-RJJ Cortinas et al v. State Of Nevada Housing Division et al, No. 2:2011cv01480 - Document 31 (D. Nev. 2011)
Court Description: ORDER Denying 4 Motion for TRO; and Denying 5 Motion for Preliminary Injunction. FURTHER ORDERED that 7 Motion to Dismiss is granted in part and denied in part. FURTHER ORDERED that Plaintiffs file an amended complaint within 14 days of the entry of this order. Signed by Judge Kent J. Dawson on 12/29/11. (Copies have been distributed pursuant to the NEF - MMM)
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-RJJ Cortinas et al v. State Of Nevada Housing Division et al Doc. 31 1 2 3 4 5 UNITED STATES DISTRICT COURT 6 DISTRICT OF NEVADA 7 8 9 ARMANDO CORTINAS, BEATRICE B. CORTINAS, Case No. 2:11-CV-01480-KJD-RJJ 10 Plaintiffs, ORDER 11 v. 12 STATE OF NEVADA HOUSING, et al., 13 Defendants. 14 15 16 Presently before the Court are Plaintiffs’ Motion for Temporary Restraining Order and 17 Preliminary Injunction (#4/5) and Defendant Wells Fargo Home Mortgage’s (“Wells Fargo”) Motion 18 to Dismiss (#7). 19 I. Background 20 In May 1997, Plaintiffs purchased a home located at 1060 Sweeney Avenue, Las Vegas, 21 Nevada 89104. Plaintiffs purchased the property by borrowing $95,757 from North American 22 Mortgage Company. The loan was serviced by Wells Fargo. In August 1997, co-Defendant State of 23 Nevada Housing Division was recorded as the beneficiary under the promissory note and assignee of 24 the deed of trust; Wells Fargo continued to act as the mortgage servicer. Plaintiffs began 25 experiencing financial difficulties in 2003, and as a result of “numerous financial obligations” and 26 “arrearages on their [mortgage] loan,” they filed for voluntary Chapter 13 bankruptcy. Plaintiffs’ Dockets.Justia.com 1 bankruptcy was subsequently discharged on December 9, 2008 as a result of Plaintiffs’ inability to 2 comply with the bankruptcy plan (Request for Judicial Notice Dkt. #8 Exh. 6). Thereafter, the 3 bankruptcy court reopened Plaintiffs’ bankruptcy case and granted discharge on May 13, 2010. 4 On October 11, 2010, the State of Nevada Housing Division – through its designated 5 substitute trustee, National Default Servicing Corporation (“National Default”) initiated a non- 6 judicial foreclosure of Plaintiffs’ property. Plaintiffs received a notice of default and election to sell 7 (Request for Judicial Notice Dkt. #8 Exh. 8). On January 13, 2011, a foreclosure mediation 8 certificate was issued and recorded allowing National Default to proceed with foreclosure (Request 9 for Judicial Notice Dkt. #8 Exh. 10). National Default recorded a Notice of Trustee Sale on January 10 13, 2011 (Request for Judicial Notice Dkt. #8 Exh. 11) and the property was purchased by the State 11 of Nevada Housing Division through a credit bid on February 17, 2011 (Request for Judicial Notice 12 Dkt. #8 Exh. 12). On or about July 11, 2011, Plaintiffs were evicted from their home. 13 Plaintiffs filed the present action in state court on August 15, 2011 which Defendants 14 subsequently removed. Plaintiffs’ complaint asserts eight causes of action: (1) wrongful foreclosure, 15 (2) declaratory judgment, (3) breach of contract, (4) breach of the covenant of good faith and fair 16 dealing, (5) unjust enrichment, (6) trespass to land, (7) conversion, and (8) slander of title. 17 II. Discussion 18 Plaintiffs request that the Court enter a temporary restraining order to prevent Defendants 19 from selling the property. Additionally, Defendant Wells Fargo moves to dismiss four of Plaintiffs’ 20 claims against them: wrongful foreclosure, breach of contract, breach of covenant of good faith and 21 fair dealing, and conversion. 