Charles E. Fogarty
Ralph Palumbo et al. James Ottenbacher
Ralph Palumbo et al.
County Superior Court, Associate Justice Brian P. Stern KB
08-1073, KB 08-1087
Plaintiffs: Michael T. Finan, Esq. Carol L. Ricker, Esq.
Philip Laffey, Esq.
Defendants: Vincent A. Indeglia, Esq. Patricia A. Buckley,
Esq. Ryan J. Lutrario, Esq.
Present: Suttell, C.J., Goldberg, and Flaherty, JJ.
A. Suttell, Chief Justice
matter before us arises from the August 15, 2005, sale of an
approximately 360-acre tract of undeveloped land located on
Dye Hill Road in Hopkinton (the property). The plaintiffs,
Charles E. Fogarty and James Ottenbacher, averred that the
sale of the property to an entity of which the defendants,
Ralph Palumbo and Jonathan Savage, were principals, without
the plaintiffs' consent, was fraudulent; they each
consequently filed an eight-count complaint in Superior
Court. The plaintiffs also named Pilgrim Title Insurance
Company (Pilgrim), which was the title insurance and escrow
agent in connection with the sale of the property, as a
defendant in this case. Following discovery, all three named
defendants, Palumbo, Savage, and Pilgrim (jointly, the
defendants), filed motions for summary judgment, all of which
were granted by a justice of the Superior Court. For the
reasons stated herein, we affirm the judgment of the Superior
Court in part and we vacate the judgment in part.
property was originally purchased by Fogarty in the 1970s. In
1994, Fogarty formed a corporation known as Stone Ridge, Inc.
(Stone Ridge), with three other shareholders: Grant Schmidt,
M.D.; William McComb; and co-plaintiff, Ottenbacher; each
shareholder owning 25 percent of the corporation. At or about
the time Stone Ridge was formed, Fogarty transferred
ownership of the property to Stone Ridge. At all times
pertinent to this case, the sole asset of Stone Ridge was the
property and the shareholders' objective was to develop
it. In or about 2003, Brushy Brook
Development, LLC (Brushy Brook), was created as a holding
company for Stone Ridge. Title to the property was
transferred from Stone Ridge to Brushy Brook and Schmidt became the managing partner
for Brushy Brook. After disagreement arose among the partners
of Stone Ridge concerning the development plans for the
property, in late 2004 and early 2005, Brushy Brook sought to
sell the property either to a separate buyer or to one or
more of its shareholders. As of November 2004, Ottenbacher
became the president of Stone Ridge.
claimed that he secured Palumbo, a certified public
accountant, and Savage, a corporate attorney, to assist him
in either purchasing the property, or securing another buyer.
Palumbo and Savage "produced * * * a buy-out plan"
whereby Ottenbacher and Fogarty, through financing, would buy
out Schmidt and McComb. A buyout agreement was drafted by
Adam Clavell, an associate at Savage's law firm at that
time, at the direction of Savage. At deposition, Fogarty
stated that he met with Ottenbacher, Palumbo, and Savage and
discussed receivership as an option, but that they ultimately
did not want to go that route. Fogarty testified that, at
this time, Savage "was [their] attorney, " and
"was doing all of the paperwork, " but that he had
not signed a retainer agreement with, or ever paid, Savage or
Savage's law firm. Fogarty averred that it was his
understanding that "from November 17, [2004, ] to
probably towards the end of December" he was represented
by Savage. He further indicated that
"Palumbo was supposed to then be [their] accountant for
the new project."
and Savage were the principals of an entity named Boulder
Brook Development, LLC (Boulder Brook), and plaintiffs claim
this was unknown to them. On April 6, 2005, the four
shareholders of Stone Ridge (plaintiffs, Schmidt, and McComb)
executed an Asset Purchase Agreement (APA) for the sale of
the property to Boulder Brook. By the terms of the APA, a
closing date was set for thirty days thereafter. The APA
closing date lapsed prior to a closing
in July 2005, Ottenbacher made an offer to Brushy Brook to
purchase the property with a partner, Steven
Kaufman. According to Ottenbacher,
Schmidt and McComb agreed on the sale of the property and a
closing was set for August 15, 2005, with Attorney Mark
Spangler engaged as the closing agent. In anticipation of the closing, $3, 654,
367.38 was transferred into Spangler's clients' trust
account. On August 16, 2005, Spangler traveled to the
Hopkinton Town Hall to review the Hopkinton Land Evidence
Records and discovered a deed signed by Schmidt dated August
15, 2005, transferring the property to Boulder Brook (herein,
the sale to Boulder Brook). As noted, Pilgrim was the title
insurance agent and escrow agent in connection with the sale
to Boulder Brook. According to plaintiffs, the deed was
executed without their knowledge and, because the terms of
the APA had since expired without a closing, their approval
was required to convey the property.
three years later, on August 14 and 18, 2008, Fogarty and
Ottenbacher, respectively, filed two pro se
complaints against Palumbo. Thereafter, in 2010, both of
their complaints were amended to include Savage and Pilgrim
as defendants, they obtained legal representation, and their
matters were consolidated. Fogarty's second-amended
complaint filed in March 2010 and Ottenbacher's
first-amended complaint filed in April 2010 are nearly
identical and allege, against both Palumbo and Savage,
negligence (counts 1 and 2), breach of contract (counts 3), tortious
interference with a contractual relationship (counts 4),
interference with a prospective contractual relationship
(counts 5), fraud (counts 6), and civil conspiracy (counts
8). The plaintiffs also each raise one negligence count
against Pilgrim (counts 7).
