Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_11-cv-01463/USCOURTS-azd-2_11-cv-01463-0/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1441 Petition for Removal- Petition to Quiet Title

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Thomas E. Russell, 

Plaintiff, 

vs.

OneWest Bank, FSB; Deutsche Bank

National Trust Company as Trustee for

IndyMac INDX Mortgage Loan Trust

2006-AR31; Merrill Lynch Mortgage

Lending, Inc.; Fairway Independent

Mortgage Corp.; Shapiro, Van Ess &

Sherman, LLP; Does 1-100,

Defendants. 

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No. CV 11-01463-PHX-FJM

ORDER

The court has before us defendants' first motion to dismiss (doc. 11), plaintiff's

response (doc. 14), defendants' motion to dismiss the amended complaint (doc. 16), plaintiff's

response (doc. 18), and defendants' reply (doc. 20). We also have before us plaintiff's motion

to remand (doc. 15), defendants' response (doc. 17), and plaintiff's reply (doc. 19).

Defendants OneWest Bank, FSB ("OneWest"), Deutsche Bank National Trust Company as

Trustee for IndyMac INDX Mortgage Loan Trust 2006-AR31, and Merrill Lynch Mortgage

Lending, Inc. join in both motions to dismiss and the response to the motion to remand.

Defendant Shapiro, Van Ess & Sherman ("Shapiro") also filed a motion to dismiss (doc. 26).

 We rule on Shapiro's motion without waiting for a response because the legal issues raised

by this motion were necessarily considered in ruling on the motion to remand.

Case 2:11-cv-01463-FJM Document 30 Filed 10/20/11 Page 1 of 5
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Plaintiff's first amended complaint asserts six causes of action: intentional

misrepresentation against Fairway Independent Mortgage Corp. ("Fairway"), consumer fraud

against Fairway, quiet title against all defendants except Fairway, breach of good faith and

fair dealing against OneWest, violation of A.R.S. § 33-420 against OneWest and Shapiro,

and negligent performance of an undertaking against OneWest.

I

Plaintiff contends this court lacks subject matter jurisdiction because there is no

complete diversity between the parties, as he is an Arizona resident and defendant Shapiro

is an Arizona limited liability partnership. Plaintiff’s state court complaint named Shapiro,

the trustee of plaintiff's mortgage, as a "third party not at fault." Defendants removed on the

basis of diversity. Plaintiff later amended his complaint to remove the "third party not at

fault" language. Defendants argue that because Shapiro was fraudulently joined, this court

has jurisdiction based on diversity.

Plaintiff's original complaint governs subject matter jurisdiction. His amended

complaint need not be considered because "jurisdiction must be analyzed on the basis of the

pleadings filed at the time of removal without reference to subsequent amendments." Sparta

Surgical Corp. v. Nat'l Ass'n of Sec. Dealers, Inc., 159 F.3d 1209, 1213 (9th Cir. 1998). See

also Williams v. Costco Wholesale Corp., 471 F.3d 975, 976 (9th Cir. 2006) ("the propriety

of removal is determined solely on the basis of the pleadings filed in state court. . . . postremoval pleadings have no bearing on whether the removal was proper"). As a result, it is

the complaint naming Shapiro "third party not at fault" which controls this issue.

"Fraudulent joinder is a term of art. If the plaintiff fails to state a cause of action

against a resident defendant, and the failure is obvious according to the settled rules of the

state, the joinder of the resident defendant is fraudulent." McCabe v. Gen. Foods Corp., 811

F.2d 1336, 1339 (9th Cir. 1987). We may find fraudulent joinder "[o]n the basis of the

complaint alone." Id. In this case, plaintiff failed to state a cause of action against Shapiro

in his original complaint. Therefore, Shapiro is a fraudulently joined party.

Plaintiff argues that Shapiro is an indispensable party, but this contention also fails.

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Under A.R.S. § 33-807(E), 

[t]he trustee need only be joined as a party in legal actions pertaining to a

breach of the trustee's obligation under this chapter or under the deed of trust.

. . . If the trustee is joined as a party in any other action, the trustee is entitled

to be immediately dismissed and to recover costs and reasonable attorney fees

from the person joining the trustee.

The complaint does not allege that Shapiro breached statutory duties or any duties under the

deed of trust. Moreover, "[a]ny order of the court entered against the beneficiary is binding

upon the trustee with respect to any actions that the trustee is authorized to take by the trust

deed or by this chapter." A.R.S. § 33-807(E). Any order against OneWest or another

beneficiary is thus binding upon Shapiro. Because Shapiro must be dismissed under this

statute, there is complete diversity between the parties. Because subject matter jurisdiction

exists, we will deny the motion to remand.

III

Plaintiff fails to state a claim for quiet title under A.R.S. § 12-1102 because he neither

possesses title to the property nor shows a readiness to pay off his loan. A complaint for an

action to quiet title must include facts showing that the plaintiff actually possesses title.

