Salcido et al v. JPMorgan Chase Bank NA et al

Filing 35

ORDER, Defendants' Motions to Dismiss 16 , 21 are granted; Defendants' request for attorneys fees 16 is denied; Plaintiffs' Complaint is dismissed with prejudice; the Clerk is directed to terminate this action. Signed by Judge David G Campbell on 3/17/15. (REW)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Gabriel Salcido, et al., Plaintiffs, 10 11 ORDER v. 12 No. CV-14-02560-PHX-DGC JPMorgan Chase Bank NA, et al., 13 Defendants. 14 15 Defendants Seterus, Inc. and Federal National Mortgage Association have filed a 16 motion of dismiss (Doc. 16), as have Defendants JPMorgan Chase Bank, N.A. and Chase 17 Home Financial LLC (Doc. 21). Defendants argue that Plaintiffs’ claims are barred by 18 the statute of limitations. The motions are fully briefed, and will be granted.1 19 I. Background. 20 Plaintiffs’ allegations are as follows. In 2005, Plaintiffs Gabriel Salcido and 21 Ingrid Fisketjon, a married couple, took out a loan secured by a deed of trust for their 22 house. Doc. 1-1, ¶ 10. This loan was subject to the Home Affordable Modification 23 Program (“HAMP”), a federal program designed to facilitate the modification of 24 mortgages. Id., ¶¶ 11-12. In 2009, Plaintiffs had financial difficulties and sought to 25 modify the terms of their loan with Defendants JPMorgan Chase Bank and Chase Home 26 Finance, LLC (collectively, “Chase”). Id., ¶ 11. On July 1, 2009, Chase informed 27 1 28 The requests for oral argument are denied because the issues have been fully briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b); Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998). 1 Plaintiffs that it would not modify their loan under HAMP because Plaintiffs had failed to 2 make several trial-period payments of $900 a month. Id., ¶ 17. Plaintiffs claim that they 3 were ignorant of any requirement to make these payments. Id. Plaintiffs also claim that 4 they were in fact eligible for a loan modification under HAMP. Id., ¶ 57. 5 Chase then offered an “internal” or “in-house” modification of Plaintiffs’ loan. 6 Id., ¶ 19. Plaintiffs agreed and paid $1,200 a month to Chase for at least fifteen months. 7 Id. On August 10, 2010, Chase notified Plaintiffs that it had transferred the servicing 8 rights on their loan to Defendant Seterus, Inc. Id., ¶ 20. After reviewing Plaintiffs’ debt, 9 Seterus informed Plaintiffs that it lacked documentation of Plaintiffs’ loan modification 10 with Chase and of Plaintiffs’ $1,200 a month payments to Chase. Id., ¶ 22. Plaintiffs 11 therefore had to apply for another loan modification with Seterus. Id. 12 Seterus then “drag[ged] out” this application process by requiring Plaintiffs to fill 13 out detailed forms and keeping Plaintiffs on hold for hours, while Seterus “continued to 14 rack up late fees, default interest, costs and other fees[.]” Id., ¶¶ 23-25. Finally, on 15 February 10, 2011, Seterus orally agreed to modify Plaintiffs’ loan if Plaintiffs paid 16 $12,000 upfront and $2,300 a month afterwards. Id., ¶ 26. Plaintiffs requested that the 17 $12,000 be held in escrow, Seterus refused, and the deal fell through. Id., ¶ 27. 18 Seterus then decided to hold a trustee’s sale of the property. Id., ¶ 31. Plaintiffs 19 tried to postpone this sale and enlisted the National Association of Consumer Advocates 20 to help them. Id., ¶¶ 28, 31. In response, Seterus gave inconsistent and false information. 21 Id., ¶¶ 31-34. The sale ultimately went through on March 3, 2011. Id., ¶¶ 31-34. On 22 March 7, 2011, Plaintiffs learned that Defendant Federal National Mortgage Association 23 (“FNMA”) claimed to be the owner of Plaintiffs’ loan. Id., ¶ 35. While receiving 24 eviction notices, Plaintiffs attempted to modify their loan with FNMA. Id., ¶¶ 36-42. In 25 May of 2011, FNMA orally requested Plaintiffs to pay $10,000 to Seterus, Plaintiffs 26 asked that this be put in writing, and FNMA refused. Id., ¶ 42. 27 On July 1, 2011, Plaintiffs filed a Chapter 13 bankruptcy petition, which stalled 28 the eviction efforts. Id., ¶ 43. The bankruptcy petition was voluntarily dismissed on -2- 1 June 7, 2012. 2 “administrative remedies.” 