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Cordoba Initiative Corporation v. Robert Leslie Deak

May 6, 2013

CORDOBA INITIATIVE CORPORATION, PLAINTIFF,
v.
ROBERT LESLIE DEAK, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Richard W. Roberts United States District Judge

MEMORANDUM ORDER

Plaintiff Cordoba Initiative Corporation ("Cordoba") filed this lawsuit against Robert Leslie Deak and his wife, Moshira Soliman, alleging that Cordoba was the victim of fraud when Deak misrepresented the value of a condominium unit ("Unit 201") in the District of Columbia, sold it to Cordoba, and did not transfer the title.*fn1 The complaint alleges that although Deak promised that he would provide Cordoba with both a lease and a sales contract covering Unit 201 once Cordoba transferred funds, Deak never had a sales contract prepared or transferred title after Cordoba transferred $1.5 million as Deak requested. Compl. ¶¶ 19-22. The complaint also alleges that the defendants used the proceeds to buy another condominium in the same building ("Unit 303") two weeks after Cordoba transferred its funds.

Compl. ¶ 26. Cordoba asks that a constructive trust be imposed upon both Units.

Cordoba filed the complaint in this matter in August 2011. Three days later, it filed with the Recorder of Deeds notices of lis pendens on Unit 201 and its accompanying parking spot, and on Unit 303, reflecting the pendency of this action. Defs.' Mem. in Supp. of Mot. to Cancel Lis Pendens ("Defs.' Mem.") at 2-3. On April 8, 2013, the defendants entered into a contract to sell Unit 201. The sale is scheduled to close on May 8, 2013, and is subject to the defendants delivering clear title. On April 16, 2013, the defendants were approved for a home equity line of credit on Unit 303 contingent on a title search. Id. at 3.

The defendants have moved to cancel and release the notices of lis pendens. The defendants argue that the notices are ineffective and were filed improperly because the action does not affect the title to real property, see Defs.' Mem. at 5-6, and that the defendants will be irreparably harmed without cancellation of the notices because they might be unable to complete the sale of Unit 201 and might not receive the home equity line of credit on Unit 303, see Defs.' Mem. at 8-10. The defendants seek sanctions against the plaintiff for recording the notices. Id. at 6. The plaintiff opposes, arguing that recordation was proper since the complaint asserts a proper interest in the Units and seeks a constructive trust on them, and -that the defendants cannot show a liklihood of success on the merits or that the balance of harms or the public interest favors the defendants. Pl.'s Opp'n at 6-8.

I

A notice of lis pendens in the District of Columbia is "effective only if the underlying action or proceeding directly affects the title to or tenancy interest . . . or other ownership interest in real property situated in the District of Columbia[.]" D.C. Code § 42-1207(b). "The purpose of a lis pendens is 'to enable interested third parties to discover the existence and scope of pending litigation affecting property.'" McNair Builders v. 1629 16th St., L.L.C., 968 A.2d 505, 507 (D.C. 2009) (quoting Heck v. Adamson, 941 A.2d 1028, 1029 (D.C. 2008) (internal quotation omitted)). However, [a] person with an ownership interest in real property upon which a notice of pendency of action has been filed under this section may . . . file a motion to cancel the notice . . . [and the] court . . . may issue an order canceling the notice of pendency of action prior to the entry of judgment in the underlying action or proceeding if the court finds . . . [t]he moving party will suffer an irreparable injury if the notice is not cancelled; . . . [t]he moving party has demonstrated a substantial likelihood of success on the merits in the underlying action or proceeding; . . .

[a] balancing of the potential harms favors the moving party; and [t]he public interest favors canceling the notice[.]

D.C. Code § 42-1207 (g)-(h). The District of Columbia Court of Appeals has stated, though, that any equitable power a court has to order cancellation of a notice of lis pendens before judgment in the underlying action "must be exercised parsimoniously." Heck, 941 A.2d at 1030; see also McWilliams Ballard, Inc. v. Level 2 Dev., 697 F. Supp. 2d 101, 111 (D.D.C. 2010) (citing Heck).

II

The defendants' argument that the notices are ineffective is not supported by the record. The complaint adequately alleges plaintiff's ownership and tenancy interests in Unit 201. The allegation that Cordoba paid to rent and buy Unit 201 and the owning defendants provided neither a lease nor a sales contract in return directly affects the parties' ownership interests in realty here.

Deak claims that the original transfer of Cordoba funds was not solely for the purchase of Unit 201 but was also in connection with an agreement for Deak's company to provide extensive consulting services to Cordoba. Deak adds that the parties terminated the consulting services agreement and therefore the notices do not directly affect the title to the Units he owns. Defs.' Reply at 2. Whatever additional terms may have attached to the money transfer, Deak's showing does nothing to disprove that one of the purposes of the money transfer was to give Cordoba a tenancy and ownership interest in Unit 201 as the complaint pleads. To the contrary, Deak's letter asking Cordoba to make the transfer corroborates that purpose. Defs.' Reply, Deak Reply Affid. ("Reply Affid."), Ex. D ("Cause Management is prepared to arrange for the transfer to you of a property located at 3030 K Street, NW, Unit 201, Washington DC . . . . In order to do so, we will need to receive a wire transfer of $1,500,000 . . . . Once the funds are received, Cause Management will arrange to transfer the property to your control[.]").

The complaint also alleges that Cordoba's funds fraudulently obtained by the defendants to secure Cordoba's interests in Unit 201 were used by the defendants to obtain Unit 303 just two weeks later. Where one party improperly obtains another's funds and uses them to obtain an interest in real property, a constructive trust upon that property is an available remedy. Heck, 941 A.2d at 1029. Seeking such a trust asserts a sufficient ...


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