Young et al v. Northwest Trustee Services Inc et al, No. 2:2014cv01807 - Document 13 (W.D. Wash. 2015)
Court Description: ORDER granting 7 Defendants' Motion to Dismiss for Failure to State a Claim, by Judge Marsha J. Pechman.(MD, cc to pltfs)
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Young et al v. Northwest Trustee Services Inc et al Doc. 13 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 10 STEVEN K YOUNG, et al., 11 Plaintiffs, ORDER GRANTING DEFENDANTS‘ MOTION TO DISMISS v. 12 13 CASE NO. C14-1807 MJP NORTHWEST TRUSTEE SERVICES INC., et al., 14 Defendants. 15 16 THIS MATTER comes before the Court on Defendants Green Tree Servicing LLC and 17 18 19 Federal National Mortgage Association‘s ( Defendants ) motion to dismiss Plaintiffs‘ claims under Fed. R. Civ. P. 12(b)(6). (Dkt. No. 7.) Having reviewed the Parties‘ briefing and all related papers, the Court GRANTS Defendants‘ motion and DISMISSES Plaintiffs‘ claims with 20 prejudice. 21 Background 22 Plaintiffs filed this suit on November 28, 2014, alleging violations of several statutes in 23 connection with Defendants‘ scheduled non-judicial foreclosure on their property. (Dkt. No. 1.) 24 ORDER GRANTING DEFENDANTS‘ MOTION TO DISMISS- 1 Dockets.Justia.com 1 Plaintiffs allege violation of 12 C.F.R. § 226.39, part of the Truth in Lending Act ( TILA ), 2 breach of contract in connection with 15 U.S.C. § 1635, violation of the Racketeering Influenced 3 and Corrupt Organizations Act ( RICO ), 18 U.S.C. § 1962, civil conspiracy, and assert claims 4 for declaratory relief and to quiet title. Plaintiffs‘ main contention is that Defendants do not have 5 adequate proof of ownership of the debt and, therefore, cannot foreclose on the property. (See 6 Dkt. No. 1 at 8–9.) Defendants now move to dismiss, arguing that Plaintiffs have failed to state a 7 claim upon which relief can be granted. (Dkt. No. 7.) 8 9 10 11 Discussion I. Legal Standard A. Dismissal Pursuant to Fed. R. Civ. P. 12(b)(6) Under Fed. R. Civ. P. 12(b)(6), the Court may dismiss a complaint for failure to state a 12 claim upon which relief can be granted. In ruling on a motion to dismiss, the Court must 13 construe the complaint in the light most favorable to the non-moving party. Livid Holdings Ltd. 14 v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005). The Court must accept all 15 well-pleaded allegations of material fact as true and draw all reasonable inferences in favor of 16 the plaintiff. Wyler Summit P‘ship v. Turner Broad. Sys., 135 F.3d 658, 661 (9th Cir. 1998). 17 Dismissal is appropriate where a complaint fails to allege enough facts to state a claim 18 to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A 19 claim is plausible on its face when the plaintiff pleads factual content that allows the court to 20 draw the reasonable inference that the defendant is liable for the misconduct alleged. Ashcroft 21 v. Iqbal, 556 U.S. 662, 678 (2009). As a result, a complaint must contain more than labels and 22 conclusions, and a formulaic recitation of the elements of a cause of action will not do. 23 Twombly, 550 U.S. at 555. 24 ORDER GRANTING DEFENDANTS‘ MOTION TO DISMISS- 2 Defendants’ Motion to Dismiss 1 II. 2 Defendants move to dismiss Plaintiffs‘ complaint under Fed. R. Civ. P. 12(b)(6) for 3 failure to state a claim. (Dkt. No. 7.) 