The opinion of the court was delivered by: Hon. George Caram Steeh
ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AGAINST DEFENDANT GAIL WELICKI AND DENYING PLAINTIFF'S MOTION FOR JUDGMENT ON THE PLEADINGS, OR IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT AGAINST DEFENDANT GILBERT EASTIN
Plaintiff, Dukes Bridge LLC, filed the instant action seeking to recover damages sustained as a result of defendants, Gilbert Eastin's and Gail Welicki's, allegedly fraudulent acts in connection with the procurement of a $20,000,000.00 life insurance policy. Before the court are the following motions: (1) Plaintiff's motion for summary judgment against Mrs. Welicki and (2) plaintiff's motion for judgment on the pleadings against Mr. Eastin or, in the alternative, for summary judgment. Mrs. Welicki filed a response to plaintiff's motion for summary judgment on April 11, 2011, and plaintiff filed a reply to Mrs. Welicki's response on April 21, 2011. To date, defendant Eastin, proceeding pro se, has failed to file any response to plaintiff's pending motion.
On or about December 1, 2007, Mr. Eastin, as grantor, established the Eastin Trust. The original trustee of the Eastin Trust was Mrs. Welicki, Mr. Eastin's daughter, and the original beneficiary was Bobbie Everett. Mrs. Welicki had never served as a trustee before, was unsure what her responsibilities entailed and guessed it had to do with the administration of her father's estate when he died.
On or about December 13, 2007, Mrs. Welicki and Mr. Eastin applied for a life insurance policy (the "Eastin Policy") with The John Hancock Life Insurance Company. Mrs. Welicki claims she first learned of her father's interest in obtaining a life insurance policy in mid-2007. She did not know who would be paying the premiums on the policy, but understood that she and her father would not be responsible for payment of the premiums. She further understood that she would not receive any money from the life insurance policy and was told that a foundation was to receive the money for the education of children. She had no understanding of how the transaction was structured and could not follow her father's explanations to the few questions she raised. She admits that she signed the application but claims that she does not recognize any of the other handwriting on the application's pages, except for her father's signature. When she was presented with the application, her father's income and asset information was left blank.
The application for the life insurance policy, signed by both defendants, stated that Mr. Eastin had a gross annual unearned income of $5,000,000.00 and a household net worth in excess of $100,000,000. On December 26, 2007, John Hancock issued the Eastin Policy, number 93-689-388, insuring the life of Mr. Eastin in the amount of $20,000,000.00. At the time of the issuance, the Eastin Trust was the sole owner and beneficiary of the Policy.
On or about January 15, 2008, Everett sold her beneficial interest in the Eastin Trust to American Heritage Enterprises, L.L.C. ("AHE"). AHE purchased the beneficial interest in the Eastin Trust and paid premiums on the Eastin Policy with funds that it borrowed from plaintiff's assignor and sole member, Ridgewood Finance Inc. ("Ridgewood"). As part of the sale of the beneficial interest in the Eastin Trust, Mr. Eastin signed a document entitled "Consent and Undertaking of Insured," which provides:
3. No statement, covenant, representation or warranty which I have made in any application, certification, worksheet or other document related to the issuance of the [Eastin] Policy, or otherwise made to the Insurer [John Hancock], contained or shall contain any untrue statement of fact, or omitted or shall omit any fact necessary to make such covenant, representation and/or warranty not misleading in light of the circumstances under which such statements were made.
I acknowledge and agree that this Consent is being delivered to the Assignee [AHE] and any lender of the Assignee in connection with the Transfer and that the statements, acknowledgments, representations and warranties contained herein are being relied on by the Assignee and any lender to the Assignee in connection with the Transfer.
Compl. ¶ 16; Ex. B. Mrs. Welicki claims that she did not know about AHE's lender nor that Ridgewood was taking a security interest to secure the loan to AHE. According to Mrs. Welicki, contemporaneously with the Consent and Undertaking, her father gave her several documents to sign, including the Resignation of Trustee and Appointment of Successor Trustee of the Gilbert Eastin Remainder Trust dated 12/1/2007. See Compl., Ex. C. Without reading it, Mrs. Welicki signed the Resignation at her bank and gave it back to her father. Jonah Meer was named as the successor trustee.
