Gardner et al v. Nationstar Mortgage LLC et al

Filing 114

ORDER - The motions to dismiss ( 87 and 89 ) are granted in part and denied in part. Count Six as to T.D. Service Company of Arizona, Japp, and Goff is dismissed. Count Seven as to Nationstar Mortgage, T.D. Service Company of Arizona, Japp, and Goff is dismissed. Count Six and Seven are dismissed with prejudice as plaintiffs have had multiple opportunities to plead the claims asserted in these counts. The motions to dismiss are denied as to all other counts and contentions. The court urg es the parties to seriously consider engaging a private mediator or requesting the designation of a United States magistrate judge to assist them with a settlement conference. (See Order for complete details.) Signed by Judge H Russel Holland on 12/07/2015. (ATD)

WO

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA

JAY N. GARDNER and RACHEL B.
GARDNER,
Plaintiffs,

)
)
)
)
vs.
)
)
NATIONSTAR MORTGAGE, LLC, et al.,
)
)
Defendants.
)
__________________________________________)
)
JAY N. GARDNER and RACHEL B.
)
GARDNER,
)
Plaintiffs,
)
)
vs.
)
)
NATIONSTAR MORTGAGE, LLC, et al.,
)
)
Defendants. )
__________________________________________)

No. 2:13-cv-1641-HRH
[Consolidated with
No. 2:13-cv-2478-HRH]

ORDER
Motions to Dismiss
The AMSL defendants move to dismiss1 plaintiffs’ Fourth Amended Complaint. The
Nationstar defendants also move to dismiss2 plaintiffs’ Fourth Amended Complaint. Both
motions are opposed.3 Oral argument was requested and has been heard.

1

Docket No. 87.

2

Docket No. 89.

3

Docket Nos. 94 and 93.

Order – Motions to Dismiss

-1-

Background
Plaintiffs are Jay N. Gardner and Rachel B. Gardner. Defendants are Nationstar
Mortgage LLC; T.D. Service Company of Arizona; U.S. Bank, N.A.;4 Starlet J. Japp; Clayton
A. Goff; AMSL Legal Group, LLC; and AMSL Legal Group, LLP.5
In April 2007, plaintiffs borrowed $960,000 from GreenPoint Mortgage Funding, Inc.,
to purchase “property located at 3601 East Mountain View Road, Phoenix, Arizona....”6
The Adjustable Rate Note that plaintiffs signed named GreenPoint as the “Lender” and
provided “that Lender may transfer this Note. Lender or anyone who takes this Note by
transfer and who is entitled to receive payments under this Note is called the ‘Note
Holder.’”7 The Note provided that if the borrower is
in default, the Note Holder may send me [the borrower] a
written notice telling me that if I do not pay the overdue
amount by a certain date, the Note Holder may require me to
pay immediately the full amount of Principal that has not been
paid and all the interest that I owe on that amount. That date
must be at least 30 days after the date on which the notice is
mailed to me or delivered by other means.[8]
Plaintiffs, as trustors, also executed a Deed of Trust.9 The Deed of Trust named
GreenPoint as the “Lender” and Marin Conveyancing Corp. as the “Trustee.”10 The Deed
of Trust listed the Mortgage Electronic Registration Systems, Inc. (MERS), “as a nominee

4

These three defendants are referred to collectively herein as the Nationstar
defendants.
5

These latter four defendants are referred to collectively herein as the AMSL
defendants.
6

Fourth Amended Complaint at 1, ¶ 1, Docket No. 82.

7

Adjustable Rate Note at 1, ¶ 1, Exhibit 2, Fourth Amended Complaint, Docket
No. 82-2.
8

Id. at 3, ¶ 7(C).

9

Deed of Trust, Exhibit 3, Fourth Amended Complaint, Docket No. 82-3.

10

Id. at 1-2, ¶ (C) and (D).

Order – Motions to Dismiss

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for the Lender and Lender’s successors and assigns. MERS is the beneficiary under this
Security Interest.”11 The Deed of Trust provided that “[t]his Security Instrument secures
to Lender: (i) the repayment of the Loan, and all renewals, extensions and modifications
of the Note; and (ii) the performance of Borrower’s covenants and agreements under this
Security Interest and Note.”12 “For this purpose, Borrower irrevocably grants and conveys
to Trustee, in trust, with power of sale” the property at 3601 East Mountain View Road,
Phoenix, Arizona.13
The Deed of Trust further provided:
Lender shall give notice to Borrower prior to acceleration
following Borrower’s breach of any covenant or agreement in
this Security Instrument (but not prior to acceleration under
Section 18 unless Applicable Law provides otherwise). The
notice shall specify: (a) the default; (b) the action required to
cure the default; (c) a date, not less than 30 days from the date
the notice is given to Borrower, by which the default must be
cured; and (d) that failure to cure the default on or before the
date specified in the notice may result in acceleration of the
sums secured by this Security Instrument and sale of the
Property. The notice shall further inform Borrower of the right
to reinstate after acceleration and the right to bring a court
action to assert the non-existence of a default or any other
defense of Borrower to acceleration and sale. If the default is
not cured on or before the date specified in the notice, Lender
at its option may require immediate payment in full of all sums
secured by this Security Instrument without further demand
and may invoke the power of sale and any other remedies
permitted by Applicable Law. Lender shall be entitled to
collect all expenses incurred in pursuing the remedies provided in this Section 22, including, but not limited to, reasonable attorneys’ fees and costs of title evidence.

