Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_10-cv-08259/USCOURTS-azd-3_10-cv-08259-1/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
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

Jay Kentera and Julie Kentera, husband

and wife, 

Plaintiffs, 

vs.

Fremont Investment and Loan, nka

Fremont Reorganizing Corporation, a

California Corporation, et al., 

Defendants. 

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No. CV-10-8259-PHX-GMS

ORDER

Pending before this Court is a Motion to Dismiss filed by Defendants Ocwen Loan

Servicing, LLC (“Ocwen”); Barclays Capital Real Estate, Inc. dba HomEq Servicing

(“HomEq”); Wells Fargo Bank, National Association, as Trustee (“Wells Fargo”); and

Mortgage Electronic Registration Systems, Inc. (“MERS”) (Doc. 38). For the reasons stated

below, the motion is granted in part and denied in part.

BACKGROUND

Plaintiffs Jay and Julie Kentera purchased a property located at 3280 Blazing Star

Road in Show Low, Arizona, on January 26, 2006 (“the property”). (Doc. 36 ¶ 12). To buy

the property, Plaintiffs borrowed $461,000.00 from Fremont Investment & Loan, nka

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1

 Plaintiffs have attached a copy of what they allege is an incomplete copy of the Note

to their Amended Complaint. Although the Court notes Plaintiffs’ contention that the copy

may be incomplete, it is “material which is properly submitted as part of the complaint” and

therefore may be considered in this Order. Hal Roach Studios, Inc. v. Richard Feiner and

Co., Inc, 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). Fremont is not named as a defendant in

the amended complaint.

2

 The copy of the Deed of Trust submitted with the First Amended Complaint is a

printout from the Navajo County Recorder’s Office and labeled “Unofficial Document.”

Nevertheless, neither party contests that the image represents the terms of the actual Deed

of Trust.

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Fremont Reorganizing Corporation (“Fremont”) pursuant to a Promissory Note.1

 (Id.). The

Note states that “The Lender or anyone who takes this Note by transfer and who is entitled

to receive payments under this Note is called the ‘Note Holder.’” (Doc. 36-1, Ex. A). The

Note grants certain powers to the Note Holder, including the power to demand accelerated

payment in the event of default. (Id.). The loan was secured by a Deed of Trust (“DOT”),

which lists Fremont as the Lender, First American Title Insurance Company (“First

American”) as the Trustee, and MERS as the beneficiary. (Doc. 36-1, Ex. B).2

In August of 2006, Securitized Asset Backed Receivables LLC (“Securitized”) issued

certificates pursuant to a Pooling and Servicing Agreement (“PSA”) between Securitized,

Fremont, and others. (Doc. 36 ¶ 20). The certificates had an aggregate initial capitalization

of $946,617,000.00, and were initially sold to Barclays Capital Inc. (“Barclays”), and Wells

Fargo served as the Trustee. (Id.). According to the Amended Complaint, during this

transaction Plaintiffs’ loan was sold to Barclays, and the transaction was subject to the PSA.

(Doc. 36 ¶¶ 22–23). The PSA affirms that parties transferring loans have “delivered or

caused to be delivered to the Trustee . . . the original Mortgage Note bearing all intervening

endorsements showing a complete chain of endorsements from the originator to the last

endorsee, endorsed ‘Pay to the order of _____, without recourse’ and signed (which may be

by facsimile signature) in the name of the last endorsee by an authorized officer.” (Doc. 36,

Ex. C). Plaintiffs allege that their mortgage was pooled with others in the PSA and included

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in the mortgage-backed security underwritten by Barclays.

Barclays, doing business as HomEq, was the servicer on Plaintiffs’ loan in 2009, when

Plaintiffs contacted HomEq to request a loan modification. According to the complaint,

HomEq stated that Plaintiffs could not be considered for a modification because they were

current on their loan and HomEq had a policy of only modifying loans in default. (Doc. 36

¶ 38). HomEq then allegedly encouraged Plaintiffs to default on their loan, which Plaintiffs

did. (Id.). HomEq subsequently supplied Plaintiffs with loan modification applications

through a program which approved modifications for primary residences, and since the

property was not Plaintiffs’ primary residence, they were rejected. (Doc. 36 ¶ 40). Plaintiffs

provided additional information to HomEq on August 18, but HomEq initiated foreclosure

proceedings on August 25, 2009. (Doc. 36 ¶¶ 54, 41).

