Court Opinion

ID: 4465154
Source: CourtListenerOpinion
Date Created: 2019-12-18 10:07:54.025768+00
Date Added: 2024-06-11T14:53:35.516340
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
              revision until final publication in the Michigan Appeals Reports.

                         STATE OF MICHIGAN

                         COURT OF APPEALS

NATHAN J. MAZUR, FRANK ASKER,                                  UNPUBLISHED
KENNETH R. ROBSON, and DAVID YALDO,                            December 17, 2019

           Plaintiffs-Appellants,

v                                                              No. 343190
                                                               Wayne Circuit Court
MICHIGAN COMMERCIAL RESOURCE                                   LC No. 14-016133-CK
LOCATOR, INC., HATCHETT DEWALT &
HATCHETT, PLLC, JAMES P. O’NEILL,
GAGGO, INC., NOURY GAGGO, MIKE
GAGGO, SABASTIAN RESTUM, also known as
SAM AJAMI, DENNIS J. DICAPO, also known
as DENALI J. DICAPO, BARBARA F.
WILLIAMS, ROBERT L. BROWN, JESSICA
RUSH, ROSE WALTON, DAVID J. CROSS,
MARVIN HICKS, ROBERTO CARTA, CARE
FINANCIAL SERVICES, INC., and ASSET
DISPOSITION SPECIALIST, LLC,

           Defendants,

and

MARCELLUS LONG JR., PC, and MARCELLUS
LONG, JR.,

           Defendants-Appellees.

NATHAN J. MAZUR, FRANK ASKER, and
KENNETH R. ROBSON,

           Plaintiffs,

and

                                           -1-
DAVID YALDO,

              Plaintiff-Appellee,

v                                                                No. 343611
                                                                 Wayne Circuit Court
MICHIGAN COMMERCIAL RESOURCE                                     LC No. 14-016133-CK
LOCATOR, INC., HATCHETT DEWALT &
HATCHETT, PLLC, MARCELLUS LONG JR.,
PC, MARCELLUS LONG, JR., JAMES P.
O’NEILL, GAGGO, INC., NOURY GAGGO,
MIKE GAGGO, DENNIS J. DICAPO, also known
as DENALI J. DICAPO, BARBARA F.
WILLIAMS, ROBERT L. BROWN, JESSICA
RUSH, ROSE WALTON, DAVID J. CROSS,
MARVIN HICKS, ROBERTO CARTA, CARE
FINANCIAL SERVICES, INC., and ASSET
DISPOSITION SPECIALISTS, LLC,

              Defendants,

and

SABASTIAN RESTUM, also known as SAM
AJAMI,

              Defendant-Appellant.

Before: RONAYNE KRAUSE, P.J., and CAVANAGH and SHAPIRO, JJ.

PER CURIAM.

        In Docket No. 343190, plaintiffs, Nathan J. Mazur, Frank Asker, Kenneth R. Robson, and
David Yaldo, challenges the trial court’s order granting summary disposition in favor of
defendants Marcellus Long, Jr., and his law firm, Marcellus Long, Jr., PC (“the Long
defendants”). In Docket No. 343611, defendant Sebastian Restum (a/k/a Sam Ajami) appeals a
default judgment entered against him and defendant Dennis J. Dicapo (a/k/a Denali J. Dicapo).
We affirm the default judgment, but reverse the grant of summary disposition as to the Long
defendants.

                                      I. BASIC FACTS

       This case arises from an alleged “illegal advance fee scheme,” in which more than 50
people, including plaintiffs, were conned out of money, totaling more than $2,000,000. The
purported architects behind the scheme included defendants Restum and Barbara Williams, who
allegedly targeted business persons who sought commercial loans. In executing the scheme,

                                             -2-
Restum and Williams used defendants Care Financial Services, Inc., and Michigan Commercial
Resource Locator, Inc. (“Michigan Commercial”) to execute the fraud. The gist of the scheme is
that Michigan Commercial would agree to facilitate the procurement of commercial loans by
finding nonconventional lenders. When potential clients agreed to apply for a commercial loan,
they were required to pay large, advanced fees before the loan would be funded. These fees
typically were paid to Michigan Commercial’s attorney, Marcellus Long, Jr., and his law firm.
Long would deposit the fees he received into his client trust account. After the checks cleared,
Long would then retain a portion to cover his own fees before forwarding the remainder of the
funds to Michigan Commercial. Long testified that at Michigan Commercial’s direction, he
disbursed the funds to Williams (personally), who was president of Michigan Commercial.
However, no loans ever materialized, and although the facilitation agreements provided that all
advanced fees would be returned if the loans did not close, no fees ever were returned.

