A settlor created a trust dividing real property evenly among four beneficiaries. One of the beneficiaries convinced the settlor to amend her trust, resulting in that beneficiary becoming the sole beneficiary of the real property and the sole trustee. The remaining beneficiaries sued the sole beneficiary for undue influence and interference with expectation. After a bench trial, the court entered a money judgment for the remaining beneficiaries and enjoined the sole beneficiary from encumbering the property. The order was then vacated because the court held it could not issue equitable remedies on legal claims. The sole beneficiary attempted to obtain a mortgage loan on the property while an appeal was pending but failed because of the court decision against her. However, the bank indicated it would approve a loan if the sole beneficiary transferred ownership of the property to her daughter. The daughter then conveyed a mortgage and secured a loan. The appellate court then affirmed the money damages award against the sole beneficiary and held that a constructive trust on the property was the appropriate remedy. The appellate court also ordered the sole beneficiary and her daughter to convey all interests in the property to the remaining beneficiaries. As a result of a judge’s deed, the remaining three beneficiaries became tenants in common, each holding a 1/3 shares. Those beneficiaries then sued the bank/mortgagee for slander of title and unjust enrichment based on the bank’s mortgage on the property. The district court dismissed two amended complaints of the remaining beneficiaries, and the beneficiaries appealed.
In Guerrero v. Howard Bank, 74 F.4th 816 (7th Cir. 2023), the court affirmed the ruling and held that the bank did not publish a falsity nor continue to publish one, defeating both the slander of title and unjust enrichment claims. The court began with the slander of title claim and addressed the remaining beneficiaries’ allegations that the mortgage lien was a false publication made by the bank. The court held that because the trustee’s deed conveyance to the sole beneficiary’s daughter was valid and the mortgage then recorded by the bank was also valid, the bank did not record a false publication. Additionally, the bank did not act with malice as it had a reasonable belief the sole beneficiary’s daughter could convey a valid mortgage. The court then addressed the continuing publication theory and found no support for it. Next, the court discussed the unjust enrichment claim first by addressing the remaining beneficiaries claim that the bank’s refusal to release the mortgage once it learned of the circumstances was unjust. Once again, the court emphasized that the mortgage was valid so the bank did not unjustly retain the mortgage. The court affirmed the trial court’s ruling to dismiss both claims.
By: The Editors