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Paatalo v. First American Title Company of Montana, Inc.

United States District Court, D. Montana, Billings Division

May 14, 2014

WILLIAM J. PAATALO, Plaintiff,
v.
FIRST AMERICAN TITLE COMPANY OF MONTANA, INC., et. al., Defendants.

ORDER and FINDINGS AND RECOMMENDATIONS OF UNITED STATES MAGISTRATE JUDGE

CAROLYN S. OSTBY, Magistrate Judge.

I. INTRODUCTION

On March 20, 2014, this Court issued Findings and Recommendations addressing various motions to dismiss and motions for summary judgment. See Findings and Recommendations of U.S. Magistrate Judge (ECF 55) [1]. Judge Haddon adopted this Court's recommendations in full, resulting in the dismissal of all claims against J.P. Morgan Chase Bank, N.A. ("Chase"), U.S. Bank, N.A. ("U.S. Bank") as Trustee for WaMu Mortgage Pass-Through Certificate Series 2007-OA3 Trust ("2007-OA3 Trust"), First American Title Company of Montana, Inc. ("First American"), Dalia Martinez ("Martinez"), Stillwater Abstract Company d/b/a Stillwater Abstract & Title Co. Inc. ("Stillwater"), and Shelly Noe ("Noe"). See Order Adopting F&R (ECF 62). Accordingly, the only defendants remaining in the case are the Mackoff Kellogg Law Firm - Charles J. Peterson ("Mackoff Kellogg") and Jason J. Henderson ("Henderson").

Now pending is Mackoff Kellogg's and Henderson's joint motion to dismiss for failure to state a claim. ECF 56. Also pending are Paatalo's Motion and Request for Judicial Notice ( ECF 57 ) and Motion for Extension to File Notice of Appeal ( ECF 71 ). Having considered the parties' arguments and submissions, the Court rules as follows.

II. BACKGROUND

In the Court's March 20, 2014 Findings and Recommendations, the Court reviewed the background facts pertinent to the pending motions. See ECF 55 at 2-8. The Court will not repeat those facts here except as necessary to explain this ruling.

III. PARTIES' ARGUMENTS

Mackoff Kellogg and Henderson argue that all of Paatalo's claims against them fail to state a claim upon which relief may be granted. They first argue that the breach of contract and breach of the implied covenant claims fail because it is clear that neither Mackoff Kellogg nor Henderson breached the Settlement Agreement. ECF 56-1 at 6. They argue that the Settlement Agreement only bound Paatalo and Mackoff Kellogg, and any action taken by a party not subject to the agreement cannot constitute a breach. Id . at 6-7.

Second, Defendants argue that the fraud, constructive fraud, and negligent misrepresentation claims fail because Paatalo has not met the pleading requirements of such claims. Additionally, Mackoff Kellogg argues that it did not make a representation that it had the capacity to bind any other Defendant. Id. at 8. They argue that Mackoff Kellogg used the name "Mackoff Kellogg Law Firm - Charles J. Peterson as successor Trustee to WAMU Mortgage Pass-Through Certificate Series 2007-OA3 Trust" in the Settlement Agreement because that was the precise name of the entity that Paatalo named in his Complaint in Paatalo I (CV 10-119-BLG-RFC-CSO). Mackoff Kellogg argues that it never acted as trustee of the 2007-OA3 Trust, but instead used the name above to avoid confusion and ensure that the proper entity was dismissed from Paatalo I pursuant to the Settlement Agreement. Id . at 10. Defendants further argue that they owed no duty to Paatalo that could form a basis for constructive fraud or negligent misrepresentation claims. Id . at 12-13.

Third, Defendants argue that the FDCPA claim fails because Mackoff Kellogg was not acting as trustee of Paatalo's Deed of Trust at the time of the foreclosure proceedings, and therefore it did not take any action as trustee to enforce the debt Paatalo owed on the Note. Id . at 15. Defendants also argue that any involvement in collection efforts by them as legal counsel for others was not improper because the Settlement Agreement did not absolve Paatalo of his obligation under the Note. Id.

Respecting the breach of contract and breach of the implied covenant claims, Paatalo continues to maintain that the Settlement Agreement with Mackoff Kellogg bound all other Defendants in the prior action, and therefore any attempt to foreclose on his home constitutes a breach of that contract. ECF 66 at 6-10. Respecting the fraud, constructive fraud, and negligent misrepresentation claims, Paatalo contends that Mackoff Kellogg intentionally misrepresented that it was the trustee of the 2007-OA3 Trust, the beneficiary of his Deed of Trust, and that he justifiably relied on this representation to his detriment. Id . at 10-12. Finally, respecting the FDCPA claim, Paatalo argues that Mackoff Kellogg and Henderson acted as legal counsel for both First American and U.S. Bank, and therefore may be held liable for their actions in attempting to collect a debt that Paatalo contends no longer existed. Id . at 13-14.

IV. LEGAL STANDARD

A cause of action may be dismissed under Rule 12(b)(6) either when it asserts a legal theory that is not cognizable as a matter of law, or if it fails to allege sufficient facts to support an otherwise cognizable legal claim. SmileCare Dental Group v. Delta Dental Plan of California, Inc., 88 F.3d 780, 783 (9th Cir. 1996). In addressing a Rule 12(b)(6) challenge, the Court accepts all factual allegations in the complaint as true ( Hospital Bldg. Co. v. Trustees of the Rex Hospital, 425 U.S. 738, 740 (1976)), and construes the pleading in the light most favorable to the nonmoving party. Tanner v. Heise, 879 F.2d 572, 576 (9th Cir. 1989). The Court is not, however, required to accept as true allegations that contradict exhibits attached to the complaint or allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences. Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010).

The Court's standard of review under Rule 12(b)(6) is informed by Rule 8(a)(2) which requires that a pleading contain "a short and plain statement of the claim showing that the pleader is entitled to relief[.]" Ashcroft v. Iqbal, 556 U.S. 662 (2009) (quoting Rule 8). To survive a motion to dismiss under Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft, 129 S.Ct. at 1949. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

As a general rule "a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (citation omitted). The Court may, however, consider "material which is properly submitted as part of the complaint[, ]" or take judicial notice of "matters of public record" without converting a motion to dismiss to a motion for summary judgment. Id., 250 F.3d at 688-89. Specifically, the Court may take judicial notice of other court proceedings. Duckett v. Godinez, 67 F.3d 734, 741 (9th Cir. 1995), and Emrich v. Touche Ross & Co., 846 F.2d 1190, 1198 (9th Cir. 1988); see also Burbank-Glendale-Pasadena Airport Authority v. City of Burbank, 136 F.3d 1360, 1364 (9th Cir. 1998) (allowing judicial notice of pleadings in other cases).

V. DISCUSSION

Paatalo's claims against Mackoff Kellogg and ...


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