Citigroup Global Markets Realty Corp. v. The City of Montgomery

Filing 15

MEMORANDUM OPINION AND ORDER denying 8 MOTION to Dismiss. Signed by Honorable William Keith Watkins on 11/19/2009. (Attachments: # 1 Civil Appeals Checklist)(wcl, )

IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA NORTHERN DIVISION C IT IG R O U P GLOBAL MARKETS R E A L T Y GROUP, P la in tif f , v. T H E CITY OF MONTGOMERY, D e f e n d a n t. ) ) ) ) ) ) ) ) ) )

CASE NO. 2:09-CV-784-WKW[WO]

M E M O R A N D U M OPINION AND ORDER B e f o re the court is Defendant City of Montgomery's ("City") motion to dismiss, filed p u rs u a n t to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Doc. # 8.) The matter h a s been fully briefed. (Docs. # 11-13.) For the reasons to follow, the court finds that the m o tio n to dismiss is due to be denied. I . JURISDICTION AND VENUE J u ris d ic tio n is exercised pursuant to 28 U.S.C. § 1332 (diversity jurisdiction) and 28 U .S .C . § 1331 (federal question jurisdiction). The parties do not contest personal jurisdiction o r venue, and the court finds allegations sufficient to support both. I I. STANDARD OF REVIEW A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint against the le g a l standard set forth in Rule 8: "a short and plain statement of the claim showing that the p le a d e r is entitled to relief," Fed. R. Civ. P. 8(a)(2). In ruling on a motion to dismiss, courts " m u s t accept the well pleaded facts as true and resolve them in the light most favorable to

the plaintiff." Paradise Divers, Inc. v. Upmal, 402 F.3d 1087, 1089 (11th Cir. 2005) (in te rn a l quotation marks omitted); see also Watts v. Fla. Int'l Univ., 495 F.3d 1289, 1295 (1 1 th Cir. 2007) ("We have held many times when discussing a Rule 12(b)(6) motion to d is m is s , that the pleadings are construed broadly, and that the allegations in the complaint a re viewed in the light most favorable to the plaintiff" (internal citation and quotation marks o m itte d )). To survive Rule 12(b)(6) scrutiny, however, "a complaint must contain sufficient f a c tu a l matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 5 4 4 , 570 (2007)). "Determining whether a complaint states a plausible claim for relief [is] . . . a context-specific task that requires the reviewing court to draw on its judicial experience a n d common sense." Id. at 1950 (citation omitted). If there is "enough fact to raise a re a s o n a b le expectation that discovery will reveal evidence" to support the claim, there is a " p la u s ib le " ground for recovery, and a motion to dismiss should be denied. Twombly, 550 U .S . at 556. The claim can proceed "even if it strikes a savvy judge that actual proof of those f a c ts is improbable, and that a recovery is very remote and unlikely." Id. (internal quotation m a rk s omitted). In addition to considering the properly pleaded allegations of the complaint, the court c a n consider "documents incorporated into the complaint by reference . . . ." Tellabs, Inc. v . Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007). In other words, "where the p la in tif f refers to certain documents in the complaint and those documents are central to the

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plaintiff's claim, then the Court may consider the documents part of the pleadings for p u rp o s e s of Rule 12(b)(6) dismissal[.]" Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F .3 d 1364, 1369 (11th Cir. 1997) (per curiam). And "the defendant's attaching such d o c u m e n ts to the motion to dismiss will not require conversion of the motion into a motion f o r summary judgment." Id. III. FACTS T h e following are the facts viewed in the light most favorable to Citigroup. On or a b o u t February 7, 2007, the City Inspections Department determined that there were a n u m b e r of municipal code violations on the property located at 7 West Delano Avenue, M o n tg o m e ry, Alabama ("Property") and issued a citation to the property owner.1 A portion o f the Property was subsequently condemned and demolished by the City between August 2 1 and September 12, 2007. On October 5, 2007, Velocity Commercial Capital, LLC ("Velocity"), as mortgagee o n the Property under a mortgage dated October 26, 2006, assigned its interest in the m o rtg a g e to Plaintiff Citigroup Global Markets Realty Corp. ("Citigroup"). On August 19, 2009, Citigroup commenced the instant action, claiming that the City f a ile d to properly notify Velocity of the condemnation and demolition of the Property and th a t, as a result, Citigroup was injured. In its amended complaint (Doc. # 4), which is the o p e ra tiv e complaint, Citigroup brings claims against the City for negligence, trespass,
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The "multi-family zoned" Property encompassed "34 buildings containing 4 units each for a total of 136 units." (Doc. # 4 ¶ 1.)

