Doyle et al v. Federal National Mortgage Association et al

Filing 18

ORDER that Defendant Fannie Mae's 7 Motion to Dismiss is granted. Plaintiffs' 8 Motion for a TRO and Preliminary Injunction is denied. The Clerk is directed to terminate this action. Signed by Judge David G Campbell on 8/6/2012.(LFIG)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Raymond L. Doyle and Kathleen Doyle,
husband and wife

No. CV-12-8080-PCT DGC
ORDER

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Plaintiffs,

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v.

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Federal National Mortgage Association

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Defendant.

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Defendant Federal National Mortgage Association (“Fannie Mae”) filed a motion

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to dismiss Plaintiffs’ complaint challenging the trustee sale of Plaintiffs’ vacation home.

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Doc. 7; see Doc. 1-1. The motion has been fully briefed and no party has requested oral

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argument. Docs. 12, 16. Plaintiffs also filed a motion for a temporary restraining order

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(“TRO”) and preliminary injunction which has been fully briefed. Doc. 8; Docs. 15, 17.

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For the reasons set forth below, the Court will grant Defendant’s motion to dismiss and

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deny Plaintiffs’ motion for a TRO and preliminary injunction.

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I.

Background.

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On February 16, 2007, Plaintiffs obtained a loan from American Brokers Conduit

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(“ABC”) in the amount of $204,000 for the purchase or refinance of a vacation home at

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1807 East Winterhaven Drive in Mohave Valley, Arizona. Doc. 1-1, ¶¶ 3, 6, 11; Doc 7-1

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at 3 (Promissory Note). Plaintiffs executed a Deed of Trust giving the lender a security

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interest in the property with a right of sale. Doc. 1-1, ¶ 6; see Doc. 7-1 at 8-29 (Deed of

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Trust).1 ABC subsequently assigned the loan to Bank of America (“BAC”), and BAC

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appointed Reconstruct Company (“Reconstruct”) as trustee. Doc. 1-1, ¶ 7, Doc. 7 at 2.

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Plaintiffs defaulted on their loan after Mr. Doyle became ill and lost his job.

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Doc. 1-1, ¶¶ 41-42. In July of 2010, Reconstruct recorded a notice of trustee sale on the

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property with the Mohave County Recorder’s Office. Doc. 7 at 3. The date for the

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trustee sale was set for October 15, 2010, but was later postponed. Id.

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Beginning in September of 2010 and lasting through December of 2010, Plaintiffs

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attempted to enter into a loan modification agreement with BAC. Id., ¶¶ 43-51. During

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this time, Plaintiffs submitted payments of $5000 and $755.44. Id., ¶¶ 45-47. Plaintiffs

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were advised in December of 2010 that the latter payment was negotiated, but the $5000

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payment was not. Id., ¶ 50. Plaintiffs do not claim to have made any other payments.

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Reconstruct held a trustee sale of the property on January 18, 2011. Defendant

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Fannie Mae purchased the property at the sale. Doc. 1-1, ¶¶ 8, 52, Doc. 7 at 3. Fannie

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Mae subsequently instituted a forcible entry and detainer (“FED”) action in Mohave

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County Superior Court, seeking to possess the property and to exclude Plaintiffs. Doc. 1-

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1, ¶ 9; Doc. 7 at 3. The court granted judgment on the pleadings in favor of Fannie Mae,

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but Plaintiffs have not yet been evicted. Doc. 7 at 3-4, 4 n. 4.

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On March 1, 2012, Plaintiffs filed this action in Mohave County Superior Court,

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alleging that they did not receive notice of default and notice of the trustee sale prior to

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the sale as required by law, that the foreclosure is therefore invalid, and that they are the

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true owners of the property. Doc. 1-1, ¶¶ 11, 14, 15. The complaint makes eight claims:

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wrongful foreclosure (Count I), declaratory judgment (Count II), fraud or waiver and

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Generally, on a motion to dismiss, a court may only consider material that is
properly presented to the court as part of the complaint. See Lee v. City of L.A., 250 F.3d
668, 688-89 (9th Cir. 2001). Courts may, however, consider “documents ‘whose
contents are alleged in a complaint and whose authenticity no party questions, but which
are not physically attached to the [plaintiff’s] pleading.’” In Re SiliconGraphics Secs.
Litig., 183 F.3d 970, 986 (9th Cir. 1999) (quoting Branch v. Tunnell, 14 F.3d449, 454
(9th Cir. 1994)); see also Knievel v. ESPN, 393 F.3d 1068, 1076-77 (9th Cir. 2005). The
Court therefore may consider the Note and the Deed of Trust which are referenced in the
Complaint.
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estoppel (Count III), breach of contract (Count IV), statutory damages (Count V),

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trespass (Count VI), injunctive relief (Count VII), and quiet title (Count VIII).

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Fannie Mae removed the action to federal court on diversity grounds (Doc. 1) and

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subsequently filed its motion to dismiss. Fannie Mae argues that Plaintiffs waived their

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right to challenge the trustee sale by failing to seek judicial relief before the sale took

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place, and that Plaintiffs nonetheless fail to state a claim under any of the theories alleged

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in the complaint.

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II.

Legal Standard.

