Heidig et al v. PNC Bank N.A. C/O Trustee Corps. et al

Filing 63

ORDER granting ECF No. 16 Motion to Dismiss; dismissal is with prejudice except as to Plaintiffs' RESPA claim; denying ECF No. 36 Motion for Leave to File; Clerk directed to close case; case terminated. Signed by Judge Miranda M. Du on 09/15/2017. (Copies have been distributed pursuant to the NEF - KW)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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***

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GUNTER HEIDIG, et al.,

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Plaintiffs,

ORDER

v.

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Case No. 3:16-cv-00576-MMD-VPC

PNC BANK N.A. C/O TRUSTEES
CORPS, et al.,

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Defendants.

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I.

SUMMARY

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Before the Court is Defendants’1 Motion to Dismiss Plaintiffs’ First Amended

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Complaint (“Motion”).2 (ECF No. 16.) The Court has reviewed Plaintiffs’ response (ECF

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No. 26) and Defendants’ reply (ECF No. 28).

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Also before this Court is PNC’s Motion for Leave to File Counterclaim (“Motion for
Counterclaim”) (ECF No. 36).3

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1Defendants

are Federal Home Loan Mortgage Corporation as Trustee for
Securitized Trust Freddie Mac Multiclass Certificates, Series 3038 (“Freddie Mac”),
Mortgage Electronic Registration Systems (“MERS”) and PNC Bank, N.A. (“PNC”). The
complaint actually named Defendant PNC as PNC Mortgage, A Division of PNC Bank,
N.A. c/o Trustee Corps. Therefore, this Court treats “PNC Mortgage, A Division of PNC
Bank, N.A. c/o Trustee Corps” as PNC solely. Moreover, it is unclear what the
abbreviation “c/o” indicates about the relationship between PNC and Trustee Corps (“c/o”
or “care of” is generally used for purposes of correspondence), although it appears that
Trustee Corps was the trustee hired by PNC to foreclose upon Plaintiffs’ home.
2In their response, Plaintiffs note that neither Trustee Corps nor Soma Financial
joined in Defendant’s Motion. (ECF No. 26 at 1, n. 1.) SOMA Financial was never served
in this case (and thus was dismissed) (ECF No. 62). As noted supra n.1, Trustee Corps
is not identified as a separate defendant from PNC and is therefore not a proper
defendant.
3The Court need not review Plaintiffs’ response (ECF No. 38) and Defendants’
reply (ECF No. 39) as the Motion is granted, rendering the Motion for Counterclaim moot.

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For the reasons discussed below, the Motion is granted and the Motion for

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Counterclaim is denied as moot.

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II.

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BACKGROUND
The following facts are taken from the First Amended Complaint (“FAC”). (ECF

No. 11.)

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On August 12, 2005, Plaintiffs Gunter and Janis Heidig obtained a $258,000

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mortgage loan from SOMA Financial (“SOMA”) that was secured by a first mortgage/deed

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of trust (“DOT”) on the property at 2655 Silky Sullivan Lane, Reno, Nevada (“the

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Property”). The DOT was recorded in Washoe County on August 18, 2005. This loan was

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then securitized, but Plaintiff alleges that the promissory note on the DOT (“the Note”)

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was not properly transferred to Defendant Freddie Mac before the closing date under the

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PSA.4 Generally, Plaintiffs allege that: any security interest in the Property was never

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perfected; the alleged holder of the Note is not the beneficiary of the DOT; the alleged

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holder of the DOT does not have requisite title, perfected security interest or standing to

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proceed in a foreclosure; and/or the holder of the DOT is not the real party in interest.

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Plaintiffs base these allegations on the theory that the security interest is invalid because

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there was a “splitting or separation of title, ownership and interest in Plaintiffs’ Note and

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[DOT]” as well as errors in assignment of the DOT and a failure to assign and transfer the

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DOT to Freddie Mac in accordance with the PSA of Defendants, New York Law, and the

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Uniform Commercial Code. (ECF No. 11 at ¶ 29.) Plaintiffs claim that as a result no true

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sale occurred and none of the Defendants hold a perfected and secured claim in the

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Property, thereby estopping Defendants from foreclosing on their home.

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Two notices of default have been recorded on the Property: one on May 31, 2013,

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and the other on December 24, 2014. The former was rescinded on December 24, 2014,

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and the latter was rescinded on October 14, 2015. Around December of 2013, Plaintiffs

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4Plaintiffs

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fail to identify what the PSA is or who is a party to it. More generally, a
“PSA” stands for a pooling and servicing agreement and is an agreement between an
original lender and subsequent purchaser of a mortgage loan. Wood v. Germann, 331
P.3d 859, 859 (Nev. 2014) (per curiam).
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received a second Notice of Default and Election to Sell by the Trustee for Defendants.

