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Blue v. Fremont Investment & Loan

June 23, 2008

JOANNE BLUE, ET AL., PLAINTIFFS,
v.
FREMONT INVESTMENT & LOAN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge

MEMORANDUM OPINION

Plaintiffs Joanne Blue, Edna Robinson, Halbert Blue, and Rose Blue (collectively, "Plaintiffs") filed a Complaint on April 4, 2008, in the Superior Court for the District of Columbia, seeking damages and other relief against Defendants Fremont Investment & Loan ("Fremont"), Executive Title & Escrow ("Executive"), Town and Country Mortgage and Financial Services, Inc. ("Town & Country"), and Dennis Bishop, based on two allegedly fraudulent home loan transactions. Fremont removed the case to this Court on April 28, 2008, and filed a Motion to Dismiss on May 12, 2008.*fn1 After carefully reviewing the submissions of Plaintiffs and Fremont, applicable case law and statutory authority, and the record of the case as a whole, the Court shall grant-in-part and deny-without-prejudice-in-part Fremont's [5] Motion to Dismiss. For the reasons set forth below, Counts I, IV, V, VI, VII, and VIII of Plaintiffs' Complaint shall be dismissed against Fremont, all claims asserted by Halbert and Rose Blue shall be dismissed against Fremont, and Plaintiffs shall be granted leave to amend Counts II and III.

I. BACKGROUND

A. Factual Background

The following allegations are adopted from Plaintiffs' Complaint and must be treated as true for purposes of Fremont's Motion to Dismiss. See Trudeau v. FTC, 456 F.3d 178, 193 (D.C. Cir. 2006). Halbert and Rose Blue owned real property located in Washington, D.C., that twice faced foreclosure. Compl. ¶¶ 15, 20. Plaintiffs staved off foreclosure by engaging in two transactions with Dennis Bishop, the CEO and President of Town and Country. Id. ¶¶ 12, 15-27. Plaintiffs allege that both of these transactions were fraudulent. Id.

The first transaction occurred in April 2004. Id. ¶ 15. Dennis Bishop approached Plaintiffs and offered to stop the impending foreclosure on their property if they signed a deed to secure a new loan. Id. Plaintiffs signed a deed to sell their property to Brenda Carew, a consultant and broker of Town and Country. Id. ¶¶ 13, 17. Ms. Carew, utilizing Town & Country as a mortgage broker, obtained a loan from New Century Mortgage in the amount of $387,000 to purchase the property. Id. ¶ 18. The loan was used to pay off the existing mortgage of $308,000, and Plaintiffs received $8,000. Id. ¶ 19. The sales price was recorded as $430,000, and a fictitious $43,000 deposit was recorded in the closing documents. Id. ¶¶ 18, 22. Plaintiffs continued to occupy the property following this transaction and were unaware that the property had been sold to Ms. Carew. Id. ¶ 19. Fremont was not a party to this transaction. Id. ¶¶ 15-19.

The second transaction occurred on September 1, 2005. Id. ¶ 20. Plaintiffs began receiving foreclosure notices at the property in the name of Ms. Carew. Id. Dennis Bishop indicated that Plaintiffs would be given a loan to refinance their home to stop the foreclosure, and he facilitated a sale from Ms. Carew to Joanne Blue and Edna Robinson.*fn2 Id. ¶ 22. Dennis Bishop arranged to have Fremont loan Joanne Blue and Edna Robinson $444,000 for this transaction. Id. The purchase price on the property was $555,000, and the closing documents included a fictitious deposit of $55,500. Id. Plaintiffs received no cash at closing, and Ms. Carew retained a second mortgage on the home in the amount of $55,500. Id. ¶ 23. Plaintiffs admit that they attended this closing but deny having applied for a loan from Fremont. Id. ¶¶ 20, 24, 25. As a result of these two transactions, Halbert and Rose Blue "had their property taken from them," and Joanne Blue and Edna Robinson "ended up with a mortgage note which exceeded their means to pay . . . ." Id. ¶¶ 26, 27.