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unreasonable seizure under the Fourth and Fourteenth Amendments, and inverse c o n d e m n a tio n . (Doc. # 4, at 4-7.) The City responded by filing the present motion to d is m is s . (Doc. # 8.) I V . DISCUSSION The City moves for dismissal of the amended complaint, pursuant to Rule 12(b)(6), f o r "failure to state a claim upon which relief may be granted."2 (Doc. # 8, at 5; see also D o c . # 8, at 1.) As support for its motion, the City relies upon Roberts v. Northern Pacific R a ilr o a d Co., 158 U.S. 1 (1895), to argue that an owner's claim for damages caused to land i s a personal claim that does not "run with the land" to a subsequent purchaser unless that c la im is "expressly conveyed."3 (Doc. # 8, at 3 & 4.) The City points out that, as the facts a re framed in the amended complaint, Citigroup did not own the mortgage on the Property a t the time of its demolition. (Doc. # 8, at 4; see also Doc. # 4 ¶ 1.) Furthermore, the City a rg u e s that, although the amended complaint alleges that Velocity "did in fact convey its

The City makes a cursory statement that its Rule 12(b)(6) motion to dismiss is grounded upon Citigroup's lack of standing (Doc. # 8, at 3), which typically would invoke Rule 12(b)(1), not Rule 12(b)(6). See DiMaio v. Democratic Nat'l Comm. 520 F.3d 1299, 1302 (11th Cir. 2008) ("[S]tanding is a threshold jurisdictional question which must be addressed prior to and independent of the merits of a party's claims." (internal quotation marks omitted)). On this record, the City's motion does not directly challenge the court's power to rule, but instead whether Citigroup has stated a claim that entitles it to relief. Review of the City's motion, therefore, appears more appropriate under Rule 12(b)(6)'s standard, and Citigroup has not argued otherwise. With that said, however, review of the motion under Rule 12(b)(1) would require the same result. In Roberts, a quiet title action, the Court explained that when a railroad company constructs its railway on the land of another with that owner's knowledge, the owner and any subsequent purchaser will be estopped from maintaining an action for trespass or ejectment for the entry. Id. at 11-12. The owner will "be restricted to a suit for damages." Id. at 11. The suit for damages, however, "belong[s] to the owner at the time of the taking, and do[es] not pass to a grantee of the land under a deed made subsequent to that time, unless expressly conveyed therein." Id.
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interest in said mortgage to Citigroup," the amended complaint "is devoid of any set of facts th a t expressly grants Citigroup a `right to damages' on the Property." (Doc. # 8, at 4.) Analogizing this case to Roberts, the City argues that, absent an express conveyance, any c la im for damages belongs solely to Velocity and "did not pass" to Citigroup when it was a s s ig n e d the mortgage. (Doc. # 8, at 4.) Thus, according to the City, Citigroup's claims are d u e to be dismissed for failure to state a claim. On the other hand, Citigroup contends that, a s s u m in g the applicability of Roberts' precepts to the instant case, Roberts does not support d is m is s a l of the complaint because "the right to relief sought by [Citigroup] . . . was e x p re s s ly conveyed to it by legal instrument, to-wit: the mortgage and assignment referenced in the Complaint." (Doc. # 11, at 2.) Making the same assumption as to the applicability of R o b e rts , the court agrees with Citigroup. Citigroup's amended complaint references both the mortgage in the name of Velocity a n d the mortgage's assignment to Citigroup. (Doc. # 4.) Because these two documents are c e n tra l to Citigroup's claims, the court finds that it may consider the documents for Rule 1 2 (b )(6 ) purposes without converting the motion into one for summary judgment. See B ro o k s, 116 F.3d at 1369. Broadly construing the pleadings, including the mortgage and its a s s ig n m e n t, and viewing the allegations in the light most favorable to Citigroup, the court f in d s that there was an express conveyance, as required by Roberts.

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The mortgage defines "Lender" as "the entity identified as `Lender' in the first p a ra g ra p h of this instrument, or any subsequent holder of the Note." 4 (Doc. # 11, Ex. 1 § 1(v) (emphasis added).) The mortgage also provides that "the rights granted by this in s tru m e n t shall inure to, the respective successors and assigns of Lender . . . ." (Doc. # 11, E x . 1 § 34.) Velocity is the Lender named in the mortgage, and Citigroup is the subsequent h o ld e r of the mortgage. Pursuant to the mortgage's terms, Citigroup stepped into Velocity's s h o e s as the Lender when it was assigned the mortgage on October 5, 2007, and obtained the s a m e rights previously held by Velocity. As to the rights received by Citigroup, the mortgage p r o v id e s that "if any action or proceeding is commenced which purports to affect the M o rtg a g e d Property, Lender's security or Lender's rights under this instrument, including . . . code enforcement," the Lender may "take such actions as Lender reasonably deems n e c e s s a ry . . . to protect Lender's interest." (Doc. # 11, Ex. 1 § 12(a).) Based upon the plain la n g u a g e of these governing documents, Velocity's right of action allegedly arising from the C ity's demolition of certain housing units on the Property passed to Citigroup on October 5, 2 0 0 7 , upon the assignment of the mortgage. The City's argument that the amended

c o m p la in t fails to state a claim upon which relief can be granted, therefore, lacks merit.5

"Note" is defined as "the Promissory Note described on page 1 of [the mortgage], including all schedules, riders, allonges and addenda, as such Promissory Note may be amended from time to time." (Doc. # 11, Ex. 1 § 1(z).) The assignment assigned to Citigroup "all of Assignor's right, title and beneficial interest in and to that certain Deed of Trust describing land therein . . . TOGETHER with the note therein described." (Doc. # 11, Ex. 2.) The foregoing discussion disposes of the arguments raised in the City's opening brief. It is inappropriate to raise a new argument in a reply brief, as the City has done, but, in any event, that argument has no merit.
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V. CONCLUSION F o r the foregoing reasons, it is ORDERED that the City's Motion to Dismiss (Doc. # 8) is DENIED. DONE this 19th day of November, 2009. /s/ W. Keith Watkins UNITED STATES DISTRICT JUDGE

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