Federal National Mortgage Association v. Willis et al

Filing 32

ORDER that #18 Plaintiff's Motion for Preliminary Injunction is GRANTED. Signed by Judge James C. Mahan on 1/26/16. (Copies have been distributed pursuant to the NEF - MMM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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FEDERAL NATIONAL MORTGAGE
ASSOCIATION,

ORDER
Plaintiff(s),

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v.

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Case No. 2:15-CV-2366 JCM (GWF)

ERNEST C. ALDRIDGE, et al.,
Defendant(s).

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Presently before the court is plaintiff Federal National Mortgage Association’s (“plaintiff”)

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James C. Mahan
U.S. District Judge

(“Fannie Mae”) motion for a preliminary injunction (doc. # 18); defendant Clarence Willis filed a
response (doc. #24), and plaintiff filed a reply. (Doc. #27). The court held a hearing on Junary 26,
2016, and granted plaintiff’s motion for preliminary injunction.
I.

Background
Plaintiff owns the following nine real properties: 230 Flint Street, Fernley, Nevada 89408

(assessor’s parcel No.: 020-323-06) (“Flint property”); 330 Garden Lane, Fernley Nevada 89408
(assessor’s parcel No.: 020-729-15) (“Garden property”); 5373 Homeria Street, Las Vegas,
Nevada 89113 (assessor’s parcel No.: 163-28-720-01) (“Homeria property”); 7240 Mountain
Moss Drive, Las Vegas, Nevada 89147 (assessor’s parcel No.: 163-15-710-093) (“Mountain Moss
property”); 7116 Cornflower Drive, Las Vegas, Nevada 89128(assessor’s parcel No.: 138-27-515029) (“Cornflower property”); 5320 Hombly Avenue, Las Vegas, Nevada 89146 (assessor’s parcel
No.: 163-01-511-026) (“Hombly property”); 2523 Palma Vista Avenue, Las Vegas, Nevada 89121
(assessor’s parcel No.: 162-12-310-045) (“Palma Vista property”); 4912 Canadian Drive, Las
Vegas, Nevada 89130 (assessor’s parcel No.: 125-36-814-012) (“Canadian property”); and 5654

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Thunder Spirit Street, Las Vegas, Nevada 89148 (assessor’s parcel No.: 163-30-816-006)

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(“Thunder Spirit property”) (collectively, “subject properties”). (Doc. #17)

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Plaintiff alleges that over the course of several months, the defendants have engaged in a

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conspiracy to defraud plaintiff of its interest in these nine Nevada properties. Defendants, without

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any legal right or authorization by plaintiff, prepared, executed and recorded deeds purporting to

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transfer title from plaintiff to the defendants.

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It appears that the defendants executed all nine schemes using substantially similar

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patterns. Fannie Mae acquired its ownership interest in a subject property pursuant to a Trustee's

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Deed Upon Sale recorded in the official records for the appropriate county. Then, defendant Ernest

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C. Aldridge would record and subsequently re-record a quitclaim deed. For each property, plaintiff

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Fannie Mae would purportedly deed the property to defendant Aldridge for the amount of $10.00.

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Defendant Clarence Moses Willis would then sign the quitclaim deed as purported authorized

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agent for Fannie Mae. The quitclaim deeds would list plaintiff’s mailing address as 4912 Canadian

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Drive, Las Vegas, Nevada 89130.

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Plaintiff asserts that Clarence Moses Willis is not, nor as ever been, an employee of plaintiff

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Fannie Mae and is not an agent or authorized representative of plaintiff in any capacity.

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Furthermore, 4912 Canadian Drive, Las Vegas, Nevada 89130 is not plaintiff’s mailing address.

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Plaintiff also claims that it never authorized defendant Aldridge to prepare, execute or record any

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quitclaim deed, nor did plaintiff authorize defendant Willis to prepare, execute or record any

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quitclaim deed on its behalf.

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Four of the properties, as detailed fully in plaintiff’s motion for TRO and preliminary

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injunction, have had a Grant, Bargain, Sale Deed recorded in the records of Clark or Lyons County.

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(Doc. #17). “Pastor Ernest C. Aldridge and his successor, a corporate sole,” has purportedly deeded

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each of these properties to one of defendants Geri L. McKinnion, Creative Solutions 4 U, or

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Clarence Moses Willis for $10.00.

