Villagrana v. ReconTrust Co., N.A.

GUSTAVO VILLAGRANA, an individual, Plaintiffs,

v. RECONTRUST COMPANY, N.A.; MORTGAGE ELECTRONIC REGISTRATION SYSTEM,INC.; EAGLE HOME MORTGAGE OF CALIFORNIA INC.; FIRST CENTENNIAL TITLE;JLM TITLE, LLC; DOE INDIVIDUALS I-X; and ROE COMPANIES I-X, inclusive Defendants.

3:11-cv-00 652-ECR-WGC

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

DATED: May 22, 2012

Order

This case arises out of allegations that Defendants wrongfully foreclosed on Plaintiff's home. Now pending before the Court is a motion to dismiss (#7) filed by Defendants Countrywide Home Loans, Inc. ("Countrywide"), Mortgage Electronic Registration System, Inc. ("MERS"), and Recontrust Company, N.A. ("Recontrust"); Plaintiff's motion to remand (#9); Plaintiff's motion to strike and for sanctions and attorney's fees (#16); Defendants First Centennial Title ("First Centennial") and JLM Title, LLC's ("JLM") motion to dismiss (#22); Defendants Countrywide, MERS, and Recontrust's second motion to dismiss (#24); Plaintiff's motion to strike (#26); Plaintiff's motion for a preliminary injunction (#30); and Plaintiff's motion to amend complaint (#34). The motions are ripe and we now rule on them.

I. Factual Background

On or about June 1, 2007, Plaintiff and another individual executed a promissory note in the amount of $250,000.00, Loan #A975008, in favor of Defendant Eagle Home Mortgage of California Inc. ("Eagle") in order to purchase the property located at 1004 Stanford Drive, Carson City, Nevada 89701. (Amd. Compl. ¶¶ 1-2, 16-17 (#15); Deed of Trust¹ (#24-8).) The loan was secured with a Deed of Trust recorded on June 4, 2007 as document #368427. (Amd. Compl ¶ 2 (#15); Deed of Trust (#24-8).) The Deed of Trust names Defendant First Centennial as the trustee and Defendant MERS as the nominee of the lender and beneficiary. (Deed of Trust (#24-8).) The Deed of Trust allows the lender to appoint a substitute trustee and provides that "MERS holds only legal title to the interests granted by Borrower in this Security Instrument," but has the right to exercise the right to foreclose and sell the Property as a nominee of the lender. (Id.)

On February 24, 2009, Defendant MERS substituted Defendant Recontrust as trustee under the Deed of Trust via a Substitution of Trustee recorded on February 26, 2009. (Substitution of Trustee (#24-9).) Also on February 24, 2009, Defendant Recontrust executedand recorded a Notice of Default and Election to Sell Under Deed of Trust. (Notice of Default (#24-10).)

On November 26, 2010, MERS executed an Assignment of Deed of Trust (the "2010 Assignment"), assigning the Deed of Trust and the underlying note to BAC Home Loans Servicing, LP f/k/a Countrywide Home Loans Servicing, LP ("BAC/Countrywide"). (2010 Assignment (#24-11).) The 2010 Assignment was recorded on November 30, 2010. (Id.) Also on November 30, 2010, BAC/Countrywide substituted Defendant Recontrust as trustee under the deed of trust. (Second Substitution of Trustee (#30-10).)

On July 18, 2011, Defendant Recontrust recorded a Notice of Trustee's Sale, setting the sale date for August 11, 2011. (Notice of Sale, (#24-12).) On August 9, 2011, BAC/Countrywide assigned the Deed of Trust and the underlying note to the Federal National Mortgage Association ("FNMA"), recording the document on August 19, 2011 (the "2011 Assignment"). (2011 Assignment (#24-13).) On August 11, 2011 the property was sold at a Trustee's Sale, and FNMA purchased the property with a credit bid of $236,446.80. (Trustee's Deed Upon Sale (#24-14).)

II. Procedural Background

On August 11, 2011, Plaintiff filed the original complaint (#1-2) in the First Judicial District Court of the State of Nevada in and for Carson City. Defendants Mortgage Electronic Registration System, Inc. ("MERS"), Recontrust Company, N.A. ("Recontrust"), and Countrywide Home Loans, Inc. ("Countrywide") removed the action tothis Court via petition for removal (#1) on September 9, 2011. Defendants First Centennial Title ("First Centennial") and JLM Title, LLC ("JLM") filed a joinder (#23) to the petition for removal(#1) on November 4, 2011.

Defendants Countrywide, MERS, and Recontrust filed a motion to dismiss (#7) on September 30, 2011. Plaintiff responded (#16) on October 20, 2011 and Defendants replied (#17) on October 25, 2011. Defendants First Centennial and JLM joined (#28) the motion to dismiss (#7) and the reply (#17) on December 7, 2011.

