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Andrea Sloan, As Guardian and Conservator On Behalf of Mary Juergens v. Urban Title Services

March 27, 2011

ANDREA SLOAN, AS GUARDIAN AND CONSERVATOR ON BEHALF OF MARY JUERGENS, AN INCAPACITATED INDIVIDUAL, IN BOTH MARY JUERGENS' INDIVIDUAL CAPACITY AND AS THE SOLE MEMBER OF "1230 23RD STREET, LLC," PLAINTIFF/COUNTER-DEFENDANT,
v.
URBAN TITLE SERVICES, INC., ET AL., DEFENDANTS/COUNTER-PLAINTIFFS.



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

MEMORANDUM OPINION

Mary Juergens ("Juergens") commenced this action on August 29, 2006, challenging the legality of two loans extended to her, each of which was secured on a condominium located at 1230 23rd Street, N.W., Apartment 505, Washington, D.C. 20037 (the "Condo"). Subsequently, Juergens was found to be an "incapacitated individual" and Andrea Sloan ("Sloan"), who was appointed as Juergens' Guardian and Conservator, was substituted for Juergens as the plaintiff in this action.*fn1 Over the years, the claims and defendants in this action have been successively winnowed down by orders of this Court and by the agreement of the parties. Today, the defendants include Dale Duncan ("Duncan"), First Mountain Vernon Industrial Loan Association, Inc. ("FMVILA"), Brickshire Settlements, LLC, and Arthur G. Bennett (collectively, "Defendants"). Presently before the Court is Duncan's [185/186] Motion for Summary Judgment, which was previously resolved in part and held in abeyance in part pending further briefing by the parties. The parties have now had the opportunity to submit the supplemental briefing required by the Court. Based upon the parties' submissions, the relevant authorities, and the record as a whole, the Court shall DENY the remainder of Duncan's [185/186] Motion for Summary Judgment.

I. BACKGROUND

The Court assumes familiarity with its prior opinions in this action, which set forth in detail the history of this case, and shall therefore only address the factual and procedural background necessary to address the discrete issues currently before the Court.

The only loan that remains at issue in this action was extended by or with the assistance of Defendants (the "Loan"). The heart of Plaintiff's lawsuit is her allegation that the Loan was intended to be, or should be construed as, a personal residential loan-not a commercial loan. See Sloan v. Urban Title Servs., Inc., 689 F. Supp. 2d 123, 127 (D.D.C. 2010). The relevant documents, taken at face value, characterize the Loan as a $250,000 commercial loan extended by FMVILA to 1220 23rd Street, LLC (the "LLC"), a limited liability corporation of which Plaintiff is the sole member. Id. at 127-28. Plaintiff nevertheless maintains that the Loan is, or should be construed as, a personal residential loan because (a) the documents relating to the Loan were fraudulently obtained by forgery and (b) the Loan is an illegal consumer residential loan disguised as a commercial loan in order to evade fair lending and disclosure requirements. See 4th Am. Compl., Docket No. [120], ¶¶ 89-92. Unsurprisingly, Defendants deny Plaintiff's allegations and assert that the Loan is a valid commercial loan extended to Plaintiff's LLC. See id. ¶¶ 94-96. By their account, Defendants assisted Plaintiff, at her request, in establishing the LLC; the title to the Condo was transferred from Plaintiff to the LLC; and FMVILA extended a lawful commercial loan for $250,000, secured by the Condo, to the LLC. See id. ¶ 96. Therefore, as presented by the parties, the central question underlying this lawsuit is whether the Loan is or is not a legitimate commercial loan lawfully extended to the LLC.

As is relevant to the instant motion, the operative version of Plaintiff's Complaint includes five claims against Duncan relating to his alleged role in the creation of the LLC and the closing of the Loan.*fn2 The five claims may be divided into two groups-the claims in each of the two groups are based on an identical set of factual allegations and essentially set forth alternative theories of recovery for the same conduct:

* Claims Concerning the Creation of the LLC. The three claims in the first group (the "LLC Creation Claims")-Count XVIII (Legal Malpractice), Count XIX (Breach of Fiduciary Duty), and Count XX (Negligence)-are each premised on an identical set of factual allegations relating to Duncan's role in the creation of the LLC. See 4th Am. Compl. ¶¶ 351-74. Plaintiff alleges that, by claiming to have prepared documents creating the LLC on Plaintiff's behalf and receiving a fee for doing so, and then filing these documents with state authorities, Duncan entered into an attorney-client relationship with Plaintiff and owed her a fiduciary duty and a duty of care. Id. ¶¶ 352, 360, 368. Plaintiff contends that Duncan violated these various duties because, by virtue of the creation of the LLC, (a) she received no benefit from the transaction, (b) she was required to pay "transfer" and "recordation" taxes, (c) she lost the ability to obtain a homestead tax deduction, (d) Duncan failed to register the LLC as a foreign limited liability company authorized to do business in the District of Columbia, (e) Duncan failed to register the Condo as rental property, and (f) the transaction allowed FMVILA to fraudulently disguise the Loan as a commercial loan in order to charge Plaintiff a higher rate of interest and circumvent consumer and fair lending laws. Id. ¶¶ 353-356, 361-364, 369-372.

