CAROLYN MOORE v. DEUTSCHE BANK NATIONAL TRUST COMPANY

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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 13-CV-1030
CAROLYN MOORE, APPELLANT,
V.
DEUTSCHE BANK NATIONAL TRUST COMPANY, APPELLEE.
Appeal from the Superior Court
of the District of Columbia
(CAR-2580-11)
(Hon. Thomas J. Motley, Trial Judge)
(Submitted March 17, 2015 Decided September 17, 2015)
Craig A. Butler was on the brief for appellant.
John R. Fischel and James A. Sullivan, Jr., were on the brief for appellee.
Before WASHINGTON, Chief Judge, THOMPSON, Associate Judge, and PRYOR,
Senior Judge.
THOMPSON, Associate Judge: Appellee Deutsche Bank National Trust
Company (“Deutsche Bank”) purchased the real property located at 54 Rhode
Island Avenue, N.W. (“the property”), at a foreclosure sale and then brought a
complaint for possession in the Landlord Tenant Branch of Superior Court. In
response, appellant Carolyn Moore, a defendant in the Landlord Tenant action,
2
filed a plea of title and counterclaim against Deutsche Bank, asserting that she was
the rightful owner of the property. After a bench trial, the Superior Court (the
Honorable Thomas Motley) rejected the plea of title and counterclaim and granted
Deutsche Bank a non-redeemable judgment of possession. On appeal, appellant
argues (1) that she provided sufficient evidence for the trial court to find that the
Deed of Sale that purportedly conveyed her interest in the property was forged; and
(2) that she provided sufficient evidence for the trial court to find that the real
estate transaction was fraudulent.1 We affirm the judgment of the trial court.
I.
In her testimony at trial, appellant provided the following background
information pertinent to her claims of forgery and fraud: She purchased the
property in 2003, financing the purchase with a $426,500 mortgage loan from New
Century Mortgage Corporation. Thereafter, struggling to make her mortgage
payments, she decided to convert the basement of the property into two
condominiums that she could sell or use to generate rental income. After speaking
with an architect, appellant believed that she needed $300,000 to pay for the
1
Appellant also argues that Deutsche Bank was not a bona fide purchaser
of the property for value. This is an issue we need not reach.
3
necessary remodeling and set about obtaining a construction loan or a refinancing
of her mortgage, so that she could take this amount out of the equity in the
property. She was eventually introduced to Darwin Farmer, who she understood to
be a loan officer for Premier Mortgage Funding. Appellant testified that Farmer
informed her that she could probably get the loan but that she would need a co-
signer; that Farmer also told her that a businessman named Reginald Walker would
be willing to co-sign for her, provided that she paid him $100,000; and that she
agreed to this arrangement.
On December 20, 2005, appellant attended settlement at the office of
Millennium Title & Abstract. The meeting took place in a conference room with
only two other people in attendance: Mr. Walker, whom she was meeting for the
first time, and a Mr. Nash, a notary. According to appellant’s testimony, during
the closing, Nash handed documents to her “one or two at a time” and instructed
her to sign them. Neither Walker nor Nash gave any explanations or made any
representations to her about what each document meant, and she never asked any
questions. Although no one prevented appellant from reading the documents, she
acknowledged at trial that she signed many of the documents without “reading
them completely” and signed others without reading them at all.
4
In the aftermath of the closing, appellant received checks totaling
$78,435.45. Realizing that this amount was far less than she had been expecting,
even after the fee to be paid to Mr. Walker, appellant contacted Premier Mortgage
Funding, which she believed to be Mr. Farmer’s employer, and was informed that
the company had no record of her loan. About a month after the closing, having
contacted Mr. Walker and demanded an explanation, appellant met him at his
attorney’s office. Mr. Walker informed her that she had sold him the property, that
he had a sales contract with her signature on it, and that she could have the
property back for $800,000. At trial, she denied that she had signed a sales
contract, testified that she was “absolutely sure” that the signature on the purported
sales contract was not hers, and described how the signature on the sales contract
differed from her own.2
Appellant did acknowledge signing or writing other documents that referred
to the transaction that was the subject of the settlement as a sales transaction. For
2
Appellant sued Walker for fraud and eventually settled with him, agreeing
to help him cover his $720,000 WMC Mortgage Corporation mortgage on the
property by paying him $1815 every month until January 2008, at which point he
would transfer title in the property to her, provided she had obtained the financing
necessary to pay off his mortgage. Mr. Walker thereafter defaulted on the
mortgage (which had been sold to Morgan Stanley and placed into a trust of which
Deutsche Bank was the trustee), and Wells Fargo, the loan servicer, foreclosed.
