Cordoba Initiative Corporation v. Deak , 943 F. Supp. 2d 74 ( 2013 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
______________________________
)
CORDOBA INITIATIVE )
CORPORATION, )
)
Plaintiff, )
)
v. ) Civil Action No. 11-1541 (RWR)
)
ROBERT LESLIE DEAK, et al., )
)
Defendants. )
______________________________)
MEMORANDUM ORDER
Plaintiff Cordoba Initiative Corporation (“Cordoba”) filed
this lawsuit against Robert Leslie Deak and his wife,
Moshira Soliman, alleging that Cordoba was the victim of fraud
when Deak misrepresented the value of a condominium unit (“Unit
201”) in the District of Columbia, sold it to Cordoba, and did
not transfer the title.1 The complaint alleges that although
Deak promised that he would provide Cordoba with both a lease and
a sales contract covering Unit 201 once Cordoba transferred
funds, Deak never had a sales contract prepared or transferred
title after Cordoba transferred $1.5 million as Deak requested.
Compl. ¶¶ 19-22. The complaint also alleges that the defendants
used the proceeds to buy another condominium in the same building
(“Unit 303") two weeks after Cordoba transferred its funds.
1
The background of this case is discussed more fully in
Cordoba Initiative v. Deak, Civil Action No. 11-1541 (RWR),
2012 WL 5285132, at * 1-2 (D.D.C. October 26, 2012).
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Compl. ¶ 26. Cordoba asks that a constructive trust be imposed
upon both Units.
Cordoba filed the complaint in this matter in August 2011.
Three days later, it filed with the Recorder of Deeds notices of
lis pendens on Unit 201 and its accompanying parking spot, and on
Unit 303, reflecting the pendency of this action. Defs.’ Mem. in
Supp. of Mot. to Cancel Lis Pendens (“Defs.’ Mem.”) at 2-3. On
April 8, 2013, the defendants entered into a contract to sell
Unit 201. The sale is scheduled to close on May 8, 2013, and is
subject to the defendants delivering clear title. On April 16,
2013, the defendants were approved for a home equity line of
credit on Unit 303 contingent on a title search. Id. at 3.
The defendants have moved to cancel and release the notices
of lis pendens. The defendants argue that the notices are
ineffective and were filed improperly because the action does not
affect the title to real property, see Defs.’ Mem. at 5-6, and
that the defendants will be irreparably harmed without
cancellation of the notices because they might be unable to
complete the sale of Unit 201 and might not receive the home
equity line of credit on Unit 303, see Defs.’ Mem. at 8-10. The
defendants seek sanctions against the plaintiff for recording the
notices. Id. at 6. The plaintiff opposes, arguing that
recordation was proper since the complaint asserts a proper
interest in the Units and seeks a constructive trust on them, and
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that the defendants cannot show a liklihood of success on the
merits or that the balance of harms or the public interest favors
the defendants. Pl.’s Opp’n at 6-8.
I
A notice of lis pendens in the District of Columbia is
“effective only if the underlying action or proceeding directly
affects the title to or tenancy interest . . . or other ownership
interest in real property situated in the District of
Columbia[.]” D.C. Code § 42-1207(b). “The purpose of a lis
pendens is ‘to enable interested third parties to discover the
existence and scope of pending litigation affecting property.’”
McNair Builders v. 1629 16th St., L.L.C., 968 A.2d 505, 507 (D.C.
2009) (quoting Heck v. Adamson, 941 A.2d 1028, 1029 (D.C. 2008)
(internal quotation omitted)). However,
[a] person with an ownership interest in real property
upon which a notice of pendency of action has been
filed under this section may . . . file a motion to
cancel the notice . . . [and the] court . . . may issue
an order canceling the notice of pendency of action
prior to the entry of judgment in the underlying action
or proceeding if the court finds . . . [t]he moving
party will suffer an irreparable injury if the notice
is not cancelled; . . . [t]he moving party has
demonstrated a substantial likelihood of success on the
merits in the underlying action or proceeding; . . .
[a] balancing of the potential harms favors the moving
party; and [t]he public interest favors cancelling the
notice[.]
