Brashkis et al v. Hyperion Capital Group, LLC et al

Filing 33

ORDER granting 8 Defendant NW Trustee Services' Motion to Dismiss; granting 20 Hyperion Capital Group's Motion to Dismiss; and granting 26 Bank of America, MERS, and Wells Fargo's Motion to Dismiss. All claims in this matter are dismissed. Signed by Judge Ronald B. Leighton.(DN)

HONORABLE RONALD B. LEIGHTON 1 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA 7 8 9 VERA BRASHKIS and DV&I SERVICES, INC., 10 Plaintiffs, 11 12 13 14 15 No. 3:11-cv-05635 RBL ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS [Dkt. #s 8, 20, 26] v. HYPERION CAPITAL GROUP, LLC; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; NORTHWEST TRUSTEE SERVICES, INC.; BANK OF AMERICA, N.A.; WELLS FARGO BANK, N.A.; and DOES 1–20, Defendants. 16 17 18 19 INTRODUCTION THIS MATTER comes before the Court upon Defendants’ Motions to Dismiss under 20 Rule 12(b)(6) for failure to state a claim upon which relief can be granted. [Dkt. #s 8, 20, 26]. 21 This case arises from a home mortgage agreement between Plaintiff Vera Brashkis and 22 Defendant Hyperion Capital Group, LLC. When Plaintiff defaulted on her mortgage, the 23 property at issue was repossessed. Plaintiff asserts a variety of claims against Defendants, all 24 based upon her assertion that they acted deceptively and fraudulently throughout the loan 25 process. 26 27 The Court has reviewed the materials submitted in support of and in opposition to the Motions. For the reasons below, the Defendants’ Motions to Dismiss are GRANTED. 28 ORDER - 1 BACKGROUND 1 2 1. Brashkis Property 3 On October 24, 2006, Plaintiff Vera Brashkis1 executed and delivered a $500,000 4 promissory note to Defendant Hyperion Capital Group, LLC. To secure repayment of the Note, 5 Brashkis executed and delivered to Hyperion a deed of trust on her Washougal, Washington 6 Property. The Deed was recorded on October 31, 2006, and identified Defendant Mortgage 7 Electronic Registration Systems, Inc. (MERS) as the nominee and beneficiary. Hyperion 8 assigned beneficial interest under the Deed to Defendant Bank of America, N.A. The 9 assignment of deed of trust was recorded on April 28, 2008. Bank of America then appointed 10 Defendant Northwest Trustee Services, Inc. (NWTS) as successor trustee. The appointment of 11 successor trustee was also recorded on April 28, 2008. Brashkis subsequently failed to make required mortgage payments and defaulted on the 12 13 Note. Bank of America pursued foreclosure under the Deed’s power of sale provision. As 14 trustee, NWTS conducted a foreclosure sale on July 15, 2011. There were no bids, and the 15 Brashkis Property reverted to beneficiary Bank of America. The Bank received a trustee’s deed, 16 which was recorded on July 25, 2011. 17 2. Procedural Background 18 Plaintiffs filed this suit in Clark County Superior Court on July 22, 2011, against 19 Hyperion, MERS, NWTS, Bank of America, Wells Fargo, and twenty unnamed officers. 20 Plaintiffs allege that Defendants acted fraudulently and deceptively throughout the mortgage 21 process. Defendant Wells Fargo Bank removed the case to Federal Court on federal question 22 grounds under 28 U.S.C. § 1446. [Dkt. #1]. Plaintiffs seek money damages as well as 23 declaratory and injunctive relief. Plaintiffs claim fraud, unfair business practices under 24 Washington’s Consumer Protection Act (RCW 19.86), prohibited practices under the 25 Washington’s Escrow Agent Registration Act (RCW 18.44), claims that Defendants aided and 26 abetted each other in fraudulent activities, claims quiet title, and slander of title. Defendants 27 filed Motions to Dismiss all claims [Dkt. #s 8, 20, 26]. 