Appeal from the Superior Court of the District of Columbia (CAB-1475-05) (Hon. A. Franklin Burgess, Jr., Trial Judge)
The opinion of the court was delivered by: Reid, Senior Judge
Before THOMPSON and BECKWITH, Associate Judges, and REID, Senior Judge.
These cases concern the rehabilitation and conversion into condominium units of rental apartments, located on Good Hope Road in the Southeast quadrant of the District of Columbia, and mortgage loans obtained for purchase of the condo units. After moving into their respective units, Joyce Saucier and ten other persons, plaintiffs/appellants, brought a lawsuit against Countrywide Home Loans, Inc. ("Countrywide") and Presidential Bank FSB ("Presidential"), defendants/appellees, alleging various causes of action, including common law fraud, conspiracy, and violations of the District of Columbia Consumer Protection Procedures Act ("CPPA"). Following extensive proceedings in the trial court, the Honorable A. Franklin Burgess, Jr., granted summary judgment in favor of Presidential on all counts, and in favor of Countrywide except with respect to three plaintiffs as to one CPPA count. Ms. Saucier and the other appellants contend that the trial court erred in granting summary judgment to defendants on their fraud claims, two of their CPPA counts, and their conspiracy claim. In addition, they challenge the trial court‟s ruling that their Condominium Association lacked standing to sue under the CPPA. We affirm the trial court‟s grant of summary judgment with respect to the common law fraud claim, the conspiracy claim, and D.C. Code § 28-3904 (e), but we vacate the judgment pertaining to the CPPA claim under § 28-3904 (f), and we hold that the Condominium Association has standing to sue on behalf of its members.
The voluminous record reveals that at least five cases were filed in the trial court between the years 2004 and 2008, relating to rental apartment conversion to condominiums in the Good Hope Road area, and mortgage loans on condo units. Plaintiffs in these cases made similar claims. The trial court consolidated four of the cases ("the Fitzhugh cases") and decided to manage discovery in the Saucier case with the consolidated cases. However, the court issued separate comprehensive and dispositive memorandum opinions (each exceeding 100 pages) in the Fitzhugh and Saucier cases. Eventually, the parties settled the Fitzhugh cases, but the Saucier plaintiffs appealed their case to this court.
The Saucier case had its origin in the purchase of condo units in a fifty-two year-old renovated property known as "King‟s Court." Between January and August 2002, Ms. Saucier and the other ten plaintiffs closed on mortgage loans from either Countrywide (five loans) or Presidential (six loans). The loans were insured by the Federal Housing Administration ("FHA"), an agency within the federal Department of Housing and Urban Development ("HUD").
Plaintiffs/appellants‟ original complaint, filed in March 2005, involved forty-three counts, including fraud, fraudulent concealment, breach of contract, violation of the CPPA, and conspiracy. On August 23, 2007, in a fifty-three page memorandum opinion, the Honorable Brook Hedge granted motions to dismiss some of the original defendants and counts. The cases were re-assigned to the Honorable Joan Zeldon from the end of December 2007 to the end of December 2009. During that time, a second amended complaint was filed in February 2008; the parties conducted extensive discovery and scheduled depositions. At the end of December 2009, the cases were transferred to Judge Burgess, who presided over continuing discovery and handled pre-trial filings and dispositive motions.
According to Judge Hedge‟s 2007 memorandum opinion responding to defendants‟ motions to dismiss, plaintiffs‟ original complaint alleged that four classes of defendants engaged in a "scheme to sell unsafe over-appraised condominiums to unsophisticated first time home buyers." One of the developer defendants allegedly "was the main organizer of the overall scheme." The complaint averred that the developer filed a public offering statement ("POS") containing assertions that the defendants allegedly knew to be false, and that "[i]nstead of being renovated in compliance with the representations made in the POS, the condominiums were poorly renovated . . . , resulting in condominiums that are not only of lesser quality than promised, but that are actually unsafe to live in due to their many problems including, a roof that requires replacing, improper ventilation, and poor drainage." The second class of defendants, the "sales defendants," sought to convince prospective condo unit owners to purchase, in part, by allegedly "manipulat[ing]" figures comparing rental and ownership costs, telling "plaintiffs that the units and common areas were backed by a two-year warranty against defects and major repairs although they knew this warranty would not be honored," filling out and approving false applications for mortgage loans, and steering plaintiffs to certain mortgage lenders when they knew plaintiffs would not be able to make the mortgage payments. The mortgage defendants, specifically Countrywide and Presidential, who purportedly were protected because FHA insured the mortgages and because they resold the loans to other entities, "allegedly knowingly approved plaintiffs‟ loan applications knowing that the information on them was incorrect, that the property the plaintiffs were purchasing was overvalued, and that plaintiffs would be unable to repay their loans." Finally the "appraiser defendant," Chesapeake Appraisal, "allegedly intentionally over appraised the value of the condominiums to make the investment more attractive to potential creditors."
