Caruthers v. Chase Home Finance LLC et al

Filing 17

ORDER granting 5 Defendants' Motion to Dismiss, with leave to seek to amend. Should Plaintiff desire to file a motion for leave to file an amended complaint, she shall do so no later than October 12, 2011. If Plaintiff does not file a motion requesting leave to file an amended complaint by October 12, 2011, the Clerk is directed to terminate this action. Signed by Judge G Murray Snow on 9/12/11.(LSP)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Plaintiff,
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vs.
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Chase Home Finance LLC, a Delaware)
Limited Liability Company; Mortgage)
Electronic Registration systems, Inc., a)
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Delaware Corporation,
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Defendants.
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Debra A. Caruthers, an individual,

No. CV-10-8248-PCT-GMS
ORDER

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Pending before the Court is the Motion to Dismiss Party Chase Home Finance, LLC

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and Mortgage Electronic Registration Systems, Inc., Doc. 5. For the reasons stated below,

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that motion is granted with leave to amend.

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BACKGROUND

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According to Plaintiff’s Complaint, which was subsequently removed to this Court,

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on or about July 5, 2006, Plaintiff Debra Carruthers executed a note in favor of American

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Mortgage Network, Inc., a California corporation. Complaint at ¶ 7. The purpose of the loan

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was, apparently, to finance the purchase of residential real property located at 620 West

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Saddle Creek Drive in Camp Verde, Arizona.

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At the same time Plaintiff executed the note, she executed a deed of trust on the

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subject property. The deed of trust named Mortgage Electronic Registration Systems, Inc.

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(“MERS”) as the nominal beneficiary under the deed of trust for the benefit of the lender or

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its successors or assigns. Id. at ¶ 17.

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Approximately four years later, Plaintiff received notice that the trustee on her deed

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of trust had been substituted, and that a statement of breach or non-performance was filed

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together with a notice of trustee’s sale on the subject property scheduled for December 10,

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2010. Id. at ¶ 8, 11. Plaintiff filed this Complaint to enjoin the sale.

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Plaintiff, in her Complaint seeks declaratory and injunctive relief. She asserts a right

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to the cancellation of the trustee’s sale based on certain legal allegations she sets forth in her

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Complaint. She alleges that, despite MERS’ claims to the contrary, it never was the original

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beneficiary under the deed of trust. Id. at ¶ 4, 13. Plaintiff alleges that the only legally

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appropriate beneficiary under the original deed of trust was the lender, American Mortgage

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Network. Id. at ¶ 9. Because, Plaintiff alleges MERS is not the original beneficiary, she

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asserts that MERS purported substitution of trustee is a legal nullity. Id. at ¶ 10. She also

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alleges that the substitution of trustee is “suspect” because it is signed by someone who

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appears to be related to the successor trustee appointed. Id. at ¶ 9. She further alleges that

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because none of the Defendants are American Mortgage Network, the original lender, they

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must, prior to foreclosing on the deed of trust, demonstrate assignment of the full and

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unencumbered rights in the note and deed of trust to them prior to foreclosing. Id. at ¶ 29.

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Plaintiff claims that she is in doubt as to her rights under the note, the deed of trust,

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and the substitution of trustee and the notice of trustee’s sale filed with the Maricopa County

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Recorder’s office. She thus asserts that she is entitled to have her rights clarified through her

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request for declaratory relief. Id.

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ANALYSIS

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“By signing the deed[] of trust, the [P]laintiff[] agreed to the terms and [was] on notice

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of the contents.” Cervantes v. Countrywide Home Loans, Inc., ___ F.3d ___, 2011 WL

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3911031 at *5 n. 2 (9th Cir. Sep. 7, 2011) citing Kenly v. Miracle Props., 412 F. Supp. 1072,

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1075 (D. Ariz. 1976). Although Plaintiff extensively references the deed of trust in her

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Complaint, she does not attach a copy, as she does with the notice of substitution, the notice

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of trustee’s sale, and the notice of breach. Nevertheless, Defendants have appended to their
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Motion to Dismiss a copy of the deed of trust. In her response, Plaintiff does not challenge

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the accuracy of the deed of trust provided by Defendants. This Court may thus consider it

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in ruling on Defendants’ Motion to Dismiss. Id. citing Swartz v. KPMG, LLP, 476 F.3d 756,

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763 (9th Cir. 2007) (holding that Court could consider deed of trust, attached to MERS reply

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in support of its motion to dismiss, “because the complaint references and relies on the deed,

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and its authenticity is unquestioned”).

