Dela Cruz et al v. HSBC Bank USA, National Association et al

Filing 36

AMENDED ORDER that 9 MOTION to Dismiss is DENIED as moot. FURTHER ORDERED that 23 Second MOTION to Dismiss is GRANTED with prejudice. All claims against HSBC and GMAC are dismissed, with the exception of the two claims against GMAC that are subject to the automatic bankruptcy stay. FURTHER ORDERED that 24 MOTION to Strike is DENIED as moot. Signed by Judge Miranda M. Du on 4/23/13. (Copies have been distributed pursuant to the NEF - MMM)

Download PDF
1 2 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT 10 DISTRICT OF NEVADA 11 *** 12 CECILIA DELA CRUZ and HEROHITO DELA CRUZ, Case No. 2:12-cv-01283-MMD-PAL 13 Plaintiffs, v. 14 15 HSBC BANK USA, N.A., et al., AMENDED ORDER (Def.’s Motion to Dismiss – dkt. no. 9; Def.’s Motion to Dismiss – dkt. no. 23; Def.’s Motion to Strike – dkt. no. 24) Defendants. 16 17 18 Before this Court are Defendant HSBC Bank USA, N.A., as Trustee for Deutsche 19 Alt-A Securities Mortgage Loan Trust, Series 2007-4’s (“HSBC”) Motions to Dismiss (dkt. 20 nos. 9 and 23), as well as HSBC’s Motion to Strike (dkt. no. 24). 21 I. BACKGROUND 22 Plaintiffs Cecilia Dela Cruz and Herohito Dela Cruz purchased real property 23 located at 820 Windhook Street, Las Vegas, Nevada 89144 (“the Property”) on July 30, 24 2007. (Dkt. no. 10-A.) To finance the purchase of the Property, Plaintiffs obtained a 25 loan of $248,000 from MortgageIT, Inc. (“the Loan”), which was secured by a deed of 26 trust (“the Deed of Trust”). (Dkt. no. 10-B.) The Deed of Trust names MortgageIT, Inc. 27 as lender, Title One as trustee, and Mortgage Electronic Registration Systems, Inc. 28 (“MERS”) as nominee. (Id.) 1 Plaintiff defaulted on the Loan by failing to make the mortgage payments starting 2 on November 1, 2010. On February 10, 2011, MERS assigned the Deed of Trust to 3 HSBC. (Dkt. no. 10-C.) The Assignment was recorded on February 18, 2011. (Id.) On 4 June 9, 2011, HSBC substituted Executive Trustee Services (“ETS”) as trustee under 5 the Deed of Trust. (Dkt. no. 10-D.) The Substitution of Trustee was recorded on June 6 23, 2011. (Id.) 7 ETS executed a notice of default on June 22, 2011, which was recorded on June 8 23, 2011 (“Notice of Default”). (Dkt. no. 10-E.) Because Plaintiffs failed to cure the 9 default, ETS recorded a Certification of the State of Nevada Foreclosure Mediation 10 Program on June 12, 2012 (dkt. no. 10-F), and recorded a Notice of Trustee’s Sale on 11 June 21, 2012 (dkt. no. 10-G). The Notice of Trustee’s Sale scheduled a sale date of 12 July 16, 2012. (Id.) 13 Plaintiffs filed a complaint in the Eighth Judicial District for the State of Nevada on 14 July 10, 2012, against HSBC Bank USA and GMAC Mortgage, LLC. (“GMAC”), alleging 15 (1) declaratory relief, (2) deceptive business practices, (3) defective foreclosure in 16 violation of NRS § 107, and (4) an accounting. On July 12, 2012, Plaintiffs filed a motion 17 for a temporary restraining order and preliminary injunction to enjoin Defendants from 18 proceeding with the July 16, 2012, foreclosure sale. (Dkt. no. 1-D.) Plaintiffs recorded a 19 Notice of Lis Pendens on July 13, 2012. (Dkt. no. 1-F.) The request for a temporary 20 restraining order was granted in state court, and a hearing on Plaintiffs’ Motion for 21 Preliminary Injunction was set for July 19, 2012. (Dkt. no. 1-C.) Defendants removed 22 the case to this Court on the same day. (Dkt. no. 1.) The temporary restraining order 23 has subsequently expired. (Id.) 24 The foreclosure sale was subsequently rescheduled to August 17, 2012. (Dkt. no. 25 14 at 3.) On August 6, 2012, HSBC filed its first Motion to Dismiss. (Dkt. no. 9.) 