Mathon v. Marine Midland Bank, NA

Decision Date04 February 1995
Docket NumberNo. CV 94-2265 (ADS).,CV 94-2265 (ADS).
Citation875 F. Supp. 986
PartiesSheila MATHON and Hank Mathon, Husband and Wife, Plaintiffs, v. MARINE MIDLAND BANK, N.A. Hongkongbank and Shanghai Bank Corporation Limited, Duane Leonard, Karen Karates, Neil Gross, Frank Culhane, Esq., Marine Midland Mortgage Corp., Laura Glulseppotti, Philip Irwin Aaron, P.C., Shapiro & Kreisman, The Law Firm, Gerald Shapiro, David S. Kreisman, Dominick Vinceslio, Stanley Stuart, Paul Rudden, Felicia Renee Durkin, "John Doe" One, "John Doe" Two, "John Doe" Three, "John Doe" Four, Jointly and Severally, Defendants.
CourtU.S. District Court — Eastern District of New York


Sheila Mathon and Hank Mathon, pro se.

Philip Irwin Aaron, P.C. by Jules A. Epstein, Syosset, NY, for defendants Philip Irwin Aaron, P.C. and Paul Rudden.

Cullen & Dykman by John P. McEntee, Garden City, NY, for defendants Marine Midland Bank, N.A., Marine Midland Mortg. Corp. and Duane Leonard.

Cahn Wishod & Lamb by Robert Folks, Melville, NY, for defendants Shapiro & Kreisman, Gerald Shapiro, David S. Kreisman, Karen Karates, Neil Gross, Frank Culhane, Felicia Renee Durkin & Dominick Vinceslio.


SPATT, District Judge.

This action arises out of a residential lease agreement "with option to buy" entered into between the plaintiffs pro se, Hank Mathon and Sheila Mathon who are husband and wife ("the plaintiffs" or "the Mathons"), and a person identified by the plaintiffs as the owner of the residence named Stanley Stuart ("Stuart"). The plaintiffs allege that the defendants acted in violation of the civil Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO").

The plaintiffs move for entry of default judgment pursuant to Fed.R.Civ.P. 12(a) and 15(a) against the following defendants contending that they did not interpose an answer to the plaintiffs' Amended Complaint or otherwise move within the time allotted by the civil rules: Marine Midland Bank, N.A., Hongkong and Shanghai Bank Corp., Ltd., Marine Midland Mortgage Corp., Duane Leonard, Laura Glulseppotti, Shapiro & Kreisman, Gerald Shapiro, David S. Kreisman, Karen Karates, Neil Gross, Frank Culhane Esq., Felicia Renee Durkin and Dominick Vinceslio. The defendants Philip Irwin Aaron, P.C. and Paul Rudden, served an answer on July 12, 1994.

Two motions to be relieved of default pursuant to Fed.R.Civ.P. 55(c) and 60(b) are before the Court from: 1) Shapiro & Kreisman, Gerald Shapiro, David S. Kreisman, Karen Karates, Neil Gross, Frank Culhane, Felicia Renee Durkin and Dominick Vinceslio (the "Shapiro defendants"); and 2) Marine Midland Bank, N.A., Marine Midland Mortgage Corp. and Duane Leonard (the "Marine Midland defendants"). In addition, Philip Irwin Aaron, P.C. and Paul Rudden (the "Aaron defendants"), the Shapiro defendants and the Marine Midland defendants move for an order dismissing the Amended Complaint pursuant to: 1) Fed.R.Civ.P. 12(b)(6) for failure to state a cause of action; 2) Fed. R.Civ.P. 9(b) for failure to plead fraud with particularity; and 3) 12(b)(1) for lack of subject matter jurisdiction over the pendant state claims.


In November, 1992, the Mathons signed a one year lease for a residence at 17 Neptune Place, Massapequa, New York (the "premises") with its owner, Stanley Stuart ("Stuart"). The Mathons allege that they had a verbal agreement with Stuart to purchase the premises for $200,000.00 and to commence repairs at their own expense upon moving in. The Mathons commenced residing at the premises in November of 1992, relocating from New Jersey.

The plaintiffs allege that much time, trouble and expense was involved in the move. However, those facts are irrelevant to the Marine Midland defendants, the Aaron defendants and the Shapiro defendants because there is no claim that those defendants had anything to do with the original lease transaction. While Stuart is named as a defendant, it is not claimed that Stuart was a member of the alleged conspiratorial RICO enterprise.

Shortly after the Mathons moved to the premises, a storm caused damage and flooding. The plaintiffs contend that appliances, furniture, floors, the heating and electrical systems, windows and doors, among other things, were damaged. The plaintiffs allegedly undertook repairs on their own because of Stuart's failure to respond to their complaints. They allege that they spend $14,000.00 to repair the premises. The plaintiffs annexed to the Amended Complaint a letter dated February 8, 1994 from them to Marine Midland Bank wherein the plaintiffs state, "in fact, Mr. Stuart's fraudulent representations cost us over $14,000.00." See Exhibit "E" annexed to Amended Complaint.

