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Bailey v. Interbay Funding, LLC

United States District Court, D. Connecticut

April 4, 2018

DAVID BAILEY, Plaintiff,
v.
INTERBAY FUNDING, LLC, ET AL., Defendants.

          RULING RE: MOTIONS TO DISMISS (DOC. NOS. 44 & 47) AND MOTION TO AMEND THIRD AMENDED COMPLAINT (DOC. NO. 60)

          Janet C. Hall United States District Judge

         I. INTRODUCTION

         This case comes before the court pursuant to a Complaint filed by the plaintiff, David Bailey (“Bailey”), against the defendants, Interbay Funding, LLC (“Interbay”); Bayview Loan Servicing, LLC, and Bayview Asset Management, LLC (collectively the “Bayview defendants”), and Blue Ribbon Appraisals, LLC (“Blue Ribbon”). In his Third Amended Complaint, Bailey alleges four counts against various combinations of defendants, including claims of fraud (Counts Four and Seven); civil conspiracy (Count Five); and violations of the Connecticut Unfair Trade Practices Act (“CUTPA”), Connecticut General Statutes section 42-110a et seq (Count Six).[1] See Third Amended Complaint (“3d Am. Compl.”) (Doc. No. 42). Bailey has also moved to amend his Third Amended Complaint in order to add a claim of breach of oral contract. See Motion to Amend Third Amended Complaint (Doc. No. 60). All of Bailey's claims arise out of a property sale that occurred in 2006 or a foreclosure action that took place from 2014 to 2017. See generally 3d Am. Compl.

         On December 7, 2017, defendant Blue Ribbon filed a Motion to Dismiss, arguing that Bailey's claims were barred by the statute of limitations and that Connecticut state law protects Blue Ribbon from liability against Bailey. See generally Defendant Blue Ribbon's Motion to Dismiss Plaintiff's Third Amended Complaint (“Blue Ribbon's Mot.”) (Doc. No. 44).

         On January 4, 2018, Interbay and the Bayview defendants filed a joint Motion to Dismiss Bailey's Third Amended Complaint. See generally Interbay and Bayview Defendants' Motion to Dismiss (“Interbay's Mot.”) (Doc. No. 47). In their Motion, Interbay and the Bayview Defendants argue that Bailey's claims are barred in their entirety by the Rooker-Feldman doctrine. Id. In the alternative, Interbay and the Bayview defendants argue that Bailey's claims are barred by res judicata, collateral estoppel, the applicable statute of limitations, or the litigation privilege doctrine; that he has failed to plead his fraud claims with adequate specificity; and that he has not alleged conduct on their part that violates CUTPA. Id.

         For the reasons that follow, the Motions to Dismiss (Doc. Nos. 44 & 47) are granted, and Bailey's Motion to Amend (Doc. No. 60) is denied.

         II. STANDARD OF REVIEW

         Blue Ribbon moves to dismiss the Third Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) (“Rule 12(b)(6)”), while Interbay and the Bayview defendants bring their Motion to Dismiss pursuant to both Rule 12(b)(1) and Rule 12(b)(6). See Blue Ribbon's Mot.; Interbay's Mot.

         “A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it.” Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). When deciding a motion to dismiss pursuant to Rule 12(b)(1), the plaintiff bears the burden of proving subject matter jurisdiction by a preponderance of the evidence. See Aurecchione v. Schoolman Transp. Sys., Inc., 426 F.3d 635, 638 (2d Cir. 2005). The court takes as true all material factual allegations in the complaint, but “argumentative inferences favorable to the party asserting jurisdiction should not be drawn.” Atlantic Mut. Ins. Co. v. Balfour Maclaine Int'l Ltd., 968 F.2d 196, 198 (2d Cir. 1992).

         With respect to a motion to dismiss pursuant to Rule 12(b)(6), the court must determine whether the plaintiff has stated a legally cognizable claim by making allegations that, if true, would show that the plaintiff is entitled to relief. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007) (interpreting Rule 12(b)(6), in accordance with Rule 8(a)(2), to require allegations with “enough heft to ‘sho[w] that the pleader is entitled to relief” (alteration in original)). The court takes all factual allegations in the complaint as true and draws all reasonable inferences in the plaintiff's favor. Crawford v. Cuomo, 796 F.3d 252, 256 (2d Cir. 2015). However, the tenet that a court must accept a complaint's allegations as true is inapplicable to “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555).

         To survive a motion pursuant to Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. (quoting Twombly, 550 U.S. at 570). “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. The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556).

         III. ALLEGED FACTS

         The following allegations are taken from the Third Amended Complaint, the exhibits attached thereto, and the filings in the underlying foreclosure action in Connecticut Superior Court.[2]

         Plaintiff Bailey is an individual residing in Maryland. See 3d Am. Compl. at 1. Defendant Blue Ribbon is an appraisal company located in Connecticut. Id. Interbay and the Bayview defendants are Delaware corporations. Id. Interbay and the Bayview defendants are in business together for profit and operate collectively as “Bayview.” Id. at 2.

