Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_11-cv-00848/USCOURTS-azd-2_11-cv-00848-1/pdf.json

Nature of Suit Code: 140
Nature of Suit: Negotiable Instruments
Cause of Action: 28:1444 Petition for Removal- Foreclosure

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Zsa Zsa Graham-Miller, 

Plaintiff, 

vs.

Nationstar Mortgage LLC; Quality Loan

Service Corp.; Mortgage Electronic

Registration Systems, Inc., 

Defendants. 

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No. CV-11-00848-PHX-JAT

ORDER

Pending before the Court is Defendants’ Motion to Dismiss Plaintiff’s First Amended

Complaint (Doc. 47). The Court now rules on the Motion.

I. BACKGROUND

Non-party K. Hovanian American Mortgage LLC (“Hovanian”) made a home loan

(the “Loan”) to Plaintiff Zsa Zsa Graham-Miller and non-party Elbert L. Miller (collectively,

the “Borrowers”) in the principal amount of $268,000 on June 15, 2006. The Loan is

evidenced by a $268,000 note (the “Note”) executed by Borrowers and payable to Hovanian.

The Borrowers also executed a Deed of Trust in favor of Hovanian encumbering real

property located at 3546 E. Blue Ridge Way, Gilbert, Arizona (the “Property”). Defendant

MERS is the designated beneficiary of the Deed of Trust. Borrowers stopped making

payments on the Note beginning September 2010. 

MERS assigned its interest in the Deed of Trust to Defendant Nationstar on March 1,

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2011. On that same date, Nationstar substituted Defendant Quality as the Trustee under the

Deed of Trust. Quality noticed a non-judicial Trustee’s Sale of the Property for June 2, 2011.

The Notice of Trustee’s Sale was later canceled. 

Defendants moved to dismiss Plaintiff’s original complaint for failing to meet Rule

8's pleading requirements. The Court agreed and dismissed the complaint, with leave to

amend. (Doc. 45). Plaintiff then filed an Amended Complaint, alleging common law and

constructive fraud. (Doc. 46). Defendants again moved to dismiss for failure to state a claim.

(Doc. 47).

II. LEGAL STANDARD

The Court may dismiss a complaint for failure to state a claim under Federal Rule of

Civil Procedure 12(b)(6) for two reasons: 1) lack of a cognizable legal theory and 2)

insufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep’t,

901 F.2d 696, 699 (9th Cir. 1990). 

To survive a 12(b)(6) motion for failure to state a claim, a complaint must meet the

requirements of Federal Rule of Civil Procedure 8(a)(2). Rule 8(a)(2) requires a “short and

plain statement of the claim showing that the pleader is entitled to relief,” so that the

defendant has “fair notice of what the . . . claim is and the grounds upon which it rests.” Bell

Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S.

41, 47 (1957)). 

Although a complaint attacked for failure to state a claim does not need detailed

factual allegations, the pleader’s obligation to provide the grounds for relief requires “more

than labels and conclusions, and a formulaic recitation of the elements of a cause of action

will not do.” Twombly, 550 U.S. at 555 (internal citations omitted). The factual allegations

of the complaint must be sufficient to raise a right to relief above a speculative level. Id.

Rule 8(a)(2) “requires a ‘showing,’ rather than a blanket assertion, of entitlement to relief.

Without some factual allegation in the complaint, it is hard to see how a claimant could

satisfy the requirement of providing not only ‘fair notice’ of the nature of the claim, but also

‘grounds’ on which the claim rests.” Id. (citing 5 C. Wright & A. Miller, Federal Practice and

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Procedure §1202, pp. 94, 95(3d ed. 2004)).

