514 Broadway Investment Trust, UDT Dated 8/22/05 v. Rapoza et al

Filing 166

OPINION AND ORDER granting in part and denying in part 98 Motion for Summary Judgment; granting in part and denying in part 99 Motion for Summary Judgment; granting in part and denying in part 106 Motion for Partial Summary Judgment. So Ordered by Judge William E. Smith on 9/7/11. (Jackson, Ryan)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
- - - - - - - - - - - - - - - - - 514 BROADWAY INVESTMENT TRUST,
)
UDT 8/22/05, by and through its
)
TRUSTEE, ROBERT A. BLECHMAN,
)
Plaintiff,
)
)
v.
)
)
CRAIG F. RAPOZA; BAINBRIDGE REALTY )
CORP. a/k/a BAINBRIDGE REALTY,
)
INC.; PETER P. D’AMICO;
)
D’AMICO & TESTA, ATTORNEYS AT LAW, )
P.C.; MICHAEL F. BEHM; HELEN R.
)
COUPE d/b/a RE/MAX METRO; MICHAEL )
J. MIALE, SR.; STATEWIDE REAL
)
ESTATE APPRAISAL, LLC a/k/a
)
STATEWIDE REAL ESTATE APPRAISAL
)
CORPORATION and JOHN DOES 1 - 10, )
Defendants.
)
- - - - - - - - - - - - - - - - - -

C.A. No. 08-369 S

OPINION AND ORDER
WILLIAM E. SMITH, United States District Judge.
This matter is before the Court on the parties’ motions for
partial summary judgment, pursuant to Fed. R. Civ. P. 56.

This

dispute concerns a failed mortgage loan transaction or, as it is
described by the parties, a “hard money loan.”1

Plaintiff 514

Broadway Investment Trust (“Plaintiff” or “the Investment Trust”)
is based in California, as is its Trustee Robert Blechman, the
businessman who found the two investors and formed the Investment
Trust with the purpose of engaging in this transaction.

1

In

The parties agree that a so-called hard money loan, as the
name implies, is characterized by its short term and high rate of
interest.

California, Blechman has worked as a paralegal for a law firm, as
a loan officer for a realty services company, and recently, he
qualified for a real estate sales license.2

In a twenty-four count

Complaint, Plaintiff has sued all the Rhode Island residents who
were involved at the borrower’s end of the transaction, including
Rhode Island businessman Craig Rapoza; his former real estate
investment company, Bainbridge Realty Corp. or Bainbridge Realty,
Inc.

(“Bainbridge

D’Amico’s

law

Realty”);

firm,

D’Amico

Rapoza’s
&

Testa,

lawyer

Peter

Attorneys

at

D’Amico;
Law,

P.C.

(“D’Amico & Testa”); real estate agent Michael F. Behm; Behm’s
employer Helen R. Coupe d/b/a Re/Max Metro; real estate appraiser
Michael J. Miale, Sr.; Miale’s employer Statewide Real Estate
Appraisal, LLC, a/k/a Statewide Real Estate Appraisal Corporation
(“Statewide”); and John Does 1-10. For the reasons outlined below,
the Court holds that some of these claims may proceed to trial,
while others must be dismissed as a matter of law.
I.

Standard of Review
When ruling on a motion for summary judgment, the Court must

look to the record and view all the facts and inferences therefrom
in the light most favorable to the nonmoving party.

Cont’l Cas.

Co. v. Canadian Univ. Ins. Co., 924 F.2d 370, 373 (1st Cir. 1991).
Once this is done, Rule 56(c) requires that summary judgment be

2

Blechman also characterizes himself as a “professional poker
player.”
-2-

granted if there is no issue as to any material fact, and the
moving party is entitled to judgment as a matter of law.

The

ultimate burden of persuasion is on the moving party to show that
the undisputed facts entitle it to summary judgment as a matter of
law.

Jaroma v. Massey, 873 F.2d 17, 20 (1st Cir. 1989).

The

moving party must show that “there is an absence of evidence to
support” the non-moving party’s claim.

Celotex Corp. v. Catrett,

477 U.S. 317, 325 (1986).
If that burden is met, the nonmoving party cannot rest on its
pleadings but must “set forth specific facts demonstrating that
there is a genuine issue for trial” as to the claim that is the
subject of the summary judgment motion.

Oliver v. Digital Equip.

Corp., 846 F.2d 103, 105 (1st Cir. 1988).
II.

Background
The Court summarizes the background of this case, supplying

more specifics as it addresses in turn the counts against each
Defendant.

