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Beck v. U.S. Bank National Association

Court of Appeals of Arizona, First Division, Department C

September 12, 2013

FRANK T. BECK and KIMBERLY K. BECK, Plaintiffs/Appellants/ Cross-Appellees,
U.S. BANK NATIONAL ASSOCIATION, as Trustee relating to Chevy Chase Funding LLC Mortgage Backed Certificates Series 2006-3; SPECIALIZED LOAN SERVICING, LLC; TIFFANY & BOSCO, P.A., Defendants/Appellees/ Cross-Appellants.

Not for Publication -Rule 28, Arizona Rules of Civil Appellate Procedure

Appeal from the Superior Court in Maricopa County Cause No. CV2010-054881 The Honorable Linda H. Miles, Judge

Law Offices of Beth K. Findsen, PLLC Scottsdale By Beth K. Findsen Attorneys for Plaintiffs/Appellants/Cross-Appellees.

Tiffany & Bosco, P.A. Phoenix By Kevin P. Nelson Attorneys for Defendants/Appellees/Cross-Appellants


DIANE M. JOHNSEN, Chief Judge.

¶1 Frank T. Beck and Kimberly K. Beck appeal from the superior court's dismissal of their complaint against U.S. Bank National Association, as Trustee relating to Chevy Chase Funding LLC Mortgage Backed Certificates Series 2006-3; Specialized Loan Servicing, LLC; and Tiffany & Bosco, P.A. (collectively, "Appellees"). Appellees cross-appeal from the superior court's failure to award them attorney's fees. We affirm the superior court judgment in its entirety.


¶2 In 2006 the Becks executed a note (the "Note") promising to repay $1, 068, 750 to Valley Mortgage & Investment, Inc. The Note was endorsed to Chevy Chase Bank, F.S.B. It is undisputed that the Becks are in default under the Note. The Note was secured by a deed of trust that identified the Becks as the trustors, First American Title Insurance Company as the trustee and Mortgage Electronic Registration Systems, Inc. ("MERS"), "acting solely as a nominee for Lender and Lender's successors and assigns, " as the beneficiary.

¶3 In February 2010, MERS purported to assign "all beneficial interest" in the deed of trust to "US Bank, NA as trustee for CCB Libor Series 2006-A Trust" ("first assignment"). In apparent recognition that that assignment was in error, Capital One, N.A., the successor by merger to Chevy Chase Bank, F.S.B., recorded a "corrective assignment" of the deed of trust in July 2010. The corrective assignment stated that it would replace the first assignment and named "U.S. Bank National Association, as Trustee relating to Chevy Chase Funding LLC Mortgage Backed Certificates Series 2006-3" ("U.S. Bank") as the beneficiary of the deed of trust. In August 2010, MERS assigned its beneficial interest in the deed to U.S. Bank ("third assignment").

¶4 Almost immediately, U.S. Bank then substituted Quality Loan Service Corporation as the trustee of the deed of trust. While Quality Loan Service Corporation initially recorded a "Notice of Trustee's Sale" to be held on November 12, 2010, it recorded a cancellation of the sale a month later. U.S. Bank then recorded a second substitution of trustee in October 2010, naming Michael A. Bosco, Jr., as the successor trustee and Bosco, as trustee, recorded a second "Notice of Trustee's Sale" to be held on January 20, 2011.

¶5 In December 2010 the Becks filed a complaint for declaratory judgment, quiet title and "other relief" against Appellees and a number of other related parties.[1] At their request, the superior court entered a temporary restraining order enjoining the trustee's sale but ordered the Becks to file a bond of $40, 000 by January 31, 2011, to secure the injunction. The Becks failed to file the bond and sought other emergency relief from the superior court, but while their request was pending, the property was sold at a trustee's sale on February 3, 2011. At the sale, the beneficiary under the deed of trust, U.S. Bank, purchased the property with a credit bid of $1, 249, 830.35. The trustee's deed upon sale was recorded on February 8, 2011.

¶6 On February 17, the Becks filed a first amended complaint, which Appellees moved to dismiss. The court granted the motion to dismiss, but allowed the Becks to file a second amended complaint.

