Case Information
*1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA GILDA MALEK,
Plaintiff,
Civil Action No. 13-01597 (BAH) v.
Judge Beryl A. Howell FLAGSTAR BANK,
Defendant. MEMORANDUM OPINION
The plaintiff, Gilda Malek, filed this action against the defendant Flagstar Bank, a federally chartered savings bank, to challenge the recording of a deed of trust that was executed by the plaintiff’s husband in exchange for a $500,000 loan secured by the couple’s house. See generally Compl., ECF No. 1. The defendant has moved, under Federal Rule of Civil Procedure 12(b)(6), to dismiss the Complaint for failure to state a claim. Def.’s Mot. to Dismiss (Def.’s Mot.), ECF No. 6. For the reasons explained below, the defendant’s motion is denied in part and granted in part.
I. BACKGROUND
On March 15, 2000, the plaintiff and her husband, Farshied Malek (“Mr. Malek”), acquired fee simple title by deed as tenants by the entireties to their house, which is located at 4836 Van Ness Street, N.W., Washington, D.C. Compl. ¶¶ 6-7, ECF No. 1-1; Def.’s Mot., Ex. A (Residential Property Deed, dated March 15, 2000) at 1, ECF No. 6-2. Five years later, on November 15, 2005, Mr. Malek obtained from the defendant a $500,000 Home Equity Line of Credit (“Home Equity Loan”), with an initial advance of $200,000 and a ten year repayment period. Compl. ¶ 8; Def.’s Mot., Ex. B (Home Equity Line of Credit Agreement), ECF No. 6-3. *2 To secure this loan, Mr. Malek executed a “Credit Line Deed of Trust” (“Deed of Trust”) for the benefit of the defendant that encumbered the couple’s house. Compl. ¶ 8; Def.’s Mot., Ex. C (Credit Line Deed of Trust), ECF No. 6-4. The parties do not dispute that the plaintiff did not execute the Home Equity Loan, the Deed of Trust, or any other document in connection with the loan made by the defendant to the plaintiff’s spouse. Compl. ¶ 10; see generally Def.’s Mot., Ex. C.
On November 28, 2005, the defendant recorded the Deed of Trust with the Office of the Recorder of Deeds of the District of Columbia. Compl . ¶¶ 9–10. Almost eight years later and about two years before repayment of of the Home Equity Loan was due in full, the plaintiff filed suit, on July 18, 2013, against the defendant asserting three claims: (1) that the Deed of Trust should be declared invalid (“Count I”), id. ¶¶ 11-12; (2) fraud (“Count II”), id. ¶¶ 13-17; and (3) negligence (“Count III), id. ¶¶ 18-20. The case was originally filed in the Superior Court of the District of Columbia and subsequently removed to this Court based on diversity jurisdiction. [1] Notice of Removal, ECF No. 1. Shortly thereafter, the defendant filed the pending motion to dismiss the Complaint with prejudice.
II. LEGAL STANDARDS
Federal Rule of Civil Procedure 8(a)(2) requires that a complaint contain “a short and
plain statement of the claim showing that the pleader is entitled to relief,” to encourage brevity
and, at the same time, “give the defendant fair notice of what the . . . claim is and the grounds
*3
upon which it rests.”
Bell Atlantic Corp. v. Twombly
,
In considering a motion to dismiss for failure to plead a claim on which relief can be
granted, the court must consider the complaint in its entirety, accepting all factual allegations in
the complaint as true, even if doubtful in fact.
Twombly
,
III. DISCUSSION
The plaintiff filed this action for a declaratory judgment that the Deed of Trust executed by the defendant is invalid. Compl. ¶¶ 11-12. In addition, the plaintiff alleges that she is owed damages in excess of $1,000,000 because of the defendant’s fraudulent, id. ¶¶ 13-17, and negligent, id. ¶¶ 18-20, conduct in allegedly wrongfully recording the Deed of Trust. The defendant counters that all three claims “must be dismissed pursuant to Rule 12(b)(6) for failure to state a claim” because the plaintiff’s “claims are devoid of any supporting factual allegations and do not state any legally cognizable claim against [the defendant].” Def.’s Mem. Supp. Mot. to Dismiss (“Def.’s Mem.”) at 1. The Court evaluates the sufficiency of the factual allegations underlying each of the plaintiff’s claims seriatim below.