22 A. Legal Standard for Temporary Restraining Order 23 Plaintiffs allege that they will suffer immediate and irreparable injury if the Court does not 24 void the February 2011 trustee’s sale. Under Fed. R. Civ. P. 65(b), a plaintiff must make a showing 25 that immediate and irreparable injury, loss, or damage will result to plaintiff without a temporary 26 restraining order before a motion for preliminary injunction can be heard. Past Ninth Circuit cases 2 1 have disputed whether a finding of irreparable injury must be “likely” or merely “possible.” Taylor 2 v. Westly, 488 F.3d 1197, 1200 (9th Cir. 2007) (laying out a traditional test and an alternative, sliding 3 scale “possibility” test). To provide clarity, the Supreme Court recently concluded that a plaintiff 4 seeking an injunction must demonstrate that irreparable harm is “likely,” not just possible. Winter v. 5 NRDC, 129 S.Ct. 365, 374–76 (2008). As a result of this ruling, the Ninth Circuit has explicitly 6 recognized that “[t]he proper legal standard for preliminary injunctive relief requires a party to 7 demonstrate ‘that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in 8 the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction 9 is in the public interest.’” Stormans, Inc. v. Selecky, 586 F.3d 1109, 1127 (9th Cir. 2009). 10 1. Success on the Merits 11 Losing one’s home and property to foreclosure may undoubtedly constitute irreparable 12 harm. See Dixon v. Thatcher, 103 Nev. 414, 416 (1987) (reasoning that losing rights to real property 13 may cause irreparable harm because the attributes of real property are unique). However, a court 14 cannot void a trustee’s sale when a plaintiff has failed to comply with the provisions of Nev. Rev. 15 Stat. § 107.080(5). Under Nev. Rev. Stat. § 107.080(5), a trustee’s “sale…may be declared void by 16 any court of competent jurisdiction in the county where the sale took place” if: 17 18 19 a) The trustee or other person authorized to make the sale does not substantially comply with the provisions of this section or any applicable provision of NRS 107.086 and 107.087; b) Except as otherwise provided in subsection 6, an action is commenced in the county where the sale took place within 90 days after the date of the sale; and 20 21 c) A notice of lis pendens providing notice of the pendency of the action is recorded in the office of the county recorder of the county where the sale took place within 30 days after commencement of the action. 22 23 In the instant case, Plaintiffs filed their complaint nearly six months after the 24 trustee’s sale in February 2011. Plaintiffs acknowledge they received the notice of default 25 and the notice of trustee’s sale. Therefore, Plaintiffs did not timely comply with Nev. Rev. 26 Stat. § 107.080(5)'s requirement that a party must file a complaint to void a foreclosure sale 3 1 within 90 days of the trustee’s sale and record a notice of lis pendens within 30 days of filing 2 the complaint. As such, Plaintiffs cannot maintain a cause of action to void a foreclosure 3 under Nev. Rev. Stat. § 107.080. Without filing a timely complaint and recording a notice of 4 lis pendens within the statutorily designated time period, the Court is without statutory 5 authority to void Plaintiffs’ foreclosure. Thus, by its very nature, Plaintiffs’ claim does not 6 demonstrate a likelihood of success on the merits. Because Plaintiffs have failed to 7 demonstrate a likelihood of success on the merits, there is no need for the Court to consider 8 the remaining factors. Accordingly, the Court denies Plaintiffs’ Motion for Temporary 9 Restraining Order and Preliminary Injunction. 10 B. Legal Standard for Motion to Dismiss 11 Wells Fargo moves the Court to dismiss Plaintiffs’ claims against it for wrongful 12 foreclosure, breach of contract, breach of the covenant of good faith and fair dealing, and 13 conversion. “To survive a motion to dismiss, a complaint must contain sufficient factual 14 matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. 15 Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 16 (2007)). Plausibility, in the context of a motion to dismiss, means that the plaintiff has 17 pleaded facts which allow “the court to draw the reasonable inference that the defendant is 18 liable for the misconduct alleged.” Id. The Iqbal evaluation illustrates a two prong analysis. 