Wells Fargo Bank, N.A. v. ANC Vista I, LLC et al
Filing
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ORDER Denying 10 Plaintiff's Motion to Dismiss Defendants' Counterclaim. Signed by Judge James C. Mahan on 8/28/2014. (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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WELLS FARGO BANK, N.A.,
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Plaintiff(s),
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Case No. 2:14-CV-840 JCM (NJK)
ORDER
v.
ANC VISTA I, LLC, et al.,
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Defendant(s).
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Presently before the court is plaintiff Wells Fargo Bank, N.A.’s (hereinafter “plaintiff”)
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motion to dismiss defendants’ counterclaim. (Doc. # 10). Defendants ANC Vista, LLC, et al.
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(hereinafter “defendants”) filed a response, (doc. # 13), to which plaintiff replied, (doc. # 14).
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I.
Background
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Defendants are the borrowers and guarantors of a $21,000,000 loan from plaintiff. (Doc.
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# 1). When defendants failed to repay the loan, plaintiff foreclosed on the real property securing
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the loan. (Doc. # 1). The foreclosure did not generate sufficient recovery to satisfy the entire
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balance of the loan and left a deficiency of approximately $5,835,000. (Doc. # 1).
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Plaintiff then filed a complaint against defendants for a deficiency judgment, alleging
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breach of the loan documents and guaranty agreements based on defendants’ failure to pay the
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amount due under the loan. (Doc. # 1). Defendants filed an answer and counterclaim for breach
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of the covenant of good faith and fair dealing. (Doc. # 8). Plaintiff then filed the instant motion.
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(Doc. # 10).
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James C. Mahan
U.S. District Judge
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II.
Legal Standard
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A. Motion to dismiss
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A court may dismiss a complaint for “failure to state a claim upon which relief can be
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granted.” Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide “[a] short and plain
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statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2); Bell
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Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 does not require detailed factual
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allegations, it demands “more than labels and conclusions” or a “formulaic recitation of the
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elements of a cause of action.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted).
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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 factual
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matter to “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (citation
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omitted).
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In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply
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when considering motions to dismiss. First, the court must accept as true all well-pled factual
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allegations in the complaint; however, legal conclusions are not entitled to the assumption of
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truth. Id. at 678-79. Mere recitals of the elements of a cause of action, supported only by
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conclusory statements, do not suffice. Id. at 678.
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Second, the court must consider whether the factual allegations in the complaint allege a
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plausible claim for relief. Id. at 678-79. A claim is facially plausible when the plaintiff’s
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complaint alleges facts that allows the court to draw a reasonable inference that the defendant is
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liable for the alleged misconduct. Id. at 678.
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Where the complaint does not permit the court to infer more than the mere possibility of
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misconduct, the complaint has “alleged–but not shown–that the pleader is entitled to relief.” Id.
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(internal quotations omitted). When the allegations in a complaint have not crossed the line from
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conceivable to plausible, plaintiff's claim must be dismissed. Twombly, 550 U.S. at 570.
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The Ninth Circuit addressed post-Iqbal pleading standards in Starr v. Baca, 652 F.3d
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1202, 1216 (9th Cir. 2011). The Starr court stated, “First, to be entitled to the presumption of
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truth, allegations in a complaint or counterclaim may not simply recite the elements of a cause of
James C. Mahan
U.S. District Judge
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action, but must contain sufficient allegations of underlying facts to give fair notice and to enable
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the opposing party to defend itself effectively. Second, the factual allegations that are taken as
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true must plausibly suggest an entitlement to relief, such that it is not unfair to require the
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opposing party to be subjected to the expense of discovery and continued litigation.” Id.
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B. Breach of the covenant of good faith and fair dealing
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In Nevada, “[e]very contract imposes upon each party a duty of good faith and fair
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dealing in its performance and execution.” A.C. Shaw Constr., Inc. v. Washoe Cnty., 784 P.2d 9,
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purpose of the contract and the justified expectations of the other party.” Morris v. Bank of Am.
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Nev., 886 P.2d 454, 457 (Nev. 1994) (internal quotation marks omitted).
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“When one party performs a contract in a manner that is unfaithful to the purpose of the
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contract . . . damages may be awarded against the party who does not act in good faith.” Hilton
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Hotels v. Butch Lewis Prods., 808 P.2d 919, 923 (Nev. 1991). A breach of the duty of good faith
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and fair dealing can occur “[w]here the terms of a contract are literally complied with but one
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party to the contract deliberately contravenes the intention and spirit of the contract.” Id. at 922-
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23.