Plaintiff filed a motion to remand (#9) on October 12, 2011 and a corrected image (#13) of the motion of October 18, 2011. Defendants Countrywide, MERS, and Recontrust responded (#20) on October 31, 2011. Plaintiff replied (#25) on November 10, 2011.

On October 20, 2011, Plaintiff filed the first amended complaint (#15) alleging three causes of action: (i) Unlawful or Fraudulent Foreclosure; (ii) Declaratory Relief; and (iii) Injunctive Relief.

On November 3, 2011, Defendants First Centennial and JLM filed a motion to dismiss (#22) the first amended complaint (#15). Plaintiff responded (#26) on November 23, 2011, and Defendants did not reply.

On November 4, 2011, Defendants Countrywide, MERS, and Recontrust filed a motion to dismiss (#24) the first amended complaint (#15). Plaintiff responded (#26) on November 23, 2011, and Defendants replied (#27) on December 5, 2011.

Plaintiff filed a motion for preliminary injunction (#30) on December 9, 2011 and corresponding errata (#32) on December 21, 2011. Defendants Countrywide, MERS, and Recontrust responded (#35) on January 3, 2012, and Plaintiff replied (#38) on January 16, 2012.

Plaintiff filed a motion to amend complaint (#34) on December 21, 2011. Defendants First Centennial and JLM responded (#36) on January 6, 2012, and Defendants Countrywide, MERS, and Recontrust responded (#37) on January 9, 2012. Plaintiff did not file a reply.

III. Discussion

A. Plaintiff's Motion to Amend Complaint (#34)

Pursuant to Federal Rule of Civil Procedure 15(a), leave to amend is to be "freely given when justice so requires." In general, amendment should be allowed with "extreme liberality." Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001) (quoting Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990)). If factors such as undue delay, bad faith, dilatory motive, undue prejudice, or futility of amendment are present, leave to amend may properly be denied in the district court's discretion. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051-52 (9th Cir. 2003). The futility analysis determines whether the proposed amendment would survive a motion to dismiss pursuant to Rule 12(b)(6). Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988).

Plaintiff seeks leave to amend the first amended complaint (#15) for the following reasons: (i) to remove causes of actionpreviously pled; (ii) to make further allegations against Defendant First Centennial in its capacity as a trustee under the Deed of Trust; (iii) to make further allegations against Defendant MERS; and (iv) to name as a new defendant and make allegations against the Federal National Mortgage Association ("FNMA") in light of newly discovered evidence. For the reasons stated below, the Court will deny leave to amend the complaint.

With regard to amending the complaint in order to remove causes of action for unjust enrichment, slander of title, and civil conspiracy or alternatively civil rights violation, Plaintiff seemingly has neglected the fact that the original complaint (#1-2) has already been amended, and the first amended complaint (#15) has already eliminated the three causes of action Plaintiff now seeks to remove. It would therefore prove futile to grant leave to amend in order to remove these three claims, so we will not grant leave on this basis.

We also find that it would prove futile to allow Plaintiff to amend the complaint in order to make further allegations against Defendant First Centennial. In the proposed amended complaint, Plaintiff alleges that First Centennial, as named trustee in the Deed of Trust, breached its duties of "independence" and "impartiality" by failing to warn Plaintiff that the other Defendants had falsely "usurped" First Centennial's role as trustee. First, Plaintiff cannot establish that First Centennial owed Plaintiff any duty to inform him of the conduct of the other Defendants. See Brown v. Fed. Home Loan Mortg. Corp., No. 2:11-CV-01228, 2011 WL 5877545, at *2 (D. Nev. Nov. 23, 2011) ("[The trustee] asserts that all other claims must also be dismissed, because a trustee owes no duties other than those required by statute. . . . [T]he Court agrees that [the trustee] does not owe special duties to Plaintiff."); Padilla v. PNC Mortg., No. 3:11-cv-0326, 2011 WL 3585484, at *3 (D. Nev. Aug. 15, 2011) ("Because plaintiffs have failed to allege sufficient facts to establish that defendants acted outside their capacities as adverse parties - namely as lender, loan service, trustee and title recordation company - during the non judicial foreclosure process, which does not in itself create a fiduciary relationship, plaintiffs' claim for breach of fiduciary duty fails to state a claim upon which relief can be granted.") (emphasis added). "There is no fiduciary duty where, as here, the parties engaged in arms-length transactions while having diverse interests. Absent a duty, there can be no breach." Padilla, 2011 WL 3585484, at *3 (citing A.C. Shaw Constr. v. Washoe Cty., 784 P.2d 9, 10 (Nev. 1989)). Moreover, the Nevada Legislature recently ratified the Court's understanding that trustees generally have no duties to homeowners in Plaintiff's position by amending Chapter 107 of the Nevada Revised Statutes to include the following: "The trustee does not have a fiduciary obligation to the grantor or any other person having an interest in the property which is subject to the deed of trust." NEV. REV. STAT. § 107.028(5). For these reasons, a claim that Defendant First Centennial breached its duty to Plaintiff as a named t...