Davenport v. Gmac Mortgage ( 2013 )

7637 Sierra Paseo Lane in Las Vegas (the Sierra Property) without
Davenport's knowledge or consent. The Grimm defendants purchased the
Sierra Property by executing two promissory notes and deeds of trust in
favor of Silver State Financial. Davenport asserts that the Grimm
defendants forged his signature on the loan documents and exaggerated
his employment income and assets, thereby misrepresenting his ability to
pay the notes. Silver State Financial allegedly failed to verify any of the
information that it received, and it subsequently sold the notes and deeds
for the Sierra Property to GMAC. Thereafter, the loans went into default,
prompting GMAC to foreclose on the property and sell it at auction.
According to Davenport, it was not until he saw Grimm and Mazzarella
being arrested on the news that he suspected being a victim of fraud.
In his second amended complaint, Davenport asserted the
following claims against GMAC: fraud, consumer fraud, constructive
fraud, civil conspiracy, civil racketeering, unfair lending practices,
negligence, negligence per se, intentional infliction of emotional distress,
breach of contract, and breach of the covenant of good faith and fair
dealing. GMAC filed a motion to dismiss the second amended complaint,
which the district court granted upon determining that the claims therein
failed under substantive law or were not stated with the required degree
of particularity.' The district court granted a motion for NRCP 54(b)
certification of the dismissal, and this appeal followed.
'Davenport also pleaded punitive damages as a claim. The district
court dismissed this claim, reasoning that it is a remedy and not a
separate cause of action.
On appeal, Davenport asserts that the district court erred in
dismissing his claims. GMAC responds that we should adopt the pleading
standard set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007),
and Ashcroft v. Iqbal, 556 U.S. 662 (2009), which, according to GMAC,
Davenport's claims do not satisfy. GMAC further argues that even if we
do not adopt the revised federal pleading standard, the district court
correctly dismissed Davenport's claims under Nevada's less demanding
pleading standard. We conclude that the district court erred in dismissing
Davenport's civil conspiracy claim but did not err in dismissing the
remaining claims that failed to satisfy Nevada's pleading standard. We do
not address whether we should adopt the revised federal pleading
standard because the civil conspiracy claim met that standard by
satisfying NRCP 9(b) and the remaining claims failed to satisfy Nevada's
pleading standard and, thus, did not meet the stricter standard provided
in Twombly and Iqbal. As the parties are familiar with the facts of this
case, we do not recount them further except as necessary for our
disposition.
Davenport's claims under Nevada's pleading standard
An order granting a motion to dismiss for failure to state a
claim "is rigorously reviewed." In re AMERCO Derivative Litig., 127 Nev.
252 P.3d 681, 692 (2011) (quoting Shoen v. SAC Holding Corp.,
122 Nev. 621, 634-35, 137 P.3d 1171, 1180 (2006)). "[T]his court considers
all factual assertions in the complaint to be true and draws all reasonable
inferences in favor of the plaintiff." Id. We reiterate, however, that "No
survive dismissal, a complaint must contain some 'set of facts, which, if
true, would entitle [the plaintiff] to relief." Id. (second alteration in
3
original) (quoting Buzz Stew, LLC v. City of N. Las Vegas, 124 Nev. 224,
228, 181 P.3d 670, 672 (2008)).
Regarding fraud-based claims, NRCP 9(b) provides, in
relevant part, that "the circumstances constituting fraud . . . shall be
stated with particularity." "The circumstances that must be detailed
include averments to the time, the place, the identity of the parties
involved, and the nature of the fraud. . . ." Brown v. Kellar, 97 Nev. 582,
583-84, 636 P.2d 874, 874 (1981). Davenport's claims for fraud, consumer
fraud, constructive fraud, and civil conspiracy must satisfy NRCP 9(b)'s
heightened pleading standards. 2 Additionally, Davenport's civil
racketeering claim must be stated with particularity. See Hale v.
