Garcia v. Regional Trustee Services Corporation et al

Filing 33

ORDER. IT IS ORDERED that the amended motion to remand 24 is DENIED. The original motion to remand 20 is DENIED as moot. IT IS FURTHER ORDERED that the motion to dismiss 27 is GRANTED IN PART AND DENIED IN PART: Plaintiff's first cause of action for violations of TILA, third cause of action for debtcollection violations, fourth cause of action for unfair and deceptive trade practices, fifth cause of action for quiet title, and eighth cause of action for wrongful foreclosure to cancel trustee's deed are DISMISSED WITH PREJUDICE, and the remaining claims are not dismissed. Signed by Judge Edward C. Reed, Jr on 8/23/2012. (Copies have been distributed pursuant to the NEF - MLC)

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1 2 3 4 UNITED STATES DISTRICT COURT DISTRICT OF NEVADA 5 6 7 OSCAR GARCIA, 8 9 10 11 12 13 14 15 16 17 ) ) Plaintiff, ) ) vs. ) ) REGIONAL TRUSTEE SERVICE ) CORPORATION, a foreign corporation,) FIRST HORIZON HOME LOANS ) CORPORATION, a revoked corporation,) MORTGAGE ELECTRONIC REGISTRATION ) SYSTEMS, INC., a foreign ) corporation, and DOES 1-10, ) inclusive, and all other persons ) unknown claiming any right, title, ) estate, lien or interest in the ) real property described herein. ) ) Defendants. ) ) ) 3:11-cv-00470-ECR-VPC Order 18 I. Background 19 On or about March 29, 2007, Plaintiff Oscar Garcia entered into 20 a purchase money mortgage agreement in the amount of $244,925.00 21 with lender First Horizon Home Loan Corporation, secured by a deed 22 of trust to the property located at 4381 Santa Maria Drive, Reno, 23 Nevada 98502 (the “Property”). (Second Am. Compl. ¶¶ 1-2 (#23); 24 Request for Judicial Notice1, Deed of Trust, Ex. 1 (#28).) On 25 26 27 28 1 Defendants request judicial notice of the deed of trust, notice of default, assignment of deed of trust, substitution of trustee, notice of trustee’s sale, and other such exhibits. (Request for Judicial Notice (#28).) Under Federal Rule of Evidence 201, a court may judicially notice matters of public record. Disabled Rights 1 October 18, 2010, a notice of default was recorded under Washoe 2 County recording number 3934174. (Request for Judicial Notice, Ex. 3 2 Notice of Default and Election to Sell (#28).) On March 30, 2011, 4 an assignment of deed of trust from Mortgage Electronic Registration 5 Systems, Inc. (“MERS”) as nominee for First Horizon Home Loan 6 Corporation to EverBank was recorded under Washoe County recording 7 number 3988443. (Request for Judicial Notice, Ex. 3 Assignment of 8 Deed of Trust (#28).) On the same day, a substitution of trustee 9 was recorded under Washoe County recording number 3988444, naming 10 Regional Service Corporation (“Regional” the Trustee. 11 Judicial Notice, Ex. 4 Substitution of Trustee (#28).) (Request for On April 19, 12 2011, Regional recorded a notice of trustee’s sale under Washoe 13 County recording number 3994868, setting a foreclosure date for May 14 9, 2011 at 11:00 A.M. 15 Trustee’s Sale (#28).) (Request for Judicial Notice, Ex. 5 Notice of The Property went to sale on May 9, 2011, 16 and Federal National Mortgage Association purchased the Property. 17 (Request for Judicial Notice, Ex. 6 Trustee’s Deed Upon Sale (#28).) 18 On May 2, 2011, Plaintiff filed a complaint in the Second 19 Judicial District Court for the State of Nevada in and for the 20 County of Washoe, alleging claims for (1) violation of Truth in 21 Lending Act (“TILA”); (2) declaratory relief; (3) debt collection 22 violations; (4) violations of the Nevada Unfair and Deceptive Trade 23 Practice Act; (5) quiet title; (6) rescission; and (7) wrongful 24 foreclosure. (Not. of Removal, Ex. A (#1).) On July 1, 2011, 25 26 27 Action Comm. v. Las Vegas Events, Inc., 375 F.3d 861, 866 n. 1 (9th Cir 2004). Therefore, we take judicial notice of these public records. 