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Giannasca v. Bank of America, N.A.

United States District Court, D. Maryland

November 19, 2018




         Plaintiff Edward V. Giannasca, II, who is self-represented, filed suit against a host of defendants, alleging fraud in connection with a construction loan and a mortgage. ECF 2 (“Complaint”).[1] In an amended complaint (ECF 24-1, “Amended Complaint”), he alleged “financial fraud” and “mortgage fraud” related to a first mortgage of $1.5 million with respect to his family farm in Street, Maryland. ECF 24-1 at 5. Several exhibits are appended to the suit. See ECF 24-2 to 24-8.

         Giannasca and New Penn Financial, LLC d/b/a/ Shellpoint Mortgage Servicing (“Shellpoint”); V Mortgage REO 3, LLC (“V Mortgage); and Wilmington Trust, National Association (“Wilmington Trust”), in its capacity as a trustee for VM Trust Series 3, filed a “Joint Stipulation Of Dismissal With Prejudice” on March 6, 2018. ECF 33. On March 22, 2018, I granted the “Joint Stipulation.” ECF 37.[2]

         Plaintiff has not set forth any allegations or claims against the Doe defendants. Accordingly, I shall dismiss them from this case. See Pair v. Alexander, GLR-16-1492, 2018 WL 1583472, at*1 n.2 (Apr. 2, 2018) (dismissing claims against Doe defendants on the ground the plaintiff “d[id] not raise specific allegations against the John Doe defendants”).

         Carrington Mortgage Services, LLC (“Carrington”) was named as a defendant in the original Complaint. In the Amended Complaint, plaintiff added defendant J.P. Morgan Mortgage Acquisitions Corp. (“J.P. Morgan”). See ECF 24; ECF 24-1. According to the Docket, neither party was served. See Docket.

         “In all cases removed from any State court to any district court . . . in which any . . . of the defendants has not been served with process . . . prior to removal, . . . such process or service may be completed or new process issued in the same manner as in cases originally filed in such district court.” 28 U.S.C. § 1448. Fed.R.Civ.P. 4(m) requires a plaintiff to serve a defendant “within 90 days after the complaint is filed.” If any defendant is not served within that time, “the court . . . must dismiss the action without prejudice against that defendant or order that service be made within a specified time.” Id.

         Pursuant to 28 U.S.C. § 1448 and Fed.R.Civ.P. 4(m), plaintiff was required to serve Carrington by October 24, 2017, and to serve J.P. Morgan by December 4, 2017. Because plaintiff has not yet served these defendants, I shall dismiss the claims against them, without prejudice.

         Defendants Bank of America, N.A. (“Bank of America” or “BOA”), Ruth Derewyanko, and Peter Kafouros have filed a joint motion to dismiss (ECF 31), supported by a memorandum of law (ECF 31-1) (collectively, “BOA Motion”) and exhibits. See ECF 31-2 through ECF 31-6. Additionally, defendant Residential Credit Solutions, Inc. (“Residential”) filed a motion to dismiss (ECF 34), along with a memorandum of law (ECF 34-1) (collectively, “Residential Motion”) and an exhibit. See ECF 34-2. And, defendants Paul J. Moran, Esq. and Stern & Eisenberg Mid-Atlantic, PC (“Stern & Eisenberg”) filed a joint motion to dismiss (ECF 35), along with a memorandum of law (ECF 35-1) (collectively, “Moran Motion”). Plaintiff opposes all of the motions. ECF 38; ECF 39; ECF 40 (collectively “Opposition”). Defendants have replied. ECF 41 (“BOA Reply”); ECF 42 (“Moran Reply”); ECF 43 (“Residential Reply”).

         No hearing is necessary to resolve the motions. See Local Rule 105.6. For the reasons set forth below, I shall grant defendants' motions.

