Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_06-cv-02622/USCOURTS-azd-3_06-cv-02622-3/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

WO

IN THE UNITED STATES DISTRICT COURT

DISTRICT OF ARIZONA

Keith Herring, et al., 

Plaintiffs, 

v.

Countrywide Home Loans, Inc., et al., 

Defendants. 

)

)

)

)

)

)

)

)

)

)

)

)

 No. CV 06-2622-PHX-PGR

 

 ORDER

Currently pending before the Court is the Plaintiff's Motion for Partial Summary

Judgment Re: Breach of Contract (Doc. 11), and the Defendant’s Cross Motion for Summary

Judgment (Doc. 34). The Court now rules on the motions. 

I. FACTUAL BACKGROUND

The Plaintiff obtained a mortgage loan from Countrywide Home Loans (“CHL”) on

December 20, 2001. The Plaintiff secured her payment obligations under the loan by

allowing a lien against her home, located at 4717 East Robin Drive, Prescott, Arizona.

Throughout the loan period, Plaintiff failed to make all her mortgage loan payments on time.

When delinquent, CHL attempted to reach Plaintiff by telephone or by mail regarding her

past-due payments. By January 2005, approximately four months had passed since Plaintiff

had made a payment on her mortgage loan. Thus, on January 12, 2005, the trustee,

ReconTrust Company, N.A.(“ReconTrust”), initiated a Trustee’s Sale to sell the property

securing the lien and apply the sale proceeds to Plaintiff’s mortgage loan. ReconTrust

recorded a Notice of Trustee’s Sale with the Yavapai County Recorder, setting a Trustee’s

Sale for 9:00 a.m. on April 18, 2005. 

Case 3:06-cv-02622-PGR Document 52 Filed 07/13/07 Page 1 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 -

ReconTrust’s records reflect that it mailed a copy of the Notice of Trustee’s Sale to

Plaintiff by certified or registered first-class mail on January 14, 2005. ReconTrust also

published the Notice of Trustee’s Sale in the Prescott Daily Courier on January 18 and 25,

2005 and February 1 and 8, 2005. In addition, ReconTrust hired a process server, Alena

Herrington, who posted the Notice of Trustee’s Sale on the front door of the property located

at 4717 East Robin Drive in Prescott on January 18, 2005. 

On April 14, 2005, Ms. Malessa Ramirez, a CHL employee, left a message at

Plaintiff’s home telephone number to follow up on the possibility of a Repayment Plan

Agreement before the scheduled April 18, 2005 Trustee’s Sale. After receiving no response

from Plaintiff, Ms. Ramirez called her again on Friday morning, April 15, 2005. Later that

morning, CHL records show that a third party, Eric Kramer from Borrower Counseling

Service, contacted CHL to discuss Plaintiff’s loan. After receiving authorization to discuss

Plaintiff’s loan with this individual, Ms. Ramirez talked to Mr. Kramer about Plaintiff’s loan

status, the reasons Plaintiff defaulted on the loan agreement, her monthly income, and her

expenses and financial commitments. Based on information CHL learned in the telephone

call with Mr. Kramer, CHL determined that Plaintiff was eligible for a Repayment Plan

Agreement. Ms. Ramirez negotiated the terms of the Repayment Plan Agreement with

Plaintiff’s agent, Mr. Kramer. Soon after, the Plaintiff ratified the agreement by signing each

page and then faxed it to CHL. CHL received the signed agreement by facsimile at

approximately 3:36 p.m on April 15, 2005. 

At approximately 4:20 p.m. on April 15, 2005, after CHL had received the signed

agreement, the Plaintiff spoke with Ms. Ramirez and assured her that she was in the process

of securing the funds that needed to be electronically submitted. Ms. Ramirez advised

Plaintiff that the Repayment Plan Agreement was not effective until CHL received not just

the signed agreement, but also the initial payment. The Plaintiff submitted the initial

payment of $2,978.25 via Western Union on April 15, 2005 at 5:07 p.m. Despite Plaintiff’s

compliance with CHL’s requirements, on April 18, 2005, at 9:00 a.m., the Trustee’s Sale

Case 3:06-cv-02622-PGR Document 52 Filed 07/13/07 Page 2 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 -

proceeded and a third-party purchased the property at 4717 East Robin Drive in Prescott for

$189,500. The present action for breach of contract and wrongful foreclosure followed.

