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Modern Management Co. v. Wilson

June 3, 2010


On Appeals from the Superior Court of the District of Columbia (04-CA-7270B) (Hon. Mary A. Gooden-Terrell, Trial Judge).

The opinion of the court was delivered by: Blackburne-rigsby, Associate Judge

Argued September 24, 2009

Before BLACKBURNE-RIGSBY and THOMPSON, Associate Judges, and SCHWELB, Senior Judge.

Opinion for the court by Associate Judge BLACKBURNE-RIGSBY.

Concurring opinion by Associate Judge THOMPSON, with whom Senior Judge SCHWELB joins at p.52.

This case arises from an unconscionable 2003 real estate transaction whereby appellee, Maria-Theresa Wilson, suffering from health problems and facing foreclosure, transferred title to her home (that she owned for twenty-two years) to appellant Vincent Abell, the sole owner of appellant Modern Management Company ("Modern Management"). Appellant Calvin Baltimore, who represented himself as a money lender, knocked on Wilson's door three days before her house was scheduled to go into foreclosure and convinced her to participate in appellants' scheme. Wilson transferred title to her home to Abell, but under the terms of the transaction, she remained liable for the mortgage payments and became a tenant in her own home. In fact, her monthly "rent" exceeded the amount of her previous mortgage payments. Wilson soon defaulted on the "lease," and Abell brought eviction proceedings against her to remove her from her own home.

Following a jury trial, appellants Vincent Abell, Modern Management Company, and Calvin Baltimore were all found liable for common law fraud and for violating the D.C. Consumer Protection Procedures Act ("CPPA") for their various misrepresentations and omissions of material facts and for including "unconscionable terms" in the transaction.*fn1 The jury awarded Wilson $60,000 in compensatory damages for the common law fraud and CPPA violations, which the trial judge trebled pursuant to the CPPA, D.C. Code § 28-3905 (k)(1), and punitive damages in the amount of $2 million against Abell, $1.1 million against Modern Management, and $200,000 against Baltimore, respectively. We affirm.

Appellants raise a sharply contested issue of considerable importance by challenging the award of punitive damages against them as constitutionally excessive. In addition, they contend that 1) the trial court erred in permitting Wilson to pursue her RICO claims and admitting evidence that appellants had completed one hundred similar transactions, which caused the jury to inflate the punitive damages awards; 2) the compensatory damage award must be reduced by the amount of the settlement agreement Wilson reached before trial with appellants' former co-defendant;*fn2 3) the trial court erred in submitting to the jury the issue of whether Wilson was a "consumer" as defined in the CPPA; and 4) the jury verdict finding appellants liable for common law fraud and for violations of the CPPA was against the weight of the evidence.

First, we focus our analysis on the issue of whether the punitive damages awarded by the jury are unconstitutionally excessive, and then we address each of the remaining issues in turn. We uphold the punitive damages awards entered against the appellants. For the reasons explained more fully below, we affirm on all issues, but remand and direct the trial court to apply the $40,000 setoff to the treble award.

I. Background

Appellant Maria-Teresa Wilson purchased her house at 1300 Taylor Street Northwest in 1981. She lived there continuously until 1997, when she suffered a severe head injury at work that prevented her from being able to work consistently. After her injury in 1997, Wilson suffered two additional head injuries causing her to develop epilepsy and suffer seizures. Wilson began spending approximately fifty percent of her time at her elderly mother's house (a few blocks away from the house on Taylor Street) due to Wilson's health problems and in order to care for her mother after the death of her father. In June 2001, Wilson registered her Taylor Street home as rental housing with the District of Columbia Department of Consumer Affairs and leased part of the property to tenants for additional income, but she always kept a set of keys to the house and maintained a room there for space to work on her art.*fn3 She also continued to receive mail at the house and listed it as her residence on her District of Columbia identification card, which was issued in 2002.

In September 2003, Wilson received a foreclosure notice indicating that she had to pay at least $42,525 by October 2, 2003, to avoid foreclosure. On September 27, 2003, five days before the scheduled foreclosure date, appellant Calvin Baltimore left a business card at Wilson's home, advertising himself on the front of the card as:

"Baltimore Company, Money Lenders, Buy and Sell Homes, 24 Hours, Seven Days a Week, Foreclosures Specialists, Calvin Baltimore, President, CEO, CPA."

The back of the card read:

"We will help you to save the equity in your home. We will buy your home, pay off your mortgage, pay you your equity. We will also pay your mortgage current, stop foreclosure, lease the home back to you, give you some money and give you a chance to buy back when you continue to live in your home. Please call immediately for help."

In fact, Baltimore was not a certified public accountant (CPA) and he claimed at trial that the money lender language was printed on his business card in error by the printing company where he ordered his cards. Baltimore's company prepared pre-foreclosure contracts for Vincent Abell, the owner/manager of Modern Management, but Baltimore did not actually lend money.Baltimore described himself as a "consultant" for Abell, and said that he was responsible for Abell's pre-foreclosure transactions and for approaching homeowners to prepare and sign the foreclosure contracts on Abell's behalf. After seeing his card, Wilson called Baltimore immediately to set up an appointment before the upcoming foreclosure.

On September 30, 2003, Baltimore met with Wilson and her friend at Wilson's home and offered to buy the house for cash. Wilson declined the offer, stating: "I'm not interested in selling my property[,] I'd like to be able to keep it." As an alternative, Baltimore offered Wilson a lease-back option, whereby Wilson would pay $2,100 per month to continue living in her home. Wilson declined this offer as well because she could only afford a maximum monthly payment of $1,800. After getting approval from Abell over the phone, Baltimore offered Wilson the lease-back option for $1,800 a month. Wilson signed an "Agreement to Sell Real Estate," which was prepared and signed by Baltimore, who listed himself as "Agent for Vincent Abell" under his signature.*fn4 Baltimore left Wilson with an "Authorization to Release Information" form that listed Wilson as the "borrower" under the signature line.*fn5 The next day, Baltimore returned and drove Wilson and her friend to the transaction "closing" with Abell at the law offices of Houlon Berman.