ensued for approximately five years. In addition to the
production of documents and interrogatories exchanged between
the parties, Fogarty, Ottenbacher, Schmidt, McComb, Palumbo,
Clavell, Spangler, Gerald Vande Werken, who was Brushy
Brook's attorney, and James A. Houle, who was retained to
appraise the property, were all deposed. Certain depositions
and documents produced during discovery will be discussed in
further detail as they become pertinent to this Court's
March 6, 2014, Pilgrim filed a motion for summary judgment on
the negligence counts against it, to which plaintiffs
objected. A hearing was held on April 7, 2014, and, on June
9, 2014, the hearing justice issued a written decision
granting Pilgrim's motion. The hearing justice reasoned
that there was "no genuine issue of material fact
that" any "potential liability" on
Pilgrim's part "was discoverable as of August 16,
2005." Unable to satisfy the requirements of the
discovery-rule exception to the three-year statute of
limitations set forth in G.L. 1956 §
9-1-14.3 for legal malpractice
claims, plaintiffs' 2010 claims against Pilgrim were
deemed untimely. Final judgment entered on August 12, 2014,
and, on August 22, 2014, plaintiffs filed a notice of appeal.
appellate process proceeded on Pilgrim's summary
disposition, defendants Palumbo and Savage filed a total of
four motions for summary judgment; two of which were joint
motions and two of which were Savage's individual
filings. A hearing was held on all
four motions on November 10, 2014. In a written decision
filed on December 1, 2014, the hearing justice granted all
four motions for summary judgment. On April 17, 2015, the
Superior Court granted final judgment pursuant to Rule 54(b)
of the Superior Court Rules of Civil Procedure and plaintiffs
filed a timely notice of appeal.
Court will review the grant of a motion for summary judgment
de novo, employing the same standards and rules used
by the hearing justice." Newstone Development, LLC
v. East Pacific, LLC, 140 A.3d 100, 103 (R.I. 2016)
(quoting Daniels v. Fluette, 64 A.3d 302, 304 (R.I.
2013)). "We will affirm a [trial] court's decision
only if, after reviewing the admissible evidence in the light
most favorable to the nonmoving party, we conclude that no
genuine issue of material fact exists and that the moving
party is entitled to judgment as a matter of law."
Id. (quoting Daniels, 64 A.3d at 304).
"Furthermore, 'the nonmoving party bears the burden
of proving by competent evidence the existence of a disputed
issue of material fact and cannot rest upon mere allegations
or denials in the pleadings, mere conclusions or mere legal
opinions.'" Id. (quoting Daniels,
64 A.3d at 304).
judgment should enter against a party who fails to make a
showing sufficient to establish the existence of an element
essential to that party's case * * *." Newstone
Development, LLC, 140 A.3d at 103 (quoting Lavoie v.
North East Knitting, Inc., 918 A.2d 225, 228 (R.I.
2007)). "Furthermore, this Court can affirm the Superior
Court's judgment on grounds other than those relied upon
by the trial justice." Berman v. Sitrin, 991
A.2d 1038, 1043 (R.I. 2010).
Pilgrim Title Insurance Company
Negligence (Counts 7)
plaintiffs' claims against Pilgrim are negligence-based
legal malpractice claims; they allege that Pilgrim "owed
a duty to all those with a legal interest in the property, to
perform professional services in a competent manner and in
conformance with standards applicable to closing
agents." According to plaintiffs, Pilgrim breached that
duty and such breach caused them to suffer damages.
August 16, 2005, Spangler went to the Hopkinton Town Hall
after being informed by plaintiffs that "something had
happened" regarding the property. Upon inspecting the
recordings, Spangler located the warranty deed transferring
the property to Boulder Brook.
Although he could not recall the specifics, Spangler
testified at deposition that "there may have been
municipal lien certificates[.]" The first nine pages of
the pertinent recordings located at the Hopkinton Town Hall
were municipal lien certificates, each of which contained the
following text on the bottom of the page: "Certificate
requested by Pilgrim Title Ins. Co., 50 Park Row West, S 102,
Providence, RI 02903." During discovery, plaintiffs
learned for the first time that counsel for Pilgrim had
requested unanimous consent of the shareholders authorizing
the transaction and had been informed that it appeared that
there would not be unanimity, but that he nevertheless
"continued forward with the closing." A document
signed by Schmidt authorizing the sale to Boulder Brook
entitled "Minutes of Actions Taken in Writing and
Without A Meeting by the Manager of Brushy Brook Development,
LLC" was provided to Pilgrim. This document referenced
an operative Asset Purchase Agreement; however, such
agreement was never produced.
Laws 1956 § 9-1-14.3 sets forth a three-year statute of
limitations for legal malpractice claims." Behroozi
v. Kirshenbaum, 128 A.3d 869, 872 (R.I. 2016). Section
9-1-14.3 provides, in relevant part, that:
"Notwithstanding the provisions of §§ 9-1-13
and 9-1-14, an action for legal malpractice shall be
commenced within three (3) years of the occurrence of the
incident which gave rise to the action; provided, however,
"* * *
"(2) In respect to those injuries due to acts of legal
malpractice which could not in the exercise of reasonable
diligence be discoverable at the time of the occurrence of
the incident which gave rise to the action, suit shall be
commenced within three (3) years of the time that the act or
acts of legal malpractice ...