        Plaintiffs filed an 11-count complaint, raising claims of (1) breach of contract, (2)
conversion, (3) unjust enrichment, (4) intentional misrepresentation, (5) negligent
misrepresentation, (6) silent misrepresentation, (7) innocent misrepresentation, (8) breach of
fiduciary duty, (9) conspiracy, (10) violation of the Racketeering Influence and Corrupt
Organizations Act (RICO), 18 USC 1961 et seq., and (11) legal malpractice.

        The Long defendants moved for summary disposition, arguing that there was no evidence
to support any of the 11 counts against them. The trial court agreed, explaining that there is no
“question of fact regarding Mr. Long, not on the conversion—alleged conversion count, not on
the breach of contract count, not on the breach of fiduciary duty, nothing, because the principle
item, if you will, or link that is missing is Mr. Long’s knowledge or anything from which you
can infer, Mr. Long’s knowledge of [Restum’s] criminal activities.”

        With regard to defendants Restum and Dicapo, a default was entered against them for
their failure to appear and defend in the action. After holding an evidentiary hearing regarding
the amount of damages,1 the trial court entered default judgments in favor of each plaintiff,
against Restum and Dicapo, jointly and severally. The default judgments awarded plaintiffs the
following amounts:       Mazur–$203,139.79; Asker–$116,677.55; Robson–$146,023.75; and
                     2
Yaldo–$124,902.76.

                                   II. DOCKET NO. 343190

      Plaintiffs argue that the trial court erred in determining that there was no evidence that
Long knew of Restum’s criminal activities. We agree with plaintiffs that there is a question of

1
  Although ordered to participate at the evidentiary hearing via telephone, Restum did not
participate. After several failed attempts to communicate to the imprisoned Restum over the
telephone, the trial court concluded that Restum was making himself unavailable and proceeded
with the hearing.
2
 These amounts included treble damages and attorney fees under MCL 600.2919a and 18 USC
1961, plus judgment interest.

                                               -3-
fact on that matter and that the trial court erred in granting the Long defendants summary
disposition.3

        Viewed in a light most favorable to plaintiffs, there was sufficient evidence presented
from which a reasonable person could find that Long knew of his client’s fraudulent scheme.
Long drafted the facilitation agreements for Restum. He participated in 20 transactions in which
the hopeful borrower signed the agreement and made the deposit. To Long’s knowledge, not one
of the loans “closed,” i.e., Long was aware that Restum had not secured a loan for any of the
would-be borrowers. Long also served as the “payee” for the facilitation agreements, meaning
that the borrowers paid his law firm the deposit money, which he then placed into his client trust
account. After the checks cleared, Long would then retain some portion for his own fees before
disbursing the remainder of the funds to Williams in her personal capacity. Long believed that
Williams was the president of Michigan Commercial, but he could not explain why he was
directed to make the cashier checks payable to Williams rather than Michigan Commercial.
Similarly, when pressed on why the funds were placed in his client trust account—as opposed to
direct payment to Michigan Commercial—Long simply maintained that “the money did not
belong to me. It belonged to Michigan Commercial, who was my client.”

         Arguably, Long’s testimony in and of itself casts doubt on his claim that he had no
knowledge of Restum’s wrongdoings. Given that the deals never closed and that Long
immediately transferred the funds minus his fees to Williams in her personal capacity, a
reasonable mind could infer that Long knew or had reason to know of the fraudulent scheme. In
any event, in response to the Long defendants’ motion for summary disposition, plaintiffs
provided affirmative evidence not only of Long’s knowledge but also his participation in the
fraudulent scheme. In an affidavit, Asker explained how the presence of an attorney gave the
facilitation agreement credibility and that he would not have entered into the agreement absent
Long’s involvement. Specifically, Asker recalled a meeting with Restum and Long at which
material misrepresentations were made regarding the facilitation agreement. At the meeting,
Asker asked Long if there was ever a deal that did not go through and Long said that had never
happened, which directly contradicts his testimony that he was not aware of any deal closing.
Asker also averred that Restum stated that the deposit money would be held in escrow in Long’s
attorney trust account, and that it would not be touch until the loan was obtained. Despite being

