Fields et al v. Walpole, Esq. et al, No. 8:2011cv01000 - Document 76 (D. Md. 2012)
Court Description: MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 9/12/12. (sat, Chambers)
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : WILLIE FIELDS, et al., : v. : Civil Action No. DKC 11-1000 : FORREST WALPOLE, ESQ., et al. : MEMORANDUM OPINION Presently pending and ready for review in this mortgage fraud case is the motion of Defendant Forrest Walpole, Esq. for summary judgment briefed, and (ECF No. court Local necessary. the Rule 71). now The rules, 105.6. issues no For have hearing the been being following fully deemed reasons, Defendant Walpole s motion for summary judgment will be granted in part and denied in part. I. Background A. Factual Background The following facts are either uncontroverted or considered in the light most favorable to Plaintiffs Willie Fields, Marcia Fields, Melvin Hamilton, and Renee Hamilton. Plaintiffs are individuals affected by an alleged ponzi scheme implemented by Defendants ( M.I. Linda Title ), Financial ). Memorandum Sadr, and This Opinion Forrest Walpole, Maximum Impact scheme is of July Financial described 6, Maximum 2011, in Impact Services detail resolving Title ( M.I. in the Defendant Walpole s motion to dismiss. (ECF No. 22). Only the facts relevant to the two remaining claims against Mr. Walpole will be recounted here. Defendant Forrest Walpole operates a law practice in Virginia, was a minority owner of Defendant M.I. Title, and was the attorney who conducted the refinance that helped fund the equity stripping ponzi scheme. (ECF No. 37, at 6). Defendants M.I. Title and M.I. Financial were business entities run by Defendant Linda Sadr, created to further the improper transactions at issue in this case. the transactions worked as (Id. at 4). follows: In brief, individuals such as Plaintiffs would refinance their homes and give the cash-out proceeds from refinancing to M.I. Title and M.I. Financial. These entities, Ms. Sadr promised, would place the funds in escrow and pay each individual s mortgage for eighteen months, after which the mortgages would be paid off in full. 3). (Id., at During this period, Ms. Sadr would file a strategic lawsuit challenging a loophole that mortgage companies used to get paid twice, and Plaintiffs mortgages. ultimately (Id.). have the court set aside Despite Sadr s representations, there was no loophole to exploit, Ms. Sadr did not pay off Plaintiffs mortgages, and their properties eventually went into foreclosure. 2 Mr. Walpole formed M.I. Title in April 2005 to facilitate loan settlements for Ms. Sadr. Walpole and company. Ms. Sadr (Id.). had Mr. a (ECF No. 73-1, at 4). 50/50 Walpole ownership also became interest a Mr. in licensed the title insurance agent in Maryland to facilitate refinancings in this state. (Id. at 5). In January 2006, Mr. Walpole surrendered 49% of his ownership in M.I. Title to Ms. Sadr, retaining a 1% equity interest. in M.I. (Id.). Financial. Mr. Walpole held no ownership stake (Id. at 6). remaining equity in M.I. Title. He later surrendered his (Id. at 21). Beginning in January 2006, M.I. Financial paid Mr. Walpole $10,000 per month as an independent contractor to facilitate mortgage refinances during the relevant time period, and issued him 1099 tax forms. (ECF No. 73-1, at 26). Individuals pursuing refinances, including Plaintiffs, also paid him $100 per transaction. or steered (Id.). toward M.I. All of the transactions were produced Title, and portions of Plaintiffs refinancing proceeds were paid to M.I. Title and M.I. Financial. (Id. at 7, 15). Mr. Walpole never told Plaintiffs of his ownership interest in M.I. Title or of any additional money he received from M.I. Financial as a result of the transactions. (Id. at 15-16). 3 B. Procedural Background Plaintiffs initially brought suit as a class action in the Circuit Court for Prince George s County, Maryland. 12, 2011, Walpole, Plaintiffs and Defendants. the basis on served April 7, the 2011, summons they and On March complaint served the on remaining On April 18, the case was removed to this court on of diversity of citizenship. complaint contains six counts: (ECF No. 1). The negligence; violation of the Maryland Consumer Protection Act ( MCPA ); unjust enrichment; negligent misrepresentation; Maryland Finder s Fee Act. M.I. Financial failed to fraud; and (ECF No. 2). respond violation the When M.I. Title and within the requisite period, Plaintiffs moved for entry of default. 