A. Count I For Declaratory Judgment
In Count I, the plaintiff seeks a declaratory judgment, pursuant to D.C. Superior Court Rule of Civil Procedure (“D.C. SCR-Civil Rule”) 57, “that the Deed of Trust is invalid because the House encumbered by the Deed of Trust is owned by [the plaintiff] as a tenant by the *5 entirety, and [the plaintiff] did not execute the Deed of Trust.” [2] Compl. ¶¶ 11-12. The defendant seeks to dismiss this claim because a declaratory judgment is a type of relief and cannot form the basis for a separate cause of action. Def.’s Mem. at 4.
D.C. SCR-Civil Rule 57, pertaining to declaratory judgments, is substantially identical to
Federal Rule of Civil Procedure 57 and provides, in pertinent part, that “[t]he procedure for
obtaining a declaratory judgment pursuant to Title 28 U.S.C. § 2201 or otherwise shall be in
accordance with these Rules.” The use of the phrase “or otherwise” in this local procedural rule
is intended to include “authority for issuance of declaratory judgments founded on Congressional
grant to the Superior Court of general equity powers,” but “like any other remedy,” a declaratory
judgment “may only be granted in cases properly within the court’s jurisdiction.” D.C. Sup. Ct.
R. 57 cmt. The Declaratory Judgment Act, 28 U.S.C. § 2201, in turn, authorizes federal courts to
grant declaratory relief as a remedy and is not, standing alone, a cause of action.
[3]
As the
defendant correctly notes, “a count for a declaratory judgment ‘is not cognizable as a separate
cause of action, but is more properly included in the [ ] prayer for relief.’” Def.’s Mem. at 4
(quoting
Intelsat USA Sales Corp. v. Juch-Tech, Inc.
,
Under District of Columbia law, “an action to quiet title may not be dismissed for failure
to state a claim when the complaint alleges,” as the plaintiff has in this case, that she is an
“owner[] of the land in fee simple,” and another party has asserted an interest in the property.
In
re Tyree
,
The plaintiff further alleges that she and her husband “own the House as tenants by the
entireties.” Compl. ¶ 7. “Many jurisdictions have abolished the tenancy by the entireties” but
“the District of Columbia still recognizes [this form of ownership] ‘with most of its common law
features still intact.’”
Morrison v. Potter
,
The plaintiff alleges that she is a tenant by the entirety but executed no documents in
connection with the loan taken from the defendant by her husband. Compl. ¶¶ 10, 12. This
*8
allegation is bolstered by documents submitted by the defendant to support its motion to dismiss.
Specifically, the deed to the house states clearly that the plaintiff and her husband hold the house
in fee simple as tenants by the entireties,
see
Def.’s Mot, Ex. A, but the Home Equity Loan and
Deed of Trust are signed only by the plaintiff’s spouse,
see
Def.’s Mot., Ex. B-C.
[4]
These factual
allegations, corroborated by the documents at issue, sufficiently set out a valid claim to quiet title
action since the Deed of Trust, on its face and without resorting to extrinsic evidence, appears to
give the defendant a property interest in the plaintiff’s house.
See Graves v. Ashburn
, 215 U.S.
331, 335 (1909) (“It is enough [to sustain a quiet title action] that the invalidity [of the
challenged instrument] does not appear upon its face, but rests partly on a matter in pais.”);
Wilson v. Moseley
,
B. Count II For Fraud
The defendant has also moved to dismiss the plaintiff’s fraud claim, in Count II, for
failure to “allege with sufficient specificity the essential elements of fraud.” Def.’s Mem. at 5.