28 1 Brashkis alleges that DV&I Services, also involved in this case as a Plaintiff, is the current lawful owner of the subject Property pursuant to a quitclaim deed executed by Brashkis. ORDER - 2 DISCUSSION 1 2 1. Standard for Dismissal 3 Dismissal under Rule 12(b)(6) may be based on either the lack of a cognizable legal 4 theory or absence of sufficient facts alleged under a cognizable legal theory. Balistreri v. 5 Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). A plaintiff’s complaint must allege 6 facts to state a claim for relief that is plausible on its face. See Ashcroft v. Iqbal, 129 S. Ct. 1937, 7 1949 (2009). A claim has “facial plausibility” when the party seeking relief “pleads factual 8 content that allows the court to draw the reasonable inference that the defendant is liable for the 9 misconduct alleged.” Id. Although the Court must accept as true the Complaint’s well-pled facts, 10 conclusory allegations of law and unwarranted inferences will not defeat an otherwise proper 11 [Rule 12(b)(6)] motion. Vasquez v. L. A. County, 487 F.3d 1246, 1249 (9th Cir. 2007); Sprewell 12 v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). “[A] plaintiff’s obligation to 13 provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, 14 and a formulaic recitation of the elements of a cause of action will not do. Factual allegations 15 must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 16 550 U.S. 544, 555 (2007) (citations and footnote omitted). This requires a plaintiff to plead 17 “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Iqbal, 129 S. Ct. at 18 1949 (citing Twombly). 19 2. Fraud Claims 20 Brashkis claims fraud against all Defendants. She claims Defendants falsely represented 21 costs, fees, commissions, and risks associated with the loan. Her fraud claims hinge on 22 Hyperion’s and MERS’ alleged failures of duties under the federal Truth in Lending Act (TILA) 23 (15 U.S.C. § 1638) and the federal Real Estate Settlement Procedures Act (RESPA) (12 U.S.C. § 24 2607). 25 Plaintiffs’ TILA and RESPA claims are time-barred. TILA imposes a one-year statute of 26 limitations on damages claims. 15 U.S.C. § 1640(e). Plaintiffs alleged violations stem from the 27 loan application process. The limitations period begins to run when loan documents are signed. 28 ORDER - 3 1 See Meyer v. Ameriquest Mortg. Co., 342 F.3d 899, 902 (9th Cir. 2003). Brashkis signed the 2 documents in October 2006. The one-year TILA limitations period has elapsed. 3 RESPA violations are also subject to limitations periods. An action may be brought 4 “within 3 years in the case of a violation of section 2605 of this title and 1 year in the case of a 5 violation of section 2607 or 2608 of this title from the date of the occurrence of the violation . . . .” 6 12 U.S.C. § 2614. Sections 2605, 2607, and 2608 of the Act are all applicable to the fraud 7 allegations here. Any alleged violations necessarily occurred at the time the loan was signed. 8 Both the one- and three-year limitations periods have run. The fraud claim is time-barred. 9 Defendants Motions to Dismiss Plaintiffs’ fraud claims are GRANTED. 10 3. Consumer Protection Act Claim 11 Plaintiffs claim Defendants used unfair business practices in violation of Washington’s 12 Consumer Protection Act (RCW 19.86). Plaintiffs claim Defendants “rushed” Brashkis through 13 the loan and escrow process, made the loan without regard to Brashkis’ ability to meet the loan’s 14 terms, and violated TILA and RESPA. This claim is also time-barred. Section 19.86.090 15 provides a four-year limitations period from the time the cause of action accrues. 16 Brashkis took no action within the limitations period after signing loan documents. The 17 limitations period has run. If Brashkis also means to support her claim with the alleged TILA 18 and RESPA violations discussed above, those alleged violations are unhelpful, because they are 19 independently time-barred. Defendants’ Motions to Dismiss Plaintiff’s CPA claim are 20 GRANTED. 