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David R. Maltz & Co., Inc. v. Wachovia Bank

March 31, 2010


The opinion of the court was delivered by: Wall, Magistrate Judge


Before the court, on consent of the parties, is a motion for summary judgment made by defendant Wachovia Bank, N.A. ("Wachovia") seeking judgment on all claims of plaintiff David R. Maltz & Company, Inc. ("Maltz"). See Docket Entry ("DE") [31]. Maltz has also moved for partial summary judgment on its cause of action for an account stated. See DE [33]. Third party defendants Kenneth A. Welt and Kenneth A. Welt, P.A. (collectively "Welt") have not submitted any papers in regard to either motion. For the reasons set forth herein, Wachovia's motion is granted and Maltz's motion is denied. In light of the dismissal of plaintiff's case, the third party complaint is also dismissed.


The material facts, drawn from the Complaint, the Third Party Complaint, and the parties' Rule 56.1 Statements, are undisputed unless otherwise noted.

In 2003-04, non-party Daniel E. Marino executed and delivered to Wachovia certain Promissory Notes and Prime Equity Line of Credit Agreements in the aggregate principal amount of $2,900,000. Those instruments were secured by mortgages on the real property and premises located at 261 Bayberry Lane, Westport, Connecticut (the "Westport property"). The Promissory Notes, Prime Equity Line of Credit Agreements and mortgages will be referred to collectively as the "Subject Mortgages." Marino defaulted on his obligations, although it is unclear from the submissions when this occurred. Wachovia commenced a foreclosure action in Connecticut on October 17, 2005.

Prior to Wachovia's filing of the foreclosure action, Marino became the subject of actions commenced by the United States government. On September 1, 2005, a civil forfeiture action was commenced in the Southern District of New York against entities associated with Marino (the "Bayou Action"). On September 16, 2005, a stipulation and order (the "Bayou stipulation") was entered in this action regarding the disposition of the Westport property. Under that stipulation, Marino represented that the Westport property was encumbered by liens and mortgages including the Subject Mortgages. The Bayou stipulation further stated that "the United States and Marino agree that the Westport Property should be sold to preserve its value pending a final adjudication on the merits." Stipulation & Order p. 2, Foudy Aff., Ex. 23. It authorized Marino to sell the property and stated that "outstanding liens, mortgages, and taxes on the property shall be satisfied from the gross proceeds of the sale, subject to the prior approval of the Office." Id. ¶2.

On September 29, 2005, the United States government commenced a criminal proceeding against Marino in the Southern District of New York in which it alleged various counts of mail, wire, and investment advisor fraud (the "Criminal Action"). See Foudy Aff., Ex. 25.*fn1 The criminal complaint also contained a forfeiture allegation that specifically listed the Westport property. Id. ¶17b. On October 19, 2005, a Preliminary Order of Forfeiture/First Order of Forfeiture was issued in the Criminal Action. See Foudy Aff., Ex. 24. According to two Discharge of Lis Pendens provided by Wachovia, the U.S. government recorded a lis pendens in both the Bayou and Criminal Actions. Foudy Aff., Ex. 27.*fn2

On November 29, 2005, Wachovia, apparently in response to a request from the U.S. Attorney's Office, provided that Office with a payoff letter indicating a payoff amount of $1,017,716.33 through the end of November to satisfy the Marino loans made by Wachovia. Foudy Aff., Ex. 33. No payoff was made and no sale of the Westport property took place at that time.

Sometime during the winter of 2005-06, the Westport property suffered weather related water and mold damage. In light of this development, Wachovia decided to forego completion of the foreclosure proceeding, and opted instead to attempt to sell the Subject Mortgages.

Puckhaber Aff. ¶9.

In April 2006, John Puckhaber, a Senior Vice President at Wachovia, had discussions with third party defendant Kenneth Welt "which resulted in Welt's retention by Wachovia as an independent contractor to market and sell" the Subject Mortgages on Wachovia's behalf. Puckhaber Aff. ¶10. Welt testified that he saw this as an opportunity to do future work with Wachovia. Welt Dep. 23:9-13. On April 10, 2006, Welt sent a letter to Puckhaber to "set down our understandings in regard to the bank's desire to sell their mortgage position" in the Westport property. Puckhaber Aff. Ex. 2. Defendant refers to this letter as the "Letter of Understanding." The relevant portion of the text of this letter follows:

In summary, the pertinent points are as follows:

* I will supervise the marketing and sale of the bank's position in the property and oversee the public auction sale which will be held on May 3rd, 2006

* I will utilize a sales agent who is qualified and licensed to conduct the sale.

* The costs and expenses to market the property will not exceed $10,000.00. Attached is a proposed budget as to these expenditures.

* Under no circumstance will the bank be responsible for more than the $10,000.00 regardless if the property is sold.

Minimum Price

The minimum price the bank will accept for their position is $1,175,000.00

On the date of the sale, a bank's representative will be available to be contacted via telephone. If the sale price obtained is less than the minimum price, it is in the sole discretion of this representative to accept or reject the offer.


My compensation and the compensation of my sale agents and staff will be from a buyer's premium to be added to the ultimate sales price. Therefore, it will not be the responsibility of the bank. To reiterate, the maximum financial responsibility of the bank will be the before mentioned $10,000.00.

Ltr of 4/10/06, Puckhaber Aff., Ex. 2. According to Welt, this letter "outlined the total terms and conditions under which I would take the engagement." Welt Dep. 21:1-2. Puckhaber testified that Welt "had a specific duty and the duty was to sell the notes and mortgages." Pl's Ex. E, Puckhaber Dep. 39:21-22. Welt had authority to sell the Subject Mortgages "[u]nder certain directed guidelines." Id. 40:24-25.

Upon receipt of Welt's Letter of Understanding, Puckhaber e-mailed him to confirm that the bank's cost would be limited to $10,000 and the purchaser would pay a fee. E-mail of 4/11/06, Puckhaber Aff. Ex. 3. Welt responded "You are correct. The bank's total exposure is limited to $10,000." Id.

On May 16, 2006, Welt advised Wachovia that he had retained the services of plaintiff David R. Maltz & Co., Inc. to act as auctioneer in connection with the sale of the Subject Mortgages. Maltz claims that it was retained by Welt on Wachovia's behalf. See Pl's Rule 56.1 Statement ("Pl's Stmt"), DE [33-1], ¶3. Welt has testified that "I never told Mr. Maltz that he was being retained by Wachovia. I was retaining Mr. Maltz in order to perform my assignment with Wachovia." Welt Dep. 28-29:25-2. According to Welt, he and Maltz had an oral, not written, agreement. Welt Dep. 59:20-25. None of the parties have provided any terms of this oral agreement.

The propriety of a buyer's premium was discussed between Welt and Maltz. Welt testified that "I told [Maltz] that he could charge a buyer's commission. . . that we would take our commission from the buyer's premium." Welt Dep. 24:6-12. David Maltz also acknowledged that it was a standard in the industry to charge a buyer's premium and the question "was just a matter of do we charge a ten percent buyer's premium or a seven percent ...

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