EDWARD C. REED, District Judge.
Plaintiff is a homeowner alleging to be the victim of a predatory lending scheme perpetrated by Defendants. Now pending is Defendant Stanley S. Silva's ("Silva") Motion to Dismiss (#3), Plaintiff's Motion to Add Indispensable Party (#10), and Defendants America Servicing Company's ("ASC") Motion to Dismiss (#11). The motions are ripe and we now rule on them.
On July 27, 2005, Plaintiff Wensley borrowed $495,000.00 from Defendant First National Bank of Nevada ("First National") and secured the loan with a deed of trust ("Foreclosing Deed of Trust") on the property located at 1181 Harbor Cove Court, Sparks, Nevada 89434, APN 037-341-21 (Compl. ¶¶ 2-4 (##1-2, 1-3); Foreclosing Deed of Trust, Ex. A (#11-1).)
Plaintiff defaulted on the deed of trust, and Defendant National Default Servicing Corporation ("NDSC"), as agent for the beneficiary, recorded a Notice of Default and Election to Sell on September 3, 2008. (Notice of Default, Ex. C (#11-3).) On November 10, 2008, MERS transferred the beneficial interest in the deed of trust and the underlying note to HSBC Bank USA, National Association, as Trustee for the holders of Deutsche Alt-A Securities Mortgage Loan Trust Series 2005-5 by its Attorney in fact Wells Fargo Bank, N.A., successor by merger to Wells Fargo Home Mortgage Inc. ("HSBC"). (Assignment, Ex. B (#11-2).) Later on November 10, 2008, HSBC substituted NDSC as trustee under the Foreclosing Deed of Trust. (Substitution of Trustee, Ex. D (#11-4).)
On December 4, 2008, NDSC recorded a Notice of Trustee's Sale, noticing a December 31, 2008 sale date. (First Notice of Trustee's Sale, Ex. E (#11-5).) The sale was postponed, and NDSC recorded a second Notice of Trustee's Sale on October 26, 2009, noticing a November 17, 2009 sale date. (Second Notice of Trustee's Sale, Ex. F (#11-6).) The sale was against postponed, and NDSC recorded a third Notice of Trustee's Sale on June 21, 2010, noticing a July 13, 2010 sale date. (Third Notice of Trustee's Sale, Ex. G (#11-7).) The sale was postponed for a third time, and NDSC recorded a fourth Notice of Trustee's Sale on December 16, 2010, noticing a January 13, 2011 sale date.
On September 27, 2011, Plaintiff filed a complaint in state court, asserting the following nine claims for relief, all sounding in wrongful foreclosure: (1) Debt Collection Violations; (2) Violation of Unfair and Deceptive Trade Practices Act; (3) Violation of Unfair Lending Practices, N.R.S. 598D.100; (4) Violation of Covenant of Good Faith and Fair Dealing; (5) Violation of NRS 107.080 et seq.; (6) Quiet Title Action; (7) Fraud in the Inducement and Through Omission; (8) Slander of Title; and (9) Abuse of Process. (Compl. (##1-2, 1-3).) Plaintiff also recorded a Notice of Lis Pendens against the property. (Notice of Lis Pendens, Ex. I (#11-9).)
On November 9, 2011, the case was removed to federal court. (Pet. for Removal (#1).) Also on November 9, 2011, Defendant Silva filed a Motion to Dismiss (#3). Plaintiff did not respond and there was no reply.
On January 20, 2012, Plaintiff filed a Motion to Add Indispensable Party (#10) seeking to add HSBC as a defendant. There was neither a response nor a reply.
On February 16, 2012, Defendant ASC filed a Motion to Dismiss (#11). Plaintiff filed her Opposition (#12) March 3, 2012. ASC replied (#16) on April 5, 2012.
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) will only be granted if the complaint fails to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1953, 173 L.Ed.2d 868 (2009) (clarifying that Twombly applies to pleadings in "all civil actions"). On a motion to dismiss, except where a heightened pleading standard applies, "we presum[e] that general allegations embrace those specific facts that are necessary to support the claim." Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (quoting Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 889, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990)) (alteration in original); see also Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (noting that "[s]pecific facts are not necessary; the statement need only give the defendant fair notice of what the ... claim is and the grounds upon which it rests.") (internal quotation marks omitted). Moreover, "[a]ll allegations of material fact in the complaint are taken as true and construed in the light most favorable to the non-moving party." In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1403 (9th Cir.1996) (citation omitted).
Although courts generally assume the facts alleged are true, courts do not "assume the truth of legal conclusions merely because they are cast in the form of factual allegations." W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Accordingly, "[c]onclusory allegations and unwarranted inferences are insufficient to defeat a motion to dismiss." In re Stac Elecs., 89 F.3d at 1403 (citation omitted).