II. LEGAL STANDARD AND ANALYSIS

Summary judgment is proper only if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with affidavits, if any, show that there is no

genuine issue as to any material fact and the moving party is entitled to judgment as a matter

of law. Fed. R. Civ. P. 56©). The moving party is entitled to judgment as a matter of law

when the nonmoving party fails to make a sufficient showing on an essential element of a

claim in the case on which the nonmoving party has the burden of proof. Celotex Corp. v.

Catrett, 477 U.S. 317, 323 (1985). There is no genuine issue of material fact for trial where

the record, taken as a whole, could not lead a rational trier of fact to find for the nonmoving

party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

The Plaintiff argues that no genuine issue of material fact remains for trial on whether

the Defendant breached the Repayment Plan Agreement executed by the parties. In addition,

the Plaintiffs assert that their claim in tort for wrongful disclosure is also ripe for entry of

judgment in their favor as no factual issue remains as to whether the Defendant wrongfully

foreclosed on Plaintiff's residence. The Defendant opposes the Plaintiff’s Motion for Partial

Summary Judgment and maintains that the undisputed facts support judgment in its favor.

A. Breach of Contract 

 In order to succeed on a claim for breach of contract, the Plaintiff must prove the

existence of a contract, its breach by CHL, and resulting damages. Graham v. Asbury, 540

P.2d 656, 657 (Ariz. 1975). According to the Defendant, the Plaintiff’s understanding and

interpretation of the written contract she claims was breached is based solely upon her

discussions with Malessa Ramirez, a CHL employee. The Defendant argues that statute of

frauds bars a verbal agreement related to the sale of real property, such as the alleged verbal

contract between CHL and Plaintiff. The Defendant concedes that the Repayment Plan

Agreement could have constituted an enforceable written contract, but because the Plaintiff

did not read or understand the terms of the Repayment Plan Agreement and did not intend

Case 3:06-cv-02622-PGR Document 52 Filed 07/13/07 Page 3 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 -

to be bound by those terms, no meeting of the minds occurred. As a result, the Defendant

argues that the Repayment Plan Agreement is not an enforceable contract.

1. Statute of Frauds

As described above, the Defendant argues that the Plaintiff’s entire understanding of

her alleged contract with CHL was based on her conversations with Malessa Ramirez on

April 15, 2005. The Defendant maintains that Plaintiff’s deposition testimony reveals that

the Plaintiff believed that, if she signed and returned the Repayment Plan Agreement to CHL

and electronically transmitted $2,978.25 to the company, the Trustee’s Sale would not

proceed and she would retain her home. However, the Defendant argues that the Plaintiff

cannot cite a single provision of the Repayment Plan Agreement upon which she based this

belief. As such, it is the Defendant’s position that the Plaintiff simply relied upon her verbal

communications with Ms. Ramirez and not the Repayment Plan Agreement itself.

Furthermore, the Defendant claims that before signing and returning the agreement, the

Plaintiff did not read it, understand it, or have any idea about its content or terms; therefore,

she simply acted solely in accordance with her conversation with a CHL employee on the

afternoon of April 15, 2005. As such, it is the Defendant’s position that the operative

contract that Plaintiff intended to enter into was oral. Since a contract to forego a Trustee’s

Sale and permit the borrower to retain her interest in the property must be in writing pursuant

to A.R.S. § 44-101(6), the Defendant contends that the alleged contract between Plaintiff

and CHL is unenforceable pursuant to the statue of frauds.

The Court finds the Defendant’s argument regarding the statute of frauds entirely

unpersuasive as it is clear that there was a written contract between the parties, the

Repayment Plan Agreement, which was properly executed on April 15, 2005. Furthermore,

as noted by the Plaintiff, Defendant’s own contract states that “[a]ll parties to this agreement

represent . . . [they] are not relying upon any representation or acknowledgment, whether oral

or in writing, of any other party hereto except as contained herein.” The Plaintiff is asserting

a claim for breach of the written contract between the parties and not any verbal agreements

that may or may not have been formed. Therefore, the statute of frauds is inapplicable. This

Case 3:06-cv-02622-PGR Document 52 Filed 07/13/07 Page 4 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 5 -

Court’s focus is on the written contract, the Repayment Plan Agreement, and whether the

terms of that agreement were met by the signatories thereto.

