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Chabrowski v. Bank of New York Mellon Trust Company NA

United States District Court, D. Arizona

January 7, 2019

Anna Chabrowski, et al., Plaintiffs,
v.
Bank of New York Mellon Trust Company NA, et al., Defendants.

          ORDER

          DOMINIC W. LANZA UNITED SLATES DISTRICT JUDGE.

         This is a pro se lawsuit brought by a married couple, Anna and Darius Chabrowski (“Plaintiffs”), against three defendants: the Bank of New York Mellon Trust Company, N.A. f/k/a The Bank of New York Trust Company, N.A. (“BONY”), Bayview Loan Servicing, LLC (“Bayview”), and Zieve, Brodnax & Steele, LLP (“ZBS”) (collectively, “Defendants”). In a nutshell, Plaintiffs allege that, even though they paid off the promissory note on their home in 2006, Defendants began pursuing improper collection and foreclosure efforts against them in 2016. As remedies, they seek (1) a declaration that Defendants are barred, for statute-of-limitations reasons, from foreclosing on their home and (2) compensatory and punitive damages.

         Pending before the Court are four motions: (1) BONY and Bayview's motion to dismiss Plaintiffs' first amended complaint (Doc. 33), (2) BONY's unopposed “Request for Judicial Notice in Support of Motion to Dismiss” (Doc. 35), (3) Plaintiffs' motion to disqualify ZBS from serving as BONY's counsel in this matter (Doc. 41), and (4) Plaintiffs' amended motion for leave to file a second amended complaint (Doc. 58). As explained below, the Court will dismiss ZBS as a party under Rule 21, because Plaintiffs have not alleged diversity of citizenship as to ZBS. In addition, the Court will grant the motion to dismiss, grant the request for judicial notice, deny Plaintiffs' motion to disqualify counsel, and deny Plaintiffs' amended motion for leave to file a second amended complaint.[1] These actions will dispose of all of Plaintiffs' claims.

         BACKGROUND

         A. Procedural History

         Plaintiffs are a married couple who reside in Arizona. (Doc. 32 ¶ 6.) In September 2017, Plaintiffs filed a pro se lawsuit against BONY in Arizona state court.[2] (Doc. 1 at 8.) In October 2017, BONY removed this case to federal court based on diversity jurisdiction. (Doc. 1 at 2.)

         On June 7, 2018, Plaintiffs filed a first amended complaint (“FAC”). (Doc. 32.) The FAC adds two new defendants, Bayview and ZBS. (Doc. 32 at 3-4.) The FAC does not, however, properly allege the existence of diversity jurisdiction as to these two defendants. Among other things, the FAC does not allege the citizenship of all of ZBS's partners, owners, and members, [3] seems to suggest that ZBS is based in Arizona, and mistakenly cites Arizona law as providing a jurisdictional basis for this case to be in federal court. (Doc. 32 at 3-4.)

         The FAC asserts a variety of claims arising from Defendants' efforts, beginning in 2016, to pursue collection and foreclosure efforts against Plaintiffs. The relief sought is two-fold: (1) a declaration that Defendants are barred, for statute-of-limitations reasons, from foreclosing on Plaintiffs' home, which is located in Anthem, Arizona, and (2) compensatory and punitive damages.

         On June 21, 2018, BONY filed a motion to dismiss the FAC under Rule 12(b)(6) (see Doc. 33) and a request for judicial notice pertaining to the motion to dismiss (see Doc. 35). Bayview subsequently filed a joinder. (Doc. 44.)

         In July 2018, Plaintiffs filed an opposition to the motion to dismiss (see Doc. 37) and a non-opposition to the request for judicial notice (see Doc. 38). Afterward, BONY timely filed a reply in support of the motion to dismiss. (Doc. 39.)

         In August 2018, Plaintiffs filed a motion to disqualify ZBS from representing BONY in this matter. (Doc. 41.) BONY filed a timely response (see Doc. 42) and Plaintiffs filed a timely reply (see Doc. 45).

         On October 9, 2018, Plaintiffs filed a motion for permission to file a second amended complaint. (Doc. 47.) On October 17, 2018, BONY and Bayview filed an opposition, arguing the motion should be denied because (1) Plaintiffs failed to comply with Local Rule 15.1(a), (2) Plaintiffs' proposed amendment (i.e., correcting BONY's true corporate name) was unnecessary because BONY had already made an appearance under its correct name and subjected itself to the Court's jurisdiction, and (3) granting leave to amend at such a late juncture (more than a year after the lawsuit was initiated) would result in undue hardship and delay. (Doc. 49.)