B. Procedural Background

The Parties fail to describe what transpired in the almost two years after these transactions, but the record indicates that Plaintiffs' property was ultimately sold at a foreclosure sale to Fremont (a lienholder on the property by virtue of the second transaction described above) on July 9, 2007. See Def.'s Mot. at 3 n.2 & Ex. 1 (7/9/07 Deed of Trust). Fremont thereafter initiated eviction proceedings in the Landlord & Tenant Branch of the Superior Court for the District of Columbia against Joanne Blue and Edna Robinson.*fn3 Def.'s Mot. at 4. On September 27, 2007, Joanne Blue, through counsel, filed a verified answer, asserted a plea of title, and raised four counterclaims against Fremont relating to the transactions described above: (1) violations of the District of Columbia Consumer Protection Procedures Act, D.C. Code § 28- 3901 et seq.; (2) common law fraud; (3) violations of the District of Columbia Mortgage Lender and Broker Act, D.C. Code § 26-1101 et seq.; and (4) violations of the District of Columbia Home Loan Protection Act, D.C. Code § 26-1151.01, et seq. Id., Ex. 4 (9/27/07 Verified Answer, Plea of Title, and Counterclaims). The case was transferred to the Civil Actions Branch of the Superior Court on October 16, 2007. Id., Ex. 5 (10/16/07 Notice of Certification to Civil Actions Branch). Fremont filed a Motion to Strike the Plea of Title and for the Entry of a NonRedeemable Judgment for Possession on January 18, 2008. Id., Ex. 2 at 1 (2/13/08 Order). The court granted Fremont's Motion on February 13, 2008, because Joanne Blue and Edna Robinson had "without justification or excuse, failed to file any opposition or response" to Fremont's Motion, and they had failed to make timely payments into the registry of the court subject to the court's protective order. Id. On February 19, 2008, the court denied Joanne Blue's pro se Motion to Vacate its February 13, 2008 Order because "a plea of title is 'contingent upon compliance with a protective order.'" Id., Ex. 3 at 1-2 (quoting Penny v. Penny, 565 A.2d 587, 589 (D.C. 1989)).

Plaintiffs filed the instant Complaint on April 4, 2008, reasserting their four counterclaims from the first Superior Court action along with four new grounds for relief (counts I, IV, V, and VI) based on common law civil conspiracy, the Truth in Lending Act, 15 U.S.C. § 1601 et seq., and the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq. Plaintiffs simultaneously filed Motions for a Temporary Restraining Order and a Preliminary Injunction to prevent Fremont from enforcing the Superior Court's February 13, 2008 judgment for possession, and to block Plaintiffs' eviction from the subject property. See Pls.' Mot. for a Prelim. Inj. at 1; Pls.' Mot. for a TRO at 1-7.

Fremont removed this case on April 28, 2008. See Notice of Removal at 2-3. The Court thereafter held two conference calls with counsel for Plaintiffs and Fremont on May 1, 2008, and May 2, 2008, respectively. Fremont agreed to temporarily stay the enforcement of the judgment for possession to allow Plaintiffs' claims to be decided through a fully-briefed Motion to Dismiss, provided that Plaintiffs would (1) pay their undertaking into the registry of the Landlord and Tenant Branch of the D.C. Superior Court during the pendency of the Motion, and (2) provide Fremont with proof of insurance on the property. See [4] Joint Status Report dated May 8, 2008. Plaintiffs agreed to withdraw without prejudice their Motions for a Temporary Restraining Order and a Preliminary Injunction, subject to the conditions above, pending resolution of the instant Motion. Id.

II. LEGAL STANDARD

The Federal Rules of Civil Procedure require that a complaint contain "'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. ___, 127 S.Ct. 1955, 1964 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); accord Erickson v. Pardus, 551 U.S. ___, 127 S.Ct. 2197, 2200 (2007) (per curiam). Although "detailed factual allegations" are not necessary to withstand a Rule 12(b)(6) motion to dismiss, to provide the "grounds" of "entitle[ment] to relief," a plaintiff must furnish "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Id. at 1964-65; see also Papasan v. Allain, 478 U.S. 265, 286 (1986). Instead, the complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Bell Atl. Corp., 127 S.Ct. at 1965 (citations omitted).

In evaluating a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court must construe the complaint in a light most favorable to the plaintiff and must accept as true all reasonable factual inferences drawn from well-pleaded factual allegations. In re United Mine Workers of Am. Employee Benefit Plans Litig., 854 F. Supp. 914, 915 (D.D.C. 1994); see also Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir. 1979) ("The complaint must be 'liberally construed in favor of the plaintiff,' who must be granted the benefit of all inferences that can be derived from the facts alleged."). The court is limited to considering facts alleged in the complaint, any documents attached to or incorporated in the complaint, matters of which the court may take judicial notice, and ...


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