3 Seterus on September 18, 2013. Id., ¶ 44. They also filed complaints with their United 4 States senators, the Arizona Attorney General’s Office, the United States Office of 5 Homeownership Preservation, the HAMP Solutions Center, and the Consumer Financial 6 Protection Bureau. 7 Plaintiffs filed this lawsuit on October 8, 2014. Id. Beginning in 2011, Plaintiffs also pursued what they term Id., ¶ 39. Id., ¶¶ 39-47. They sought another loan modification with When all of these complaints came to naught, 8 Plaintiffs assert five claims: (1) negligent performance of an undertaking against 9 all Defendants; (2) unjust enrichment against the Chase Defendants and FNMA; 10 (3) conversion against the Chase Defendants and FNMA; (4) breach of the covenant of 11 good faith and fair dealing against all Defendants; and (5) wrongful foreclosure against 12 FNMA. 13 II. Legal Standards. 14 A. 15 Under Arizona law, “[t]he purpose of the statute of limitations is to ‘protect 16 defendants and courts from stale claims where plaintiffs have slept on their rights.’” Doe 17 v. Roe, 955 P.2d 951, 960 (Ariz. 1998) (quoting Gust, Rosenfeld & Henderson v. 18 Prudential Ins. Co. of Am., 898 P.2d 964, 968 (Ariz. 1995)). “As a general matter, a 19 cause of action accrues, and the statute of limitations commences, when one party is able 20 to sue another.” Gust, 898 P.2d at 966 (citing Sato v. Van Denburgh, 599 P.2d 181, 183 21 (Ariz. 1979)). Thus, “the period of limitations begins to run when the act upon which 22 legal action is based took place, even though the plaintiff may be unaware of the facts 23 underlying his or her claim.” Id. To mitigate the harshness that the traditional rule 24 sometimes imposed, courts have developed the “discovery rule” exception. Id. Under 25 the discovery rule, “a cause of action does not accrue until the plaintiff knows or with 26 reasonable diligence should know the facts underlying the cause.” Doe, 955 P.2d at 960. 27 “The rationale behind the discovery rule is that it is unjust to deprive a plaintiff of a cause 28 of action before the plaintiff has a reasonable basis for believing that a claim exists.” Arizona’s Statute of Limitations. -3- 1 Gust, 898 P.2d at 967. “The defense of statute of limitations is never favored by the 2 courts, and if there is doubt as to which of two limitations periods should apply, courts 3 generally apply the longer.” Id. at 968. 4 B. 5 “[T]he statute of limitations defense . . . may be raised by a motion to dismiss . . . . 6 [i]f the running of the statute is apparent on the face of the complaint[.]” Jablon v. Dean 7 Witter & Co., 614 F.2d 677, 682 (9th Cir. 1980). The complaint cannot be dismissed, 8 however, “‘unless it appears beyond doubt that the plaintiff can prove no set of facts that 9 would establish the timeliness of the claim.’” Hernandez v. City of El Monte, 138 F.3d 10 393, 402 (9th Cir. 1998) (quoting Supermail Cargo, Inc. v. United States, 68 F.3d 1204, 11 1206 (9th Cir. 1995)); see Cervantes v. City of San Diego, 5 F.3d 1273, 1275 (9th Cir. 12 1993). Indeed, “[d]ismissal on statute of limitations grounds can be granted pursuant to 13 Fed. R. Civ. P. 12(b)(6) ‘only if the assertions of the complaint, read with the required 14 liberality, would not permit the plaintiff to prove that the statute was tolled.’” TwoRivers 15 v. Lewis, 174 F.3d 987, 991 (9th Cir. 1999) (quoting Vaughan v. Grijalva, 927 F.2d 476, 16 478 (9th Cir. 1991)); see Pisciotta v. Teledyne Indus., Inc., 91 F.3d 1326, 1331 (9th Cir. 17 1996). “‘Because the applicability of the equitable tolling doctrine often depends on 18 matters outside the pleadings, it is not generally amenable to resolution on a Rule 19 12(b)(6) motion.’” 20 1206). 21 III. Rule 12(b)(6). Hernandez, 138 F.3d at 402 (quoting Supermail Cargo, 68 F.3d at Analysis. 22 A. 23 Under Arizona law, “‘[o]ne who undertakes, gratuitously or for consideration, to 24 render services to another which he should recognize as necessary for the protection of a 25 third person or his things, is subject to liability to the third person for physical harm 26 resulting from his failure to exercise reasonable care to protect his undertaking, if . . . his 27 failure to exercise reasonable care increases the risk of such harm[.]’” Diggs v. Arizona 28 Cardiologists, Ltd., 8 P.3d 386, 390 (Ariz. Ct. App. 2000) (quoting Restatement (Second) Negligent Performance of an Undertaking. -4- 1 of Torts § 324A). The statute of limitations for this claim is two years. A.R.S. § 12- 2 542(3); see McManus v. Am. Exp. Tax & Bus. Servs., Inc., 67 F. Supp. 2d 1083, 1086 (D. 3 Ariz. 1999). 