26 Thereafter, Plaintiffs filed an ex parte motion for a temporary restraining order on August 27 10, 2012. (Dkt. no. 14.) The Court denied the Plaintiffs’ motion. (Dkt. no. 16.) Plaintiffs 28 subsequently filed an Amended Complaint on August 24, 2012. (Dkt. no. 20.) HSBC 2 1 brought a second Motion to Dismiss on September 10, 2012, as well as a Motion to 2 Strike Jury Demand. (Dkt. nos. 23 and 24.) GMAC filed a joinder to HSBC’s second 3 Motion to Dismiss, seeking dismissal of Plaintiffs’ defective foreclosure and declaratory 4 judgment claims.1 The Court’s decision below disposes of all claims against HSBC, as 5 well as the two above-referenced claims. 6 II. LEGAL STANDARD 7 A court may dismiss a plaintiff’s complaint for “failure to state a claim upon which 8 relief can be granted.” Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide 9 “a short and plain statement of the claim showing that the pleader is entitled to relief.” 10 Fed. R. Civ. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While 11 Rule 8 does not require detailed factual allegations, it demands more than “labels and 12 conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. 13 Iqbal, 556 US 662, 678 (2009) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). 14 “Factual allegations must be enough to rise above the speculative level.” Twombly, 550 15 U.S. at 555. Thus, to survive a motion to dismiss, a complaint must contain sufficient 16 factual matter to “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 17 678 (internal citation omitted). 18 In Iqbal, the Supreme Court clarified the two-step approach district courts are to 19 apply when considering motions to dismiss. First, a district court must accept as true all 20 well-pled factual allegations in the complaint; however, legal conclusions are not entitled 21 to the assumption of truth. Id. at 679. Mere recitals of the elements of a cause of action, 22 supported only by conclusory statements, do not suffice. Id. at 678. Second, a district 23 court must consider whether the factual allegations in the complaint allege a plausible 24 claim for relief. Id. at 679. A claim is facially plausible when the plaintiff’s complaint 25 alleges facts that allow a court to draw a reasonable inference that the defendant is 26 27 28 1 Plaintiffs’ remaining claims against GMAC are subject to an automatic stay imposed by ongoing bankruptcy proceedings. (See dkt. no. 25.) 3 1 liable for the alleged misconduct. Id. at 678. Where the complaint does not permit the 2 court to infer more than the mere possibility of misconduct, the complaint has “alleged – 3 but not shown – that the pleader is entitled to relief.” Id. at 679 (internal quotation marks 4 omitted). When the claims in a complaint have not crossed the line from conceivable to 5 plausible, the complaint must be dismissed. Twombly, 550 U.S. at 570. 6 A complaint must contain either direct or inferential allegations concerning “all the 7 material elements necessary to sustain recovery under some viable legal theory.” 8 Twombly, 550 U.S. at 562 (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 9 1106 (7th Cir. 1989) (emphasis in original)). 10 III. DISCUSSION 11 To begin with, HSBC’s first Motion to Dismiss is denied as moot, since Plaintiffs 12 timely filed an Amended Complaint within twenty-one (21) days after HSBC’s Rule 13 12(b)(6) Motion. See Fed. R. Civ. P. 15(a)(1)(B) (allowing a party to amend its pleading 14 once as a matter of course within 21 days after service of a Rule 12(b)(6) motion). As 15 HSBC’s second Motion to Dismiss governs the viability of the Amended Complaint, the 16 Court denies as moot HSBC’s first dismissal request. 