¶7 In their second amended complaint, the Becks asserted Appellees violated Arizona Revised Statutes ("A.R.S.") section 33-420 (West 2013) by recording documents that asserted false claims relating to the property.[2] The Becks also sought to quiet title as to parties asserting an interest in the property through those alleged false recordings. The complaint alleged Appellees recorded six documents regarding the property that "contain[ed] material misrepresentations purporting to create an interest in the Subject Property." The documents the Becks identified were the first, corrective and third assignments, the substitution of Bosco as trustee, the second notice of the trustee's sale and the trustee's deed upon sale. The Becks alleged that due to alleged false statements within each of the documents, each of them either assigned an interest improperly and/or that the recording was made by an individual who did not have authority to execute and/or record such a document. Generally speaking, the Becks alleged that because the various assignments were improper, U.S. Bank could not be the true beneficiary of the deed of trust. Accordingly, the Becks asserted that U.S. Bank had neither the power to appoint Bosco as trustee with authority to initiate a trustee's sale nor the power to make a credit bid at the trustee's sale.

¶8 The complaint also alleged that Bosco and the law firm that conducted the trustee's sale, Tiffany & Bosco, P.A., should be required to disgorge the price for which the Becks' property was purchased at the trustee's sale. The Becks alleged that because U.S. Bank was not a valid beneficiary entitled to make a credit bid at the trustee's sale in satisfaction of the loan, it was obliged to pay its bid price entirely in cash, and Bosco wrongfully withheld those proceeds from them. The Becks therefore demanded judgment for the full amount that U.S. Bank had bid at the sale.

¶9 Appellees moved to dismiss the second amended complaint pursuant to Arizona Rule of Civil Procedure ("Rule") 8(a)(2) for failure to contain a "short and plain statement of the claim" and Rule 12(b)(6) for failure to state a claim. The court granted the motion to dismiss and dismissed the Becks' claims with prejudice. Appellees then filed an application for attorney's fees and costs, requesting fees of "not less than $65, 207.50" and costs of $309. After the Becks objected, the court awarded Appellees "$0" in attorney's fees and $309 in taxable costs.

¶10 The Becks timely appealed, and Appellees filed a timely cross-appeal. We have jurisdiction pursuant to Article 6, Section 9, of the Arizona Constitution, and A.R.S. §§ 12-120.21(A)(1) (West 2013) and -2101(A)(1) (West 2013).


A. Legal Principles.

¶11 We review de novo the grant of a Rule 12(b)(6) motion to dismiss. Coleman v. City of Mesa, 230 Ariz. 352, 356, 8, 284 P.3d 863, 867 (2012) . In reviewing a dismissal of a complaint for failure to state a claim,

Arizona courts look only to the pleading itself and consider the well-pled factual allegations contained therein. Courts must also assume the truth of the well-pled factual allegations and indulge all reasonable inferences therefrom. Because Arizona courts evaluate a complaint's well-pled facts, mere conclusory statements are insufficient to state a claim upon which relief can be granted.

Cullen v. Auto-Owners Ins. Co., 218 Ariz. 417, 419, ¶ 7, 189 P.3d 344, 346 (2008) (citations omitted).[3] Although the superior court did not specify the grounds upon which it granted the motion to dismiss, we may affirm for any reason supported by the record. See Dube v. Likins, 216 Ariz. 406, 417, ¶ 36, n.3, 167 P.3d 93, 104 (App. 2007).

¶12 We generally review a superior court's award of attorney's fees for an abuse of discretion. Gutierrez v. Gutierrez, 193 Ariz. 343, 351, ¶ 32, 972 P.2d 676, 684 (App. 1998). "An abuse of discretion is discretion manifestly unreasonable, or exercised on untenable grounds, or for untenable reasons." Benkendorf v. Advanced Cardiac Specialists Chartered, 228 Ariz. 528, 530, ¶ 7, 269 P.3d 704, 706 (App. 2012) (quotation omitted). Whether a fee statute applies to an award of attorney's fees, however, is a question of law reviewed de novo. See Burke v. Ariz. State Ret. Sys., 206 Ariz. 269, 272, 6, 77 P.3d 444, 447 (App. 2003).

