Feeley v. Total Realty Management, Case No. 1:08cv1212 (GBL).

CourtUnited States District Courts. 4th Circuit. United States District Court (Eastern District of Virginia)
Writing for the CourtGerald Bruce Lee
Citation660 F.Supp.2d 700
PartiesBeth FEELEY, et al., Plaintiffs, v. TOTAL REALTY MANAGEMENT, et al., Defendants.
Docket NumberCase No. 1:08cv1212 (GBL).
Decision Date28 August 2009
660 F.Supp.2d 700
Beth FEELEY, et al., Plaintiffs,
TOTAL REALTY MANAGEMENT, et al., Defendants.
Case No. 1:08cv1212 (GBL).
United States District Court, E.D. Virginia, Alexandria Division.
August 28, 2009.

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Martin Carroll Conway, The Pesner Law Group PLC, John Connell Altmiller, Jr., Susan Jill Pisner, Pesner Kawamoto Conway PLC, McLean, VA, John P. Forest, II, Stahlzelloe PC, Fairfax, VA, for Plaintiffs.

Margaret Melissa Glassman, Andrew John Trask, Jodie Nicole Herrmann, McGuirewoods LLP, McLean, VA, George Everitt Kostel, Erika Jensene Karnaszewski, Nelson Mullins Riley & Scarborough LLP, Glenn C. Kennett, Pillsbury Winthrop Shaw Pittman LLP, Arthur Thomas Kelley Norris, Lee & McShane PC, Washington, DC, William David Dolan, III, Venable LLP, Vienna, VA, Alan Steven Shachter, Manassas, VA, Lenore C. Garon, Law Office of Lenore C. Garon, Falls Church, VA, Curtis Gilbert Manchester, Travis Aaron Sabalewski, Reed Smith LLP, Richmond, VA, Virginia Whitner Hoptman, James S. Kurz, Womble Carlyle Sandridge & Rice PLLC, Tysons Corner, VA, William David Dolan, III, Venable LLP, Vienna, VA, for Defendants.

Charles T. Busby, Hampstead, NC, pro se.


GERALD BRUCE LEE, District Judge.

THIS MATTER is before the Court on Defendants Cooperative Bank and Frederick Willetts, Ill's Motion to Dismiss, Defendants Branch Banking & Trust Co. of South Carolina and BB & T Collateral Service Corporation's Motion to Dismiss, Defendant SunTrust Mortgage, Inc.'s Motion to Dismiss, Defendants Bank of America, N.A. and Prlap, Inc.'s Motion to Dismiss, Defendant Maryville's Motion to Dismiss, Defendants Woodlands Bank and John T. Harris' Motion to Dismiss, and Defendants Beach First National Bank and Carolina First Bank's Motion to Dismiss. Plaintiffs, a large number of individuals assert that: they were lured by Total Realty Management into an investment in unimproved land in North Carolina and South Carolina that TRM asserted the individual investors could purchase with little or no money down and after the purchase flip or re-sell at a profit. The Plaintiffs' allege that this "too good to be true" investment was really a scheme between

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TRM, several banks, several bank mortgage officers, real estate developers and appraisers to defraud the investors of their funds. Plaintiffs' investors ultimately did acquire property, however the land is not highly marketable at a profit in this downturn economy, and Plaintiffs' investors assert that TRM and the banks are liable to them for fraud, violation of the Interstate Land Sales Disclosure Act, conspiracy with bank officers and corrupted appraisers, and violation of the state unfair trade practices. The Amended Complaint is 326 pages long, asserts 45 claims on behalf of 127 plaintiffs against 26 Defendants. The key threshold question is whether the Amended Complaint states a plausible claim under Ashcroft v. Iqbal. That is whether after 326 pages the Complaint succinctly states facts showing sufficient factual matter to state a plausible claim on its face where the Complaint fails to show facts supporting the claim that the Banks or mortgage companies made any affirmative representations of material facts upon which Plaintiffs could rely to their detriment which proximately caused Plaintiffs to suffer damages.

There are 5 issues before the Court. The first issue is whether the Complaint's allegations that Banks colluded with corrupt mortgage loan officers and corrupt appraisers to enter into risky loans that would fail sufficiently states a plausible claim. The second issue is whether the Complaint states sufficient facts in support of the alleged agency relationships between the banks and developers and Total Realty Management ("TRM") where these agency relationships form the predicate for liability against these defendants. The third issue is whether the banks are liable under the Interstate Land Sales Act ("ILSA") where the Act is explicitly applicable to developers, not banks.1 The fourth issue is whether Plaintiffs claims alleging civil conspiracy to defraud and conspiracy to commit fraud are subject to the particularity requirements of Rule 9(b), and if so, whether Plaintiffs have made sufficient allegations to sustain this claim. The fifth issue is whether the place of the wrong for purposes of an unfair trade practice claim is the location of the settlement or the location of Plaintiffs' residences.

