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Haak Motors, LLC v. TD Auto Finance LLC

United States District Court, D. Maryland

September 9, 2014

HAAK MOTORS, LLC,
v.
TD AUTO FINANCE LLC, et al.

MEMORANDUM

J. FREDERICK MOTZ, District Judge.

Plaintiff Haak Motors brings this suit against defendant Len Stoler, Inc., ("Stoler") for alleged negligence and conversion. Stoler now moves to dismiss, or in the alternative, for summary judgment. The parties have fully briefed the issues and no oral argument is necessary. See Local Rule 105.6. For the reasons set forth below, the motion will be granted.

BACKGROUND

Lloyd Haak ("Haak") began operating a Chrysler Motors dealership in Baltimore County, Maryland in 2002. Six years later, he agreed to sell the dealership to William Ackridge ("Ackridge"), who assumed control of the entity on June 1, 2008. When Ackridge subsequently failed to pay Haak for the dealership and its assets, Haak successfully pursued an action in the Circuit Court for Queen Anne's County and regained possession of the dealership on August 19, 2008. In the interim period between June 1 and August 19, however, Ackridge initiated at least fifty-seven deals involving vehicles at the dealership, many of them "buy here pay here" ("BHPH") transactions, secured by liens in favor of TD Auto Finance LLC ("TDAF"). As Haak discovered when he repossessed the dealership, these transactions were deficient in several respects. Specifically, Haak recounts that "there were.... [f]ifty-seven problems of cars that were traded and not paid off, cars that were financed that shouldn't have been, cash taken and not re-put in the dealership, endless number of things...." (Haak Dep. 52: 10-14; ECF No. 40-2). According to Haak, Ackridge also improperly recorded these vehicles' registrations, liens, titles, tags, "everything." (Haak Dep. 52: 18-21; ECF No. 40-2).

In one such example, Ackridge sold a 2006 Dodge Dakota to Latora Ackridge, which TDAF secured with a lien. A little over a year later, however, Latora Ackridge used a fraudulent security interest filing ("SIF") and lien release letter to trade the Dakota to Stoler, in partial payment for a 2009 Hyundai Santa Fe. Dated September 8, 2009-three days before Latora sought to trade in the car-the fraudulent lien release represents that: (1) Latora Ackridge purchased the Dakota from Ackridge; (2) Ackridge Auto Group financed the purchase; and (3) Latora paid for the car in full and owed no outstanding debt to Ackridge or Ackridge Auto Group.

In fact, TDAF-not Ackridge Auto Group-was the legitimate secured party on the Dakota, Latora Ackridge had not paid for the car in full, and she was obligated to continue making payments to TDAF. Because the fraudulent letter allegedly: (1) did not contain an SIF from Ackridge terminating the lien; (2) was issued by a dealership instead of a financial institution; (3) was not notarized; (4) was dated only a few days prior to Latora Ackridge's negotiations with Stoler; (5) revealed two different addresses for Latora; and (6) showed that Latora had the same last name as the dealership issuing the lien release, Haak alleges that these irregularities should have alerted Stoler to the possibility that Latora Ackridge's lien release was fraudulent. In Haak's view, Stoler should have independently verified the legitimacy of the lien release letter and confirmed the identity of the secured party with the Maryland Motor Vehicle Administration ("MVA"). Instead, Stoler allegedly accepted the Dakota, along with fraudulent lien release, as partial payment for the Santa Fe. Stoler then resold the Dakota to a third party.

In the meantime, as Haak sought to resolve the issues caused by Ackridge's tenure at the dealership, a dispute arose between Haak and TDAF regarding the storage fees for the vehicles on the premises. To resolve this dispute, Haak and TDAF reached a Settlement and Mutual Release Agreement on June 9, 2010. Pursuant to this Agreement, TDAF assigned to Haak "all the BHPH Deals set forth on Exhibit 1... as well as all contract, lien and other rights in said BHPH Deals to Haak, without representation or warranty." (Settlement Agreement ΒΆ 20; ECF No. 17-4 at 2). Latora Ackridge's Dakota was one of the BHPH deals included in the settlement.

