Diallo v. Redwood Invs.
| Decision Date | 14 October 2020 |
| Docket Number | Case No.: 18-CV-1793 JLS (JLB) |
| Parties | ABDOULAYE DIALLO; WILLIAM MERRITT, Plaintiffs, v. REDWOOD INVESTMENTS, LLC; SOCAL METRO HOLDINGS, LLC; CHRISTOPHER CARNES; TONIKA MILLER; CHI KUANG HWANG, Defendants. |
| Court | U.S. District Court — Southern District of California |
ORDER GRANTING DEFENDANTS REDWOOD INVESTMENTS, LLC, AND CHI KUANG HWANG'S MOTION TO DISMISS SECOND AMENDED COMPLAINT
Presently before the Court is the Motion to Dismiss Second Amended Complaint filed by Defendants Redwood Investments, LLC ("Redwood"), and Chi Kuang Hwang (collectively, "Moving Defendants") ("Mot.," ECF No. 68). Also before the Court are Plaintiffs Abdoulaye Diallo and William Merritt's (collectively, "Plaintiffs") Opposition to the Motion ("Opp'n," ECF No. 69) and Moving Defendants' Reply in support thereof ("Reply," ECF No. 70). The Court vacated the hearing on the Motion and took it under submission without oral argument pursuant to Civil Local Rule 7.1(d)(1). See ECF No. 74. Having carefully reviewed the pleadings, the Parties' arguments and evidence, and the law, the Court GRANTS Moving Defendants' Motion WITH LEAVE TO AMEND.
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The Court has attempted to distill the complex and troubling facts of the Second Amended Complaint ("SAC," ECF No. 67), spanning 232 paragraphs over 30 pages, as concisely as possible.
Mr. Merritt received a "notice of special tax lien," dated March 17, 2018, indicating that he was in default on his property taxes. SAC ¶ 23. On or about the evening of April 30, 2018,2 after Mr. Merritt had been drinking heavily all day, id. ¶ 27, Defendant Tonika Miller, a real estate agent, id. ¶ 14, and Defendant Christopher Carnes, her husband, id. ¶ 13, showed up at Mr. Merritt's house, id. ¶ 24, situated at 4026 Charles Street, La Mesa, CA 91941 (the "Property"). Id. ¶¶ 9, 16.
Redwood is a California limited liability company located in Dana Point, California, which "deals in real estate transactions." Id. ¶¶ 11, 218. Redwood is managed by Mr. Hwang. See id. ¶ 13. Plaintiffs allege that Mr. Carnes and Ms. Miller were commissioned by Redwood and SoCal to obtain properties financed by Redwood and subsequently sold to SoCal. Id. ¶ 26. Plaintiffs allege that "each of the named Defendants was at all times mentioned herein, the agent, employee, partner and/or representative of one or more of the remaining Defendants and was acting within the course and scope of such relationship," and that "each of the Defendants herein gave consent to, ratified and authorized the acts alleged herein to each of the remaining Defendants." Id. ¶ 15. Plaintiffs also claim that "[a]ll of the defendants have contractual or other relationships with each other." Id. ¶ 192.
/ / / Mr. Carnes and Ms. Miller, acting as agents of Redwood and SoCal, offered Mr. Merritt a case of beer. Id. ¶¶ 25, 28. They then took Mr. Merritt to a Claim Jumper Restaurant and Saloon in La Mesa, California, and offered to help him with the back taxes on his Property and his utilities if he signed a document (the "First Grant Deed"). Id. ¶¶ 30-33. Mr. Carnes and Ms. Miller did not inform Mr. Merritt that they intended to take the Property from him. Id. ¶ 39. Intoxicated, Mr. Merritt signed and notarized the First Grant Deed, purporting to transfer ownership of the Property to Mr. Carnes. Id. ¶¶ 34-37.
On May 2, 2018, Mr. Carnes recorded the First Grant Deed at the San Diego County Recorder's Office. Id. ¶¶ 38, 47-48. While at the Recorder's Office, Mr. Carnes and Ms. Miller e-mailed and/or texted a copy of the recorded First Grant Deed to Redwood, SoCal, and Mr. Hwang, "in order to inform their co-conspirators of their success in obtaining the grant deed from Mr. Merritt," id. ¶ 47, and sent another copy by mail to Mr. Carnes at an address in Missouri, id. ¶ 48. Plaintiffs allege that Mr. Carnes and Ms. Miller, "in association and conspiracy with all other Defendants, caused the fraudulent grant deed obtained from Mr. Merritt to be sent through the interstate United States mails by recording it at the San Diego recorder's office with instructions to have it mailed to" Mr. Carnes at an address in Missouri. Id. ¶ 95; see also id. ¶ 151.
On or around May 2, 2018, Redwood and Mr. Hwang paid the back taxes due on the Property in the amount of $36,137.81, approximately twice the back taxes of $18,137.81 actually due on the Property. Id. ¶¶ 57, 156-58.3 Thus, when Plaintiffs went to pay the back taxes at the San Diego County Assessor's Office, they were turned away. Id. ¶ 57. Plaintiffs allege that Redwood "knowingly received stolen property from Defendant Carnes and Miller through a purchase and sale agreement to purchase the subject property." Id. ¶ 159. Plaintiffs further claim that Redwood "provided no contract to purchase the property from Mr. Merritt," id. ¶ 160; "provided no legally bargained for consideration forthe property of Mr. Merritt," id. ¶ 161; and paid the back taxes "[w]ithout a contractual interest or legitimate business purpose," id. ¶ 162. Plaintiffs allege that "Defendant Hwang caused the RICO enterprise, Redwood Investments, LLC, to pay the property taxes on the subject property in order to fraudulently obtain, and thereafter fraudulently transfer, the subject property." Id. ¶ 163.
