United States District Court, D. Nevada
January 4, 2017
IRMA MENDEZ, Plaintiff,
WRIGHT, FINDLAY AND ZAK LLP et al., Defendants.
C. JONES United States District Judge.
case arises out of a homeowners association foreclosure sale.
Now pending before the Court are a Motion to Dismiss (ECF No.
36), Motion for Clarification of Order (ECF No. 39), Motion
to Set Aside Entry of Default (ECF No. 43), and Motion to
Stay Proceedings (ECF No. 44). For the reasons given herein,
the Court grants the Motion to Set Aside Entry of Default,
Motion to Dismiss, and Motion for Clarification, and denies
the Motion to Stay.
FACTS AND PROCEDURAL HISTORY
2005, Irma Mendez (“Plaintiff”) purchased real
property at 3416 Casa Alto Ave., North Las Vegas, Nevada,
89031 (the “Property”) for $315, 000, giving the
lender a promissory note for $252, 792 and a deed of trust
against the Property securing the note. When Mendez became
delinquent on her monthly assessment fees, Alessi &
Koenig (“Alessi”) conducted a trustee's sale
to Absolute Business Solutions, Inc. (“ABS”), on
behalf of Fiesta Del Norte Homeowners Association (the
sale has given rise to three lawsuits now pending before this
Court: Mendez v. Fiesta Del Norte Homeowners
Ass'n, 2:15-cv-00314 (filed Feb. 23, 2015)
(“the ‘314 Case”); Absolute Bus. Sols.,
Inc. v. Mortg. Elec. Registration Sys., Inc.,
2:15-cv-01325 (filed July 13, 2015) (“the ‘1325
Case”); and the instant case, Mendez v. Wright,
Findlay and Zak LLP, 2:15-cv-01077 (filed May 13, 2016)
(“the ‘1077 Case”). The procedural
background of these cases was detailed in the Court's
August 3, 2016 Order deciding several motions in this case,
(ECF No. 29), and need not be repeated here. In the August 3,
2016 Order, the Court dismissed Plaintiff's claims of
fraud, violation of the Dodd-Frank Act, and violation of the
Fair Debt Collection Practices Act, with leave to amend as to
the fraud claim only. (ECF No. 29 at 11-12.) On September 1,
2016, the Court issued another order, stating that the August
3, 2016 Order “granted Plaintiff Irma Mendez leave to
amend in part Motions to Dismiss (ECF #11 and 18 in case No.
2:16-cv-1077), ” and ordering that Plaintiff's
amended motions to dismiss be filed no later than September
19, 2016. (ECF No. 31 at 1.)
on September 9, 2016, the Clerk of the Court entered default
against Defendant Bank of America, N.A. (“BOA”),
due to its failure to timely file a responsive pleading or
otherwise defend against Plaintiff's claims. (ECF No.
34.) Also on September 9, BOA filed a response to
Plaintiff's request for entry of default, (ECF No. 35),
as well as the instant Motion to Dismiss Plaintiff's
claims of slander of title, negligence, and breach of implied
contract, (ECF No. 36). BOA later filed the instant Motion to
Set Aside Entry of Default, citing inadvertent error and
excusable neglect as the reasons for its failure to answer
the Complaint. (ECF No. 43.) Then, on September 22, 2016,
Defendants Fannie Mae, Seterus, and Wright, Findlay and Zak
(“WFZ”) filed the instant Motion to Stay
Proceedings pending issuance of the Ninth Circuit's
mandate in Bourne Valley Court Trust v. Wells Fargo Bank,
NA, No. 15-15233, 2016 WL 4254983 (9th Cir. Aug. 12,
2016). Finally, on September 23, 2016, three days before
Plaintiff's response to the Motion to Dismiss was due,
Fannie Mae, Seterus, and WFZ joined BOA's Motion to
Dismiss, additionally requesting that the Court dismiss the
slander of title, negligence, and breach of implied contract
claims as pled against them. (ECF No. 45.)