11

Id. at 2, ¶ (E). “Listing MERS as a nominal beneficiary in the deed of trust
facilitates a process common in the home lending industry today known as ‘securitization.’” Steinberger v. McVey ex rel. County of Maricopa, 318 P.3d 419, 427 n.9 (Ariz. Ct.
App. 2014). “Securitization describes the process by which large numbers of home loans
are ‘pooled into a trust and converted into mortgage-backed securities that can be bought
and sold by investors.’” Id. (quoting United States Bank Nat’l Ass’n v. Ibanez, 941 N.E.2d
40, 46 (Mass. 2011).
12

Deed of Trust at 3, Exhibit 3, Fourth Amended Complaint, Docket No. 82-3.

13

Id. at 4, ¶ (R).

Order – Motions to Dismiss

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If Lender invokes the power of sale, Lender shall give written
notice to Trustee of the occurrence of an event of default and
of Lender’s election to cause the Property to be sold. Trustee
shall record a notice of sale in each county in which any part of
the Property is located and shall mail copies of the notice as
prescribed by Applicable Law to Borrower and to the other
persons prescribed by Applicable Law. After the time required
by Applicable Law and after publication and posting of the
notice of sale, Trustee, without demand on Borrower, shall sell
the Property at public auction to the highest bidder for cash at
the time and place designated in the notice of sale. Trustee
may postpone sale of the Property by public announcement at
the time and place of any previously scheduled sale. Lender or
its designee may purchase the Property at any sale.[14]
The Deed of Trust also provided that “Lender may, for any reason or cause, from
time to time remove Trustee and appoint a successor trustee to any Trustee appointed
hereunder. Without conveyance of the Property, the successor trustee shall succeed to all
the title, power and duties conferred upon Trustee herein and by Applicable Law.”15
The Deed of Trust further provided that:
[t]he Note or a partial interest in the Note (together with this
Security Instrument) can be sold one or more times without
prior notice to Borrower. A sale might result in a change in the
entity (known as the “Loan Servicer”) that collects Periodic
Payments due under the Note and this Security Instrument
and performs other mortgage loan servicing obligations under
the Note, this Security Instrument, and Applicable Law. There
also might be one or more changes of the Loan Servicer
unrelated to a sale of the Note. If there is a change of the Loan
Servicer, Borrower will be given written notice of the change
which will state the name and address of the new Loan
Servicer, the address to which payments should be made and
any other information RESPA requires in connection with a
notice of transfer of servicing.[16]
The Deed of Trust does not define “other mortgage loan servicing obligations” nor does
the Note define this term.

14

Id. at 13, ¶ 22.

15

Id. at ¶ 24.

16

Id. at 11-12, ¶ 20.

Order – Motions to Dismiss

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At some point in time, Lehman Brothers Holdings Inc. came to own plaintiffs’ Note.
In July 2007, a trust entitled Lehman XS Trust Mortgage Pass-Through Certificates Series,
2007-15N was created by Structured Asset Securities Corporation, Aurora Loan Services
LLC, and U.S. Bank National Association (the “Trust”).17 Structured Asset Securities
Corporation was the “depositor,” Aurora Loan Services LLC was the “master servicer,”
and U.S. Bank was the “trustee.”18 The pooled Trust Agreement provided that “[t]he
Depositor has acquired the Mortgage Loans from Lehman Brothers Holdings Inc. ... and
at the Closing Date is the owner of the Mortgage Loans....”19 The pooled Trust Agreement
provided that “[c]oncurrently with the execution and delivery of this Agreement, the
Depositor does hereby transfer, assign, set over, deposit with and otherwise convey to the
Trustee, without recourse, ... in trust, all the right, title and interest of the Depositor in and
to the Mortgage Loans.”20 The trustee holds the Trust Fund, which includes the Mortgage
Loans,21 “for the benefit and use of the Holders of the related Certificates....”22 The pooled
Trust Agreement provided that:
the Depositor does hereby deliver to, and deposit with, or
cause to be delivered to and deposited with, the Trustee and/or
a Custodian acting on the Trustee’s behalf, the following
documents or instruments with respect to each Mortgage Loan
... so transferred and assigned:
(i) with respect to each Mortgage Loan, the original Mortgage
Note endorsed without recourse in proper form to the order of
the Trustee ... or in blank...;

17

Exhibit 6, Fourth Amended Complaint, Docket No. 82-6.

18

Id. at 1.

19

Id.

20

Id. at 112, Section 2.01(a).

21

Id. at 104.

22

Id. at 112, Section 2.01(a).

Order – Motions to Dismiss

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(ii) if applicable, the original of any guarantee, security
agreement or pledge agreement executed in connection with
the Mortgage Note, assigned to the Trustee[.23]
In other words, plaintiffs’ Note and the Deed of Trust were to be transferred to U.S. Bank,
as the trustee, which held them for the benefit and use of the Certificateholders, but the
Trust owned plaintiffs’ Note and held the Deed of Trust.
The pooled Trust Agreement identifies a number of loan servicers, including
GreenPoint, GMACM, and Aurora24 and provided that:
[t]he Master Servicer ... and each Servicer shall have full power
and authority (to the extent provided in the applicable servicing agreement) to do any and all things necessary or desirable
in connection with the servicing and administration of the
Mortgage Loans, including but not limited to the power and
authority (i) to execute and deliver, on behalf of the
Certificateholders and the Trustee, customary consents or
waivers and other instruments and documents, (ii) to consent
to transfers of any Mortgaged Property and assumptions of the
Mortgage Notes and related Mortgages, (iii) to collect any
Insurance Proceeds and Liquidation Proceeds, and (iv) to
effectuate foreclosure or other conversion of the ownership of
the Mortgaged property securing any Mortgage Loan....[25]
The pooled Trust Agreement also provides that:
[t]he Master Servicer is further authorized and empowered by
the Trustee, on behalf of the Certificateholders and the Trustee,
in its own name or in the name of any Servicer ... when the
Master Servicer or a Servicer, as the case may be, believes it is
appropriate in its best judgment to register any Mortgage Loan
with MERS, or cause the removal from the registration of any
Mortgage Loan on the MERS system, to execute and deliver,
on behalf of the Trustee and the Certificateholders, or any of
them, any and all instruments of assignments and other
comparable instruments with respect to such assignment or re-

23

Id. at 113, Section 2.01(b).