18). of time (ECF Nos. 17, The clerk entered default against those Defendants on June 28, 2011. (ECF No. 19). Separately, on April 25, 2011, Walpole moved to dismiss all counts against him for failure to state a claim. (ECF No. 11). On July 6, 2011, in a memorandum opinion and order, this court dismissed four of the six counts against Walpole, leaving the unjust enrichment and MCPA claims. (ECF Nos. 22, 23). subsequently filed an answer on July 12, 2011. Plaintiffs requested leave to file an amended Walpole (ECF No. 24). complaint on October 28, 2011 to add Linda Sadr as a Defendant (ECF No. 30), and that motion was granted in part on December 13, 2011 (ECF 4 Nos. 35, 36). same day. Plaintiffs filed a second amended complaint that (ECF No. 37). filed an answer. Ten days later, Defendant Walpole (ECF No. 38). On February 6, 2012, Plaintiffs filed a motion to certify a class. Defendant Walpole provided (ECF No. 47). notice Bankruptcy on February 3, 2012. that he The next day, filed (ECF No. 48). entered as to Defendant Sadr on March 6, 2012. Chapter 7 Default was (ECF No. 60). Due to Mr. Walpole s bankruptcy, the case was administratively closed. (ECF No. 61). The case was reopened on June 20, 2012, because the bankruptcy court lifted the stay for the limited purpose of allowing Plaintiffs to pursue the proceeds of Mr. Walpole s 67). professional insurance policy. (ECF No. Mr. Walpole then filed a motion for Summary Judgment on August 6, 2012. II. liability (ECF No. 71). Analysis A. Summary Judgment Only two claims remain against Mr. Walpole from Plaintiffs complaint: No. 22). unjust enrichment and violation of the MCPA. (ECF Because Defendant Walpole is exempt from the MCPA pursuant to section 13-104, summary judgment will be granted with respect to this claim. Because genuine issues of material fact exist with respect to Plaintiffs unjust enrichment claim, summary judgment will be denied as to that claim. 5 1. Standard of Review A court may enter summary judgment only if there is no genuine issue as to any material fact and the moving party is entitled 56(a); to judgment Celotex as v. Corp. a matter Catrett, of 477 law. See U.S. 317, Fed.R.Civ.P. 322 Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008). (1986); Summary judgment is inappropriate if any material factual issue may reasonably be resolved in favor of either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); JKC Holding Co. LLC v. Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001). A party opposing a properly supported motion for summary judgment may not rest upon the mere allegations or denials of [the] pleadings, but rather must set forth specific showing that there is a genuine issue for trial. facts Bouchat v. Balt. Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003) (quoting former Fed.R.Civ.P. 56(e)). proof . . . will not suffice to prevent A mere scintilla of summary judgment. Peters v. Jenney, 327 F.3d 307, 314 (4th Cir. 2003). If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted. 249 50 (citations omitted). construe the facts that Liberty Lobby, 477 U.S. at At the same time, the court must are presented 6 in the light most favorable to the party opposing the motion. See Scott v. Harris, 550 U.S. 372, 378 (2007); Emmett, 532 F.3d at 297. 2. Maryland Consumer Protection Act The MCPA, codified at Md. Code Ann., Comm. Law §§ 13-101, et seq., was intended to provide minimum standards for the protection of consumers in [Maryland]. Corp., 397 Md. 108, 140 (2007). Lloyd v. Gen. Motors The Maryland legislature passed the Act in response to mounting concern over the increase of deceptive practices and out of a concern that existing federal and State laws [were] inadequate, poorly coordinated and not widely known or adequately enforced. Morris v. Osmose Wood Preserving, 340 Md. 519, 536-37 (1995). The Act is intended to be achieve liberally construed protection objectives. in order to its consumer See State v. Cottman Transmissions Sys., Inc., 86 Md.App. 714, 743 (1991). The MCPA proscribes, inter alia, deceptive and unfair trade practices in the sale, lease, rental, loan, or bailment of any consumer goods, consumer realty, or consumer services and the extension of consumer credit. Md. Code Ann., Com. Law § 13-303 (2011). In this case, Plaintiffs allege that Walpole violated the MCPA through false representations and omissions relating to the validity of the mortgage payoff program and their refinancings. (ECF No. 37, at 14-15). In moving for summary judgment on this count, Mr. Walpole argues that he is statutorily exempt from 7 liability under the Act because it does not apply to attorneys. (ECF No. 71, at 6-7). To support this position, Mr. Walpole cites § 13-104 of the MCPA: This title does not apply to: (1) The professional services of a . . . lawyer, . . . insurance company authorized to do business in the State, [or] insurance producer licensed by the State. Md. Code Ann., Com. Law § 13- 304(1) (2011). Plaintiffs contend that Mr. Walpole cannot be exempt from statutory liability because he is not a Maryland-licensed attorney, but rather a licensed . . . title insurance agent with the Maryland Insurance Administration. 