Residential Funding Company, LLC v. Circle Mortgage Corp.

Filing 143

ORDER granting 133 Motion to Strike Pleading ; finding as moot 133 Motion for Judgment on the Pleadings (Written Opinion). Signed by Judge Paul A. Magnuson on June 23, 2015. (ALT)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Residential Funding Company, LLC,

Civ. No. 13-3457 (PAM/FLN)

Plaintiff,
v.
Embrace Home Loans, Inc., f/k/a
Advanced Financial Services, Inc.,
Defendant.
MEMORANDUM AND ORDER
Residential Funding Company, LLC,

Civ. No. 13-3545 (PAM/FLN)

Plaintiff,
v.
Circle Mortgage Corp.,
Defendant.

This matter is before the Court on Motions to Strike or for Judgment on the Pleadings
filed by Plaintiff Residential Funding Company (“RFC”) in the above-captioned cases. Both
Motions seek to strike the same two affirmative defenses; the Motion as to Defendant Circle
Mortgage Corp. also seeks to strike an additional affirmative defense.1
On May 21, 2015, Judge Susan Richard Nelson of this Court dismissed the three
affirmative defenses at issue here in ruling on a motion to strike or for judgment on the
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The Motion in Embrace initially sought to strike three affirmative defenses. But
after Judge Nelson’s ruling, discussed below, the parties stipulated that RFC would
withdraw its motion as to the affirmative defense of estoppel, leaving only RFC’s challenge
to the defenses of unclean hands and laches. (Stipulation (Docket No. 154).)

pleadings filed in the consolidated RFC action. In re: RFC and ResCap Liquidating Trust
Litigation, No. 13cv3451, 2015 WL 2451254 (D. Minn. May 21, 2015) (Nelson, J.). The
parties have agreed to rely on their briefing in the consolidated action in lieu of filing
duplicative briefs, and have waived oral argument on the pending Motions.
For the reasons that follow, the Motions are granted.
BACKGROUND
The full factual background of the matter is set forth in a previous Order, Residential
Funding Co., LLC v. Embrace Home Loans, Inc., 27 F. Supp. 3d 980 (D. Minn. 2014), and
in Judge Nelson’s opinion referenced above. In these Motions, RFC challenges Embrace’s
affirmative defenses of laches and unclean hands (Answer (Docket No. 113 in 13cv3457) 6th
Affirmative Defense), and Circle’s affirmative defenses of laches, unclean hands, and failure
to satisfy conditions precedent. (Answer (Docket No. 106 in 13-3545) Affirmative Defense
¶¶ 6, 10.)
DISCUSSION
A.

Standard of Review
RFC moves to strike the affirmative defenses under Rule 12(f), or in the alternative

for judgment on the pleadings under Rule 12(c). The effect of either subsection is the same:
the affirmative defense will be dismissed, either with or without prejudice. And the standard
of review under either subsection is indistinguishable: a motion to strike tests whether the
defense is sufficient as a matter of law, Fed. R. Civ. P. 12(f), while a motion for judgment
on the pleadings tests whether the movant is entitled to judgment on the defense as a matter
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of law. Fed. R. Civ. P. 12(c). Thus, either subsection provides an appropriate avenue by
which to challenge an affirmative defense. See In re: RFC, 2015 WL 2451254, at *4
(considering the motion under Rule 12(f)).
In addition and as noted, the issues presented here are the same as those in Judge
Nelson’s thorough and well-reasoned opinion. Although the Court has considered the issues
independently, in light of Judge Nelson’s thorough opinion on the matter, there is no need
to “engage in an ‘affectation of research and a pretense of authorship and originality.” Ray
v. Anoka Cnty., 24 F. Supp. 3d 843, 846 (D. Minn. 2014) (quoting N. PCS Servs., LLC v.
Sprint Nextel Corp., No. 05cv2744, 2007 WL 951546, at *8 (D. Minn. Mar. 27, 2007) (Kyle,
J.)).
B.

Equitable Defenses
RFC argues that Defendants’ equitable defenses—unclean hands and laches—should

be dismissed because its claims are legal, not equitable. In response, Defendants contend that
RFC seeks a declaratory judgment and may in the future amend its claims to assert a claim
for equitable relief. But as Judge Nelson found, Defendants’ argument regarding RFC’s
declaratory-judgment claim misconstrues the nature of that claim and Defendants’ argument
about potential amendments to the pleadings is speculative. In re: RFC, 2015 WL 2451254,
at *10. Because RFC has not pleaded equitable claims, Defendants’ equitable defenses must
be stricken.
C.

Conditions Precedent
“[U]nder New York and Minnesota law, a conditions precedent defense requires the
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contract in question to clearly and unambiguously provide for this defense.” Id. at *9. As
Circle acknowledges, because the terms of the parties’ agreements are in dispute, Circle can
point to no provision in the contracts that includes a condition precedent. Because Circle
must plead this defense with particularity, the defense fails. Id. It is dismissed without
prejudice, however, to allow Circle to re-plead it should the parties’ contracts support the
defense.
CONCLUSION
Accordingly, IT IS HEREBY ORDERED that:
1.

RFC’s Motion to Strike (Docket No. 117 in 13-3457) Embrace Home Loan’s
affirmative defenses of laches and unclean hands (Defendant’s Sixth
Affirmative Defense (Docket No. 113)) is GRANTED and those defenses are
STRICKEN/DISMISSED with prejudice;

2.

RFC’s Motion to Strike (Docket No. 133 in 13-3545) Circle Mortgage
Company’s affirmative defenses of laches and unclean hands (Defendant’s
Sixth Affirmative Defense (Docket No. 106)) is GRANTED and those
defenses are STRICKEN/DISMISSED with prejudice; and

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3.

RFC’s Motion to Strike (Docket No. 133 in 13-3545) Circle Mortgage
Company’s affirmative defense of failure to satisfy conditions precedent
(Defendant’s Tenth Affirmative Defense (Docket No. 106)) is GRANTED
and that defense is STRICKEN without prejudice/DISMISSED without
prejudice.

Dated: June 23, 2015

s/Paul A. Magnuson
Paul A. Magnuson
United States District Court Judge

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