Opinion ID: 2559870
Heading Depth: 1
Heading Rank: 2

Heading: analysis

Text: OneWest Bank argues that although Ms. Marshall's motion to dismiss sought nothing more than a dismissal of the [c]omplaint brought against the James Scott [e]state for failure to state a claim against that party  (emphasis in original) the Civil Division, instead, appears to have entered sua sponte adjudication on the validity of the Surepoint [d]eed of [t]rust and the OneWest [d]eed of [t]rust notwithstanding that the validity of these [d]eeds of [t]rust (as against the interests of Renaud and Abbie Scott) was never before the trial court in the first place. The bank complains that it had no notice that the Civil Division would dispose of its claims against Renaud and Abbie Scott summarily by voiding the deeds of trust that they admitted signing. OneWest Bank asserts that the Civil Division's ruling constituted error as a matter of law because the deeds of trust encumber[ed] Renaud Scott and Abbie Scott's interests in the [Clay Street] [p]roperty without regard to the interests held by the James Scott Estate. Furthermore, the bank maintains that no violation of D.C.Code § 20-105 occurred because there was no non-judicial transfer of James Scott's one-third interest in the Clay Street property. The bank contends, in essence, that it stated legally viable claims and the Civil Division erred by dismissing its verified complaint. Ms. Marshall argues that OneWest Bank lacks standing to bring its claim; she maintains that: In light of the trial court's concerns about One West[ ] [Bank's] standing [as reflected in its denial of OneWest Bank's motion to dismiss Ms. Marshall's counterclaim], it appears that this appeal is premature and should be dismissed. [2] Moreover, she declares that OneWest [Bank] must show that it is the beneficiary of a valid assignment of both the UMG promissory note and the UMG deed of trust, or [it] lack[s] standing to enforce the UMG deed of trust which is the subject of this legal action. Furthermore, Ms. Marshall claims that the trial court's dismissal of OneWest Bank's verified complaint was proper, essentially because [t]he failure to obtain the signature of James Scott's Personal Representative and the failure to reflect James Scott's interest on the [d]eed, alienating the estate's one-third interest in the Clay Street property, violated the express statutory language of D.C.Code § 20-105. We are guided by the following legal principles. Standing is a threshold jurisdictional question which must be addressed prior to and independent of a party's claims. Grayson v. AT & T Corporation, 15 A.3d 219, 229 (D.C.2011) (en banc) (internal quotation marks and citation omitted). To establish standing, a plaintiff must present an injury that is concrete, particularized, and actual or imminent.... [T]he critical question is whether ... [the plaintiff] has alleged such a personal stake in the outcome of the controversy as to warrant his invocation of [the] court['s] jurisdiction. Horne v. Flores, ___ U.S. ___, 129 S.Ct. 2579, 2592, 174 L.Ed.2d 406 (2009) (internal quotation marks and citations omitted). We review the dismissal of a complaint under Super. Ct. Civ. R. 12(b)(6) de novo. Drake v. McNair, 993 A.2d 607, 615 (D.C.2010). In reviewing the complaint, the court must accept its factual allegations and construe them in a light most favorable to the non-moving party. Chamberlain v. American Honda Fin. Corp., 931 A.2d 1018, 1023 (D.C.2007) (citation omitted). However, [f]actual allegations must be enough to raise a right to relief above the speculative level ....; and dismissal under Rule 12(b)(6) is appropriate where the complaint fails to allege the elements of a legally viable claim. Id. (internal quotation marks and citations omitted). Here, we have no doubt that OneWest Bank's complaint sufficiently alleges that it has standing. It has alleged, in essence, that it has a security interest in the Clay Street property through the deed of trust executed by Renaud and Abbie Scott with OneWest Bank's predecessor in interest; that because Renaud and Abbie Scott paid off the Surepoint mortgage loan with funds obtained from OneWest Bank's predecessor in interest (UMG/IndyMac), OneWest Bank has assumed the first lien position as to the encumbrance on the Clay Street property; that an issue has arisen as to whether OneWest Bank has the first lien position that its predecessor in interest had; and that there is a danger that if it does not, its security interest will be non-existent or diminished in value. [3] Under these circumstances, OneWest Bank has alleged an injury that is concrete, particularized, and actual or imminent and it has a personal stake in the outcome of the controversy. Horne, supra, 129 S.Ct. at 2592. We next examine whether the Civil Division properly dismissed OneWest Bank's complaint in response to Ms. Marshall's Rule 12(b)(6) motion. [4] Ms. Marshall's motion only involved James Scott's estate. Our task, then, is to determine whether