24

Id. at 102.

25

Section 9.04(a), Trust Agreement, available at http://www.sec.gov.Archives/edgar/
data/1406223/000114420407044356/v084952_ex4-1.htm (last visited on Dec. 3, 2015).
Order – Motions to Dismiss

-6-

recording of a Mortgage in the name of MERS, solely as
nominee of the Trustee and its successors and assigns.[26]
Plaintiffs allege that on July 13, 2007, GreenPoint advised them that the servicing of
their loan was being transferred from GreenPoint to GMAC Mortgage, effective August 1,
2007.27 Plaintiffs further allege that on October 15, 2010, GMAC Mortgage advised them
that the servicing of their loan was being transferred to Aurora Loan Services, effective
November 1, 2010.28
On September 21, 2011, MERS “as nominee of GreenPoint ... and its successors
and/or assigns” assigned plaintiffs’ Deed of Trust to Aurora Bank FSB.29 MERS purported
to assign “all its right, title, and interest in and to said Deed of Trust.”30 As set out above,
MERS was listed in the Deed of Trust as the “beneficiary under this Security Instrument”
and MERS was authorized to act “solely as a nominee for Lender and Lender’s successors
and assigns.”31 The assignment was executed by Stacy Sandoz, vice-president,32 who
plaintiffs allege works for Aurora Bank, not MERS.33 Plaintiffs refer to this as the First
Assignment.34 Plaintiffs allege that the First Assignment is “invalid and void” because

26

Id.

27

Fourth Amended Complaint at 9, ¶ 40, Docket No. 82.

28

Id. at ¶ 41.

29

Corporate Assignment of Deed of Trust at 1, Exhibit 7, Fourth Amended
Complaint, Docket No. 82-7.
30

Id.

31

Deed of Trust at 2, Exhibit 3, Fourth Amended Complaint, Docket No. 82-3.

32

Corporate Assignment of Deed of Trust at 1, Exhibit 7, Fourth Amended
Complaint, Docket No. 82.
33

Fourth Amended Complaint at 9-10, ¶¶ 43-44, Docket No. 82.

34

Id. at 9-10, ¶ 43.

Order – Motions to Dismiss

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Sandoz had no authority to act on behalf of MERS.35 Plaintiffs also allege that because the
First Assignment purports to assign only the Deed of Trust, this assignment “separated the
Note from the Deed of Trust.”36
On October 25, 2011, Aurora Bank FSB, as “the present Beneficiary under said Deed
of Trust,” substituted Quality Loan Service Corporation as the trustee of the Deed of
Trust.37 Plaintiffs refer to this as the First Substitution and allege that this First Substitution
was void because “Aurora Bank FSB did not have the authority from the true beneficiary
or beneficiaries, to sign the First Substitution.”38
On November 9, 2011, Vanessa Sisk, an assistant secretary for Quality Loan Service
Corporation, signed a Notice of Trustee’s Sale.39 The Notice of Trustee’s Sale listed Aurora
Bank FSB as the current beneficiary of the Deed of Trust and Quality Loan Service
Corporation as the trustee.40 The trustee’s sale was scheduled for February 8, 2012.41
Plaintiffs allege that “Aurora Bank FSB could not be the true beneficiary” because it was
not the note holder and/or the lender.42
Sisk also sent a Statement of Breach or Non-Performance on behalf of Aurora Bank
FSB and Quality Loan Service Corporation, the “agent” of Aurora.43 Plaintiffs allege that

35

Id. at 10, ¶ 44.

36

Id. at ¶ 46.

37

Exhibit 8, Fourth Amended Complaint, Docket No. 82-8.

38

Fourth Amended Complaint at 11, ¶¶ 52-53, Docket No. 82.

39

Exhibit 9, Fourth Amended Complaint, Docket No. 82-9.

40

Id. at 1.

41

Id.

42

Fourth Amended Complaint at 11-12, ¶ 57, Docket No. 82.

43

Exhibit 10 at 1, Fourth Amended Complaint, Docket No. 82-10.

Order – Motions to Dismiss

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“[t]his Statement of Breach is void and invalid, because QLS was not the agent of the true
beneficiary, which must also be the Note Holder/Lender[.]”44 Quality Loan Service
Corporation also sent a Debt Validation Notice that stated that “[t]he debt/loan is currently
owed to: Aurora Bank FSB.”45 Plaintiffs allege that “Aurora Bank FSB was not then, or
ever, the true beneficiary or the Note Holder/Lender.”46
Plaintiffs allege that on June 28, 2012, Aurora Bank assigned its “purported” interest
in the Deed of Trust to Nationstar.47 Plaintiffs refer to this as the Second Assignment.
Plaintiffs allege that the Second Assignment was invalid and void because it was based on
the First Assignment which was invalid and void.48 Plaintiffs further allege that Nationstar
was not the note holder or the lender, but merely the servicer of the loan, and thus
Nationstar could not be a true beneficiary under the Deed of Trust.49 Plaintiffs also allege
that the Second Assignment was invalid “because a transfer of a deed of trust, without the
note, is a nullity.”50
On July 15, 2012, plaintiffs allege that Nationstar advised them that the servicing of
their loan was being transferred to Nationstar.51

The letter advised plaintiffs that

Nationstar was servicing the loan “on behalf of U.S. Bank, Trustee, LXS Series 2007-15N.”52

44

Fourth Amended Complaint at 12, ¶ 58, Docket No. 82.

