United States District Court, D. Arizona
ORDER
DOMINIC W. LANZA, UNITED STATES DISTRICT JUDGE
INTRODUCTION
In
November 2005, Plaintiffs David and Lisa Gard
(“Plaintiffs”) executed a $1.7 million promissory
note and deed of trust on their home in Scottsdale, Arizona.
It is undisputed that Plaintiffs haven't paid a nickel
toward their mortgage since July 2010. Accordingly, in August
2017, the trustee scheduled an auction on Plaintiffs'
home. Two months later, Plaintiffs filed this lawsuit, which
names the following four entities as defendants: Morgan
Stanley Home Loans, Morgan Stanley Credit Corporation
(collectively, “the Morgan Stanley Defendants”),
Ocwen Loan Servicing LLC (“Ocwen”), and U.S. Bank
National Association (“U.S. Bank”). As relief,
Plaintiffs seek a declaration that none of these entities may
foreclose on their home because (1) the statute of
limitations has expired, (2) no Defendant holds an ownership
interest in the property that would allow it to foreclose,
(3) the Defendants' ability to foreclose was eliminated
when the loan was securitized, and (4) foreclosure would
result in impermissible double recovery.
Now
pending before the Court are an array of different motions.
First, the Morgan Stanley Defendants contend that although
they were the original lenders and servicers on
Plaintiffs' loan, they transferred their interests in
that loan to other entities many years ago. As a result, they
have moved for summary judgment on the ground, inter
alia, that Plaintiffs' claims against them don't
present a justiciable controversy under Article III. (Doc.
57.) In response, Plaintiffs acknowledge the Morgan Stanley
Defendants weren't involved in the 2017 effort to
initiate a trustee's sale-Plaintiffs merely contend that
“[t]he Morgan Stanley Defendants [were] named in this
action for the sake of judicial efficiency” and that
“the Morgan Stanley Defendants' presence in the
litigation serves a useful purpose in clarifying the legal
resolution of the matter if the Court holds that the
transfers claimed to have occurred are invalid.” (Doc.
81 at 2, 6.) Given this clarification, the Court will dismiss
Plaintiffs' claims against the Morgan Stanley Defendants
for lack of subject matter jurisdiction.[1] The Court will
also deny, as moot, the Morgan Stanley Defendants'
request for judicial notice (Doc. 58).
Second,
Ocwen and U.S. Bank (Doc. 52) and Plaintiffs (Doc. 62) have
separately moved for summary judgment. As explained below,
the Court concludes that all four of Plaintiffs' theories
for avoiding foreclosure lack merit and will therefore grant
Ocwen's and U.S. Bank's motion for summary judgment
and deny Plaintiffs' motion. This outcome also makes it
unnecessary to resolve Plaintiffs' motion to withdraw
admissions (Doc. 77).
BACKGROUND
The
parties have filed a total of three statements of facts and
four controverting statements of facts. (See Docs.
54, 61, 63 [statements]; 75, 76, 80, 82 [controverting
statements].) The summary below is derived from the
undisputed facts contained therein.
On
November 28, 2005, Plaintiffs obtained a $1, 743, 600 loan
from Morgan Stanley Credit Corporation (“MSCC”).
(Doc. 54 ¶ 2; Doc. 61 ¶ 1.) The loan was secured by
a promissory note and deed of trust recorded against
Plaintiffs' Scottsdale home. (Doc. 61 ¶ 2; Doc. 63
¶ 1.) The note, which was made payable to MSCC, required
Plaintiffs to make periodic payments such that the loan would
be fully repaid by January 1, 2036. (Doc. 61 ¶¶
3-4.) The Deed of Trust states that “The Note or
partial interest in the Note (together with this Security
Instrument) can be sold one or more times without notice to
the Borrower.” (Id. ¶ 5.)
