Duckett et al v. LoanCity, A California Corporation et al

Filing 30

ORDER. IT IS ORDERED that the 4 Motion to Dismiss and the 18 Motion to Dismiss and Expundge Lis Pendens are GRANTED. Signed by Chief Judge Robert C. Jones on 10/24/2011. (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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JOHN H. DUCKETT et al.,

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This is a standard foreclosure case involving one property. The Complaint filed in state

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Plaintiffs,
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vs.
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LOANCITY et al.,
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Defendants.

3:11-cv-00465-RCJ-VPC
ORDER

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court lists nine causes of action: (1) Unfair Debt Collection Practices Under Nevada Revised

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Statutes (“NRS”) section 649.370; (2) Unfair and Deceptive Trade Practices Under NRS sections

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41.600 and 598.0923; (3) Unfair Lending Practices Under NRS section 598D.100; (4) Breach of

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the Covenant of Good Faith and Fair Dealing; (5) Violation of NRS section 107.080; (6) Quiet

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Title; (7) Fraud; (8) Slander of Title; and (9) Abuse of Process. The case is not part of Case No.

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2:09-md-02119-JAT in the District of Arizona but appears eligible for transfer. Defendants have

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moved to dismiss and to expunge the lis pendens. For the reasons given herein, the Court grants

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the motions as motions for summary judgment.

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I.

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THE PROPERTY
John H. and Bernadette Duckett gave lender LoanCity a $412,000 promissory note to

refinance property at 3145 Eaglewood Dr., Reno, NV 89502 (the “Property”). (See Deed of Trust

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(“DOT”) 1–3, Dec. 20, 2006, ECF No. 4-1, at 7). The trustee was First Centennial Title Co. of

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Nevada (“First Centennial”), and Mortgage Electronic Registration Systems, Inc. (“MERS”) was

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the lender’s “nominee.” (Id. 1). Plaintiffs originally purchased the Property in 2001 for

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$187,000 and refinanced it several times, the latest time representing the current $412,000 loan.

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(See Mot. Dismiss 3–4, Aug. 4, 2011, ECF No. 18). MERS assigned the note and DOT to BAC

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Home Loans Servicing, f.k.a. Countrywide Home loans Servicing, LP (“BAC”). (See

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Assignment, June 4, 2009, ECF No. 4-1, at 23). BAC substituted MTC Financial, Inc., d.b.a.

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Trustee Corps (“Trustee Corps”) as trustee. (See Substitution, June 4, 2009, ECF No. 4-1, at 30).

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Trustee Corps filed the notice of default (“NOD”) as agent for BAC based on a default of

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unspecified amount as of August 1, 2008. (See NOD, May 13, 2009, ECF No. 4-1, at 27).

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Trustee Corps noticed a trustee’s sale for September 8, 2009. (see First Notice of Trustee’s Sale

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(“FNOS”), Aug. 18, 2009, ECF No. 4-1, at 33), and again for July 6, 2011, (see Second Notice

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of Trustee’s Sale (“SNOS”), June 9, 2011, ECF No. 4-1, at 36). At oral argument, the parties

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indicated that the trustee’s sale had been completed and that Plaintiffs had not made any

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payments for approximately thee years.

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II.

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ANALYSIS
Most of the claims fail for reasons given in substantively similar cases. The first issue

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with respect to the statutory propriety of foreclosure is MERS’ transfer of the note and DOT.

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The Court had in the past challenged such transfers as potentially improper, because MERS is

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typically not in fact a beneficiary and the scope of MERS’ agency due to its designation as a

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“nominee” on a deed of trust is not clear enough without more to indicate that a lender intends to

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give MERS the ability to sell the beneficial interest on its behalf. However, several defendants

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have since brought to the Court’s attention a common clause in MERS deeds of trust—also

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present in the DOT here—that indicates an intention to give MERS the broadest possible agency

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on behalf of the lender, including transfer of the beneficial interest. See, e.g., Smith v. Cmty.
Page 2 of 3

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Lending, Inc., 773 F. Supp. 2d 941, 942–43 (D. Nev. 2011). The MERS assignment of the note

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and DOT from LoanCity to BAC in this case was proper, because the DOT contains the relevant

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agency language. See id.; DOT 3.

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The second issue is the timing of the substitution of the trustee. Trustee Corps filed the

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NOD a month before BAC appointed Trustee Corps as the new trustee. Without more, this

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would indicate a statutory defect in foreclosure, because only the beneficiary, trustee, or an agent

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of one of these may file the NOD under section 107.080(2)(c). The Court has ruled in the past

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that “[a] later-executed substitution of trustee making the notice of default filer the new trustee

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before proceeding to sale is practically insurmountable evidence of ratification . . . .” Nevada ex

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rel. Bates v. MERS, No. 3:10–cv–00407–RCJ–VPC, 2011 WL 1582945, at *5 (D. Nev. Apr. 25,

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2011) (citing Restatement (Third) of Agency § 4.03 & cmt. b). Such is the case here. (See NOD,

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May 13, 2009, ECF No. 4-1, at 27; Substitution, June 4, 2009, ECF No. 4-1, at 30). The Court

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has recently indicated that it does not intend to grant motions to dismiss based on ratification, but

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will leave this issue to summary judgment. In the present case, the extreme inequity of further

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stalling the disposition of the Property where it has been sold and Plaintiffs have not made any

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payment for three years leads the Court to treat the motions as motions for summary judgment

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and grant them.

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CONCLUSION
IT IS HEREBY ORDERED that the Motion to Dismiss (ECF No. 4) and the Motion to
Dismiss and Expunge Lis Pendens (ECF No. 18) are GRANTED.

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IT IS SO ORDERED.

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Dated this 24th day of October, 2011.

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_____________________________________
ROBERT C. JONES
United States District Judge

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