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Kemp v. Eiland

United States District Court, D. Columbia

September 30, 2015

ETHEL KEMP, Plaintiff,
v.
DERRICK K. EILAND, et al., Defendants

          For ETHEL KEMP, Plaintiff: Amy R. Mix, LEAD ATTORNEY, LEGAL COUNSEL FOR THE ELDERLY, Washington, DC; Erik Goodman, LEAD ATTORNEY, PRO HAC VICE, LEGAL COUNSEL FOR THE ELDERLY, Washington, DC.

         For DERRICK K. EILAND, Defendant: Philip M. Musolino, LEAD ATTORNEY, MUSOLINO & DESSEL PLLC, Washington, DC.

         For WORLD SAVINGS BANK, FSB, WACHOVIA CORPORATION, WELLS FARGO & COMPANY, WELLS FARGO BANK, N.A., Defendants: Anand Vijay Ramana, MCGUIREWOODS LLP, Washington, DC.

         MEMORANDUM OPINION

         TANYA S. CHUTKAN, United States District Judge

         Plaintiff Ethel Kemp alleges a decade-long scheme by Defendant Derrick Eiland to fraudulently transfer ownership in property from Kemp to himself. Kemp filed suit against Eiland and the holder[1] of a mortgage on the subject property to quiet title to the property, and otherwise obtain monetary and equitable relief against the Defendants. The Bank Defendants moved to dismiss the Complaint for failure to state a claim. Eiland answered the Complaint and subsequently moved to dismiss for failure to state a claim or, in the alternative, for pre-discovery summary judgment. Kemp opposed the motions and cross-moved for discovery pursuant to Fed.R.Civ.P. 56(d). For the reasons set forth below, Defendants' motions are granted in part and denied in part. Plaintiff's cross-motion for discovery is denied. Plaintiff's motion for leave to file an amended complaint is denied without prejudice for failure to comply with the Local Rules.[2] Plaintiff may refile the motion in accordance with the Local Rules within ten (10) days from the issuance of this Opinion.

         I. BACKGROUND[3]

         The 81-year old Plaintiff, Ethel Kemp, lives at 1637 V Street N.W. Washington, D.C. (the " Property" ). (Compl. ¶ ¶ 17-18). Mrs. Kemp and her late husband Roger Kemp purchased the Property in 1979. ( Id. ¶ 17). In or around 2001, the Kemps began falling behind on their mortgage payments, and as a result, faced foreclosure. ( Id. ¶ ¶ 19-20). Defendant Eiland approached the Kemps and offered to help them save their home. ( Id. ¶ ¶ 20-21). The Kemps agreed to work with Eiland because " they believed he was helping them keep their long-time home." ( Id. ¶ 22).

         The Kemps signed a document entitled a " Declaration of Trust and Land Agreement" (the " Declaration of Trust" ) on February 8, 2001. ( Id. ¶ 23). That document, written by Mr. Eiland and his former co-defendant, Denise Cowley, purported to transfer title of the Property to the newly created " 1637 V. St. Land Trust" . ( Id. ¶ ¶ 24, 26, 28, 31). The Declaration of Trust did not contain any explicit language identifying any beneficiary of the Trust. ( Id. ¶ 32). Plaintiff alleges that the Declaration of Trust " lacks explicit language stating that the Kemps intended to create a trust or that the Kemps intended to place title of their home into the Trust once created." ( Id. ¶ 27). Plaintiff also points out that the Kemps' names " are not identified in the Declaration of Trust other than by the appearance of their signatures on the next-to-last page of the document, above the words ' % Beneficiary,'" which is left blank. ( Id. ¶ 33). The Declaration of Trust was recorded two years after it was signed. ( Id. ¶ ¶ 36-37). In addition to the Declaration of Trust, the Kemps signed a Warranty Deed (the " 2001 Deed" ), which purported to transfer the Property to the Trust. ( Id. ¶ 38). Like the Declaration of Trust, it was recorded two years after it was signed. ( Id. ¶ 40).

