Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_11-cv-00558/USCOURTS-azd-2_11-cv-00558-1/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
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

Tamara Schultz, an individual, 

Plaintiff, 

vs.

BAC Home Loans Servicing, LP;

ReconTrust Company, NA; Bank of New

York Mellon, as trustee for CWALT, Inc.

Alternative Loan Trust 2007-HY3; and

Does 1-100, 

Defendants. 

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No. CV-11-00558-PHX-NVW

ORDER

Before the Court is Defendants BAC Home Loans Servicing LP, ReconTrust

Company, N.A., and Bank of New York Mellon, as trustee for CWALT Inc. Alternative

Loan Trust 2007-HY3’s Motion to Dismiss (Doc. 22), which will be granted for the reasons

stated below.

I. Background

This action arises from Plaintiff’s loan obligation for real property located at 1611

West Mulberry Drive, Phoenix, Arizona 85015. Plaintiff filed a complaint in the Superior

Court of Maricopa County, Arizona on March 8, 2011, seeking damages, injunctive and

declaratory relief for breach of contract, quiet title, and bad faith (Doc. 1). On March 15,

2011, the Superior Court granted a temporary restraining order to prohibit a foreclosure sale

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of her property from the Superior Court on March 15, 2011 (Doc. 8). On March 25, 2011,

Defendants removed the case to this Court on the basis of diversity jurisdiction (Doc. 1).

Plaintiff filed a motion to remand the case to state court (Doc. 8), which this Court denied

(Doc. 16). Plaintiff subsequently filed an amended complaint, which includes causes of

action for breach of contract, quiet title under A.R.S. § 12-1101 et seq., bad faith in tort, and

violation of A.R.S. § 33-420 (Doc. 18). Defendants filed the pending motion to dismiss on

July 5, 2011 (Doc. 22).

II. Legal Standard

On a motion to dismiss under Fed. R. Civ. P. 12(b)(6), all plausible allegations of

material fact are assumed to be true and construed in the light most favorable to the

nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). Dismissal under

Rule 12(b)(6) can be based on “the lack of a cognizable legal theory” or “the absence of

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

901 F.2d 696, 699 (9th Cir. 1990). To avoid dismissal, a complaint need contain only

“enough facts to state a claim for relief that is plausible on its face.” Twombly, 550 U.S. at

570. The principle that a court accepts as true all of the allegations in a complaint does not

apply to legal conclusions or conclusory factual allegations. Ashcroft v. Iqbal, 129 S. Ct.

1937, 1949 (2009). “Threadbare recitals of the elements of a cause of action, supported by

mere conclusory statements, do not suffice.” Id. “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.” Id. “The plausibility standard is not akin to

a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has

acted unlawfully.” Id. To show that the plaintiff is entitled to relief, the complaint must

permit the court to infer more than the mere possibility of misconduct. Id.

III. Analysis

Because Plaintiff has failed to state any plausible claim for relief, Defendants’ motion

to dismiss (Doc. 22) will be granted.

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A. Breach of Contract

Count One of Plaintiff’s complaint purports to allege a claim for breach of contract.

To state a claim for breach of contract, a plaintiff must allege the existence of a contract

between the plaintiff and defendant, a breach of the contract by the defendant, and resulting

damage to the plaintiff. See Clark v. Compania Ganadera de Cananea, S.A., 95 Ariz. 90, 94,

387 P.2d 235, 238 (1963). The basis of Plaintiff’s contract based claims is that “BAC is

seeking to enforce the [deed of trust] without demonstrating that BAC is the lender or even

an agent of the lender” (Doc. 23 at 4) and that failures to record various assignments of the

note and deed of trust violate Arizona recording statutes. These generalized challenges to

the legitimacy of the securitization process, assertions that the failure to record assignments

of trust deeds invalidates any underlying note obligations, and other iterations of the “show

me the note” theory have repeatedly been rejected in this district. See, e.g., Silvas v. GMAC

Mortgage LLC, No. CV09-0265-PHX-GMS, 2009 WL 4573234 (D. Ariz. Dec. 1, 2009);

Cervantes v. Countrywide Home Loans, Inc., No. CV09-517-PHX-JAT, 2009 WL 3157160

(D. Ariz. Sept. 24, 2009). Plaintiff may not state a claim for breach of contract based on the

assertion that parties without an interest in the contract are trying to enforce it or that the

purported splitting the promissory note from the deed of trust extinguishes any obligation she

had under the note.

The only specific contractual provision which Plaintiff claims BAC Home Loans

Servicing breached is paragraph 22 of the deed of trust. Plaintiff claims that this provision

allows only the lender to accelerate the note, substitute the trustee, and notice the trustee’s

sale, and that BAC Home Loans Servicing breached the trust deed by taking these actions

when it was not the lender or a valid agent of the lender. (Doc. 23 at 5.) Plaintiff relies on

her general objections to MERS, loan securitization, and alleged bifurcation of the note and

deed of trust to attempt to subvert the fact that BAC Home Loans Servicing is the lender’s

servicing agent and is therefore empowered to exercise the authority granted in paragraph

22 of the deed of trust. This argument accordingly fails to state a plausible claim for relief

for breach of contract.

