C:\Documents and Settings\netaylor\Local Settings\Temp\notesE1EF34\First Guaranty v. Bryant

See 18 U.S.C. §§ 1961, et seq. (2005).

IN THE UNITED STATES DISTRICT COURT FOR

THE DISTRICT OF MARYLAND, NORTHERN DIVISION

FIRST GUARANTY MORTGAGE *

CORPORATION

Plaintiff,

v. * CIVIL NO.: WDQ-03CV-3259

JOHN BRYANT, et al., *

Defendants. *

* ************

MEMORANDUM OPINION AND ORDER

First Guaranty Mortgage Corporation (“FGMC”) sued 16

Defendants for violations of the Racketeer Influenced and Corrupt

Organizations Act.

Pending are motions to dismiss the First

Amended Complaint, or in the alternative, for summary judgment

filed by Conroy, Ballman & Dameron, Chartered (“Conroy Ballman”),

Monica Silver (“Silver”), Brendan Reilly (“Reilly”), and Richard

Minor (“Minor”). For the following reasons Conroy Ballman’s

motion to dismiss will be granted, and the remaining motions to

dismiss will be denied.

I. Background

FGMC is a corporation in the business of originating and

brokering residential mortgage loans. Am. Compl. at ¶ 21. To

make loan decisions, FGMC relies on representations of several

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Allegedly, Defendants would identify individuals with poor credit ratings and offer

them the opportunity to purchase a home. The Defendants allegedly prepared false

documentation, obtained fraudulent appraisals, and falsely inflated the true value of the

properties as a means of securing loans through FGMC. Defendants allegedly would then use

the proceeds from the loans to pay for the properties that were sold to new buyers. See Am.

Compl. at ¶ 23.

sources, including mortgage brokers, loan officers, real estate

brokers, real estate appraisers, real estate attorneys, and

mortgage applicants. Id. at ¶ 22. FGMC alleges damage from a

real estate “flipping”

scheme where FGMC issued loans in excess

of the value and sales price of properties in Maryland as a

result of illegal activities and false documentation submitted by

the Defendants to FGMC. Id. at ¶ 23. FGMC sued the following 16

Defendants.

John Bryant (“Bryant”); Bryant’s business Bryant

Enterprises, Inc.; Bryant’s wife, Monica Silver (“Silver”); HRT

Enterprises, Inc. trading as ReMax and ReMax Professionals, a

real estate brokerage firm where Silver is employed as a real

estate agent; R&M Appraisal Services, L.L.C., an appraiser for

mortgage loan qualification; Ronald Brvenik, a principal with

R&M; three former FGMC loan processors/officers: Valerie Borders

(“Borders”), Brendan Reilly (“Reilly”), and Richard Minor

(“Minor”); Conroy Ballman, a law firm; Lynn Kromminga

(“Kromminga”), a former attorney with Conroy Ballman; Scott Davis

(“Davis”), Jervis Bryant (“J. Bryant”), and Eric Patterson, who

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A “straw purchaser” is one who is not intended as the real buyer of property. See U.S.

v. 72.71 Acres of Land, 23 F.R.D. 635, 638 (D. Md. 1959).

Bryant, Silver, Reilly, Kromminga, Davis, and Borders were charged with conspiracy

and aiding and abetting. Bryant was also charged with wire fraud and aiding and abetting. J.

Bryant was charged with false statements relating to HUD insured loans and aiding and abetting.

FGMC asserts negligence and breach of contract claims against Conroy Ballman and

RICO violations, fraud and negligent misrepresentation, and civil conspiracy counts against

Silver, Reilly, and Minor.

acted as “straw purchasers”

and/or falsified documents; and two

real estate settlement services, Beltway Title & Abstract, Inc.

and Brennan Title Company. Id. at ¶¶ 2-17. These proceedings

were stayed pending resolution of the criminal action, U.S. v.

Bryant, et al., No.: 8:03-cr-00302-AW-ALL (D. Md. 2005), in which

Bryant, Silver, Reilly, Kromminga, Davis, J. Bryant, and Borders

were charged with crimes related to the real estate flipping

scheme.

FGMC alleges in this civil action that the various real

estate flipping schemes caused damage to its business. FGMC

asserts various torts, breach of contract, and RICO violations

against the defendants

and seeks damages in excess of $1 million

dollars.

II. Analysis

A. Defendants’ Motions to Dismiss

Under Rule 12(b)(6), a motion to dismiss should be granted

“only if it is clear that no relief could be granted under any

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set of facts that could be proved consistent with the

allegations.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514

(2002), (citing Hishon v. King & Spalding, 467 U.S. 69, 73

(1984)); Mylan Laboratories, Inc. v. Raj Matkari, et. al., 7 F.3d

1130, 1134 (4th Cir. 1993). All allegations are treated as true,

and the complaint is viewed in the light most favorable to the

plaintiff. Mylan, 7 F.3d at 1134.

In deciding a Rule 12(b)(6) motion, the Court will consider

the facts stated in the complaint and any attached documents.

Biospherics, Inc., v. Forbes, Inc., 989 F. Supp. 748, 749 (D. Md.

1997), aff’d, 151 F.3d 180 (4th Cir. 1998)). The Court may also

consider documents referred to in the complaint and relied upon

by the plaintiff in bringing the action. Id.

