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Salvador v. Bank of New York Mellon

United States District Court, D. Nevada

April 25, 2018

BANK OF NEW YORK MELLON, et al., Defendants.



         Plaintiff Editha Salvador owns property located at 4404 Grey Spencer Drive in Las Vegas. She financed the purchase of the property through an adjustable rate loan that was secured by a deed of trust on the property. After she defaulted on her payments, defendant Bank of New York Mellon (BONY) initiated non-judicial foreclosure proceedings under the deed of trust. In an effort to avoid foreclosure, Salvador filed this lawsuit against BONY, who is the holder of the note and the beneficiary of record under the deed of trust; Quality Loan Servicing Corporation, the trustee under the deed of trust; BONY's former loan servicer, Select Portfolio Servicing, Inc.; Bank of America, to whom Salvador previously made loan payments; and Bayview Loan Servicing, LLC, BONY's current loan servicer. The defendants filed various motions to dismiss the complaint. Salvador moves for summary judgment, and to enjoin the foreclosure sale, currently set for April 27, 2018.

         I grant the defendants' motions to dismiss because Salvador has failed to allege a valid claim against any of these defendants. I deny Salvador's motions for summary judgment for the same reason and because (contrary to Salvador's contention) the defendants timely responded to her complaint. Even if they had not, I would set aside any default. I Salvador's motion for injunctive relief because she has not shown a likelihood of success on any claim that would support enjoining the foreclosure sale.

         I. BACKGROUND

         Salvador purchased the property for $1, 074, 420 in September 2006. ECF No. 1 at 52. She obtained a $752, 000 adjustable rate note from Meridias Capital, Inc. to partially finance the purchase, and she made a $322, 420 down payment. Id. at 3, 8, 14. The loan was secured by a deed of trust encumbering the property. ECF No. 11-2.[1] The deed of trust identified Salvador as the borrower, Meridias as the lender, First American Title as the trustee, and Mortgage Electronic Registration Systems, Inc. (MERS) as the beneficiary solely as the nominee for the lender and its successors and assigns. Id. at 2-3.

         There is no recorded assignment of the loan or deed of trust from Meridias to Countrywide, but Salvador made mortgage payments to Countrywide. ECF No. 1 at 4. The loan then passed to Bank of America, but there is no recorded assignment of the loan or deed of trust reflecting a transfer from Countrywide to Bank of America. Id. Salvador made mortgage payments to Bank of America and sought a loan modification, but was denied. Id.

         In March 2012, MERS assigned the deed of trust to BONY, as trustee for the holders of the Alternative Loan Trust 2006-OA19, Mortgage Pass Through Certificates, Series 2006 OA19. Id. at 75. In December 2013, BONY substituted the original trustee, First American Title, with defendant Quality Loan Servicing Corporation. Id. at 77.

         On June 12, 2014, Quality recorded a notice of default and election to sell. Id. at 81. In connection with that notice, Quality recorded an affidavit of authority to exercise the power of sale executed by defendant Select Portfolio Servicing, Inc. Id. at 85-88. That affidavit identified BONY, care of Select Portfolio, as the holder of the note and beneficiary of record. Id. at 85-86. Quality was identified as the loan servicer. Id. at 86. The affidavit also identified the only recorded assignment of the deed of trust as the March 2012 transfer from MERS to BONY. Id. at 87-88.

         On October 14, 2014, Salvador and Quality participated in a mediation conference under Nevada's Foreclosure Mediation Program (FMP). Id. at 91. The parties were unable to reach a resolution, and the FMP issued a certificate allowing BONY to proceed with the foreclosure process. Id. In May 2015, Quality recorded a notice of a trustee's sale set for June 10, 2015. Id. at 92. That sale did not take place, and on September 3, 2015, Quality rescinded the June 12 notice of default. Id. at 79.

         Quality recorded a new notice of default and election to sell in April 2016. Id. at 95. That notice included another affidavit of authority to exercise the power of sale identifying BONY, care of Select Portfolio, as the note holder and beneficiary of record, and Select Portfolio as the loan servicer. Id. at 100. It identified the only recorded assignment of the deed of trust as being the March 2012 assignment from MERS to BONY. Id. at 102. Salvador elected to again proceed to mediation under the FMP on May 9, 2016. ECF No. 74-1. The parties had an unsuccessful mediation on August 22, 2016. ECF No. 74-2. The FMP indicated it would issue a certificate of foreclosure on October 17, 2016. Id. However, the FMP did not actually issue the certificate until February 28, 2018, which was recorded on March 8, 2018. ECF No. 69-10. Quality issued a new notice of sale on March 30, 2018, setting the sale for April 27. ECF No. 69-11.