All of the facts recited herein are undisputed unless

otherwise noted, or are stated in a manner drawing all reasonable
inferences in favor of the nonmoving party.
In August 2005, Plaintiff Investment Trust agreed to loan
Defendants Craig Rapoza and Bainbridge Realty the sum of $800,000.
Rapoza was in a hurry to obtain funds in order to remove from
bankruptcy a business that he partially owned, radio station
operator Cumbre Communications Corp. (“Cumbre”). Plaintiff’s loan

-3-

was to be secured by a first mortgage on property owned by
Bainbridge Realty at 514 Broadway in Providence, Rhode Island.
This historic residence, built in 1867, was recently described in
the local newspaper as an “ornate West Side mansion, in disrepair
for decades.”3
Rapoza retained an attorney, Defendant Peter P. D’Amico, to
prepare the mortgage and loan documents.

Blechman asserts, and

D’Amico denies, that D’Amico also agreed to serve as attorney for
the

Investment

Trust.

Blechman

explains

that

he

requested,

received, and relied upon advice from D’Amico concerning all
aspects of the loan transaction, including the legality of the
loan’s interest rate and the clarity of the property’s title, as
well as non-legal matters such as Rapoza’s financial solvency and
character, and the value of the collateral.

While admitting that

he served as closing agent on the loan, D’Amico denies that
Blechman sought or relied on his legal advice and denies that he
discussed the value of 514 Broadway with him.

The parties agree

that the Investment Trust sought no independent assurances of
Rapoza’s financial situation, such as a credit report or loan
application, prior to the loan’s closing.
As additional collateral for the loan, Rapoza agreed to
provide an assignment of his interest in two contiguous parcels of
real property in Burrillville and North Smithfield, Rhode Island,

3

The Providence Journal, January 30, 2011.
-4-

owned by Cumbre (“the Cumbre property”).

Plaintiff alleges that

D’Amico’s misfeasance in recording this assignment resulted in
Plaintiff’s

receiving

no,

or

only

partial,

value

for

the

assignment.
Before

the

loan’s

closing,

Blechman

reviewed

a

property

appraisal for 514 Broadway that had been prepared for Rapoza by
Defendant Michael J. Miale Sr. in August 2005.

The accompanying

cover letter from Miale to Rapoza set forth a potential value for
the property of between $1.1 and $1.3 million, “depending on use
and finish,” and made several references to the building’s need for
“renovation both interior and exterior.”

Neither Blechman nor any

other member of the Investment Trust obtained an independent
appraisal, visited 514 Broadway, or reviewed the property’s tax
assessment prior to the loan’s closing.
Prior to the closing, Blechman also had an opportunity to
review

a

marketing

proposal

generated

for

Rapoza

by

realtor

Defendant Michael Behm in August 2005, which stated that the 514
Broadway property could be marketed for over $1 million.

Behm’s

employer Helen R. Coupe d/b/a Re/Max Metro was also named as a
Defendant in the lawsuit; however, both Behm and his employer were
dismissed from the lawsuit by stipulation on June 14, 2010, thereby
retiring Counts XV - XIX.
On October 7, 2005, Rapoza, individually and on behalf of
Bainbridge Realty, executed the “Balloon Promissory Note Secured by

-5-

Mortgage, Deed of Trust or other Security Deed on Real Property”
(“the Note”). According to the Note’s terms, Rapoza and Bainbridge
Realty agreed to pre-pay two monthly 18% interest payments totaling
$24,000,

as

well

as

$80,000

in

lender

origination

fees.

Thereafter, Rapoza was to make four more monthly interest payments
of $12,000, and an $800,000 balloon payment six months later, at
the end of the loan’s term.

Also on October 7, 2005, Rapoza

executed the $800,000 mortgage on 514 Broadway in favor of the
Investment Trust.

Following the closing, the Investment Trust

deposited $696,000 into an escrow account held by D’Amico.

Rapoza

and Bainbridge Realty made a single payment on the Note of $12,000
in January 2006.
In September 2006, Bainbridge Realty filed for Chapter 11 in
Rhode Island’s Bankruptcy Court.

Attorney D’Amico, on behalf of

Bainbridge Realty, petitioned the Bankruptcy Court to void the
Note, based on the argument that its interest rate, along with the
costs

and

fees,

constituted

usury

under

Rhode

Island

law.

Concluding that it was indeed usurious, the Bankruptcy Court
reformed the Note to comply with the law, in accordance with a
usury savings clause that Blechman had requested be included in the
Note.

On June 18, 2007, the Bankruptcy Court issued an Order

-6-

approving a payoff from Bainbridge Realty to the Investment Trust
of $975,806.70.4
With permission of the Bankruptcy Court, the Investment Trust
foreclosed

on

514

foreclosure auction.

Broadway,

then

bought

it

at

a

May

2007

Plaintiff claims to have then found a buyer

for the property who offered $450,000 but backed out of the deal
when a title search revealed unresolved issues.
title was affirmed.