At the "closing," Wilson signed various documents, including: a "Deed," a "Real Property and Transfer Form," an "Owner/Seller Affidavit," and a "Seller Affidavit of Sales Subject to Mortgage." Wilson asked why the titles of certain documents indicated a sale of her home when she intended only to obtain a loan to stop the foreclosure. In response, both Abell and the attorney from Houlon Berman told Wilson that the sale was only a "legal fiction" which was necessary to speed up the process because the foreclosure was scheduled to go forward in two days.A sales price was never negotiated during the transaction. While the Deed represented that Wilson was to receive "consideration of $199,273.10" for the sale, Wilson only received a payment $5,000 via check.*fn6 The end result of the transaction was that Wilson remained liable for the mortgage (which Abell did not assume) but then she also had to pay rent to remain in the home. Wilson entered into a one year "Lease Agreement" whereby Abell leased the property back to her. The Lease Agreement included an "Option to Purchase" provision which she could invoke at the end of the year.Pursuant to Section 5 of the lease, Wilson was to pay $2,100*fn7 for rent ($600 more than her mortgage payments prior to the transaction). However, Wilson contends that she intended the payments to go towards the loan that she obtained to stop the foreclosure, and not to appellants as rent. Ultimately, when Wilson failed to make any of the rent payments during the thirteen months following the sales transaction, Abell sued her for possession of the property and successfully evicted her from her house. Following her eviction, Wilson initiated this action in February 2005 against appellants and their former co-defendant Houlon Berman.

Appellants moved for partial summary judgment on Wilson's CPPA, fraud, and RICO claims. Initially, the trial judge granted partial summary judgment, dismissing the RICO claims.But Wilson filed a motion for reconsideration, contending that the trial judge improperly dismissed the RICO claims because appellants failed to make any legal or factual arguments supporting their dismissal.*fn8 Wilson's counsel argued that Abell's "scheme" for RICO purposes was to "approach homeowners that are in foreclosure, tell them that they're going to lend them money to save their house, and by trick, take title from the homeowners, make them a tenant in their own house, and then come to landlord/tenant court and try and kick them out of their own house." The trial judge granted the motion for reconsideration and at this stage of the proceedings, she permitted Wilson to pursue her RICO claims.

In addition to the motion for partial summary judgment, appellants filed a series of motions in limine to exclude testimony about Wilson's physical condition, the fair market value of the property, and evidence and testimony regarding Abell and Modern Management's "other transactions," where they allegedly employed the same scheme against other vulnerable homeowners.*fn9 The trial court denied all of appellants motions in limine, permitting the evidence to be presented to the jury.*fn10

Before the case was submitted to the jury, appellants moved for judgment as a matter of law a second time, and the trial judge granted the motion with respect to the RICO claims because she found that the evidence presented did not amount to a "pattern or practice," within the meaning of the RICO statute. 18 U.S.C. § 1961. The jury found appellants liable for common law fraud and for violating the CPPA by making misrepresentations and omissions of material facts and including "unconscionable terms" in the transaction. After trial, appellants filed a motion for judgment notwithstanding the verdict ("JNOV") and a motion for a new trial on damages, both of which were denied. This appeal followed.

II. Punitive Damages Analysis


In reviewing appellants' constitutional challenge to the punitive damage awards in this case, we think it is useful to revisit and distill the legal principles and guidance gleaned from the relevant Supreme Court cases. The Due Process Clauses of the Fifth*fn11 and Fourteenth Amendments prohibit a State from imposing a "grossly excessive" civil punishment upon a tortfeasor.*fn12 The Supreme Court has had several opportunities to consider due process challenges to punitive damage awards. From these cases, we glean several illuminating principles and concerns which have guided the Supreme Court's review of punitive damage awards. These principles include the concern that: 1) courts conduct a "meaningful and adequate review" of a jury's punitive damage award both at the trial and appellate level to ensure that the award is the product of a process that is entitled to a strong presumption of validity; 2) the award punishes truly reprehensible conduct; 3) the punitive damage award has some relation to the harm suffered by the plaintiff and evidences "reasonableness and proportionality," although there is no "bright-line" ratio, to ensure that the award is not grossly out of proportion to the severity of the offense; and 4) the award advances a State policy concern such as protection of the public by deterring the defendant or others from doing such wrong in the future.

In its first case reviewing whether punitive damage awards may violate the Due Process Clause of the Fourteenth Amendment, Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 18 (1991), the Supreme Court noted its concern that such awards may "run wild." There, Haslip brought a claim for fraud against Pacific Mutual and its employee after the insurance agent misappropriated checks for a customer's premium payments, which resulted in a lapse of her health insurance coverage. Notices of the lapse in coverage were not forwarded to Haslip, who was forced to pay her hospital bill on discharge because the hospital could not confirm her health coverage.

The jury returned a general verdict for $1,040,000.*fn13 On appeal, the Supreme Court of Alabama affirmed the punitive damage award. Pacific Mutual Life then petitioned for certiorari arguing that the punitive damage award was "the product of unbridled jury discretion and [ ] violative of its due process rights." Id. at 7.Noting that the specific award in that case resulted in punitive damages more than four times the compensatory damages, the Court cautioned that "unlimited jury discretion - or unlimited judicial discretion for that matter - in the fixing of punitive damages may invite extreme results that jar one's constitutional sensibilities." Id. at 18. ...

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