3
  We review a trial court’s decision on a motion for summary disposition de novo. Gyarmati v
Bielfield, 245 Mich. App. 602, 604; 629 NW2d 93 (2001). The order granting defendants’ motion
for summary disposition did not specify the subsection of MCR 2.116 on which the trial court
relied. However, the court determined that the exhibits did not establish a question of fact, and
therefore the court was plainly granting summary disposition under MCR 2.116(C)(10), which is
properly granted when there are no genuine issues of material fact and the moving party is
entitled to judgment as a matter of law. Michalski v Bar-Levav, 463 Mich. 723, 730; 625 NW2d
754 (2001). “A court reviewing a motion under MCR 2.116(C)(10) must consider the pleadings,
affidavits, depositions, admissions, and any other evidence in favor of the party opposing the
motion, and grant the benefit of any reasonable doubt to the opposing party.” White v Taylor
Distrib Co, Inc, 482 Mich. 136, 139; 753 NW2d 591 (2008) (cleaned up).

                                               -4-
present for those assurances, Long promptly transferred Asker’s deposit funds to Williams once
the check cleared.

         Plaintiffs’ evidence establishes a question of fact as to Long’s knowledge of Restum’s
criminal activity.4 According to Asker’s affidavit, Long represented to Asker that every
facilitation agreement with Michigan Commercial resulted in a loan being obtained, when in fact
the opposite was true. He also stood by as Restum assured Asker that his funds would not be
touched unless closing occurred, only to then disburse the deposit funds as soon as the check
cleared. For purposes of discerning Long’s knowledge of the fraud, it is irrelevant whether the
facilitation agreement permitted him to disburse the deposit per Michigan Commercial’s
direction. What matters for present purposes is that Long allegedly heard Restum tell Asker
something about the agreement that Long knew not to be true. If believed by the jury, that is
plainly strong evidence that Long was aware of the fraud being perpetrated on plaintiffs. For
those reasons, the trial court erred in granting summary disposition on the grounds that Long
lacked knowledge of the fraudulent scheme.5

                                   III. DOCKET NO. 343611

     A. SUFFICIENCY OF THE EVIDENCE TO ESTABLISH RESTUM’S LIABILITY

        In his appeal, Restum argues that there was no evidence establishing his liability for
plaintiffs’ claims. Restum’s argument fails to recognize the effect of the default that was entered
against him. Restum frames the issue as if the trial court had found Restum liable on the merits,
after a trial or after some other presentation and evaluation of the evidence. However, no trial
was held, and summary disposition was not considered with respect to plaintiffs’ claims against
Restum. Instead, a default was entered against Restum. When a default is entered against a
party, all well-pleaded assertions in the complaint are considered admitted by that party. Epps v

4
  Plaintiffs ask that we take judicial notice that, after the trial court decided the motion for
summary disposition, Long pleaded guilty to conspiracy to commit mail and wire fraud, 18 USC
371, for his involvement in the fraudulent scheme. Generally, a party may not expand the record
on appeal. Kent Co Aeronautic Bd v Dep’t of State Police, 239 Mich. App. 563, 579-580; 609
NW2d 593 (2000). We question whether that rule applies, however, when the proffered
evidence could not have existed at the time the underlying motion was decided. Regardless, we
need not decide that issue because the record evidence as of the time the motion was decided
establishes a question of fact as to Long’s knowledge of and involvement in the scheme.
5
  We decline to consider whether summary disposition was warranted on any other ground. The
trial court offered no other justification for its ruling, nor did it address the individual counts.
Rather, the court determined that Long’s lack of knowledge was dispositive. Indeed, the Long
defendants repeatedly emphasized Long’s purported lack of knowledge in their motion for
summary disposition, and it is the moving party’s initial burden to establish that summary
disposition is warranted under MCR 2.116(C)(10). Lowrey v LMPS & LMPJ, Inc, 500 Mich. 1,
7; 890 NW2d 344 (2016). Further, the Long defendants have not filed an appellate brief
presenting an alternative ground for affirmance.

