Kuc v. BAC Home Loans Servicing LP et al

Filing 21

ORDER DENYING 9 plaintiff's motion to remand. Granting Bank of America, N.A., Bank of America Corp., and MERS's motion to dismiss 6 . Granting Old Republic's motion to dismiss 7 ). The action is dismissed against all defendants. Signed by Judge Frederick J Martone on 4/16/12.(DMT)

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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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Bank of America, NA, successor by)
merger to BAC Home Loans Servicing LP;)
Bank of America Corp., successor in)
interest to Countrywide Bank; Saxon)
Mortgage Services, Inc.; Old Republic)
National Title Insurance Co.; Mortgage)
Electronic Registration Systems Inc.)
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("MERS"),
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Defendants.
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Anthony J. Kuc, Jr.,

CV 12-08024-PCT-FJM
ORDER

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The court has before it plaintiff's motion to remand (doc. 9) and defendant Old

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Republic National Title Insurance Company's ("Old Republic") response (doc. 12). Plaintiff

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did not reply, and the time for replying has expired. We also have before us Old Republic's

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motion to dismiss (doc. 7) and Bank of America, NA, Bank of America Corporation, and

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MERS's ("the BANA defendants") motion to dismiss (doc. 6). Plaintiff filed a single

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response to both motions (doc. 10). Only the BANA defendants replied (doc. 11), and the

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time for replying has expired.

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I

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In June 2007, plaintiff took out a $520,000 construction loan from Mohave State

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Bank. This loan was secured by a Deed of Trust ("the Mohave Deed of Trust"). In

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December 2007, plaintiff refinanced his property by taking out a $535,000 loan from

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Countrywide Bank. This second loan was secured by a Deed of Trust ("the Countrywide

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Deed of Trust"). MERS recorded a document in January 2008 stating that the Mohave loan

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had been fully paid and discharged.

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In June 2011, MERS recorded an assignment of the Countrywide Deed of Trust to

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BAC Home Loans Servicing. Defendant Saxon Mortgage Services ("Saxon") assumed

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servicing the Countrywide loan in July 2011.1 Saxon sent plaintiff a notice of intent to

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accelerate the Countrywide loan in August 2011.

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MERS recorded an assignment of the Mohave Deed of Trust to Bank of America in

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October 2011. That same day, Bank of America (through its attorney-in-fact, Saxon)

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recorded a substitution of trustee naming Old Republic as the new trustee. Old Republic

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recorded a Notice of Trustee's Sale pursuant to the Mohave Deed of Trust that same day. A

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cancellation of the Notice of Trustee's Sale was recorded by Old Republic on December 19,

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2011.

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Plaintiff originally filed this action in the Superior Court of Arizona in Mohave

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County on January 13, 2012, asserting claims for (1) broken chain of title, (2) defective deed

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of trust, and (3) invalid assignment of the deed of trust by MERS. Old Republic removed

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to this court. Plaintiff moves to remand. Old Republic and the BANA defendants each move

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to dismiss the action for failure to state a claim.
II

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Plaintiff argues that removal of this action is improper and is a violation of the

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Seventh and Tenth Amendments. He also argues that defense counsel have not proved that

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they are representing the defendants, and their failure to do so is a violation of due process.

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Old Republic contends that removal of this action is proper because we have original

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jurisdiction under 28 U.S.C. § 1332. Diversity jurisdiction exists when there is complete

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diversity between plaintiff and defendants and the amount in controversy exceeds $75,000.

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It does not appear that Saxon has been served, and it has not appeared.
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Id. § 1332(a). Old Republic's allegations of citizenship in its notice of removal establish

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complete diversity, because no defendant is alleged to be a citizen of Arizona (doc. 1 at 2-3).

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Plaintiff has not challenged any of these allegations. Moreover, in this action plaintiff seeks

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to quiet title to a home secured by a Deed of Trust for over $500,000, requests punitive

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damages in the amount of $1,836,000, requests a return of all taxes paid on the property, and

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requests a return of all loan payments made since 2007. The amount in controversy

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unquestionably exceeds $75,000. Plaintiff's motion to remand is denied.