Burkhardt, 104 Nev. 632, 637-38, 764 P.2d 866, 869 (1988) (holding that
2 Davenport asserts that the district court should have applied the
relaxed pleading standard from Rocker v. KPMG LLP, 122 Nev. 1185, 148
P.3d 703 (2006), abrogated on other grounds by Buzz Stew, LLC, 124 Nev.
at 228 n.6, 181 P.3d at 672 n.6. We disagree. Rocker affords a relaxed
pleading standard for fraud where the plaintiff alleges "facts supporting a
strong inference of fraud[ ] . . . and show[s] in his complaint that he cannot
plead with more particularity because the required information is in the
defendant's possession." Id. at 1195, 148 P.3d at 709. Here, Davenport
possessed the allegedly fraudulent documents when he filed his second
amended complaint. Thus, unlike Rocker, the information required to
support Davenport's claims was not solely in the defendants' hands. Id. at
1193, 148 P.3d at 708. See Patterson v. Grimm, No. 2:10-CV-1292 JCM
(RJJ), 2010 WL 4395419, at *4 (D. Nev. Nov. 1, 2010) (declining to apply
Rocker in a case brought by another straw buyer against the Grimm
defendants and other lenders where "plaintiff complains of forgeries of his
signature, misrepresentations of his finances, and inconsistencies within
documents in his possession"); see also Weinstein v. Home Am. Mortg.
Corp., No. 2:10-CV-1552 JCM (RJJ), 2010 WL 5463681, at *3 (D. Nev. Dec.
29, 2010) (Rocker is inapplicable where a party "complains of
inconsistencies within documents in [its] possession").
4
claims for civil racketeering must be pleaded with particularity). The
more lenient pleading requirements of NRCP 8(a) apply to Davenport's
claims for unfair lending practices, negligence, negligence per se,
intentional infliction of emotional distress, breach of contract, and breach
of the covenant of good faith and fair dealing.
Fraud and consumer fraud
In order to state a claim for fraud, a plaintiff must allege:
(1) a false representation made by the defendant;
(2) defendant's knowledge or belief that its
representation was false or that defendant has an
insufficient basis of information for making the
representation; (3) defendant intended to induce
plaintiff to act or refrain from acting upon the
misrepresentation; and (4) damage to the plaintiff
as a result of relying on the misrepresentation.
Barmettler u. Reno Air, Inc., 114 Nev. 441, 447, 956 P.2d 1382, 1386
(1998).
The defect with Davenport's fraud claim against GMAC is that
Davenport failed to allege that GMAC made any misrepresentations.
Instead, he alleged that the Grimm defendants made false representations
about him and that GMAC failed to inform him of this fraud. While
Davenport's allegations might establish fraud by the Grimm defendants,
those parties are not before us. As to GMAC, Davenport's claim for fraud
fails to state a claim upon which relief can be granted because it does not
meet the essential elements that define a fraud claim.
Davenport's consumer fraud claim was predicated on GMAC's
alleged violations of NRS 41.600, NRS 598.0915, and NRS 598.0917. NRS
41.600(2)(e) defines "consumer fraud" as "[a] deceptive trade practice as
defined in NRS 598.0915 to 598.0925, inclusive." Most of the provisions
cited in Davenport's second amended complaint apply specifically to the
5
sale or lease of goods or to retail installment transactions. See NRS
598.0915(2), (5), (7), (9), (13), (14), (16); NRS 598.0917(2), (6), (7). Only
NRS 598.0915(15) could apply to real estate transactions. That provision
provides that "[k]nowingly mak[ing] any. . . false representation in a
transaction" is a deceptive trade practice. NRS 598.0915(15). But, as with
his fraud claim, Davenport's claim for consumer fraud under NRS
598.0915(15) did not allege that GMAC made any misrepresentations.
Thus, it did not state a legally cognizable claim for relief.