Review on a motion pursuant to Fed.R.Civ.P. 12(b)(6) is normally limited to the complaint itself. See Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir.2001). If the district court relies on materials outside the pleadings in making its ruling, it must treat the motion to dismiss as one for summary judgment and give the non-moving party an opportunity to respond. FED. R. CIV. P. 12(d); see United States v. Ritchie, 342 F.3d 903, 907 (9th Cir.2003). "A court may, however, consider certain materials — documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice — without converting the motion to dismiss into a motion for summary judgment." Ritchie, 342 F.3d at 908.
Because the two Motions to Dismiss (##3, 11) make similar arguments with respect to each of Plaintiff's claims, the Court will address the arguments together.
Plaintiff's first cause of action alleges that Defendants violated Nevada Revised Statute 649.370, which provides that any violation of the Federal Fair Debt Collection Practice Act ("FDCPA") is a violation of Nevada law. Plaintiff's claim fails as a matter of law because foreclosure pursuant to a deed of trust does not constitute debt collection under the FDCPA. Camacho-Villa v. Great W. Home Loans, No. 3:10-cv-00210, 2011 WL 1103681 at *4 (D.Nev. Mar. 23, 2011). Therefore, Plaintiff's first claim must be dismissed without leave to amend.
Plaintiff's second cause of action for violation of the Nevada Unfair and Deceptive Trade Practices Act, Nev. Rev. Stat. § 598.0923, also fails as a matter of law. The statute provides that a person engages in deceptive trade practices when he or she knowingly conducts his or her business or occupation without all required state, county, or city licenses. NEV. REV. STAT. § 598.0923(1). However, the statutes explicitly state that the following activities do not constitute doing business in Nevada: (1) maintaining, defending or settling any proceeding; (2) creating or acquiring indebtedness, mortgages and security interests in real or personal property; and (3) securing or collecting debts or enforcing mortgages and security interests in property securing the debts. NEV. REV. STAT. § 80.015(1)(a), (g), (h). Because Defendants are explicitly exempted from the need to acquire licenses, the Court dismisses Plaintiff's second cause of action without leave to amend.
Plaintiff's third cause of action for unfair lending practices in violation of Nev. Rev. Stat. § 598D is time-barred. The statute of limitations for "[a]n action upon a liability created by statute" is three years. NEV. REV. STAT. § 11.190(3)(a). Plaintiff obtained the loan at issue in July 2005, and filed this action more than six years later in September 2011. Plaintiff's claim for unfair lending practices is therefore untimely and must be dismissed without leave to amend.
Plaintiff's fourth cause of action for breach of the covenant of good
Plaintiff asserts that Defendants breached the covenant of good faith and fair dealing because Defendants "offered the Plaintiff consideration for loan modifications, told her that the foreclosures would be postponed but they were not." (Compl. ¶ 92 (#1-2, 1-3).) Because there is no loan modification contract, and because none of these actions, even if true, contravene the intention or spirit of any existing contracts between Plaintiff and Defendants, Plaintiff's claim for breach of the covenant of good faith and fair dealing must be dismissed with prejudice.
Plaintiff also claims that Defendants breached the covenant by withholding information and placing Plaintiff in a loan for which she did not qualify. (Id. ¶ 90.) However, these alleged omissions and misrepresentations occurred before a contract was formed. A party cannot breach the covenant of good faith and fair dealing before a contract is formed. See Indep. Order of Foresters v. Donald, Lufkin & Jenrette, Inc., 157 F.3d 933, 941 (2d Cir.1998) ("[A]n implied covenant relates only to the performance of obligations under an extant contract, and not to any pre-contract conduct."). Plaintiff fails to allege facts to establish that a breach occurred after the contract between the parties was formed. Because Plaintiff's claim revolves entirely around alleged misrepresentations made before the contract was entered into, it fails as a matter of law.
Moreover, Defendants were under no obligation to disclose the risks of the loan and whether Plaintiff could afford it:
Megino v. Linear Fin., No. 2:09-CV-00370, 2011 WL 53086 at *5 (D.Nev. Jan. 6, 2011) (quoting Yerington Ford, Inc. v. Gen. Motors Acceptance Corp., 359 F.Supp.2d 1075, 1090 (D.Nev.2004), overruled on other grounds by Giles v. Gen. Motors Acceptance Corp., 494 F.3d 865 (9th Cir.2007)). Where there is no duty to determine a borrower's ability to repay the loan, there can be no breach of that obligation. For this additional reason, Plaintiff's claim fails and leave to amend would prove futile.