         The Complaint references no other documents signed on February 8, 2001. Eiland's motion for summary judgment identifies additional documents signed on that date, which Kemp's subsequent filings acknowledge. (Pl. Summ. J. Opp'n at 12). But because, as is discussed below, the Court denies Eiland's motion for summary judgment as premature, and these documents are not " documents upon which the plaintiff's complaint necessarily relies," the Court does not look to them in its evaluation of the Defendants' motions to dismiss. Bullock v. Donohoe 71 F.Supp.3d 31, 34 (D.D.C. 2014).[4]

         Sometime in 2007, Eiland and Cowley created and executed a new Deed (the " 2007 Deed" ), purporting to transfer title of the Property from the Trust to " Derrick Eiland, sole owner." (Compl. ¶ 41). Eiland executed the 2007 Deed as " Substitute Trustee" of the Trust, even though the Declaration of Trust neither names a substitute trustee nor conveys authority on the trustees to appoint a substitute, and no appointment of a substitute trustee was filed among the land records. ( Id. ¶ ¶ 42-45). The 2007 Deed was executed in the District of Columbia but notarized by a Maryland notary public. ( Id. ¶ ¶ 25, 39, 47). It was subsequently recorded in the land records. ( Id. ¶ 46). On or about November 19, 2007, Eiland obtained a $300,000 mortgage from Defendant World Savings Bank (" WSB" ) secured by the Property pursuant to a Deed of Trust (" 2007 Deed of Trust" ).[5] ( Id. ¶ ¶ 48-50).

         Plaintiff asserts that " Eiland used the 2007 Deed and Deed of Trust to strip the equity in the Kemps' home for his own benefit or for the benefit of himself and Defendant Cowley." ( Id. ¶ 51). Additionally, Eiland instructed the Kemps to make direct payments to him instead of their lenders. ( Id. ¶ 53). The Kemps complied with that request until June 2014, making monthly payments of $941, which Plaintiff " believed . . . were going toward her mortgage." ( Id. ¶ ¶ 54-55). Altogether, Eiland is alleged to have received at least $135,000 from Plaintiff since 2001. ( Id. ¶ 56). Finally, " [i]n May 2014, Defendant Eiland threatened to 'evict' Mrs. Kemp from her home for 'nonpayment of rent.'" ( Id. ¶ 58).

         On June 30, 2014 Plaintiff filed suit in the Superior Court for the District of Columbia against Defendants Eiland and Cowley, as well as Defendants Wells Fargo & Company (" WFC" ), Wachovia Corporation, and WSB (collectively, the " Bank Defendants" ). The Complaint contains five claims: Count I (against all Defendants), seeks to quiet title to the Property by setting aside all deeds and deeds of trust on the grounds that the documents involved were either facially deficient, void, voidable, fraudulently induced, or otherwise unconscionable ( Id. ¶ ¶ 59-77); Count II (against Eiland), alleges a breach of the fiduciary duty of loyalty ( Id. ¶ ¶ 78-84); Count III (against all Defendants), seeks injunctive relief prohibiting " any further conveyance, encumbrance, or other transactions involving her home, including any eviction proceeding to evict Mrs. Kemp from her home" ( Id. ¶ ¶ 85-86); Count IV (against Eiland), alleges unjust enrichment ( Id. ¶ ¶ 87-94); and Count V (against all Defendants), alleges slander of title ( Id. ¶ ¶ 95-109).

         On September 16, 2014, the Bank Defendants removed the case to this court pursuant to 28 U.S.C. § 1441, asserting diversity jurisdiction. Eiland filed an answer on September 23, 2014, and on the same day, both the Bank Defendants and Cowley filed motions to dismiss.[6]

         On February 6, 2015, Eiland filed his own motion to dismiss, or, in the alternative, for summary judgment. Plaintiff opposed the motion and countered with a motion to permit discovery pursuant to Rule 56(d).

