Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_10-cv-02435/USCOURTS-azd-2_10-cv-02435-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Fraud

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NOT FOR PUBLICATION

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Nicole Blake, 

Plaintiff, 

vs.

Irwin Mortgage a subsidiary of Irwin

Financial Corp; Midland Mortgage Corp a

subsidiary of Midfirst Bank; and Midland

Financial Co, the holding company of

Midfirst Bank, 

Defendants. 

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No. CV-10-2435-PHX-GMS

ORDER

Pending before the Court are: (1) Defendant Midland Mortgage Co., Midland

Financial Co. And MidFirst Bank’s (“The Midland Defendants”) Motion to Dismiss or, in

the Alternative, Motion for Summary Judgment (Doc.4); and (2) Plaintiff’s Motion for a

Temporary Restraining Order (Doc. 6). For the following reasons, the Court grants the

Midland Defendants Motion to Dismiss with leave to amend and denies Plaintiff’s Motion

For Temporary Restraining Order. 

BACKGROUND

On or about late October 2003, Plaintiff borrowed $137,258.00 from Irwin Mortgage

Corporation. The loan was evidenced by a promissory note that was secured by a deed of

trust on property located at 10620 E. Ananea Avenue in Mesa, Arizona. The beneficiary on

the deed was Mortgage Electronic Registration Systems, Inc. as the nominee of the lender

and its successors and assigns. Plaintiff alleges that after she signed the documents,

Case 2:10-cv-02435-GMS Document 8 Filed 01/12/11 Page 1 of 8
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Defendants “did fail to lend the Plaintiff lawful money of the United States for the full value

of the alleged loan.” Doc. 1 at ¶ 19. The Complaint alleges that Defendants, “in carrying out

their commitment to lend lawful money of the United States” “did write a check for the sum

of One Hundred Thirty Seven thousand Two Hundred Fifty Eight Dollars ($137, 258).” But,

the Complaint alleges, the “check or checks which the Defendants wrote were not backed by

or redeemable in Federal Reserve Notes, coins or lawful money of the United States for their

full face value,” id. at ¶ 24, and that “the only consideration which the Defendants provided

for this alleged loss was a book entry demand deposit which the Defendants created

effortlessly and at virtually no cost to itself, and that in stamping its own check ‘Paid’” the

bank made “false representations as it merely transferred some book entries and never

intended to redeem this check in lawful money of the United States. Id. at ¶ 28. 

The Complaint further alleges, apparently in the alternative, that in issuing the check

the bank “did deliberately make a loan beyond its customers’ deposits.” Id at ¶ 23. It also

alleges that Defendants did use “the US Postal Service on numerous occasions . . . to collect

monies on this debt.” Id. at ¶ 25. 

Also according to the Complaint, the promissory note specified that the annual

adjustable interest rate was 4.0%. Id. at ¶ 18. The ceiling on any possible adjustments was

apparently a 9.0% interest rate. The Complaint alleges that Defendants ended up charging

an interest rate that was “estimated to be twenty (20) times greater than what was authorized

in the documents.” Id. at ¶ 21. 

On August 5, 2010, MERS purportedly assigned the beneficial interest in the Deed

of Trust to MidFirst Bank. Plaintiff thereafter filed the instant complaint on November 10,

2010. The Complaint contains four counts. The first, for breach of contract, alleges that

“the Defendants failed to lend the Plaintiffs lawful money of the United States and instead

submitted a check with the intended purpose of circulating it as money.” Id. at ¶ 32. The

second, denominated as a count of fraud, alleges that Defendants used the US Mail and Wire

Services to collect on the debt in violation of 18 U.S.C. §§ 1341 and 1343. The third, a count

of usury, alleges that by creating and passing a bad check on which they collected interest

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at a rate that was twenty times greater than the amount of interest specified in the Note,

Defendants violated the contract because the unlawful money risked by Defendants in

making the loan was less than 5% of the loan’s face value. The Fourth, a truth-in-lending

claim alleges that in making the $137, 258 loan the bank made a loan beyond its customer’s

deposits which when redeposited by Plaintiff with the bank, resulted in the bank’s failure to

make the material disclosure to the bank that Plaintiff was the depositor and Defendants

risked none of its assets in the exchange, nor did the bank risk any of the assets of its other

depositors. The Midland Defendants moved to dismiss or alternatively for summary

judgment (Doc. 4). Thereafter, Plaintiff filed her Motion for Temporary Restraining Order

(Doc. 6).