73-1, at 5)). (ECF No. 73, at 6; They also argue that Mr. Walpole cannot be exempt from the statute because he was not practicing law in Maryland. (Id. at 21-23). The MCPA expressly does not reach the conduct of either attorneys or insurance producers. 104(1) (2011). Because Mr. Md. Code Ann., Com. Law § 13- Walpole producer, he is exempt from the MCPA. is a title insurance Sections 10-101(i)(1) and (2) of the Insurance Article of the Maryland Code define Title insurance producer as someone who for compensation, solicits, procures, or negotiates title insurance contracts or a person who provides escrow, closing, or settlement services that may result in the issuance of a title insurance contract. Ann., Ins. § 10-101(i)(1),(2). 8 Md. Code Further, it is not clear that the statutory exemption would not apply to Mr. Walpole because he was not licensed to practice law in Maryland, as Plaintiffs argue.1 not provide category of this distinction lawyers, but with does The statute itself does respect restrict to the exemption general only to insurance compan[ies] authorized to do business in the State, [and] insurance producer[s] licensed by the State. Ann., Com. Law § 13-104(1) (2011). Md. Code The plain meaning of this statute indicates that the General Assembly did not intend to limit the statutory exemption for lawyers in the same way that it did insurance companies or insurance providers. Id.; Dean v. U.S., 556 U.S. 568, 573 (2009) ( Where Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion. ) (quoting Russello v. U.S., 464 U.S. 16, 23 (1983)); see also Robinson v. Fountainhead Title Group 1 Plaintiffs also argue that if Mr. Walpole is exempt from the MCPA on the basis of his being an attorney, their negligence claim must be revived because this fact gives rise to a duty of care that Mr. Walpole owed Plaintiffs. (See ECF No. 73, at 3536). The statutory exemption, however, is not based on an attorney-client relationship, but on the attorney s status as an attorney. As discussed here, it applies a broad exemption to the professional services of a . . . lawyer. Because there is no evidence that an attorney-client relationship existed between Plaintiffs and Mr. Walpole, the negligence claim will not be revived. 9 Corp., 447 F.Supp.2d 478, 489-90 (D.Md. 2006) (holding that real estate brokers and title insurance producers not hired to act in that capacity are nonetheless exempt from the MCPA for conduct concern[ing] the professional services of Defendants ). Walpole signed conducted the the documents, settlement, disbursed oversaw the refinancing. the arranged the checks[,] (ECF No. 37, at 10). and Mr. paperwork, generally These services are related to his professional services as a lawyer, and Mr. Walpole is therefore exempt from liability under this statute. In any event, Plaintiffs argument is unavailing because Mr. Walpole, by Plaintiffs own admission, is a title insurance provider, and also exempt from the statute on that basis. Thus, Mr. Walpole s motion for summary judgment will be granted as to the MCPA claim.2 2 Plaintiffs argue that Mr. Walpole s violation of a number of other statutes and regulations are evidence of his liability for fraud and deceptive trade practices. (ECF No. 73, at 2329). Because the MCPA proscribes fraud and deceptive trade practices, this will be construed as an argument that Mr. Walpole violated the MCPA. Because he is exempt from this statute, this argument carries no weight. See Joseph v. Bozzuto Mgmt. Co., 173 Md.App. 305, 321, 326 (2007) (noting that this principle is one that is carefully circumscribed, and [i]n Maryland, the violation of a statute does not constitute negligence per se. Rather, the breach of a statutory duty may be considered some evidence of negligence where three requirements are met. First, the plaintiff must be a member of the class of persons the statute was designed to protect. Second, the injury suffered must be of the type the statute was designed to prevent. Third, the plaintiff must present legally 10 3. Unjust Enrichment In Maryland, unjust enrichment consists of three elements: (1) a benefit conferred upon the defendant by the plaintiff; (2) an appreciation or knowledge by the defendant of the benefit; and (3) the acceptance or retention by the defendant