                                                -5-
4 Quarters Restoration, LLC, 498 Mich. 518, 554; 872 NW2d 412 (2015). Thus, it is necessary
to consider whether the complaint sufficiently pleaded facts to show that Restum was liable.6
See State ex rel Saginaw Prosecuting Attorney v Bobenal Investments, Inc, 111 Mich. App. 16,
22; 314 NW2d 512 (1981), citing Hofweber v Detroit Trust Co, 295 Mich. 96; 294 N.W. 108
(1940).

        Restum first claims that there was no evidence to show that he received any of the funds
in question, and accordingly, there was insufficient evidence to link him to the scheme
perpetuated against plaintiffs. In the complaint, plaintiffs alleged, inter alia, that Restum
converted the funds plaintiffs deposited for his own use and benefited from the possession and
use of the funds. Thus, Restum’s claim that there was no evidence to show that he had received
any of the funds is not persuasive, because he has admitted, by virtue of the default entered
against him, that he did receive and use the funds.

        Restum also argues that there was no evidence to “connect” him to any of the contracts
that plaintiffs executed. But plaintiffs specifically alleged that they contracted with, among
others, Restum. Thus, Restum has admitted this fact, and his claim on appeal fails.

        Finally, Restum asserts that there was no evidence to show that he was connected with
any commercial lending or scouting company. Instead, he claims that the evidence shows that it
was Dicapo and his company that recruited plaintiffs. Whether the complaint sufficiently
pleaded that Restum was connected to any of the lending companies, particularly Michigan
Commercial, is beside the point. As already noted, the complaint makes numerous allegations
directly against Restum.       The complaint further alleges that Restum made material
misrepresentations of fact, both knowingly and negligently, to each of the plaintiffs regarding the
return of the advanced funds. More specifically, the complaint alleged that Restum

       [o]rganized, operated and directed a conspiracy to defraud the Plaintiffs of their
       funds; fraudulently held himself out to be a legitimate broker of commercial loans
       to business clients; executed and delivered to the Plaintiffs fraudulent documents;
       participated in the conspiracy to fraudulently take possession of and converted the
       funds of the Plaintiffs; directed other Defendants in the operation of the
       conspiracy to defraud the Plaintiffs of their funds[.]

        Therefore, with all of these well-pleaded assertions deemed admitted by Restum, he
cannot show that there was an insufficient basis to establish his liability under plaintiffs’ various
theories of recovery.

                                 B. EVIDENTIARY HEARING

6
  Such a review is a question of law that this Court reviews de novo. See Bobenal Investments,
111 Mich. App. at 22-24; cf. Maiden v Rozwood, 461 Mich. 109, 118, 119-120; 597 NW2d 817
(1999) (stating that review of the legal sufficiency of a complaint, in the context of summary
disposition, is de novo).

                                                 -6-
        Restum raises many issues related to the evidentiary hearing that was held. However,
these issues are not preserved because they were not raised before the trial court. See Fast Air,
Inc v Knight, 235 Mich. App. 541, 549; 599 NW2d 489 (1999). Accordingly, our review is for
plain error affecting substantial rights. Kern v Blethen-Coluni, 240 Mich. App. 333, 336; 612
NW2d 838 (2000). An error affects substantial rights when it would have affected the outcome
of the proceeding. Richard v Schneiderman & Sherman, PC (On Remand), 297 Mich. App. 271,
273; 824 NW2d 573 (2012).

                                        1. DUE PROCESS

       Restum argues that he was denied due process because the trial court held the evidentiary
hearing on damages without his presence. We disagree.7

        Procedural due process generally requires notice and an opportunity to be heard before an
impartial tribunal. Mettler Walloon, LLC v Melrose Twp, 281 Mich. App. 184, 213; 761 NW2d
293 (2008). Restum’s argument focuses on the second due-process component: the opportunity
to be heard at the evidentiary hearing.