An Assignment of Trustee from HomEq to Wells Fargo was recorded on August 25.

(Doc. 36-2, Ex. D). Also on August 25, a Substitution of Trustee was recorded with Navajo

County, substituting Old Republic Default Management Services (“Old Republic”) for Wells

Fargo; this substitution was dated on August 3, 2009, and executed by HomEq, purportedly

acting as attorney in fact for Wells Fargo. (Doc. 36-2, Ex. F). On August 25, 2009, Old

Republic noticed a trustee sale for November 30, 2009 at 2:00 P.M. (Doc. 36-2, Ex. G).

Plaintiffs continued to work with HomEq on the situation, and the parties agreed to

a Listing Forbearance Agreement (“LFA”) on November 5, 2009, through which the

foreclosure proceedings were postponed while the property was listed for sale. (Doc. 36 ¶

63). Plaintiffs continued to make loan payments under the agreement. (Doc. 36 ¶ 65). The

parties entered into a second LFA covering the period from March 26, 2010 through

September 30, 2010, which required Plaintiffs to continue to make payments and set a lower

listing price for the property. (Doc. 36 ¶ 67).

On August 11, 2010, Plaintiffs were notified that the servicing of the loan would be

transferred from HomEq to Ocwen on August 31, 2010. (Doc. 36, ¶ 69). Plaintiffs made their

August payment, and mailed the September payment. (Doc. 36 ¶¶ 70–71). On October 6, an

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Ocwen representative called Plaintiffs and discussed Ocwen’s loan modification program.

(Doc. 36 ¶ 72). Plaintiffs engaged in a series of phone conversations with Ocwen

representatives during the month of October regarding modification. On October 28, they

were contacted by an Ocwen representative about paperwork regarding a pending

modification application. During the phone conversation, the Ocwen representative checked

on the status of the property and noticed that the foreclosure sale had taken place the day

before, on October 27. (Doc. 36 ¶ 76). Plaintiffs called Ocwen throughout the day, learning

at one point that their required September payment had been changed from $3,898.10, the

amount they had sent, to $3,898.11. (Doc. 36 ¶ 79). They received a letter on November 6,

2010 that was dated October 22, 2010, stating that their $3,898.10 payment was insufficient

to bring the loan current and that it was being rejected. (Doc. 36 ¶ 82).

Plaintiffs continued to contact Ocwen in an effort to rescind the foreclosure, but

Ocwen representatives were either not able or not willing to comply, stating instead that

Plaintiffs would have to purchase the property back. (Doc. 36 ¶¶ 88–92). Plaintiffs filed their

initial complaint in the Navajo County Superior Court on December 6, 2010, and Defendants

removed to federal court on December 30. (Doc. 1).

On September 8, 2011, the Court dismissed a number of allegations against MERS

and HomEq in the original complaint, including claims for declaratory relief, quiet title

claims based upon the theory that a deed of trust is void if a note and beneficiary are not the

same party and related theories, claims of the breach of covenant of good faith and fair

dealing, a claim of negligent performance of an undertaking, and fraud claims. (Doc. 33). A

claim of quiet title against Wells Fargo survived, along with claims for the breach of the

covenant of good faith and fair dealing, negligent performance of an undertaking, and fraud

against Wells Fargo and Ocwen. (Doc. 33). Plaintiffs filed an Amended Complaint on

October 7, 2011. (Doc. 36). Plaintiffs and Old Republic stipulated to the dismissal of Old

Republic from the complaint, and all claims against Old Republic were dismissed on January

10, 2012. (Doc. 50).

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The claims to be discussed in this order are as follows: 1) Breach of Contract, against

all Defendants, for failing to abide by the terms of the Note in the subsequent transfers and

foreclosure proceedings, 2) Quiet Title, against all Defendants, for conducting a foreclosure

without authority to do so, 3) Breach of the Duty of Good Faith and Fair Dealing against all

Defendants, 4) Negligent Performance of an Undertaking against HomEq and Ocwen, 5)

Fraudulent Concealment against Wells Fargo, HomEq, and Ocwen, 6) Fraud against Wells

Fargo, HomEq, and Ocwen, 7) Consumer Fraud against all Defendants, and 8) Negligence

per se against Wells Fargo and HomEq. (Doc. 36). Defendants have moved to dismiss the

complaint.

