Barrington Invs. of Ariz. LLC v. US Bank N.A.
| Decision Date | 19 May 2020 |
| Docket Number | No. CV-19-05084-PHX-SMB,CV-19-05084-PHX-SMB |
| Parties | Barrington Investments of Arizona LLC, Plaintiff, v. US Bank National Association, et al., Defendants. |
| Court | U.S. District Court — District of Arizona |
Pending before the Court is Defendants Motion to Dismiss, (Doc. 14, "Mot."). Plaintiff Barrington Investments of Arizona LLC responded, (Doc. 19, "Resp."), and Defendants replied, (Doc. 21, "Reply"). Plaintiff requested oral argument, but the Court elects to resolve the motion without it. See L.R. Civ 7.2(f). Considering the parties' motions and relevant case law, the Court enters the following Order:
I. BACKGROUND
October 10, 2006, Donald Baldwin, a non-party to this action, took a loan from New Century Mortgage Corp. ("New Century"), secured by a Deed of Trust1 on certain real property located in Peoria, Arizona (the "Property"). (Doc. 1, "Complaint".) The Deed ofTrust identified Mortgage Electronic Registration Systems, Inc. ("MERS") as "the beneficiary under this Security Agreement." Shortly thereafter, New Century filed for bankruptcy, (Id. § X), and New Century's assets were transferred to New Century TRS Holdings, Inc., which also subsequently filed for bankruptcy. (Id. §§ XI, XII.) Five years passed until, on September 5, 2012, MERS, as nominee and beneficiary for the, now-bankrupt, New Century, recorded an assignment of the Deed of Trust to Defendant U.S. Bank. (Id. § XIV, Ex. B.) Late in 2013, Mr. Baldwin and U.S. Bank's loan servicer, Wells Fargo (d/b/a America's Servicing Company), agreed to a loan modification. (Id. §§ XV, XVIII; see also Mot. Ex. 3, "Home Affordable Modification Agreement".) The resulting modification, entitled the "Home Affordable Modification Agreement," affirmed the validity of the Note and Deed of Trust. (See Mot. Ex. 3 at 4, ¶¶ E, F (stating that "all terms and provisions of the Loan Documents, except as expressly modified by this Agreement, remain in full force and effect").)
Around April 6, 2018 Plaintiff acquired its own beneficial interest to a deed of trust also secured by the Property and executed by Mr. Baldwin on August 24, 2007. (Complaint ¶ II.) Plaintiff filed for foreclosure on this second deed of trust (hereinafter, the "Junior Lien"). Plaintiff obtained a judgment of foreclosure directing a sheriff's sale of the property, and on March 19, 2019, successfully bid for the Property and received a deed transferring ownership of the Property to Plaintiff. (Id. ¶¶ V, VI.) Separately, Wells Fargo, the aforementioned servicing agent for U.S. Bank, substituted Quality Loan Service Corporation ("Quality Loan") as the successor trustee under the Deed of Trust. (Id. ¶ XVI; see also Complaint, Ex. C.) On May 20, 2019, Quality Loan filed a Notice of Trustee's Sale for the Property.
On August 12, 2019, Plaintiff filed the instant action seeking declaratory relief based on an unfulfilled demand for Mr. Baldwin's payment history and an assertion that Defendants lacked authority to conduct the Trustee's Sale. (Doc. 1.)
II. LEGAL STANDARD
To survive a Rule 12(b)(6) motion for failure to state a claim, a complaint must meetthe requirements of Rule 8(a)(2). See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007). Rule 8(a)(2) requires a "short and 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." Fed. R. Civ. P. 8(a)(2); Twombly, 550 U.S. at 555 (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). 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. 1988). A complaint that sets forth a cognizable legal theory will survive a motion to dismiss if it contains sufficient factual matter, which, if accepted as true, states a claim to relief that is "plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). Facial plausibility exists if the pleader sets forth "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id.