         I. Factual Background[3]

         This dispute concerns alleged fraud with regard to a construction loan and mortgage on Giannasca's family farm. In 2006, Giannasca applied to Bank of America for a $2 million construction loan and mortgage on a farm owned at the time by the Giannasca Family Farm, LLC (“GFF”). ECF 24-1 at 10.[4] Giannasca intended to use the proceeds of the construction loan to satisfy a prior mortgage and to fund a construction project on the farm. Id. During the loan application process, he was assisted by Derewyanko, a BOA account executive. Id. After plaintiff submitted his loan application, he received Bank of America's $2 million loan documents, including a funding date and a first payment due date. Id. at 11. Derewyanko advised Giannasca to accelerate the construction renovations to ensure a $3 million BOA appraisal prior to funding the loan. Id. Giannasca did so, and the property was appraised at $3 million. Id.

         In February 2007, Derewyanko advised Giannasca that the loan would be reduced to $1.5 million, due to “sweeping system-wide changes in [Bank of America's] loan products.” Id. at 12. To make up for the shortfall, she suggested Giannasca increase his home equity line of credit. Id. She also informed Giannasca that the loan could not be made to GFF because it was a limited liability company, and that Giannasca would have to transfer the farm to himself to receive the loan. Id. Accordingly, Giannasca transferred the farm from GFF to himself, and the loan ultimately closed for $1.5 million on February 13, 2007. Id. at 6. However, BOA never approved an increase in Giannasca's home equity line of credit. As a result, a $500, 000 financing shortfall remained for his construction project. Id.

         Several liens were lodged against the farm, and Giannasca was sued by contractors engaged in the construction project. Id. at 13. Thus, Giannasca contends that his credit was ruined because BOA failed to lend the additional $500, 000. Id. at 13-14.

         The right to service the construction loan was subsequently released to other entities, including Carrington, Residential, and Shellpoint. Id. at 14. Giannasca ultimately defaulted on the loan and Shellpoint, through its attorneys, Moran and Stern & Eisenberg, initiated foreclosure proceedings. Id. at 15.

         In addition, Giannasca references a “McCrary Action, ” alleging that the judgments in that action have prohibited him from refinancing the mortgage on his home and have contributed to his financial ruin. ECF 24-1 at 14-15. However, he fails to explain the nature of the “McCrary Action.”

         Giannasca also alleges that he suffered damages from the conduct of BOA and Kafouros, including, id. at 17:

(i) allowing the opening of the Crescent City bank account with improper documentation . . ., (ii) by allowing [Stuart C.] Fisher[5] to deposit a check for $5, 000, 000 dollars into a BOA account when the check was made payable to a nonexistent corporation, (iii) by allowing Fisher to negotiate (deposit) the $5, 000, 000 check into an account when he was not a signatory or authorized user of that account, and (iv) allowing Fisher to make withdrawals from an account without any authority whatsoever to do so, (v) by allowing Fisher to deposit monies into personal accounts without the account owner[']s knowledge and control.

         Presumably, the “Crescent City bank account” is related to Crescent City, LLC (“Crescent City”), in which plaintiff claims to hold a 50% interest. See Id. at 20. Plaintiff asserts that Crescent City entered into a $5, 700, 000 settlement agreement with BOA in 2011 (“Crescent City settlement”). Id. Additionally, “Fisher” appears to have connections to Crescent City and Giannasca. See Id. at 21. According to an unsigned affidavit of secured creditors of plaintiff, attached to the Complaint (ECF 2-2 at 21-32), [6] Stuart C. Fisher “was personally responsible for soliciting and delivering Bank of America, Palm Beach to the Giannasca Family's Farm in Harford County, Maryland.” ECF 2-2 at 22.

         Plaintiff avers that the Crescent City settlement resolved the case of Crescent City Estates, LLC v. Bank of America, N.A., CCB-08-3458 (ECF 24-1 at 20-21). On December 24, 2008, BOA removed that case to this Court from the Circuit Court for Baltimore City. See Id. ECF 1.[7] In that litigation, Crescent City alleged that BOA converted $11, 000, 000 by allowing Fisher to open a BOA account in Crescent City's name without authorization, and then depositing several checks payable to Crescent City into that account. See CCB-08-3458, ECF 2. The parties filed a stipulation of dismissal on June 1, 2011. See CCB-08-3458, ECF 105. The terms of the settlement agreement are not publicly available. See CCB-08-3458.

