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First American Title Insurance Co. v. Sadek

United States District Court, D. New Jersey

December 29, 2017

FIRST AMERICAN TITLE INSURACE COMPANY, assignee and successor in interest by assignment from PNC BANK NATIONAL ASSOCIATION, Plaintiff,
DAVID SADEK, ETTY SADEK, et al., Defendants.


          KEVIN MCNULTY U.S.D.J.

         Before me are cross-motions for summary judgment by plaintiff First American Title Insurance Company ("First American") and defendant David Sadek, who has filed in bankruptcy. This action arises from a nearly seven year dispute over the sale of a house in Teaneck, New Jersey in 2006 and the use of the proceeds thereafter. First American, standing as assignee of all the rights, interests, and claims held by PNC Bank National Association ("PNC"), sues David Sadek and Etty Sadek for those proceeds, as well as interest, costs, and other relief. First American moves for summary judgment on its claims for fraud (Count II) and conversion (Count V), as well as a determination barring the discharge in bankruptcy of such a judgment against the Sadeks. David Sadek moves for summary judgment on the same two counts. For the reasons set forth in this opinion, I will deny both sides' motions for summary judgment on Count II (Fraud) and dischargeability, but will grant First American's motion for summary judgment as to Count V (Conversion).

         I. Summary of Facts[1]

         Mr. Sadek was the primary shareholder, President, and CEO of First Financial Equities ("FFE"), a mortgage banking firm located in Englewood, New Jersey. (PI. R. 56.1 Statement, Def. R. 56.1 Statement ¶¶ 4, 8.) FFE originated mortgage loans and sold them on the secondary market. (Id. ¶ 6.) FFE used Winthrop Abstract of New Jersey, LLC ("Winthrop-NJ") to perform the title searches for a significant amount of loans. (Id. ¶¶ 14, 20.) Ms. Sadek and Rachel Sadek, Mr. Sadek's mother, both held positions at Winthrop-NJ, and Mr. Sadek received a share of revenue from its New York counterpart, Winthrop Abstract, LLC ("Winthrop Abstract"). (Id. ¶¶ 16, 18-19.) In addition, Mr. Sadek controlled FFE and, in 2005, he used FFE to extend and fund more than 30 loans to himself, approximately $15 million in total. (Id. ¶¶ 9, 10.) He admitted that if he wanted a personal loan from FFE, he was able to obtain it. (Id. ¶ 11.)

         In October 2005, the Sadeks owned a single family home, where they resided, at 374 Winthrop Road in Teaneck, New Jersey. [Id. ¶¶ 21, 23.) At that time, there were two recorded mortgages encumbering the property, one held by Summit Bank and one held by Chevy Chase Bank, FSB. (Id. ¶¶ 24-26). Mr. Sadek applied for another loan in the amount of $792, 000 from FFE in order to refinance the loans on that property. (Id. ¶¶ 28, 32.) The title search for the refinance was performed by Winthrop Abstract. (Id. ¶ 29.) Mr. Sadek signed the promissory note on October 31 and does not dispute that mortgage was "[p]repared by [him]." (Id. ¶¶ 33-34.) That loan was then sold by FFE to National City Bank ("National City"); however, the mortgage held by National City went unrecorded. (Id. ¶ 37, 40.)

         On March 2, 2006, the Sadeks sold their home to Daniel and Tsipora Gurell, a little over four months after the refinance on the property had closed. (¶ 41, 43.) Mr. Sadek did not disclose to PNC or National City the sale of the property. (¶ 49.) The proceeds of the sale, totaling $588, 806.22, were deposited into the Sadeks' bank account, instead of being used to pay off the outstanding loan with National City. (¶¶ 53, 56.) Mr. Sadek does not dispute that these amounts were due and owing. He entered into a Consent Judgment with PNC for the amount of the loan plus interest that had accrued, which resolved Count I (Breach of Contract) of the Second Amended Complaint. [Id. ¶¶ 65-67; 2AC ¶ 36 et seq.).

