Opinion
Civil No. 99 CV 2266-SBC-JMF.
April 7, 2005
MEMORANDUM OPINION AND ORDER
Georgette Bynum, a paralyzed, seventy-nine year old widow, brings suit over the refinancing of her home mortgage. Bynum contends she desired a $10,000 home improvement loan but was induced to acquire a $75,000 loan that contained undisclosed terms and exorbitant charges. Bynum asserts she did not receive money for home repairs, and that she was unable to afford the mortgage. Foreclosure proceedings were instituted against her.
Bynum sues Manufacturers and Traders Trust ("Manufacturers"), holder and assignee of her mortgage, for violating the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., the Home Ownership and Equity Protection Act ("HOEPA"), codified as amendments to TILA, the District of Columbia Interest and Usury Statute, D.C. Code § 28-3301(f), the District of Columbia Mortgage Lender and Broker Act ("MLBA"), D.C. Code § 26-1101 et seq., the District of Columbia Consumer Protections Procedure Act ("CPPA"), D.C. Code § 28-3901 et seq., and for rescission, fraud and breach of contract. See 3rd Am. Compl. at Counts I-VI, IX-X. Manufacturers asserts an equitable subrogation counterclaim.
Bynum sues Equitable Mortgage Group, Inc. ("Equitable"), her mortgage broker, under the MLBA and CPPA, and for promissory estoppel, breach of fiduciary duty and conversion, conspiracy to convert and aiding and abetting conversion. See 3rd Am. Compl. at Counts VII-XI. Finally, Bynum sues Dimarcus Waldo, proprietor of Dutchmans Home Improvement Co., under the CPPA and for conversion, conspiracy to convert and aiding/abetting conversion. See 3rd Am. Compl. at Counts VII, X. Bynum seeks damages, rescission and declaratory relief. Only two defendants remain. Before the court are Manufacturers' motions to dismiss and for summary judgment, Equitable's motion for summary judgment, and Bynum's motion for partial summary judgment.
Bynum originally sued First Government Mortgage and Investors Corp., ContiMortgage Corp., Valley Title Co., Equitable Mortgage and Waldo/Dutchmans. Bynum accepted First Government's Rule 68 offer of judgment. Dkt. No. 22-1. ContiMortgage filed a suggestion of bankruptcy; Manufacturers intervened in ContiMortgage's place and ContiMortgage was dismissed. Dkt. No. 62-1. Summary judgment was granted in Valley Title's favor. Dkt. 63-1. The clerk entered default against Waldo on 9/23/03. Dkt. No. 82-1. Bynum's motion to file a third amended complaint against defendants Manufacturers, Equitable and Waldo/Dutchmans was granted on 12/31/03. Dkt. No. 94-1. Manufacturers and Equitable answered the third amended complaint. Dkt. 101, 106.
On March 11, 2005, this case was reassigned by the Chief Justice of the United States to the Honorable Suzanne B. Conlon, District Judge for the Northern District of Illinois. See Dkt. No. 125.
BACKGROUND
A. Loan Application with EquitableThe following material facts are undisputed unless otherwise noted. Georgetta Bynum resides in Washington, D.C. In 1997, Bynum contacted Equitable, a licensed mortgage broker, about refinancing her home mortgage. Bynam had previously refinanced her mortgage on three occasions, and sought a fourth refinancing to obtain $10,000 in cash for home improvements. On November 18, 1997, Bynum signed several documents provided by Equitable, including: (1) a loan application that reflected an estimated total loan amount of $85,000 and a prospective interest rate of 9.99%; (2) an agreement to obtain a loan commitment, which identified Equitable as a mortgage broker, set forward the brokerage agreement terms between Bynum and Equitable, estimated an $8,000 broker fee due at closing, and declared Equitable did not owe Bynum a fiduciary duty; and (3) a good faith estimate of the costs and fees Bynum would face in connection with the loan. See Equitable Exs. K, L-M. The documents Bynum signed and dated November 18, 1997, are also signed and dated by Equitable representative Kenneth Thompson. See id. The loan application reflects it was obtained in a "face to face interview." See id. at Ex. K. Thompson contends he met with Bynum at her home on November 18, 1997, where he explained the documents to her, explained Equitable's status as a broker who would help her find a lender, and answered her questions. Thompson submits a detailed affidavit describing his meeting with Bynum. Equitable Ex. B. At her deposition, Bynum did not recall meeting with Thompson; her affidavit attests Thompson did not come to her home. See Bynum Ex. A at ¶ 4; Ex. B at 11-12.
Bynum fails to respond to Equitable's statement of undisputed facts as required by local rules. See L.R. 7(h); 56.1 (opposition to summary judgment "shall be accompanied by a separate concise statement of genuine issues" of material fact). Equitable's statement of facts is deemed admitted. See L.R. 56.1, 7(h) ("In determining a motion for summary judgment the court may assume that facts identified by the moving party in its statement of material facts are deemed admitted, unless such a fact is controverted in the statement of genuine issues filed in opposition to the motion"); Twist v. Meese, 854 F.2d 1421, 1425 (D.C. Cir. 1988); Flowers v. Internal Revenue Serv., 307 F. Supp. 2d 60, 62 n. 1 (D.D.C. 2004).
Bynum's refinancing loan application and background financial information were submitted to Thompson's supervisor, Charles Ruiz, and to First Government, a mortgage lender. First Government agreed to offer Bynum a $75,000 refinancing loan at a 9.9% interest rate. Bynum initially qualified for and accepted a 10.5% interest rate, but First Government lowered the rate when Equitable voluntarily surrendered a portion of its own compensation to allow her the benefit of the reduced rate. As a result, Equitable ultimately received a $5,475 fee instead of the originally estimated $8,000 fee. After forwarding the materials to First Government, Equitable had no further involvement in the negotiation, structure and settlement of Bynum's loan.
B. Loan Settlement with First Government and Valley Title
Settlement of the refinancing loan occurred at Bynum's home on February 28, 1998. Prior to settlement, First Government provided Bynum with a finance agreement and loan commitment, which set forth the $75,000 loan amount, term, interest rate and annual percentage rate of Bynum's loan. Bynum signed and initialed each document. Alan Friedman, a settlement agent with Valley Title Company, reviewed First Government's loan documents with Bynum, as well as the HUD-1 statement that Valley Title prepared pursuant to First Government's instructions. Bynum signed the documents Friedman presented including: (1) the HUD-1 statement reflecting the final terms of the loan, including the amount, term, interest rate and fees and charges; and (2) a letter to Wilshire Credit regarding payoff of her prior mortgage loan. Bynum executed a deed of trust securing repayment of the $75,000 loan by encumbering her property and a promissory note evidencing the $75,000 loan made to her by First Government. At the conclusion of settlement, Friedman signed a settlement agent affidavit before a notary public attesting Bynum signed the refinancing documents. Further, Friedman notarized Bynum's deed of trust. His notary seal reflects he is a certified notary in "Baltimore County, Maryland."
Bynum's home was given a $130,000 appraisal value. The February 28th settlement reflects insurance and property reserve charges. Bynum did not receive a separate written statement indicating that she could pay taxes and insurance directly, nor did she receive a HOEPA early warning disclosure at least three days before settlement. Bynum had previously executed a promissory note in the principal amount of $62,000 payable to Crusader Savings Bank, the repayment of which was secured by a deed of trust encumbering the property. Accordingly, Bynum's loan from First Government refinanced the loan secured by the Crusader deed of trust. The proceeds of the loan executed by the First Government deed of trust paid: (1) $53,417.24 to retire Bynum's Crusader deed of trust; and (2) $3,680.81 to the District of Columbia to fully pay delinquent real estate taxes.