2. Meeting of the Minds

The next argument raised by the Defendant is that the Plaintiff and CHL never had

a meeting of the minds regarding the terms of the Repayment Plan Agreement, thus it is not

a valid, enforceable contract. The Defendant maintains that the Plaintiff cannot establish the

requisite mutual consent because she never intended to be bound to the terms of the

Repayment Plan Agreement; therefore, the Repayment Plan Agreement is unenforceable as

a matter of law.

The Defendant claims the Plaintiff did not understand that the Repayment Plan

Agreement obligated her to pay an extra $721.33 – on top of her regular $992.75 monthly

mortgage payment – for the next six months. The Defendant asserts, based on her alleged

lack of understanding, that the Plaintiff did not intend to commit to making these monthly

payments on the exact due date, with no grace period, via certified funds. According to the

Defendant, the Plaintiff incorrectly believed that entering into Repayment Plan Agreement

would require CHL to cancel the scheduled Trustee’s Sale, when in truth, the terms of the

Repayment Plan Agreement stated that CHL would postpone the Trustee’s Sale if Plaintiff

did not default on the agreement. The Defendant points out that the Repayment Plan

Agreement would have obligated Plaintiff to pay a total of $7,306.20, and until such amounts

were paid, CHL retained the right to reschedule the Trustee’s Sale. The Defendant

maintains that “[i]n light of the vast discrepancy between the actual terms of the Repayment

Plan Agreement and Plaintiff’s understanding of the ‘contract,’ no meeting of the minds

occurred and no contract was formed.” 

The Court finds the Defendant’s arguments regarding the formation of a written

contract both irrelevant and unpersuasive. A contract is formed when there is manifestation

of mutual assent to the exchange and a consideration. Hill-Shaefer Partnership v. Chilson

Family Trust, 799 P.2d 810, 815 (Ariz. 1990). Mutual assent, however, is based on objective

evidence, not the hidden intent of the parties. Id. Based on the objective evidence before this

Case 3:06-cv-02622-PGR Document 52 Filed 07/13/07 Page 5 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 6 -

Court, a written contract was indeed formed. The terms of the repayment plan were

negotiated and formed on behalf of the Plaintiff by her authorized agent, Mr. Eric Kramer

from Borrower Counseling Service. Although the Defendant asserts that there was a vast

discrepancy between the actual terms of the written agreement and Plaintiff’s understanding

of those terms, the record before the Court does not support such a contention. The

Repayment Plan Agreement indeed states that if the Plaintiff signed and returned it within

five days, and the stated sum of $2,978.25 was paid, the Trustee’s Sale would be postponed.

 It is undisputed that the contract was accepted then ratified by the Plaintiff’s signature and

submitted via fax to CHL. The consideration for the agreement, $2,978.25, was submitted

the same day via electronic funds. Despite Plaintiff’s clear compliance with her commitment

to CHL, the Defendant failed to adhere to its obligation to postpone the Trustee’s Sale. It is

undisputed that CHL proceeded with said sale on April 18, 2005, in clear breach of the

written agreement formed between the parties. The Court will not allow the Defendant to

justify their clear breach of the agreement by arguing that Plaintiff did not understand its

terms.

 3. Wrongfully Induced

The Defendant contends that if this Court does not determine that CHL is entitled to

summary judgment in its favor, then alternatively, initial discovery suggests that a material

issue of fact exists regarding the circumstances that induced CHL to offer the Plaintiff a

repayment plan. Specifically, the Defendant claims that CHL determined that Plaintiff was

eligible for a Repayment Plan Agreement based, at least in part, upon a discussion between

Malessa Ramirez at CHL and Eric Kramer from Borrower Counseling Service, an individual

who indicated he had authorization to discuss Plaintiff’s loan with CHL. Mr. Kramer

represented to CHL that the Plaintiff, after paying all her required monthly expenses, would

have a positive income of at least $1,026.25. CHL states that it relied upon the information

provided to it by Mr. Kramer when determining that the Plaintiff had the reasonable potential

to become and remain current on her mortgage.

