Swapp v. Wells Fargo Bank, National Association et al
Filing
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ORDER Granting with prejudice 8 Motion to Dismiss. Granting 10 Motion to Expunge Lis Pendens. Denying as moot 27 Motion for Hearing. Signed by Judge Miranda M. Du on 11/29/2012. (Copies have been distributed pursuant to the NEF - SLR)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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***
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RONALD SWAPP,
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Plaintiff,
v.
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Case No. 2:12-cv-00179-MMD-PAL
WELLS FARGO BANK, National
Association, et al.,
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ORDER
(Defs.’ Motion to Dismiss – dkt. no. 8;
Defs.’ Motion to Expunge – dkt. no. 10;
Defs.’ Motion for Decision – dkt. no. 27)
Defendants.
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Before the Court are Defendant Wells Fargo Bank, N.A.’s (“Wells Fargo”) Motions
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to Dismiss and to Expunge Lis Pendens (dkt. nos. 8 and 10), as well as Wells Fargo’s
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Motion for Decision (dkt. no. 27).
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I.
BACKGROUND
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A.
Factual Background
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Plaintiff Ronald Swapp purchased the property located at 1534 Teramo Street,
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Henderson, Nevada 89052, on or about October 10, 2006.
On November 1, 2006,
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Swapp obtained a loan of $999,999 (“the Loan”) from Wells Fargo and executed a
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promissory note (“Note”), which was secured by a deed of trust on the property (“Deed of
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Trust”) for $999,999. (Dkt. no. 9-1.) The Deed of Trust names Wells Fargo as lender
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and designates United Title of Nevada as trustee. (Id.) The Deed of Trust was recorded
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on November 3, 2006, in the official records of Clark County, Nevada. (Id.) A second
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Deed of Trust was recorded on November 3, 2006. (Dkt. no. 9-2.) The second Deed of
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Trust secured a $425,000 loan from Wells Fargo, and names American Securities
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Company of Nevada as trustee. (Id.)
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On June 30, 2009, a Notice of Default and Election to Sell Under Deed of Trust
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(“Notice of Default”) was recorded by National Default Servicing Corporation (“National
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Default”). (Dkt. no. 9-3.) The Notice indicates that Swapp had been in default since
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February 2009 and owed more than $36,000 in mortgage obligations. (Id.)
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On October 27, 2010, a second Notice of Default and Election to Sell Under Deed
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of Trust (“Second Notice of Default”) was recorded by National Default specifying a
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default of over $146,000. (Dkt. no. 9-4.) That same day, National Default executed a
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Notice of Rescission of Notice of Default wherein it rescinded the June 30, 2009, Notice
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of Default. (Dkt. no. 9-5.)
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On February 22, 2011, Wells Fargo executed a Corporation Assignment of Deed
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of Trust (“the Assignment”) transferring all beneficial interest under the Deed of Trust to
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Bank of America, N.A. (“Bank of America”).
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recorded in Clark County on May 16, 2011. (Id.)
(Dkt. no. 9-6.)
The Assignment was
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Also on February 22, 2011, a Substitution of Trustee (“the Substitution”) was
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executed substituting United Title of Nevada for National Default. (Dkt. no. 9-7.) The
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Substitution was also recorded on May 16, 2011, and was signed by Olivia A. Todd,
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President of National Default. (Id.) The signature was on behalf of “Bank of America,
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National Association by its attorney in fact Wells Fargo Bank, N.A., successor by merger
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to Wells Fargo Home Mortgage, Inc., by its attorney in fact National Default Servicing
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corporation.” (Id.)
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National Default executed a Notice of Trustee’s Sale (“Notice of Sale”) on May 12,
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2011, setting a sale date of June 7, 2011. (Dkt. no. 9-9.) The Notice of Sale was
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recorded on May 16, 2011. (Id.)
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A second Notice of Trustee’s Sale (“Second Notice of Sale”) was executed by
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National Default on September 9, 2011, and recorded on October 3, 2011. (Dkt. no.
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9-10.) The Second Notice of Sale set an October 25, 2011, sale date. (Id.)
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B.
Procedural History
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On February 24, 2011, a foreclosure mediation was held in accordance with the
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State of Nevada’s Foreclosure Mediation Program.
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Foreclosure Mediation Statement stated that both Swapp and his attorney failed to
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attend the mediation, and failed to provide the necessary documents for the mediation.
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(Id.) Swapp alleges that the mediator did not accommodate the scheduling constraints
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of Swapp’s attorney and did not notify Swapp and his attorney of the mediation date.
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(Dkt. no. 1-A at ¶ 16.)
(See dkt. no. 9-13.)
The
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On May 5, 2011, the State of Nevada Foreclosure Mediation Program issued a
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Certification stating that the Grantor or title holder did not attend the Foreclosure
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Mediation Conference or failed to produce the necessary disclosure forms, and
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authorizing the beneficiary to proceed with the foreclosure process. (Dkt. no. 9-8.) The
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Certificate was recorded on May 16, 2011.
