Mendez v. Fiesta Del Norte Home Owners Association et al

Filing 60

ORDER Granting in Part and Denying in Part 45 , 47 , and 55 Motions to Dismiss. The Court dismisses the claim under §1692d against Alessi & Koenig, the claim under § 1692f against CMC, the claim under § 1692g (c) against all Defendants, the fraud claim against all Defendants, and the breach of contract claim against CMC and Alessi & Koenig without leave to amend. Signed by Judge Robert C. Jones on 8/26/2015. (Copies have been distributed pursuant to the NEF - SLD)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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______________________________________
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IRMA MENDEZ,
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Plaintiff,
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vs.
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FIESTA DEL NORTE HOME OWNERS
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ASSOCIATION et al.,
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Defendants.
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No.: 2:15-cv-00314-RCJ-NJK
ORDER

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This case arises out of a homeowners’ association foreclosure sale. Pending before the

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Court are three Motions to Dismiss (ECF Nos. 45, 47, 55). For the reasons given herein, the

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Court grants the motions in part and denies them in part.

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I.

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FACTS AND PROCEDURAL HISTORY
In 2005, Plaintiff Irma Mendez purchased a piece of real property (the “Property”) for

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$315,000, giving the lender a promissory note for $252,792 and a deed of trust against the

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Property securing the note. (See Compl. ¶¶6, 18–19, ECF No. 1). Defendant Alessi & Koenig,

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on behalf of Defendant Fiesta Del Notre HOA (the “HOA”), caused to be recorded a notice of

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delinquent assessment lien on March 13, 2013, caused to be recorded a notice of default and

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election to sell under homeowners association lien on July 5, 2013, and caused to be recorded a

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trustee’s deed upon sale on March 3, 2014 after a trustee’s sale. (See id. ¶¶ 26–30).

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Plaintiff sued Alessi & Koenig, the HOA, Complete Management Co., LLC (“CMC”),

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Absolute Business Solutions, Inc. (“ABS”), and Amir Hujjuttallah in this Court in pro se on

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eight causes of action: (1) wrongful foreclosure; (2) violations of constitutional rights; (3)

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Nevada Unfair Trade Practices Act (“NUTPA”); (4) Fair Debt Collection Practices Act

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(“FDCPA”); (5) Fraud; (6) Unjust Enrichment; (7) Racketeering; and (8) Breach of Contract and

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Fiduciary Duties. CMC moved to dismiss for failure to state a claim, and the HOA and Alessi &

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Koenig joined the motion. ABS and Hujjuttallah separately moved to dismiss under Brillhart v.

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Excess Insurance Co., 316 U.S. 491 (1942), and the HOA joined the motion. The Court denied

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the second motion but granted the first motion in part, with leave to amend in part. Specifically,

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the Court dismissed the claims for unjust enrichment, racketeering, breach of fiduciary duty, and

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the claims under Nevada Revised Statutes sections (“NRS”) 598.0915(1) and (15), 42 U.S.C.

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§ 1983, and 15 U.S.C. §§ 1692f(6), 1692g(c), 1692i(b), and 1692k, without leave to amend. The

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Court dismissed the claim for fraud and the claims under 15 U.S.C. §§ 1692d, 1692e, and

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1692j(a), with leave to amend. The Court refused to dismiss the claims for wrongful foreclosure

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and breach of contract and the claims under NRS 598A.060(1)(12) and 15 U.S.C. § 1692f(1).

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Plaintiff has filed the First Amended Complaint (“FAC”), listing five causes of action: (1)

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wrongful foreclosure; (2) NUTPA; (3) FDCPA; (4) Fraud; and (5) Breach of Contract. CMC has

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filed two identical (or nearly identical) motions to dismiss the FAC, and the HOA has joined the

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first motion. Alessi & Koenig has filed a separate motion to dismiss, which the HOA has joined.

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II.

LEGAL STANDARDS

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Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the

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claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of

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what the . . . claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47

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(1957). Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action

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that fails to state a claim upon which relief can be granted. A motion to dismiss under Rule

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12(b)(6) tests the complaint’s sufficiency. See N. Star Int’l v. Ariz. Corp. Comm’n, 720

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F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 12(b)(6) for

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failure to state a claim, dismissal is appropriate only when the complaint does not give the

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defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell

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Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is

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sufficient to state a claim, the court will take all material allegations as true and construe them in

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the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th

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Cir. 1986). The court, however, is not required to accept as true allegations that are merely

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conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden

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State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

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A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a

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plaintiff must plead facts pertaining to his own case making a violation “plausible,” not just

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“possible.” Ashcroft v. Iqbal, 556 U.S. 662, 677–79 (2009) (citing Twombly, 550 U.S. at 556)

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(“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to

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draw the reasonable inference that the defendant is liable for the misconduct alleged.”). That is,