Case 3:06-cv-02622-PGR Document 52 Filed 07/13/07 Page 6 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

The issue of whether the CHL representative made a clerical error when inputting the

date of April 18,2005 in the Repayment Plan Agreement is irrelevant. Even if the document

had contained April 15, 2005 as the date the Plaintiff was required to submit her initial

payment, the contract terms would have still been met. The contract does not specify a

particular time that the funds had to be received, and it is undisputed that the Plaintiff

submitted said funds electronically on April 15, 2005 and that CHL received that

transmission at 5:07 p.m.

- 7 -

The Defendant now argues that a factual dispute exists regarding both the source and

the accuracy of the information upon which CHL relied in deciding to offer the Plaintiff a

Repayment Plan Agreement. The Defendant supports this contention by stating that the

Plaintiff testified that she did not recall authorizing Mr. Kramer to discuss her loan or the

pending sale of her home with CHL. However, Plaintiff’s deposition testimony that she does

not specifically recall a Mr. Eric Kramer, after two years have passed since the sale of her

home, does not mean that he provided incorrect information. Nor does it support the position

that a valid contract was never formed. The Defendant received an authorization from Mr.

Kramer, the Plaintiff’s agent, to speak about her financial information and negotiate a

contract. Indeed, Ms. Ramirez would not deal with Mr. Kramer until she had written

confirmation of his ability to act on behalf of the Plaintiff and her interests. CHL received

both the signed contract and the monetary payment it required in consideration of postponing

the Trustee’s Sale in accordance with the terms of the Repayment Plan Agreement. 

The undisputed facts before this Court establish that the Defendant breached the

Repayment Plan Agreement executed by CHL and Vanessa Herring on April 15, 2005. The

written terms of the agreement required the Plaintiff to sign the document and submit

$2,978.25 electronically to CHL by April 18, 2005 in order for the Trustee’s sale to be

postponed. The Plaintiff submitted the funds via Western Union at 5:07 p.m. on April 15,

2005.1

 The Defendant asserts that the Plaintiff knew, based on her verbal communications

with Ms. Ramirez, that the Repayment Plan Agreement was not effective until CHL received

the initial payment. The Defendant also maintains that the Plaintiff understood that the

Trustee’s Sale would proceed if the Plaintiff did not electronically transmit the initial

Case 3:06-cv-02622-PGR Document 52 Filed 07/13/07 Page 7 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 8 -

payment that day, April 15, 2007. There is nothing in the record before this Court to suggest

that the Plaintiff was required to submit the initial payment electronically by 5:00 pm on

April 15, 2005. Despite Plaintiff’s clear compliance with the contract terms, the Trustee’s

Sale went forward on April 18, 2005 at 9:00 a.m., and the property was sold for $189,000.

As a result of the Defendant’s breach, the Plaintiff and her family were subsequently forced

to vacate their home. 

B. Wrongful Foreclosure

The Plaintiff has also moved for summary judgment on Count 7 of her Complaint,

Wrongful Foreclosure. Although this Court is aware that the state of Arizona has yet to

recognize the tort of Wrongful Foreclosure, it is also clear that Arizona courts have not

refused to recognize it either. Furthermore, other jurisdictions have recognized this tort, and

based on the undisputed facts of this matter, the Court finds it appropriate to join those

jurisdictions and hold the Defendant liable for wrongfully foreclosing on the Plaintiff’s

home. See, e.g., Heritage Creek Development Corp. v. Colonial Bank, 601 S.E.2d 842 (Ga.

App. Ct. 2004).

Wrongful Foreclosure is a tort that “exists as a statutory duty .... to exercise fairly and

in good faith the power of sale in a deed to secure [a] debt.” Boaz v. Latson, 580 S.E. 2d

572, 577 (Ga. Ct. of App. 2003). A breach of this duty is a tort compensable at law. Id.

Arizona Revised Statute § 33-807(A) confers a duty upon the trustee of a trust deed to only

sell the property at issue “after a breach or default.” The statutory provision states:

By virtue of his position, a power of sale is conferred upon the

trustee of a trust deed under which the trust property may be

sold, in the manner provided in this chapter, after a breach or

default in performance of the contract or contracts, for

which the trust property is conveyed as security, or a breach or

default of the trust deed. At the option of the beneficiary, a trust

deed may be foreclosed in the manner provided by law for the

foreclosure of mortgages on real property in which event chapter

6 of this title governs the proceedings. The beneficiary or trustee

shall constitute the proper and complete party plaintiff in any

action to foreclose a deed of trust. The power of sale may be

exercised by the trustee without express provision therefor in the

trust deed.