         As noted, plaintiff asserts that he owns a 50% interest in Crescent City, LLC. ECF 24-1 at 20. But, he complains that he was not a party to the Crescent City settlement agreement, and only recently became aware of it. ECF 1 at 13-14. According to plaintiff, the Crescent City settlement agreement is central to his claim of conspiracy and collusion (Count Four) against BOA.

         In May 2016, Giannasca and the Giannasca Family Farm, LLC filed a “Fraud Complaint” in the Circuit Court for Harford County against BOA, Kafouros, Derewyanko, Shellpoint, Residential, Carrington, Stern & Eisenberg, Gregory Mullen, Esq., and several Doe defendants. They alleged fraud in the inducement; breach of contract; negligence; negligent training and supervision; breach of common law duty of inquiry; breach of duty to disclose; tortious interference; flipping a troubled loan; lender fraud and misrepresentation; conspiracy; and collusion. The case was removed to this court in June 2016. See Giannasca v. Bank of America, N.A. et. al., JFM-16-2002, ECF 2. Judge Motz dismissed the case in January 2017, upon defendants' motions for failure to state a claim. Id., ECF 42. Giannasca then filed the case sub judice in the Circuit Court for Harford County (ECF 2), and in July 2017 the case was again removed to this Court and assigned initially to Judge Motz. ECF 1.[8]

         On September 5, 2017, plaintiff filed an amended complaint, without leave of Court or consent of the parties. ECF 24 (“Amended Complaint”). All defendants filed motions to strike the Amended Complaint. See ECF 26 (BOA, Derewyanko, and Kafouros); ECF 28 (Residential); ECF 29 (Moran; Shellpoint, Stern & Eisenberg, V Mortgage REO 3, and Wilmington Trust). The Court denied the motions to strike. ECF 30.

         Giannasca's Amended Complaint contains five counts: fraud in the inducement (Count One); “flipping” the “struggling loan” (Count Two); lender fraud and misrepresentation (Count Three); conspiracy and collusion (Count Four); and punitive damages (Count Five).

         Additional facts are included in the Discussion.

         II. Standard of Review

         A defendant may test the legal sufficiency of a complaint by way of a motion to dismiss under Rule 12(b)(6). In re Birmingham, 846 F.3d 88, 92 (4th Cir. 2017); Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159, 165-66 (4th Cir. 2016); McBurney v. Cuccinelli, 616 F.3d 393, 408 (4th Cir. 2010), aff'd sub nom. McBurney v. Young, 569 U.S. 221 (2013); Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). A Rule 12(b)(6) motion constitutes an assertion by a defendant that, even if the facts alleged by a plaintiff are true, the complaint fails as a matter of law “to state a claim upon which relief can be granted.”

         Whether a complaint states a claim for relief is assessed by reference to the pleading requirements of Rule 8(a)(2). That rule provides that a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” The purpose of the rule is to provide the defendant with “fair notice” of the claims and the “grounds” for entitlement to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007).

         To survive a motion under Fed.R.Civ.P. 12(b)(6), a complaint must contain facts sufficient to “state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570; see Ashcroft v. Iqbal, 556 U.S. 662, 684 (2009) (“Our decision in Twombly expounded the pleading standard for ‘all civil actions' . . . .” (citation omitted)); see also Willner v. Dimon, 849 F.3d 93, 112 (4th Cir. 2017). But, a plaintiff need not include “detailed factual allegations” in order to satisfy Rule 8(a)(2). Twombly, 550 U.S. at 555.

