Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_08-cv-08113/USCOURTS-azd-3_08-cv-08113-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1331 Fed. Question

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Lucy Garcia, 

Plaintiff, 

vs.

ReconTrust Company; Mortgage

Electronic Registration Company, 

Defendants. 

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No. CV-08-8113-PHX-MHM

ORDER

Currently pending before the Court are Plaintiff Lucy Garcia’s Motion for Summary

Judgment or in the alternative, Motion for Remand, (Dkt.#26), and Defendant ReconTrust

Company (“ReconTrust”) and Mortgage Electronic Registration Company (“MERS”)

Motion for Judgment on the Pleadings, (Dkt.#21). After reviewing the pleadings and

determining oral argument unnecessary, the Court issues the following Order. 

Given the complete absence of a relevant factual predicate to any of Plaintiff’s claims,

the record before the Court is somewhat muddled. Nevertheless, Plaintiff, Lucy Garcia, is

a California citizen who owns a piece of real property in Lake Havasu, Arizona. That

property is apparently secured by a deed of trust which is in default. Defendants, ReconTrust,

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a Texas citizen, and MERS, a citizen of the State of Delaware, have initiated in the past or

plan to initiate in the future non-judicial foreclosure proceedings on the property.

On July 16, 2008, Plaintiff Garcia file suit against Defendants ReconTrust and MERS

in Maricopa County Superior Court. On September 22, 2008, Defendants removed the case

to federal court. On January 7, 2009, Garcia filed an Amended Complaint against Defendants

ReconTrust and MERS alleging a claim for a declaratory judgment that Defendants are not

entitled to enforce the underlying promissory note (Count I), a claim for injunctive relief to

prevent the trustee’s sale (Count II), a claim under the Uniform Commercial Code (“U.C.C.”)

as adopted by the State of Arizona in A.R.S. § 47-3101 (Count III), claims under the Real

Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2601 et seq., and the Fair Debt

Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692 et seq. (Count IV), and claims under

the Home Ownership and Equity Protection Act (“HOEPA”), 15 U.S.C. §§ 1637 et seq., the

Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601, 12 C.F.R. 226, the Federal Trade

Commission Act (“FTCA”), 15 U.S.C. §§ 41 et seq. (Count V). 

On July 28, 2009, Defendants moved for Judgment on the Pleadings, arguing that

Garcia’s contention that Defendants cannot initiate non-judicial foreclosure proceeding until

they first present the original note is legally incorrect and that Garcia’s remaining federal

claims are without merit. On August 8, 2009, Garcia filed a Motion for Summary Judgment,

or in the alternative, a Motion to Remand. In her Motion, Garcia argues that a decision on

her original note theory is not ripe for review, and that in the alternative, the Court should

dismiss her federal claims and remand the case in its entirety back to state court.

 In the response to Defendants’ Motion for Judgment on the Pleadings, Plaintiff’s

counsel states that after “[p]erforming a diligent Rule 11 inquiry and doing an ongoing

analysis of these two claims, undersigned reasonably believes that these claims can be

voluntarily dismissed at this time.” (See Dkt.#25, p. 11.) Defendants do not contest the

dismissal of Plaintiff’s federal claims. As a preliminary matter, the Court notes that seeking

a voluntary dismissal under Rule 41(a) of the Federal Rules of Civil Procedure may not be

granted “when a plaintiff seeks to dismiss some, but not all, of his or her claims.” Paglin v.

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In addition, the Court sees no reason why remanding the remaining state law issues

would be appropriate in this case. In her Motion for Summary Judgment, or in the alternative,

Motion for Remand, Plaintiff did not present a compelling argument that federal jurisdiction

would be lacking if the Court were to dismiss her federal claims. A cursory review of the

Amended Complaint reveals that Plaintiff is a citizen of California and Defendants are

citizens of Texas and of Delaware. As such, there is complete diversity between the Parties.

While there is no information to indicate the value of the relevant piece of real property and

whether the amount in controversy is over $75,000, the Court notes that Plaintiff did not so

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Saztec Int’l, Inc., 834 F. Supp. 1184, 1189 (W.D. Mo. 1993). As such, a voluntary dismissal

of Plaintiff’s federal claims pursuant to RESPA, FDCPA, TILA and FTCA (Counts IV and

V) is not appropriate, as Plaintiff intends to dismiss a portion of her Amend Complaint while

proceeding forward on her remaining Arizona U.C.C. claims. Although a voluntary

dismissal under Rule 41(a) cannot be properly granted in this case, the Court must note that

it has reviewed the federal claims alleged in Plaintiff’s Amended Complaint to determine

whether the Amended Complaint on its face “contain[s] sufficient factual matter, accepted

as true, to ‘state a claim to relief that is plausible on its face.’” See Ashcroft v. Iqbal, 129

S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).).