OneWest Bank stated the elements of a legally viable claim against the estate and whether the allegations of its complaint, which we must accept as true, were sufficient to raise a right to relief above the speculative level. Chamberlain, 931 A.2d at 1023 (internal quotations and citation omitted). When we construe the allegations in the light most favorable to OneWest Bank, we conclude that OneWest Bank has stated the elements of legally viable equitable claims (equitable lien or equitable title, and equitable subrogation). Paragraph 13 of the complaint indicates that the Clay Street property was owned by James Scott, Renaud Scott, and Abbie Scott. Paragraph 19 avers that the monies loaned by OneWest[ ] [Bank's] predecessor in interest were actually loaned to and for the benefit of James Scott and to and for James Scott's interest in the property, in addition to Renaud Scott and Abbie Scott, as the monies loaned were for the [Clay Street] [p]roperty. Moreover, Paragraph 20 alleges that the monies loaned by One West[ ] [Bank's] predecessor in interest were used to improve and maintain the [Clay Street] [p]roperty and thus benefitted all of the title owners of the [Clay Street] [p]roperty, including James Scott, Renaud Scott and Abbie Scott. In Count II of its complaint (Declaratory JudgmentEquitable Lien), OneWest Bank states, in paragraph 27, that [after the death of James Scott] UMG provided Renaud Scott and Abbie Scott with refinance funding in the total amount of $208,000.00 for the [Clay Street] [p]roperty. With the deed of trust that secured the UMG loan, UMG intended to and did occupy a first lien position with respect to any other encumbrance. Paragraph 28 alleges that OneWest Bank stepped into the first lien position of its predecessor in interest: [E]quity requires that this [c]ourt exercise its equitable powers and declare that as of July 3, 2007, UMG, and its successor in interest, One West [Bank] holds a first lien position against the [Clay Street] [p]roperty.... Equity recognizes that where ... the intention to hold and charge a particular interest or estate as security for the payment of a debt or other obligation is clearly manifested in writing [here, through the UMG/IndyMac/OneWest Bank deed of trust], but frustrated simply through some default of form or in procedure, an equitable lien upon such interest or estate is created, which is enforceable against the property in the hands of ... the original promisor.... Equitable Trust Co. v. Imbesi, 287 Md. 249, 412 A.2d 96, 101 (1980) (citation omitted). In essence, OneWest Bank alleges that it acquired the deed of trust encumbering the Clay Street property in good faith with the intent to step into the first lien position of Surepoint Lending through a specific mortgage interest, and hence, it has an equitable lien on the Clay Street property. As such, its complaint states the elements of a viable legal claim and that claim should not have been dismissed under Rule 12(b)(6). In addition, OneWest Bank made a claim of equitable subrogation in Count III of its complaint, indicating in paragraph 30 that UMG's refinance loan was intended to be secured by [its deed of trust]; and Paragraph 31 explains that [p]roceeds from the refinance settlement were disbursed in the amount of $192,737.44 to the holder of the [d]eed of [t]rust originally secured by Surepoint Lending. Furthermore, Paragraph 32 alleges that [t]he UMG loan proceeds were disbursed and the loan payoffs were made in reliance of the discharge of the prior lien against the [Clay Street] [p]roperty in reliance of UMG, and its successors in interest, acquiring and enjoying a superior lien position against the [Clay Street] [p]roperty. However, [t]he error in the [d]eed of [t]rust does not provide OneWest Bank with the intended first position [d]eed of [t]rust. In paragraph 36, OneWest Bank states that the doctrine of equitable subrogation permits the court to exercise its equitable powers and declare that OneWest [Bank] is subrogated to the prior superior lien position to the extent of the amount of $192,737.44. We conclude that OneWest Bank has alleged the elements of a legally viable claim for equitable subrogation. We addressed the doctrine of equitable subrogation in HSBC Bank USA, N.A. v. Mendoza, 11 A.3d 229 (D.C.2010): Under the doctrine of equitable subrogation, a lender who pays off a pre-existing mortgage and takes a new mortgage as security for the loan will be subrogated to the rights of the first mortgagee as against any intervening lienholders, even if the lender is on constructive notice of the existence of the junior liens. In other words, the lender steps into the shoes of the mortgagee it has paid off and receives that mortgagee's priority over subsequent liens. The subrogation extends to the amount paid to satisfy the earlier indebtedness. Id. at 235 (footnotes omitted). OneWest Bank's verified complaint includes allegations that would satisfy the elements of equitable subrogation as set out in Mendoza. The Civil