Opinion
Civil Action No. 04-2185 (RMC).
March 9, 2005
MEMORANDUM OPINION AND ORDER
Plaintiff Karen Evans, as personal representative of the Estate of Dorothy Evans, initially sued Chase Manhattan Mortgage Corporation ("Chase") and three alleged trustees — the law firm of Draper Goldberg P.L.L.C. ("Draper Goldberg") and its two named partners, David W. Draper and L. Darren Goldberg — for wrongful foreclosure, breach of contract, breach of the District of Columbia Consumer Protection Procedures Act, D.C. Code § 28-3901 et seq., infliction of emotional distress, and for an accounting after the foreclosure and sale of the house a borrower in default. Draper Goldberg filed a motion to dismiss the firm and its lawyers, to which the Plaintiff filed an opposition and a motion to file an amended complaint. The amended complaint adds two additional parties who allegedly acted as trustees for the foreclosure and sale, James W. Holderness, and Ignacio Cortina.
BACKGROUND
On May 5, 2000, Dorothy Evans borrowed $102,550.00 from FM Mortgage Services, Inc. ("FM"), securing the loan with a note and deed of trust to her Washington DC home. Am. Compl. ¶ 12. Because this loan was insured by the Federal Housing Authority, it required property insurance. Id. at 14. According to Plaintiff, Ms. Evans already had fire and hazard insurance and, in addition, $2,256.75 was paid as a mortgage insurance premium at the time the loan was issued. Id. ¶ 20. See id., Exh. B (Form HUD-1A).
The facts in the amended complaint are accepted as true for purposes of resolving the motion to dismiss. Macharia v. United States, 334 F.3d 61, 64 (D.C. Cir. 2003); Holy Land Found. for Relief Develop. v. Ashcroft, 333 F.3d 156, 165 (D.C. Cir. 2003).
Chase subsequently purchased the note and became the beneficiary of the deed of trust. Id. ¶ 23. After making monthly payments of $889.38 to Chase, Ms. Evans was notified in July 2001 that the monthly payment had risen to $1,058.19. Id. ¶ 26. According to a Chase representative, changes in annual taxes and homeowner's insurance bills had resulted in an increase to the monthly payment due. Id. ¶ 27. See id., Exh. G (December 14, 2001 letter to Dorothy Evans). Ms. Evans's failure to pay the increased amount resulted in an escrow account shortage. Id. And, on November 27, 2001, Chase notified Ms. Evans that her account was past-due and that a recent payment would not be credited to the account but would be placed in the escrow account. Id. ¶ 30.
Ms. Evans disputed the increased charges and Chase's method of crediting her account. Id. ¶¶ 35-36, 39. Plaintiff believes that the increase was not primarily attributable to an increase in annual taxes but, instead, represented an improper charge for insurance that had already been paid in full. Id. ¶ 29. In any event, the increase in the monthly amount proved unmanageable for Ms. Evans and the loan went into default. Id. ¶ 34.
Chase sent a letter to Ms. Evans notifying her that her account was being forwarded to "an attorney/trustee to immediatelyinitiate foreclosure proceedings." Id., Exh. I (January 11, 2002 letter to Dorothy Evans). The letter listed Draper Goldberg as the "attorney/trustee." Id. Foreclosure documents listed Draper Goldberg and Mr. Draper without specifying their relationship to the trust. A later document entitled "Appointment of Substitute Trustees" listed Messrs. Goldberg, Holderness, and Cortina as trustees. Id. ¶¶ 40, 42-43.
On or about March 14, 2002, Ms. Evans's house was auctioned and sold. Id. ¶ 52. Ms. Evans then sued in D.C. Superior Court to enjoin transfer of her home. Id. ¶ 53. That case was dismissed. Ms Evans died a few months later of metastic carcinoma of the liver. Id. ¶ 59.