of the benefit under such circumstances as to make it inequitable for the defendant to retain the benefit without the payment of its value. Hill v. Cross Country Settlements, LLC, 402 Md. 281, 295 (2007). deprive A successful the conscience defendant he ought unjust of not enrichment benefits to keep, claim that in even though serves equity he to and good may have received those benefits quite honestly in the first instance, and even though the plaintiff may have suffered no demonstrable losses. Id. at 295-96 (quoting Dep't of Hous. & Cmty. Dev. v. Mullen, 165 Md.App. 624, 659 (2005), cert. denied, 391 Md. 579 (2006)). Defendant Walpole initially contended that Plaintiffs unjust enrichment claim is defeated because a written contract exists between the parties. See Janusz v. Gilliam, 404 Md. 524, 537 (Md. 2008) (holding that unjust enrichment claims may not be brought where the subject matter of the claim is covered by an express contract between the parties. ) (quoting Cnty. sufficient evidence to demonstrate that the statutory violation was the proximate cause of the injury sustained. ). Id. at 326. 11 Comm rs of Caroline Cnty. v. J. Roland Dashiell & Sons, Inc., 358 Md. 83, 96 (2000)). Mr. Walpole attached two documents as evidence of his written contracts with the Plaintiffs. Nos. 71-2 & 71-3). Plaintiffs pointed out that (ECF the two documents that Defendant submitted are not executed by either party, and contract. therefore do not establish the existence of a Recognizing the merit of Plaintiffs argument, Mr. Walpole withdrew the argument in his Reply. (ECF No. 75, at 10- 12). As Mr. Walpole recognizes, this argument is flawed for a number of Application reasons. Disclosure First, the forms that contracts lenders are are Maryland required to provide to borrowers disclosing fees for settlement services. See Md. Code Ann., Com. Law § 12-119 and 12-120 (2011). Mr. Walpole s name does not appear on either form. 71-2 & 71-3). Plaintiffs evidence parties.3 or that Next, (ECF Nos. Finally, the forms are not signed by either Mr. a Walpole. contractual These documents relationship do exists not provide between the Therefore, Plaintiffs unjust enrichment claim will 3 Plaintiffs argue that the existence of these contracts give rise to a duty of care that Mr. Walpole owed them. Thus, they seek to resuscitate their dismissed negligence claim. Because there is no evidence that such a contract exists, the negligence claim will not be revived. (See ECF No. 73, at 3536). 12 not be defeated on this basis, requiring an examination of the individual elements of the claim. By not addressing them in his summary judgment motion, Mr. Walpole concedes that the first two elements of an unjust enrichment claim are met: that Plaintiffs conferred a benefit to knowledge him, and benefit. that he had See Hill, 402 Md. at 295. and appreciation of that Here, the unjust enrichment Walpole allegedly incurred was a portion of the proceeds from Plaintiffs fraudulently induced cash-out refinancings, including amounts paid directly to Walpole and large cash amounts to either Sadr and/or Walpole. 4 (ECF No. 37, at 11). Plaintiffs minimum, received adduce $10,000 evidence per that, month and at a $100 per Mr. Walpole transaction to facilitate the closing transactions between Plaintiffs and M.I. Title and M.I. Financial. deposition testimony (ECF No. 73-1, at 26). further reveals 4 that he Mr. Walpole s received this Plaintiffs did not waive their unjust enrichment claim in their class certification reply brief. (ECF No. 72, at 10 n.1) (noting that the unjust enrichment claim is so limited as to preclude continued litigation ). Plaintiffs opposition to Defendant s summary judgment motion (ECF No. 73), however, argues that the unjust enrichment claims should not be dismissed. A plaintiff s failure to respond to a summary judgment motion may constitute waiver or abandonment of a claim. Estate of Edgerton v. UPI Holdings, Inc., CCB-09-1825, 2011 WL 6837560, at *4 (D.Md. Dec. 28, 2011) (citing Mentch v. Eastern Sav. Bank, FSB, 949 F.Supp. 1236, 1246 47 (D.Md. 1997)). Because Plaintiffs respond to Defendant s unjust enrichment arguments in their summary judgment opposition, this claim is not waived. 13 compensation pursuant to his relationship with M.I. Financial as a 1099 independent testified to facilitated steered the and toward contractor. fact closed M.I. (Id.). that all after of January Title, and Mr. the 2006 that Walpole also transactions were a he produced portion of or the refinancing proceeds were paid to M.I. Title and M.I. Financial. (Id. at 7, 15). interest in He did not tell Plaintiffs of his ownership M.I. Title, or of any money he received Plaintiffs refinancings as a result of that ownership. 