4 Against Defendants JPMorgan Chase Bank, Chase Home Financial, and FNMA,2 5 Plaintiffs allege the following facts in support of this claim: (1) Defendants improperly 6 evaluated Plaintiffs’ eligibility for a loan modification under HAMP; (2) Defendants 7 failed to inform Plaintiffs that they were required to make several “trial-period payments” 8 for the loan modification under HAMP; (3) Defendants failed to document the “in-house” 9 loan modification provided for Plaintiffs; and (4) Defendants failed to document receipt 10 of the $1,200 monthly payments made by Plaintiffs. Doc. 1-1, ¶¶ 54-65. 11 Plaintiffs became aware of the first two facts on July 1, 2009, when Chase 12 informed Plaintiffs that they were not eligible for a loan modification under HAMP due 13 to their failure to make trial-period payments. Id., ¶ 17. Plaintiffs became aware of the 14 third and fourth facts when Seterus told Plaintiffs that it did not have documentation of 15 their loan modification with Chase and of their $1,200 monthly payments. Id., ¶ 22. 16 Although Plaintiffs do not allege a date for this event, it certainly occurred before 17 February 10, 2011, when Seterus offered a different loan modification. Id., ¶ 26. These 18 dates are more than two years before the date of Plaintiffs’ complaint, October 8, 2014. 19 Plaintiffs’ negligence claim against these Defendants is therefore barred by the statute of 20 limitations. 21 Against Defendants Seterus and FNMA, Plaintiffs’ allege the following facts in 22 support of their claim: (1) Seterus did not timely process Plaintiffs’ application for a loan 23 modification; (2) Seterus improperly demanded a large upfront payment for a loan 24 modification; and (3) Seterus failed to honor Plaintiffs’ previous loan modification with 25 and $1,200 monthly payments to Chase. Id., ¶¶ 68-70. Plaintiffs knew all of these facts 26 27 28 2 Plaintiffs allege that FNMA was the true owner of Plaintiffs’ loan and that the Chase Defendants and Seterus were acting as FNMA’s agents when they serviced Plaintiffs’ loan. Doc. 1-1, ¶¶ 12, 55, 66. Plaintiffs claim that FNMA is vicariously liable for the actions of these Defendants. Id., ¶¶ 55, 66. -5- 1 by February 10, 2011. By this time, Plaintiffs had completed the application process for 2 a loan modification, Seterus had demanded a large upfront payment, and Seterus had told 3 Plaintiffs it would not honor their loan modification with and $1,200 a month payments 4 to Chase. Id., ¶¶ 22-26. Because Plaintiffs knew of these facts more than two years 5 before they filed their complaint, their negligence claim against Seterus and FNMA is 6 barred by the statute of limitations. 7 B. 8 Under Arizona law, “[u]njust enrichment occurs when one party has and retains 9 money or benefits that in justice and equity belong to another.” Trustmark Ins. Co. v. 10 Bank One, Ariz., NA, 48 P.3d 485, 491 (Ariz. Ct. App. 2002). The statute of limitations 11 for this claim is three years. A.R.S. § 12-543(1); MCK Exports, LLC v. Wal-Mart Stores, 12 Inc., No. CV 13-156-TUC-DCB, 2014 WL 3700877, at *6 (D. Ariz. July 25, 2014). Unjust Enrichment. 13 In support of their unjust enrichment claim against Defendants JPMorgan Chase 14 Bank, Chase Home Financial, and FNMA, Plaintiffs allege that Defendants received at 15 least ten monthly $1,200 payments from Plaintiffs and did not apply those payments to 16 Plaintiffs’ loan. 17 February 10, 2011, by which time Seterus had told Plaintiffs that it lacked documentation 18 of Plaintiffs’ loan modification and their $1,200 monthly payments to Chase. Id., ¶¶ 22, 19 26. Because this date is more than three years before the date of Plaintiffs’ complaint, 20 their unjust enrichment claim is barred by the statute of limitations. Doc. 1-1, ¶¶ 78-81. Plaintiffs became aware of these facts by 21 C. 22 Under Arizona law, “[c]onversion is defined as ‘an act of wrongful dominion or 23 control over personal property in denial of or inconsistent with the rights of another.’” 