Karen Evans, as personal representative of the Estate of Dorothy Evans, sued in D.C. Superior Court for wrongful foreclosure, breach of contract and covenant of good faith, breach of fiduciary duty, civil conspiracy and fraud, negligent misrepresentation, intentional infliction of emotional distress, violation of the D.C. Consumer Protection Procedures Act, and for an accounting. Chase removed the case to this Court and filed an answer. Draper Goldberg filed a motion to dismiss the law firm and its lawyers ("DG Defendants").
MOTION TO AMEND COMPLAINT
The Federal Rules of Civil Procedure guarantee a plaintiff a right to amend a complaint once at any time before the defendant has filed a responsive pleading. FED. R. CIV. P. 15(a) ("A party may amend the party's pleading once as a matter of course at any time before a responsive pleading is served. . . ."). See Cureton v. United States Marshal Serv., 322 F. Supp. 2d 23, 25 n. 5 (D.D.C. 2004) (Rule 15(a) "guarantees a plaintiff an absolute right" to file an amended complaint prior to service of a responsive pleading). In addition, Rule 15(a) allows a party to amend its pleading to add a new party. Wiggins v. Dist. Cablevision, Inc., 853 F. Supp. 484, 499 (D.D.C. 1994). A motion to dismiss is not a responsive pleading for the purposes of Rule 15. James V. Hurson Assocs. v. Glickman, 229 F.3d 277, 283 (D.C. Cir. 2000) (citing Confederate Memorial Ass'n v. Hines, 995 F.2d 295, 299 (D.C. Cir. 1993)).
Plaintiff is entitled to amend her complaint as to Draper Goldberg and its lawyers/trustees because the Court has not decided those defendants' motion to dismiss. Nat'l City Mortgage Co. v. Navarro, 220 F.R.D. 102, 104 (D.D.C. 2004) ("If there is more than one defendant, and not all have served responsive pleadings, the plaintiff may amend the complaint as a matter of course with regard to those defendants that have yet to answer."). This motion is granted and the Court will examine the contentions of the motion to dismiss against the amended complaint.
MOTION TO DISMISS
A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of a complaint. Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). The complaint need only set forth a short and plain statement of the case, giving the defendant fair notice of the claim and the grounds upon which it rests. Kingman Park Civic Ass'n v. Williams, 348 F.3d 1033, 1040 (D.C. Cir. 2003) (citing FED. R. CIV. P. 8(a)(2) and Conley v. Gibson, 355 U.S. 41, 47 (1957)). It is not necessary for the plaintiff to plead all elements of his prima facia case, Swierkiewicz v. Sonoma N.A., 534 U.S. 506, 511-14 (2002), or "plead law or match facts to every element of a legal theory," Krieger v. Fadely, 211 F.3d 134, 136 (D.C. Cir. 2000) (internal quotation marks and citation omitted).
"The movant bears a heavy burden of establishing 'beyond doubt that the [non-movant] can prove no set of facts in support of [its] claim which would entitle [it] to relief.'" Action Comm. for Rural Electrification Nat'l Rural Elec. Coop. Ass'n v. Am. Council for Renewable Energy, 02-cv-01837, 2003 U.S. Dist. LEXIS 19225 at *2 (D.D.C. Mar. 21, 2003) (citing Conley, 355 U.S. at 45-46). The court must accept as true all well-plead factual allegations and draw all reasonable inferences in favor of the plaintiffs. Macharia v. United States, 334 F.3d 61, 67 (D.C. Cir. 2003). Count I: Wrongful Foreclosure
Counts II, VI, VIII, and X of the amended complaint run only to Chase Manhattan and will not be examined on Draper Goldberg's motion to dismiss.
The fundamental issue is whether Plaintiff's claims against DG Defendants (Mr. Draper, Mr. Goldberg, Mr. Holderness, Mr. Cortina, and Draper Goldberg) should be dismissed based on trustee status. The amended complaint alleges that Messrs. Goldberg, Holderness, and Cortina were appointed substitute trustees. Without more, these defendants cannot be dismissed. By contrast, neither the law firm nor Mr. Draper was explicitly named as substitute trustee. Rather, Plaintiff alleges that both Mr. Draper and Draper Goldberg variously completed forms or were identified in forms from Chase Manhattan as "attorney/trustee." Under notice pleading standards, these claims raise sufficient questions of fact to defeat this early motion to dismiss. All defendants are on notice of the claims against them and can defend. Count I in the amended complaint will not be dismissed.
