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White v. Aurora Loan Services LLC

United States District Court, D. Arizona

July 5, 2016

Shizue S. White, Plaintiff,
v.
Aurora Loan Services LLC, et al., Defendants.

          ORDER

          James A. Teilborg Senior United States District Judge

         Pending 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 motions.

         I. Factual Background[1]

         In 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.

         At the 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.)

         Sometime 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).

         Included 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 3-4).

         After 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. (Doc. 1).

         Regarding 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).[2] 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.)[3] 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).

         II. Legal Standard for Summary Judgment

         Summary 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).

         Initially, 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)).

         At the 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).

         III. Defendants' Motion for Summary Judgment

         Plaintiff 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).[4] 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.

         A. Statutes of Limitation

         To 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).[5] 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.

         1. Legal Standard for Equitable Tolling[6]

         In 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.

         2. Negligence

         Plaintiff's 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 words, ...


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