Dalby et al v. Citimortgage, Inc. et al

Filing 73

ORDERED that the # 5 Motion to Remand is DENIED. FURTHER ORDERED that the# 31 Motion to Stay All Proceedings is DENIED as moot. FURTHER ORDERED that the Motions to Dismiss (# 43 , 45 , 46 , 47 ) are GRANTED in their entirety without leave to amend. There are no remaining claims in this case. Clerk shall enter judgment accordingly. Signed by Chief Judge Robert C. Jones on 1/10/2012. (Copies have been distributed pursuant to the NEF - DRM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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RANDALL DALBY and KANDI DECONTIDALBY, et al.

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Plaintiffs,
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v.
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CITIMORTGAGE, INC., et al.,
Defendants.

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3:09-cv-659-RCJ-VPC
ORDER

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Currently before the Court are a Motion to Remand (#5); a Motion to Stay All

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Proceedings (#31); and four Motions to Dismiss (#43, 45, 46, 47). The Court heard oral

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argument on January 3, 2012.
BACKGROUND

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I.

Procedural History

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In 2009, Defendants Aurora Loan Services and Mortgage Electronic Registration

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Systems, Inc. (“MERS”) filed a petition for removal in this Court. (Pet. for Removal (#1)).

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Plaintiffs Randall Dalby, Kandi Deconti-Dalby, Molly England, Walt Swickla, Sharon Swickla,

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Shane Synder, Jennifer R. Quilici, Rick Bell, Jewel Shepard, and Jean Merkelbach (collectively

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“Plaintiffs”) filed a 56-page complaint against Defendants Citimortgage, Inc.; Aurora Loan

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Services; American Home Mortgage Servicing Inc.; Bank of America, N.A.; Recontrust

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Company, N.A.; Countrywide Home Loans and BAC Home Loans Servicing fka Countrywide

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Home Loans Servicing LP; Fidelity National Title Insurance Company; and MERS (collectively

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“Defendants”). (Compl. (#1-3) at 1). Plaintiffs alleged six causes of action including: (1)
wrongful foreclosure; (2) fraud in the inducement; (3) conspiracy to commit fraud by creation,

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operation, and use of the MERS system; (4) conspiracy to commit wrongful foreclosure by

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creation, operation and use of the MERS system; (5) unjust enrichment; and (6) injunction,

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reformation, declaratory, and quiet title. (Id. at 1, 26-53).

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In November 2009, Plaintiffs filed a motion to remand. (Mot. to Remand (#5)). On

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January 27, 2010, this case was transferred to the Judicial Panel on Multidistrict Litigation,

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MDL No. 2119. (Conditional Transfer Order (#33)). On April 21, 2010, this Court stayed all

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proceedings in this case pending Judge Teilborg’s order to remand. (Order (#38) at 2).1

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On April 28, 2010, Judge Teilborg issued the remand order. (MDL Order (#39)). The

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order stated the following. The MDL court would only retain causes of action that “turn on the

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formation or operation of MERS, no matter how framed.” (Id. at 2). The court would “not

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retain claims that, although naming MERS as a defendant, allege conduct primarily related to

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loan origination and collection practices.” (Id.). The MDL court retained claims 1, 3, and 4,

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and part of claims 2, 5, and 6, and remanded part of claims 2, 5, and 6 to this Court. (Id. at

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8).

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II.

Complaint

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In the second cause of action for fraud in the inducement, Plaintiffs alleged that

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Defendants had “failed to disclose the material terms of the loans and incidental services to

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Plaintiffs at the execution of the closing papers” and had “failed to explain the fact that

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Plaintiffs and others similarly situated persons entering into similar loans by the millions across

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this country were not qualified to enter the loans on the terms stated.” (Compl. (#1-3) at 29).

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Plaintiffs alleged that “Defendants [had] concealed the true terms of the loans, and the risks

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of the transactions, including, but not limited to, negative amortization, prepayment penalty

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provisions, the risk of default and the risk of foreclosure.” (Id.).

