Frederick v. Federal National Mortgage Association et al

Filing 18

ORDER Granting 8 MOTION to Dismiss Complaint filed by Federal National Mortgage Association and Aurora Loan Servicing, LLC. IT IS FURTHER ORDERED that Plaintiff is given leave to amend Complaint by 5/14/2012. Signed by Judge Gloria M. Navarro on 4/18/12. (Copies have been distributed pursuant to the NEF - EDS)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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ROBERT A. FREDERICK,
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Plaintiff,

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vs.

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FEDERAL NATIONAL MORTGAGE
ASSOCIATION, et al.,

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Defendants.

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Case No.: 2:11-cv-00522-GMN-CWH
ORDER

This is a foreclosure case initiated by pro se Plaintiff Robert A. Frederick in state court,

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against Defendants Federal National Mortgage Association (“Fannie Mae”), Cal-Western

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Reconveyance Corp. (“Cal-Western”), Aurora Loan Servicing, LLC (“Aurora”), Centex Mortgage

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Services (“Centex”), MERSCORP, Inc. (“MERSCORP”), Mortgage Electronic Registration

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Systems, Inc. (MERS), and Shalom Rubanowitz, an individual.
Pending before the Court is the Motion to Dismiss (ECF No. 8) filed by Defendants

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Fannie Mae and Aurora (collectively “Moving Defendants”), along with their Request for

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Judicial Notice (ECF No. 9). Plaintiff filed a Response (ECF No. 13) and Moving Defendants

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filed a Reply (ECF No. 14) that was corrected and re-filed (ECF No. 15) the same day.

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I.

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BACKGROUND
Plaintiff’s Complaint alleged thirteen (13) causes of action relating to the mortgage and

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foreclosure proceedings instituted against his property located at 5713 Earthsong Street, Las

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Vegas, Nevada, 89081, APN# 124-25-812-028 (“the property”): (1) Violations of Unfair Lending

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Practices – NRS 598(D); (2) Deceptive Trade Practices – all named Defendants; (3) Wrongful

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Foreclosure; (4) Conspiracy to Commit Fraud and Conversion; (5) Conspiracy to Commit Fraud

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Related to MERS System; (6) Inspection and Accounting; (7) Unjust Enrichment; (8) Quiet Title

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– all named Defendants; (9) Breach of Good Faith and Fair Dealing; (10) Wrongful Filing of

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Unlawful Detainer [mislabeled as “Ninth Cause of Action”]; (11) Injunctive Relief;

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(12) Declaratory Relief; (13) Rescission. (ECF No. 1-3.)

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The Complaint appears to be a form complaint that has come before this Court in other

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cases.1 The thirteen causes of action in the body of the Complaint do not distinguish which

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actions are attributed to each Defendant, nor does the Complaint allege specific facts supporting

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each cause of action. The Complaint also includes allegations that Bank of America violated

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truth in lending laws, although Bank of America is not a party to this litigation. (See Compl.,

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23:¶132.)

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II.

LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action

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that fails to state a claim upon which relief can be granted. See North Star Int’l. v. Arizona Corp.

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Comm’n., 720 F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule

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12(b)(6) for failure to state a claim, dismissal is appropriate only when the complaint does not

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give the defendant fair notice of a legally cognizable claim and the grounds on which it rests. See

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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is

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sufficient to state a claim, the Court will take all material allegations as true and construe them in

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the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th

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Cir. 1986).
The Court, however, is not required to accept as true allegations that are merely

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conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden

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State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). A formulaic recitation of a cause of action

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with conclusory allegations is not sufficient; a plaintiff must plead facts showing that a violation

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See, e.g., Lee v. BAC Home Loans Servicing, LP, No. 2:11-cv-1583-JCM-PAL, 2011 WL 5827202, 2011 U.S. Dist. LEXIS
133697 (D. Nev. Nov. 18, 2011).

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is plausible, not just possible. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Twombly,

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550 U.S. at 555) (emphasis added).

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A court may also dismiss a complaint pursuant to Federal Rule of Civil Procedure 41(b)

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for failure to comply with Federal Rule of Civil Procedure 8(a). Hearns v. San Bernardino Police

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Dept., 530 F.3d 1124, 1129 (9th Cir.2008). Rule 8(a)(2) requires that a plaintiff’s complaint

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contain “a short and plain statement of the claim showing that the pleader is entitled to relief.”