         On October 31, 2018, this case was reassigned to the undersigned judge. (Doc. 53.)

         On December 7, 2018, the Court issued an order denying Plaintiffs' motion for leave to file a second amended complaint based on non-compliance with Local Rule 15.1(a). (Doc. 55.)

         On December 21, 2018, Plaintiffs filed an amended motion for leave to file a second amended complaint. (Doc. 58.) This time, they complied with Local Rule 15.1(a) by providing a redlined copy of their proposed new complaint. (Doc. 59.) It appears the only proposed changes would be (1) to insert the phrase “f.k.a Bank of New York Trust Company” after “Bank of New York Mellon Trust Company, ” (2) to assert a new allegation concerning BONY's registration to do business in Arizona, (3) to assert that the address of BONY's parent company is in California, not Arizona, (4) to include new allegations about ZBS's activities in Arizona and California, and (5) to replace the acronym BONY with “BNY Trust.” There are no changes to Plaintiffs' legal theories or claims for relief.

         B. Factual Assertions in the FAC

         Below, the Court has attempted to summarize, in chronological order, the allegations in the FAC relevant to Plaintiffs' asserted claims:

In 2005, Plaintiffs hired a builder to construct a home for them in Anthem, Arizona. (Doc. 32 ¶¶ 18-20.) They paid $150, 000 to the builder and borrowed the remaining balance, $185, 000, from a company called Preferred Home Mortgage Company (“Preferred Home”), which was “a financing arm” of the builder. (Id.) The promissory note was executed in April 2006. (Id.)

         On a date not specified in the FAC, but “before the house was even built, and before [Plaintiffs] closed on the loan, ” Preferred Home sold the $185, 000 mortgage to Bank of America. (Id. ¶ 21.)

         In mid-to-late 2006, “Plaintiffs paid of[f] the mortgage with Preferred Home” by using their own savings and money they had obtained from an equity line of credit from ETRADE Financial. (Id. ¶ 22.) Plaintiffs then carried that line of credit as their first mortgage. (Id.)

         In 2007, Preferred Home went bankrupt. (Id. ¶ 50.) Plaintiffs allege that Preferred Home “failed to fully satisfy [the loan] . . . before Preferred Home Mortgage went bankrupt, ” thus making the mortgage “defunct.” (Id.)

         In 2009, despite the fact that Plaintiffs had already paid off the promissory note, Bank of America accelerated the loan and scheduled a foreclosure. (Id. ¶ 23.) Bank of America then cancelled the foreclosure effort, “after discovering it an error, ” and paid $2, 000 to Plaintiffs in consequential damages. (Id.)

         “[S]ometime in 2009, ” BONY acquired an interest in Plaintiffs' mortgage from Preferred Home pursuant to an Assignment of Deed of Trust. (Id. ¶¶ 30, 46.) The Assignment was signed by “Aida Duenas.” (Id. ¶ 46.) Plaintiffs allege that “Aida Duenas” is a robo-signer who lacked authority to assign any interest to BONY because Preferred Home went bankrupt in 2007 and “Aida Duenas” is a false name that has reappeared in litigation concerning robo-signing efforts by other banks. (Id. ¶¶ 48-50.) Therefore, BONY knew or had reason to know the Assignment of Deed of Trust was invalid. (Id. ¶ 51.) Regardless, BONY recorded the Assignment of Deed of Trust. (Id.)

         On February 16, 2016, Plaintiffs began receiving mail from Bayview, which was attempting to collect mortgage payments on behalf of Bank of America. (Id. ¶ 24.) Bayview then corrected itself and attempted to collect the payments on behalf of BONY. (Id.) Bayview had purchased servicing rights to Plaintiffs' mortgage loan knowing the loan was defunct. (Id. ¶ 25.) In the correspondence received by Plaintiffs, Defendants represented themselves as debt collectors, giving notices such as “WE ARE ATTEMPTING TO COLLECT DEBT, AND ANY INFORMATION WILL BE USED FOR THAT PURPOSE.” (Id. ¶ 56.) Moreover, Defendants sent Plaintiffs a Statement of Breach and Non-Performance that stated: “the monthly installment of principal and interest became due on 4/1/2009, including late charges and all subsequent monthly installments of principal and interest.” (Id. ¶ 38.) Plaintiffs refused to pay, so Bayview threatened Plaintiffs with a non-judicial foreclosure. (Id. ¶ 25.)

         On July 13, 2017, BONY sent Plaintiffs a “notice of acceleration” of their loan. (Id. ΒΆ 40.) The notice from BONY was invalid because the loan had never been decelerated or reinstated ...


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