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Plaintiff’s other arguments within her breach of contract claim are similarly

unavailing. Although Plaintiff also refers in her complaint to a “pooling and servicing

agreement” related to the securitization of her loan, Plaintiff has not alleged that she is a

party to this agreement, nor has she shown that any alleged breach of this agreement would

in any way impact the authority of Defendants to conduct a trustee sale of Plaintiff’s

property. Relatedly, Plaintiff claims that because the CWALT, Inc. Alternative Loan Trust

2007-HY3 “closed ninety-nine days before Plaintiff’s loan originated” it could not have

“validly acquired Plaintiff’s loan[,]” (Doc. 23 at 4), and therefore BAC Home Loans

Servicing does not have the right to foreclose. This argument is vague and unsupported by

any authority. Additionally, although Plaintiff asserts that various “robosigners” were

involved with signing documents pertaining to her mortgage, she has provided no facts

supporting this claim or why she is accordingly entitled to relief for breach of contract.

Finally, Plaintiff’s speculative assertion that BAC Home Loans Servicing may have

misapplied her mortgage payments is not enough to state a claim for breach of contract.

Plaintiff cites no facts for this proposition; rather, she simply states that BAC Home Loans

Servicing has “failed to show a full accounting for the Note” and has not shown that

“Plaintiff’s payments were actually applied to her Promissory Note[.]” (Doc. 18 at 12.)

Plaintiff has pointed to no authority showing she was owed any accounting on the note, nor

provided the Court with any evidence that any payments she made were not, in fact, credited

to her. For all these reasons, Plaintiff has failed to state a claim for relief in Count One.

B. Quiet Title

In her second cause of action, Plaintiff asserts a claim to quiet title to the subject

property. To state a quiet title claim, a plaintiff must allege that she has satisfied her loan

obligation and is accordingly entitled to the release of the deed of trust. See Farrell v. West,

57 Ariz. 490, 491, 114 P.2d 910, 911 (1941) (noting that where there is “an unsatisfied

balance due to a defendant-mortgagee, or his assignee, the court will not quiet the title until

and unless [plaintiff] pays off such mortgage lien”). However, Plaintiff has not indicated that

she is able or willing to tender the full amount owed on the loan or that she is otherwise

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equitably entitled to quiet title relief. This alone causes Plaintiff’s claim for quiet title to fail.

Additionally, Plaintiff’s arguments regarding standing to enforce the note under the

“show me the note” theory, conflicts of interest, and the invalidity of the securitization

process, on which she relies in asserting her claim to quiet title, are without merit, as

discussed above. These theories do not provide a basis for the Court to grant Plaintiff quiet

title to the subject property. Count Two will therefore be dismissed.

C. Bad Faith in Tort

Plaintiff’s third cause of action claims that BAC Home Loans Servicing is liable for

“bad faith in tort.” Plaintiff claims that BAC Home Loans Servicing violated its duties

“under the Treasury Guidelines and Servicer Participating Agreement” by refusing to

evaluate Plaintiff for a loan modification and failing to disclose the true owner of Plaintiff’s

promissory note and deed of trust so that Plaintiff could attempt to obtain a loan modification

from that party. This claim is best read as a violation of the implied covenant of good faith

and fair dealing in contract. However, Plaintiff has not alleged that she is a party to any of

the agreements BAC Home Loans Servicing purportedly violated in bad faith. Absent the

showing of a contractual relationship, Plaintiff cannot assert a claim for breach of the implied

covenant of good faith and fair dealing. See Rawlings v. Apodaca, 151 Ariz. 149, 153 726

P.2d 565, 569 (1986) (noting duty of good faith and fair dealing “arises by virtue of a

contractual relationship”). Further, Plaintiff has not shown that she was entitled to a loan

modification, or entitled to be considered for a loan modification, so as to make denying her

such relief or failing to disclose from whom such relief could be sought a tort. To the extent

Plaintiff’s claim rests on some other theory of liability, Plaintiff has provided no authority

to support her claim and failed to articulate a claim with enough specificity to satisfy the

federal pleading requirements.

D. Violation of A.R.S. § 33-420

A.R.S. § 33-420 prohibits a party from recording “an interest in, or a lien or

encumbrance against, real property” when that party “knows[s] or ha[s] reason to know that

the document is forged, groundless, contains a material misstatement or false claim or is

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otherwise invalid[.]” Plaintiff alleges that BAC Home Loans Servicing violated A.R.S. § 33-

420 because, when the deed of trust was separated from the promissory note, any lien on

Plaintiff’s property was extinguished. Therefore, Plaintiff argues, BAC Home Loans

Servicing had no real interest in any of Plaintiff’s loan documents, but nonetheless “falsely

identified itself as the beneficiary under the Deed of Trust in the (i) Assignment; (ii)

Substitution of Trustee; and (iii) Notice of Trustee’s Sale[.]” (Doc. 18 at 17.)

