Pеggy and James Haley sued Jack Corcoran, Michael Mattice, Charles Head, Alliance Title (“Alliance”), Option One Mortgage (“Option One”), First American Title Co. (“First American”), and others, for claims that arise from an alleged foreclosure rescue fraud. Pending are Option One and First American’s motions to dismiss for failure to state a claim upon which relief can be granted. For the following reasons, the motions will be granted.
I. Background
The complaint alleges a foreclosure rescue fraud. 1 James and Peggy Haley, husband and wife, bought a house in 1986 for $89,500. 2 Compl. ¶2, 13. In 2005, the Halеys fell behind on their mortgage payments, and a foreclosure action was commenced in the Circuit Court for Carroll County. Id. ¶ 14. Shortly thereafter, Charles Head contacted the Haleys for Fundingforeclosure.com, and offered to help them stop the foreclosure and repair their credit. Id. Head explained that Fundingforeclosure.com would arrange the sale of the house to a person who would allow the Haleys to continue to live in the house and remain on its deеd. Id. ¶ 17. During the year following the sale, the Haleys would lease the house from Nations Property Management. Id. Then, Head explained, the Haleys could repurchase the house with a loan that Head guaranteed would be extended. Id. Relying on these representations, the Haleys agreed to the transactions. Id. ¶ 20.
The August 8, 2005 settlement was conducted by a notary public; the buyer, whom the Haleys later learned was Michael Mattice, was not present. Id. ¶ 21. The Haleys signed a deed in blank, which did not stаte the purchase price, and a lease requiring $2000 monthly payments to Nations Property Management. Id. ¶¶ 29, 30. Alliance prepared the settlement documents and was the settlement agent. Id. ¶¶ 6, 22. Alliance also was title agent for First American, the title insurer. Id. ¶¶ 6, 10. The Haleys were not given copies of the settlement documents. Id. ¶¶ 25, 28.
The Haleys were not informed of the purchase price of the house or shown a “HUD-1” settlement statement. Id. ¶ 23. A deed to the house, stating a $400,000 purchase price, wаs later recorded. Id. ¶ 31. The Haleys did not receive proceeds from the settlement. Id. ¶ 27. Thereafter, the Haleys’ mortgage obligations were satisfied, and the pending foreclosure was dismissed for lack of prosecution. Id. ¶ 26.
The Haleys paid rent to Nations Property Management until November 2006; then Mattice informed them that he had bought the house with a loan from Option One secured by two mortgages. Id. ¶¶ 33, 35, 37. The Haleys then began making payments to Option One. Id. ¶ 33. Around this time, the Haleys also discoverеd that they were not on the deed with Mattice. Id.
On June 6, 2007, Option One filed a foreclosure action against Mattice in the Circuit Court for Carroll County for nonpayment. Id. ¶ 41. On June 26, 2007, the Haleys filed an emergency motion to stop the foreclosure, which the Circuit Court granted three days later. Id. ¶ 42.
II. Analysis
Option One has moved to dismiss the Haleys’ claims for quiet title, equitable mortgage, negligent misrepresentation, and unjust enrichment under Rule 12(b)(6), and the claims for intentional misrepresentation and violation of the Maryland Consumer Protection Act 3 (“MCPA”) under Rules 12(b)(6) and 9(b).
First American has moved to dismiss the Haleys’ claims for negligent misrepresentation, unjust enrichment and civil conspiraсy under Rule 12(b)(6), and the claims for intentional misrepresentation and violation of the MCPA under Rules 12(b)(6) and 9(b).
A. Standard of Review
1. Rule 12(b)(6)
Under Fed.R.Civ.P. 12(b)(6), an action may be dismissed for failure to state a claim upon which relief can be granted. Rule 12(b)(6) tests the legal sufficiency of a complaint, but does not “resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”
Presley v. City of Charlottesville,
The Court bears in mind that Rule 8(a)(2) requires only a “short and plain statement of the claim showing that the pleader is entitled to relief.”