DISCUSSION

I. Legal Standard

To survive dismissal for failure to state a claim pursuant to Federal Rule of Civil

Procedure 12(b)(6), a complaint must contain more than “labels and conclusions” or a

“formulaic recitation of the elements of a cause of action”; it must contain factual allegations

sufficient to “raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly,

550 U.S. 544, 555 (2007). While “a complaint need not contain detailed factual allegations

. . . it must plead ‘enough facts to state a claim to relief that is plausible on its face.’”

Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 2008) (quoting Twombly,

550 U.S. at 570). “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, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550

U.S. at 556). The plausibility standard “asks for more than a sheer possibility that a defendant

has acted unlawfully.” Id. When a complaint does not “permit the court to infer more than

the mere possibility of misconduct, the complaint has alleged—but it has not shown—that

the pleader is entitled to relief.” Id. at 1950 (internal quotation omitted).

When analyzing a complaint for failure to state a claim under Rule 12(b)(6), “[a]ll

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

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nonmoving party.” Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). However, legal

conclusions couched as factual allegations are not given a presumption of truthfulness, and

“conclusory allegations of law and unwarranted inferences are not sufficient to defeat a

motion to dismiss.” Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998).

II. Analysis

As a preliminary matter, Defendants argue that Plaintiffs’ claims must fail because

Plaintiffs did not obtain an injunction prior to the foreclosure sale, as required by Arizona

Revised Statutes (“A.R.S.”) § 33-811 (2006). Plaintiffs have claimed that they were not

notified of the sale after Ocwen took over servicing the loan from HomEq. Other courts have

noted that § 33-811 is subject to equitable exceptions, including for cases in which notice of

the sale was not given or the sale was void. See Martenson v. RG Financing, 2010 WL

334648, at *9 (D. Ariz. Jan. 22, 2010) (“Defendants would thus pack into the 2002

amendment of subsection (C) an implicit repeal of other express provisions of the statutory

scheme and of the essential structure of the deed of trust system since its enactment three

decades before.”). As this Court noted in its initial order, “in light of the facts pleaded in the

Complaint, the Court cannot say at this stage of the litigation that no equitable exception to

the application of A.R.S. § 33-811 would apply.” (Doc. 33 at 9). Under the facts alleged,

Plaintiffs’ claims are not barred by § 33-811.

Likewise, Defendants contend the Court did not grant Plaintiffs leave to amend to

include a claim for breach of contract or a claim for negligence per se. (Doc. 38 at 4). In the

order denying the initial motion to dismiss, the Court noted, when writing about the “show

me the note” theory, that Plaintiffs would not be “authorized to reassert the inadequate legal

theories discussed above” in their amended complaint. (Doc. 33 at 9). The order did not

otherwise place limits on how Plaintiffs framed their causes of action, and Plaintiffs’

amended complaint is based on the same core factual allegations as the original complaint.

Plaintiffs’ amended complaint will be considered on the merits.

A. Breach of Contract

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As discussed in the earlier order, the courts of this district have routinely rejected the

“show me the note” argument—a claim, for example, that a foreclosure is invalid because

a promissory note and a deed of trust name different beneficiaries, or that foreclosures on a

deed of trust are subject to legal protections applying to actions on negotiable instruments.

See Diessner v. Mortgage Elec. Registration Sys., 618 F. Supp. 2d 1184, 1187 (D. Ariz.

2009) (“[D]istrict courts have routinely held that Plaintiff’s ‘show me the note’ argument

lacks merit.”). Moreover, the Ninth Circuit has rejected any argument that MERS, or another

trustee named as a beneficiary, lacks the power to transfer its rights under a deed of trust. See

Cervantes et al. v. Countrywide et al., 656 F.3d 1034, 1044 (9th Cir. 2011) (“[T]he notes and

deeds are not irreparably split: the split only renders the mortgage unenforceable if MERS

or the trustee, as nominal holders of the deeds, are not agents of the lenders.”).

