Pyles v. HSBC Bank USA, N.A.

• Decision Date: 09 November 2017
• Docket Number: No. 15–CV–752,15–CV–752
• Citation: 172 A.3d 903
• Parties: Barbara Harrison PYLES, Appellant, v. HSBC BANK USA, N.A., as Trustee for Wells Fargo Asset Securities Corporation, et al., Appellees.
• Court: D.C. Court of Appeals

172 A.3d 903

Barbara Harrison PYLES, Appellant,

v.HSBC BANK USA, N.A., as Trustee for Wells Fargo Asset Securities Corporation, et al., Appellees.

No. 15–CV–752

District of Columbia Court of Appeals.

Argued November 30, 2016

Decided November 9, 2017

Barry Coburn, with whom Lloyd Liu was on the brief, for appellant.

Mary C. Zinsner, with whom S. Mohsin Reza was on the brief, for appellees.

Before Glickman, Associate Judge, and Washington and Steadman, Senior Judges.^*

Steadman, Senior Judge:

Appellant Barbara Harrison Pyles alleges that she was duped by her husband, appellee John C. Pyles III, into subjecting her formerly separately owned property, the family home, to a deed of trust to secure a bank loan, made to her husband alone. Now threatened with foreclosure on the deed of trust, she seeks to set aside the transaction and restore her position as the sole owner of the property free and clear of the deed of trust. The trial court dismissed her complaint as to all parties under Super. Ct. Civ. R. 12 (b)(6) for failure to state a claim upon which relief can be granted. We conclude that the complaint was sufficient to survive dismissal under that rule as to Mr. Pyles and remand for further proceedings.

I. Factual and Procedural Background¹

Upon the death of her former husband in 1992, appellant became the sole owner of the family home located at 2812 Chesterfield Place, N.W., Washington, D.C. The acquisition of the property in 1985 had been financed in part by a mortgage on the home. In 1995, appellant married John C. Pyles III. He with his four minor children moved into the home but she resisted several attempts he made to change the ownership to joint title. He knew that she wanted to provide for her retirement² and her children's future by maintaining sole ownership of the home. The two generally kept their finances separate, but Mr. Pyles made the mortgage payments on the home.

Mr. Pyles was a real estate developer and president of Washington Management & Development Company. For a number of years, he had enjoyed credit arrangements with the Bank³ without being required to provide secured collateral. However, in early 2007, the Bank approached Mr. Pyles to "restructure certain of his business debts" and insisted that a loan of $3.6 million be on a secured basis. Otherwise, the Bank threatened to call Mr. Pyles's outstanding debt of approximately $15 million. The Bank "pressured" Mr. Pyles to use the Chesterfield home as collateral, although it knew that he had no ownership interest in the home at that point. Originally, the Bank requested that Mr. Pyles include appellant on the application for the loan. However, subsequently, the Bank said that the application should be in Mr. Pyles's name alone; otherwise, the loan would not be eligible for approval. It was agreed that Mr. Pyles would provide the home as collateral and the transaction would be structured as a refinancing of the mortgage. According to the complaint, all of the loan-related documents describe the loan "as or pertaining to a residential mortgage transaction" and state that "the purpose of the loan was to refinance Mr. Pyles's primary residence.⁴ The deed of trust provided for equal monthly payments for a period of thirty years. At the "request" of or as "instructed" or "directed" by the Bank, Mr. Pyles set out to obtain appellant's signature to the relevant documents.⁵

This plan led to the crucial event in this appeal. On April 25, 2007, appellant worked three broadcasts, requiring her to leave her home at 3:30 a.m. Just as she was rushing to leave, Mr. Pyles asked her to sign "some documents related to his business," without further explanation. Two of the documents were a deed transferring title to appellant and Mr. Pyles as tenants by the entirety and a deed of trust securing a loan for $3.6 million. Mr. Pyles presented only the signature pages of these documents to appellant. She also signed a disclosure statement under the Truth in Lending Act, the entire text of which was presented to her. As she states in her complaint, "because Ms. Pyles trusted in and relied upon her husband, she signed the documents as he requested." She previously had relied without incident on Mr. Pyles's representations as to the contents of certain documents on which he requested her signature. Both the deed and the deed of trust bore the signature of a witness and a notarization, which were subsequently falsely added by assistants to Mr. Pyles.⁶ The deed of trust bore Mr. Pyles's initials on each of its fourteen pages but not those of appellant. The deed of trust, the crucial document in its litigation, and the Truth in Lending Act disclosure form name appellant as a "borrower" or "applicant" along with her husband. The loan transaction then proceeded as agreed to by Mr. Pyles and the Bank.