ANALYSIS

I. The Midland Defendants’ 12(b) Motion. 

The claims as they are set forth in Plaintiff’s Complaint apparently relate to Irwin

Mortgage. It is unclear what claims, if any, Plaintiff asserts against the Midland Defendants.

When a party brings claims against multiple defendants the party must clearly specify the

claims with which each party is charged.” Wright & Miller, Federal Practice and Procedure

§ 1248 (2009 ed.). This Plaintiff has not done with respect to the Midland Defendants.

Further when bringing a complaint, Plaintiff must plead sufficient facts “to state a

claim for relief that is plausible on its face.” Bell Atlantic v. Twombly, 550 U.S. 544, 570

(2007) (holding that a plaintiff has an obligation to allege sufficient facts to plausibly allege

grounds upon which he claims his entitlement to relief and that mere labels and conclusions

or a formulaic recitation of the elements of a claim is insufficient.”). Plaintiff’s Complaint

also fails in this respect.

The substantial underlying assumption of Plaintiff’s Complaint, and each of Plaintiff’s

four counts, appears to be that Plaintiff never actually received anything of substantial value

from Irwin in exchange for her promissory note. Plaintiff acknowledges that Irwin issued

her a check in the amount of $137,258.00. But, Plaintiff apparently alleges that the check

was redeposited, and that Irwin only engaged in a transfer of assets on its own books that

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Attached to the Midland Defendant’s Statement of Facts filed in Support of its

Alternative Motion for Summary Judgment, is a settlement statement for Irwin’s loan to the

Plaintiff which shows that, aside from various settlement charges, the balance of the loan

($130,964.55) went to Countrywide Funding to payoff a previous loan on the property. The

Court does not need to consider the statement in granting Midland’s Motion to Dismiss for

a failure to allege sufficient facts to state a plausible claim. Nevertheless, should Plaintiff

seek leave to amend her complaint, she should consider her obligations under Fed. R. Civ.

P. 11 before re-pleading that Plaintiff merely redeposited the proceeds of the check with

Irwin thus resulting in a meaningless and sham transaction.

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provided her with no real value and was never backed by legal tender. As an initial matter,

such allegations, in and of themselves, are insufficient to state a claim. See, Pryzbylski v.

Stumpf, No. CV-10-8073-PCT-GMS (D. Ariz. filed Jan. 4, 2011). See, also, Rodriguez v.

Summit Lending solutions, Inc. et al., No 09-CV-773-BTM(NLS), 2009 Wl 1936795 (S.D.

Cal. July 7, 2009). Even assuming that such a claim might be plausible under some

conceivable factual scenario, Plaintiff’s Complaint does not allege sufficient facts to make

such a scenario plausible here.1

 

Further, in Plaintiff’s Application for a TRO she states that she is a resident on the

property that is the subject of the deed of trust that secures the note that she gave in exchange

for the check and that she will be irreparably harmed if she loses the legal rights that belong

to her in that property. Plaintiff appears to be simultaneously claiming that the proceeds of

the check provided her with no benefit, yet allows her to assert legal rights in the property

in which she resides. Plaintiff is allowed to plead claims in the alternative. In doing so,

however, the alternative claims must be supported by sufficient alternative factual pleadings

to make them plausible. Plaintiff’s Complaint falls short of that. 

Thus, count one of Plaintiff’s Complaint that asserts a breach of contract because “the

Defendants failed to lend the Plaintiffs lawful money of the United States and instead

submitted a check with the intended purpose of circulating it as money,” Doc. 1 at ¶ 32, fails

to sufficiently plead facts to make her claim plausible. It further fails to allege a claim

against any of the Midland Defendants. The claim is thus dismissed against the Midland

Defendants with leave to seek to amend. 

