Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_11-cv-00848/USCOURTS-azd-2_11-cv-00848-0/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.; CitiMortgage; Mortgage

Electronic Registration Systems, Inc.; and

K. Hovanian American Mortgage LLC, 

Defendants. 

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No. CV11-00848-PHX-JAT

ORDER

Currently pending before the Court are: 1) Motion to Dismiss, or, in the Alternative,

Motion for More Definite Statement (Doc. 7) filed by Defendants Nationstar Mortgage, LLC

(“Nationstar”), Mortgage Electronic Registration Systems, Inc. (“MERS”), and Quality Loan

Service Corp. (“Quality”); 2) Motion to Dismiss with Prejudice (Doc. 8) filed by Defendant

CitiMortgage; 3) Plaintiff’s Motion to Review the Authentication of Official Documents

Related to Fraud (Doc. 23); 4) Plaintiff’s Alternative Motion for More Definite Statement

(Doc. 25); and Plaintiff’s Motion to Review Notary Public Oath and Certificate of Filing for

Authentication (Doc. 34). The Court now rules on the Motions.

BACKGROUND

Defendant 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

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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,

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. 

MOTIONS TO DISMISS

Defendants Nationstar, MERS, and Quality moved pursuant to Rule 12(b)(6) to

dismiss Plaintiff’s Complaint. In the alternative, they moved for a more definite statement.

They argue that Plaintiff’s rambling 30-page Complaint, that does not contain any delineated

Counts or causes of action, is incomprehensible and fails to meet Rule 8’s pleading

requirements. 

Defendant CitiMortgage also moved pursuant to Rule 12(b)(6) to dismiss the

Complaint. CitiMortgage argues that the only time Plaintiff even mentions CitiMortgage is

in the caption of the Complaint. Because Plaintiff makes no allegations against it,

CitiMortgage asserts that it should be dismissed from this case. CitiMortgage further argues

that the Complaint woefully fails to meet the pleading standards and that to the extent the

Complaint can be read as identifying claims, those claims fail as a matter of law. 

A. 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

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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 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,

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1

The Court notes that Plaintiff filed her Complaint in Arizona state court, which has

not adopted Twombly. The Court does not need to decide which pleading standard applies,

federal or state, because the Complaint fails to state a claim under either standard. 

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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).

In Arizona, courts assess the sufficiency of a claim under Arizona Rule of Civil

Procedure 8, which mirrors Federal Rule of Civil Procedure 8.1

 Cullen v. Auto-Owners Ins.

Co., 189 P.3d 344, 346 (Ariz. banc 2008). Arizona courts follow a notice pleading standard.

Id. Under that standard, a pleading must give the adverse party fair notice of the nature and

basis of the claim and indicate generally the type of litigation involved. Id.

If a pleading does not meet the standards of Rule 8, a party may move to dismiss for

failure to state a claim pursuant to Arizona Rule of Civil Procedure 12(b)(6). When deciding

a Rule 12(b)(6) motion, Arizona courts consider only the pleading itself and the well-pleaded

allegations contained therein. Id. The courts assume the truth of all well-pleaded factual

allegations and reasonable inferences therefrom. Id. “Because Arizona courts evaluate a

complaint’s well-pled facts, mere conclusory statements are insufficient to state a claim upon

which relief can be granted . . . a complaint that states only legal conclusions . . . does not

satisfy Arizona’s notice pleading standard under Rule 8.” Id. 

Arizona courts did not adopt the Supreme Court’s admonition in Conley v. Gibson,

355 U.S. 41 (1957) that complaints should not be dismissed unless it appears beyond doubt

that the plaintiff could prove no set of facts in support of her claim. Id. at 346-47. Arizona

trial courts may not speculate about hypothetical facts that might entitle a plaintiff to relief.

Id. at 347. Instead, they are limited to considering the well-pleaded allegations and

reasonable inferences from those allegations. Id. 