4 5 A. Quiet Title Plaintiffs‘ first cause of action seeks to quiet title to their property and seeks a declaration 6 that the title to the Subject Property is vested solely in Plaintiff and that Defendants have no 7 right, title, estate, lien, or interest in the Property and that Defendants and each of them be 8 forever enjoined from asserting any right, title, lien or interest in the Property adverse to 9 Plaintiff. (Dkt. No. 1 at 16.) Plaintiffs argue Defendants must cease foreclosure proceedings on 10 the property because none of the Defendants are the holder of the [promissory] Note, and none 11 of them can prove that the Note is secured by the Deed of Trust. . . . (Id.) Defendants argue 12 Plaintiffs‘ claim to quiet title is both legally deficient and inadequately pleaded: Defendants are 13 not, and could not be, asserting an ownership interest in or a right to possession of the property 14 because the deed of trust created only a lien, and Plaintiffs fail to plead that Defendants are 15 otherwise asserting a current right to ownership or possession of the property. (Dkt. No. 7 at 4.) 16 A plaintiff may bring a quiet title action against the person claiming the title or some 17 interest therein, and may have judgment in such action quieting or removing a cloud from 18 plaintiff‘s title. RCW 7.28.010. [T]he plaintiff in an action to quiet title must prevail, if he 19 prevails at all, on the strength of his own title, and not on the weakness of the title of his 20 adversary. City of Centralia v. Miller, 31 Wn.2d 417, 422 (1948). A deed of trust creates a lien 21 on real property, but it does not convey title to the lender. RCW 61.24.020; Rustad Heating & 22 Plumbing Co. v. Waldt, 91 Wn.2d 372, 376 (1979) (holding that a deed of trust is a species of 23 mortgage, creating a lien on real property). 24 ORDER GRANTING DEFENDANTS‘ MOTION TO DISMISS- 3 1 Plaintiffs fail to state a claim to quiet title. While Plaintiffs allege that Defendants lack a 2 right to possess the property, they do not allege that Defendants are claiming a current right of 3 ownership or possession of the property. (See Dkt. No. 1 at 13.) Because the deed of trust only 4 creates a lien without conveying ownership rights to Defendants, and because Plaintiffs do not 5 separately allege that Defendants have asserted a title interest in the property, a claim to quiet 6 title cannot be maintained. See, e.g., Evans v. BAC Home Loans Servicing LP, No. 10-0656, 7 2010 WL 5138394, at *4 (W.D. Wash. Dec. 10, 2010) (dismissing a claim to quiet title when 8 Plaintiffs did not allege that Defendant asserted a title interest in the disputed property). 9 Plaintiffs‘ first cause of action fails to state a claim upon which relief can be granted, and is 10 therefore DISMISSED. 11 12 B. Wrongful Foreclosure under Truth in Lending Act Plaintiffs‘ second cause of action alleges Defendants wrongfully foreclosed on Plaintiffs‘ 13 property by violating certain TILA requirements codified at 12 C.F.R. § 226.39. (Dkt. No. 1 at 14 16.) Plaintiffs allege the Defendant GREENTREE is not a real and beneficial party of interest, 15 nor the Holder of the Note, . . . [and that] Green Tree Servicing LLC has offered no evidence that 16 loan [sic] was ever purchased from Countrywide Bank, FSB. (Id. at 9, 15.) As a result, Plaintiffs 17 claim that Defendants do not have the right to foreclose on the Property because the Defendants 18 do not own the Note of [sic] have any legal relationship to the Note. (Id. at 18.) Defendants 19 argue that 12 C.F.R § 226.39 contains no private cause of action and cannot support a wrongful 20 foreclosure claim. (Dkt. No. 7 at 5.) 21 12 C.F.R. § 226.39 consists of notification requirements for a creditor who takes title to 22 an existing mortgage loan. Failure to comply with these requirements gives rise to a private 23 cause of action against the creditor. See 15 U.S.C. § 1640; Logan v. U.S. Bank Nat. Ass‘n, 722 24 ORDER GRANTING DEFENDANTS‘ MOTION TO DISMISS- 4 1 F.3d 1163, 1172 (9th Cir. 2013) (explaining that any person may sue a creditor who fails to 2 comply with the newly enacted notice requirement or other requirements under the Act for 3 damages. ). To state a claim under TILA, a plaintiff must allege actual damages resulting from 4 the creditor‘s TILA violation. In re Smith, 289 F.3d 1155, 1157 (9th Cir. 2002); Fazio v. 5 Experian Info. Solutions, Inc., No. 12-00497, 2012 WL 2119253, at *6 (N.D. Cal. June 11, 6 2012). 