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III

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Although not listed as a separate claim, plaintiff alleges violations of the Fair Debt

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Collection Practices Act ("FDCPA"). The FDCPA prevents abusive practices by a "debt

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collector," defined as "any person who uses any instrumentality of interstate commerce or

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the mails in any business the principal purpose of which is the collection of any debts, or who

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regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted

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to be owed or due another." 15 U.S.C. § 1692a(6). However, "a non-judicial foreclosure

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proceeding is not the collection of a 'debt' for purposes of the FDCPA." Mansour v. Cal-

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Western Reconveyance Corp., 618 F. Supp. 2d 1178, 1182 (D. Ariz. 2009).

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"mortgagees and their assignees, servicing companies, and trustee fiduciaries are not

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included in the definition of 'debt collector.'" Id. Because defendants are not debt collectors

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within the meaning of the FDCPA and a non-judicial foreclosure is not the collection of a

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debt, plaintiff's FDCPA claim fails.

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And

IV

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Plaintiff's "broken chain of title" claim asserts that a foreclosing party must have proof

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of chain of title and be a real party in interest. Plaintiff claims that defendants have no

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standing to foreclose on his property. But in Arizona, neither the presentation of the original

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Note nor proof that a party is entitled to enforce an instrument is needed to conduct a non-

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judicial foreclosure. See Deissner v. Mortg. Elec. Registration Sys., 618 F. Supp. 2d 1184,

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1187-88 (D. Ariz. 2009). To the extent that plaintiff may be alleging a claim of wrongful

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foreclosure, this cause of action has not yet been recognized by Arizona state courts.
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Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1043 (9th Cir. 2011). Even if

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it had, the cause of action is inapplicable to this case because a foreclosure sale has not

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happened. Plaintiff also alleges that the securitization of his loan split the Note and Deed of

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Trust and renders them unenforceable. This argument has been continually rejected. See,

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e.g., Mansour, 618 F. Supp. 2d at 1181.

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Plaintiff contends that the assignments of the Deed of Trust were fraudulent, and

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complains that the signatories are known "robosigners." To the extent that plaintiff is

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alleging a claim for false recordings in violation of A.R.S. § 33-420, this claim fails.

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Arizona courts apply this statute to "some sort of document purporting to create an interest,

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lien, or encumbrance, such as a lis pendens, mechanics lien, or the deed of trust itself," but

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there is "no authority applying this statute to assignments of mortgages and notices of

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trustee's sales." Schayes v. Orion Fin. Grp., Inc., CV-10-02658-PHX-NVW, 2011 WL

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3156303, at *6 (D. Ariz. July 27, 2011); see also In re Mortg. Elec. Registration Sys.

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(MERS) Litig., MDL Docket No. 09-2119-JAT, 2011 WL 4550189, at *4 (D. Ariz. Oct. 3,

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2011) (A.R.S. § 33-420 does not apply to assignments, substitution of trustees, and notices

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of trustee's sales). Similarly, plaintiff, as a third-party borrower, does not have standing to

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challenge the validity of any allegedly "robosigned" recorded assignments. See In re Mortg.

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Elec. Registration Sys. (MERS) Litig., 2011 WL 4550189, at *5 (plaintiffs lack standing on

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robosigning allegations, because "as third-party borrowers, [they] are uninvolved and

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unaffected by the alleged [recorded] [a]ssignments, and do not possess standing to assert a

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claim based on such").

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Plaintiff also refers to the Truth In Lending Act ("TILA"). It is unclear whether

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plaintiff is attempting to assert a claim for rescission of the Countrywide loan. To the extent

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that plaintiff is alleging a claim under TILA, it is apparent from the face of his complaint that

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his claim is time-barred. The right to rescission under TILA is extinguished three years after

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a loan is consummated. McOmie-Gray v. Bank of Am. Home Loans, 667 F.3d 1325, 1329

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(9th Cir. 2012). Because plaintiff filed this action more than three years after he signed the

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Countrywide Deed of Trust, rescission is unavailable. See id.
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Finally, plaintiff alleges in this claim and throughout his complaint that defendants

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committed fraud by misrepresenting themselves as real parties in interest and publically filing

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"false mortgage assignments." Compl. at 15. Under Rule 9(b), Fed. R. Civ. P., allegations

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of fraud must be specific enough to give defendants notice of specific misconduct, including

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the "who, what, when, where, and how" of the challenged conduct. Vess v. Ciba-Geigy

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Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (citation omitted). When an action involves

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multiple defendants, a plaintiff cannot simply "lump multiple defendants together," but must

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at a minimum identify each defendant's role in the alleged fraud. Swartz v. KPMG LLP, 476

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F.3d 756, 764-65 (9th Cir. 2007).

