Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_10-cv-01829/USCOURTS-azd-2_10-cv-01829-1/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 28:1331(a) Fed. Question: Real Property

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Van M. Robinson and Polly R. Robinson,

Plaintiffs, 

vs.

Bank of New York Mellon, et. al., 

Defendants. 

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No. CV 10-1829-PHX-FJM

ORDER

The court has before it plaintiffs' Motion for Leave to File Second Amended

Complaint (docs. 43, 47), defendants Bank of New York Mellon, BAC Home Loans

Servicing, LP, Merscorp Inc, Mortgage Electronic Registration Systems Inc. ("MERS"),

ReconTrust Company, N.A., Darla Sproles, and Naomi Dudek's response ("defendants")

(doc. 48), and plaintiffs' reply (doc. 49). Defendant On Q Financial Inc. did not respond.

On March 23, 2007, plaintiffs purchased the real property that is the subject of this

action with a loan secured by a Deed of Trust in favor of defendant On Q Financial, Inc. The

Deed of Trust originally named Chicago Title Insurance Company as the Trustee and MERS

as nominee for the "Lender and Lender's successors and assigns." Second Amended

Complaint ¶ 11 ("SAC"). Various assignments subsequently occurred. In May 2010, Trustee

ReconTrust recorded a Notice of Trustee Sale and intended to sell plaintiffs' home at a

Trustee's sale on August 27, 2010. On August 26, 2010, plaintiffs filed this action pro se

alleging multiple claims including wrongful foreclosure and violations of various federal

Case 2:10-cv-01829-FJM Document 50 Filed 03/04/11 Page 1 of 4
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statutes. After retaining counsel, plaintiffs amended their complaint by leave of court and

abandoned all previously stated federal claims. At the Rule 16 Scheduling Conference we

raised the issue of subject matter jurisdiction and asked for supplemental briefing. On

January 4, 2011 we issued an order holding that we did not have subject matter jurisdiction

over the First Amended Complaint. Pursuant to plaintiffs' assertions that they neglected to

raise certain federal questions in the First Amended Complaint, we granted plaintiffs leave

to file a motion to amend. We specifically asked plaintiffs to address the issue of whether

there is state action when a foreclosure is conducted pursuant to Arizona's Deed of Trust

statute, A.R.S. § 33-801, et. seq.

On January 14, 2011, plaintiffs filed a motion for leave to file second amended

complaint (docs. 43, 47). Plaintiffs added one claim for violations of procedural due process

but did not address the issue of state action as we requested. Defendants accuse plaintiffs of

forum shopping and ask that we deny the motion to amend on grounds of futility.

Rule 15(a), Fed. R. Civ. P. provides that leave to amend "shall be freely given when

justice so requires." We deny leave to amend if amendment is futile. AmerisourceBergen

Corp. v. Dialysist W., Inc., 465 F.3d 946, 951 (9th Cir. 2006). A proposed amendment is

futile if it would not withstand a motion to dismiss under Rule 12(b)(6), Fed. R. Civ. P. See

Townsend v. Univ. of Alaska, 543 F.3d 478, 486, n. 6 (9th Cir. 2008). Therefore, we

consider whether plaintiffs' SAC contains "well-pleaded factual allegations" that "plausibly

give rise to an entitlement to relief." Ashcroft v. Iqbal, __ U.S. __, __, 129 S.Ct. 1937, 1950

(2009).

Plaintiffs' sole basis for federal question jurisdiction lies in the added eleventh claim

which asserts violations of procedural due process guaranteed by the 14th Amendment. SAC

at 25. Included are four separate bases allegedly giving rise to violations of procedural due

process: (1) A.R.S. § 33-810's allowance for postponements of a trustee's sale without

requiring the trustee to record notice of the postponement or new sale date; (2) defendants'

failure to provide plaintiffs notice of their right to reinstate upon each postponement; (3)

A.R.S. § 33-807(E)'s prohibition against joining a trustee as a party in a legal action alleging

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1

 We note that plaintiffs argue in the reply that state action is involved because SEC

Rules and Regulations set forth certain preconditions to the marketing and sale of shares in

mortgage backed securities. Reply ¶ V. This is the first time plaintiffs raise this argument

and there is no mention of it in the complaint. We do not consider matters raised for the first

time in a reply.