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Swapp filed a Petition for Judicial Review on May 19, 2011, in the District Court of
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Clark County, Nevada. After a hearing on a motion for an order to show cause, the
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District Court judge ruled in a “Findings of Fact Conclusions of Law and Order” that
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Swapp’s petition was untimely filed and his failure to appear at the mediation “was
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without legal excuses.” (See dkt. no. 9-14.) It ruled that a Letter of Certification of the
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foreclosure will issue. (Id.)
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Swapp filed this Complaint on January 27, 2012, in the District Court of Clark
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County, Nevada, alleging improper foreclosure and seeking declaratory and injunctive
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relief nullifying current foreclosure proceedings and prohibiting future unlawful
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foreclosure actions. Wells Fargo removed the action to this Court on February 2, 2012.
Swapp’s Bankruptcy
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C.
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Swapp filed a Chapter 13 Bankruptcy on October 19, 2011. After a filing of a
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motion to convert the Chapter 13 bankruptcy petition to a Chapter 7 petition, the
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bankruptcy court granted the conversion on January 24, 2012. On February 14, 2012,
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Swapp filed an Amended Bankruptcy Petition. The bankruptcy stay in place as to Bank
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of America expired pursuant to a February 1, 2012, bankruptcy court order. (See dkt.
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no. 9-15.)
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II.
LEGAL STANDARD
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A court may dismiss a plaintiff’s complaint for “failure to state a claim upon which
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relief can be granted.” Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide
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“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); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While
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Rule 8 does not require detailed factual allegations, it demands more than “labels and
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conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v.
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Iqbal, 556 US 662, 678 (2009) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)).
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“Factual allegations must be enough to rise above the speculative level.” Twombly, 550
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U.S. at 555. Thus, to survive a motion to dismiss, a complaint must contain sufficient
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factual matter to “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at
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678 (internal citation omitted).
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In Iqbal, the Supreme Court clarified the two-step approach district courts are to
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apply when considering motions to dismiss. First, a district court must accept as true all
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well-pled factual allegations in the complaint; however, legal conclusions are not entitled
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to the assumption of truth. Id. at 679. Mere recitals of the elements of a cause of action,
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supported only by conclusory statements, do not suffice. Id. at 678. Second, a district
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court must consider whether the factual allegations in the complaint allege a plausible
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claim for relief. Id. at 679. A claim is facially plausible when the plaintiff’s complaint
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alleges facts that allow a court to draw a reasonable inference that the defendant is
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liable for the alleged misconduct. Id. at 678. Where the complaint does not permit the
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court to infer more than the mere possibility of misconduct, the complaint has “alleged–
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but not shown–that the pleader is entitled to relief.” Id. at 679 (internal quotation marks
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omitted). When the claims in a complaint have not crossed the line from conceivable to
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plausible, the complaint must be dismissed. Twombly, 550 U.S. at 570.
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A complaint must contain either direct or inferential allegations concerning “all the
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material elements necessary to sustain recovery under some viable legal theory.”
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Twombly, 550 U.S. at 562 (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101,
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1106 (7th Cir. 1989) (emphasis in original)).
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On a motion to dismiss, the Court takes judicial notice of attached copies of
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relevant publicly recorded documents. See Disabled Rights Action Comm. v. Las Vegas
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Events, Inc., 375 F.3d 861, 866 n.1 (9th Cir. 2004) (the court may take judicial notice of
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the records of state agencies and other undisputed matters of public record under Fed.
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R. Evid. 201).
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III.
DISCUSSION
Wells Fargo’s Motion to Dismiss (dkt. no. 8)
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A.
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Wells Fargo brings this Motion seeking dismissal of all claims under Fed. R. Civ.
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P. 12(b) and, in the alternative, seeking summary judgment pursuant to Fed. R. Civ. P.
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56. Wells Fargo argues that Swapp is equitably estopped from pursuing these claims.
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Wells Fargo further argues that Swapp’s claims on the merits fail because inter alia the
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later-filed Substitution of Trustee validates National Default’s Notice of Default, and
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Swapp’s wrongful foreclosure claim fails because of Swapp’s inability to tender full
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payment for his deficiencies. At bottom, the merits of this dispute revolve around the
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authority of National Default to institute foreclosure proceedings without first being
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identified as a trustee in a recorded substitution of trustee document.
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collateral estoppel issues surrounding the mortgage foreclosure mediation program and
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the bankruptcy filing add additional layers of complexity to this case, the Court needs not
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decide those issues.
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estoppel fail, Swapp cannot state a claim for relief under NRS 107.080.
While the
Assuming without deciding that Wells Fargo’s arguments on
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“NRS 107.080 does not require that a particular party—trustee, beneficiary, or
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their assigns—record notices of default or trustee sale.” Berilo v. HSBC Mortg. Corp.,
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USA, No. 2:09-CV-2353, 2010 WL 2667218, at *4 (D. Nev. June 29, 2010). “Nor does
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Nevada law require a substitution of trustee be recorded prior to a notice of default.” Id.