17 Plaintiffs bring a statutory defective foreclosure claim under NRS § 107.080, a 18 Truth in Lending Act claim, and a Fair Debt Collection Practices Act claim. For the 19 foregoing reasons, all are dismissed with prejudice. 20 A. Defective Foreclosure Under § NRS 107 21 Nevada law provides that a deed of trust is an instrument that may be used to 22 “secure the performance of an obligation or the payment of any debt.” NRS § 107.020. 23 Upon default, the beneficiary, the successor in interest of the beneficiary, or the trustee 24 may foreclose on the property through a trustee’s sale to satisfy the obligation. NRS 25 § 107.080(2)(c). 26 The procedures for conducting a trustee’s foreclosure sale are set forth in NRS 27 § 107.080. To commence a foreclosure, the beneficiary, the successor in interest of the 28 beneficiary, or the trustee must execute and record a notice of default and election to 4 1 sell. NRS § 107.080(2)(c). A copy of the notice of default and election to sell must be 2 mailed to the residents by registered mail or certified mail with return receipt requests. 3 NRS § 107.080(3). The trustee or other person authorized to make the sale must wait at 4 least three months after recording the notice of default and election to sell before the 5 sale may proceed. NRS § 107.080(2)(d). After the three-month period, the trustee must 6 give notice of the time and place of the sale to each trustor by personal service or by 7 mailing the notice by registered or certified mail to the last known address of the trustor. 8 NRS § 107.080(4)(a). Under NRS § 107.080(5), a “sale made pursuant to this section 9 may be declared void by any court of competent jurisdiction in the county where the sale 10 took place if . . . [t]he trustee or other person authorized to make the sale does not 11 substantially comply with the provisions of this section.” 12 nominee on a deed of trust has the authority, as an agent, to act on behalf of the holder 13 of the promissory note and execute a substitution of trustees. Gomez v. Countrywide 14 Bank, FSB, No. 09-1489, 2009 WL 3617650, at *1 (D. Nev. Oct. 26, 2009). As long as 15 the note is in default and the foreclosing trustee is either the original trustee or has been 16 substituted by the holder of the note or the holder’s nominee, there is no defect in the 17 Nevada foreclosure. Id. at *2. NRS § 107.080(5)(a). A 18 As set out in the Court’s August 16, 2012, Order denying Plaintiffs’ request for a 19 temporary restraining order, the proper entities foreclosed on the Property in the proper 20 order. MERS was given authority in the Deed of Trust to assign beneficial interest in the 21 Deed of Trust to others. (Dkt. no. 10-B.) As a nominee, MERS also had the authority to 22 act on behalf of the holder of the note to execute a substitution of trustee. See Gomez, 23 2009 WL 3617650, at *1; Weingartner v. Chase Home Finance, LLC, 702 F. Supp. 2d 24 1276, 1280 (D. Nev. 2010) (“[S]o long as the note is in default and the foreclosing 25 trustee is either the original trustee or has been substituted by the holder of the note or 26 the holder's nominee, there is simply no defect in foreclosure, at least in states such as 27 Nevada where a trustee may foreclose non-judicially.”). MortgageIT’s rights in the Deed 28 of Trust were validly assigned to HSBC by MERS, its nominee and agent. See 5 1 Weingartner, 702 F. Supp. 2d at 1279 (“In the context of a nominee on a deed of 2 trust . . . the nominee is granted authority as an agent to act on behalf of the nominator 3 (holder of the promissory note) as to administration of the deed of trust, which would 4 include authority for substitution of trustees”). Pursuant to the