*9
To withstand a motion to dismiss for failure to state a fraud claim, the plaintiff must meet the
pleading standard set out in Federal Rule of Civil Procedure 9(b), which provides that “a party
must state with particularity the circumstances constituting fraud or mistake.” F ED . R. C IV . P.
9(b). As this rule makes clear, fraud “‘is never presumed and must be particularly pleaded.’”
Lee v. Bos
,
The plaintiff must plead with sufficient particularity the following elements for a viable
fraud claim: “‘(1) a false representation, (2) in reference to a material fact, (3) made with
knowledge of its falsity, (4) with the intent to deceive, and (5) action . . . taken in reliance upon
the representation.’”
Lee
,
In support of her fraud claim, the plaintiff alleges that: (1) “[the defendant] knew upon
recording the Deed of Trust that [the plaintiff] did not execute the Deed of Trust or any other
document in connection with the [Home Equity] Loan,”
id.
¶ 14; (2) “[the defendant’s] act(s) in
recording the Deed of Trust were willful and malicious,”
id.
¶ 15; (3) “[r]ecording the Deed of
Trust as if [the plaintiff] had executed the necessary documents constitutes a fraud upon [the
plaintiff],”
id.
¶ 16; and (4) “[a]s a direct and proximate result of [the defendant’s] fraudulent
act(s), [the plaintiff] has suffered consequential damages, economic, and non-economic loss, all
to her detriment in the amount of $1,000,000.00,”
id.
¶ 17. The defendant contends that these
statements are conclusory and thus, “are not entitled to an assumption of truth.” Def.’s Mem. at
6. Indeed, the defendant is correct that the plaintiff “does not identify one single statement made
[] to her by [the defendant], much less any false representation . . . [n]or does [the plaintiff]
allege that [the defendant] intended to deceive her . . . ” Def.’s Mem. at 6;
see Ashcroft v. Iqbal
,
To the extent the plaintiff’s fraud claim boils down to the contention that the defendant’s
execution and recordation of the Deed of Trust amounts to a false representation to the plaintiff,
the plaintiff has nonetheless wholly failed to allege the critical element for a common law fraud
claim of her reasonable reliance to her detriment on the defendant’s conduct. Def.’s Mem. at
6 (noting that plaintiff failed to plead “that she reasonably relied on any such
misrepresentation”);
Aktieselskabet AF 21. November 2001 v. Fame Jeans Inc.
,
C. Count III For Negligence
Finally, the defendant argues that the plaintiff has failed to state a claim for negligence because she has not alleged “that [the defendant] owed her any legal duty of care—let alone how [the defendant] breached any such duty or proximately caused her damages.” Def.’s Mem. at 7. The plaintiff, on the other hand, contends that “[t]he very lack of a relationship is the basis for Plaintiff’s negligence claim.” Pl.’s Opp’n at 5.
To establish a negligence claim, “under D.C. law, ‘a plaintiff must prove a duty of care
owed by the defendant to the plaintiff, a breach of that duty by the defendant, and damage to the
interests of the plaintiff, proximately caused by the breach.’”
Sigmund v. Starwood Urban Retail
VI, LLC
,
The key documents cited in the Complaint and submitted by the defendant in support for
its motion, corroborate the plaintiff’s contention that the defendant should have known that the
property was held in fee simple by the plaintiff and her spouse, as tenants by the entirety, as
plainly reflected in the Deed to the house,
see
Def.’s Mot., Ex. A, and that the plaintiff never
signed the Home Equity Loan or the Deed of Trust between Mr. Malek and the defendant, the
recording of which documents now encumbers title to the house,
see
Def.’s Mot., Ex. B-C.
Nonetheless, the defendant argues that, since the plaintiff was not a party to these agreements
between the defendant and her spouse, the plaintiff has not established or alleged how the
defendant could owe a “duty to non-customers with whom it has no direct relationship.” Def.’s
Reply at 3 (citing
Eisenberg v. Wachovia Bank, N.A.