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To prevail on a theory of breach of the covenant of good faith and fair dealing, a plaintiff
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must establish each of the following: (1) plaintiff and defendant were parties to a contract; (2)
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defendant owed a duty of good faith to plaintiff; (3) defendant breached that duty by performing
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in a manner that was unfaithful to the purpose of the contract; and, (4) plaintiff’s justified
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expectations were denied. Perry v. Jordan, 900 P.2d 335, 338 (Nev. 1995).
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III.
Discussion
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Defendants’ counterclaim alleges that plaintiff violated the covenant of good faith and
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fair dealing by taking “arbitrary and unfair actions that disadvantage[d] [defendants], including
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without limitation unfair enforcement of the terms of the written agreements in contravention of
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[defendants]’ justified expectations,” and “performing under the loan documents and guarantees
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in a manner that was unfaithful to their purpose . . . .” (Doc. # 8).
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James C. Mahan
U.S. District Judge
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More specifically, defendants claim that plaintiff “conducted itself in a manner designed
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to maximize a deficiency against [defendants],” namely by “arbitrarily disregard[ing] the
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established opinions of value upon maturity and shop[ping] for a lower opinion of value from an
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outside appraiser.” (Doc. # 8). Defendants contend that plaintiff did so in order to seek “double
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recovery of the Loan obligation.” (Doc. # 8). Defendants state that “the fair market value of the
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property as of the sale date exceeded the alleged loan indebtedness as of that same sale date.”
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(Doc. # 8).
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Plaintiff argues that defendants allege a breach of the covenant of good faith and fair
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dealing based solely on the fact that plaintiff has filed a deficiency action. (Doc. # 10). Plaintiff
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maintains that this is not a sufficient basis to show breach of the covenant of good faith and fair
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dealing because it does not “deliberately contravene the intention and spirit of the loan
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documents”. (Doc. # 10).
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Accepting defendants’ allegations as true, the court finds that defendants have
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sufficiently alleged a breach of the covenant of good faith and fair dealing.
Defendants’
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counterclaim alleges wrongdoing on the part of plaintiff that goes beyond merely filing suit.
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Plaintiff and defendants both concede that they were parties to a loan agreement, and the
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covenant of good faith and fair dealing is implied in every contract.
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Further, defendants adequately allege that plaintiff “deliberately contravene[d] the
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intention and spirit of the contract,” by underselling the property for its own gain. Finally,
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defendants claim that plaintiff’s actions interfered with their justified expectations based on prior
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appraisals. These allegations are sufficient to preclude dismissal on the pleadings.
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Plaintiff also claims that defendants’ counterclaim should be dismissed as a matter of law
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because it makes the same allegations as defendants’ affirmative defenses. (Doc. # 10). Plaintiff
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cites a prior order in which this court noted that courts may dismiss or strike counterclaims “if
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those claims raise the same facts or legal issues as those asserted in the pleadings, or which
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constitute a mirror image of the original complaint.” Righthaven LLC v. Choudhry, No. 2:10-
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CV-2155-JCM-PAL, 2011 WL 1743839, at * 5 (D. Nev. May 3, 2011).
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James C. Mahan
U.S. District Judge
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The court also finds dismissal on this basis to be inappropriate. Notably, defendants’
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answer alleges a breach of the covenant of good faith and fair dealing on two grounds: (1) that
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the property was not sold for fair market value at the foreclosure sale, and (2) that plaintiff’s
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claims are barred because plaintiff breached the express and implied covenants of the loan
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documents. (Doc. # 8).
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However, defendants’ counterclaim is more than just a “mirror image” of their
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affirmative defenses. As stated above, it alleges that plaintiff acted to “maximize a deficiency”
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against defendants and “arbitrarily disregard[ed] the established opinions of value” of the
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property, among other allegations. (Doc. # 8). Taken as true, these claims go beyond the
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affirmative defense and state a plausible claim for relief. For these reasons, the court will deny
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the instant motion.
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IV.
Conclusion
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Accordingly,
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IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that plaintiff’s motion to
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dismiss defendants’ counterclaim, (doc. # 10), be, and the same hereby is, DENIED.
DATED August 28, 2014.
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UNITED STATES DISTRICT JUDGE
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James C. Mahan
U.S. District Judge
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