Id. (emphasis added).

Case 3:06-cv-02622-PGR Document 52 Filed 07/13/07 Page 8 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 9 -

The Defendant argues that even if CHL had not fully complied with the statutory

notice requirements necessary to complete a valid Trustee’s Sale, the Plaintiff cannot seek

damages for a tort of wrongful foreclosure. The Defendant maintains that the Plaintiff

waived her only defenses and objections to the Trustee’s Sale by failing to seek injunctive

relief pursuant to Rule 65, Arizona Rules of Civil Procedure, by 5:00 p.m. mountain standard

time on April 15, 2005. Pursuant to A.R.S. § 33-811(C): 

[A]ll persons to whom the trustee mails a notice of a sale under

a trust deed pursuant to section 33-809 shall waive all defenses

and objections to the sale not raised in an action that results in

the issuance of a court order granting relief pursuant to rule 65,

Arizona rules of civil procedure, entered before 5:00 p.m.

mountain standard time on the last business day before the

scheduled date of the sale.

According to the Defendant, since the Plaintiff did not seek, nor obtain, a Court Order

granting injunctive relief pursuant to Rule 65, Arizona Rules of Civil Procedure, by 5:00 p.m.

mountain standard time on April 15, 2005, the last business day before the scheduled date

of the sale, the Plaintiff has waived all defenses and objections to said sale. 

The Court finds the Defendant’s position without merit. The Plaintiff does not

represent that the Court should grant judgment in her favor on the wrongful foreclosure claim

because the Defendant failed to give her notice of the sale. Instead, the Plaintiff’s well

founded arguments focus on the fact that her default was cured when she executed the

Repayment Plan Agreement and fully complied with its terms. The Court agrees.

Furthermore, on April 15, 2005, the Plaintiff executed a Repayment Plan Agreement and

submitted funds to cure her default and postpone the sale. Clearly, the Plaintiff was

operating under the belief that the Defendant was also upholding its duty under the

agreement. Had the Defendant acted in compliance with the law, certainly injunctive relief

would have been wholly unnecessary. The facts presented by the Defendant to show that the

statutory notice provisions were followed are irrelevant. 

The undisputed facts before the Court show that the Plaintiff cured any defaults when

she entered into the Repayment Plan Agreement with the Defendant. The Defendant

breached the contract formed between the parties when it allowed the Trustee’s sale to go

Case 3:06-cv-02622-PGR Document 52 Filed 07/13/07 Page 9 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 10 -

forward on April 18, 2005 in clear violation of the contract terms. According to A.R.S. § 33-

807(A), a trustee is only permitted to exercise the power of sale after a breach or default.

The Plaintiff’s full and timely performance and complaisance with the aforementioned

Repayment Plan Agreement cured any defaults; therefore, the Defendant clearly violated the

statutory requirements when it allowed the trustee’s sale to go forward. 

III. CONCLUSION

As stated above, the undisputed facts in this matter establish as a matter of law that

Defendant breached the Repayment Plan Agreement executed by the parties on April 15,

2005, by selling the Plaintiff’s home on April 18, 2005. As such, the Plaintiff is entitled to

partial summary judgment in her favor as to her claim for breach of contract and wrongful

foreclosure. Therefore,

IT IS ORDERED that the Plaintiff’s Motion for Partial Summary Judgment Re:

Breach of Contract (Doc. 11) is GRANTED. Judgment in favor of the Plaintiff is to be

entered as to Count Two - Breach of Contract and Count 7 - Wrongful Foreclosure.

IT IS FURTHER ORDERED that the Defendant’s Motion for Summary Judgment

(Doc. 34) is DENIED.

IT IS FURTHER ORDERED that a Scheduling Conference is set in this case for

Monday, August 13, 2007 at 1:30 p.m. in Courtroom 601 before the Honorable Paul G.

Rosenblatt. The parties’ Joint Case Management is due to the Court on or before Friday, July

27, 2007. An order detailing the requirements for the Joint Case Management Report will

follow.

DATED this 13th day of July, 2007.

Case 3:06-cv-02622-PGR Document 52 Filed 07/13/07 Page 10 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 11 -

Case 3:06-cv-02622-PGR Document 52 Filed 07/13/07 Page 11 of 11