45

Exhibit 10 at 2, ¶ 1, Fourth Amended Complaint, Docket No. 82-10.

46

Fourth Amended Complaint at 12, ¶ 59, Docket No. 82.

47

Id. at 13, ¶ 64.

48

Id. at ¶ 68.

49

Id. at ¶ 66.

50

Id. at 14, ¶ 70.

51

Id. at 9, ¶ 42.

52

Letter from Nationstar Mortgage to Gardners (July 15, 2012), Exhibit 5, Fourth
(continued...)

Order – Motions to Dismiss

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The letter further advised that “[t]he debt is owed to U.S. Bank, Trustee, LXS Series 200715N, but is being serviced by Nationstar.”53
Plaintiffs allege that on October 9, 2012, Quality Loan Service Corporation cancelled
the First Notice of Trustee’s Sale.54
On March 4, 2013, Nationstar sent plaintiffs a default letter, in which Nationstar
advised plaintiffs that it
intends to enforce the provisions of the Note and Security
Instrument. ...If you do not pay the full amount of the default,
we may accelerate the entire sum of both principal and interest
due and payable, and invoke any remedies provided for in the
Note and Security Instrument, including but not limited to the
foreclosure sale of the property.[55]
In the letter, Nationstar identified itself as the “Servicer” and indicated that it was acting
“on behalf of ‘U.S. Bank National Association as trustee for Lehman XS Trust Mortgage
Pass-Through Certificates, Series 2007-15N’, the Creditor to whom the debt is owed[.]”56
Plaintiffs allege that Nationstar had no right to declare a default, accelerate the balance of
the Note, and elect to foreclose, because under the Deed of Trust only the lender can
declare a default, accelerate the balance of the Note, and elect to foreclose.57 Plaintiffs
contend that Nationstar could not act as the lender’s agent.

52

(...continued)
Amended Complaint, Docket No. 82-5.
53

Id. Plaintiffs make much of the fact that U.S. Bank was not the “owner” of the debt,
but these allegations have little to do with whether plaintiffs have stated plausible claims.
54

Fourth Amended Complaint at 14, ¶ 73, Docket No. 82.

55

Exhibit 12, Fourth Amended Complaint, Docket No. 82-12.

56

Id.

57

Fourth Amended Complaint at 14-15, ¶ 76, Docket No. 82.

Order – Motions to Dismiss

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On April 19, 2013, Nationstar, as the purported beneficiary of the Deed of Trust,
substituted T.D. Service Company as the trustee.58 Plaintiffs refer to this as the Second
Substitution.59 Plaintiffs allege that the Second Substitution is void because Nationstar was
not a true beneficiary and did not have the authority from the true beneficiary to sign the
Second Substitution.60 Plaintiffs also allege that the Second Substitution is void “because
it depends on the void and invalid First and Second Assignments for its own validity.”61
On April 30, 2013, T.D. Service Company recorded a Notice of Trustee’s Sale.62 The
Notice listed Nationstar as the beneficiary of the Deed of Trust and T.D. Service Company
as the current trustee.63 The trustee’s sale was set for August 1, 2013.64 Plaintiffs allege that
the second Notice of Trustee’s Sale was void because Nationstar was not a true beneficiary
and could not declare a default.65
On July 20, 2013, Nationstar responded to a letter from plaintiffs.66 In the letter,
Nationstar advised that “[o]ur records indicate U.S. Bank as Trustee for LLXS Series 200715N is the current owner of the Note.”67 Nationstar further advised that it was “the

58

Exhibit 13, Fourth Amended Complaint, Docket No. 82-13.

59

Fourth Amended Complaint at 15, ¶ 78, Docket No. 82.

60

Id.

61

Id.

62

Exhibit 14, Fourth Amended Complaint, Docket No. 82-14.

63

Id. at ¶ 1.

64

Id.

65

Fourth Amended Complaint at 17, ¶¶ 90-91, Docket No. 82.

66

Exhibit 15, Fourth Amended Complaint, Docket No. 82-15.

67

Id. at 1.

Order – Motions to Dismiss

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servicer of the loan” and that “[s]ervicing matters include ... [f]oreclosure proceedings[.]”68
On September 18, 2013, U.S. Bank responded to an email from plaintiffs about their
loan.69 The email advised that plaintiffs’ “loan is owned by the Trust and US Bank serves
as Trustee for that Trust. However, as Trustee, we do not own your loan....”70 The email
further advised that Nationstar was the servicer and that “[w]hile the Servicer does not
own the loan either (again it is the Trust), they have all of the decision making authority
for any action deemed necessary on your loan.”71
On September 5, 2014, AMSL Legal Group, LLC, as “attorney in fact for Nationstar
Mortgage LLC” substituted Starlet J. Japp as the trustee.72 Plaintiffs refer to this as the
Third Substitution.73 Plaintiffs allege that the Third Substitution is void because “[i]t
depends for its validity on the void First and Second Assignments which resulted in the
assignment of the DOT to Nationstar.”74 Plaintiffs further allege that the Third Substitution
is void “because AMSL, LLC does not exist and therefore cannot be attorney-in-fact for
another[.]”75
On September 29, 2014, AMSL Legal Group, LLC, again acting “as attorney in fact
for Nationstar Mortgage LLC”, appointed Clayton A. Goff, as trustee.76 Plaintiffs refer to

68

Id.

69

Exhibit 16, Fourth Amended Complaint, Docket No. 82-16.

70

Id. at 1.

71

Id. at 2.

72

Exhibit 17, Fourth Amended Complaint, Docket No. 82-17.

73

Fourth Amended Complaint at 19, ¶ 104, Docket No. 82.

74

Id. at ¶ 105.

75

Id.

76

Exhibit 18, Fourth Amended Complaint, Docket No. 82-18.

