Welch v. Centex Home Equity Co., LLC

• Citation: 262 F.Supp.2d 1263
• Decision Date: 16 May 2003
• Docket Number: No. 03-2132,03-2132
• Parties: Kory A. WELCH, Plaintiff, v. CENTED HOME EQUITY CO., LLC, et al., Defendants.
• Court: U.S. District Court — District of Kansas

Page 1263

262 F.Supp.2d 1263

Kory A. WELCH, Plaintiff, v. CENTED HOME EQUITY CO., LLC, et al., Defendants.

No. 03-2132

United States District Court, D.Kansas

May 16, 2003

COPYRIGHT MATERIAL OMITTED

Charles E. Branson, Lawrence, KS, for Beth Romero.

William F. Logan, Foland & Eickeris, P.C., Kansas City, MO, for Kerstin Siley.

Michael D. Hufft, Hufft & Maginn, LLC, Kansas City, MO, for Jay Jordan.

James E. Kiley, Jr., Kiley, Wiesner & Frackowiak, L.L.P., Overland Park, KS, for Kory A. Welch.

Leo L. Logan, Coates & Logan, LLC, Overland Park, KS, for Producers Mortgage Corp.

Eldon J. Shields, Gates, Biles, Shields & Ryan, P.A., Overland Park, KS, for Centex Home Equity Co., LLC.

William M. Modrcin, Stinson Morrison Hecker, LLP, Kansas City, MO, for Nations Title Agency, Inc.

Todd W. Ruskamp, Shook, Hardy & Bacon, L.L.P., Kansas City, MO, for Household Finance Corp., III. Jeffrey R. Siegel, Shaffer, Lombardo & Shurin, Kansas City, MO, for Owen Gibson.

MEMORANDUM & ORDER

LUNGSTRUM, District Judge.

This matter is before the court on defendant Owen Gibson's motion to dismiss (Doc. 9). Plaintiffs petition (filed in state, court) includes eight causes of action against defendant Gibson including a fraud claim, a Kansas Consumer Protection Act claim, a conspiracy claim, a Real' Estate Settlement Procedures Act claim, a declaratory judgment claim, a quiet title claim, a claim under K.S.A. § 53-119, and a defamation claim.

Defendant Gibson seeks dismissal of the fraud claim, the claim under the Real Estate Settlement Procedures Act, the declaratory judgment claim, and the claim to quiet title for failure to state a claim upon which relief can be granted. The motion also seeks to dismiss all of the claims against him because the petition allegedly does not establish that plaintiff has any damages. For the reasons set forth below, the motion is granted as to the fraud claim, the Real Estate Settlement Procedures Act claim, the declaratory judgment claim, and the quiet title claim but is denied as to the remaining claims.

I. UNCONTROVERTED FACTS

The following allegations are set out in plaintiffs petition.¹ In June of 2001, plaintiff Kory A. Welch (formerly known as Kory A. Jordan) and her husband at the time, Jay Jordan; were in discussions' with loan officers from Producers Mortgage to refinance their home in Shawnee Mission, Kansas. They wanted to take out two loans, a first and second trust. On or abdut June 14, 2001, Ms. Kerstin Siley and Mr. Eli Coritreras, two of Producers Mortgage's loan officers, came to the Jordans' residence and had' both Mr. Jordan and Ms. Welch (then Jordan) sign certain loan application papers and loan disclosure statements (including a Good Faith Estimate of Settlement Costs) required by law.

On June 25, 2001, Ms. Welch left Kansas City for a business trip to Bethesda, Maryland. That evening Ms. Siley and Mr. Contreras delivered loan documents, including both loans' mortgages and notes, to Mr. Jordan at his home. Ms. Siley asked Mr. Jordan to sign the loan documents immediately in order to close that month. After Mr. Jordan informed them that his wife was out of town, Ms. Siley allegedly told Mr. Jordan to sign the documents, sign his wife's name on the documents, and she would pick up the documents at his office the next day. Mr. Jordan later signed the notes, mortgages, and settlement statements and signed his wife's name without her authorization or knowledge.² The next day, Ms. Siley picked up the loan documents from Mr. Jordan at his office and delivered them to Owen Gibson at Producers Mortgage's offices in Kansas City, Missouri. Mr. Gibson then "fraudulently attested" that he witnessed Kory A. Welch (then Jordan) sign the documents on June 25, 2001, in Johnson County, Kansas.

