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Carroll v. Fremont Investment & Loan

July 20, 2009

ROBERT CARROLL AND MONICA CARROLL, PLAINTIFFS,
v.
FREMONT INVESTMENT & LOAN, ET. AL, DEFENDANTS.



The opinion of the court was delivered by: Henry H. Kennedy, Jr. United States District Judge

MEMORANDUM OPINION AND ORDER

Robert Carroll and his daughter Monica Carroll bring this action against two mortgage lenders, Fremont Investment and Loan ("Fremont") and Litton Loan Servicing LP ("Litton"), several companies involved in obtaining their loan, including JMJ Appraisal Services, LLC ("JMJ"), and several individuals who are officers or employees of those companies. The Carrolls bring a number of common law claims and a District of Columbia statutory claim in connection with a loan that Fremont made to them, and that defendants allegedly falsified and knew the Carrolls could not afford. Fremont, Litton, and three of the individual defendants have moved to dismiss the Carrolls' claims or for summary judgment. Upon consideration of the motions, the oppositions thereto, and the record of this case, the Court concludes that defendants' motions to dismiss should be granted in part and denied in part and that their motions for summary judgment should be denied.

I. BACKGROUND

The Carrolls are owners by joint tenancy with Annette Carroll of a townhouse in the District of Columbia. Robert Carroll is elderly and disabled; Monica Carroll is severely disabled by dyslexia. The Carrolls purchased their home in 1992 for $161,500. In 2005, the Carrolls applied for a loan to refinance their existing loan on their home, which had an interest rate of 6.4 percent. Defendant Premier Mortgage Solutions, Services, Inc. ("Premier Mortgage") brokered the mortgage and loan on behalf of Fremont, and one of Premier Mortgage's employees, defendant Frank Okebugwu, prepared the loan application. According to the Carrolls, the terms of the loan were supposed to include an interest rate of 7.4 percent and monthly payments of $1,887. The final loan, however, issued in July 2005 and signed by the Carrolls, included a variable interest rate that climbed to 11.5 percent and monthly payments of $2,748. The closing costs on the loan, according to the Carrolls, were approximately one-third of the value of the loan; the Carrolls received $21,593 and closing costs were $10,385. The Carrolls state that defendant Litton now holds the mortgage.

To obtain the loan, the Carrolls allege that Premier Mortgage grossly overstated their income and assets and that JMJ's appraisal grossly overvalued their home. They state that Premier Mortgage required the Carrolls to provide written verification of their income, and that they understood that such verification was essential to qualifying for and obtaining the loan. The Carrolls assert that they provided such verification, showing that Monica Carroll earned $2,706 per month and Robert Carroll earned $1,107.40 per month. The loan application, however, stated that Monica Carroll's monthly income was $5,465 per month and Robert Carroll's was $1,386.25 per month. Similarly, the Carrolls state that the District of Columbia Office of Tax and Assessments valued their home at $461,230 for tax year October 2004 to September 2005, but the loan application stated that the market value of their home was $650,000.

The Carrolls allege that defendants violated the District of Columbia's consumer protection laws by making an unconscionable loan, defrauded them, acted negligently, and breached a fiduciary duty owed to them. Had they known and understood its terms, the Carrolls state that they would not have agreed to the Fremont loan.

In September 2006, the Carrolls brought a similar lawsuit against Fremont in this Court. See Carroll v. Fremont Investment & Loan, 1:06-cv-01641 (September 22, 2006). In connection with that case, in October 2006, Fremont sent the Carrolls' attorney a four-page settlement agreement with an attached payment plan. Because of the relevance of the first page to this dispute, this memorandum replicates it in whole:

FORBEARANCE AGREEMENT

Fremont Investment & Loan, ("Lender") and MONICA CARROLL; ROBERT CARROLL ("Borrower") acknowledge and agree that:

ACKNOWLEDGMENTS

1. On 9/28/2005 Borrowers executed that certain promissary note ("the Note") in the face amount of $288,230, which evidences a loan in that amount. The Note is secured by a Deed of Trust or Mortgage ("the Mortgage") upon the Property at 3328 17TH ST NW, ("The Property"). The Note and the Mortgage are hereafter collectively referred to as "the Loan" or the "Loan Documents."

