Steward v. Goldman Sachs Mortg. Co.

• Decision Date: 31 August 2016
• Docket Number: Case No: 14-cv-01868-RCL, Case No: 15-cv-02041-RCL
• Citation: 206 F.Supp.3d 131
• Parties: Esther STEWARD and Karim Steward, Plaintiffs, v. GOLDMAN SACHS MORTGAGE COMPANY, L.P., and Litton Loan Servicing, L.P., Defendants. U.S. Bank National Association, et al., Plaintiff, v. Steward, et al., Defendants.
• Court: U.S. District Court — District of Columbia

206 F.Supp.3d 131

Esther STEWARD and Karim Steward, Plaintiffs,

v.GOLDMAN SACHS MORTGAGE COMPANY, L.P., and Litton Loan Servicing, L.P., Defendants.

U.S. Bank National Association, et al., Plaintiff,

v.Steward, et al., Defendants.

Case No: 14-cv-01868-RCL

Case No: 15-cv-02041-RCL

United States District Court, District of Columbia.

Signed August 31, 2016

Kenneth Hanson Rosenau, Patrick C. Horrell, Rosenau & Rosenau, Washington, DC, for Esther Steward and Karim Steward.

J. David Folds, Mindy Lynn Rattan, Baker Donelson Bearman, Caldwell & Berkowitz, PC, Washington, DC, for Goldman Sachs Mortgage Company, L.P., and Litton Loan Servicing, L.P.

Rita Ting-Hopper, Atlantic Law Group, LLC, Leesburg, VA, for U.S. Bank National Association, et al.

Michael Benjamin Posner, Michael Steven Taylor, U.S. Attorney's Office, Washington, DC, for Steward, et al.

MEMORANDUM OPINION

Honorable Royce C. Lamberth, United States District Court

I. INTRODUCTION

The motions before the Court concern two cases which one of the parties has moved to consolidate. The defendants in Civil Action No. 14-1868 have moved to dismiss and the plaintiffs in Civil Action No. 15-2041 have moved to remand.

Esther Steward and Karim Steward ("the Stewards") are suing Goldman Sachs Mortgage Company, L.P. ("Goldman Sachs") and Litton Loan Servicing, L.P. ("Litton") for quiet title and declaratory relief as to the interests in 715 S Street NW, Washington, D.C. Goldman Sachs and Litton have filed a motion to dismiss Civil Action No. 14-1868.

U.S. Bank National Association ("U.S. Bank") is suing the Stewards in Civil Action No. 15-2041 for judicial foreclosure on the same property and the case was removed to this Court, but U.S. Bank has filed a motion to remand the case to D.C. Superior Court. The Stewards have filed a motion to consolidate the two cases.

The motions to dismiss and remand are granted, rendering the motion to consolidate moot.

II. BACKGROUND

The Stewards obtained the deed to 715 S Street NW, Washington, D.C., in November 2004 and used a mortgage loan to finance their purchase. Steward Compl. ¶¶ 3, 7, ECF No. 1. They used Fremont Investment & Loan ("Fremont" or "Fremont Investment"), which did not have a license to engage in mortgage lending in D.C. to refinance their home for a lump sum cash payment in February 2006. Id. ¶¶ 8-10. The Stewards executed two Deeds of Trust ("Deed I" and "Deed II") with Fremont Investment for loans of $624,000 and $156,000, respectively. Defs.' Mem. in Supp. of Mot. Dismiss Exs. B, C, ECF No. 6. The deeds state that Fremont Investment is the lender and/or original payee on the Stewards' Note and that Fremont possesses a security interest in the property. Steward Compl. ¶ 15.

In August 2008, Mortgage Electronic Registration Systems, Inc. ("MERS"), as nominee for Fremont Investment, transferred Fremont's interest under Deed I to U.S. Bank. U.S. Bank Compl. ¶ 13, ECF No. 1. After the Stewards missed several loan payments, U.S. Bank sent a demand letter to the Stewards in April 2009 regarding their default. Id. at ¶¶ 16-17. The Stewards failed to cure their default and U.S. Bank attempted to foreclose on the property. Id. at ¶ 18; Steward Compl. ¶ 18. In July, the D.C. Superior Court enjoined U.S. Bank from selling the property on the scheduled date, Steward Compl. ¶ 26, but the case was later dismissed by the District Court due to the lack of responsiveness by the Stewards' attorney, id. at ¶ 31.¹ U.S. Bank is the current holder and beneficiary under Deed I. U.S. Bank Compl. ¶ 15.

In September 2011, MERS assigned Deed II to Goldman Sachs and Goldman Sachs nominated Litton as its servicer. Steward Compl. ¶¶ 40-41.

The Stewards filed this action against Goldman Sachs and Litton in D.C. Superior Court on October 10, 2014. Goldman Sachs and Litton removed this case to the District Court in November 2014 and moved the court to dismiss the case. The Court requested and received supplemental memoranda regarding the D.C. Mortgage Lender and Broker Act of 1996, D.C. Code §§ 26–1100 et seq.