The property was sold at auction and purchased by Deutsche Bank.
5
example, appellant acknowledged that she signed a HUD-1 settlement statement —
a standard form she had previously seen at least five times when buying and selling
other properties — by placing her signature on a line marked “seller.” She
admitted that she saw the word “seller” at the time, but testified that she did not
intend to sell her home and believed the document was simply “incorrect.”3
Appellant further acknowledged that she executed a “Correction Agreement,
Limited Power of Attorney,” which she signed above the line that says “seller.”
She also testified that after the closing, Mr. Farmer dictated the words of a
disbursement authorization, which she wrote out in longhand and signed. The
authorization states, in part: “Of the proceeds of the sale of 54 Rhode Island
Avenue NW, Washington, D.C. 20001, please provide [$]100,000 to Reggie
Walker[.]” (Emphasis added.) A few days after the closing, appellant signed a
second disbursement authorization that similarly began, “I, Carolyn L. Moore,
authorize Millennium Title to disburse the proceeds of the sale of my property
located at 54 Rhode Island Avenue NW as follows[.]” (Emphasis added.)
3
Appellant acknowledged that she also saw that the HUD-1 form indicated
that the seller would receive $169,000. Even though she believed she was
supposed to receive $300,000 from the refinancing, she did not walk away from
the transaction.
6
Appellant acknowledged that the signature on the deed filed with the
Recorder of Deeds, which shows a conveyance of the property to Walker for
$800,000, “looks like my signature.” She testified, however, that she did not
remember signing that document, and her counsel asserted that the signature was
either “a Xeroxed copy of her signature . . . or . . . a signature that someone wrote
to make it look like hers[.]” Appellant also showed the trial court that an unsigned
deed included in a packet of documents that she took home with her after the
closing differed from the recorded deed, in that it listed Mr. Walker as the “parties
of the first part” and appellant as the party of the second part (whereas the recorded
deed listed appellant as the party of the first part and Walker as the party of the
second part). The recorded deed also has an irregularity: the notary block purports
to acknowledge Mr. Walker’s signature, although his signature does not appear on
the deed.
In an August 19, 2013, written order, Judge Motley found that appellant did
not meet her burden to demonstrate that the deed was forged or altered or that the
underlying transaction was fraudulent.
II.
7
On appeal, appellant renews several of the arguments she made in the trial
court. She appears no longer to contend that her signature on the deed is a
forgery,4 but argues that the deed recorded in the land records was altered and is a
forged document for that reason; that the transaction by which she purportedly
conveyed the property to Mr. Walker was fraudulent; and that, for those reasons,
the transaction was void ab initio, invalidating the interest in the property claimed
by Deutsche Bank as well as the interests of the individual (Mr. Walker) and the
lenders that preceded Deutsche Bank in the chain of title. Appellant contends that
she provided clear and convincing evidence to support her claims and that the trial
court therefore erred in ruling that she failed to meet her burden of proof and in
rejecting her plea of title.
Appellant first argues that the evidence permitted the trial court to “infer that
the blank [i.e., unsigned] deed [contained in the packet of documents that appellant
4
Even if appellant did intend to pursue that claim, we would reject her
challenge to Judge Motley’s findings. While Judge Motley acknowledged
appellant’s testimony that she had no memory of signing any deed, he reasonably
found that her lack of memory was “unremarkable” in light of her testimony that
she signed some documents at the closing without even reading them. Judge
Motley also noted appellant’s initial, repeated testimony that the signature on the
deed looked like hers; the absence of expert testimony that the signature was a
forgery; and the lack of “obvious signs that [appellant’s] signature on the Deed of
Sale is materially different from her signature on other documents which [she]
admitted to signing.” Judge Motley reasonably found that all of these factors
detracted from the strength of appellant’s case.