         To be sure, federal pleading rules “do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted.” Johnson v. City of Shelby, Miss., 574 U.S. ___, 135 S.Ct. 346, 346 (2014) (per curiam). Nevertheless, the rule demands more than bald accusations or mere speculation. Twombly, 550 U.S. at 555; see Painter's Mill Grille, LLC v. Brown, 716 F.3d 342, 350 (4th Cir. 2013). A complaint is insufficient if it provides no more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555. Rather, to satisfy the minimal requirements of Rule 8(a)(2), the complaint must set forth “enough factual matter (taken as true) to suggest” a cognizable cause of action, “even if . . . [the] actual proof of those facts is improbable and . . . recovery is very remote and unlikely.” Twombly, 550 U.S. at 556 (internal quotations omitted).

         In reviewing a Rule 12(b)(6) motion, a court “‘must accept as true all of the factual allegations contained in the complaint'” and must “‘draw all reasonable inferences [from those facts] in favor of the plaintiff.'” E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011) (citations omitted); see Semenova v. Maryland Transit Admin., 845 F.3d 564, 567 (4th Cir. 2017); Belmora, LLC v. Bayer Consumer Care AG, 819 F.3d 697, 705 (4th Cir. 2016); Houck v. Substitute Tr. Servs., Inc., 791 F.3d 473, 484 (4th Cir. 2015); Kendall v. Balcerzak, 650 F.3d 515, 522 (4th Cir. 2011), cert. denied, 565 U.S. 943 (2011). But, a court is not required to accept legal conclusions drawn from the facts. See Papasan v. Allain, 478 U.S. 265, 286 (1986). “A court decides whether [the pleading] standard is met by separating the legal conclusions from the factual allegations, assuming the truth of only the factual allegations, and then determining whether those allegations allow the court to reasonably infer” that the plaintiff is entitled to the legal remedy sought. A Society Without a Name v. Virginia, 655 F.3d 342, 346 (4th Cir. 2011), cert. denied, 566 U.S. 937 (2012).

         In general, courts do not “resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses” through a Rule 12(b)(6) motion. Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). The purpose of the rule is to ensure that defendants are “given adequate notice of the nature of a claim” made against them. Twombly, 550 U.S. at 555-56 (2007). But, “in the relatively rare circumstances where facts sufficient to rule on an affirmative defense are alleged in the complaint, the defense may be reached by a motion to dismiss filed under Rule 12(b)(6).” Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007) (en banc); accord Pressley v. Tupperware Long Term Disability Plan, 533 F.3d 334, 336 (4th Cir. 2009); see also U.S. ex rel. Oberg v. Penn. Higher Educ. Assistance Agency, 745 F.3d 131, 148 (4th Cir. 2014). However, because Rule 12(b)(6) “is intended [only] to test the legal adequacy of the complaint, ” Richmond, Fredericksburg & Potomac R.R. Co. v. Forst, 4 F.3d 244, 250 (4th Cir. 1993), “[t]his principle only applies . . . if all facts necessary to the affirmative defense ‘clearly appear[ ] on the face of the complaint.'” Goodman, 494 F.3d at 464 (quoting Forst, 4 F.3d at 250) (emphasis added in Goodman).

         To survive a motion to dismiss, a complaint, relying on only well-pled factual allegations, must state a “plausible claim for relief.” Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). The “mere recital of elements of a cause of action, supported only by conclusory statements, is not sufficient to survive a motion made pursuant to Rule 12(b)(6).” Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012). To determine whether a complaint has crossed “the line from conceivable to plausible, ” a court must employ a context-specific inquiry, drawing on the court's “experience and common sense.” Iqbal, 556 U.S. at 679-80.

         Under limited circumstances, when resolving a Rule 12(b)(6) motion, a court may consider exhibits, without converting the motion to dismiss to one for summary judgment. Goldfarb v. Mayor & City Council of Balt., 791 F.3d 500, 508 (4th Cir. 2015). In particular, a court may consider documents that are “explicitly incorporated into the complaint by reference and those attached to the complaint as exhibits . . . .” Goines, 822 F.3d at 166 (citations omitted); see also U.S. ex rel. Oberg v. Pennsylvania Higher Educ. Assistance Agency, 745 F.3d 131, 136 (4th Cir. 2014); Anand v. Ocwen Loan Servicing, LLC, 754 F.3d 195, 198 (4th Cir. 2014); Am. Chiropractic Ass'n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004), cert. denied, 543 U.S. 979 (2004); Phillips v. LCI Int'l Inc., 190 F.3d 609, 618 (4th Cir. 1999). A court may also take judicial notice of matters of public record. Philips, supra, 572 F.3d at 180.

