Ditech Financial LLC v. Sommerset Park Homeowners Association et al

Filing 97

ORDER granting 64 Motion to Substitute Party. FURTHER ORDERED that The Bank of New York Mellon f/k/a The Bank of New York as Trustee for the Certificateholders of the CWABS, Inc. Asset-Backed Certificates, Series 2006-2 is substituted for Ditech Financial LLC f/k/a Green Tree Servicing LLC as the plaintiff in this case. Signed by Magistrate Judge Carl W. Hoffman on 4/9/2019. (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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***

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DITECH FINANCIAL LLC F/K/A
GREEN TREE SERVICING LLC,
Plaintiff,

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Case No. 2:16-cv-01811-GMN-CWH
ORDER

v.
SOMMERSET PARK HOMEOWNERS
ASSOCIATION, et al.,
Defendants.

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Presently before the court is plaintiff Ditech Financial LLC f/k/a Green Tree Servicing

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LLC’s Motion to Substitute The Bank of New York Mellon f/k/a The Bank of New York as

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Trustee for the Certificateholders of the CWABS, Inc., Asset-Backed Certificates, Series 2006-2

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as Real Plaintiff in Interest (ECF No. 64), filed on September 13, 2018. Defendant Sommerset

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Park Homeowners Association filed a response (ECF No. 68) on September 27, 2018. Defendant

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SFR Investments Pool 1, LLC filed a response (ECF No. 69) on September 27, 2018. Ditech

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filed a reply (ECF No. 72) on October 4, 2018.

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This is a diversity action brought by Ditech after Sommerset Homeowners Association

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conducted a foreclosure on residential real property in Las Vegas, Nevada. After the foreclosure,

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there was a series of assignments of the deed of trust securing the loan, and the deed of trust

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eventually was assigned to Ditech. This case was administratively stayed for nearly two years

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pending all appeals of Bourne Valley Court Trust v. Wells Fargo Bank, NA, 832 F.3d 154 (9th

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Cir. 2016). Ditech now moves to substitute non-party Bank of New York Mellon as the plaintiff

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in this case under Federal Rule of Civil Procedure 25(c), arguing the deed of trust was assigned

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from Ditech to Bank of New York Mellon during the litigation stay. Ditech provides a copy of a

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recorded assignment of deed of trust from Ditech to Bank of New York Mellon dated November

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7, 2017. (Mot. to Substitute, Ex. A (ECF No. 64-1).)

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Sommerset opposes the substitution, arguing that Ditech refused to provide it with

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underlying documentation of the assignment and that it is unclear how the assignment will impact

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discovery. SFR also opposes the substitution, echoing Sommerset’s concerns about the lack of

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documentation of the assignment and arguing the court should not rely on argument of counsel

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and a photocopy of an assignment to authorize the substitution. SFR further argues it will be

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prejudiced by the substitution because it is unclear whether Ditech’s prior discovery responses are

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binding on Bank of New York Mellon and because SFR will have to conduct additional

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unexpected discovery. SFR also references a 2012 memorandum by the Office of Inspector

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General, Department of Housing & Urban Development, regarding its findings regarding the

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conduct of five major mortgage lenders and servicers during the mortgage crisis, though it is

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unclear to the court how this memorandum relates to this particular dispute.

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Ditech replies that Bank of New York Mellon is the record beneficiary of the deed of trust

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and that substituting it as the real party in interest changes nothing other than the name of the

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plaintiff. Ditech argues the substitution has no impact on the underlying facts or whether the

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HOA foreclosure extinguished the deed of trust. Ditech further argues it is pursuing declaratory

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relief and quiet title claims, not seeking to enforce the deed of trust, so the underlying

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documentation regarding the assignment is irrelevant. Regarding discovery, Ditech argues the

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remaining discovery period allows the other parties to address any issues that may arise.

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Rule 25(c) provides that “[i]f an interest is transferred, the action may be continued by or

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against the original party unless the court, on motion, orders the transferee to be substituted in the

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action or joined with the original party.” It is within the court’s discretion to allow a substitution

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under Rule 25 if it will “facilitate the conduct of the litigation.” In re Bernal, 207 F.3d 595, 598

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(9th Cir. 2000) (quotation omitted). See also Whitt v. Richland Holdings, Inc., No. 2:17-cv-

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00014-APG-NJK, 2018 WL 2972925, at *4 (D. Nev. Apr. 27, 2018) (citing Charles Alan Wright,

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Arthur R. Miller & Richard L. Marcus, Federal Practice and Procedure: Civil § 1958 at 696-504

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(3d ed. 2010) (“Since the matter [of substitution] is discretionary, the court also may refuse

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substitution if this seems the wisest course.”); McComb v. Row River Lumber Co., 177 F.2d 129,

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129 (9th Cir. 1949) (noting that “under Rule 25(c) it is not mandatory that a substitution be made
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in every case of a transfer of interest”)). “Rule 25(c) is not designed to create new relationships

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among parties to a suit but is designed to allow the action to continue unabated when an interest

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in the lawsuit changes hands.” Bernal, 207 F.3d at 598 (quotation omitted).

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Since the time Ditech’s motion was filed, discovery has closed. The parties did not file

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any discovery motions, indicating they did not encounter any discovery-related difficulties based

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on the assignment that they were unable to resolve without court intervention. Thus, it does not

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appear there is any significant prejudice to the defendants based on the assignment. Since the

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motion to substitute was filed, Ditech, Sommerset, and SFR have briefed their motions for

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summary judgment. The court has reviewed the motions for summary judgment, which are

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pending before the United States district judge assigned to this case, and it does not appear to the

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undersigned that the recent assignment bears on the circumstances of the underlying foreclosure,

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which occurred years ago. On the other hand, given the case’s advanced procedural posture and

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Ditech’s extensive participation, the Bank’s presence does not appear to be necessary to

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“facilitate the conduct of the litigation.” Regardless, because Ditech has presented a recorded

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assignment indicating the Bank of New York Mellon is the current beneficiary of the deed of

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trust, and for the sake of clarity going forward, the court in its discretion will grant Ditech’s

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motion to substitute parties.

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IT IS THEREFORE ORDERED that plaintiff Ditech Financial LLC f/k/a Green Tree

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Servicing LLC’s Motion to Substitute The Bank of New York Mellon f/k/a The Bank of New

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York as Trustee for the Certificateholders of the CWABS, Inc., Asset-Backed Certificates, Series

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2006-2 as Real Plaintiff in Interest (ECF No. 64) is GRANTED.

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IT IS FURTHER ORDERED that The Bank of New York Mellon f/k/a The Bank of New

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York as Trustee for the Certificateholders of the CWABS, Inc. Asset-Backed Certificates, Series

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2006-2 is substituted for Ditech Financial LLC f/k/a Green Tree Servicing LLC as the plaintiff in

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this case.

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DATED: April 9, 2019

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C.W. HOFFMAN, JR.
UNITED STATES MAGISTRATE JUDGE
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