1. Negligence

Conroy Ballman argues that the illegal acts of FGMC’s

employees, including Borders and Reilly, are imputed to FGMC;

therefore, any negligence claim against Conroy Ballman is barred

by the doctrine of contributory negligence. FGMC contends that

Conroy Ballman’s liability depends on its own conduct and that of

its former employee, Kromminga, and is not contingent on the

actions of any FGMC’s employees.

An employee’s tortious acts are within the scope of his

employment if (1) the acts were in furtherance of the employer’s

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business; and (2) were “authorized” by the employer. Sawyer v.

Humphries, 322 Md. 247, 255, 587 A.2d 467, 470 (Md. 1991). To be

within the scope of employment, the conduct must be of the type

the employee is hired to perform. Id. at 255, 471. In

determining whether the conduct is within the scope of

employment, factors considered include whether the act is

commonly done by employees, whether the employer had reason to

expect that such an act would be done, and whether the act is

seriously criminal. Id. at 256, 471. An important factor is

whether the employee’s conduct was foreseeable. Id.

“Authorized” actions does not mean expressly conferred authority,

but whether the act was incident to the performance of duties

entrusted to the employee. Id. at 255, 470.

It is undisputed that two of FGMC’s employees, Borders and

Reilly, in their positions as a loan processor and loan officer

respectively at FGMC, were found guilty of criminal conspiracy

and aiding and abetting in the real estate flipping schemes. The

crimes committed by Borders and Reilly are imputed to FGMC under

the theory of respondeat superior. An employer is responsible

for an employee’s wrongful conduct when committed within the

scope of his employment and in furtherance of the employer’s

business, even if the conduct was committed in a wrongful or

forbidden manner. Stratton v. Sacks, 99 B.R. 686, 694 (D. Md.

1989)(citing Cox v. Prince George’s County, 296 Md. 162, 171, 460

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A.2d 1039 (Md. 1983)).

FGMC argues that the determination of the scope of

employment and conduct imputed to an employer is a question of

fact that cannot be resolved by a dispositive motion. However,

when there is no factual dispute and only one reasonable

inference may be drawn from the facts, the issues regarding scope

of employment and imputed conduct may be resolved as a matter of

law. Id. at 694-695. FGMC originates and brokers residential

mortgage loans. Borders and Reilly were criminally charged for

the abuse of their positions as a loan processor and loan

officer. Borders and Reilly were acting within the scope of

their employment and in furtherance of FGMC’s business when they

committed their criminal acts.

“The contributory negligence of an agent acting within the

scope of his power to bind his principal by his conduct bars the

principal from recovery against a third person to the same extent

as if the principal had been negligent.” Sanders v. Rowan, 61

Md. App. 40, 484 A.2d 1023 (Md. Ct. Spec. App. 1984)(quoting

Restatement of Torts 2d § 317). The acts of Borders and Reilly

are imputed to FGMC, and contributory negligence bars FGMC from

recovery from Conroy Ballman. See Stratton v. Miller, 113 B.R.

204, 210 (D. Md. 1989)(law firm not liable for its own negligence

because the negligence of the plaintiff also contributed to the

cause of loss).

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2. Breach of Contract

FGMC’s negligent breach of contract claim against Conroy

Ballman is also barred by its contributory negligence. See

Stratton v. Sacks, 99 B.R. 686, 692 (D. Md. 1989)(contributory

negligence bars negligence and breach of contract claims).

3. RICO Violations

FGMC has sued Defendants Silver, Reilly, and Minor for RICO

violations. FGMC seeks civil damages through 18 U.S.C. §

1964(c), which requires (1) an injury to business or property;

(2) caused by racketeering activity. Thomas v. Ross & Hardies, 9

F. Supp. 2d 547, 559 (D. Md. 1998). These Defendants argue that

because FGMC has failed to allege a basis for damages, its RICO

claim fails. FGMC’s allegation in the Amended Complaint that its

business has been damaged by the racketeering activity is

sufficient to withstand this motion to dismiss.

4. Fraud and Negligent Misrepresentation

Defendants Silver, Reilly, and Minor adopt the arguments

raised by Conroy Ballman, asserting that contributory negligence

bars FGMC’s allegations of fraud and negligent misrepresentation.

Contributory negligence is not a defense to a claim of fraud;

therefore, FGMC’s allegations of fraud withstand the motions to

dismiss. Equitable Trust Co. v. G&M Construction Corp., 544 F.

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Supp. 736, 745 (D. Md. 1982).

5. Civil Conspiracy

Defendants Silver, Reilly, and Minor adopt the arguments

raised by Conroy Ballman, asserting that contributory negligence

bars FGMC’s allegations of civil conspiracy to defraud. Silver

also raises the argument that FGMC was a co-conspirator in the

illegal acts of its employees, and thus, cannot recover under an

allegation of civil conspiracy. Leaving aside the issue whether

a corporation may conspire with its officers or employees, FGMC’s

denial that it was a co-conspirator and the reasons stated above,

are sufficient to deny the motion to dismiss the civil conspiracy

allegations.

CONCLUSION

For the reasons discussed above, Conroy Ballman’s motion to

dismiss will be granted, and the remaining motions to dismiss

will be denied.

December 19, 2005

/s/

Date William D. Quarles, Jr.

United States District Judge

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