United States District Court, D. Arizona
G. Campbell United States District Judge
Nationstar Mortgage LLC and Aurora Loan Services, LLC move
for summary judgment and have filed a statement of facts in
support of that motion. Docs. 32, 33. Plaintiffs Peter and
Renee Bayer, who are represented by counsel, have responded
(Doc. 34) and filed an “Objection to Defendants'
Evidence Submitted In Support of Summary Judgment”
(Doc. 35). Plaintiffs' “Objection” contains
both an opposing statement of facts and a 14-page memorandum
outlining specific and general objections to Defendants'
declaration of Fay Janati. Id. Defendants have
replied and moved to strike the 14-page memorandum pursuant
to LR Civ. 7.2(m)(2). Doc. 40. Neither party has requested
oral argument. Defendants' motion will be granted in part
and denied in part.
October 25, 2006, Plaintiffs signed a Deed of Trust securing
a Promissory Note in the amount of $269, 000 from GN Mortgage
LLC (“GNM”). Doc. 33, ¶¶ 1, 2. The Deed
was recorded on November 2, 2006 on property owned by
Plaintiffs at 10685 East Valley View Drive in Gold Canyon
Arizona. Doc. 1-1 ¶¶ 1, 12-14. The Note, as
submitted by Defendants, bears several endorsements. Doc. 33,
¶ 3; Doc. 32-1 at 25 (Exhibit B to the motion).
Plaintiffs object to the authenticity and admission of
Defendants' Exhibit B. Doc. 35, ¶ 3.
assert that Federal National Mortgage Association
(“Fannie Mae”) owns the debt the Note represents.
Doc. 33, ¶ 6. Nationstar is a loan servicer for Fannie
Mae, and “currently possesses the original Note
endorsed in blank.” Id., ¶¶ 4-5.
Plaintiffs dispute these facts, and assert that “no
admissible evidence demonstrates that Fannie Mae
‘owns' the debt that the Note represents” or
“reflects a servicing arrangement between Nationstar
and Fannie Mae.” Doc. 35, ¶¶ 5-6.
named beneficiary on the Deed of Trust is Mortgage Electronic
Registration Systems Inc. (“MERS”), “acting
solely as a nominee for Lender and Lender's successors
and assigns.” Doc. 33, ¶ 8. The Deed of Trust
Borrower understands and agrees that MERS holds only legal
title to the interests granted by Borrower in this Security
Instrument, but, if necessary to comply with law or custom,
MERS (as nominee for Lender and Lender's successors and
assigns) has the right to exercise any or all of those
interests, including, but not limited to, the right to
foreclose and sell the Property, and to take any action
required of Lender including, but not limited to, releasing
and canceling this Security Instrument.
Id., ¶ 9.
December 6, 2010, MERS assigned its beneficial interest under
the Deed of Trust, including “the full benefit of all
powers” contained therein, to Aurora Loan Services LLC,
effective as of November 15, 2010. Id., ¶ 10.
On June 26, 2012, Aurora assigned “all its right, title
and interest In [sic] and to said Deed of Trust” to
Nationstar, effective as of July 1, 2012. Doc. 32-1 at 47;
Doc. 33, ¶ 11. In June 2015, Nationstar executed a
Substitution of Trustee, appointing David W. Cowles as
Successor Trustee under the Deed of Trust. Doc. 33, ¶
12. On June 19, 2015, Mr. Cowles recorded a Notice of
Trustee's Sale, setting the property to be sold at public
auction on September 25, 2015. Id., ¶ 13; Doc.
32-1 at 52 (Exhibit G - Notice of Trustee's Sale). A
“Notice of Statement of Breach or
Non-Performance” is attached to the Notice of
Trustee's Sale, and states that Plaintiffs breached the
Note and Deed of Trust for “failure to make monthly
payments of $1, 160.87 each, from 8/01/13 and all subsequent
installments.” Doc. 33, ¶ 14; Doc. 32-1 at 54.
do not deny that these events - the assignments,
substitution, and filing of Notices as reported by Defendants
- occurred, but rather dispute the legal effect of the acts
and the authority of the entities performing them. Doc. 35,
¶¶ 10-14. Plaintiffs further dispute
Defendants' assertion that Plaintiffs failed to make
payments from August 2013 forward, and argue that payments
they made between 2013 and 2015 were either returned,
misapplied, or assessed to unauthorized charges and fees.
Id., ¶ 14.