Plaintiff's fifth cause of action, violation of Nev. Rev. Stat. § 107.080 et seq., appears
In general:
Collins v. Union Fed. Sav. & Loan Ass'n, 99 Nev. 284, 662 P.2d 610, 623 (1983); see also Cervantes v. Countrywide Home Loans, 656 F.3d 1034, 1044 (9th Cir.2011) (plaintiffs cannot state a claim for wrongful foreclosure while in default). Because Plaintiff has failed to allege she was not in default, Plaintiff's wrongful foreclosure claim must be dismissed. The Court, however, will also address the merits of Plaintiff's claim.
Nevada Revised Statutes § 107.080 provides that the power of sale in real property may not be exercised until:
NEV. REV. STAT. § 107.0802(c). The "Notice of Default/Election to Sell Under Deed of Trust" was signed by NDSC as agent for the beneficiary. (Notice of Sale, Ex. C (#11-3).) NDSC was not formally substituted as the foreclosure trustee until after it issued the notice of sale. (Substitution of Trustee, Ex. D (#11-4)). This timeline, however, appears to be fairly common and not improper in foreclosure.
In Karl v. Quality Loan Service Corp., this district noted that Quality was neither the trustee nor the beneficiary when it recorded the notice of default, but claimed on the notice of default to be the agent for the beneficiary. 759 F.Supp.2d 1240, 1246 (D.Nev.2010). The court in Karl stated that "[a]lthough MERS is not a beneficiary, its agency for the beneficiary under the [deed of trust] extends to administering the [deed of trust] for purposes of foreclosure." Id. The court further stated that:
Id. No party on whose behalf agency was claimed has come forth disputing that fact. Furthermore, NDSC's formal substitution as trustee after signing the notice as an agent appears to show, at the least, ratification of the previously-claimed agency.
In Cervantes v. Countrywide Home Loans, Inc., the Ninth Circuit considered wrongful foreclosure claims based on alleged procedural defects. 656 F.3d 1034, 1044 (9th Cir.2011).
Plaintiff's sixth cause of action is for quiet title. In Nevada, a quiet title action may be brought "by any person against another whom claims an estate or interest in real property, adverse to the person bringing the action, for the purpose of determining such adverse claim." NEV. REV. STAT. § 40.010. "In a quiet title action, the burden of proof rests with the plaintiff to prove good title in himself." Breliant v. Preferred Equities Corp., 112 Nev. 663, 918 P.2d 314, 318 (1996). "Additionally, an action to quiet title requires a plaintiff to allege that she has paid any debt owed on the property." Lalwani v. Wells Fargo Bank, N.A., No. 2-11-cv-00084, 2011 WL 4574338 at *3 (D.Nev. Sep. 30, 2011) (citing Ferguson v. Avelo Mortg., LLC, 126 Cal.Rptr.3d 586, 589 (Cal.Ct.App.2011)). Plaintiff has failed to allege that she is not in breach of the loan agreement. While Plaintiff does not expressly admit to being in default on the loan, the complaint, read as a whole, and taking all allegations in favor of Plaintiff, does not show even the barest hint of a dispute over whether Plaintiff was in default. Rather, Plaintiff is challenging the procedure with which foreclosure was initiated against her, not that the loan was not in default. Accordingly, the quiet title claim must be dismissed without leave to amend.
Plaintiff claims that Defendants committed fraud in the inducement by luring Plaintiff into the loan under false pretenses, that is, by declaring her qualified for the loan based upon future equity in the home and not from income or other assets. In order to state a claim for fraud in the inducement, a plaintiff must show that the defendant knowingly made a false representation with the intent to induce the plaintiff to consent to the contract's formation. J.A. Jones Constr. Co. v. Lehrer McGovern Bovis, Inc., 120 Nev. 277, 89 P.3d 1009, 1017 (2004).
Defendants were under no obligation to disclose the risks of the loan and whether Plaintiffs could afford it:
Megino v. Linear Financial, No. 2:09-CV-00370, 2011 WL 53086 at *5 (D.Nev. Jan. 6, 2011) (quoting Yerington Ford, Inc. v. Gen. Motors Acceptance Corp., 359 F.Supp.2d 1075,
Furthermore, under Federal Rule of Procedure 9(b), a party alleging fraud "must state precisely the time, place, and nature of the misleading statements, misrepresentations, and specific acts of fraud." Kaplan v. Rose, 49 F.3d 1363, 1370 (9th Cir.1994). Because a claim for fraud in the inducement cannot depend upon Plaintiff's allegations, Plaintiff's claim for fraud in the inducement must be dismissed. Nor has Plaintiff show that there are any facts upon which a proper fraud claim may be brought against Defendants. Plaintiff will therefore not be granted leave to amend this claim.
