For
Plaintiff: Nicholas Gorham, Esq. David M. D'Agostino,
Esq.
For
Defendant: Patricia A. Buckley, Esq. Robert F. McNelis, Esq.
Gerard M. Decelles, Esq.
DECISION
K.
RODGERS, J.
The
genesis of this case is an erstwhile relationship between
Plaintiff Michelle Ang (Ang or Plaintiff) and Defendant Hugo
Spidalieri (Spidalieri). Partial default judgment has
previously entered against Spidalieri.[1] The remaining
claims before this Court, sitting without a jury, arise from
an allegedly fraudulent deed and subsequent mortgage on
property located at 1556 Center Road, New Shoreham, Rhode
Island (the Block Island Property)[2], at one time owned by Ang
and Spidalieri. Ang's Fourth Amended Complaint seeks,
inter alia, a declaration that the quitclaim deed
which purported to transfer her one-half interest in the
Block Island Property to Spidalieri is a forgery, and to
partition the real estate in accordance with G.L. 1956
§§ 34-15-1 et seq. Defendant/Counterclaim
Plaintiff J.P. Morgan Chase Bank N.A. (Chase), as
successor-in- interest to Washington Mutual Bank, FA (WaMu),
is the holder of a promissory note and mortgage securing the
Block Island Property and seeks to quiet title to the same
real estate. Also before this Court are Ang's claims
against Louis Marandola, Esq. (Marandola), Spidalieri's
former attorney, [3] alleging fraud, deceit and negligence, and
seeking punitive damages.
Jurisdiction
of this case is pursuant to G.L. 1956 §§ 9-30-1
et seq. For the reasons that follow, this Court
grants relief in favor of Chase on Plaintiff's Fourth
Amended Complaint and on its Counterclaim. This Court denies
relief on all other claims before this Court.
I
Findings of Fact
Having
reviewed the Joint Statement of Facts and all the evidence
presented by both parties, the Court makes the following
findings of fact.
A
The Relationship and the Couple's Financial
Dealings
Sometime
in or around June of 2004, Spidalieri and Ang became
romantically involved and moved in together to the Block
Island Property that Spidalieri owned. At no point were Ang
and Spidalieri married to each other. Notwithstanding, by
quitclaim deed dated March 17, 2005, Spidalieri transferred
the Block Island Property to himself and "Michelle Ang
Spidalieri" as tenants by the entirety. Ang had not
asked Spidalieri to give her any interest in the Block Island
Property, nor did she provide any consideration in exchange
for that property interest.[4] Ang was familiar with the term
"tenants by the entirety" reflecting ownership by
married persons but no action was taken to accurately reflect
their unmarried status in any subsequent deed.
In
April 2005, Ang accessed $200, 000.00 from a line of credit
she held in her own name and used those funds to purchase the
Block Island Fitness Center (Fitness Center) with Spidalieri.
Using those very funds, The Intermesh Group, Inc. a/k/a The
Intermesh Group, Ltd. (Intermesh), of which Ang served as
President and Spidalieri served as Vice President, purchased
the Fitness Center on April 18, 2005, for the total sum of
$200, 000.00. Spidalieri contributed no funds to this
business venture. Ang also entered into a five-year
employment agreement with Intermesh (the Fitness Center
Employment Agreement) by which she was responsible for the
management and daily operations of the Fitness Center. Her
annual salary under the Fitness Center Employment Agreement
was $30, 000, with additional compensation for a car and
similar expenses to be paid.