C. Bynum Endorses Her Loan Check
Shortly following settlement, Bynum received a $9,162.55 check from Valley Title dated March 5, 1998. The check was made payable to Bynum and reflected the funds generated to her from the refinancing. After receiving the check from Valley Title, a man named Tim Byrd came to Bynum's home. Bynum had previously met with Byrd on several occasions to discuss her desired home improvements. Byrd told Bynum he worked for Equitable. Byrd pressured Bynum to endorse the check and told her the repair work would not begin unless she gave the check to him. He further indicated the check would be placed in an escrow account. When Bynum resisted Byrd's request, he purportedly telephoned his boss, who spoke with Bynum and informed her the endorsed check was needed for her home repairs. Bynum endorsed the check and gave it to Byrd. No repair work was done to Bynum's home.
Bynum telephoned First Government, the Better Business Bureau, her District of Columbia council member and Equitable regarding Byrd's actions. Upon calling Equitable, Bynum spoke with Ruiz. She explained that she had signed the check and given it to Byrd, who told her he worked for Equitable. In fact, Byrd worked for Dutchmans, a company entirely independent from and unconnected to Equitable. Dutchmans leased a separate, partitioned office with its own entrance in one of Equitable's suites for four months. Ruiz told Bynum that Byrd did not work for Equitable, and Bynum admitted Byrd had not presented her with a business card or any paperwork evidencing a relationship with Equitable. Nevertheless, Ruiz told Bynum he would try to locate Byrd to find out what happened to her check and why the home repair work was not done. Ruiz first spoke to Thompson, who did not know anything about Bynum's home improvement work or her incident with Byrd. Ruiz then contacted Dimarcus Waldo, Dutchmans' owner, who told Ruiz that Byrd had cashed the check and disappeared. Ruiz forwarded Waldo's explanation to Bynum. Equitable had no further contact with Bynum.
Equitable never employed Byrd. Dutchmans' bank records subsequently established that Bynum's check was improperly negotiated for deposit into Dutchmans' account, and was altered by an unauthorized party to read "Dutchmans, For Deposit Only" above Bynum's signature. Bynum acknowledges Dutchmans received the check proceeds.
D. Assignment of Bynum's Promissory Note and Deed of Trust
First Government subsequently assigned Bynum's promissory note and deed of trust to ContiMortgage. ContiMortgage filed a suggestion of bankruptcy and Manufacturers became the holder of the February 28th promissory note and deed of trust. Manufacturers was not involved in the application or closing of Bynum's loan. Bynum ceased making payments on the loan after February 5, 1999 and foreclosure proceedings were initiated. Bynum sent a letter to ContiMortgage and First Government on August 3, 1999, providing notice of her intent to rescind and cancel the note and deed of trust.
Manufacturers admits that it is the holder of the note. See Manufacturers Statement of Facts at ¶ 2. Bynum asserts she does not know whether Manufacturers is the holder of the note and deed of trust. See Bynum Resp. to Manufacturers Facts at ¶ 2. Nevertheless, Bynum contends Manufacturers' liability stems from its status as assignee of the note and deed of trust. Id. at ¶ 4. Given Bynum's pursuit of her claims against Manufacturers as assignee, Manufacturers' possession of the note and deed of trust is deemed admitted.
DISCUSSION
I. Motion to Dismiss
On January 15, 2004, Manufacturers moved to dismiss Counts I-VI, VIII of the complaint pursuant to Rule 12(b)(6). Manufacturers answered Bynum's third amended complaint on February 24, 2004. Manufacturers' summary judgment motion on Counts IX-X was filed on March 17, 2004. "Where matters outside the complaint are presented to the court in support of a motion to dismiss under Fed.R.Civ.P. 12(b)(6), such motion shall be treated as a motion for summary judgment and disposed of under Fed.R.Civ.P. 56." Romero-Ostolaza v. Ridge, No. 03-1890, 2005 U.S. Dist. LEXIS 5189, *2 (D.D.C. 2005). When addressing a motion to dismiss under Rule 12(b)(6), the court may not consider facts outside the four corners of the complaint unless it treats the motion to dismiss as a motion for summary judgment. See Fed.R.Civ.P. 12; Currier v. Postmaster Gen., 304 F.3d 87, 88 (D.C. Cir. 2002). Manufacturers' motion to dismiss and Bynum's response require consideration of matters outside the complaint and will be treated as a summary judgment motion.
II. Legal Standard
Summary judgment is appropriate when the moving papers and affidavits show there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once a moving party meets its burden, the non-movant must go beyond the pleadings and set forth specific facts showing there is a genuine issue for trial. Fed.R.Civ.P. 56(e); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). A genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248. The court considers the record as a whole and draws all reasonable inferences in the light most favorable to the opposing party, however the non-movant must establish more than the existence of a mere scintilla of evidence in support of its position. Fed.R.Civ.P. 56(c); Anderson, 477 U.S. at 252; Celotex, 477 U.S. at 325. The non-movant may not rely solely on allegations or conclusory statements, and if the non-movant's evidence is merely colorable or is not significantly probative, summary judgment may be granted. Anderson, 477 U.S. at 249-50; Greene v. Dalton, 164 F.3d 671, 675 (D.C. Cir. 1999).
III. Bynum's Substantive Claims Against Manufacturers — Assignee Liability
Manufacturers argues it is entitled to summary judgment on all of Bynum's substantive HOEPA, TILA and state law claims because Bynum accepted First Government's Rule 68 offer of judgment. Manufacturers asserts it is a privy to First Government, the alleged offending party, as assignee of Bynum's note and security interest. Because Bynum has recovered for First Government's liability, Manufacturers contends Bynum may not pursue claims against it as assignee. Manufacturers argues Bynum has recovered for any of First Government's substantive violations of law, and is not entitled to recover twice for the same alleged wrongful conduct. Bynum contends an assignee of a HOEPA loan is subject to liability for any claim that could be asserted against the original lender, and that a Rule 68 judgment accepted on behalf of one defendant does not resolve the claims against all defendants. Bynum's claims must be rejected.
Generally, HOEPA subjects mortgage assignees to increased liability for HOEPA loans. Cooper v. First Gov't Mortgage and Investors Corp., 238 F.Supp.2d 50, 55-56 (D.D.C. 2002). Congress enacted HOEPA to force the high cost mortgage market to police itself, and made HOEPA loan assignees subject to "all claims and defenses, whether under TILA or other law, that could be raised against the original lender." Id. Ordinarily, a HOEPA loan assignee's argument that it is not liable for the mistakes of the assignor is without merit. See Cooper, 238 F.Supp.2d at 55-56; see also In re Rodrigues, 278 B.R. 683, 688 (Bankr. R.I. 2002). It is not clear, however, how a Rule 68 judgment against the original lender affects assignee liability for the lender's substantive violations of the Act.
Rule 68 provides:
At any time more than 10 days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against the defending party for the money or properly or to the effect specified in the offer, with costs then accrued.
Therefore, Bynum correctly notes that an accepted Rule 68 offer of judgment constitutes a settlement between the parties making and accepting the offer. See e.g., Marek v. Chesny, 473 U.S. 1, 5 (1985) (characterizing Rule 68 offer as pretrial settlement and stating "the plain purpose of Rule 68 is to encourage settlement and avoid litigation"); Delta Airlines v. August, 450 U.S. 346, 350 (Rule 68 pertains to settlement offers). A Rule 68 judgment that does not dispose of all claims and parties does not constitute a final judgment against all claims and parties. See e.g., Acceptance Indem. Ins. Co. v. Southeastern Forge, Inc., 209 F.R.D. 697, 699-700 (M.D. Ga. 2002) (reading Rule 68 in light of Rule 54(b) and holding accepted Rule 68 offer not a final judgment against any party that did not participate in the offer).
