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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1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 *** 7 GUNTER HEIDIG, et al., 8 Plaintiffs, ORDER v. 9 10 Case No. 3:16-cv-00576-MMD-VPC PNC BANK N.A. C/O TRUSTEES CORPS, et al., 11 Defendants. 12 13 I. SUMMARY 14 Before the Court is Defendants’1 Motion to Dismiss Plaintiffs’ First Amended 15 Complaint (“Motion”).2 (ECF No. 16.) The Court has reviewed Plaintiffs’ response (ECF 16 No. 26) and Defendants’ reply (ECF No. 28). 17 18 Also before this Court is PNC’s Motion for Leave to File Counterclaim (“Motion for Counterclaim”) (ECF No. 36).3 19 20 21 22 23 24 25 26 27 28 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. 1 For the reasons discussed below, the Motion is granted and the Motion for 2 Counterclaim is denied as moot. 3 II. 4 5 BACKGROUND The following facts are taken from the First Amended Complaint (“FAC”). (ECF No. 11.) 6 On August 12, 2005, Plaintiffs Gunter and Janis Heidig obtained a $258,000 7 mortgage loan from SOMA Financial (“SOMA”) that was secured by a first mortgage/deed 8 of trust (“DOT”) on the property at 2655 Silky Sullivan Lane, Reno, Nevada (“the 9 Property”). The DOT was recorded in Washoe County on August 18, 2005. This loan was 10 then securitized, but Plaintiff alleges that the promissory note on the DOT (“the Note”) 11 was not properly transferred to Defendant Freddie Mac before the closing date under the 12 PSA.4 Generally, Plaintiffs allege that: any security interest in the Property was never 13 perfected; the alleged holder of the Note is not the beneficiary of the DOT; the alleged 14 holder of the DOT does not have requisite title, perfected security interest or standing to 15 proceed in a foreclosure; and/or the holder of the DOT is not the real party in interest. 16 Plaintiffs base these allegations on the theory that the security interest is invalid because 17 there was a “splitting or separation of title, ownership and interest in Plaintiffs’ Note and 18 [DOT]” as well as errors in assignment of the DOT and a failure to assign and transfer the 19 DOT to Freddie Mac in accordance with the PSA of Defendants, New York Law, and the 20 Uniform Commercial Code. (ECF No. 11 at ¶ 29.) Plaintiffs claim that as a result no true 21 sale occurred and none of the Defendants hold a perfected and secured claim in the 22 Property, thereby estopping Defendants from foreclosing on their home. 23 Two notices of default have been recorded on the Property: one on May 31, 2013, 24 and the other on December 24, 2014. The former was rescinded on December 24, 2014, 25 and the latter was rescinded on October 14, 2015. Around December of 2013, Plaintiffs 26 4Plaintiffs 27 28 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). 2 1 received a second Notice of Default and Election to Sell by the Trustee for Defendants. 2 In April 2015, there was a hearing before a state foreclosure mediator. The mediator 3 denied a certificate of foreclosure. On judicial review, the mediator’s findings were upheld. 4 On March 4, 2016, Defendants’ Trustee recorded a third Notice of Default and Election 5 to Sell. On September 19, 2016, a Notice of Trustee Sale was recorded and the sale of 6 the Property was scheduled for October 21, 2016.5 7 Plaintiffs allege nine claims for relief: (1) a cause of action under NRS § 107.028(7) 8 for Defendants’ non-compliance with NRS Chapter 107; (2) intentional infliction of 9 emotional distress; (3) negligent infliction of emotional distress; (4) slander of title; (5) 10 quiet title; (6) declaratory relief that Defendants do not have authority to foreclose upon 11 or sell the Property and that Plaintiffs are entitled to exclusive possession of the Property 12 and own it in fee simple; (7) violation of the Real Estate Settlement Procedures Act 13 (“RESPA”); (8) contractual breach of the implied covenant of good faith and fair dealing; 14 and (9) tortious breach of the implied covenant of good faith and fair dealing. 