24 Case Corp. v. Gehrke, 91 P.3d 362, 365 (Ariz. Ct. App. 2004) (citation omitted). The 25 statute of limitations for this claim is two years. 26 Peterson, 121 P.3d 1286, 1290 (Ariz. Ct. App. 2005). In support of this claim against 27 Defendants JPMorgan Chase Bank, Chase Home Financial, and FNMA, Plaintiffs allege 28 the same facts as for its unjust enrichment claim, namely, that Defendants accepted over Conversion. -6- A.R.S. § 12-542(5); Tissicino v. 1 ten $1,200 monthly payments without applying the payments towards Plaintiffs’ loan. As 2 noted, Plaintiffs became aware of this by February 10, 2011. Plaintiffs’ conversion claim 3 is barred by the statute of limitations. 4 D. 5 Under Arizona law, a party may bring a tort action for breach of the covenant of 6 good faith and fair dealing implied in every contract. Wells Fargo Bank v. Arizona 7 Laborers, Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 38 P.3d 12, 8 28-29 (Ariz. 2002). The statute of limitations for this claim is two years. A.R.S. § 12- 9 542(3); Frew v. Coit Servs., Inc., No. CV-07-1372-PHX-DGC, 2007 WL 2903026, at *2 10 11 Breach of Covenant of Good Faith and Fair Dealing. (D. Ariz. Oct. 2, 2007). Plaintiffs bring this claim against all Defendants. They base the claim on 12 Defendants’ failure to honor Plaintiffs’ loan-modification agreement with Chase and 13 $1,200 payments to Chase. Doc. 1-1, ¶¶ 96-102. As with the other claims, Plaintiffs 14 knew of these facts by February 10, 2011. Id., ¶¶ 22, 26. This claim is also barred by the 15 statute of limitations. 16 E. 17 Plaintiffs do not appear to dispute that their complaint was filed after the 18 applicable limitations periods. See Docs. 20 at 7-8; 28 at 6-13. Rather, they argue that 19 the statute of limitations should be equitably tolled. Equitable Tolling of Statute of Limitations. 20 “‘Under equitable tolling, plaintiffs may sue after the statutory time period for 21 filing a complaint has expired if they have been prevented from filing in a timely manner 22 due to sufficiently inequitable circumstances.’” McCloud v. State, Ariz. Dep’t of Pub. 23 Safety, 170 P.3d 691, 696 (Ariz. Ct. App. 2007) (quoting Seitzinger v. Reading Hosp. & 24 Med. Ctr., 165 F.3d 236, 240 (3d Cir. 1999)). 25 ‘extraordinary circumstances’ and not to ‘a garden variety claim of excusable neglect.’” 26 Little v. Arizona, 240 P.3d 861, 867 (Ariz. Ct. App. 2010) (quoting McCloud, 170 P.3d at 27 697). Equitable tolling may apply when “plaintiffs were ‘lulled’ or ‘misled’ into an 28 untimely filing by the actions of the defendant,” Stulce v. Salt River Project Agr. Imp. & -7- “Equitable tolling applies only in 1 Power Dist., 3 P.3d 1007, 1015 (Ariz. Ct. App. 1999), or when “the plaintiff is excusably 2 ignorant of the limitations period and the defendant would not be prejudiced by the late 3 filing,” Kyles v. Contractors/Engineers Supply, Inc., 949 P.2d 63, 65 (Ariz. Ct. App. 4 1997). Plaintiffs bear the burden of establishing that a limitations period should be 5 equitably tolled. McCloud, 170 P.3d at 694. 6 Plaintiffs argue that their pursuit of administrative remedies under HAMP entitles 7 them to equitable tolling. Doc. 20 at 7-8.3 As previously noted, HAMP is a federal 8 program designed to provide relief for homeowners. See Wigod v. Wells Fargo Bank, 9 N.A., 673 F.3d 547, 556-57 (7th Cir. 2012) (noting that HAMP was established by 10 Secretary of the Treasury under the Emergency Economic Stabilization Act of 2008). 