19 First, the Court identifies “the allegations in the complaint that are not entitled to the 20 assumption of truth,” that is, those allegations which are legal conclusions, bare assertions, 21 or merely conclusory. Id. at 1949–51. Second, the Court considers the factual allegations 22 “to determine if they plausibly suggest an entitlement to relief.” Id. at 1951. If the 23 allegations state plausible claims for relief, such claims survive the motion to dismiss. Id. at 24 1950. 25 //// 26 //// 4 1 C. Defendant Wells Fargo’s Request to take Judicial Notice 2 Wells Fargo requests that judicial notice be taken of 11 documents related to the 3 foreclosure of Plaintiffs’ property which are publicly recorded: a May 30, 1997 Deed of 4 Trust, a May 28, 1997 Promissory Note, an August 8, 1997 Assignment of Deed of Trust, an 5 August 1, 2003 copy of Plaintiffs’ Bankruptcy Petition, a September 13, 2011 copy of 6 Plaintiffs’ bankruptcy docket, a December 9, 2008 order dismissing Plaintiffs’ bankruptcy 7 case, an August 2, 1010 copy of Plaintiffs’ bankruptcy discharge, an October 11, 2010 Notice 8 of Default and Election to Sell, an October 11, 2010 Substitution of Trustee, a January 13, 9 2011 Foreclosure Mediation Certificate, a January 13, 2011 Notice of Trustee’s Sale, and a 10 February 17, 2011 Trustee’s Deed Upon Sale. Wells Fargo’s request for judicial notice is 11 unopposed. 12 While, “as a general rule, a district court may not consider materials not originally 13 included in the pleadings in deciding a Rule 12 motion. . . it may take judicial notice of 14 matters of public record and may consider them without converting a Rule 12 motion into one 15 for summary judgment.” United States v. 14.02 Acres of Land, 547 F.3d 943, 955 (9th 16 Cir.2008) (quotations and citations omitted). However, to take judicial notice of a fact, it 17 must be either “generally known within the territorial jurisdiction of the trial court” or 18 “capable of accurate and ready determination by resort to sources whose accuracy cannot 19 reasonably be questioned.” Fed. R. Evid. 201(b). The documents submitted by Wells Fargo 20 are publicly recorded documents of which judicial notice may properly be taken, and 21 accordingly, those documents may be considered in deciding Wells Fargo’s motion to 22 dismiss. 23 D. Wells Fargo’s Standing 24 As a preliminary issue, Plaintiffs’ complaint and also their opposition to Wells 25 Fargo’s motion to dismiss allege that neither the State of Nevada Housing Division nor Wells 26 Fargo have standing to pursue a foreclosure sale against Plaintiffs’ property. The State of 5 1 Nevada Housing Division was not the original mortgagee and, therefore, must show that the 2 mortgage was properly assigned to them in writings signed by the grantors before they could 3 notice the sales and foreclosures of the properties. See Pasillas v. HSBC Bank USA, 255 P.3d 4 1281, 1286 (Nev. 2011) (ruling that valid assignments are needed when a beneficiary of a 5 deed of trust seeks to foreclose on a property). North American Mortgage Company’s 6 assignment of the deed of trust to the State of Nevada Housing Division’s – correctly 7 recorded on August 8, 1997 – is evidence of the State of Nevada Housing Division’s standing 8 to foreclose (Request for Judicial Notice Dkt. #8 Exh. 3). Plaintiffs do not dispute that 9 Defendant State of Nevada Housing Division, through its substituted servicer, National 10 Default, initiated foreclosure proceedings against Plaintiffs. Because the State of Nevada 11 Housing Division was the properly recorded beneficiary under the note and assignee of the 12 deed of trust it had authority and standing to initiate foreclosure proceeds if Plaintiffs 13 breached the terms of the loan agreement. 14 As to Wells Fargo’s standing, Plaintiffs acknowledge in their opposition to Wells 15 Fargo’s motion to dismiss that Wells Fargo did not foreclose on their home, is not the note 16 holder or trustee, and does not currently own Plaintiffs’ home. Therefore, Wells Fargo need 17 not provide proof of assignment in order to challenge Plaintiffs’ claims. Instead, Plaintiffs 18 incorrectly argue that Wells Fargo “has no standing to discuss the sufficiency of the 19 foreclosure sale” – while at the same time claiming that Wells Fargo should be held liable for 20 money damages based upon their conduct. Wells Fargo is a defendant, not a plaintiff, and 21 thus need not establish constitutional standing to “discuss” claims brought against it by 22 Plaintiffs. 