7 Plaintiffs fail to state a plausible claim for relief under TILA. While Plaintiffs support 8 their TILA violation claim by alleging Green Tree Servicing cannot prove ownership of the 9 promissory note, they do not state any facts showing that actual damages resulted from a TILA 10 notice violation. Plaintiffs‘ second cause of action fails to state a claim upon which relief can be 11 granted, and is therefore DISMISSED. 12 To the extent Plaintiffs‘ second cause of action can be construed to allege that Defendants 13 violated the Fair Debt Collection Practices Act ( FDCPA ), 15 U.S.C. § 1692g, Plaintiffs‘ claim 14 still fails. Plaintiffs argue that Defendants do not have the right to foreclose on the property 15 because the debt has been and is now officially in dispute. By law, all collection activities must 16 cease until this matter is resolved. (Dkt. No. 1 at 17.) While the FDCPA covers debt collection 17 activities, a non-judicial foreclosure action does not constitute debt collection‘ under the 18 FDCPA. Diessner v. Mortgage Elec. Registration Sys., 618 F. Supp. 2d 1184, 1188–89 (D. 19 Ariz. 2009), aff‘d 384 F. App‘x 609 (9th Cir. 2010). Because Defendants‘ non-judicial 20 foreclosure of Plaintiffs‘ property does not equate to debt collection under the FDCPA, to the 21 extent Plaintiffs‘ cause of action can be construed as a FDCPA claim, Plaintiffs fail to state a 22 claim upon which relief can be granted. 23 24 ORDER GRANTING DEFENDANTS‘ MOTION TO DISMISS- 5 1 C. TILA Right to Rescind/Breach of Contract Plaintiffs‘ third cause of action asserts a breach of contract claim against Defendants, but 2 3 is styled as a TILA violation under the right-to-rescind provision, 15 U.S.C. § 1635. (Dkt. No. 1 4 at 19.) Plaintiffs allege that after failure of the Defendants to validate true ownership [of the 5 property], [Plaintiffs] executed their Right-to-Cancel‘ pursuant to Truth in Lending [Act]. (Id. 6 at 6.) Defendants argue Plaintiffs fail to state a claim for rescission under TILA because any 7 claim would be time-barred and Plaintiffs do not claim to be ready, willing, and able to return the 8 funds loaned to them. (Dkt. No. 7 at 6.) Defendants further argue Plaintiffs fail to allege any 9 facts supporting a breach of contract claim, including what contract was breached and by whom. 10 (Id.) 11 TILA provides a right to rescind to borrowers who secure a loan with their primary 12 residence, such as a borrower securing a home loan with a deed of trust and promissory note. 15 13 U.S.C. § 1635. The borrower‘s right to rescind, however, expires three years after the date of 14 consummation of the transaction or upon the sale of the property, whichever occurs first. 15 15 U.S.C. § 1635(f); Merritt v. Countrywide Fin. Corp., 759 F.3d 1023, 1030 (9th Cir. 2014). 16 Plaintiffs fail to state a claim for rescission under TILA. Although Plaintiffs state that 17 they executed their right to rescind after failure of the Defendants to validate true ownership, 18 (Dkt. No. 1 at 6), they do not state when, precisely, Defendants failed to validate true ownership 19 or when they executed their right to rescind. Plaintiffs‘ mortgage was recorded in 2008, (Id. at 20 10), more than three years before this action was instituted, and Plaintiffs do not argue that the 21 statute of limitations should not apply. The Court finds that Plaintiffs‘ right to rescind has 22 expired because the transaction was consummated more than three years ago, and therefore their 23 third cause of action fails to state a claim upon which relief can be granted and is DISMISSED. 