MOTION TO SET ASIDE ENTRY OF DEFAULT (ECF NO. 43)
Federal Rule of Civil Procedure 55(c), a court may set aside
an entry of default for “good cause.” “To
determine ‘good cause, ' a court must consider
three factors: (1) whether the party seeking to set aside the
default engaged in culpable conduct that led to the default;
(2) whether it had no meritorious defense; or (3) whether
reopening the default judgment would prejudice the other
party.” United States v. Signed Pers. Check No. 730
of Yubran S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010)
(internal quotation marks and brackets omitted). When
exercising its discretion under Rule 55, the court's
“underlying concern . . . is to determine whether there
is some possibility that the outcome of the suit after a full
trial will be contrary to the result achieved by the
default.” Hawaii Carpenters' Trust Funds v.
Stone, 794 F.2d 508, 513 (9th Cir. 1986). The party
seeking to invoke Rule 55(c) bears the burden of
demonstrating that the test factors favor setting aside the
default. See TCI Group Life Ins. Plan v. Knoebber,
244 F.3d 691, 696 (9th Cir. 2001).
overriding judicial goal of deciding cases correctly on the
merits is to be balanced with the interests of both litigants
and the courts in the finality of judgments. See Pena v.
Seguros La Comercial, S.A., 770 F.2d 811, 814 (9th Cir.
1985). Accordingly, “judgment by default is a drastic
step appropriate only in extreme circumstances; a case
should, whenever possible, be decided on the merits.”
Mesle, 615 F.3d at 1091 (quoting Falk v.
Allen, 739 F.2d 461, 463 (9th Cir. 1984)).
asserts that its failure to timely defend in this action is
the product of excusable neglect. It states that the
“substantially similar nature” of the ‘1325
Case and the ‘1077 Case “led to internal
calendaring errors, and, as a result, [BOA] did not timely
file a response to Plaintiff's Complaint.” (Mot. 2,
ECF No. 43.) After learning that Plaintiff had requested the
Clerk enter default, BOA promptly-the following day-filed a
response to Plaintiff's request for entry of default,
(ECF No. 35), and the Motion to Dismiss discussed below, (ECF
parties and claims in the ‘1325 Case and ‘1077
Case are different, though both actions arise from the same
HOA foreclosure sale. Nonetheless, “to treat a failure
to answer as culpable, the movant must have acted with bad
faith, such as an intention to take advantage of the opposing
party, interfere with judicial decisionmaking, or otherwise
manipulate the legal process.” Mesle, 615 F.3d
at 1092. While BOA's failure to respond is surely the
result of some level of carelessness, the Court cannot find
the requisite bad faith under the circumstances presented.
Furthermore, as explained more fully below in the analysis of
BOA's Motion to Dismiss, BOA has meritorious defenses to
Plaintiff's claims. Both of these factors weigh in favor
of setting aside the Clerk's entry of default.
Plaintiff will not be prejudiced by setting aside the
default. “The standard is whether [her] ability to
pursue [her] claim will be hindered.” Falk,
739 F.2d at 463. In her Response, Plaintiff has not argued
prejudice nor presented any basis for a finding that she
would suffer prejudice. Nor does the Court find any such
for the foregoing reasons, the Court will set aside the
Clerk's entry of default in service of the strong
judicial interest of disposing of cases on their merits.
BOA'S MOTION TO DISMISS (ECF NO. 36)
Rule of Civil Procedure 8(a)(2) requires only “a short
and plain statement of the claim showing that the pleader is
entitled to relief” in order to “give the
defendant fair notice of what the . . . claim is and the
grounds upon which it rests.” Conley v.
Gibson, 355 U.S. 41, 47 (1957). Federal Rule of Civil
Procedure 12(b)(6) mandates that a court dismiss a cause of
action that fails to state a claim upon which relief can be
granted. A motion to dismiss under Rule 12(b)(6) tests the
complaint's sufficiency. See N. Star Int'l v.
Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir.
1983). When considering a motion to dismiss under Rule
12(b)(6) for failure to state a claim, dismissal is
appropriate only when the complaint does not give the
defendant fair notice of a legally cognizable claim and the
grounds on which it rests. See Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). In considering
whether the complaint is sufficient to state a claim, the
court will take all material allegations as true and construe
them in the light most favorable to the plaintiff. See NL
Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir.