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Plaintiff's conclusive allegations that defendants

committed fraud by recording fraudulent documents do not meet this standard.
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Plaintiff's next claim is that the Deed of Trust is defective. He repeats his allegations

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that because his loan was securitized, the Deed of Trust is unenforceable, concluding that

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defendants "committed fraud in foreclosing the property." Compl. at 16. This claim fails for

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several reasons. First, the foreclosure sale noticed on the Mohave Deed of Trust never

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occurred, and, as discussed above, wrongful foreclosure is not a recognized cause of action

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in Arizona. Next, to the extent this is a fraud claim, it is not stated with particularity as

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required by Rule 9(b), Fed. R. Civ. P. Finally, as discussed above, the theory that

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securitization renders the Deed of Trust unenforceable has been repeatedly rejected.

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VI

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In his "invalid assignment of the Deed of Trust" claim, plaintiff repeats his allegations

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that MERS was not authorized to transfer the Deed of Trust. To the extent that plaintiff is

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claiming that either or both Deeds of Trust are unenforceable because MERS separated the

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Note and Deed of Trust, MERS's involvement would only be an issue if MERS was not an

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agent of the lender. See Cervantes, 656 F.3d at 1044. Plaintiff has not alleged so here. To

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the contrary, plaintiff agreed in signing the Countrywide Deed of Trust that "MERS is the

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beneficiary under this Security Instrument," and acts "as a nominee for Lender and Lender's

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successors and assigns." Compl., ex. C, at 2. In signing, he also agreed that the "Note or
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a partial interest in the Note (together with this Security Instrument) can be sold one or more

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times without prior notice to Borrower." Id. at 7. Finally, he agreed that MERS has "the

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right to foreclose and sell the Property; and to take any action required of Lender." Id. at 3.

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The Mohave Deed of Trust contains these same provisions. See BANA Mot. to Dismiss, ex.

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1 at 1-2, 7.
VII

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Although not stated as a separate claim, plaintiff seeks the remedy of quiet title. In

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Arizona, quiet title is not available to a homeowner until the loan debt is paid or offered to

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be paid. Farrell v. West, 57 Ariz. 490, 491, 114 P.2d 910, 911 (1941). Although his Mohave

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loan has already been discharged, plaintiff has not alleged that he has paid off or is able to

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pay off the Countrywide loan. Accordingly, his request for quiet title is dismissed.
VIII

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Plaintiff states in his response that he reserves the right to amend his complaint. At

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this stage of the proceedings, plaintiff must seek leave from court to amend his complaint.

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See Fed. R. Civ. P. 15(a)(2). Under LRCiv 15.1, a plaintiff seeking leave to amend must

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include a copy of the proposed amended complaint. Here, plaintiff did not file a motion to

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amend and has not submitted a proposed amended complaint. Accordingly, to the extent that

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plaintiff is asking to amend his complaint, the request is denied. See Cervantes, 656 F.3d at

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1043 (affirming denial of leave to amend when plaintiffs failed "to submit a copy of the

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proposed amended pleadings along with a motion for leave to amend" as required by this

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District's local rules).

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Finally, Saxon has not appeared in this action. We dismiss this case as to Saxon,

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regardless of whether it has been served, as the legal result would be the same. See

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Abagninin v. AMVAC Chem. Corp., 545 F.3d 733, 742-43 (9th Cir. 2008).

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IX
IT IS ORDERED DENYING plaintiff's motion to remand (doc. 9).

IT IS

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ORDERED GRANTING Bank of America, N.A., Bank of America Corp., and MERS's

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motion to dismiss (doc. 6). IT IS FURTHER ORDERED GRANTING Old Republic's
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motion to dismiss (doc. 7). The action is dismissed against all defendants.

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The Clerk shall enter judgment.

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DATED this 16th day of April, 2012.

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