Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-01314/USCOURTS-azd-2_09-cv-01314-2/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 15:1601 Truth in Lending

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Holly Martenson, 

Plaintiff, 

vs.

RG Financing, et al., 

Defendants. 

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No. CV-09-01314-PHX-NVW

ORDER

Before the Court is Plaintiff’s Motion for Preliminary Injunction, part of which

was previously denied (Docs. 92, 93).

I. Background

On November 29, 2006, Martenson refinanced her home loan through a mortgage

broker, Buy America Real Estate, by executing a Deed of Trust and Note for which JL

Financing is the beneficiary and lender. RG Financing is the loan servicer for

Martenson’s loan. In May 2007, Martenson fell behind on her loan payments, and on

June 8, 2009, the property subject to the Deed of Trust was sold at a trustee’s sale to JL

Financing. The factual and procedural history of this case before February 2010 is

described more fully in the Court’s January 22, 2010 Order (Doc. 56).

On February 5, 2010, the Court enjoined JL Financing and RG Financing from

enforcing a state justice court order granting JL Financing immediate possession of

Martenson’s residence (Doc. 62). The preliminary injunction was conditioned upon

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Martenson posting a bond in the nominal amount of one hundred dollars because the

Court found that “Defendants are more than fully secured by the Property (Id.; Doc. 56)." 

In support of her request for a preliminary injunction, Martenson contended the trustee’s

sale was unlawful and invalid (Doc. 34 at 4 n.4, 7). One of the findings supporting

injunctive relief was that Defendants had not complied with the Deed of Trust’s

requirement that the lender provide the borrower with notice and thirty days to cure the

default (Doc. 56).

On May 6, 2010, JL Financing recorded a Notice of Rescission of Trustee’s Deed

Upon Sale, which states that the Trustee’s Sale and the purported Trustee’s Deed Upon

Sale are rescinded (Docs. 74 at 6, 74-2 at 43-45). The Notice also states:

3) THE TRUSTEE has been informed by the Beneficiary that the

Trustor has contested the Trustee’s Sale and that the Beneficiary desires to

rescind the Trustee’s Deed recorded upon the foreclosure sale on June 8,

2009, in order to resolve any contest made by the Trustor regarding the sale

without acknowledging any fault in the conduct of the foreclosure sale;

4) THE EXPRESS PURPOSE of this Notice of Rescission is to return

the priority and existence of all title and lien holders to the status quo-ante

as existed prior to the Trustee’s Sale.

(Doc. 74-2 at 43) By letter dated May 7, 2010, JL Financing notified Martenson she was

in default, itemized the amounts due, and demanded payment of $290,638.34 by June 11,

2010 (Doc. 92, Exh. A). The amount due includes $49,541.23 for “Legal Fees to enforce

Note & Deed of Trust.” (Id.) A Notice of Trustee’s Sale for September 29, 2010, also

was recorded (Doc. 92, Exh. B). 

On August 20, 2010, the Court denied Plaintiff’s Motion to Enforce Preliminary

Injunction to Enjoin Second Sale of Plaintiff’s Home or Alternatively to Modify Its

Terms (Doc. 89). The Court found that Defendants had rescinded the trustee’s deed

emanating from the disputed trustee’s sale and abandoned the trustee’s sale in dispute,

thus nullifying the predicate for the forcible entry and detainer judgment. The Court

found that Martenson “remains liable for whatever her obligations are and were under the

note and deed of trust, but no additional obligations grounded in the rescinded deed of

trust sale.” The Court expressly refrained from determining whether the amounts

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demanded in the May 7, 2010 demand and cure letter are correct or the amount of the

demand invalidated the current notice of trustee’s sale because no such claim had been

pled.

On August 24, 2010, Martenson moved for leave to file a Third Amended

Complaint (Doc. 90). The proposed Third Amended Complaint alleges that the May 7,

2010 Notice of Default includes in its demand interest, fees, taxes, insurance, and costs

accrued during the period of JL Financing’s record ownership and the period covered by

the preliminary injunction and that Defendants “demand illegal, retroactive payments

from plaintiff as a condition to cure the ‘new’ default under threat of sale of her home.” 

It further alleges that “on the first sale of plaintiff’s property on June 8, 2009, plaintiff’s

personal obligation on the note was extinguished under A.R.S. § 33-814(G) and the note

and mortgage were merged with the deed vesting JL Financing with fee simple title to the

property.” 