         Based on these allegations, Salvador brought suit in this court alleging that the defendants violated various federal and state laws by placing her into a negative amortization loan where her loan balance would increase even as she made timely payments. She also alleges BONY cannot foreclose because it cannot show it is the holder of the note and beneficiary of record because there is no recorded assignment from Meridias to Countrywide or from Countrywide to Bank of America, so the transfer from Bank of America to BONY is invalid. Salvador asserts the defendants are liable under 15 U.S.C. § 45(a); the Truth in Lending Act (TILA), 15 U.S.C. § 1601, et seq.; the Homeownership Equity Protection Act (HOEPA), 15 U.S.C. § 1689; 15 U.S.C. § 1607; and Nevada Revised Statutes § 598D.

         Salvador previously moved for an injunction, which I denied because she did not identify a potential impending foreclosure sale. ECF Nos. 3, 4. The defendants then moved to dismiss on a variety of grounds. Salvador filed two motions for summary judgment. She also moves to enjoin the recently noticed foreclosure sale.


         Salvador moves for summary judgment against Bank of America, BONY, and Bayview, arguing that they failed to timely respond to the complaint after being served. She also argues she did not receive documents from these defendants after the court later ordered the defendants to send them to her. Bank of America responds that service was never properly completed on it because Salvador never requested or obtained a summons, so Bank of America was not served with a copy of the summons. BONY and Bayview respond that they attempted personal service on Salvador several times but were unable to contact her at her home, so they mailed their motion to dismiss via first class mail. They also note that Salvador is not prejudiced because she obtained both a copy of their motion and Bank of America's joinder to Select Portfolio's motion.

         The docket does not reflect that Salvador requested or obtained a summons. See also ECF No. 7 (Salvador's certificate of service showing she mailed the complaint, her request for injunctive relief, and a notice of lis pendens, but no mention of a summons). She thus has not properly served Bank of America, BONY, or Bayview under Federal Rule of Civil Procedure 4(c). Consequently, these defendants have not defaulted by failing to respond within twenty-one days. See Fed. R. Civ. P. 12(a)(1)(A)(i) (providing that the defendant must serve an answer “within 21 days after being served with the summons and complaint”). Further, Salvador did not follow the proper procedure to obtain a default judgment by first seeking entry of default under Rule 55(a).

         Even if these defendants defaulted, I would set aside entry of default. “The court may set aside an entry of default for good cause . . . .” Fed.R.Civ.P. 55(c). When determining whether good cause exists, the court considers (1) “whether the defendant's culpable conduct led to the default, ” (2) “whether the defendant has a meritorious defense, ” and (3) “whether reopening the default judgment would prejudice the plaintiff.” TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001), overruled on other grounds, Egelhoff v. Egelhoff ex. rel. Breiner, 532 U.S. 141 (2001). With regard to the first factor, “a defendant's conduct is culpable if he has received actual or constructive notice of the filing of the action and intentionally failed to answer.” Id. at 697 (emphasis and quotation omitted). However, if the defendant offers a good faith explanation for its neglectful failure to answer, and that explanation negates any intent to take advantage of the plaintiff, interfere with judicial decision-making, or otherwise manipulate the legal process, such failure is not “intentional.” Id. at 697-98. A defendant's conduct is culpable “where there is no explanation of the default inconsistent with a devious, deliberate, willful, or bad faith failure to respond.” Id. at 698.

         Here, BONY and Bayview filed a motion to dismiss on December 26, 2017. ECF No. 19. Bank of America filed a joinder to Select Portfolio's motion to dismiss on January 2, 2018. ECF No. 22. Thus, within approximately a month and a half after Salvador filed her complaint, the defendants responded despite the improper service. There is no evidence the defendants engaged in culpable conduct. The defendants have offered meritorious defenses to Salvador's claims. Finally, reopening would not prejudice Salvador. The defendants promptly filed their motions and Salvador has had an opportunity to respond to them. Further, as discussed below, Salvador's claims are subject to dismissal, and her motions are not supported by evidence showing she is entitled to judgment as a matter of law on any of her claims. See Fed. R. Civ. P. 56. I therefore deny Salvador's motions for summary judgment.

         III. MOTIONS TO DISMISS (ECF Nos. 11, 14, 19)

         In considering a motion to dismiss, “all well-pleaded allegations of material fact are taken as true and construed in a light most favorable to the non-moving party.” Wyler Summit P'ship v. Turner Broad. Sys., Inc., 135 F.3d 658, 661 (9th Cir. 1998). However, I do not necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations in the complaint. See Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994). A plaintiff must make sufficient factual allegations to establish a plausible entitlement to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, ...

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