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On January 13, 2016, this court granted plaintiff’s ex parte motion for a TRO, set a briefing

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schedule for the parties to file responses for the preliminary injunction motion, and set a hearing

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date. (Doc. #19). Defendant Willis was the only defendant to respond. (Doc. #24). The other

James C. Mahan
U.S. District Judge

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defendants have not responded to the motion for preliminary injunction nor did they appear in

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court for the preliminary injunction hearing.

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In response to the motion for preliminary injunction, defendant Willis made no substantive

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arguments pertaining to the motion for preliminary injunction. (Doc. #24). He did, however,

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provide various documents including a certificate of business asserting that he was conducting

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business under the fictitious name of “Federal National Mortgage Association,” and a purported

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copy of a Nevada State Business License issued to “Federal National Mortgage Association” under

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the address 4912 Canadian Drive, Las Vegas, NV 89130, Defendant Willis’s personal address.

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(Id.)

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Plaintiff’s reply argues that the attached exhibits in defendant’s response are clear proof

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that defendant sought out and obtained various purported licenses in order to falsely operate under

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its name, which is prohibited by the statute that governs plaintiff. 12 U.S.C. § 1723(a)(e). Plaintiff

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never authorized defendant to use its name.

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II.

Legal Standard

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It is well established that a plaintiff seeking a preliminary injunction or temporary

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restraining order must demonstrate each of the following: (1) a likelihood of success on the merits;

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(2) that he is likely to suffer irreparable harm in the absence of relief; (3) that the balance of equities

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tips in his favor; and (4) that an injunction is in the public interest. Winter v. N.R.D.C., 555 U.S.

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7, 20 (2008). The test is conjunctive, meaning the party seeking the injunction must satisfy each

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element.

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Post-Winter, the Ninth Circuit has maintained its serious question and sliding scale test.

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See Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127 (9th Cir. 2011). “Under this approach,

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the elements of the preliminary injunction test are balanced, so that a stronger showing of one

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element may offset a weaker showing of another.” Id. at 1131. “Serious questions going to the

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merits and a balance of hardships that tips sharply towards the plaintiff can support issuance of a

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preliminary injunction, so long as the plaintiff also shows that there is a likelihood of irreparable

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injury and that the injunction is in the public interest.” Id. at 1135 (quotations omitted).

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James C. Mahan
U.S. District Judge

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Additionally, pursuant to Local Rule 7-2, an opposing party must file points and authorities

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in response to a motion and failure to file a timely response constitutes the party’s consent to the

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granting of the motion. See LR IB 7-2(d); United States v. Warren, 601 F.2d 471, 474 (9th Cir.

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1979).

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III.

Discussion

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A. Likelihood of success on the merits

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Plaintiff argues that it is likely to succeed on the merits of its claims for declaratory relief,

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quiet title, fraud, conspiracy to defraud, slander of title, unjust enrichment, fraudulent conveyance,

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unauthorized impersonation, and trespass. (Doc. #17). However, for the purposes of this order, the

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court will focus its likelihood of success on the merits analysis on only those claims central and

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immediately relevant to the injunction preventing the unauthorized use of plaintiff’s name and

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conveyance against the real properties in question. Because the court finds that plaintiff is likely

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to succeed on its claims for unauthorized impersonation, declaratory relief, quiet title, fraud, and

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conspiracy to defraud, the court need not address whether plaintiff is likely to succeed on the merits

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of its remaining claims.

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a. Unauthorized Use of the Name Federal National Mortgage Association

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Defendant Willis’ unauthorized use of the name Federal National Mortgage Association,

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and the use of the name in Aldridge Quitclaim Deeds, is a violation of federal law. 12 U.S.C. §

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1723(a)(e) states that “[n]o individual, partnership, or corporation, except the bodies corporate

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named in section 1717(a)(2) of this title, shall hereafter use the words “Federal National Mortgage

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Association”. . . or any combination of such words, as the name of part thereof under which the

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individual, association, partnership, or corporation shall do business.” 12 U.S.C. § 1723(a)(e). An

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injunction is authorized for violating this statute. Id.

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Plaintiff asserts it never authorized defendant to use its name, and there is no evidence to

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suggest the contrary. Indeed, the documents included in defendant’s response make it clear that

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Willis intentionally sought out and obtained licenses in order to operate under the name Federal

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National Mortgage Association. (Doc. #25). Even if the licenses were properly issued, they would

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be void ab initio under the Supremacy Clause. Val del Sol Inc. v. Whiting, 732 F.3d 1006, 1022

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U.S. District Judge

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(9th Cir. 2013). Plaintiff therefore has a high likelihood of success on the merits, and Defendant

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Willis is enjoined from use of or operation under the name “Federal National Mortgage

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Association.”