Ultimately, the

While the fact is in no way essential to the

outcome of this lawsuit, Plaintiff has since sold the property for
$210,000 to Community Works Rhode Island, which plans to convert
the

structure

Providence

into

condominiums

Preservation

Society,

Journal article cited earlier.
A.

with

the

according

III.

assistance
to

the

of

the

Providence

Analysis

Claims against Defendants Craig F. Rapoza and Bainbridge
Realty

Plaintiff has moved for partial summary judgment on four of
the eight counts against Defendants Craig F. Rapoza and his company
Bainbridge Realty.

These counts include claims of breach of

contract and book account actions against each defendant.5

Rapoza

has not objected to Plaintiff’s motion for summary judgment on
these counts.

Bainbridge Realty has failed to plead or otherwise

4

This amount includes the balance on the principal, finance
charges, and legal fees, as of February 27, 2007.
5

Plaintiff has additional counts against Rapoza for negligent
misrepresentation, fraud, deceit, and civil conspiracy, on which no
party has moved for summary judgment.
-7-

defend itself in this lawsuit, and was defaulted on November 3,
2008.

In

connection

with

these

claims,

Plaintiff

seeks

$1,506,357.32 on the Note, and reasonable attorneys’ fees to be
established by affidavit. This amount represents the payoff figure
entered

by

the

Bankruptcy

Court

as

of

February

2007,

additional finance charges calculated through October 2010.

plus
As

these amounts are undisputed, the Court accepts them in accordance
with Fed. R. Civ. P. 56(e)(2), and grants summary judgment in favor
of Plaintiff on these four counts, pursuant to Fed. R. Civ. P.
56(e)(3).
B.

Claims against Defendants Michael J. Miale, Sr. and
Statewide

Plaintiff asserts four counts against real estate appraiser
Michael J. Miale, Sr. for negligent misrepresentation, fraud,
deceit, and civil conspiracy, and one count for vicarious liability
against

Miale’s

employer

Statewide.

Specifically,

Plaintiff

alleges that Miale negligently or intentionally “grossly overstated
the value of the subject property [514 Broadway], and his practices
and

methodology

exceeded

all

bounds

of

reasonably

practices and methods used in the industry.”

accepted

(Compl. ¶ 203.)

Miale and Statewide have filed a joint motion for summary judgment
on all the counts against them.

Plaintiff has objected.

In their memoranda, Miale and Plaintiff both extensively
debate various legal theories, such as the economic loss doctrine,
contractual privity, and assumption of the risk, and they address
-8-

certain factual issues at length, such as what was or was not said
in a telephone call between Blechman and Miale, how promptly Miale
recollected

that

phone

call

several

years

later

when

he

was

deposed, and whether or not Miale’s appraisal conformed to industry
standards as set forth in the Uniform Standards of Professional
Appraisal Practice.

All of this seems to the Court largely

inapposite, irrelevant, or, at least, beside the point.
The appraisal and the accompanying cover letter, which are the
centerpieces of Plaintiff’s allegations, were prepared by Miale for
Rapoza before Rapoza and Plaintiff were in contact. Both documents
are couched with conditions, ‘howevers,’ ‘ifs,’ and
red flags.

other verbal

For example, the cover letter, while extolling the

building’s unique and ornate Victorian architectural features,
points out twice that the building is in need of renovation both
inside and out.

The final paragraph, which includes the valuation

considered false and misleading by Plaintiff, states:
Utilizing a cost per sf at the low end of $178.00 the
subject would warrant an estimated market value of
$979,000. After considering the size, detail and appeal
of the subject, as well as the large lot size for the
area, we are of the opinion that the subject property
would warrant an estimated market value in the range of
$1.1-1.3 million dollars depending on the use and finish.
This appraisal is based on the information provided by
the owner including information on the reconfigured lot
size.
Letter from Miale to Rapoza (Aug. 1, 2005), Def.’s Ex. C in Sup. Of
Mot. for Summ. J., ECF No. 109.

The appraisal itself, a form

attached to the cover letter, continues in the same tone, with
-9-

several disclaimers and cautionary notes, such as on the first
page:
The exterior needs maintenance.
The kitchen has been
gutted. Several rooms partly gutted in various stages of
renovation.
Overall
interior
and
exterior
maintenance/renovation needed. . . . The appraiser did
not conduct a structural inspection.
Appraisal, Aug. 1, 2005, Def.’s Ex. C in Sup. of Mot. for Summ. J.,
ECF No. 109.
The tort of negligent misrepresentation requires a finding of
the following elements:
1) a misrepresentation of a material fact; 2) the
representor must either know of the misrepresentation,
must make the misrepresentation without knowledge as to
its truth or falsity or must make the representation
under circumstances in which he ought to have known of
its falsity; 3) the representor must intend the
representation to induce another to act on it; and 4)
injury must result to the party acting in justifiable
reliance on the misrepresentation.
Mallette v. Children’s Friend & Serv., 661 A.2d 67, 69 (R.I. 1995)
(citation omitted).
On these facts, it cannot be said that Miale or Statewide made
misrepresentations of material fact; instead, they expressed a
conditional assessment of the property’s potential value.

