Canyon Community Bank National Association v. National Title Company

Filing 26

ORDER denying 7 Motion to Dismiss. Signed by Chief Judge Robert C. Jones on 1/10/12. (Copies have been distributed pursuant to the NEF - ECS)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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CANYON COMMUNITY BANK NATIONAL )
ASSOCIATION,
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Plaintiff,
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v.
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NATIONAL TITLE COMPANY,
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Defendant.
)

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___________________________________

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2:11-CV-950-RCJ-RJJ
ORDER

Currently before the Court is a Motion to Dismiss (#7). The Court heard oral argument
on October 21, 2011.
BACKGROUND

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On June 10, 2011, Plaintiff Canyon Community Bank National Association (“Plaintiff”

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or “Canyon Bank”) filed a complaint in this Court against Defendant National Title Company

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(“Defendant” or “National Title”) asserting diversity jurisdiction. (Compl. (#1) at 1-2). The

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complaint alleged the following. (Id. at 2). On October 18, 2006, Plaintiff, as correspondent

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for Everbank, took an application for a mortgage loan on a piece of property from Edward

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Wheeler, who was purchasing the property. (Id.). Defendant was the escrow agent for the

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transaction and Plaintiff was a party to the escrow. (Id.). The sale was a part of an ongoing

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scheme in which Wheeler obtained money from escrow closings by having the seller agree

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to pay money from the closing proceeds for non-existent home improvements. (Id.). With

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respect to the property at issue, the amount was $120,000.00 to G.I.G. Enterprises, LLC

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(“G.I.G.”), a Panamanian entity. (Id.). Wheeler immediately defaulted on his Everbank loan.
(Id.). Everbank made a yet-to-be-determined loss on the loan and made a claim for

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reimbursement from Plaintiff for its loss pursuant to a contract between Plaintiff and Everbank.

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(Id.). That claim is presently being litigated in Everbank v. Wheeler et al., case no. 2:09-cv-

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1080-KJD-RJJ (“Everbank lawsuit”). (Id. at 3). Defendant had a contract to provide escrow

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services during the property transaction. (Id.). Plaintiff acted as a correspondent for Everbank

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during the transaction. (Id.).

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The complaint alleged four causes of action. (Id. at 3-6). In the first cause of action,

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Plaintiff alleged negligence. (Id. at 3). Plaintiff asserted that Defendant had provided services

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below the standard of care of other escrow service providers because, inter alia, National Title

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changed the pre-closing HUD-1 Statement to add the $120,000 disbursement to G.I.G. to the

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Final HUD-1 Statement without notifying Everbank or Plaintiff of the change and failed to alert

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Plaintiff and Everbank of the obvious fraudulent nature of the disbursal to G.I.G. (Id.).

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In the second cause of action, Plaintiff alleged breach of contract against Defendant.

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(Id. at 4). The complaint alleged that Defendant and Everbank had entered into a contract–the

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Master Closing Instructions–prior to the property transaction and that Plaintiff was a third-party

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beneficiary to that contract. (Id. at 4-5; see Master Closing (#7) at 41). That contract stated

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that the Settlement Agent had the duty to provide precise and correct information that could

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affect Lender’s decision to make the loan including changes to financing. (Compl. (#1) at 4).

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If the Settlement Agent received any such material information, the Settlement Agent was to

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suspend loan closing and immediately disclose the information to Lender.

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complaint alleged that National Title never contacted Lender Everbank or Plaintiff to the

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significant changes in escrow and the unusual payout of $120,000 to G.I.G. (Id.).

(Id.).

The

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In the third claim for relief, Plaintiff sought indemnity from Defendant “for any damages

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sustained by either Everbank or Canyon Bank, . . . and for any sums paid by way of settlement

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or, in the alternative judgment entered against Canyon Bank.” (Id. at 6). Plaintiff sought

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indemnity from Defendant for damages if Everbank ever recovered against Plaintiff in the

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Everbank lawsuit. (Id.). In the fourth cause of action, Plaintiff alleged it was entitled to

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contribution from Defendant “if a judgment [was] rendered in favor of Everbank whereby

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Canyon Bank is responsible in whole or in part for the obligations, if any, owed to Everbank.”
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(Id.).
LEGAL STANDARD

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When considering a Rule 12(b)(6) motion to dismiss for failure to state a claim, the

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court must accept as true all factual allegations in the complaint as well as all reasonable

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inferences that may be drawn from such allegations. LSO, Ltd. v. Stroh, 205 F.3d 1146, 1150

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n.2 (9th Cir. 2000). Such allegations must be construed in the light most favorable to the

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nonmoving party. Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000). In general, the

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court should only look to the contents of the complaint during its review of a Rule 12(b)(6)

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motion to dismiss. However, the court may consider documents attached to the complaint or

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referred to in the complaint whose authenticity no party questions. Id.; see Durning v. First

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Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987).

