United States District Court, D. Arizona
Shizue S. White, Plaintiff,
Aurora Loan Services LLC, et al., Defendants.
A. Teilborg Senior United States District Judge
before the Court is Defendants' Motion for Summary
Judgment, (Doc. 78), and Plaintiff's Response/Cross
Motion for Summary Judgment to Defendant's [sic] Motion
for Summary Judgment, (Doc. 81). The Court now rules on the
1998, Plaintiff and her husband (the "Whites")
obtained a loan from Old Kent Mortgage Company to purchase
real property located in Sun City, Arizona. (Doc. 79 at 1).
In 2003, Plaintiff refinanced the 1998 loan with First Magnus
Financial Corporation. (Id. at 2). In 2006,
Plaintiff refinanced again, this time with Credit Union West.
(Id.) Finally, in March 2007, Plaintiff initiated
and completed a third refinance with American Brokers Conduit
("ABC"), which is evidenced by a Promissory Note
and Deed of Trust. (Id.) Plaintiff's third
refinance is the subject of this lawsuit.
time of the March 2007 refinance, Plaintiff was an elderly
widow who had lived in the United States for over fifty years
after emigrating from Japan. (Id. at 3). Before
moving to Arizona, Plaintiff owned and operated a successful
daycare business in California for twenty years.
(Id. at 1). Plaintiff's husband spoke no
Japanese, and English was the "near-exclusive"
language spoken in the Whites' household. (Id.)
in early 2007, Plaintiff called a lender seeking a lower
monthly payment on her mortgage. (Id. at 2). The
lender stated that "we can do something with interest
only." (Id.) In March 2007, a lender
representative went to Plaintiff's house to conduct the
closing. (Doc. 79-1 at 114). The representative was
"professional, " spoke exclusively English during
the closing, and did not rush Plaintiff into signing the
documents or discourage her from taking the documents to
someone else for review. (Doc. 79 at 2-3).
in the closing documents was the Promissory Note describing
Plaintiff's obligation to repay the loan. At the heart of
this dispute are the Note's payment options and negative
amortization features. These terms were disclosed to
Plaintiff at closing, including the following statement on
the first page of the Note, in bold, capital type:
THIS NOTE CONTAINS PROVISIONS ALLOWING FOR CHANGES IN MY
INTEREST RATE AND MY MONTHLY PAYMENT. DURING THE FIRST 5
YEARS OF THIS NOTE, MY MONTHLY PAYMENT MAY NOT FULLY PAY THE
INTEREST THAT ACCRUES. AS A RESULT, THE PRINCIPAL AMOUNT I
REPAY MAY BE LARGER THAN THE AMOUNT ORIGINALLY BORROWED.
(Id. at 3). The closing documents also included a
four-page "Variable Rate Mortgage Program Disclosure,
" which outlined the general aspects of variable rate
mortgages. (Id.) During her deposition, Plaintiff
testified that she understood the concept of an interest-only
loan and could comprehend the interest-only disclosures and
variable rate mortgage documents that she signed at closing.
(Id.) However, despite understanding that a
promissory note creates a binding legal obligation to repay
the underlying loan, Plaintiff did not read any of the
documents before she signed them at closing. (Id. at
the March 2007 closing, Plaintiff received monthly statements
expressly detailing her payment options and their impact on
the loan's principal. (Id. at 4). Specifically,
the monthly statements explained the differences between an
accelerated payment, a full monthly payment, an interest-only
payment, and a minimum payment that did not fully cover the
accrued monthly interest. (Id.) For example, the
statements described "minimum amount due" as
"[t]his amount will not be sufficient to pay all the
accrued interest for the month or to pay the loan in full
over the remaining term in equal monthly installments.
Therefore negative amortization may result and any deferred
interest will be added to the balance of your loan."
(Doc. 79-2 at 4). Despite the four payment options available
to her, Plaintiff chose to make minimum payments which, in
turn, increased the loan's principal. (Doc. 79 at 4).