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Plaintiff’s primary claim is that despite what the deed of trust says, MERS cannot, as

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a matter of law, serve as the nominal beneficiary under the deed of trust for the benefit of the

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lender because allowing MERS to serve as beneficiary on the deed of trust would

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impermissibly split the note and the deed of trust. The Ninth Circuit, however, has recently

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and definitively rejected such an argument in this Circuit so long as the complaint does not

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allege that MERS is not acting as the agent of the lender or its successors. “[T]he note[] and

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deed[] are not irreparably split: the split only renders the mortgage unenforceable if MERS

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or the trustee, as nominal holders of the deeds are not agents of the lenders.” Id. at * 7 citing

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Landmark Nat’l Bank v. Kesler, 216 P.3d 158, 167 (Kan. 2009).

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The Complaint here makes no such allegation. The Complaint does allege that

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Plaintiff does not know who the lender’s successors might be. It further alleges that because

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none of the Defendants are the original lender, the successors must, prior to foreclosing on

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the deed of trust, demonstrate assignment of the full and unencumbered rights in the note and

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deed of trust. Id. at ¶ 29. But, as the Ninth Circuit noted in Cervantes, such an argument is

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unavailing in this case because “the deed states that the loan or a partial interest in it ‘can be

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sold one or more times without prior notice to Borrower.’” Id. Thus, absent an allegation

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that foreclosure is being pursued on behalf of someone who is not the lender or its successor

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or assign, Defendants need not demonstrate a complete chain of all assignments of the Note

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prior to conducting the non-judicial foreclosure.

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Further, as has been made abundantly clear by a number of cases deciding the

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question, in this state, Defendants do not have to show the note prior to conducting a

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foreclosure. Diessner v. Mortg. Elec. Registration Sys., 618 F. Supp. 2d 1184, 1187 (D. Ariz.
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2009) (“[D]istrict courts have routinely held that Plaintiff's 'show me the note' argument lacks

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merit.”); See, e.g., Ciardi v. Lending Co., 2010 WL 2079735 (D. Ariz. May 24, 2010); Silvas

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v. GMAC Mortg., 2009 WL 4573234 (D. Ariz. Dec. 1, 2009, amended Jan. 5, 2010);

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Contreras v. U.S. Bank, 2009 WL 4827016 (D. Ariz. Dec. 15, 2009).

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The sole basis in the Complaint for asserting that MERS could not file a substitution

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of trustee in this case is the allegation that MERS cannot be the beneficiary under the deed

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of trust. Because, as is explained above, that argument is incorrect as a matter of law, there

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is no remaining substance to Plaintiff’s assertion that MERS’ purported substitution of

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trustee is a legal nullity. Id. at ¶ 10.

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To the extent that Plaintiff alleges that the substitution of trustee is “suspect” because

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it is signed by someone who appears to be related to the person who is appointed by the

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successor trustee, such an assertion, without more, fails to state any cognizable claim. To

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survive dismissal for failure to state a claim pursuant to Federal Rule of Civil Procedure

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12(b)(6), a complaint must contain more than “labels and conclusions” or a “formulaic

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recitation of the elements of a cause of action[;]” it must contain factual allegations sufficient

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to “raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S.

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544, 555 (2007). “A claim has facial plausibility when the plaintiff pleads factual content

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that allows the court to draw the reasonable inference that the defendant is liable for the

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misconduct alleged.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Twombly, 550

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U.S. at 556). The assertion that the appointment of the successor trustee is somehow invalid

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because that appointment was signed on behalf of the beneficiary by a relative of the

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successor trustee fails to meet that standard.

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IT IS ORDERED:

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1.

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Granting Defendants’ Motion to Dismiss (Doc. 5), with leave to seek to

amend.
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Should Plaintiff desire to file a motion for leave to file an amended complaint,

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she shall do so no later than October 12, 2011. The proposed amended complaint shall be

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attached to the motion for leave to amend and comply with Federal Rules of Civil Procedure
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15 and Local Rules of Civil Procedure 15.1. The Court will not permit the filing of any

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proposed amended complaint that does not comply with the requirements of this Order, or

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seeks to reassert claims that have been dismissed as a matter of law.

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3.

If Plaintiff does not file a motion requesting leave to file an amended complaint

by October 12, 2011, the Clerk of the Court is directed to terminate this action.
DATED this 12th day of September, 2011.

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