The fact that a Rule 68 judgment with one party does not automatically bar claims against other parties is the reason Bynum's claims against Equitable are not subject to dismissal based on her acceptance of First Government's offer of judgment. However, Bynum's claims against Manufacturers are exclusively premised on its relationship as assignee and holder of First Government's note. Bynum's acceptance of First Government's offer of judgment was predicated on her understanding that First Government did not hold her loan and was thus unable to provide her with the rescission remedy. See Equitable Mem. Ex. U. Therefore, First Government's offer of judgment did not resolve Bynum's rescission claim. However, while Bynum's acceptance further purported to reserve her other claims against Manufacturers, her acceptance stated that the offer of judgment is "a resolution of First Government's liability in this matter." Id. In exchange for her release of all claims and resolving First Government's liability, Bynum received $3,600. Thereafter, she dropped all claims against First Government.
An assignee merely steps into the shoes of the assignor. See e.g., SEC v. Bilzerian, 378 F.3d 1100, 1108 (D.C. Cir. 2004). Accordingly, an assignee's liability can be no greater than the assignor's. While the Act provides an assignee is subject to any claims that may be brought against the assignor, Bynum may no longer bring her claims against the assignor — she has obtained a judgment on those claims. Bynum makes no claim that Manufacturers independently violated her rights under federal and state law. Rather, all claims are based on First Government's actions, for which she received full satisfaction. By maintaining her substantive claims against Manufacturers, Bynum seeks a double recovery for the lender's violations. Accordingly, Manufacturers' summary judgment motion on Bynum's substantive HOEPA, TILA and state law claims (except rescission) must be granted.
IV. Bynum's Rescission Claims Against Manufacturers
Bynum moves for summary judgment on her claims that she validly rescinded the deed of trust under TILA, HOEPA and on account of improper notarization. Specifically, Bynum alleges her mortgage constitutes a high cost loan under HOEPA, 15 U.S.C. § 1602(aa). Bynum contends she validly rescinded the deed of trust on August 9, 1999 under §§ 1635(a), (f), 1639(b)(1) and 1602(u) because First Government failed to make required disclosures three or more days prior to the transaction's completion in violation of § 1639(b)(1). Bynum further argues the rescission was valid under TILA because First Government failed to accurately disclose and characterize the loan's finance charges and amount financed under §§ 1632(a), 1635. Accordingly, Bynum moves for summary judgment on her rescission claim against Manufacturers as holder of the promissory note and deed of trust. Finally, Bynum contends the deed is invalid because it was illegally notarized under D.C. Code §§ 42-401, 42-404. Specifically, Bynum contends Friedman's notarial acts were improper because he was not certified by the District of Columbia. Bynum contends the improper notarization invalidates the February 29, 1998 conveyance.
Manufacturers contends Bynum's loan is not covered by HOEPA. Further, Manufacturers asserts the TILA disclosures were proper and Bynum's right to rescind expired three days after settlement. Manufacturers admits the notarization should have been completed by a District of Columbia notary, but contends the error should be considered an omission of acknowledgment under D.C. Code §§ 42-403, 42-4-4(a)(1), not warranting voidance of the deed. In the event the court finds Bynum properly rescinded the deed or that the deed is invalid, Manufacturers seeks summary judgment on its equitable mortgage counterclaim.
A. Background
Congress enacted TILA to prevent consumers from being misled as to financing costs and to assure a meaningful disclosure of credit terms. See Cooper v. First Gov't Mort. and Investors Corp., et al., 238 F. Supp. 2d 50, 54 (D.D.C. 2002). Faced with increasing reports of abusive practices in home mortgage lending, Congress amended TILA and enacted HOEPA to require greater disclosures to borrowers involved in high cost loans and to stop certain loan terms and practices. Id. A consumer credit transaction secured by the consumer's principal dwelling is considered a high cost mortgage covered by HOEPA when points and fees payable by the consumer at closing exceed 8% of the total loan amount. 15 U.S.C. § 1602(aa). A high cost mortgage under § 1602(aa) subjects the consumer to HOEPA protections and requirements, including the provision of specific disclosures. See id. at §§ 1639(a)-(b), 1641. The required disclosures must be made not less than three business days prior to the transaction's consummation. 15 U.S.C. § 1639(b)(1). If not disclosed in a timely manner, the consumer acquires a statutory right to rescind the transaction. 15 U.S.C. § 1635(a), (f). The Act provides the right to rescind exists against the original lender as well as any subsequent assignee. 15 U.S.C. § 1641(c).
The Board of Governors of the Federal Reserve System introduced Regulation Z to implement TILA and HOEPA. Cooper, 238 F.Supp.2d at 54; 12 C.F.R. § 226.1 et seq.
B. HOEPA Rescission Claim
Bynum contends her loan is covered by HOEPA and she did not receive the required disclosures at least three days prior to the transaction's consummation. Manufacturers does not dispute that HOEPA disclosures were not timely provided, but disagrees that the points and fees Bynum paid at closing exceeded 8% of the total loan amount.
Manufacturers defines the total loan amount as the principal amount of the loan, $75,000, and states the points and fees must exceed 8% of $75,000, or $6,000, to be covered by HOEPA. This argument has twice been rejected by the district court and is contrary to the Act's official commentary. Instead, the total loan amount is calculated by subtracting points and fees from the amount financed. See 4/28/00 Order, Dkt. No. 39-1; 5/23/00 Order, Dkt. No. 52-1; Hays v. Bankers Trust Co. of California, 46 F.Supp.2d 490, 498 n. 14 (S.D.W. Va. 1999); 12 C.F.R. Pt. 226, Supp. I, Official Staff Commentary, Comment 32(a)(1)(ii). The HOEPA 8% trigger is then calculated by using the formula: (1) principal amount of the loan — total points and fees = total loan amount; (2) total loan amount × .08 = HOEPA trigger amount. Cooper, 238 F. Supp. 2d at 59-60.
Points and fees generally include: (1) all finance charges; (2) compensation paid to mortgage brokers; and (3) costs listed in 15 U.S.C. § 1605 (e) "unless the charge is reasonable, the creditor receives no direct or indirect compensation, and the charge is paid to a third party unaffiliated with the creditor." 15 U.S.C. § 1602(aa)(4); 12 C.F.R. § 226.32(b)(1). Thus, "HOEPA points and fees include finance charges imposed by creditors and third parties, fees paid to mortgage brokers, and real estate fees unless the real estate fees are reasonable and compensate neither the creditor nor the creditor's affiliate." Cooper, 238 F.Supp.2d at 58. Bynum contends she was charged the following points and fees that must be included in the HOEPA calculation:
Broker Fee $5,475.00 Flood Cert. Reimburse to First Gov't $20.00 Hazard Insurance Reserve $218.76 Settlement Fee $395.00 Judgment Reports $64.00 Recordation Walk Through Affidavit $85.00 Total Points and Fees: $6,257.76
Both parties agree the $5,475 broker fee paid to Equitable constitutes a point and fee for the loan under 15 U.S.C. § 1602(aa)(4)(b). Because the broker fee does not reach the 8% trigger alone, the court must consider whether any of the other fees should be included and whether the fees, added to the broker fee, reach the 8% threshold.
($75,000-$5,475) × .08 = $5,562. Therefore, the broker's fee is $87.00 less than the 8% trigger.
