Araya HENOK, Plaintiff, v. CHASE HOME FINANCE, LLC, et al., Defendants.
Civil Action No. 12-335 (RWR).
United States District Court, District of Columbia.
Feb. 13, 2013.
RICHARD W. ROBERTS, District Judge.
Paul A. Kaplan, Jeffrey L. Tarkenton, Womble Carlyle Sandridge & Rice, PLLC, Washington, DC, Todd D. Ross, Womble Carlyle Sandridge & Rice, PLLC, Tysons Corner, VA, for Defendants.
MEMORANDUM OPINION
RICHARD W. ROBERTS, District Judge.
Pro se plaintiff Araya Henok brings this action against Chase Home Finance, LLC (“Chase“), Shapiro & Burson, LLP (“Shapiro“), and Fannie Mae challenging the legality of the foreclosure on a property he owned on Myrtle Avenue N.E. in Washington, D.C. (“the property“). After the defendants moved for judgment on the pleadings arguing that Henok‘s complaint failed to satisfy the pleading requirements under
BACKGROUND
Henok purchased the property in 2005 with financing from Chase. Pl.‘s Mot. for
Shapiro filed with the Recorder of Deeds a copy of the notice of foreclosure sale. Id., Counts 1, 13, 19, Ex. 4. Fannie Mae bought the property in a foreclosure sale on March 24, 2010. Id. ¶ 17, Exs. 4, 8. Chase had appointed John Burson and Gregory Britto as substitute foreclosure trustees under the deed of trust that secured Henok‘s mortgage, Id., Ex. 8, and Britto filed with the Recorder of Deeds the trustees’ deed of sale in July 2010. Id.
Henok filed a complaint in D.C. Superior Court in February 2012 challenging the foreclosure. Henok‘s complaint asserts against Chase and Shapiro claims of breach of contract, breach of fiduciary duty, fraud, negligence, negligent misrepresentation, and a constitutional violation of the Fifth Amendment‘s takings clause. Compl., Counts 1-4, 6-8, 10-13. Henok‘s complaint also asserts that the trustees’ deed was issued late and failed to satisfy the formal requisites of an instrument. Id., Counts 5, 9.
The defendants removed the case to federal court on March 1, 2012. Chase and Fannie Mae moved for judgment on the pleadings under
Henok then moved for partial summary judgment arguing that Chase did not give him and he did not receive notice of default, he did not receive a valid notice of the foreclosure, and the defendants failed to provide a cure amount. Pl.‘s Mot. for Partial Summ. J. (“Pl.‘s Summ. J. Mot.“), Points 1-7. Next, Henok moved on July 26, 2012 for leave to amend his complaint. Read broadly, Henok‘s first amended complaint adds common law claims of negligence and negligent misrepresentation,
DISCUSSION
I. PARTIAL SUMMARY JUDGMENT
Summary judgment is warranted if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Henok moves for partial summary judgment, arguing in part that Chase never gave him the required advance notice of default, Pl.‘s Summ. J. Mot. at 6, 8, and that he never received such a notice, Pl.‘s Mot. at 9-12. The deed of trust securing Henok‘s mortgage required Chase before foreclosing to “give notice to Borrower ... [that] shall specify (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property.” Pl.‘s Summ. J. Mot., Ex. 3 ¶ 22. The deed also provided that “[a]ll notices given by Borrower or Lender in connection with this Security Instrument must be in writing. Any notice to Borrower in connection with this Security Instrument shall be deemed to have been given to Borrower when mailed by first class mail or when actually delivered to Borrower‘s notice address if sent by other means.” Id., Ex. 3 ¶ 15.
These provisions impose a duty upon Chase to “give notice” of default to Henok. Henok‘s allegation that Chase never gave him advance notice of default alleges a breach of Chase‘s contractual duty to him; the allegation that Henok did not receive such a notice does not. Henok is not entitled to summary judgment on an allegation that does not state a claim for relief. However, Chase supplied with its opposition to Henok‘s motion a declaration under the penalty of perjury from its Assistant Secretary and Operations Unit Manager
Henok has not rebutted this evidence that Chase gave the notice required by the deed in the way the deed allowed it to be given. Henok may not simply rely upon denials to raise a genuine dispute of fact about whether Chase complied with its duty to provide notice of default. Because there are no disputed facts to resolve regarding that duty, and it is Chase that is entitled to judgment as a matter of law, judgment will be entered for Chase on that cause of action. See District of Columbia v. Straus, 607 F.Supp.2d 180, 184-85 (D.D.C.2009) (citing 10A Charles Alan Wright et al., Federal Practice & Procedure § 2720 (3d ed. 1998) (noting that summary judgment may be granted in favor of the nonmoving party without waiting for a cross-motion); Keh Tong Chen v. Attorney Gen., 546 F.Supp. 1060, 1068 (D.D.C.1982) (“Filing of a cross-motion is not a prerequisite to the entry of judgment for the non-moving party.“)).
