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Smith v. Rkelley-Law, P.C.

United States District Court, D. Massachusetts

December 8, 2015

RKELLEY-LAW, P.C., et. al



This is the culminating decision in litigation that has now outlived the mortgage banking crisis that precipitated it. Enough has been written that the court will confine itself to only those facts and rulings necessary to bring this lingering aspect of the case to an overdue conclusion. The necessary background, supplemented by the additional credible testimony and exhibits offered at the trial on damages, is as follows.

1. Robert Smith was duped into becoming the catspaw for a mortgage fraud scheme orchestrated by defendant Dwight Jenkins with the help of real estate brokers and mortgage lender complicitors. The court has previously provided the following portrait of Smith at the moment Jenkins found him: “[A] Marine veteran and former drug addict, Smith had drifted in and out of the New England Shelter for Homeless Veterans in Boston. He suffers from schizophrenia, post-traumatic stress disorder, depression, and mental retardation. [He] graduated from high school in 1978 only with the help of special education courses. His comprehension, reading, and writing skills are well below those of an average adult.” Smith v. Jenkins, 818 F.Supp.2d 336, 344 (D. Mass. 2011) (Smith I), rev’d on other grounds, 732 F.3d 51 (1st Cir. 2013) (Smith II) (internal quotations omitted).

2. This court described the gist of the scheme in Smith I as follows: “Jenkins trolled the margins of society for the gullible (like Smith) and the greedy . . . whom he recruited as straw ‘investors’ in shady real estate deals. With the help of louche mortgage brokers and a complicit attorney, the ‘investors’ were inveigled into taking out ‘liar loans’ for the purchase of overvalued residential properties. The ‘investors’ received a small [stipend], while Jenkins and his cohorts (including the brokers) skimmed fees and commissions from the grossly inflated purchase prices.” Smith I, 818 F.Supp.2d at 340.

3. In early 2005, Jenkins, with the help of an accomplice, Laurice Taylor, convinced Smith to “invest” in a “special program” from which he would earn a guaranteed $10, 000 for each investment he made with no capital contribution required.[1] Smith II, 732 F.3d at 59. After Smith expressed interest, on February 7, 2005, Jenkins instructed him “to attend a meeting at the law office of [defendant] RKelley-Law, P.C. in Quincy, Massachusetts, to sign the documents for his first investment.” Id. at 60. At the meeting, “[a]ttorney Louis Bertucci, an associate at RKelley-Law, introduced himself to Smith as the lawyer in charge of the paperwork and assured him that the documents were ‘in order.’” Id. The “meeting” was in fact a real estate closing. A second closing, with Smith and Bertucci again in attendance, occurred at RKelley-Law on February 28, 2005.

4. At the first closing, Smith signed purchase papers for 2715 Winfield Lane in Dighton, Massachusetts (the Dighton Property), for $400, 000, plus $11, 964.24 in settlement charges and taxes. Smith also executed two mortgages on the Dighton Property, one for $320, 000, the second for $79, 088.64, both of which were financed by defendant Signature Group Holdings, Inc., f/k/a Fremont Investment & Loan (Fremont).

5. At the second closing, Smith signed papers for the purchase of 27 West Cottage Street in Dorchester, Massachusetts (Dorchester Property), for $429, 000, plus $8, 198.13 in settlement charges and taxes. Smith also executed two mortgages on the Dorchester Property, one for $343, 200, the second for $85, 184.44. The mortgages were financed by defendant Meritage Mortgage Corporation (Meritage).

6. Smith received a $10, 000 cash payment from Jenkins after each of the closings.

7. Bertucci, the lawyer who had dealt with Jenkins at both closings, had worked as an associate at RKelley-Law since becoming licensed to practice law in Massachusetts in 2002. He handled most of the eight to fifteen closings conducted weekly by RKelley-Law. RKelley-Law received a fee for each closing that it conducted, a portion of which was paid to Bertucci. The closings, including the two involving Smith, took place on the premises of RKelley-Law during normal business hours.

8. RKelley-Law was identified by the mortgage lenders as the closing agent on the Dighton and Dorchester Property transactions. Bertucci signed the closing documents on behalf of RKelley-Law.

9. At the time he purchased the Dighton and Dorchester Properties, Smith was working as a trash hauler for Waste Management, Inc., earning $19.50 per hour. Because of his learning disabilities, Smith did not fully comprehend the nature of the transactions in which he became involved. Nor did he understand that he would become personally liable on the mortgage notes that he had executed.

10. The Court of Appeals takes up the story: “A number of months after the closings, Smith began receiving calls from the lenders on a daily basis regarding missed mortgage payments. . . . The two properties were eventually foreclosed on.” Smith II, 732 F.3d at 61. Once his personal liability on the mortgages was made clear to him, Smith devoted hours - sometimes five to eight daily - in a stressful and futile attempt to disassociate himself from the loans and restore his credit. Aug. 17, 2015 Trial Tr. (Tr.) at 20-21. Over the course of the next two years, Smith continued to be hounded by calls to his cell phone from banks and angry tenants, as well as utilities seeking to collect on unpaid bills. (Smith specifically recalled a $500 water bill, which he paid). Id. at 11-17, 28, 38-39; see also Smith II, 732 F.3d at 61. The calls only stopped when Smith obtained counsel. Smith also personally made complaints to the FBI, the Suffolk District Attorney’s Office, the Attorney General’s office, the Real Estate Licensing Board, the mortgage companies, and Jenkins, none of which bore fruit. At one point Jenkins called Smith and threatened Smith’s life if he continued to complain. Tr. at 14.

11. During these two years Smith was not actively working, but was receiving worker’s compensation because of injuries from a work-related fall. The only specific instance that he could recall when his low credit score adversely affected him was having been rejected on a lease on a new apartment.

12. Robert Kelley, Esq., is the sole owner of RKelley-Law. In that capacity, he hired Bertucci and acted as his supervising attorney. Bertucci received a fixed salary, plus ...

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