11 Specifically, HAMP “provides eligible borrowers the opportunity to modify their first 12 lien mortgage loans to make them more affordable. Under HAMP, servicers apply a 13 uniform loan modification process to provide eligible borrowers with . . . sustainable 14 monthly payments for their first lien mortgage loans.” HAMP Guidelines at 15 (found at 15 16 A borrower dissatisfied with a loan servicer’s decision regarding a loan 17 modification may “escalate” the issue. Id. at 60-63. An escalation requires the servicer 18 to reexamine the borrower’s eligibility for a modification. Id. In certain circumstances, 19 the servicer may not consider the case resolved until a third-party agency “concurs with 20 the proposed resolution.” Id. at 62. Plaintiffs allege that they pursued an escalation of 21 their loan-modification dispute with Defendants. Doc. 1-1, ¶¶ 39, 44. They further claim 22 23 24 25 26 27 28 3 Defendants claim that Plaintiffs were not in fact eligible for a loan modification under HAMP. Doc. 25 at 6. Because the Court finds that the HAMP administrative process does not result in equitable tolling, the Court need not resolve this issue. 4 This Internet address includes a 237-page document explaining HAMP and other federal programs. The document was not included in Plaintiffs’ complaint. Rather, Plaintiffs first provided this link in their response. Doc. 20 at 7 n.2. Defendants do not dispute the document’s authenticity. Normally, the Court will not consider evidence or documents beyond the complaint when ruling on a Rule 12(b)(6) motion to dismiss. See United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003). But because the document appears to be incorporated by reference in the complaint (Doc. 1-1, ¶ 39), and does not change the outcome of this case, the Court will consider it. See id. at 908. -8- 1 that the “loan modification process” continued until “sometime in 2014.” Doc. 20 at 8. 2 They argue, without citing applicable caselaw, that this administrative process should 3 equitably toll the statute of limitations. Id. 4 The statute of limitations is equitably tolled when the pursuit of administrative 5 remedies is a precondition to filing suit. Third & Catalina Associates v. City of Phoenix, 6 895 P.2d 115, 118-19 (Ariz. Ct. App. 1994); Harris v. Alumax Mill Products, Inc., 897 7 F.2d 400, 404 (9th Cir. 1990). Courts have also found that the filing of a lawsuit may 8 equitably toll the limitations period for a second lawsuit, so long as “both actions involve 9 the same basic right or claim.” Hosogai v. Kadota, 700 P.2d 1327, 1331-35 (Ariz. 1985) 10 (collecting cases). The law is less clear, however, on whether the pursuit of optional 11 administrative remedies – such as escalating a case under HAMP guidelines – merits 12 equitable tolling. 13 Some courts have held that equitable tolling is appropriate even if the 14 administrative proceedings are optional. See McDonald v. Antelope Valley Cmty. Coll. 15 Dist., 194 P.3d 1026, 1032 (Cal. 2008); Dayhoff v. Temsco Helicopters, Inc., 772 P.2d 16 1085, 1087-88 (Alaska 1989). 17 administrative remedies may equitably toll the statute if the administrative proceeding 18 adequately gives “notice of the existence of a legal claim.” Erickson v. Croft, 760 P.2d 19 706, 709 (Mont. 1988). The apparent majority of courts has held that equitable tolling is 20 generally not available where a plaintiff chooses to pursue optional administrative 21 remedies before filing a lawsuit. See Int’l Union of Elec., Radio & Mach. Workers, AFL- 22 CIO, Local 790 v. Robbins & Myers, Inc., 429 U.S. 229, 231, 237 (1976) (finding that 23 “the existence and utilization of grievance procedures” does not equitably toll the 24 limitations period for filing of an EEOC charge); see also Kalyanaram v. Am. Ass’n of 25 Univ. Professors at N.Y. Inst. of Tech., 742 F.3d 42, 48 (2d Cir. 2014); Brodeur v. Am. 26 Home Assur. Co., 169 P.3d 139, 149-51 (Colo. 2007) (finding that “the accrual of a bad 27 faith tort claim is not tolled by a workers’ compensation proceeding”); Harris, 897 F.2d 28 at 404 (emphasizing that courts are “reluctant to invoke tolling where a plaintiff is tardy Other courts have held that the pursuit of optional -9- 1 in pursuing a parallel avenue of relief”); Conley v. Int’l Bhd. of Elec. Workers, Local 639, 2 810 F.2d 913, 916 (9th Cir. 1987) (Kennedy, J.). Arizona courts have not addressed this 3 issue. 4 “When an issue of state law arises in federal court and there is no controlling 5 decision by the state’s highest court, the federal court is obliged to predict what the 6 state’s highest court would decide if confronted with the issue.” Lucero v. Valdez, 884 7 P.2d 199, 204 (Ariz. Ct. App. 1994) (citing Aetna Casualty & Sur. Co. v. Sheft, 989 F.2d 8 1105, 1108 (9th Cir. 1993)). 