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Tesi v. Recontrust N.A.

United States District Court, Ninth Circuit

May 7, 2013

Barbara Tesi, a widow and unmarried, Plaintiff,
ReconTrust N.A., a California corporation; Bank of America, N.A., a foreign corporation doing business in the State of Arizona, Defendants.


BERNARDO P. VELASCO, Magistrate Judge.

Pending before the Court is Defendants' Motion to Dismiss (Doc. 14). Plaintiff has filed a Response (Doc. 15) and Defendants have filed a Reply (Doc. 16). For the following reasons, the Magistrate Judge recommends that the District Court grant Defendants' Motion to Dismiss (Doc. 14).


On August 17, 2012, Defendants removed this matter from state court. (Doc. 1). Plaintiff alleges two causes of action. In Count One, Plaintiff alleges that on approximately June 1, 2006, she and her now-deceased husband executed a Promissory Note ("Note") made payable to Homefield Financial, Inc., and also executed a Deed of Trust ("DOT") in which Homefield Financial, Inc., was named as Lender, and Zen Title was designated as Trustee.[1] (Complaint, ¶¶II-III (Doc. 1-2)). Under the DOT, Mortgage Electronic Registration Systems, Inc. ("MERS"), which was "acting solely as a nominee for Lender and Lender's successors and assignees", was named as beneficiary.[2] (Complaint, Exh. B; see also Complaint, ¶IV). Plaintiff alleges that thereafter, the Note and DOT were acquired by Fannie Mae. (Complaint, at ¶V). On approximately March 8, 2012, an Assignment of the DOT to Bank of America ("BOA") "was made by MERS by a person whose name is Jeannine Abramoff, an assistant Secretary of MERS, and recorded... on March 16, 2012." ( Id. at ¶VI). Plaintiff further alleges that she is "informed and thus believes..." that Ms. Abramoff was not an employee of MERS and did not have authority to execute such assignment. ( Id. ).

Plaintiff also alleges that on approximately March 20, 2012, "a Corporation Assignment of [DOT]... was made by Anthony Cannon as [A]ssistant Secretary of MERS and recorded...." ( Id. at ¶VII). According to Plaintiff, Mr. Cannon was not an employee or officer of MERS and did not have authority to execute such assignment. ( Id. ). Additionally, on March 20, 2012, Defendant BOA executed a Substitution of Trustee appointing Defendant ReconTrust Company ("ReconTrust") Successor Trustee. ( See Complaint, Exh. F; see also Complaint, ¶VIII).

Plaintiff alleges that because neither Defendant BOA nor Defendant ReconTrust hold the Note, they lack authority to enforce the provisions of the DOT. (Complaint, ¶X).

In Count Two, Plaintiff alleges that state legislation granting "private parties the power to foreclosure security instrument [sic] without judicial oversight[]" violates the "First and Fourteenth Amendments..." of the U.S. Constitution, and Article 2, section 4, of the Arizona Constitution. ( Id. at ¶¶ XII-XIII).

Plaintiff requests that the Court enjoin Defendants from enforcing the DOT by Trustee Sale, and that the Court declare Title 33, Chapter 6.1, Article 1, unconstitutional. ( Id. at ¶XIII).


Defendants contend that there is no dispute that when Plaintiff signed the loan documents, she agreed foreclosure would be the consequence of default. Defendants assert that Plaintiff indisputably defaulted. (Motion, p. 2). According to Defendants, although Defendant ReconTrust recorded a Notice of Sale for August 15, 2012, no sale has occurred. ( Id. ). Defendants seek dismissal of this action pursuant to Fed.R.Civ.P. 12(b) for failure to state a claim.

A. Standard

"To survive a motion to dismiss [under Fed.R.Civ.P. 12(b)(6)], a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face;' that is, plaintiff must plead[ ] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Telasaurus VPC, LLC. v. Power, 623 F.3d 998, 1003 (9th Cir. 2010), cert. denied, ___ U.S. ___ , 132 S.Ct. 95 (2011), ( quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)); see also Moss v. United States Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (to defeat a motion to dismiss, the "non-conclusory factual content, ' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief."). Dismissal under Rule 12(b)(6) "can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't., 901 F.2d 696, 699 (9th Cir. 1990), abrogated on other grounds by Bell Atl. Corp. v. Twombly, 530 U.S. 544 (2007).

"[T]he tenet that a court must accept as true all of the allegations contained in a complaint..." does not apply to legal conclusions. Iqbal, 556 U.S. at 678; see also Telasaurus, 623 F.3d. at 1003 (pleadings that are no more than legal conclusions "are not entitled to the assumption of truth.'") ( quoting Iqbal, 556 U.S. at 679). Thus, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678. Moreover, the court "cannot assume any facts necessary to [the plaintiffs']... claim that they have not alleged." Jack Russell Terrier Network of Northern Calif. v. American Kennel Club, Inc., 407 F.3d 1027, 1035 (9th Cir. 2005).