Plaintiffs have refashioned much of their original “show me the note” argument into

a breach of contract claim. (Doc. 36 ¶¶ 106–135). First, they claim that the parties

securitizing the mortgage did not abide by the terms of the PSA, rendering the transactions

void. (Doc. 36 ¶ 119). Next, they claim that because the Note defines the “Note Holder” as

the lender or someone “who takes this Note by transfer and who is entitled to receive

payments,” and because the holders of the issued security were the only ones entitled to the

payments, that no Defendant was the “Note Holder” under the terms of the Note, and thus

none could demand an accelerated payment or initiate foreclosure proceedings. (Doc. 36-1,

Ex. A). Finally, they claim that the signatures in the Assignment of Trustee and the Notice

of Sale were not authenticated and improperly notarized, and thus constitute breaches of the

contracts created by the DOT in conjunction with the Arizona statutes. (Doc. 36 ¶¶ 106–135).

No claim based on a violation of the PSA can survive. Plaintiffs were not a party to

the PSA, and make no argument to suggest that they have standing to challenge transactions

between financial institutions based upon the fact that the strict terms of the PSA were not

followed. See Anderson v. Countrywide Home Loans, No. 10–2685 (MJD/JJG), 2011 WL

1627945, at *2 (D. Minn. Apr. 2, 2011) (rejecting breach of contract argument relying on

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 Plaintiffs also allege that because the signer was a bank employee, she could not

have signed as an officer for MERS. Plaintiffs misunderstand how MERS operates. See

Cervantes, 656 F.3d at 1040 (“MERS relies on its members to have someone on their own

staff become a MERS officer with the authority to sign documents on behalf of MERS.”).

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pooling and servicing agreement because the “only contracts between Plaintiffs and

Defendants are the note and mortgage”).

The Note states that “[t]he Lender or anyone who takes this Note by transfer and who

is entitled to receive payments under this Note is called the ‘Note Holder.’” (Doc. 36-1, Ex.

A). Plaintiffs contend that no Defendant was the “Note Holder” because after the Note was

securitized, “the Certificateholders [were] the only ones entitled to payment.” (Doc. 36, ¶

37). Plaintiffs nowhere claim that they were paying the Certificateholders directly. Rather,

they state that they continued to pay HomEq, which they acknowledge is a subsidiary of

Barclays Capital Real Estate, Inc., which itself is in privity with the underwriter of the

certificates, Barclays Capital, Inc. (Doc. 36 ¶¶ 39, 6). If Plaintiffs were sending their

payments to Barclays, which was then paying the Certificateholders, then Barclays was

“entitled to payment” even if it, through the trust, forwarded that payment to others.

Plaintiffs’ argument that no Defendant was the “Note Holder” fails.

Plaintiffs finally allege irregularities regarding the transfers of interest that render

those transfers invalid under the Deed of Trust statutes. (Doc. 36 ¶¶ 118–35). Similar claims

in the original complaint were dismissed under Iqbal’s plausibility standard. (Doc. 33 at

5–6). In their amended complaint, however, Plaintiffs offer substantially more detail in

support of this claim than they did originally. They note that the person who signed the

Assignment, for example, lives and works in Jacksonville, Florida, but that the Assignment

was notarized in Sacramento County, California.3

 They note that HomEq signed the

Substitution as attorney in fact for Wells Fargo but had no power to act as such.

Foreclosures in Arizona are governed by the non-judicial deed of trust statutes,

Arizona Revised Statutes (“A.R.S.”) § 33-801–21 (2006). Plaintiffs correctly note that

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because these statutes “strip borrowers of many of the protections available under a

mortgage,” lenders “must strictly comply with” them and they “must be strictly construed

in favor of the borrower.” Patton v. First Federal Sav. and Loan Ass’n, 118 Ariz. 473, 477,

578 P.2d 152, 156 (1978). Allegations that the Deed of Trust statutes were violated,

including an allegation that a “notary falsely certified [that] the signatory appeared before

her in California,” are sufficient to state a claim that the trustee’s sale was void. Silving v.

Wells Fargo Bank, NA, 800 F. Supp. 2d 1055, 1066 (D. Ariz. 2011). Plaintiffs’ breach of

contract claim survives with regard to the allegations that by violating the Deed of Trust

statutes, Defendants violated the terms of the DOT itself.

B. Quiet Title

Plaintiffs’ original quiet title claim was dismissed as to all parties except Wells Fargo.

