United States District Court, E.D. California
PNC BANK, N.A., a National Association, as successor in interest to National City Bank, Plaintiff,
BELINDA L. SMITH, in personam; JACOB WINDING, in personam; B & B DREAMIN', Hull No. GMKD283C505 (the
ORDER AND FINDINGS AND RECOMMENDATIONS
EDMUND F. BRENNAN, Magistrate Judge.
This action is before the court on plaintiff's motion to dismiss defendant Smith's counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF No. 78. Defendant Smith opposes the motion. ECF No. 82. Smith also moves to strike the affidavit of Brian J. Lutton, which plaintiff submitted in support of its motion to dismiss. For the reasons stated herein, Smith's motion to strike is denied and it is recommended that plaintiff's motion to dismiss be granted.
I. PROCEDURAL HISTORY
Plaintiff PNC Bank (hereafter "PNC Bank") filed a verified complaint in rem and in personam for foreclosure of a vessel owned by defendant owner Belinda Smith (defendant B & B DREAMIN', Hull No. RGMKD283C505), on July 20, 2010. ECF No. 1. On September 10, 2010, the court issued an order authorizing an in rem arrest warrant for the vessel. ECF No. 11. The warrant was served and, on March 30, 2011, an order was entered confirming the vessel's arrest and appointing National Maritime Services as substitute custodian of the vessel, ECF No. 19.
Smith filed an answer to the complaint, ECF No. 31, and defendant Winding filed an answer and counterclaim, ECF No. 32. PNC Bank has filed an answer to Winding's counterclaim. ECF No. 35.
PNC Bank filed a motion for summary judgment on its complaint, seeking an order providing that: (1) PNC Bank has a first priority security interest in the Vessel; (2) defendant Smith is in default of her obligations to plaintiff; (3) PNC Bank is entitled to possession of the Vessel; (4) PNC Bank is entitled to a deficiency judgment against Smith pursuant to 46 U.S.C. § 1325(b)(2)(A); and (5) PNC Bank is entitled to a judgment against Smith for attorney's fees and costs. ECF No. 39. PNC Bank also sought summary judgment on defendant Winding's counterclaims for declaratory relief, conversion, and/or negligence. Specifically, PNC Bank sought an order providing that (1) defendant Winding's interest in the Vessel is subordinate to that of PNC Bank; (2) PNC Bank is not liable to Winding for conversion; (3) PNC Bank is not liable to Winding for tort; and (4) PNC Bank is not liable to Winding for attorney's fees or court costs. PNC Bank's motion for summary judgment was denied on March 18, 2013. ECF Nos. 56, 62.
On April 1, 2013, Smith filed a motion for leave to file an amended answer in order to assert counterclaims against PNC Bank. ECF No. 65. That motion was granted (ECF No. 76) and on June 28, 2013, Smith filed her amended answer and counterclaim, ECF No. 77. PNC Bank now moves to dismiss Smith's counterclaim. ECF No. 78.
II. FACTUAL BACKGROUND
Smith's counterclaim, standing on its own, provides little, if any, context as to the overarching dispute between the parties in this action. Because the counterclaim is not drafted to stand on its own, to understand it requires reference to the allegations contained in PNC Bank's complaint. PNC Bank alleged in that complaint that the vessel B & B DREAMIN', Hull No. MKD283C505, its engines, machinery, appurtenances, etc. ("Vessel") was owned by defendant Belinda Smith. Compl., ECF No. 1 ¶ 2. It is undisputed that it was purchased on credit and encumbered. On July 12, 2005, Smith executed and delivered to National City a written Fixed Rate Promissory Note and Security Agreement-Multi-State Dealer (hereinafter the "Note") in the principal sum of $336, 653.69 plus interest for the purchase of the Vessel. Id. ¶ 5. The Note was secured by a Preferred Ship Mortgage ("Mortgage") on the Vessel. Id. The Mortgage was duly recorded at the National Vessel Documentation Center against the Vessel on August 18, 2005 as a Preferred Mortgage. Id. ¶¶ 5, 6, Exs. 3, 5.
Smith also executed a second Promissory Note Secured By A Marine Vessel Called B&B Dreamin' (Straight Note-Interest Only) (hereinafter "Note 2") on July 11, 2005, in favor of defendant Winding in the amount of $110, 000.00. Id. ¶ 7. A Preferred Ship Mortgage (hereinafter the "Winding Mortgage") securing Note 2 was allegedly recorded by Winding on or about May 29, 2009. Id. ¶ 8.
In November 2009, PNC Bank merged with National City. Id. ¶ 9. As a result, PNC Bank assumed all of the deposits and loans of National City and thereby PNC Bank became the holder and owner of Note and Mortgage on the Vessel. Id. ¶¶ 9, 10. PNC Bank's complaint alleges that Smith defaulted under the Note and Mortgage by failing to make monthly payments due on August 10, 2008, and all payments accruing thereafter. Id. PNC Bank elected to charge off the account in April 2009, and accelerate the entire balance due under the Note and Mortgage. Id. ¶ 11. Therefore, according to PNC Bank, there is now due and owing to PNC Bank under the Note the principle sum of $288.648.57, plus interest. Id. ¶ 13. In or about June 2009, PNC Bank repossessed the Vessel for the purpose of re-marketing same in order to apply the net proceeds to the balance owing under the Note and Mortgage. Id. ¶ 14.
Smith disputes PNC Bank's version of the facts in her amended answer and counterclaim. She alleges that PNC Bank repossessed the Vessel on June 1, 2009 (ECF No. 77 ¶ 3) and at the time of the repossession, defendant Winding was utilizing the Vessel pursuant to a contractual agreement between Smith and Winding. Id. Smith further alleges that she was never in default under the Note and Mortgage and had not heard from National City in over two years. Id. ¶ 6. Smith further alleges that she did not owe National City any money. Id. She contends that the arrest of the Vessel was wrongful because she had paid the amount owed under the Note and therefore was not in default. Id. ¶ 10.
III. MOTION TO STRIKE
In spite of having filed this motion under Rule 12(b)(6) rather than Rule 56, PNC Bank submitted the affidavit of Brian J. Lutton in support of its motion to dismiss. ECF No. 79. Mr. Lutton's declaration is submitted as evidence to refute the allegations in Smith's ...