8
brought home from the closing] was the deed that was presented to [Ms.] Moore
during the 12/20/05 Transaction and that the deed was subsequently forged in
order [to] get it recorded[.]” We cannot agree; we discern no error in Judge
Motley’s determination that the evidence was insufficient to enable appellant to
meet her difficult burden of proving that the deed was forged. 5 Judge Motley
reasonably found that the unsigned deed in appellant’s packet did not compel an
inference that she was given that version of the deed to sign at the closing. As
Judge Motley recognized, a mistake in the deed could have been found at the
closing and a new copy made for signature, with appellant simply “retain[ing] an
earlier unsigned draft of the document” that had been included in a packet of
copies made for her records. The mistake in the notary block also does not
indicate that the deed was forged, because it could have simply been a “clerical
error[,]” as the trial court deemed it to be. A clerical mistake of this sort could
have easily been made while Mr. Nash (who, appellant testified, did not notarize
5
“[T]here is a ‘presumption that a deed is what it purports to be on its face,
and one who seeks to establish the contrary has the burden of doing so by clear and
convincing evidence.’” In re Estate of Munawar, 981 A.2d 584, 587 (D.C. 2009)
(quoting Smart v. Nevins, 298 A.2d 217, 219 (D.C. 1972)). Clear and convincing
evidence is “evidence that will produce in the mind of the trier of fact a firm belief
or conviction as to the facts sought to be established.” Lumpkins v. CSL
Locksmith, LLC, 911 A.2d 418, 426 n.7 (D.C. 2006) (internal quotation marks
omitted).
9
any of the documents in front of her) was notarizing the batch of documents after
the closing.6
Appellant next argues that she provided sufficient evidence for the trial court
to find fraud (both fraud in the factum and fraudulent inducement) by clear and
convincing evidence. Again, we disagree. Fraud in the factum is “the sort of fraud
that procures a party’s signature to an instrument without knowledge of its true
nature or contents.” Chen v. Bell-Smith, 768 F. Supp. 2d 121, 135 (D.D.C. 2011)
(quoting Langley v. FDIC, 484 U.S. 86, 93 (1987)). Parties alleging fraud in the
factum must prove their claim by clear and convincing evidence, and they will be
estopped from making such a claim “if as . . . literate and reasonably intelligent
person[s they] fail[] to read the instrument.” Columbia Fed. Sav. & Loan Ass’n v.
Jackson, 131 A.2d 404, 408 (D.C. 1957).7
6
This mistake in the signed and filed deed’s acknowledgment does not
otherwise make the deed invalid. The District’s curative statute provides that “a
defective or improper acknowledgment[,]” D.C. Code § 42-404 (a)(1) (2001), in
“[a]ny instrument recorded in the Office of the Recorder of Deeds on or after April
27, 1994, shall be effective . . . unless the failure is challenged in a judicial
proceeding commenced within [six] months after the instrument is recorded.”
D.C. Code § 42-403 (2001). Ms. Moore’s claim was brought years after the deed
was recorded.
7
“Successful invocations of the fraud in the factum defense are rare, and
only in the most extreme situations have courts of any jurisdiction found a fraud in
(continued…)
10
The evidence at trial showed that appellant is a college graduate who had
engaged in numerous property transactions before the transaction in issue here.
She acknowledged in her trial testimony that she had the opportunity to read all the
documents that were given to her during the closing, but that she chose to sign
many without “reading them completely” and to sign others without reading them
at all. As the trial court emphasized, and as described above, by her own
admission, she signed or wrote in longhand “numerous [at least four] documents at
closing in which she represented that she was ‘selling’ the property to Mr.
Walker.” Further, appellant testified that no one told her what the closing
documents purported to do, and she provided no evidence that anyone
misrepresented the nature of the documents she was signing.8 We agree with
Judge Motley that the weight of the evidence did not support appellant’s claim that
she signed the closing documents believing that they were refinancing documents.
Moreover, even if we assume the contrary arguendo, if appellant did not
understand the nature of the closing documents, the evidence supports a conclusion
(…continued)
the factum defense to be viable.” Chen, 768 F. Supp. 2d at 135 (internal quotation
marks omitted).
8
The facts of this case are thus unlike those in Modern Management Co. v.