       MCR 2.603(B)(3)(b)(ii) provides that, after a default has been entered, a trial court may
conduct hearings to “determine the amount of damages.” The trial court did conduct such a
hearing in this case. However, Restum was in federal prison at the time. To facilitate Restum’s
presence, the trial court took steps to have Restum participate via teleconference, including
ordering him to do so. Despite having notice of the time of the hearing, the trial court’s attempts
to have Restum participate were unsuccessful. Many of these attempts ended with the person on
the other end of the line refusing to identify himself and hanging up. The trial court found that
Restum was making himself “unavailable.”

        Although the record does not establish with certainty the identity of the person the clerk
spoke to on the phone, we are not left with a definite and firm conviction that the trial court erred
by finding that it was Restum, who deliberately refused to make himself available. Because
Restum was given an opportunity to participate at the hearing, he was afforded due process. We
also note that his actions, as found by the trial court, of intentionally making himself unavailable
constituted a waiver, which extinguishes any error. People v Carter, 462 Mich. 206, 215; 612
NW2d 144 (2000).

        Moreover, to the extent that the court erred by holding the hearing without Restum’s
participation, Restum has failed to show that the error affected the outcome of the proceeding.
Restum has failed to put forth any argument whatsoever addressing how his presence, telephonic
or otherwise, would have altered the outcome. Importantly, the hearing was solely addressing

7
 We review any of the court’s factual findings for clear error. Speicher v Columbia Twp Bd of
Election Comm’rs, 299 Mich. App. 86, 94; 832 NW2d 392 (2012). A finding is clearly erroneous
when the reviewing court is left with “a definite and firm conviction” that the trial court made a
mistake. Solution Source, Inc v LPR Assoc Ltd Partnership, 252 Mich. App. 368, 381-382; 652
NW2d 474 (2002).

                                                -7-
plaintiffs’ damages. Restum’s liability already had been established by the default entered
against him. Indeed, through the entry of the default, Restum had already admitted that Mazur
had paid and lost $61,000, Asker had paid and lost $21,500, Robson had paid and lost $43,500,
and Yaldo had paid and lost $37,000. Therefore, no evidentiary hearing was needed for these
portions of the damages. The only portions of the awarded damages that were not captured in
plaintiffs’ complaint were attorney fees8 and $13,000 in extra or consequential damages that
Asker had incurred. Restum has failed to explain how his presence would have affected the
amount of damages awarded. Even in his arguments on appeal, Restum does not assert that the
amounts of damages were incorrect; instead, his arguments on appeal primarily focus on his
liability, which is not permissible because “default settles the question of liability as to well-
pleaded allegations and precludes the defaulting party from litigating that issue.” Wood v DAIIE,
413 Mich. 573, 578; 321 NW2d 653 (1982). Therefore, even if it was improper to proceed with
the evidentiary hearing without Restum’s participation, the error did not affect the outcome,
which precludes relief on this unpreserved issue. See Richard, 297 Mich. App. at 273.

    2. “INTERJECTING” OF INFORMATION RELATED TO FEDERAL PROCEEDING

        Restum argues that the trial court at the evidentiary hearing improperly admitted “federal
communications” pertaining to the federal criminal proceedings against him. Although Restum’s
argument is difficult to follow, he appears to be complaining about the evidence at the
evidentiary hearing showing that Restum had pleaded guilty related to his “activity involved in
the scam.” At the outset, regardless of the admissibility of this evidence, Restum cannot
establish any prejudice, which is necessary to succeed on this issue. See Richard, 297 Mich. App.
at 273. Once again, Restum conflates the purpose of the evidentiary hearing—it was to establish
damages, not to establish liability. The plea only seemingly would relate to Restum’s liability.
Therefore, whether he had pleaded guilty to any criminal activity is wholly irrelevant for the
purpose of establishing the amount of plaintiffs’ damages. Indeed, the amounts of damages that
plaintiffs incurred were admitted at the hearing without reference to any “federal
communications.” As a result, Restum has failed to show how he is entitled to relief on this
issue.