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b. Declaratory Relief

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Plaintiff argues that it is likely to succeed on its cause of action for declaratory relief

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because it has superior claim to the title of the subject properties. 12 U.S.C. § 1723(a)(e) states

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that “[n]o individual, partnership, or corporation, except the bodies corporate named in section

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1717(a)(2) of this title, shall hereafter use the words “Federal National Mortgage Association”. . .

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or any combination of such words, as the name of part thereof under which the individual,

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association, partnership, or corporation shall do business.” 12 U.S.C. § 1723(a)(e). An injunction

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is authorized for violating this statute. Id.

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Declaratory relief is available when: (1) a justiciable controversy exists; (2) the controversy

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is between parties with adverse interests; (3) the party seeking declaratory relief has a legally

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protectable interest; and (4) the issue involved in the controversy is ripe for judicial determination.

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Doe v. Bryan, 102 Nev. 523, 525, 728 P.2d 443, 444 (l 986) (citing Kress v. Corey, 65 Nev. l, 26,

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189 P.2d 352, 364 (1948)); see also Douglas v. Don King Productions, Inc., 736 F.Supp 223, 225

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(1990). Declaratory relief is also appropriate to clarify parties' rights to property where allegations

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of fraudulent conveyances exist. See, e.g., Federal Home Loan Mortg. Corp. v. Gonzalez, 2015W

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L 2358444, *3 (E.D. Cal. 2015) (granting declaratory relief where defendants executed and

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recorded, without authority, grant deeds conveying away Freddie Mac's ownership interest in the

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subject property).

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Based on the documents provided, it appears that plaintiff obtained legal title to all of the

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subject properties via legitimate trustee's deeds upon sale. (Doc. #17, Exhs. 1, 5, 8, 11, 13, 16, 18,

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20, 22). Following the establishment of plaintiff’s interests, defendant Aldridge, without

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authorization, prepared, executed and recorded unauthorized quitclaim deeds. These unauthorized

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deeds purported to convey title in the subject properties to Defendant Aldridge. In furtherance of

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this scheme, Defendant Willis, executed the quitclaim deeds purportedly on behalf of plaintiff,

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James C. Mahan
U.S. District Judge

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stating he was an "authorized agent." Plaintiff responds that defendant Willis is not, and has never

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been, an employee or authorized agent of Fannie Mae.

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The court finds that plaintiff has demonstrated a likelihood of success on the merits. Given

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their lack of authorization to prepare, execute or record quitclaim deeds against the properties,

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defendants’ actions appear to intentionally cloud title and allow them to profit by collecting rental

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proceeds for properties belong to plaintiff. (Doc. #17). However, as these deeds are fraudulent and

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unauthorized, they cannot convey title. See Balfour v. Hopkins, 93 F. 564, 569 (9th Cir. 1899);

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United States v. Payette Lumber & Mfg. Co., 198 F. 881, 895 (D. Idaho 1912).

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c. Quiet Title

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Plaintiff next claims it is entitled to an order quieting title in Fannie Mae's names because

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the quitclaim deeds and GBS Deeds are fraudulent and unauthorized. Pursuant to N.R.S. § 40.010,

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a claim for quiet title "may be brought by any person against another who claims an estate

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or interest in real property, adverse to the person bringing the action, for the purpose of

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determining such adverse claim.'' See also Chapman v. Deutsche Bank Nat’l Trust Co., 302 P.3d

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1 103, 1107 (2013) (finding that a quiet title claim is set forth in N.R.S. 40.010).

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The court finds plaintiff is likely to succeed on the merits of this issue. In a quiet title action,

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the burden of proof rests with the plaintiff to prove good title. Brehant v. Preferred Equities Corp.,

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112 Nev. 663, 918 P.2d 314, 31 8 (1996). Plaintiff obtained legal title to the properties via several

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trustee’s deeds upon sale. (Doc. #17, Exhs. 1, 5, 8, 11, 13, 16, 18, 20, 22). Plaintiff claims to have

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never agreed to convey the subject properties to the defendants.

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d. Fraud and Conspiracy to Defraud

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Plaintiff claims that defendants knowingly prepared, executed and recorded fraudulent

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deeds. In Nevada, a cause of action for fraud requires a showing of false representation of a

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material fact, known to be false, with the intent to induce reliance. Lubbe v. Barba. 91 Nev. 596,

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599, 540 P.2d 115, 117 (1975).

