Fourness et al vs Mortgage Electronic Registration Systems, Inc., et al, No. 3:2010cv00040 - Document 14 (D. Nev. 2010)

Court Description: ORDER GRANTING 10 Motion to Dismiss. FURTHER ORD Amended Complaint due by 12/24/2010. Signed by Judge Edward C. Reed, Jr on 12/3/2010. (Copies have been distributed pursuant to the NEF - DRM)
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Fourness et al vs Mortgage Electronic Registration Systems, Inc., et al Doc. 14 1 2 3 4 UNITED STATES DISTRICT COURT DISTRICT OF NEVADA RENO, NEVADA 5 6 7 DYSON FOURNESS AND VIRGINIA, 8 FOURTESS, 9 Plaintiffs, 10 vs. 11 MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC.; ROBERT V. BUDHWA; 12 FIELDSTONE MORTGAGE COMPANY; NATIONAL DEFAULT SERVICING CO.; 13 HOME EQ SERVICING; AND DOES I-X 14 15 Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) 3:10-CV-40-ECR-RAM Order 16 17 Plaintiffs in this case are homeowners who claim to be victims 18 of an unlawful and wrongful foreclosure initiated by Defendants. 19 Plaintiffs assert five claims for relief: (1) wrongful foreclosure; 20 (2) fraud in the inducement; (3) conspiracy to commit wrongful 21 foreclosure; (4) unjust enrichment and; (5) slander of title. Now 22 pending is Defendants HomEq Servicing, Mortgage Electronic 23 Registration Systems, Inc. (“MERS”) and National Default Servicing 24 Co.’s (“NDSC”) motion to dismiss (# 10). 25 The motion is ripe, and we now rule on it. 26 27 28 1 2 I. Procedural Background On January 15, 2010, Plaintiffs filed this lawsuit in state 3 court. On January 21, 2010, Defendants removed the lawsuit (#1) to 4 federal court, invoking our diversity jurisdiction. On April 5, 5 2010, Defendants filed the pending motion to dismiss (#10) and a 6 request for judicial notice (#11). Plaintiffs opposed (#12) the 7 motion to dismiss (#10), and Defendants replied (#13). 8 9 10 II. Motion to Dismiss Standard A motion to dismiss under Fed. R. Civ. P. 12(b)(6) will only be 11 granted if the complaint fails to “state a claim to relief that is 12 plausible on its face.” 13 570 (2007). Bell Atl. Corp. v. Twombly, 550 U.S. 544, On a motion to dismiss, “we presum[e] that general 14 allegations embrace those specific facts that are necessary to 15 support the claim.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 16 561 (1992) (quoting Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 889 17 (1990)) (alteration in original). Moreover, “[a]ll allegations of 18 material fact in the complaint are taken as true and construed in 19 the light most favorable to the non-moving party.” In re Stac 20 Elecs. Sec. Litig., 89 F.3d 1399, 1403 (9th Cir. 1996) (citation 21 omitted). 22 Although courts generally assume the facts alleged are true, 23 courts do not “assume the truth of legal conclusions merely because 24 they are cast in the form of factual allegations.” 25 Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). W. Mining Accordingly, 26 “[c]onclusory allegations and unwarranted inferences are 27 28 2 1 insufficient to defeat a motion to dismiss.” In re Stac Elecs., 89 2 F.3d at 1403 (citation omitted). 3 Review on a motion pursuant to Fed. R. Civ. P. 12(b)(6) is 4 normally limited to the complaint itself. 5 250 F.3d 668, 688 (9th Cir. 2001). See Lee v. City of L.A., If the district court relies on 6 materials outside the pleadings in making its ruling, it must treat 7 the motion to dismiss as one for summary judgment and give the non8 moving party an opportunity to respond. Fed. R. Civ. P. 12(d); 9 see United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). “A 10 court may, however, consider certain materials — documents attached 11 to the complaint, documents incorporated by reference in the 12 complaint, or matters of judicial notice — without converting the 13 motion to dismiss into a motion for summary judgment.” Ritchie, 342 14 F.3d at 908. 