In the
summer of 2005, Spidalieri suggested to Ang that they,
together, refinance the Block Island Property in order to
obtain a more favorable interest rate. Ang testified that
after they had applied to Fleet Bank, the
predecessor-in-interest to Bank of America, to obtain
refinancing, a bank representative called her to say he could
not accept their joint application because Spidalieri's
credit history was too poor, but that he could refinance with
her individually. According to Ang, it was for this reason
that a quitclaim deed was executed on July 22, 2005,
transferring Ang and Spidalieri's interest as tenants by
the entirety to Ang alone. Thereafter, Ang, individually,
applied for a loan in the amount of $1, 000, 000.00 from Bank
of America and, contemporaneously, a $250, 000.00 home equity
line of credit (HELOC) from Bank of America and represented
to the bank that her annual income was $300, 000.00. Ang
acknowledged at trial that, at the time she submitted that
application, her annual income was $35, 000.00 and that she
provided false information to the bank.[5] On July 22, 2005,
the same day the Block Island Property had been transferred
to her as sole owner, Ang closed on the $1, 000, 000.00 loan
and $250, 000.00 HELOC from Bank of America, each secured by
a promissory note, a mortgage on the Block Island Property,
and Ang's personal guaranty.[6]
The
proceeds from the Bank of America loan were distributed as
follows: $740, 584.69 was used to pay off Spidalieri's
prior mortgage on the Block Island Property; $49, 709.41 was
used by Ang to pay off a mortgage on a condominium owned by
Ang in Massachusetts; and $204, 505.25 was used to pay off
the balance due on Ang's line of credit that had been
used to purchase the Fitness Center just three months
earlier.
Notwithstanding
the representations to Bank of America that she had a
significant annual income and was the exclusive owner of the
Block Island Property which she used as collateral, on the
same day that she and Spidalieri executed the quitclaim deed
to her individually and that she closed on the two
transactions with Bank of America, Ang executed a second
quitclaim deed, this time transferring title back to herself
and Spidalieri, as tenants by the entirety. Although signed
by Ang on July 22, 2005, that quitclaim deed was not recorded
until July 29, 2005, seven days after Ang had obtained the
Bank of America loan and HELOC.
At some
time in their relationship, Ang used Spidalieri to invest
over $200, 000.00 in her own funds.[7] Spidalieri had suggested to
Ang that such investments could be used to hide Ang's
assets from her ex-husband and therefore avoid paying child
support. Ang admitted that such a plan "sounded
good" to her.
On
February 22, 2006, another quitclaim deed (the 2006 Deed) was
recorded in the New Shoreham Land Evidence Records wherein
Ang purported to transfer her interest in the Block Island
Property back to Spidalieri as sole owner. Ang asserts that
she never signed the 2006 Deed, nor granted anyone permission
to sign it on her behalf. She additionally testified that she
does not know who signed her name to the deed, nor who signed
the notarization.
Around
the same time that the 2006 Deed was executed in February
2006, Ang claims to have discovered that Spidalieri had been
engaging in several fraudulent schemes, including a plan to
dilute her one-half interest in the Fitness Center. She also
claims to have discovered that Spidalieri converted funds
belonging to the Fitness Center to his own use without her
knowledge, and that he had withdrawn $177, 000.00 from the
Bank of America HELOC without her consent or knowledge.
Finally, Ang claims to have discovered that Spidalieri
withdrew substantial amounts of her personal funds from an
annuity account, allegedly to invest them, but that he had
instead converted the funds to his personal
use.[8]
In
April 2006, Ang learned of the existence of the 2006 Deed
when Spidalieri told her that he recorded the 2006 Deed in
order to refinance the Block Island Property and pay off her
debts and monies that he owed her. Ang did not object to
Spidalieri's plan, nor was there any evidence that she in
any way protested the manner in which the Block Island
Property was transferred to Spidalieri alone vis-à-vis
the 2006 Deed. No evidence was offered concerning what
attempts, if any, were made to refinance the Block Island
Property consistent with what Ang and Spidalieri had
discussed.
B
The Lawsuit
Plaintiff
continued to live with Spidalieri at the Block Island
Property until August of 2006 when she discovered that he
cheated on her. She moved off Block Island that same month.
On September 12, 2006, Ang filed the instant action against
Spidalieri alleging fraud, deceit, conversion, breach of
contract, breach of fiduciary duty, breach of confidential
relationship, and seeking a declaration concerning the rights
and interests of the parties in relation to the Block Island
Property. The original Complaint in this action also sought
declaratory judgment with regard to two business ventures and
their respective interests in the Block Island Property:
Intermesh d/b/a Block Island Fitness Center and MFG Ltd.