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The law only requires that a party filing a notice of default be an agent of the beneficiary.
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Nev. ex rel. Bates v. Mortgage Elec. Registration Sys., Inc., No. 3:10-CV-00407, 2011
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WL 1582945, at *5 (D. Nev. Apr. 25, 2011) (“[A]ny party [the beneficiary] commands to
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file a notice of default is by that fact alone a proper party as the beneficiary’s agent.”).
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Swapp carries a significant burden if he attempts to demonstrate that National
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Default was not an agent acting under the authority of Wells Fargo or its successor Bank
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of America at the time the Notice of Default issued. But even if he were to succeed in
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demonstrating that “a rogue title company [National Default] file[d] a notice of default
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without the knowledge of the beneficiary—the Court has not yet seen such a case—the
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filing becomes proper if the beneficiary later ratifies the act after discovering what has
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occurred.” Bates, 2011 WL 1582945, at *5 (citing Edwards v. Carson Water Co., 34 P.
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381, 386-89 (Nev. 1893). Here, the fact that National Default was later substituted as a
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trustee “is practically insurmountable evidence of ratification,” the agency doctrine that
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allows for a principal to retroactively authorize an actor’s prior conduct.
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Restatement (Third) of Agency § 4.03.
Id.; see
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Swapp’s citation to Corral v. Homeeq Servicing Corp., No. 2:10-cv-465, 2010 WL
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3927660 (D. Nev. Oct. 6, 2010) is inapposite. There, the court allowed the borrower’s
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action to proceed over a motion to dismiss because the trustee issued a notice of default
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without any record of its agency status or a substitution of trustee. Id. at *6. The court
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qualified its decision by noting that “Defendant may be able to demonstrate that there
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was no statutory defect—and thus no unlawful foreclosure—by providing evidence
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showing that the beneficiary or trustee, or an agent thereof, at the time [the trustee] filed
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the NOD caused [the trustee] to file the NOD.” Id. Here, Wells Fargo provided that
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evidence in the form of the later-filed Substitution.
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Accordingly, Swapp’s Complaint fails to state a claim upon which relief can be
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granted, and must be dismissed. Swapp’s quiet title action fails, as no “cloud” on the title
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of the Property exists; the foreclosure process was statutorily sound. Swapp’s second
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cause of action alleging wrongful foreclosure fails as a matter of law, for a wrongful
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foreclosure action requires a plaintiff “establish that at the time the power of sale was
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exercised or the foreclosure occurred, no breach of condition or failure of performance
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existed on the mortgagor’s or trustor’s part which would have authorized the foreclosure
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or exercise of power of sale.” Collins v. Union Fed. Sav. & Loan Ass’n, 662 P.2d 610,
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623 (Nev. 1983). Since Swapp does not allege that he is current with his mortgage
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payments, no wrongful foreclosure action may proceed. The Court construes Swapp’s
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third and fourth causes of action as defective foreclosure claims that challenge, under
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NRS § 107.080, the foreclosure process undertaken by Defendants. But for the reasons
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discussed above, National Default properly initiated foreclosure proceedings.
Wells Fargo’s Motion to Expunge Lis Pendens (dkt. no. 10)
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B.
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NRS § 14.015 provides that once a notice of pendency has been filed, the
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defendant may request a hearing in the notice at which time the party who recorded the
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notice must show, by affidavits or other evidence, the following: (a) the action is for the
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foreclosure of a mortgage upon the real property described in the notice or affects the
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title or possession of the real property described in the notice; (b) the action was not
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brought in bad faith or for an improper motive; (c) he will be able to perform any
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conditions precedent to the relief sought in the action insofar as it affects the title or
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possession of the real property; and (d) he would be injured by any transfer of an
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interest in the property before the action is concluded. Wells Fargo has challenged the
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notice of pendency. As Swapp has failed to produce evidence to show that he filed the
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notice of pendency on proper grounds, the Court must grant Defendants' Motion to
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Expunge Lis Pendens.
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IV.
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CONCLUSION
IT IS THEREFORE ORDERED that Defendant Wells Fargo’s Motion to Dismiss
Plaintiff Ronald Swapp’s Complaint (dkt. no. 8) is GRANTED with prejudice.
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IT IS FURTHER ORDERED that Defendant’s Motion to Expunge Lis Pendens
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(dkt. no. 10) is GRANTED. Any Lis Pendens or Notice of Pendency recorded by Plaintiff
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in connection with this lawsuit be expunged, extinguished, and/or released.
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IT IS FURTHER ORDERED that Defendant’s Request for Decision (dkt. no. 27) is
DENIED as moot.
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DATED THIS 29th day of November 2012.
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MIRANDA M. DU
UNITED STATES DISTRICT JUDGE
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