The opinion of the court was delivered by: SUZANNE CONLON, District Judge
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.*fn1 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
A. Loan Application with Equitable
The following material facts are undisputed unless otherwise
noted.*fn3 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'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
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
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.*fn4
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.
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.
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
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 ...