Deposition Testimony and Supporting Documents
Plaintiffs‟ depositions, through fact and expert witnesses, were
designed to provide support for their litigation theory.*fn1
Some unit owners experienced financial problems before and
after the purchase of their condo units. For example, Barbara
Wilkerson, who bought her condo unit for $62,995, testified that she
"walked away" from her previously owned home because she could not pay
the taxes on the home. Adrienne Newell Currington co-owned her sister‟s
car and a loan officer told her she would not be approved for a
Presidential loan; however, a sales agent gave her money to get the
car off of her outstanding credit indebtedness. In light of these
types of ongoing financial difficulties, plaintiffs began to question
the accuracy of the appraised value of their units, whether they had
timely received certain documents before closing on their loans, the
accuracy of documents they ultimately saw, and whether the mortgage
defendants approved their loans even though they knew plaintiffs could
not afford to make the mortgage payments. After purchasing their condo
units, some of the plaintiffs obtained equity credit lines or loans,
or refinanced their mortgages one or more times in an effort to meet
ongoing obligations, including credit card payments and financing of
Plaintiffs testified that they did not timely receive, or had no recollection of receiving, certain documents from the mortgage defendants that may have influenced their decision as to whether to purchase a condo unit. Four documents were mentioned specifically: the Informed Consumer Choice Disclosure Notice, the POS, the Notice of Right to Copy of Appraisal, and the actual appraisal of their respective condo units. There is no Informed Consumer Choice Disclosure Notice in the record for Katie Carter, Traci Hamilton, Michael Maxwell, and Carlton Wilson. The notice for Roosevelt Hall appears in the record; it is signed (presumably by him) but undated. The notice appears in the record for the other appellants and is signed and dated.
Traci Hamilton maintained that she did not receive the POS until after closing, and that it contained a false statement, namely that the "roof was only five years old." There is no Notice of Right to Copy of Appraisal for plaintiffs/appellants Carter, Hall, Hamilton, Maxwell, Wilson, and Dixon. However, there is a signed and dated notice for the other plaintiffs/appellants. Katie Carter and Roosevelt Hall denied receiving an appraisal, and Michael Maxwell did not remember receiving an appraisal before closing.
In addition to the specified documents, plaintiffs/appellants claim that they did not receive certain information, or accurate information, from the mortgage defendants that may have influenced their decision to purchase a condo unit -- information that they could not afford to pay off the mortgage loan, that the loans did not comply with FHA/HUD guidelines and regulations, that the appraisals were inflated, and that the rehabilitation of the condo building was defective or lacking in new equipment and a new roof. The appraisal report that Ms. Hamilton eventually received stated falsely, she claimed, that the condo building "has a new flat rubberized bituminous membrane roof." Katie Carter‟s appraisal said: "The subject has a flat rubberized bituminous membrane roof that has been replaced," but there also was a later statement signed by Countrywide‟s underwriter that specified: "needs roofing cert." A "notice to homeowner" statement contained in the Chesapeake appraisal report for Carl Wilson said that the condo building "has a flat rubberized membrane roof that has been replaced."*fn2 Sheleta Bedney Watts testified that she took a friend and the friend‟s father to her meeting with sales agents, and that a sales agent told them the water heater, boiler, and other equipment "all would be replaced" and that "the roof was only a matter of just a few years old."
One of the documents in plaintiffs‟ files was a form entitled "Direct Endorsement Approval for a HUD/FHA Insured Mortgage." This form was present in all of the plaintiffs‟ loan files. The form was signed and dated, except for plaintiffs Michael Maxwell (signature but no date), Adrienne Newell, Regina Dixon, and Barbara Wilkerson (signed but not dated), and Emma Pittman (no signature/date).
Plaintiffs/appellants‟ expert, Dr. Calvin Bradford, a sociologist and consultant and a former HUD employee, reviewed document files, including the loan files of plaintiffs who received Countrywide loans. It was his written "opinion" that "the circumstances in this case fall within the general historical context of lending patterns and practices that have exploited minority buyers through loans that contained misrepresentation, misleading information and that failed to properly inform borrowers of the true conditions of the property or loan." Specifically, he stated, in part, that "[t]here [wa]s no evidence that either lender conducted an inspection of any unit by an FHA approved fee inspector," but "[n]onetheless, the lenders [mis]represented in certifications to the FHA that the property met the FHA underwriting standards and conditions." Furthermore, he concluded, "by approving the loans without meeting [the fee inspection requirement], the lenders were also misrepresenting to the borrower that the property met FHA standards." He opined "that the defendant lenders knew or should have known of any basic issue with the building systems in King‟s Court that caused damages to plaintiffs‟ units," that "the lenders misrepresented to the FHA that the issue with the roof was resolved by signing certifications that the property was acceptable," and that "several of the applicants were only marginally qualified, and perhaps not qualified, for the loans based on the FHA underwriting standards."