Order – Motions to Dismiss

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this as the Fourth Substitution.77 Plaintiffs allege that the Fourth Substitution was void
because “[i]t depends for its validity on the void First and Second Assignments which
resulted in the assignment of the DOT to Nationstar.”78 Plaintiffs further allege that the
Fourth Substitution was void “because AMSL, LLC does not exist and therefore cannot be
attorney-in-fact for anyone, and cannot sign legal documents, which are recorded,
appointing a trustee.”79
On October 26, 2014, plaintiffs sent a letter to Goff “demand[ing] that [he]
immediately record a document voiding, releasing and nullifying” the Fourth
Substitution.80

Plaintiffs allege that “[t]o date, Goff has not recorded such a

release/resignation.”81
Plaintiffs commenced this action in state court on July 30, 2013. On August 12, 2013,
it was removed to this court. Defendants moved to dismiss plaintiffs’ complaint and on
September 26, 2013, the court granted the motion to dismiss after plaintiffs failed to
respond to the motion.82 Judgment was entered dismissing plaintiffs’ complaint.83 This
judgment was subsequently vacated and plaintiffs were given leave to file an amended
complaint.84 Plaintiffs filed their first amended complaint on September 9, 2013.85 Pursuant

77

Fourth Amended Complaint at 20, ¶ 109, Docket No. 82.

78

Id. at ¶ 111.

79

Id.

80

Exhibit 19, Fourth Amended Complaint, Docket No. 82-19.

81

Fourth Amended Complaint at 21, ¶ 113, Docket No. 82.

82

Docket No. 14.

83

Docket No. 15.

84

Docket No. 27.

85

Docket No. 30.

Order – Motions to Dismiss

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to stipulations, plaintiffs filed a second and third amended complaint.86 On March 20, 2015,
pursuant to a stipulation, this case was consolidated with Case No. 2:13-cv-2478.87 On
May 11, 2015, plaintiffs filed their Fourth Amended Complaint in this consolidated action.88
In their Fourth Amended Complaint, plaintiffs assert eight counts. Count One is a
declaratory judgment claim asserted against all defendants. Specifically, plaintiffs seek a
declaratory judgment: (1) “that pursuant to the Note and Deed of Trust, only the Note
Holder/Lender and true beneficiary may pursue foreclosure, and that the Defendants must
therefore prove their status as Note Holder/Lender and true beneficiary, before they may
be allowed to proceed to Trustee’s Sale[;]”89 (2) “that the First and Second Assignments, the
First, Second, Third and Fourth Substitutions and the First and Second [Notices of Trustee’s
Sales] are void and unenforceable, and that these recorded documents must be cancelled
and title cleared by recordings at the Maricopa County Recorder’s Office[;]”90 (3) “that no
party may notice or re-notice a trustee’s sale without proving status as Note Holder/Lender
and true beneficiary under the Note and Deed of Trust, and otherwise complying with the
contracts, and applicable law[;]”91 (4) “that the Note and DOT require that only the Note
Holder/Lender may enforce the terms of the Note and accelerate the balance, that only the
Note Holder/Lender is protected by the Deed of Trust as Security, and only the Note

86

Docket Nos. 38 and 44.

87

Docket No. 71. Case No. 2:13-cv-2478 was brought by plaintiffs against Nationstar
and U.S. Bank, and the complaint in that case originally asserted one claim alleging that
plaintiff’s mortgage loan was never transferred to the Trust.
88

Docket No. 82.

89

Fourth Amended Complaint at 29-30, ¶ 142, Docket No. 82.

90

Id. at 32, ¶ 161.

91

Id. at ¶ 162.

Order – Motions to Dismiss

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Holder/Lender may initiate foreclosure of the Deed of Trust[;]”92 (5) that Nationstar and its
alleged attorney-in-fact AMSL, LLC or any other agent, cannot sign or record any further
substitutions of trustee or assignments of the DOT, as Nationstar is not the Lender, Note
Holder or true beneficiary of the DOT[;]”93 and (6) that “no Defendant is the Note
Holder/Lender and true beneficiary, that the DOT has been rendered a nullity, and that
until an entity can prove its status as Note Holder/Lender, no entity may seek to enforce
the Note[.]”94
Count Two is a breach of contract claim asserted against all defendants in which
plaintiffs allege that in pursuing the trustee’s sales in violation of the deed of trust statutes,
the Deed of Trust, the Note, and other applicable law, defendants have breached the Deed
of Trust and the Note.95
Count Three is a breach of the duty of good faith and fair dealing claim against all
defendants in which plaintiffs allege that defendants breached their duty of good faith and
fair dealing by:

(1) hiding from plaintiffs the identify of the true beneficiary and

misrepresenting that Aurora Bank and then Nationstar were true beneficiaries;96 (2) hiding
the identity of the true Note Holder/Lender by misrepresenting the owner of the loan as
U.S. Bank;97 (3) allowing someone other than the note holder/lender to write to plaintiffs
declaring a default;98 (4) initiating foreclosure without requiring that the lender notify the

92

Id. at ¶ 163.

93

Id. at ¶ 164.

94

Id. at 33, ¶ 166.

95

Id. at 34, ¶¶ 172-173.

96

Id. at 35, ¶ 184(a).

97

Id. at 36, ¶ 184(b).

98

Id. at ¶ 184(c).