November 18, 2015, Plaintiffs filed this action against
Aurora, Nationstar, and Cowles in Pinal County Superior
Court, and requested a Temporary Restraining Order
(“TRO”). Doc. 1-1. The TRO was granted,
temporarily enjoining the trustee's sale. Id. at
50. The case was removed to this Court on November 30, 2015.
Doc. 1. On December 29, 2015, Plaintiffs filed an amended
complaint, eliminating Cowles as a Defendant. Doc. 10.
seeking summary judgment “bears the initial
responsibility of informing the district court of the basis
for its motion, and identifying those portions of [the
record] which it believes demonstrate the absence of a
genuine issue of material fact.” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). Summary judgment is
appropriate if the evidence, viewed in the light most
favorable to the nonmoving party, shows “that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). Only disputes over facts that might affect the outcome
of the suit will preclude the entry of summary judgment, and
the disputed evidence must be “such that a reasonable
jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
assert seven causes of action: (1) false recordings in
violation of A.R.S. § 33-420; (2) breach of contract;
(3) breach of the duty of good faith and fair dealing; (4)
negligence per se; (5) violations of the Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. § 1692;
(6) violations of the Real Estate Settlement Procedures Act
(“RESPA”), 12 U.S.C. § 2605; and (7)
violations of the Truth in Lending Act (“TILA”),
15 U.S.C. § 1639. Doc. 10, ¶¶ 98-341.
Plaintiffs' claims break down into two categories: claims
disputing Defendants' authority to conduct the
trustee's sale, and claims alleging unauthorized charges
and misapplied payments.
Claims 1-4: Authority to Initiate a Non-Judicial
statutes do not require the beneficiary to show possession of
or otherwise document its right to enforce the underlying
note before a trustee may exercise the power of sale.
Hogan v. Wash. Mut. Bank, N.A., 277 P.3d 781, 783
(Ariz. 2012). “Absent an affirmative allegation by the
borrower that the trustee or beneficiary is not, in fact, the
‘true' trustee/beneficiary, the trustee or
beneficiary may conduct a trustee's sale without having
to demonstrate his authority to foreclose.”
Steinberger v. McVey ex rel. Cnty. of Maricopa, 318
P.3d 419, 430 (Ariz.Ct.App. 2014). But “if a borrower
is in default and possesses a good faith basis to dispute the
authority of an entity to conduct a trustee's sale, the
borrower should not be prohibited from challenging its
authority simply because such action may slow down the
foreclosure process.” Id.
argue that they are entitled to summary judgment on all
claims involving the trustee's sale. Doc. 32 at 4-9.
Defendants assert that “[i]t is well established that
MERS may serve as a beneficiary of an Arizona trust deed in a
nominee capacity.” Id. at 4-5. Further,
“it is beyond dispute that MERS may validly assign its
interest in a trust deed and that such assignment does not
nullify the power of sale.” Id. at 5 (citing
e.g., Steinberger, 318 P.3d at 427 n.11).
Defendants frame the analysis as follows: “Plaintiffs
executed a Deed of Trust naming MERS as beneficiary in a
nominee capacity for the original lender. . . . [and]
Defendants obtained their interest in the Deed of Trust by
assignment from MERS.” Id. “Nationstar
became the beneficiary of the Deed of Trust by assignment
from MERS” and “appoint[ed] Mr. Cowles as
Successor Trustee.” Id. “Mr. Cowles as
Successor Trustee has authority to notice and ultimately to
conduct the Trustee's Sale.” Id. (citing
A.R.S. § 33-808(A); A.R.S. § 33-810(A)). Thus,
Defendants reason, Plaintiffs' claims pertaining to
Defendants' lack of authority to initiate a non-judicial
foreclosure are without merit and the Court should award
summary judgment. Id.
response, Plaintiffs make several arguments that Defendants
lacked authority to initiate a non-judicial foreclosure under
Arizona law: (1) GN Mortgage, LLC did not exist in October
2006 when the Deed of Trust was signed; (2) MERS's
assignment of the Deed of Trust in December 2010 was executed
without authority and by a non-MERS member; (3) conditions
precedent to enforcing the Deed of Trust were not performed
in compliance with the Deed's terms; (4) MERS is not a
beneficiary of the Deed of Trust under A.R.S. §
33-801(1); and (5) contradictory evidence of ownership raises
a material issue of fact. Doc. 34 at 4-14. Defendants contend
that each of Plaintiffs' arguments fails as a matter of
law. Doc. 40 at 2-4.
GN Mortgage, LLC.
first argue that Defendants had no authority under the Deed
of Trust because the original Lender, GNM, did not exist in
October 2006 when Plaintiffs and GNM signed the Note and Deed
of Trust. Thus, Plaintiffs claim, GNM obtained no interest in
the Deed of Trust and any interest or authority it assigned
to MERS as the nominal beneficiary was defective. Because
MERS received a defective interest, it could only assign a
defective interest. Accordingly, when MERS recorded an
assignment from GNM to Aurora in December 2010, and from
Aurora to Nationstar in July 2012, the interest was defective
and Defendants lacked authority to act under the Deed of
courts have rejected similar arguments that a deed of trust
was invalid because the original lender named in the deed of
trust did not exist as listed. See, e.g.,
Galindo v. Select Portfolio Servicing, Inc., No. 2:
15-cv-03582, 2016 WL 4925908, at *5- 6 (C.D. Cal. Sept. 12,
2016); Moran v. HSBC Bank USA, N.A., 2015 WL 139705
(N.D. Cal. Jan. 9, 2015). Significantly, Plaintiffs do not
contest that they signed the Note and Deed of Trust with GNM
in October 2006. Nor do they contest that that they received
$269, 000 from GNM that they were obligated to pay back.
Plaintiffs fail to ...