1. Recordation Affidavit
The settlement statement reflects Bynum was charged $85.00 for a "Recordation Walk Through Affidavit." The charge appears on the statement's section pertaining to "Government Recording and Transfer Charges." Bynum contends the government does not charge for recordation walk through affidavits and only fees actually paid to government officials may be excepted from the total points and fees under § 1605(d)(1) and 12 C.F.R. § 226.4(e)(1). Further, Bynum argues the affidavit fee lists no payee and no actual affidavit exists. However, Manufacturers does not assert that the fee was paid to the District of Columbia. Rather, Manufacturers provides an affidavit from two Valley Title officers who attest the recordation walk through affidavit is a document required by Valley Title. In addition, the officers attest the fee was paid "to the person" who recorded the document in the office of the Recorder of Deeds. Resp. Ex. 1. Manufacturers therefore asserts the charge was a title-related charge imposed by Valley Title, was not imposed by First Government and was not paid directly or indirectly to First Government. Manufacturers' evidence of the charge's validity is vague and suspect. Nevertheless, for summary judgment purposes, Bynum has failed to present undisputed evidence that the affidavit charge was not bona fide or reasonable, or that the charge was retained by First Government. 12 C.F.R. 226.32(b)(1)(iii); Cooper, 238 F.Supp.2d at 60-61. Accordingly, the affidavit charge shall not be included in the points and fees calculation.
2. Flood Certification
Bynum contends she was charged $20 for a flood certification that should be included in the points and fees category because it was paid to First Government. Flood certificates are expressly excluded from finance charges pursuant to § 1605(c)(5) (items exempted include "flood hazard inspections conducted prior to closing"), and the charge is clearly labeled as a reimbursement to First Government. Manufacturers asserts the $20 fee was advanced by First Government on Bynum's behalf and Bynum does not dispute that the fee was a reimbursement. Flood certification inspection fees are not included in the HOEPA points and fees calculations when the fee is reasonable and when the fee is not paid to the creditor. See 15 U.S.C. § 1605(e)(5); 12 C.F.R. §§ 226.4(c)(7)(iv), 226.32(b)(1)(iii). The flood certification charge shall not be included in the points and fees calculation.
3. Hazard Insurance
Bynum contends the $218.76 charge for hazard insurance should be included in points and fees. Although § 1605(e)(3) excludes escrows for insurance from finance charges, Bynum argues the charge was not bona fide or reasonable because it was illegal under the MLBA, D.C. Code § 26-1115(b). Section 1115(b) prohibits a lender from requiring the escrow of hazard insurance if the borrower has equity worth more than 20% of the property's fair market value. Because the lender appraised Bynum's home at $130,000, while lending her only $75,000, Bynum asserts she possessed at least 42% equity and the lender could not lawfully require an insurance escrow. Further, Bynum contends she was not provided a separate required notice in writing that she could pay her own hazard insurance directly. D.C. Code § 26-1115(b).
Manufacturers does not dispute that Bynum had more than 20% equity in her home or that the required disclosure was not provided. Further, Manufacturers provides no evidence regarding the reasonableness of the fee in light of § 26-115's prohibitions. Manufacturers argues, without legal or factual support, that Bynum's hazard insurance was previously cancelled and that state law prohibitions cannot be employed to include insurance escrows within the HOEPA computations. These arguments must be rejected. Manufacturers does not argue the MLBA did not apply to First Government. Indeed, the MLBA clearly applies to all licensed mortgage lenders. Moreover, Manufacturers does not dispute § 26-115 was violated. Accordingly, the $218.76 fee, imposed in violation of the MLBA, cannot be considered reasonable and must be included in the points and fees calculation.
4. Settlement Closing Fee
Bynum contends the settlement closing fee of $395 is a finance charge under 12 C.F.R. § 226.4(a)(2) because First Government required the use of a settlement agent to close the loan. Further, Bynum contends the fee is not excludable under § 1605(e) or § 226.4(c)(7) because it was unreasonable and duplicative of the $495 title examination fee. In support, Bynum presents an affidavit from Richard Eisen, a settlement attorney, who attests the closing fee appears duplicative, atypical and unreasonably high. However, as Manufacturers points out, Eisen does not attest he examined any of the loan documents to determine the amount of time required to close the transaction and he states "each settlement agent characterizes the services and charges differently and I have seen a large variety of characterizations and amounts on settlement statements." Mot. at Ex. L.
Nevertheless, "[f]ees charged by a third party that conducts the loan closing . . . are finance charges only if the creditor; (i) requires the particular services for which the consumer is charged; (ii) requires the imposition of the charge; or (iii) retains a portion of the third-party charge, to the extent of the portion retained." 12 C.F.R. § 226.4(a)(2) (emphasis added). Bynum attaches a "Disclosure of Settlement Attorney" form which indicates First Government required the loan be closed by a First Government-approved title insurance company, and that fees for settlement attendance were required. Reply Ex. D. Therefore, the settlement closing fee is a finance charge that must be included in the points and fees calculation.
First Government's "Disclosure of Settlement Attorney" form provides "The Lender requires that the loan be closed by an attorney or a Title Insurance Company approved by the Lender." Further, "You may, if you choose, select the attorney or Title Insurance Company. If you do choose an attorney other than the Lender's attorney, you will still be obligated to pay the attorney for the Lender fees for the following: (a) Preparation of Closing Documents; (b) Review of Closing Documents prepared by the attorney you choose; (c) Attendance at settlement." Reply Ex. D (emphasis added).
5. Judgment Reports
Finally, Bynum contends the $64 she was charged for judgment reports must be included in the points and fees calculation because no such documents exist and the charge is unreasonable. Manufacturers refers to the Valley Title officers' affidavit attesting the charge was incurred by Valley Title as part of the title examination process to determine whether any judgment liens encumbered Bynum's property. However, Bynum was charged $495 for the title examination process at line 1103. While the affidavit attests the charge was "in addition to the judgment report given by the abstractor related to the Superior Court of the District of Columbia," Bynum was already charged $185 for "abstract or title search to Abstractor" on line 1102. Because a judgment constitutes a lien on the property, any registered judgment would have appeared during the title examination or abstractor search. The judgment reports were thus duplicative, not bona fide and unreasonable. The $64 fee must be included in the HOEPA points and fees calculations.
6. HOEPA Calculations
The $218.76 hazard insurance fee, the $395 closing fee and the $64 abstract, when added to the $5,475 broker fee, clearly qualify Bynum's loan for HOEPA protection: ($75,000-($5,475 + $218.76+$395 + $64)) × .08 = $5,507.88. In this calculation, 8% of the total loan amount equals $5,507.88, yet Bynum paid $6,152.76 in total points and fees. Accordingly, the loan is a high cost loan covered by HOEPA.
The loan qualifies for HOEPA protection even if the court adds only the $218.76 hazard insurance fee to the mortgage broker fee: ($75,000-($5,475+$218.76)) × .08 = $5,544.50. In this calculation, 8% of the total loan amount equals $5,544.50, yet Bynum paid $5,693.76 in total points and fees.
It is undisputed that Bynum did not receive required HOEPA disclosures in a timely fashion. Due to First Government's failure to provide the mandatory disclosures in the prescribed time period, Bynum acquired a statutory right to rescind the deed of trust within three years of the transaction's consummation. 15 U.S.C. § 1635(f). The February 28, 1998 loan between Bynum and First Government is subject to the Home Ownership and Equity Protection Act.