23 E. Wrongful Foreclosure 24 Notwithstanding the Court’s non-authority to void Plaintiffs’ foreclosure due to 25 Plaintiffs’ untimely complaint, the Court must still consider Plaintiffs’ claim for wrongful 26 foreclosure. Generally speaking, a tort action for wrongful foreclosure does exist in Nevada, 6 1 but only if “no breach of condition or failure of performance existed on the mortgagor’s or 2 trustor’s part which would have authorized the foreclosure or exercise of power of sale.” 3 Collins v. Union Federal Sav. & Loan Ass’n, 662 P.2d 610, 623 (Nev. 1983). 4 Unlike many recent and similarly situated cases in Nevada, Plaintiffs allege that they 5 are not in breach of the agreement, but that they have made “every attempt to keep the note 6 current.” Instead, Plaintiffs argue that Defendants breached the agreement by refusing to 7 accept Plaintiffs’ mortgage payments. Adding strength to their claim, Plaintiffs assert that 8 they “have all of the funds to pay all of the arrears caused by Wells Fargo.” Although such 9 bare assertions do not warrant an assumption of truth, Plaintiffs allege additional facts in their 10 complaint. Plaintiffs assert that although they had arrearages in 2003, these arrearages were 11 paid and discharged under a Chapter 13 bankruptcy plan in May 2010, and that they remained 12 current on their mortgage through 2008. Plaintiffs allege that beginning in 2009, Wells Fargo 13 began to refuse their mortgage payments, and that Wells Fargo’s refusal continued into the 14 first few months of 2010. Although Wells Fargo points to significant evidence in their 15 opposition to Plaintiffs’ motion for temporary restraining order that weakens Plaintiffs’ 16 claims, the Court cannot use these documents in considering a motion to dismiss. Moreover, 17 Plaintiffs have not provided complete bank statements for 2009 and 2010, thus, at this stage it 18 is unclear whether Plaintiffs attempted to make their mortgage payment, whether Wells Fargo 19 rejected these payments, or whether such payments were misapplied. Accordingly, the Court 20 denies the motion to dismiss the wrongful foreclosure claim. 21 F. Breach of Contract and Breach of Covenant of Good Faith and Fair Dealing 22 To state a claim for breach of contract in Nevada, a plaintiff must demonstrate (1) the 23 existence of a valid contract, (2) that the plaintiff performed or was excused from 24 performance, (3) that the defendant breached, and (4) that the plaintiff sustained damages. 25 Calloway v. City of Reno, 993 P.2d 1259, 1263 (2000). Basic contract principles require, for 26 an enforceable contract, an offer and acceptance, meeting of the minds, and consideration.” 7 1 May v. Anderson, 121 Nev. 668, 672 (2005). Moreover, “[e]very contract imposes upon each 2 party a duty of good faith and fair dealing in its performance and execution.” A.C. Shaw 3 Constr. v. Washoe County, 105 Nev. 913, 784 P.2d 9, 9 (Nev.1989) (quoting Restatement 4 (Second) of Contracts § 205). 5 In their complaint, Plaintiffs alleged that Wells Fargo entered into an agreement with 6 Plaintiffs and breached that agreement when they foreclosed on Plaintiffs’ home. However, 7 with respect to the motion to dismiss, Plaintiffs do not dispute that Wells Fargo and Plaintiffs 8 never entered into an express, written agreement. However, in their opposition to Wells 9 Fargo’s motion to dismiss, Plaintiffs’ provide additional allegations claiming breach of an 10 implied contract that are not contained in their complaint. 