United States District Court, District of Columbia
FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for AmTrust Bank, Plaintiff,
US TITLES, INC., et al., Defendants
For FDIC, As receiver for AmTrust Bank, Plaintiff: Eric Weinstein, LEAD ATTORNEY, ELLENOFF GROSSMAN & SCHOLE, LLP, New York, NY.
For U.S. TITLES, INC., Defendant: Mariana del Valle Bravo, Matthew D. Berkowitz, LEAD ATTORNEYS, CARR MALONEY PC, Washington, DC.
For FIRST AMERICAN TITLE INSURANCE COMPANY, Defendant: Ira L. Oring, LEAD ATTORNEY, FEDDER & GARTEN PROFESSIONAL ASSOCIATION, Baltimore, MD; Maryann E. Nowinski, LEAD ATTORNEY, FEDDER AND GARTEN, PA, Baltimore, MD; Clair E. Dickinson, PRO HAC VICE, Louise M. Mazur, PRO HAC VICE, BROUSE MCDOWELL, Akron, OH.
JAMES E. BOASBERG, United States District Judge.
At a real-estate closing, the closing agent is typically supposed to take certain precautions that help a mortgage lender detect sham transactions. Despite explicit directives here to take such precautions, the closing agent in this case - U.S. Titles, Inc. - allegedly failed to do so, and the fraudulent sale went through, undetected. The Federal Deposit Insurance Corporation, receiver for the lender bank, thus brought this suit against U.S. Titles and another Defendant for breach of contract. U.S. Titles now moves to dismiss the case for lack of personal jurisdiction, untimeliness, and failure to state a claim. Unpersuaded by any of these arguments, the Court will deny the Motion.
Because the Motion at issue is a motion to dismiss, the Court draws the facts from the Complaint, assuming them to be true at this stage.
A. Factual Background
On January 9, 2008, a closing was held for a Washington, D.C., property located at 317 R Street, N.W., Unit 1. See Compl., ¶ 8. A closing (also known as a settlement) is " the final transaction between the buyer and seller, whereby the conveyancing documents are concluded and the money and property transferred." Black's Law Dictionary 291 (9th ed. 2009). The purported purchaser was Raomito Salazar, with a stated sale price of $650,000. See Compl., ¶ 8. Financing for the home came primarily from AmTrust Bank, which gave Salazar a $585,000 mortgage loan. See id. Salazar himself would pay the balance as a down payment. See id., ¶ 11.
The closing agent on the Salazar transaction was U.S. Titles. See id., ¶ 9. A closing agent " handl[es] financial calculations and transfers of documents" during the closing. Black's Law Dictionary 74. Because the lender is typically not present at a closing, AmTrust required U.S. Titles to make assurances about how the closing would be conducted. Those assurances, which were put to paper in the Closing Instructions now in dispute, included the following provisions:
o " Closing Agent has special knowledge that the Lender cannot obtain from any other source. Lender is relying on Closing Agent to communicate to Lender any material fact known or suspected which may arise during or out of the closing and settlement process. Closing Agent has a duty to provide Lender precise and correct information and to alert Lender to facts and events that might affect Lender's decision to make the loan. By way of example, . . . contributions of funds not identified in these or the Supplemental Closing Instructions by persons other than the Borrower. . . . If Closing Agent becomes aware of any such material information, the Closing Agent shall suspend loan closing and immediately disclose the information to Lender."
o " If Closing Agent has reason to believe there is a fraud or scheme related to the transaction, Closing Agent shall suspend loan closing and immediately notify Lender."
o " If Closing Agent has knowledge . . . that any monies Borrower is required to pay or deposit at closing are not from the Borrower's own funds or a bona fide gift, the Closing Agent shall suspend loan closing and immediately notify Lender."
o " All funds must pass through escrow and should be noted on the HUD-1 Settlement Statement. Copies of down payment checks or funds needed to close must be sent to Lender for
approval prior to disbursement of loan proceeds. The name and address on the Borrower's down payment check must match the Borrower's name and address."
Compl., ¶ 10 (quoting Closing Instructions, ¶ ¶ 1.1, 1.3, 1.10, 1.12) (omissions in original). U.S. Titles received " valuable consideration" for agreeing to the Closing Instructions. Id.
The closing itself, however, deviated from those Instructions. First, Salazar was supposed to pay $102,920 at closing - $65,000 as his down payment, plus $39,420 in closing costs, minus $1500 in earnest money purportedly already deposited. See id., ¶ 11. While U.S. Titles did receive a cashier's check for $102,920, the check was purchased and delivered by Frank Davis, an unrelated third party.
See id., ¶ 12. Second, instead of depositing that check in escrow and then passing on the appropriate sum to the seller, U.S. Titles simply returned the check to Davis.
See id., ¶ 13. Despite those irregularities, U.S. Titles allowed the transaction to proceed. See id., ¶ ¶ 18, 20. ...