Rule 8’s pleading standard demands more than “an unadorned, the-defendantunlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)(citing

Twombly, 550 U.S. at 555). A complaint that offers nothing more than naked assertions will

not suffice. To survive a motion to dismiss, a complaint must contain sufficient factual

matter, which, if accepted as true, states a claim to relief that is “plausible on its face.” Iqbal,

129 S.Ct. at 1949. Facial plausibility exists if the pleader pleads factual content that allows

the court to draw the reasonable inference that the defendant is liable for the misconduct

alleged. Id. Plausibility does not equal “probability,” but plausibility requires more than a

sheer possibility that a defendant has acted unlawfully. Id. “Where a complaint pleads facts

that are ‘merely consistent’ with a defendant’s liability, it ‘stops short of the line between

possibility and plausibility of entitlement to relief.’” Id. (citing Twombly, 550 U.S. at 557).

In deciding a motion to dismiss under Rule 12(b)(6), the Court must construe the facts

alleged in the complaint in the light most favorable to the drafter of the complaint and the

Court must accept all well-pleaded factual allegations as true. See Shwarz v. United States,

234 F.3d 428, 435 (9th Cir. 2000). Nonetheless, the Court does not have to accept as true a

legal conclusion couched as a factual allegation. Papasan v. Allain, 478 U.S. 265, 286

(1986). “Pro se complaints are to be construed liberally and ‘may be dismissed for failure to

state a claim only where “it appears beyond doubt that the plaintiff can prove no set of facts

in support of his claim which would entitle him to relief.”’” Weilburg v. Shapiro, 488 F.3d

1202, 1205 (9th Cir. 2007) (quoting Franklin v. Murphy, 745 F.2d 1221, 1228, 1230 (9th Cir.

1984) (internal citation omitted)).

III. DISCUSSION

A. Fraud

In its previous order, the Court cautioned Plaintiff to allege fraud with the required

specificity in any amended complaint. (Doc. 45 at 7-8). 

Pursuant to Fed. R. Civ. P. 9(b), “in order for a complaint to allege

fraud with the requisite particularity, ‘a plaintiff must set forth more than the

neutral facts necessary to identify the transaction. The plaintiff must set forth

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what is false or misleading about a statement, and why it is false. In other

words, the plaintiff must set forth an explanation as to why the statement or

omission complained of was false or misleading.’” Yourish v. Cal. Amplifier, 191 F.3d 983, 993 (9th Cir. 1999) (quoting In re GlenFed, 42 F.3d at 1548 (9th

Cir. 1994)).

Williamson v. Allstate Insurance Co., 204 F.R.D. 641, 644-45 (D. Ariz. 2001). “Rule 9(b)

does not allow a complaint to merely lump multiple defendants together but require[s]

plaintiffs to differentiate their allegations when suing more than one defendant ... and inform

each defendant separately of the allegations surrounding his alleged participation in the

fraud.” Swartz v. KPMG LLP, 476 F.3d 756, 765 (9th Cir.2007) (internal citation omitted).

Plaintiff alleges constructive fraud on the part of Defendant Quality. “Constructive

fraud is defined as a breach of a legal or equitable duty which, without regard to moral guilt

or intent of the person charged, the law declares fraudulent because the breach tends to

deceive others, violates public or private confidences, or injures public interests.” Lasley v.

Helms, 880 P.2d 1135, 1137 (Ariz. Ct. App. 1994). Plaintiff’s claim consists of a bare

allegation of fraud, without an indication as to how Defendant Quality breached its duty,

whom was deceived, what confidences were violated, or how the public interest was injured.

(Doc. 46 at 2). Plaintiff thus fails to meet the requirements of Rule 9(b) with regard to this

claim.

Plaintiff alleges Defendants committed common law fraud with regard to: (1) the

Notice of Trustee’s Sale on March 2, 2011. (Pl. Ex. 2A); (2) the Substitution of Trustee on

March 1, 2011 (Pl. Ex. 2B); (3) and the Assignment of Deed of Trust on March 1, 2011 (Pl.

Ex. 3B). Insofar as Plaintiff’s claims regard the Notice of Trustee’s Sale, they are moot, as

the sale was cancelled.