                        3. “SEPARATE AND DISTINCT” ANALYSIS

       Restum next argues that the trial court should have engaged in further or more detailed
analysis at the evidentiary hearing. We take Restum’s position to be that the trial court should
have analyzed his liability under each of the counts plaintiffs brought. Restum’s argument
presupposes that if the trial court had engaged in such analysis, it would have determined that he
was not liable under plaintiffs’ various claims of recovery. Once again, however, the purpose of
the evidentiary hearing was only to determine plaintiffs’ damages. Restum’s liability had

8
  Under the “American rule,” attorney fees normally are not recoverable. Haliw v City of
Sterling Hts, 471 Mich. 700, 707; 691 NW2d 753 (2005). But they are recoverable when
authorized by statute, id., and in this instance, plaintiffs relied on MCL 600.2919a for the
recovery of attorney fees and the trebling of damages.

                                               -8-
already been established through the entry of the default against him. See Epps, 498 Mich. at
554. Thus, his argument misses the point and is devoid of merit.

                           4. ADMISSION OF YALDO AFFIDAVIT

       Restum argues that an affidavit written by plaintiff Yaldo was improperly admitted at the
evidentiary hearing. We disagree.

        At the evidentiary hearing on plaintiffs’ damages, plaintiff Yaldo was not personally
present due to a family medical emergency. However, Yaldo’s attorney noted that Yaldo’s
damages were “set forth in the complaint” and that they were also set forth in Yaldo’s affidavit
that was used to support his motion for entry of default and default judgment. Notably, although
Yaldo’s affidavit was referenced by his attorney at the hearing, there is no indication in the
record that the affidavit actually was admitted into evidence. Thus, the premise for Restum’s
issue does not exist; i.e., Yaldo’s affidavit was not admitted into evidence.

       Moreover, it is fully apparent that the trial court did not rely on the affidavit when it
determined Yaldo’s damages. In his affidavit, Yaldo averred that he paid $47,000 to Restum in
connection with obtaining a commercial loan, but the complaint alleged that Yaldo only paid
$37,000. The trial court awarded trebled damages of $111,000, which corresponds to the base
damages of $37,000 alleged in the complaint. Therefore, because the affidavit (1) was not
admitted at the evidentiary hearing, and (2) was not otherwise considered for damages, Restum’s
claim of error with respect to the affidavit fails.

                       5. REFERENCE TO OTHER CODEFENDANTS

        Restum next argues that plaintiffs’ attorney impermissibly referred to two codefendants
during the evidentiary hearing. Specifically, Restum claims that the attorney erroneously
referred to Marvin Hicks and Barbara Williams, who both had been dismissed as parties.
Restum’s argument fails for many reasons.

       First, Restum does not cite any pages of the evidentiary hearing transcript where these
supposed references took place. Moreover, our review of the hearing transcript does not reveal
any instances of Hicks or Williams being mentioned, let alone mentioned by plaintiffs’ attorney.
Second, Restum does not cite any authority that would prevent a party from referring to other
codefendants or referring to actions those codefendant may have done. Regardless, it should be
abundantly clear that there is no authority that would categorially preclude either a nonparty or a
nonappearing party from being mentioned at a hearing.

                              C. “LABELLING UP” OF CLAIMS

        Finally, Restum contends that the trial court erred when it failed to recognize this case as
being solely contractual. Restum asserts that the court should not have allowed plaintiffs to
“label-up” a contractual dispute by turning it into “a quasi-criminal proceeding.”

        Restum’s argument has no merit. First, to the extent that the case resembles a “quasi-
criminal proceeding,” it is because Restum and other codefendants had engaged in criminal
activity; thus, criminal activity was involved and a necessary component of this civil case.

                                                -9-
Second, the crux of Restum’s argument is that he believes the case should have been decided
solely on contractual grounds and that plaintiffs’ attempt to add other counts or theories of
recovery was not permissible. However, in addition to alleging facts pertaining to breach of
contract, plaintiffs alleged many facts implicating other counts or theories, such as conversion
and fraud. And because a default was entered against Restum, those other allegations were
deemed admitted by him. See Epps, 498 Mich. at 554. Therefore, contrary to his view that the
case was solely contractual in nature, there were other aspects involved as well, and his attempt
to limit this case to contract law fails.

       Affirmed in part, reversed in part, and remanded for proceedings consistent with this
opinion. We do not retain jurisdiction. Plaintiffs may tax costs as the prevailing parties. MCR
7.219(A).

                                                           /s/ Amy Ronayne Krause
                                                           /s/ Mark J. Cavanagh
                                                           /s/ Douglas B. Shapiro

                                              -10-