Lesson learned: Trust But Verify
Continuing with reports of the legal and collateral consequences when romantic relationships (with undocumented financial connections) rupture:
In mid-2017 Nebular Hou met Terry Zhang by October 2017 they began “a romantic relationship.”
Also in October 2017, Terry informed Nebular that his bank account, containing more than $100,000, was “frozen” and that his employer, Tristate, Auto Service Center Inc. was “struggling financially.”
Unfortunately, Nebular trusted Terry.
In November 2017 Terry asked Nebular for a personal loan of $100,000.00 and Nebular orally agreed to lend Terry the money “through multiple transfers and payments of money from November 2017 to February 2018.” In return Terry promised to repay Nebular “no later than May 2018”.
Nebular honored her part of the loan, making transfers and payments “to Terry and to others at his request” that were “largely comprised of direct bank transfers and/or check payments” as well as through “smartphone applications like Venmo, Zelle, and Quickpay.”
In May 2018 Terry failed to repay the loan and thereafter did not do so.
In early July 2018 a “loan agent” friend of Terry’s advised Nebular that, in order to get an advantageous interest rate on a mortgage for a condominium she was trying to buy, she should open a joint checking account with someone she trusted.
On or about July 9, 2018, Nebular used $377,000.00 to open a joint bank account with Terry at TD Bank. Although Terry’s name was on the account, the funds were “completely” Nebular’s. According to Nebular, “Terry did not have my permission to unilaterally use, handle, or manage the funds in the TD account.”
The real estate sale soon fell through (due to issues with the condominium seller) but Nebular, on the advice of Terry’s friend, kept the TD account open in case she found a new place to purchase.
On July 26, September 24, and October 7, 2018, a person, not Nebular, went to various TD Bank branches in Flushing, Queens, and withdrew funds (specifically: $5,000, $15,000, and $25,000) from the account using a withdrawal slip bearing Terry’s name and what appears to be his signature on the front, and what appears to be his driver’s license number and expiration date on the back.
After learning of each unauthorized withdrawal Nebular confronted Terry, who denied taking the money. Terry blamed the withdrawals on his previously stolen identity. Once again, Nebular trusted Terry.
In July 2019, Nebular, having found a new condominium to buy, asked Terry to go to TD Bank on her behalf to close out the TD account and transfer the balance of $335,045.60 to her personal Chase account.
On July 18, 2019, Terry went to a TD Bank branch to close out the TD account and, afterwards, presented Nebular with a check for only $308,000.00.
When confronted by Nebular about the rest of her money, Terry explained that, on the alleged advice of a bank representative, he had “held back” $27,045.60 from the TD account to open a separate bank account, in only his name, so that “TD Bank’s investigation concerning the previously unauthorized withdrawals from the TD account could continue.”
Nebular, for the last time, trusted Terry.
In September 2019 Nebular discovered that Terry had been unfaithful and ended their romantic relationship.
In October 2019, Nebular returned to TD Bank to further investigate the previous mysterious withdrawals, finally seeing the withdrawal slips with a signature appearing to match Terry’s.
Nebular now believed Terry was not telling the truth about his stolen identity, the TD account withdrawals, or the held-back funds.
Nebular “attempted to call and message Terry (and his mother) regarding” the loan and the TD account withdrawals and hold back, but failed to receive any response.
Nebular now believed Terry took a total of $72,045.60 from her.
In September 2018, Richard Hou (Nebular’s brother) then a graduate student in Boston, decided to sell a 2014 Ford Edge, VIN 2FMDK4JC6EBB66472, that he owned with his father, non-party Xingmin Hou.
Knowing Richard wanted to sell his vehicle, and that Terry worked for Tristate, a car center with dealer affiliates, Nebular facilitated a conversation between the two, during which they “agreed that Terry would take possession of the Ford Edge on Richard’s behalf and market it, make efforts with his employer Tristate and affiliates [Imperial] to find a purchaser, who, subject to Richard’s approval, would buy” the vehicle for a price amenable to all. In exchange, Richard would pay “a reasonable commission to Terry based on the sales price of the Ford Edge for his, his employer’s and affiliates’ marketing and sales work.”
On September 7, 2018, at the direction of Terry, two men met with Richard in Massachusetts and took possession of the Ford Edge and its ownership documents. On September 8, 2028, Terry told Richard he was in possession of the vehicle.
Between September and February 2019 Richard reached out “on a monthly basis” for updates on the vehicle and was each time told by Terry that a buyer had not yet been found.
According to the Certificate of Title for a 2014 Ford Edge, VIN 2FMDK4JC6EBB66472, Terry and his father (or someone signing their names) transferred ownership of the vehicle on October 1, 2018, to Imperial Motors Inc.
According to a Certificate of Sale and a Bill of Sale for a 2014 Ford Edge, VIN 2FMDK4JC6EBB66472, the vehicle was sold for $14,000 to Frederick Chevrolet of Lebanon, Pennsylvania, on Octobers 25, 2018.
On February 2, 2019, Groundhog Day, Richard messaged Terry and told him he had changed his mind about selling the Ford Edge and asked Terry to hold on to the vehicle while he found new insurance and a place to park it in Boston. Terry agreed to hold on to the vehicle.