According to Haak, although he had the opportunity to review and/or investigate the various records relating to each BHPH deal prior to the finalization of the settlement agreement-including: buyer's orders, retail installment contracts, and applications for title-he saw no reason to do so, despite knowing, as of August 2008, that the records for most of the transactions were deficient in some respects and that Ackridge had acted fraudulently in other instances regarding the dealership's operations. (Haak Dep. 63: 8-18; ECF No. 40-2). TDAF nevertheless informed Haak that (1) it did not possess the sales contract for the 2006 Dakota; (2) the lien on the Dakota was for $11, 539.50; and (3) Latora Ackridge had made no payments on the loan and was not scheduled for any payments in the future. (Overcashier Aff. at 2; ECF No. 17-5).

Still, in the aftermath of its agreement with TDAF, Haak took no steps to contact Latora Ackridge-or any of the BHPH customers-in order to notify her that he had acquired the rights to the lien. Instead, he testified that he expected TDAF to initiate this process, despite the fact that TDAF had allegedly failed, on multiple occasions, to keep him apprised of the status of the liens on the BHPH deals. As Haak explained, "I knew I had these liens, okay, I knew those cars were there. I just didn't have time to get to it.... I attempted to start doing it, but time just didn't allow. I mean, you can only do so much in 24 hours." (Haak Dep. 71: 8-15; ECF No. 40-2). Unsure of whether TDAF had notified the BHPH customers regarding Haak's rights to the account, Haak still declined to follow up with TDAF in 2010 and 2011, even when he failed to receive any of the expected payments on the liens. (Haak Dep. 80: 9-12; ECF No. 41-3).[1] Haak ultimately requested the books and records for the BHPH deals in January 2013. Nine months later, in November 2013, Haak learned that Latora Ackridge had traded in her Dakota to Stoler, and that Stoler had subsequently resold the car to a bona fide purchaser in Pennsylvania.

As a result of this and other problems arising from the liens on the BHPH deals, Haak filed a complaint against TDAF in the Circuit Court for Baltimore County, claiming damages for breach of contract, unjust enrichment, negligent misrepresentation, and conversion, while also seeking an accounting, constructive trust and specific performance. On July 17, 2013, TDAF removed the suit to this court on the basis of diversity jurisdiction. (ECF No. 1). On January 8, 2014, Haak filed an amended complaint joining Stoler as a defendant. Because it maintains that Stoler (1) negligently permitted Latora Ackridge to trade in the Dakota with a fraudulently obtained lien release and (2) subsequently destroyed Haak Motor's rights in the lien by reselling the car, Haak seeks damages against Stoler in the amount of $9, 000 for negligence and conversion. Stoler moved for summary judgment, or in the alternative to dismiss, on May 16, 2014.[2]

STANDARD

Under Rule 12(b)(6), a motion to dismiss should be treated as a motion for summary judgment when the motion to dismiss, or exhibits in the record, present matters outside the nonmoving party's pleadings and the court does not exclude such matters. Fed.R.Civ.P. 12(b)(6). I will treat Stoler's motion as a motion for summary judgment because it requires me to look beyond the four corners of the complaint.

According to Federal Rule of Civil Procedure 56(a), summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." The Supreme Court has clarified that this does not mean any factual dispute will defeat the motion: "By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).

"A party opposing a properly supported motion for summary judgment may not rest upon the mere allegations or denials of [his] pleadings, ' but rather must set forth specific facts showing that there is a genuine issue for trial." See Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 525 (4th Cir. 2003) (alteration in original) (quoting Fed.R.Civ.P. 56(e)). The court should "view the evidence in the light most favorable to..the nonmovant, and draw all inferences in her favor without weighing the evidence or assessing the witnesses' credibility." See Dennis v. Columbia Colleton Medical Ctr., Inc., 290 F.3d 639, 644-45 (4th Cir. 2002). The court must, however, also abide by "the affirmative obligation of the trial judge to prevent factually ...


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