         II. LEGAL STANDARD

         A. Motion to Dismiss

         A motion to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to state a claim tests the legal sufficiency of a complaint. Browning v. Clinton, 292 F.3d 235, 242, 352 U.S.App.D.C. 4 (D.C. Cir. 2002). " To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks and citation omitted). A claim is plausible when the factual content allows the Court to " draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Thus, although a plaintiff may survive a Rule 12(b)(6) motion even where " recovery is very remote and unlikely," the facts alleged in the complaint " must be enough to raise a right to relief above the speculative level." Bell A. Corp. v. Twombly, 550 U.S. 544, 555-56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotation marks and citation omitted). Evaluating a 12(b)(6) motion is a " context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679. The reviewing 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." E.E.O.C. v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624, 326 U.S.App.D.C. 67 (D.C. Cir. 1997).

         B. Motion for Summary Judgment

         Summary judgment is appropriate where there is no disputed genuine issue of material fact, and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In determining whether a genuine issue of material fact exists, the court must view all facts in the light most favorable to the non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The moving party bears the " initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits . . . which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp., 477 U.S. at 323 (internal quotation marks omitted). The nonmoving party, in response, must " go beyond the pleadings and by [its] own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial." Id. at 324 (internal quotation marks omitted). " If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (citations omitted). " [A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Id., at 249.

         Summary judgment is often inappropriate when the parties have not yet engaged in discovery. The D.C. Circuit has repeatedly cautioned that " summary judgment is premature unless all parties have 'had a full opportunity to conduct discovery.'" Convertino v. U.S. Dep't of Justice, 684 F.3d 93, 99, 401 U.S.App.D.C. 297 (D.C. Cir. 2012) (citing Liberty Lobby, Inc., 477 U.S. at 257); Americable Int'l, Inc. v. Dep't of Navy, 129 F.3d 1271, 1274, 327 U.S.App.D.C. 159 (D.C. Cir. 1997) (" As we have stated before, summary judgment ordinarily 'is proper only after the plaintiff has been given adequate time for discovery.'" ) (citing First Chicago Int'l v. United Exch. Co., 836 F.2d 1375, 1380, 267 U.S.App.D.C. 27 (D.C. Cir. 1988)); see also Celotex Corp., 477 U.S. at 322 (summary judgment appropriate only " after adequate time for discovery" ).[7]

         III. ANALYSIS

         A. Summary Judgment

         Eiland moves for summary judgment largely on the basis of: (1) documents disclosed in his Motion, purporting to reflect agreements between Eiland and the Kemps, Eiland and the Trust, and Eiland and the Bank Defendants; and (2) his sworn declaration, attached as an exhibit to his Motion. Normally, at the summary judgment stage, Eiland's reliance on these documents would not be improper: it does appear that the text of the documents, which purportedly bear Plaintiff's signature, may provide a defense to her allegations. See, e.g., Hughes v. Abell, 867 F.Supp.2d 76, 94-95 (D.D.C. 2012) (holding that documents of undisputed authenticity unambiguously demonstrated transfer of property).

         However, at this stage of the litigation, a summary judgment motion is premature. As noted above, summary judgment is normally appropriate only after the parties have had an opportunity to engage in discovery. See Convertino, 684 F.3d at 99. When a party moves for pre-discovery summary judgment, it " bears the heavy burden of establishing that the merits of his case are so clear that expedited action is justified." Taxpayers Watchdog, Inc. v. Stanley, 819 F.2d 294, 297, 260 U.S.App.D.C. 334 (D.C. Cir. 1987). Eiland does not meet this heavy burden. Kemp has alleged that she was fundamentally misled about the effect of the various agreements, and implies--although does not explicitly assert--that the authenticity of the documents upon which Eiland relies is unsettled.[8] Proof of these allegations necessarily goes beyond the text of the transaction documents and requires discovery into what, if any, representations Eiland made to Kemp and any other circumstances indicating that the text of the documents should not control. See, e.g., Barrer v. Women's Nat'l Bank, 761 F.2d 752, 758-60, 245 U.S.App.D.C. 349 (D.C. Cir. 1985) (describing the fact-intensive inquiry under D.C. law into whether even innocent misrepresentations can be the basis for rescission of a contract). Indeed, even in Hughes, the court considered deposition testimony by the homeowner that he did not understand the transactions, but ultimately concluded that this testimony was not credible " in light of the written documents in the record," which were " extremely clear." Hughes, 867 F.Supp.2d at 94. Where a plaintiff has not had the opportunity to adduce evidence relating to the circumstances under which the documents were created, summary judgment must be denied without prejudice. Because Defendant's motion for summary judgment is denied, the court also denies the Plaintiff's FED. R. CIV. P 56(d) motion for discovery as moot.

