Wells Fargo Bank, N.A. v. ANC Vista I, LLC et al

Filing 15

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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1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 *** 7 WELLS FARGO BANK, N.A., 8 Plaintiff(s), 9 10 Case No. 2:14-CV-840 JCM (NJK) ORDER v. ANC VISTA I, LLC, et al., 11 Defendant(s). 12 Presently before the court is plaintiff Wells Fargo Bank, N.A.’s (hereinafter “plaintiff”) 13 motion to dismiss defendants’ counterclaim. (Doc. # 10). Defendants ANC Vista, LLC, et al. 14 (hereinafter “defendants”) filed a response, (doc. # 13), to which plaintiff replied, (doc. # 14). 15 I. Background 16 Defendants are the borrowers and guarantors of a $21,000,000 loan from plaintiff. (Doc. 17 # 1). When defendants failed to repay the loan, plaintiff foreclosed on the real property securing 18 the loan. (Doc. # 1). The foreclosure did not generate sufficient recovery to satisfy the entire 19 balance of the loan and left a deficiency of approximately $5,835,000. (Doc. # 1). 20 Plaintiff then filed a complaint against defendants for a deficiency judgment, alleging 21 breach of the loan documents and guaranty agreements based on defendants’ failure to pay the 22 amount due under the loan. (Doc. # 1). Defendants filed an answer and counterclaim for breach 23 of the covenant of good faith and fair dealing. (Doc. # 8). Plaintiff then filed the instant motion. 24 (Doc. # 10). 25 ... 26 ... 27 ... 28 James C. Mahan U.S. District Judge 1 II. Legal Standard 2 A. Motion to dismiss 3 A court may dismiss a complaint for “failure to state a claim upon which relief can be 4 granted.” Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide “[a] short and plain 5 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2); Bell 6 Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 does not require detailed factual 7 allegations, it demands “more than labels and conclusions” or a “formulaic recitation of the 8 elements of a cause of action.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). 9 “Factual allegations must be enough to rise above the speculative level.” Twombly, 550 10 U.S. at 555. Thus, to survive a motion to dismiss, a complaint must contain sufficient factual 11 matter to “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (citation 12 omitted). 13 In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply 14 when considering motions to dismiss. First, the court must accept as true all well-pled factual 15 allegations in the complaint; however, legal conclusions are not entitled to the assumption of 16 truth. Id. at 678-79. Mere recitals of the elements of a cause of action, supported only by 17 conclusory statements, do not suffice. Id. at 678. 18 Second, the court must consider whether the factual allegations in the complaint allege a 19 plausible claim for relief. Id. at 678-79. A claim is facially plausible when the plaintiff’s 20 complaint alleges facts that allows the court to draw a reasonable inference that the defendant is 21 liable for the alleged misconduct. Id. at 678. 22 Where the complaint does not permit the court to infer more than the mere possibility of 23 misconduct, the complaint has “alleged–but not shown–that the pleader is entitled to relief.” Id. 24 (internal quotations omitted). When the allegations in a complaint have not crossed the line from 25 conceivable to plausible, plaintiff's claim must be dismissed. Twombly, 550 U.S. at 570. 26 The Ninth Circuit addressed post-Iqbal pleading standards in Starr v. Baca, 652 F.3d 27 1202, 1216 (9th Cir. 2011). The Starr court stated, “First, to be entitled to the presumption of 28 truth, allegations in a complaint or counterclaim may not simply recite the elements of a cause of James C. Mahan U.S. District Judge -2- 1 action, but must contain sufficient allegations of underlying facts to give fair notice and to enable 2 the opposing party to defend itself effectively. Second, the factual allegations that are taken as 3 true must plausibly suggest an entitlement to relief, such that it is not unfair to require the 4 opposing party to be subjected to the expense of discovery and continued litigation.” Id. 5 B. Breach of the covenant of good faith and fair dealing 6 In Nevada, “[e]very contract imposes upon each party a duty of good faith and fair 7 dealing in its performance and execution.” A.C. Shaw Constr., Inc. v. Washoe Cnty., 784 P.2d 9, 8 9 (Nev. 1989). This implied covenant requires that parties “act in a manner that is faithful to the 9 purpose of the contract and the justified expectations of the other party.” Morris v. Bank of Am. 10 Nev., 886 P.2d 454, 457 (Nev. 1994) (internal quotation marks omitted). 11 “When one party performs a contract in a manner that is unfaithful to the purpose of the 12 contract . . . damages may be awarded against the party who does not act in good faith.” Hilton 13 Hotels v. Butch Lewis Prods., 808 P.2d 919, 923 (Nev. 1991). A breach of the duty of good faith 14 and fair dealing can occur “[w]here the terms of a contract are literally complied with but one 15 party to the contract deliberately contravenes the intention and spirit of the contract.” Id. at 922- 16 23. 