         Although much is in dispute between Mr. Sadek and First American, what is disputed can be boiled down to a few core issues. First, Mr. Sadek disputes that it was his or FFE's obligation to record the mortgage for the refinancing loan with National City. (Def. R. 56.1 Stmt. ¶ 36.) Second, Mr. Sadek disputes that he knowingly failed to disclose the existence of the loan or the mortgage to the Gurells. (Id. ¶ 44.) Third, Mr. Sadek disputes his attendance at and personal knowledge of the closing, his awareness that there were outstanding loans or unrecorded mortgages on the property, his knowledge that the funds should have been paid out to National City, and the allegation that he continued (or had FFE continue) to pay the loan for another two and a half years following the closing of the sale of the property. (Id. ¶¶ 51-53, 60.)

         II. Legal Argument

         a. Standard of Review

         Federal Rule of Civil Procedure 56(a) provides that the court should grant summary judgment "if die movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Krescholtek v. S. Stevedoring Co., 223 F.3d 202, 204 (3d Cir. 2000). In deciding a motion for summary judgment, a court must construe all facts and inferences in the light most favorable to the nonmoving party. See Hayes v. Harvey, 874 F.3d 98, 103 (3d Cir. 2017). The moving party bears the burden of establishing that no genuine issue of material fact remains. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). "[W]ith respect to an issue on which the nonmoving party bears the burden of proof... the burden on the moving party may be discharged by 'showing'-that is, pointing out to the district court-that there is an absence of evidence supporting the non-moving party's case." Celotex, 477 U.S. at 325.

         Once the moving party has met that threshold burden, the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The opposing party must present actual evidence that creates a genuine issue as to a material fact for trial. Anderson, 477 U.S. at 248; see also Fed. R. Civ. P. 56(c) (setting forth types of evidence on which nonmoving party must rely to support its assertion that genuine issues of material fact exist). "[Unsupported allegations . . . and pleadings are insufficient to repel summary judgment." Schoch v. First Fid. Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990); see also Gleason v. Norwest Mortg., Inc., 243 F.3d 130, 138 (3d Cir. 2001) ("A nonmoving party has created a genuine issue of material fact if it has provided sufficient evidence to allow a jury to find in its favor at trial."). If the nonmoving party has failed "to make a showing sufficient to establish the existence of an element essential to that party's cases, and on which that party will bear the burden of proof at trial, . . . there can be 'no genuine issue of material fact, ' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Katz v. Aetna Cas. & Sur. Co., 972 F.2d 53, 55 (3d Cir. 1992) (quoting Celotex, 477 U.S. at 322-23).

         In deciding a motion for summary judgment, the court's role is not to evaluate the evidence and decide the truth of the matter but to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249. Credibility determinations are the province of the fact finder. Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992). Additionally, when parties file cross-motions for summary judgment, the governing standard "does not change." Clevenger v. First Option Health Plan of N.J., 208 F.Supp.2d 463, 468-69 (D.N.J. 2002) (citing Weissman v. U.S.P.S., 19 F.Supp.2d 254 (D.N.J. 1998)). The court must consider the motions independently, in accordance with the principles outlined above. Goldwell of N.J., Inc. v. KPSS, Inc., 622 F.Supp.2d 168, 184 (D.N.J. 2009); Williams v. Philadelphia Housing Auth., 834 F.Supp.2d 794, 797 (E.D. Pa. 1993), affd, 27 F.3d 560 (3d Cir. 1994). That one of the cross-motions is denied does not imply that the other must be granted. For each motion, "the court construes the facts and draws inferences in favor of the party against whom the motion under consideration is made" but does not "weigh the evidence or make credibility determination" because "these tasks are left for the fact-finder." Pichler v. UNITE, 542 F.3d 380, 386 (3d Cir. 2008) (internal quotation and citations omitted).

         Furthermore, if a party fails to address the other parly's properly supported assertion of fact, the court may consider "grant[ing] summary judgment if the motion and supporting materials-including the facts considered undisputed-show that the movant is entitled to it... ." Fed.R.Civ.P. 56(e). Local Civil Rule 56.1(a) deems a movant's statement of material facts undisputed where a party does not respond or file a counterstatement. L. Civ. R. 56(a). A failure to dispute a party's statement of material facts, however, "is not alone a sufficient basis for an entry of a summary judgment." See Anchorage Assocs. v. Virgin Islands Bd. of Tax Review, 922 F.2d 168, 175 (3d Cir. 1990).

         b. ...

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