Quicken Loans Inc. v. Newland Court Condo. Ass'n

QUICKEN LOANS INC., Plaintiff, v. NEWLAND COURT CONDOMINIUM ASSOCIATION, MOELLER GRAF, P.C., andJANET S. COMMODORE, Defendants.

Civil Action No. 19-cv-01485-PAB-STV

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

April 6, 2020

Chief Judge Philip A. Brimmer

ORDER

This matter is before the Court on the Rule 12(b)(1) and (6) Motion to Dismiss Claims Against Newland Court Condominium Association [Docket No. 36] filed by defendant Newland Court Condominium Association ("Newland Court") on August 27, 2019. On September 27, 2019, plaintiff Quicken Loans Inc. filed a response. Docket No. 43. Newland Court replied on October 10, 2019. Docket No. 44.

I. BACKGROUND¹

On October 30, 2009, defendant Janet Commodore executed a promissory note made payable to WR Starkey Mortgage, L.L.P ("WR Starkey"). Docket No. 1 at 2, ¶ 9. The promissory note was secured by a deed of trust, which was executed by Ms.Commodore and Erin Snow.² Id., ¶ 10. This deed of trust related to a condominium unit located in Boulder, Colorado (the "Property"). Id. at 3, ¶ 11. The deed of trust named the Public Trustee of Boulder County as the trustee, WR Starkey as the lender, and Mortgage Electronic Registration Systems, Inc. ("MERS") as beneficiary. Id. at 2, ¶ 10. The deed of trust was recorded with the Clerk and Recorder of Boulder County on November 2, 2009. Id. at 2-3, ¶ 10.

The promissory note and deed of trust contain a due-on-sale clause providing that, "[i]f all or any part of the Property or an Interest in the Property is sold or transferred . . . without Lender's prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument." Id., ¶ 12. In addition, the deed of trust provides that, if any lawsuit is instituted that "could result in forfeiture" of the Property, Ms. Commodore and Ms. Snow would be considered in default of the deed's terms and the full amount due under the promissory note would become immediately due and payable. Id., ¶ 13. On August 1, 2013, Ms. Commodore and Ms. Snow were notified that servicing of the loan was being transferred to plaintiff Quicken Loans. Docket No. 1-3 at 3. However, not until December 18, 2017 did WR Starkey assign its rights in the mortgage to Quicken Loans. Id. at 5-6.

On September 16, 2016, because Ms. Snow and Ms. Commodore had not paid dues and other assessments, defendant Newland Court, a condominium association organized as a non-profit corporation, initiated a foreclosure action in the District Courtof Boulder County against Ms. Commodore, Ms. Snow, MERS, WR Starkey, the Public Trustee of Boulder County, and the Treasurer of Boulder County to collect on "substantial dues and other assessments that were due and owing" to Newland Court. Docket No. 1 at 1, ¶ 2; id. at 3-4, ¶¶ 15-16. In this state-court case, Newland Court was represented by defendant Moeller Graf, P.C.. Id. at 3, ¶ 15. Under Colo. Rev. Stat. § 38-33.3-316, Newland Court had a priority "superlien" in "[a]n amount equal to the common expense assessments . . . which would have become due, in the absence of any acceleration, during the six months immediately preceding institution . . . of an action . . . to enforce . . . the lien." Colo. Rev. Stat. § 38-33.3-316(2)(b)(I); Docket No. 1 at 4, ¶ 17.³ In its state-court complaint, Newland Court alleged that it held a super-priority lien in the amount of $1,758.00 and was otherwise "entitled to a second priority lien." Docket No. 1 at 4, ¶ 18. On October 28, 2016, Quicken Loans paid Newland Court $1,758.00 for purposes of satisfying Newland Court's superlien on the Property. Id. at 5, ¶ 20.

Quicken Loans did not intervene or enter an appearance in the foreclosure action, despite being aware of its existence. Id. at 4, ¶ 19; see also Docket No. 36-1 at 3, ¶ 5.⁴ Newland Court moved for default judgment in the foreclosure action on December 5, 2016, id. at 5, ¶ 22, and the state court entered a default judgment anddecree of foreclosure on December 6, 2016. Id., ¶ 24. A sheriff's sale of the Property was scheduled for May 25, 2017. Id., ¶ 25. On or about March 24, 2017, an attorney for Moeller Graf informed Quicken Loans of the scheduled sale and told Quicken Loans "that it could simply pay the 'superlien' amount." Id. at 6, ¶ 31. On May 18, 2017, Quicken Loans paid Newland Court $1,758.00 for a second time. Id. at 5, ¶ 26. Newland Court reflected both the October payment and the May payment in its ledger, recording the October payment as a "lockbox payment" and the May payment as "Superlien Payment/Quicken Loans." Id. at 5-6, ¶¶ 28-29.