         However, “before treating the contents of an attached or incorporated document as true, the district court should consider the nature of the document and why the plaintiff attached it.” Goines, 822 F.3d at 167 (citing N. Ind. Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 455 (7th Cir. 1998)). “When the plaintiff attaches or incorporates a document upon which his claim is based, or when the complaint otherwise shows that the plaintiff has adopted the contents of the document, crediting the document over conflicting allegations in the complaint is proper.” Goines, 822 F.3d at 167. Conversely, “where the plaintiff attaches or incorporates a document for purposes other than the truthfulness of the document, it is inappropriate to treat the contents of that document as true.” Id.

         A court may also “consider a document submitted by the movant that was not attached to or expressly incorporated in a complaint, so long as the document was integral to the complaint and there is no dispute about the document's authenticity.” Goines, 822 F.3d at 166 (citations omitted); see also Woods v. City of Greensboro, 855 F.3d 639, 642 (4th Cir. 2017), petition for cert. filed, No. 17-492 (Oct. 3, 2017); Kensington Volunteer Fire Dep't. v. Montgomery Cty., 684 F.3d 462, 467 (4th Cir. 2012). To be “integral, ” a document must be one “that by its ‘very existence, and not the mere information it contains, gives rise to the legal rights asserted.'” Chesapeake Bay Found., Inc. v. Severstal Sparrows Point, LLC, 794 F.Supp.2d 602, 611 (D. Md. 2011) (citation omitted) (emphasis in original).

         Plaintiff submits several exhibits with his Amended Complaint. See ECF 24-2 at 1-9 (Proof of complaint that plaintiff filed with the Consumer Financial Protection Bureau); ECF 24-2 at 11-13 (Proof of complaint that plaintiff filed with the Federal Bureau of Investigation); ECF 24-2 at 14-19 (Department of Justice press release on BOA settlement for financial fraud); ECF 24-2 at 20-21 (List of BOA securitizations); ECF 24-2 at 22-23 (Business Wire release on Fitch rating of BOA Funding Corp.'s mortgage pass through certificates, series 2007-B); ECF 24-2 at 24-25 (Plaintiff's e-mail to the Department of Housing and Urban Development, Office of Inspector General); ECF 24-2 at 26-29 (Proof of complaint that plaintiff filed with the Office of the Comptroller of the Currency); ECF 24-2 at 30-32 (Proof of complaint that plaintiff filed with the Department of Justice); ECF 24-3 (Proof of complaint that plaintiff filed with the Consumer Financial Protection Bureau); ECF 24-4 (Letter from Shellpoint to plaintiff); ECF 24-5 (Letter from Residential to plaintiff); ECF 24-6 (Residential's mortgage statement for plaintiff); ECF 24-7 at 2 (Interest rates on BOA mortgage per adjustable rate note); ECF 24-7 at 3-8 (BOA's adjustable rate note); ECF 24-8 (Plaintiff's annotated copy of proof of the claim submitted by Shellpoint in the U.S. Bankruptcy Court, Baltimore Division). Because these exhibits are incorporated into the Amended Complaint, I may consider them without converting the motions to dismiss to motions for summary judgment.

         Additionally, defendants submit various exhibits with their motions to dismiss. See ECF 31-2 (Deed of Trust); ECF 31-3 (Uniform Residential Loan Application, dated February 13, 2007); ECF 31-4 (Exception/Accommodation Request Form submitted by plaintiff to BOA, dated January 18, 2007); ECF 31-5 (the docket from the Circuit Court for Harford County case of Wittstadt v. Giannasca, No. 12C12003437); ECF 34-2 (Order of this Court, dated January 26, 2017, in the case of Giannasca v. Bank of America, et al., JFM-16-2002).