II. LEAVE TO AMEND COMPLAINT
A plaintiff may amend his complaint at this stage3 “only with the opposing party‘s written consent or the court‘s leave. The court should freely give leave when justice so requires.”
In considering a motion to dismiss, a court accepts well-pleaded factual allegations in the complaint as true and interprets them in the light most favorable to the plaintiff. NB ex rel. Peacock v. District of Columbia, 682 F.3d 77, 82
A. Breach of contract
The gravamen of Henok‘s surviving breach of contract claims is that Chase breached the terms of the mortgage note and the deed of trust by failing to address the notice of foreclosure to him at his full correct address, see, e.g., Second Am. Counts 1, 6, 7, 9, 13, and the notice was therefore invalid, see, e.g., id., Counts 1-6, 8. Henok also alleges that the notice of foreclosure did not include the precise amount to cure the default. Second Am. Compl., Count 7. Under D.C. law, a claim of breach of contract includes four elements: “(1) a valid contract between the parties; (2) an obligation or duty arising out of the contract; (3) a breach of that duty; and (4) damages caused by breach.” Tsintolas Realty Co. v. Mendez, 984 A.2d 181, 187 (D.C.2009).
Read liberally, the amended complaint identifies the mortgage note and deed of trust as the contract breached. Second Am. Compl. ¶¶ 25-30. The D.C. Court of Appeals has recognized that “the note and the trust deed can be considered merely different parts of a single contract.” Osbourne v. Capital City Mortg. Corp., 667 A.2d 1321, 1326 (D.C.1995) (quoting Yasuna v. Miller, 399 A.2d 68, 72 (D.C.1979)). In addition, citing the note and deed of trust, Henok alleges that Chase had a duty to address to him at his full current address written notice of the foreclosure sale. Henok argues that his address includes the suite number and that the failure to include the full address makes the notice invalid. Second Am. Compl., Count 1. However, Henok provides no authority for the proposition that omission of a suite number from an otherwise accurate street address in Washington, D.C. constitutes defective notice. This is not a case where the foreclosure notice was sent to the entirely wrong address. See Abdel-Kafi v. Citicorp Mortg., Inc., 772 A.2d 802, 803-04 (D.C.2001) (finding the lender‘s notice of foreclosure defective because the lender sent it to the property address rather than to the address provided in the plaintiff‘s change of address notice, where no argument was made that actual notice occurred). Moreover, Henok has pled no facts plausibly showing any damages caused by omission of his suite number. Henok admits that he re
Henok also argues that the foreclosure notice was defective because it “did not have a specific amount of money listed to cure the default.” Id., Count 7. Henok argues that including with the specific cure figure the language “plus attorney fees, foreclosure costs and other charges or payments which become due” makes the notice defective because it is not a precise figure identifying the sum which was required. Id. (quoting id., Ex. 4). However, Henok does not provide any authority which requires that the noteholder divine in advance and include in the cure figure in the foreclosure notice all possible fees or costs that may become due. The provision of the D.C. Code in force at the time of the foreclosure required the holder of any mortgage note to give written notice of the intention to foreclose with “information as the Council of the District of Columbia shall by regulation prescribe.”
B. Breach of fiduciary duty
To state a claim for breach of fiduciary duty under D.C. law, a plaintiff must allege that “(1) defendant owed plaintiff a fiduciary duty; (2) defendant breached that duty; and (3) to the extent plaintiff seeks compensatory damages—the breach proximately caused an injury.” Bode & Grenier, LLP v. Knight, 821 F.Supp.2d 57, 64 (D.D.C.2011) (quoting Paul v. Judicial Watch, Inc., 543 F.Supp.2d 1, 5-6 (D.D.C.2008)). “As a general rule, the mere existence of a contract does not create a fiduciary duty.” Paul, 543 F.Supp.2d at 6 (citing Steele v. Isikoff, 130 F.Supp.2d 23, 36 (D.D.C.2000)). Nor is a debtor-creditor relationship ordinarily a fiduciary relationship. Ponder v. Chase Home Fin., LLC, 666 F.Supp.2d 45, 49 (D.D.C.2009).4 “However, if a special relationship of trust or confidence exists in a particular case, a fiduciary relationship may arise in the lender-borrower context.” Ellipso, Inc. v. Mann, 541 F.Supp.2d 365, 373 (D.D.C.2008) (internal quotation marks and citation omitted) (finding no fiduciary relationship from facts pled); see also Overseas Private Inv. Corp. v. Industria
Henok‘s single reference in the second amended complaint to a breach of fiduciary duty is the allegation that Chase and Shapiro “had a fiduciary duty to respond to all [his] certified mails and constant attempts to cure [his] default” and “allow [Henok] to re-instate [his] loan.” Second Am. Compl., Count 12-1. As an initial matter, Henok does not plead any facts which show the existence of a special relationship of trust or confidence with Chase extending beyond his standard debtor-creditor relationship. Thus, Henok fails to state a claim for breach of a fiduciary duty against Chase.