C. TILA Rescission Claim
Bynum further contends she acquired a right to rescind the loan under TILA because TILA requires lenders to disclose the amount financed and finance charges conspicuously and accurately. 15 U.S.C. § 1632(a). The amount financed constitutes the amount of credit provided to the borrower. 12 C.F.R. § 226.18(b). The finance charge constitutes the cost charged to the borrower for making the loan, including interest over the life of the loan and up-front charges. Id. at § 226.4(a). Finance charges are defined as:
[T]he sum of all charges, payable directly or indirectly by the person to whom credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit. The finance charge shall not include fees and amounts imposed by third party closing agents (including settlement agents, attorneys, and escrow and title companies) if the creditor does not require the imposition of the charges or the services provided and does not retain the charges. . . .15 U.S.C. § 1605(a). Failure to disclose the proper finance charge and amount financed constitutes a material violation that entitles the borrower to rescind the loan within three years of the transaction's consummation. See 15 U.S.C. § 1635(a), (f); § 1602(u). A single violation of TILA, even if technical, extends a borrower's period of rescission. See Wiggins v. Avco Fin. Servs., 62 F. Supp.2d 90, 94 (D.D.C. 1999). Generally, for rescission purposes, disclosure of the finance charge shall be treated as accurate if the amount disclosed does not vary from the actual finance charge by more than one-half of one percent of the total amount of credit extended. See 15 U.S.C. § 1602(f)(2)(a). If a borrower rescinds after initiation of foreclosure proceedings, the disclosure of the finance charge shall be treated as accurate if the amount disclosed does not vary from the actual finance charge by more than $35. 15 U.S.C. § 1635(i)(2).
Bynum asserts the only fee included in the finance charge was the broker fee. Because the $85 recordation affidavit and $395 settlement fee were not included, the finance charge was never accurately disclosed and was understated by more than $35. Manufacturers contends § 1605(a) clearly states that charges imposed by third parties and not retained by the lender are excludable from the finance charge. Accordingly, Manufacturers asserts the finance charge was accurately disclosed and Bynum's right of rescission expired three business days after closing.
As previously discussed, there is a question of fact as to whether the recordation affidavit was bona fide and reasonable, and who retained the $85 fee. The recordation fee, for summary judgment purposes, is not clearly a finance charge that was improperly disclosed. However, the $395 settlement fee should have been included in the finance charge. While § 1605(a) provides finance charges do not include fees and amounts imposed by third party closing agents, the exclusion only applies "if the creditor does not require the imposition of the charges." In general, fees charged by third party closing agents are finance charges when the creditor requires the particular services for which the consumer is charged. 12 C.F.R. § 226.4(a)(2)(i). As evidenced by First Government's "Disclosure of Settlement Attorney" form, First Government required the particular services for which the $395 fee was imposed. Accordingly, the closing fee should have been disclosed as a finance charge, and the total finance charge was thus understand by at least $395. Bynum acquired a statutory right to rescind the deed of trust within three years of closing. 15 U.S.C. § 1635(f).
D. Improper Notarization
Finally, Bynum contends the deed is invalid because it was illegally notarized under D.C. Code §§ 42-401, 42-404. Although Friedman took Bynum's acknowledgment, witnessed her signature and certified the deed in her home, Bynum argues notarial acts may only be performed in the District of Columbia by a notary licensed in the District. Friedman was not a certified notary public in the District of Columbia, rather he was a notary public certified by the State of Maryland. Bynum contends the improper and illegal notarization invalidates the February 29, 1998 conveyance.
Bynum relies on a case from the Superior Court of the District of Columbia that invalidated an absolute deed granting property in the District when the deed was notarized by a notary public from Maryland. In Jackson v. Byrd, No. 825-01 RP (D.C. Sup. Ct. Aug. 25, 2003), the court determined the notary's failure to obtain a license to notarize documents in the District of Columbia invalidated the deed and did not merely constitute an improper acknowledgment. The court reasoned, in part, that a notary acts as a final gatekeeper against fraud and to protect vulnerable citizens and the integrity of public records. Id. at 6. This court is not bound by the Superior Court's decision and respectfully declines to adopt its reasoning.
Under District of Columbia law, a notarial act includes "taking an acknowledgment, administering an oath or affirmation, taking a verification upon oath or affirmation, witnessing or attesting a signature, noting a protest of a negotiable instrument, or any other similar act authorized by law." D.C. Code § 42-141(4). Notarial acts pertain to witnessing and acknowledging that the "person who appears before the officer and makes the acknowledgment is the person whose true signature is on the instrument." D.C. Code § 42-142(a). The Code further provides that:
The failures in the formal requisites of an instrument that may be cured by this act are:
(1) An omission of an acknowledgment or a defective or improper acknowledgment;
(2) A failure to attach a clerk's certificate;
(3) An omission of a notary seal or other seal; or
(4) An omission of an attestation.
D.C. Code § 42-404. It is apparent that an improper notarization affects the acknowledgment, but that the D.C. Code does not mandate invalidation of a deed on account of an improper acknowledgment.
Unlike Jackson, this case involves a deed of trust, not an absolute deed. The District of Columbia distinguishes between absolute deeds, and mortgages or deeds of trust. D.C. Code § 42-801 provides:
Mortgages and deeds of trust to secure debts, conveying any estate in land, shall be executed and may be acknowledged and recorded in the same manner as absolute deeds; and they shall take effect both as between the parties thereto and as to others, bona fide purchasers and mortgagees and creditors, in the same manner and under the same conditions as absolute deeds.
The statute's provision that a deed of trust "may be acknowledged and recorded" in the same manner as absolute deeds implies that the acknowledgment pertains to recordability of the instrument as opposed to validity.
Finally, D.C. Code § 42-407 provides the recorder of deeds shall not record an instrument if improperly acknowledged. There is no dispute that the deed of trust was accepted for recordation. The Jackson court's concern regarding fraud is not implicated here. Bynum does not dispute that she executed the deed. To hold that improper notarization renders the deed void would encourage parties to obtain improper notarizations and avoid responsibilities based on a technicality. Further, voiding a deed based on an improper notarization would provide windfalls to parties where security interests are invalidated, and would create forfeitures for parties on account of a notary's failure to perform duties properly. Bynum has failed to establish the deed is invalid as a matter of law and summary judgment on the claim of illegal notarization must be denied. All notarial acts or omissions in the execution or recordation of the February 29, 1998 deed of trust are cured by D.C. Code § 42-403.
E. Remedy
Manufacturers' security interest in Bynum's home is subject to rescission due to HOEPA and TILA violations. Bynum gave notice of her intent to rescind within the three year statutory period. Manufacturers contends dismissal of its security interest will result in a forfeiture and will provide Bynum with a windfall. Thus, Manufacturers seeks summary judgment on an equitable subrogation counterclaim.
Manufacturers argues the court should apply the equitable subrogation doctrine to find the First Government deed of trust constitutes a lien on the property "to the extent of $53,417.24 which was the amount paid to retire the indebtedness secured by the Crusader deed of trust and $3,680.812 to pay delinquent real estate taxes . . . together with interest thereon from the date of such payments less any sums paid by the Plaintiff thereafter." Manufacturers Mot. to Dismiss at 17. "[I]t is difficult to imagine any situation in which the Plaintiff would be more unjustly enriched than in this case by permitting the Plaintiff to enjoy the benefit of the payment of the prior loan held by Wilshire Credit in the amount of $53,417.25 and $3,680.81 in delinquent real property taxes and, in turn, disavow the indebtedness owed." Manufacturers Reply to MSJ at 17.
Manufacturers' motion for summary judgment on the equitable subrogation counterclaim must be denied. Preliminarily, the doctrine appears to apply when priority of competing liens is at issue, as opposed to situations where no lien exists. See e.g., Eastern Sav. Bank, FSB v. Pappas, 829 A.2d 953 (D.C.App. 2003); Restatement (Third) of Property, § 7.6 (equitable subrogation exists to determine priority of liens). Nevertheless, the court need not determine the applicability of the equitable subrogation doctrine because § 1635(b) of TILA governs the return of money or property when a borrower exercises a right to rescind under the Act.
Section 1635(b) provides:
Return of money or property following rescission. When an obligor exercises his right to rescind under subsection (a), he is not liable for any finance or other charge, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as carnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has delivered any property to the obligor, the obligor may retain possession of it. Upon the performance of the creditor's obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value. Tender shall be made at the location of the property or at the residence of the obligor, at the option of the obligor. If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his part to pay for it. The procedures prescribed by this subsection shall apply except when otherwise ordered by a court.