15 III. LEGAL STANDARD 16 A court may dismiss a plaintiff’s complaint for “failure to state a claim upon which 17 relief can be granted.” Fed. R. Civ. P. 12(b)(6). A properly pleaded complaint must provide 18 “a short and plain statement of the claim showing that the pleader is entitled to relief.” 19 Fed. R. Civ. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While 20 Rule 8 does not require detailed factual allegations, it demands more than “labels and 21 conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. 22 Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555.) In other words, 23 “[f]actual allegations must be enough to rise above the speculative level.” Twombly, 550 24 U.S. at 555. Thus, to survive a motion to dismiss, a complaint must contain sufficient 25 factual matter to “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 26 (internal citation omitted). 27 5The 28 Court granted Plaintiffs’ Motion for a Temporary Restraining Order postponing the October 21, 2016, sale. (ECF No. 10.) 3 1 In Iqbal, the Supreme Court clarified the two-step approach district courts are to 2 apply when considering motions to dismiss. First, a district court must accept as true all 3 well-pleaded factual allegations in the complaint; however, legal conclusions are not 4 entitled to the assumption of truth. Id. at 678-79. Mere recitals of the elements of a cause 5 of action, supported only by conclusory statements, do not suffice. Id. at 678. Second, a 6 district court must consider whether the factual allegations in the complaint allege a 7 plausible claim for relief. Id. at 679. A claim is facially plausible when the plaintiff’s 8 complaint alleges facts that allow a court to draw a reasonable inference that the 9 defendant is liable for the alleged misconduct. Id. at 678. Where the complaint does not 10 permit the court to infer more than the mere possibility of misconduct, the complaint has 11 “alleged—but it has not show[n]—that the pleader is entitled to relief.” Id. at 679 (internal 12 quotation marks omitted). When the claims in a complaint have not crossed the line from 13 conceivable to plausible, the complaint must be dismissed. Twombly, 550 U.S. at 570. 14 Moreover, a complaint must contain either direct or inferential allegations concerning “all 15 the material elements necessary to sustain recovery under some viable legal theory.” 16 Twombly, 550 U.S. at 562 (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 17 1106 (7th Cir. 1989) (emphasis in original)). 18 IV. MOTION TO DISMISS (ECF No. 16) 19 A. Judicial Notice 20 Defendants request that this Court take judicial notice of certain documents in 21 support of their Motion. (ECF No. 17.) These exhibits include: (1) the DOT for the Property 22 that was recorded on August 18, 2005 (ECF No. 17-1); (2) Assignment of the DOT that 23 was recorded on August 5, 2011 (ECF No. 17-2); (3) Assignment of the DOT that was 24 recorded on February 25, 2015 (ECF No. 17-3); (4) Assignment of the DOT that was 25 recorded on January 19, 2016 (ECF No. 17-4); (5) Notice of Default that was recorded on 26 December 24, 2014 (ECF No. 17-5); (6) Petition for Judicial Review filed on June 5, 2015 27 in the Second Judicial District Court of the State of Nevada (ECF No. 17-6); (7) Rescission 28 of the Notice of Default, which was recorded on October 14, 2015 (ECF No. 17-7); and 4 1 (8) Notice of Default that was recorded on March 4, 2016 (ECF No. 17-8). In their 2 response, Plaintiffs do not dispute the authenticity of these documents. The Court 3 therefore grants Defendants’ request to take judicial notice of these documents. 4 B. 5 6 7 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. 