Codilla v. CTX Mortgage Company LLC et al, No. 2:2010cv01469 - Document 29 (D. Nev. 2011)
Court Description: ORDER Granting 6 CTX Defendants' Motion to Dismiss; granting 12 BOA Defendants' Motion to Dismiss; and granting 18 Aurora Defendants' Motion to Dismiss. Signed by Chief Judge Roger L. Hunt on 2/17/11. (Copies have been distributed pursuant to the NEF - EDS)
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Codilla v. CTX Mortgage Company LLC et al Doc. 29 1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 *** 7 8 9 10 11 12 13 14 15 16 17 18 19 JAY CODILLA, an individual, ) ) Plaintiff, ) ) vs. ) ) CTX MORTGAGE COMPANY, LLC, a ) Delaware limited liability company; BANK OF ) AMERICA CORPORATION, a North Carolina ) corporation; COMMERCE TITLE COMPANY ) OF AMERICA, LLC, a Delaware limited ) liability company; AURORA LOAN ) SERVICES, LLC, a Delaware limited liability ) company; TIMOTHY M. BARTOSH, an ) individual; PRLAP, INC., a North Carolina ) corporation; KELLER WILLIAMS REALTY, ) INC., a Texas corporation; MERSCORP INC. ) d/b/a MORTGAGE ELECTRONIC ) REGISTRATION SYSTEMS, INC., a Virginia ) corporation; DOES I-X; and ROE ) COMPANIES I-X, inclusive, ) ) Defendants. ) _______________________________________) Case No.: 2:10-cv-01469-RLH-PAL ORDER (Motion to Dismiss–#6; Motion to Dismiss–#12; Motion to Dismiss–#18) 20 Before the Court is Defendants CTX Mortgage Company, Timothy M. Bartosh, and 21 22 PGP Title, Inc.’s (formerly known as Commerce Land Title, Inc., and improperly referred to as 23 Commerce Title Company of America, LLC) (collectively, the “CTX Defendants”) Motion to 24 Dismiss (#6), filed September 22, 2010. The Court has also considered Plaintiff Jay Codilla’s 25 Opposition (#19), filed October 8, 2010, and the CTX Defendants’ Reply (#24), filed October 18, 26 2010. AO 72 (Rev. 8/82) 1 Dockets.Justia.com 1 Also before the Court is Defendants Bank of America, N.A. (improperly referred to 2 as Bank of America Corporation) and PRLAP, Inc.’s (collectively, the “BOA Defendants”) 3 Motion to Dismiss (#12), filed September 30, 2010. The Court has also considered Codilla’s 4 Opposition (#23), filed October 18, 2010, and the BOA Defendants’ Reply (#26), filed October 28, 5 2010. 6 Finally before the Court is Defendants Aurora Loan Services, LLC, and Merscorp, 7 Inc.’s (“MERS”) (collectively, the “Aurora Defendants”) Motion to Dismiss (#18), filed October 8 7, 2010. The Court has also considered Codilla’s Opposition (#25), and the Aurora Defendants’ 9 Reply (#27), filed November 4, 2010. 10 11 BACKGROUND On November 22, 2006, Plaintiff Jay Codilla purchased a single family home in 12 North Las Vegas, Nevada (the “Property”). Codilla financed the purchase with a $252,000.00 loan 13 from CTX (the “First Mortgage”). The CTX loan was secured by a deed of trust on the Property. 14 On December 8, 2006, Codilla obtained a home equity line of credit (the “HELOC”) through Bank 15 of America, which was also secured by a deed of trust on the Property. In February 2007, CTX 16 transferred the First Mortgage to Aurora. Sometime thereafter Codilla defaulted on the First 17 Mortgage. Accordingly, Aurora foreclosed on the First Mortgage and eventually purchased the 18 Property at a trustee’s sale on May 12, 2010. Two days later Codilla received an eviction notice 19 from Keller Williams. 20 Codilla filed this lawsuit on August 30, 2010, asserting the following claims: (1) 21 declaratory relief; (2) injunctive relief; (3) breach of the implied covenant of good faith and fair 22 dealing, contractual breach; (4) violation of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601, 23 et seq.; (5) violations of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601 24 et seq.; (6) recission; (7) fraud; (8) Unfair and Deceptive Acts and Practices (“UDAP”); (9) lack of 25 standing; (10) breach of fiduciary duty; (11) unconscionability–UCC § 2-302; (12) predatory 26 lending; and (13) quiet title. Each claim is against all of the Defendants, except the lack of AO 72 (Rev. 8/82) 2 1 standing claim, which is only against MERS. All Defendants except Keller Williams subsequently 2 filed a motion to dismiss. To date no proof of service has been filed as to Keller Williams. For 3 the reasons discussed below, the Court grants Defendants’ motions. 