Therefore, according to § 1635(b), the security interest becomes void upon rescission and a borrower is no longer liable for any finance or other charges. Within 20 days of receiving notice of rescission, the creditor is to return any money or property and reflect termination of the security interest. When the creditor has met these obligations, the borrower is to tender the property. The sequence of rescission and tender must be followed unless the court directs otherwise. See 15 U.S.C. § 1635(b); see also 12 C.F.R. § 226.23 (tracks the language of § 1635 and implements the statute).
Section 1635(b)'s provision permitting a court to modify the sequence of procedures was added after courts held the statute need not be interpreted literally as requiring the creditor to remove its security interest prior to the borrower's tender of proceeds. See e.g., Yamamoto v. Bank of New York, 329 F.3d 1167, 1170 (9th Cir. 2003).
In Brown v. Nat'l Permanent Federal Sav. and Loan Assoc., 683 F.2d 444, 447 (D.C. Cir. 1982), the borrower refinanced a mortgage to obtain funds for home repair work. The balance due on the original mortgage and money for the rehabilitation work was paid out of the newly executed promissory note. The lender moved to foreclose on the loan when the borrower stopped making payments, and the borrower sought rescission under TILA. The appellate court affirmed the district court's grant of summary judgment to the borrower on her rescission claim. Further, the district court correctly noted the statute does not require the debtor to tender first; rather the creditor must tender before the borrower's obligation arises. Id. at 447. However, the district court erred by failing to recognize that the rescission remedy remains subject to equitable considerations and that the court possessed the equitable power to condition rescission upon return of the loan proceeds. "The statute is clearly designed to restore the parties as much as possible to the status quo ante." Id. at 448 (citation omitted). "A court may condition the granting of rescission upon plaintiff's repayment of the principal amount of the loan to the creditor." Id. at 447, quoting Etta v. Seaboard Enter., Inc., 674 F.2d 913 (D.C. Cir. 1982). The case was remanded to the district court for a determination of whether the borrower received any benefit and whether rescission should be conditioned on the borrower's return of any benefit gained.
The Brown holding is consistent with that of other courts. See e.g., Yamamoto v. Bank of New York, 329 F.3d 1167, 1171 (9th Cir. 2003) ("A trial judge has the discretion to condition [TILA] rescission on tender by the borrower of the property he had received by the lender . . . whether a decree of rescission should be conditional depends upon the equities present in a particular case . . ."); Rudisell v. Fifth Third Bank, 622 F.2d 243 (6th Cir. 1980) (where borrowers argued they were entitled to rescind, receive back all money they paid to lender, and keep the property received, court conditioned rescission on borrowers return of reasonable value of the property received); Powers v. Sims and Levin, 542 F.2d 1216 (4th Cir. 1976) (when borrower rescinded but refused to return the amount the lender expended in discharging prior debts, lender merely sought "legal due" in seeking reimbursement. Section 1635 does not "limit the power of a court in equity to circumscribe the right of rescission to avoid the perpetration of stark inequity . . . [courts] may condition the borrowers' continuing right of rescission upon their tender to the lender of all of the funds spent by the lender in discharging the earlier indebtedness of the borrowers").
TILA's statutory rescission procedures do not alter the equitable nature of the rescission remedy. See Brown, 683 F.2d at 447. Courts are free to exercise equitable discretion to modify rescission procedures, and rescission under TILA may be conditioned on the debtor's return of any money or property received. Id.; see also Yamamoto, 329 F.3d at 1173 (affirming dismissal of rescission claim when borrowers could not establish their ability — after being given sixty days to do so — to tender the proceeds of the loan if they prevailed); see also Velazquez v. Home American Credit, Inc., 254 F.Supp.2d 1043, 1045-47 (N.D. Ill. 2003) ("[a] scheme that requires the creditor to act first by canceling its security interest without assurance that the consumer will do her part risks leaving the creditor high and dry, an unsecured creditor forced to rely on the consumer's good graces and ability to tender . . . equity may require that we order [the borrower] to return the money simultaneous with [the lender's] release of its security interest").
The court may impose conditions on rescission that assure the borrower meets her obligations once the creditor has performed its obligations. Nevertheless, whether to alter the sequence of § 1635's procedures and whether to place conditions upon the release of the security interest, requires case by case consideration. See Brown, 683 F.2d at 447; Yamamoto, 329 F.3d at 1171. Factors to consider include the Act's underlying legislative policy requiring full disclosure, the remedial penal nature of the Act's remedies, the egregiousness of the TILA violations, and the nature of benefits received. Id.
Bynum contends the entire loan transaction and security interest are void, but does not acknowledge the benefits she received, or suggest a method for returning those benefits. There is no genuine dispute that the loan executed by the First Government deed of trust paid $53,417.24 to retire the indebtedness secured by the Crusader deed of trust and $3,680.81 to the District of Columbia to pay delinquent real estate taxes. It is possible Bynum simply contends it is equitable to order an unconditional release of the security interest and place Manufacturers in an unsecured position as to the funds advanced on her behalf. However, neither party briefed the implications of § 1635(b)'s return of property provisions. The court is unaware of Bynum's ability or willingness to structure a return of the $57,098.05 benefit — less any finance or other charges and any payments she made on the loan through February 5, 1999 — before the security interest will be released. The court declines to order rescission of the security interest without input from the parties as to how the rescission remedy should be structured. Accordingly, on the court's own motion, the parties shall brief 15 U.S.C. § 1635's application to Bynum's rescission claim. In doing so, consideration should be given to the cases and equitable circumstances discussed in this section.
Bynum repeatedly contends the security interest is void because she rescinded. To clarify, the security interest did not automatically become void when she expressed her intention to rescind. See e.g., Yamamoto, 329 F.3d at 1172 (argument that rescission is accomplished automatically upon decision to rescind and communication thereof "makes no sense" when lender contests the grounds for rescission); Large v. Conseco Fin. Serv. Corp., 292 F.3d 49-54-55 (1st Cir. 2002) (security interest becomes void when creditor acknowledges right to rescind or when appropriate decision maker determines right to rescind available, not when borrower merely asserts right to rescind).
A final note pertaining to rescission remedies is warranted. The Act provides that a right to rescind against the original lender also applies to any assignee. 15 U.S.C. § 1641(c). Typically, a creditor's failure to respond to a rescission notice pursuant to § 1635(b), constitutes a separate violation of the Act. Id. at § 1635(g). However:
Although 15 U.S.C. § 1641(c) provides that a material violation by a creditor creates a right to rescind against the creditor's assignee, TILA's civil liability provision only permits `creditors' to be held liable for a monetary penalty or award of attorney's fees for a TILA violation. 15 U.S.C. § 1640(a). Neither 15 U.S.C. § 1641(c) nor any other violation of TILA provides for a statutory penalty or award of attorney's fees against an assignee for failure to respond to a valid rescission notice.Kane v. Equity One, Inc., No. 03-3931, 2003 U.S. Dist. LEXIS 23810, *17-18 (E.D. Pa. Nov. 21, 2003). Therefore, Manufacturers is not subject to liability for challenging Bynum's ground for rescission and not responding to Bynum's rescission notice.
