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Ward v. Shad

United States District Court, D. Minnesota

March 7, 2019

MARIE WARD, Plaintiff,
v.
RIAZ SHAD and 2959 BRYANT, LLC, Defendants.

          ORDER ON DEFENDANTS' MOTION TO DISMISS

          Nancy E. Brasel United States District Judge

         Plaintiff Marie Ward bought a home from Defendants Riaz Shad and 2595 Bryant, LLC, on contract for deed, and brings a claim under the Truth in Lending Act. The Truth in Lending Act applies only to creditors defined specifically under the statute, and it includes a numerical requirement for the number of credit extensions made by the purported creditor. Defendants here bring a motion to dismiss, arguing they do not meet the numerical requirement, and thus the definition of “creditor, ” under TILA. For the reasons stated below, the Court denies the motion to dismiss.

         BACKGROUND

         The Complaint alleges the following facts:

         Plaintiff Marie Ward is an elderly, vulnerable adult with a fifth-grade education. [ECF No. 1 (“Compl.”) at ¶¶7, 10-14.] ¶ 2013, Ward agreed to buy a home on contract for deed from Defendant Riaz Shad through his company, 2959 Bryant, LLC (“2595 Bryant”). (Id., ¶¶77, 95, 248.) The agreed upon purchase price was $80, 000, though Shad had purchased it three years earlier for $25, 000 and made no improvements. (Id., ¶¶34, 64, 78, 184(c), (e)-(f).) Shad took Ward to the bank by herself and had her execute a contract for deed for $180, 000, not $80, 000. At the same time, he had her sign a quit claim deed signing away any rights she had received under the contract for deed back to 2959 Bryant. (Id., ¶¶88-89, 96-97, Ex. N.) The terms of the contract for deed included payment of $650 per month, but Shad demanded and collected $1, 050 or $1, 100 per month instead. (Id., ¶¶101(a)-(b).) 103, 106-107, Ex. M.) Defendants then attempted to evict Ward by recording the quit claim in the property records in 2018, and filed a complaint in Hennepin County housing court alleging breach of a verbal lease agreement. (Id., ¶¶130- 135, 139, Exs. N, R.)

         This suit alleges violations of TILA and several state law claims. Ward argues that Shad meets the definition of creditor under TILA because he is a sophisticated real estate operator who has owned many properties through various limited liability companies. (See id., ¶¶17-19, tbl.) From 2009 through 2017, he purchased many North Minneapolis properties through LLCs created expressly for those purchases, even naming the LLCs for the specific addresses. (Id.) At least three other family members or business associates were involved in some of Shad's real estate purchases. (See id., ¶19, tbl.) Around the time Ward executed the contract for deed, Shad had interest in at least 12 houses in North Minneapolis. (Id.) The scheme Ward asserts under TILA is that Shad enters into contracts for deed and has the buyers execute quit claim deeds back to the sellers, his LLCs, before the buyer defaults on the contract, for the purpose of avoiding contract for deed cancellation requirements. (Id., ¶¶25-28, tbl.) Ward asserts at least six such contracts for deed between 2011 and 2015. (Id., ¶27, tbl.) In addition, Ward alleges Defendants were interchangeable, in that Shad wrote money orders out to himself personally rather than to 2959 Bryant, and obtained a rental license in his own name rather than as 2959 Bryant. (Id., ¶¶43, 50, 104, 125, Ex. A.)

         Shad also masks interest in inflated purchase prices and lump sum payments due about a year into the contracts, despite claiming the contracts for deed are “no interest” loans. (Id., ¶228.) This hidden interest is present in Ward's loan in the form of an inflated purchase price, a $10, 000 lump sum payment due one year into the contract, and a demand from Shad for $400-$450 more per month than the contract required. (Id., ¶214.) Ward asserts that Shad has spread his real estate holdings among family, business associates, and separate LLCs, all in an attempt to avoid responsibility as a “creditor” under TILA. (Id., ¶¶20-22.)

         ANALYSIS

         I. STANDARD OF REVIEW

         Rule 12(b)(6) of the Federal Rules of Civil Procedure provides that a defendant may move to dismiss a claim if, on the pleadings, a party has failed to state a claim upon which relief may be granted. In reviewing a motion to dismiss under Rule 12(b)(6), the Court must accept as true all factual allegations and view them in the light most favorable to the plaintiff. Schaller Tel. Co. v. Golden Sky Sys., Inc., 298 F.3d 736, 740 (8th Cir. 2002). When “addressing a motion to dismiss, the court may consider the pleadings themselves, materials embraced by the pleadings, exhibits attached to the pleadings, and matters of public record.” Mulvenon v. Greenwood, 643 F.3d 653, 656-57 (8th Cir. 2011) (quotation and citation omitted).

         Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” To state a claim, a plaintiff must plead facts sufficient to “raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2008); see also Schaaf v. Residential Funding Corp., 517 F.3d 544, 549 (8th Cir. 2008). “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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). Whether a complaint states a claim is a matter of law. Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986). A motion to dismiss must be granted when the complaint does not allege “enough facts to state a claim to relief that is plausible on its face, ” rather than merely conceivable. Twombly, 550 U.S. at 570; Iqbal, 556 U.S. at 678-79.

         II. Shad's Declaration is Excluded.

         When “matters outside the pleadings are presented to and not excluded by the court” a motion to dismiss “must be treated as one for summary judgment.” Fed.R.Civ.P. (12)(d). But a “court may consider the pleadings themselves, materials embraced by the pleadings, exhibits attached to the pleadings, and matters of public record” without converting a motion to dismiss as one for summary judgment. Mulvenon v. Greenwood, 643 F.3d 653, 656-57 (8th Cir. 2011) (citation and quotation omitted).

         Shad submitted a declaration with his moving papers, asserting that he made no personal loans and was involved in only four sales of real property between 2012 and 2013. [ECF No. 20 (“Shad Decl.”) at ¶¶4-5.] Attached to the declaration are exhibits of contract for deeds for those sales. (Id., ¶¶9, 13, 22.) While the exhibits are matters of public record, Shad's statements that he made no personal loans and was involved in only four sales are not part of the public record, nor are they embraced by the Complaint. Considering these statements would require the Court to treat the motion as one for summary judgment, which the Court declines to do. See Fed. R. Civ. P. 56(d); Iverson v. Johnson Gas Appliance Co.,172 F.3d 524, 530 (D. Minn. 1999) ...


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