Court Opinion

ID: 4295324
Source: CourtListenerOpinion
Date Created: 2018-07-18 18:05:03.988275+00
Date Added: 2024-06-11T14:40:07.310940
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

MICHAEL McCARTHY,
Plaintiff, : C.A. No. Sl7C-02-026 NEP
In and for Sussex County
v.

LAWRENCE FIFER, ESQ.,
TARA BLAKELY, ESQ., and
FIRST AMERICAN TITLE
INSURANCE COMPANY,

Defendants.
OPINION AND ORDER

Submitted: June l, 2018
Decided: July 18, 2018
Before the Court is Defendant Larry Fifer’s (hereinafter “Defendant Fifer”)
motion for judgment on the pleadings,l Defendant Tara Blakely’s (hereinafter
“Defendant Blakely”) motion for judgment on the pleadings, and Plaintiff Michael
McCarthy’s (hereinafter “Plaintiff’) responses. For the reasons set forth beloW,
Defendant Fifer’s motion is GRANTED in part and DENIED in part, and Defendant
Blakely’s motion is GRANTED in part and DENIED in part.

A. F actual Background
The facts recited are as alleged in Plaintiffs’ complaint.2 Some time prior to

2015, Plaintiff used the services of Defendant Fifer as his real estate attorney to

 

1 Defendant Fifer initially brought a motion to dismiss, but an oral motion to convert to a motion for
judgment on the pleadings Was granted at the hearing held June 1, 2018.

2 Blanco v. AMVAC Chem. Corp., 2012 WL 3194412, at *6 (Del. Super. Aug. 8, 2012) (on a motion
for judgment on the pleadings, “the Court must accept all the complaint's Well-pled facts as true and
construe all reasonable inferences in favor of the non-moving party”).

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purchase and title twenty-seven investment properties (hereinafter the “Investment
Properties”). In January of 2015, Plaintiff, individually, filed for bankruptcy, using
Defendant Blakely as his bankruptcy attorney. In March of 2015, the trustee for
Plaintiff’s bankruptcy estate (hereinafter the “Trustee”) abandoned certain of the
lnvestment Properties, as they were worth less than the mortgages owed, and these
properties (hereinafter the “Abandoned Properties”) reverted to Plaintiff personally'.3

The Trustee, however, discovered that Defendant Fifer had titled twelve of the
lnvestment Properties in Plaintiff` s personal name and under the entity Abba First, LLC
(hereinafter the “Mistitled Properties”), rather than titling them to MJM Management
Corp. (hereinafter “MJM”), which was responsible for the mortgages on the properties
The Mistitled Properties were mortgaged to County Bank, which also discovered that
the titles on the Mistitled Properties did not match the loan documents. Due to the title
defect, the Trustee considered the Mistitled Properties unsecured and did not abandon
them, but instead began to collect rents and attempt to market the Mistitled Properties
for sale.

County Bank, along with an unnamed title insurance company (hereinafter
“Title Insurance Company”), initiated an adversarial proceeding to protect County
Bank’s interest in the Mistitled Properties. Eventually, Title Insurance Company settled
with the Trustee to recognize County Bank’s mortgage rights and cure the title defects

by a transfer of the Properties out of Plaintiff’s name and into MJM’s name. The

 

3 In re Lyn, 483 B.R. 440, 451 (Bankr. D. Del. 2012) (“The debtor holds abandoned property as if

no bankruptcy had been filed.”).
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Trustee also released rents collected for these properties to County Bank to be allocated
towards the Mistitled Properties’ mortgages

County Bank issued Plaintiff an ultimatum that if he did not reimburse County
Bank for its expenses incurred in the adversarial action, and take back the Mistitled
Properties on the original mortgage terms, County Bank would foreclose on all the
lnvestment Properties. Plaintiff was unable to come to a decision by the next business
day, and County Bank foreclosed, through cross-collateralization, on all the lnvestment
Properties.

As a result of the above, Plaintiff brought breach of contract and malpractice
claims against Defendants Fifer and Blakely. Plaintiff specifically alleges that
Defendant Fifer committed breach of contract and malpractice by failing to title the
Mistitled Properties to MJM, and as a result, Plaintiff lost all of the lnvestment
Properties. Plaintiff alleges that Defendant Blakely committed breach of contract and
malpractice by failing to review the titles of all the lnvestment Properties and
subsequently failing to take the necessary actions to protect them from loss during the

bankruptcy proceedings

B. Arguments of Parties
Defendant Fifer moves for judgment on the pleadings, arguing that Plaintiff has
failed to allege an injury in fact, and that dismissal is appropriate for lack of standing.
According to Defendant Fifer, MJM, not Plaintiff, lost the mistitled properties in
foreclosure, and Plaintiff suffered no injury from any alleged mistitling, as the Mistitled

Properties were transferred into his bankruptcy estate without his having paid for them.