Order – Motions to Dismiss

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trustee in writing that the Note was in default and of an election to foreclose;99 (5) seeking
to proceed to a trustee’s sale on clearly invalid documents;100 (6) “knowingly and
purposefully separating the Note from the DOT thereby rendering the Note
unsecured[;]”101 (7) “falsely listing the servicer of the Loan as Aurora Commercial Corp.,
on the MERS database;”102 (8) “having a non-existent entity sign the Third Substitution on
September 5, 2104, but not recording it until after Plaintiffs’ First Amended Complaint was
filed and never disclosing same to Plaintiffs[;]”103 (9) “having a non-existent entity sign the
Fourth Substitution on September 9, 2014, and recording it on October 2, 2014 without
disclosing same to Plaintiffs in spite of this pending litigation[;]”104 and (10) “clouding
Plaintiffs’ title to such an extent that Plaintiffs will be hampered in their ability to alienate
their property, and resulting in a decrease in its market value.”105
In Count Four, plaintiffs assert quiet title and slander of title claims under A.R.S.
§ 33-420 against all defendants. These claims are based on allegations that defendants have
recorded documents that “are groundless, contain material misstatements, and [make] false
claims against” plaintiffs’ property.106
In Count Five, plaintiffs assert negligence per se claims against Nationstar, T.D.
Service Company and the AMSL defendants. Plaintiffs allege that these defendants

99

Id. at ¶ 184(d).

100

Id. at ¶ 184(e).

101

Id. at ¶ 184(f).

102

Id. at ¶ 184(g).

103

Id. at ¶ 184(h).

104

Id. at ¶ 184(i).

105

Id. at 37, ¶ 184(j).

106

Id. at 40-41, ¶ 210.

Order – Motions to Dismiss

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violated A.R.S. § 39-161,107 that Nationstar, T.D. Service Company, and AMSL Legal Group
LLP violated A.R.S. § 33-420,108 that Japp and Goff violated A.R.S. § 33-420(C),109 and that
all of these defendants violated A.R.S. §§ 33-503, 41-311, 41-312, and 41-313.110
In Count Six, plaintiffs assert a Fair Debt Collection Practices Act claim against T.D.
Service Company, Japp, and Goff. Plaintiffs allege that these defendants used false,
deceptive, and misleading representations or means in connection with collection of a
debt.111
In Count Seven, plaintiffs assert a cancellation of trustee’s sale claim against
Nationstar, T.D. Service Company, Japp, and Goff. Plaintiffs allege that these defendants
had an obligation to cancel the second Notice of Trustee’s Sale because they knew their
substitutions as trustee were not valid.112
In Count Eight, plaintiffs assert an intentional interference with contractual relations
claim against all defendants. Plaintiffs allege that defendants have interfered with
plaintiffs’ contracts with their lender.113
Pursuant to Rules 8 and 12(b)(6), Federal Rules of Civil Procedure, defendants now
move to dismiss all of plaintiffs’ claims.

107

Id. at 42, ¶¶ 219 and 224.

108

Id. at 42-43, ¶ 225.

109

Id. at 43, ¶¶ 227 and 229.

110

Id. at ¶ 231.

111

Id. at 45, ¶ 243.

112

Id. at 48, ¶ 265.

113

Id. at 51, ¶ 292.

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Discussion
“Rule 12(b)(6) is read in conjunction with Rule 8(a)[.]” Zixiang Li v. Kerry, 710 F.3d
995, 998 (9th Cir. 2013). “Rule 8 requires a complaint to include ‘a short and plain
statement of the claim showing that the pleader is entitled to relief.’” Eclectic Properties
East, LLC v. Marcus & Millichap Co., 751 F.3d 990, 995 (9th Cir. 2014) (quoting Fed. R. Civ.
P. 8(a)). “To meet this requirement, the Supreme Court has held that an ‘entitlement to
relief’ requires ‘more than labels and conclusions.... Factual allegations must be enough to
raise a right to relief above a speculative level.’” Id. (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007)). “Although a well-pleaded complaint may proceed
even if it strikes a savvy judge that actual proof is improbable, plaintiffs must include
sufficient factual enhancement’ to cross the line between possibility and plausibility.” Id.
(internal citations and quotation marks omitted). “This standard represents a balance
between Rule 8's roots in relatively liberal notice pleading and the need to prevent ‘a
plaintiff with a largely groundless claim’ from tak[ing] up the time of a number of other
people, with the right to do so representing an in terrorem increment of settlement value.’”
Id. (quoting Twombly, 550 U.S. at 557–58). “Establishing the plausibility of a complaint’s
allegations is a two-step process that is ‘context-specific’ and ‘requires the reviewing court
to draw on its judicial experience and common sense.’” Id. at 995-96 (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 679 (2009)). “First, a court should ‘identif[y] pleadings that, because
they are no more than conclusions, are not entitled to the assumption of truth.’” Id.
(quoting Iqbal, 556 U.S. at 679). “Then, a court should ‘assume the[] veracity’ of ‘well
pleaded factual allegations’ and ‘determine whether they plausibly give rise to an
entitlement to relief.’” Id. at 996 (quoting Iqbal, 556 U.S. at 679). The court is “not,
however, required to accept as true conclusory allegations that are contradicted by
documents referred to in the complaint, and [the court does] not necessarily assume the
truth of legal conclusions merely because they are cast in the form of factual allegations.”
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Paulsen v. CNF Inc., 559 F.3d 1061, 1071 (9th Cir. 2009). “‘Where a complaint pleads facts
that are merely consistent with a defendant’s liability, it stops short of the line between
possibility and plausibility of entitlement to relief.’” Eclectic Properties, 751 F.3d at 996
(quoting Iqbal, 556 U.S. at 678).
In reaching the following conclusions on issues presented by the motions to dismiss,
the court has considered the parties’ arguments and authorities and has applied the
foregoing principles for evaluating the adequacy of plaintiffs’ Fourth Amended Complaint.
Allegations that Defendants are not
the Lender or Note Holder
Plaintiffs have alleged that the person who signed the First Assignment was not
authorized to do so. Plaintiffs have pled a plausible claim that the First Assignment was
invalid. It appears to the court that plaintiffs are challenging more than the MERS system.
They are challenging the authority of the people who were actually signing documents for
MERS. The court concludes for purposes of the motions to dismiss that plaintiffs have
stated a plausible claim that defendants lacked authority to conduct the trustee’s sale
(presently noticed but held in abeyance) because the First Assignment was not valid.
Allegations Based on Plaintiffs’ Challenges
to the Assignments of the Deed of Trust
Defendants contend that all of plaintiffs’ claims, directly or indirectly, rely on
plaintiffs’ allegations that the Deed of Trust was not properly assigned to MERS as
beneficiary in the first instance, and thus any subsequent assignments (to Aurora and to
Nationstar) were invalid. Plaintiffs contend that MERS could have transferred its nominee
status under the Deed of Trust, but that did not mean it could transfer any beneficiary
rights under the Deed of Trust.
Plaintiffs have stated a plausible claim that the person who signed the First
Assignment was not authorized to do so on behalf of MERS.