DG Defendants argue that dismissal is appropriate because neither Mr. Draper nor Draper Goldberg conducted the foreclosure and because none of the allegations relate to acts or omissions by Mr. Draper, Mr. Goldberg, or Draper Goldberg. Motion to Dismiss at 3. DG Defendants read the complaint allegations too narrowly for purposes of a motion to dismiss.
Standing alone, the argument of DG Defendants that Plaintiff has not alleged acts or omissions by Mr. Goldberg is not sufficient to warrant dismissal of a trustee on a claim for wrongful foreclosure.
Count III: Breach of Fiduciary Duty
Count III alleges that the Defendant Trustees — the law firm and lawyer defendants — breached their fiduciary duties by "profiting at the expense of the Decedent," Am. Compl. ¶ 86, "refusing to state the correct balance due, as well as the minimum balance required to cure default and to redeem," id. ¶ 87, "refusing to demand and obtain from the lender the basis for the claim of the alleged balance due," id. ¶ 88, and "failing and refusing to pay to the Decedent the amounts remaining after the March 14, 2003 foreclosure auction until on or about April 21, 2003," id. ¶ 89.
DG Defendants argue that Draper Goldberg and Mr. Draper did not serve as trustees to the foreclosure sale. Whether they served as trustees, substitute trustees, or held themselves out as trustees is a factual question that cannot be answered on a motion to dismiss where a court must accept as true all well-pled factual allegations and draw all reasonable inferences in favor of the plaintiff.
In addition, DG Defendants contend that Mr. Goldberg, an admitted substitute trustee along with Messrs. Holderness and Cortina, should be dismissed because Plaintiff has not alleged that he "failed to carry out his affirmative duties. . . ." Motion to Dismiss at 4. Citing Leona Perry v. Virginia Mortgage and Investment, 412 A.2d 1194 (D.C. 1980), DG Defendants argue that a trustee does not have "general duties" but "only those powers and duties imposed by the trust instrument itself, coupled with an applicable statute. . . ." Id. But Leona Perry provides more-pointed guidance than the defendants admit. Specifically, "a trustee under a deed of trust owes fiduciary duties both to the noteholder and to the borrower" and, where a fiduciary has conflicting interests, "ancient principles require him to bear the burden of proving that he has been faithful to his trust." Leona Perry, 412 A.2d at 1197. Here, Plaintiff has sufficiently alleged a conflict of interest and the Court cannot find as a matter of law that the complaint fails to state a claim for breach of a fiduciary duty. Count IV: Civil Conspiracy and Fraud
Count IV alleges that Chase and Defendant Trustees engaged in civil conspiracy and fraud by "ma[king] false representations or omissions in the representation of payments received, the amounts owed on the Note and the amount necessary to redeem." Am. Compl. ¶ 93. DG Defendants argue that Count IV does not state with particularity such matters as the "time, place, and content of the false misrepresentations, the misrepresented fact, and what the opponent retained or the claimant lost as a consequence of the alleged fraud." Motion to Dismiss at 5.
Rule 9(b) of the Federal Rules of Civil Procedure requires that "in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." FED. R. CIV. P. 9(b). The rule permits matters such as "intent, knowledge and other condition of the mind" to be averred generally, but demands that the circumstances of the fraud be plead with specificity. United States ex. rel. Totten v. Bombardier Corp., 286 F.3d 542, 551-52 (D.C. Cir. 2002)).