9 jurisdictions, the Court concludes that equitable tolling is not appropriate in this case. After examining precedent from Arizona and other 10 As already noted, an apparent majority of courts has found that equitable tolling is 11 not available where a plaintiff voluntarily pursues an optional administrative remedy. 12 While this is not dispositive, Arizona courts look to other jurisdictions in deciding 13 questions of first impression. See, e.g., Midas Muffler Shop v. Ellison, 650 P.2d 496, 499 14 (Ariz. Ct. App. 1982). Furthermore, those jurisdictions that do allow equitable tolling in 15 these circumstances often require that the administrative proceeding give “notice of the 16 existence of a legal claim.” Erickson, 760 P.2d at 709. Thus, the optional administrative 17 proceedings that merit equitable tolling often have a “quasi-judicial” character. Id.; see 18 also Sorenson v. Massey-Ferguson, Inc., 927 P.2d 1030, 1032 (Mont. 1996). 19 example, in McDonald, the optional administrative proceedings involved an investigation 20 and an internal appeals process. 194 P.3d at 1029-30. In Dayhoff, the administrative 21 proceeding was with the Department of Labor, which had the power to investigate and 22 order compliance. 772 P.2d at 1086. For 23 The proceeding in this case – an “escalation” under HAMP guidelines – appears to 24 involve little more than a bank rechecking whether a borrower is eligible for a loan 25 modification. See HAMP Guidelines at 60-63. At most, the bank’s resolution of an issue 26 is subject to a third-party’s approval. Id. at 62. Although Plaintiffs’ “escalation” under 27 HAMP guidelines involved many of the same issues as this case, the administrative 28 proceeding would not have given Defendants notice that they might be sued for damages. - 10 - 1 More significantly, the facts in this case are quite dissimilar from facts that have 2 merited equitable tolling in other Arizona cases. In Kyles, the plaintiff received a right- 3 to-sue notice from the Attorney General’s Office stating that plaintiff must file his claim 4 within one year, when in fact the law required him to file within ninety days. 949 P.2d at 5 66. Plaintiff filed his claim within one year, but after ninety days had passed. Id. The 6 court applied equitable tolling because the plaintiff “was entitled to rely on the deadline 7 in the notice” and defendants were not prejudiced by the late filing. Id. 8 In Kosman v. Arizona, 16 P.3d 211 (Ariz. Ct. App. 2000), the court considered 9 whether a prisoner’s pursuit of an optional internal grievance procedure equitably tolled 10 the 180-day-limitations period for filing a notice of claim. Id. at 212-13. The court 11 found that if the prisoner had reasonably believed that the internal procedure was a 12 precondition to filing suit, then equitable tolling may be appropriate because the prisoner 13 was “‘excusably ignorant of the limitations period and the defendant would not be 14 prejudiced by the late filing.’” Id. at 213 (quoting Kyles, 949 P.2d at 65). The court then 15 remanded the case to determine whether the prisoner reasonably believed that the 16 grievance procedure was required. Id. at 214. 17 Unlike Kyles and Kosman, Plaintiffs have not alleged that they were misled about 18 the statute of limitations or that they reasonably believed the procedures under HAMP 19 were mandatory. 20 proceedings before filing suit. While pursuing optional remedies may have been entirely 21 reasonable, it did not excuse Plaintiffs from complying with the relevant statutes of 22 limitation. As already noted, Arizona law limits equitable tolling to “extraordinary 23 circumstances,” Little, 240 P.3d at 867, where “plaintiffs were ‘lulled’ or ‘misled’ into an 24 untimely filing by the actions of the defendant,” Stulce, 3 P.3d at 1015, or where “the 25 plaintiff is excusably ignorant of the limitations period,” Kyles, 949 P.2d at 65. Plaintiffs, 26 who bear the burden of establishing their right to equitable tolling, McCloud, 170 P.3d at 27 694, have not shown that any of these circumstances exist. Nor have Plaintiffs alleged 28 any incapacity that would have prevented them from filing suit. Indeed, they were Rather, they simply chose to complete optional administrative - 11 - 1 capable of pursuing all kinds of relief, filing a bankruptcy petition and submitting 2 complaints to Senator McCain, Senator Kyl, the Arizona Attorney General’s Office, the 3 United States Treasury Department, and the Consumer Financial Protection Bureau. Id., 4 ¶¶ 39-47.5 5 Finally, Plaintiffs argue that if they had filed suit before completing the HAMP 6 procedures, Defendants would have been able to withdraw from the HAMP proceedings. 