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Ottenbacher v. Palumbo

Superior Court of Rhode Island, Kent

June 9, 2014

JAMES OTTENBACHER, Plaintiff,
v.
RALPH PALUMBO, PILGRIM TITLE INSURANCE COMPANY, and JONATHAN SAVAGE, Defendants. CHARLES E. FOGARTY
v.
RALPH PALUMBO, PILGRIM TITLE INSURANCE COMPANY, JONATHAN SAVAGE

Kent County Superior Court.

For Plaintiff: Philip J. Laffey, Esq.; Michael T. Finan, Esq.

For Defendant: Vincent A. Indeglia, Esq.; Patricia A. Buckley, Esq.

DECISION

STERN, J.

Plaintiffs Charles Fogarty (Fogarty) and James Ottenbacher (Ottenbacher) filed pro se complaints against Defendants Ralph Palumbo (Palumbo) and Jonathan Savage (Savage) in Kent County Superior Court in mid-August 2008.[1] After retaining counsel in March 2009, the Plaintiffs' individual complaints were consolidated on June 11, 2009. Thereafter, on April 1, 2010, the Plaintiffs moved and were granted leave to amend their complaint to add Pilgrim Title Insurance Company (Pilgrim) as a Defendant. The case was transferred to the Business Calendar on May 13, 2013. Before the Court is Pilgrim's Motion for Summary Judgment.

I

Facts and Travel

According to the Plaintiffs, Fogarty owned a three hundred acre tract of land in Hopkinton, Rhode Island. Plaintiffs Fogarty and Ottenbacher, along with Grant Schmidt, M.D. (Schmidt) and William McComb (McComb) (collectively, Shareholders) became the four shareholders of Stone Ridge, Inc. (Stone Ridge), which purchased Fogarty's property from Fogarty's Chapter 11 bankruptcy estate in 1994. In either 2002 or 2003, the Shareholders transferred the property from Stone Ridge to Brushy Brook Development, LLC (Brushy Brook), which was, apparently, a holding company for Stone Ridge. The Shareholders, through Brushy Brook, sought to develop the property and obtained financing for their project through Pioneer Bank.

By late 2004, in the face of financial problems, internal squabbling, and, according to the Plaintiffs, a scheduled foreclosure of the property by Pioneer Bank, the Shareholders began to try to sell off the property. Ottenbacher and Fogarty, according to the Plaintiffs, wanted to obtain the property from Brushy Brook and retained Palumbo as a tax and financial advisor; and Savage, as an attorney, to accomplish their task. The Plaintiffs allege that Savage was to purchase the property from Brushy Brook and then enter into a separate option agreement with Fogarty and Ottenbacher for the property.

Savage-acting as an unincorporated entity called Boulder Brook Development Co. (Boulder Brook)-and Brushy Brook agreed on a $5.5 million deal for the purchase of the property. That deal, according to the Plaintiffs, was never consummated, and the purchase agreement, again according to the Plaintiffs, lapsed by May 2005. In June 2005, according to the Plaintiffs, Ottenbacher-with Fogarty as his partner[2]-made an offer of $4.1 million for the property, and Schmidt, acting as Managing Member of Brushy Brook, agreed to that deal. The Plaintiffs claim that Ottenbacher sensed that Schmidt was considering reviving the original deal with Savage instead of closing on the deal with the Plaintiffs, and they allege that, consequently, Ottenbacher specifically instructed Schmidt and Savage not to proceed with the conveyance to Savage and Boulder Brook. The Plaintiffs claim that Schmidt and McComb agreed to sell the property to Ottenbacher and Fogarty, and the parties set a closing date for August 15, 2005. The Plaintiffs claim that $3.6 million was wired to the trust account of Attorney Mark Spangler (Spangler) prior to the date of the closing. On August 16, 2005, according to the Plaintiffs, Spangler was dispatched by the Plaintiffs to the office of the Hopkinton Land Evidence Records, and there Spangler discovered that Schmidt had transferred the property not to the Plaintiffs, but to Boulder Brook on the previous day.[3] The records that Spangler reviewed included nine "Municipal Lien Certificates" that were dated "08/12/2005.[4]" At the bottom of each of these one-page lien certificates, just above the signature of the Hopkinton "Tax Collector/Authorized Representative" in a section titled "CERTIFICATION" is the following words, appearing in regular-sized font:

"This is to certify that the above is true and correct. Said Certification is given in accordance with 44-7-11 of the General Laws of Rhode Island, 1956, as of this 12th day of August, 2005.
"Certificate requested by Pilgrim Title Ins [sic] Co., 50 Park Row West, S 102, Providence, RI 02903." Aff. of Elizabeth J. Cook-Martin, Ex. A.[5]

Ottenbacher and Fogarty, individually and acting prose, sued Savage and Palumbo in August 2008, claiming that this conveyance was unauthorized and was executed in contravention of the Brushy Brook Operating Agreement. The Plaintiffs' individual cases were consolidated in June 2009. Subsequently, in response to Ottenbacher's Request for Production of Documents, the Plaintiffs obtained Palumbo's records. The Plaintiffs admit that they became aware, at that point, that Pilgrim had acted as the designated closing agent for the property and had closed on the deal despite numerous "irregularities" that the Plaintiffs allege should have been readily apparent to Pilgrim. Pilgrim was served with a subpoena on October 7, 2009. In response, Pilgrim provided the Plaintiffs with documents that the Plaintiffs claim reveal the extent of Pilgrim's role in the transaction; that Pilgrim knew that the Shareholders had not assented to the conveyance to Boulder Brook; and that Pilgrim was negligent in closing the deal with Boulder Brook. The Plaintiffs allege that it was only when they obtained these documents from Pilgrim that they came to ...


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