1986). The court, however, is not required to accept as true
allegations that are merely conclusory, unwarranted
deductions of fact, or unreasonable inferences. See
Sprewell v. Golden State Warriors, 266 F.3d 979, 988
(9th Cir. 2001).
formulaic recitation of a cause of action with conclusory
allegations is not sufficient; a plaintiff must plead facts
pertaining to his own case making a violation
“plausible, ” not just “possible.”
Ashcroft v. Iqbal, 556 U.S. 662, 677-79 (2009)
(citing Twombly, 550 U.S. at 556) (“A claim
has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.”). That is, under the modern interpretation of
Rule 8(a), a plaintiff must not only specify or imply a
cognizable cause of action (Conley review), but also
must allege the facts of his case so that the court can
determine whether the plaintiff has any basis for relief
under the cause of action he has specified or implied,
assuming the facts are as he alleges (Twombly-Iqbal
review). Put differently, Conley only required a
plaintiff to identify a major premise (a cause of action),
but Twombly and Iqbal require a plaintiff
also to allege minor premises (facts of the plaintiff's
case) such that the syllogism showing liability is logically
complete and that liability necessarily, not only possibly,
follows (assuming the allegations are true).
a district court may not consider any material beyond the
pleadings in ruling on a Rule 12(b)(6) motion. However,
material which is properly submitted as part of the complaint
may be considered on a motion to dismiss.” Hal
Roach Studios, Inc. v. Richard Feiner & Co., 896
F.2d 1542, 1555 n.19 (9th Cir. 1990) (citation omitted).
Similarly, “documents whose contents are alleged in a
complaint and whose authenticity no party questions, but
which are not physically attached to the pleading, may be
considered in ruling on a Rule 12(b)(6) motion to
dismiss” without converting the motion to dismiss into
a motion for summary judgment. Branch v. Tunnell, 14
F.3d 449, 454 (9th Cir. 1994). Moreover, under Federal Rule
of Evidence 201, a court may take judicial notice of
“matters of public record.” Mack v. S. Bay
Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir.
1986). Otherwise, if the district court considers materials
outside of the pleadings, the motion to dismiss is converted
into a motion for summary judgment. See Arpin v. Santa
Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir.
Complaint, Plaintiff alleges three claims against BOA:
slander of title, negligence, and breach of implied contract.
BOA moves to dismiss all three claims.
Slander of Title
establish a slander of title claim in Nevada, the plaintiff
must show the defendant made a false and malicious statement
which disparaged the plaintiff's title in land causing
special damages. Executive Mgmt., Ltd. v. Ticor Title
Ins. Co., 963 P.2d 465, 478 (Nev. 1998). Recording a
false document constitutes making a false statement.
Summa Corp. v. Greenspun, 607 P.2d 569, 573 (Nev.
1980). A defendant makes a false statement maliciously if the
defendant knew the statement was false or the defendant acted
in reckless disregard of the statement's truth or
falsity. Rowland v. Lepire, 662 P.2d 1332, 1335
(Nev. 1983). “Where a defendant has reasonable grounds
for belief in his claim, he has not acted with malice.”
Id. Special damages may be established by impairment
of the land's vendibility or expenses incurred in
removing the cloud on the plaintiff's title caused by the
false statement. Summa Corp., 655 P.2d at 515.
only evidence of a false and malicious statement by BOA is
that BOA's predecessor-in-interest caused a Substitution
of Trustee to be recorded on October 22, 2009, substituting
Recontrust Company, N.A. in the place of original trustee
Equity Title of Nevada. (ECF No. 1 at 57.) Plaintiff points
to the fact that the Substitution of Trustee was signed by
Angela Nava, as assistant secretary of BOA's
predecessor-in-interest, the same day Nava signed a
Corporation Assignment of Deed of Trust, (ECF No. 1 at 55),
as assistant secretary of Defendant MERS. Plaintiff argues
this is evidence that Nava is a “robo-signer, ”
and that the Substitution of Trustee is therefore false and
invalid, and disparaged Plaintiff's title to the
Plaintiff has not alleged sufficient facts to allow the court
to find that there was an improper, or unauthorized,
appointment of the successor trustee. The mere fact that the
same person signed multiple documents does not establish, or
even make it likely, that the person lacked authority to
execute the documents. See James v. ReconTrust Co.,
845 F.Supp.2d 1145, 1169 (D. Or. 2012). A person can wear two
hats and act on behalf of multiple parties. See Id.