Not only did Davenport fail to state legally sufficient claims
against GMAC for fraud and consumer fraud, but he did not plead those
claims with particularity. Rather than identifying the time, place, and
circumstances of GMAC's alleged deceptions, Davenport lumped GMAC
together with the other defendants and declared that it defrauded him.
These conclusory averments do not satisfy NRCP 9(b). See Swartz v.
KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007) (discussing the federal
counterpart to NRCP 9(b) and stating that "Rule 9(b) does not allow a
complaint to merely lump multiple defendants together but ``require[s]
plaintiffs to differentiate their allegations when suing more than one
defendant. . . and inform each defendant separately of the allegations
surrounding his alleged participation in the fraud." (alterations in
original) (quoting Haskin v. R.J. Reynolds Tobacco Co., 995 F. Supp. 1437,
1439 (M.D. Fla. 1998))). Accordingly, we conclude that the district court
did not err in dismissing Davenport's fraud and consumer fraud claims.
Constructive fraud
"Constructive fraud is characterized by a breach of duty
arising out of a fiduciary or confidential relationship." Long v. Towne, 98
Nev. 11, 13, 639 P.2d 528, 530 (1982). Such relationships can give rise to
a duty to disclose, such that nondisclosure amounts to fraud. Mackintosh
6
v. Jack Matthews & Co., 109 Nev. 628, 634-35, 855 P.2d 549, 553 (1993).
Generally, "[a]bsent such a relationship, no duty to disclose arises." Dow
Chem. Co. v. Mahlum, 114 Nev. 1468, 1487, 970 P.2d 98, 111 (1998),
overruled on other grounds by GES, Inc. v. Corbitt, 117 Nev. 265, 270-71,
21 P.3d 11, 14-15 (2001).
This court has never recognized the existence of a special or
fiduciary relationship arising solely from a routine, arm's-length
relationship between a borrower and a lender or successor lender. Other
courts have held that "[t]he lender-borrower relationship . . . is normally
an arms-length transaction involving no special duty to disclose," Pension
Trust Fund for Operating Eng'rs v. Fed. Ins. Co., 307 F.3d 944, 954 (9th
Cir. 2002), and Davenport does not provide any persuasive reason to
depart from this general rule. 3
Davenport alleged in his second amended complaint that
GMAC's failure to inform him of the Grimm defendants' wrongdoing was
constructive fraud. He alleged that GMAC owed him a duty to disclose the
Grimm defendants' wrongdoing because they "were in a relationship of
special confidence with [him]." Although the factual allegations contained
in a complaint must be accepted as true, we have never held that this type
3Although Davenport asserts that under Mackintosh a relationship
between a borrower and lender gives rise to a duty of disclosure,
Mackintosh addressed a buyer-seller relationship. 109 Nev. at 635, 855
P.2d at 554. In Mackintosh, we reasoned that if a seller acts as more than
an ordinary seller, a special relationship between a buyer and seller could
preclude summary judgment in favor of the seller on a nondisclosure claim
if there is a question of fact as to whether a reasonable person would have
placed more reliance on the seller based on the relationship. Id. Thus,
Davenport's reliance on Mackintosh is misplaced.
7
of conclusory legal allegation must be accepted as true. The complaint
contained no factual averments describing any interactions or contact with
GMAC, nor did Davenport allege that GMAC had any involvement with
the origination of the loans for the Sierra Property. Thus, Davenport
failed to state facts indicating that he and GMAC had a fiduciary or
special relationship that would impose a duty on GMAC to inform him of
the Grimm defendants' wrongdoing. 4 Therefore, the district court did not
err in dismissing Davenport's constructive fraud claim.
