Glanton et al v. Bank of America et al

Filing 267

ORDER denying 211 Motion to Vacate ; granting 238 Motion for Leave to File; granting 251 Motion to Amend/Correct; granting in part and denying in part 44 Motion to Dismiss; granting in part and denying in part 47 Motion to Dismiss; granting in part and denying in part 50 Motion to Dismiss; granting in part and denying in part 57 Motion to Dismiss; granting in part and denying in part 68 Motion to Dismiss; granting in part and denying in part 71 Motion to Dismiss; granting in pa rt and denying in part 76 Motion to Dismiss; granting 129 Motion to Amend/Correct; granting in part and denying in part 157 Motion to Dismiss. Counsel see order for further rulings. Signed by Senior District Judge Malcolm J. Howard on 3/29/2011. (Heath, D.)

Glanton et al v. Bank of America et al

Doc. 267

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
SOUTHERN DIVISION
NO.: 7:09-CV-89-H
CAMILLA THOMPSON, et al. , Plaintiffs,

) ) )
)

v.

) ) )
)

ORDER

BANK OF AMERICA, et al. , Defendants.

) ) )
)

)

This matter is before the court on motions to dismiss filed by defendants Branch Banking and Trust Company [DE #44]; Bank of America [DE #47]; Maryville Partners, Inc., R.A. North Inc. [DE #50]; R.A. I, Inc., North

Development,

Development

Randolph Inc.

Allen, William Allen and Southeastern Waterfront Marketing, [DE #57]; Carolina First Bank [DE #68]; RBC Bank (USA) Craven's Grant Homeowner's Association, Inc. [DE

[DE #71] ; #76]; and

SunTrust Bank [DE #157]; and on plaintiffs' multiple motions for leave to amend their to complaint vacate [DE #129, 238
&

251]

and with

plaintiffs'

motion

their

voluntary

dismissal

prejudice of Richard Mace Watts [DE #211] .

Dockets.Justia.com

On

February

24,

2011,

united

States

Magistrate

Judge

William A.

Webb filed a that the

Memorandum and Recommendation to dismiss be granted

("M&R"), and that

recommending plaintiffs' [DE #129], misnomer

motions

motion for plaintiffs' [DE #238]'

leave to file a motion and for leave

third amended complaint to amend motion (Mem. to to correct a the

plaintiffs'

vacate

voluntary dismissal of Watts be denied. [DE #254] .)' Plaintiffs object to the M&R,

& Recommendation

arguing

that

it

failed

to

adequately address the allegations of plaintiffs' amended complaint, focusing instead on the

proposed third the

sufficiency of

allegations Plaintiffs allegations for leave

contained contend

in plaintiffs' this is
error,

second amended especially

complaint. since the

in their third amended complaint to amend) are based on newly

(and their motion evidence

discovered

demonstrating that the scheme to

"the Defendants knew of and participated in lots at artificially inflated prices for

churn

' Plaintiffs' motion for leave to amend filed at DE #251 was not before Judge Webb. 'The M&R also addressed a number of motions pending in 2433 South Blvd., LLC, et al. v. Bank of America, et al., No. 7:10 CV-28-H (E.D.N.C.), and recommended that this action and the 2433 South Blvd. action be consolidated pursuant to Rule 42 (a) of the Federal Rules of Civil Procedure. The court will address the 2433 South Blvd. motions, as well as the issue of consolidation, by separate order entered in due course.

2

financial gain." at 8.) counsel

(Plfs.'

Obj. Mem.

&

Recommendation

[DE #259]

Relying on a number of emails procured by plaintiffs' as a result of discussions the proposed with Richard Mace third amended Watts,3

plaintiffs

argue

that

complaint

asserts viable, other lenders

plausible claims that Bank of America and the "actively participated with the other Defendants used to defraud the

to procure knowingly inflated appraisals" plaintiffs.

(Plfs.' Obj. Mem. & Recommendation at 12.)

The court agrees with Judge Webb that plaintiffs' claim (as stated "Lender in all versions of plaintiffs' the
§

complaint) Land

against Sales

the
Full

Defendants" Act, 15

under U.S.C.

Interstate et
~,

Disclosure

1701

("ILSA")

fails

to

state a claim for relief. agents, not financial

ILSA applies to developers and their See 15 U.S.C. by "developer
§§

institutions. activities

1703 (a)

(prohibiting 1709(a) for

enumerated

or

agent"),

(authorizing civil action against a "developer or agent"
§

violation of acts

1703 (a) ) .