28 2 1 Defendant MERS and Regional removed the action to this Court on the 2 basis of diversity jurisdiction. (Not. of Removal (#1).) On 3 October 31, 2011, Plaintiff filed a first amended complaint (#17).) 4 On December 2, 2011, a case management conference was held and 5 Plaintiff was ordered to file a second amended complaint properly 6 identifying defendants in the caption. 7 (#22).) 8 (Dec. 2, 2011 Minutes Plaintiff filed his second amended complaint (#24). Now pending are an amended motion to remand (#24) filed by 9 Plaintiff, and a motion to dismiss (#27) filed by MERS and Regional. 10 11 II. Motion to Remand (#24) 12 A. Legal Standard 13 Under the federal removal statute, 28 U.S.C. § 1441, “any civil 14 action brought in a State court of which the district courts of the 15 United States have original jurisdiction, may be removed by the 16 defendant or the defendants, to the district court of the United 17 States for the district and division embracing the place where such 18 action is pending.” 28 U.S.C. § 1441(a). Removal of a case to a 19 United States District Court may be challenged by motion, and a 20 federal court must remand a matter if there is a lack of 21 jurisdiction. 28 U.S.C. § 1441(c). Removal statutes are construed 22 restrictively and in favor of remanding a case to state court. See 23 Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108–09, 61 S.Ct. 24 868, 85 L.Ed. 1214 (1941); Gaus v. Miles, Inc., 980 F.2 564, 566 25 (9th Cir.1992). On a motion to remand, the removing defendant faces 26 a strong presumption against removal and bears the burden of 27 establishing that removal is proper. Gaus, 980 F.2d at 566–67; 28 3 1 Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 403–04 (9th 2 Cir.1996). 3 A district court has original jurisdiction over civil actions 4 where the suit is between citizens of different states and the 5 amount in controversy, exclusive of interest and costs, exceeds 6 $75,000.00. 28 U.S.C. § 1332(a). For this reason, an action based on 7 diversity jurisdiction is “removable only if none of the parties in 8 interest properly joined and served as defendants is a citizen of 9 the state in which such action is brought.” 28 U.S.C. § 1441(b). 10 B. Discussion 11 Plaintiff contends that the matter should be remanded to the 12 State Court because there is no diversity jurisdiction and that 13 regardless, the Court should abstain from hearing the matter which 14 sounds in state law. In the alternative, Plaintiff requests that 15 the Court stay the action until a final decision is reached in 16 Chapman v. Deutsche Bank Nat’l Trust Co., 651 F.3d 1039 (9th Cir. 17 2011). 18 1. Diversity Jurisdiction 19 Plaintiff argues only that there are no federal questions 20 presented and does not address diversity jurisdiction under 28 21 U.S.C. § 1332(a). The Notice of Removal (#1) clearly provides that 22 the action was removed under 28 U.S.C. § 1332, and Plaintiff has not 23 argued or shown that the parties are not diverse or that the amount 24 in controversy is not met. Therefore, we reject Plaintiff’s 25 argument that the action must be remanded due to lack of federal 26 question jurisdiction, and deny the request for attorney’s fees. 27 28 2. Abstention 4 1 Plaintiff argues that federal courts should abstain from making 2 state law, arguing that there have been inconsistent rulings within 3 this District, that this Court would have to predict how the Nevada 4 Supreme Court would rule on certain state law matters, and that the 5 possibility of making a ruling that conflicts with state law 6 decisions should be avoided. However, these potential problems are 7 not peculiar to the federal courts. The State Court would also be in 8 a position of avoiding inconsistent rulings and having to predict 9 how the Nevada Supreme Court would likely rule on an unaddressed 10 issue of state law. The Court will therefore decline, in its 11 discretion, to abstain for these reasons. 