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Defendant Blakely moves for judgment on the pleadings, arguing that Plaintiff
failed to identify any specific contractual term Defendant Blakely allegedly breached
or instruction that she failed to follow. Defendant Blaker also argues that Plaintiff
lacks standing to bring a malpractice claim, as he personally suffered no injury, and
further, according to ll U.S.C. § 54l(a), that only the Bankruptcy Trustee may assert
claims that arose pre-petition or that impact the bankruptcy estate.

Plaintiff responds that he has suffered damages and has standing to bring the
malpractice claims. At the hearing, Plaintiff’ s counsel acknowledged that the breach of
contract claims against the Defendants were improper, and did not oppose their

dismissal.

C. Discussion
On motions for judgment on the pleadings, the moving party bears the burden of
demonstrating that “there are no material issues of fact and that he is entitled to
judgment as a matter of law.”4 Upon this Court’s review, “(i) all well-pleaded factual
allegations are accepted as true; (ii) even vague allegations are well-pleaded if they
give the opposing party notice of the claim; (iii) the Court must draw all reasonable
inferences in favor of the non-moving party; and (iv) dismissal is inappropriate unless

the plaintiff would not be entitled to recover under any reasonably conceivable set of

 

4 Daisy Constr. Co. v. W.B. Venables & Sons, Inc., 2000 WL 145818, at *1 (Del. Super. Jan. 14,
2000). The cases cited here are addressing the standard for motions to dismiss; however, the
standard for judgment on the pleadings is “almost identical to the standard for a motion to dismiss.”

Blanco v. AMVAC Chem. Corp., 2012 WL 3194412, at *6 (Del. Super. Aug. 8, 2012).
4

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circumstances susceptible of proof.”5 Finally, “a pro se pleading is judged by a ‘less

stringent standard’ than a pleading or document filed by an attomey.”6

i. Defendant Fifer’s Motion for Judgment on the Pleadings

As indicated earlier, on a motion for judgment on the pleadings, the moving
party, here Defendant Fifer, bears the burden of demonstrating entitlement to judgment
as a matter of law. Defendant Fifer has not met that burden with regard to the
malpractice claim because he has failed to rule out any possibility susceptible of proof
under the complaint that Defendant suffered an injury-in-fact.

The complaint alleges that MJM held and operated the Mistitled Properties to
provide Plaintiff with income, retirement funds, and other benefits, and that Plaintiff
lost these benefits due to the foreclosures allegedly caused by Defendant Fifer’s
malpractice Moreover, Plaintiff’ s complaint alleges that the Trustee abandoned certain
of the lnvestment Properties, which then reverted to Plaintiff personally, and that these
Abandoned Properties were also lost in the foreclosure that occurred as a result of
Defendant Fifer’s breach.

In short, Plaintiff’ s complaint adequately alleges that the titling of the Mistitled
Properties into his name caused him harm. County Bank held Plaintiff responsible for
reimbursing its expenses relating to the title dispute. Plaintiff’ s failure to meet this

demand resulted in the loss of all lnvestment Properties, including those that had been

 

5 Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97. (Del. 2002).
6 Johnson v. State, 442 A.2d 1362, 1364 (Del. 1982). Plaintiff filed his complaint as a pro se litigant

and later retained counsel.
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abandoned and thus were held by Plaintiff personally, The Court is bound to accept

Plaintiff` s allegations as true at this stage.7

ii. Defendant Blakely’s Motion for Judgment on the Pleadings
Turning to Defendant Blakely’s motion, Defendant Blakely argues that
Plaintiff" s claim belongs to the Trustee and not to Plaintiff, pursuant to ll U.S.C. §
54l(a). According to 54l(a)(l), the property of the estate generally includes “all legal
or equitable interests of the debtor in property as of the commencement of the case.”
Defendant Blakely argues that according to the complaint, Plaintiff’ s malpractice claim

against her arose pre-petition, and therefore only the Trustee can assert it.
Defendant Blakely largely relies on the Third Circuit’s decision In re 0 ’Dowd,8
in which that court determined that a post-petition malpractice claim belonged to a
plaintiff’ s bankruptcy estate, not to the plaintiff personally,9 In O’Dowd, the plaintiff
filed a malpractice claim against her real estate attorney, Sevack, who represented the
plaintiff in purchasing an apartment building that later turned out to be a bad
investment, and led to the plaintiff filing for bankruptcy.10 The Sevack malpractice
claim became a part of the plaintiff’ s bankruptcy estate.ll The plaintiff then hired two

additional attorneys, Trueger and Biunno, to sue Sevack for malpractice12 When

 