Plaintiff‟s appraisal expert, Donald S. Boucher, reviewed eleven appraisal reports prepared by Catherine M. Huber Moore for eleven units purchased by plaintiffs. He declared during his deposition that the appraiser of the eleven units failed to conduct "a thorough inspection of the property," and contrary to general appraisal practice, "relied on comparables in the same project." In addition, because the renovation project had not been completed by the time most of the appraisals were done, a final inspection of the property should have been made, or a sum of money should have been placed in escrow. In Mr. Boucher‟s opinion, the appraised value of three units should have been $706,500, rather than the stated appraised value of $776,495. Mr. Boucher‟s written report noted that the appraiser had made assumptions that were not grounded in fact. For example, the appraiser of King‟s Court assumed that the apartment building had been "gutted" and renovated, but it was not gutted; and she further assumed the existing roof had been removed and replaced with a new roof, but that was not true. Mr. Boucher concluded that the appraiser failed to "conform to generally accepted appraisal practices, generally accepted loan underwriting guidelines and USPAP [Uniform Standards of Professional Appraisal Practice] Standards and requirements."*fn3
Fact witnesses who worked for defendants also were deposed, as plaintiffs sought to establish the theory of their causes of action. Doretha Austin, who was employed as a sales agent, denied ever telling plaintiffs "that the units were fully gutted and renovated"; she stated only that the units were "[n]ewly renovated." Her "biggest stress problem and [her] biggest concern" was "[t]he flooding at King‟s Court." A developer, Eric Fedewa, denied hearing about sales agent Roger Black‟s "paying off a buyer‟s car note in order to help [her] get approved." Mr. Fedewa acknowledged that he did not have "[t]he whole roof replaced" at King‟s Court, and that "a lot of the tubs, if not most of the tubs," were not replaced "because they were lead, . . . porcelain tubs that were in good shape" and cutting them out would have "cause[d] a lot of damage." Consequently, the tubs were "cleaned" and "reglazed." When asked what role he played in drafting the POS for King‟s Court, Mr. Fedewa responded, "Not much," but he did review the POS. The POS indicated that the roof had been "[r]epaired and covered . . . with coping, gutters downspouts, and cornice," and that the roof had a "useful life" of fifteen years, with a replacement cost for "roofing/gates" of $30,000 in "2001 dollars." Plaintiffs submitted a March 8, 2001, "Building Condition Survey" prepared by an architectural firm and an engineering firm, which included the following statement about the roof: "According to the management, the roof was replaced about 7 years ago and is built-up with an aluminized coating."
Tracy Brosnan, the loan officer and processor for Presidential, stated that she did not "run credit reports on buyers." Ms. Saucier and the other appellants did not have to make down payments on their respective units, because these payments were covered by a gift from a non-profit organization, Ameri-Dream. The seller of the condo units funded the down payments and also paid the nonprofit‟s administrative fees relating to the payments. Ms. Brosnan maintained that she did not make any representations about repairs to or the condition of the King‟s Court building.
Patricia Mills, an appraiser for Countrywide, asserted that the developer of King‟s Court informed her that "there was a new rubber bituminous membrane put on the roof" at King‟s Court; the lender is required to file a new roof certification but there was none in the file; and had she been aware that there was a defect in the roof, that would have had an effect on the appraised value of the property. Catherine Moore, an appraiser for Presidential, stated that she saw reference to King‟s Court‟s "new flat rubberized . . . bituminous membrane roof" in a document and included that statement in her appraisal report, but she could not recall getting the information from the developer. She also indicated in her appraisal report that the King‟s Court units had been "gutted and renovated." She could not remember how she learned about this information, but she generally assumed that if fresh drywall is in a unit, it had been gutted and renovated.
Countrywide‟s expert, Middleton Thompson, and Presidential‟s expert, William Heyman, disputed many aspects of plaintiffs/appellants‟ claims regarding the loan approval process, and HUD/FHA requirements. Mr. Thompson reviewed the five Countrywide loan files; he addressed and disagreed with many of the conclusions reached by plaintiffs/appellants‟ expert, Calvin Bradford. Similarly, William Heyman, Presidential‟s expert, reviewed the Presidential loan files and opined that the loans were processed properly.
The Trial Court's Summary Judgment Decision
At the conclusion of discovery, and after dispositive motions were filed, Judge Burgess issued two separate memorandum opinions, a 114-page memorandum in the Fitzhugh cases on November 22, 2010, and a memorandum in excess of 100 pages in the Saucier case on March 28, 2011. In the Saucier case, Judge Burgess considered four alleged misrepresentations by the mortgage lenders:
(1) mortgage loans made to plaintiffs/appellants "complied with FHA guidelines when they did not"; (2) "plaintiffs could afford their loans when they could not";
(3) "the appraisals [of the condo units] reflected the true value of the units when they were inflated"; and (4) "the construction of the units was sound." He determined that the mortgage lenders made no explicit misrepresentations, and he rejected plaintiffs/appellants‟ argument that by approving the mortgage loans, the mortgage lenders made implied misrepresentations concerning FHA guidelines, plaintiffs‟ capacity to make the purchases and repay the loans, the value of the units based on the appraisals, and the soundness of the construction. Judge Burgess further concluded that the mortgage lenders made no material omissions because, based on Maryland law which he applied (due to the lack of relevant District law), plaintiffs/appellants failed to show a duty on the part of the mortgage lenders to ...