12 3. Stay 13 Plaintiff also requests a stay pursuant to the prior exclusive 14 jurisdiction doctrine as pronounced by the Ninth Circuit in Chapman 15 v. Deutsche Bank Nat’l Trust Co., 651 F.3d 1039, 1043 (9th Cir. 16 2011), which, where it applies, requires federal courts to stay or 17 dismiss federal actions in favor of state-court litigation. In 18 Chapman, the Ninth Circuit held that the doctrine of prior exclusive 19 jurisdiction holds that “when one court is exercising in rem 20 jurisdiction over a res, a second court will not assume in rem 21 jurisdiction over the same res.” 22 547 U.S. 293, 311 (2006)). 23 24 25 26 Id. (quoting Marshall v. Marshall, As summarized by the Supreme Court: Where the action is in rem the effect is to draw to the federal court the possession or control, actual or potential, of the res, and the exercise by the state court of jurisdiction over the same res necessarily impairs, and may defeat, the jurisdiction of the federal court already attached. The converse of the rule is equally true, that where the jurisdiction of the state court has first attached, the federal court is precluded form exercising 27 28 5 1 its jurisdiction over the same res to defeat or impair the state court’s jurisdiction. 2 Kline v. Burke Constr. Co., 260 U.S. 226, 229 (1922), quoted in 3 Chapman, 651 F.3d at 1043-44. The doctrine therefore applies only 4 when both actions are in rem or quasi in rem, and does not apply 5 when if either action is in personam. Chapman, 651 F.3d at 1044 6 (citing State Eng’r v. S. Fork Band of Te-Moak Tribe of W. Shoshone 7 Indians, 339 F.3d 804, 811 (9th Cir. 2003)). 8 9 10 11 Accordingly, where parallel state and federal proceedings seek to determine interests in specific property as against the whole world (in rem), or where the parties’ interest in the property serve as the basis of jurisdiction for the parallel proceedings (quasi in rem), then the doctrine of prior exclusive jurisdiction fully applies. 12 Chapman, 651 F.3d at 1044 (internal quotation marks, alterations, 13 and citations omitted). Furthermore, where the doctrine applies, it 14 is “no mere discretionary abstention rule. Rather, it is a 15 mandatory jurisdictional limitation.” State Eng’r, 339 F.3d at 810 16 (citations and internal quotation mark omitted); see also Chapman, 17 651 F.3d at 1044 n.1 (“[I]f the doctrine applies, it is legal error 18 for a district court not to remand, dismiss, or stay federal 19 proceedings on account of the state court’s prior exercise of 20 jurisdiction, and any decision on the merits must be vacated.”). 21 The Ninth Circuit concluded that the characterization of 22 unlawful detainer actions and quiet title actions as in rem or quasi 23 in rem or in personam was an unresolved issue of state law and 24 certified the following questions to the Nevada Supreme Court: 25 26 1. Is a quiet title action under Nevada Revised Statues § 40.010, which is premised on an allegedly invalid trustee’s sale under Nevada Revised Statutes § 107.080(5)(a), properly 27 28 6 1 characterized under Nevada law as a proceeding in person, in rem, or quasi in rem? 2 3 2. Is an unlawful detainer action under Nevada Revised Statutes § 40.255(1)(c) properly characterized under Nevada law as a proceeding in personam, in rem, or quasi in rem? 4 Chapman, 651 F.3d at 1048. 5 On July 11, 2011, Plaintiff filed a motion to stay (#5) pending 6 the outcome of the questions certified to the Nevada Supreme Court 7 by the Ninth Circuit in Chapman. MERS and Regional opposed (#8) on 8 the basis that there is no concurrent or subsequent case involving 9 the Property. In his reply (#11), Plaintiff did not dispute that 10 there is no concurrent or subsequent case that would make this case 11 factually similar to Chapman. On August 4, 2011, the Court denied 12 (#12) Plaintiff’s motion to stay (#5). Plaintiff’s request for a 13 stay contained in the amended motion to remand (#24) appears to be 14 nothing more than a second attempt to resurrect an argument