The Court holds that the Complaint: fails to state a claim against the banks and TRM as either co-conspirators or as parties involved in an agency relationship because there are insufficient allegations to support a plausible conclusion that the Banks would enter into risky loans based upon knowingly false information so the banks would sustain a loss. The Court also holds that the Complaint contains insufficient factual allegations of agency demonstrating a relationship between TRM and the banks or TRM, Southeastern and Maryville because the Complaint is devoid of allegations that these alleged agents were operating under the control of the defendants, or that these entities were acting in the defendants' interest. With respect to the third issue, the Court grants the Defendant's Motion to Dismiss the claims against the banks under the ILSA because the Act is limited in application to developers, not banks, and there are insufficient allegations to support finding the banks liable as developers on the grounds that they exceeded the normal course of conduct. The Court grants the Defendant's Motion to Dismiss the conspiracy to defraud and conspiracy claims because the claims are not alleged with sufficient particularity

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as to the who, what, where, when, and why to meet the requirements of Federal Rule of Civil Procedure 9(b). The Complaint while long, is replete with broad brush general group allegations, group pleading which is not sufficient in fraud claims and the Amended Complaint is devoid of key factual allegations. The Complaint fails to allege facts that would support the requisite finding of a meeting of minds for a conspiracy claim as opposed to mere parallel conduct. Finally, the Court grants the Defendants' Motions to Dismiss the North and South Carolina unfair trade practices acts claims, because the harm Plaintiffs assert, the loss of their investment money or credit occurred in the Plaintiff's states of residence, none of the plaintiffs are North Carolina residents, Plaintiffs have not met the requirement that the alleged conduct impacts the public interest in order to state a claim under the South Carolina Act, causes of action under other states' unfair trade practices statutes have not been asserted, and with respect to the Virginia Plaintiffs, the Virginia Consumer Protection Act, precludes actions such as these against banks.


Presently before the Court is a 326 page Complaint with 45 Counts filed on behalf of 127 plaintiffs against 26 defendants. The foundation of this action is Plaintiffs' purchase from TRM of unimproved lots in North and South Carolina for the purpose of resale. Plaintiff investors assert they met with representatives of TRM who presented an investment opportunity where the plaintiffs could buy unimproved land in area ripe for development with little or no money down that the plaintiffs could easily resell at a profit. TRM promised to make it easy to invest and to take care of arranging financing and closing for the investors. These lots were located in three (3) subdivisions—two (2) in North Carolina (Summerhouse on Everett Bay and Cannonsgate on Bogue Sound); and one (1) in South Carolina (Craven's Gate at Winyah Bay). Plaintiffs' purchases were financed by the following seven (7) banks, which are named as defendants in this action: Bank of America, Carolina First, Cooperative Bank, SunTrust Mortgage Inc., Branch Banking & Trust Co., Woodlands Bank and Beach First National Bank.2 In addition to bringing suit against the banks and their trustees, Plaintiffs have also names as defendants, TRM, Mark Dain (TRM Chief Executive Officer), Mark Jalajel (TRM President), Michael McCracken (TRM Chief Financial Officer), Cari Deuterman (TRM Vice President of Finance), and Daniel Meier(TRM spokesperson). Additionally, Plaintiffs have named as defendants, developers involved with these properties; as well as their independent contractors and entities who received funds from TRM. Maryville, who has filed one of the motions to dismiss presently before the Court is one such developer. As of the date of this opinion, TRM has been placed into involuntary bankruptcy3, Mr. Jalajel, Mr. Meier and Ms. Deuterman have filed for bankruptcy, and Mr. Dain and Mr. McCracken have failed to respond to the Second Amended Complaint and Plaintiffs have filed motions for default judgments against them.

Plaintiffs' Complaint alleges that TRM purchased properties at fair market value prices and in turn "flipped" the properties by selling them for a substantial profit to Plaintiffs, promising Plaintiffs that they

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too would be able to resell their properties at a profit. (Second Am. Compl. ¶¶ 166, 122.) According to the Complaint, "TRM Representatives held themselves out as a provider of a complete package of real estate services, including not only being the seller, but also being the real estate agent, mortgage broker, settlement service provider and notary." (Second Am. Compl4. ¶ 172.) As such TRM handled all contact with the banks on behalf of the Plaintiffs, who concede that they had Little, if any direct contact with the banks. According to the Second Amended Complaint, Plaintiffs assert that this arrangement allowed TRM: "(i) to qualify purchasers for loans for which they would not normally qualify; (ii) to create a mistaken belief in the purchasers that the transactions were legitimate fair market transactions; and...

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