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Securitization and Split Note / Deed of Trust Arguments
Defendants believe that plaintiffs are alleging that because their Note was sold as
part of a securitization mortgage trust shortly after the Deed of Trust was recorded, they
somehow have the right to stop the foreclosure sale. Plaintiffs disagree. Plaintiffs contend
that they have alleged that the securitization of their loan means that the Certificateholders
are the lender and note holder. Based upon that contention, plaintiffs assert that only the
Certificateholders can declare default on the Note, accelerate it, and tell the trustee to
initiate foreclosure.
The respective roles of the various entities involved in the multiple transactions
affecting plaintiffs’ Deed of Trust are not entirely clear. Some relevant documents evidence
at least uncertainty as to the parties’ roles. It is plausible that MERS had the authority to
transfer the lender’s beneficial interest in the Deed of Trust. But the issue remains: did the
person who signed the First Assignment have the authority to act on behalf of MERS.
Count One – Declaratory Action
Plaintiffs’ Count One seeking declaratory relief states a plausible cause of action.
The court will exercise its discretion to entertain plaintiffs’ Count One. As suggested by
the foregoing, a primary issue which must be addressed by the parties and the court is the
validity of the First Assignment. The validity of the First Assignment will depend upon
two factors: (1) who – under the Deed of Trust, the pooled Trust Agreement, and other
relevant documents – had the authority to assign or otherwise change beneficiary status
under the Deed of Trust, and (2) was that authority validly exercised? If the First
Assignment was valid, then it will become necessary to evaluate proceedings that took
place following the First Assignment. However, if the First Assignment were invalid, then
much of what followed will also fail.

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Count Two – Breach of Contract
Plaintiffs have plausibly alleged a breach of the Deed of Trust based upon their
contention that the First Assignment was invalid – which, if established, would render the
Second Assignment invalid.
Count Three – Breach of Duty
of Good Faith and Fair Dealing
Because plaintiffs have stated a plausible breach of contract claim (Count Two), then
it follows that their breach of implied covenant claims are also plausible.
Count Four – Quiet Title and Slander of Title
Plaintiffs contend, based upon A.R.S. § 33-420.A, that one or more of the defendants
caused a forged, groundless, or false statement of claim as to the real property in question
to be recorded. Defendants argue that none of the recordings made by them contain false
statements or misrepresentations or, in the alternative, that any misstatements were not
material to the plaintiffs.
If, as plaintiffs contend, the First and Second Assignments of the Deed of Trust are
invalid, then plaintiffs’ claim that a purported lien holder has caused the recording of a
knowingly groundless or false claim against the real estate in question is plausible. Because
of the significant rights that go with beneficiary status, the recording of a groundless or
false assignment of a deed of trust is material to the plaintiffs, for beneficiary status carries
with it the right to accelerate the loan, to declare a default, and to proceed with foreclosure.
Count Five – Negligence per se Claims
Plaintiffs have pled a plausible negligence per se claim based upon A.R.S. § 39-161
because plaintiffs allege that defendants recorded the First Assignment that is alleged to
have been signed by someone without authority to do so. Plaintiffs have also stated a
plausible negligence per se claim based upon A.R.S. § 33-420 and the recording of
documents containing material false statements as discussed above. At this stage of

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proceedings, the court is unpersuaded that plaintiffs have pleaded this claim with
insufficient particularity.
Count Six – Fair Debt Collection Practices Act Claim
Count Six of plaintiffs’ Fourth Amended Complaint alleges a Fair Debt Collection
Practices Act Claim against T.D. Service Company, Japp, and Goff. Each of these
defendants were substituted as trustees under the Deed of Trust. “‘[A] non-judicial
foreclosure proceeding is not the collection of a “debt” for purposes of the FDCPA.’” Zinni
v. Jackson White, P.C., No. CV 11–02143–PHX–FJM, 2012 WL 869008, at *2 (D. Ariz.
March 14, 2012) (quoting Mansour v. Cal-Western Reconveyance Corp., 618 F. Supp. 2d
1178, 1182 (D. Ariz. 2009)). “Moreover, ‘mortgagees and their assignees, servicing
companies, and trustee fiduciaries are not included in the definition of “debt collector.”’”
Id. (quoting Mansour, 618 F. Supp. 2d at 1182). Because trustees in non-judicial foreclosure
proceedings are not debt collectors, plaintiffs’ Count Six is dismissed.
Count Seven – Cancellation of Trustee’s Sale Claim
This claim is asserted against Nationstar, T.D. Service Company, Japp, and Goff.
Plaintiffs argue that Japp and Goff were obligated to cancel the trustee’s sale set by T.D.
Service Company.
A.R.S. § 33-813 requires that a trustee cancel a pending sale if a trustor has reinstated
the deed of trust through payment of amounts due. Here, there has been no such
reinstatement. Plaintiffs’ Count Seven does not state a plausible claim. Indeed, it appears
to the court that plaintiffs’ Count Seven merely states a potential remedy that might be
imposed if plaintiffs prevail on their declaratory action (Count One).
Plaintiffs’ Count Seven is dismissed.