already 15 denied by this Court. In the reply (#26), Plaintiff makes a vague 16 reference to an unlawful detainer action filed in state court, but 17 does not state when that action was filed. Plaintiff only claims 18 that “[p]ost filing his Amended Motion for Remand” he found that the 19 federal National Mortgage Association filed their unlawful detainer 20 action in Reno Justice Court, Case No. RJC 2011 072253. Plaintiff 21 provides no further details, and because the argument was made only 22 in reply, Defendants were unable to counter the suggestion that 23 there may be a simultaneous action in state court. However, given 24 that Plaintiff had previous opportunity to show a simultaneous 25 action in the motion to stay (#5), in the reply to the motion to 26 stay (#11), and the amended motion to remand (#24) and failed to do 27 28 7 1 so, the Court refuses to reconsider its previous ruling that a stay 2 in not appropriate in this case under Chapman. Even if an unlawful 3 detainer action was filed in state court after this Court took 4 jurisdiction pursuant to the notice of removal and 28 U.S.C. § 5 1332(a), regardless of whether these actions are considered in rem, 6 this court would have priority in exercising jurisdiction and remand 7 or dismissal would not be necessary. Therefore, Plaintiff’s request 8 for a stay shall be denied. 9 10 III. Motion to Dismiss (#27) 11 A. Legal Standard 12 Courts engage in a two-step analysis in ruling on a motion to 13 dismiss. Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009); Bell Atl. Corp. 14 v. Twombly, 550 U.S. 544 (2007). First, courts accept only non- 15 conclusory allegations as true. Iqbal, 129 S. Ct. at 1949. 16 “Threadbare recitals of the elements of a cause of action, supported 17 by mere conclusory statements, do not suffice.” Id. (citing Twombly, 18 550 U.S. at 555). Federal Rule of Civil Procedure 8 “demands more 19 than an unadorned, the-defendant-unlawfully-harmed-me accusation.” 20 Id. Federal Rule of Civil Procedure 8 “does not unlock the doors of 21 discovery for a plaintiff armed with nothing more than conclusions.” 22 Id. at 1950. The Court must draw all reasonable inferences in favor 23 of the plaintiff. See Mohamed v. Jeppesen Dataplan, Inc., 579 F.3d 24 943, 949 (9th Cir. 2009). 25 After accepting as true all non-conclusory allegations and 26 drawing all reasonable inferences in favor of the plaintiff, the 27 Court must then determine whether the complaint “states a plausible 28 8 1 claim for relief.” Iqbal, 129 S. Ct. at 1949 (citing Twombly, 550 2 U.S. at 555). “A claim has facial plausibility when the plaintiff 3 pleads factual content that allows the court to draw the reasonable 4 inference that the defendant is liable for the misconduct alleged.” 5 Id. at 1949 (citing Twombly, 550 U.S. at 556). This plausibility 6 standard “is not akin to a ‘probability requirement,’ but it asks 7 for more than a sheer possibility that a defendant has acted 8 unlawfully.” Id. A complaint that “pleads facts that are ‘merely 9 consistent with’ a defendant’s liability...’stops short of the line 10 between possibility and plausibility of ‘entitlement to relief.’” 11 Id. (quoting Twombly, 550 U.S. at 557). 12 B. Discussion 13 1. TILA Violations 14 Plaintiff alleges that Defendants violated TILA by failing to 15 answer his demands for the name and address of the purported owner 16 of his mortgage. Defendants argue that the TILA claim is barred by 17 the one-year statute of limitations, which generally starts at the 18 consummation of the transaction. 19 910, 915 (9th Cir. 1986). See King v. California, 784 F.2d Plaintiff’s loan closed on or about March 20 29, 2007, several years before Plaintiff filed his complaint. In 21 response, Plaintiff states that the court should decide whether 22 equitable tolling is applicable to this action. Plaintiff has not 23 made any argument or allegation that equitable tolling is 24 appropriate in this action and therefore the TILA claim shall be 25 dismissed. 