authority given to MERS, 5 on February 10, 2011, MERS assigned all beneficial interest under the Deed of Trust to 6 HSBC. (Dkt. no. 10-C.) On June 9, 2011, HSBC substituted ETS as trustee of the Deed 7 of Trust. (Dkt. no. 10-D.) On June 22, 2011, ETS, as trustee, executed a notice of 8 default. (Dkt. no. 10-E.) HSBC thus had a right to substitute the original trustee with 9 ETS, and ETS’s initiation of foreclosure proceedings comported with Nevada law. 10 Plaintiffs appear to allege in their Amended Complaint that the foreclosure was 11 statutorily defective because their Note was split from the Deed of Trust. However, the 12 theory that a party is not entitled to foreclose because the note was split from the deed 13 of trust has been repeatedly rejected by this Court and the Ninth Circuit. See Cervantes 14 v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1044 (9th Cir. 2011); Vega v. CTX 15 Mortgage Co., LLC, 761 F. Supp. 2d 1095, 1097-98 (D. Nev. 2011); Khankhodjaeva v. 16 Saxon Mortgage Servs., No. 10-1577, 2012 WL 214302, at *4 (D. Nev. Jan. 24, 2012); 17 Wittrig v. First Nat’l Bank of Nev., No. 11-131, 2011 WL 5598321, at *5-6 (D. Nev. Nov. 18 15, 2011). 19 Plaintiffs also appear to argue that the improper securitization of Plaintiffs’ home 20 precludes HSBC from the right to foreclose. To the extent that Plaintiffs’ NRS § 107.080 21 claims are premised on improper securitization, the claim fails. See Chavez v. Cal. 22 Reconveyance Co., No. 2:10-cv-325-RLF-LRL, 2010 WL 2545006, at *2 (D. Nev. June 23 18, 2010) (holding that N.R.S. § 107.080 does not forbid the securitization of a loan); 24 Byrd v. Meridian Foreclosure Serv., No. 2:11-cv-096-KJD-PAL, 2011 WL 1362135, at *3 25 (D. Nev. Apr. 8, 2011) (court dismissed securitization claim because Nevada does not 26 impose a legal duty on lender to inform the borrower of securitization). 27 Plaintiffs further allege that Defendants engaged in fraud by making false 28 representations in public notices and records, including in the Assignment and in the 6 1 Substitution of Trustee. (Dkt. no. 14.) However, Plaintiffs provide nothing more than 2 mere conclusory allegations of this fraud. Having failed to meet the heightened pleading 3 requirements of Fed. R. Civ. P. 9(b) with respect to fraud, the Court does not give weight 4 to Plaintiffs’ allegations of fraud. 5 6 For the reasons set forth above, Plaintiffs’ statutory defective foreclosure claim under NRS § 107.080 is dismissed with prejudice. 7 B. Truth in Lending Act Claim 8 Plaintiffs’ Truth in Lending Act Claim is based on the alleged failure to provide 9 Plaintiffs with notice of their mortgage’s Assignment. See 15 U.S.C. § 1641(g). Any 10 claim arising under the Federal Truth in Lending Act (“TILA”) is limited by a one-year 11 statute of limitations. 15 U.S.C. § 1640(e); King v. California, 784 F.2d 910, 915 (9th 12 Cir.1986) (explaining that the limitations period runs from the date of the transaction). 13 Here, the Assignment occurred on February 10, 2011, and was recorded on February 14 18, 2011. Plaintiffs were required to bring a TILA claim by February 18, 2012, unless the 15 statute of limitations is equitably tolled. Plaintiffs filed this action on July 20, 2012, over 16 five months after the cut-off date. However, they allege in their Amended Complaint that 17 the statute of limitations tolled as they were not aware of the Assignment until meeting 18 with their attorney in May 2012. (Dkt. no. 20 at ¶ 66.) 