,
The plaintiff does not dispute that she “did not enter into a relationship” with the defendant by choice but, contrary to the defendant’s position, she contends this is not fatal to her claim. The defendant fails to appreciate that the gravamen of the negligence claim is that the defendant’s negligent conduct created a relationship between the plaintiff and the defendant. See Pl.’s Opp’n at 6 (“Defendant created a relationship [with the plaintiff] when it recorded the Deed *13 of Trust encumbering Plaintiff’s property.”). In other words, assuming, arguendo, that the Deed of Trust validly encumbers the title to the plaintiff’s house, the defendant has created a relationship with the plaintiff by making the plaintiff’s interest in her own house subject to the defendant’s interest in the same property.
Even if the plaintiff’s theory were cognizable that the defendant was negligent in placing an invalid encumbrance on her house, the plaintiff has utterly failed to provide any factual allegations about how, over the past eight years, she suffered any damages, let alone damages in the amount of $1,000,000, as a proximate cause of the defendant’s breach of any duty owed to her, even assuming such a duty existed. This is a clear missing element of the plaintiff’s negligence claim that requires dismissal, without prejudice, of Count III [6]
IV. CONCLUSION
Accordingly, the defendant’s motion to dismiss the complaint, pursuant to Federal Rule 12(b)(6) for failure to state a claim, is denied as to plaintiff’s declaratory judgment claim to quiet title (Count I), and granted as to the plaintiff’s claims for fraud (Count II) and negligence (Count III), which two counts are dismissed without prejudice.
An Order consistent with this Memorandum Opinion will be contemporaneously entered. Date: September 29, 2014
__________________________ BERYL A. HOWELL United States District Judge
Notes
[1] The Court has diversity jurisdiction over this case, pursuant to 28 U.S.C. § 1332, since the plaintiff “resides at
4836 Van Ness Street, Washington, D.C. 20016” and is a citizen of the District of Columbia; the defendant is a
“federally chartered savings bank with its principal place of business in Troy, Michigan;” and the amount in
controversy exceeds the $75,000 threshold based upon the plaintiff’s demand for judgment “in the amount of
$1,000,000, plus attorneys’ fees, interest and costs,” and the Credit Line Deed of Trust at issue amounts to $500,000.
See
Notice of Removal ¶¶ 5, 6, 8;
Busby v. Capital One, N.A
.,
[2] The Complaint cites to Superior Rule of Civil Procedure 55 rather than 57. Compl. ¶ 12. The plaintiff has clarified her intent to refer to Rule 57. Def.’s Mem. at 4; Pl.’s Opp’n to Def.’s Mot. to Dismiss (“Pl.’s Opp’n”) at 3 (“[c]learly [p]laintiff intended to invoke Rule 57 and the relevant citation is a typographical error”).
[3] The Declaratory Judgment Act provides, in pertinent part, that “[i]n a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a).
[4] The Court may consider these documents attached to the defendant’s motion papers without converting the motion
to dismiss into a motion for summary judgment since the plaintiff references the same documents in the Complaint.
See
Compl. ¶¶ 6, 9, 19;
EEOC v. St. Francis Xavier Parochial Sch
.,
[5] The defendant urges the Court to dismiss with prejudice because granting leave to amend would be futile. See Def.’s Mem. at 6-7. The plaintiff, on the other hand, requests that “if the Court finds that Plaintiff’s Complaint falls short of the standard” under Federal Rules of Civil Procedure 9(b) and 12(b)(6), that the Court grant leave to amend. Pl.’s Opp’n at 6. The sparse and conclusory nature of the allegations supporting the fraud claim make it impossible to determine whether granting leave to amend would be futile. Consequently, Count II is dismissed without prejudice.
[6] Indeed, if the plaintiff is correct that the Deed of Trust is invalid, then, ironically, it is the defendant, not the
plaintiff, who may face harm because the security for the Home Equity Loan will be compromised.
See Kay v.
Fowler
,