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under the modern interpretation of Rule 8(a), a plaintiff must not only specify or imply a

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cognizable legal theory (Conley review), but also must allege the facts of his case so that the

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court can determine whether the plaintiff has any basis for relief under the legal theory he has

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specified or implied, assuming the facts are as he alleges (Twombly-Iqbal review). Put

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differently, Conley only required a plaintiff to identify a major premise (a legal theory) and

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conclude liability therefrom, but Twombly-Iqbal requires a plaintiff additionally to allege minor

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premises (facts of the plaintiff’s case) such that the syllogism showing liability is logically

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complete and that liability necessarily, not only possibly, follows (assuming the allegations are

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true).
“Generally, a district court may not consider any material beyond the pleadings in ruling

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on a Rule 12(b)(6) motion. However, material which is properly submitted as part of the

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complaint may be considered on a motion to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner

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& Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citation omitted). Similarly, “documents

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whose contents are alleged in a complaint and whose authenticity no party questions, but which

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are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6)

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motion to dismiss” without converting the motion to dismiss into a motion for summary

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judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Moreover, under Federal Rule

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of Evidence 201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay

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Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court

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considers materials outside of the pleadings, the motion to dismiss is converted into a motion for

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summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir.

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2001).

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III.

ANALYSIS

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A.

Wrongful Foreclosure

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Plaintiff alleges that she attempted to pay the delinquent dues to CMC but that her

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attempts were rejected. (See First Am. Compl. ¶¶ 33, 50). CMC notes that under state law Alessi

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& Koenig, not CMC, was the collection agent authorized to receive past due payments. CMC

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bases this argument on the fact that CMC has no license to operate as a collection agency, as

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required under NRS 649.075. The Court rejects this argument. Simply because CMC was not

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licensed does not mean that it was not an agent of the HOA for the purposes of collecting both

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currently due and past due HOA assessments. Moreover, Plaintiff points out that a community

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manager such as CMC is specifically prohibited by Nevada law from “[r]efus[ing] to accept from

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a unit’s owner payment of any assessment, fine, fee or other charge that is due because there is

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an outstanding payment due.” Nev. Rev. Stat. § 116A.640(9). Plaintiff also alleges that CMC

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was Alessi & Koenig’s agent. (See id. ¶ 31). Although the claim includes many irrelevant

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allegations, Plaintiff has sufficiently alleged a wrongful foreclosure, and the Court will not

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dismiss the claim. The Court also denies Alessi & Koenig’s motion, because Plaintiff has

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sufficiently alleged having attempted to pay the delinquent fees before the foreclosure sale to

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CMC, who Plaintiff alleges was Alessi & Koenig’s agent.

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B.

NUTPA

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Plaintiff alleges a violation of NRS 598A.060(1)(12), which makes unlawful “Bid

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rigging, including the misuse of bid depositories, foreclosures of competitive activity for a period

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of time, rotation of jobs among competitors, submission of identical bids, and submission of

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complementary bids not intended to secure acceptance by the customer.” Nev. Rev. Stat.

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§ 598A.060(1)(12). Plaintiff has sufficiently alleged bid rigging against Alessi & Koenig under

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NUTPA. An allegation of the sale of the Property for approximately 10% of its fair market value

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conducted in the private offices of the auctioneer is sufficient to make a bid rigging claim

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plausible. (See First Am. Compl. ¶¶ 65–79).

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C.

FDCPA

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Plaintiff alleges violations of 15 U.S.C. §§ 1692d, 1692f, and 1692g. Plaintiff first

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alleges a violation of 15 U.S.C. § 1692d against Alessi & Koenig based on its having attempted

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to collect the debt over the telephone without disclosing that it was a debt collector. No

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provision of § 1692d appears to govern such a claim. The Court therefore dismisses this part of

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the claim.

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Next, Plaintiff alleges violations of § 1692f(1) against all Defendants. That subsection

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prohibits “[t]he collection of any amount (including any interest, fee, charge, or expense

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incidental to the principal obligation) unless such amount is expressly authorized by the

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agreement creating the debt or permitted by law.” 15 U.S.C. § 1692f(1). Plaintiff alleges that the

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Notice of Default indicated she owed $1,378.81, but the monthly assessments were only $25 per

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month, such that the most due should have been $150. (See First Am. Compl. ¶ 84). She alleges

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that the additional fees and collection costs were added as an “unfair or unconscionable means”

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under § 1692f to discourage or make impossible such a payment before foreclosure. (See id.).