Plaintiff also alleges fraud by omission. Under Nevada law, a claim for fraudulent concealment must plead that defendant concealed or suppressed a material fact that he or she was under a duty to disclose to the plaintiff. Nev. Power Co. v. Monsanto Co., 891 F.Supp. 1406, 1415 (D.Nev.1995) (citing Nevada Jury Instruction 9.03). Like many of Plaintiff's claims, this claim fails on its face because it is well-settled that lenders and servicers owe no fiduciary duties to mortgage borrowers. Megino, 2011 WL 53086 at *5 (quoting Yerington Ford, 359 F.Supp.2d at 1090, overruled on other grounds by Giles, 494 F.3d 865); see also Kwok v. Recontrust Co., No. 2:09-cv-02298, 2010 WL 2555615, at *5 (D. Nev. June 23, 2010); Saniel v. Recontrust Co., No. 2:09-cv-2290, 2010 WL 2555625, at *5 (D.Nev. June 23, 2010); Renteria, 452 F.Supp.2d at 922-23 (holding that borrowers cannot establish the reliance element of their claim because lenders have no duty to determine the borrower's ability to repay the loan); Oaks Mgmt. Corp., 51 Cal.Rptr.3d at 570.
Plaintiff's allegations in support of these claims are vague and conclusory, asserting only that Defendants failed to disclose certain facts about the inner workings of the mortgage industry, that Plaintiffs were not qualified for the loans, and that Defendants had no right to foreclose on Plaintiffs' property. Moreover, Plaintiff cannot show that Defendants owed her a duty to disclose these alleged facts. For this reason, Plaintiff's claim for fraud through omission must be dismissed without leave to amend.
Plaintiff's eighth cause of action is slander of title against NDSC, ASC, Chicago Default Services, and Stanley S. Silva. Plaintiff asserts that Defendants "disparaged the title to the Plaintiff's properties pursuant to recording Notices of Default that were defective" because Defendants did not have the authority to record those notices, and did not serve those notices upon Plaintiff. (Compl. ¶ 158 (#1-3).)
To succeed on a slander of title claim, a plaintiff must show "false and malicious communications, disparaging to one's title in land, and causing special damages." Exec. Mgmt., Ltd. v. Ticor Title Co., 114 Nev. 823, 963 P.2d 465, 478 (1998). However, Plaintiff has failed to state a claim because it is undisputed that Plaintiff is in default. See Sexton v. IndyMac Bank FSB, No. 3:11-cv-437, 2011 WL
Plaintiff's claim for abuse of process fails as a matter of law because non-judicial foreclosure is not the type of "process" addressed by the abuse of process tort as it does not involve judicial action. Riley v. Greenpoint Mortg. Funding, Inc., No. 2:10-cv-01873, 2011 WL 1979831 at *5 (D.Nev. May 20, 2011); see also Barlow v. BNC Mortg., Inc., No. 3:11-CV-0304, 2011 WL 4402955 at *4 (D.Nev. Sept. 21, 2011) ("[T]he process at issue in this action is a non-judicial foreclosure which is not the characteristic legal action contemplated by an abuse of process claim ... Therefore, the court finds that [Plaintiff] has failed to state a claim for abuse of process.") (citation omitted). Accordingly, Plaintiff's claim for abuse of process shall be dismissed without leave to amend.
Nevada statutory law allows a Notice of Pendency or a Lis Pendens to be filed for an action pending in the United States District Court for the District of Nevada when there is "a notice of an action affecting real property, which is pending," in any such court. NEV. REV. STAT. § 14.010(2). As this Order dismisses this action, Defendants request to expunge lis pendens is granted. See McKinnon v. IndyMac Bank F.S.B., No. 2:11-CV-00607-KJD-GWF, 2012 WL 194426, at *5 (D.Nev. Jan. 23, 2012) (granting motion to expunge lis pendens after dismissing all claims).
In light of the dismissal of Plaintiff's complaint, Plaintiff's Motion to Add Indispensable Party (#10) shall be denied as moot. Further, because all of Plaintiff's claims fail and the Court has found that the foreclosure has proceeded properly according to Nevada law, Plaintiff cannot state a claim against HSBC, the current owner of the beneficial interest in the Foreclosing Deed of Trust and the underlying loan. (See Assignment, Ex. B (#11-2).)
Because Plaintiff's claims are deficient against all defendants in this action, and leave to amend would be futile, the action must be dismissed with prejudice.
The Clerk shall enter judgment accordingly.