Civil conspiracy
To state an actionable claim for civil conspiracy to defraud, a
plaintiff must allege: (1) a conspiracy agreement formed by the defendants
to unlawfully harm the plaintiff, (2) an act of fraud in furtherance thereof,
and (3) resulting damages to the plaintiff. Jordan v. State ex rel. Dep't of
Motor Vehicles & Pub. Safety, 121 Nev. 44, 74-75, 110 P.3d 30, 51 (2005),
4We note that
even in absence of a fiduciary or confidential
relationship and where the parties are dealing at
arm's length, an obligation to speak can arise from
the existence of material facts peculiarly within
the knowledge of the party sought to be charged
and not within the fair and reasonable reach of the
other party.
Villalon v. Bowen, 70 Nev. 456, 467-68, 273 P.2d 409, 414-15 (1954).
However, because Davenport never alleged that GMAC was involved in
the origination of the loans for the Sierra Property or that he had any
interactions with GMAC, no duty to disclose could arise under this theory.
See Dow Chem., 114 Nev. at 1487, 970 P.2d at 111 (no duty to disclose
arises from a party's superior knowledge where "it was not directly
involved in the transaction" that gave rise to the claim).
8
abrogated on other grounds by Buzz Stew, LLC v. City of N. Las Vegas, 124
Nev. 224, 228 n.6, 181 P.3d 670, 672 n.6 (2008).
Davenport averred that after the Grimm defendants obtained
loans in his name through fraudulent means, they would then "launder
the improperly obtained loans by transfers or sales to [GMAC]," and
GMAC "would seek to legitimize the loans as good faith Purchasers."
Davenport claimed that as a result of this conspiracy, he incurred
damages because his credit was destroyed. Considering these factual
averments to be true, we conclude that Davenport set forth a claim upon
which relief could be granted for civil conspiracy. And, although
Davenport was somewhat imprecise about the details of this alleged
conspiracy, we conclude that he satisfied NRCP 9(b). Thus, the district
court erred in dismissing Davenport's claim for civil conspiracy. 5
Our conclusion would not be different under the revised
federal pleading standard, which requires allegations to "raise a right to
relief above the speculative level," Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 555 (2007), and establish a plausible claim for relief that permits
"the court to draw [a] reasonable inference that the defendant is liable for
the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
Given that the civil conspiracy claim satisfied NRCP 9(b)'s heightened
pleading requirement, it states a plausible claim for relief under the
revised federal pleading standard.
5 Because the district court erred in dismissing this claim, on remand
the district court is to reinstate Davenport's demand for punitive damages,
which may be considered if he proves his claim for civil conspiracy.
9
Civil racketeering
Davenport's civil racketeering claim was predicated on
GMAC's alleged violation of Nevada's RICO statutes, NRS 207.350
through NRS 207.520. To state a claim for such a violation, a plaintiff
must allege, with specificity, that the defendant "engag[ed] in at least two
crimes related to racketeering that have the same or similar pattern,
intents, results, accomplices, victims or methods of commission, or are
otherwise interrelated by distinguishing characteristics and are not
isolated incidents." NRS 207.390.
Davenport did not set forth, with any specificity, the
circumstances of the alleged racketeering. He did not differentiate
between the defendants or state with particularity what racketeering
crimes GMAC allegedly committed or when, where, and how such crimes
occurred. Rather, he indiscriminately claimed that "[d]efendants engaged
in no less than two crimes relating to racketeering" and set forth a
laundry list of crimes that GMAC and the other defendants committed.
Thus, Davenport failed to state his racketeering claim with sufficient
particularity. See Hale v. Burkhardt, 104 Nev. 632, 637, 642, 764 P.2d
866, 869, 872 (1988) (explaining that a civil racketeering claim must
provide information as to "when, where [and] how" the underlying
criminal acts occurred and "state the necessary elements of the predicate
crimes"). Consequently, the district court did not err in dismissing
Davenport's civil racketeering claim.
