Transamerica Life Insurance Company v. Caramadre et al

Filing 103

RESPONSE in Support re (121 in 1:09-cv-00473-S-DLM) MOTION to Dismiss Third Amended Complaint filed by DK LLC. Associated Cases: 1:09-cv-00470-S-DLM et al.(Prentiss, R.)

UNITED STATES DISTRICT COURT
DISTRICT OF RHODE ISLAND
WESTERN RESERVE LIFE ASSURANCE
CO. OF OHIO
Plaintiff,
v.
JOSEPH CARAMADRE, RAYMOUR
RADHAKRISHNAN, ESTATE PLANNING
RESOURCES, INC., HARRISON CONDIT,
And FORTUNE FINANCIAL SERVICES
INC.
Defendants.
_____________________________________
TRANSAMERICA LIFE INSURANCE
COMPANY,
Plaintiff,
WESTERN RESERVE LIFE ASSURANCE
CO. OF OHIO
Plaintiff,
v.
JOSEPH CARAMADRE, RAYMOUR
RADHAKRISHNAN, ESTATE PLANNING
RESOURCES, INC., DK LLC,
EDWARD HANRAHAN, THE LEADERS
GROUP, INC and JASON VEVEIROS
Defendants.

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C.A. No. 09-470-WS

C.A. No. 09-473S

REPLY MEMORANDUM IN SUPPORT OF
MOTION OF DK, LLC FOR DISMISSAL
The Memorandum in Support of Consolidated Objections to Defendants’ for
Reconsideration, Dismissal, and for a more definite Statement (April 25, 2011; Document # 102)
(“WRL Memo”), appears to address the motion of DK, LLC for dismissal by incorporation of its
previous memorandum, filed November 17, 2010 (Document # 79), in opposition to DK, LLC’s
then-pending motion for judgment on the pleadings and for dismissal. See WRL Memo at 6, 7.
The only issue common to DK, LLC’s erstwhile motion and the instant one is whether WRL’s

second (now third) amended complaint fails to state a claim for which relief can be granted on
the legal theory of fraud in the factum. WRL addressed this issue at pp. 24 to 26 of Document #
79.
In its Memorandum of Defendant DK, LLC in Support of Motion for Dismissal of Third
Amended Complaint (Document # 121 )(“DK Memo”), DK, LLC reviewed and explained the
case law establishing that fraud in the factum is a doctrine which will relieve a party from its
obligations under a contract when it is established that it was induced to sign the contract by
misrepresentation regarding its contents or meaning. See DK Memo at 6 - 9. WRL’s fraud in
the factum claim arises from the form signed by the annuitant, Jason Viveiros. See Third
Amended Complaint (“TAC”) at ¶ 51 (“All defendants except Viveiros committed fraud in the
factum by concealing the existence, nature and essential terms of the annuity from Viveiros in
order to get him to sign the application under which he purportedly agreed to serve as an
annuitant”). The TAC does not allege that Mr. Viveiros was induced into signing the form based
on a misrepresentation regarding its contents or meaning, but that he signed the form without
knowing its contents or meaning. This is a significant difference. It is black letter law that mere
ignorance of the terms of an agreement will not relieve a party from being bound to it. See
Shappy v. Downcity Capital Partners, Ltd. 973 A.2d 40 (2009). It is only when ignorance of the
terms is coupled with a demonstration that the signature on the document was procured by
misrepresentation regarding the document’s meaning that the party can avoid the obligations of a
contract that he executed.
WRL has failed to address this argument. Its response does nothing more than repeat the
TAC’s threadbare allegation that the defendants “conceal[ed] the existence, nature, and essential
terms of the annuity from the Annuitants in order to get them to sign the application.” Document