Verde Water & Power Co. v. Salt River Valley Water Users' Ass'n, 22 Ariz. 305, 307, 197

P. 227, 227-28 (1921). Plaintiff "executed a promissory note for the amount borrowed,

which was secured by the deed of trust." First Amended Complaint at 3-4. In Arizona, a

deed of trust passes legal title to the trustee. A.R.S. § 33-801(8); Brant v. Hargrove, 129

Ariz. 475, 481, 632 P.2d 978, 984 (Ct. App. 1981). Therefore, the facts alleged show that

plaintiff, as trustor, does not hold title to the property. In addition, plaintiff has not paid off

his mortgage loan or shown that he is ready, willing, and able to do so. If an unsatisfied

balance is due to a trustee, "the court will not quiet the title until and unless [plaintiff] pays

off such mortgage lien." Farrell v. West, 47 Ariz. 490, 491, 114 P.2d 910, 911 (1941). As

a result, plaintiff has not adequately pled the elements of a quiet title action.

VI

Plaintiff's next claim for relief is premised on a breach of good faith and fair dealing

by OneWest. He explicitly says that his claim arises out of the contractual obligations set

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forth in the deed of trust and the note. However, OneWest was not a party to the deed of

trust or the note. All his allegations relate to the loan modification process, which began on

November 20, 2009 and continued through December, 2010. First Amended Complaint at

18-20, ex. I at 3-4. Throughout this time, OneWest was a servicing agent. The beneficial

interest in plaintiff's note was assigned to OneWest on or about March 16, 2011, with an

effective date of March 10, 2011. Id., ex. B. Because no contractual relationship existed

between plaintiff and OneWest before this time, there was no implied covenant of good faith

and fair dealing between the parties. Rawlings v. Apodaca, 151 Ariz. 149, 153, 726 P.2d

565, 569 (1986). Plaintiff cannot assert a claim for breach of the implied covenant of good

faith and fair dealing against OneWest.

VII

Plaintiff alleges a violation of A.R.S. § 33-420 by defendants OneWest and Shapiro.

He contends the assignment of the deed of trust, notice of substitution of trustee, and notice

of trustee's sale were recorded with false statements. A claim will lie under this statute

against "[a] person purporting to claim an interest in, or a lien or encumbrance against, real

property, who causes a document asserting such claim to be recorded in the office of the

county recorder, knowing or having reason to know that the document is forged, groundless,

contains a material misstatement or false claim or is otherwise invalid . . ." A.R.S. § 33-

420(A). 

Plaintiff is neither involved with nor affected by the assignment and substitution. As

a result, he cannot demonstrate a concrete and particularized injury and therefore lacks

standing to challenge the validity of the assignment. See In re Mortgage Electronic

Registration Systems (MERS) Litig., MDL Docket No. 09-2119-JAT, 2011 WL 4550189,

at *5 (D. Ariz. Oct. 3, 2011). Moreover, this statute applies only to "some sort of document

purporting to create an interest, lien, or encumbrance, such as a lis pendens, mechanics lien,

or the deed of trust itself. . . . The Court could locate no authority applying this statute to

assignments of mortgages and notices of trustee's sales." Schayes v. Orion Fin. Group, Inc.,

No. CV-10-02658-PHX-NVW, 2011 WL 3156303, at *6 (D. Ariz. July 27, 2011). There can

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be no claim for a violation of A.R.S. § 33-420 based on these documents.

VIII

Plaintiff's last claim is against OneWest for negligent performance of an undertaking.

 Arizona applies the Good Samaritan doctrine in § 323 of the Restatement (Second) of Torts

(1965). Thompson v. Sun City Community Hosp., Inc., 141 Ariz. 597, 608, 688 P.2d 605,

616 (1984). 

One who undertakes, gratuitously or for consideration, to render

services to another which he should recognize as necessary for the protection

of the other's person or things, is subject to liability to the other for physical

harm resulting from his failure to exercise reasonable care to perform his

undertaking, if 

(a) his failure to exercise such care increases the risk of such harm, or

(b) the harm is suffered because of the other's reliance upon the

undertaking.

Restatement (Second) of Torts § 323 (1965).

The Arizona Supreme Court has not extended this theory beyond its express limitation

to physical harm. To do so would greatly transform the law of contracts. We decline to do

so. As plaintiff has not pled any physical harm, his claim for negligent performance of an

undertaking is dismissed.

IX

IT IS ORDERED DENYING plaintiff's motion to remand (doc. 15).

IT IS ORDERED GRANTING Shapiro's motion to dismiss (doc. 26).

IT IS ORDERED GRANTING defendants' motion to dismiss counts three through

six of the first amended complaint against defendants OneWest, Deutsche Bank National

Trust Company as Trustee for IndyMac INDX Mortgage Loan Trust 2006-AR31, and Merrill

Lynch Mortgage Lending, Inc. (Doc. 16). This leaves counts one and two against defendant

Fairway as the only remaining claims.

IT IS ORDERED DENYING defendants' first motion to dismiss (doc. 11) as moot.

DATED this 20th day of October, 2011.

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