Unfair lending practices
Davenport's unfair lending practices claim was premised on
GMAC's alleged violation of NRS 598D.100. The version of NRS 598D in
effect at the time of the origination of the loans for the Sierra Property
made it an unfair lending practice to "[k]nowingly or intentionally make a
10
home loan to a borrower based solely upon the equity of the borrower in
the home property and without determining that the borrower has the
ability to repay the home loan from other assets." 2003 Nev. Stat., ch.
465, § 7, at 2891.
Davenport's claim for unfair lending practices fails because he
did not allege that GMAC was involved with the origination of the loans
for the Sierra Property. Thus, Davenport's unfair lending claim is legally
insufficient because GMAC did not "make a home loan" to him. 6 See
generally Camacho-Villa v. Great W. Home Loans, No. 3:10-CV-210-ECR-
VPC, 2011 WL 1103681, at *6 (D. Nev. March 23, 2011) (noting that there
is no authority for the proposition that a loan servicer "steps into the shoes
of the originator," and therefore concluding that an unfair lending claim
under NRS Chapter 598D does not lie against loan servicers not involved
in the origination of the loan); Vo v. Am. Brokers Conduit, No. 3:09-cv-
00654-LRH-VPC, 2010 WL 2696407, at *2 (D. Nev. July 2, 2010) ("A loan
servicer who did not make the loan at issue cannot be subject to an unfair
lending practices claim."). Accordingly, the district court did not err in
dismissing Davenport's unfair lending practices claim.
Negligence and negligence per se
To state a claim for negligence, a plaintiff must allege four
well-known elements: "(1) an existing duty of care, (2) breach, (3) legal
6 Under the Truth in Lending Act, a civil action "which may be
brought against a creditor may be maintained against any assignee of
such creditor." 15 U.S.C. § 1641(a) (2006). Notably, no comparable
language is contained in NRS 598D.100.
11
causation, and (4) damages." Turner v. Mandalay Sports Entm't, LLC,
124 Nev. 213, 217, 180 P.3d 1172, 1175 (2008).
Davenport claimed that GMAC owed him a duty "to provide
various financing options," "to disclose relevant information," and "to
conduct reasonable evaluations into the merits" of the loans taken out in
his name. When, as here, a lender lacks involvement in the loan
origination and has a conventional relationship with a borrower, no such
duties exist. See Larson v. Homecomings Fin., LLC, 680 F. Supp. 2d 1230,
1235 (D. Nev. 2009) (recognizing that a lender in an arm's-length loan
transaction generally does not owe a duty of care to a borrower); Nymark
v. Heart Fed. Say. & Loan Ass'n, 283 Cal. Rptr. 53, 56 (Ct. App. 1991)
(noting that "as a general rule, a financial institution owes no duty of care
to a borrower when the institution's involvement in the loan transaction
does not exceed the scope of its conventional role as a mere lender of
money"). Therefore, because GMAC does not, as a matter of law, owe
Davenport the duties of care that he alleged it breached, he failed to state
a claim for negligence.
To state a claim for negligence per se, a plaintiff must allege
that (1) he or she belongs to a class of persons that a statute was intended
to protect, (2) the defendant violated the relevant statute, (3) the plaintiffs
injuries are the type against which the statute was intended to protect, (4)
the violation was the legal cause of the plaintiffs injury, and (5) the
plaintiff suffered damages. Anderson v. Baltrusaitis, 113 Nev. 963, 965,
944 P.2d 797, 799 (1997). 7
7 Wenote that because Davenport's negligence and negligence per se
claims arise from two different sets of allegations, we consider them
continued on next page. . .
12
Davenport's negligence per se claim was based upon GMAC's
alleged unfair lending practices in violation of NRS 598D.100. Because
Davenport failed to state a claim against GMAC for unfair lending, his
negligence per se claim against GMAC necessarily failed to state a claim. 8
Consequently, we conclude that the district court did not err in dismissing
Davenport's negligence and negligence per se claims.