4 5 DISCUSSION I. Legal Standard 6 A court may dismiss a plaintiff’s complaint for “failure to state a claim upon which 7 relief can be granted.” Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide “a short 8 and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 9 8(a)(2). While Rule 8 does not require detailed factual allegations, it demands “more than labels 10 and conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. 11 Iqbal, 129 S. Ct. 1937, 1949 (2009). “Factual allegations must be enough to rise above the 12 speculative level.” Twombly, 550 U.S. at 555. Thus, to survive a motion to dismiss, a complaint 13 must contain sufficient factual matter to “state a claim to relief that is plausible on its face.” Iqbal, 14 129 S. Ct. at 1949 (internal citation omitted). 15 In Iqbal, the Supreme Court recently clarified the two-step approach district courts 16 are to apply when considering motions to dismiss. First, a district court must accept as true all 17 well-pled factual allegations in the complaint; however, legal conclusions are not entitled to the 18 assumption of truth. Id. at 1950. Mere recitals of the elements of a cause of action, supported only 19 by conclusory statements, do not suffice. Id. at 1949. Second, a district court must consider 20 whether the factual allegations in the complaint allege a plausible claim for relief. Id. at 1950. A 21 claim is facially plausible when the plaintiff’s complaint alleges facts that allows the court to draw 22 a reasonable inference that the defendant is liable for the alleged misconduct. Id. at 1949. Where 23 the complaint does not permit the court to infer more than the mere possibility of misconduct, the 24 complaint has “alleged—but not shown—that the pleader is entitled to relief.” Id. (internal 25 quotation marks omitted). When the claims in a complaint have not crossed the line from 26 conceivable to plausible, plaintiff’s complaint must be dismissed. Twombly, 550 U.S. at 570. AO 72 (Rev. 8/82) 3 1 II. Analysis 2 Codilla has agreed to voluntarily dismiss his claims for declaratory relief, injunctive 3 relief, and quiet title. Therefore, the Court need not address those claims. Also, unless otherwise 4 stated, the following analysis applies to all Defendants. 5 A. 6 Breach of the Covenant of Good Faith and Fair Dealing Under Nevada law, “[e]very contract imposes upon each party a duty of good faith 7 and fair dealing in its performance and execution.” A.C. Shaw Constr. v. Washoe County, 784 8 P.2d 9, 9 (Nev. 1989) (quoting Restatement (Second) of Contracts § 205). To state a valid claim 9 for contractual breach of the covenant of good faith and fair dealing, a plaintiff must show: (1) 10 plaintiff and defendant were parties to a contract; (2) defendant owed a duty of good faith to 11 plaintiff; (3) defendant breached that duty by performing in a manner that was unfaithful to the 12 purpose of the contract; and (4) plaintiff’s justified expectations were thus denied. Perry v. 13 Jordan, 900 P.2d 335, 338 (Nev. 1995). 14 Codilla’s complaint alleges that he and Defendants were parties to a contract for the 15 First Mortgage and the HELOC, and that Defendants violated the spirit and purpose of those 16 contracts by willfully withholding numerous disclosures regarding those contracts. However, 17 these allegations only deal with alleged conduct before these contracts were entered into. And this 18 Court has previously held that a “party cannot breach the covenant of good faith and fair dealing 19 before a contract is formed.” Urbina v. Homeview Lending, Inc., 681 F.Supp.2d 1254, 1260 (D. 20 Nev. 2009) (citing Indep. Order of Foresters v. Donald, Lufkin & Jenrette, Inc., 157 F.3d 933, 941 21 (2d Cir. 1998) (“an implied covenant relates only to the performance of obligations under an 22 extant contract, and not to any pre-contract conduct”)). Thus, to the extent Codilla’s claim 23 revolves around alleged conduct that occurred before the contract was entered into, it fails as a 24 matter of law. 25 Codilla further alleges that while he was attempting to modify the First Mortgage 26 Aurora and MERS proceeded to foreclose on the Property. However, neither Aurora nor MERS AO 72 (Rev. 8/82) 4 1 were contractually obligated to provide Codilla with a loan modification. Therefore, Codilla has 2 failed to state a valid claim because he does not allege that Aurora and MERS violated the terms of 3 the First Mortgage. Accordingly, the Court dismisses Codilla’s claim for breach of the covenant 4 of good faith and fair dealing. 