19 The Ninth Circuit has held that equitable tolling of claims for damages under TILA 20 may be appropriate “in certain circumstances,” and can operate to “suspend the 21 limitations period until the borrower discovers or had reasonable opportunity to discover 22 the fraud or non-disclosures that form the basis of the TILA action.” King, 784 F.2d at 23 914-15. District courts have discretion to evaluate specific claims of fraudulent 24 concealment and equitable tolling and “to adjust the limitations period accordingly.” Id. 25 at 915. “Because the applicability of the equitable tolling doctrine often depends on 26 matters outside the pleadings, it “is not generally amenable to resolution on a Rule 27 12(b)(6) motion.” Supermail Cargo, Inc. v. United States, 68 F.3d 1204, 1206 (9th Cir. 28 1995). When, however, a plaintiff does not allege any facts demonstrating that he or she 7 1 could not have discovered the alleged violations by exercising due diligence, dismissal 2 may be appropriate. See Meyer v. Ameriquest Mortgage Co., 342 F.3d 899, 902-03 (9th 3 Cir. 2003) (refusing to toll statute of limitations on TILA claim because plaintiff was in full 4 possession of all loan documents and did not allege any concealment of loan documents 5 or other action that would have prevented discovery of the alleged TILA violations). 6 Here, there is no basis to equitably toll the statute of limitations, as Plaintiffs 7 request, since the recording of the Assignment provided Plaintiffs with constructive 8 notice of the Assignment for the entire duration of statute-of-limitations period. Plaintiffs 9 have not demonstrated any circumstances that would justify tolling their claim. See 10 Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1045-46 (9th Cir. 2011) 11 (declining to equitably toll statute of limitations where plaintiffs failed to allege 12 “circumstances beyond their control” that prevented them from appreciating any alleged 13 violation). 14 C. 15 Plaintiffs claim a violation of 15 U.S.C. § 1692, et seq., but this claim fails as a 16 matter of law because non-judicial foreclosure does not constitute debt collection under 17 the Act. “Foreclosure does not constitute debt collection under the Fair Debt Collection 18 Practices Act (‘FDCPA’).” Smith v. Cmty. Lending, Inc., 773 F.Supp.2d 941, 944 (D. Nev. 19 2011). “Although the Ninth Circuit has not ruled on the question, the district courts of this 20 Circuit have held that the foreclosure of a mortgage in and of itself does not constitute 21 debt collection as contemplated by the FDCPA.” Id.; see also Mansour v. Cal-Western 22 Reconveyance Corp., 618 F. Supp. 2d 1178, 1182 (9th Cir. 2009). Accordingly, this 23 claim is dismissed. Federal Debt Collection Practices Act 24 D. Declaratory relief 25 Declaratory relief is not a separate cause of action, but dependent on the merits 26 of Plaintiff’s substantive claims. See Stock West, Inc. v. Confederated Tribes of the 27 Coville Reservation, 873 F.2d 1221, 1225 (9th Cir. 1989); In re Wal-Mart Wage & Hour 28 Employ. Practices Litig., 490 F. Supp. 2d 1091, 1130 (D. Nev. 2007). 8 As Plaintiffs 1 cannot state a claim under any of their causes of action, their request for declaratory 2 judgment is dismissed. 3 IV. 4 5 CONCLUSION IT IS HEREBY ORDERED that Defendant HSBC’s Motion to Dismiss (dkt. no. 9) is DENIED as moot. 6 IT IS FURTHER ORDERED that Defendant HSBC’s second Motion to Dismiss 7 (dkt. no. 23) is GRANTED with prejudice. All claims against HSBC and GMAC are 8 dismissed, with the exception of the two claims against GMAC that are subject to the 9 automatic bankruptcy stay. 10 11 12 IT IS FURTHER ORDERED that Defendant HSBC’s Motion to Strike (dkt. no. 24) is DENIED as moot. ENTERED THIS 23rd day of April 2013. 13 14 MIRANDA M. DU UNITED STATES DISTRICT JUDGE 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.


Why Is My Information Online?