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When analyzing a complaint for failure to state a claim under Rule 12(b)(6), “[a]ll

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allegations of material fact are taken as true and construed in the light most favorable to

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the non-moving party.” Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). To avoid

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a Rule 12(b)(6) dismissal, the complaint “must plead ‘enough facts to state a claim to

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relief that is plausible on its face.’” Clemens v. DaimlerChrysler Corp., 534 F.3d 1017,

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1022 (9th Cir. 2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

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Dismissal is appropriate where the complaint lacks a cognizable legal theory, lacks

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sufficient facts alleged under a cognizable legal theory, or contains allegations disclosing

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some absolute defense or bar to recovery. See Weisbuch v. County of L.A., 119 F.3d 778,

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783, n.1 (9th Cir. 1997).

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III.

Discussion.

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A.

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Fannie Mae seeks dismissal of all claims premised on the invalidity of the trustee

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sale because defenses to a foreclosure sale not raised in an action for injunctive relief

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brought before the sale are waived. Doc. 7 at 5. Fannie Mae relies on the following

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Arizona statute:

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Waiver of Claims under A.R.S. § 33-811(C).

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.
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A.R.S. § 33-811(C).

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Plaintiffs respond that they have not waived their claims because § 33-811(C)

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applies only to those who are provided notice of sale, and Plaintiffs allege that they were

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not provided notice of default or notice of sale. Doc. 12 at 6, 11; see Doc. 1-1, ¶¶ 11, 14,

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19-22, 37, 53, 71.

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The Arizona Court of Appeals recently addressed this issue and concluded, under

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the plain language of § 33-811(C), that waiver applies to the trustor regardless of whether

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the trustee has complied with the notice-mailing requirements of § 33–809(C). Madison

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v. Groseth, 279 P.3d 633, 637 (Ariz. Ct. App. 2012). This is because the persons who

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must receive notice for purposes of waiver are listed separately in § 33-811(C) from the

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trustor. Id. The Court of Appeals explained that “[a]lthough § 33–809(C) mandates

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service on trustors, we decline to interpret the reference to § 33–809 in § 33–811(C) as

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requiring service on trustors as a prerequisite to application of the waiver provision; this

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interpretation would render the separate reference to the ‘trustor’ in § 33–811(C)

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superfluous.” Id.

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Madison is dispositive of the waiver issue in this case. Plaintiffs do not claim that

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they filed for an injunction before the trustee sale. Any defenses or objections they have

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to the validity of the sale are therefore waived under § 33-811(C). As the court found in

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Madison, the fact that Plaintiffs allege not to have been provided notice does not change

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this outcome. The Court finds that Counts One, Two, Five, Six, Seven, and Eight all rest

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on Plaintiff’s objections to the validity of the trustee sale and are waived.2

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B.

Plaintiffs’ Remaining Claims.

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Claim Three asserts fraud and rests on Plaintiffs’ allegation that during their

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To the extent Plaintiffs attempt to make a separate due process claim under the
United States and Arizona Constitutions related to their alleged lack of notice (see
Doc. 1-1, ¶ 26), this claim fails because the sale was held and the notice given (or not
given) by the non-party trustee, not by Fannie Mae. Moreover, Plaintiffs have not
alleged state action as required for a due process claim. See Kenly v. Miracle Properties,
412 F. Supp. 1072, 1074 (D. Ariz. 1976).

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attempted loan modification “Defendant” made material misrepresentations of fact.

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Doc. 1-1, ¶¶ 39-67. To the extent Plaintiffs appear to rely on statements made by BAC

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and its agents, the allegations are insufficient because BAC is not a party to this action

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and Plaintiffs allege no facts showing that Defendant Fannie Mae was involved in any

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events prior to the trustee sale. Plaintiffs’ alternative claims for waiver and estoppel fail

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for the additional reason that they seek to invalidate the trustee sale and – as explained

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above – Plaintiffs have waived any defenses or challenges to that sale.

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Claim Four asserts breach of contract and rests on the allegation that “Defendant”

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breached a contract “not to foreclose” and an agreement to modify Plaintiff’s loan that

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constituted “a novation of the original agreement between Plaintiffs and Defendant.”

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Doc. 1-1, ¶¶ 70-71; 72-76. Again, such allegations pertain only to BAC, not Fannie Mae.

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Because BAC is not named in this action and Plaintiff has alleged no facts showing that

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Fannie Mae was in any way involved in Plaintiff’s loan modification discussions, these

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allegations fail to support a claim for breach of contract.

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C.

Plaintiffs’ Motion for a TRO.

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Plaintiffs filed a motion for a TRO and preliminary injunction seeking to bar

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Fannie Mae from entering, taking possession, or interfering with Plaintiffs’ use and

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enjoyment of the property. Doc. 8 at 1. To obtain a preliminary injunction, a plaintiff

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must show that he is likely to succeed on the merits, that he is likely to suffer irreparable

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harm in the absence of preliminary relief, that the balance of equities tips in his favor, and

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that an injunction is in the public interest. Winter v. Natural Res. Def. Council, 555 U.S.

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7, 129 S. Ct. 365, 374 (2008). For the reasons already discussed, the Court finds that

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Plaintiffs’ have no chance of success on the merits their claims. The Court will deny

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Plaintiffs’ motion.

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IT IS ORDERED:

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1.

Defendant Fannie Mae’s motion to dismiss (Doc. 7) is granted.

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2.

Plaintiffs’ motion for a TRO and preliminary injunction (Doc. 8) is denied.

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3.

The Clerk is directed to terminate this action.

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Dated this 6th day of August, 2012.

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