EMC Mortg. Corp. v. Patton, s. 11–CV–976

• Decision Date: 11 April 2013
• Docket Number: Nos. 11–CV–976,11–CV–1291.,s. 11–CV–976
• Parties: EMC MORTGAGE CORPORATION, et al., Appellants, v. Patricia PATTON, et al., Appellees.
• Court: D.C. Court of Appeals

64 A.3d 182

EMC MORTGAGE CORPORATION, et al., Appellants,

v.Patricia PATTON, et al., Appellees.

Nos. 11–CV–976, 11–CV–1291.

District of Columbia Court of Appeals.

Argued Nov. 28, 2012.

Decided April 11, 2013.

Michael R. Sklaire, McClean, with whom Thomas J. McKee, Jr. was on the brief, for appellants.

Ian Stumpf, Washington, for appellees.

Before GLICKMAN, THOMPSON, and McLEESE, Associate Judges.

McLEESE, Associate Judge:

Appellant J.P. Morgan Chase Bank (“JPMC”) contends that the trial court erroneously invalidated a deed of trust now held by JPMC even though JPMC's predecessor in interest was not a party to the litigation at the time of the trial court's ruling. We agree, and therefore reverse and remand for further proceedings.

I.

This case arises out of a real-estate transaction that was subsequently determined to be fraudulent. Because the rather complex factual circumstances of the fraudulent transaction are not presently germane, we provide only a brief summary. For current purposes, the parties do not appear to dispute the following. In 2004, appellee Sterling Watts leased the real property at issue to appellee Patricia Patton, and also granted her an option to buy the property. In 2005, representatives of a property-management company persuaded Mr. Watts and Ms. Patton to sell the property. The company assured Mr. Watts that it would use mortgage-loan proceeds from the sale of the property to extinguish Mr. Watts's debts, and that Mr. Watts would be allowed to repurchase the home within a year. Relying on the company's representations, Mr. Watts agreed to execute a deed of sale conveying title to the property to appellee Gretha Jenkins, who, as an “investor” in the scheme, would obtain a mortgage loan that far exceeded Mr. Watts's financial needs.

The company submitted a false loan application to Fremont Investment & Loan Corp., which provided nearly $700,000 in financing for the underlying mortgage transaction. A promissory note was executed requiring Ms. Jenkins to repay Fremont. Mr. Watts also executed a deed of sale conveying title to the property to Ms. Jenkins. In turn, a deed of trust was executed, conveying the property from Ms. Jenkins to Fremont as trustee, to secure the promissory note. ¹ Ms. Jenkins, however, was not present at the closing and did not sign or authorize anyone to sign the settlement documents. Rather, Ms. Patton signed Ms. Jenkins's name on the settlement documents, later claiming that she was instructed to do so and was falsely informed that Ms. Jenkins had executed a power of attorney authorizing Ms. Patton to sign on Ms. Jenkins's behalf.

The owner of the property-management company eventually pleaded guilty to conspiracy to make false statements to financial institutions. Although Ms. Jenkins had obtained title to the property, she never made payments on the mortgage. Ms. Patton continued to reside at the property and made at least some mortgage payments.

JPMC, as successor in interest to appellant EMC Mortgage Corporation (“EMC”), which in turn was a successor in interest to Fremont, is the holder in due course of the deed of trust for the property, as well as the promissory note signed by Ms. Jenkins and secured by the deed of trust.

In April 2010, Ms. Patton and Mr. Watts filed suit against Ms. Jenkins and EMC, alleging that the sale had been induced by fraud and that Ms. Jenkins's signature on the deed of trust had been forged. Ms. Patton and Mr. Watts asked the trial court to quiet title to the property in their favor and to cancel the deed of sale and the deed of trust.

EMC filed a motion to dismiss, arguing that the action was time-barred under the three-year statute of limitations applicable to claims of fraud and forgery. The trial court agreed and dismissed the action against EMC. Ms. Jenkins subsequently filed a motion to dismiss and for summary judgment, arguing among other things that the action was time-barred and that the trial court's prior ruling on that issue in EMC's favor was the law of the case. The trial court granted summary judgment to Ms. Jenkins on the alternative ground that Ms. Jenkins was not involved in fraudulently inducing the transaction or in forging the financial instruments at issue. The trial court did not address Ms. Jenkins's argument that the action was time-barred. Although it had ruled in favor of both of the defendants participating in the litigation,² the trial court also granted relief in favor of Ms. Patton and Mr. Watts. Specifically, the trial court declared the deed of sale and “all related documents” void ab initio.³ In its order, the trial court noted that “there may be others that have an interest in the property that is not voided by the underlying fraud” who could be adversely affected by the court's ruling. The court further noted that “[t]hose parties and/or interest are not before the Court in this case.”