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Count Eight – Intentional Interference with Contractual Relations
The elements of a cause of action for intentional interference
with contract are a contract between the plaintiff and a third
party; knowledge of the defendant that the contract exists;
intentional interference by the defendant which causes the
third party to breach the contract; a showing that the defendant acted improperly; and a showing that damage resulted to
the plaintiff.
Barrow v. Arizona Bd. of Regents, 761 P.2d 145, 152 (Ariz. Ct. App. 1988). Plaintiffs allege
that “[e]ach defendant has intentionally interfered with the contracts between the Gardners
and GreenPoint, thereby causing one or more breaches of those contracts.”114
Plaintiffs contend that they have adequately alleged that defendants interfered with
their contract with the true lender. Plaintiffs contend that the Certificateholders, the note
holder, and the lender on the loan are the only ones who can be true beneficiaries of the
Deed of Trust. Plaintiffs contend that defendants interfered with plaintiffs’ contract with
the Certificateholders. Defendants argue that plaintiffs are not parties to the pooled Trust
Agreement and have no standing to assert rights thereunder.
As stated above, the court has concluded that plaintiffs’ Count One for declaratory
relief states a plausible cause of action. It is the court’s perception that in the course of
ruling on Count One, the court will necessarily confront and decide who is and who is not
a beneficiary under the Deed of Trust for purposes of enforcing the Deed of Trust if the
Note is not paid. Plaintiffs’ Count Eight is plausible if, as plaintiffs contend, only the
lender/note holder can be the beneficiary. The court declines to address that proposition
at this time.
Statute of Limitations
Defendants contend that all of plaintiffs’ claims rely on a theory that MERS could
not have been a true beneficiary and that all assignments and substitutions flowing from

114

Fourth Amended Complaint at 50, ¶ 287, Docket No. 82.

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its appointment were invalid. Defendants also argue that all claims that depend upon a
purported defect in acknowledgment of a recorded document are time-barred.
The court declines to take up the parties’ statute of limitations arguments until
plaintiffs’ claims (especially those in connection with Count One for declaratory relief) are
better defined.
Claims against T.D. Service Company, Japp, and Goff
T.D. Service Company, Japp, and Goff argue that all claims against them should be
dismissed pursuant to A.R.S. § 33-807(E). That statute provides in pertinent part that a
trustee should not be joined in a legal action except for breach of the trustee’s obligations
under the statute or the deed of trust in question.
Plaintiffs contend that there were multiple breaches of obligation by the trustees in
question, including their knowledge that Nationstar was not the true beneficiary for
purposes of initiating foreclosure proceedings.
Taking the allegations of plaintiffs’ complaint as true, plaintiffs have stated
plausible claims against T.D. Service Company, Japp, and Goff.
Plaintiffs’ Standing
Nationstar argues that plaintiffs have no standing to challenge the validity of the
Third Substitution, which plaintiffs contend was void because AMSL Legal Group LLC
does not exist. This quarrel has to do with use of the company named AMSL Legal Group
LLC, as opposed to AMSL Legal Group LLP.
Plaintiffs have standing to inquire into the validity of the various documents
underlying the Notice of Sale recorded for purposes of enforcing plaintiffs’ Deed of Trust.
Declaratory Relief
Defendants argue that plaintiffs’ request for declaratory injunctive relief should be
denied because they are remedies for underlying causes of action and not independent
causes of action.
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Plaintiffs have stated a plausible cause of action for declaratory relief, and the
remedies for which they pray remain viable.
Allegations Not Contained
in Proposed Fourth Amended Complaint
The AMSL defendants argue that plaintiffs have improperly included allegations
in their Fourth Amended Complaint that were not contained in the proposed Fourth
Amended Complaint.
The court has already rejected that argument when it ruled upon the Nationstar
defendants’ motion to strike.115
Conclusion
The motions to dismiss116 are granted in part and denied in part. Count Six as to
T.D. Service Company of Arizona, Japp, and Goff is dismissed. Count Seven as to
Nationstar Mortgage, T.D. Service Company of Arizona, Japp, and Goff is dismissed.
Count Six and Seven are dismissed with prejudice as plaintiffs have had multiple
opportunities to plead the claims asserted in these counts. The motions to dismiss are
denied as to all other counts and contentions.
The court reminds the parties of its conviction that plaintiffs owe a debt that is
secured by a Deed of Trust. Laying aside the technicalities of the voluminous records over
which the parties disagree, the money which the plaintiffs owe (or the proceeds of the
security for the Deed of Trust) ultimately belongs to the LEHMAN XS TRUST, Series 200715N, Certificateholders, for whom U.S. Bank National Association acts as the trustee. There
is no doubt but that someone on behalf of the Certificateholders and the trustee for the
Certificateholders is entitled to collect payments, declare a default if payments are not
made, and, if the default is not cured, demand foreclosure. The parties would save

115

Docket No. 102.

116

Docket Nos. 87 and 89.

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themselves a great deal of effort and money if they were to reach an agreement identifying
the entity presently entitled to demand payment of plaintiffs’ debt, the entity entitled to
declare a default if payment is not made, and the trustee entitled to foreclose if full
payment of plaintiffs’ debt is not made.
The court urges the parties to seriously consider engaging a private mediator or
requesting the designation of a United States magistrate judge to assist them with a
settlement conference.
DATED at Anchorage, Alaska, this 7th day of December, 2015.
/s/ H. Russel Holland
United States District Judge

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