(Doc. 33 at 9). They now claim that the irregularities in the foreclosure paperwork render the

transfers and the trustee’s sale void, allowing them to state a quiet title claim against other

parties as well. Plaintiffs can only bring a quiet title claim against a person or entity which

“claims an estate or interest in real property which is adverse to the party bringing the

action.” A.R.S. § 12-1101 (2007). Only Wells Fargo currently claims an interest in the

property, and so the quiet title claim is again dismissed against all other Defendants. As noted

above, Plaintiffs have not stated a claim that the transfers were invalid based upon an

argument that no party was the “Note Holder,” but have stated a claim that the sale was void

because the failure to provide notice and the improper authentication of documents violated

the Deed of Trust statutes. Defendants argue that Plaintiffs cannot state a claim to quiet title

without paying off the debt they owe. However, “[t]he tender rule does not apply to a void,

as opposed to a voidable, foreclosure sale.” Martinez v. America’s Wholesale Lender, 446

Fed. App’x 940, 943 (9th Cir. 2011). Plaintiffs’ quiet title claim may proceed against Wells

Fargo.

C. Breach of the Duty of Good Faith and Fair Dealing

Plaintiffs’ original claim for breach of the duty of good faith and fair dealing was

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allowed to proceed with respect to Wells Fargo and Ocwen, and was dismissed with regards

to HomEq and MERS. Allegations that these Defendants increased the September payment

by one penny without notifying Plaintiffs, held the payment that was sent for the original

price without notifying Plaintiffs that it was inadequate, conducted a foreclosure without

notice and based upon an Assignment that was invalid, and gave notice that the September

payment was inadequate only after the foreclosure took place, together state a claim that

Wells Fargo and Ocwen breached the duty of good faith and fair dealing.

In the Amended Complaint, Plaintiffs again “make no allegation that MERS had any

role in processing their payments, loan modification requests, or in making the decision to

proceed with the non-judicial foreclosure.” (Doc. 33 at 10). They claim only that MERS

allowed an employee of Old Republic to sign as an officer for MERS; as noted above, MERS

officers are regularly employees of other entities. See Cervantes, 656 F.3d at 1040.

As noted in the initial order, Plaintiffs do not allege that HomEq foreclosed on their

home—in fact, “HomEq was replaced by Ocwen one month prior to the expiration of the last

Listing Foreclosure Agreement and two months prior to foreclosure.” (Doc. 33 at 10).

Plaintiffs initially alleged that HomEq would not offer a modification when they were not

in default; they have now added that HomEq encouraged them to default, only to deny their

loan modification applications later. (Doc. 36 ¶¶ 38–39). Nevertheless, Plaintiffs plead no

facts “from which it could be concluded that HomEq was involved in the decision to conduct

the foreclosure or conducted the foreclosure.” (Doc. 33 at 10).

Plaintiffs’ claims that HomEq and MERS breached their duty of good faith are

dismissed. The claims against Wells Fargo and Ocwen may proceed.

D. Negligent Performance of an Undertaking (Good Samaritan Rule)

Parties disagree as to whether Arizona law permits recovery under the Good

Samaritan doctrine absent physical injury to the Plaintiff. As articulated in the Restatement

of Torts, the Good Samaritan doctrine permits recovery of those who render services for

“physical harm resulting from [defendant’s] failure to exercise reasonable care to perform

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his undertaking.” RESTATEMENT (SECOND) OF TORTS § 323 (1965). Although the

Restatement specifies that only physical harm is actionable under the doctrine, the Arizona

Court of Appeals has held that a volunteer “may be liable for economic harm as well as

physical harm.” Lloyd v. State Farm Mut. Auto Ins. Co., 176 Ariz. 247, 250, 860 P.2d 1300,

1303 (App. 1992) (insurance company that volunteered to defend claim not covered in policy

may be liable when it defends claim negligently). Federal Courts in this district considering

lending cases have alternately adopted the reasoning of the Arizona Court of Appeals, see

Renteria v. United States, 452 F. Supp. 2d 910, 914 (D. Ariz. 2006) (“[t]he Good Samaritan

Doctrine applies to economic harm”), or denied claims because “[t]he Arizona Supreme

Court has not extended this theory beyond its express limitation to physical harm.” Russel

v. One West Bank, FSB, CV-11-01463-PHX-FJM, 2011 WL 5007958, at *3 (D. Ariz. Oct.