Commercial Bancorp a/k/a MFG, Ltd. (MFG), [9] an entity through
which Spidalieri is alleged to have conducted his fraudulent
machinations. Contemporaneously with filing this action, Ang
caused to be filed a Notice of Lis Pendens in the New
Shoreham Land Evidence Records, thus placing the world on
notice of a cloud on the title to the Block Island Property.
Following
initiation of suit, Ang and Spidalieri engaged in informal
settlement discussions wherein, according to Ang, Spidalieri
admitted that he had treated Ang badly, promised to make her
whole by refinancing the Block Island Property, and stated
that he would place her name back on the deed. Again, Ang did
not object to Spidalieri's proposal. She thereafter
agreed to return to live with Spidalieri at the Block Island
Property in October of 2006, but, unbeknownst to Spidalieri,
Ang's intent in returning to live with Spidalieri was to
obtain evidence and documentation of his fraudulent
activities and schemes. Ang moved away from the Block Island
Property for good sometime around December of 2006 or January
of 2007.[10]
Ang
claims to have made efforts to continue to make monthly
mortgage payments to Bank of America after she moved off
Block Island but ran out of money. Eventually, according to
Ang, Bank of America sought to foreclose on the Block Island
Property.
On
September 4, 2007, a Release of Notice of Lis Pendens was
recorded in the New Shoreham Land Evidence Records,
purportedly executed by Ang in Medford, MA on August 30,
2007. Alleging that this Release was executed and filed as
part of Spidalieri's continued fraudulent actions, Ang
caused to be filed a Notice of Invalidity of Release of
Notice of Lis Pendens, which was recorded in the New Shoreham
Land Evidence Records on September 7, 2007.
C
The WaMu/Chase Loan
On
November 30, 2007, Spidalieri managed to obtain a loan from
WaMu[11] in the amount of $1, 500, 000.
Spidalieri executed a promissory note for $1, 500, 000,
secured by a mortgage on the Block Island Property. The
mortgage was recorded in the New Shoreham Land Evidence
Records. The proceeds from the WaMu/Chase Loan were used to
pay off the entirety of the Plaintiff's personal
obligations for both the Bank of America loan in the amount
of $1, 000, 486.20, and the Bank of America HELOC in the
amount of $253, 590.50, for a total payoff of $1, 254,
076.70. Spidalieri received $199, 803.83 in cash from the
loan closing.
While
Spidalieri may have orchestrated and clearly benefitted from
the WaMu/Chase Loan, he was not the lead actor. Instead, a
cast of characters, only one of whom was associated with
Spidalieri, performed the various roles needed to complete
the transaction. Spidalieri's past attorney, Marandola,
served as the director and selected his cast. First,
Marandola brought in John J. Finan, III, Esq. (Finan) to
serve as the closing attorney on the WaMu/Chase Loan.
Marandola told Finan that he himself could not serve as the
closing attorney because he had a conflict of interest with
Spidalieri arising from $5000.00 due to Marandola for
unspecified services previously provided to Spidalieri. Next,
Marandola arranged for his former brother-in-law, Jeffrey
Prete (Prete), to act as Spidalieri's attorney-in-fact at
the closing, despite the fact that Prete never met
Spidalieri. Marandola also arranged for a title examination
of the Block Island Property to be conducted by Ronald
Gauthier (Gauthier). Finally, Marandola's friend, Brian
McCaffrey (McCaffrey), was the mortgage broker for the
WaMu/Chase Loan, was paid a commission of more than $40,
000.00 according to Marandola, and was responsible for
performing a title examination on the Block Island Property
from August 2, 2007 to November 27, 2007, the date of the
closing on the loan. According to Marandola, McCaffrey had
never conducted a title examination before.