15 If documents are physically attached to the complaint, then a 16 court may consider them if their “authenticity is not contested” and 17 “the plaintiff’s complaint necessarily relies on them.” Lee, 250 18 F.3d at 688 (citation, internal quotations, and ellipsis omitted). 19 A court may also treat certain documents as incorporated by 20 reference into the plaintiff’s complaint if the complaint “refers 21 extensively to the document or the document forms the basis of the 22 plaintiff’s claim.” Ritchie, 342 F.3d at 908. Finally, if 23 adjudicative facts or matters of public record meet the requirements 24 of Fed. R. Evid. 201, a court may judicially notice them in deciding 25 a motion to dismiss. Id. at 909; see Fed. R. Evid. 201(b) (“A 26 judicially noticed fact must be one not subject to reasonable 27 dispute in that it is either (1) generally known within the 28 3 1 territorial jurisdiction of the trial court or (2) capable of 2 accurate and ready determination by resort to sources whose accuracy 3 cannot reasonably be questioned.”). 4 5 III. Analysis 6 A. Wrongful Foreclosure 7 The first claim alleged in Plaintiffs’ complaint is wrongful 8 foreclosure. It appears that Plaintiffs’ wrongful foreclosure claim 9 is based on two independent theories of relief. Plaintiffs’ first 10 theory of relief is as follows: 11 12 13 14 15 The obligation of the Plaintiffs . . . was discharged when the investors of the mortgage backed securities claims were paid as a result of over-collateralization of the obligations and/or credit default swaps and/or federal bailout funds and other monies paid to investors who owned the note of the Plaintiffs co-mingled with the other notes and obligations and/or to the Defendants or bank holding companies who disbursed the monies in such a fashion as to extinguish the obligation of Plaintiffs to repay the monies that they borrowed . . . . 16 (Compl. ¶ 36 (#1).) 17 An action for the tort of wrongful foreclosure will lie only 18 “if the trustor or mortgagor can establish that at the time the 19 power of sale was exercised or the foreclosure occurred, no breach 20 of condition or failure of performance existed on the mortgagor’s or 21 trustor’s part which would have authorized the foreclosure or 22 exercise of the power of sale.” Collins v. Union Fed. Sav. & Loan 23 Ass'n, 662 P.2d 610, 623 (Nev. 1983). The “material issue of fact 24 in a wrongful foreclosure claim is whether the trustor was in 25 default when the power of sale was exercised.” Id. Plaintiffs do 26 not allege that they were not in default on their loan. 27 28 4 Moreover, 1 Plaintiffs’ theory, that the federal bailout funds somehow 2 extinguished their mortgage obligation, is simply untenable. 3 Plaintiffs’ alternative theory is that because MERS was 4 improperly named as the beneficiary on Plaintiffs’ deed of trust, 5 “the security interest in their properties was rendered invalid,” 6 (P.’s Opp. at 9 (#12)), as was any action by MERS purporting to 7 substitute trustees, (Compl. ¶ 26 (#1)). 8 theory is likewise untenable. Plaintiffs’ alternative We agree with Plaintiffs that calling 9 MERS a “beneficiary” is incorrect. Weingartner v. Chase Home 10 Finance, LLC, --- F. Supp. 2d ----, No. 2:09-cv-02255, 2010 WL 11 1006708, at * 2 (D. Nev. March 15, 2010)(“MERS is not a beneficiary. 12 MERS is the nominee of the beneficiary. Often, the true beneficiary 13 (the lender/nominator) will obfuscate this distinction on the deed 14 of trust by referring to MERS as the ‘beneficiary of record.’”). We 15 have not discovered, however, nor has Plaintiff provided, any 16 authority in support of the contention that the incorrect 17 designation of MERS as a beneficiary on Plaintiffs’ deed of trust 18 renders the security interest on Plaintiffs’ property invalid. 19 We also disagree with Plaintiffs’ assertion that because of the 20 incorrect designation, any substitution of trustees effected by MERS 21 was a nullity. MERS is named in Plaintiffs’ deed of trust not only 22 as the beneficiary but as the nominee for the lender. 