20, 2011).

The Court of Appeals itself relied upon a case decided by the Arizona Supreme Court

in 1985, in which a judge wrote an order of release and handed it to a sheriff’s deputy with

the verbal instruction not to file it until the defendant had posted bail. McCutchen v. Hill, 147

Ariz. 401, 710 P.2d 1056 (1985). The deputy turned in the order before the bail was posted,

and the defendant, who was being held for non-payment of child support, never returned. The

Arizona Supreme Court quoted the Restatement’s definition of the Good Samaritan rule in

its entirety, and then held that under it, the deputy could be liable to the mother who never

received child support payments from the defendant. McCutchen, 147 Ariz. at 404 (“The

deputy’s personal agreement to hold the release order until the money was paid gave rise to

‘the duty to use proper care in the performance of the task’ assumed” (citing W. Prosser and

W. Keeton, Law of Torts § 56 at 379–80 (5th ed. 1984)). The Arizona Supreme Court has

therefore held that in Arizona, a claim for negligent performance of an undertaking may be

stated for purely economic harm.

Defendants do not argue in their motion that the Good Samaritan claim should be

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 In their reply, Defendants argue additionally that “Defendants owe no negligence

duty to Plaintiffs as a matter of law.” (Doc. 38 at 9). The Court need not consider this

argument. United States v. Gianelli, 543 F.3d 1178, 1184 n.6 (9th Cir.2008) ( “[A]rguments

raised for the first time in a reply brief are generally considered waived.”).

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dismissed for any other reason than that such a claim is not cognizable for economic loss.4

Plaintiffs’ Good Samaritan claim may proceed.

E. Fraud Claims

In the original complaint, fraud claims against HomEq and MERS were dismissed,

while fraud claims against Wells Fargo and Ocwen survived. (Doc. 33). Plaintiffs claim that

Wells Fargo, HomEq, and Ocwen are liable for fraudulent concealment, that Wells Fargo,

HomEq, and Ocwen are liable for fraud, and that all Defendants are liable for consumer

fraud. In a fraud claim, a Plaintiff must “state with particularity the circumstances

constituting fraud or mistake.” FED.R.CIV.P. 9(b). In Arizona, the elements of fraud are “(1)

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

or ignorance of its truth; (5) his intent that it should be acted upon by the person and in the

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

its truth; (8) his right to rely thereon; (9) his consequent and proximate injury.” Nielson v.

Flashberg, 101 Ariz. 335, 339, 419 P.2d 514, 518 (1966). These elements must be pled with

particularity for each claim and for each Defendant. The Defendants will be discussed in

turn.

Plaintiffs claim that MERS is liable only for consumer fraud. They allege that MERS

submitted the Assignment to the Navajo County recorder even though it had not been

properly notarized and was therefore invalid. Plaintiffs do not state with particularity how

they relied on the Assignment. They acknowledge that they knowingly went into default, and

they continued to negotiate with their loan servicer for a modification. They do not allege

that they would have done anything differently had they believed that MERS, rather than

Wells Fargo, had still been the trustee under the DOT. The fraud claim against MERS is

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dismissed.

Plaintiffs allege that HomEq falsely told them that they could not receive a loan

modification unless they were in default. Plaintiffs allege that HomEq encouraged Plaintiffs

to default on their loan as part of a plan whereby they “would lure Plaintiffs into default and

engage in dilatory tactics . . . [because] the Defendants intended to foreclose.” (Doc. 36 ¶

195(g)). They allege that they relied on the statement that a modification was only possible

if they were in default by going into default, and that HomEq knew that the statements were

false and made them in order to foreclose on the property. They do not, however, allege that

HomEq’s false statements led to Plaintiffs’ proximate injury. After HomEq initiated the 2009

foreclosure proceedings, it offered two Listing Foreclosure Agreements that delayed the sale.

It took no part in the 2010 trustee’s sale that damaged Plaintiffs. (Doc. 36 ¶ 69). The fraud

claims against HomEq are dismissed.

Plaintiffs allege that an Ocwen representative told Plaintiffs, after their September

payment had been mailed, that Ocwen did not want the property and would work with

Plaintiffs to allow them to keep the property. (Doc. 36 ¶ 75). Plaintiffs allege that they relied

on this statement when they submitted further paperwork seeking a modification, and that

if Ocwen had instead stated that the September payment had not been accepted and a

trustee’s sale was scheduled, that they would have taken steps to stop the foreclosure. (Doc.