8 The improper securitization and assignment argument advanced by Plaintiffs is not 9 legally cognizable. “Since the securitization merely creates a separate contract, distinct 10 from plaintiffs’ debt obligations under the note and does not change the relationship of 11 the parties in any way, plaintiffs’ claims arising out of securitization fail.” Reyes v. GMAC 12 Mortg. LLC, No. 2:11-cv-00100-JCM-RJJ, 2011 WL 1322775, at *3 (D. Nev. Apr. 5, 2011) 13 (internal quotation marks and citation omitted). “The securitization argument has been 14 repeatedly rejected by this district because it does not alter or change the legal 15 beneficiary’s standing to enforce the deed of trust.” Beebe v. Fed. Nat. Mortg. Ass’n, No. 16 2:13-cv-311-JCM-GWF, 2013 WL 3109787, at *2 (D. Nev. June 18, 2013). Moreover, it 17 is “well-established that a third party lacks standing to raise a violation of the [PSA].” Burd 18 v. JP Morgan Chase, No. 2:13-cv-337-JCM-PAL, 2013 WL 1787192, at *4 (D. Nev. Apr. 19 25, 2013) (internal alterations omitted); Wood v. Germann, 331 P.3d 859, 861 (Nev. 2014) 20 (“the homeowner, who is neither a party to the PSA nor an intended third-party 21 beneficiary, lacks standing to challenge the validity of [a] loan assignment”). 22 Because Counts 4, 5, and 6 rely solely on a theory of improper securitization, these 23 counts are dismissed. 24 /// 25 26 27 28 6There 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). 5 1 C. NRS § 107.028(7) 2 Plaintiffs’ first claim is brought pursuant to NRS § 107.028(7). However, this 3 provision applies only to trustees, and none of the actual defendants are alleged to be 4 the trustee for the DOT7 at the time either notice of trustee’s sale was recorded. 5 Therefore, this claim is dismissed. 6 D. 7 In order to properly allege a claim for intentional infliction of emotional distress, 8 Plaintiffs must allege that there was “extreme and outrageous conduct with the intention 9 of, or reckless disregard for, causing emotional distress.” State v. Eighth Judicial Dist. 10 Court ex rel. Cty. Of Clark, 42 P.3d 233, 241 (2002). The purportedly “extreme and 11 outrageous” conduct Defendants have engaged in is “fraudulently attempting to foreclose 12 or claiming the right to foreclose on a property in which they have no right, title, or 13 interest.” (ECF No. 11 at ¶ 68.) However, the basis for Plaintiffs’ contention that 14 Defendants had no right to foreclose on the Property has been rejected by both this Court 15 and the Nevada Supreme Court. See discussion supra at Sect. IV(B). Therefore, it is not 16 extreme or outrageous as a matter of law. Intentional and Negligent Infliction of Emotional Distress 17 In order to properly allege a claim for negligent infliction of emotional distress, 18 Plaintiffs must show that the emotional harm they suffered was “reasonably foreseeable” 19 as a result of Defendants’ actions. Crippens v. Sav-on Drug Stores, 961 P.2d 761, 762- 20 63 (Nev. 1998). However, Defendants’ actions appear to be fraudulently claiming the right 21 to foreclose on Plaintiffs’ home. (See ECF No. 11 at ¶¶ 68, 73.) As noted, this conduct is 22 not “extreme or outrageous” as a matter of law. See Simon v. Bank of Am., N.A., No. 23 2:10-cv-00300-GMN-LRL, 2010 WL 2609436, at *12 (D. Nev. June 23, 2010) (“[an 24 allegation of unlawful foreclosure process does not] amount to extreme and outrageous 25 conduct . . . . Foreclosure, particularly where there is no legally sufficient claim that it was 26 7The 27 28 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.) 6 1 wrongful, is insufficient to amount to an actionable claim for [negligent infliction of 2 emotional distress].”) 3 Therefore, the Court dismisses Counts 2 and 3. 4 E. 5 In Count 7, Plaintiffs allege that Trustee Corps violated RESPA by failing to 6 acknowledge receipt of a qualified written request or investigate and respond to the 7 request within the statutory time period. (ECF No. 11 at ¶ 99.) 8 9 RESPA As this claim is against Trustee Corps, who is not a proper defendant to this action, it is dismissed without prejudice. 10 F. Breach of the Implied Covenant of Good Faith and Fair Dealing 11 Plaintiffs bring two claims for breach of the implied covenant of good faith and fair 12 dealing, one sounding in tort and the other in contract. (ECF No. 11 at 20-21.) A party 13 may be liable for a contractual breach of the implied covenant of good faith and fair 14 dealing if that party “deliberately countervenes [sic] the intention and spirit of the contract.” 