in these cases is that the power to mortgage is included within the power to sell, and
thus a life tenant’s reservation of the right to sell the fee-simple estate shows that the life tenant
intended to reserve the right to mortgage the same unless some contrary intent appears either in
the deed or from the circumstances surrounding the making of the deed (to the extent such
extrinsic evidence is admissible under the rules articulated by such cases as Kipp v. Estate of
Chips, 169 Vt. 102, 107 (1999) and Isbrandtsen v. North Branch Corp., 150 Vt. 575, 579
(1988)). See Brunton v. Easthampton Sav. Bank, 145 N.E.2d 696, 699–700 (Mass. 1957)
(providing example of when deed would show contrary intent, as when life tenant’s power to sell
was limited to apply only as necessary for the maintenance and support of life tenant).

        Plaintiff argues that a contrary intent is shown here because a mortgage is not a “fee
interest” in the property, but rather a security interest in the fee. It appears to the court, however,
that this interpretation of the deed focuses too narrowly on the noun and does not give enough
consideration to the reservation clause as a whole (keeping in mind the aforementioned rule that
the power to convey includes the power to mortgage) or to the overall purpose of “enhanced life
estate” deeds. Cf. In re Guité, 2011 VT 58, ¶ 9 (explaining that “[o]ur master rule for the
construction of deeds is that the intention of the parties, when ascertainable from the entire
instrument, prevails over technical terms or their formal arrangement”) (quoting Kennedy v.
Rutter, 110 Vt. 332, 338 (1939)). For example, a deed in which the life tenant reserved the right
“to convey and mortgage” the fee interest in the property would undoubtedly reserve the right to
mortgage the entire property regardless of the fact that the deed used the same noun—“fee”—as
in the present case. It follows that the scope of this particular reservation clause is not controlled
by the noun but rather by the scope of the life tenant’s right “to convey” the property—and for
the reasons discussed above, the reservation of the right “to convey” includes the right “to


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mortgage.” Because plaintiff has not offered any other evidence that the parties intended a
different outcome, the court concludes that Ms. Barber unambiguously reserved the right to
convey the fee-simple interest in her condominium unit and the right to mortgage the same.

         Finally, in reviewing the motion paperwork, there appears to be a dispute between the
parties as it relates to the accounting. Because the issues are so squarely before the court at this
time, the court would be willing to entertain an amended complaint in this docket for the limited
purpose of resolving the accounting issues, so as to obviate the need for the filing of another case
(if, in fact, there is a dispute to an extent that the parties cannot resolve themselves). If plaintiff
does not seek such relief by motion by April 15, 2012, the court will assume that the parties have
resolved the issue and will enter final judgment in this docket accordingly.


                                              ORDER

        Defendant’s Motion for Summary Judgment (MPR #2), filed August 18, 2011, is
granted. If plaintiff does not file a motion to amend the complaint for the limited purpose of
seeking an accounting by April 15, 2012, the court will enter final judgment in accordance with
this decision.

       Dated at Woodstock, Vermont this ____ day of March, 2012.


                                                       _________________________________
                                                       Theresa S. DiMauro
                                                       Superior Court Judge




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