The amended complaint includes thirty-nine pages of exhibits, including: 1) Exhibit I, a January 11, 2002 letter to Dorothy Evans telling her to contact "the attorney/trustee" if she wished to pay off her loan prior to foreclosure and identifying Draper Goldberg; 2) Exhibit J, a January 23, 2002 letter from Ms. Evans notifying Draper Goldberg and/or Chase that she did not believe the deficit amount was correct and did not understand how it was calculated; 3) Exhibit K, the February 12, 2002 Notice of Foreclosure Sale sent from Mr. Draper to Ms. Evans without regard to her protest; 4) Exhibit L, the Deed of Appointment of Substitute Trustees prepared by Draper Goldberg and selecting Messrs. Goldberg, Holderness, and Cortina as the substitute trustees; and 5) Exhibit N, a letter from attorney Stephen Kushnir of Draper Goldberg to Ms. Evans dated May 9, 2002, purporting to reflect the distribution from the foreclosure sale. Together with Plaintiff's other allegations of harm and the nature and cause of her damages, these exhibits sufficiently clarify the time and nature of the alleged false representation or omission and fully meet notice pleading standards. The motion to dismiss Count IV will be denied. Count V: Negligent Misrepresentation
The extent to which DG Defendants acted as counsel to Chase, counsel to the substitute Trustees, substitute Trustees, and/or fiduciaries with respect to monies owed to Ms. Evans cannot be deciphered.
Count V of the amended complaint sounds in negligent misrepresentation. For the same reasons stated concerning Count IV, it would be premature to dismiss this count on a pre-answer motion to dismiss.
Count VII: Violation of D.C. Consumer Protection Procedures Act
Count VII alleges that Chase and the Defendant Trustees violated the D.C. Consumer Protection Procedures Act, D.C. Code. § 28-3901 et seq. DG Defendants argue that all representations made by Mr. Goldberg as a substitute trustee were made in litigation (the foreclosure proceeding) on behalf of a client and therefore could not be "misleading" under the law. Motion to Dismiss at 7. Even if this characterization of the law and facts is accurate, the Court reads the complaint allegations more broadly and cannot find that there are no facts alleged that would permit a finding that any of the DG Defendants violated the Act.
Under D.C. Code § 28-3904, it is a violation for any person to:
(e) misrepresent as to a material fact which has a tendency to mislead; (f) fail to state a material fact if such failure tends to mislead;
. . .
(u) represent that the subject of a transaction has been supplied in accordance with a previous representation when it has not.
Count IX: Intentional Infliction of Emotional Distress
Count IX accuses the Defendant Trustees of intentional infliction of emotional distress because, knowing of Ms. Evans's cancer and extremely poor health, they nonetheless failed and refused to distribute the proceeds from the foreclosure sale to her after providing the deed to the auction sale purchaser. "This wrongful refusal to make the payment caused the Decedent to suffer sever[e] emotional distress because on the one hand she was being hounded by the purchaser to vacate and she did not have the proceeds to secure another place." Am. Compl. ¶ 140.
DG Defendants accurately point out that the amended complaint alleges no representations made by any of them, in any capacity, that might have caused severe emotional distress. Motion to Dismiss at 8. Under the law of the District of Columbia, however, a specific statement or representation is not required to support a claim for intentional infliction of emotional distress. Such a claim has three elements: (1) extreme and outrageous conduct on the part of the defendant which; (2) intentionally or recklessly; (3) causes the plaintiff severe emotional distress. Howard Univ. v. Best, 484 A.2d 958, 985 (D.C. 1984). Viewed in the light most favorable to the non-movant Plaintiff, the Court determines that Count IX is sufficient to withstand this early motion to dismiss. Count XI: Accounting
On the papers before the Court, it is not possible to discern whether the actors who are alleged to have wrongfully refused to release the proceeds to Ms. Evans were acting as trustees and/or agents of Draper Goldberg.
Count XI seeks an accounting from the Defendant Trustees. Contrary to the motion to dismiss, Count XI adequately alleges that DG Defendants breached their fiduciary duty to "correctly, accurately and expeditiously determine the amount of monies which were to be returned to or paid to the Decedent after the March 14, 2002, foreclosure auction." Am. Compl. ¶ 149. This Count will not be dismissed without a defense.
CONCLUSION
For the reasons stated, the motion to file an amended complaint is GRANTED and the motion to dismiss is DENIED.