Plaintiff’s reliance on the same meritless allegations, rejected above, about the

invalidity of the securitization process and any resulting transfers of the deed of trust to

support her claim that BAC Home Loans Servicing had no interest in Plaintiff’s property and

thus wrongly recorded loan documents in violation of A.R.S. § 33-420 are unavailing.

Plaintiff has offered no facts to show BAC Home Loans Servicing knowingly recorded false

documents in violation of A.R.S. § 33-420. Accordingly, Count Four fails to state a plausible

claim for relief.

E. Declaratory Relief

Finally, Plaintiff asserts that she is entitled to declaratory relief to “resolve the

construction or validity of a written contract” under A.R.S. § 12-1832. (Doc. 18 at 17.) To

the extent that the Plaintiff’s complaint seeks to raise an independent cause of action for

declaratory relief, that claim also fails. Declaratory relief is a “remed[y] for underlying

causes of action . . . not [a] separate cause[] of action[.]” Silvas v. GMAC Mortgage, LLC,

No. CV09-0265-PHX-GMS, 2009 WL 4573234, at *6 (D. Ariz. Dec. 1, 2009) (citations

omitted). Because Plaintiff has not sufficiently pled a breach of contract claim, she is not

entitled to a declaratory judgment regarding the meaning and enforcement of the note and

deed of trust. Nor has Plaintiff provided any facts supporting her claim that the Court should

declare “the provisions of A.R.S. §§ 47-3301, 47-3304, and 47-3309, apply to her Promissory

Note and have not been satisfied.” (Doc. 18 at 18.) Accordingly, Plaintiff’s claim for

declaratory judgment will be dismissed.

F. Dismissal of ReconTrust

ReconTrust was appointed as substitute trustee on August 30, 2010 (Doc. 18-1). 

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Actions against a substitute trustee are governed by A.R.S. § 33-807(E), which provides that

a 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.” Where a trustee is named in an

action that does not allege a breach of the trustee’s duties, “the trustee is entitled to be

immediately dismissed and to recover costs and reasonable attorney fees from the person

joining the trustee.” A.R.S. § 33–807(E).

Plaintiff alleges that ReconTrust “caused documents to be recorded evidencing an

improper lien on Plaintiff’s property” when ReconTrust did not know who had the right to

enforce Plaintiff’s note, and that ReconTrust has “not demonstrated that they were properly

appointed as trustee from a valid beneficiary or that they had a complete lender file before

causing these documents to be recorded.” (Doc. 23 at 3.) However, these speculative

assertions are not supported by any facts, nor does Plaintiff provide any legal authority

showing ReconTrust was bound by any of these duties. Because Plaintiff’s allegations in this

regard are simply another reiteration of her general challenges to the securitization process,

which have been repeatedly rejected by this Court, and has not alleged a plausible claim that

ReconTrust breached any of its trustee’s duties, ReconTrust, as substitute trustee, is

independently entitled to dismissal of the claims against it pursuant to A.R.S. § 33-807(E).

IV. Leave to Amend

Although leave to amend should be freely given “when justice so requires,” Fed. R.

Civ. P. 15(a)(2), the district court has “especially broad” discretion to deny leave to amend

where the plaintiff already has had one or more opportunities to amend a complaint. Ascon

Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1161 (9th Cir. 1989). “Leave to amend need

not be given if a complaint, as amended, is subject to dismissal.” Moore v. Kayport Package

Exp., Inc., 885 F.2d 531, 538 (9th Cir. 1989). “Futility of amendment can, by itself, justify

the denial of a motion for leave to amend.” Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir.

1995). 

Plaintiff has already had the opportunity to file an amended complaint to properly

plead any causes of action she has against Defendants. Nonetheless, Plaintiff’s First

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Amended Complaint still fails to state any plausible claim for relief against any of the

Defendants. Because the amended complaint is still subject to dismissal, no further leave to

amend will be granted. See McHenry, 84 F.3d at 1177 (affirming dismissal with prejudice

of prolix, argumentative, and redundant amended complaint that did not comply with Rule

8(a)); Nevijel v. N. Coast Life Ins. Co., 651 F.2d 671, 673-74 (9th Cir. 1981) (affirming

dismissal of amended complaint that was “equally as verbose, confusing, and conclusory as

the initial complaint”); Corcoran v. Yorty, 347 F.2d 222, 223 (9th Cir. 1965) (affirming

dismissal without leave to amend of second complaint that was “so verbose, confused and

redundant that its true substance, if any, [was] well disguised”). 

IT IS THEREFORE ORDERED that Defendants’ Motion to Dismiss (Doc. 22) is

granted.

IT IS FURTHER ORDERED that the March 15, 2011 temporary restraining order

issued by the Maricopa County Superior Court is dissolved.

IT IS FURTHER ORDERED that the Clerk enter judgment dismissing Plaintiff’s First

Amended Complaint (Doc. 18) with prejudice. The Clerk shall terminate this case.

DATED this 22nd day of August, 2011.

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