         The Deed of Trust (ECF 31-2) submitted as an exhibit to the BOA Motion is integral to plaintiff's claim of “flipping” a “struggling loan.” In that claim, plaintiff appears to challenge the legality of the sale of the Construction Loan from Bank of America to Carrington, then to Residential, and then to Shellpoint. See ECF 24-1 at 18. Plaintiff does not dispute the authenticity of the Deed of Trust. See ECF 38. And, the Deed of Trust gives rise to the rights plaintiff asserts in his claim of “flipping” a “struggling loan.” See ECF 24-1 at 18. Accordingly, the Deed of Trust (ECF 31-2) is integral to the Amended Complaint, and I may consider it without converting the BOA Motion to one for summary judgment.

         The Court is mindful that the pleadings of a pro se litigant, such as plaintiff, are “held to less rigorous standards than formal pleadings drafted by lawyers” See Erickson v. Pardus, 551 U.S. 89, 94 (2007); see also White v. White, 886 F.2d 721, 722-23 (4th Cir. 1989).

         III. Discussion

         A. Subject Matter Jurisdiction

         The “burden of establishing subject matter jurisdiction is on . . . the party asserting jurisdiction.” Robb Evans & Assocs., LLC v. Holibaugh, 609 F.3d 359, 362 (4th Cir. 2010). And, this Court, like all federal courts, has “an independent obligation to determine whether subject-matter jurisdiction exists, even when no party challenges it.” Hertz Corp. v. Friend, 559 U.S. 77, 94 (2010).

         Under 28 U.S.C. § 1332(a)(1), federal district courts have subject matter jurisdiction over “civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between . . . citizens of different States.” Diversity jurisdiction under § 1332 “requires complete diversity among parties, meaning that the citizenship of every plaintiff must be different from the citizenship of every defendant.” Cent. W.Va. Energy Co. v. Mountain State Carbon, LLC, 636 F.3d 101, 103 (4th Cir. 2011).

         In this case, defendants Bank of America, Kafouros, and Derewyanko filed a Notice of Removal, invoking this Court's diversity jurisdiction pursuant to 28 U.S.C. § 1332. See ECF 1. The parties are diverse except for plaintiff Giannasca and defendant Moran. Id. ¶¶ 24-33. Both are citizens of Maryland. Id. ¶¶ 24, 34.

         1. Fraudulent Joinder

         To justify diversity jurisdiction, despite the incomplete diversity of the parties, defendants BOA, Kafouros, and Derewyanko invoked the doctrine of fraudulent joinder in their Notice of Removal. ECF 1, ¶¶ 34-35. They asserted that “there is no possibility that Plaintiff can establish a cause of action against Mr. Moran, and, accordingly, his citizenship should be disregarded for diversity purposes.” Id. ¶ 34. Plaintiff has not disputed defendants' contention. Nevertheless, I have “an independent obligation to determine whether subject-matter jurisdiction exists” here. Hertz, 559 U.S. at 94. I agree with the defendants: the doctrine of fraudulent joinder applies and thus this Court has subject-matter jurisdiction.

         The Fourth Circuit has adopted an exception to complete diversity known as the doctrine of fraudulent joinder. See Mayes v. Rapoport, 198 F.3d 457, 464 (4th Cir. 1999). The fraudulent joinder doctrine prevents a plaintiff from including or adding a non-diverse defendant solely for the purpose of defeating federal diversity jurisdiction. See Id. at 461 n.8. When the doctrine applies, a court can “disregard, for jurisdictional purposes, the citizenship of certain non-diverse defendants, assume jurisdiction over a case, dismiss the nondiverse defendants, and thereby retain jurisdiction.” Mayes, 198 F.3d at 464; accord Schur v. L.A. Weight Loss ...

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