Plaintiff testified that she first noticed the increased
principal balance in 2008, but did not take any action until
the minimum payment period expired in 2011. (Id.) At
that point, Plaintiff spoke with her son about the principal
increase. (Id.) This lawsuit was filed in May 2014.
the ownership and property interests in the Note and Deed of
Trust, the original lender on the Note was ABC. (Doc. 79 at
1). At that time, the Note was secured by a Deed of Trust
under which the Trustee was Chicago Title Insurance Company
and the beneficiary was Mortgage Electronic Registrations
Systems, Inc. ("MERS"). (Id.; Doc. 79-1 at
230-45). In September 2007, ABC hired Aurora Loan Services,
L.L.C. ("Aurora") to service the Note. (Doc. 79 at
6). In July 2012, Nationstar Mortgage, L.L.C.
("Nationstar") became the servicer of the Note
after it acquired Aurora. (Id.) On November 7, 2013,
MERS, "as nominee for [ABC], its successors and/or
assigns, " assigned the Note and its proceeds to U.S.
Bank as Trustee for the Certificate Holders of the LXS 2007
7N Trust Fund ("U.S. Bank"). (Doc. 79-2 at
51-52). Currently, U.S. Bank is the sole
beneficiary of the Deed of Trust and possesses the original
Note, endorsed in blank, through its agent Nationstar.
(Id.) On February 26, 2014, Nationstar, "as
Attorney in Fact for U.S. Bank, " appointed Clear Recon
Corporation as Trustee of the Deed of Trust. (Doc. 13-1 at
48). Subsequently, Clear Recon Corporation noticed a
Trustee's Sale, which this Court enjoined. (Doc. 29).
Legal Standard for Summary Judgment
judgment is appropriate when "the movant shows that
there is no genuine issue as to any material fact and that
the moving party is entitled to summary judgment as a matter
of law." Fed.R.Civ.P. 56(a). A party asserting that a
fact cannot be or is genuinely disputed must support that
assertion by "citing to particular parts of materials in
the record, " including depositions, affidavits,
interrogatory answers or other materials, or by "showing
that materials cited do not establish the absence or presence
of a genuine dispute, or that an adverse party cannot produce
admissible evidence to support the fact." Id.
at 56(c)(1). Thus, summary judgment is mandated "against
a party who fails to make a showing sufficient to establish
the existence of an element essential to that party's
case, and on which that party will bear the burden of proof
at trial." Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986).
the movant bears the burden of pointing out to the Court the
basis for the motion and the elements of the causes of action
upon which the non-movant will be unable to establish a
genuine issue of material fact. Id. at 323. The
burden then shifts to the non-movant to establish the
existence of material fact. Id. The non-movant
"must do more than simply show that there is some
metaphysical doubt as to the material facts" by
"com[ing] forward with ‘specific facts showing
that there is a genuine issue for trial.'"
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586-87 (1986) (quoting Fed.R.Civ.P. 56(e)
(1963) (amended 2010)). A dispute about a fact is
"genuine" if the evidence is such that a reasonable
jury could return a verdict for the nonmoving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). The non-movant's bare assertions, standing alone,
are insufficient to create a material issue of fact and
defeat a motion for summary judgment. Id. at 247-48.
Further, because "[c]redibility determinations, the
weighing of the evidence, and the drawing of legitimate
inferences from the facts are jury functions, not those of a
judge, . . . [t]he evidence of the nonmovant is to be
believed, and all justifiable inferences are to be drawn in
his favor" at the summary judgment stage. Id.
at 255 (citing Adickes v. S.H. Kress & Co., 398 U.S.
144, 158-59 (1970)); Harris v. Itzhaki, 183 F.3d
1043, 1051 (9th Cir. 1999) ("Issues of credibility,
including questions of intent, should be left to the
jury." (citations omitted)).
summary judgment stage, the trial judge's function is to
determine whether there is a genuine issue for trial. There
is no issue for trial unless there is sufficient evidence
favoring the non-moving party for a jury to return a verdict
for that party. Liberty Lobby, 477 U.S. at 249-50.