In October 2015, U.S. Bank filed Civil Action No. 15-2041 against the Stewards in the Superior Court for the District of Columbia. In November 2015, the Stewards removed the case to this Court and moved to consolidate this case with Civil Action No. 14-1868, in which the Stewards are plaintiffs. U.S. Bank has moved to remand Civil Action No. 15-2041 back to D.C. Superior Court.

III. STANDARD OF REVIEW

"Under Rule 12(b)(6), a plaintiff need only plead ‘enough facts to state a claim to relief that is plausible on its face’ and to ‘nudge[ ] [his or her] claims across the line from conceivable to plausible.’ " Hunter v. District of Columbia, 64 F.Supp.3d 158, 165 (D.D.C.2014) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The Court must accept as true all factual allegations contained in the complaint and construe the complaint liberally in the plaintiff's favor, granting the plaintiff the benefit of all reasonable inferences that can be derived. Boykin v. Gray, 895 F.Supp.2d 199, 205 (D.D.C.2012).

Civil actions filed in state court may be removed to a United States district court by the defendant so long as the case could have been filed in the district court originally. 28 U.S.C. § 1441(a). However, "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c). A challenge to subject matter jurisdiction may be raised on a motion to remand by the parties. 28 U.S.C. § 1447(c).

Courts should apply a strict reading to the removal statute to avoid federalism concerns. See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108–09, 61 S.Ct. 868, 85 L.Ed. 1214 (1941). Any uncertainty about the existence of subject matter jurisdiction should be resolved in favor of remand. Hood v. F. Hoffman – La Roche, Ltd., 639 F.Supp.2d 25, 28 (D.D.C.2009) (citing Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, 281–82 (5th Cir.2007) ).

IV. ARGUMENT

A. Motion to Dismiss

The Stewards claim Goldman Sachs and Litton violated Section 26-1114(a)(10) of the D.C. Mortgage Lender and Broker Act, D.C. Code § 26–1100 et seq. , and the D.C. Loan Shark Act, D.C. Code § 26-901 et seq. However, Fremont Investment was a "bank" under D.C. Code § 26-1102(1) and therefore was exempt from the regulations of §§ 26-1100 et seq. Additionally, because the loan in this case was greater than $25,000, the D.C. Loan Shark Act does not apply. Therefore, the motion to dismiss Civil Action No. 14-1868 will be granted.

The relevant section of the D.C. Mortgage Lender and Broker Act reads:

(a) No mortgage broker, mortgage lender, mortgage loan originator, or loan officer required to be licensed under this chapter, or person required to be licensed under this chapter, shall:

(10) Purchase loans from an unlicensed mortgage broker or lender, unless the unlicensed mortgage broker or lender is exempt under § 26-1102 ;

D.C. Code § 26-1114(a)(10). Section 1102(1) states that the provisions of the Mortgage Lender and Broker Act shall not apply to:

(1) Any bank, trust company, savings bank, savings and loan association, or credit union incorporated or chartered under the laws of the United States, any state or territory of the United States, or the District, and any other financial institution incorporated or chartered under the laws of the District or of the United States, that accepts deposits and is regulated under Title 26 of the District of Columbia Official Code.

D.C. Code § 26-1102(1).

In their Complaint, the Stewards argue that Goldman Sachs possesses no right to the property because Deed II was "void ab initio. " Steward Compl. ¶¶ 45, 48, 50, 51, 53, 54. Therefore, the appropriate question to ask is whether Fremont Investment was a "bank" for the purposes of § 26-1102(1) at the time the deed was executed and the loan was issued—March 8, 2006. See Steward Compl. ¶ 10.

Fremont Investment was a "bank" on March 8, 2006. On October 11, 2004, Fremont Investment received a Certificate of Authority from the State of California Department of Financial Institutions and was "authorized to transact industrial banking business." Defs.' Mem. Supp. Mot. Dismiss Ex. A, ECF No. 17. The same day, it received a certification from the Federal Deposit Insurance Corporation ("FDIC"). Defs.' Mem. Supp. Mot. Dismiss Ex. B, ECF No. 17. Furthermore, a Certificate of Search from the State of California Department of Business Oversight confirms that in March 2006, Fremont Investment & Loan "was licensed to conduct the business of an industrial bank." Defs.' Suppl. Mem. In Resp. to Ct.'s March 6, 2015 Order Ex. A, ECF No. 20. Fremont Investment did not cease operating as bank and become inactive until 2008, Pl.'s Suppl. Mem. in Resp. to Mar. 5, 2015 Order 2, ECF No. 19, more than two years after the execution of Deed II. The Stewards have conceded that "Fremont was, at one time, a commercial, state-chartered, non-federal reserve bank." Id. at 1.

Furthermore, this is not the first time this Court has considered whether § 26-1100 et seq. applies to Fremont Investment. Previously, this Court has found that Fremont Investment was a "bank" according to Section 1102(1) and was therefore not subject to the Mortgage Lender and Broker Act. See Blue v. Fremont Inv. & Loan , 562 F.Supp.2d 33, 44 (D.D.C.2008) (dismissing claim under D.C. Mortgage Lender and Broker Act because Fremont was exempt under D.C. Code § 26-1102(1) ); see also In re Stevenson, No. 06–00306, 2013 WL 8149438, at *13 (B...