Division mistakenly believed that D.C.Code § 20-105 constituted a bar against any liability of the James Scott estate, and further, that the deeds of trust were void because of a non-judicial transfer of interests in the Clay Street property; hence, the Civil Division reasoned, OneWest Bank could not have stated a legally viable claim for equitable relief through the doctrines of equitable lien or equitable subrogation. In the District of Columbia, legal title to real property ... passes not directly to the heirs or devisees, as at common law, but rather to the personal representative of the decedent's estate. Douglas v. Lyles, 841 A.2d 1, 3 (D.C.2004) (quoting D.C.Code § 20-105 (2001)). This provision `operates to vest legal title to all a decedent's property in the personal representative,' therefore, appointment of a personal representative is a prerequisite to probate and distribution and precludes the possibility of nonjudicial distribution.' Id. (quoting Richardson v. Green, 528 A.2d 429, 430 (D.C. 1987)). Here, however, James, Renaud, and Abbie Scott held the Clay Street property as tenants in common. After James Scott's death, when his one-third interest had passed to his estate and awaited the appointment of his personal representative for distribution, Renaud and Abbie Scott each encumbered their one-third interest in the Clay Street property by using it as collateral for the Surepoint mortgage loan. Later, when Renaud and Abbie Scott refinanced the Surepoint loan, Renaud and Abbie executed a deed of trust to UMG and Renaud Scott signed a promissory note pledging his one-third interest to secure the UMG loan. A cotenant is free to sell or encumber his or her interest in property. 7 POWELL ON REAL PROPERTY, § 50.06[4]. A sale or encumbrance by one tenant in common of more than his or her share does not bind the others. Id. Hence, neither the Surepoint nor the UMG loan could bind James Scott's one-third interest in the Clay Street property at the point in which it was secured. Nevertheless, [w]hile a mortgage granted by a single tenant in common covers only the mortgagor's interest, the mortgagee also has a lien on the increased value of the entire cotenancy caused by improvements obtained with mortgagee's funds. Id. Thus, assuming that improvements were made to the Clay Street property with the loan proceeds, and even assuming a defect in UMG's deed of trust, as UMG's alleged successor in interest, OneWest Bank c[ould] receive an equitable lien for the value of improvements that were made ... in good faith with its loan funds. M.M. & G., Inc. v. Jackson, 612 A.2d 186, 191 (D.C.1992) (citations omitted). OneWest Bank avers that James Scott's one-third interest in the Clay Street property benefitted from the UMG loan that paid off the Surepoint mortgage loan, and that one third interest would be subject to OneWest Bank's equitable lien. Furthermore, even assuming that Renaud and Abbie Scott sought to convey a one hundred percent interest in the Clay Street property when they obtained the Surepoint and UMG mortgage loans, or assuming that the estate benefitted from the Surepoint and UMG/IndyMac/OneWest Bank loans, OneWest Bank could rely on the doctrine of after-acquired title to demonstrate that it had an equitable lien on James Scott's estate's one-third interest and that interest would pass to Abbie Scott at the end of the probate process, thus giving Renaud and Abbie Scott all of the interest in the Clay Street property and allowing OneWest Bank to proceed to foreclosure. The doctrine of after-acquired title holds that if a grantor purports to transfer ownership of real property to which he lacks legal title at the time of the transfer, but subsequently acquires legal title to the property, the after-acquired title inures, by operation of law, to the benefit of the grantee. Id. at 190; see also Ackerman v. Abbott, 978 A.2d 1250, 1254 (D.C.2009); Douglas, supra, 841 A.2d at 5. In short, OneWest Bank stated the elements of legally viable claims for equitable subrogation and equitable lien or equitable title. Whether they can prevail on those claims is not a question for these appeals. [5] To the extent that the Civil Division purported to act on OneWest Bank's claims against Renaud and Abbie Scott by declaring UMG's deed of trust, and hence OneWest Bank's security interest, void, that ruling is based upon a misapprehension of the law. [6] Moreover, since Ms. Marshall's Rule 12(b)(6) motion was filed only on behalf of the James Scott estate, it could not have impacted OneWest Bank's claims against Renaud and Abbie Scott. In addition, because the Probate Division's decision denying OneWest Bank's motion to distribute estate funds to Abbie Scott was based on the Civil Division's ruling, we would be constrained to vacate it, assuming that the probate case is properly before us. [7] Accordingly, for the reasons stated above, we vacate the Civil Division orders and remand these cases to the Superior Court for further proceedings. [8] So ordered.