D.C. Code § 42-1207 (g)-(h). The District of Columbia Court of
Appeals has stated, though, that any equitable power a court has
to order cancellation of a notice of lis pendens before judgment
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in the underlying action “must be exercised parsimoniously.”
Heck, 941 A.2d at 1030; see also McWilliams Ballard, Inc. v.
Level 2 Dev., 697 F. Supp. 2d 101, 111 (D.D.C. 2010) (citing
Heck).
II
The defendants’ argument that the notices are ineffective is
not supported by the record. The complaint adequately alleges
plaintiff's ownership and tenancy interests in Unit 201. The
allegation that Cordoba paid to rent and buy Unit 201 and the
owning defendants provided neither a lease nor a sales contract
in return directly affects the parties’ ownership interests in
realty here.
Deak claims that the original transfer of Cordoba funds was
not solely for the purchase of Unit 201 but was also in
connection with an agreement for Deak’s company to provide
extensive consulting services to Cordoba. Deak adds that the
parties terminated the consulting services agreement and
therefore the notices do not directly affect the title to the
Units he owns. Defs.’ Reply at 2. Whatever additional terms may
have attached to the money transfer, Deak’s showing does nothing
to disprove that one of the purposes of the money transfer was to
give Cordoba a tenancy and ownership interest in Unit 201 as the
complaint pleads. To the contrary, Deak’s letter asking Cordoba
to make the transfer corroborates that purpose. Defs.’ Reply,
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Deak Reply Affid. (“Reply Affid.”), Ex. D (“Cause Management is
prepared to arrange for the transfer to you of a property located
at 3030 K Street, NW, Unit 201, Washington DC . . . . In order
to do so, we will need to receive a wire transfer of $1,500,000
. . . . Once the funds are received, Cause Management will
arrange to transfer the property to your control[.]”).
The complaint also alleges that Cordoba’s funds fraudulently
obtained by the defendants to secure Cordoba’s interests in Unit
201 were used by the defendants to obtain Unit 303 just two weeks
later. Where one party improperly obtains another’s funds and
uses them to obtain an interest in real property, a constructive
trust upon that property is an available remedy. Heck, 941 A.2d
at 1029. Seeking such a trust asserts a sufficient ownership
interest to support the filing of a notice of lis pendens. Id.
at 1030; McWilliams, 697 F. Supp. 2d at 110.
III
The defendants fail to show that they are entitled to an
order cancelling the notices. Their claim of irreparable harm is
supported by no more than speculation that they might lose their
buyer on Unit 201 and might lose their line of credit on
Unit 303. They do not demonstrate certainty of harm,
impossibility of extending deadlines, irretrievable loss of
title, preclusion from reapplying for new lines of credit, or
other evidence of irreparability. The defendants make an anemic
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showing of likelihood of success on the merits. Nothing they
present dispels the strong evidence of a bargained-for transfer
of a property interest in Unit 201 that they at minimum
suspiciously failed to honor. Concerning Unit 303, Deak confirms
that he asked Cordoba when he could expect the funds so “we do
not lose the other property[,]” Reply Affid., Ex. C, but denies
in his reply affidavit that he used any of the funds from Cordoba
to purchase Unit 303, Reply Affid. at 17; see also Answer ¶ 26.
Deak’s sworn denial may slightly tip the balance against Cordoba
on likelihood of success on the merits of the claim for a
constructive trust on Unit 303, but it does not overcome the weak
showing of irreparable harm if the notice on Unit 303 is not
removed. Nor do the defendants show that the public interest
favors removing public notice that litigation is pending over
properties as to which colorable showings of fraud have been
made. In light of all of these factors, the balance of harms is
insufficient to tilt in favor lifting the notices.
IV
The defendants have not shown that cancelling the notices of
lis pendens or imposing sanctions would be proper. Therefore, it
is hereby
ORDERED that the defendants’ emergency motion [35] to quash
notices of lis pendens be, and hereby is, DENIED. It is further
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ORDERED that the defendants’ emergency motion [36] for a
hearing on the motion to quash notices of lis pendens be, and
hereby is, DENIED as moot.
SIGNED this 6th day of May, 2013.
/s/
RICHARD W. ROBERTS
United States District Judge