7 Savor Inc., 812 A.2d at 896-97.
8 233 F.3d 197 (3d Cir. 2000).

9 Id. at 202.

10 Id. at 199~200.

11 Ia’.

12 Ia'.

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Trueger and Biunno omitted certain claims and allowed the statute of limitations to
run, the plaintiff filed a second malpractice suit against them as well.13

The O ’Dowa' court’s main inquiries, in determining whether the second
malpractice suit belonged to the plaintiff or to the bankruptcy estate, were (1) whether
the attorneys’ breach of professional duty that proximately caused the plaintiffs
damages occurred before or after the petition, and (2) whether the alleged malpractice
injured the bankruptcy estate, or only the debtor personally,14 The 0 ’Dowd court found
that even though Trueger and Biunno’s actions constituting alleged malpractice did not
occur until after the petition, the claim was traceable to pre-petition conduct: the first
malpractice suit belonged to the estate, and any devaluation in its value caused by the
two attorneys’ malpractice was an injury suffered by the estate alone.15 The O’Dowa’
Court concluded that “only in the post-petition situation where the debtor is personally
injured by the alleged malpractice, while the estate is concomitantly not affected, is it
appropriate to assign the malpractice to the debtor.”16

Here, the complaint’s allegations leave open the possibility that the claim
belongs to Plaintiff and not to the estate_in other words, they allow a scenario under
which Plaintiff would be entitled to recover. In Delaware, legal malpractice claims
accrue at the time of the alleged malpractice, or when the plaintiff learns or should have
learned of the malpractice,17 Plaintiff’ s complaint alleges twelve separate acts or

omissions constituting malpractice by Defendant Blakely, but does not indicate the

 

13 Id.

14 Id. at 204.

15 Ia'.

16 Id.

17 Estate ofStz'les v. Lz'lly, 2011 WL 5299295, at *3 (Del. Super. Oct. 27, 2011).
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dates on which these acts were performed or the dates on which Plaintiff learned of
these acts. Defendant Blakely does not contend that Plaintiff knew or should have
known about each of the alleged acts of malpractice before the petition. Defendant
Blakely’s failure to show that the malpractice claim was pre-petition property weighs
against a finding that it belongs to the Trustee.

Further, the complaint’s allegations demonstrate that the instant case is highly
distinguishable from O ’Dowa'. In 0 ’Dowa', the first malpractice action, the Sevack suit,
belonged to the estate, and therefore the estate suffered the primary loss resulting from
omitted claims in that action. In contrast here, the complaint indicates that after the
Trustee discharged the Abandoned Properties, Plaintiff held them “as if no bankruptcy
had been filed,” 18 and the Trustee was divested of “any interest in the propert[ies].”19
The subsequent loss of the Abandoned Properties, due to Defendant Blakely’s alleged
negligence, inflicted no injury whatsoever to the estate, which had abandoned them.
Therefore, concerning the loss of the Abandoned Properties at least, the complaint
alleges damages that Plaintiff suffered personally, while the estate was unaffected.20
This also convinces the Court that Plaintiff’s allegations are sufficient to establish
standing and some damages such that he may present his malpractice claim against

Defendant Blakely.

 

18 In re Lyn, 483 B.R. 440, 451 (Bankr. D. Del. 2012).

19 Spiro v. Vions Tech. Inc., 2014 WL 1245032, at *9 (Del. Ch. Mar. 24, 2014) (citing In re Pilz
Compact Disc, Inc., 229 B.R. 630, 637 (Bankr. E.D. Pa. 1999)).

20 Having found that complete dismissal of the malpractice claim is inappropriate at this stage, the
Court does not determine which, if any, of the other injuries are potentially recoverable. Such a
determination is better made at the summary judgment phase, with the benefit of more discovery

and more targeted argument from the parties.
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WHEREFORE, for the foregoing reasons, Defendant Fifer’s Motion for
Judgment on the Pleadings is GRANTED as to Plaintiff’ s claim for breach of contract
and DENIED as to Plaintiff`s claim for malpractice; and Defendant Blakely’s Motion
for Judgment on the Pleadings is GRANTED as to Plaintiff’ s claim for breach of

contract and DENIED as to Plaintiff’s claim for malpractice,

 

IT IS SO ORDERED.
/s/Noel Eason Primos
Judge
NEP/sz
Via File & ServeXpress

oc: Prothonotary
xc: All Counsel of Record