After conducting a careful review of Plaintiff’s pleading, it is clear that her Amended

Complaint fails to allege any facts that tend to support a finding of liability under either

RESPA, FDCPA, TILA or FTCA. As such, an involuntary dismissal without prejudice is

appropriate as to Plaintiff’s federal claims (Counts IV and V), because her Amended

Complaint fails to plead sufficient facts to state a claim upon which relief can be granted. See

Albade v. Albade, 616 F.2d 1089, 1093 (9th Cir. 1980) (noting that Rule 12(h)(2) [of the

Federal Rules of Civil Procedure] authorizes use of a motion [for judgment on the pleadings]

to raise the defense of failure to state a claim.”). It bears mentioning that Rule 41(b), which

authorizes an involuntary dismissal, is framed more broadly than Rule 41(a). While Rule

41(a) only permits dismissal of an entire “action,” rather than one or several individual

claims, Rule 41(b) allows a court to involuntarily dismiss “an action or any claim.”

Accordingly, dismissal without prejudice of Garcia’s federal claims is proper for failing to

meet the pleading requirements of Iqbal and Twombly.

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much as attempt to argue that the case failed to meet the requirements of diversity

jurisdiction under 28 U.S.C. § 1332. 

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As to Garcia’s remaining state law claims concerning whether the physical production

of the original promissary note is required before initiating a non-judicial foreclosure under

Arizona state law, the Court notes that her position with respect to original promissary note

lacks legal merit and must be dismissed.

Under Arizona law, “[u]nlike their judicial foreclosure cousins that involve the court,

deed of trust sales are conducted on a contract theory under the power of sale authority of the

trustee.” In re Krohn, 52 P.3d 774, 777 (Ariz. 2002). “[A] power of sale is conferred upon

the trustee of a trust deed under which the trust property may be sold . . . after a breach or

default in performance of the contract or contracts, for which the trust property is conveyed

as security . . ..” A.R.S. § 33-807(A). The Arizona statutes governing the sale of foreclosed

property through a trustee’s sale do not specifically require that the foreclosing party

produce a physical copy of the original promissary note. 

Like most states, Arizona has adopted the U.C.C.. The U.C.C., among other things,

governs the enforcement of negotiable instruments, providing that “‘[p]erson[s] entitled to

enforce’ an instrument include the holder of the instrument, a nonholder in possession of the

instrument who has the rights of a holder or a person not in possession of the instrument who

is entitled to enforce the instrument pursuant to § 47-3309 [because the note is lost or

destroyed].” A.R.S. § 47-3301. There is very little case law on the issue of whether the

U.C.C. has any applicability in the context of non-judicial trustee sales or foreclosures in

Arizona. The only courts that have addressed this issue are federal courts within the District

of Arizona; neither the Arizona Court of Appeals, nor the Arizona Supreme Court have

weighed in on the issue. When addressing the applicability of the UCC to foreclosure sales,

courts within the District of Arizona “have routinely held that [a plaintiff’s] ‘show me the

note’ argument lacks merit.” Diessner v. Mortgage Elec. Registration Sys., 618 F. Supp. 2d

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1184, 1187-88 (D. Ariz. 2009) (quoting Mansour v. Cal-Western Reconveyance Corp., 618

F. Supp. 2d 1178, 1181 (D. Ariz. 2009)). 

Given the absence of instruction from the Arizona Supreme Court or Court of

Appeals, the most reasonable course of action is for this Court to follow the rulings of its

sister courts within the District of Arizona and hold that production of the original

promissary note is not required before commencing a foreclosure/trustee’s sale. To the extent

Garcia intends to argue that these non-judicial proceedings are indeed contemplated by the

U.C.C., that argument would be better suited for the Arizona Supreme Court, which is the

body that is charged with interpreting the laws of the State of Arizona. Absent specific and

compelling Arizona case law, this Court will not presume that the U.C.C. has any

applicability to the initiation of non-judicial foreclosure proceedings. As such, the Counts

relating to the production of the original note, (Counts I, II and III) are hereby dismissed with

prejudice. “Dismissal is appropriate where the complaint lacks . . . a cognizable legal theory

. . ..” Mansour v. Cal-Western Reconveyance Corp., 618 F. Supp. 2d 1178, 1181 (D. Ariz.

2006) (citing Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988)).

Accordingly,

IT IS HEREBY ORDERED granting Defendant ReconTrust and MERS Motion for

Judgment on the Pleadings, (Dkt.#21).

IT IS FURTHER ORDERED denying as moot Plaintiff Lucy Garcia’s Motion for

Summary Judgment or in the alternative, Motion for Remand, (Dkt.#26).

IT IS FURTHER ORDERED dismissing as moot Defendant ReconTrust and

MERS’ Counterclaim against Plaintiff Lucy Garcia.

IT IS FURTHER ORDERED directing the Clerk to enter judgment accordingly.

DATED this 26th day of March, 2010.

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