23 Judicial Notice (“RJN”), Ex. 2 (#11).) (Request for In that capacity, MERS has 24 the authority for substitution of trustees. Weingartner, 2010 WL 25 1006708, at * 2 (noting that the nominee on a deed of trust has 26 authority to administer the deed of trust, which includes authority 27 for substitution of trustees). 28 We have not discovered, nor has 5 1 Plaintiff provided, any authority in support of a contrary 2 proposition. Plaintiffs’ claim for wrongful foreclosure will 3 therefore be dismissed.1 4 B. Fraud in the Inducement 5 Plaintiffs’ second claim for relief is for fraud in the 6 inducement. Plaintiffs’ claim fails to satisfy the particularity 7 requirements of Rule 9(b). Federal Rule of Civil Procedure 9(b) 8 requires that a complaint “must state with particularity the 9 circumstances constituting fraud or mistake.” FED . R. CIV . P. 9(b). 10 Rule 9(b) “requires . . . an account of the time, place, and 11 specific content of the false representations as well as the 12 identities of the parties to the misrepresentations.” Swartz v. 13 KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (internal quotation 14 marks and citation omitted). In a case with multiple defendants, 15 “Rule 9(b) does not allow a complaint to merely lump multiple 16 defendants together but requires plaintiffs to differentiate their 17 allegations when suing more than one defendant and inform each 18 defendant separately of the allegations surrounding his alleged 19 participation in the fraud.” Id. at 764-65 (internal quotation 20 marks and citation omitted). 21 Plaintiffs’ claim for fraud in the inducement fails to allege 22 who made what misrepresentations or when any of the alleged 23 1 27 The parties spill considerable amounts of ink discussing the implications of the circumstance that NDSC was only formally substituted as Trustee after NDSC filed a notice of default. It appears this issue came to the parties’ attention when Defendants filed their request for judicial notice (#11). Regardless, there are no facts alleged, nor claims asserted, in the complaint relating to this issue. As such, this issue is not a part of this case unless and until Plaintiffs choose to amend their complaint. 28 6 24 25 26 1 misrepresentations took place. The claim is replete with vague and 2 conclusory allegations such as “Defendants failed to advise the 3 Plaintiffs that the obligation on his [sic] note had been discharged 4 in whole or in part, and failed to advise Plaintiffs of the fact 5 that Defendants had no lawful rights to foreclose upon the homes of 6 Plaintiffs.” (Compl. ¶ 47 (#1).) Plaintiffs’ claim for fraud in 7 the inducement will therefore be dismissed. 8 C. Conspiracy to Commit Wrongful Foreclosure 9 Plaintiffs’ third claim for relief alleges that all Defendants 10 engaged in a conspiracy to “promote, encourage, facilitate and 11 actively engage in wrongful foreclosures perpetrated on 12 Plaintiffs . . . .” (Compl. ¶ 57 (#1).) A civil conspiracy is “a 13 combination of two or more persons who, by some concerted action, 14 intend to accomplish some unlawful objective for the purpose of 15 harming another which results in damage .” Collins v. Union Fed. 16 Sav. & Loan Ass’n., 663 P.2d 610, 622 (Nev. 1983). An “act in 17 furtherance of the conspiracy [must] constitute an actionable tort.” 18 Eikelberger v. Tolotti, 611 P.2d 1086, 1088 & n.1 (Nev. 1980). 19 Plaintiffs have failed to adequately allege a plausible claim for 20 conspiracy. The basis alleged for the conspiracy claim in 21 Plaintiffs’ complaint is the wrongful foreclosure claim, which is 22 itself fatally deficient. Plaintiffs’ third claim will therefore be 23 dismissed. 24 D. Unjust Enrichment 25 Plaintiffs’ fourth claim for relief alleges unjust enrichment 26 against all Defendants. Under Nevada law, unjust enrichment occurs 27 when “a person has and retains a benefit which in equity and good 28 7 1 conscience belongs to another.” Leasepartners Corp. v. Robert L. 2 Brooks Trust Dated November 12, 1975, 942 P.2d 182, 187 (Nev. 1997). 