         The Court now proceeds to address whether Counts I through V state claims for relief under Rule 12(b)(6).

         B. Count I -- Quiet Title (All Defendants)

         " It is well established that courts may hear a common law action to quiet title in order to prove title, secure title, or to remove obstacles which hinder its enjoyment." Jessup v. Progressive Funding, 35 F.Supp.3d 25, 34 (D.D.C. 2014) (quoting In re Tyree, 493 A.2d 314, 317 (D.C.1985)). " In a quiet title action, the plaintiff asks the court to declare that he or she has good title to the property in question and compels any adverse claimant to prove a competing ownership claim or forever be barred from asserting it." 65 Am.Jur.2d Quieting Title § 1. In these actions, " 'the Plaintiff has the burden of showing a title or right superior to that of the defendant as a prima facie case,' which means that 'the plaintiff [must] at least prove a title better than that of the defendant, which, if not overcome by the defendant, is sufficient.'" Jessup, 35 F.Supp.3d at 36 (quoting 74 C.J.S. Quieting Title § 77 (2014)). " If the defendant has established the due execution of an instrument, the burden is again cast on the plaintiff to show facts in avoidance." 74 C.J.S. Quieting Title § 77 (2014).

         The court notes at the outset that Defendants place great reliance on Jessup v. Progressive Funding. But, Plaintiff points out, that case differed from this one in several respects. " Jessup's complaint contains no allegation that she has superior title to the property, let alone any facts that would support such an allegation." Id., 35 F.Supp.3d at 36. Jessup also did not allege " facts showing that this conveyance was invalid in the first instance," whereas here, Plaintiff alleges that the conveyance was invalid due to facial deficiencies in the trust instrument, unauthorized actions under the trust, self-dealing, fraudulent inducement, and unconscionability. Id. Further, there were no allegations in Jessup, as there are here, that due to deceit, the Plaintiff unknowingly and unintentionally entered into a transaction which clouded the title to her property. Allegations of deception suffice to state a claim to quiet title. Lancaster v. Fox, 72 F.Supp.3d 319, 322 (D.D.C. 2014) (" were [plaintiff] successful in proving his fraud allegations . . . he could clear the title to the property of any cloud created by the contested deeds" ); see also 65 Am.Jur.2d Quieting Title § 21 (" a title or lien that has been procured by fraud, deceit, or misrepresentation casts upon the property a cloud that may be removed by a suit to quiet title" (citing Graves v. Ashburn, 215 U.S. 331, 30 S.Ct. 108, 54 L.Ed. 217 (1909))).[9]

         Eiland[10] and Kemp also devote substantial resources arguing whether the irregularities Plaintiff has identified suffice to justify an order quieting title in Kemp's favor. As Eiland reads the Complaint, Plaintiff alleges that:

she is entitled to an order quieting title for five reasons: deficiencies in the 2001 Declaration of Trust and the 2001 Deed, Compl., at ¶ ¶ [sic]; Eiland's 'unauthorized acts' void the 2007 transaction, Compl., at ¶ ¶ 62-64; self-dealing in the 2007 transaction, Compl., ¶ ¶ 64-70; fraudulent inducement, Compl., at ¶ ¶ 71-73; and unconscionability. Compl., at ¶ ¶ 74-76.