B. The Complaint Properly Was Dismissed for Failure to State a Claim.

1. The assignments of the beneficiary of the deed of trust, the substitution of the trustee and the notice of trustee's sale do not constitute misrepresentations "material" to the Becks.

¶13 Section 33-420(A) provides:

A person purporting to claim an interest in, or a lien or encumbrance against, real property, who causes a document asserting such claim to be recorded in the office of the county recorder, knowing or having reason to know that the document is forged, groundless, contains a material misstatement or false claim or is otherwise invalid is liable to the owner or beneficial title holder of the real property for the sum of not less than five thousand dollars, or for treble the actual damages caused by the recording, whichever is greater, and reasonable attorney fees and costs of the action.

¶14 The Becks argue the first, corrective and third assignment, the second substitution of trustee, the second notice of the trustee's sale and the trustee's deed upon sale all contain a variety of "material misrepresentations of which the recording parties knew or should have known."[4]

¶15 With regard to the first five documents, the Becks assert that each assignment and substitution was improperly executed, rendering each purported transfer invalid. Even assuming that the assignments and the ultimate substitution of Bosco as trustee were invalid, however, the Becks have no remedy under § 33-420(A). The statute allows a claim against one who records a document knowing or with reason "to know that the document is forged, groundless, contains a material misrepresentation or false claim or is otherwise invalid." A.R.S. § 33-420(A) (emphasis added). "A misrepresentation is material if a reasonable person 'would attach importance to its existence or nonexistence in determining [his or her] choice of action in the transaction in question.'" Caruthers v. Underhill, 230 Ariz. 513, 521, ¶ 28, 287 P.3d 807, 815 (App 2012) (quoting Restatement (Second) of Torts § 538(2)(a) (1977)).

¶16 Here, the first five disputed documents purported to change the beneficiary or the trustee of the trust deed. Yet the alleged misrepresentations in the recorded documents with respect to those changes were immaterial to the Becks. Sitton v. Deutsche Bank Nat. Trust Co., No. 1 CA-CV 12-0557, 2013 WL 4766283, at ¶¶ 32-33 (Ariz. App. September 5, 2013).

¶17 The Becks indisputably executed the Note, which indisputably was secured by a deed of trust that named "MERS . . and the successors and assigns of MERS" as the beneficiary of the deed. Under the express terms of the deed of trust, the Becks' admitted default gave MERS or its successors and assigns "the right to foreclose and sell the [p]roperty." The Becks' liability, as secured by the trust deed, was unaffected by any assignment of the deed of trust. Id. While the confusion among the various recorded assignments could be material to a prospective assignee trying to determine whether to purchase an interest in the property, the identity of the beneficiary or trustee is immaterial to the Becks and to their rights and obligations with respect to the Note. Id. The deed of trust the Becks gave as security for their debt specifically allowed for the transfer of the beneficiary's interest and provided that if the Becks defaulted on the Note, the beneficiary had the power to foreclose. From the Becks' standpoint, given their default on the Note, it was irrelevant what party ultimately became the beneficiary or the trustee, or how.

2. The Becks lack standing to sue for the recording of the trustee's deed.

¶18 The Becks seek damages under § 33-420(A) for the recording of the trustee's deed upon sale, a document necessarily recorded after the trustee's sale was complete and the deed conveyed to U.S. Bank. Section 33-420(A) allows only an "owner" or "beneficial title holder" of real property to assert a claim for damages for recording a false document. After the trustee's sale of their property, however, the Becks retained no ownership interest in the property. See A.R.S. § 33-811(E) (West 2013); Madison v. Groseth, 230 Ariz. 8, 13, ¶ 15, 279 P.3d 633, 638 (App. 2012) (trustee's sale extinguished all interests and claims of prior owner/trustor).

¶19 Because the Becks no longer had any title or interest in the property per § 33-811(E) after the trustee's sale, they were not "owners" pursuant to § 33-420(A) and therefore they lack standing to assert a claim for damages from the recording of the trustee's deed upon sale.