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Fed. R. Civ. P. 8(a)(2). “Prolix, confusing complaints” should be dismissed because “they

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impose unfair burdens on litigants and judges.” McHenry v. Renne, 84 F.3d 1172, 1179 (9th

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Cir.1996). Mindful of the fact that the Supreme Court has “instructed the federal courts to

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liberally construe the ‘inartful pleading’ of pro se litigants,” Eldridge v. Block, 832 F.2d 1132,

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1137 (9th Cir. 1987), the Court will view Plaintiff’s pleadings with the appropriate degree of

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leniency.

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“Generally, a district court may not consider any material beyond the pleadings in ruling

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on a Rule 12(b)(6) motion . . . . However, material which is properly submitted as part of the

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complaint may be considered on a motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner

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& Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citations omitted). Similarly, “documents

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whose contents are alleged in a complaint and whose authenticity no party questions, but which

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are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6)

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motion to dismiss” without converting the motion to dismiss into a motion for summary

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judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Under Federal Rule of Evidence

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201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay Beer Distrib.,

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798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court considers materials outside

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of the pleadings, the motion to dismiss is converted into a motion for summary judgment. See

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Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir. 2001).

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If the court grants a motion to dismiss, it must then decide whether to grant leave to

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amend. The court should “freely give” leave to amend when there is no “undue delay, bad

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faith[,] dilatory motive on the part of the movant . . . undue prejudice to the opposing party by

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virtue of . . . the amendment, [or] futility of the amendment . . . .” Fed. R. Civ. P. 15(a); Foman v.

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Davis, 371 U.S. 178, 182 (1962). Generally, leave to amend is only denied when it is clear that

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the deficiencies of the complaint cannot be cured by amendment. See DeSoto v. Yellow Freight

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Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992).

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III.

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DISCUSSION
The Court takes judicial notice of the documents submitted by Moving Defendants (ECF

No. 9) and makes the following findings: (1) the allegations in the Complaint are merely

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conclusory, unwarranted deductions of fact, or unreasonable inferences; (2) Plaintiff has failed to

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plead facts showing that violations are plausible, not just possible; (3) even taking all material

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allegations as true and construing them in the light most favorable to the Plaintiff, the Complaint

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does not give Defendants fair notice of a legally cognizable claim and the grounds on which it

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rests. Therefore, the Complaint will be dismissed pursuant to Rule 12(b)(6) for failure to state a

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claim upon which relief can be granted.

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Because Plaintiff is representing himself pro se, the Court construes his pleadings with

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leniency. As discussed below, the Court will grant Plaintiff leave to amend the following causes

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of action.

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(1) Violations of Unfair Lending Practices – NRS 598(D)
Plaintiff obtained the instant loan on April 18, 2005. At the time of this loan, it was an

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unfair lending practice to approve a loan without considering a borrower’s ability to repay,

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pursuant to NRS 598D. The statute of limitations for claims alleging a violation of the unfair

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lending practices act is three years. See NRS 11.190(3)(a) (creating a three-year statutory period

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for claims premised on a violation of a statute). Therefore, this cause of action accrued in 2005,

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when the loan was finalized. Plaintiff does not allege facts supporting tolling of the statute of

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limitations. If Plaintiff can do so, the Court will grant him leave to amend his Complaint to

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reflect those allegations.

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(2) Deceptive Trade Practices. – all named Defendants

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Plaintiff’s second cause of action alleges deceptive trade practices pursuant to NRS

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598.0915 and 598.0923. (Compl., 10:¶36). Subsection 598.0915 makes knowingly making any

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false representation in a transaction a deceptive trade practice. Here, Plaintiff alleges that

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“Defendants did not furnish Plaintiff the correct Notice of Servicing that the loan may be

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assigned, sold, or transferred to any other person in violation of 12 U.S.C. 2605(a).” (Compl.

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10:¶39). This claim is barred by the applicable statute of limitations for a claim under the

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Deceptive Trade Practices Act, which is four years. NRS 11.190(2)(d). Again, Plaintiff’s claim

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arises from the origination of the loan in 2005, and the instant action was filed in 2011, more than

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four years later.

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Subsection 598.0923 does not apply to this case: (1) Plaintiff has not alleged, under

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subsection one, that any Defendant has been conducting its business without a required license;

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(2) subsections two and three apply to the sale or lease of goods or services; (3) Plaintiff has not

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alleged that any Defendant, under subsection four, has used coercion, duress or intimidation in a

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transaction; and (4) no Defendant was the seller in a land sale installment contract under

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subsection five.

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Moreover, courts have recognized that the Deceptive Trade Practices act does not apply to

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real property transactions, but to the sale of goods and services. See Reyna v. Wells Fargo Bank,

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N.A., No. 2:10-cv-01730-KJD-RJJ, 2011 WL 2690087, *9 (D. Nev. July 11, 2011) (“N.R.S. §

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598 ... applies only to goods and services and not to real estate loan transactions.”; see also

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Alexander v. Aurora Loan Services, No. 2:09-cv-1790-KJD-LRL, 2010 WL 2773796, *2 (D.