7 See HAMP Guidelines at 63. The Court finds this argument unavailing. Arizona’s 8 statute of limitations gave Plaintiffs up to two or three years to pursue other remedies. 9 That Plaintiffs freely chose to pursue these remedies beyond the limitations period does 10 not call for equitable tolling. See Johnson v. Ry. Exp. Agency, Inc., 421 U.S. 454, 466 11 (1975) (“The fact that [plaintiff’s] slumber may have been induced by faith in the 12 adequacy of [the administrative] remedy is of little relevance inasmuch as the two 13 remedies are truly independent. . . . We find no policy reason that excuses petitioner’s 14 failure to take the minimal steps necessary to preserve each claim independently.”). The 15 Court declines to equitably toll the statute of limitations. 16 E. 17 Plaintiff asserts a claim for wrongful foreclosure against FNMA. Id., ¶¶ 107-21. 18 “Arizona . . . has not expressly recognized the tort of wrongful foreclosure.” In re 19 Mortgage Elec. Registration Sys., Inc., 754 F.3d 772, 784 (9th Cir. 2014); Cervantes v. 20 Countrywide Home Loans, Inc., 656 F.3d 1034, 1043 (9th Cir. 2011). If such a tort 21 action were to be recognized, it most likely would be subject to the two-year limitations 22 period for tort actions found in A.R.S. § 12-542. It would also be akin to the specific 23 claims identified in § 12-542 for “trespass for injury done to the estate or the property of 24 another” and “forcible entry or forcible detainer.” A.R.S. § 12-542(3), (6). As noted Wrongful Foreclosure. 25 5 26 27 28 Plaintiffs seek leave to amend their complaint to allege that Defendants sent communications stating they would participate in the escalation process in good faith. Doc. 20 at 8. But even assuming such communications were sent, Defendants’ willingness to participate in the escalation process does not guarantee an outcome of that process, nor does it somehow suggest that the limitations period has ceased to run. The proposed amendment therefore would not alter the fact that Plaintiffs have failed to show their right to equitable tolling under Arizona law. - 12 - 1 above, this case was filed well after the two-year limitations period. Any claim for 2 wrongful foreclosure is therefore time barred. 3 In addition, the claim would be barred by A.R.S. § 33-811(C). Under this statute, 4 The trustor, its successors or assigns, and all persons to whom the trustee mails a notice of a sale under a trust deed pursuant to § 33-809 shall waive all defenses and objections to the sale not raised in an action that results in the issuance of a court order granting relief pursuant to rule 65, Arizona rules of civil procedure, entered before 5:00 p.m. mountain standard time on the last business day before the scheduled date of the sale. 5 6 7 8 A.R.S. § 33-811(C). Thus, “a trustor who fails to enjoin a trustee’s sale waives his 9 claims to title of the property upon the sale’s completion, and also waives any claims that 10 are dependent on the sale.” Morgan AZ Fin., L.L.C. v. Gotses, 326 P.3d 288, 290-91 11 (Ariz. Ct. App. 2014) (citing BT Capital, LLC v. TD Serv. Co. of Ariz., 275 P.3d 598, 600 12 (Ariz. 2012); Madison v. Groseth, 279 P.3d 633, 638 (Ariz. Ct. App.2012)). 13 Plaintiffs obtained a loan secured by a deed of trust on their house. Doc. 1-1, ¶ 10. 14 Defendant Seterus, who was then acting as trustee, gave notice of the sale of Plaintiffs’ 15 house under the deed of trust. Id., ¶ 31. Plaintiffs did not secure a court order preventing 16 the sale, and the sale was completed on March 3, 2011. Id., ¶ 34. Because Plaintiffs’ 17 wrongful foreclosure claim would necessarily “depend on . . . objections to the validity of 18 the trustee’s sale,” Madison, 279 P.3d at 638, the Court finds that Plaintiffs have waived 19 this claim under § 33-811(C). 