Trustees and substitute trustees of deeds owe fiduciary duties both to the noteholder and the borrower. Murray v. Wells Fargo Home Mortg., 953 A.2d 308, 324-25 (D.C.2008) (internal citations omitted). Generally, “trustees of deeds have only those powers and duties imposed by the trust instrument itself, coupled with the applicable statute governing foreclosure sales in the District of Columbia.” Id. (quoting Perry v. Va. Mortg. and Inv. Co., Inc., 412 A.2d 1194, 1197 (D.C.1980)) (internal quotation marks omitted). “[T]o state a claim against a trustee for breach of fiduciary duty, a plaintiff must allege facts that would constitute a breach of a duty under the trust instrument or District of Columbia law, or allege fraud, misrepresentation, self-dealing or overreaching.” Evans v. First Mount Vernon, ILA, 786 F.Supp.2d 347, 356 (D.D.C.2011) (citing Murray, 953 A.2d at 325).
Henok‘s allegation that Shapiro had fiduciary duties that it breached by failing5 to respond to his letters and not allowing him to reinstate his loan is factually unsupported. Henok cites no provision in the deed of trust or District of Columbia law to support the existence of a trustee‘s fiduciary duty to respond to the borrower‘s correspondence or to allow the borrower to reinstate his loan. The deed of trust requires the lender, not the trustee, to send written notice of foreclosure to the borrower. See Am. Compl., Ex. 11 ¶ 22; see also Evans v. Chase Manhattan Mortg. Corp., Civil Action No. 04-2185(RMC), 2007 WL 902306, at *6 (D.D.C. Mar. 3, 2007) (finding that a similar deed of trust required the lender, not the trustee, to notify the borrower of default and that this arrangement was consistent with
Moreover, the trustees’ deed reflects that Chase appointed as substitute trustees Burson and Britto, not Shapiro. See Second Am. Compl., Ex. 8. Henok names Shapiro as the defendant in this matter rather than Burson and Britto. Henok does not plead in the second amended complaint any agency theory upon which to hold Shapiro liable for the actions of Burson and Britto. Koker, 915 F.Supp.2d at 66-67, 2013 WL 40320, at *11, held that
C. Negligence; negligent misrepresentation
A claim of negligence under D.C. law consists of four elements: “(1) the defendant owed a duty [of care] to the plaintiff, (2) the defendant breached its duty, (3) and that breach was the proximate cause of (4) damages sustained by the plaintiff.” Busby v. Capital One, N.A., 772 F.Supp.2d 268, 283 (D.D.C.2011) (citing Powell v. District of Columbia, 634 A.2d 403, 406 (D.C.1993)). “However, the tort must exist in its own right independent of the contract, and any duty upon which the tort is based must flow from considerations other than the contractual relationship. The tort must stand as a tort even if the contractual relationship did not exist.” Carter v. Bank of America, N.A., 888 F.Supp.2d 1, 15 (D.D.C.2012) (quoting Nugent v. Unum Life Ins. Co. of Am., 752 F.Supp.2d 46, 53-54 (D.D.C.2010)).
The elements of negligent misrepresentation under D.C. law are “(1) the defendant negligently communicated false information, (2) the defendant intended or should have recognized that the plaintiff would likely be imperiled by action taken in reliance upon his misrepresentation, and that (3) the plaintiff reasonably relied upon the false information to his detriment.” Ponder v. Chase Home Fin., LLC, 865 F.Supp.2d 13, 20 (D.D.C.2012) (citing Hall v. Ford Enterprises, Ltd., 445 A.2d 610, 612 (D.C.1982)). Likewise, though, a negligent misrepresentation claim may lie in a contract dispute only “when there are facts separable from the terms of the contract upon which the tort may independently rest and when there is a duty independent of that arising out of the contract itself, so that an action for breach of contract would reach none of the damages suffered by the tort.” Choharis v. State Farm Fire & Cas. Co., 961 A.2d 1080, 1088-89 (D.C.2008); see also Plesha v. Ferguson, 725 F.Supp.2d 106, 112-13 (D.D.C.2010) (citing Choharis).