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CMC argues that this claim should be dismissed as against CMC because CMC did not foreclose

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on the home. The documents attached to the FAC indeed make clear that Absolute Collection

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Services, LLC (“ACS”) and Alessi & Koenig conducted the complained-of collection activities

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on behalf of the HOA, and there is no indication of CMC’s involvement. (See Notice of

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Delinquent Assessment Lien, ECF No. 43, at 66 (ACS); Notice of Delinquent Assessment Lien,

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ECF No. 43, at 69 (Alessi & Koenig); Notice of Default and Election to Sell, ECF No. 43, at 71

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(Alessi & Koenig); Notice of Trustee’s Sale, ECF No. 43, at 73 (Alessi & Koenig)). The Court

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therefore grants the motion as to CMC, without leave to amend, but denies the motion as to the

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HOA and Alessi & Koenig. The HOA and Alessi & Koenig have been sufficiently alleged to

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have attempted to collect amounts not authorized by law or contract as specifically prohibited by

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§ 1692f(1) and to have also violated the generally applicable rule against unfair or

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unconscionable debt collection in § 1692f.

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Finally, Plaintiff alleges violations of § 1692g(c) against all Defendants. Plaintiff had no

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leave to amend that dismissed claim. The Court therefore dismisses this claim as against all

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Defendants.

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D.

FRAUD

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Plaintiff alleges Defendants misrepresented the amount of the debt owed and committed

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fraud by taking the property over a small debt. Plaintiff alleges no reliance on the

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misrepresentation, however. For example, she does not allege that she paid the amount

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represented to be owed, but that Defendants foreclosed anyway because in fact a greater amount

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was owed. In other words, she does not allege to have been intentionally tricked to her

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detriment. Her claims sound in wrongful foreclosure, unfair trade practices, and unfair debt

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collection practices, not fraud. The Court dismisses this claim as to all Defendants, without

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leave to amend.

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E.

BREACH OF CONTRACT

The breach of contract claim is brought only against CMC and the HOA. 1 Plaintiff

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alleges that the “HOA manager” (presumably meaning CMC) rejected her tender of two late

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assessments because the account had been turned over to “collections” (presumably meaning

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ABS or Alessi & Koenig). (See First Am. Compl. ¶ 96). As noted, supra, NRS 116A.640

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specifically prohibits a community manager such as CMC from rejecting a tender of an

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assessment simply because it is late, and it prohibits the collections of fees or other charges from

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a client not specified in the management agreement. A breach of contract claim cannot stand on

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these bases, however. The first issue—wrongful rejection of the tender of a delinquent

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amount—is a matter of wrongful foreclosure. The second issue—a community manager’s

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1 The heading of the claim states that it is only brought against the HOA, but the claim clearly
implicates CMC, as well.
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charging of fees not specified in a management agreement—concerns charges by a community

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manger to an HOA (“a client”) not authorized in the management agreement between them, as

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opposed to charges by a community manager (on behalf of an HOA) to a homeowner not

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authorized in the CC&R. See Nev. Rev. Stat. § 116A.640(10).

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Plaintiff also alleges the HOA violated its own rules indicating that a lien is placed only

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after two billing cycles. But an HOA’s lien is automatic and immediate upon any delinquency.

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See Nev. Rev. Stat. § 116.3116(1) (“The association has a lien on a unit for . . . any assessment

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levied against that unit . . . from the time the . . . assessment . . . becomes due.”). Such a lien is

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perfected as against other interests in the property as of the date the CC&R is recorded, so any

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such lien will necessarily be perfected when it arises, except where an HOA has failed to record

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the CC&R before it begins collecting assessments thereunder, a circumstance this Court has

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never encountered. See id. § 116.3116(5).

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Plaintiff also alleges the HOA violated NRS 116.3106, 116.31065, and 116.3108 as to its

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adoption of bylaws, rules, and its conduct of meetings. Although Plaintiff does not explain how

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any of that harmed her, Plaintiff also alleges that the CC&R in fact require a 67% vote of the

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homeowners for the HOA to foreclose on Plaintiff’s property, and that there was no such vote.

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(See First Am. Compl. ¶ 108). That allegation is sufficient to allege a breach of contract as

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against the HOA, but CMC and Alessi & Koenig are not alleged to have been parties to the

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CC&R. In summary, the breach of contract claim survives the motion to dismiss as against the

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HOA.

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CONCLUSION

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IT IS HEREBY ORDERED that the Motions to Dismiss (ECF Nos. 45, 47, 55) are

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GRANTED IN PART and DENIED IN PART. The Court dismisses the claim under § 1692d

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against Alessi & Koenig, the claim under § 1692f against CMC, the claim under § 1692g(c)

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against all Defendants, the fraud claim against all Defendants, and the breach of contract claim

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against CMC and Alessi & Koenig, without leave to amend.

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IT IS SO ORDERED.
Dated this 26th day August, 2015.
Dated this 11th day of of August, 2015.

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_____________________________________
ROBERT C. JONES
United States District Judge

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