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Nev. July 8, 2010) (“Plaintiff’s claim deals with the sale or lease of real property, not goods or

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services; therefore [N.R.S. § 598] does not provide an avenue of relief to [p]laintiff.”); Parker v.

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GreenPoint Mortgage Funding, No. 3:11-cv-00039-ECR-RAM, 2011 WL 2923949, (D. Nev.

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July 15, 2011) (N.R.S. § 598 “does not cover a mortgage foreclosure”).

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Accordingly, Plaintiff’s second cause of action is dismissed.

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(3) Wrongful Foreclosure

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Under Nevada law, “[a]n action for the tort of wrongful foreclosure will lie if the trustor

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or mortgagor can establish that at the time the power of sale was exercised or the foreclosure

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occurred, no breach of condition or failure of performance existed on the mortgagor’s or trustor’s

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part which would have authorized the foreclosure or exercise of the power of sale.” Collins v.

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Union Fed. Sav. & Loan Ass’n, 662 P.2d 610, 623 (Nev. 1983). In order to state a claim for

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wrongful foreclosure, Plaintiff must allege that he had not breached any condition of the loan that

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would have authorized the foreclosure or exercise of the power of sale. Plaintiff did not do so.

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Accordingly, Plaintiff’s third cause of action is dismissed.

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(4) Conspiracy to Commit Fraud and Conversion; and

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(5) Conspiracy to Commit Fraud Related to MERS System

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To allege a conspiracy to defraud, a complaint must meet the particularity requirements of

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Federal Rule of Civil Procedure 9(b) and inform each defendant of its actions that constituted

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joining the conspiracy. Graziose v. Am. Home Products Corp., 202 F.R.D. 638, 642 (D.

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Nev.2001). Allegations of conspiracy should be accompanied by the who, what, when, where,

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and how of the misconduct. Ness v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003).

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Here, Plaintiff makes conclusory allegations of fraud and fails to individualize the

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Defendants’ conduct. For example, Plaintiff alleges that Defendants “did willfully and

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knowing[ly] conspire and agree among themselves to engage in a conspiracy to promote,

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encourage, facilitate and actively engage in fraudulent and predatory lending practices.” (Compl.

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13:¶64.) The Complaint alleges that MERS was created as a fraudulent venture to take

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advantage of unwitting borrowers and that the defendants “acted as creators for the conspiracy.”

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(Compl. ¶ 72-73.) Such general and vague allegations are not sufficient to meet the heightened

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pleading standard of Rule 9(b). Accordingly, the fourth and fifth causes of action are dismissed

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as to all Defendants. If Plaintiff can amend these allegations of fraud with the required

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specificity, he is given leave to do so.

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(6) Inspection and Accounting

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An action for inspection and accounting will prevail only where the plaintiff can establish

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that there exists a relationship of special trust between the plaintiff and defendant. McCurdy v.

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Wells Fargo, 2010 WL 4102943 (D. Nev. 2010). Absent special circumstances, no such

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relationship exists between a lender and a borrower. Giles v. Gen. Motors Acceptance Corp., 494

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F.3d 865, 882 (9th Cir. 2007).

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Plaintiff alleges that “[d]ue to the unfair and deceptive nature of the Plaintiff’s loan

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transaction, the defendants were paid excessive interest and fees . . . . Therefore proper discovery

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and accounting will reveal the ‘true realized’ status of the account as stated.” (Compl. 16:¶80.)

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However, Plaintiff has failed to allege any special circumstances that would create the requisite

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fiduciary relationship between himself as the borrower, and one or more Defendants as a lender.

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See McCurdy, 2010 WL 4102943 (dismissing an action for inspection and accounting where

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plaintiff failed to allege the requisite relationship of trust). Accordingly, the sixth cause of action

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is dismissed as to all Defendants.

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(7) Unjust Enrichment

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“An action based on a theory of unjust enrichment is not available when there is an

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express, written contract, because no agreement can be implied when there is an express

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agreement.” Leasepartners Corp. v. Robert L. Brooks Trust, 942 P.2d 182, 187 (Nev. 1997) (per

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curiam). Thus the doctrine of unjust enrichment only “applies to situations where there is no

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legal contract but where the person sought to be charged is in possession of money or property

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which in good conscience and justice he should not retain but should deliver to another [or

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should pay for].” Id.
Plaintiff’s Complaint admits that he entered into an express contract when he executed the

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deed of trust and note. (Compl. 4:¶2.) Accordingly, his cause of action for unjust enrichment

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must fail.