On August 26, 2010, Martenson filed another motion for preliminary injunction. 

(Doc. 92). The Court denied Martenson’s motion in all respects except for her challenge

to the inclusion in the cure amount of attorneys’ fees incurred in unsuccessfully defending

against the first motion for preliminary injunction (Doc. 93). 

On September 2, 2010, JL Financing and RG Financing stated that, “for the

purposes of the foreclosure sale, scheduled for September 29, 2010, Defendants will

stipulate and agree to include only those post-injunction fees in the cure amount,” which

is $14,978, instead of $49,541.23 (Doc. 95 at 2). They further stated that, alternatively,

they “will withdraw any claim for attorneys’ fees in the computation of the cure amount

necessary for Plaintiff to cure her default and redeem her property, while reserving the

right to litigate the amount of fees properly awarded to Defendants in the substantive case

filed in this action.” (Id.) Martenson did not respond to JL Financing and RG

Financing’s response that the Court limited to the narrow issue regarding attorneys’ fees.

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II. Analysis

Arizona courts strictly construe deeds of trust and related statutes in favor of the

borrower. Patton v. First Fed. Sav. & Loan Ass’n, 118 Ariz. 473, 477, 578 P.2d 152, 156

(1978). Paragraph 21 of the Deed of Trust requires the lender to give notice to the

borrower of the default, the action required to cure the default, and a date not less than

thirty days from the date of notice by which the default must be cured. It also provides:

If the default is not cured on or before the date specified in the notice,

Lender, at its option, may require immediate payment in full of all sums

secured by this Security Instrument without further demand and may invoke

the power of sale and any other remedies permitted by applicable law. 

Lender shall be entitled to collect all expenses incurred in pursuing the

remedies provided in this paragraph 21, including, but not limited to,

reasonable attorneys’ fees and costs of title evidence.

(Doc. 90-2) 

After default, a trustor may reinstate by paying to the beneficiary, trustee, or the

trustee’s agent the entire amount then due under trust deed, payment of costs and expenses

incurred in enforcing the terms of the trust deed, payment of the recording fee for a

cancellation of notice of sale, payment of the trustee’s fees, and payment of expenses and

reasonable attorney fees “incurred in protecting and preserving the beneficiary’s interest in

the trust property.” A.R.S. § 33-813(A), (B). “On request from the trustor . . . at any time

that the trust deed is subject to reinstatement, the trustee shall provide a good faith

estimate of the sums that appear necessary to reinstate the trust deed.” A.R.S. § 33-

813(C). Upon written request from the trustor, the trustee must inform the trustor of the

exact amount necessary to reinstate the trust deed, separately specifying costs, fees, and

any other amounts that are required to be paid as a condition to reinstatement of the trust

deed. A.R.S. § 33-813(D). The trustee must provide the information within five days of

receipt of the written request unless it is received during the five business days before the

day of the sale, in which case the trustee must provide the information “as soon as

practicable.” Id. Subsection D, however, does not require extension of the period for

reinstatement of the trust deed to accommodate providing information regarding the

amount of the payment required for reinstatement. Id. 

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Thus, under the Deed of Trust, JL Financing was entitled to collect all expenses

incurred in pursuing its remedies under the Deed of Trust, including reasonable attorneys’

fees. Under statute, JL Financing was obligated to provide Martenson, upon request, “a

good faith estimate of the sums that appear necessary to reinstate the trust deed.” Further,

upon written request, JL Financing was required to provide Martenson the exact amount

necessary to reinstate the trust deed. But the request for an estimate or the exact amount of

payment does not require the period for reinstatement to be extended nor the trustee’s sale

to be continued. Moreover, the record does not show that Martenson made any such

request. 

The May 7, 2010 demand and cure letter provided a good faith estimate of the

payment required to cure Martenson’s default and set a date not less than thirty days from

the date of notice by which the default must be cured. On September 2, 2010, JL

Financing informed Martenson of a reduction in the amount of payment required to cure

her default. Martenson has provided insufficient basis for finding the May 7, 2010 notice

of default and demand for cure defective.

Therefore, Martenson’s Motion for Preliminary Injunction enjoining the sale of her

home on September 29, 2010, will be denied.

IT IS ORDERED that Plaintiff’s Motion for Preliminary Injunction (Doc. 92) is

denied.

DATED this 17th day of September, 2010.

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