Klahn v. Clackamas County Bank et al

Filing 61

OPINION AND ORDER : Klahn's Motion for an Emergency Order (docket #45) is DENIED; Cable Huston and Walker's Motion to Dismiss (docket #31) is GRANTED and those defendants are dismissed with prejudice, and the Bank's Motion to Dismiss (docket #36) is GRANTED with leave granted to the Klahns to file an Amended Complaint by August 23, 2013. The failure to timely file an Amended Complaint will result in dismissal of this case. Signed on 7/24/13 by Magistrate Judge Janice M. Stewart. (jlr)

UNITED STATES DISTRICT COURT
DISTRICT OF OREGON
PORTLAND DIVISION
DANIEL P. KLAHN SR.,
Plaintiff,
Civil No. 3:13-CV-621-ST
v.
OPINION AND ORDER
CLACKAMAS COUNTY BANK; CABLE,
HUSTON BENEDICT HAAGENSEN &
LLOYD, LLP; and LAURA J. WALKER,
Defendants.
STEWART, Magistrate Judge:
INTRODUCTION
Plaintiff, Daniel P. Klahn (“Klahn”),1 appearing pro se, filed a Complaint on April 13,
2013, alleging various claims against defendants Clackamas County Bank (“Bank”), the law firm
of Cable Huston Benedict Haagensen & Lloyd, LLP (“Cable Huston”) and one of its lawyers,
Laura J. Walker (“Walker”), arising out of conduct culminating in foreclosure proceedings
against Klahn’s floating home.
Klahn invokes diversity jurisdiction under 28 USC § 1332 based on his citizenship in
California and defendants’ citizenship in Oregon. However, the Complaint fails to allege that the
amount in controversy exceeds the sum of $75,000.00, and the damages sought in the prayer of

1

His wife, Laurie Klahn, was dismissed as a plaintiff on June 12, 2013 (docket # 42).

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the Complaint may not meet that threshold. Even if the Complaint does not sufficiently allege
diversity jurisdiction, it alleges claims for violations of federal law which suffices to invoke
federal question jurisdiction under 28 USC § 1331.
All parties have consented to allow a Magistrate Judge to enter final orders and judgment
in this case in accordance with FRCP 73 and 28 USC § 636(c).
At a telephone hearing held on July 24, 2013, this court heard argument on Klahn’s
Expedited Request and Motion for an Emergency Order Barring the Sale of 55 NE Bridgeton
Rd., #6, Portland, Oregon (docket #45), Cable Huston and Walker’s Motion to Dismiss (docket
#31), and the Bank’s Motion to Dismiss (docket #36). For the reasons stated on the record at the
hearing and summarized below, Klahn’s Motion for an Emergency Order is DENIED, Cable
Huston and Walker’s Motion to Dismiss is GRANTED, the Bank’s Motion to Dismiss is
GRANTED, and leave is granted to Klahn to file an Amended Complaint by August 23, 2013.
STANDARDS
In order to state a claim for relief, a pleading must contain “a short and plain statement of
the claim showing that the pleader is entitled to relief[.]” FRCP 8(a)(2). This standard “does not
require ‘detailed factual allegations,’” but does demand “more than an unadorned, the-defendantunlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 US 662, 678 (2009), citing Bell Atl.
Corp. v. Twombly, 550 US 544, 555 (2007). “A pleading that offers ‘labels and conclusions’ or
‘a formulaic recitation of the elements of a cause of action will not do.’” Id, quoting Twombly,
550 US at 555. In order to survive a motion to dismiss for failure to state a claim pursuant to
FRCP 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a
claim to relief that is plausible on its face.’” Id, quoting Twombly, 550 US at 570.