The Mathons repeatedly refer to this $14,000.00 figure in the Amended Complaint and conclude that they were mislead and induced into spending it. The Court notes some confusion or contradiction regarding this issue in the Amended Complaint. It does not follow that the Marine Midland, Aaron and/or Shapiro defendants could have induced the plaintiffs to spend $14,000.00 to repair the premises if the plaintiffs made the $14,000.00 expenditure before they had contact with the Marine Midland, Aaron and/or Shapiro defendants.

I. The Aaron defendantsFebruary, 1993 to October, 1993

The Aaron defendants served as legal counsel to Marine Midland in a foreclosure action against Stuart. The Mathons' first contact by phone with the Aaron defendants was in February of 1993 upon receipt of a `Notice of motion for judgment of foreclosure and sale.' The plaintiffs allege that six phone calls in the course of one week were made to them by the Aaron defendants. The substance of these calls is alleged by the plaintiffs to be that: 1) the Mathons should not pay Stuart any more rent; 2) when Marine Midland Bank gets title to the premises as a result of the foreclosure action, it would be, in the plaintiffs' words, "more desireous sic for the banks to sell the house to the Mathons since the Mathons were living there and maintaining the property at great expense."

The Mathons allege that at some unspecified time, apparently in the Spring of 1993, the Aaron defendants told the Mathons that "because of the expenses they incurred relating to this house after any forclosure sic Action, they should not worry, since they are now `Junior Lienors.'" See Compl. ¶ 67.

One more call from the Aaron defendants is specifically set forth. It apparently occurred in the Spring of 1993, and allegedly, in substance, advised the Mathons not to pay rent to Stuart. No specific calls are set forth in the Amended Complaint after the ones allegedly made in the Spring of 1993, but the plaintiffs claim that they spoke with the Aaron defendants by phone on various occasions until October, 1993, and were assured by the Aaron defendants that the house and any improvements they made to the house would eventually be their own property.

The plaintiffs allege that the Aaron defendants asked them to write a letter that would be forwarded to Marine Midland by the Aaron defendants. That letter is dated October 1, 1993, and is annexed as Exhibit "C" to the Amended Complaint. The letter seems to set forth the terms of purchase that the Mathons understood would be available or that they desired, as opposed to any terms that Aaron represented would be available. The Aaron defendants are not named in the Amended Complaint in the events that are described as occurring after October 1, 1993.

II. The Marine Midland defendantsOctober, 1993 to February, 1994

In October, 1993, the Mathons began discussions regarding purchase and sale of the property with the Marine Midland defendants directly. The plaintiffs allege that between October, 1993, and February, 1994, they were assured "on an ongoing basis" by Marine Midland that they would "own the house."

The plaintiffs allege that the Marine Midland defendants phoned the Mathons to advise them that appraisals and inspections were needed and that the plaintiffs cooperated with the bank in that respect. There is no allegation that the Mathons, rather than the bank, paid for these appraisals and inspections.

The plaintiffs allege that Marine Midland Bank, on February 8, 1994, asked the Mathons by phone to "recap" the phone conversations and agreed on terms in a letter. The letter that the plaintiffs allege was written in response to that conversation is addressed to Duane Leonard of Marine Midland Bank and signed by Hank Mathon and Sheila Mathon. The letter is annexed to the Amended Complaint as Exhibit "D." The letter recites that there will be 100% financing by the bank. The plaintiffs complain that a written contract later sent to them by the Marine Midland Bank varied the terms to which the parties allegedly verbally agreed as recited in the Mathon's February 8, 1994, letter.

III. The Shapiro DefendantsNovember, 1993 to May, 1994

The Shapiro defendants, another law firm that represented Marine Midland Bank, entered the picture in November of 1993, when an eviction notice prepared by them was left at the premises. The Mathons called the Shapiro defendants, who allegedly assured them they should not worry about the eviction notice and asked them to write a letter stating that they were interested in purchasing the property. That letter is annexed to the Amended Complaint as Exhibit "E."

Three letters regarding the purchase and sale agreement were sent to the Mathons by the Shapiro defendants during the period between February, 1994, and May, 1994. These letters constitute the alleged mail fraud. One letter dated February 23, 1994 accompanied a contract for purchase and sale of the premises, which required a 10% down payment. The next letter, which is dated March 18, 1994, states that the contract terms were firm and sets a March 31, 1994, expiration date of the offer to sell. The final letter, dated May 3, 1994, states that the bank is no longer interested in selling the...

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