Throughout this entire period, no communication of any kind ever took place between appellant and the Bank concerning the documents or the loan itself. Appellant did not become aware of the nature of the documents that she had signed until late 2008, in connection with a threatened suit involving other business debts of her husband's company. Appellant apparently took no action at that point, but on January 8, 2010, the Bank commenced foreclosure proceedings under the deed of trust on the home. On January 15, through counsel, appellant sent a letter to the Bank disputing the validity of the deed of trust. In a second letter on February 1, she asserted her right to rescind under the Truth in Lending Act. Subsequently, she commenced litigation challenging the validity of the documents. The version of the complaint now before us, her third amended complaint filed on April 6, 2012, sought declaratory relief voiding the deed and deed of trust, an injunction against any action thereon by the Bank, damages for statutory violations and otherwise, and attorney's fees. The trial court granted the Bank's 12 (b)(6) motion on February 14, 2014. A motion for reconsideration was denied on June 19, 2015, and a timely appeal taken to this court.⁷

II. Analysis

Before us is a challenge to a dismissal under Super. Ct. Civ. R. 12 (b)(6)for failure to state a claim in the complaint. We fairly recently en banc set forth the standard for review of such a dismissal, which is de novo."[W]e accept the allegations of the complaint as true, and construe all facts and inferences in favor of the plaintiff ... [t]he only issue on review of a dismissal made pursuant to Rule 12 (b)(6) is the legal sufficiency of the complaint and a complaint should not be dismissed because a court does not believe that a plaintiff will prevail on [his] claim. Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test." Grayson v. AT & T Corp., 15 A.3d 219, 228–29 (D.C. 2011) (en banc) (citations omitted). A complaint "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Family Fed'n for World Peace & Unification Int'l v. Hyun Jin Moon, 129 A.3d 234, 245 (D.C. 2015) (citation omitted). See also Poola v. Howard Univ., 147 A.3d 267, 276 (D.C. 2016). But "[a] court should be circumspect in assessing the sufficiency of a complaint in any case where the substantive legal standard requires a fact-intensive inquiry." Potomac Dev. Corp. v. District of Columbia, 28 A.3d 531, 544 (D.C. 2011).

A. Common-law Fraud: John C. Pyles III

At the outset, appellant invokes lack of mutual assent and fraud as the common-law legal principles that invalidate her signature to the documents.⁸ "We have ... consistently adhered to a general rule that one who signs a contract has a duty to read it and is obligated according to its terms.... absent fraud or mistake, one who signs a contract is bound by a contract which he has an opportunity to read whether he does so or not." Pers Travel, Inc. v. Canal Square Assocs., 804 A.2d 1108, 1110 (D.C. 2002) (citations omitted).⁹ While appellant may have chosen to sign the contracts as she was going off to work, no allegation is made that she had no other choice than to sign at that point. Her signature on the documents must constitute assent unless it was obtained by fraud.¹⁰

The criteria to prove common-law fraud are well-established. Briefly put, a plaintiff must show that the defendant, with the intent to deceive the plaintiff, knowingly made a false representation of a material fact on which plaintiff justifiably and detrimentally relied. See Sibley v. St. Albans School, 134 A.3d 789, 808–09 (D.C. 2016). In alleging fraud, the circumstances constituting the fraud must be stated in the complaint with particularity. Super Ct. Civ. R. 9 (b). It has also been said that, because fraud requires a reasonable reliance on a misrepresentation, claims may be defeated by a plaintiff's own recklessness or where the plaintiff "should have discovered the facts." Media Gen., Inc. v. Tomlin, 505 F.Supp.2d 51, 61 (D.D.C. 2007) (quoting Royal Am. Managers, Inc. v. IRC Holding Corp., 885 F.2d 1011, 1015 (2d Cir. 1989) ), affirmed in part and reversed in part

, 532 F.3d 854 (D.C. Cir. 2008).¹¹

The trial court here ruled that no misrepresentations had been made by Mr. Pyles in his statement that she was signing "some documents relating to his business." Appellant correctly points out that this overlooks the principle that fraud may be committed by the omission of material facts, especially when a partial explanation has been rendered. See Saucier v. Countrywide Home Loans, 64 A.3d 428, 438–40 (D.C. 2013). A fiduciary or confidential relationship may require the furnishing of information beyond that required in a strictly commercial context. Restatement (Second) of Contracts § 161 (d) and cmt. F ("[s]uch a [confidential] relationship normally exists between members of the same family"); Richard A. Lord, 26 Williston on Contracts § 69:23 (4th ed. 2003). The trial court also ruled that appellant's reliance on Mr....