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(8) Quiet Title – all named Defendants

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In Nevada, a quiet title action may be brought “by any person against another who claims

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an estate or interest in real property, adverse to the person bringing the action, for the purpose of

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determining such adverse claim.” NRS 40.010. “In a quiet title action, the burden of proof rests

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with the plaintiff to prove good title in himself.” Breliant v. Preferred Equities Corp., 918 P. 2d

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314, 318 (Nev. 1996). “Additionally, an action to quiet title requires a plaintiff to allege that she

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has paid any debt owed on the property.” Lalwani v. Wells Fargo Bank, N.A., No. 2-11-cv-

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00084, 2011 WL 4574338 at *3 (D. Nev. Sep. 30, 2011) (citing Ferguson v. Avelo Mortg., LLC,

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No. B223447, 2011 WL 2139143 at *2 (Cal. App. 2d June 1, 2011). Plaintiff has failed to allege

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that he is not in breach of the loan agreement. Accordingly, his eighth cause of action is

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dismissed.

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(9) Breach of Good Faith and Fair Dealing

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To state a claim of breach of the covenant of good faith and fair dealing, Plaintiff must

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allege: (1) Plaintiff and Defendants were parties to an agreement; (2) Defendants owed a duty of

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good faith to the Plaintiff; (3) Defendants breached that duty by performing in a manner that was

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unfaithful to the purpose of the contract; and (4) Plaintiff’s justified expectations were denied.

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Perry v. Jordan, 900 P.2d 335, 338 (Nev. 1995). In Nevada, an implied covenant of good faith

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and fair dealing exists in every contract, Consolidated Generator–Nevada v. Cummins Engine,

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917 P.2d 1251, 1256 (Nev. 1998), and a plaintiff may assert a claim for its breach if the

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defendant deliberately contravenes the intention and spirit of the agreement, Morris v. Bank Am.

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Nev., 886 P.2d 454 (Nev. 1994). The covenant of good faith and fair dealing “only applies after

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a binding contract is formed.” Crellin Techs., Inc. v. Equipmentlease Corp., 18 F.3d 1, 10 (1st

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Cir. 1994).

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Plaintiff alleges that Defendants breached the duty in two ways. First, Plaintiff contends

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that by failing to pay equal consideration to Plaintiff’s financial interests, Defendants acted in

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bad faith. Second, Plaintiff argues that Defendants refused to negotiate with Plaintiff in good

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faith after plaintiff requested payment assistance under the Home Affordable Modification

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Program (“HAMP”).

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Plaintiff’s first contention must fail because it is established that lenders owe no fiduciary
obligations to borrowers absent exceptional circumstances. See Kwok v. CR Title Co., No. 2:09-

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cv-2298 (D. Nev. June 23, 2010). No exceptional circumstances or special relationship was

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alleged here.

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Plaintiff’s second allegation regarding the covenant of good faith and fair dealing alleges

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that Defendants failed to meet their obligations under the federal HAMP program, and that the

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failure constitutes a breach of the covenant of good faith and fair dealing. (Compl. 19:¶¶99-101.)

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However, even if Plaintiff has a private right of action under HAMP, Plaintiff has failed to allege

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any conduct by Defendants which deliberately contravened the intention and spirit of any

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agreement between them. Accordingly, Plaintiff’s ninth cause of action is dismissed as to all

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Defendants.

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(10) Wrongful Filing of Unlawful Detainer [mislabeled as “Ninth Cause of Action”]

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Wrongful filing of an unlawful detainer is not a tort recognized as a cause of action in

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Nevada. Goodwin v. Executive Trustee Services, LLC, 2010 WL 5056192, at *4 (D. Nev. 2010).

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Accordingly, Plaintiff’s tenth cause of action is dismissed.

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(11) Injunctive Relief; (12) Declaratory Relief; and (13) Rescission

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Plaintiff’s eleventh, twelfth and thirteenth causes of action are not recognized as causes of

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action in Nevada. Injunctive relief, declaratory relief, and rescission are remedies, not claims.

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Accordingly, these “causes of action” are dismissed.

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IV.

CONCLUSION

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IT IS HEREBY ORDERED that the Motion to Dismiss (ECF No. 8) is GRANTED.

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IT IS FURTHER ORDERED that Plaintiff is given leave to amend his Complaint

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consistent with this order by May 14, 2012.
DATED this 18th day of April, 2012.

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_____________________________
Gloria M. Navarro
United States District Judge

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