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In the fifth cause of action for unjust enrichment, Plaintiffs alleged that Defendants had

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received monetary payments from Plaintiffs that they were not entitled to. (Id. at 48). Plaintiffs

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On January 13, 2010, MERS filed a motion to stay all proceedings pending a transfer
of the case to the MDL court. (Mot. to Stay (#31)). The Court denies this motion to stay (#31)
as moot.
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alleged that the Defendants who had serviced the loans “did not fund the loan, did not loan

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any money to the Plaintiffs, and [were] not holders in due course of the notes . . . and [had]

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no lawful right to foreclose on Plaintiffs’ home[s] if Plaintiffs [did] not make the payments

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according to the notes that were executed by Plaintiffs at the time the loans were received.”

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(Id. at 50).

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In the sixth cause of action, Plaintiffs sought declaratory relief, reformation, and quiet

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title. (Id. at 51-52). Plaintiffs allege that they each executed a note secured by a deed of trust

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on their respective properties located in Nevada. (Id. at 3-12).

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LEGAL STANDARD

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When considering a Rule 12(b)(6) motion to dismiss for failure to state a claim, the

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court must accept as true all factual allegations in the complaint as well as all reasonable

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inferences that may be drawn from such allegations. LSO, Ltd. v. Stroh, 205 F.3d 1146, 1150

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n.2 (9th Cir. 2000). Such allegations must be construed in the light most favorable to the

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nonmoving party. Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000). In general, the

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court should only look to the contents of the complaint during its review of a Rule 12(b)(6)

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motion to dismiss. However, the court may consider documents attached to the complaint or

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referred to in the complaint whose authenticity no party questions. Id.; see Durning v. First

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Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987).

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The analysis and purpose of a Rule 12(b)(6) motion to dismiss for failure to state a

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claim is to test the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th

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Cir. 2001). The issue is not whether a plaintiff will ultimately prevail but whether the claimant

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is entitled to offer evidence to support the claims. Gilligan v. Jamco Dev. Corp., 108 F.3d 246,

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249 (9th Cir. 1997) (quotations omitted). To avoid a Rule 12(b)(6) dismissal, a complaint does

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not need detailed factual allegations; rather, it must plead “enough facts to state a claim to

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relief that is plausible on its face.” Clemens v. Daimler Chrysler Corp., 534 F.3d 1017, 1022

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(9th Cir. 2008) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955,

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1964, 167 L.Ed.2d 929 (2007)); Ashcroft v. Iqbal, 556 U.S. 662, ___, 129 S.Ct. 1937, 1949,

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173 L.Ed.2d 868 (2009) (stating that a “claim has facial plausibility when the plaintiff pleads
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factual content that allows the court to draw the reasonable inference that the defendant is

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liable for the misconduct alleged”). Even though a complaint does not need “detailed factual

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allegations” to pass muster under 12(b)(6) consideration, the factual allegations “must be

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enough to raise a right to relief above the speculative level . . . on the assumption that all the

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allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555, 127

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S.Ct. at 1965. “A pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the

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elements of a cause of action will not do.” Iqbal, 556 U.S. at ___, 129 S.Ct. at 1949. “Nor

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does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual

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enhancements.’” Id. (quoting Twombly, 550 U.S. at 557, 127 S.Ct. at 1966).

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If the court grants a motion to dismiss a complaint, it must then decide whether to grant

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leave to amend. The court should “freely give” leave to amend when there is no “undue delay,

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bad faith or dilatory motive on the part of the movant . . . undue prejudice to the opposing party

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by virtue of allowance of the amendment, [or] futility of amendment.” Fed. R. Civ. P. 15(a)(2);

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Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962). Generally,

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leave to amend is only denied when it is clear that the deficiencies of the complaint cannot be

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cured by amendment. See DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir.

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1992).
DISCUSSION

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I.