It

is

only where course of

a

financial as a

institution

beyond

its

ordinary

dealing

lending institution and participates in the actual development, 3This court previously found that plaintiffs' counsel violated Rule 4.2 (a) of the North Carolina Revised Rules of Professional Conduct by communicating directly with Watts about matters for which Watts had secured legal representation. As a consequence of the unethical behavior, counsel received a written reprimand and a monetary sanction. (See Disciplinary Order [DE #237] . )
3

marketing or ILSA.

sale

of property that v.

liability may arise 621 F.2d 246,

under 250-51

Cumberland Capital Corp.

Harris,

(6th Cir. 1980); Feeley v. Total Realty Management, 660 F. SUpp. 2d 700, 709-710 (E.D. Va. 2009). Although plaintiffs assert

that the lender defendants are developers within the meaning of ILSA, they fail to allege sufficient facts to support such a

finding. Plaintiffs' negligence, claims for negligent misrepresentation,

and violation of North Carolina's Mortgage Lending

Act and South Carolina's Licensing of Mortgage Brokers Act also fail. The Mortgage Lending Act, which has since been repealed, such as

prohibited lenders from engaging in certain activities,

fraud or the misrepresentation or concealment of material facts "likely to influence, persuade or induce an applicant take a mortgage loan." July 1, N.C. 2009). Gen. Stat.
§

.

to (8)

53-243.11(1),

(repealed eff.

South Carolina's

Licensing of

Mortgage Brokers Act provides similar prohibitions on fraud and misrepresentation by lenders. However, action. at *24 neither of these See S.C. provides Code Ann. a
§

40-58-70. right of

acts

private

See Ahmed v. Porter, No. 1:09-CV-101, 2009 WL 2581615, (W.D.N.C. 2009) ("[T]he court cannot find a reported case [the Mortgage Lending Act] provides a

in which it was held that

4

private

cause

of

action.") ;

s.c.

Code

Ann.

§

40-58-80

(preserving statutory and common law rights) . To the extent the Mortgage Lending Act may have created a duty of care that could form the basis of a negligence have failed or to

negligent allege their

misrepresentation facts

claim,

plaintiffs such a they the

suf ficient complaint, and

to support assert

claim.

Throughout by At the no

plaintiffs fraudulent

were

injured

intentional

conduct of

defendants.

point do plaintiffs allege any facts to support a finding that any of the defendants unintentionally breached any duty owed to plaintiffs. The second court also agrees is with Judge Webb in a that plaintiffs' of other

amended

complaint

deficient

number

respects. "replete numerous

As noted in the M&R, with banks conclusory through the

the second amended complaint is which lump together 'Lender

allegations

group-pleading

designation

Defendants'" and, as such, requirements of Rule 9 (b) ." review limited to

"fails to satisfy the (M&R at 14.) second

[particularity]

Were the court's amended complaint,

p lainti ff s'

dismissal of plaintiffs' be appropriate.
However,

claims against these defendants would

since

the

filing

of

the

motions

to

dismiss

presently before the court, plaintiffs have twice moved to amend

5

their complaint based on what they contend is newly discovered evidence. plaintiffs first By way of seek to their proposed third amended some to of the deficiencies their claims complaint, of their

remedy

three

complaints,'

reinstate

against

Richard Mace Watts (a previously named defendant whom plaintiffs dismissed with prejudice), and to add a civil RICO claim against all of the named defendants.
a

In their motion for leave to file plaintiffs purportedly that seek

fourth

amended to add

complaint, yet another

permission William G. (the wife

claim alleging

defendants Allen to
§

Allen and R.A. of William G.

North conspired with Minok L. Allen) and MLA Income N.C.

Properties Gen. Stat.

violate the Uniform Fraudulent Transfer Act, 39-23.1 et
~

("UFTA").

The proposed complaint attached to

plaintiffs' motion includes not only the proposed UFTA claim but also seeks to hold Minok L. Allen and MLA Income Properties

liable on plaintiffs' ILSA and RICO claims.

'For example, plaintiffs now allege that each of the plaintiffs rescinded their contract within two years. These allegations are no doubt a response to defendants' motions to dismiss plaintiffs' ILSA rescission claims as barred by the statute of limitations. (See,~, Maryville's Mem. Supp. Mot. Dismiss [DE #51] at 10 ("The Second Amended Complaint fails to allege that any Plaintiff revoked their contract to purchase the property in Cravens Grant within two years.").)
6

For

sure,

none been a

of

plaintiffs'

complaints

or

proposed fail to by

complaints has specifically which
groups

model of what acts

clarity. S were to

Plaintiffs

identify

allegedly pleading
Lenders,"

performed that

defendants,
of

resorting
(~1

instead

certain

defendants

"Defendant

\\Developers I"