V. Bynum's Claims Against Equitable
Equitable moves for summary judgment on all claims. Bynum failed to respond to Equitable's statement of undisputed facts as required by local rules. See L.R. 7(h); 56.1 (opposition to summary judgment "shall be accompanied by a separate concise statement of genuine issues" of material fact). Equitable's statement of facts is deemed admitted. See L.R. 56.1, 7(h) ("In determining a motion for summary judgment the court may assume that facts identified by the moving party in its statement of material facts are deemed admitted, unless such a fact is controverted in the statement of genuine issues filed in opposition to the motion"); Twist v. Meese, 854 F.2d 1421, 1425 (D.C. Cir. 1988); Flowers v. Internal Revenue Serv., 307 F.Supp.2d 60, 62 n. 1 (D.D.C. 2004). Bynum's admission of Equitable's facts is not cured by her submission of a sworn statement opposing summary judgment. Bynum's sworn statement is conclusory, contains mere denials of the facts Equitable alleges in support of summary judgment, and is insufficient to create a genuine issue of material fact. See e.g., Harding v. Gray, 9 F.3d 150, 154 (D.C. Cir. 1993) ("mere unsubstantiated allegation . . . creates no `genuine issue of fact' and will not withstand summary judgment"); Bryant v. Brownlee, 265 F.Supp.2d 52, 68 (D.D.C. 2003) (conclusory allegations in affidavit opposing summary judgment do not raise genuine issue of material fact); Sage v. Broad. Publs., 997 F.Supp. 49, 53 (D.D.C. 1998) ("mere denial of the facts alleged in a properly supported motion for summary judgment is not enough to meet the non-moving party's burden").
A. Conversion Claims (Count VII)
Equitable moves for summary judgment on Count VII. Bynum contends Equitable converted, conspired to convert, and aided and abetted conversion of the $9,162.00 proceeds from the loan. The elements of conversion are: (1) the unlawful exercise, (2) of ownership, dominion, or control, (3) of another's personal property, (4) in denial or repudiation of that person's property rights. See Equity Group v. Painewebber Inc., 839 F.Supp. 930, 933 (D.D.C. 1993). Bynum has not satisfied these elements and does not produce any evidence establishing Equitable's involvement in the alleged conversion of the check and its proceeds. Indeed, Bynum admits that Byrd took her check and that Waldo and Dutchmans received the proceeds. See e.g., Bynum Ex. B at 39-41. Her conversion claim against Equitable fails.
Bynum's conspiracy and aiding and abetting claims also fail. Preliminarily, the district court has previously hold that the District of Columbia does not recognize independent causes of action for civil conspiracy or aiding and abetting. See 02/25/03 Order, Dkt. No. 63-1 at 9. Even if these claims were available, Bynum has produced no evidence of an agreement between Equitable and Dutchmans or Waldo. The elements of civil conspiracy are: (1) an agreement between two or more persons, (2) to participate in an unlawful act or a lawful act in an unlawful manner, (3) injury caused by a party to the agreement's actions, (4) pursuant to and in furtherance of the common scheme. See Griva v. Davison, 637 A.2d 830, 848 (D.C. 1994). Bynum argues a conspiracy may be inferred based on several assumptions lacking record support. For example, there is no evidence that Equitable sent Byrd to her home. Viewing the facts in her favor, the undisputed evidence simply does not support Bynum's claims. Bynum asserts Byrd told her he worked with Equitable, but admits Byrd did not tell her his boss' name, nor did she know who was called when he telephoned his "boss" from her home. See Bynum Ex. B at 36, 88-91. Rather, the undisputed evidence reflects: (1) Equitable was not aware of Bynum's experience with Byrd until she telephoned Ruiz; (2) Equitable did not know of Bynum's contacts or negotiations with Dutchmans and Byrd regarding home improvements (Bynum admits Bryd visited her home two or three times — see Bynum Ex. B at 92-93); and (3) Byrd was never an Equitable employee. Bynum fails to present evidence raising a genuine issue of material fact regarding her conversion claims. Equitable's summary judgment motion on Count VII must be granted.
B. Promissory Estoppel (Count VIII)
Equitable moves for summary judgment on Count VIII. Bynum contends: (1) Equitable promised to provide her with home improvements and financing for the improvements; (2) she relied on Equitable's promises; (3) Equitable did not make any repairs and sent a representative of an "unlicensed, unregistered, unbonded, sole proprietorship which coerced [her] to sign over loan proceeds to an escrow account and then made no repairs;" and (4) after she called Equitable for help, Equitable promised to send the contractor out to perform the promised work but no such work occurred. See 3rd Am. Compl. Count VIII.
A party may not assert a promissory estoppel claim where there is an enforceable contract. See e.g., Bldg. Servs. Co. v. Amtrak, 305 F.Supp.2d 85, 95-96 (D.D.C. 2004) ("District of Columbia law presupposes that an express, enforceable contract is absent when the doctrine of promissory estoppel is applied"). Because Bynum and Equitable entered into a valid brokerage agreement, the doctrine of promissory estoppel does not apply.
Even if promissory estoppel were applied, Bynum fails to establish the requisite elements: (1) a promise; (2) reasonable reliance on the promise; (3) injury due to detrimental reliance; and (4) enforcement would be in the public interest and would prevent injustice. Id. at 95; see also District of Columbia v. McGregor Prop., Inc., 479 A.2d 1270, 1273 (D.C. 1984). Critically, Bynum provides no evidence that Equitable promised to obtain home improvements for her, or to send a contractor to perform home improvement work. Bynum contends "she relied on Equitable's promise to perform home repairs when they sent Byrd out to her home." Resp. at 16. However, the premise for Bynum's promissory estoppel claim, that Equitable sent Byrd to her home, is totally unsupported. Bynum fails to present evidence raising a genuine issue of material fact regarding her promissory estoppel claim. Equitable's summary judgment motion on Count VIII must be granted.
C.D.C. Mortgage Lender and Broker Act (Count IX)
Equitable moves for summary judgment on Count IX. Bynum contends Equitable failed to provide her with certain disclosures at least three days prior to the loan settlement as required by D.C. Code § 26-1113. Preliminarily, Bynum signed a written loan commitment that contained an agreed and accepted date of February 25, 1998. The loan commitment was therefore received three days before closing.
Moreover, § 26-1113(a)(1) provides that a licensee — defined in § 26-1101(8) to include mortgage brokers and lenders — shall provide the borrower with a financing agreement executed by the lender. Section 26-1113(b)(1) provides the financing agreement executed by the lender shall be delivered to the borrower at least 72 hours before settlement. However, "a borrower aggrieved by any violation of this section shall be entitled to bring a civil suit . . . against the lender." D.C. Code § 26-1113(b)(3) (emphasis added). Accordingly, § 26-1113 does not provide a private cause of action against mortgage brokers.
Bynum's argument that § 26-1118(e) permits her to bring an action against brokers for violations of § 26-1113 must fail. Section 26-1118 delineates the actions the Superintendent of the Office of Banking and Financial Institutions may pursue to suspend, revoke and enforce violations of the statute, but provides individuals are not precluded from bringing actions to recover for violations. Section 26-1118 does not affect § 26-1113(b)(3)'s express provision of a cause of action against only lenders. A basic rule of statutory construction, expression unius est exclusion alterius, provides that "when a legislature makes express mention of one thing, the exclusion of other is implied." McCray v. McGee, 504 A.2d 1128, 1130 (D.C. 1986); see also Indep. Ins. Agents of America, Inc. v. Hawke, 211 F.3d 638, 643-44 (D.C. Cir. 2000) ("all words in a statute are to be assigned meaning . . . nothing therein is to be construed as surplusage"). The court must presume the District of Columbia intentionally chose to provide a remedy only against lenders.
Bynum also contends Equitable violated D.C. Code § 26-1114(a)(8) because it received compensation in the form of a $5,475 brokerage fee prior to delivery of the financing agreement. Again, Bynum signed a written loan commitment that contained an agreed and accepted date of February 25, 1998 — three days before the loan closed. In any event, Bynum's claim must fail because she presents no evidence reflecting when Equitable received its fee. Therefore, she has not established Equitable received compensation prior to provision of the three day notice. Equitable's summary judgment motion on Count IX must be granted.