In this case, Henok claims that Shapiro and Chase were negligent or made negligent misrepresentations by entering his address incorrectly on the notice of foreclosure sale, failing to state in the notice the specific amount of costs and fees that may come due in addition to the balance owed on the note, and certifying in the trustees’ deed after foreclosure that the notice of foreclosure was sent to Henok‘s last known address. Second Am. Compl., Counts 9, 12-2, 19, 22, 23. How
D. Fraud
A plaintiff claiming fraud under D.C. law must prove the existence of “(1) a false representation (2) in reference to material fact, (3) made with knowledge of its falsity, (4) with the intent to deceive, and (5) action is taken in reliance upon the representation.” Busby, 772 F.Supp.2d at 275 (quoting Fort Lincoln Civic Ass‘n, Inc. v. Fort Lincoln New Town Corp., 944 A.2d 1055, 1074 n. 22 (D.C.2008)). “A claim for fraud may be founded on a false representation or a willful omission.” Cordoba Initiative Corp. v. Deak, 900 F.Supp.2d 42, 47 (D.D.C.2012) (quoting McWilliams Ballard, Inc. v. Broadway Mgmt. Co., 636 F.Supp.2d 1, 5 (D.D.C.2009)).
Henok‘s amended complaint states that Chase falsely represented that it was the note holder at the time of foreclosure and that the foreclosure was advertised. Second Am. Compl., Counts 11, 15, 16. Henok also accuses Chase and Shapiro of engaging in a scheme to defraud him by falsely stating that they sent him at his current address a notice of foreclosure, continuing to foreclose his property, and selling the property knowing that the sale was void. Id., Counts 13, 19, 21. However, Henok fails to meet the heightened requirements of
E. Wrongful foreclosure under D.C. Code § 42-815
Under D.C. law, the holder of a note must give written notice to the owner of the property at least 30 days in advance of any foreclosure sale. See
Henok‘s amended complaint also states that the mortgage is a “residential mortgage” which is “secured by a residential property thus it‘s not a commercial note.” Second Am. Compl. ¶ 7. Therefore, Henok alleges that he was entitled to “reinstate the loan at any time prior to five days before the foreclosure sale[.]” Second Am. Compl., Count 8. Under D.C. law, residential mortgagors have a right to cure any default within five business days prior to a foreclosure sale.
F. Failure to respond under federal law
Henok also alleges that Chase and Shapiro were required under RESPA to respond to his written requests for the cure amount before foreclosure. Second Am. Compl., Count 25. RESPA provides that if the loan servicer receives a written request from the borrower for information about his loan, the servicer is required to provide “a written response acknowledging receipt of the correspondence within 20 days ... unless the action requested is taken within such period.”
In this case, Henok attaches four letters sent to Chase and two letters sent to Shapiro between January 20 and March 18, 2010 asking for the amount to cure his default. See Second Am. Compl., Exs. 1-3, 5-7. Because, as is explained above, Henok did not rebut that Chase gave him notice of default on November 18, 2009, and Henok received the notice of foreclosure on February 18, 2010, id. ¶ 13, the defendants provided the statutorily required information both before and after Henok‘s written requests. Both the notice of default and the notice of foreclosure
G. Remaining claims
Henok argues that the trustees’ deed which conveyed the property at the foreclosure sale did not conform to the formal requisites of an instrument under
Henok further claims that the trustees’ deed was issued on May 5, 2010, beyond a statutory deadline of 30 days after the foreclosure sale. Second Am. Compl., Count 14. Henok may be relying on
[w]ithin 30 days after ... an economic interest in real property is transferred, ... all transferees of ... and all holders of the security interest in real property shall record a fully acknowledged copy of the deed ... with the Recorder of Deeds of the District of Columbia.
Henok also alleges, with no supporting authority, that the foreclosure sale is void because the February 17, 2010 notice of foreclosure expired 30 days later, before the March 24, 2010 foreclosure sale occurred. Second Am. Compl., Count 24. However, Henok misreads the notice of foreclosure. Whatever its legal significance, the notice dates its expiration from the foreclosure sale date, and not from the date of the notice of foreclosure, and it did not expire before the sale. In sum, none of Henok‘s remaining claims provides grounds for relief.
