U.S. Bank N.A. v. Thunder Properties, Inc.

Filing 24

ORDER denying ECF No. 11 Motion to Dismiss. Signed by Judge Robert C. Jones on 6/14/2017. (Copies have been distributed pursuant to the NEF - KR)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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______________________________________
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U.S. BANK N.A.,
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Plaintiff,
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vs.
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THUNDER PROPERTIES, INC. et al.,
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Defendants.
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3:16-cv-00700-RCJ-VPC
ORDER

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This case arises out of a homeowners association foreclosure sale. Pending before the

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Court is a motion to dismiss.

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I.

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FACTS AND PROCEDURAL HISTORY
In March 2006, Alan Yuen and Ka Man Cheng gave an unidentified party a promissory

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note (“the Note”) for $248,240 in exchange for funds in that amount to purchase real property at

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245 Dawson Jacob Lane, Reno, Nevada, 89503 (“the Property”) and gave another unidentified

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party a deed of trust (“the DOT”) against the Property to secure the Note. (Compl. ¶¶ 9–12, ECF

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No. 1). Plaintiff U.S. Bank N.A., as trustee for a mortgage-backed security (“US Bank”), is the

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current beneficiary of the Note and DOT. (Id. 1, ¶ 13). In February 2014, a non-party agent

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acting on behalf of Defendant Rancho San Rafael Townhomes, Phase II Homeowners

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Association (“the HOA”) sold the Property at auction under Chapter 116 of the Nevada Revised

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Statutes to Defendant Thunder Properties, Inc. (“Thunder”) for $11,700. (Id. ¶¶ 6, 5–19). The

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fair market value of the Property at that time was at least $167,000. (Id. ¶ 20).

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US Bank has sued Thunder and the HOA in this Court to quiet title to the Property, i.e.,

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for a declaration that the February 2014 sale did not extinguish the DOT. US Bank argues that

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the sale was invalid under state law and the Due Process Clause of the Fourteenth Amendment of

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the U.S. Constitution for lack of notice, and that the sale was commercially unreasonable under

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state law. The HOA has moved to dismiss.

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II.

LEGAL STANDARDS

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Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the

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claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of

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what the . . . claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47

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(1957). Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action

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that fails to state a claim upon which relief can be granted. A motion to dismiss under Rule

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12(b)(6) tests the complaint’s sufficiency. See N. Star Int’l v. Ariz. Corp. Comm’n, 720

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F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 12(b)(6) for

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failure to state a claim, dismissal is appropriate only when the complaint does not give the

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defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell

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Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is

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sufficient to state a claim, the court will take all material allegations as true and construe them in

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the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th

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Cir. 1986). The court, however, is not required to accept as true allegations that are merely

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conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden

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State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

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A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a

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plaintiff must plead facts pertaining to his own case making a violation “plausible,” not just

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“possible.” Ashcroft v. Iqbal, 556 U.S. 662, 677–79 (2009) (citing Twombly, 550 U.S. at 556)

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(“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to

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draw the reasonable inference that the defendant is liable for the misconduct alleged.”). That is,

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under the modern interpretation of Rule 8(a), a plaintiff must not only specify or imply a

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cognizable legal theory (Conley review), he must also allege the facts of his case so that the court

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can determine whether he has any basis for relief under the legal theory he has specified or

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implied, assuming the facts are as he alleges (Twombly-Iqbal review). Put differently, Conley

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only required a plaintiff to identify a major premise (a legal theory) and conclude liability

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thereunder, but Twombly-Iqbal requires a plaintiff additionally to allege minor premises (facts of

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the plaintiff’s case) such that the syllogism showing liability is complete and that liability

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necessarily, not only possibly, follows if the allegations of fact are true.

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“Generally, a district court may not consider any material beyond the pleadings in ruling

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on a Rule 12(b)(6) motion. However, material which is properly submitted as part of the

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complaint may be considered on a motion to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner

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& Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citation omitted). Similarly, “documents

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whose contents are alleged in a complaint and whose authenticity no party questions, but which

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are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6)

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motion to dismiss” without converting the motion to dismiss into a motion for summary

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judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Moreover, under Federal Rule

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of Evidence 201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay

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Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court

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considers materials outside of the pleadings, the motion to dismiss is converted into a motion for
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summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir.

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2001).

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III.

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ANALYSIS
The HOA argues that it should be dismissed as a Defendant because it disclaims any

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interest in the Property, and the dispute over whether the DOT survived the sale is purely

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between US Bank and Thunder. The Court disagrees that the HOA’s interest in the Property

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could not be affected in this case. Unlike a case where a plaintiff seeks only a declaration as to

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the legal effect of a Chapter 116 sale on a deed of trust, see, e.g., My Global Vill., LLC v. Fed.

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Nat’l Mortg. Ass’n, No. 2:15-cv-211, 2015 WL 4523501, at *4 (D. Nev. July 27, 2015) (Jones,

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J.), US Bank has prayed in the alternative that the sale be set aside altogether, (see Compl. 7). If

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US Bank obtained that measure of relief, title would be restored to Yuen and Cheng, the HOA

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would have to return the sale price to Thunder, and the HOA’s lien against the Property would be

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reinstated. The Court cannot say that the HOA has no plausible interest in the outcome of the

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case as pled.

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Nor will the Court dismiss based on the argument that there is no jurisdiction for any

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claims unless and until they are mediated with the Nevada Real Estate Division. See Nev. Rev.

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Stat. § 38.310(1) (mandating mediation for any claims requiring the interpretation, application,

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or enforcement of covenants, conditions, and restrictions (“CC&R”)). The Complaint includes

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allegations of CC&R violations. (See Compl. ¶ 40). To the extent the quiet title claim is so

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based, the issue must be mediated. However, the Court cannot dismiss even the CC&R-

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dependent claims in this case. Where a statute is silent on pleading requirements, as here, failure

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to exhaust non-judicial remedies is an affirmative defense, Jones v. Bock, 549 U.S. 199, 212

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(2007), and a court may not dismiss based on such a defense unless the elements of the defense

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appear on the face of the challenged pleading, Rivera v. Peri & Sons Farms, Inc., 735 F.3d 892,
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902 (9th Cir. 2013). Otherwise, the defense cannot be adjudicated until the summary judgment

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stage; a motion to dismiss based on non-exhaustion cannot be treated as a quasi-summary-

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judgment matter under Rule 12(b). Albino v. Baca, 747 F.3d 1162, 1168–69 (9th Cir. 2014) (en

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banc) (overruling Wyatt v. Terhune, 315 F.3d 1108 (9th Cir. 2003)). Because the Complaint

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does not allege facts indicating non-exhaustion, the Court cannot dismiss the CC&R-dependent

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claims for that reason.

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CONCLUSION

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IT IS HEREBY ORDERED that the Motion to Dismiss (ECF No. 11) is DENIED.

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IT IS SO ORDERED.

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June 14, day of
Dated this 23rd 2017 May, 2017.

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_____________________________________
ROBERT C. JONES
United States District Judge

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