Motion to Remand (#5)

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Plaintiffs move to remand the case because there is no federal question or diversity

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jurisdiction in this case. (Mot. to Remand (#5) at 2-4). Plaintiffs assert that the Dalbys and the

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Swicklas are residents of California and that Defendant Fidelity National Title Insurance

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Company is a California corporation. (Id. at 3-4).

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In response, Citimortgage argues that Plaintiffs’ complaint raises significant issues of

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federal law because their claims reference federal banking laws, rules, and regulations;

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violations of the Truth in Lending Act (“TILA”) and the Real Estate Settlement Procedures Act;

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violations of federal lending laws; and violations of federal laws to deceive homeowners and

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securities purchasers. (Opp’n to Mot. to Remand (#17) at 2-3). Citimortgage asserts that
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complete diversity exists because every Plaintiff is a citizen of Nevada because each Plaintiff

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alleged that the properties at issue were their primary residences. (Id. at 5). Aurora Loan

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Services also filed a response and makes similar arguments to Citimortgage. (See generally

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Opp’n to Mot. to Remand (#16)).

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In reply, Plaintiffs argue that they have only asserted common law, state law claims.

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(Reply to Mot. to Remand (#25) at 3). Plaintiffs contend that the Dalbys and the Swicklas are

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California residents and that the allegation that all of Plaintiffs’ properties are Plaintiffs’ primary

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residences is a misstatement. (Id.). Plaintiffs also argue that Bank of America is a resident

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of Nevada because it can be “served with process at any branch in this State.” (Id.).

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In this case, the Court denies the motion to remand because both federal and diversity

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jurisdiction exist on the face of the complaint. Here, Plaintiffs’ third cause of action for

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conspiracy to commit fraud by the creation, operation, and use of MERS system alleges that

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Defendants conspired to violate federal laws including TILA and the Real Estate Settlement

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Procedures Act. (See Compl. (#1-3) at 31, 36, 39, 41). Therefore, this Court has federal

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jurisdiction because the third cause of action is based on the interpretation of federal law. See

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28 U.S.C. § 1331 (providing that the “district courts shall have original jurisdiction of all civil

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actions arising under the Constitution, laws, or treaties of the United States”).

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Diversity jurisdiction also exists in this case. See 28 U.S.C. § 1332(a)(1) (providing that

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the “district courts shall have original jurisdiction of all civil actions where the matter in

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controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is

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between . . . citizens of different States”). The complaint states that “Plaintiffs all own property

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located in the State of Nevada, counties of Washoe and Douglas and Plaintiffs maintained

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[their] primary residence at all times relevant” in those properties. (See Compl. (#1-3) at 3-11).

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As such, based on the complaint, Plaintiffs are all citizens of Nevada. See Kanter v. Warner-

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Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001) (holding that a person’s citizenship is

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determined by the state of domicile, which is a person’s permanent home where he or she

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resides with the intention to remain or to return).

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With respect to the Defendants, a corporation is a citizen of (1) “any State by which it
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has been incorporated” and (2) “the State where it has its principal place of business.” 28

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U.S.C. § 1332(c)(1). Pursuant to 28 U.S.C. § 1348, “[a]ll national banking associations shall,

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for the purposes of all actions by or against them, be deemed citizens of the States in which

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they are respectively located.” In Wachovia Bank v. Schmidt, 546 U.S. 303, 307, 126 S.Ct.

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941, 945, 163 L.Ed.2d 797 (2006), the Supreme Court determined that, for purposes of

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§ 1348, a national bank “is a citizen of the State in which its main office, as set forth in its

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articles of association, is located.”

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In this case, none of the Defendants are citizens of Nevada. Citimortgage is a New

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York corporation with a principal place of business in Missouri. (Statement Upon Removal

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(#11) at 2). Aurora Loan Services is a Delaware limited liability company with a principal place

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of business in Colorado. (Id.). American Home Mortgage Servicing, Inc. is a Delaware

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corporation with a principal place of business in Texas. (Id.). Bank of America, N.A. is a

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national bank with its main office, as designated in its articles of incorporation, in North

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Carolina. (Id.). Recontrust Company, N.A. is a national association with a primary address

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in California. (Id.). Countrywide Home Loans is a New York corporation with a principal place

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of business in California. (Id.). BAC Home loans Servicing, LP is a Texas limited partnership.