In ruling on a Rule 12(b)(6) motion to dismiss, the well-pled factual allegations are taken as true and construed in the light most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). However, legal conclusions couched as factual allegations are not given a presumption of truthfulness, and "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss." Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). A court ordinarily may not consider evidence outside the pleadings in ruling on a Rule 12(b)(6) motion to dismiss. See United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). "A court may, however, consider materials—documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice—without converting the motion to dismiss into a motion for summary judgment." Id. at 908.
III. DISCUSSION
"In essence the question of standing is whether the litigant is entitled to have thecourt decide the merits of the dispute or of particular issues." Warth v. Seldin, 422 U.S 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). When resolving disputes of standing, courts are bound by Article III of the United States Constitution, which limits the "judicial power" to the resolution of "cases" and "controversies." See Valley Forge Christian Coll. v. Ams. United for Separation of Church and State, Inc., 454 U.S. 464, 470-71, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982). In order to have standing, a plaintiff must have suffered an "injury in fact." Id. at 473. Further, he bears the burden of proving that (1) he has suffered " 'an injury in fact' that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged act of defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 180-81, 120 S.Ct. 693, 145 L.Ed. 2d 610 (2000) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)).
Defendants' challenge to Plaintiff's standing touches on three related topics. As a starting point, Defendants argue that because Plaintiff was not party to the assignment or underlying loan transaction, it cannot demonstrate a concrete, particularized injury fairly traceable to the assignment required to establish standing. (Mot. at 4-6.) Defendants next argue that neither the securitization of the Deed of Trust, nor any alleged impropriety in the timing of the assignment affects the validity of the assignment grants Plaintiff standing to challenge the foreclosure. (Id. at 6-10.)
Plaintiff responds primarily with one case: Steinberger v. McVey ex rel. Cnty. of Maricopa, 234 Ariz. 125, 318 P.3d 419 (Ariz. App. 2014).2 Plaintiff reads Steinberger to "specifically address[]" that an owner of property, not party to a deed of trust being foreclosed, "has standing to contest the validity of the trustee's sale." (Resp. at 1.) Steinberger's holding was not so expansive. Namely, and as Defendants' observe,Steinberger limited its holding to "borrowers" or "trustors." Id. at 136, 318 P.3d at 430 (). Plaintiff, a non-party to the Deed of Trust or its subsequent assignment, is neither. Unlike the Steinberger borrower, Plaintiff has not assumed the U.S. Bank loan or made payments on it; it has not requested loan modifications or in any meaningful way acted as the borrower. The most that can be said is that Plaintiff's interest in the Property—as a junior lienholder and current owner—overlaps with Defendants. That Plaintiff acquired an independent interest in (and later purchased) the Property, does not transform it into a "borrower" or "trustor" under the Deed of Trust. Nor should Plaintiff be treated as a "borrower" like the Steinberger plaintiff who, after inheriting her deceased father's home and assuming the mortgage, purposefully defaulted on the home loan subject to the later foreclosed deed of trust. See id. at 129-30. Merely because Plaintiff can point to a junior interest in the Property, wholly independent of and junior to Defendants' interest, does not confer standing to enjoin Defendants' foreclosure on the Deed of Trust to which Plaintiff otherwise lacks all connection.
Aside from citing Steinberger and a pair of out-of-state cases, Plaintiff largely avoids addressing Defendants' challenge to Plaintiff's standing. The substance of that challenge is relatively straightforward. As a party with no connection to the underlying loan transaction or assignment of the Deed of Trust, it is difficult for Plaintiff to "demonstrate a concrete and particularized injury in fact." In re Mortg. Elec. Registration Sys. (MERS) Litig., No. CV 10-1547-PHX-JAT, 2012 WL 932625, at *4 (D. Ariz. Mar. 20, 2012); see also Robertson v. DLJ Mortg. Capital, Inc., No. CV-12-9033-PCT-LOA, 2012 WL 4840033, at *10 (D. Ariz. Oct. 11, 2012). Tougher still is showing that such injury "is fairly traceable to [a] challenged assignment" to which Plaintiff has no relation. See id. It is unclear how, in fact, Plaintiff is injured. In its response, Plaintiff briefly concludes that "injury in this case" is "obvious." (Resp. ...
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