For

example, Miale’s million-dollar valuation depends on “use and
finish.”

His

ensuing

description

of

the

house

in

need

of

maintenance inside and out, with several rooms gutted and in
various stages of renovation, conveys clearly to the reader that
this “finish” has not yet taken place.

-10-

In his deposition, Blechman testified that, after he received
the appraisal, he telephoned Miale to discuss it with him further.
In these calls, Blechman claims, but Miale denies, that Miale
affirmed his valuation.

Both parties recall that Miale urged

Blechman to: “Read the appraisal.”

Blechman interprets this

directive as an invitation to rely on Miale’s valuation, but it
seems more logical that Miale did not want to be pressed to
elaborate on or contradict his appraisal, whose words and phrases
had no doubt been carefully chosen.
Plaintiff also argues that Miale’s appraisal does not conform
to industry standards for professional appraisers.
has no legs.

This argument

Plaintiff did not hire Miale, and Miale had no

relationship with Plaintiff.

If Plaintiff believed his work

product was deficient, Plaintiff could have retained its own
appraiser prior to the loan’s closing, as any reasonable purchaser
would have done.

Indeed, it appears that Plaintiff deliberately

did not take this prudent step because it did not want to receive
contrary information. Whatever the reason, there is nothing on the
face of the appraisal to indicate that it professed to be anything
other

than

negligent,

what

it

was.

intentionally,

Miale
or

made

no

otherwise,

misrepresentation,
to

Plaintiff.

Consequently, the Court grants summary judgment in favor of Miale
and Statewide on Counts XX - XXIV.

-11-

C.

Claims against Defendants Peter D’Amico and D’Amico &
Testa

Plaintiff alleges that Attorney D’Amico committed the torts of
negligent misrepresentation, fraud, legal malpractice, and deceit
against Plaintiff Investment Trust.

Plaintiff also alleges that

D’Amico engaged in a civil conspiracy to commit the intentional
torts, along with Defendants Craig Rapoza, Michael Behm, Michael
Miale, and John Does 1-10.

D’Amico has moved for summary judgment

for the claims against him, with the exception of Count III for
legal malpractice, because the issue central to that count, i.e.,
whether D’Amico entered into an attorney-client relationship with
Plaintiff, is disputed.
motion.

Plaintiff has objected to D’Amico’s

No party has moved for summary judgment on Count VI

against D’Amico & Testa for vicarious liability.
1.

Negligent Misrepresentation

In the Complaint, Plaintiff alleges that Defendant Attorney
D’Amico made negligent misrepresentations in six distinct areas of
their communication and dealings: “the value and condition of the
property, the historic condition of the property, the state of
title with respect to the subject property, Rapoza’s ability to
repay the proposed loan and his standing in the community, and with
respect to the state of the law in the State of Rhode Island with

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respect to usury, as well as with respect to Rapoza’s interest in
Cumbre Communications Corporation.”6

(Compl. ¶ 81.)

Although generally a lawyer owes no duty of care to an adverse
party, third party, or other non-client, the Rhode Island Supreme
Court recently determined that an exception should be made in cases
where a lawyer and her client intend their transaction to benefit
a third party.

Credit Union Central Falls v. Groff, 966 A.2d 1262,

1272 (R.I. 2009).

The circumstances in Groff, similar to the

present circumstances, involved a real estate transaction, where
the lawyer was retained by the borrower to conduct the closing so
as to effectuate the shared goals set forth in the contract between
the third-party lender and the borrower.

Id. at 1273.

In

evaluating the lawyer’s conduct, the Rhode Island Supreme Court
held

that

the

lawyer’s

duty

of

care

must

be

measured

by

professional standards, that is, the lawyer must “use such skill,
prudence, and diligence as lawyers of ordinary skill and capacity
commonly possess and exercise in the performance of the tasks which
they undertake.”

Id. at 1272 (internal citation omitted).

As the

Court articulated its new rule, it emphasized the rule’s “narrow
scope,”

id.

jurisdictions

at

1271,

which

distinguishing

“have

embraced

6

a

its

ruling

broader

from

other

foreseeability

For purposes of analyzing this count, the Court assumes that
no attorney-client relationship existed between Plaintiff and
D’Amico, so that this count sets forth an alternative claim to
Plaintiff’s claim for legal malpractice.
-13-

approach to determine an attorney’s duty of care to a nonclient,”
and refraining from extending the exception as far.

Id. at 1272

n.12.
A

plaintiff

must

provide

expert

evidence

in

order

to

demonstrate that an attorney has failed to employ the level of
professional skill and diligence used by lawyers of ordinary skill
and capacity.

