Preview:

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : : : v. : : BRYAN P. ROSENBERG, WILLIAM : W. DENT, ALL FINANCIAL : SERVICES, INC., JOSEPH L. RIECK, : MONUMENTAL CITY TITLE CO., : LLC, and ROBERT F. DASHIELL, : Defendants : ...o0o... Plaintiff
RALPH D. CARTER, JR.,

CIVIL NO. AMD 04-759

MEMORANDUM OPINION Plaintiff, Ralph D. Carter, Jr., is a resident of Washington, D.C. and a sometimes real estate investor. In 2001, responding to media advertisements, he purchased 12 residential investment properties located in Baltimore City. In this case, here based on diversity of citizenship and federal question subject matter jurisdiction, Carter has filed a multi-count complaint against the sellers of those properties, a mortgage broker, a settlement attorney, and others involved in the purchase and sale transactions, on theories of fraud, negligent misrepresentation, and violations of state and federal statutes. Defendants Bryan P. Rosenberg, Joseph L. Rieck, and Monumental City Title Co., LLC, have defaulted. Discovery has concluded as to the remaining defendants. Now pending are motions for summary judgment filed by defendants William W. Dent ("Dent") and his mortgage brokerage business, All Financial Services, Inc. ("All Financial"), and Robert F. Dashiell, Esq. ("Dashiell"). No hearing is necessary. For the reasons stated below, the

motions shall be granted. See Fed.R.Civ.P. 56. Furthermore, in the unique circumstances of this case, judgment in favor of the defaulting defendants shall be entered as well. In the light most favorable to plaintiff Carter, the record shows that in response to certain advertisements promising "no money down" and "cash back at settlement" and similar enticements appearing in the Washington Post, Carter came to Baltimore in pursuit of such "deals." Carter had attended one or more widely-available seminars heralding "no money down" real estate purchases and had previously purchased one or two properties in the District of Columbia. Ultimately, during the period between September and December 2001, Carter purchased 12 residential rental properties located in Baltimore City, four of which he purchased from a company known as Millineum Properties, Inc. ("Millineum"). Defendant Dent was a co-owner of Millineum. Dent is also the owner of All Financial, a mortgage brokerage that was involved in arranging the financing of the disputed transactions. Plaintiff does not deny that at all times, he had the opportunity to retain real estate or other professionals, e.g., an attorney, of his choosing in order to obtain advice as to the propriety and/or advisability of the proposed transactions. Although he failed to hire his own advisors, he admits that he did physically inspect all or most of the properties before entering into the disputed transactions, as described below. The gist of plaintiff's claims against Dent and All Financial (and against the defaulting defendants as well) is that defendants defrauded plaintiff in that they made

-2-

material misrepresentations as to the market value and/or physical condition of the properties, employed false appraisals, and, contrary to certain unspecified representations, made only "cosmetic" repairs to the properties. Plaintiff claims compensatory damages, representing his alleged "overpayments" in purchasing the properties and to repair them, as well as punitive damages. Notably, however, plaintiff was able to refinance the properties shortly after he purchased them (while effecting significant equity "cash-outs" from the refinancings), and he has generally experienced a "positive cash flow" from the rental income generated by the properties. The following chart reflects the disputed purchases as to Dent/Millineum:
Property Address 615 Glenwood 3313 Presstman 613 Robinson 2453 Biddle Date Purchased October 1, 2001 Sept. 20, 2001 December 2001 Sept. 20, 2001 Amount Paid $53,000 $52,000 $59,000 $55,000 Amount of Lien $42,400 $41,600 $47,200 $44,000 "Actual Value" $16,000 $19,900 $16,501 $17,500

Plaintiff purchased eight other properties under the same or similar circumstances from entities controlled by other defendants. As best as can be determined from plaintiff's submissions, it appears that the "Actual Value" column noted above reflects the genuine value of the respective property as determined by a good faith, contemporary appraisal of the property. It appears that plaintiff never became aware of the genuine values at the time of his purchase but, as described below, it is clear that it would not have mattered to plaintiff even if he had seen the appraisals. (Other, allegedly "inflated" appraisals are also in the record.) The "Amount Paid"
-3-

column represents the amount that plaintiff purportedly "paid" for the properties according to the official documentation of the transactions, i.e., the HUD-1 Settlement Statements. In fact, however, consistent with plaintiff's purpose in coming to Baltimore in the first place in response to the newspaper advertisements, plaintiff actually paid considerably less than is reflected in the "Amount Paid" column. This is because (1) he not only put no money into any of the above transactions (he claims the HUD-1s that he signed correctly reflected that he had paid no money at settlement, but he has not produced any such documents), and indeed, (2) he departed the closings either with funds in hand or with funds in an escrow account for the purpose of making repairs to the properties. In short, the record establishes, as a matter of law, that plaintiff, either knowingly, i.e., with a criminal purpose, or perhaps, unknowingly, i.e., without a criminal purpose, participated in a "flipping scheme."* In any

*

See U.S. v. McNeil, 45 Fed.Appx. 225, 2002 WL 1963335, *1 n.1 (4th Cir. Aug 26,

2002): A general description of what is called a criminal flipping scheme includes a buyer acquiring title or right to title to a property and then selling it to a second buyer at an increased price without disclosing on record the first buyer's true interest in the property. The illegality in the transaction comes from false representations as to value, or use, or tenancy, or condition, or like things which affect value or credit worthiness." Indeed, it appears that defendant Bryan P. Rosenberg was sentenced in this court to federal prison for his participation in just such a flipping scheme. See Judgment and Commitment Order in United States of America v. Bryan P. Rosenberg, et al., Criminal Case no. MJG 02-0512 (D.Md. April 9, 2003). It has not gone unnoticed that this case was filed on March 16, 2004, a mere three weeks after the Maryland Court of Special Appeals released its opinion, on February 27, 2004, in Hoffman v. Stamper, 155 Md.App. 247, 843 A.2d 153 (2004), affirmed in part and reversed in part, 385 Md. 1, 867 A.2d 276 (2005). Hoffman was a damages action brought by nine defrauded purchasers in one of the rash of "flipping schemes" that have overrun Baltimore City in the past decade. Plaintiff and his counsel have plainly tried to fit this case within the legal and factual (continued...) -4-

event, as a matter of law, there was no actionable fraud perpetrated against plaintiff. This is demonstrated conclusively by plaintiff's remarkably candid deposition testimony as to how the transactions actually occurred: Q: A: Q: A: [Y]ou said that you didn't get the purchase price of the Millineum Properties until a day or two before the closing. Is that what you said? Right. How did you know

Download Ralph D. Carter, Jr. v. Bryan P. Rosenberg, et al.,.pdf

Maryland Law