If the evidence is merely colorable or is not significantly
probative, the judge may grant summary judgment. Id.
Notably, "[i]t is well settled that only admissible
evidence may be considered by the trial court in ruling on a
motion for summary judgment." Beyene v. Coleman Sec.
Servs., Inc., 854 F.2d 1179, 1181 (9th Cir. 1988).
Defendants' Motion for Summary Judgment
asserts five tort claims against Defendants, namely,
negligence, common law fraud, violations of the Arizona
Consumer Fraud Act ("CFA") and Fair Debt
Collections Practices Act ("FDCPA"), and
misrepresentation. (Doc. 1 at 7-16). Plaintiff also seeks
injunctive and equitable relief. (Id.) Defendants
move for complete summary judgment. (Doc. 78). The Court will
analyze each of Plaintiff's claims in turn.
Statutes of Limitation
begin, Defendants argue that Plaintiff's five tort claims
are barred by their respective statutes of limitation. (Doc.
78 at 5-6). In response, Plaintiff contends that
"equitable tolling" applies because she has alleged
"extraordinary circumstances" that warrant tolling
of the limitation periods. (Doc. 80 at 13). Specifically,
Plaintiff argues that "[t]he determination of the
genuine issue as to the purchase of America [sic] Brokers
Conduits [sic] assets while in an active bankruptcy and the
further factual determination if such transfer was with or
without [the Bankruptcy] Court's consent as well and the
precipitous ramifications thereof may meet and exceed the
standard required to apply equitable suspension or
tolling." (Id. at 14). Plaintiff also cites two
Arizona statutes that allegedly designate a "[s]tatutory
exception that may apply to suspend or legally toll the
limitations period in this matter." (Id. at 13)
(citing Ariz. Rev. Stat. §§ 12-501, 43-722).
Plaintiff, however, does not explain how statutes involving a
person's absence from a state, see Ariz. Rev.
Stat. § 12-501, or the assessment of properties in
bankruptcy or receivership proceedings, see Id.
§ 43-722, apply to this case. Because both statutes are
inapplicable, the Court will focus its analysis on the
doctrine of equitable tolling.
Legal Standard for Equitable Tolling
Arizona, "whether to apply equitable tolling is a
question the trial court, not the jury, should
determine." McCloud v. State, 170 P.3d 691, 695
(Ariz.Ct.App. 2007). Under this doctrine, Plaintiff "may
sue after the statutory time period for filing a complaint
has expired if [she] ha[s] been prevented from filing in a
timely manner due to sufficiently inequitable
circumstances." Id. (citation omitted). While
courts have applied equitable tolling in a variety of
circumstances, such requests should be granted
"sparingly." See Id. (collecting cases).
Ultimately, to obtain relief via equitable tolling, Plaintiff
must "establish extraordinary circumstances" that
were "beyond [her] control[, making] it impossible to
file the claims on time." Id. at 696 (citations
omitted); see Porter v. Spader, 239 P.3d 743, 747
(Ariz.Ct.App. 2010) ("[A] defendant whose affirmative
acts of fraud or concealment have misled a person from either
recognizing a legal wrong or seeking timely legal redress may
not be entitled to assert the protection of a statute of
limitations."). Plaintiff bears the burden of
establishing such extraordinary circumstances "with
evidence; [s]he cannot rely solely on personal conclusions or
assessments." McCloud, 170 P.3d at 695.
first cause of action, negligence, is premised on her
argument that Defendants breached a duty to her by
"creating and enforcing" the March 2007 Note which
allegedly included "unconscionable" terms. (Doc. 1
at 7). According to Plaintiff, Defendants
"deceiv[ed]" her into believing that she could
afford the repayment terms by "never expressly
indicat[ing] that the terms of the NOTE contained negative
amortization features." (Id. at 5). In other