Eiland Mot. at 27 (footnote omitted). Eiland argues that none of these grounds can void the documents purporting to transfer the Property. Kemp responds that these are not stand-alone claims, but rather " reasons why this Court, in equity, should quiet title in Mrs. Kemp's favor." (Kemp Summ. J. Opp'n at 14 (emphasis in original)). Kemp also correctly notes that " [i]n the District of Columbia, an action to quiet title may not be dismissed for failure to state a claim when the complaint alleges, as appellants' complaint does, that the plaintiffs are the owners of the land in fee simple." In re Tyree, 493 A.2d at 317. However, to properly allege superior title, Kemp must proffer facts supporting that assertion, meaning she must allege a basis for finding as void the documents which she argues cloud her title. The court must, accordingly, analyze the extent to which she has alleged such a basis, and does so below by evaluating each theory for quieting title. See, e.g., Diaby v. Bierman, 795 F.Supp.2d 108, 112 (D.D.C. 2011) (dismissing quiet title complaint when plaintiff's allegations that defendants lacked standing to foreclose on his property were unsupported by the law). The court also notes that other cases in this District have noted that " it is premature to consider dismissal of [a quiet title count], which may or may not constitute an appropriate remedy depending on the evidence yet to be adduced in this case." Hughes v. Abell, 867 F.Supp.2d at 90 ( citing Armenian Genocide Museum and Mem'l, Inc. v. Cafesjian Family Found., Inc., 595 F.Supp.2d 110, 119 (D.D.C.2009)).

         As discussed below, the court finds that Kemp's allegations provide a sufficient basis on which to challenge the documents that she alleges cloud her title. Defendants' motion to dismiss as to Count I is therefore denied.

         i. Invalidity of the 2001 Trust and Deed

         The District of Columbia has adopted the Uniform Trust Code, which requires a " definite beneficiary" in order to create a trust. D.C. Code § 19-1304.02(a)(3); see also In re D.M.B., 979 A.2d 15, 21 (D.C. 2009). A beneficiary is definite " if the beneficiary can be ascertained now or in the future." D.C. Code § 19-1304.02(b). Kemp alleges that the Trust is " facially deficient" due to a failure " to specifically name the Kemps (or anyone else) as beneficiaries and the failure to include language demonstrating the intent of the Kemps to create a trust and to transfer title of their home into the Trust." (Compl. ¶ 60).

         Eiland responds that because the beneficiary could be ascertained in the future, the Trust is not defective on its face. However, this argument misconstrues the meaning of 19-1304.02(a)(3), which:

is simply a codification of the common-law rule of the Restatement (Second) of Trusts § 112, which states that a trust is not created unless there is a beneficiary who is definitely ascertained at the time of the creation of the trust or definitely ascertainable within the period of the rule against perpetuities.

Newman v. Liebig, 282 Neb. 609, 613-14, 810 N.W.2d 408 (2011) (interpreting Nebraska's codification of the Uniform Trust Code); see D.C. Code § 19-1301.06 (" The common law of trusts and principles of equity supplement" the Uniform Trust Code.). The Restatement (Second) of Trusts § 112 comments provide that a beneficiary " must be either (1) specifically named; or (2) capable of ascertainment from facts existing at the time of the creation of the trust; or (3) capable of ascertainment from facts which although not existing at the time must necessarily be in existence at some time within the period of the rule against perpetuities." Restatement (Second) of Trusts § 112 comment a. While a beneficiary can be " designated by description," id. at comment c, the thrust of this rule is that the trust instrument itself must designate some manner of identifying the beneficiary. The trust at issue in Newman failed because the " beneficiary must be ascertainable from the trust instrument" and " no beneficiary [was] designated by the trust instrument." Newman, 282 Neb., at 614 (emphasis in original).

         The Declaration of Trust in this case (attached as Ex. 10B to Eiland Mot.), does not identify the Kemps, or any other party, as beneficiaries of the Trust. However, the Kemps did sign above two lines line stating " % Beneficiary." The Declaration of Trust also does not confer power on the Trustee to nominate a beneficiary from a broadly defined class. Thus the identity of any beneficiary in the Declaration of Trust is unsettled or missing entirely, and therefore Plaintiff raises " a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 678.

         Eiland maintains that, in any event, a defect in the trust agreement does not " vest title in the grantor" but instead the " transferee takes title free of trust." (Eiland Mot. at 28 n.11 (citing Restatement (Third) of Trusts § 8 comment f)). This again misreads the law, which provides that if " the transferor received from the transferee consideration for the transfer as an agreed exchange," the transferee holds the title free of trust. Restatement (Third) of Trusts ยง 8 comment f. Here, the Declaration ...


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