24 ORDER GRANTING DEFENDANTS‘ MOTION TO DISMISS- 6 1 To the extent Plaintiffs plead breach of contract under Washington common law, a breach 2 of a contract is actionable where the contract imposes a duty, the duty is breached, and the 3 breach proximately causes damages to the claimant. Northwest Mfrs. v. Dep‘t of Labor, 78 Wn. 4 App. 707, 713 (1995). Here, Plaintiffs fail to allege a specific contract that was breached, the 5 duty that was breached, and the party who breached it. Plaintiffs therefore fail to state a claim for 6 breach of contract. 7 8 D. Racketeering Influenced and Corrupt Organizations Act Plaintiffs‘ fourth cause of action alleges a RICO violation by Defendant Green Tree 9 Servicing under 18 U.S.C. § 1962. (Dkt. No. 1 at 20.) Plaintiffs claim Defendant was the 10 principal or participated in the operation, management of this scheme itself and the pattern of 11 racketeering include at least acts, transmission, the use of mail of fake assignments and mortgage 12 and fictional corporate signatures [sic]. (Id.) Plaintiffs also claim Defendant manufactured 13 default and used the State Court and County Recorder‘s office to foreclose on Plaintiff‘s 14 property. (Id.) Defendants argue Plaintiffs fail to allege facts that support any of the RICO 15 elements, and that the claim is time-barred. (Dkt. No. 7 at 7.) 16 To state a RICO claim, a plaintiff must allege (1) conduct (2) of an enterprise (3) 17 through a pattern (4) of racketeering activity (known as predicate acts‘) (5) causing injury to 18 plaintiff‘s business or property.‘ Living Designs, Inc. v. E.I. Dupont de Nemours & Co., 431 19 F.3d 353, 361 (9th Cir. 2005). Courts apply Fed. R. Civ. P. 9(b)‘s particularity requirement to 20 RICO claims. Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 541 (9th Cir. 1989). Rule 21 9(b) requires that the pleader state the time, place, and specific content of the false 22 representations as well as the identities of the parties to the misrepresentation. Id. 23 24 ORDER GRANTING DEFENDANTS‘ MOTION TO DISMISS- 7 1 Plaintiffs fail to state a plausible RICO claim with particularity because they do not state 2 the time, place, or specific content of the false representations allegedly made by Defendant 3 Green Tree Servicing. Plaintiffs‘ fourth cause of action fails to state a claim upon which relief 4 can be granted, and is therefore DISMISSED. 5 6 E. Civil Conspiracy Plaintiffs‘ fifth cause of action alleges civil conspiracy against Defendants Northwest 7 Trustee Services and Green Tree Servicing. (Dkt. No. 1 at 21.) Plaintiffs argue Northwest 8 Trustee Services and Green Tree Servicing conspired to divest Plaintiffs of real property and are 9 employing a willful and intentional misuse of the foreclosure process. (Id.) Plaintiffs voluntarily 10 dismissed Northwest Trustee Services from this lawsuit, which results in a civil conspiracy claim 11 against one party: Green Tree Servicing. (See Dkt. No. 9.) Because a claim for civil conspiracy 12 requires a combination of two or more persons who contrive to commit a criminal or unlawful 13 act, Adams v. King Cnty., 164 Wn.2d 640, 660 (2008) (emphasis added), Plaintiffs‘ fifth cause 14 of action fails to state a claim upon which relief can be granted, and is therefore DISMISSED. 15 16 F. Declaratory Relief Plaintiffs‘ final cause of action seeks declaratory relief and requests the Court to 17 determine whether any Defendant has the legal right to foreclose based upon the Mortgage, 18 and the rights and duties as to the validity of the Note and the Deed of Trust, and Defendants‘ 19 rights to conduct a non-judicial foreclosure. (Dkt. No. 1 at 22.) 