Plaintiff has failed to meet federal pleading standards with regard to the Substitution

of Trustee and the Assignment of Deed of Trust. To show fraud, a plaintiff must identify:

“(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge of its

falsity or ignorance of its truth; (5) the speaker’s intent that it be acted upon by the recipient

in the manner reasonably contemplated; (6) the hearer’s ignorance of its falsity; (7) the

hearer’s reliance on its truth; (8) the right to rely on it; [and] (9) his consequent and

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proximate injury.” Echols v. Beauty Built Homes, Inc., 647 P.2d 629, 631 (1982). Even

assuming Plaintiff’s allegation that false signatures were used is true, Plaintiff has still failed

to demonstrate elements seven and nine. Plaintiff has failed to show reliance, as her

obligations did not change with either the Substitution of Trustee or the Assignment of Deed

of Trust, nor did she allege that she took any action in reliance upon either of the documents.

Plaintiff has failed to demonstrate injury, since her obligations were incurred in 2006, and

neither of the documents modified those obligations. Accordingly, she has failed to state a

valid legal claim for common law fraud.

Plaintiff also alleges that Defendant MERS was not legally authorized as nominee,

or beneficiary, “as a result of inaccurate information submitted on the Deed of Trust dated

June 15, 2006.” Specifically, she argues that MERS required slightly different Original

Mortgagee language than was actually used on the Deed. (Pl. Ex. 1A; Pl. Ex. 1B). The source

Plaintiff uses for that requirement includes the disclaimer “[t]his is representative language

only.” (Pl. Ex. 1A). Even if Plaintiff is correct that the language used did not meet MERS’s

requirements, she fails to allege a legal theory under which this fact might entitle her to

relief. Accordingly, this allegation fails to state a claim for relief.

B. Standing

Defendants argue that even if Plaintiff has sufficiently alleged a claim, she lacks

standing to bring it. This Court has previously held that borrowers who were not parties to

the assignment of their deed lack standing to challenge the assignment’s validity. In Re

MERS Litigation, MDL Dkt. No. 09–2119–JAT, 2011 WL 4550189, *5 (D. Ariz. Oct. 03,

2011); see also Silving v. Wells Fargo Bank, NA, CV 11-0676-PHX-DGC, 2012 WL 135989,

*3 (D. Ariz. Jan. 18, 2012). Accordingly, Plaintiff lacks standing to challenge the

Substitution of Trustee or Assignment of Deed of Trust as fraudulent.

C. Conclusion

Because Plaintiff has failed to plead fraud with the requisite particularity against any

Defendant, because her claim regarding the Notice of Trustee Sale is moot, and because she

does not have standing to challenge the validity of Substitution of Trustee or the Assignment

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of her Deed of Trust, the Court will grant the Motion to Dismiss the Amended Complaint.

IV. Attorneys’ Fees

Defendants seek an award of attorneys’ fees under two separate Arizona statutes.

A. Ariz. Rev. Stat. Ann. § 33-807(E)

Defendant Quality argues that under Arizona law it is entitled, as trustee, to be

dismissed immediately and to recover its costs and attorney’s fees. 

The 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.

Ariz. Rev. Stat. Ann. § 33-807(E).

[T]o receive the protection of A.R.S. § 33-807(E) [sic] as to any particular

claim, a trustee must establish three elements. First, that the trustee has been

named as a defendant in the claim. Second, that the claim relates to the

authority of the trustee to act, given to the trustee either by the trust deed or

Arizona statutes regulating trust deeds. Third, that the claims do not allege that

the trustee breached any of his or her obligations that arise under either the

deed of trust or the statutory chapter of the Arizona Revised Statutes that

regulates deeds of trust.

Puzz v. Chase Home Fin., LLC, 763 F. Supp. 2d 1116, 1125 (D. Ariz. 2011). The first

element is satisfied here; Defendant Quality is a named defendant. Second, because the

alleged fraud concerns the substitution of Quality as trustee, it necessarily relates to Quality’s

authority to act under the trust deed. Third, there is no allegation that Quality breached any

of its obligations under the deed of trust, nor under the relevant chapter of the Arizona

Revised Statutes. Accordingly, Quality is entitled to be dismissed and to recover costs and

attorneys’ fees from Plaintiff.