Between
November 2005 and April 2012, either Morgan Stanley Home
Loans or Saxon Mortgage Services, Inc. (“Saxon”)
acted as the loan servicer. (Doc. 61 ¶
13.)[2]
On May
1, 2006, the note was transferred to LaSalle Bank National
Association (“LaSalle”) as Trustee for Morgan
Stanley Mortgage Loan Trust 2006-8AR Mortgage Pass-Through
Certificates, Series 2006-8AR. (Doc. 54 ¶ 4; Doc. 61
¶ 7.)[3] LaSalle later merged with Bank of America,
effective October 17, 2008. (Doc. 61 ¶ 8.)[4] And on or about
November 11, 2010, U.S. Bank acquired substantially all of
Bank of America's corporate trust business, which
included the note. (Doc. 54 ¶ 6.)[5]
In or
around July 2010, Plaintiffs stopped making payments on the
loan. (Doc. 61 ¶ 14; Doc. 63 ¶ 3.)
On or
about September 1, 2010, Plaintiffs received a “Notice
of Intent to Accelerate” from Saxon. (Doc. 61 ¶
17; Doc. 63 ¶ 7.) It stated that Plaintiffs were in
breach of the note and that failure to pay the delinquent
amount ($24, 528.89) by October 4, 2019 “may”
result in the loan's acceleration. (Id.; see
also Doc. 60 at 38 [actual notice].)[6]The Notice did not
demand the loan's full and immediate repayment. (Doc. 61
¶ 19.) Nor did anybody initiate a trustee's sale
against the property in that timeframe. (Id. ¶
20.)
On or
about May 31, 2011, MSCC merged with and into Morgan Stanley
Private Bank, N.A. (“MSPB”). (Doc. 54 ¶ 7.)
On
April 2, 2012, Ocwen began acting as the servicer of the
loan. (Doc. 54 ¶ 8; Doc. 61 ¶ 21; Doc. 63 ¶
10.)
On May
18, 2012, Plaintiffs received a “Notice of
Default” from Ocwen. (Doc. 54 ¶ 9.) It stated that
the loan was in default and that if the default wasn't
cured by June 18, 2012, the loan “may” be
accelerated, resulting in the total amount being immediately
due and payable. (Id.; see also Doc. 55 at
20-23 [actual notice].)[7]
On
December 18, 2014, the Deed of Trust was assigned to U.S.
Bank. (Doc. 54 ¶ 11.)[8] The following day, the United States
District Court for the Southern District of New York entered
a final judgment approving the settlement of a class action
lawsuit between certain retirement systems and Morgan Stanley
entities;[9] however, there is no indication that
Plaintiffs' loan was satisfied as a result of that
settlement. (Doc. 54 ¶ 12.)
On
August 31, 2017, an entity called Quality Loan Service
Corporation (“Quality”)-which had, by that time,
been named the trustee under the deed of trust- recorded a
“Notice of Trustee's Sale” concerning the
property. (Doc. 54 ¶¶ 13, 16; Doc. 61 ¶ 25.)
On
November 1, 2017, at U.S. Bank's request, MSPB indorsed
the note to U.S. Bank via allonge, which is affixed to the
note. (Doc. 54 ¶ 17.)[10]
On
October 25, 2017, Quality recorded a “Cancellation of
Trustee's Notice of Sale” concerning the property.
(Doc. 61 ¶ 26.) To date, no foreclosure sale has taken
place. (Id. ¶ 27.)
On
November 6, 2017, Plaintiffs filed this case in Maricopa
County Superior Court, which Ocwen and U.S. Bank later
removed to this Court. (Doc. 1.)
On June
17, 2018, Plaintiffs filed an amended complaint. (Doc. 34.)
SUMMARY
JUDGMENT STANDARD
A party
moving for summary judgment “bears the initial
responsibility of informing the district court of the basis
for its motion, and identifying those portions of ‘the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if
any,' which it believes demonstrate the absence of a
genuine issue of material fact.” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). “In order to
carry its burden of production, the moving party must either
produce evidence negating an essential element of the
nonmoving party's claim or defense or show that the
nonmoving party does not have enough evidence of an essential
element to carry its ultimate burden of persuasion at
trial.” Nissan Fire & Marine Ins. Co. v. Fritz
...