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In count two of Plaintiff’s Complaint, Plaintiff alleges fraud due to Defendants use

of the US Mail and Wire Services to collect on the debt in violation of 18 U.S.C. §§ 1341 and

1343. As Midland notes, however, even assuming Defendants violated the statutes

indicated, there are no private claims available to the Plaintiffs for such violations. See

Wisdom v. First Midwest Bank of Poplar Bluff, 167 F.3d 402, 407-08 (8th Cir. 1999); Lynn

v. Earle, 2006 WL 1030374 (D. Ariz. 2006). (“[T]he mail fraud statute- § 1341- does not

create an implied private right of action. . . . The same is true of the wire fraud statute.”).

Thus, to the extent the Complaint asserts claims for violations of these statutes, those claims

are dismissed as to the Midland Defendants with leave to seek to amend. 

To the extent that Plaintiff otherwise seeks to assert claims of fraud against

Defendants she must “state with particularity the circumstances constituting fraud or

mistake.” Fed. R. Civ. P. 9(b). There are nine elements required to plead common law fraud

in Arizona. Nielson v. Flashberg, 101 Ariz. 335, 338, 419 P.2d 514, 517 (1966). Each fraud

claim must be plead with particularity as to each Defendant against which Plaintiff raises

such claims. A Plaintiff must “state the time, place and specific content of the false

representation as well as the identities of the parties to the misrepresentations.” Schreiber

Distrib. Co. v. Serv-Well Furniture Co., 806 F2d 1393, 1401 (9th Cir. 1986); A.G. Edwards

& Sons, Inc. v. Smith, 736 F. Supp. 1030, 1033 (D. Ariz. 1989) (holding that “[m]ere

conclusory allegations of fraud will not suffice; the complaint must contain statements of the

time, place and nature of the alleged fraudulent activities.”). The only allegations that

Plaintiff has made that might be considered allegations of fraud are those that are based on

her assertion that the check she was issued by Irwin in exchange for her promissory note and

deed of trust provided her with no real value backed by legal tender. For the reasons above

stated, those allegations are insufficient to state a plausible claim against any of the Midland

Defendant. Thus, count two of the complaint is dismissed as to the Midland Defendants with

leave to seek to amend. 

Plaintiff’s Complaint denominates its third count as one for usury. Nevertheless,

Arizona law specifies that “any rate of interest” may be agreed to in writing. A.R.S. § 44-

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1201(A) (2003). Thus, there is no cause of action for usury in the state of Arizona for

contracts such as Plaintiff’s. Plaintiff points to no federal law that specifies a private right

of action for usury. To the extent that Plaintiff alleges that she has paid a rate of interest that

exceeds the contracted rate, her claim for usury could be considered a claim for breach of

contract. Nevertheless, this argument seems to be founded on Plaintiff’s assertion that the

interest rate should be calculated on a loan balance that is no more than 5% of the loan

proceed’s face value of $137, 258. Doc. 1 at ¶¶ 21, 37-38. For the reasons set forth above,

Plaintiff has alleged insufficient facts to make such a pleading credible. Therefore, count

three of the Complaint is dismissed against the Midland Defendants with leave to seek to

amend. 

For her fourth count, Defendant alleges a truth-in-lending claim that is difficult to

exactly comprehend. Its essence appears to be that Irwin never had sufficient funds to fund

the loan. Thus, it funded the loan in a face amount that was beyond it’s customers deposits.

However, when Plaintiff redeposited those same funds with Defendants, Plaintiffs became

the depositors, and Defendants were risking nothing and as a result, Plaintiff’s debt to

Defendants was paid by the deposit and Defendants had no right to transfer the note. For the

reasons stated above, none of these claims as pleaded meet the standard required by

Twombly. They are therefore dismissed against the Midland Defendants with leave to

amend.

Further, in Plaintiff’s Request for Temporary Restraining Order she seems to seek to

add the assertions in her Complaint that her debt to Irwin was paid by Irwin’s receipt of

TARP funds or other bailout assistance from the federal government. See, Doc. 6 at ¶ 25.

 A lawsuit does not proceed in such a fashion. A lawsuit is necessarily governed by the

complaint and the answers to it. The complaint must state, in one separate and distinct

pleading, all of the claims that Plaintiff brings against each Defendant. Plaintiff cannot

informally “amend” the complaint by attempting to supplement her allegations in later

motions, or responses thereto. Therefore, any claims that Plaintiff wishes to raise against

Defendants must be asserted in the amended complaint. 