However, the court will assume "well-pleaded factual allegations, '... to be true, and then determine whether they plausibly give rise to an entitlement to relief.'" Telasaurus, 623 F.3d. at 1003 ( quoting Iqbal, 556 U.S. at 679); see also Iqbal, 556 U.S. at 678 ("A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."). "The plausibility standard is not akin to a probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678. Determining plausibility is a "context-specific task..." that requires the court to "draw on its judicial experience and common sense." Id. at 679. A complaint cannot survive dismissal where the court can only infer that a claim is merely possible rather than plausible. Id.

As a general rule, the district court may not consider any material beyond the pleadings when resolving a motion to dismiss for failure to state a claim. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2002), impliedly overruled on other grounds as discussed in Gallardo v. DiCarlo, 203 F.Supp.2d 1160, 1162 n.2(C.D. Cal. 2002). However, the court may consider material submitted as part of the complaint, such as the exhibits which Plaintiff has attached to her Complaint. See Id.

B. Count One

"Arizona's Deed of Trust Act (the Act), A.R.S. §§ 33-801 to 33-821, first authorizes deeds of trust and then provides a detailed and comprehensive framework for carrying out non-judicial foreclosures." In re Krohn, 203 Ariz. 205, 215, 52 P.3d 774, 784 (2002). "The Act is a comprehensive set of statutes governing the execution and operation of deeds of trust." In re Bisbee, 157 Ariz. 31, 32, 754 P.2d 1135, 1137 (1998); see also Patton v. First Fed. Sav. & Loan Ass'n. of Phoenix, 118 Ariz. 473, 476, 578 P.2d 152, 155 (1978) (Arizona's Deed of Trust "statutes set forth the only procedure for a valid trustee's sale."). The Arizona court has recognized that in contrast to a mortgage, which "generally may be foreclosed only by filing a civil action..., under a Deed of Trust, the trustee holds a power of sale permitting him to sell the property out of court with no necessity of judicial action." Patton, 473 Ariz. at 477, 578 P.2d at 156. See also Hogan v. Washington Mut. Bank, 230 Ariz. 584, ¶5, 277 P.3d 781, 782-83 (2012) ( en banc ) ("When parties execute a deed of trust and the debtor thereafter defaults, A.R.S. §33-807 empowers the trustee to sell the real property securing the underlying note through a non-judicial sale.").

Plaintiff alleges that Defendants are not proper parties to enforce the DOT because they do not have an interest in the Note. (Complaint, ¶X). Relying on Carpenter v. Longan, 16 Wall 271, 83 U.S. 271 (1822), Plaintiff argues that "the note and mortgage are inseparable." (Response, p. 2). Therefore, according to Plaintiff, because the Note is owned by Fannie Mae, "MERS [] had nothing to assign to Defendant Bank of America, and Bank of American had no right or authority to record a substitution of trustee." ( Id. ). However, as Defendants point out, the Arizona Supreme Court has held that beneficiaries are not required to show ownership of the note that a deed of trust secures before a trustee can conduct a non-judicial foreclosure sale. Hogan, 230 Ariz. at ¶8, 277 P.3d at 783. Instead, "[t]he only proof of authority the trustee's sales statutes require is a statement indicating the basis for the trustee's authority." Id. (citations omitted) (emphasis added). See also Cardin v. Wilmington Finance, Inc., 2013 WL 1123815 at *2 (D. Ariz. Mar. 18, 2013) (relying on Hogan and other cases from the District of Arizona to reject the plaintiffs' claim based on "the theory that in order to foreclose[, ] a party must show possession of the original note...."); Hensley v. Bank of New York Mellon, 2013 WL 791294 at *5 (D. Ariz. Mar. 4, 2013) (relying on Hogan to reject the plaintiff's claim that the defendant must show ownership or otherwise document its right to enforce the underlying note prior to selling the real property secured by the underlying note through a non-judicial sale.). Further, in rejecting reliance on Carpenter to prevent a trustee's sale under Arizona's Deed of Trust statutes, the District Court for the District of Arizona has found Carpenter inapposite given that Carpenter did not address "whether the lender was required to show possession of the note in order to enforce the mortgage. As noted by another district court, Carpenter concerns a loan that had not yet matured and not a home mortgage in default as in the present case.'" Maxa v. Countrywide Loans, Inc., 2010 WL 2836958, at *4 (D. Ariz. July 19, 2010) ( quoting Nicholson v. OneWest Bank, 2010 WL 2732325 at *4 n.5 (N.D.Ga. Apr. 20, 2010)). The Maxa Court's sound reasoning applies equally in the instant case. Moreover, as discussed below, there is no inference that the trustee in this case lacks the authority to act on behalf of the lender. See Cervantes, 656 F.3d at 1044.