         On or about February 7, 2006, Bailey was contacted by a family friend about the possibility of purchasing a commercial property located at 607-611 Washington Avenue, New Haven, Connecticut (“the property”). Id. Approximately one week later, Bailey spoke with then-owner of the property, Kelly Moye (“Moye”). Id. During that conversation, Moye informed Bailey that the mortgage company, Bayview, “already ha[d] a good property appraisal and building inspection report, ” which Bailey could review at the time of closing. Id. at 3. Relying on the appraisal and building report to which Moye referred, Bailey purchased the property. Id. at 3-4. His mortgage for the property was serviced by Bayview Loan Servicing, LLC. Id. at 4.

         Shortly after the closing, Bailey discovered that the building needed a lot of work and was not up to code. Id. at 4. By 2014, Bailey was “underwater” in terms of his mortgage payments to Bayview Loan Servicing, LLC. Id. On multiple occasions, including shortly before August 2014, Bayview Loan Servicing, LLC, promised him a loan modification with a principal reduction. Id.

         In August 2014, Bayview Loan Servicing, LLC, initiated a foreclosure action against Bailey in Connecticut Superior Court. Id. On August 19, 2014, the defendants filed a Summons, Complaint, and Return of Service in the foreclosure case. See id. at 12. On September 22, 2014, the defendants served the Secretary of State of Connecticut. See id. They also attempted to serve Bailey at his home, but Bailey never received service of process. See id. at 12, 14. However, a return of service was filed in the foreclosure action reflecting that receipts for certified mail had been signed on August 19, 2014. See Exh. B, 3d Am. Compl. (Doc. No. 42-6) at 1. The United States Postal Service later sent Bailey a letter stating that, upon investigation, the Postal Service had identified that the certified mail in question was signed by a postal carrier on August 19, 2014. See Exh. C, 3d Am. Compl. (Doc. No. 42-5).

         Bailey did not file an appearance or an answer in the foreclosure action and, on October 27, 2014, a default judgment of foreclosure entered against Bailey. See Exh. D, 3d Am. Compl. (Doc. No. 42-4) at 1. The judgment provides that law days[3] will commence on November 24, 2014. Id.

         Subsequently, Bailey filed an Appearance and a Motion to Open in Connecticut Superior Court. See Exh. A, 3d Am. Compl. (Doc. No. 42-1). In this Motion to Open, Bailey asserted the following: “Bayview lied to me about my receiving a principal reduction and a loan modification! And they also provided false appraisal documents!” Id. at 2. That Motion to Open was denied by the Superior Court judge on June 5, 2017. See Bayview Loan Servicing, LLC v. Bailey, NNI-CV14-6007566-S.[4] On June 9, 2017, Bailed filed a Second Motion to Open alleging lack of personal jurisdiction, fraud, unclean hands, and lack of notice. Id. The Superior Court judge denied Bailey's Second Motion to Open on June 26, 2017. Id. Bailey filed this action on August 31, 2017. Bailey then filed a Third Motion to Open in the foreclosure action alleging fraud on September 22, 2017, to which Bayview Loan Servicing, LLC, objected. Id. The Superior Court judge sustained that objection on November 6, 2017.[5] Id.

         IV. ANALYSIS

         In his Third Amended Complaint, Bailey alleges the following claims: (1) fraud related to the alleged fake appraisal, Count Four, against all defendants; (2) civil conspiracy based on the fraud alleged in Count Four, Count Five, against all defendants; (3) violations of CUTPA, Count Six, against Interbay and the Bayview defendants; and (4) fraud related to the default foreclosure judgment, Count Seven, against the Bayview defendants.[6]

         Because the claims raise distinct legal questions as alleged against different defendants, the court first addresses the claims alleged against Blue Ribbon and then turns to the claims against Interbay and the Bayview defendants.

         A. Claims Against Blue Ribbon

         Bailey alleges two claims against Blue Ribbon: fraud related to an allegedly fake appraisal (Count Four) and civil conspiracy based on that appraisal-related fraud (Count Five). In support of these claims, Bailey alleges that Blue Ribbon represented that it conducted an appraisal, which did not take place at the time he purchased the property. See 3d Am. Compl. at 3. Bailey further alleges that he learned the appraisal in question did not take place at the time of his purchase from “the wife of the owner of Blue Ribbon” in January 2017. Id. Bailey also alleges that the appraisal in question “was done for the previous owner of the building, Defendant [sic] Kelly B. Moye, one year earlier in violation of the law.”[7] Id. at 6. Bailey also conclusorily alleges, but does not plead facts to support, that all defendants, including Blue Ribbon, “devised a plan to take [sic] sell the Plaintiff a ruined property appraised as being good” and “knew and intended to defraud the Plaintiff by using a fake appraisal in order [sic] the Plaintiff purchase the property from the Defendant [sic] Mr. Kelly and obtain a loan from the Defendants Bayview.” Id. at 9.

         In its Motion to Dismiss, Blue Ribbon argues that Bailey's claims regarding the appraisal are barred by the statute of limitations as well as Connecticut General Statutes section 36a-755, which prohibits liability of real estate appraisers against any party other than the party with whom the appraiser contracted. See Blue Ribbon's Mot. at 1.