5 B. TILA 6 In general, TILA requires creditors to disclose certain information about the terms 7 of a loan to the prospective borrower. See e.g., 15 U.S.C. §§ 1631–32, 1638; 12 C.F.R. § 226.17. 8 Damages claims under TILA must be brought within one year from the date of the occurrence of 9 the violation. 15 U.S.C. § 1640(e). However, equitable tolling may apply if the plaintiff can show 10 fraudulent concealment on the part of the defendant. King v. California, 784 F.2d 910, 915 (9th 11 Cir. 1986). Rescission claims, on the other hand, must be brought within three years from the date 12 of the consummation of the transaction or upon the sale of the property, whichever occurs first. 13 15 U.S.C. § 1635(f). However, the Supreme Court has held that, unlike a claim for damages, a 14 rescission claim cannot be tolled. Beach v. Ocwen Federal Bank, 523 U.S. 410, 417 (1998). 15 Codilla seeks both damages and rescission under TILA. Codilla alleges that 16 Defendants violated TILA by failing to provide him with accurate material disclosures, among 17 other things, as TILA requires. However, both of Codilla’s loans closed in 2006 and this suit was 18 commenced in August 2010—almost four years later. Therefore, the limitations period has run for 19 both damages and rescission under TILA. Furthermore, the Court finds that equitable tolling is not 20 appropriate for the damages claim because Codilla has not shown fraudulent concealment on the 21 part of the Defendants. Therefore, because the limitations period has expired, Codilla’s TILA 22 claims fail as a matter of law and are dismissed. 23 C. RESPA 24 In general, RESPA requires that borrowers receive disclosures regarding the costs 25 associated with real estate closings and prohibits certain practices in the real estate business such 26 as undisclosed kickbacks. 15 U.S.C. §§ 2601–2617. However, any RESPA action must be AO 72 (Rev. 8/82) 5 1 brought within either one or three years from the date of the occurrence of the violation depending 2 on the alleged violation. Id. at § 2614. Thus, because Codilla’s loans closed in 2006 and this suit 3 was commenced almost four years later in August 2010, Codilla’s RESPA claim fails as a matter 4 of law. The Court refuses to apply the doctrine of equitable tolling for the same reason stated in its 5 TILA analysis. Therefore, the Court dismisses Codilla’s RESPA claim. 6 D. 7 Fraud In order to state a claim for fraud in Nevada, a plaintiff must allege that (1) the 8 defendant made a false representation; (2) the defendant knew or believed the representation to be 9 false; (3) the defendant intended to induce plaintiff to rely on the misrepresentation; and (4) the 10 plaintiff suffered damages as a result of his reliance. Barmettler v. Reno Air, Inc., 956 P.2d 1382, 11 1386 (Nev. 1998). Rule 9(b) of the Federal Rules of Civil Procedure further requires that in 12 “alleging fraud or mistake, a party must state with particularity the circumstances constituting 13 fraud.” 14 Codilla’s fraud claim fails under Rule 9(b). Codilla merely alleges that Defendants 15 “engaged in conduct” calculated to deceive him. However, he doesn’t specify what this conduct 16 was other than to say that Defendants unlawfully suppressed facts and made no effort to determine 17 if Codilla had the ability to repay the loan. Codilla makes no specific allegation of any false 18 representations by Defendants. Therefore, the Court dismisses Codilla’s fraud claim for lack of 19 specificity. 20 21 E. Unfair and Deceptive Practices Act Codilla’s eighth cause of action is premised on the alleged violation of the “Federal 22 Unlawful and Deceptive Acts and Practices statutes,” although he doesn’t cite any particular 23 federal statute. (Dkt. #1, Compl. 19:27–28, 20:1–2.) However, in this motion Codilla now claims 24 that this cause of action is premised on the alleged violation of NRS §§ 598 and 598A. The Court 25 finds this to be a disingenuous attempt to amend a complaint outside of the proper procedural 26 process. Thus, because a “motion to dismiss ‘addresses the present state of the pleadings, not what AO 72 (Rev. 8/82) 6 1 an amended complaint might state,’” the Court dismisses this claim. Lingad v. IndyMac Fed. 2 Bank, 682 F. Supp. 2d 1142, 1151 (E. D. Cal. 2010). 