There are many mansion in Round Hill Road in Greenwich, CT. Some are worth $5 million to $13 million.
During a recent lawsuit, Seven Oaks Enterprises LP and Seven Oaks Management Corp. v. Sherri DeVito and Robert DePalo: Litigation over a debunk real estate development project in Greenwich has led to a $1.33 million jury verdict in Stamford.
According to a 2014 New York Times article, Round Hill Rd is also notorious for being home to rich criminals serving prison sentences. Among them are an investment adviser who steered clients to Bernie Madoff, a hedge fund executive serving time for insider trading and a founder of a high-end handbag business convicted of bribery.
Another resident is Dominick DeVito, who served time for real estate fraud. DeVito also bought, renovated and sold homes in the area. After the market crashed in 2009, he was sent to prison again.
According to court documents, Seven Oaks Management Corp., of Greenwich, was in business to buy and sell assets through its agent, Murray Chodos. Seven Oaks created a limited liability company, 516 LLC, whose sole purpose was acquiring, managing, and maintaining a property at 516 Round Hill Rd.
On Oct. 19, 2006, Sherri DeVito, Dominick’s wife, purchased the property from Seven Oaks for $4 million. The same day, DeVito obtained a construction loan from Patriot National Bank for $5.6 million. The Patriot mortgage was to be used to build a single-family residence on the property. That same day, DeVito paid Seven Oaks $2.68 million at the close of escrow.
Also on Oct. 19, DeVito and Seven Oaks entered into a promissory note, in which DeVito promised to pay by a particular date the difference between the purchase price and the amount tendered at the closing. The two sides further entered into a management agreement that was intended to protect Seven Oaks’ interest by preventing subsequent financing of the property while the debt was unpaid; to prevent mismanagement; and to allow Chodos to control 516 LLC while the debt was still owed.
Seven Oaks’ lawyer, Ryan O’Neill, of the Law Offices of Mark Sherman in Stamford, explained that the intent of putting Chodos in charge of the project was to protect Seven Oaks’ investment while DeVito still owed the company money. But in 2008, O’Neill said, a number of changes were made to the management contract. The upshot was that Chodos was removed from his management role without his knowledge or consent.
According to court documents, DeVito replaced Chodos with Robert DePalo. The defendants then allegedly took out additional loans and used funds for their own personal use and that of their family members. In the meantime, the plaintiffs charge, DeVito and DePalo never made any payments on what they owed throughout this time. The date by which the defendants had to pay off the amount listed in the management agreement came and went. The project never did get completed.
O’Neill said this alleged contract breach occurred around the time the real estate market crashed in 2009. “Chodos and Seven Oaks didn’t get anything out of this deal,” said O’Neill. “That was a time when a lot of real estate deals collapsed … but despite everything going on with the economy and the real estate market, this was something they could have and should have made good on and didn’t.”
The Seven Oaks companies sued DeVito and DePalo in 2010 for breach of contract, breach of the implied covenant of good faith and fair dealing and reckless and wanton misconduct. In response, the defendants filed counterclaims alleging that Chodos duped them and that the management agreement terms were not in their best interests, according to O’Neill. Counterclaims included a Connecticut Unfair Trade Practices Act violation and intentional misrepresentation.
“They alleged that the plaintiff had intimate knowledge of the financial affairs of the defendant and by virtue knew they shouldn’t be getting into this kind of deal and took advantage of them,” said O’Neill.
The lawsuit was filed in 2010 but ended up on what’s called the dormancy docket because nothing was happening. The plaintiffs’ initial lawyer eventually withdrew, and O’Neill and Christine Gertsch, also of the Law Offices of Mark Sherman, were hired. The case went to trial earlier this year before Judge Charles Lee in Stamford Superior Court.
During the trial, one hotly contested issue was the whereabouts of the original promissory note. O’Neill explained that under the Uniform Commercial Code, a party must possess the original document in order to try to collect in court for breach of contract. He said a party must prove that it cannot reasonably obtain the original in order to get around the UCC’s requirement.
At trial, Chodos testified that he simply could not find the original but displayed a copy. O’Neill said the defense argued that the plaintiffs had to show how and when they lost the original. “Trying to figure out how or when you lost it was kind of a difficult burden to meet when you think about it conceptually,” said O’Neill. “If we knew, it wouldn’t be lost anymore. We would just go get it.”
After about five days of evidence presentation, the jury sided with the plaintiffs on all of their claims, and against the defendants on their counterclaims. The jury awarded $1.33 million. “It was important for [Chodos] to have this deal enforced,” said O’Neill. “It was his view that the failure to pay [the remaining debt] wasn’t something inevitable. There were actions taken specifically to disregard his financial interest, and it was important to hold them accountable for it.”
The defendants were represented by Ridgely Brown of Stamford. Brown said he filed post-trial motions, including a motion to set aside the verdict. If unsuccessful, he plans to file an appeal, he said. Brown declined to discuss the case further because motions were pending before the judge.
Comments are closed