Also on or around May 2, 2018, unaware of the First Grant Deed, Plaintiff Abdoulaye Diallo offered to purchase the Property from Mr. Merritt for $260,000. Id. ¶ 54. On or around May 4, 2018, Mr. Merritt and Mr. Diallo signed a contract for the sale of the Property, and Mr. Merritt also signed a quitclaim deed purportedly transferring the Property to Mr. Diallo. Id. ¶ 55. Mr. Merritt and Mr. Diallo recorded the quitclaim deed the same day, at which time they discovered the recorded First Grant Deed. Id. ¶¶ 56, 58.
In New York, another grant deed (the "Second Grant Deed") was purportedly executed on or around June 6, 2018, and notarized on or around June 19, 2018, supposedly transferring the Property from Mr. Diallo to Mr. Carnes. Id. ¶¶ 61-63, Ex. 4.
The Mr. Diallo who signed the Second Grant Deed is not the same Mr. Diallo who is a party to this action; rather, he lives in Brooklyn, New York. Id. ¶¶ 64, 71. The Mr. Diallo who is a party to this action "had no knowledge or involvement in preparing the [Second Grant Deed]," "did not sign it," "did not know about it," and "was not in the State of New York" at the relevant time. Id. ¶ 71.
Plaintiffs allege that "Defendants defrauded Abdoulaye Diallo#2 into signing a fake grant deed for the sole purpose of creating a 'clean' chain of title in the San Diego County Records in favor of Christopher Carnes." Id. ¶ 72; see also id. ¶ 185 (). "This enabled Christopher Carnes to transact title to Redwood Investments, LLC, through escrow which would not have been possible while the name 'Abdoulaye Diallo' remained on title." Id. In connection with the Second Grant Deed, Ms. Miller e-mailed the Mr. Diallo living inBrooklyn several documents, including a "Relinquishment of Ownership in Error" that indicates, when recorded, it should be mailed to Redwood. Id. ¶¶ 75-77; see also id. Ex. 4. Thus, Plaintiffs allege that Redwood and Hwang "participated in the manufacture of the fake [Second Grant Deed]," id. ¶ 189, and that Redwood "is directly tied to the fraudulent signing and fraudulent filing of the [Second Grant Deed]," id. ¶ 78.
On or about June 28, 2018,4 the Second Grant Deed was recorded in San Diego County. Id. ¶ 61. A copy of the recorded Second Grant Deed was mailed by the San Diego Recorder's Office, at Mr. Carnes and Ms. Miller's instruction, to Mr. Carnes at an address in Missouri, id. ¶¶ 70, 98, and also was e-mailed by Mr. Carnes and Ms. Miller from their apartment in North Hollywood, California, to Redwood, SoCal, and Mr. Hwang. Id. ¶¶ 82, 101. Plaintiffs allege that, in so doing, "[a]ll other Defendants, acting in concert with Defendants Miller and Carnes, committed the acts of fraud, mail fraud, and wire fraud." Id. ¶ 102.
Plaintiffs claim that "[a]ll Defendants, and each of them, conspired together to fraudulently file false grants deeds in violation of California Penal Code § 115." Id. ¶ 84. They further claim that "Defendants, and each of them, in procuring both the fraudulent grant deeds . . . in favor of Defendant Carnes committed the criminal act of mail fraud." Id. ¶ 85. Finally, they claim that "Defendants, and each of them, in causing the fraudulent grant deeds . . . to be filed in favor of Defendant Carnes committed the criminal act of wire fraud." Id. ¶ 86. Plaintiffs broadly allege that "[a]ll Defendants acted in association and conspiracy by use of the telephone, mail, email or other communication facilities to communicate with each other regarding the conspiracy and to complete the unlawful execution of the grant deed and filing in the County Recorder's office," and that this constitutes racketeering activity. Id. ¶¶ 170-71.
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Beyond these predicate acts related to the Property, Plaintiffs allege that Ms. Miller and Mr. Carnes have been involved in multiple fraudulent and criminal real estate activities. See id. ¶¶ 103-25, Ex. 5. Plaintiffs attach to the SAC a Felony Complaint filed in San Mateo County, California, alleging that Ms. Miller and an individual who is not a party to the instant case engaged in the felonious recording of a forged instrument. See generally id. Ex. 5. Plaintiffs claim that one of the fraudulent transactions concerned a property located on Sunkist Drive in Oakland, California (the "Sunkist Property"), which belonged to a third party and not Plaintiffs. Id. ¶¶ 115-25.
Plaintiffs also allege that Redwood and Mr. Hwang, see id. ¶¶ 126-34, and SoCal, see id. ¶¶ 135-44, have been involved in various fraudulent and criminal real estate transactions. They claim that Redwood "participated in...
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