20 Declaratory judgment is a remedy, not a cause of action. See, e.g., Bisson v. Bank of 21 Am., N.A., 919 F. Supp. 2d 1130, 1139 (W.D. Wash. 2013). To obtain declaratory relief, 22 Plaintiffs must first adequately state an underlying claim. Id.; see also Massey v. BAC Home 23 Loans Servicing LP, 2013 U.S. Dist. LEXIS 147342, at *14 (W.D. Wash. Feb. 13, 2013). 24 ORDER GRANTING DEFENDANTS‘ MOTION TO DISMISS- 8 1 Because Plaintiffs have failed to state any plausible claim, they are not entitled to declaratory 2 relief, and their sixth cause of action is DISMISSED. Plaintiffs’ Additional Arguments 3 II. 4 In their January 23, 2015 Response, (Dkt. No. 10), Plaintiffs assert that they did not 5 receive service of the motion, mailed to them on December 22, 2014, (Dkt. No. 7 at 10), until 6 January 17, 2015, six days before the motion‘s noting date. They argue the motion should be re7 noted from January 23, 2015, to February 13, 2015, to allow them time to seek counsel regarding 8 a response to the motion. (Dkt. No 10 at 2–3.) Plaintiffs then filed an Amended Response— 9 without counsel—on February 2, 2015, (Dkt. No. 11), again requesting that the motion be re10 noted for February 13, 2015. 11 To the extent Plaintiffs‘ response can be interpreted as a request for additional time to 12 respond, Plaintiffs have now had over one month to prepare and file a response since the alleged 13 date of service, and have already filed one amended response. The Court declines to provide 14 Plaintiffs with additional time, or leave to file a third response, simply because Plaintiffs have 15 decided to seek counsel. The Court also notes that service appears proper because Defendants 16 mailed the motion on December 22, 2014 via first class mail. Fed. R. Civ. P. 5(b); Kim v. 17 Commandant, Def. Language Inst., Foreign Language Ctr., 772 F.2d 521, 524 (9th Cir. 1985) 18 ( Service by mail is complete upon mailing. ). The Court finds that Plaintiffs have had sufficient 19 opportunity to respond to the motion and, therefore, denies Plaintiffs‘ request for additional time 20 to respond. 21 Plaintiffs also argue in their amended response that Defendants have failed to comply 22 with Fed. R. Civ. P. 7.1, requiring them to file corporate disclosure statements. (Dkt. No. 11 at 23 4.) Because Defendants did not submit corporate disclosure statements prior to their motion, 24 ORDER GRANTING DEFENDANTS‘ MOTION TO DISMISS- 9 1 Plaintiffs move the Court to strike Defendant‘s Motion and for Judgment on the allegations of 2 Plaintiff‘s Complaint. . . . (Id.) 3 Plaintiffs‘ argument is without merit. Fed. R. Civ. P. 7.1 is intended to help judges be 4 properly informed of potential conflicts of interest that might justify disqualification. See 5 Advisory Committee Note, Fed. R. Civ. P. 7.1. Furthermore, corporate disclosures were filed on 6 March 2, 2015, and the Court finds that the delay in their filing has not prejudiced Plaintiffs in 7 this case. 8 The remainder of Plaintiffs‘ response argues that Plaintiffs believe they will prevail if 9 allowed to conduct discovery. (Dkt. No. 11 at 5.) To survive dismissal, however, Plaintiffs‘ 10 complaint must plead factual content sufficient to state a claim for relief that is plausible on its 11 face; conclusory statements are insufficient. 12 13 Conclusion Because Plaintiffs fail to state a plausible claim for relief, the Court GRANTS 14 Defendants‘ motion to dismiss under Fed. R. Civ. P. 12(b)(6) and DISMISSES Plaintiffs‘ claims 15 with prejudice. 16 17 The clerk is ordered to provide copies of this order to all counsel. 18 Dated this 11th day of March, 2015. 19 A 20 21 Marsha J. Pechman Chief United States District Judge 22 23 24 ORDER GRANTING DEFENDANTS‘ MOTION TO DISMISS- 10
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