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McCarthy v. Fifer

Superior Court of Delaware, Sussex

July 18, 2018

MICHAEL McCarthy, Plaintiff,
v.
LAWRENCE FIFER, ESQ., TARA BLAKELY, ESQ., and FIRST AMERICAN TITLE INSURANCE COMPANY, Defendants.

          Submitted: June 1, 2018

          OPINION AND ORDER

          Noel Eason Primos Judge.

         Before the Court is Defendant Larry Fifer's (hereinafter "Defendant Fifer") motion for judgment on the pleadings, [1] 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. Factual 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 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 Plaintiffs bankruptcy estate (hereinafter the "Trustee") abandoned certain of the Investment 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 Investment Properties in Plaintiffs 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 Plaintiffs name and into MJM's name. The 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 Investment Properties. Plaintiff was unable to come to a decision by the next business day, and County Bank foreclosed, through cross-collateralization, on all the Investment 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 Investment Properties. Plaintiff alleges that Defendant Blakely committed breach of contract and malpractice by failing to review the titles of all the Investment 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.

         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 Blakely also argues that Plaintiff lacks standing to bring a malpractice claim, as he personally suffered no injury, and further, according to 11 U.S.C. § 541(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, Plaintiffs counsel acknowledged that the breach of contract claims against the Defendants were improper, and did not oppose their dismissal.

         C. ...


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