The parties are directed to confer in good faith to resolve any disputes concerning the

amount of reasonable expenses and fees. See LRCiv 54.2(d)(1). If the parties are unable to

agree, Defendant Quality may file a motion pursuant to Local Rule 54.2. Any such motion

shall be filed, with a supporting memorandum, within twenty-one (21) days of this order,

with the response and reply briefs due in accordance with the time periods provided in Local

Rule 54.2(b)(3) and (4).

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B. Ariz. Rev. Stat. Ann. § 12-341.01

Defendants further argue that they are entitled to an award of their attorneys’ fees

pursuant to Arizona Revised Statutes section 12-341.01. (Doc. 49 at 2; A.R.S. § 12-341.01).

Under Arizona law, “[i]n any contested action arising out of a contract, express or

implied, the court may award the successful party reasonable attorney fees.”§ 12-341.01(a).

The action in this case arises “out of a contract.” Therefore, the Court must determine

whether Defendants are the “successful party” within the meaning of section 12-341.01(a).

If the Court finds Defendants are the “successful party,” the Court must then determine

whether awarding fees to Defendants is appropriate. Finally, the Court must determine if the

amount of fees Defendants seek is reasonable.

However, Defendants have merely asserted that they are entitled to an award of their

attorneys’ fees. They have failed to discuss any of the reasonableness factors this Court must

weigh in exercising its discretion to award attorney’s fees. Associated Indem. Corp. v.

Warner, 694 P.2d 1181, 1184 (Ariz. 1985) (in banc) (discussing the factors to be considered

in awarding attorney’s fees and stating that trial courts have broad discretion in fixing the

amount of the fee). When weighing the factors set out in Warner, the party requesting fees

has the burden of proving entitlement. Woerth v. City of Flagstaff, 808 P.2d 297, 305 (Ariz.

Ct. App. 1991). By making their request for attorneys’ fees in their Reply, Defendants have

also denied Plaintiff an opportunity to present specific evidence of hardship by affidavit or

testimony in order to oppose an award. See Wilcox v. Waldman, 744 P.2d 444, 450 (Ariz. Ct.

App. 1987). Accordingly, if Defendants wish to be awarded attorneys’ fees under section 12-

341.01, they must file a separate motion that complies with Local Rule 54.2, setting out the

reasons this Court should exercise its discretion to award fees. The Court therefore denies

the request for attorneys’ fees pursuant to A.R.S. § 12-341.01, without prejudice to refiling.

V. REQUEST FOR RULING

The Court acknowledges Defendants’ Request for Ruling. (Doc. 51). The Court notes

that under Local Rule of Civil Procedure 7.2(l), the attorneys of record in this case should

properly have inquired of this Court regarding the status of this matter, in writing, one

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hundred and eighty days after the matter had been taken under advisement. LRCiv 7.2(l). The

Court also notes that Defendants’ Request was filed only forty-five days after Defendants’

Reply In Support of Motion to Dismiss (Doc. 49) was received. As the Court is now ruling

on the Motion, Defendants’ Request is rendered moot.

Based on the foregoing,

IT IS ORDERED granting Defendants’ Motion to Dismiss (Doc. 47).

IT IS FURTHER ORDERED that, as set forth in this Order, Defendant Quality must

file any reasonable request for attorneys’ fees pursuant to A.R.S. § 33-807(E) within twentyone (21) days of this order.

IT IS FURTHER ORDERED denying without prejudice to refiling the Defendants’

request for attorneys’ fees pursuant to A.R.S. § 12-341.01.

IT IS FURTHER ORDERED denying Defendants’ Request for Ruling (Doc. 51)

as moot.

DATED this 21st day of June, 2012.

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