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Silverstein v. Percudani

March 22, 2006

CARL B. SILVERSTEIN, TERRY SILVERSTEIN, PLAINTIFFS
v.
GENE PERCUDANI; GERALD A. POWELL; CHASE MANHATTAN MORTGAGE CORP.; CHAPEL CREEK HOMES, INC.; RAINTREE HOMES, INC.; HOMES BY VINTAGE, INC.; Y-RENT; CHAPEL CREEK MORTGAGE BANKER, INC.; CHAPEL CREEK MORTGAGE, INC.; GEORGE D. MILLER; WILLIAM SPANER; JOHN DOE TITLE COMPANY; JOHN DOE ABSTRACT COMPANY; AND JOHN DOE MORTGAGE BROKER, DEFENDANTS



The opinion of the court was delivered by: (Judge Munley)

MEMORANDUM

Presently before the court for disposition are three motions to dismiss the amended complaint pursuant to Federal Rule of Civil Procedure 12(b). Additionally before the court is a motion to strike a brief. The parties have fully briefed these matters and they are ripe for disposition. For the following reasons, we will grant the motions to dismiss and deny the motion to strike as moot.

I. Background

Plaintiffs Carl and Terry Silverstein ("Plaintiff") allege that they purchased a new construction home in Tobyhanna, Monroe County, Pennsylvania through the "Why-Rent" program operated and controlled by Defendants Gene Percudani ("Percudani") and Gerald A. Powell ("Powell").*fn1

Plaintiffs allege that the "Why-Rent" program was a fraudulent scheme to induce potential buyers to purchase homes at inflated prices. Beginning in 1994, Percudani, Powell, Chapel Homes, Chapel Mortgage, and Raintree ran radio, print, and television advertisements in New York and New Jersey to induce customers to purchase and finance homes in Tobyhanna, Pennsylvania, at prices well in excess of the houses' actual fair market value. The advertisements offered new homes for a $1000 down payment and monthly payments of $685, while the defendants knew that the monthly payments would far exceed that amount. When a consumer responded to the advertisement, he was provided with an appointment to come to the Poconos for a meeting with an employee. To confirm the appointment, the defendants sent the potential buyer a letter praising the Pocono region, assuring that no gimmicks were involved, and providing in fine print that the price quote was based on a specific calculation available solely to qualified applicants.

During the ensuing meeting, the customer was advised by the defendants that they would "take care of everything," including financing, appraisal, title insurance, and an attorney to protect the clients' interests. The customer was also informed that the seller would pay his rent and other obligations on his former home.

After the customer agreed to buy the home, he was "passed off" to Chapel Creek Mortgage or Chapel Mortgage Banker, which are owned and operated by Percudani and Powell. The customers were never informed of the affiliation. The customer then took out a promissory note from Chapel Mortgage, although Defendant Chase Manhattan Bank provided the funds. Chase and its agent, Spaner, approved the loan in exchange for Chapel's agreement that Chase would purchase the note and mortgage from Chapel immediately after closing.

After the home was built, Raintree would arrange for an appraisal by Defendant George Miller. Then, in furtherance of the conspiracy, Miller would overvalue the home with an estimate that exceeded industry loan-to-value ratios as well as the fair market value of the home. Chase did not perform its own appraisals, but relied on Miller's appraisals even though it knew them to be false.

Following the mortgage approval and completion of the construction of the house, the defendants discouraged the purchaser from hiring his own attorney. At the closing, the tax assessments were based on undeveloped land, although a completed home was located on the property, and as a result the tax figures are unrealistically low. The customer was then provided with his monthly payments, which exceeded the originally quoted price.

Following the closing, Chase immediately purchased the loans from Chapel Mortgage. After holding the loan for a required time period, Chase sold the loans to Freddie Mac or Fannie Mae, securing its profit from the scheme.

II. Procedural Background

On June 10, 2004, Plaintiff Carl Silverstein filed the Complaint pro se advancing five claims based on the defendants' alleged fraudulent scheme. He asserted one claim pursuant to the Racketeering Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §1962(c), against Percudani, Powell, Chapel Homes, Chapel Mortgage, and Raintree (collectively "the Percudani defendants"). He asserted a second §1962(c) RICO claim against Chase and Spaner (collectively "the Chase defendants"), and a §1962(d) RICO conspiracy claim against Miller. He asserted one claim against every defendant under the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 PA. CONS. STAT. § 201-1 et seq. ("UTPCPL"), and one negligent misrepresentation claim against all defendants.

The defendants filed nine motions to dismiss the Complaint, and one motion to strike and for a more definite statement. On May 26, 2005, we granted the motion to strike and for a more definite statement, and ordered Plaintiff Carl Silverstein to file an amended complaint joining his wife as a plaintiff and pleading the fraud allegations in support of his RICO claims with greater specificity. We granted the Chase defendants' motion to dismiss in part, but denied the remaining motions to dismiss. Plaintiffs ...


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