Plaintiff also alleges in Count One that Ms. Abramoff and Mr. Cannon, who made assignments to Defendant BOA on behalf of MERS, were not employees or officers of MERS and had no authority to execute the assignments. (Complaint, ¶¶VI, VII). Plaintiff bases these allegations on her information and belief. ( Id. ). Defendants argue that Plaintiff's assertions are not supported by "factual allegations, but unsupported conclusions to which this Court is not bound." (Motion, p. 7 (citations omitted)). Defendants also argue that "[r]egardless of whether or not Jeanine [sic] Abramoff, Anthony Cannon, or Laurie Bayona[3] had authority when they executed the documents, Defendants do not contest their actions, and therefore, ratify them." ( Id. at p. 7 ( citing Brown v. Bank of America N.A., 2011 WL 2633150, at *1 (D. Nev. July 5, 2011)). Plaintiff did not respond to Defendants' argument on this issue. "Parties must come forward with their points and authorities in support of or in opposition to a motion." E.E.O.C. v. Eagle Produce, L.L.C., 2008 WL 2796407, at *2 (D. Ariz. July 18, 2008). Plaintiff's failure to respond to Defendants' argument "serves as an independent basis upon which to grant..." Defendants' Motion to Dismiss on this issue. Currie v. Maricopa County Cmty. Coll. Dist., 2008 WL 2512841, at *2 n.1 (D. Ariz. June 20, 2008).

Moreover, Plaintiff provides absolutely no factual or legal basis for her allegations that Ms. Abramoff and Mr. Cannon were not employees of MERS and/or had no authority to make the assignments. "[A]lthough allegations upon information and belief' may state a claim after Iqbal and Twombly, a claim must still be based on factual content that makes liability plausible, and not be formulaic recitations of the elements of a cause of action.'" Klohs v. Wells Fargo Bank, N.A., ___ F.Supp.2d ___, 2012 WL 4758126, at *5 n.2 (D. Haw. Oct. 4, 2012) ( quoting Long v. Yomes, 2011 WL 4412847, at *4 (D. Haw. Sept. 20, 2011) quoting Twombly, 550 U.S. at 555); see also Solis v. City of Fresno, 2012 WL 868681, at *8 (E.D. Cal. Mar. 13, 2012) ("In the post- Twombly and Iqbal era, pleading on information and belief, without more, is insufficient to survive a motion to dismiss for failure to state a claim."). "The facts alleged must be sufficient to nudge the claims across the line from conceivable to plausible.'" Solis, 2012 WL 868681, at *8 ( quoting Twombly, 550 U.S. at 547). On the instant record, Plaintiff's conclusory allegations fail to state a claim. See Bergdale v. Countrywide Bank FSB, 2012 WL 4120482, at *5 (D. Ariz. Sept. 18, 2012) (rejecting claim that individual did not have authority to sign as Assistant Secretary of MERS where such claim had no legal support and the plaintiff "pleads no fact that suggests that [the individual named] was not an Assistant Secretary of MERS."); Phillips v. Wells Fargo Bank, N.A., 2009 WL 3756698 at *4 (S.D. Cal. Nov. 6, 2009) (dismissing claim where the plaintiff failed to support allegation that assignment was made by an individual who was not Vice President of MERS).

For the foregoing reasons, Count One will be dismissed.

C. Count Two

In Count Two, Plaintiff alleges that the provisions of Arizona's Deed of Trust Act, which "grant[s] private parties the power to foreclosure security instrument [sic] without judicial oversight" denies "the right of judicial relief" and, therefore, violates the "right to due process as provided in the First and Fourteenth Amendments to the United States Constitution and Article 2, section 4 of the Arizona Constitution." (Complaint, ¶¶XII-XIII). Plaintiff requests that the Court declare the Act unconstitutional. ( Id. at ¶XIII).

Defendants argue that they are not state actors and, thus, Plaintiff fails to state a due process claim against them. (Motion, pp. 7-9). In response, Plaintiff agrees that her due process claim does not apply to private parties such as Defendants. (Response, p. 3); see also Dimond v. Samaritan Health Service, 27 Ariz.App. 682, 558 P.2d 710 (App. 1977) ("The Fourteenth Amendment of the United States Constitution applies only to state action and not to private conduct. Burton v. Wilmington Parking Auth., 365 U.S. 715 (1961).... Likewise, Article 2, Sec. 4 of the Arizona Constitution applies only to state action."). Instead, Plaintiff asserts that her "claim is based... on the act of the Legislature in enacting the non-judicial foreclosure process." (Response, p.3). Plaintiff further contends that "[i]t is the action of the Arizona Legislature that fails to provide some mechanism for the intervention of some disinterested third party agency, whether administrative or judicial, to determine the merits of a claim for foreclosure of property interest that constitutes a denial of due process require [sic] by the [F]ourteenth Amendment of the U.S[.]... Constitution." ( Id. ). Plaintiff's counsel indicates that he provided a copy of the Complaint to the Arizona Attorney General.[4] ( Id. ). Plaintiff also offers to amend the Complaint to name the Arizona Attorney General as a party. ( Id. at pp. 3-4).