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The analysis and purpose of a Rule 12(b)(6) motion to dismiss for failure to state a

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claim is to test the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th

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Cir. 2001). The issue is not whether a plaintiff will ultimately prevail but whether the claimant

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is entitled to offer evidence to support the claims. Gilligan v. Jamco Dev. Corp., 108 F.3d 246,

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249 (9th Cir. 1997) (quotations omitted). To avoid a Rule 12(b)(6) dismissal, a complaint does

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not need detailed factual allegations; rather, it must plead “enough facts to state a claim to

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relief that is plausible on its face.” Clemens v. Daimler Chrysler Corp., 534 F.3d 1017, 1022

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(9th Cir. 2008) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955,

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1964, 167 L.Ed.2d 929 (2007)); Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173

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L.Ed.2d 868 (2009) (stating that a “claim has facial plausibility when the plaintiff pleads factual

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content that allows the court to draw the reasonable inference that the defendant is liable for

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the misconduct alleged”).

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allegations” to pass muster under 12(b)(6) consideration, the factual allegations “must be

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enough to raise a right to relief above the speculative level . . . on the assumption that all the

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allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555, 127

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S.Ct. at 1965. “A pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the

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elements of a cause of action will not do.” Iqbal, ___ U.S. at ___, 129 S.Ct. at 1949. “Nor

Even though a complaint does not need “detailed factual

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does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual

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enhancements.’” Id. (quoting Twombly, 550 U.S. at 557, 127 S.Ct. at 1966).

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

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

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bad faith or dilatory motive on the part of the movant . . . undue prejudice to the opposing party

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by virtue of allowance of the amendment, [or] futility of amendment.” Fed. R. Civ. P. 15(a)(2);

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Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962). Generally,

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leave to amend is only denied when it is clear that the deficiencies of the complaint cannot be

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cured by amendment. See DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir.

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1992).
DISCUSSION

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Defendant files a motion to dismiss the complaint, or in the alternative a motion for

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summary judgment. (Mot. to Dismiss (#7) at 1). Defendant argues that Plaintiff’s negligence

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claim should be dismissed because it is barred by the three-year statute of limitations period.

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(Id. at 6). Defendant argues that Plaintiff’s loss would have occurred on or before October 30,

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2006, when the real property transaction closed. (Id. at 7). Defendant asserts that Plaintiff

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is not a third-party beneficiary to the contract between itself and Everbank and that, even if

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Plaintiff was, the breach of contract claim is barred by the four-year statute of limitations

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period. (Id. at 8, 10). Defendant argues that the Court should dismiss the equitable indemnity

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claim because Plaintiff was not free from active wrongdoing regarding the alleged injury to

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Everbank. (Id. at 11). Defendant contends that Plaintiff engaged in wrongdoing because, in

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the Everbank lawsuit, the court found that Plaintiff had breached its contract with Everbank.

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(Id. at 12). Defendant argues that the Court should dismiss the contribution claim under

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Nevada law because Plaintiff has not made any payments to Everbank in the Everbank

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lawsuit. (Id. at 13). Additionally, Defendant argues that the Court should dismiss the claims

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for indemnity and contribution based on the doctrine of unclean hands.

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Specifically, Defendant asserts that Plaintiff has unclean hands because it failed to comply

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with Everbank’s demand for indemnity and breached the terms of the agreement between
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(Id. at 14).

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those two parties. (Id. at 15).

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In response, Plaintiff argues that its negligence claim is not barred by the statute of

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limitations because the statute of limitations did not begin to run until Plaintiff had been injured

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on March 30, 2011, when Judge Dawson found that Plaintiff was liable to Everbank for breach

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of contract. (Opp’n to Mot. to Dismiss (#9) at 7-8). Plaintiff argues that the statute of

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limitations for its negligence claim is four years. (Id. at 7). Plaintiff argues that it was the third-

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party beneficiary to the contract between Defendant and Everbank and its breach of contract

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claim is not barred by the statute of limitations because it was injured on March 30, 2011. (Id.

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at 8, 11). Plaintiff asserts that it is not making a claim for contribution under the Nevada

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Revised Statutes, but is instead making a common law contribution claim. (Id. at 12). Plaintiff

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asserts that a contractual dispute is not egregious conduct to warrant the application of the

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unclean hands doctrine. (Id. at 12-13).

