Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_12-cv-01250/USCOURTS-azd-2_12-cv-01250-0/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 28:1331 Fed. Question

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 Plaintiffs’ FAC refers to and necessarily relies on the DOT, the assignment by

MERS, and the Notice of Trustee’s Sale, and these documents are central to Plaintiffs’

claims. Thus, because they are attached as exhibits to Defendants’ motion, and because no

party disputes their authenticity, the Court may consider this evidence without converting this

motion into a motion for summary judgment. See Marder v. Lopez, 450 F.3d 445, 448 (9th

Cir., 2006).

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Raymond J. Forbes et al.,

Plaintiffs,

v.

SGB Corporation et al.,

Defendants. 

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No. CV-12-1250-PHX-SMM

MEMORANDUM OF DECISION AND

ORDER

Before the Court is the Motion to Dismiss the First Amended Complaint (“FAC”) by

Defendants CitiMortgage, Inc. (“CitiMortgage”), and Mortgage Electronic Registration

Systems, Inc. (“MERS”) (collectively “Defendants”). (Doc. 7.) Plaintiffs have responded,

Defendants have replied, and the matter is fully briefed. (Doc. 11; Doc. 12.) The Court will

grant Defendants’ motion.

BACKGROUND

I. Factual Background

On April 25, 2003, Plaintiffs Raymond J. Forbes and Korin L. Forbes, husband and

wife, executed a Deed of Trust (“DOT”) which secured a mortgage for real property located

at 16313 East Villa Park Court, Higley, Arizona. (Doc. 7-1 at 2.)1

 The DOT named as

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lender Defendant SGB Corporation, d/b/a WestAmerica Mortgage Co., and named as trustee

Transnation Title Insurance Co. (Id. at 2-3.) The DOT also named MERS as beneficiary,

“acting solely as a nominee for Lender and Lender’s successors and assigns.” (Id. at 3.) The

Deed also provided that “[t]he Note or a partial interest in the Note (together with this

Security Instrument) can be sold one or more times without prior notice to Borrower.” (Id.

at 12.)

On June 16, 2010, MERS assigned its interest as beneficiary under the Deed to

CitiMortgage. (Id. at 21-22.) Plaintiffs apparently later defaulted on their loan at some

unspecified time; after Plaintiffs’ default, CitiMortgage substituted a trustee, and recorded

notice of a trustee’s sale. (Id. at 24-26.)

II. Procedural Background

Plaintiffs initiated this suit against SGB Corporation, MERS, and Transnation Title

Insurance Co., along with additional un-named Defendants. (Doc. 1.) Plaintiffs’ FAC

purports to assert six claims: (1) wrongful foreclosure; (2) fraud; (3) quiet title; (4)

declaratory relief; (5) violation of the Real Estate and Settlement Procedures Act; and (6)

violation of the Truth in Lending Act. (Doc. 3.)

Defendants now bring this motion to dismiss all of Plaintiffs’ claims, asserting that

these claims all rely on a “show me the note” theory of liability that fails as a matter of law.

(Doc. 7.)

LEGAL STANDARDS

To survive a Rule 12(b)(6) motion to dismiss for failure to state a claim, the plaintiff

must simply allege facts sufficient “to raise a right to relief above the speculative level.” Bell

Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see also Morley v. Walker, 175 F.3d 756,

759 (9th Cir. 1999). “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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “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. In evaluating a motion to dismiss, “all well-pleaded

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allegations of material fact are taken as true and construed in a light most favorable to the

nonmoving party.” Wyler Summit Partnership v. Turner Broad. Sys. Inc., 135 F.3d 658, 661

(9th Cir. 1998). 

However, “the court [is not] required to accept as true allegations that are merely

conclusory, unwarranted deductions of fact, or unreasonable inferences.” Spreewell v.

Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Likewise, “a formulaic recitation

of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Dismissal

under Rule 12(b)(6) can be based on “the lack of a cognizable legal theory” or “the absence

of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police

Dep’t, 901 F.2d 696, 699 (9th Cir. 1990).

 Moreover, certain elements of fraud claims must satisfy a higher standard of pleading

under the Federal Rules of Civil Procedure. In alleging fraud or mistake, malice, intent,

knowledge, and other conditions of a person’s mind may be alleged generally, but the

circumstances must be alleged with particularity. Fed.R.Civ.P. 9(b). Rule 9(b) requires

allegations of fraud to be “specific enough to give defendants notice of the particular

misconduct which is alleged to constitute the fraud charged so that they can defend against

the charge and not just deny that they have done anything wrong.” Bly–Magee v. California,

236 F.3d 1014, 1019 (9th Cir.2001). Plaintiffs alleging fraud “must state the time, place, and

specific content of the false representations as well as the identities of the parties to the

misrepresentations.” Schreiber Distrib. Co. v. ServWell Furniture Co., 806 F.2d 1393, 1401

(9th Cir.1986).