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A civil cause of action for conspiracy to defraud requires: 1) a conspiracy agreement. i.e., a

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combination of two or more persons who, by some concerted action intended to accomplish an

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unlawful objective for the purpose of harming another; 2) an overt act of fraud in furtherance

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U.S. District Judge

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of the conspiracy; and 3) resulting damages to the plaintiff. Jordan v. State ex rel. Dept. of Motor

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Vehicles and Public Safety, 121 Nev. 44, 75, 110 P.3d 30, 51 (Nev. 2005) (overruled on other

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grounds).

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Here too, the court finds that plaintiff has demonstrated a likelihood of success on the merits.

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It appears that defendants collectively worked together to prepare, execute and recorded the

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quitclaim deeds and GBS deeds knowing that plaintiff did not authorize the deeds or conveyances

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of the subject properties. Plaintiff is a large-scale corporation that maintains records of its property

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interest and employees. Plaintiff also contends that defendant Willis falsely represented that he is

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an authorized agent of Fannie Mae. Because the defendants performed the same acts together on

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nine separate occasions, it is likely that defendants knew that plaintiff did not authorize the

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quitclaim deeds, and that defendant Willis is not and was not an authorized agent of Fannie Mae.

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Accordingly, the court finds that plaintiff has demonstrated a likelihood of success on the merits.

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B. Likelihood of irreparable injury

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Plaintiff argues that it will suffer irreparable injury if defendants continue to record

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fraudulent deeds concerning plaintiff's real property. Real property is unique, and the law

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holds that the loss of real property constitutes irreparable injury per se. Deckert v. Independence

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Shares Corp., 311 U.S. 282, 290 (1940); see also Dixon v. Thatcher, 742 P.2d 1029 (Nev. 1987)

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(holding an injunction appropriate to prevent foreclosure of real property). Further, where

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property subject to the litigation is likely to be dissipated unless the court freezes the asset,

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and there are allegations of past fraud, an injunction is appropriate. See, e.g., Fidelity Nat. Title

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Ins. Co. v. Castle, 201 1 WL 5882878, *6 (N.D. Cal. 2011) (granting an injunction where

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defendants placed fraudulent liens on real property) .

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The court agrees with plaintiff. As defendants continue to prepare, execute, and record

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deeds that purport to strip Fannie Mae of recorded title to the subject properties, plaintiff’s

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interests are further damaged or potentially conveyed entirely to other parties that may assert

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they are bona fide purchasers.

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Plaintiff has demonstrated a high likelihood that it will suffer continued injury at the

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hands of defendants. Defendants have continued to record fraudulent deeds even after the

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U.S. District Judge

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filing of the complaint. (Doc. #17, Exh. 24). The recording of this deed evidences an attempt

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to further cloud title and defraud plaintiff of its assets.

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C. Balance of hardships

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Plaintiff’s claims of balance of the hardships weigh in its favor because it suffers a potential

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loss of property interest. (Doc. #17) If defendants proceed with their current efforts, additional

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properties could be affected and the title to the subject properties could be further clouded.

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Conversely, granting a temporary restraining order until the motion for preliminary injunction can

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be fully briefed and adjudicated will not create a hardship for defendants. Defendants need only

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temporarily refrain from executing and recording documents that reference Fannie Mae or

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properties in which the chain of title of the property reflects Fannie Mae as the owner of record of

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the property. If the court ultimately agrees with defendants' position at the preliminary injunction

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stage, the defendants will not be affected.

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D. Public interest

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Plaintiff contends that granting the injunction and preventing defendants from preparing

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and recording additional documents is in the public's interest. Defendants’ conduct may lure

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additional tenants to sign leasehold agreements for properties they do not own, leaving tenants in

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a precarious position once the litigation resolves. Thus, it is in the public's best interest to enjoin

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Defendants' objectionable conduct rather than risk the addition of more properties and parties to

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the litigation.

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IV.

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Conclusion

Based on the foregoing, the balance of factors weigh in plaintiff’s favor and the court finds
good cause to order a preliminary injunction against the defendants.

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Accordingly,

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IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that plaintiff’s motion for

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preliminary injunction (doc. # 18) be, and the same hereby is, GRANTED.
DATED January 26, 2016.

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James C. Mahan
U.S. District Judge

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UNITED STATES DISTRICT JUDGE

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