In Cronan v. Iwon, 972 A.2d 172, 175 (R.I. 2009),

the Rhode Island Supreme Court held that, “[a]s with negligencebased legal malpractice claims, expert evidence is required to
establish the appropriate fiduciary duties owed by the attorneys
unless such duties are a matter of common knowledge.”
According

to

Plaintiff,

Defendant

D’Amico

made

three

representations which misled and induced the Investment Trust to
enter into the loan transaction, and three other misrepresentations
that sabotaged the ostensible goals of the loan transaction and
resulted in Plaintiff’s financial losses.

The Court takes them in

turn.
a)

The Value and Condition of the Property

Blechman asserted in an affidavit that he asked D’Amico about
the accuracy of Miale’s appraisal and that “D’Amico indicated to me
that that valuation was reasonable for the 514 Broadway property.”
(Blechman Aff. ¶ 59, Dec. 15, 2010, ECF No. 152.)

-14-

b)

The Historic Nature of the Property

In his affidavit, Blechman states, “D’Amico indicated to me
that he had been to the property, that it was a historical property,
that it was in good condition, and that it was a valuable local
historical landmark.”
c)

(Id. ¶ 60.)

Rapoza’s Ability to Repay the Loan and His Standing
in the Community

Blechman states that he asked D’Amico about Rapoza and that
D’Amico stated “he was a man of means,” “of good reputation and
character and would be unlikely to default.”

(Id. ¶¶ 61, 62.)

According to Blechman, all of these assurances turned out to
be untrue. However, even if D’Amico did make these statements,7 and
regardless of their truthfulness, these statements cannot form the
basis of a negligent misrepresentation claim for several reasons.
First, these statements are outside the realm of D’Amico’s duty and
expertise as a closing attorney.

Under Groff, D’Amico’s duty to

non-client Plaintiff is limited to those actions for which Plaintiff
is a “direct and intended beneficiary” of D’Amico’s transaction with
his client, Rapoza.

966 A.2d at 1273.

As the Court reads Groff,

the conduct subject to potential liability would be limited to the
lawyerly activities involved in closing the loan and would not
include preliminary conversations even on related topics.

7

In

For the purposes of his summary judgment motion, D’Amico
does not dispute that he made these statements, or similar
statements.
-15-

addition, Plaintiff has produced no evidence that D’Amico’s alleged
statements were false: that the appraisal was inaccurate; that the
building is not a historic landmark; or that Rapoza was not “a man
of means.”
Finally, Plaintiff’s reliance on these statements as the basis
for its business decision-making is not reasonable; in fact, it is
barely credible.

Plaintiff had in its possession a real estate

appraisal prepared by a professional appraiser, as well as a
marketing proposal prepared by a real estate broker.

It would not

have been reasonable for Plaintiff to rely on the closing attorney
as the guarantor of the collateral’s value and historic nature.
for

Rapoza’s

deposition

financial
that

creditworthiness.

well

being,

Plaintiff

was

Blechman

testified

unconcerned

with

in

As
his

Rapoza’s

Blechman explained that Plaintiff did not think

it necessary to get a credit report because they already knew that
Rapoza had “lousy credit” and that Cumbre’s bankruptcy was the
impetus for Rapoza’s need for cash.
Undisputed

Facts

18,

ECF

No.

(Def. D’Amico’s Statement of

107.)

The

investors

were

not

particularly concerned about Rapoza’s creditworthiness, Blechman
continued, because they were confident the collateral adequately
secured the loan.

Consequently, there is no basis to find that

Plaintiff relied on assurances D’Amico made concerning Rapoza’s
financial

status.

Finding

that

D’Amico

made

no

negligent

misrepresentations in connection with the first three topics,

-16-

summary judgment must be granted in D’Amico’s favor with respect to
the representations concerning the value and historic quality of 514
Broadway and Rapoza’s character and financial status.
The next three areas of representations allegedly made by
D’Amico include:

the state of the title on 514 Broadway; whether

or not the mortgage’s interest rate conformed to Rhode Island law;
and the secondary collateral in the Cumbre property.

These areas

require more scrutiny because they bear directly on the loan
transaction and, consequently, trigger the duty of professional care
D’Amico owed to Plaintiff under Groff.
d)
Prior

Title for 514 Broadway

to

the

mortgage

loan

closing,

D’Amico

prepared

a

Preliminary Report of Title on 514 Broadway which indicated that the
title

was

clear,

except

for

two

discharged prior to the closing.

mortgages

which

were

to

be

In his affidavit, Blechman states

that Plaintiff “relied on the Preliminary Report of Title prepared
by D’Amico in deciding to enter into the loan transaction.”
(Blechman Aff. ¶ 40.)

However, Plaintiff alleges that a number of

new and significant issues with the title were revealed by a title
company after Plaintiff foreclosed on the property and attempted to
market it.