17 To prevail on a theory of breach of the covenant of good faith and fair dealing, a plaintiff 18 must establish each of the following: (1) plaintiff and defendant were parties to a contract; (2) 19 defendant owed a duty of good faith to plaintiff; (3) defendant breached that duty by performing 20 in a manner that was unfaithful to the purpose of the contract; and, (4) plaintiff’s justified 21 expectations were denied. Perry v. Jordan, 900 P.2d 335, 338 (Nev. 1995). 22 III. Discussion 23 Defendants’ counterclaim alleges that plaintiff violated the covenant of good faith and 24 fair dealing by taking “arbitrary and unfair actions that disadvantage[d] [defendants], including 25 without limitation unfair enforcement of the terms of the written agreements in contravention of 26 [defendants]’ justified expectations,” and “performing under the loan documents and guarantees 27 in a manner that was unfaithful to their purpose . . . .” (Doc. # 8). 28 James C. Mahan U.S. District Judge -3- 1 More specifically, defendants claim that plaintiff “conducted itself in a manner designed 2 to maximize a deficiency against [defendants],” namely by “arbitrarily disregard[ing] the 3 established opinions of value upon maturity and shop[ping] for a lower opinion of value from an 4 outside appraiser.” (Doc. # 8). Defendants contend that plaintiff did so in order to seek “double 5 recovery of the Loan obligation.” (Doc. # 8). Defendants state that “the fair market value of the 6 property as of the sale date exceeded the alleged loan indebtedness as of that same sale date.” 7 (Doc. # 8). 8 Plaintiff argues that defendants allege a breach of the covenant of good faith and fair 9 dealing based solely on the fact that plaintiff has filed a deficiency action. (Doc. # 10). Plaintiff 10 maintains that this is not a sufficient basis to show breach of the covenant of good faith and fair 11 dealing because it does not “deliberately contravene the intention and spirit of the loan 12 documents”. (Doc. # 10). 13 Accepting defendants’ allegations as true, the court finds that defendants have 14 sufficiently alleged a breach of the covenant of good faith and fair dealing. Defendants’ 15 counterclaim alleges wrongdoing on the part of plaintiff that goes beyond merely filing suit. 16 Plaintiff and defendants both concede that they were parties to a loan agreement, and the 17 covenant of good faith and fair dealing is implied in every contract. 18 Further, defendants adequately allege that plaintiff “deliberately contravene[d] the 19 intention and spirit of the contract,” by underselling the property for its own gain. Finally, 20 defendants claim that plaintiff’s actions interfered with their justified expectations based on prior 21 appraisals. These allegations are sufficient to preclude dismissal on the pleadings. 22 Plaintiff also claims that defendants’ counterclaim should be dismissed as a matter of law 23 because it makes the same allegations as defendants’ affirmative defenses. (Doc. # 10). Plaintiff 24 cites a prior order in which this court noted that courts may dismiss or strike counterclaims “if 25 those claims raise the same facts or legal issues as those asserted in the pleadings, or which 26 constitute a mirror image of the original complaint.” Righthaven LLC v. Choudhry, No. 2:10- 27 CV-2155-JCM-PAL, 2011 WL 1743839, at * 5 (D. Nev. May 3, 2011). 28 James C. Mahan U.S. District Judge -4- 1 The court also finds dismissal on this basis to be inappropriate. Notably, defendants’ 2 answer alleges a breach of the covenant of good faith and fair dealing on two grounds: (1) that 3 the property was not sold for fair market value at the foreclosure sale, and (2) that plaintiff’s 4 claims are barred because plaintiff breached the express and implied covenants of the loan 5 documents. (Doc. # 8). 6 However, defendants’ counterclaim is more than just a “mirror image” of their 7 affirmative defenses. As stated above, it alleges that plaintiff acted to “maximize a deficiency” 8 against defendants and “arbitrarily disregard[ed] the established opinions of value” of the 9 property, among other allegations. (Doc. # 8). Taken as true, these claims go beyond the 10 affirmative defense and state a plausible claim for relief. For these reasons, the court will deny 11 the instant motion. 12 IV. Conclusion 13 Accordingly, 14 IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that plaintiff’s motion to 15 16 17 18 dismiss defendants’ counterclaim, (doc. # 10), be, and the same hereby is, DENIED. DATED August 28, 2014. __________________________________________ UNITED STATES DISTRICT JUDGE 19 20 21 22 23 24 25 26 27 28 James C. Mahan U.S. District Judge -5-

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