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At any rate, Plaintiff’s assertion that her promissory note has been paid in full by any

of the Defendants’ receipt of any TARP funds or other form of government assistance is

without merit and does not state a claim. See, Pryzbylski v. Stumpf, No. Cv-10-8073-PCTGMS (D. Ariz. filed Jan. 4, 2011). The Complaint therefore is dismissed against the Midland

Defendants with leave for Plaintiff to seek to amend. Should Plaintiff seek to bring a new

amended complaint against the Midland Defendants, however, she shall file a motion for

leave to file an amended complaint. The motion shall attach the proposed amended

complaint and shall otherwise follow the requirements of Arizona Local Rules of Civil

Procedure 15.1. 

Plaintiff is advised that the Court will not authorize the filing of an amended

complaint that merely restates the allegations of the original Complaint without sufficient

factual plausible factual allegations to make her claims against the Midland Defendants

plausible. Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007).

II. The Motion For Temporary Restraining Order. 

Federal Rule of Civil Procedure 65 authorizes the Court to issue a preliminary

injunction or Temporary Restraining Order (“TRO”) upon a proper showing. The standard

for issuing a TRO is the same as that for issuing a preliminary injunction. See Brown Jordan

Int’l, Inc. v. The Mind’s Eye Interiors, Inc., 236 F. Supp. 2d 1152, 1154 (D. Haw. 2007). To

prevail on a request for a preliminary injunction, a plaintiff must show either “(a) probable

success on the merits combined with the possibility of irreparable injury or (b) that [it] has

raised serious questions going to the merits, and that the balance of hardships tips sharply in

[its] favor.” Bernhardt v. Los Angeles County, 339 F.3d 920, 925 (9th Cir. 2003). The Ninth

Circuit has explained that “these two alternatives represent ‘extremes of a single continuum,’

rather than two separate tests. Thus, the greater the relative hardship to the moving party, the

less probability of success must be shown.” Immigrant Assistant Project of LA County Fed’n

of Labor (AFL-CIO) v. INS, 306 F.3d 842, 873 (9th Cir. 2002) (citation omitted). 

In this case, Plaintiff strenuously contends that each of the elements for a TRO are

met. She fails, however, to explain how the applicable facts and law merit injunctive relief.

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With respect to his argument that his request for a TRO “clearly establish[es] a reasonable

likelihood of success on the merits,” Plaintiff simply offers the following:

[It] is clearly evident the Defendants’ conduct set forth in

Plaintiff’s Complaint, Responses and Replies is wrongful and

violates her legally protected rights. 

Doc. 6 at ¶ 23. This conclusory statement, however, is insufficient to merit a TRO. And, as

the discussion above demonstrates, the allegations made in Plaintiff’s Complaint are, at this

point, insufficient to state a claim against the Midland Defendants and demonstrate no

sufficient likelihood of success against the Irwin Defendants. As the Supreme Court has

repeatedly held, temporary injunctive relief will not be granted “unless the movant, by a

clear showing, carries the burden of persuasion” of showing a likelihood of success on the

merits. Mazurek v. Armstrong, 520 U.S. 968, 972 (1997). 

Further, in the Motion for Temporary Restraining Order, Plaintiff suggests that a nonjudicial foreclosure of the deed of trust has already occurred. See, Doc. 6 at ¶ ¶ 9 and 15.

If this is so, it is unclear just what Plaintiff would have the Court temporarily restrain. 

IT IS THEREFORE ORDERED:

1. Granting the Midland Defendants’ Motion to Dismiss (Doc. 4), with leave to

seek to amend.

2. Should Plaintiff desire to file a motion for leave to file an amended complaint,

she shall do so no later than February 10, 2011. The proposed amended complaint shall be

attached to the motion for leave to amend. The Court will not permit the filing of any

proposed amended complaint that does not comply with the requirements of this Order.

3. If Plaintiff does not file a motion requesting leave to file an amended complaint

by February 10, 2011, the Clerk of the Court is directed to terminate Midland Mortgage

Corporation.

4. Denying Plaintiff’s Motion for a Temporary Restraining Order (Doc. 6). 

DATED this 11th day of January, 2011.

Case 2:10-cv-02435-GMS Document 8 Filed 01/12/11 Page 8 of 8