36 ¶ 75). Instead, Ocwen foreclosed on their property, damaging them. (Doc. 36 ¶ 76). The

fraud claims against Ocwen survive.

Plaintiffs’ fraud claim against Wells Fargo also relates to the Assignment. As noted

above, however, they do not state what reliance they placed on the Assignment itself. They

do not claim they would have behaved differently had they believed that MERS, rather than

Wells Fargo, was the trustee under the Deed of Trust. They also claim that Wells Fargo

engaged in fraud by issuing the trustee’s deed, but do not state how they relied on this

representation to their detriment, since it was issued after the foreclosure sale had taken

place. The fraud claims against Wells Fargo are dismissed.

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F. Negligence Per Se

Plaintiffs allege that by submitting documents that they knew to be falsely notarized

to the Navajo county recorder, Defendants violated A.R.S. § 39-161, which reads:

A person who acknowledges, certifies, notarizes, procures or

offers to be filed, registered or recorded in a public office in this

state an instrument he knows to be false or forged, which, if

genuine, could be filed, registered or recorded under any law of

this state or the United States, or in compliance with established

procedure is guilty of a class 6 felony.

Plaintiffs allege that the law was enacted to protect property owners, and that they were

damaged by the violation since without the violation the foreclosure would not have taken

place. See Orlando v. Northcutt, 103 Ariz. 298, 300, 441 P.2d 58, 60 (“Violations of a statute

created to protect a certain group is negligence per se.”). Defendants claim that Plaintiffs do

not allege that Defendants knew the documents were falsely authenticated, but in the body

of the amended complaint Plaintiffs allege that employees of Defendants signed documents

in Florida and sent them to California to be notarized, which demonstrates that they knew the

notaries did not personally witness the signatures. (Doc. 36 ¶¶ 45–46, 51–52, 89–92). As

noted above, the claims of false notarization of documents, while conclusory when stated as

they were in the original complaint, are stated in a manner to be rendered plausible in the

amended complaint.

Plaintiffs also claim that Defendants violated A.R.S. §§ 41-312 and 41-313. These

provisions apply to notaries. Plaintiffs do not allege in their complaint that Defendants

employed notaries who violated these statutes, but instead that they are liable for “allowing

documents to be notarized by notaries who did not witness the signature, or confirm

authority” of the documents. (Doc. 36 ¶ 47). Those who allow notaries to violate these laws

do not themselves violate them. Defendants do not address the claim that they filed false

liens, as prohibited by A.R.S. § 33-420, and the negligence per se claim pertaining to this

alleged violation survives.

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CONCLUSION

Plaintiffs state no claim for breach of contract based on breaches of the PSA, to which

they were not parties. They state no breach of contract claim based on allegations that only

the certificate holders were “entitled to payment” under the terms of the note, because the

entity they were in fact paying was entitled to payment, even if it was obligated to render that

payment to the certificate holders. Their quiet title claim survives only against Wells Fargo.

Their breach of duty of good faith and fair dealings claims are dismissed against HomeEq

and MERS, who were not involved with the foreclosure, but survive against Wells Fargo and

Ocwen. Their Good Samaritan doctrine claims against HomeEq and Ocwen survive, since

these claims may be brought for purely financial damages in Arizona. Their fraud claims

survive only against Ocwen, and their negligence per se claims survive only with regard to

violations of A.R.S. §§ 39-161 and 33-420.

IT IS THEREFORE ORDERED:

1. Defendants’ Motion to Dismiss (Doc. 38) is granted in part and denied in

part.

2. The remaining claims and Defendants are as follows:

a. Claim One survives with regards to allegations that MERS, HomEq,

and Wells Fargo violated the Deed of Trust statutes, which were part of the DOT contract,

in executing the Substitution and the Assignment.

b. Claim Two survives with regards to Wells Fargo.

c. Claim Three survives against Wells Fargo and Ocwen.

d. Claim Four survives against HomEq and Ocwen.

e. Claims Five, Six, and Seven survive only against Ocwen.

f. Claim Eight survives with regards to violations of A.R.S. §§ 39-161 and

33-420.

DATED this 4th day of April, 2012.

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