Intentional infliction of emotional distress
To state a claim for intentional infliction of emotional distress,
a plaintiff must allege: "(1) extreme and outrageous conduct with either
the intention of, or reckless disregard for, causing emotional distress, (2)
the plaintiffs having suffered severe or extreme emotional distress and (3)
actual or proximate causation." Star v. Rabello, 97 Nev. 124, 125, 625
P.2d 90, 91-92 (1981).
Davenport failed to describe what conduct by GMAC he
considered extreme and outrageous. Rather, he made the conclusory
allegation that "[t]he acts of the Defendants, and each of them, were
extreme and outrageous and were designed and calculated, in hole [sic] or
in part, to cause [him] emotional distress." Thus, the complaint lacked
facts supporting the elements of a claim for intentional infliction of
. . . continued
separately. Cf. Munda v. Summerlin Life & Health Ins. Co., 127 Nev. ,
n.3, 267 P.3d 771, 773 n.3 (2011); Cervantes v. Health Plan of Nev.,
Inc., 127 Nev. , n.4, 263 P.3d 261, 264 n.4 (2011).
8 Inlight of our conclusions with respect to Davenport's negligence
and negligence per se claims, we need not consider whether the district
court correctly found that these claims are also barred by the economic
loss doctrine.
13
emotional distress. Accordingly, the district court did not err in
dismissing Davenport's intentional infliction of emotional distress claim.
Breaches of contract and of the covenant of good faith and fair
dealing
To state a breach of contract claim, a plaintiff must allege the
existence of a valid agreement between the plaintiff and the defendant, a
material breach by the defendant, and damages. See Bernard v. Rockhill
Dev. Co., 103 Nev. 132, 135, 734 P.2d 1238, 1240 (1987).
In his second amended complaint, Davenport did not identify
what contract GMAC allegedly breached. Instead, he stated that he "had
one or more contracts with. . . Lender, orally and/or in writing."
Davenport did not identify what provisions of these alleged contracts were
breached, much less what breaches were attributable to GMAC. He
simply asserted that GMAC and the other defendants "breached the
contract terms causing damages to [him]." Although a plaintiffs pleadings
are liberally construed when considering an NRCP 12(b)(5) motion to
dismiss for failure to state a claim, pleadings nonetheless must "give fair
notice of the nature and basis of a legally sufficient claim and the relief
requested." Breliant v. Preferred Equities Corp., 109 Nev. 842, 846, 858
P.2d 1258, 1260 (1993). As pleaded, Davenport's breach of contract claim
wholly failed to give GMAC fair notice as to the nature of his claim.
Next, where a party intentionally violates "the intention and
spirit of the contract, that party can incur liability for breach of the
implied covenant of good faith and fair dealing." Hilton Hotels Corp. v.
Butch Lewis Prods., Inc., 107 Nev. 226, 232, 808 P.2d 919, 922-23 (1991).
Davenport alleged that he had a contract with the defendants
and that the defendants "breached the contractual covenant of good faith
causing damages to [him]." We conclude that as with the allegations
14
supporting Davenport's breach of contract claim, this vague allegation
failed to place GMAC on fair notice. Accordingly, the district court did not
err in dismissing Davenport's claims for breach of contract and breach of
the covenant of good faith and fair dealing. 9
For the foregoing reasons, we
ORDER the judgment of the district court AFFIRMED IN
PART AND REVERSED IN PART AND REMAND this matter to the
district court for proceedings consistent with this order.
C.J.
Gibbons
J.
J.
Cher
J.
Saitta
9 We have considered Davenport's remaining contentions and
conclude that they are without merit.
15
cc: Hon. Elissa F. Cadish, District Judge
Robert F. Saint-Aubin, Settlement Judge
G. Dallas Horton & Associates
Vannah & Vannah
Hall Jaffe & Clayton, LLP
Kolesar & Leatham, Chtd.
Eighth District Court Clerk
SUPREME COURT
OF
NEVADA
16
(0) 1947A