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Andia Evans v. First Mount Vernon

May 24, 2011


The opinion of the court was delivered by: Reggie B. Walton United States District Judge


This case is currently before the Court on defendant Cohn, Goldberg, & Deutsch, LLC's ("CGD") motion to dismiss pursuant to Rule 12 of the Federal Rules of Civil Procedure. See CGD's Motion to Dismiss the Complaint Pursuant to Rule 12(b)(1) and 12(b)(6) ("Def.'s Mot."). Although the plaintiff, Andia Evans, brings this case against two additional defendants asserting a variety of claims, CGD's motion to dismiss pertains only to the plaintiff's claims of fraud and breach of fiduciary duty, as those are the only claims alleged against CGD. After considering all of the relevant submissions by the parties, the Court concludes for the following reasons that it must grant in part and deny in part the defendant's motion to dismiss.*fn1


In August of 2008, the plaintiff was living in a house owned by her grandparents, Compl. ¶¶ 9, 12, which she sought to purchase from them. Id. ¶ 9. She contacted a mortgage broker, defendant Sherman Brown ("Brown"), to help her secure financing for the purchase. Id. ¶ 13. At that time, the property had an existing mortgage of $26,576.11, and was valued at $237,000. Id. ¶ 10. In discussions with Brown prior to the purchase, the plaintiff told Brown that she currently lived in the house, and that she intended to continue living there after the purchase. Id.

¶ 14. She further explained that her reason for purchasing the house was to live near her grandparents, who were experiencing health problems. Id. ¶ 9, 15. Despite this information, Brown helped the plaintiff secure a commercial, rather than residential mortgage. Id. ¶¶ 30, 38-39, 41, 46-47, 61, 67, 71. And Brown secured the commercial loan even though such loans are subject to stiffer penalties upon default and have fewer protections than residential loans. Id. ¶¶ 30, 39, 46-47, 71.

Defendant First Mount Vernon, ILA ("FMV"), a privately owned, Virginia-based mortgage lending firm, financed the plaintiff's purchase of the house. Id. ¶¶ 6, 9. The mortgage on the house was secured by a deed of trust, on which the plaintiff contends defendant CGD, a Maryland law firm, was the trustee.*fn2 Id. ¶¶ 8, 25. The deed of trust granted the trustee the power to sell the property in the event of a default. Def.'s Mot., Exhibit ("Ex.") A (Commercial Loan Balloon Deed of Trust) ("Deed of Trust") at 1.

At the time of the purchase, the plaintiff's gross monthly income was approximately $2,000. Compl. ¶ 16. Although the plaintiff presented Brown with documentation showing this amount as her monthly income, Brown indicated on the loan application that her gross monthly income was $2,773.33. Id. The total amount of the loan Brown secured for the plaintiff was $119,500, with an interest rate of 18% per year, and payable in monthly installments of $1,792.50. Id. ¶ 18. Thus, the monthly payment represented nearly 90% of the plaintiff's gross income, and actually exceeded her income after deductions for taxes. Id. ¶¶ 18, 71. The loan was structured as a one-year loan with a balloon payment at the end of the loan period.*fn3 Id. ¶ 19. The loan was structured so that Evans was not required to make any monthly payments during the one-year term of the loan. Id. ¶ 18. Instead, FMV escrowed the loan funds, and then drew against those funds to pay the monthly installments on the mortgage.*fn4 Id. ¶ 26. The entire outstanding balance of the mortgage would then be due in one lump-sum payment at the end of the one-year term. Id. ¶ 19 The loan included penalties for nonpayment at the end of the loan term, and the interest rate would also increase to 24% at the end of the loan term. Id. ¶ 18. Apparently to allay any fears the plaintiff may have had about the unfavorable terms in the loan, Brown represented to the plaintiff that he would help her refinance the loan at the end of the one-year term. Id. ¶¶ 19, 35, 72.

