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Ang v. Spidalieri

Superior Court of Rhode Island, Washington

February 5, 2018

MICHELLE ANG
v.
HUGO SPIDALIERI, ET AL.
v.
JOHN J. FINAN, III, ESQ.

          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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