Less than a month after judgment was entered, JPMC, as successor in interest to EMC, moved to intervene, in order to seek relief from the trial court's order vacating the mortgage documents. JPMC contended that the trial court's order clouded title to the property and created an ambiguity as to whether its interest in the property had been extinguished. The trial court denied JPMC's motion to intervene as untimely, concluding that JPMC could not reenter the case because its predecessor in interest had been a party but had chosen to seek dismissal rather than to remain in the case to protect its interests. JPMC's predecessor in interest noted a timely appealfrom the trial court's order declaring the mortgage documents void ab initio (No. 11–CV–976) and JPMC noted a timely appeal from the trial court's order denying its post-judgment motion to intervene (No. 11–CV–1291).⁴

II.

In the first instance, Ms. Patton and Mr. Watts contend that JPMC does not have standing to seek review of the trial court's order declaring the mortgage documents void ab initio, because (1) JPMC was not a party to the action at the time judgment was entered; and (2) JPMC's predecessor abandoned the opportunity to protect its interests, by successfully seeking dismissal from the action, and therefore JPMC cannot claim to be “aggrieved” by the trial court's ruling. We are not persuaded by these arguments. This court has previously permitted entities that were not a party to proceedings in the trial court but were aggrieved by a ruling of the trial court to intervene for purposes of pursuing an appeal. See, e.g., United States v. Chesapeake & Potomac Tel. Co., 418 A.2d 114, 116 (D.C.1980); Simon v. Circle Assocs., Inc., 753 A.2d 1006, 1010 (D.C.2000). For reasons explained more fully infra, we conclude that JPMC was aggrieved by the trial court's order and that JPMC should be permitted to intervene on appeal for purposes of challenging the trial court's entry of that order at a time when JPMC was not a party to the litigation.

III.

JPMC argues that the trial court violated the requirements of Rule 19 of the Superior Court Rules of Civil Procedure, by invalidating the mortgage documents at a time when JPMC, an indispensable person, was not a party to the litigation.⁵ Ms. Patton and Mr. Watts argue in response that JPMC's argument (1) is foreclosed because JPMC's predecessor in interest successfully sought to be dismissed from the litigation, rather than remaining in the case to protect its interests; (2) at best, is subject to the plain-error standard of review, because the argument was not raised in the trial court; and (3) lacks merit, because JPMC was not indispensable and because JPMC's interests were adequately represented by Ms. Jenkins. We conclude that JPMC's argument is not foreclosed, that our review is for abuse of discretion rather than plain error, and that it was error to invalidate the mortgage documents at a time when JPMC was not a party to the litigation.

A.

This court generally reviews claims arising under Rule 19 for abuse of discretion. See, e.g., American Univ. v. District of Columbia Educ. Licensure Comm'n, 930 A.2d 200, 207–08 (D.C.2007) (trial court's failure to join indispensable person under Rule 19 reviewed for abuse of discretion); District Cablevision Ltd. P'ship v. McLean Gardens Condo. Unit Owners' Ass'n, 621 A.2d 815, 816 (D.C.1993) (applying abuse-of-discretion standard to trial court's decision to require joinder of indispensable person). As Ms. Patton and Mr. Watts emphasize, however, this case arises in an unusual posture. JPMC's predecessor in interest was originally a party to this action, and was dismissed from the action on its own motion. Ms. Patton and Mr. Watts argue that JPMC therefore should not be heard to complain that the trial court erred by granting relief in JPMC's absence. Although this argument has some surface appeal, we ultimately do not find it persuasive.

Ms. Patton and Mr. Watts do not invoke the doctrine by name, but their argument in substance appears to rest on the “invited error” doctrine. Under that doctrine, a party generally is precluded from asserting as error on appeal an action that the party caused the trial court to take. See District of Columbia v. Wical Ltd. P'ship, 630 A.2d 174, 183 (D.C.1993). At first blush, the doctrine seems potentially applicable here, given that JPMC's predecessor in interest asked to be dismissed from the case but JPMC now contends that the trial court erred in granting relief to Ms. Patton and Mr. Watts in JPMC's absence. We do not believe, however, that the action of JPMC's predecessor in interest in obtaining dismissal in this case can fairly be said to have caused the trial court to later extinguish JPMC's interests in JPMC's absence. The trial court granted the motion to dismiss filed by JPMC's predecessor in interest on the basis of a statute-of-limitations defense that logically seemed to preclude invalidation of the mortgage documents at issue. Specifically, the trial court concluded that by 2005 Ms. Patton and Mr. Watts...