Migdal v. Rowe Price-Fleming Int’l Inc.,
To present a facially plausible complaint, a plaintiff must do more than “plead[] facts that are ‘merely consistent with a defendant’s liability’ the facts as pleaded must “allow[] the court to draw the reasonable inference that the dеfendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal,
— U.S. -,
The Court “should view the complaint in a light most favorable to the plaintiff,” and “accept as true all well-pleaded allegations,”
Mylan Labs., Inc. v. Matkari,
2. Rule 9(b)
When a plaintiff alleges fraud or when “the gravamen of the claim is fraud even though the theory supporting the claim is not technically termed fraud,”
Adams v. NVR Homes, Inc.,
When a complaint alleges fraud against multiple defendants, Rule 9(b) requires that the plaintiff identify each defendant’s participation in the alleged fraud.
Adams,
B. Option One’s Motion
1. Quiet Title
The Haleys seek to quiet title to the house through a declaratory judgment that they are the sole owners of — and the defendants have no interest in — the house. Option One moves to dismiss the Haleys’ quiеt title claim on the ground that it is prohibited by § 14-108(a) of the Real Property Article of the Maryland Code.
Section 14-108 allows a person in “actual peaceable possession of property” to sue for quiet title “when his title to the property is denied or disputed, or when any other person claims, of record or otherwise to own the property ... or to hold any lien encumbrance on it.” Md.Code Ann., Real Prop. § 14-108 (LexisNexis 2009). However, a quiet title claim may be brought only “if an action at law or proceeding in equity is not pending to enforce or test the validity of the title, lien, encumbrance, or other adverse claim.”
Id.; see also Keefauver v. Richardson,
Option One argues that because the foreclosure action against Mattice is still pending in the Circuit Court for Carroll County, the Haleys cannot sue for quiet title here. In foreclosure proceedings, a mortgagee seeks to “enforcе” a lien on the property. Here, although the Property was sold at auction on April 2, 2009, the foreclosure is still pending in Carroll County; the Haleys have filed exceptions to ratification of the sale which have not been resolved.
4
Because the foreclosure
2. Equitable Mortgage
The Haleys also seek a declaratory judgment that the execution and transfer to Mattice of the deed created an equitable mortgage rather than absolute ownеrship. Option One argues that the transaction between the Haleys and Mattice is irrelevant because it acquired its interest as a bona fide purchaser for value.
Under § 7-101 of the Real Property Article of the Maryland Code, “[e]very deed which by any other writing appears to have been intended only as security for payment of an indebtedness or performance of an obligation, though expressed as an absolute grant is considered a mortgage.” Md.Code Ann., Real Prop. § 7-101 (LexisNexis 2009). But “a deed absolute on its face may be treated in equity as a mortgage [only]
between the original parties
and against all persons deriving title from the grantee who are not
bona fide
purchasers for value, without notice[.]”
Lednum v. Barnes,
A mortgagee is treated as a purchaser, and if a mortgage is supported by consideration and taken in good faith, the mortgagee is treated as a
bona fide
purchaser for value.
See Irvington Fed. Sav. & Loan Ass’n v. West,
A mortgagee may obtain a valid interest in real property from someone who obtained that property by fraud if the mortgagee had no notice of the fraud.
Wicklein v. Kidd,
A grantee (or mortgagee) is presumed to act in good faith, and this presumption may be overcome only by showing that the grantee had knowledge of “suspicious circumstances” that would give rise to a duty to inquire into previous transactions involving the property.
Julian,
The Haleys have not alleged facts showing that Option One participated in or should have known of the alleged fraud in the conveyance to Mattice. 7 The only allegation bearing on Option One’s knowledge of the transaction is that Option One lent Mattice $400,000, secured by two mortgages on the house. Compl. ¶ 35. This allegation is insufficient to overcome the presumption of good faith and shift to Option One the burden of pleading and proving bona fide purchaser status. Accordingly, Option One’s motion to dismiss the equitable mortgage claim will be granted.
3. Negligent Misrepresentation
Option One seeks to dismiss the Haleys’ negligent misrepresentation claim because the complaint fails to allege (1) the defendant, owing a duty оf care to the plaintiff, negligently asserted a false statement; (2) that the defendant intended would be acted upon by the plaintiff; (3) the defendant knew the plaintiff would probably rely on the statement, which, if erroneous, would cause loss or injury; (4) the plaintiff, justifiably, acted in reliance on the statement; and (5) the plaintiff suffered damage proximately caused by that negligence.
Lloyd v. GMC,
When, as here, the plaintiff alleges only economic loss, the plaintiff must also show that the defendant owed a duty оf care because of an “intimate nexus between the parties.”