26 2. Declaratory Relief 27 28 9 1 Declaratory relief is a remedy, not an independent cause of 2 action. Parker v. Greenpoint Mortg. Funding Inc., No. 3:11-cv- 3 00039-ECR-RAM, 2011 WL 2923949, at *5 (D. Nev. Jul. 15, 2011); In re 4 Wal-Mart Wage & Hour Emp’t Practices Litig., 490 F.Supp.2d 1091, 5 1130 (D. Nev. 2007). Because we decline to dismiss one of 6 Plaintiff’s substantive causes of action, we decline to dismiss 7 Plaintiff’s second cause of action for declaratory relief but note 8 that it is a remedy rather than a cause of action. 9 10 3. Debt Collection Violations Plaintiff’s third cause of action alleges that Defendants 11 violated Nevada Revised Statute 649.370, which provides that any 12 violation of the Federal Fair Debt Collection Practice Act (“FDCPA”) 13 is a violation of Nevada law. Plaintiff’s claim fails as a matter 14 of law because foreclosure pursuant to a deed of trust does not 15 constitute debt collection under the FDCPA. Camacho-Villa v. Great 16 W. Home Loans, No. 3:10-cv-00210, 2011 WL 1103681 at *4 (D. Nev. 17 Mar. 23, 2011). Therefore, Plaintiff’s third claim must be 18 dismissed without leave to amend. 19 4. Unfair and Deceptive Trade Practices 20 Plaintiff’s fourth cause of action for violation of the Nevada 21 Unfair and Deceptive Trade Practices Act, Nev. Rev. Stat. § 22 598.0923, also fails as a matter of law. The statute provides that 23 a person engages in deceptive trade practices when he or she 24 knowingly conducts his or her business or occupation without all 25 required state, county, or city licenses. 26 598.0923(1). NEV . REV . STAT . § However, the statutes explicitly state that the 27 following activities do not constitute doing business in Nevada: (1) 28 10 1 maintaining, defending or settling any proceeding; (2) creating or 2 acquiring indebtedness, mortgages and security interests in real or 3 personal property; and (3) securing or collecting debts or enforcing 4 mortgages and security interests in property securing the debts. 5 NEV. REV. STAT. § 80.015(1)(a), (g), (h). Because Defendants are 6 explicitly exempted from the need to acquire licenses, the Court 7 dismisses Plaintiff’s fourth cause of action without leave to amend. 8 5. Quiet Title 9 In Nevada, a quiet title action may be brought “by any person 10 against another who claims an estate or interest in real property, 11 adverse to the person bringing the action, for the purpose of 12 determining such adverse claim.” NEV . REV . STAT . § 40.010. “In a 13 quiet title action, the burden of proof rests with the plaintiff to 14 prove good title in himself.” Breliant v. Preferred Equities Corp., 15 918 P.2d 314, 318 (Nev. 1996). “Additionally, an action to quiet 16 title requires a plaintiff to allege that she has paid any debt owed 17 on the property.” Lalwani v. Wells Fargo Bank, N.A., No. 2-11-cv- 18 00084, 2011 WL 4574338, at *3 (D. Nev. Sep. 30, 2011) (citing 19 Ferguson v. Avelo Mortg., LLC, No. B223447, 2011 WL 2139143, at *2 20 (Cal.App.2d June 1, 2011)). Plaintiff has failed to allege that 21 Plaintiff is not in breach of the loan agreement, and it is 22 indisputable that such a claim cannot be made. Accordingly, 23 Plaintiff’s fifth cause of action is dismissed. 24 6. Rescission-Mistake-Void Agreement 25 Rescission is a remedy and not an independent cause of action 26 under Nevada law. Frederick v. Fed. Nat’l Mortg. Ass’n, No. 2:11- 27 cv-00522-GMN-CWH, 2012 WL 1340801, at *6 (D. Nev. Apr. 18, 2012); 28 11 1 see also Great Am. Ins. Co. v. Gen. Builders, Inc., 934 P.2d 256 2 (Nev. 1997) (“[R]escission is not a claim, but rather a remedy.”). 3 Because we decline to dismiss one of Plaintiff’s substantive claims, 4 we decline to dismiss the rescission claim, but note that it is a 5 remedy rather than a cause of action. 