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(Id. at 3). Fidelity National Title Insurance Company is a California corporation with a principal

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place of business in California. (Id.). MERS is a Delaware corporation with a principal place

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of business in Virginia. (Id.). Moreover, based on the multiple loans at issue in this case, the

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amount in controversy exceeds $75,000. (See Compl. (#1-3) at 21-24). As such, diversity

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jurisdiction exists. Accordingly, the Court denies the motion to remand (#5).

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II.

Motions to Dismiss (#43, 45, 46, 47)2

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Aurora Loan Services (#43); American Home Mortgage Servicing, Inc. (#45); Bank of

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America, N.A., Recontrust, Countrywide, and BAC Home Loans (#46), and Citimortgage (#47)

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all filed motions to dismiss remanded claims 2, 5, and 6. Plaintiffs filed a response. (Opp’n

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to Mot. to Dismiss (#54)). Defendants filed replies. (Reply to Mot. to Dismiss (#55, 59, 60,

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Citimortgage filed a joinder to all of the other motions to dismiss. (Joinder (#48) at 1).
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61)).

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The Court dismisses the second cause of action for fraud in the inducement. The

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elements of fraud in Nevada are: (1) a false representation made by the defendant; (2)

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defendant’s knowledge or belief that the representation is false (or insufficient basis for making

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the representation); (3) defendants intention to induce the plaintiff to act or to refrain from

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acting in reliance upon the misrepresentation; (4) justifiable reliance upon the

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misrepresentation; and (5) damage to the plaintiff resulting from such reliance. Bulbman, Inc.

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v. Nevada Bell, 825 P.2d 588, 592 (Nev. 1992). Pursuant to Fed. R. Civ. P. 9(b), a party

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alleging fraud “must state with particularity the circumstances constituting fraud or mistake.”

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Fed. R. Civ. P. 9(b). As such, the pleadings “must state precisely the time, place, and nature

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of the misleading statements, misrepresentations, and specific acts of fraud.” Kaplan v. Rose,

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49 F.3d 1363, 1370 (9th Cir. 1994). In this case, Plaintiffs make general allegations of fraud

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based on the failure to disclose certain facts about the inner workings of the mortgage industry

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and for failing to explain to them that they were not qualified to enter the loans on the stated

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terms. Because Plaintiffs do not allege that Defendants made any false statements about the

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terms of the deal they fail to state a claim for fraud. Additionally, Plaintiffs’ fraud allegations

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lack the specificity required by Rule 9(b). Therefore, the Court dismisses the second cause

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of action without leave to amend.

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The Court dismisses the fifth cause of action for unjust enrichment because the deeds

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of trust constitute express, written contracts. See Leasepartners Corp. v. Robert L. Brooks

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Trust, 942 P.2d 182, 187 (Nev. 1997) (holding that “[a]n action based on a theory of unjust

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enrichment is not available when there is an express, written contract, because no agreement

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can be implied when there is an express agreement”). The Court dismisses the sixth cause

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of action because Plaintiffs are not entitled to relief when they fail to state a substantive claim.

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Accordingly, the Court grants the motions to dismiss claims 2, 5, and 6, without leave to

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amend (#43, 45, 46, 47).

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CONCLUSION

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For the foregoing reasons, IT IS ORDERED that the Motion to Remand (#5) is DENIED.

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IT IS FURTHER ORDERED that the Motion to Stay All Proceedings (#31) is DENIED

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as moot.

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IT IS FURTHER ORDERED that the Motions to Dismiss (#43, 45, 46, 47) are

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GRANTED in their entirety without leave to amend. There are no remaining claims in this

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case.

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The Clerk of the Court shall enter judgment accordingly.

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10th
DATED: This _____ day of January, 2012.

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_________________________________
United States District Judge

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