Wilson, 997 A.2d 37 (D.C. 2010), in which the defendants “told [the plaintiff
homeowner] that the sale documents were a ‘legal fiction’” and thereby
fraudulently induced her to enter into a transaction “three days before her house
was scheduled to go into foreclosure[.]” See id. at 40-41, 63 n.31.
11
that her misunderstanding was due to her own negligence, negating any fraud-in-
the-factum defense, as the trial court found. See Chen, 768 F. Supp. 2d at 126-27,
136 (finding that where plaintiffs believed they were refinancing their home but
were actually selling it, there was no fraud in the factum because the college-
educated “plaintiffs were fully capable of reading and understanding the deed of
sale and the HUD-1 settlement statement” but “chose to sign these documents
without reading them”).
As to appellant’s fraudulent inducement claim, Judge Motley correctly
recognized that appellant had the burden to show, inter alia, that she relied on
misrepresentations about the nature of the transaction when she signed the
documents at closing.9 Judge Motley found “little question that the transaction . . .
9
There are two separate standards that can be applied in a fraudulent
inducement case. The first standard enables an individual who signed a contract
due to a fraudulent misrepresentation to obtain relief by proving, by clear and
convincing evidence, that there was “(1) a false representation (2) made in
reference to a material fact, (3) with knowledge of its falsity, (4) with the intent to
deceive, and (5) an action that is taken in reliance upon the representation[.]” In re
Estate of McKenney, 953 A.2d 336, 342 (D.C. 2008) (quoting Park v. Sandwich
Chef, Inc., 651 A.2d 798, 801 (D.C. 1994)). Alternatively, individuals seeking
rescission of a contract (and not damages) need only show, by a preponderance of
the evidence, that they were prejudiced by relying on a misrepresentation of
material facts (even if the misrepresentation was made innocently and without
fraudulent intent). Estate of McKenney, 953 A.2d at 342 (citing Barrer v.
Women’s Nat’l Bank, 761 F.2d 752, 757-58 (D.C. Cir. 1985)). For the reasons set
(continued…)
12
was not a legitimate transaction” (because, for example, “it is highly unlikely that
[WMC Mortgage Corporation] would have . . . approved a $720,000 loan” to Mr.
Walker when he was to receive a portion of the proceeds as a “co-signer” fee) and
recognized that “there is an inference that WMC [Mortgage Corporation] was
defrauded[.]” However, Judge Motley was “unable to accept as true and accurate
[appellant’s] testimony that she believed the documents she was signing were part
of a refinancing and not the sale of her property.” He therefore rejected appellant’s
fraudulent inducement claim, as she could not prove that she relied on
misrepresentations about the agreed-to transaction when she signed the documents
at closing.
We are satisfied that the trial court reasonably found that “[t]he evidence
indicating [that] Ms. Moore knew that the transaction was a sale of her property is
overwhelming.” As Judge Motley highlighted, appellant “did not know the
amount that her new mortgage would increase after the refinancing” and “did not
know the monthly payments she would be expected to pay[,]” matters that she
reasonably would be expected to know about had she intended to undertake a mere
refinancing. Moreover, she wrote a disbursement authorization that called for
(…continued)
out in the text that follows this footnote, the evidence did not suffice for appellant
to prevail under either standard.
13
funds to be given to Mr. Walker to cover six mortgage payments. As Judge
Motley reasonably observed, “it would be unusual for [appellant as a borrower at a
refinancing] to give money to . . . a cosigner[] to pay six months of her mortgage
payments.” As Judge Motley emphasized, the evidence was also that appellant
signed “at least four documents” of which “[e]ven a cursory review” would “lead
to the conclusion that the transaction Ms. Moore was engaged in was the sale of 54
Rhode Island Avenue, and not a refinancing.” On this record, the court reasonably
rejected appellant’s claim that she “did not understand that she was selling her
home to Mr. Walker.”
Accordingly, we discern no reason to disturb the trial court’s finding that
appellant failed to prove that she relied on a false representation about the nature of
the closing transaction. Appellant has “fallen short of proving that a finding of . . .
fraud [in the inducement] is mandated by the evidence, or that no impartial trier of
fact could reasonably find otherwise.” Allen v. District of Columbia Bd. of
Elections & Ethics, 663 A.2d 489, 496 (D.C. 1995).
14
III.
For the foregoing reasons, the judgment of the trial court is
Affirmed.