21 4. Escrow Agent Restriction Act Claim 22 Plaintiffs claim Defendants engaged in prohibited practices in violation of Washington’s 23 Escrow Agent Restriction Act (RCW 18.44). Section 18.44.301 identifies prohibited practices 24 for “any escrow agent, controlling person, officer, designated escrow officer, independent 25 contractor, employee of an escrow business, or other person subject to this chapter.” Prohibited 26 practices under the EARA include employing any means to defraud or mislead borrowers, 27 engaging in any unfair or deceptive practice toward any person, and obtaining property through 28 ORDER - 4 1 fraud or misrepresentation. Plaintiffs allege Defendants falsely provided and ratified notarized 2 documents, “rushed” Brashkis through the loan process, and violated RESPA. 3 Plaintiffs simply fail to allege any fact placing Defendants under the regulatory ambit of 4 the EARA. Plaintiffs have not asserted that Defendants are escrow agents or any other of the 5 identified persons regulated under the statute. Defendants point out that the state database of 6 escrow agents and officers subject to the Act does not include any of their names. This claim is 7 improper, because Plaintiffs have not alleged any fact to support the application of this statute to 8 Defendants. Defendants’ Motions to Dismiss Plaintiffs’ EARA claim are GRANTED. 9 10 5. Aiding and Abetting Claim Plaintiffs claim Defendants aided and abetted each other in deceptive and fraudulent acts. 11 Washington recognizes a cause of action for aiding and abetting fraud in some circumstances. 12 Wash. Constr., Inc. v. Sterling Sav. Bank, 163 Wash. App. 1027, 2011 WL 4043579, at *10 n.8 13 (2011) (citing Restatement (Second) of Torts § 876 (1977)). To succeed on an aiding and 14 abetting claim, a plaintiff must show that a defendant “knows that the other’s conduct constitutes 15 a breach of duty and gives substantial assistance or encouragement to the other.” Restatement 16 (Second) of Torts § 876(b). This claim requires a showing of agreement and concerted action 17 among Defendants in committing the fraud. See Martin v. Abbott Labs., 102 Wash.2d 581, 597– 18 599 (1984). 19 The fraud claim underlying this aiding and abetting claim has been dismissed. Supra at 20 3–4. The aiding and abetting claim cannot proceed when the fraud claim does not. Furthermore, 21 Plaintiffs fail to allege any fact establishing Defendants’ knowledge of and assistance with 22 deceptive or fraudulent conduct. Plaintiffs merely allege that Defendants did know and did 23 assist. These legal conclusions are not factual allegations and insufficient to state a claim on 24 which relief can be granted. Defendants’ Motions to Dismiss Plaintiffs’ aiding and abetting 25 claim is GRANTED. 26 6. Injunctive Relief Claim 27 Plaintiffs seek injunctive relief barring collection of Brashkis’ debt, creation of a lien on 28 the Property, and foreclosure of the Property. The collection of debt via foreclosure sale already ORDER - 5 1 occurred in July 2011. Plaintiffs claim for injunctive relief is moot. Defendants’ Motions to 2 Dismiss Plaintiffs’ request for injunctive relief are GRANTED. 3 7. Loan Rescission 4 Defendants ascertain that Plaintiff seeks rescission of her loan agreement under TILA. 5 The purpose of TILA rescission is to return parties to the status quo ante. Yamamoto v. Bank of 6 N.Y., 329 F.3d 1167, 1171 (9th Cir. 2003). Under TILA, a borrower will return money or 7 property following rescission (15 U.S.C. § 1635(b)), but courts have discretion to require tender 8 of advanced funds prior to rescission of a loan agreement. See Yamamoto, 329 F.3d at 1170. 9 Where a borrower has not alleged an ability to tender such funds, this Court has been unwilling 10 to allow TILA rescission to proceed. See, e.g., Moore v. ING Bank, FSB, 2011 WL 1832797, at 11 *3 (W.D. Wash. May 13, 2011) (holding a TILA rescission claim barred because of a borrower’s 12 failure to allege ability to tender). Brashkis has not alleged an ability to return funds advanced 13 on the Note. 14 Additionally, the TILA limitations period has run, barring Plaintiff from rescinding the 15 loan under that statute. To the extent Brashkis seeks rescission of her loan agreement, her 16 request fails, and Defendants Motions to Dismiss any rescission claim are GRANTED. 