Pritchard et al v. Countrywide Home Loans, Inc. et al
Filing
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ORDER. IT IS ORDERED that the 6 Motion to Dismiss is GRANTED and the lis pendens is EXPUNGED. Signed by Chief Judge Robert C. Jones on 9/12/2011. (Copies have been distributed pursuant to the NEF - PM)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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ARLEN D. PRITCHARD et al.,
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This is a standard foreclosure case involving one property. The Complaint is a MERS-
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Plaintiffs,
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vs.
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COUNTRYWIDE HOME LOANS, INC. et al.,
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Defendants.
3:11-cv-00352-RCJ-WGC
ORDER
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conspiracy-type complaint listing nine causes of action: (1) Debt Collection Violations under
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Chapter 649; (2) Deceptive Trade Practices under Chapter 598; (3) Unfair Lending Practices
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under Chapter 598D; (4) Violation of the Covenant of Good Faith and Fair Dealing; (5)
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Violations of section 107.080; (6) Quiet Title; (7) Fraud; (8) Slander of Title; and (9) Abuse of
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Process. The case is not part of Case No. 2:09-md-02119-JAT in the District of Arizona but
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appears eligible for transfer. Defendants have moved to dismiss. Plaintiff untimely responded.
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For the reasons given herein, the Court grants the motion.
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I.
THE PROPERTY
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Arlen D. and Lamis M. Pritchard gave lender Countrywide Home Loans, Inc. a $460,000
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promissory note to purchase real property at 15795 Fawn Ln., Reno, NV 89511 (the “Property”).
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(See Deed of Trust (“DOT”) 1–4, Aug. 25, 2005, ECF No. 6-8). The trustee was Recontrust Co.,
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N.A. and Mortgage Electronic Registration Systems, Inc. (“MERS”) was the lender’s
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“nominee.” (Id. 2). Defendants note that this loan was a refinancing. Plaintiffs later took out
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what appears to be a $301,000 cash loan against the Property with Nevada State Bank, and
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Western Title Co. is the trustee on the Cash Loan Deed of Trust (“CLDOT”) securing that loan.
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(See CLDOT 1–2, Oct. 23, 2006, ECF No. 6-9).1 Recontrust filed the notice of default (“NOD”)
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on the DOT. (See NOD, Mar. 11, 2011, ECF No. 6-10). The foreclosure was statutorily proper.
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See Nev. Rev. Stat. § 107.080(2)(c).
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II.
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ANALYSIS
The foreclosure was statutorily proper, so the section 108.070, quiet title, slander of title,
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bad faith, and abuse of process claims fail. In the untimely opposition, Plaintiffs argue that
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securitization of a mortgage invalidates the security interest, but they cite to no authority for this
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proposition. Securitization is merely a complex way of transferring the beneficial interest in the
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debt. The security interest follows the debt. So long as the fractional interest holders of the debt
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are not squabbling amongst themselves over whether to initiate foreclosure versus sue on the
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note or take no action at all, the trustee presumably represents their collective will. Next,
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Plaintiffs argue that the Restatement (Third) of Property (Mortgages) § 5.4 stands for the
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proposition that assigning a deed of trust without also assigning the note renders the deed of trust
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unenforceable. This Court has applied this rule (the “Traditional Rule”) under the assumption
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that the Nevada Supreme Court would adopt it, but the Restatement in fact stands for the exact
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opposite proposition, and if the Nevada Supreme Court were to adopt the Restatement’s position,
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the separate transfer of a deed of trust would transfer the note by operation of law, and the deed
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of trust would not become unenforceable. Section 5.4 of the Restatement proposes that the
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assignment of a note or deed of trust effectively assigns both instruments, making them as a
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default rule legally impossible to split such that the note becomes unsecured and the deed of trust
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Defendants allege the loan was for $301,000, although the CLDOT does not itself list
the amount.
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unenforceable. See Restatement (Third) of Property (Mortgages) § 5.4(a)–(b). Plaintiff cites to a
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comment thereunder that notes that when the note and deed of trust are “split,” the note becomes
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unsecured. That comment, however, is not the proposed rule of the Restatement, but an
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explanation of the problem that the Restatement proposes to fix. Counsel cites to this comment
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out of context without citing to § 5.4(b) itself, which is directly contrary to his position that a
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separate transfer of a deed of trust leaves a note unsecured. The comment Plaintiff cites
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specifically notes that the Traditional Rule is “economically wasteful and confers an
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unwarranted windfall on the mortgagor.” In any case, there appears to have been no assignment
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of either the note or DOT in this case, and in cases this Court has seen where there is a transfer to
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be accounted for, the transferor typically assigns “the beneficial interest under the deed of trust,”
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which language shows an intent to transfer either the note or both the note and the deed of trust,
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but certainly not the deed of trust alone.
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Finally, foreclosure does not constitute “debt collection” under the state or federal fair
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debt collection statutes, and the claims for deceptive trade practices, unfair lending practices, and
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fraud fail under the respective statutes of limitations.
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CONCLUSION
IT IS HEREBY ORDERED that the Motion to Dismiss (ECF No. 6) is GRANTED and
the lis pendens is EXPUNGED.
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IT IS SO ORDERED.
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Dated this 12th day of September, 2011.
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_____________________________________
ROBERT C. JONES
United States District Judge
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