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In evaluating a motion to dismiss, the court must accept the allegations of material fact as
true and construe those allegations in the light most favorable to the non-moving party. Sateriale
v. R.J. Reynolds Tobacco Co., 697 F3d 777, 783 (9th Cir 2012). In addition to the allegations of
the complaint, the court may also consider documents whose authenticity no party questions
which are attached to, or incorporated by reference into, the complaint, as well as matters
capable of judicial notice. Skilstaf, Inc. v. CVS Caremark Corp., 669 F3d 1005, 1016 n9 (9th Cir
2012); Coto Settlement v. Eisenberg, 593 F3d 1031, 1038 (9th Cir 2010).
In support of their motions, defendants have submitted copies of documents which were
either recorded in the Multnomah County Official Records or filed in the Circuit Court of the
State of Oregon for the County of Multnomah. These are documents which are capable of
judicial notice. In addition, defendants have submitted documents signed by the parties whose
authenticity is not questioned. Therefore, in resolving the motions to dismiss, the court may
consider all of these documents and need not accept as true allegations in the complaint that
contradict these sources. Daniels-Hall v. Nat’l Educ. Ass’n, 629 F3d 992, 998 (9th Cir 2010)
(“We are not, however, required to accept as true allegations that contradict exhibits attached to
the Complaint or matters properly subject to judicial notice, or allegations that are merely
conclusory, unwarranted deductions of fact, or unreasonable inferences.”) (citation omitted).
In responding to the motions to dismiss, Klahn submitted facts not alleged in the
Complaint. To the extent that these facts are disputed by defendants (such as whether the Bank
first contacted the tenant or whether the Bank evicted the tenants), they cannot be considered.
However, given Klahn is representing himself, this court will consider those facts which are not
disputed.
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CHRONOLOGY
Based on the allegations in the Complaint and other submissions, the following is a brief
chronology of the main events leading up to the filing of this case:
2008: While living in Montana, the Klahns bought a floating home in Portland, Oregon,
with they intended to use as their primary home. However, their move to Oregon was delayed.
In the interim, they have lived in California and rented the floating home.
2/25/09: The Bank made a $213,200 loan to Klahns secured by note and by a Consumer
Security Agreement on the floating home.
1/3/11: The Bank obtained an Assignment of Rents as additional security for the loan.
11/21/11: The Bank filed a lawsuit in Multnomah County Circuit Court to foreclose its
security interest in the floating home.
2/28/12: The parties settled the lawsuit by executing a Settlement and Loan
Modification Agreement.
10/22/12: Without notice to the Klahns, the Bank advanced $2,250 to Captains Moorage
to pay the slip rental arrearage and added that amount to the loan.
12/14/12: The Bank filed second lawsuit in Multnomah County Circuit Court to
foreclose its security interest in the floating home based on the Klahns’ alleged failure to pay
moorage fees due to Captains Moorage and real property taxes for 2011-12 & 2012-13. Klahn
disputes that he was in default.
2/7/13: Based on unsuccessful attempts to personally serve the Klahns with the
Summons and Complaint, the Multnomah County Circuit Court entered an Order Allowing
Service by Publication and by posting a copy on the floating home.
2/11/13: A notice of the lawsuit was posted on the floating home.

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4/3/13: Based on the Klahns’ failure to appear, the Multnomah County Circuit Court
entered a General Judgment and Money Award (Ex Parte) foreclosing the Bank’s security
interest.
CLAIMS
The Complaint alleges the following claims against the Bank:
Claim 1: Breach of Contract arising out of the Bank advancing funds to Captains
Moorage without Klahn’s knowledge or consent and adding that amount to the loan;
Claim 2: Negligence based on contacting Klahn’s tenant, advancing funds to Captains
Moorage, and sending an eviction notice to the tenant in violation of the Protecting Tenants
Foreclosure Act;
Claim 3: Breach of Confidence by directly contacting Captains Moorage, the tenant and
a realtor and disclosing the status of the loan and an intent to foreclose;
Claim 4: Abuse of Process based on filing two foreclosure actions;
Claim 5: Conspiracy with Deborah Robinson, Board Member of Captains Moorage, to
take ownership of and sell the floating home;
Claim 6: Fraud for financial gain; and
Claim 7: Negligent Infliction of Emotional Distress.
The Complaint also alleges two claims against Cable Huston and Walker for violations of
the Fair Debt Collection Practices Act, 15 USC § 1692 (“FDCPA”), and for Negligent Infliction
of Emotional Distress.
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DISCUSSION
I.

Motion for an Emergency Order Barring Sale
Pending resolution of these motions, the Bank has voluntarily delayed a Sheriff’s sale of

the floating home to execute on its foreclosure judgment. Now that these motions are resolved,
this Court cannot bar the sale as requested by Klahn. As argued the Bank, any interference by
this court in the state court proceedings is barred by the Rooker-Feldman doctrine and the
doctrine of estoppel by judgment. Moreover, Klahn only seeks money damages and, thus, will
not suffer irreparable harm to justify any preliminary injunctive relief.
If the Klahns did not receive notice of the second foreclosure action and have a viable
defense to the Bank’s claim of a default on the loan, as they contend, then they must take action
in state court to appeal, stay or set aside the judgment of foreclosure.
II.

Bank’s Motion to Dismiss
To the extent that Klahn contests that he was in default and that the Bank has any right to

foreclosure its security interest, his claims arise out of the same contract documents and same
facts and circumstances at issue in the state court action. As a result, they are barred. In any
event, Klahn fails to state any claim upon which relief can be granted as discussed below.
With respect to the breach of contract claim based on the Bank adding moorage
arrearages to loan, the state court in the second foreclosure action necessarily decided that the
Bank appropriately added moorage fees to the balance owing on the loan. Moreover, the
Consumer Security Agreement expressly authorizes the Bank to pay expenses necessary to keep
the floating home free of “liens” and “claims” and to add such expenses to the balance of the
loan.

