Marathon Funding Services Inc et al v. Berg et al, No. 2:2019cv00828 - Document 44 (W.D. Wash. 2020)
Court Description: ORDER granting Defendant Sonkin's 36 Motion to Dismiss. All claims against Defendant Sonkin are DISMISSED with prejudice. The action shall continue as to Defendant Berg. Plaintiff Marathon is DISMISSED from the action pursuant to Local Civil Rule 83.2(b)(4). Signed by U.S. District Judge John C Coughenour. (TH) (cc: Plaintiffs via USPS)
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Marathon Funding Services Inc et al v. Berg et al Doc. 44 Case 2:19-cv-00828-JCC Document 44 Filed 07/16/20 Page 1 of 7 THE HONORABLE JOHN C. COUGHENOUR 1 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7 8 9 10 MARATHON FUNDING SERVICES, INC., ROBERT CRAWFORD, and PETER YAGI, CASE NO. C19-0828-JCC ORDER Plaintiffs, 11 v. 12 LOUIS J. BERG and IRVING A. SONKIN, 13 Defendants. 14 15 16 This matter comes before the Court on Defendant Irving A. Sonkin’s motion to dismiss 17 18 (Dkt. No. 42). Having thoroughly considered the parties’ briefing and the relevant record, the 19 Court finds oral argument unnecessary and hereby GRANTS Defendant Sonkin’s motion to 20 dismiss (Dkt. No. 32) for the reasons explained herein. 21 I. 22 BACKGROUND This case involves a $250,000 loan issued to Marathon and secured by real property 23 located at 7152 34th Ave SW, Seattle, WA 98126. (Dkt. No. 6 at 2.) Robert W. Crawford is the 24 majority shareholder of Marathon Funding Services, Inc. (“Marathon”), and Peter K. Yagi is the 25 minority shareholder. (Id.) On September 9, 2016, Louis J. Berg loaned Marathon $250,000. 26 (Id.) Marathon executed a promissory note for Berg and gave him a mortgage encumbering the ORDER C19-0828-JCC PAGE - 1 Dockets.Justia.com Case 2:19-cv-00828-JCC Document 44 Filed 07/16/20 Page 2 of 7 1 property at issue. (Dkt. No. 6-1.) Sonkin served as counsel for Berg in the transaction. (Dkt. No. 2 6. at 2–3.) The deed of trust lists Marathon as the grantor, Berg as the beneficiary, and Chicago 3 Title Insurance Company as the trustee. (Dkt. No. 6-2 at 1.) On September 8, 2018, Sonkin 4 served Marathon with a notice of default. (Dkt. No. 6 at 5.) On October 1, 2018, Sonkin, acting 5 as successor trustee for the deed of trust, served Marathon with a notice of non-judicial 6 foreclosure and a notice of trustee’s sale. (Id.; Dkt. Nos. 6-6 at 3; 6-7 at 1.) 7 Plaintiffs allege that Defendants structured the loan as a commercial loan, even though 8 they knew the property was owner-occupied, and that therefore some of the terms were illegal. 9 (Id. at 3–4.) Plaintiffs further allege that Defendants accelerated the loan, increased the interest 10 rate, and then carried out a wrongful non-judicial foreclosure of the property. (Id. at 4–6.) On 11 May 29, 2019, Plaintiffs filed suit. (Dkt. No. 1.) Plaintiffs bring claims against Defendants for 12 (1) failure to provide disclosure documents and interfering with Plaintiffs exercising federal 13 rights, in violation of 15 U.S.C. §§ 1635 and 1639 and 12 C.F.R. § 226.23; (2) unfair or 14 deceptive practices by setting the loan payments too low to cover interest, in violation of 15 15 U.S.C. § 1639; (3) fraud in failing to credit $43,000 in Plaintiffs’ payments, in violation of 18 16 U.S.C. § 1341; (4) loss of value and monetary damages; and (5) claims related specifically to 17 Sonkin and arising from his role as trustee to the Berg loan, including notary fraud, failure to 18 perform trustee duties, conflict of interest, failure to follow non-judicial foreclosure procedures, 19 faulty notice of foreclosure and trustee’s sale, consumer protection violation, breach of fiduciary 20 duty, breach of contract, and malpractice. (Id. at 6–13.) Sonkin now moves to dismiss all claims 21 against him. (Dkt. No. 36.) 22 II. DISCUSSION 23 A. 24 Corporations must be represented by counsel. See W.D. Wash. Local Civ. R. 83.2(b)(4). 25 Marathon is a corporation. (Dkt. No. 6 at 2.) On February 21, 2020, Plaintiffs’ attorneys notified 26 Plaintiffs of their intent to withdraw as counsel and the need to obtain replacement counsel for ORDER C19-0828-JCC PAGE - 2 Order to Show Cause Case 2:19-cv-00828-JCC Document 44 Filed 07/16/20 Page 3 of 7 1 Marathon. (See Dkt. No. 30 at 2.) On March 10, 2020, Plaintiffs’ attorneys filed a motion for 2 leave to withdraw as counsel for Plaintiffs. (Dkt. No. 30.) Its attorneys certified to the Court that 3 they had advised Marathon that failure to obtain a replacement attorney by the effective 4 withdrawal date could result in dismissal of the corporation’s claims. (Dkt. Nos. 30 at 2, 31 at 1.) 