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B. ANALYSIS AND CONCLUSION

Plaintiff’s Complaint fails to meet either the federal pleading standard, as annunciated

in Twombly and Iqbal, or the Arizona notice pleading standard. First, Plaintiff never clearly

identifies what her causes of action might be. She mentions several statutory sections and

rules, but never alleges how any of the Defendants violated those statutes or rules. In fact,

the only Defendant that Plaintiff even discusses in the Complaint is Nationstar. The

Complaint certainly does not give fair notice of the basis for her claims. 

Second, and more importantly, courts have rejected all the causes of action that

Plaintiff appears to attempt to allege. Although difficult to discern from Plaintiff’s scattered

allegations, Plaintiff seems to be alleging some claims typically attmepted in mortgage

foreclosure litigation: Nationstar is not the holder in due course of the Note (“show me the

note”); the Note and the Deed of Trust were impermissibly separated; the lender did not lend

actual money, just credit (“vapor money”); and wrongful foreclosure. 

The main thrust of Plaintiff’s Complaint appears to be that Nationstar cannot produce

the original Note and therefore is not a “holder in due course” under the UCC. Courts have

repeatedly rejected this argument. See, e.g., Hogan v. Wash. Mut. Bank, 261 P.3d 445, 448-

49 (Ariz. Ct. App. 2011); Diessner v. Mortgage Elec. Registration Sys., 618 F.Supp.2d 1184,

1187-88 (D. Ariz. 2009). Any attempt to state a claim based on Defendants’ inability to

produce the original Note therefore fails as a matter of law. 

This Court also has rejected attempts to state a claim for impermissible separation of

a promissory note from a deed of trust. Owens v. Reconstruct Co., 2011 WL 3684473 *3 (D.

Arizona August 23, 2011)(citing Maxa v. Countrywide Loans, Inc., 2010 WL 2836958 *4

(D. Arizona July 19, 2010)). The Court has found no Arizona authority suggesting that a

trustee must produce both the promissory note and the deed of trust together before the

trustee can foreclose. Any attempt to state a claim for separation of Plaintiff’s Note and

Deed of Trust therefore fails. 

Any attempt to state a “vapor money” claim similarly fails. Proponents of the vapor

money theory argue that home mortgages are not enforceable because banks do not loan

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actual money. Vollmer v. Present, 2011 WL 11415 *6 (D. Arizona January 4, 2011). Courts

in this District universally have rejected this argument. See, e.g., Vollme, 2011 WL 11415

at *6; Owens, 2011 WL at *3. 

Plaintiff entitled her complaint, “Unlawful Foreclosure.” (Doc. 1-1.) The Court

therefore assumes that Plaintiff is attempting to allege the tort of wrongful foreclosure.

Arizona state courts have not yet recognized a wrongful foreclosure action. Cervantes v.

Countrywide Home Loans, Inc., 656 F.3d 1034, 1043 (9th Cir. 2011). But to the extent the

cause of action even exists in Arizona, the cause is not ripe until a foreclosure sale has

occurred. Id. at 1043-44; Jones v. Bank of Am., 2010 WL 2228517, at *3 (D. Ariz. June, 1,

2010). Because no Trustee Sale has occurred here, Plaintiff cannot possibly state a claim for

wrongful foreclosure. 

Plaintiff’s Complaint does not satisfy the pleading requirements of either Federal or

Arizona Rule of Civil Procedure 8. Additionally, to the extent the Court generously

construes Plaintiff’s allegations as articulating legal theories, those legal theories fail as a

matter of law. The Court therefore will grant the Motions to Dismiss. 

ALTERNATIVE MOTION FOR MORE DEFINITE STATEMENT

Plaintiff filed a pleading that she captioned “Alternative Motion for More Definite

Statement.” (Doc. 25.) In the pleading, Plaintiff states that she “submits this motion to

change the original motion ‘Unlawful Disclosure’ to ‘Common Law Fraud.’” (Id. p.1.) The

Court construes this pleading as a motion to amend the Complaint. In the pleading, Plaintiff

specifies that she is “only changing the motion and would like to keep all original documents

filed in the original case in the Superior Court of the State of Arizona . . . as supporting

documentation.” (Id. p.2.)