Accordingly, Plaintiff's allegations fail to state a
plausible claim with respect to the elements of falsehood and
addition, Plaintiff has failed to make sufficient allegations
of special damages, as required for her slander of title
claim. In her Response, Plaintiff clarifies that her slander
of title claim against BOA is “based on the prima facie
evidence of notary fraud that exists on a certain
substitution of trustee document recorded on Plaintiff's
title.” (Resp. 4, ECF No. 46.) However, Plaintiff has
made no effort to allege facts supporting her contention that
the allegedly invalid Substitution of Trustee had any effect
on the vendibility of the Property. She has only made the
conclusory allegation that she has “suffered punitive
and special damages . . . [in] an amount of over $75, 000 . .
. .” (Compl. ¶¶ 103, 147, ECF No. 1.) Indeed,
it is highly unlikely that any potential buyer would consider
the Substitution of Trustee to be a cloud on the title.
it is apparent from Plaintiff's Complaint and Response
that her slander of title claim is actually grounded in
allegations of notary fraud. Accordingly, this court finds
that Plaintiff's claim must be pled with particularity
under Federal Rule of Civil Procedure 9(b). See Vess v.
Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103-04 (Cal. 2003)
(“In some cases, the plaintiff may allege a unified
course of fraudulent conduct and rely entirely on that course
of conduct as the basis of a claim. In that event, the claim
is said to be ‘grounded in fraud' or to
‘sound in fraud, ' and the pleading of that claim
as a whole must satisfy the particularity requirement of Rule
9(b).”). Rule 9(b) requires that Plaintiff's claim
include “the who, what, where, when, why, and
how” in order state with particularity the
circumstances constituting fraud. Me v. LNV Corp.,
2012 U.S. Dist. Lexis 50328, at *8-9, 2012 WL 1203403 (C.D.
Cal. Apr. 10, 2012) (noting that “courts have
consistently dismissed robo-signing fraud allegations when
they are pled in a conclusory fashion without any factual
support because this fails to comply with Rule 9(b)”).
Likewise, this Court finds that Plaintiff has failed to
allege the required factual matter to meet the pleading
requirements of Rule 9.
the Court grants the Motion to Dismiss the slander of title
claim with prejudice because amendment would be futile.
See United States v. Corinthian Colls., 655 F.3d
984, 995 (9th Cir. 2011) (stating that courts can decline
leave to amend based on “bad faith, undue delay,
prejudice to the opposing party, futility of
Negligence and Breach of Implied Contract
claims of negligence and breach of implied contract are both
premised on the same factual allegations, and the Court will
therefore consider them together. Plaintiff's premise is
that BOA had a duty, contractual or otherwise, to notify
Plaintiff that it had received notices from the HOA
“regarding the HOA lien.” (Resp. 6, ECF No. 46.)
Plaintiff asserts BOA breached this alleged duty by failing
to forward such notices to Plaintiff.
prevail on a negligence theory in Nevada, a plaintiff must
show that “(1) the defendant owed a duty of care to the
plaintiff; (2) the defendant breached that duty; (3) the
breach was the legal cause of the plaintiff's injury; and
(4) the plaintiff suffered damages.” Wiley v.
Redd, 885 P.2d 592, 595 (Nev. 1994). Plaintiff has not
opposed BOA's Motion to Dismiss with respect to the
negligence claim. “The failure of an opposing party to
file points and authorities in response to any motion . . .
constitutes a consent to the granting of the motion.”