The sheriff's sale of the Property proceeded as planned, and the Property was sold for $95,000 to Vista Property Group, LLC. Id. at 6, ¶ 33.⁵ On June 12, 2017, the court released $42,328.99 of the proceeds to Newland Court, upon its request, in satisfaction of its lien. Id., ¶ 35.⁶ The court distributed $2,685.15 to non-party Oakwood Holdings LLC, and the remaining $49,985.86 to Ms. Commodore and Ms. Snow. Id. at 7, ¶¶ 37-38. Quicken Loans did not receive any proceeds of the sheriff's sale. Id. at 6, ¶ 34. Quicken Loans represents that Newland Court has refused to pay Quicken Loans the amounts of the October payment, the May payment, or the amount that Newland Court received from the sheriff's sale, despite Quicken Loans' demands for it to do so. Id. at 7, ¶ 39.

On May 23, 2019, Quicken Loans filed this lawsuit against Newland Court, Moeller Graf, Ms. Commodore, and Ms. Snow. See generally id. It raises the following claims against Newland Court: (1) wrongful foreclosure, (2) negligent misrepresentation, (3) intentional interference with a contract, (4) civil theft, (5) conversion, and (6) unjust enrichment. Id. at 7-13. On August 27, 2019, Newland Court filed a motion to dismiss under Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Docket No. 36.

II. LEGAL STANDARD

Newland Court moves to dismiss Quicken Loans' lawsuit under Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Dismissal pursuant to Federal Rule of Civil Procedure 12(b)(1) is appropriate if the Court lacks subject matter jurisdiction over claims for relief asserted in the complaint. Rule 12(b)(1) challenges are generally presented in one of two forms: "[t]he moving party may (1) facially attack the complaint's allegations as to the existence of subject matter jurisdiction, or (2) go beyond allegations contained in the complaint by presenting evidence to challenge the factual basis upon which subject matter jurisdiction rests." Merrill Lynch Bus. Fin. Servs., Inc. v. Nudell, 363 F.3d 1072, 1074 (10th Cir. 2004) (quoting Maestas v. Lujan, 351 F.3d 1001, 1013 (10th Cir. 2003)). When reviewing the factual basis on which subject matter jurisdiction rests, the district court does not presume the truthfulness of the complaint and "has wide discretion to allow affidavits, other documents, and a limited evidentiary hearing to resolve disputed jurisdictional facts under Rule 12(b)(1)." Holt v. United States, 46 F.3d 1000, 1003 (10th Cir. 1995) (citations omitted).Consideration of evidence outside the pleadings does not convert the motion to a Rule 56 motion. Id. The proponent of federal jurisdiction bears the burden of establishing that jurisdiction. Kunk v. Salazar, No. 07-cv-01617-PAB-MJW, 2009 WL 3052292, at *2 (D. Colo. Sep. 22, 2009).

In contrast to motions to dismiss brought under Fed. R. Civ. P. 12(b)(1), a motion under Fed. R. Civ. P. 12(b)(6) tests the legal sufficiency of the complaint. To survive a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a complaint must allege enough factual matter that, taken as true, makes the plaintiff's "claim to relief ... plausible on its face." Khalik v. United Air Lines, 671 F.3d 1188, 1190 (10th Cir. 2012) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not shown - that the pleader is entitled to relief." Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (internal quotation marks and alteration marks omitted); see also Khalik, 671 F.3d at 1190 ("A plaintiff must nudge [his] claims across the line from conceivable to plausible in order to survive a motion to dismiss." (quoting Twombly, 550 U.S. at 570)). If a complaint's allegations are "so general that they encompass a wide swath of conduct, much of it innocent," then plaintiff has not stated a plausible claim. Khalik, 671 F.3d at 1191 (quotations omitted). Thus, even though modern rules of pleading are somewhat forgiving, "a complaint still must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory." Bryson v. Gonzales, 534 F.3d 1282, 1286 (10th Cir. 2008) (alteration marks omitted).

III. ANALYSIS

Newland Court argues that Quicken Loans' claims against it should be dismissed because (1) the Court does not have jurisdiction to consider the claims under the Rooker-Feldman doctrine; and (2) issue preclusion prevents the Court from considering Quicken Loans' claims. Docket No. 36 at 3. In the alternative, Newland Court argues that "there is no wrongful foreclosure claim accepted in Colorado and that claim should be dismissed" under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Id.

A. Rooker-Feldman

Newland Court argues that Quicken Loans' claims are barred by the Rooker-Feldman doctrine. Docket No. 36 at 5; see Rooker v. Fid. Trust Co., 263 U.S. 413 (1923); D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983). The Rooker-Feldman doctrine prevents "state-court losers" from seeking a review and rejection of a state-court judgment "rendered before the district court proceedings commenced." Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005); Miller v. Deutsche Bank Nat'l Trust Co. (In re Miller), 666 F.3d 1255,...