United States District Court, D. Arizona
Bryan W. Hummel and Sandra M. Dahl Living Trust, Plaintiff,
Rushmore Loan Management LLC, et al., Defendants.
G. CAMPBELL, UNITED STATES DISTRICT JUDGE.
“Brian W. Hummel and Sandra M. Dahl Living Trust”
(the “Trust” or “Plaintiff”) has sued
Defendants Rushmore Loan Management, LLC and U.S. Bank
National Association. Doc. 1. The Court previously granted a
motion to dismiss some of Plaintiff's claims. Doc. 20.
Plaintiff filed an amended complaint (Doc. 27), and U.S. Bank
filed a third-party complaint against Bryan Hummel and Sandra
Dahl as individuals (collectively, the “Hummels”)
now seek dismissal of Plaintiff's adverse possession and
common law fraud claims under Rules 12(b)(6) and 9(b). Doc.
35. The Hummels seek dismissal of all claims against them
under Rule 12(b)(6). Doc. 50. No party has requested oral
argument. The Court will grant Defendants' motion and
deny the Hummels' motion.
factual basis of Plaintiff's claims remains substantially
unchanged from the original complaint and is discussed at
length in the Court's order of June 8, 2017. See
Doc. 20 at 1-4. The Hummels purchased real property in Mohave
County, Arizona in 2003. They transferred the property to the
Trust in 2007, and the Trust properly recorded the transfer.
In 2008, the Hummels entered into a loan agreement with
Defendants' predecessor in interest, secured by a deed of
trust on the property (the “DOT”). The DOT was
recorded in Maricopa County. The Hummels defaulted in 2009,
and Defendants' predecessor invoked the acceleration
clause. In 2011, the DOT was re-recorded in Mohave County by
Defendants' predecessor. In 2017, shortly after the DOT
was assigned to Rushmore, Rushmore noticed a trustee's
sale of the property. The parties postponed the trustee's
sale multiple times, and, on June 14, 2017, the Court entered
a preliminary injunction prohibiting the sale during the
pendency of this case. Doc. 26. The Trust's amended
complaint seeks to bar the trustee's sale on the basis of
statute of limitations, adverse possession, declaratory
relief, common law fraud, and quiet title. Doc. 27 at 5-9.
Bank has filed a third-party complaint (“TPC”)
against the Hummels. Doc. 37 at 10-15. The TPC alleges that
when the Hummels entered into the loan and DOT they were the
trustees of the Trust. Id. at 11 ¶ 7. It also
alleges that the Hummels covenanted in the DOT that they were
“lawfully seised of the estate hereby conveyed”
and had “the right to grant and convey the
Property.” Id. at 11-12 ¶ 13. The TPC
alleges that the Hummels and the Trust used the loan funds to
pay off prior loans and taxes on the property, and that U.S.
Bank has been damaged in the amount of $640, 319.89.
Id. at 11 ¶ 9, 15 ¶ 49. The TPC asserts
claims for reformation of the DOT, unjust enrichment,
equitable lien, and fraud. Id. at 10-15.
successful motion to dismiss under Rule 12(b)(6) must show
either that the complaint lacks a cognizable legal theory or
fails to allege facts sufficient to support its theory.
Balistreri v. Pacifica Police Dep't, 901 F.2d
696, 699 (9th Cir. 1990). A complaint that sets forth a
cognizable legal theory will survive a motion to dismiss if
it contains “sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on
its face.'” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (citing Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). 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.” Id.
(citing Twombly, 550 U.S. at 556). “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.”
Id. (citing Twombly, 550 U.S. at
move to dismiss Counts II (adverse possession) and IV (common
law fraud) of Plaintiff's amended complaint. Doc. 35.
amended complaint asserts a claim for adverse possession
“pursuant to A.R.S. 12-523; 12-524; 12-522 and
12-526.” Doc. 27 at 6. Plaintiff alleges that it
“acquired title to the property in 2007, ” has
been “in peaceable adverse possession with color of
title for the statutory period, ” has paid and
continues to pay taxes on the property, and has made
substantial improvements to the property. Doc. 27 at 6
argue that Plaintiff's claim fails because an action for
adverse possession may be maintained only by a true owner who
seeks to recover property from one who is in possession. Doc.
35 at 4-5; Doc. 48 at 2. Defendants are correct. The statue
primarily cited by Plaintiff states that an “action
to recover real property from a person in
peaceable and adverse possession under title or color of
title shall be commenced within three years after the cause
of action accrues.” A.R.S. § 12-523(A) (emphasis
added). Sections 12-524, 12-522, and 12-526 all contain
similar language. In this case, Plaintiff is not seeking to
recover the property from a person in peaceable and adverse
possession of it. The parties agree that Plaintiff is in
possession of the property (Doc. 27 at 6 ¶ 8; Doc. 48 at
2) and is the true owner and titleholder (Doc. 37 at 2 ¶
3; Doc. 35 at 5).
Plaintiff cannot argue that it adversely possessed the
property from Defendants because, under Arizona law,
Defendants do not hold title to the property. “Arizona
is a lien theory state. A mortgage creates lien rights in the
mortgagee, but it passes neither legal nor equitable title to
the mortgagee.” Berryhill v. Moore, 881 P.2d
1182, 1193 (Ariz.Ct.App. 1994), as corrected ...