20 IV. Attorneys’ Fees. 21 Defendants Seterus and FNMA argue that Plaintiffs’ promissory note and the deed 22 of trust entitle them to attorneys’ fees. The relevant section of the promissory note states: 23 25 If the Note Holder has required me to pay immediately in full as described above, the Note Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note to the extent not prohibited by applicable law. Those expenses include, for example, reasonable attorneys’ fees. 26 Doc. 16-1 at 3. The relevant section of the Deed of Trust discusses the power of the 27 lender to accelerate payment in the event of a default. Id. at 18. It further states that 28 “Lender shall be entitled to collect all expenses incurred in pursuing the remedies 24 - 13 - 1 provided in this [Section], including, but not limited to, reasonable attorneys’ fees and 2 costs of title evidence.” Id. 3 Plaintiffs do not contest the validity of these documents, but argue that they do not 4 entitle Defendants to attorneys’ fees. 5 promissory note permits recovery of costs incurred in “enforcing this Note,” Doc. 16-1 at 6 3, and the deed of trust for costs incurred in responding to a default, id. at 18. This case 7 involves Defendants’ allegedly tortious conduct in modifying Plaintiffs’ loan. It does not 8 involve the enforcement of the note or Defendants’ response to a default. Doc. 20 at 9-10. The Court agrees. The 9 Defendants Seterus and FNMA also request attorneys’ fees under A.R.S. § 12- 10 341.01(A), which allows a court to award the successful party reasonable attorneys’ fees 11 “[i]n any contested action arising out of a contract, express or implied[.]” 12 consider six factors in deciding whether attorneys’ fees should be granted under this 13 statute. Associated Indem. Corp. v. Warner, 694 P.2d 1181, 1184 (Ariz. 1985). These 14 factors are: (1) the merits of the unsuccessful party’s claim, (2) whether the successful 15 party’s efforts were completely superfluous in achieving the ultimate result, (3) whether 16 assessing fees against the unsuccessful party would cause extreme hardship, (4) whether 17 the successful party prevailed with respect to all relief sought, (5) whether the legal 18 question presented was novel or had been previously adjudicated, and (6) whether a fee 19 award would discourage other parties with tenable claims from litigating. Id. Courts 20 Defendants Seterus and FNMA contend that this action arises out of a contract, 21 namely, the promissory note and deed of trust. Assuming without deciding that this is 22 correct, the Court concludes that the six factors do not weigh in favor of attorneys’ fees. 23 Plaintiffs have recently completed a long foreclosure process on their home and awarding 24 attorneys’ fees may cause them hardship. 25 argument is not frivolous and has not been previously decided by an Arizona court. 26 V. Furthermore, Plaintiffs’ equitable tolling Leave to Amend. 27 Plaintiffs request leave to amend their complaint. Doc. 20 at 10-11. Rule 15 of 28 the Federal Rules of Civil Procedure declares that courts should “freely give leave [to - 14 - 1 amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2). While “this mandate is to be 2 heeded,” leave to amend may be denied if the amendment would be futile. Foman v. 3 Davis, 371 U.S. 178, 182 (1962). The Court finds that amending the complaint would be 4 futile. The statute of limitations clearly bars Plaintiffs’ claims, equitable tolling is not 5 justified in this case, and Plaintiffs’ claim of wrongful foreclosure is time barred and 6 waived under A.R.S. § 33-811(C). 7 IT IS ORDERED: 8 1. Defendants’ motions to dismiss (Docs. 16, 21) are granted. 9 2. Defendants’ request for attorneys’ fees (Doc. 16) is denied. 10 3. Plaintiffs’ complaint is dismissed with prejudice. 11 4. The Clerk is directed to terminate this action. 12 Dated this 17th day of March, 2015. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 15 -

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