15-16). Taken together, this evidence supports from (Id. at Plaintiffs claim that Mr. Walpole received a benefit from them as a result of these transactions. the benefit that Mr. Walpole disputes only the amount of Plaintiffs conferred, limited to $100 per transaction. arguing that it is (ECF No. 71, at 12). Additionally, Mr. Walpole does not dispute his knowledge and acceptance (noting that of some [t]he benefit. essence of See Hill, 402 the requirement Md. at 299 that the defendant have knowledge or appreciation of the benefit is that the defendant have an opportunity to decline the benefit. ). Because Mr. Walpole was (1) responsible for the disbursement of funds from the refinancing; (2) had an ownership interest in, and drew a salary from, the entities receiving some of the funds from refinancing; and (3) does not dispute that he appreciated a benefit from Plaintiffs, it is reasonable to infer that Mr. 14 Walpole had the requisite knowledge of the benefit received by him and had an opportunity to decline such benefit. Mr. Walpole s final argument to defeat Plaintiffs unjust enrichment claim is that the balance of equities tilts in his favor because Sadr s Plaintiffs criminal scheme chose by to fail[ing] remain to ignorant ask any of Ms. substantive questions in an effort to evade their financial obligations to lenders without fully repaying their loans. 11). This argument is without merit. unjust enrichment equities. claim Hill, is 402 a Md. (ECF No. 71, at The final element of an fact-specific at 301. balancing When of making the this determination in considering a motion for summary judgment, a reviewing court considers the facts in the record, and the reasonable inferences drawn from those facts, in a light most favorable to the non-moving party, in this case, Plaintiffs. Id. Plaintiffs assert the following facts to support their argument that equity requires a finding of unjust enrichment: Mr. Walpole has been practicing real estate law for 46 years; he recognized that transactions something after was processing amiss the with first the nature refinancing of the for Ms. Sadr; he completed approximately 90 refinancing transactions for Ms. Sadr at his office; Mr. Walpole had an undisclosed equity interest in an entity receiving funds from the refinancings; the 15 people involved in these transactions closed and facilitated by Mr. Walpole had equity stripped from their homes. Plaintiffs also assert that they were unsophisticated with respect to this type of transaction and believed in the legitimacy of the transaction, at least to some degree, based on the gravitas and professionalism that Mr. Walpole, as an attorney, brought to the table. At (ECF No. 73, at 11-19, 33-34). Linda Sadr s sentencing hearing, U.S. District Court Judge Liam O Grady also commented on the merits of an argument similar to the one posed by Mr. Walpole here concerning these transactions. Directing his comments to Plaintiffs and others, he remarked: [I]t was a sophisticated enterprise that [Ms. Sadr] was very good at. And I don't think any of you should feel guilty about having been victims of this crime and having been convinced of it when you shouldn t have fallen prey to it because you re smarter than that. This was a very clever scheme. . . . A scheme that really drew out people's interest, the bank being the bad guy. That is very attractive to most citizens in the community. And so, you really should not feel deep down that you didn t carefully consider things that you should have and as a result you have suffered and your families have suffered. And I think that you just, unfortunately, fell prey to a sophisticated scheme. U.S. v. Sadr, (transcript of No. 1:10-cr-00437-LO sentencing hearing, 16 (E.D.Va. at 41). June 17, 2011) Plaintiffs and Judge O Grady s reasoning is persuasive, and the scales of granted in equity do not tip in Mr. Walpole s favor. Therefore, summary judgment will not be Defendant s favor on Plaintiffs unjust enrichment claim because there is a sufficient basis upon which a fact finder could determine that Plaintiffs conferred a benefit to Mr. Walpole, that he had knowledge and appreciation of that benefit, and the equities do not balance in Mr. Walpole s favor. III. Conclusion For the foregoing reasons, the motion for summary judgment filed by Defendant Walpole will be granted as to Plaintiffs MCPA claim and denied as to Plaintiffs unjust enrichment claim. A separate order will follow. /s/ DEBORAH K. CHASANOW United States District Judge 17
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