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Emc Mortgage v. Patricia Patton

April 11, 2013

EMC MORTGAGE CORPORATION, ET AL., APPELLANTS,
v.
PATRICIA PATTON, ET AL., APPELLEES.



Appeals from the Superior Court of the District of Columbia (CAR-2244-10) (Hon. Gregory E. Jackson, Trial Judge)

The opinion of the court was delivered by: Mcleese, Associate Judge:

(Argued November 28, 2012

Before GLICKMAN, THOMPSON, and MCLEESE, Associate Judges.

Appellant J.P. Morgan Chase Bank ("JPMC") contends that the trial court erroneously invalidated a deed of trust now held by JPMC even though JPMC's predecessor in interest was not a party to the litigation at the time of the trial court's ruling. We agree, and therefore reverse and remand for further proceedings.

I.

This case arises out of a real-estate transaction that was subsequently determined to be fraudulent. Because the rather complex factual circumstances of the fraudulent transaction are not presently germane, we provide only a brief summary. For current purposes, the parties do not appear to dispute the following. In 2004, appellee Sterling Watts leased the real property at issue to appellee Patricia Patton, and also granted her an option to buy the property. In 2005, representatives of a property-management company persuaded Mr. Watts and Ms. Patton to sell the property. The company assured Mr. Watts that it would use mortgage-loan proceeds from the sale of the property to extinguish Mr. Watts's debts, and that Mr. Watts would be allowed to repurchase the home within a year. Relying on the company's representations, Mr. Watts agreed to execute a deed of sale conveying title to the property to appellee Gretha Jenkins, who, as an "investor" in the scheme, would obtain a mortgage loan that far exceeded Mr. Watts's financial needs.

The company submitted a false loan application to Fremont Investment & Loan Corp., which provided nearly $700,000 in financing for the underlying mortgage transaction. A promissory note was executed requiring Ms. Jenkins to repay Fremont. Mr. Watts also executed a deed of sale conveying title to the property to Ms. Jenkins. In turn, a deed of trust was executed, conveying the property from Ms. Jenkins to Fremont as trustee, to secure the promissory note.*fn1

Ms. Jenkins, however, was not present at the closing and did not sign or authorize anyone to sign the settlement documents. Rather, Ms. Patton signed Ms. Jenkins's name on the settlement documents, later claiming that she was instructed to do so and was falsely informed that Ms. Jenkins had executed a power of attorney authorizing Ms. Patton to sign on Ms. Jenkins's behalf.

The owner of the property-management company eventually pleaded guilty to conspiracy to make false statements to financial institutions.Although Ms. Jenkins had obtained title to the property, she never made payments on the mortgage. Ms. Patton continued to reside at the property and made at least some mortgage payments.

JPMC, as successor in interest to appellant EMC Mortgage Corporation ("EMC"), which in turn was a successor in interest to Fremont, is the holder in due course of the deed of trust for the property, as well as the promissory note signed by Ms. Jenkins and secured by the deed of trust.

In April 2010, Ms. Patton and Mr. Watts filed suit against Ms. Jenkins and EMC, alleging that the sale had been induced by fraud and that Ms. Jenkins's signature on the deed of trust had been forged. Ms. Patton and Mr. Watts asked the trial court to quiet title to the property in their favor and to cancel the deed of sale and the deed of trust.

EMC filed a motion to dismiss, arguing that the action was time-barred under the three-year statute of limitations applicable to claims of fraud and forgery. The trial court agreed and dismissed the action against EMC. Ms. Jenkins subsequently filed a motion to dismiss and for summary judgment, arguing among other things that the action was time-barred and that the trial court's prior ruling on that issue in EMC's favor was the law of the case. The trial court granted summary judgment to Ms. Jenkins on the alternative ground that Ms. Jenkins was not involved in fraudulently inducing the transaction or in forging the financial instruments at issue. The trial court did not address Ms. Jenkins's argument that the action was time-barred. Although it had ruled in favor of both of the defendants participating in the litigation,*fn2 the trial court also granted relief in favor of Ms. Patton and Mr. Watts. Specifically, the trial court declared the deed of sale and "all related documents" void ab initio.*fn3 In its order, the trial court noted that "there may be others that have an interest in the property that is not voided by the underlying fraud" who could be adversely affected by the court's ruling. The court further noted that "[t]hose parties and/or interest are not before the Court in this case."

Less than a month after judgment was entered, JPMC, as successor in interest to EMC, moved to intervene, in order to seek relief from the trial court's order vacating the mortgage documents. JPMC contended that the trial court's order clouded title to the property and created an ambiguity as to whether its interest in the property had been extinguished. The trial court denied JPMC's motion to intervene as untimely, concluding that JPMC could not re-enter the case because its predecessor in interest had been a party but had chosen to seek dismissal rather than to remain in the case to protect its interests. JPMC's predecessor in interest noted a timely appeal from the trial court's order declaring ...


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