Snyder v. HSBC Bank, USA, N.A.

• Decision Date: 08 June 2012
• Docket Number: No. CV–12–0016–PHX–LOA.,CV–12–0016–PHX–LOA.
• Citation: 873 F.Supp.2d 1139
• Parties: Susan M. SNYDER, a married woman, as her sole and separate property, Plaintiff, v. HSBC BANK, USA, N.A., a foreign corporation; Les Zieve; and Ocwen Loan Servicing, LLC, a foreign limited liability company, et al., Defendants.
• Court: U.S. District Court — District of Arizona

873 F.Supp.2d 1139

Susan M. SNYDER, a married woman, as her sole and separate property, Plaintiff,

v.HSBC BANK, USA, N.A., a foreign corporation; Les Zieve; and Ocwen Loan Servicing, LLC, a foreign limited liability company, et al., Defendants.

No. CV–12–0016–PHX–LOA.

United States District Court, D. Arizona.

June 8, 2012.

George Alfred Tacker, Tacker & Associates PC, Goodyear, AZ, for Plaintiff.

Charles Anthony Piccuta, Christopher Robert Blevins, Houser & Allison, Irvine, CA, Nathaniel Morris Brodnax, Law Offices of Les Zieve, Huntington Beach, CA, for Defendants.

ORDER

LAWRENCE O. ANDERSON, United States Magistrate Judge.

Pending before the Court are two Rule 12(b)(6) motions to dismiss, one filed by Defendants HSBC Bank, USA, N.A.¹ (“HSBC”) and Ocwen Loan Servicing, LLC (“Ocwen”), and the other by Defendant Les Zieve (“Zieve”), each asserting the Complaint fails to state claims upon which relief may be granted. (Docs. 10, 22) Plaintiff filed responses and a Motion to Allow Supplemental Pleading, purportedly authorized by Rule 15, Fed.R.Civ.P., regarding factual allegations made in HSBC and Ocwen's Reply. (Docs. 17, 19) Defendants HSBC and Ocwen replied and filed a Request to Correct Record, which the Court construes as a notice of errata, informing the Court that Plaintiff's real property did not proceed to a trustee's sale on January 30, 2012. (Docs. 18, 20) Because oral argument would not aid the Court's decisional process, HSBC and Ocwen's and Plaintiff's requests for oral argument are denied. ²Mahon v. Credit Bur. of Placer County, Inc., 171 F.3d 1197, 1200 (9th Cir.1999).

After considering the briefing and applicable law, the Court will grant Defendants' motions, dismiss the Complaint, and grant Plaintiff leave to file an amended complaint.

I. Background

This lawsuit arises over a dispute whether a loan modification agreement was reached by the parties in September 2010 or whether Plaintiff is in default on the loan regarding her real property located on West Fishhook Court, Surprise, Arizona. (Doc. 1, ¶ at 17) Plaintiff's property is subject to a deed of trust as a result of her execution of a promissory note in June 2005 with HSBC. ( Id., ¶ at 16) At some time, Plaintiff stopped making full payments on the loan. Plaintiff represents she retained the services of Michael S. Define, an attorney, to negotiate a loan modification agreement (“LMA”) with Ocwen, the servicing agent for the HSBC loan.³ Plaintiff and Define claim Plaintiff “was ultimately approved for a loan modification by Ocwen and executed a written contract stating such.” (Doc. 17–1 at 1–4, Exhibit (“Exh.”) 1, Affidavit of Michael S. DeFine, Esq.) Plaintiff attaches a copy of a nine-page document, entitled Loan Modification Agreement, but it is signed only by Plaintiff. (Doc. 17–1 at 9–17, Exh. 2)

Consistent with her claim that the parties reached a LMA, Plaintiff represents she made ten consecutive payments in the amount specified in the LMA. (Doc. 1, ¶¶ 10–11 at 17) Plaintiff alleges that after the tenth payment was returned to her by Ocwen, she was informed this payment was not the full amount due under the original note and deed of trust and she was in default on the loan. ⁴ ( Id.) Plaintiff provides a copy of the front of check No. 1069, dated September 8, 2010, which was made payable to Ocwen in the amount of $922.41. (Doc. 17–1 at 8) This is the exact amount which was due “on or before 9/10/2010[ ]” according to the LMA. ( Id., ¶ 2 at 9) Plaintiff claims neither Ocwen nor HSBC returned any of the other nine partial payments. (Doc. 17 at 5) Further, prior to the LMA, Ocwen and/or HSBC sent a notice of default and started fore-closure proceedings, but after the LMA, Ocwen and HSBC cancelled the scheduled fore-closure sale and accepted payments under the LMA for the next nine months. ( Id., ¶¶ 13–14) After returning the last payment, “Ocwen and/or HSBC then re-filed the required documents for foreclosure under Arizona law.” ( Id., ¶ 15) Plaintiff alleges she and her attorney Define “attempted on several occasions after Ocwen sent back the second check to give Ocwen and/or HSBC the opportunity to recognize their errors ... but they continued to send back the check and deny liability under the terms of the loan modification agreement.” ( Id., ¶ 21) According to Plaintiff, Ocwen provided Plaintiff a monthly account statement, showing her reduced principal, the deferred principal, and the reduced interest rate, all in accordance with the LMA. (Doc. 17–1 at 22)

