CitiFinancial, Inc. v. Balch
2013 Vt. 86
Vt.2013Background
- Theodore Ballard, a competent but illiterate 71-year-old, petitioned for a voluntary guardianship; his niece Leala Bell was appointed guardian with authority to approve contracts (except necessaries) and to approve or withhold approval of sale or encumbrance of his real property.
- In June 2008 Ballard and Bell executed loan-closing documents: Ballard signed a mortgage deed; both Ballard and Bell signed a promissory note (Bell’s signature appeared on a preprinted "Borrower" line and she also signed the settlement statement).
- The probate court never granted a license or approval authorizing a mortgage or encumbrance of Ballard’s real property under 14 V.S.A. §§ 2201-2202 / 2881-2891.
- CitiFinancial sued to foreclose; the trial court granted summary judgment for Ballard’s estate, holding the note and mortgage unenforceable because Ballard lacked capacity to encumber property while under guardianship and no probate approval was obtained.
- The Vermont Supreme Court affirmed in part and reversed in part: it held the mortgage deed ineffective for lack of required probate approval, but concluded the promissory note — if approved by the guardian — could be enforceable against Ballard and remanded the note claim for further proceedings.
Issues
| Issue | CitiFinancial's Argument | Ballard/Estate's Argument | Held |
|---|---|---|---|
| Whether the guardian’s signature on the promissory note sufficed as the required guardian "approval" of Ballard’s contract | Bell’s signature as co-borrower and on the settlement statement manifests guardian approval of the note | Ballard lacked legal capacity to execute contracts encumbering property while under guardianship unless court-approved; guardian notwithstanding | Guardian approval was required by the guardianship order; Bell’s signature is a permissible evidentiary basis for approval. Court reversed summary judgment as to the note and remanded for further proceedings. |
| Whether absence of a probate license/approval invalidates the mortgage (and/or the note) | License to sell/mortgage not required for a ward acting personally; statutes governing sales/mortgages don’t bar a competent ward in a voluntary guardianship from encumbering property with guardian consent | Probate court approval (motion/licensing) is required before a guardian may mortgage or encumber a ward’s real property; absence of approval makes mortgage ineffective | Mortgage deed invalid for lack of statutory probate approval under 14 V.S.A. §§ 2201-2202 (and cross-referenced sale/encumbrance provisions). The invalidity of the mortgage does not automatically invalidate the underlying promissory note. |
Key Cases Cited
- Richart v. Jackson, 171 Vt. 94, 758 A.2d 319 (Vt. 2000) (summary judgment standard)
- Slafter v. Savage, 89 Vt. 352, 95 A. 790 (Vt. 1915) (guardian may dispose of ward’s real estate only in accordance with statute)
- Doty v. Hubbard, 55 Vt. 278 (Vt. 1882) (legislature carefully guarded wards’ rights in real estate; court licensing required)
- Bryan v. Century Nat’l Bank, 498 So. 2d 868 (Fla. 1986) (competent ward who cedes property control to voluntary guardian cannot unilaterally convey that property)
- Pomfret Farms Ltd. P’ship v. Pomfret Assocs., 174 Vt. 280, 811 A.2d 655 (Vt. 2002) (note and mortgage create distinct obligations; note imposes personal liability)