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fraud or misconduct by the trustee; and (4) A.R.S. § 33-811(B)'s conclusive presumption of

compliance with Arizona's Deed of Trust statute in favor of a bona fide purchaser for value

and without actual notice. SAC ¶¶ 92-1021

. Plaintiffs argue that this states federal question

jurisdiction under 28 U.S.C. § 1331. Defendants argue that amendment is futile because no

state action exists when a private lender invokes non-judicial foreclosure.

The Fourteenth Amendment provides that "[n]o state shall . . . deprive any person of

life, liberty, or property without due process of law." (emphasis added). It shields citizens

from unlawful governmental action, not action by private citizens. Flagg Bros., Inc. v.

Brooks, 436 U.S. 149, 156, 98 S.Ct. 1729, 1733 (1978). Therefore, where a plaintiff asserts

a violation of procedural due process, a threshold question is whether there is state action.

See id.; Apao v. Bank of New York, 324 F.3d 1091, 1095 (9th Cir. 2003). The Supreme

Court has held that in cases involving foreclosures or seizures of property to satisfy a debt,

the 14th Amendment is only implicated where there is some direct state involvement in the

execution of the foreclosure or seizure. Flagg Bros, 426 U.S. at 157, 98 S.Ct. at 1734. The

process must involve the "overt, significant assistance of state officials." Am. Mfrs. Mut. Ins.

Co., 526 U.S. 40, 54, 119 S.Ct. 977 (1999).

Plaintiffs do not squarely confront the state action requirement and posit conclusory

statements about how various provisions of Arizona's Deed of Trust statute violate

procedural due process. The weight of authority is overwhelmingly against plaintiffs. See

Flagg Bros., 436 U.S. 149, 98 S.Ct. 1729; Apao, 324 F.3d 1091; Nieves v. World Sav. Bank,

FSB, 357 Fed. Appx. 843, 844 (9th Cir. 2009); Charmicor, Inc. v. Deaner, 572 F.2d 694, 696

(9th Cir. 1978); Kenly v. Miracle Props., 412 F. Supp. 1072, 1074 (D. Ariz. 1976). 

In Kenly, this court expressly held that acts of a private trustee in conducting a nonCase 2:10-cv-01829-FJM Document 50 Filed 03/04/11 Page 3 of 4
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judicial foreclosure under A.R.S. § 33-801, et. seq. did not constitute "state" action so as to

invoke due process guarantees. 412 F. Supp. at 1077. The court found that in the context

of non-judicial foreclosures it is not the power of the state that is being invoked, but rather,

the private agreement itself. Id. at 1074. Furthermore, the court reasoned that the mere fact

that state law regulates the residential mortgage business, does not convert mortgage lenders

into state actors. Id. Absent overt state official involvement, there was "no nexus between

a private sale pursuant to contract and the powers conferred by statute." Id. 

 The United States Court of Appeals for the Ninth Circuit addressed the same issue

with regard to Hawaii's Deed of Trust statute and reached the same conclusion. Apao, 324

F.3d at 1095. The court reasoned that because the state merely authorized the parties to

contract for foreclosure upon default there was no state action. Id.

Here, plaintiffs' procedural due process claim fails as a matter of law because

plaintiffs cannot show the threshold element of state action. Plaintiffs have not pled any facts

showing "overt official involvement." In fact, plaintiffs' home has not been sold. Plaintiffs

voluntarily contracted with a private party and agreed to confer a power of sale upon the

trustee in the Deed of Trust. The trustee is now invoking that power, not the power of the

state. Accordingly, plaintiffs' SAC fails to plead a plausible federal question. Amendment

would be futile. Absent any federal question or diversity jurisdiction we do not have the

power to hear this case.

Therefore, IT IS ORDERED DENYING plaintiffs' motion for leave to file a second

amended complaint (docs. 43, 47). It is further ORDERED DISMISSING this action for

lack of subject matter jurisdiction. Defendants' previous motions to dismiss plaintiffs'

complaint and first amended complaint are DENIED as MOOT (docs. 7 and 24).

DATED this 4th day of March, 2011.

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