Between March and August of 2019 Richard repeatedly reached out to Terry to obtain information about the Ford Edge to facilitate his hunt for insurance and parking. But each time Terry would put off answering, while leaving Richard believing the vehicle was still with Terry and Tristate.
In October 2019, a newly single Nebular inquired directly with Tristate, Terry’s employer, about Richard’s Ford Edge and found out that it had been sold a year before.
Richard now believed that his sister’s ex-boyfriend, Terry, caused the sale documents to be signed with forged signatures and, with Tristate, facilitated the sale of the Ford Edge through Tristate’s affiliate Imperial. Neither Richard nor his father received any compensation for the Ford Edge.
On November 11, 2020, Nebular and Richard sued Terry, Tristate, Imperial, and TD Bank, asserting fifteen causes of action: (1) breach of contract as against Terry; (2) breach of contract as against all three defaulting defendants; (3) conversion as against Terry; (4) “breach of bailment” as against the defaulting defendants; (5) conversion as against the defaulting defendants (in the alternative); (6) money had and received as against Terry; (7) money had and received as against the defaulting defendants; (8) unjust enrichment as against Terry; (9) unjust enrichment as against the defaulting defendants (in the alternative); (10) fraud as against Terry; (11) fraud as against the defaulting defendants; (12) breach of fiduciary duty as against Terry; (13) breach of fiduciary duty as against Terry and Tristate; (14) aiding and abetting breach of fiduciary duty as against Imperial; and (15) negligence as against TD Bank.
On December 11, 2020, TD Bank was served; the bank’s deadline to answer was later extended by stipulation 13 times. In a stipulation of discontinuance dated January 5, 2022, Nebular and Richard agreed to discontinue with prejudice their claim against TD Bank only.
On December 14, 2020, Terry was served at his place of business, Tristate.
On December 15, 2020, Tristate and Imperial were served via the Secretary of State of New York.
In documents dated July 14, 2021, Tristate and Imperial were given additional notice.
In another document dated July 14, 2021, Terry was served additional notice.
On October 12, 2021, Nebular and Richard moved for a default judgment against Terry, Tristate and Imperial—none of whom appeared or answered the complaint, after their time to do so had expired.
To obtain a default judgement, a plaintiff must submit proof of service of the summons and complaint, the facts constituting the claim, the default, and the amount due. Given that in default proceedings the defendant has failed to appear and the plaintiff does not have the benefit of discovery, the affidavit or verified complaint need only allege enough facts to enable a Court to determine that a viable cause of action exists.
Nebular and Richard provided proof of service and additional notice while Terry, Tristate and Imperial failed to appear, answer, or otherwise respond to the complaint, and their time to do so had expired. Consequently, Nebular was entitled to a judgement against the defaulting defendants.
In support of the first cause of action (breach of contract as against Terry), Nebular submitted facts constituting: a claim of an orally contracted loan for $100,000, Terry’s breach, and Terry’s default. Therefore, Nebular was entitled to a judgment in the amount of $100,000 against Terry for breach of contract. And the sixth and eighth causes of action (money had and received, and unjust enrichment as against Terry) were dismissed as duplicative of the first.
In support of the second cause of action (breach of contract as against Terry, Tristate and Imperial), Richard submitted facts constituting: a claim of an orally contracted agreement for them to market and sell his Ford Edge at a mutually agreed upon price in exchange for a reasonable commission; the sale of the vehicle and their default. Therefore, Richard was entitled to a judgment against the defaulting defendants in the amount of $14,000.00, the amount for which Richard’s Ford Edge was sold. And the fourth, fifth, seventh, ninth, eleventh, thirteenth, and fourteenth causes of action (breach of bailment, conversion, money had and received, unjust enrichment, fraud, breach of fiduciary duty, aiding and abetting breach of fiduciary duty), all as against Terry, Tristate and Imperial were dismissed as duplicative of the second.
In support of the tenth cause of action (fraud as against Terry), Nebular submitted facts constituting: a claim of fraud in the amount of $72,045.60 from the TD account (withdrawals of $5,000 + $15,000 + $25,000 + $27,045.60 in “held back” funds) through Terry’s alleged (false) oral agreement not to take Nebular’s money from the TD account with an intent to deceive Nebular, an agreement she reasonably relied upon to her detriment. The third and twelfth causes of action (conversion and breach of fiduciary duty as against Terry) were dismissed as duplicative of the third.
The fifteenth cause of action (negligence as against TD Bank) was dismissed with prejudice pursuant to the stipulation of discontinuance between the parties.
Therefore, the Clerk was directed to enter a default judgment in favor: (1) of Nebular against Terry on the first cause of action in the amount of $100,000.00; (2) of Richard against Terry, Tristate, and Imperial, jointly and severally, on the second cause of action in the amount of $14,000.00; and (3) in favor of Nebular as against Terry on the tenth cause of action in the amount of $72,045.60; plus statutory interest. The third through ninth and eleventh through fourteenth causes of action were dismissed as duplicative and, pursuant to a stipulation of discontinuance between the parties, the Clerk was directed to dismiss with prejudice Nebular and Richard’s cause of action against TD Bank.