5 On April 16, 2020, the Court granted the motion to withdraw as counsel and ordered Marathon to 6 show cause why it should not be dismissed for failing to obtain counsel within 21 days. (Dkt. No. 7 34.) The Court extended the show cause order deadline to May 29, 2020. (Dkt. No. 35.) Plaintiffs 8 stated that they expected to retain alternate counsel by May 29, 2020. (Dkt. No. 40.) But no 9 attorney has appeared on behalf of Marathon, and Marathon has neither requested nor shown 10 good cause for an additional extension of time. Therefore, the Court DISMISSES Marathon from 11 the case pursuant to Local Civil Rule 83.2(b)(4). 12 B. 13 14 Motion to Dismiss 1. Legal Standard A defendant may move for dismissal when a plaintiff “fails to state a claim upon which 15 relief can be granted.” Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss, a complaint must 16 contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its 17 face. Ashcroft v. Iqbal, 556 U.S. 662, 677–78 (2009). A claim has facial plausibility when the 18 plaintiff pleads factual content that allows the court to draw the reasonable inference that the 19 defendant is liable for the misconduct alleged. Id. at 678. Although the Court must accept as true 20 a complaint’s well-pleaded facts, “conclusory allegations of law and unwarranted inferences” 21 will not defeat an otherwise proper Rule 12(b)(6) motion. Vasquez v. Los Angeles County, 487 22 F.3d 1246, 1249 (9th Cir. 2007). The plaintiff is obligated to provide grounds for entitlement to 23 relief that amount to more than labels and conclusions or a formulaic recitation of the elements 24 of a cause of action. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007). “[T]he pleading 25 standard Rule 8 announces does not require ‘detailed factual allegations,’ but it demands more 26 than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678. A ORDER C19-0828-JCC PAGE - 3 Case 2:19-cv-00828-JCC Document 44 Filed 07/16/20 Page 4 of 7 1 dismissal under Federal Rule of Civil Procedure 12(b)(6) “can [also] be based on the lack of a 2 cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). 3 4 2. Judicial Notice When ruling on a motion to dismiss for failure to state a claim, the Court may consider 5 matters that are subject to judicial notice. United States v. Ritchie, 342 F.3d 903, 907–08 (9th 6 Cir. 2003); Fed. R. Evid. 201. Sonkin asks the Court to take judicial notice of four exhibits, 7 including copies of the Deed of Trust (“Titus DOT”) between Douglas Titus and Sierra Pacific 8 Mortgage Company, Inc.; an assignment of the Titus DOT to Nationstar Mortgage, LLC.; the 9 Frick Loan; and the subordination agreement between the Frick loan and the Berg loan. (Dkt. 10 No. 36 at 2–3; Dkt. No. 37.) Plaintiffs do not dispute the accuracy of these exhibits. Furthermore, 11 the accuracy of the exhibits is capable of verification from sources whose accuracy cannot 12 reasonably be questioned. See Fed. R. Evid. 201(a)–(b). Therefore, Defendant Sonkin’s request 13 for judicial notice is GRANTED. The Court hereby takes judicial notice of the exhibits contained 14 in Docket Number 37. 15 16 3. Claims Against Defendant Sonkin Plaintiffs Crawford and Yagi bring claims against Sonkin for Truth in Lending Act 17 (“TILA”) violations, fraud, and violations of Washington law. (Dkt. No. 6 at 10–13.) These 18 claims are all premised on Sonkin’s duty of care to buyer and seller as trustee. (See id.) Sonkin 19 argues that Crawford and Yagi lack standing to pursue claims against him and that the TILA 20 claims are not viable. (Dkt. No. 36 at 11.) 21 While Plaintiffs clearly would like their action to proceed, they have not responded 22 substantively to Sonkin’s motion to dismiss. Proceeding pro se, they submitted a response 23 captioned as a filing from Marathon Funding and signed by Crawford and Yagi, (Dkt. No. 40), 24 but only an attorney may appear on behalf of a corporation. See W.D. Wash. Local Civ. R. 25 83.2(b)(4). Plaintiffs’ response offers three general arguments why the Court should not dismiss 26 the case. ORDER C19-0828-JCC PAGE - 4 Case 2:19-cv-00828-JCC Document 44 Filed 07/16/20 Page 5 of 7 1 First, Plaintiffs argue that the Court should not grant the motion because it takes 2 advantage of Marathon’s difficulty in obtaining counsel and Defendant has not been harmed by 3 Marathon’s failure to retain counsel. (See Dkt. No. 40 at 1–4.) But as discussed above, Marathon 4 has been on notice since February of its need to find new counsel. (See Dkt. No. 30 at 2.) 