The Court initially notes that Plaintiff’s motion is procedurally improper because she

did not submit a copy of the proposed amended complaint as required by Local Rule of Civil

Procedure 15.1. Cervantes, 656 F.3d at 1043 (holding the plaintiffs’ motion to amend was

procedurally improper because it was made orally and they did not submit a copy of the

proposed amended pleadings). Nonetheless, the Court will consider the motion.

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The Court should freely give leave to amend “when justice so requires.” Fed. R. Civ.

P. 15(a)(2). Whether to grant a motion to amend depends on the following factors: (1) undue

delay, (2) bad faith, (3) prejudice to the opposing party, (4) futility of amendment, and (5)

whether plaintiff has previously amended his complaint. Western Shoshone Nat. Council v.

Molini, 951 F.2d 200, 204 (9th Cir. 1991). The most important of these factors is prejudice

to the opposing party. U.S. v. Pend Oreille Public Utility Dist., No. 1, 926 F.2d 1502, 1511

(9th Cir. 1991).

Defendants have not argued that Plaintiff acted with undue delay or in bad faith in

requesting to change her claim from wrongful foreclosure to common law fraud. Nor do

Defendants argue they will be prejudiced if the Court allows Plaintiff to amend her

Complaint, which is the most important factor. And Plaintiff has not amended her Complaint

previously. 

Defendants do argue that amendment would be futile. They argue Plaintiff cannot

state a claim for fraud. Although the Court suspects that is true, the Court cannot say with

certainty that amendment would be futile. Moreover, Plaintiff initially filed her Complaint

in state court, where she did not anticipate having to meet federal standards. Because

Defendants have not demonstrated prejudice and because the Court cannot say with certainty

that amendment would be futile, the Court will allow Plaintiff to file an amended complaint.

But Plaintiff’s amended complaint must make clear her allegations in short, plain

statements in the manner required by Rule 8 of the Federal Rules of Civil Procedure. And

Plaintiff must make specific allegations against each Defendant. She cannot simply name

a Defendant in the caption, then never allege any wrongdoing by that Defendant.

Moreover, Plaintiff is cautioned not to simply re-allege the legal theories that the

Court in this Order found fail to state a claim, i.e., show me the note, vapor money,

separation of the note and deed, wrongful foreclosure. The Court further cautions Plaintiff

that if she wants to allege fraud claims, she must do so with the specificity required by Rule

9(b). “In alleging fraud or mistake, a party must state with particularity the circumstances

constituting fraud or mistake.” Fed.R.Civ.P. 9(b). 

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The Court also notes that Plaintiff has peppered the Complaint with repetitive requests

for relief, admissions, production and with interrogatories. If Plaintiff amends the

Complaint, then she is advised to set forth her demand for relief in one place at the end of the

amended complaint as required by Rule 8(a)(3). Finally, Plaintiff cannot make requests for

admissions or requests for production in her amended complaint and cannot list questions for

Defendants to answer.

Accordingly,

IT IS ORDERED GRANTING Defendants’ Motions to Dismiss (Docs. 7 & 8).

IT IS FURTHER ORDERED GRANTING Plaintiff’s Alternative Motion for More

Definite Statement (Doc. 25), which the Court has construed as a motion to amend. Plaintiff

shall have twenty (20) days from the date of this Order to file an amended complaint that

complies with the Court’s directions above. If Plaintiff does not file an amended complaint

within twenty days of the date of this Order, the Clerk’s office shall dismiss this case with

prejudice without further notice. 

IT IS FURTHER ORDERED DENYING Plaintiff’s Motion to Review the

Authentication of Official Documents Related to Fraud (Doc. 23) and Plaintiff’s Motion to

Review Notary Public Oath and Certificate of Filing for Authentication (Doc. 34) because

Plaintiff has not articulated a valid legal basis for her requests in those pleadings.

DATED this 8th day of February, 2012.

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