Sometime after the loan closed, Mr. and Mrs. Jordan separated and ultimately divorced. In the divorce, Ms. Welch was granted exclusive ownership and title to their residence. In early May of 2002, when Ms. Welch was first billed separately for her homeowner's insurance, she recognized that there were certain discrepancies in the payment amount on the loans. Her loan payment was $97.00 higher than what she thought she had agreed to pay pursuant to the Good Faith Estimates that she had signed, which she alleges she thought were the final loan documents. When she Contacted Producers Mortgage, she learned that the loan was for a 20 year period rather than the 15 year period stated in the Good Faith Estimate of Settlement Costs that she had signed. She then obtained copies of the loan documents and realized that the documents she signed were not the actual loan documents, that the actual loan documents did not comport with the Good Faith Estimates that she signed, and that her signature was forged on the loan documents. At that point, she contacted her former husband and learned that he had signed her name on the loan documents while she was out of town. She then filed this lawsuit in state court in the District of Johnson County, Kansas. Defendants removed the case to this court and defendant Gibson filed a motion to dismiss for failure to state a claim.

II. 12(b)(6) MOTION TO DISMISS STANDARD

The court will dismiss a cause of action for failure to state a claim only when "it appears beyond a doubt that the plaintiff can prove no set of facts in support of his [or her] claims which would entitle him [or her] to relief," Poole v. County of Otero, 271 F.3d 955, 957 (10th Cir.2001) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)), or when art issue of law is dispositive. Neitzke v. Williams, 490 U.S. 319, 326, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989). The court accepts as true all well-pleaded facts, as distinguished from conclusory allegations, and all reasonable inferences from those facts are viewed in favor of the plaintiff. Smith v. Plati, 258 F.3d 1167, 1174 (10th Cir.2001). The issue in resolving a motion such as this is "not whether [the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence'' to support the claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)).

III. DISCUSSION

Defendant Gibson seeks to dismiss the following claims: (1) the fraud claim, (2) the claim under the Real Estate Settlement Procedures Act, (3) the declaratory judgment claim, and (4) the claim to quiet title. The court will addresses the parties' arguments regarding each of these claims in turn.

A. Fraud

Plaintiffs fraud claim alleges that defendant Gibson falsely attested to plaintiffs signature on loan documents that plaintiff never in fact signed. As a result of this conduct, plaintiff alleges that she received a loan with payments $97.00 higher than she anticipated. Defendant Gibson moves to dismiss this claim arguing that plaintiff could not have relied on any representation made by him. In response, plaintiff contends that her-claim is a fraud by silence claim. In reply,'defendant Gibson points out that a fraud by silence claim requires a duty to speak and that he had no such duty. The court agrees with defendant Gibson that plaintiffs petition fails to state a claim.

Under Kansas law, to prove* a cause of action for fraud by silence, plaintiff must set forth by clear and convincing evidence:

(1) that defendant had knowledge of ... material facts which plaintiff did not have and which plaintiff could not have discovered by the exercise of reasonable diligence; (2) that defendant was under an obligation to communicate the material facts to the plaintiff; (3) that defendant intentionally failed to communicate to plaintiff the material facts; (4) that plaintiff justifiably relied on defendant to communicate the material facts to plaintiff; and (5) that plaintiff sustained damages as a result of defendant's failure to communicate the material facts to the plaintiff.

Miller v. Sloan, Listrom, Eisenbarth, Sloan and Glassman, 267 Kan. 245, 978 P.2d 922 (1999) (citations omitted).

In Wolfv. Brungardt, 215 Kan. 272, 524 P.2d 726 (1974), the Kansas Supreme Court described the claim:

Where one party to a contract or transaction has superior knowledge, or knowledge which is not within the fair and reasonable reach of the other party and which he could not discover by the exercise of reasonable diligence, or means of knowledge which are not open to both parties alike, he is under a legal obligation to speak, and his silence constitutes fraud, especially when the other party relies upon him to communicate to him the true state of facts to enable him to judge of the expedience of the bargain. Key to this cause of action, we think, is the unequal relationship in which the claimant seeks particular information from a specialist upon which the recipient intends to rely or act. Under Kansas law, that interaction in those circumstances may create a fiduciary relationship. Moreover, although Kansas law "does not specifically define the nature of that unequal relationship, we are satisfied its concept of a "fiduciary relationship" embraces it.

Id.

A necessary element of fraud by silence is that the defendant was under an obligation to communicate material facts to the plaintiff. DuShane v. Union Nat'l Bank, 223 Kan. 755, 760, 576 P.2d 674, 678-79 (1978); OMI Holdings, Inc. v. Howell, 260 Kan. 305, 345, 918 P.2d 1274, 1299 (1996). Whether a duty to disclose exists is determined by the facts and circumstances of each individual case. Ensminger, 102 F.3d at 1574. "The question of what gives rise to a legal or equitable obligation to communicate is not always an easy question to resolve, but generally the duty must arise from a relationship existing between the parties when the suppression or concealment is alleged to have occurred." DuShane, 223 Kan. at 760, 576 P.2d 674. "It may arise between two contracting parties when there is a...