When the one-year term of the loan expired, the plaintiff was unable to pay the outstanding balance of the mortgage and FMV instituted foreclosure proceedings. Id. ¶¶ 74, 77. The plaintiff then filed this action in the Superior Court of the District of Columbia against all three defendants alleging fraud, violation of the District of Columbia Consumer Protection Procedures Act, D.C. Code §§ 28-3901 - 3913 (2001), violation of the District of Columbia Mortgage Lenders Brokers Act, id. §§ 26-1101 - 1121, violation of the District of Columbia Usury Statute, id. §§ 28-3301 - 3314, civil conspiracy to commit fraud and to violate the District of Columbia Consumer Protection Procedures Act, id. §§ 28-3901 - 3913, and the District of Columbia Usury Statute, id. §§ 28-3301 - 3314, intentional infliction of emotional distress, negligent supervision, and breach of fiduciary duty owed by trustees. Id. ¶¶ 33-97. Defendant CGD removed the case to this Court based on diversity jurisdiction,*fn5 and has now filed its motion to dismiss the two claims asserted against it-Fraud (Count 1) and Breach of Fiduciary Duty Owed by Trustees (Count 8). As grounds for its motion, CGD argues that the Court lacks subject matter jurisdiction because the plaintiff is a debtor in bankruptcy, that the plaintiff's claims are barred by res judicata, and that the plaintiff has failed to state a claim for breach of fiduciary duty.


A. Rule 12(b) of the Federal Rules of Civil Procedure

Federal Rule of Civil Procedure 12(b)(1) provides for the dismissal of claims for which the plaintiff fails to set forth allegations sufficient to establish the court's jurisdiction over the subject matter of the claims presented. Fed. R. Civ. P. 12(b)(1). In deciding a motion to dismiss challenging the Court's subject-matter jurisdiction under Rule 12(b)(1), a court "must accept as true all of the factual allegations contained in the complaint" and draw all reasonable inferences in favor of the plaintiff, Brown v. District of Columbia, 514 F.3d 1279, 1283 (D.C. Cir. 2008) (internal quotation marks omitted), but courts are "not required . . . to accept inferences unsupported by the facts alleged or legal conclusions that are cast as factual allegations." Rann v. Chao, 154 F. Supp. 2d 61, 64 (D.D.C. 2001). Further, the "court may consider such materials outside the pleadings as it deems appropriate to resolve the question whether it has jurisdiction to hear the case." Scolaro v. D.C. Bd. of Elections & Ethics, 104 F. Supp. 2d 18, 22 (D.D.C. 2000). Ultimately, however, the plaintiff bears the burden of establishing the Court's jurisdiction, Rasul v. Bush, 215 F. Supp. 2d 55, 61 (D.D.C. 2002), and where subject-matter jurisdiction does not exist, "the court cannot proceed at all in any cause." Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998).

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint for failure to state a claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6). For a complaint to survive a Rule 12(b)(6) motion, it must provide only "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The complaint must also "give the defendant fair notice of what the claim is and the grounds on which it rests," Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted), and although "detailed factual allegations" are not necessary to provide the grounds of entitlement to relief, a plaintiff must furnish "more than labels and conclusions[] and a formulaic recitation of the elements of a cause of action." Id. A complaint alleging facts that are "merely consistent with a defendant's liability . . . stops short of the line between possibility and plausibility of entitlement to relief." Ashcroft v. Iqbal, __ U.S. __, __, 129 S. Ct. 1937, 1949 (2009) (internal citations omitted). In evaluating a Rule 12(b)(6) motion, "[t]he 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." Schuler v. U.S., 617 F.2d 605, 608 (D.C. Cir. 1979) (internal citations omitted). The Court "may consider only the facts alleged in the complaint, any documents either attached to or incorporated in the complaint and matters of which [the Court] may take judicial notice." Equal Emp't Opportunity Comm'n v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C. Cir. 1997).

The Federal Rules of Civil Procedure permit conversion of a Rule 12(b)(6) motion to dismiss to a Rule 56 motion for summary judgment where matters outside the pleadings are presented. Fed. R. Civ. P. 12(b). If, however, documents are referenced in the complaint, those documents are considered incorporated into the complaint by reference. See Abhe & Svoboda, Inc. v. Chao, 508 F.3d 1052, 1059 (D.C. Cir. 2007). Furthermore, documents that are "integral to the claim" may also be considered in resolving motions to dismiss under Rule 12(b)(6) without converting the motion to a summary judgment motion. Meijer v. Biovail Corp., 533 F.3d 857, 867 n.* (D.C. Cir. 2008). B. Rule 9(b) of the Federal Rules of Civil Procedure Federal Rule of Civil Procedure 9(b) requires that allegations of fraud be pleaded with particularity. Fed. R. Civ. P. 9(b). "Under District of Columbia law, an allegation of fraud must include the following essential elements: (1) a false representation, (2) concerning a material fact, (3) made with knowledge of its falsity, (4) with the intent to deceive, and (5) upon which reliance is placed." Acosta Orellana v. CropLife Int'l., 711 F. Supp. 2d 81, 96 (D.D.C. 2010) (Walton, J.) (internal quotation marks omitted). "In this Circuit, the circumstances that the claimant must plead with ...

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