* Claims Concerning the Closing of the Loan. The two claims in the second group (the "Loan Closing Claims")-Count XXII (Breach of Fiduciary Duty) and Count XXIII (Negligence)-are each premised on an identical set of factual allegations relating to Duncan's role in the closing of the Loan. See 4th Am. Compl. ¶¶ 383-98. Plaintiff alleges that Duncan owed her a duty of care and a fiduciary duty to perform the closing on the Loan. Id. ¶¶ 384, 392. Plaintiff contends that Duncan violated these duties by (a) failing to use a proper and accurate accounting statement, (b) failing to ensure that the loan documents complied with all relevant laws and statutes, (c) failing to promptly disburse funds associated with the Loan, (d) failing to promptly file loan documents and loan releases, (e) failing to conduct the settlement in a manner in accordance with all relevant laws and statutes, (f) using a HUD-1*fn3 settlement statement that did not accurately reflect the nature of the transaction, and (g) paying "transfer" and "recordation" taxes to the Recorder of Deeds.*fn4 Id. ¶¶ 385-87, 393-95.

On March 7, 2009, Duncan moved for summary judgment on several fronts, including the merits of each of the five claims identified above. See Def.'s Mem. in Supp. of Mot. for Summ.

J. ("Def.'s Mem."), Docket No. [186-1]. He also moved for summary judgment with respect to Plaintiff's request for punitive damages on each of the five identified claims, as well as Count XXI (Breach of Contract), which is based on the same allegations underlying the Loan Closing Claims.*fn5 See id. Plaintiff filed a timely opposition to Duncan's motion. See Pl.'s Opp'n to Def.'s Mot. for Summ. J. ("Pl.'s Opp'n"), Docket No. [196]. Duncan filed a reply. See Def.'s Reply to Pl.'s Opp'n to Def.'s Mot. for Summ. J. ("Def.'s Reply"), Docket No. [224].

Duncan's primary argument was that Plaintiff's claims for legal malpractice, breach of fiduciary duty, and negligence are all predicated upon a finding that he entered into an attorney-client relationship with Plaintiff and that, absent such a relationship, she cannot succeed on her claims. See Def.'s Mem. at 4-8. Plaintiff, for her part, conceded that she never entered into an attorney-client relationship with Duncan in connection with the closing of the Loan, but maintained that such a relationship nonetheless existed with respect to the creation of the LLC. See Pl.'s Opp'n at 9-16. In addition, Plaintiff argued that, even in the absence of an attorney-client relationship, Virginia law permits third parties to bring a legal malpractice claim in certain "special circumstances" where the third party's reliance is reasonable and foreseeable and, irrespective of the question of whether an attorney-client relationship existed, her claims based on negligence and fiduciary duty would survive. See id. at 11-16. In reply, Duncan offered no direct response to Plaintiff's argument, but instead argued for the first time that Plaintiff's claims must fail because she is required to proffer expert testimony to establish the appropriate standard of care and to prove liability. See Def.'s Reply at 4-8.

On February 12, 2010, this Court issued a decision addressing, inter alia, Duncan's Motion for Summary Judgment. See generally Sloan v. Urban Title Servs., Inc., 689 F. Supp. 2d 94 (D.D.C. 2010) (hereinafter, "Sloan II"). As noted by the Court at the time, the parties' briefing left much to be desired. Indeed, the Court observed that its resolution of Duncan's motion was "significantly hindered by the generally deficient quality of the parties' briefing." Id. at 104. Among other things, the parties had failed to provide the Court with anything beyond a "bare outline" of the facts relevant to Duncan's role in creating the LLC and closing the Loan.

Id. As a result, the precise contours of Duncan's conduct remained, to a large degree, unclear. Id. Nevertheless, the following background could be gleaned from the parties' respective submissions, which the Court shall quote in full here as it sets the stage for the issues that remain open:

As the parties agree, Duncan acted as FMVILA's attorney with respect to the FMV Loan transaction. Plaintiff admitted as much at deposition, testifying that she knew Duncan was counsel for FMVILA and that he had neither agreed to be nor was acting as her attorney with respect to the FMV Loan.

The details of the FMV Loan closing itself are largely absent from the parties' briefing. The parties' agree, however, that Duncan was present at the FMV Loan closing and that he discussed the FMV Loan papers with Plaintiff. Although Plaintiff was aware that Duncan was acting as FMVILA's attorney at the closing, she testified that she "trusted" him because he was a lawyer who was "there to be on your side and not take advantage."

In addition, the parties appear to agree that Duncan assisted with the preparation and filing of the articles of organization necessary for the formation of Plaintiff's LLC. A material dispute exists, however, as to whether Duncan did so at Plaintiff's request. As to this point, the parties present contradictory stories. According to Duncan, Plaintiff requested that Duncan assist with the formation of a limited liability corporation. Duncan agreed to ...


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