"the

Allen

Enterprise") Nevertheless, have failed to

engaged the

in

the is

allegedly unable a to

injurious say that claim to

conduct. plaintiffs

court

adequately
in

state case.

plausible At

against any of defendant Bank

the defendants of America,

this

least as filings

plaintiffs'

recent

have

included more specific facts to support their alleged fraud and conspiracy claims. It is for this reason that the court has decided to grant plaintiffs order to one final opportunity any to amend claims plaintiffs their with that complaint in

restate The

remaining warns

sufficient wholesale

particularity.

court

blanket assertions of wrongdoing, such as those recently alleged against Minok L. Allen and MLA Investment Properties, will not

SIn fact, the record in this case is replete with irregularities in plaintiffs' filings, including plaintiffs' filing of a "Second Amended Complaint" without leave of court, the filing of numerous "corrections," the filing of two different versions of a proposed fourth amended complaint, plaintiffs' failure to attach exhibits to their third and fourth proposed amended complaints, and misrepresentations made by plaintiffs' counsel during this court's investigation of ethical violations by counsel.
7

suffice. must

In order

to

avoid

subsequent

dismissal, facts

plaintiffs upon which Absent not be

state with sufficient particularity the

plaintiffs seek to hold each of the defendants liable. exceptional allowed. circumstances, further amendment will

Following plaintiffs' to

amendment,

defendants will have to plaintiffs'

an opportunity

answer or otherwise

respond

claims as provided by the Federal Rules of civil Procedure.' Finally, the voluntary the court addresses plaintiffs' dismissal of Richard Mace motion to vacate Watts Inc., is a

Watts.

former employee of Southeastern Waterfront Marketing, was originally named as a defendant to this action.
2010,

who

In January their Federal

plaintiffs against

voluntarily

dismissed on Rule

with
60 (b)

prejudice of the

claims

Watts.

Relying

Rules of Civil Procedure, plaintiffs now seek to reinstate Watts as a defendant. JUdge Webb concluded that plaintiffs have and,

failed to meet Rule

60 (b) 's

standard.

The court agrees

therefore, DENIES plaintiffs' motion [DE #211J
CONCLUSION

For

the

foregoing

reasons,

the

court GRANTS

in part

and

DENIES in part the motions to dismiss filed by Branch Banking and Trust Company of South Carolina [DE #47] Maryville Partners, Inc. [DE #44]; [DE Bank of America R.A. North

#50];

'Any arguments previously made for dismissal of plaintiffs' claims may be renewed if deemed appropriate by defendants.
8

Development,

Inc.,

R.A.

North

Development

I,

Inc.,

Randolph

Allen, William Allen and Southeastern Waterfront Marketing, Inc. [DE #57]; Carolina First Bank [DE #68]; RBC Bank (USA) SunTrust Bank Inc. [DE [DE #157] ; #76]. and
Craven's

[DE #71] ; Homeowners the

Grant Rule

Association,

Pursuant

to

12 (b) (6),

following claims are DISMISSED for failure to state a claim upon which relief can be granted: 1. Plaintiffs' ILSA claims against Branch Banking and Trust Company, Bank of America, Carolina First Bank, RBC Bank (USA) and SunTrust Bank; 2. Plaintiffs' negligent misrepresentation claims against Branch Banking and Trust Company, Bank of America, Maryville Partners, Inc., R.A. North Development, Inc., R.A. North Development I, Inc., Randolph Allen, William Allen and Southeastern Waterfront Marketing, Inc., Carolina First Bank, RBC Bank (USA), Craven's Grant Homeowner's Association, Inc., and SunTrust Bank; 3. Plaintiffs' North Carolina Mortgage Lending Act claims against Branch Banking and Trust Company, Bank of America, Maryville Partners, Inc., R.A. North Development, Inc., R.A. North Development I, Inc., Randolph Allen, William Allen and Southeastern Waterfront Marketing, Inc., Carolina First Bank, RBC Bank (USA), Craven's Grant Homeowner's Association, Inc., and SunTrust Bank; South Carolina Licensing of 4. Plaintiffs' Mortgage Brokers Act claim against defendant Maryville Partners, Inc.; 5. Plaintiffs' negligence claim against Branch Banking and Trust Company, Bank of America, Carolina First Bank, RBC Bank (USA) and SunTrust Bank.

9

Plaintiffs' motions for leave to amend 251] (30) their are days GRANTED from insofar date as plaintiffs order terms the is set

[DE #129, have to

238 & thirty amend

shall

the

this the

entered forth

complaint motion

under

herein. with

Plaintiffs'

to vacate

voluntary dismissal [DE #211] is DENIED.

prejudice as to Richard Mace Watts This ~ day of March 2011.
q/)J

At Greenville, NC #31

10