D. Nev. Local R. 7-2(d); see also Danielson v.
Stratosphere, LLC, No. 2:10-CV-2241, 2011 WL 1767809, at
*1 (D. Nev. May 9, 2011) (Mahan, J.) (dismissing
plaintiff's claims where plaintiff failed to respond to
certain of defendant's arguments). Furthermore, and more
importantly, Plaintiff's only allegation of BOA's
negligence is that BOA received “notices” and did
“nothing to protect a property that was still legally
recorded under [its] name in public records.” (Compl.
¶ 205, ECF No. 1.) However, Plaintiff has identified no
statutory or common law duty of a lender to protect the
borrower's property from foreclosure, or to notify a
borrower of the potential foreclosure of an HOA lien based on
the borrower's failure to pay HOA assessments. The Court
is aware of no such duty.
prevail on a claim for breach of contract under Nevada law, a
plaintiff must show: “(1) the existence of a valid
contract, (2) a breach by the defendant, and (3) damage as a
result of the breach.” Saini v. Int'l Game
Tech., 434 F.Supp.2d 913, 919-20 (D. Nev. 2006) (citing
Richardson v. Jones, 1 Nev. 405, 405 (Nev. 1865)).
Whereas the terms of an express contract are stated in words,
“those of an implied contract are manifested by
conduct.” Smith v. Recrion Corp., 541 P.2d
663, 664 (Nev. 1975). However, both types of contracts are
founded upon an ascertainable agreement. Back Streets,
Inc. v. Campbell, 601 P.2d 54, 55 (Nev. 1979).
Plaintiff has identified no conduct on BOA's behalf
manifesting an intent to enter into a contract. In fact,
Plaintiff contends in her Response that “BOA is a party
to the Deed of Trust by virtue of being one of the
lender's ‘successors and assigns.'”
(Resp. 6, ECF No. 46.) It appears that Plaintiff, having
labeled her claim a breach of implied contract, is actually
asserting the existence of an express contract (i.e., the
deed of trust). Either way, Plaintiff's claim fails.
Again, Plaintiff has not identified any contractual
obligation of BOA to notify Plaintiff of a potential HOA
foreclosure. Plaintiff points to Section 4 of the deed of
trust to support her assertion that BOA had a duty to send
Plaintiff notices regarding the HOA lien. (Id.)
However, under the plain language of the deed, BOA had no
such duty. (See Deed of Trust § 4, ECF No. 1 at
33.) Section 4 imposes obligations on the borrower for the
purpose of protecting BOA's lien against any other
interests that may obtain priority over the deed of trust.
(See id.) It does not require the lender to notify
the borrower of a superior lien; rather, it permits the
lender to provide such notification in order to trigger the
borrower's obligation to protect the lender's
interest from extinguishment. (See Id. (“If
Lender determines that any part of the Property is subject to
a lien which can attain priority over this Security
Instrument, Lender may give Borrower a notice identifying the
lien. Within 10 days of the date on which that notice is
given, Borrower shall satisfy the lien or take one or more of
the actions set forth above in this Section 4.”).)
Plaintiff has failed to plead that BOA had any duty-whether
arising under statute, contract, or common law-to notify
Plaintiff of the HOA's lien. The Court grants the Motion
to Dismiss the negligence and breach of contract claims with
prejudice, finding amendment of these claims would also be
JOINDER IN MOTION TO DISMISS (ECF NO. 45)
Fannie Mae, Seterus, and WFZ have joined in BOA's Motion
to Dismiss. The joinder was filed the same day as
Plaintiff's Response to the Motion to Dismiss, and just
three days before such Response was due. Accordingly,
Plaintiff has not had a full and fair opportunity to address
the arguments raised in support of dismissing the claims of
slander of title as pled against Fannie Mae, Seterus, and
WFZ, and negligence and breach of implied contract as pled
against Fannie Mae and Seterus. Plaintiff's Complaint
makes factual allegations against Fannie Mae, Seterus, and
WFZ that are not made against BOA. For example, the slander
of title allegations against BOA, as noted in Plaintiff's
Response, are limited to facts surrounding the recordation of
a Substitution of Trustee. (Resp. 4-6, ECF No. 46.) In
contrast, the Complaint clearly implicates Fannie Mae,
Seterus, and WFZ in the allegedly fraudulent recordation of
an assignment of the deed of trust. (Compl. 9-11, ECF No. 1.)