3 An action “based on a theory of unjust enrichment is not available 4 when there is an express, written contract, because no agreement can 5 be implied when there is an express agreement.” Id. The doctrine 6 of unjust enrichment thus only “applies to situations where there is 7 no legal contract but where the person sought to be charged is in 8 possession of money or property which in good conscience and justice 9 he should not retain but should deliver to another [or should pay 10 for].” 11 Id. (quoting 66 Am. Jur. 2d Restitution § 11 (1973)). The basic premise of Plaintiffs’ claim for unjust enrichment is 12 that they were “targeted for and lured” into their mortgages. 13 Compl. ¶ 177 (#35).) (Am. These mortgages are express and written 14 contracts; Plaintiffs’ fourth claim thus fails and will be 15 dismissed. 16 E. Slander of Title 17 Plaintiffs’ fifth claim alleges slander of title. A claim for 18 slander of title “involves false and malicious communications, 19 disparaging to one’s title in land, and causing special damages.” 20 Executive Mgmt., Ltd. v. Ticor Title Co., 963 P.2d 465, 478 (Nev. 21 1998). Plaintiffs’ slander of title claim is based on the same 22 untenable legal theory of Plaintiffs’ other claims: “National 23 Default Servicing and HomeEq (Barclays) knew that they did not have 24 any grounds to believe that the Fournesses owed them any money on 25 the note nor does National Default Servicing and HomeEq (Barclays) 26 know who the actual investors on the note and deed of trust for the 27 Fournesses are or how much is owed or how much has been discharged 28 8 1 on that note or whether pursuant to another action, the mote has 2 been paid in part of discharged in whole.” (Compl. ¶ 80 (#1).) 3 Plaintiffs’ fifth claim will therefore be dismissed. 4 5 6 IV. Leave to Amend Under Rule 15(a) leave to amend is to be “freely given when 7 justice so requires.” FED . R. CIV . P. 15(a). 8 should be allowed with “extreme liberality.” In general, amendment Owens v. Kaiser Found. 9 Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001) (quoting 10 Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th 11 Cir. 1990)). If factors such as undue delay, bad faith, dilatory 12 motive, undue prejudice or futility of amendment are present, leave 13 to amend may properly be denied in the district court’s discretion. 14 Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051-52 (9th 15 Cir. 2003)(discussing Foman v. Davis, 371 U.S. 178, 182 (1962). 16 In light of the liberal spirit of Rule 15(a), Plaintiffs should 17 have an opportunity to amend their complaint. If the amended 18 complaint is similarly deficient, however, we may be forced to 19 conclude that leave to further amend would be futile. 20 21 22 VI. Conclusion Plaintiffs’ first claim for wrongful foreclosure fails because 23 Plaintiffs do not allege that they were not in default on their loan 24 and Plaintiffs’ theories of relief are untenable and unsupported by 25 authority. Plaintiffs’ second claim for fraud in the inducement 26 fails because it does not satisfy the particularity requirements of 27 Rule 9(b). 28 Plaintiffs’ third claim for conspiracy to commit 9 1 wrongful foreclosure fails because Plaintiffs’ underlying wrongful 2 foreclosure claim is fatally deficient. Plaintiffs’ fourth claim 3 for unjust enrichment fails because mortgages are express and 4 written contracts. Plaintiffs’ fifth claim for slander of title is 5 based on the same untenable legal theory of Plaintiffs’ other 6 claims. Plaintiffs will be given leave to amend. 7 8 IT IS, THEREFORE, HEREBY ORDERED THAT Defendants’ Motion to 9 Dismiss (#10) is GRANTED. 10 11 IT IS FURTHER ORDERED THAT Plaintiffs shall have twenty-one 12 (21) days within which time to file an amended complaint. 13 14 15 DATED: December 3, 2010. ____________________________ UNITED STATES DISTRICT JUDGE 16 17 18 19 20 21 22 23 24 25 26 27 28 10