On January 30, 2008, a representative of Ridgewood called Mrs. Welicki to confirm the veracity of the statements in the Eastin Policy application. According to plaintiff, the representative asked Mrs. Welicki, "[a]re you aware of any false statement or material omission contained in the documentation submitted to the insurer relating to the initial issuance of the Eastin Policy?" Mrs. Welicki answered "no." Mrs. Welicki denies being contacted by a Ridgewood representative and testified at her February 3, 2010 deposition that she had no recollection of speaking with a Ridgewood representative.
Ridgewood loaned AHE $2,067,987.00 so that AHE could purchase the beneficial interest in the Eastin Trust, and pay premiums on the Eastin Policy. Ridgewood claims that it would not have loaned any funds to AHE had it been aware that there were misrepresentations in the Eastin Policy application and in the documents signed in connection with the Eastin beneficial interest sale. Ridgewood subsequently assigned its rights, title, and interest in the loan to plaintiff.
In February of 2009, Mrs. Welicki received correspondence from John Hancock indicating that the policy was fraudulently obtained and rescinded. SeeDef. Welicki's Resp., Ex. 9. She claims that this is the first time that she learned of the fraud.
On May 7, 2009, John Hancock filed suit against Mr. Eastin and Mrs. Welicki in the Oakland County Circuit Court, Pontiac, Michigan. John Hancock alleged that both defendants made misrepresentations in the Eastin Policy application concerning Mr. Eastin's actual net worth and income, which were "materially and substantially less than claimed in the" application. John Hancock further alleged that court filings in an unrelated Michigan state court action indicated that "Eastin's annual income consisted of pension payments totaling approximately $60,000.00."
On May 27, 2009, both Mr. Eastin and Mrs. Welicki signed a letter sent to John Hancock's attorneys in response to the complaint filed in the Oakland County Circuit Court, stating that "[A]fter reviewing the Complaint and discussing these transactions, it is our opinion that your client [John Hancock] is entitled to the liability relief sought in the Complaint." Compl. ¶ 18, Ex. E. Mrs. Welicki maintains that after she and her father were sued in the state court action, her father retained an attorney, Mr. Hartwick. After retaining Mr. Hartwick, Mr. Eastin presented the May 27, 2009 correspondence to Mrs. Welicki and asked her to sign it, and she complied because her father asked her to. Mrs. Welicki maintains that she had no part in drafting the letter, and that Mr. Hartwick instructed her to sign off on the settlement documents with John Hancock without providing her with an opportunity to read them.
Also, on May 27, 2009, Mrs. Welicki, in her individual capacity and in her capacity as trustee of the Eastin Trust, executed a Mutual Release with John Hancock. The Mutual Release stated in relevant party: "Policy Holder [the Eastin Trust] does not dispute John Hancock's position as to the validity of the Eastin Policy and certain of the relief sought by John Hancock." Mrs. Welicki signed the Mutual Release despite having resigned as trustee on January 15, 2008. On June 3, 2009, Mr. Eastin and Mrs. Welicki executed a Consent Judgment that consented to a judgment declaring that the Eastin Policy was void and that John Hancock could retain the premiums paid for the Eastin Policy.
Subsequently, John Hancock filed suit against Jonah Meer in the United States District Court for the Eastern District of New York. In the New York action, John Hancock alleged that Meer and the Eastin Trust were bound by the Mutual Release and Consent Judgment executed by Welicki in her purported capacity as trustee of the Eastin Trust. On February 2, 2010, Mr. Eastin was deposed in the New York action.
Q. Is it your understanding that you lied to John Hancock?
Q. And that you signed documents making representations to John Hancock that were false?
A. I am aware of that now, yes.
See Dep. Tr. of Gilbert Eastin at ____. On February 3, 2010, Mrs. Welicki was deposed in the New York action:
Q. Would you be surprised to learn that I made that [sic] representation to you that he [Gilbert Eastin] said he committed fraud in these transactions?
A. No, because I feel we all did.
Q. Now, when you say that you committed fraud, does that fraud-is the basis of the fraud the representations that were made in the application for the life insurance policy to John Hancock?
A. I believe so. But not with my knowing. I feel it did happen, but I don't feel that--it wasn't intentional on our part.
Q. What types of misrepresentations were made in the applications for the life insurance policies? What are your understanding of ...