C. The Becks' Suit to Quiet Title Is Barred by § 33-811.

¶20 Appellees argue the Becks' quiet title claim is barred pursuant to the operation of A.R.S. § 33-811. The statute provides that

the trustor . . . 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 schedule date of the sale.

A.R.S. § 33-811(C). Under the statute, if a trustor fails to enjoin a scheduled trustee's sale, the trustor waives all claims of title to the property. BT Capital, LLC v. TD Serv. Co. of Ariz., 229 Ariz. 299, 301, ¶ 11, 275 P.3d 598, 600 (2012); see also Madison, 230 Ariz. at 13, 15, 279 P.3d at 638 ("It is undisputed [appellant] did not obtain an injunction prior to the trustee's sale of the Property. By operation of § 33-811(C), therefore, she waived all defenses and objections to the sale.") .

¶21 The Becks did not obtain an injunction to halt the second trustee's sale of their home. Pursuant to § 33-811(C), they therefore waived all claims to title. While the Becks argue that the statute does not apply here because they "had brought the underlying lawsuit, and had obtained an order, and were actively seeking an emergency hearing regarding the bond, " none of these actions is sufficient to preserve the Becks' quiet title action.

¶22 Although the Becks obtained an injunction enjoining the first scheduled trustee's sale, the injunction dissolved automatically when they failed to tender the $40, 000 bond required by the court. That the Becks' emergency motion offering an alternative bond was still pending when the trustee's sale was conducted is immaterial.

D. The Becks' Claim for Disgorgement of the Sale Price Is Waived Pursuant to § 33-811(C).

¶23 Section 33-811(A) provides that "[t]he highest bidder at the sale, other than the beneficiary to the extent of the credit bid, shall pay the price bid . . . ." (Emphasis added). Section 33-812 requires the proceeds of a trustee's sale to be allocated in a specific order of priority, with the trustee to provide notice to the trustor within 15 days of the sale of any excess proceeds. A.R.S. § 33-812(A)-(B) (West 2013).[5] The Becks allege that because U.S. Bank was not a valid beneficiary entitled to make a credit bid at the trustee's sale, U.S. Bank was obliged to pay its $1, 249, 830.35 bid price entirely in cash. From that premise, they allege that Bosco should have paid them the entirety of U.S. Bank's credit bid.

¶24 We cannot conclude the superior court erred by granting Appellees' motion to dismiss this claim. In the first place, even assuming that, as the Becks argue, U.S. Bank was not authorized to make a credit bid for the property, the Becks fail to specify how the full credit bid would constitute excess proceeds subject to distribution to the trustor under the statute. Section 33-812(A) specifies that after satisfying the costs of conducting the sale, payment must be made on the contract secured by the trust deed - in this case, the Note. The Becks do not provide any information regarding how much was still owed on the Note at the time of the sale, or how their claim to the proceeds of the sale was superior to the claims to which § 33-812(A) grants priority. It is clear, however, that regardless of how much was still owed on the Note, the Becks do not dispute that some outstanding debt remained, meaning they are not entitled to the full bid price as they claim.

¶25 Second, the Becks' complaint and brief to this court simply list a number of statutes that govern trustees' sales and how proceeds should be allocated after a trustee's sale without explaining how Bosco and Tiffany & Bosco, P.A. allegedly violated those statutes. The Becks fail to provide any authority for their implicit contention that the consequence of a trustee's improper acceptance of a credit bid is that the trustee must pay to the trustor an amount equal to the credit bid. In the absence of any legal authority for the premise of their claim, we cannot conclude the superior court erred by dismissing it.