Plaintiff filed suit in the Maricopa County Superior Court, State of Arizona on December 8, 2011. (Doc. 1 at 15–25, Complaint) Defendants HSBC and Ocwen removed the action to this District Court on January 3, 2012. ( Id. at 1–5) Plaintiff's verified Complaint asserts four causes of action: (1) declaratory relief,⁵ Count One; (2) conversion and slander of title, Count Two; (3) breach of the covenant of good faith and fair dealing, Count Four; ⁶ and (4) intentional misrepresentation, Count Five. (Doc. 1 at 15–25) On December 8, 2011 and without notice to Defendants, Plaintiff obtained a temporary restraining order (“TRO”) from a Superior Court commissioner pursuant to Arizona Rule of Civil Procedure 65(d), enjoining Defendants from foreclosing on or selling Plaintiff's property or removing Plaintiff from her property. (Doc. 1 at 13–14) The TRO was set to expire at “the conclusion of the Order to Show Cause Hearing scheduled” before a Superior Court judge on January 5, 2012. ( Id. at 10–11) Defendants HSBC and Ocwen, however, removed this action on January 3, 2012, three days before the OSC hearing.

On June 5, 2012, over five months after removal, Plaintiff filed a notice of pending motion required by LRCiv 3.7(c), requesting a hearing on her Application for Temporary Restraining Order and Preliminary Injunction. (Doc. 30) See LRCiv 3.7(c) (“If a motion is pending and undecided in the state court at the time of removal, the Court need not consider the motion unless and until a party files and serves a notice of pending motion ....”). According to Plaintiff's Notice, the parties disagree whether the December 8, 2011 TRO is currently valid as Defendants “[i]ntend to sell the Plaintiff's home at a trustee sale currently set for June 20, 2012.” ( Id. at 2) A Rule 16(a) pretrial conference is scheduled before the undersigned on June 14, 2012. (Doc. 32)

Defendants HSBC and Ocwen contend “Plaintiff's Complaint fails to plead the facts necessary to put them on notice of the precise wrongdoing Plaintiff believes they committed.” (Doc. 10 at 3) Specifically, they argue Plaintiff failed to affirmatively plead that a valid and binding loan modification agreement was entered into and executed by Defendants. ( Id.) They point out the Complaint does not allege HSBC and Ocwen executed the LMA; thus, their dismissal motion “should be granted because Plaintiff's Complaint lacks the facts necessary to determine if a loan modification agreement was executed and entered into by Defendants and the terms Plaintiff alleges were breached.” ( Id.) According to Defendants HSBC and Ocwen, “[a]bsent an allegation that a loan modification was executed by Defendants, and what provision of the modification agreement was allegedly breached, all of Plaintiff's claims fail and Defendants' motion to dismiss should be granted.” ( Id. at 5)

Regarding Plaintiff's conversion claim, Count Two, and the bad faith claim, Count Four, HSBC and Ocwen contend Plaintiff has not shown that a valid contract was formed modifying Plaintiff's note, that Defendants have breached the contract, or Defendants have foreclosed on her property, citing Bike Fashion Corp. v. Kramer, 202 Ariz. 420, 423–24, 46 P.3d 431, 434–35 (Az.Ct.App.2002) (“The general rule is that an implied covenant of good faith and fair dealing cannot directly contradict an express contract term ....”). ( Id. at 7) HSBC and Ocwen argue Plaintiff's conversion claim is not ripe because “Plaintiff is in possession of the property and continues to enjoy the benefits of the property without payment.” ( Id. at 6) Additionally, they argue Plaintiff's slander-of-title claim is without merit because a beneficiary under a deed of trust, like HSBC, is entitled to initiate a non-judicial foreclosure proceeding when a debtor, like Plaintiff, is in default on a loan, citing SWC Baseline & Crismon Investors, LLC v. Augusta Ranch Ltd. Partnership, 228 Ariz. 271, 265 P.3d 1070, 1086 (Az.Ct.App.2011) (“Slander of title requires proof of ‘the uttering and publication of the slanderous words by the defendant, the falsity of the words, malice and special damages.’ [citation omitted] Malice, a required element of the claim, means acting ‘from improper motives or without reasonable belief in the efficacy of the claim.’ ”). They argue because HSBC and Ocwen are proceeding appropriately to foreclose on Plaintiff's property, claims of conversion and slander of title are not viable. Finally, HSBC and Ocwen argue that Plaintiff's claim for material misrepresentation or fraud fails because the Complaint does not set forth sufficient facts to support the heightened pleading standard required by Rule 9(b), Fed.R. Civ.P., or satisfy the elements of a fraud claim. ( Id. at 7) According to HSBC and Ocwen, because the Complaint fails to set forth specific facts of what the material misrepresentation was, who made it, when it was made or how it was false, the speaker's knowledge of the statement's falsity and how the statement proximately caused Plaintiff damages, Plaintiff's material misrepresentation claim in Count Five must be dismissed. ( Id. at 8)

Defendant Les Zieve, a licensed Arizona escrow agent, argues that, as a successor trustee, he is not a proper party to this action and was named as a defendant in this action solely in his role as trustee. (Doc. 22 at 3) According to Zieve, HSBC determined a default existed under the note and deed of trust with Plaintiff, appointed Zieve...