DISCUSSION

I. Motion to Dismiss

The FAC identifies six causes of action: (1) wrongful foreclosure; (2) fraud; (3) quiet

title; (4) declaratory relief; (5) violation of the Real Estate and Settlement Procedure Act, 12

U.S.C. § 2601 et seq.; and (6) violation of the Truth in Lending Act, 15 U.S.C. § 1641(g).

Plaintiffs’ allegations are all founded on the discredited “show me the note theory” that has

been repeatedly rejected by this Court as well as the Arizona Supreme Court. In Hogan v.

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Washington Mutual Bank, N.A., the Arizona Supreme Court held that “Arizona’s

non-judicial foreclosure statutes do not require the beneficiary to prove its authority or ‘show

the note’ before the trustee may commence a non-judicial foreclosure” and Arizona’s trust

deed statutes do not require compliance with the UCC before a trustee commences a

nonjudicial foreclosure. __ Ariz. __, 277 P.3d 781, 782, 783 (2012). See, e.g., Geddes v.

HSBC Bank USA, No. CV12-0667-PHX-FJM, 2012 WL 1977277, *1 (D. Ariz. 2012)

(observing that in Hogan the Arizona Supreme Court confirmed what had long been the

holding of the U.S. District Court for the District of Arizona and the Arizona Court of

Appeals). 

Regarding Plaintiffs’ first claim, wrongful foreclosure, Arizona courts have not yet

recognized a cause of action for wrongful foreclosure. Cervantes v. Countrywide Home

Loans, Inc., 656 F.3d 1034, 1043 (9th Cir. 2011). Even in states that recognize a claim for

wrongful foreclosure, such claims typically are available after foreclosure and premised

either on allegations that the borrower was not in default, or on procedural issues that

resulted in damages to the borrower. Id. Such allegations are not present here. Further, the

wrongful foreclosure claim as alleged in the FAC relies on the discredited “show the note”

theory.

Plaintiffs’ second claim, fraud, alleges that Defendants misrepresented that they are

the “holder and owner” of the Note and failed to disclose certain information about the

securitization of the loan. The claim does not satisfy Rule 9(b)’s particularity requirement

because it does not identify statements that were false in fact and by which Defendant they

were made. Moreover, this claim too relies substantively on the discredited “show the note”

theory.

Plaintiffs’ third claim to quiet title and fourth claim for declaratory relief are

dependent on establishing their other claims.

Plaintiffs’ fifth and sixth claims under the Real Estate Settlement Procedure Act and

Truth in Lending Act, respectively, are alleged against all Defendants and do not include

enough factual content to allow the Court to draw a reasonable inference that any Defendant

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is liable for any specific misconduct. Thus, these claims too must be dismissed for failure

to state a claim. Therefore, all of Plaintiffs’ claims will be dismissed because they fail to

state a claim upon which relief can be granted.

II. Leave to Amend

Plaintiffs respond to Defendants’ motion by noting that they are proceeding without

the benefit of legal counsel, and they request an opportunity to remedy any defects in their

pleadings. (Doc. 11 at 2.)

Leave to amend should be freely given “when justice so requires.” Fed. R. Civ. P.

15(a)(2). However, despite the policy favoring amendment under Rule 15, leave to amend

may be denied if the proposed amendment is futile or would be subject to dismissal. Saul v.

United States, 928 F.2d 829, 843 (9th Cir. 1991). Granting or denial of leave to amend rests

in the sound discretion of the trial court. Swanson v. United States Forest Serv., 87 F.3d

339, 343 (9th Cir. 1996). 

Here, it is plain from Plaintiffs’ FAC that any amendment would be futile and subject

to dismissal; Plaintiffs can not allege any plausible theory to impose liability on Defendants

under the current state of the law. The Court therefore will not allow further amendment to

the complaint.

CONCLUSION

Accordingly, for the foregoing reasons,

IT IS HEREBY ORDERED granting the Motion to Dismiss First Amended

Complaint. (Doc. 7.)

IT IS FURTHER ORDERED directing the Clerk of Court to set aside the default

entered September 17, 2012, against Defendant SGB Corporation. (Doc. 16.)

IT IS FURTHER ORDERED dismissing with prejudice all of Plaintiffs’ claims

in this suit.

IT IS FURTHER ORDERED directing the Clerk of Court to enter judgment

accordingly.

DATED this 10th day of December, 2012.

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