These additional title problems were outlined in a

“Commitment for Title Insurance” prepared by LandAmerica Lawyers
Title for Jahan Montague, dated April 4, 2008.

(ECF No. 153-31.)

As a precondition for the issuance of a title policy, LandAmerica

-17-

Lawyers Title required proof of the discharge of five tax liens and
eight additional mortgages, as well as various judgments, lis
pendens, and other so-called “matters of record.”

Because of these

issues, Plaintiff alleges that it lost the potential purchaser.
Plaintiff states that it would not have entered into the loan
transaction had it known of the issues with the title.
D’Amico admits that he did prepare the Preliminary Report of
Title and that he told Plaintiff it was reliable.

D’Amico argues

that the fact that Plaintiff was able to secure a first priority
mortgage and was later able to foreclose on the property indicate
that his title report was accurate.

Furthermore, D’Amico asserts

that Plaintiff made a claim against the title company after the
alleged buyer backed out, and the title company affirmed the title,
rather than paying the claim. D’Amico argues that this demonstrates
that the title was clear and marketable.
The preparation of the title comprises part of the loan
transaction and falls within the gambit of Groff’s duty to a thirdparty beneficiary.

Although Plaintiff has not proffered expert

testimony to establish the proper standard of care as required by
Cronan v. Iwon, the Court holds that it is within the realm of
common knowledge that a clean and marketable title is a cornerstone
of a real estate transaction.

There is a genuine dispute between

the parties concerning the marketability of the title and the
accuracy of D’Amico’s title report.

-18-

Consequently, the Court denies

D’Amico’s motion for summary judgment on this portion of Plaintiff’s
Count I.
e)

Rhode Island’s Usury Rate

The next area of misrepresentation concerns the interest rate
included

in

the

mortgage

loan.

At

his

deposition,

Blechman

testified that he specifically asked D’Amico about Rhode Island’s
usury rate and whether the loan’s terms would violate the statute.
In his affidavit, Blechman states, “D’Amico advised me that the
terms of the loan, as reflected in the final loan documents, did not
violate Rhode Island usury prohibition.”

However, after Bainbridge

Realty declared bankruptcy, D’Amico argued to the Bankruptcy Court
that the loan’s terms were usurious and that the entire transaction
should be void.

The Bankruptcy Court agreed that the loan’s terms

were usurious.
D’Amico argues that there is no evidence to show that he ever
represented that the terms of the loan complied with Rhode Island’s
usury statute.

Moreover, even if he made such a representation,

D’Amico argues that Plaintiff did not rely on it, because the
inclusion of the usury savings clause, at Blechman’s suggestion,
ensured the enforceability of the loan.
As the closing attorney on the loan, D’Amico’s duties included
preparing an enforceable contract, with agreed-upon terms.

Because

of the savings clause, the contract was reformed and rendered
enforceable by the Bankruptcy Court.

-19-

The contract itself did not

conform to Rhode Island law, despite D’Amico’s alleged assurances
to the contrary.

Expert testimony is not required to understand

that a closing attorney is obligated to produce an enforceable
contract; this is common knowledge.

Consequently, Plaintiff has

produced sufficient evidence to demonstrate a genuine issue for
trial in connection with this single representation, and the Court
accordingly denies D’Amico’s motion for summary judgment on this
portion of Plaintiff’s claim.
f)

Cumbre Property

Plaintiff

also

claims

that

D’Amico’s

negligent

misrepresentations prevented it from receiving an assignment of
Rapoza’s interest in the Cumbre property, which was to serve as
additional
D’Amico’s

collateral
initial

for

version

the
of

loan.
the

According

documents

to

Plaintiff,

assigned

Rapoza’s

interest in his “40% interest in Cumbre, limited to the real
property.”

Blechman asked D’Amico to revise the documents because

he felt that they understated Rapoza’s interest in Cumbre.

D’Amico

complied. However, according to Plaintiff, D’Amico recorded the
first version of the assignment in the North Smithfield town office
and the revised version in Burrillville.

Then, Blechman states in

his

and

affidavit,

D’Amico

recorded

a

new

different

version,

assigning the “proceeds” of Rapoza’s mortgage to Plaintiff, in both
North Smithfield and Burrillville.

According to Plaintiff, this

rendered the documents “unenforceable.”

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D’Amico asserts that he never discussed the value of the Cumbre
property with Plaintiff and that his activities in connection with
recording the mortgages were consistent with his understanding of
the deal between Rapoza and Plaintiff.

In addition, D’Amico points

out that Plaintiff reviewed the Cumbre property assignments prior
to releasing the loan funds.
It is unclear to the Court what actually happened in connection
with the recording of these assignments, but it is clear that
Plaintiff has veered out of the territory of ‘common knowledge’ with
these

allegations.