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# 79 at 25. That allegation standing alone fails to state a claim for misrepresentation. See DK
Memo at 8, 9.
The TAC’s allegation in this regard also takes considerable liberty with the affidavit that
Mr. Viveiros signed. The complaint implies coercion: information was concealed as a means of
obtaining the annuitant’s signature. The affidavit offers no support to the implication. Its
pertinent paragraphs state only that at the time he signed the form Mr. Viveiros did not know that
he was entering into an annuity contract (he is correct; he was not, in fact, entering into an
annuity contract); and that “[n]either Joseph Caramadre nor anyone else even explained to me
how this annuity contract worked or what my role in it was.” Mr. Viveiros offers not even the
suggestion that he was in any way coerced into signing the form, or that he sought information
that was refused.
Moreover, WRL has failed completely to address the fundamental problem that fraud in
the factum, if proved, operates only to relieve the party who was fraudulently induced to sign a
contract from his own obligations under the contract. Mr. Viveiros, the putative victim of fraud
in the factum, is not a party to the Annuity. The form he signed is not a contract. No party is
attempting to enforce the terms of any contract on him.
DK, LLC unequivocally argued this point in DK Memo at 7-8. WRL has no response.
WRL has offered no legal analysis at all to support its proposition that proof of fraud in the
factum regarding Mr. Viveiros’s signature on the application would operate to invalidate the
contract that was subsequently entered into between it and DK, LLC (and to which Mr. Viveiros
is not a party). The sole authority offered by WRL, Operating Engineers Pension Trust v.
Gilliam, 737 F.2d 1501 (9th Cir. 1984) (WRL Memo at 25), gives it no assistance. Rather, that
decision states clearly and succinctly the principles which DK, LLC argued: “[A] party who

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signs a written agreement generally is bound by its terms, even though he neither reads it nor
considers the legal consequences before signing it. … This proposition, however, is qualified by
the principle that he who signs a document reasonably believing it is something quite different
than it is cannot be bound to the terms of the document.” Id., 737 F.2d at 1504, citing
Restatement (Second) of Contracts, § 32 (1981), E. Farsnworth, Contracts, 116 (1982), J.
Calamari & J. Perillo, Contracts, 332 (2d ed. 1977), and 1 Williston on Contracts, § 95A (3d ed.
1957) (emphasis supplied).
There is nothing in the Operating Engineers decision that supports WRL’s contention
that it may be excused from its obligation under its contract with DK, LLC, based on an infirmity
that it alleges to exist in the application form signed by Mr. Viveiros. The Annuity expressly
excludes the application form from the contents of the contract.1
WRL has provided no legal authority whatsoever for its attempt to apply the doctrine of
fraud in the factum to the circumstances of this case. Its entreaty that it “ought to be afforded the
opportunity to test [its] claim [of fraud in the factum] on the merits,” WRL Memo at 26, ignores
the fact that it has failed to demonstrate that the claim has any merits. The instant motions of
DK, LLC and the other defendants place the viability of WRL’s allegations as stating a cause of
action for fraud in the factum squarely in issue. It was WRL’s burden to establish the legal basis
for its claim. Having failed utterly to do so, it has no claim to test.

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Section 3 of the Annuity, “General Provisions,” contains the following definitional terms:
THE CONTRACT
This policy, which includes any attached endorsements and riders, constitutes the entire contract between You and
Us.
MODIFICATION OF POLICY
No change in this policy is valid unless made in writing by Us and approved by one of Our authorized officers. No
agent or registered representative has authority to change or waive any provision of Your policy.

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Respectfully submitted,
DK, LLC
By its attorneys,
/s/ R. Daniel Prentiss
R. Daniel Prentiss (#0783)
R. Daniel Prentiss, P.C.
One Turks Head Place, Suite 380
Providence, RI 02903
Tel: [phone]
Fax: [phone]
[e-mail]

CERRTIFICATE OF SERVICE
I certify that the within document was electronically filed with the clerk of the court on April 28,
2011, and that it is available for viewing and downloading from the Court’s ECF system.
Service by electronic means has been effectuated on all counsel of record.

/s/ R. Daniel Prentiss

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