Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_10-cv-00051/USCOURTS-azd-2_10-cv-00051-1/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Milan Stejic, 

Plaintiff, 

vs.

Aurora Loan Services, LLC; Shelter

Mortgage Co., LLC; and Mortgage

Electronic Registration Systems, Inc., 

Defendants. 

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No. CV-10-51-PHX-DGC

ORDER

In April 2007, Milan Stejic refinanced his home located at 2015 East Barkwood Road

in the Phoenix area. The loan consisted of two promissory notes totaling $1,420,000, each

secured by a separate deed of trust. Shelter Mortgage Co., LLC (“Shelter”) was the lender,

Aurora Loan Services, LLC (“Aurora”) was the loan servicer, and Mortgage Electronic

Registration Systems, Inc. (“MERS”) was the beneficiary on the deeds of trust. The home

was sold at a trustee’s sale on December 7, 2009. 

Plaintiff filed suit four days later, asserting claims for wrongful foreclosure, breach

of contract, breach of the covenant of good faith and fair dealing, fraud, consumer fraud, and

injunctive relief. Doc. 1-1 at 4-44. All claims other than the consumer fraud claim (count

five) and the corresponding request for injunctive relief (part of count six) have been

transferred to the MDL case, In re MERS Litigation, Nos. 09-md-2119-JAT, 10-cv-1547-

JAT. See Doc. 46.

Defendants have filed motions to dismiss pursuant to Rule 12(b)(6) of the Federal

Case 2:10-cv-00051-DGC Document 68 Filed 10/20/10 Page 1 of 7
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Rules of Civil Procedure. Docs. 48, 51, 54. The motions are fully briefed. No party has

requested oral argument. For reasons stated below, the motions will be granted.

I. Rule 12(b)(6) Standard.

When analyzing a complaint for failure to state a claim to relief under Rule 12(b)(6),

the factual allegations are taken as true and construed in the light most favorable to

the plaintiff. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). “‘[C]onclusory

allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss

for failure to state a claim.’” In re Cutera Sec. Litig., 610 F.3d 1108 (9th Cir. 2010).

To avoid a Rule 12(b)(6) dismissal, the complaint must plead “enough facts to state a claim

to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

This plausibility standard requires sufficient factual allegations to allow “the court to draw

the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft

v. Iqbal, 129 S. Ct. 1937, 1949 (2009). “[W]here the well-pleaded facts do not permit the

court to infer more than the mere possibility of misconduct, the complaint has alleged – but

it has not ‘show[n]’ – ‘that the pleader is entitled to relief.’” Id. at 1950 (quoting Fed. R. Civ.

P. 8(a)(2)).

II. Count Five: Consumer Fraud.

Arizona’s Consumer Fraud Act, A.R.S. § 44-1522 (the “Act”), “makes it illegal to

commit fraud or deception ‘in connection with the sale or advertisement of any

merchandise.’” Sutter Home Winery, Inc. v. Vintage Selections, Ltd., 971 F.2d 401, 407

(9th Cir. 1992) (quoting § 44-1522(A)). Count five of the complaint asserts violations of

the Act on the part of Shelter and Aurora. Doc. 1-1 at 41-43, ¶¶ 133-41. This claim must be

dismissed, Shelter and Aurora argue, because it is time barred and the complaint fails to

allege fraud with particularity. Docs. 48 at 5-6, 51 at 9-10. The Court agrees.

A. Fraud.

To satisfy Rule 9(b)’s heightened pleading standard for fraud, “a plaintiff ‘must state

the time, place, and specific content of the false representations as well as the identities of

the parties to the misrepresentations.’” Stejic v. Aurora Loan Servs., LLC, No. 09-CV-819-

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PHX-GMS, 2009 WL 4730734, at *4 (D. Ariz. Dec. 1, 2009) (quoting Schreiber Distrib. Co.

v. ServWell Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). The plaintiff also “‘must

set forth what is false or misleading about the statement, and why it is false.’” Id. (quoting

Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003)).