         1. Statute of Limitations

         In Connecticut, fraud and civil conspiracy are both subject to a three year statute of limitations. Connecticut General Statutes section 52-577 (“section 52-577”) states: “No action founded upon a tort shall be brought but within three years from the date of the act or omission complained of.” C.G.S. § 52-577. Section 52-577 is a statute of repose, which means that the applicable period for the statute of limitations begins on “the date of the act or omission complained of, not the date when the plaintiff first discovers an injury.” Byrne v. Burke, 112 Conn.App. 262, 272 (2009); see Kidder v. Read, 150 Conn.App. 720, 726-27 (2014).

         Blue Ribbon argues that, because Bailey's purchase of the property took place in 2006, any claims arising out of the use of the appraisal in connection with that purchase are time-barred. See Memorandum of Law in Support of Blue Ribbon's Motion to Dismiss (“Blue Ribbon's Mem.”) (Doc. No. 44-1) at 4-6.

         Bailey argues that the statute of limitations defense is a “special defense, ” which “should not be used as a vehicle to dismiss [Bailey]'s claim.” Response to Blue Ribbon at 4. However, claims may be dismissed at the pleading stage “[w]here the dates in a complaint show that an action is barred by a statute of limitations.” Est. of Axelrod, 476 F.Supp.2d at 203 (quoting Ghartey v. St. John's Queens Hosp., 869 F.2d 160, 162 (2d Cir. 1989); see Velez v. City of New London, 903 F.Supp. 286, 289 (D. Conn. 1995) (“Although the statute of limitations defense is usually raised in a responsive pleading, the defense may be raised in a motion to dismiss if the running of the statute is apparent from the fact of the complaint.” (quoting Ledesma v. Jack Steward Produce, Inc., 816 F.2d 482, 484 n.1 (9th Cir. 1987))).

         Bailey also argues that the court should not look to the date of the appraisal or the date of the purchase of the property, but should “postpone” the statute of limitations period until January 2017 “which is when [Bailey] discovered he was wronged by the Defendant Blue Ribbon.”[8] Plaintiff's Response to Blue Ribbon's Mot. (“Response to Blue Ribbon”) (Doc. No. 48) at 4. As aforementioned, section 52-577 is a statute of repose, meaning that the date at which an injury is discovered is irrelevant. See Byrne, 112 Conn.App. at 272. However, the date on which Bailey discovered fraud could be relevant to the extent that Bailey is attempting to raise a tolling defense of fraudulent concealment, which, in Connecticut, is governed by Connecticut General Statutes section 52-595 (“section 52-595”). See Kidder, 150 Conn.App. at 727 (recognizing fraudulent concealment as a basis for tolling the section 52-577 statute of limitations period).

         fraudulent concealment, like all claims of fraud, must be pled according to the heightened pleading standard in Federal Rule of Civil Procedure 9(b) (“Rule 9(b)”). See Armstrong v. McAlpin, 699 F.2d 79, 88 (2d Cir. 1983) (“Appellants' generalized and conclusory allegations of fraudulent concealment do not satisfy the requirements of [Rule] 9(b).”); In re Publication Paper Antitrust Litig., No. 3:04-MD-1631(SRU), 2005 WL 2175139, at *3 (D. Conn. Sept. 7, 2005) (“A claim that the statute of limitations should be tolled because of fraud is, obviously, a claim of fraud, and therefore the circumstances constituting that fraud must meet Rule 9(b)'s requirements.”). In order to plead fraudulent concealment pursuant to section 52-595, Bailey must allege that Blue Ribbon had actual awareness of facts necessary to establish fraud, that Blue Ribbon intentionally concealed those facts from Bailey, [9] and that this concealment was done for the purpose of delaying Bailey from filing a complaint. See Gibbons v. NER Holdings, Inc., 983 F.Supp. 310, 316 (D. Conn. 1997) (discussing elements of fraudulent concealment pursuant to section 52-595); OBG Tech. Servs., Inc. v. Northrop Grumman Space & Mission Sys. Corp., 503 F.Supp.2d 490, 504 (D. Conn. 2007) (“[B]ecause [the plaintiff]'s claims are time-barred on the face of its own complaint, [the plaintiff] has the burden of pleading facts sufficient to establish that the statutes of limitations should be tolled.”).

         Bailey has not alleged facts adequate to plead fraudulent concealment. As noted above, see supra Section IV(A), Bailey has only alleged that Blue Ribbon “represented” that it conducted an appraisal, which appraisal was conducted for Moye a year before Bailey purchased the property. 3d Am. Compl. at 3, 6. Bailey has not alleged that Blue Ribbon had actual awareness of facts necessary to establish fraud or that Blue Ribbon intentionally concealed those facts, much less that they did so to prevent Bailey from filing a complaint. He certainly has not stated fraudulent concealment “with particularity” as Rule 9(b) requires. See Fed.R.Civ.P. 9(b) (“In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.”).

         In sum, the court concludes that Bailey's claims against Blue Ribbon are barred by the statute of limitations, as the running of the statute is apparent from the face of Bailey's Third Amended Complaint, and he has ...


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