17 8. Declaratory Relief Claim 18 Plaintiffs seek declaratory relief. DV&I requests a declaration that it holds clear title to 19 the Property, and Brashkis requests a declaration that she does not owe any money pursuant to 20 her loan. Plaintiffs also seek a declaration that various documents filed with Clark County are 21 invalid. These requests for injunctive relief are thoroughly unsupported by factual allegations. 22 DV&I is alleged to hold a quitclaim deed to the Property. A quitclaim deed does not in and of 23 itself bestow title. It simply confers on grantee whatever interest grantor has in the Property at 24 the time of transfer. 25 Plaintiffs have alleged no facts to support DV&I’s assertion that it holds title, since 26 Brashkis lost title to the property upon repossession by Bank of America. Brashkis’ request for 27 declaratory relief is similarly unsupported by factual allegations, as is the request for a 28 ORDER - 6 1 declaration of document invalidity. Defendants’ Motions to Dismiss Plaintiffs’ request for 2 declaratory relief are GRANTED. 3 9. Quiet Title Claim 4 Plaintiff DV&I seeks quiet title of the Property. A quiet title action is designed to resolve 5 competing claims of ownership or the right of property possession. See Kobza v. Tripp, 106 6 Wash. App. 90, 95 (2001). Under RCW 7.28.230(1), deeds of trust and mortgages create only a 7 secured lien on real property. They do not convey ownership or a right to possess. None of the 8 Defendants except Bank of America have a current claim of ownership. Therefore Defendants, 9 other than Bank of America, are not the correct parties to engage in such an action. 10 With respect to Bank of America, Plaintiff fails to state a claim. Bank of America holds 11 a trustee’s deed to the Property following the foreclosure sale. The Deed of Trust Act provides 12 that “after a trustee’s sale, no person shall have any right, by statute or otherwise, to redeem the 13 property sold at the trustee’s sale.” RCW 61.24.050. Washington law requires that a trustee’s 14 deed be delivered and sale finalized “unless the sale itself was void due to a procedural 15 irregularity that defeated the trustee’s authority to sell the property.” Udall v. T.D. Escrow 16 Servs., Inc., 159 Wash.2d 903, 911 (2007). No such procedural irregularities are alleged here. 17 Plaintiff’s quiet title claim depends upon loan rescission this Court refused to grant. 18 Supra at 6. Furthermore, Plaintiff cannot rightly proceed on a quiet title claim when all the bases 19 for it have been previously dismissed in this Order. The quiet title claim against Bank of 20 America therefore fails. Defendants’ Motions to Dismiss Plaintiff’s quiet title claim are 21 GRANTED. 22 10. Slander of Title Claim 23 Plaintiffs assert a slander of title claim against all Defendants. Slander of title is the 24 employment of false words regarding a pending sale of property, published maliciously with the 25 purpose of defeating plaintiff’s title. See Rogvig v. Douglas , 123 Wash.2d 854, 859 (1994). 26 The slander must result in plaintiff’s financial loss. Id. 27 28 Plaintiffs fail to allege any use of false words by Defendants. Plaintiffs fail to allege any malicious publication. Plaintiffs fail to allege a pending sale or purchase of property at issue. ORDER - 7 1 The slander of title claim seems to be based on Plaintiffs’ allegation that Defendants did not 2 properly file or record various documents. Defendants’ alleged omission is insufficient to 3 support a slander of title claim. Defendants’ Motions to Dismiss Plaintiffs’ slander of title claim 4 are GRANTED. CONCLUSION 5 6 Defendants’ Motions to Dismiss all claims are GRANTED. 7 8 IT IS SO ORDERED. 9 Dated this 8th day of December, 2011. 10 11 12 13 14 15 A RONALD B. LEIGHTON UNITED STATES DISTRICT JUDGE 16 17 18 19 20 21 22 23 24 25 26 27 28 ORDER - 8