Contrary to Plaintiff's assertion that she has been deprived of "the right of judicial relief" (Complaint, ¶XIII), "Arizona law requires that homeowners be given 90 days' notice of a trustee sale. A.R.S. § 33-808(C); A.R.S. §33-809(C)[]", the intent of which is "to afford homeowners ample time to protect their interests." Coleman v. American Home Mortg. Servicing Corp., 2010 WL 1268141, at *4 (D.Ariz. Mar. 30, 2010) ("The state statutes afford [plaintiff] time to seek redress in court if she believes the trustee's sale is defective."). More importantly, "Deeds of Trust are essentially private contractual relationships which tie a given debt to a given parcel of property." Kenly v. Miracle Properties, 412 F.Supp. 1072, 1075 (D.Ariz. 1976). In upholding state statutes like Arizona's that merely authorize private parties to contract for the express terms of foreclosure upon default, the Ninth Circuit has been clear that there is "no state action in either the availability of such private remedies or their enforcement." Apao v. Bank of N.Y., 324 F.3d 1091, 1094-95 (9th Cir. 2002); see also Charmicor, Inc., v. Deaner, 572 F.2d 694, 696 (9th Cir. 1978) (finding no state action where plaintiffs challenged Nevada's non-judicial foreclosure statute on due process grounds); see also Robinson v. Bank of New York Mellon, 2011 WL 810658 (citing Apao to reject the plaintiff's due process claim regarding Arizona's Deed of Trust statutes and stating: "[p]laintiffs voluntarily contracted with a private party and agreed to confer a power of sale upon the trustee in the Deed of Trust. The trustee is now invoking that power, not the power of the state."); Coleman, 2010 WL 1268141, at *4 n.1 ("Ninth Circuit authority is clear... that the Fourteenth Amendment does not apply to private action. See Single Moms, Inc., v. Mont. Power Co., 331 F.3d 743, 746-43 (9th Cir. 2003); Apao v. Bank of N.Y., 324 F.3d 1091, 1093 (9th Cir. 2003)."). Consequently, Count Two is dismissed.

D. Amendment

Plaintiff seeks leave to amend to name the Arizona Attorney General as a party regarding her due process claim. (Response, pp. 3-4). When dismissing for failure to state a claim, the court should grant leave to amend unless amendment would be futile. See Cervantes, 656 F.3d at 1041 ("Although leave to amend should be given freely, a district court may dismiss without leave where a plaintiff's proposed amendments would fail to cure the pleading deficiencies and amendment would be futile.") (citation and footnote omitted). In light of Apao, the addition of the Arizona Attorney General as a party would not revive Plaintiff's due process claim. Additionally, given that the law is settled against Plaintiff's "show-the-note" theory alleged in Count One, amendment would be futile on that Count as well. See Mortgage Electronic Registration Systems Litigation MDL, 2012 WL 1931365, at *4 (D. Ariz. May 25, 2012) (denying leave to amend "[b]ecause Plaintiff's claims depend on legal theories that have repeatedly been rejected by this Court, and in light of the foregoing analysis, the Court finds that Plaintiff's Complaint could not be cured of allegations of other facts and, thus, allowing Plaintiff to amend her Complaint would be futile."). Accordingly, Plaintiff should not be granted leave to amend her Complaint.


For the foregoing reasons, Plaintiff has failed to allege claims upon which relief may be granted. Therefore, the Magistrate Judge recommends that the District Court grant Defendants' Motion to Dismiss (Doc. 14).

Pursuant to 28 U.S.C. §636(b) and Rule 72(b)(2) of the Federal Rules of Civil Procedure and LRCiv 7.2(e), Rules of Practice of the U.S. District Court for the District of Arizona, any party may serve and file written objections within fourteen (14) days after being served with a copy of this Report and Recommendation. A party may respond to another party's objections within fourteen (14) days after being served with a copy. Fed.R.Civ.P. 72(b)(2). No replies to objections shall be filed unless leave is granted from the district court to do so. If objections are filed, the parties should use the following case number: CV 12-621-TUC-JGZ.

Failure to file timely objections to any factual or legal determination of the Magistrate Judge may be deemed a waiver of the party's right to de novo review of the issues. See United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir.) ( en banc ), cert. denied, 540 U.S. 900 (2003).

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