L & P Converters v. Alling & Cory Co.,
The Haleys assert that all the defendants had a duty to “exercise due diligence to prevent fraud in the foreclosure reconveyance of Plaintiffs[’] home to Defendant Mattice.” Compl. ¶ 93. The complaint alleges only economic loss, and does not allege contractual privity or another close nexus between them and Option One. Indeed, the Haleys have not alleged any relationship with Option One. Accordingly, the claim for negligent misrepresentation against Option One must be dismissed.
4. Unjust Enrichment
Option One next argues that the Haleys have failed to state a claim for unjust enrichment. 9
non-tortiously and without notice that another has the beneficial ownership of it, acquires property which it would have been wrongful of him to acquire with notice of the facts and of which he is not a purchaser for value is, upon discovery of the facts, under a duty to account to the other for the direct product of the subject matter and the value of the use to him [.]”
Plitt v. Greenberg, 242
Md. 359,
The Haleys have not alleged facts showing that Option One had notice of the allegedly fraudulent transaction between the Haleys and Mattice.
See Plitt,
5. Intentional Misrepresentation and Violation of the MCPA
Option One argues that the Haleys have not pled the intentional misrepresentation and MCPA
10
сlaims with particularity. Because Rule 9(b)’s heightened pleading requirements apply to the claims, the Haleys must allege “the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.”
Harrison v. Westinghouse Savannah River Co.,
The complaint alleges no representations by Option One, but generally asserts fraudulent conduct by all the defendants. This undifferentiated assertion of fraud against multiple defendants is prohibited by Rule 9(b).
See Adams v. NVR Homes, Inc.,
With the exception of the unjust enrichment and civil conspiracy claims, the Haleys’ claims against First American are based on Alliance’s role as First American’s agent in the sale of the house to Mattice. Specifically, the Haleys allege that Alliance “serves as the agent for issuance of First American Title Insurance Company policies in Maryland,” and that “First American ... is the title insurance company for this transaction.” Compl. ¶¶ 6, 10. These are the only factual allegations about First American, and, apart from the unjust enrichment and civil conspiracy claims, the Haleys do not allege that First American is directly liable for issuing title insurance. Rather, the Haleys seek to hold First American vicariously liable for Alliance’s conduct as settlement agent and its preparation of the settlement documents. See id. ¶¶ 6, 22.
First American maintains that Alliance’s actions as settlement agent should be distinguished from its actions as title insurance agent. First American contends that because the Haleys have not sufficiently alleged that First American’s agent Alliance was anything other than a title insurance agent, the claims must be dismissed.
The plaintiff has the burden of proving the nature and extent of the principal-agent relationship.
Green v. H & R Block,
“The employment of an agent for purposes of issuing title insurance does not (at least by itself) establish an agency relationship for purposes of settlement undertaken by that title agent.”
Proctor,
2. Civil Conspiracy
First American seeks to dismiss the Haleys’ civil conspiracy claim because the complaint fails to allege a tort on which the conspiracy claim may be based.
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“Conspiracy is not a separate tort capable of independently sustaining an award of damages in the absence of other tortious injury to the plaintiff.”
Alleco Inc. v. The Harry and Jeanette Weinberg Foundatiоn, Inc.,
First American contends that the civil conspiracy claim must be dismissed because the complaint does not adequately allege a tort claim against First American. The Haleys respond that all they must show is that First American agreed to accomplish an unlawful act, or use an unlawful means to accomplish a lawful act, and that one of the other defendants committed a tort in furtherance of the agreement.
The Haleys’ have not stated a claim for civil conspirаcy against First American because they have not alleged that First American entered into an agreement that a tort be committed. The closest they come is the allegation that “Alliance ... serves as the agent for issuance of First American ... policies in Maryland.” Compl. ¶ 6. The Haleys have not alleged that the agency agreement between First American and Alliance contemplated tortious conduct. Because the Haleys do not allege such an agreemеnt, their civil conspiracy claim against First American must be dismissed.
3. Unjust Enrichment
Finally, First American contends that the Haleys’ unjust enrichment claim must be dismissed because the complaint failed to allege facts showing that they conferred a benefit on First American. The Haleys rely on Paragraph 98, which states that “[a]ll Defendants ... benefitted from the collection and receipt of illegal rents, fees and costs, and interests escrowed and other funds ... associated with the wrongful obtaining of title to the Plaintiffs home.” Cоmpl. ¶ 98. In their Opposition, the Haleys assert that because “First American issued a policy relative to this transaction, they must have gotten paid.” Pis.’ Opp. at 9.