Despite
having a so-called conflict of interest, Marandola was in the
thick of this transaction. According to Marandola, Gauthier
prepared a title report that covered the period from
September 23, 1966 to August 2, 2007, but failed to include
the Notice of Lis Pendens filed on Plaintiff's behalf on
September 12, 2006. Marandola testified at trial that he was
"positive" that the Notice of Lis Pendens had been
released from the Block Island Property because Gauthier had
not included it in his title report. Like Gauthier, McCaffrey
failed to report that a Release of Notice of Lis Pendens and
a Notice of Invalidity of Release of Notice of Lis Pendens
had been recorded in the New Shoreham Land Evidence Records
on September 4, 2007 and September 7, 2007, respectively.
Marandola told Finan that a title examination had been
performed on the property and it was "clean."
Finan, who passed away after appearing for a deposition but
before the trial, relied on Marandola and never ran his own
title search for the Block Island Property, nor did he see a
formal report from anyone.[12] As a result of Finan's
reliance on Marandola's representations, neither Finan
nor WaMu had actual knowledge of the Notice of Lis Pendens on
the Block Island Property, the Release of Notice of Lis
Pendens, or the Notice of Invalidity of Release of Notice of
Lis Pendens recorded against the Block Island Property prior
to or at the time of the closing on the WaMu/Chase
Loan.[13]
Shortly
after the closing of the WaMu/Chase Loan and the payoff of
Ang's Bank of America loan and HELOC, Finan was notified
by Ang's then-attorney that there was a Notice of Lis
Pendens on the Block Island Property and that the title was
not clear of encumbrances. In his deposition testimony, Finan
stated that, even subsequent to learning this, he never
notified WaMu, or later Chase, that there were issues with
the title. Indeed, Chase did not have any knowledge of the
alleged forged 2006 Deed until it was notified of the
pendency of this lawsuit in June 2010.
The
note and the mortgage on the WaMu/Chase Loan are in default
and have been since July of 2008. As of November 10, 2014,
the payoff amount of the Chase mortgage was $2, 129, 577.14,
and the value of the Block Island Property as of August of
2014 was $1, 700, 000.00.[14]
D
Default Judgment Against Spidalieri
Plaintiff's
Fourth Amended Complaint, filed on May 18, 2011, is the
operative Complaint in the instant matter. On May 20, 2011, a
justice of this Court granted Plaintiff Partial Judgment
against Spidalieri on her counts for fraud, conversion,
deceit, breach of contract, breach of fiduciary duty, and
breach of confidential relationship. The Partial Judgment is
in the amount of $1, 590, 269.00, and includes awards for
Plaintiff's 2005 and 2006 unpaid salary under the Fitness
Center Employment Agreement in the amount of $66, 500.00 and
compensation for the remainder of the five-year Fitness
Center Employment Agreement in the amount of $105,
000.00[15]; personal expenses which should have
been covered by the Fitness Center Employment Agreement in
the amount of $44, 998.00; Spidalieri's theft of $177,
000.00 from the Plaintiff; $98, 000.00 stolen from
Plaintiff's annuity account; early withdrawal penalties
from Plaintiff's annuity account in the amount of $41,
022.00; and half of the value of the Block Island Property in
the amount of $957, 500.00. The Partial Judgment specifically
prohibited Plaintiff from executing the judgment against the
Block Island Property because the Court at that time did not
make any determinations as to Chase's interest in the
Block Island Property and did not want to prejudice Chase in
the continuing litigation.
In
addition to default judgment entering against Spidalieri on
Plaintiff's claims, Spidalieri has been defaulted on
Chase's cross-claim against him. The parties have agreed
that the mortgage securing the WaMu/Chase Loan encumbers
Spidalieri's one-half interest in the Block Island
Property.
II
Presentation of Witnesses
Four
witnesses were called to testify at trial: Dr. Marc Seifer,
Ph.D. (Dr. Seifer), Plaintiff Ang, Defendant Marandola, and
Frank Dean (Dean). All four witnesses were called in
Plaintiff's case-in-chief. The parties also agreed to
introduce excerpts of Finan's deposition transcript for
this Court's consideration.
A
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