Finally, Henok‘s second motion to amend the complaint seeks to remove Fannie Mae as a defendant and add Freddie Mac in its place. Pl.‘s Mot. for Leave to File an Amended Pleading at 1; Second Am. Compl. ¶ 5. Chase and Fannie Mae agree that Fannie Mae should be dismissed as a named defendant, but oppose adding Freddie Mac as a defendant in this case because the second amended complaint fails to state a claim for relief on any ground. Resp. of Chase and Fannie Mae to Pl.‘s Second Mot. for Leave to File Am. Compl. at 1-2, 4-12. As is discussed above, Henok‘s second amended complaint fails to state a claim on any ground. Therefore, leave to file a second amended complaint and add as a defendant Freddie Mac will be denied.
III. MOTION FOR JUDGMENT ON THE PLEADINGS
Under
In this case, Henok‘s original complaint includes claims of breach of contract, breach of fiduciary duty, fraud, negligence, negligent misrepresentation, and a constitutional violation of the Fifth Amendment‘s takings clause. Compl., Counts 1-4, 6-8, 10-13. Henok‘s complaint also asserts that the trustees’ deed was issued late and failed to satisfy the formal requisites of an instrument. Id., Counts 5, 9. With the exception of the Fifth Amendment claim, these claims are included in Henok‘s first and second amended complaints. While the amended complaints add additional claims and include further factual allegations regarding Henok‘s claims, the same defects in the amended complaints addressed above undermine the original complaint‘s claims of breach of contract, breach of fiduciary duty, fraud, negligence, and negligent misrepresentation.
However, the Fifth Amendment takings claim was eliminated from the amended complaints and has not been addressed. Henok has not stated a takings claim because the Fifth Amendment Takings Clause refers only to the government‘s physical occupation or regulation of private property. See
IV. SANCTIONS
Henok moves under
The essence of Henok‘s argument is that Chase and Shapiro falsely represented that they never received Henok‘s letters9 regarding the property, that these defendants’ attorneys “failed to do any reasonable inquiry” as to whether Henok‘s letters were delivered, Mot. for Sanctions Against Shapiro at 1-2; Mot. for Sanctions Against Chase at 1-2, and that Chase and Shapiro falsely represented that Henok received notices, Mot. for Sanctions Against Shapiro at 3; Mot. for Sanctions Against Chase at 3.10
First, Henok has not complied with the safe harbor provision of
Even if Henok had complied with the procedural rule, sanctions are not appropriate in this case. With regard to Chase, Henok has not otherwise provided any record of the letters he sent to Chase from August 2009 to December 2009. Henok also does not identify any filing where Chase represented that it did not receive letters from Henok. Henok may be referring to Kevin Johnson‘s declaration attached to Chase and Fannie Mae‘s opposition to Henok‘s motion for partial summary judgment. This declaration states that “Chase did not receive any cure payments from [Henok] at any time between March 4, 2009 and March 24, 2010, or at any time thereafter.” Chase‘s Opp‘n, Ex. 1, ¶ 11. Henok has not provided any basis to question this statement in the declaration or provided any evidence showing that Henok sent letters to Chase during this period.
With regard to Shapiro, Henok does not attach to this motion any letters sent to Shapiro between August 2009 and May 2010, but Henok seems to be referring to his letters requesting cure amounts attached to the second amended complaint. See Second Am. Compl., Exs. 5, 7. In particular, Henok alleges that Shapiro stated in a filing that Shapiro did not receive Henok‘s letters. Mot. for Sanctions Against Shapiro 3. Callahan signed a declaration that states that his review of Shapiro‘s business records revealed a payoff request on February 27, 2010, but that “no other communications, such as requests for loan payoffs or reinstatement figures, were received by [Shapiro] from [Henok] in connection with the Property prior to the Sale.” Def. Shapiro Opp‘n to Mot. for Part. Summ. J., Ex. A ¶¶ 3, 4(c),
Because Henok has not met the requirements of
CONCLUSION
Because Chase is entitled to summary judgment on Henok‘s breach of contract claim relating to the notice of default, judgment on that claim will be entered for Chase. Since the proposed amended complaints do not plead sufficient facts to state a cause of action on any of Henok‘s remaining claims, allowing Henok to amend his complaint would be futile. Because there is no objection to dismissing Fannie Mae as a defendant and the original complaint does not state a claim for relief on any ground against Chase or Shapiro, the defendant‘s motions for judgment on the pleadings will be granted and the complaint will be dismissed. In light of the disposition of the motions for judgment on the pleadings, the remainder of Henok‘s motion for partial summary judgment will be denied as moot. Because Henok has not met the requirements of
An appropriate final Order accompanies this memorandum opinion.
RICHARD W. ROBERTS
United States District Judge