15 Hilton Hotels Corp. v. Butch Lewis Prods., 808 P.2d 919, 922-23 (Nev. 1991). The 16 contract that Plaintiffs appear to identify in Count 8 is the promissory note. However, 17 according to their own allegations, Plaintiffs entered into the promissory note with SOMA, 18 and on Plaintiffs’ allegations the Note was never properly securitized or assigned to the 19 various Defendants in this case. (ECF No. 11 at ¶¶ 10, 14-16.) Thus, it is unclear how 20 any of the Defendants may have breached the Note when Plaintiffs argue that Defendants 21 are not actual parties to it. Moreover, because Plaintiffs breached the promissory note 22 first by ceasing to make payments on their mortgage loan,8 they cannot maintain an action 23 against Defendants based on a failure to perform consistent with the spirit of the 24 promissory note. See Harfouche v. Wehbe, No. 2:13-cv-00615-LDG-NJK, 2016 WL 25 1047354, at *2 (citing Bradley v. Nev.-Cal.-Or. Ry., 178 P. 906, 908-09 (Nev. 1919)). 26 /// 27 8Plaintiffs 28 have allegedly been in default since October 2011. (See ECF No. 36-1 at ¶ 17.) 7 1 “[A] tort action for breach of the implied covenant of good faith and fair dealing 2 requires a special element of reliance or fiduciary duty . . . and is limited to rare and 3 exceptional cases.” Great Am. Ins. Co. v. Gen. Builders, Inc., 934 P.2d 257, 263 (Nev. 4 1997) (internal quotation marks and citations omitted). A special element of reliance 5 arises in such relationships as partnerships, insurance, and franchise agreements. Ins. 6 Co. of the W. v. Gibson Title Co., 134 P.3d 698, 702 (Nev. 2006) (en banc). In the FAC, 7 Plaintiffs do not allege that they had a fiduciary relationship with any of the defendants; 8 instead, they contend that they had a “justified expectation that their note and deed of 9 trust would be handled, transferred and assigned in appropriate and lawful manners” and 10 that “Defendants were in a superior position to Plaintiffs.” (ECF No. 11 at ¶¶ 106-107.) 11 However, these allegations do not demonstrate a “special element of reliance” between 12 Plaintiffs and Defendants and appear to be based on the theory of improper securitization 13 and assignment, which the Court has previously stated is not a legally cognizable 14 argument that is available to Plaintiffs. To the extent Plaintiffs rely on a special relationship 15 between borrowers and lenders, no such special relationship exists. See Larson v. 16 Homecomings Fin., LLC, 680 F. Supp. 2d 1230, 1235 (D. Nev. 2009) (citing Giles v. Gen. 17 Motors Acceptance Corp., 494 F.3d 865, 883-84 (9th Cir. 2007)) (“Although Plaintiffs 18 contend that a special relationship existed because . . .they trusted Defendants’ superior 19 knowledge, those circumstances do not amount to more than an arm’s length 20 transaction.”). 21 Therefore, Counts 8 and 9 are dismissed. 22 G. 23 Because the Court dismisses all of Plaintiffs’ claims, the Court need not address 24 the punitive damages allegations or Defendants’ arguments regarding punitive damages. 25 V. Punitive Damages MOTION FOR COUNTERCLAIM (ECF No. 36) Because the Court dismisses all of Plaintiffs’ claims, the Motion for Leave to File 26 27 Counterclaim is denied as moot. 28 /// 8 1 VI. CONCLUSION 2 The Court notes that the parties made several arguments and cited to several 3 cases not discussed above. The Court has reviewed these arguments and cases and 4 determines that they do not warrant discussion or reconsideration as they do not affect 5 the outcome of motions before the Court. 6 It is therefore ordered that Defendants’ Motion to Dismiss Plaintiffs’ First Amended 7 Complaint (ECF No. 16) is granted. Dismissal is with prejudice except as to Plaintiffs’ 8 RESPA claim. Defendants’ Motion for Leave to File Counterclaim (ECF No. 36) is denied 9 as moot. 10 The Clerk is directed to close this case. 11 12 DATED THIS 15th day of September 2017. 13 MIRANDA M. DU UNITED STATES DISTRICT JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9

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