Count five alleges generally that Shelter and Aurora committed fraud by

“misrepresenting, concealing, or omitting the terms of the loan, including, but not limited to,

the true cost of the loan, the true parties to the loan, the interest rate, the payments to be made

under the loan, Stejic’s ability to qualify for the loan, and Stejic’s ability to refinance or

modify the loan in the future.” Doc. 1-1 at 42, ¶ 136. It further alleges that Shelter failed to

“mak[e] a commercially reasonable determination of Stejic’s ability to repay the loan”

(id. ¶ 137), and Shelter and Aurora knew, or should have known, that “Stejic would be

incapable of making loan payments as required by the terms of the loan based upon Stejic’s

income” (id. ¶ 138). These allegations are entirely conclusory, and do not pass muster under

Rule 9(b). See Rhoads v. Wash. Mut. Bank, F.A., No. CV10-0197-PHX-NVW, 2010 WL

1408888, at *8 (D. Ariz. Apr. 7, 2010) (finding nearly identical allegations to be insufficient

under Rule 9(b)); Dumesnil v. Bank of Am., N.A., No. CV10-0243-PHX-NVW, 2010 WL

1408889, at *7 (D. Ariz. Apr. 7, 2010) (same).

Plaintiff asserts that the complaint, read as a whole, provides the requisite who, what,

when, where, and why of the fraud. Docs. 57 at 6-7, 58 at 14-15. Plaintiff cites numerous

paragraphs of the complaint in support of this assertion (id.), but does not explain, and it is

not otherwise clear to the Court, how any alleged fraudulent act is pled with particularity.

Plaintiff asserts that the “who” includes all three Defendants. Docs. 57 at 7, 58 at 14. A

plaintiff alleging fraud “must do more than make ‘sweeping references’ encompassing all of

defendants’ allegedly fraudulent conduct.” Concorde Funds, Inc. v. Value Line, Inc., No. 04

Civ. 9923(NRB), 2006 WL 522466, at *5 (S.D.N.Y. Mar. 2, 2006). “The Ninth Circuit has

repeatedly emphasized that ‘Rule 9(b) does not allow a complaint to merely lump multiple

defendants together but ‘requires plaintiffs to differentiate their allegations and inform each

defendant separately of the allegations surrounding his alleged participation in the fraud.’”

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In re MERS Litig., No. 09-md-2119-JAT, 2010 WL 4038788, at *6 (D. Ariz. Sept. 30, 2010)

(quoting Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007)).

With respect to the “when,” Plaintiff asserts that fraud occurred “[a]t origination and

throughout the term of the loan, including the purported ‘foreclosure’ sale in 2010.”

Docs. 57 at 7, 58 at 14-15. “[C]ourts have consistently held that such a lengthy time-frame

fails to satisfy the particularity requirement of Rule 9(b).” Concorde Funds, 2006 WL

522466, at *5 (citations omitted).

 The complaint fails to plead fraud with particularity, and otherwise does not permit

the Court “to infer more than the mere possibility of misconduct” on the part of Shelter and

Aurora. Iqbal, 129 S. Ct. at 1950. The complaint has therefore “alleged – but it has not

‘show[n]’ – ‘that [Plaintiff] is entitled to relief’” on count five. Id.; see Rhoads, 2010 WL

1408888, at *8-9 (dismissing consumer fraud claim brought by mortgagee where the

complaint failed to plead fraud with particularity); Dumesnil, 2010 WL 1408889, at *8

(same); Silvas v. GMAC Mortg., LLC, No. CV-09-265-PHX-GMS, 2009 WL 4573234, at

*7-8 (D. Ariz. Dec. 1, 2009) (same); Fromkin v. IndyMac Bank FSB, No. 10-CV-8014-PCTPGR, 2010 WL 2541167, at *6 (D. Ariz. June 18, 2010) (same).

B. Statute of Limitations.

Claims brought under the Consumer Fraud Act are subject to a one-year statute of

limitations. See A.R.S. 12-541(5); Grimmelman v. Pulte Home Corp., No. CV-08-1878-

PHX-FJM, 2010 WL 2744943, at *2 (D. Ariz. July 9, 2010). The loan transaction in this

case was consummated when Plaintiff signed the closing papers on May 25, 2007. Doc. 1-1

at 9, ¶ 18. The one-year limitations period therefore expired on May 26, 2008. Plaintiff

brought his consumer fraud claim more than one year later. See Doc. 46, Stejic v. Aurora

Loan Servs., LLC, No. 09-CV-819-PHX-GMS (D. Ariz. Sept. 11, 2009).

Plaintiff alleges that “[h]e was not told and did not realize that he was paying a higher

interest rate so that Shelter Mortgage could receive a $16,000 yield spread premium.” 