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In April 2015, there was a hearing before a state foreclosure mediator. The mediator

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denied a certificate of foreclosure. On judicial review, the mediator’s findings were upheld.

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On March 4, 2016, Defendants’ Trustee recorded a third Notice of Default and Election

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to Sell. On September 19, 2016, a Notice of Trustee Sale was recorded and the sale of

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the Property was scheduled for October 21, 2016.5

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Plaintiffs allege nine claims for relief: (1) a cause of action under NRS § 107.028(7)

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for Defendants’ non-compliance with NRS Chapter 107; (2) intentional infliction of

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emotional distress; (3) negligent infliction of emotional distress; (4) slander of title; (5)

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quiet title; (6) declaratory relief that Defendants do not have authority to foreclose upon

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or sell the Property and that Plaintiffs are entitled to exclusive possession of the Property

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and own it in fee simple; (7) violation of the Real Estate Settlement Procedures Act

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(“RESPA”); (8) contractual breach of the implied covenant of good faith and fair dealing;

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and (9) tortious breach of the implied covenant of good faith and fair dealing.

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III.

LEGAL STANDARD

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A court may dismiss a plaintiff’s complaint for “failure to state a claim upon which

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relief can be granted.” Fed. R. Civ. P. 12(b)(6). A properly pleaded complaint must provide

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“a short and plain statement of the claim showing that the pleader is entitled to relief.”

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Fed. R. Civ. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While

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Rule 8 does not require detailed factual allegations, it demands more than “labels and

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conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v.

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Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555.) In other words,

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“[f]actual allegations must be enough to rise above the speculative level.” Twombly, 550

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U.S. at 555. Thus, to survive a motion to dismiss, a complaint must contain sufficient

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factual matter to “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678

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(internal citation omitted).

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5The

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Court granted Plaintiffs’ Motion for a Temporary Restraining Order
postponing the October 21, 2016, sale. (ECF No. 10.)
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In Iqbal, the Supreme Court clarified the two-step approach district courts are to

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apply when considering motions to dismiss. First, a district court must accept as true all

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well-pleaded factual allegations in the complaint; however, legal conclusions are not

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entitled to the assumption of truth. Id. at 678-79. Mere recitals of the elements of a cause

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of action, supported only by conclusory statements, do not suffice. Id. at 678. Second, a

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district court must consider whether the factual allegations in the complaint allege a

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plausible claim for relief. Id. at 679. A claim is facially plausible when the plaintiff’s

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complaint alleges facts that allow a court to draw a reasonable inference that the

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defendant is liable for the alleged misconduct. Id. at 678. Where the complaint does not

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permit the court to infer more than the mere possibility of misconduct, the complaint has

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“alleged—but it has not show[n]—that the pleader is entitled to relief.” Id. at 679 (internal

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quotation marks omitted). When the claims in a complaint have not crossed the line from

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conceivable to plausible, the complaint must be dismissed. Twombly, 550 U.S. at 570.

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Moreover, a complaint must contain either direct or inferential allegations concerning “all

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the material elements necessary to sustain recovery under some viable legal theory.”

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Twombly, 550 U.S. at 562 (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101,

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1106 (7th Cir. 1989) (emphasis in original)).

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IV.

MOTION TO DISMISS (ECF No. 16)

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A.

Judicial Notice

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Defendants request that this Court take judicial notice of certain documents in

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support of their Motion. (ECF No. 17.) These exhibits include: (1) the DOT for the Property

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that was recorded on August 18, 2005 (ECF No. 17-1); (2) Assignment of the DOT that

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was recorded on August 5, 2011 (ECF No. 17-2); (3) Assignment of the DOT that was

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recorded on February 25, 2015 (ECF No. 17-3); (4) Assignment of the DOT that was

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recorded on January 19, 2016 (ECF No. 17-4); (5) Notice of Default that was recorded on

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December 24, 2014 (ECF No. 17-5); (6) Petition for Judicial Review filed on June 5, 2015

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in the Second Judicial District Court of the State of Nevada (ECF No. 17-6); (7) Rescission

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of the Notice of Default, which was recorded on October 14, 2015 (ECF No. 17-7); and

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(8) Notice of Default that was recorded on March 4, 2016 (ECF No. 17-8). In their

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response, Plaintiffs do not dispute the authenticity of these documents. The Court

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therefore grants Defendants’ request to take judicial notice of these documents.

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B.

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Claims Based on a Theory of Improper Securitization and Improper
Assignment6

In their Motion, Defendants contend that Plaintiffs do not have standing to
challenge any errors in assignment of the DOT. The Court agrees.