2. Borrower has defaulted on the Loan. $14,796.44 is delinquent ("the Default") and $287,213.67 is due. ("The Debt.")

3. Borrower acknowledges the Default and the Debt and further acknowledges Borrower has no defense or legal objection to the Note, the Mortgage, the Loan or the Debt.

4. Borrower has requested Lender to temporarily forbear enforcement of its rights under the Loan to better enable Borrower to cure the Default.

5. Lender has agreed to temporarily forbear enforcement of its rights under the Loan pursuant to the terms of this Forbearance Agreement. ("The Agreement.")

6. In consideration of the mutual benefits of this Agreement, Borrower and Lender agree as follows: Fremont Mot. Dismiss Ex. B. Page two of the agreement is headed "AGREEMENTS" and is followed by seventeen paragraphs on pages two through four. These paragraphs require installment payments, describe what will happen if the Carrolls breach the agreement, and state that during the time that the Carrolls fully perform, Fremont will not take any steps to prosecute the foreclosure, among other things. Relevant to this case, paragraph 14 states:

14. BORROWER RELEASE OF LENDER. Borrower hereby releases Lender of any and all claims known or unknown, which Borrower has against Lender which in any way arise from or relate to the Loan, the Default or the Debt. Borrower also specifically waives any right it has under any statute, which provides that a release does not extend to claims, which the releasor does not know and suspect to exist in his favor at the time of executing the release, which, if known by him, would materially affect his settlement with the releasee.

Id.

It is undisputed that the Carrolls signed at the bottom of the first page of this agreement and sent that signed first page back to Fremont in November 2006; the import of that signature is in dispute. In January 2007, the Carrolls moved to dismiss their first lawsuit without prejudice. According to Fremont, the Carrolls dismissed that lawsuit as part of a settlement agreement with Fremont. In May 2008, the Carrolls brought the instant lawsuit.

II. ANALYSIS

This case comes before the Court upon defendants' motions to dismiss or for summary judgment. There are ten defendants in this case: (1) Fremont, the original lender; (2) Litton, allegedly the assignee of the loan; (3) Premier Mortgage, a mortgage brokerage company (which may have changed its name to Smith-Meyers Corporation); (4) Smith-Meyers Corporation, a mortgage brokerage company; (5) Jeffrey Smith, the president of Smith-Meyers Corporation, (6) Frank Okebugwu, a loan officer for Premier Mortgage Solutions, Services, Inc. and/or Smith-Meyers Corporation; (7) J.G. Enterprises LLC, the owner of the trade name used by Premier Mortgage; (8) Sheila Locke, an agent or employee of Premier Mortgage; (9) JMJ, an appraisal company; and (10) Shannon Ingram, an officer or employee of JMJ who performed the appraisal on the Carrolls' home.

Defendants Fremont and Litton are represented by counsel and have filed motions to dismiss or for summary judgment [## 49, 65]. Defendants Okebugwu, Ingram and Smith (collectively, "the individual defendants") are proceeding pro se and have filed motions to dismiss or for summary judgment [## 67, 68, 69]. The other five defendants have not entered appearances nor responded to the Carrolls' amended complaint. The motions to dismiss or for summary judgment of Fremont, Litton, and the individual defendants will be addressed in turn.

A. Fremont's Motion to Dismiss or for Summary Judgment

Fremont makes two principal arguments in its motion to dismiss or for summary judgment. First, Freemont argues that the Court should enforce the settlement agreement between it and the Carrolls and dismiss the Carrolls' amended complaint against Fremont. Second, it argues that even if the Court does not enforce the settlement agreement, it should dismiss the Carrolls' amended complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The Court turns to these arguments.

1. Motion to Enforce Settlement Agreement

Fremont's motion to enforce the settlement agreement depends upon materials beyond the allegations in the amended complaint or documents attached to the compliant, and therefore the Court must convert it to a motion for summary judgment. Marshall Co. Health Care Auth. v. Shalala, 988 F.2d 1221, 1226 (D.C. Cir. 1993). The Carrolls resist such a ...


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