5 Marathon did not respond to the Court’s show cause order, and Plaintiffs do not now request 6 additional time to seek counsel, let alone show good cause why the Court should permit them 7 additional time. 8 9 Second, Plaintiffs argue that Defendants have harmed Plaintiffs and engaged in fraudulent conduct and that dismissal of the case would cause significant financial losses to 10 Plaintiffs. (See Dkt. No. 40 at 2–4.) But these vague and conclusory allegations do not identify a 11 specific reason why the Rule 12(b)(6) motion to dismiss should not be granted. See Twombly, 12 550 U.S. at 545. 13 Third, Plaintiffs argue that Defendants did not answer the complaint within the time 14 prescribed by Rule 12(a)(1)(A), and therefore Plaintiffs should prevail. (See Dkt. No. 40 at 2.) 15 But a defendant is permitted to file a motion to dismiss before filing an answer. See Fed. R. Civ. 16 P. 12(b). And a plaintiff should address a defendant’s failure to answer or otherwise defend by 17 filing their own motion, such as motion for default judgment. See Fed. R. Civ. P. 55. Thus, 18 Plaintiffs offer irrelevant and ultimately meritless reasons why this action should not be 19 dismissed. 20 Turning to the merits of Sonkin’s motion, Sonkin argues that Plaintiffs Crawford and 21 Yagi do not have standing to pursue the claims in their complaint. (Dkt. No. 36 at 11.) Sonkin 22 concedes that he owed a duty of good care as a successor trustee for the deed of trust under 23 Washington law. (See id.) He acknowledges that he owed this duty to the borrower, beneficiary, 24 and grantor. See Wash. Rev. Code § 61.24.010(4). In this case, Marathon is the borrower-grantor 25 on the Berg loan, and Berg is the beneficiary. (Dkt. No. 6-2 at 1.) But as discussed above, 26 Marathon has been dismissed from the case. Crawford and Yagi are not alleged to be or listed in ORDER C19-0828-JCC PAGE - 5 Case 2:19-cv-00828-JCC Document 44 Filed 07/16/20 Page 6 of 7 1 the recorded documents as borrower, beneficiary, or grantor. (See Dkt. No. 37.) Sonkin argues 2 that thus he owed no duty to Crawford and Yagi and therefore they have no basis to recover on 3 behalf of Marathon. (Dkt. No. 36 at 11.) Crawford and Yagi do not dispute that they lack 4 standing to recover on behalf of Marathon. (See generally Dkt. No. 40.) 1 5 If a plaintiff lacks standing, then the court lacks subject matter jurisdiction and the case 6 must be dismissed. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 101–02 (1998). 7 Plaintiffs’ complaint raises very serious allegations of predatory lending and wrongful 8 foreclosure. (See generally Dkt. No. 6.) But, as discussed above, Marathon has failed to pursue 9 its claims and has been dismissed from the case. And Plaintiffs have failed to substantively 10 oppose the motion to dismiss and to specifically dispute Sonkin’s arguments that they lack 11 standing to proceed and otherwise lack any viable claim. Their failure to substantively oppose 12 the motion leads the Court to conclude that Sonkin’s motion has merit. See W.D. Wash. Local 13 Civ. R. 7(b)(2). 14 III. CONCLUSION 15 For the foregoing reasons, Defendant Sonkin’s motion to dismiss (Dkt. No. 36) is 16 GRANTED and all claims against Defendant Sonkin are DISMISSED with prejudice. The action 17 shall continue as to Defendant Berg. Plaintiff Marathon is DISMISSED from the action pursuant 18 to Local Civil Rule 83.2(b)(4). 19 // 20 // 21 // 22 // 23 24 25 1 Additionally, even if Crawford and Yagi did have standing, they would not have a viable TILA claim. The Act does not apply to credit transactions involving extension of credit for business or commercial purposes. 15 U.S.C. § 1603(1); see also 12 C.F.R. § 226.3(a). The language in the Berg loan specifies that the loan is for commercial, not personal, use. (See Dkt. No. 6-2 at 3.) 26 ORDER C19-0828-JCC PAGE - 6 Case 2:19-cv-00828-JCC Document 44 Filed 07/16/20 Page 7 of 7 1 DATED this 16th day of July 2020. A 2 3 4 John C. Coughenour UNITED STATES DISTRICT JUDGE 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 ORDER C19-0828-JCC PAGE - 7
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