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The improper securitization and assignment argument advanced by Plaintiffs is not

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legally cognizable. “Since the securitization merely creates a separate contract, distinct

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from plaintiffs’ debt obligations under the note and does not change the relationship of

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the parties in any way, plaintiffs’ claims arising out of securitization fail.” Reyes v. GMAC

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Mortg. LLC, No. 2:11-cv-00100-JCM-RJJ, 2011 WL 1322775, at *3 (D. Nev. Apr. 5, 2011)

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(internal quotation marks and citation omitted). “The securitization argument has been

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repeatedly rejected by this district because it does not alter or change the legal

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beneficiary’s standing to enforce the deed of trust.” Beebe v. Fed. Nat. Mortg. Ass’n, No.

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2:13-cv-311-JCM-GWF, 2013 WL 3109787, at *2 (D. Nev. June 18, 2013). Moreover, it

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is “well-established that a third party lacks standing to raise a violation of the [PSA].” Burd

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v. JP Morgan Chase, No. 2:13-cv-337-JCM-PAL, 2013 WL 1787192, at *4 (D. Nev. Apr.

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25, 2013) (internal alterations omitted); Wood v. Germann, 331 P.3d 859, 861 (Nev. 2014)

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(“the homeowner, who is neither a party to the PSA nor an intended third-party

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beneficiary, lacks standing to challenge the validity of [a] loan assignment”).

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Because Counts 4, 5, and 6 rely solely on a theory of improper securitization, these

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counts are dismissed.

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is also a third theory challenging the assignments based on a “robo-signing”
argument. (ECF No. 13 at ¶¶ 36-50.) However, the Ninth Circuit has affirmed that a
borrower lacks standing to allege such an argument because the borrower does not suffer
an injury from the robo-signing. Javaheri v. JPMorgan Chase Bank, N.A., No. 2:10-cv08185-ODW, 2012 WL 3426278, at *6 (C. D. Cal. Aug. 13, 2012), aff’d, 561 F. App’x 611
(9th Cir. 2014).
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C.

NRS § 107.028(7)

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Plaintiffs’ first claim is brought pursuant to NRS § 107.028(7). However, this

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provision applies only to trustees, and none of the actual defendants are alleged to be

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the trustee for the DOT7 at the time either notice of trustee’s sale was recorded.

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Therefore, this claim is dismissed.

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D.

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In order to properly allege a claim for intentional infliction of emotional distress,

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Plaintiffs must allege that there was “extreme and outrageous conduct with the intention

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of, or reckless disregard for, causing emotional distress.” State v. Eighth Judicial Dist.

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Court ex rel. Cty. Of Clark, 42 P.3d 233, 241 (2002). The purportedly “extreme and

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outrageous” conduct Defendants have engaged in is “fraudulently attempting to foreclose

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or claiming the right to foreclose on a property in which they have no right, title, or

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interest.” (ECF No. 11 at ¶ 68.) However, the basis for Plaintiffs’ contention that

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Defendants had no right to foreclose on the Property has been rejected by both this Court

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and the Nevada Supreme Court. See discussion supra at Sect. IV(B). Therefore, it is not

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extreme or outrageous as a matter of law.

Intentional and Negligent Infliction of Emotional Distress

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In order to properly allege a claim for negligent infliction of emotional distress,

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Plaintiffs must show that the emotional harm they suffered was “reasonably foreseeable”

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as a result of Defendants’ actions. Crippens v. Sav-on Drug Stores, 961 P.2d 761, 762-

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63 (Nev. 1998). However, Defendants’ actions appear to be fraudulently claiming the right

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to foreclose on Plaintiffs’ home. (See ECF No. 11 at ¶¶ 68, 73.) As noted, this conduct is

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not “extreme or outrageous” as a matter of law. See Simon v. Bank of Am., N.A., No.

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2:10-cv-00300-GMN-LRL, 2010 WL 2609436, at *12 (D. Nev. June 23, 2010) (“[an

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allegation of unlawful foreclosure process does not] amount to extreme and outrageous

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conduct . . . . Foreclosure, particularly where there is no legally sufficient claim that it was

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7The

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trustee at the time of the foreclosure sales appears to have been Trustee
Corps (see ECF Nos. 17-5, 17-7), who was not named as a proper defendant to this
action. (The remaining Defendants were purported beneficiaries of the DOT at various
points in time.)
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wrongful, is insufficient to amount to an actionable claim for [negligent infliction of

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emotional distress].”)

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Therefore, the Court dismisses Counts 2 and 3.

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E.

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In Count 7, Plaintiffs allege that Trustee Corps violated RESPA by failing to

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acknowledge receipt of a qualified written request or investigate and respond to the

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request within the statutory time period. (ECF No. 11 at ¶ 99.)