Furthermore, certain arguments are raised in Fannie Mae,
Seterus, and WFZ's motion to dismiss that were not raised
prior to ruling the Court will provide Plaintiff an
opportunity to respond to the motion of Fannie Mae, Seterus,
and WFZ, and demonstrate how, if at all, her claims might
survive as against them where they have failed as against
BOA. Plaintiff shall have fourteen days following entry of
this order to file a response. Thereafter, Fannie Mae,
Seterus, and WFZ shall have seven days to reply.
MOTION FOR CLARIFICATION OF ORDER (ECF NO. 39)
seeks clarification of the Court's September 1, 2016
Order. (ECF No. 31.) BOA argues the September 1, 2016 Order
incorrectly stated that the Court had granted Plaintiff leave
to amend one or more motions to dismiss in its prior order of
August 3, 2016. (Mot. 3-4, ECF No. 39.) Moreover, the
September 1, 2016 Order purports to permit Plaintiff to amend
the motion filed as ECF No. 11, which was not originally
filed by Plaintiff. (Id. at 4.)
Court finds that the September 1, 2016 Order erroneously
indicated the Court had previously granted leave to filed
amended motions to dismiss. Rather, the August 3, 2016 Order
was clear in that leave was granted to file amended
pleadings to cure defects in certain identified claims
and counterclaims. Therefore, the Court grants BOA's
Motion for Clarification (ECF No. 39) and vacates the
September 1, 2016 Order (ECF No. 31).
the errors in the September 1, 2016 Order, the Court will
grant the parties additional time to file amended pleadings.
Plaintiff shall file an amended complaint, in accordance with
the Court's August 3, 2016 Order, which granted leave to
amend only her claim of fraud, no later than twenty-one days
following entry of the instant order. Defendants Joel Stokes,
Sandra Stokes, and JimiJack Irrevocable Trust may amend their
counterclaims for abuse of process and conspiracy, in
accordance with the Court's August 3, 2016 Order, no
later than forty-two days following entry of the instant
MOTION TO STAY (ECF NO. 44)
the briefs were filed on this motion, the Ninth Circuit Court
of Appeals denied the petition for en banc rehearing in
Bourne Valley Ct. Tr. v. Wells Fargo Bank, N.A., No.
15-15233 (9th Cir. Nov. 4, 2016). Accordingly, the Motion to
Stay Proceedings is denied as moot.
HEREBY ORDERED that the Motion to Set Aside Entry of Default
(ECF No. 43) is GRANTED.
FURTHER ORDERED that BOA's Motion to Dismiss (ECF No. 36)
is GRANTED without leave to amend. Plaintiffs claims of
slander of title, negligence, and breach of implied contract
are dismissed with prejudice as against Defendant Bank of
FURTHER ORDERED that Plaintiff shall have fourteen days from
the date of entry of the instant order to file a response to
the motion to dismiss of Fannie Mae, Seterus, and WFZ. (ECF
No. 45.) Fannie Mae, Seterus, and WFZ shall have seven days
thereafter to reply.
FURTHER ORDERED that the Motion for Clarification of Order
(ECF No. 39) is GRANTED. The Court vacates its September 1,
2016 Order, (ECF No. 31), and grants the parties additional
time to amend their pleadings in accordance with the
Court's August 3, 2016 Order, (ECF No. 29). Plaintiff may
amend her claim of fraud no later than twenty-one days
following entry of the instant order. Defendants Joel Stokes,
Sandra Stokes, and JimiJack Irrevocable Trust may amend their
counterclaims of abuse of process and conspiracy no later
than forty-two days following entry of the instant order.
FURTHER ORDERED that the Motion to Stay Proceedings (#44) is
DENIED as moot.