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In reply, Defendant asserts that, at the latest, the statute of limitations began to run on

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January 31, 2008, when Everbank made its demand for indemnity to Plaintiff. (Reply to Mot.

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to Dismiss (#15) at 5). Defendants contend that, under that date, the negligence claim is still

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barred by the statute of limitations. (Id. at 6).

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I.

Negligence

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In Nevada, the “general rule concerning statutes of limitation is that a cause of action

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accrues when the wrong occurs and a party sustains injuries for which relief could be sought.”

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Peterson v. Bruen, 792 P.2d 18, 20 (Nev. 1990). “An exception to the general rule has been

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recognized by this court and many others in the form of the so-called ‘discovery rule.’” Id.

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“Under the discovery rule, the statutory period of limitations is tolled until the injured party

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discovers or reasonably should have discovered facts supporting a cause of action.” Id.

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The Court finds that Plaintiff sustained injuries for which relief could be sought on March

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30, 2011, when Judge Dawson found that Plaintiff was liable to Everbank for breach of

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contract. As such, the Court finds that Plaintiff timely brought its lawsuit on June 10, 2011,

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and denies the motion to dismiss the first cause of action.

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II.

Breach of Contract

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In Nevada, in order to enjoy the status of a third-party beneficiary, “there must clearly

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appear a promissory intent to benefit the third party . . . and ultimately it must be shown that

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the third party’s reliance thereon is foreseeable.” Elizabeth E. v. ADT Sec. Sys. West Inc., 839

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P.2d 1308, 1311 (Nev. 1992). “Before a stranger can avail himself of the exceptional privilege

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of suing for a breach of an agreement, to which he is not a party, he must, at least, show that

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it was intended for his direct benefit.” Olson v. Iacometti, 533 P.2d 1360, 1364 (Nev. 1975).

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The Court finds that Plaintiff is a third-party beneficiary to the Master Closing

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Instructions because Plaintiff was the designated lender in most of the loan documents signed

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by the borrower until Everbank took over the loan. As such, the Court denies the motion to

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dismiss the second cause of action.

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III.

Indemnity

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“Noncontractual or implied indemnity is an equitable remedy that allows a defendant

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to seek recovery from other potential tortfeasors whose negligence primarily caused the

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injured party’s harm.” Rodriguez v. Primadonna Co., LLC, 216 P.3d 793, 801 (Nev. 2009).

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The “remedy is available after the defendant has extinguished its own liability through

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settlement or by paying a judgment.” Id. A cause of action for indemnity accrues when

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payment has been made. Id. “A claimant seeking equitable indemnity must plead and prove

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that: (1) it has discharged a legal obligation owed to a third party; (2) the party from whom it

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seeks liability also was liable to the third party; and (3) as between the claimant and the party

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from whom it seeks indemnity, the obligation ought to be discharged by the latter.” Id.

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The Court interprets Plaintiff’s indemnity claim as one for declaratory relief that it is

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entitled to seek indemnity from Defendant when it pays Everbank for any settlement or

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judgment. (See Compl. (#1) at 6). The Court finds that this is an appropriate claim and denies

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the motion to dismiss the third cause of action.

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IV.

Contribution

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In Nevada, contribution is a creature of statute. The Doctors Co. v. Vincent, 98 P.3d

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681, 686 (Nev. 2004). “The right of contribution exists only in favor of a tortfeasor who has
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paid more than his or her equitable share of the common liability, and the tortfeasor’s total

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recovery is limited to the amount paid by the tortfeasor in excess of his or her equitable share.”

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Nev. Rev. Stat. § 17.225(2). If there is no judgment for injury against the tortfeasor seeking

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contribution, the tortfeasor’s right of contribution is barred unless the tortfeasor has:

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(a) Discharged by payment the common liability within the statute of limitations
period applicable to claimant’s right of action against him or her and has
commenced an action for contribution within 1 year after payment; or
(b) Agreed while action is pending against him or her to discharge the common
liability and has within 1 year after the agreement paid the liability and
commenced an action for contribution.
Nev. Rev. Stat. § 17.285(4)(a)-(b).

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The Court interprets Plaintiff’s contribution claim as one for declaratory relief that it is

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entitled to seek contribution from Defendant if there is a judgment rendered in favor of

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Everbank and Plaintiff is responsible in whole or in part for the obligations, if any, to Everbank.

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(See Compl. (#1) at 7). The Court finds that this claim is appropriate and denies the motion

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to dismiss the fourth cause of action.

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CONCLUSION
For the foregoing reasons, IT IS ORDERED that the Motion to Dismiss (#7) is DENIED.
DATED: This 10th day of January, 2012.
DATED: This _____ day of December, 2011.

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_________________________________
United States District Judge

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