3 F. 4 Lack of Standing Codilla’s ninth cause of action alleges that MERS does not have standing to 5 foreclose because it lacks a beneficial interest in the First Mortgage. However, this Court has 6 previously held that “so long as the note is in default and the foreclosing trustee is either the 7 original trustee or has been substituted by the holder of the note or the holder’s nominee, there is 8 simply no defect in foreclosures, at least in states such as Nevada where a trustee may foreclose 9 non-judicially.” Weingartner v. Chase Home Fin., LLC, 702 F.Supp.2d 1276, 1280 (D. Nev. 10 2010). Thus, because Codilla has defaulted on the loan, and because MERS is the designated 11 nominee on the deed of trust (Dkt. #6, Mot. to Dismiss Ex. A, Deed), Codilla’s claim for lack of 12 standing fails as a matter of law. Therefore, the Court dismisses this claim. 13 G. 14 Breach of Fiduciary Duty To state a valid claim for breach of fiduciary duty, a plaintiff must show: (1) the 15 defendant owed a fiduciary duty to the plaintiff; (2) the defendant breached that fiduciary duty; and 16 (3) the plaintiff sustained damages. Mosier v. S. Cal. Physicians Ins. Exch., 74 Cal. Rptr. 2d 550, 17 565 (Cal. Ct. App. 1998). “A fiduciary relationship exists between two persons when one of them 18 is under a duty to act for the benefit of another upon matters within the scope of the relation.” 19 Stalk v. Mushkin, 199 P.3d 838, 843 (Nev. 2009). However, courts have repeatedly held that a 20 lender owes no fiduciary duties to a borrower absent exceptional circumstances, such as when a 21 special relationship exists between the two parties. See Yerington Ford, Inc. v. Gen. Motors 22 Acceptance Corp., 359 F. Supp. 2d 1075, 1090 (D. Nev. 2004) (stating “the Court is satisfied that 23 the Nevada Supreme Court would hold that an arms-length lender-borrower relationship is not 24 fiduciary in nature, absent exceptional circumstances”), aff’d in relevant part by Giles v. Gen. 25 Motors Acceptance Corp., 494 F.3d 865 (9th Cir. 2007). In this case, Codilla has only alleged the 26 / AO 72 (Rev. 8/82) 7 1 existence of a lender–borrower relationship with Defendants, which is insufficient to establish a 2 fiduciary relationship. Therefore, Codilla’s claim fails as a matter of law. 3 H. 4 Unconscionability Unconscionability is an affirmative defense that allows a court to refuse to enforce 5 a provision or an entire contract to avoid unfair terms, it is not a cause of action. Premiere Digital 6 Access, Inc. v. Cent. Tel. Co., 360 F. Supp. 2d 1161, 1168 (D. Nev. 2005). Furthermore, this claim 7 relies on UCC § 2-302 (codified in Nevada as NRS § 104.2302), which only applies to the sale of 8 goods. See NRS 104.2107, 104.2105. Therefore, the Court dismisses this claim. 9 I. 10 Predatory Lending Codilla’s twelfth cause of action is a predatory lending claim against all 11 Defendants. However, this claim is based entirely upon broad generalizations and conclusory legal 12 statements. While Rule 8 does not require detailed factual allegations, it demands “more than 13 labels and conclusions.” Iqbal, 129 S. Ct. at 1949. Therefore, the Court dismisses this claim. 14 III. 15 Keller Williams On January 26, 2011, this Court issued a notice of intent to dismiss Keller Williams 16 pursuant to Rule 4(m) of the Federal Rules of Civil Procedure. Rule 4(m) requires service of 17 process to be served upon a defendant within 120 days after the filing of the complaint. Codilla 18 filed his complaint on August 30, 2010, and to date, no proof of service has been filed as to Keller 19 Williams. Therefore, the Court dismisses Keller Williams from this case. 20 / 21 / 22 / 23 / 24 / 25 / 26 / AO 72 (Rev. 8/82) 8 1 CONCLUSION 2 Accordingly, and for good cause appearing, 3 IT IS HEREBY ORDERED that the CTX Defendants’ Motion to Dismiss (#6) is 4 GRANTED. 5 6 IT IS FURTHER ORDERED that the BOA Defendants’ Motion to Dismiss (#12) is GRANTED. 7 8 IT IS FURTHER ORDERED that the Aurora Defendants’ Motion to Dismiss (#18) is GRANTED. 9 The Court orders the Clerk of Court to close the case. 10 Dated: February 17, 2010 11 ____________________________________ ROGER L. HUNT Chief United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 AO 72 (Rev. 8/82) 9
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