D.D.C. Consumer Protections Procedure Act (Count X)
Equitable moves for summary judgment on Count X. Bynum contends Equitable violated the CPPA, D.C. Code § 28-3901 et seq. "The Consumer Protection Procedures Act is a comprehensive statute with an extensive regulatory framework designed to remedy all improper trade practices." Osbourne v. Capital City Mortgage Corp., 727 A.2d 322, 325 (D.C. 1999) (quotations omitted); see also 02/25/03 Order, Dkt. No. 63-1 at 7. The CPPA applies to home mortgage finance transactions. DeBerry v. First Gov't Mortgage and Investors Corp., 743 A.2d 699, 703 (D.C. 1999). Bynum contends Equitable violated the CPPA, D.C. Code § 28-3904 when it:
1. Misrepresented it would create a $10,000 home improvement and refinance loan without stating it was not the lender, but the broker which would charge a large fee for referring the loan, or that the loan would include amounts other than the $10,000 and the previous mortgage, such as other debts and real estate taxes;
2. Included amounts in the loan without her consent, including debts she of which she was unaware, real estate taxes and settlement fees that were not bona fide or reasonable;
3. Misrepresented that it would obtain an actual home improvement contractor for her but instead sent her a contractor that was unlicensed and that had been sued repeatedly for stealing money from individuals;
4. Failed to provide her with her notice of right to cancel the home improvement contract and home solicitation sales as required by law;
5. Failed to provide the promised home improvements;
6. Received compensation for services prior to completion of work, prior to delivery of required consumer disclosures and without being licensed as a home improvement contractor;
7. Made and enforced unconscionable contracts; and
8. Failed to provide a financing agreement containing the terms of the loan at least seventy-two hours before settlement of the loan. The record is devoid of evidence supporting Bynum's assertions and summary judgment must be granted.
A claim for fraudulent or intentional misrepresentation under the CPPA "requires the same burden of proof as does a common law claim for such misrepresentation — the clear and convincing standard." See 02/25/03 Order, Dkt. No. 63-1 at 7, quoting Osbourne v. Capital City Mortgage Corp., 727 A.2d 322, 325 (D.C. 1999). Bynum fails to present clear and convincing evidence that Equitable engaged in the purported misrepresentations. There is no evidence that Equitable represented itself as a lender, instead of a broker, that it failed to tell her she would be charged a brokerage fee, that it told her she would receive $10,000, that it promised to obtain a home improvement contractor or that it sent one to her home. Thompson attests he went to Bynum's home, gathered information for Bynum's loan application, and explained that Equitable, as a broker, would submit Bynum's loan application materials to a potential lender. Equitable Ex. B. At her deposition, Bynum did not recollect meeting with Thompson, but she now attests that Thompson never came to her home. See Bynum Ex. A at ¶ 4; Ex. B at 11-12. Regardless, Bynum signed a brokerage agreement reflecting Equitable's status as a broker and its entitlement to fees from loan proceeds. See Equitable Ex. L.
There is no evidence Equitable had any role in the preparation of the actual loan or the fees and debts paid from loan proceeds. As a broker, Equitable assisted Bynum in preparing a loan application. The negotiation, structuring and settlement of the loan involved Bynum, First Government and Valley Title. Because Equitable was not the alleged home improvement contractor, it cannot be held liable for the purported failure to provide her with a "notice of right to cancel the home improvement contract and home solicitation sales," or the alleged receipt of compensation for services "prior to completion of work, prior to delivery of required consumer disclosures and without being licensed as a home improvement contractor."
Finally, there is no evidence that Equitable made or enforced an unconscionable agreement. The only contract Bynum entered into with Equitable was the brokerage agreement entitled "Agreement to Obtain Loan Commitment." Bynum has produced no evidence that the commitment was unreasonably favorable to Equitable. See Urban Inv. v. Branham, 464 A.2d 93, 99 (D.C. 1993). Indeed, Equitable received a $5,475 fee, less than the $8,000 Bynum agreed to in the agreement, by obtaining a reduction in the interest rate on her loan from First Government and waiving a portion of its compensation. While Bynum's affidavit from Richard Eisen opines as to the reasonableness of some closing fees, it does not question the reasonableness of the broker fee. Bynum's arguments opposing summary judgment on her CPPA claims are unsupported and fail to raise a genuine issue of material fact. Equitable's summary judgment motion on Count X must be granted.
E. Breach of Fiduciary Duty (Count XI)
Equitable moves for summary judgment on Count XI. Bynum contends Equitable, as a mortgage broker, owed her a fiduciary duty and that it breached that duty. Bynum must establish the existence of a fiduciary duty and a breach of that duty. See Vicki Bagley Realty, Inc. v. Laufer, 482 A.2d 359, 363 (D.C. 1984); see also 02/25/03 Order, Dkt. No. 63-1 at 8. On February 25, 2003, the district court granted Valley Title's summary judgment motion and held no breach of fiduciary duty claim existed because Bynum signed an acknowledgment that Valley Title did not have "any fiduciary obligations for or toward her." See 02/25/03 Order, Dkt. No. 63-1 at 8. On November 18, 1997, Bynum signed a similar acknowledgment in her brokerage agreement with Equitable:
It is agreed that this Agreement is solely a contractual agreement and does not create any type of agency relationship, fiduciary responsibility or other trust relationship between the parties hereto.
Mot. Ex. L. at ¶ 6. Accordingly, Bynum's fiduciary duty claim fails.
Bynum does not deny signing the disclaimer, but she argues a fiduciary duty should be imposed because of Equitable's position as a broker, her position as a severely ill borrower, and because she was not given a copy of the document she signed. Bynum's arguments miss the mark. First, even if Equitable's position as a broker could arguably create a fiduciary relationship, Bynum acknowledged that no fiduciary relationship existed. Second, while it is undisputed that Bynum is paralyzed, she presents no evidence to support her insinuation that an illness prevented her from understanding the documents she signed. Finally, Bynum cites no authority for the proposition that her waiver is invalidated because she did not retain a copy of the document.
Even if a fiduciary duty arguably existed, Bynum fails to establish a breach of that duty. While she contends Equitable only sent her loan application to one lender, sent an unlicensed home improvement contractor to her home, and failed to help her when no repairs were performed, her claims are factually unsupported. Nor does she provide legal support that the purported actions constitute a breach of a fiduciary duty. The undisputed evidence reflects that Ruiz attempted to help locate Byrd after Bynum telephoned. Bynum fails to present evidence raising a genuine issue of material fact regarding her breach of fiduciary duty claim. Equitable's summary judgment motion on Count XI must be granted.
CONCLUSION
Bynum's summary judgment motion is granted in part. The court grants Bynum's request for declaratory relief and declares the February 28, 1998 loan between Bynum and First Government is subject to the Home Ownership and Equity Protection Act. On the court's own motion, the parties shall brief 15 U.S.C. § 1635's application to Bynum's rescission claim. In doing so, consideration shall be given to the cases and equitable circumstances discussed in this memorandum opinion. Counsel for Bynum and Manufacturers shall meet and confer by April 15, 2005 regarding a mutually agreeable rescission plan. If an agreement is reached, a joint proposed judgment order shall be submitted to the court by April 22, 2005. If no agreement is reached, Bynum's brief shall be filed no later than April 22, 2005. Manufacturers shall respond by May 2, 2005. Courtesy copies of all filings shall be sent directly to the assigned judge. The briefs shall not exceed 15 pages, including proposed judgment orders.
All notarial acts or omissions in the execution or recordation of the February 29, 1998 deed of trust are cured by D.C. Code § 42-403. Manufacturers' summary judgment motion on its counterclaim is denied, and its summary judgment motion on Counts I-II, IV-VI, IX-X of the Third Amended Complaint is granted. Equitable's summary judgment motion is granted.