Plaintiff

has

failed

to

produce

adequate

evidence, expert or otherwise, to demonstrate that D’Amico violated
the norms of professional competency and skill in connection with
the Cumbre property collateral.

Consequently, the Court grants

D’Amico’s motion for summary judgment on this portion of Count I.
2.

Fraud and Deceit

In Count II for fraud, Plaintiff alleges that D’Amico made the
same six representations discussed in connection with Count I, with
knowledge that those representations were false.

An action for

common-law fraud, or deceit, requires a showing of a false statement
of fact, not an opinion or estimate, knowingly made, which the
plaintiff can show he or she justifiably relied and acted upon.
Fournier v. Fournier, 479 A.2d 708, 714 (R.I. 1984); E. Providence
Loan Co. v. Ernest, 236 A.2d 639, 642 (R.I. 1968). An attorney owes
a duty, even to an adverse party, not to participate in fraud or

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malicious conduct.

Nisenzon v. Sadowski, 689 A.2d 1037, 1046 (R.I.

1997).
In

order

to

establish

that

a

false

statement

was

made

knowingly, with the intent to defraud, a plaintiff must produce
sufficient evidence for a reasonable inference of such intent to be
drawn.

State v. Letts, 986 A.2d 1006, 1012 (R.I. 2010); Jamestown

Bridge Comm’n v. Am. Empl’rs’ Ins. Co., 128 A.2d 550, 552 (R.I.
1957).

Intent to defraud may be inferred by the factfinder based

on the totality of the circumstances.

Palmacci v. Umpierrez, 121

F.3d 781, 789 (1st Cir. 1997) (applying traditional common law in
a review of a ruling of the Bankruptcy Court) (citing In re Anastas,
94 F.3d 1280, 1286 n.3 (9th Cir. 1996); In re Sheridan, 57 F.3d 627,
633 (7th Cir. 1995)).
As discussed above, Plaintiff has failed to present sufficient
evidence to establish that D’Amico’s alleged representations on the
accuracy of the appraisal, the historic nature of the property, and
Rapoza’s financial status were false.

There is no need for further

examination of D’Amico’s statements on these topics.

Likewise, the

assignment and recording of the secondary collateral in the Cumbre
property requires no discussion because Plaintiff’s allegations in
this area fail to provide the quantum

of

proof necessary to

demonstrate that there is a genuine issue for trial.
The two allegations that remain are the legality of the loan
terms and the clarity of 514 Broadway’s title at the time of the

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loan’s closing.

For these allegations to support a claim of fraud,

Plaintiff

show

must

that

D’Amico

made

these

representations

knowingly, with the intent to defraud, or Plaintiff must produce
sufficient evidence from which a reasonable inference of such intent
may be drawn.
Plaintiff alleges that D’Amico assured him that the interest
rates and fees set forth in the Note complied with Rhode Island law
when, in fact, they did not.

Moreover, when Bainbridge Realty

declared bankruptcy, D’Amico argued to the Bankruptcy Court that the
Note was void because of its usurious rates.

While Plaintiff lacks

direct proof of D’Amico’s intent, these circumstances create a
reasonable inference that D’Amico knew the rates were usurious when
the Note was drawn up.

Consequently, summary judgment must be

denied on this portion of the fraud claim.
D’Amico prepared and signed a Preliminary Report of Title as
of August 19, 2005 and faxed it to Blechman a few days later.

The

Report included the two mortgages on the 514 Broadway property that
the parties had agreed would be discharged before closing. On April
4,

2008,

LandAmerica

Lawyers

Title

company

identified

eight

additional unresolved issues with the title. Given D’Amico’s status
as the closing attorney for the mortgage for 514 Broadway, the
discrepancies between the two title reports create a reasonable
inference that D’Amico knew of the omissions in his Preliminary
Report

of

Title

when

he

prepared

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and

sent

it

to

Plaintiff.

Therefore, this allegation also raises a genuine issue for trial,
and summary judgment in D’Amico’s favor on this matter must be
denied.
In a separate count, Plaintiff alleges that D’Amico committed
the tort of deceit in connection with the same representations
discussed previously.

To establish the tort of deceit, a plaintiff

must show that the defendant made a false statement, knowing it to
be false, with the intention to deceive and induce the plaintiff to
rely on the statement to his or her detriment.

Francis v. Am.

Bankers Life Assurance Co. of Fl., 861 A.2d 1040, 1046 (R.I. 2004);
Katz v. Prete, 459 A.2d 81, 84 (R.I. 1983). In these circumstances,
this tort is indistinguishable from the previously-pled fraud claim,
as

are

the

allegations

forming

the

basis

of

the

claim.

Consequently, because it is unnecessarily duplicative, D’Amico’s
motion for summary judgment on this count is granted, pursuant to
Fed. R. Civ. P. 56(f)(2).
3.