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RESPA

As this claim is against Trustee Corps, who is not a proper defendant to this action,
it is dismissed without prejudice.

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F.

Breach of the Implied Covenant of Good Faith and Fair Dealing

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Plaintiffs bring two claims for breach of the implied covenant of good faith and fair

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dealing, one sounding in tort and the other in contract. (ECF No. 11 at 20-21.) A party

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may be liable for a contractual breach of the implied covenant of good faith and fair

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dealing if that party “deliberately countervenes [sic] the intention and spirit of the contract.”

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Hilton Hotels Corp. v. Butch Lewis Prods., 808 P.2d 919, 922-23 (Nev. 1991). The

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contract that Plaintiffs appear to identify in Count 8 is the promissory note. However,

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according to their own allegations, Plaintiffs entered into the promissory note with SOMA,

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and on Plaintiffs’ allegations the Note was never properly securitized or assigned to the

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various Defendants in this case. (ECF No. 11 at ¶¶ 10, 14-16.) Thus, it is unclear how

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any of the Defendants may have breached the Note when Plaintiffs argue that Defendants

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are not actual parties to it. Moreover, because Plaintiffs breached the promissory note

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first by ceasing to make payments on their mortgage loan,8 they cannot maintain an action

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against Defendants based on a failure to perform consistent with the spirit of the

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promissory note. See Harfouche v. Wehbe, No. 2:13-cv-00615-LDG-NJK, 2016 WL

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1047354, at *2 (citing Bradley v. Nev.-Cal.-Or. Ry., 178 P. 906, 908-09 (Nev. 1919)).

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8Plaintiffs

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have allegedly been in default since October 2011. (See ECF No. 36-1

at ¶ 17.)
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“[A] tort action for breach of the implied covenant of good faith and fair dealing

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requires a special element of reliance or fiduciary duty . . . and is limited to rare and

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exceptional cases.” Great Am. Ins. Co. v. Gen. Builders, Inc., 934 P.2d 257, 263 (Nev.

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1997) (internal quotation marks and citations omitted). A special element of reliance

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arises in such relationships as partnerships, insurance, and franchise agreements. Ins.

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Co. of the W. v. Gibson Title Co., 134 P.3d 698, 702 (Nev. 2006) (en banc). In the FAC,

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Plaintiffs do not allege that they had a fiduciary relationship with any of the defendants;

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instead, they contend that they had a “justified expectation that their note and deed of

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trust would be handled, transferred and assigned in appropriate and lawful manners” and

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that “Defendants were in a superior position to Plaintiffs.” (ECF No. 11 at ¶¶ 106-107.)

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However, these allegations do not demonstrate a “special element of reliance” between

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Plaintiffs and Defendants and appear to be based on the theory of improper securitization

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and assignment, which the Court has previously stated is not a legally cognizable

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argument that is available to Plaintiffs. To the extent Plaintiffs rely on a special relationship

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between borrowers and lenders, no such special relationship exists. See Larson v.

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Homecomings Fin., LLC, 680 F. Supp. 2d 1230, 1235 (D. Nev. 2009) (citing Giles v. Gen.

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Motors Acceptance Corp., 494 F.3d 865, 883-84 (9th Cir. 2007)) (“Although Plaintiffs

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contend that a special relationship existed because . . .they trusted Defendants’ superior

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knowledge, those circumstances do not amount to more than an arm’s length

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transaction.”).

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Therefore, Counts 8 and 9 are dismissed.

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G.

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Because the Court dismisses all of Plaintiffs’ claims, the Court need not address

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the punitive damages allegations or Defendants’ arguments regarding punitive damages.

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V.

Punitive Damages

MOTION FOR COUNTERCLAIM (ECF No. 36)
Because the Court dismisses all of Plaintiffs’ claims, the Motion for Leave to File

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Counterclaim is denied as moot.

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VI.

CONCLUSION

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The Court notes that the parties made several arguments and cited to several

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cases not discussed above. The Court has reviewed these arguments and cases and

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determines that they do not warrant discussion or reconsideration as they do not affect

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the outcome of motions before the Court.

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It is therefore ordered that Defendants’ Motion to Dismiss Plaintiffs’ First Amended

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Complaint (ECF No. 16) is granted. Dismissal is with prejudice except as to Plaintiffs’

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RESPA claim. Defendants’ Motion for Leave to File Counterclaim (ECF No. 36) is denied

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as moot.

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The Clerk is directed to close this case.

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DATED THIS 15th day of September 2017.

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MIRANDA M. DU
UNITED STATES DISTRICT JUDGE

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