III. Conclusion
For the reasons stated above, the Option One аnd First American motions to dismiss will be granted.
ORDER
For the reasons discussed in the accompanying Memorandum Opinion, it is, this 2nd day of October, 2009, ORDERED that:
1. First American’s Motion to Dismiss (Paper No. 10) BE, and HEREBY IS, GRANTED;
2. Option One’s Motion to Dismiss (Paper No. 18), BE, and HEREBY IS, GRANTED; and
3. The Clerk of the Court shall send copies of this Memorandum Opinion and Order to counsel for the parties.
Notes
. For a general discussion of foreclosure rescue fraud, see
Johnson v. Wheeler,
. For the pending motions, the Haleys’ well-pleaded allegations are accepted as true.
See Mylan Labs., Inc. v. Matkari,
. Md.Code Ann., Com. Law § 13-101, et seq.
. A district court may take judicial notice of “matters of public record” without converting a Rule 12(b)(6) motion into a motion for summary judgment.
Clark v. BASF Salaried Employees’ Pension Plan,
. "Fraud ... perpetrated by a third person without the instigation, procurement, knowledge, or consent of the mortgagee, will generally not affect the mortgage or prejudice his security.”
Wicklein,
. Recent cases arising from fraudulent foreclosure rescue schemes have extended
bona fide
purchaser status to such mortgagees.
See Homan, 914
A.2d at 390-91;
Julian,
. Option One argues that to state a claim for equitable mortgage, the Haleys must plead facts showing that Option One was not a bona fide purchaser, that is, that it participated in or had notice of the allegedly fraudulent transfer of the deed. The Haleys counter that bona fide purchaser status is an affirmative defense that must be pled and proved by Option One.
.
See id.
at 267;
Weisman v. Connors,
. Unjust enrichment requires (1) a benefit conferred upon the defendant by the plaintiff, (2) a defendant’s appreciation or knowledge of the benefit, and (3) the defendant's acceptance or retention of the benefit under circumstances that would make it inequitable for the defendant to retain the benefit without the payment of its value.
Hill v. Cross Country Settlements, LLC,
Option One argues that the complaint does not allege that it received a benefit from the allegedly fraudulent transaction with Mattice. The Haleys respond that Option One's receipt of the two mortgages securing Mattice’s loan — on which Option One has foreclosed— is a benefit.
. The Haleys assert claims under the Maryland Consumer Protection Act for unfair or deceptive trade practices.
See
Md.Code Ann., Com. Law § 13-301 (LexisNexis 2009). The complaint alleges that "the false statements, deceptive actions, misrepresentations, omissions, and other acts described in this complaint deceived and tended to deceive Plaintiffs in violation of MCPA.”
See
Compl. ¶ 68. This claim sounds in fraud, and is subject to the heightened pleading requirements of Rule 9(b).
See Adams v. NVR Homes, Inc.,
. In their Opposition to First American's Motion to Dismiss, the Haleys argue that § 10-12 l(k) (formerly § 10 — 121(j)) of the Maryland Insurance Law Article has changed the nature of the agency relationship between a title issuer and a title agent and imposes upon the issuer greater responsibilities with respect to settlements and escrow services. Specifically, the Haleys argue that in § 10-121(k):
the legislature has expanded the agency relationship to include review and responsibility beyond the mere issuance of title insurance to include the essence of claims brought by Plaintiffs in their Complaint, namely the misappropriation of escrow funds and either nеgligently or willingly turning a blind eye to the underlying transaction.
Pis.' Opp. at 3-4. This argument was rejected in
Proctor,
when the court explained that "[a]lthough § 10 — 12l(j) certainly imposes an oversight duty on title insurers, this provision
. The elements of civil conspiracy are: (1) an agreement between two or more persons, (2) some unlawful or tortious act done in furtheranсe of the agreement or use of unlawful or tortious means to accomplish a legal act, and (3) damage to the plaintiff.
See Lloyd v. GMC,
. As title insurance premiums are frequently paid out of the mortgage loan proceeds,
see Sage v. Freedom Mortgage Co.,