United States District Court, D. Maryland
ROGER SCHLOSSBERG, Plan Administrator under the Confirmed Plan of Liquidation of 350113th Street, N.W., LLC, Plaintiff,
JEFFREY NADEL d/b/a Law Offices of Jeffrey Nadel, Defendant.
Xinis United States District Judge
the Plan Administrator for a Chapter 11 bankruptcy
liquidation plan for the LLC known as 350113 Street, N.W.
(“3501”), brings this action based on his
authority to pursue all claims on behalf of the bankrupt
estate of 3501. In essence, Plaintiff claims that attorney
Jeffrey Nadel (“Nadel”) conspired with and aided
and abetted two clear wrongdoers, Robert Schaechter
(“Schaechter”) and Steven Madeoy
(“Madeoy”) to falsify a secured loan using the
real property held by 3501 as the collateral, the recordation
of which in the land records triggered a series of events
that led to 3501’s resort to filing bankruptcy.
Presently pending and ready for resolution is Nadel’s
Motion to Dismiss or, in the alternative, Motion for Summary
Judgment. ECF No. 18. Because no hearing is necessary,
pursuant to Local Rule 106.5, and for the reasons that
follow, the Motion is GRANTED.
following facts are derived from Plaintiff’s Amended
Complaint, ECF No. 16. Because this matter can and is
dispositively resolved without resort to facts outside the
Amended Complaint, the Court will treat this Motion as one to
Dismiss under Rule 12(b)(6) for failure to state a claim.
a limited liability corporation organized under the laws of
the District of Columbia. Steve Madeoy retained a 45%
membership interest in 3501, and at some point became its
managing member. ECF No. 16 at 2-3. In December of 2006,
Robert Schaechter loaned $500, 000 to Madeoy personally
(“the Schaechter Loan”). At no point did 3501
receive any benefits arising from the loan, directly or
Nadel assisted in the preparation of the documents related to
the Schaechter Loan. The documents consisted of a promissory
note and a Deed of Trust (“DOT”) which made it
appear as if Schaechter loaned the money to 3501, and that
the loan was secured with 3501’s principle asset-the
real property located at 350113th Street, N.W.,
Washington, D.C., and owned in fee simple by 3501. ECF No. 16
at 4. The DOT was executed by Schaechter, Madeoy and a third
member of the LLC, but not recorded initially because the
recordation would trigger the first mortgage lender to
accelerate the entire balance due on the mortgage per the
terms of its loan agreement with 3501. Id. at 5.
mid-2010, Schaechter grew concerned about Madeoy’s
failure to repay any of the loan. As a result, Madeoy and
Schaechter requested that Nadel amend the promissory note,
altering only the time for repayment, and then record the DOT
with the District of Columbia. Nadel complied even though he
knew that 3501 was not an actual party to the loan. ECF No.
16 at 5.
result of Nadel’s actions, the DOT was filed with the
District of Columbia Recorder of Deeds on August 5, 2010. ECF
No. 16 at 7. Almost three years later, Fannie Mae, the lender
holding the first mortgage on 3501, accelerated the entire
balance of its $3.8 million loan, leaving 3501 no choice but
to file for bankruptcy on July 19, 2013. Id.
Although Schaechter was initially listed as a secured
creditor of 3501 arising from the recordation of the DOT, the
bankruptcy court held in an adversary proceeding that
Schaechter did not have an enforceable lien against 3501.
Id. Consequently, 3501 incurred substantial
attorneys’ fees and expenses litigating the adversary
proceeding to clear title to 350113th Street, N.W.
Id. To recover these losses on behalf of the
bankrupt estate for 3501, Plaintiff filed the instant action.
Motion to Dismiss Standard
ruling on a motion under Rule 12(b)(6), the court must
“accept the well-pled allegations of the complaint as
true, ” and “construe the facts and reasonable
inferences derived therefrom in the light most favorable to
the plaintiff.” Ibarra v. United States, 120
F.3d 472, 474 (4th Cir. 1997). “The mere recital of
elements of a cause of action, supported only by conclusory
statements, is not sufficient to survive a motion made
pursuant to Rule 12(b)(6).” Walters v.
McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citing
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). To
survive a motion to dismiss, a complaint’s factual
allegations “must be enough to raise a right to relief
above the speculative level on the assumption that all the
allegations in the complaint are true (even if doubtful in
fact).” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 555 (2007) (internal citations omitted). “To
satisfy this standard, a plaintiff need not
‘forecast’ evidence sufficient to prove the
elements of the claim. However, the complaint must allege
sufficient facts to establish those elements.”
Walters, 684 F.3d at 439 (citation omitted).
“Thus, while a plaintiff does not need to demonstrate
in a complaint that the right to relief is ‘probable,
’ the complaint must advance the plaintiff’s
claim ‘across the line from conceivable to
plausible.’” Id. (quoting
Twombly, 550 U.S. at 570).
preliminary matter, the parties disagree over whether the
substantive laws of the District of Columbia or Maryland
apply. Because Maryland is the forum state, Maryland’s
choice-of-law rules apply. See Klaxon Co. v. Stentor
Elec. Mfg. Co., 313 U.S. 487, 496 (1941); see also
Rawl’s Auto Auction Sales, Inc. v. Dick Herriman Ford,
Inc., 690 F.2d 422, 426 (4th Cir. 1982). Maryland
follows the principles of lex loci delicti in
determining choice of law. Great American Ins. v. Nextday
Network Hardware Corp., 73 F.Supp.3d 636, 640 (D. Md.
2014). In tort actions, the court applies the law of the
state in which the last event required to constitute the tort
had taken place. Id.
case, Maryland law applies because the last event triggering
the injury to 3501 occurred in Maryland. Specifically, Nadel,
Schaechter and Madeoy executed the promissory note and DOT in
Maryland in 2006, and amended the same in 2010. ECF No. 16 at
4, Ex. 2. Upon execution, a DOT is “valid between the
parties, ” regardless of when recorded.
Stebbins-Anderson, Co. v. Bolton, 208 Md. 183, 190
(1955); see also Chicago Title Ins. Co. v. Mary B.,
190 Md.App. 305 (2010). The DOT and promissory note
solidified that the property held by 3501 was fraudulently
pledged as collateral to secure the loan between Schaechter
and Madeoy. Accordingly, at the time of the DOT’s
execution, the property held by 3501 became encumbered and
could theoretically be used to satisfy the outstanding amount
if Madeoy defaulted. Because these transactions occurred in
Maryland, the laws of Maryland apply.
Count I: ...