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With respect to any negligence in directly contacting the tenants, Klahn, who is not the
tenant, has no claim under the Protecting Tenants at Foreclosure Act and, based on the cases
cited by the Bank, that act provides no private right of action.
The Breach of Confidence claim is premised on providing notice to the tenant, Captains
Moorage, and a realtor of the Bank’s intent to foreclose. Any disclosure to the realtor allegedly
occurred in 2011 in connection with the first foreclosure proceeding. However, when settling
that foreclosure proceeding, the Klahns released all claims. Any disclosure to Captain Moorage
was authorized by the terms of the Consumer Security Agreement which allows the Bank to take
action to keep the floating home free of “liens” and “claims.” With respect to notice to the
tenant, the court in the second foreclosure action authorized posting a notice of the Summons and
Complaint as an alternative form of service on the Klahns. Thus, this claim has no merit.
The Abuse of Process claim is premised on the Bank pursuing a foreclosure for its own
pecuniary gain. However, the foreclosure does not enable the Bank to receive anything more
than the amount due on the Note. The foreclosure judgment specifically requires any excess
funds received from the sale to be distributed to the Klahns as provided by Oregon law. Thus,
the Complaint alleges no factual basis for this claim.
The Conspiracy claim is premised on the Bank paying the delinquent moorage fees, not
communicating, filing the foreclosure actions, and violating the tenant’s rights. Since none of
those alleged acts rises to the level of a viable claim, the conspiracy claim also fails. Moreover,
enforcement of a judgment through a Sheriff’s sale cannot constitute a wrongful conspiracy.
The Fraud claim accuses the Bank of seeking to acquire the floating home for financial
gain. As discussed above, the alleged facts do not support such a claim.

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Finally, the Negligent Infliction of Emotional Distress claim fails under Oregon law as
argued by Cable Huston and Walker.
As became clear during the argument on the motions, any claim by Klahn against the
Bank separate and apart from the validity of the state court foreclosure arises from his loss of his
tenant due to the Bank’s alleged harassment of the tenant prior to the foreclosure judgment.
According to Klahn, the tenant timely made all rental payments to the Bank which covered the
monthly loan payments. Thus, the Bank had no reason to contact the tenant concerning Klahn’s
alleged default in the moorage fees without Klahn’s consent and cause the tenant to leave. If
true, Klahn may be able to state a viable claim under Oregon law for intentional interference
with business relations. To pursue that potential claim, he may file an Amended Complaint.
However, to bring that claim in federal court pursuant to diversity jurisdiction, the damages must
exceed $75,000.00, which they may not. If not, this claim must be filed in state court.
III.

Cable Huston and Walker’s Motion to Dismiss
The FDCPA applies only to consumer debts defined as “any obligation or alleged

obligation of a consumer to pay money arising out of a transaction in which the money, property,
insurance or services which are the subject of the transaction are primarily for personal, family or
household purposes.” 15 USC § 1692a(5). Klahn argues that he obtained the loan from the
Bank to purchase the floating home with the intent to make it his primary residence. Premised
on this intent, the Bank may well have made a consumer loan initially, as evidenced by the title
“Consumer Security Agreement.” However, at some point, the floating home became occupied
by a tenant, and the loan became subject to the additional security of the Assignment of Rents.
Based on the cases cited by defendants, a debt associated with rental properties or for investment
purposes is not considered a consumer debt under the FDCPA.

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Any alleged conduct by the lawyer defendants which falls within the FDCPA’s one-year
statute of limitations (after April 2012) occurred after the floating home became a rental or
investment property. Thus, any conduct by them did not pertain to a consumer debt.
Furthermore, that alleged conduct arose out of the second foreclosure action. Based on the cases
cited by defendants, foreclosure does not constitute debt collection under the FDCPA. Thus, the
Complaint fails to state a claim for violations of the FDCPA.
Even though the Klahns allege that they have suffered emotional distress, the Complaint
also fails to state a claim for the negligent infliction of emotional distress under Oregon law
based on the cases cited by defendants.
Any further amendment to state a viable claim against these defendants based on the facts
alleged in Complaint is futile. Thus, these defendants are dismissed with prejudice.
ORDER
Accordingly, Klahn’s Motion for an Emergency Order (docket #45) is DENIED; Cable
Huston and Walker’s Motion to Dismiss (docket #31) is GRANTED and those defendants are
dismissed with prejudice , and the Bank’s Motion to Dismiss (docket #36) is GRANTED with
leave granted to the Klahns to file an Amended Complaint by August 23, 2013. The failure to
timely file an Amended Complaint will result in dismissal of this case.
In addition, the Bank shall commence negotiations with the Klahns in a good faith
attempt to modify the loan, if possible, in order to enable them to retain ownership of the floating
home.
DATED July 24, 2013.
s/ Janice M. Stewart
Janice M. Stewart
United States Magistrate Judge

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