11 Plaintiffs argue that Wells Fargo’s acceptance of Plaintiffs’ monthly mortgage 12 payments constitute contractual acceptance; that the sending of monthly invoices, notices of 13 deficiencies, and receipt of payments manifest a mutual meeting of the minds, and; that 14 acceptance of Plaintiffs’ monthly mortgage payment demonstrate consideration. While 15 certain federal statutes prohibit liability against a mortgage servicer for certain activities, See 16 12 U.S.C.A. § 2605(j)(1)-(2) (mandating that a servicer of a federally related mortgage shall 17 not be liable to a borrower for failure to provide notice of an assignment, sale, or transfer of 18 the servicing of a loan), mortgage servicers, whether holders of the mortgage note or simply 19 agents of the holder of the note, may be liable for contractual breaches if the facts demonstrate 20 the existence of a contract. Since, Plaintiffs’ complaint does not meet the pleading 21 requirements by alleging facts claiming breach of an implied contract, i.e., the existence of an 22 offer, acceptance, meeting of the minds, and consideration, the Court dismisses the breach of 23 contract claim against Wells Fargo with leave to amend. Likewise, the Court dismisses 24 Plaintiffs’ breach of covenant of good faith and fair dealing with leave to amend. 25 //// 26 //// 8 1 G. Conversion 2 In order to state a claim for conversion, Plaintiffs must allege that Wells Fargo 3 “wrongfully exerted [dominion] over personal property in denial of, or inconsistent with, title 4 or rights therein or in derogation, exclusion or defiance of such rights.” Winchell v. Schiff, 5 193 P.3d 946, 950 (Nev. 2008). While conversion requires a physical act of dominion of 6 personal property, liability for conversion is predicated upon “general intent, which does not 7 require wrongful intent and is not excused by care, good faith, or lack of knowledge.” Id. 8 Therefore, Plaintiffs must plausibly demonstrate that Wells Fargo exerted an act of dominion 9 over their personal property, in derogation of their rights in the property. 10 Defendant’s argument that conversion only lies in the wrongful dominion over 11 personal property without any contextual reference to real property wherein the personal 12 property is stored is misplaced. See Winchell, 193 P.3d at 950 (upholding jury damages 13 award for conversion where landlord wrongfully exerted dominion over a tenant’s personal 14 property located in a warehouse when landlord changed the tenant’s locks prior to the 15 termination of the lease, and thereafter tenant’s property was stolen). Plaintiffs allege in their 16 complaint that they were wrongfully evicted. Therefore, changing the locks on Plaintiffs’ 17 house would constitute an act of dominion over Plaintiffs’ personal property if the eviction 18 was wrongful. 19 It is unclear whether Wells Fargo is a party in interest to Plaintiffs’ conversion claim. 20 They are not and never have been the owner, note holder, or beneficiary of the deed of trust 21 secured by Plaintiffs’ property. Plaintiffs acknowledge that they did not initiate or conduct 22 the foreclosure sale. It is unsettled whether Wells Fargo participated in the eviction process 23 which Plaintiffs allege forms the basis of their conversion claim. However, Wells Fargo does 24 not disavow participation in the eviction procedure. Thus, the Court cannot say as a matter of 25 law whether Wells Fargo wrongfully exerted dominion over Plaintiffs’ personal property, or 26 //// 9 1 whether such eviction was wrongful. Accordingly, the Court denies the motion to dismiss 2 Plaintiffs’ conversion claim. 3 III. Conclusion 4 IT IS HEREBY ORDERED that Plaintiffs’ Motion for Temporary Restraining Order 5 and Preliminary Injunction (#4/5) is DENIED; 6 IT IS FURTHER ORDERED that Defendant Wells Fargo’s Motion to Dismiss (#7) 7 is GRANTED in part and DENIED in part; 8 IT IS FURTHER ORDERED that Plaintiffs file an amended complaint within 9 fourteen (14) days of the entry of this order. Failure to do so will result in dismissal of 10 Plaintiffs’ claims against Wells Fargo for breach of contract and breach of the covenant of 11 good faith and fair dealing. 12 DATED this 29th day of December 2011. 13 14 15 16 _____________________________ Kent J. Dawson United States District Judge 17 18 19 20 21 22 23 24 25 26 10
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