Civil Conspiracy

Plaintiff alleges that D’Amico “worked together with Defendants
Rapoza, Behm and Miale and John Does 1-10, or some of them, to
intentionally misrepresent information to Plaintiff with the intent
to induce Plaintiff to enter into the subject loan transaction.”
(Compl. ¶ 109.)

To establish a civil conspiracy, Plaintiff needs

evidence of an agreement between two or more parties to commit an
intentional tort or other unlawful act.

-24-

Read & Lundy, Inc. v.

Washington Trust Co. Of Westerly, 840 A.2d 1099, 1102 (R.I. 2004).
Plaintiff’s evidence may demonstrate the existence of the agreement
or “facts from which the existence of such an agreement reasonably
could be inferred.”
(D.R.I. 1998).

Smith v. O’Connell, 997 F. Supp. 226, 241

The Rhode Island Supreme Court has held, in the

criminal context, “[b]ecause it is difficult to prove in complete
detail the explicit terms of conspiracy agreements, the goals of the
conspirators ‘may be inferentially established by proof of the
relations, conduct, circumstances, and actions of the parties.’”
State v. Mastracchio, 612 A.2d 698, 706 (R.I. 1992) (quoting State
v. Gordon, 508 A.2d 1339, 1349 (R.I. 1986)).
As discussed above, Plaintiff has presented sufficient evidence
to reach a jury on some of his claims, including the intentional
tort of fraud.

In order to avoid summary judgment on the civil

conspiracy count, Plaintiff must also demonstrate that there was an
agreement between D’Amico and someone else to carry out the fraud.
Plaintiff has presented no evidence of any agreement between D’Amico
and Miale, Behm, or any John Doe.

In fact, there is little or no

evidence that D’Amico even knew these other defendants.

However,

Plaintiff has alleged a significant, long-standing relationship
between D’Amico and Rapoza. In fact, Plaintiff has made allegations
concerning prior fraudulent and criminal transactions involving both
D’Amico and Rapoza.

On his part, D’Amico vehemently denies that he

-25-

conspired with Rapoza.

The Court takes no position on these claims

but only notes that a dispute exists.
D’Amico’s alleged assurances made to Plaintiff concerning the
value of 514 Broadway and Rapoza’s financial solvency and good
character, while not actionable as misrepresentations, nonetheless
reflect D’Amico’s eagerness to see the mortgage loan transaction
completed. These circumstances, taken together with the allegations
concerning the usury rate and the title, give rise to a reasonable
inference that an agreement existed between D’Amico and Rapoza to
induce Plaintiff to enter into the mortgage loan transaction.
Consequently, the Court denies D’Amico’s motion for summary judgment
as to Count V for civil conspiracy.
IV.

Conclusion
For all of the reasons set forth above, the Court rules and

records the disposition of all claims as follows:
Count I – Negligent misrepresentation as to Peter D’Amico.
Summary judgment is granted in Defendant D’Amico’s favor on the
portion of the count that concerns claims made about the value and
historic nature of 514 Broadway, the character and financial status
of Craig Rapoza, and the recording of the mortgages on the Cumbre
property.

Summary judgment is denied on the portion of the count

that concerns claims made about the usury rate in the Note and the
title for 514 Broadway.

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Count II – Fraud as to Peter D’Amico.
Summary judgment is granted in Defendant D’Amico’s favor for the
same claims as in Count I; and it is denied for the same claims as
in Count I.
Count III – Legal malpractice as to Peter D’Amico.
No motion has been made.
Count IV – Deceit as to Peter D’Amico.
Summary judgment is granted in Defendant D’Amico’s favor.
Count V – Civil Conspiracy as to Peter D’Amico.
Summary judgment is denied.
Count VI – Vicarious liability as to D’Amico & Testa.
No motion has been made.
Counts VII, VIII, IX and X – Breach of contract as to Craig Rapoza
and

Bainbridge

Realty;

Book

accounts

as

to

Craig

Rapoza

and

Bainbridge Realty.
Summary judgment is granted in favor of Plaintiff.
Counts XI, XII, XIII, XIV – Negligent misrepresentation, fraud,
deceit and civil conspiracy as to Craig Rapoza.
No motion has been made.
Counts XV, XVI, XVII, XVIII and XIX – Claims against Michael F. Behm
and Helen R. Coupe d/b/a ReMax Metro.
All counts dismissed by stipulation.
Counts XX, XXI, XXII, XXIII and XIV – Claims against Michael J.
Miale, Sr. and Statewide Real Estate Appraisal Corp.
-27-

Summary

judgment

is

granted

in

favor

of

Defendant

Miale

and

Defendant Statewide on all counts.
No judgments shall enter in this case until all claims are
resolved.

In addition, no interim award of attorneys’ fees will be

made.
IT IS SO ORDERED.

/s/ William E. Smith
William E. Smith
United States District Judge
Dated: September 7, 2011

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