6 7. Violation of Nev. Rev. Stat. § 107.086 7 Nevada’s foreclosure statute, Nev. Rev. Stat. § 107.080(2)(c), 8 governing notice to a borrower, requires only that the beneficiary, 9 its successor in interest, or trustee record a notice of breach and 10 of the election to sell. Plaintiff alleges that Defendants failed 11 to properly file a notice of availability of mediation with their 12 notice of default. Nev. Rev. Stat. § 107.086(2) requires that 13 before exercising a power of sale as part of a nonjudicial 14 foreclosure, a trustee must include a mediation election form with 15 the notice of default that is sent to the grantor. Instead of 16 providing documents that would show that the notice of default 17 included a mediation election form, Defendants respond that 18 Plaintiff’s allegations are vague, conclusory, and unwarranted. The 19 notice of default as filed with the request for judicial notice does 20 not include such a form. Defendants also argue that because 21 Plaintiff has failed to show that he is not in default, he cannot 22 have a claim for wrongful foreclosure. However, Plaintiff has 23 alleged a claim that Defendants violated Nev. Rev. Stat. § 107.086 24 as in effect on the date the notice of default was filed, and 25 Defendants have failed to oppose in a meaningful manner. 26 reason, we decline to dismiss this claim. 27 28 12 For that Defendants may, however, 1 prevail in a summary judgment motion upon a showing that the 2 mediation election forms were sent. 3 8. Cancel Trustee’s Deed 4 Plaintiff requests that we cancel the deed of trust because 5 Regional was not an authorized agent as stated on the deed of trust 6 and because the original Trustee’s deed and original promissory 7 notes no longer exist, if they ever did exist. To the extent that 8 Plaintiff’s claim requests cancellation, it is a remedy. However, 9 because Plaintiff makes vague allegations similar to those often 10 made in wrongful foreclosure claims, we shall consider this claim as 11 if it were a wrongful foreclosure claim. 12 Pursuant to Nevada law, 13 An action for the tort of wrongful foreclosure will lie if the trustor or mortgagor can establish that at the time the power of sale was exercised or the foreclosure occurred, no breach of condition or failure of performance existed on the mortgagor’s or trustor’s part which would have authorized the foreclosure or exercise of the power of sale. 14 15 16 17 Collins v. Union Fed. Sav. & Loan Ass’n, 662 P.2d 610, 623 (Nev. 18 1983); see also Cervantes v. Countrywide Home Loans, 656 F.3d 1034, 19 1044 (9th Cir. 2011) (holding that plaintiff-appellants cannot state 20 a claim for wrongful foreclosure while in default). Because 21 Plaintiff cannot dispute that he is in default, Defendants had 22 authority to foreclose and Plaintiff’s wrongful foreclosure claim 23 must be dismissed. Furthermore, Defendants have provided judicially 24 noticed recorded documents of the deed of trust, notice of default, 25 and assignment of deed of trust. Therefore, Plaintiff cannot state 26 a wrongful foreclosure claim on these grounds. 27 28 13 1 IV. Conclusion 2 IT IS, THEREFORE, HEREBY ORDERED that the amended motion to 3 remand (#24) is DENIED. In addition, the original motion to remand 4 (#20) is DENIED as moot, as it was filed before the filing of the 5 second amended complaint (#23) and the amended motion to remand 6 (#24). 7 IT IS FURTHER ORDERED that the motion to dismiss (#27) is 8 GRANTED IN PART AND DENIED IN PART: Plaintiff’s first cause of 9 action for violations of TILA, third cause of action for debt 10 collection violations, fourth cause of action for unfair and 11 deceptive trade practices, fifth cause of action for quiet title, 12 and eighth cause of action for wrongful foreclosure to cancel 13 trustee’s deed are DISMISSED WITH PREJUDICE, and the remaining 14 claims are not dismissed. 15 16 17 DATED: August 23, 2012. 18 ____________________________ UNITED STATES DISTRICT JUDGE 19 20 21 22 23 24 25 26 27 28 14

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