E. The Superior Court Did Not Err by Denying Appellees' Request for Attorney's Fees.

¶26 Appellees' claim for attorney's fees was based on two grounds.[6]The first is that the deed of trust contractually entitles them to fees. But nothing in the deed of trust explicitly mandates a court award of attorney's fees. The deed provides that the "Lender may charge Borrower fees for services performed in connection with Borrower's default, . . . including, but not limited to, attorneys' fees . . . ." (Emphasis added). That provision allows the lender to add any attorney's fees it may have incurred to the total amount owed under the Note but does not mandate an award of attorney's fees by the court. In that manner, it is distinct from other contractual provisions that may require a court award of attorney's fees. See Chase Bank of Ariz. v. Acosta, 179 Ariz. 563, 575, 880 P.2d 1109, 1121 (App. 1994) ("The undersigned agree to pay all costs of collection when incurred, including reasonable attorneys' fees."); Sweis v. Chatwin, 120 Ariz. 249, 251, n.2, 585 P.2d 269, 271 (App. 1978) ("In the event that any of the parties to this Agreement are required to resort to judicial or arbitration proceedings for the enforcement of this Agreement, then in that case the successful or prevailing party shall be entitled to recover from the other party or parties, all costs of such judicial or arbitration proceedings, including reasonable attorney's fees.").

¶27 Appellees also argue that the superior court should have granted them their fees pursuant to either A.R.S. §§ 12-349(A) (West 2012) or 12-341.01 (West 2012) . Section 12-349(A) allows an award of reasonable attorney's fees against a party that either "[b]rings or defends a claim without substantial justification, " "[b]rings or defends a claim solely or primarily for delay or harassment, " or who "[u]nreasonably expands or delays the proceeding." "'Without substantial justification' means that the claim or defense constitutes harassment, is groundless and is not made in good faith." A.R.S. § 12-349(F). Appellees argue that the Becks' numerous filings and motions, only one of which was granted (the injunction enjoining the first trustee's sale), demonstrate that their claims were brought without substantial justification.

¶28 On this record, we cannot say that the superior court abused its discretion in determining Appellees were not entitled to attorney's fees pursuant to § 12-349(A). While the Becks did file various iterations of their original complaint, each new complaint was either ordered or permitted by the superior court. Additionally, every subsequent version of the complaint developed the Becks' various arguments more fully. While the Becks did not prevail, their filings are not so clearly without substantial justification as to justify reversal of the superior court's determination to deny fees to Appellees under § 12-349(A).

¶29 We also are not persuaded by Appellees' argument that the court erred by denying their request for attorney's fees pursuant to § 12-341.01(A). The statute provides that "[i]n any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees." A.R.S. § 12-341.01(A). Appellees argue that because a deed of trust is a form of contract under Arizona law, and because they were the successful party in the underlying litigation, the statute allows for an award of attorney's fees. To be sure, the Becks' claims would not have existed but for the deed of trust they executed in making the Note. But the claims they asserted were based in statute, not on the deed of trust.

¶30 Hanley v. Pearson, 204 Ariz. 147, 151, 17, 61 P.3d 29, 33 (App. 2003), illustrates the distinction. In that case we held that § 12-341.01(A) did not apply to an action brought pursuant to A.R.S. § 33-812(D) (West 2000) seeking the excess proceeds paid in a trustee's sale. Id. at 149, 4, 61 P.3d at 30. We reasoned that the deed of trust "formed only a factual predicate for the action and was not its essential basis. The issue before the trial court was whether the excess trustee's sale proceeds must be used to satisfy the tax lien before distribution to [appellee]. . . . [T]he essential basis for the dispute was the meaning of § 33-812(A)(3), and the case did not therefore arise out of a contract." Id. at 151, 18, 61 P.3d at 33 .

¶31 Similarly, in this case, while the deed of trust is a necessary predicate for the Becks' claims, it is not the essential basis of their action, which concerned alleged false recordings and asserted a claim to quiet title to the property. Accordingly, we cannot conclude that the superior court abused its discretion in determining that Appellees were not entitled to fees under A.R.S. § 12-341.01(A).


¶32 We affirm the superior court's judgment. For the reasons set forth above, we deny Appellees' request for attorney's fees on appeal pursuant to A.R.S. §§ 12-341.01 (A) and -349. As the prevailing party on the Becks' appeal, however, Appellees are entitled to an award of costs under § 12-341 (West 2013), upon their compliance with ARCAP 21.


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