Opinion
3:11-cv-00465-RCJ-VPC
10-24-2011
JOHN H. DUCKETT et al., Plaintiffs, v. LOANCITY et al., Defendants.
ORDER
This is a standard foreclosure case involving one property. The Complaint filed in state court lists nine causes of action: (1) Unfair Debt Collection Practices Under Nevada Revised Statutes ("NRS") section 649.370; (2) Unfair and Deceptive Trade Practices Under NRS sections 41.600 and 598.0923; (3) Unfair Lending Practices Under NRS section 598D.100; (4) Breach of the Covenant of Good Faith and Fair Dealing; (5) Violation of NRS section 107.080; (6) Quiet Title; (7) Fraud; (8) Slander of Title; and (9) Abuse of Process. The case is not part of Case No. 2:09-md-02119-JAT in the District of Arizona but appears eligible for transfer. Defendants have moved to dismiss and to expunge the lis pendens. For the reasons given herein, the Court grants the motions as motions for summary judgment.
I. THE PROPERTY
John H. and Bernadette Duckett gave lender LoanCity a $412,000 promissory note to refinance property at 3145 Eaglewood Dr., Reno, NV 89502 (the "Property"). (See Deed of Trust ("DOT") 1-3, Dec. 20, 2006, ECF No. 4-1, at 7). The trustee was First Centennial Title Co. of Nevada ("First Centennial"), and Mortgage Electronic Registration Systems, Inc. ("MERS") was the lender's "nominee." (Id. 1). Plaintiffs originally purchased the Property in 2001 for $187,000 and refinanced it several times, the latest time representing the current $412,000 loan. (See Mot. Dismiss 3-4, Aug. 4, 2011, ECF No. 18). MERS assigned the note and DOT to BAC Home Loans Servicing, f.k.a. Countrywide Home loans Servicing, LP ("BAC"). (See Assignment, June 4, 2009, ECF No. 4-1, at 23). BAC substituted MTC Financial, Inc., d.b.a. Trustee Corps ("Trustee Corps") as trustee. (See Substitution, June 4, 2009, ECF No. 4-1, at 30). Trustee Corps filed the notice of default ("NOD") as agent for BAC based on a default of unspecified amount as of August 1, 2008. (See NOD, May 13, 2009, ECF No. 4-1, at 27). Trustee Corps noticed a trustee's sale for September 8, 2009. (see First Notice of Trustee's Sale ("FNOS"), Aug. 18, 2009, ECF No. 4-1, at 33), and again for July 6, 2011, (see Second Notice of Trustee's Sale ("SNOS"), June 9, 2011, ECF No. 4-1, at 36). At oral argument, the parties indicated that the trustee's sale had been completed and that Plaintiffs had not made any payments for approximately thee years.
II. ANALYSIS
Most of the claims fail for reasons given in substantively similar cases. The first issue with respect to the statutory propriety of foreclosure is MERS' transfer of the note and DOT. The Court had in the past challenged such transfers as potentially improper, because MERS is typically not in fact a beneficiary and the scope of MERS' agency due to its designation as a "nominee" on a deed of trust is not clear enough without more to indicate that a lender intends to give MERS the ability to sell the beneficial interest on its behalf. However, several defendants have since brought to the Court's attention a common clause in MERS deeds of trust—also present in the DOT here—that indicates an intention to give MERS the broadest possible agency on behalf of the lender, including transfer of the beneficial interest. See, e.g., Smith v. Cmty. Lending, Inc., 773 F. Supp. 2d 941, 942-43 (D. Nev. 2011). The MERS assignment of the note and DOT from LoanCity to BAC in this case was proper, because the DOT contains the relevant agency language. See id.; DOT 3.
The second issue is the timing of the substitution of the trustee. Trustee Corps filed the NOD a month before BAC appointed Trustee Corps as the new trustee. Without more, this would indicate a statutory defect in foreclosure, because only the beneficiary, trustee, or an agent of one of these may file the NOD under section 107.080(2)(c). The Court has ruled in the past that "[a] later-executed substitution of trustee making the notice of default filer the new trustee before proceeding to sale is practically insurmountable evidence of ratification . . . ." Nevada ex rel. Bates v. MERS, No. 3:10-cv-00407-RCJ-VPC, 2011 WL 1582945, at *5 (D. Nev. Apr. 25, 2011) (citing Restatement (Third) of Agency § 4.03 & cmt. b). Such is the case here. (See NOD, May 13, 2009, ECF No. 4-1, at 27; Substitution, June 4, 2009, ECF No. 4-1, at 30). The Court has recently indicated that it does not intend to grant motions to dismiss based on ratification, but will leave this issue to summary judgment. In the present case, the extreme inequity of further stalling the disposition of the Property where it has been sold and Plaintiffs have not made any payment for three years leads the Court to treat the motions as motions for summary judgment and grant them.
CONCLUSION
IT IS HEREBY ORDERED that the Motion to Dismiss (ECF No. 4) and the Motion to Dismiss and Expunge Lis Pendens (ECF No. 18) are GRANTED.
IT IS SO ORDERED.
ROBERT C. JONES
United States District Judge