Doc. 1-1 at 9, ¶ 18. Plaintiff further alleges that the loan included more than “$13,000.00 in

undisclosed settlement charges over the life of the loan.” Id. at 11, ¶ 29. Plaintiff claims that

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Shelter and Aurora concealed the overcharges and he did not discover them “until he had his

loan papers audited[.]” Id. ¶ 28.

But Plaintiff himself admits that “[t]he origination process made on no income and

no documentation suggested fraud.” Id. ¶ 29. “[T]he test for when a cause of action accrues

is not only what the plaintiff actually knew, but what he or she should have known or could

have discovered with reasonable diligence.” Cervantes v. Countrywide Home Loans, Inc.,

No. CV 09-517-PHX-JAT, 2009 WL 3157160, at *7 (D. Ariz. Sept. 24, 2009) (emphasis in

original). Plaintiff does not allege facts showing an inability, despite diligent effort on his

part, to discover the alleged overcharges within the limitations period.

The same is true with respect to other alleged acts of fraud. Regarding the alleged

“secret transfers through securitization” (Doc. 1-1 at 14-22), Plaintiff concedes that “[t]he

note was securitized from the beginning” (id. at 13 ¶ 34) (emphasis added). He further

concedes that the deeds of trust, which are alleged to falsely list Shelter as the true lender,

were publically recorded on May 31, 2007. Id. at 12, ¶ 30. Plaintiff has not alleged an

inability to discover the securitization or Shelter’s role in the transaction within the

limitations period.

Moreover, while the refinance loan in this case may constitute the “sale or

advertisement” of “merchandise” for purposes of the Act, see Villegas v. TransAmerica

Financial Services, Inc., 708 P.2d 781, 783-84 (Ariz. Ct. App. 1985), the loan closed on

May 25, 2007. Plaintiff does not explain how any fraudulent conduct after that date falls

within the scope of the Act.

C. Count Five Summary.

The consumer fraud claim asserted in count five will be dismissed as time barred and

for failure to state a claim to relief. Given this ruling, the Court need not address Shelter’s

preemption arguments. See Doc. 51 at 6-9.

III. Count Six: Injunctive Relief.

In count six of the complaint, Plaintiff seeks an order enjoining Aurora and MERS

from “depriving him of his rights to his property via trespass, forcible detainer, eviction,

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wrongful sale, or otherwise.” Doc. 1-1 at 43, ¶ 146. Defendants note, correctly, that an

injunction is not an independent cause of action, but an equitable remedy for an underlying

claim. Docs. 48 at 6, 54 at 5 (citing Silvas, 2009 WL 4573234, at *6). The only substantive

claim remaining in this case is the consumer fraud claim asserted in count five. See Docs. 1-

1 at 41-43, 46 at 5-6. Because that claim will be dismissed, the corresponding request for

injunctive relief will be denied.

IV. Leave to Amend.

The Court recognizes that leave to amend should be freely given when justice so

requires. Fed. R. Civ. P. 15(a)(2). Plaintiff, however, already has amended his claims in

response to Defendants’ motions to dismiss. See Docs. 39 & 46, Stejic v. Aurora Loan

Servs., LLC, No. 09-CV-819-PHX-GMS. Plaintiff has not shown, and it does not otherwise

appear to the Court, that deficiencies in count five can be cured through additional

amendment. The Court will therefore deny leave to amend. See Foman v. Davis, 371 U.S.

178, 182 (1962) (leave to amend may be denied as futile); Leadsinger, Inc. v. BMG Music

Publ’g, 512 F.3d 522, 532 (9th Cir. 2008) (affirming denial of leave to amend where the

complaint could not be saved by any amendment).

V. Request to Quash Lis Pendens.

Plaintiff recorded a lis pendens on the property in connection with his initial suit.

Doc. 1-1 at 46-47. Aurora and MERS assert that when all claims affecting title to the

property have been dismissed, it will be appropriate for the Court to quash the lis pendens.

Docs. 48 at 7, 54 at 6. The claims asserted by Plaintiff in the MDL case have not been

dismissed and may affect title to the property. See In re MERS Litigation, Nos. 09-md-2119-

JAT, 10-cv-1547-JAT. The request to quash the lis pendens is therefore denied.

IT IS ORDERED:

1. Defendants’ motions to dismiss (Docs. 48, 51, 54) are granted.

2. The consumer fraud claim asserted in count five of the complaint is dismissed,

and the corresponding request for injunctive relief in count six is denied.

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3. The Clerk is directed to enter judgment accordingly.

DATED this 20th day of October, 2010.

 

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