DOUGLAS L. RAYES, District Judge.
Before the Court is Defendant Nationstar Mortgage LLC's ("Nationstar") Motion to Dismiss. (Doc. 11.) The motion is fully briefed.
Plaintiff is a Lieutenant Colonel in the United States Air Force. (Doc. 1-1 at 42, ¶ 1.) On September 20, 2007, Plaintiff borrowed $237,500.00 from Miner Kennedy Association ("Miner Kennedy") to purchase property in Chandler, Arizona ("Property"). (Id. at 43, 50-55.) The loan is evidenced by a promissory note ("Note") executed by Plaintiff in favor of Miner Kennedy, and secured by a deed of trust ("DOT") recorded against the Property in the Office of the Maricopa County Recorder.
Thereafter, the Note and DOT (collectively "Loan") were transferred to AmTrust Bank ("AmTrust"). (Doc. 1-1 at 44, ¶ 7.) On December 4, 2009, the Office of Thrift Supervision closed AmTrust and appointed the Federal Deposit Insurance Corporation ("FDIC") as its Receiver. (Id.; Doc. 11 at 3 n.4 (citing http://www.fdic.gov/bank/individual/failed/amtrust.html).)
At some point, Plaintiff defaulted on the Loan.
On August 10, 2015, Plaintiff filed his complaint in Maricopa County Superior Court, along with a motion seeking a temporary restraining order ("TRO") enjoining the scheduled trustee's sale. (Id. at 29-37, 42-48.) The court scheduled a hearing on Plaintiff's TRO request, but vacated it after Nationstar voluntarily agreed to postpone the trustee's sale pending resolution of this case. (Id. at 93-99.) Thereafter, Nationstar removed the matter to this Court pursuant to 28 U.S.C. § 1332, and now moves to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (Docs. 1, 11.)
When analyzing a complaint for failure to state a claim to relief under Rule 12(b)(6), 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). Legal conclusions couched as factual allegations are not entitled to the assumption of truth, Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009), and therefore are insufficient to defeat a motion to dismiss for failure to state a claim, In re Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). Nor is the court required to accept as true "allegations that contradict matters properly subject to judicial notice," or that merely are "unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). To avoid dismissal, the complaint must plead sufficient facts to state a claim to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This plausibility standard "is not akin to a `probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556). "Where a complaint pleads facts that are `merely consistent with' a defendant's liability, it `stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 557.)
Plaintiff's claims are brought pursuant to A.R.S. § 33-420, which states, in relevant part:
To state a claim under this section based on a misstatement of fact or false claim, Plaintiff must plausibly allege that (1) Nationstar knowingly recorded or caused to be recorded a document containing a misstatement of fact or false claim and (2) the misstatement or false claim was material to him. Sitton v. Deutsche Bank Nat'l Trust. Co., 311 P.3d 237, 243 (Ariz. Ct. App. 2013).
Plaintiff alleges that Nationstar recorded or caused to be recorded the Assignment, Substitution of Trustee, and Notice of Trustee's Sale, which falsely state that Nationstar has an interest in the Property. (Doc. 1-1 at 43-44, ¶¶ 5-6.) Plaintiff alleges that the FDIC still owns the Loan and is the only entity legally authorized to order a trustee's sale upon his default. (Id. at 44-45, ¶¶ 7-9.) These allegations, however, are directly contradicted by documents properly subject to judicial notice, and are premised on a series of unsupportable legal conclusions.
First Plaintiff alleges that, once the FDIC acquired the Loan as Receiver for AmTrust, "the provisions naming MERS as the beneficiary became null and void by reason of the statutory avoidance powers of the FDIC under the case law of the D'Oench, Duhme doctrine and the partial codification thereof in 12 U.S.C. [§] 1823." (Id., ¶ 7.) When the FDIC acquires a note, the D'Oench, Duhme doctrine precludes an obligor from defending against his obligation on the note based on a secret agreement with the lender. Fed. Deposit Ins. Corp. v. Newhart, 892 F.2d 47, 49 (8th Cir. 1989). The doctrine "is a principle of equitable estoppel that permits bank examiners to rely on the records of a bank in evaluating the bank's financial condition, by protecting bank authorities from suits founded on undisclosed conditions or deceptive documents." Brookside Assocs. v Rifkin, 49 F.3d 490, 493 (9th Cir. 1995). It reflects "a `federal policy to protect [the FDIC], and the public funds which it administers, against misrepresentations as to the securities or other assets in the portfolios of the banks which [the FDIC] insurers or to which it makes loans.'" Falk v. Mt. Whitney Sav. & Loan Ass'n, 5 F.3d 347, 350 (9th Cir. 1993) (quoting D'Oench, Duhme & Co. v. Fed. Deposit Ins. Corp., 315 U.S. 447, 457 (1942)).
Congress codified this doctrine in 12 U.S.C. § 1823(e), which provides that "[n]o agreement which tends to diminish or defeat the interest of the [FDIC] in any asset acquired by it . . ., either as security for a loan or by purchase or as receiver of any insured depository institution, shall be valid against the [FDIC]," unless certain conditions are met. "Section 1823 codified and `was meant to offer as much protection as the common law rule in D'Oench.'" Falk, 5 F.3d at 351 (quoting Fed. Sav. & Loan Ins. Corp. v. Gemini Mgmt., 921 F.2d 241, 246 n.4 (9th Cir. 1990)). D'Oench, Duhme and its statutory counterpart protect the FDIC from agreements not easily discoverable by examining a bank's records, and which affect the value of assets it acquires.
Plaintiff cites no authority, and the Court is aware of none, permitting an obligor, as opposed to the FDIC or one who subsequently purchases a note from it, from invoking the doctrine's protections. Moreover, Plaintiff's invocation of D'Oench, Duhme is illogical in this context. Plaintiff seems to suggest that the DOT naming MERS as the nominal beneficiary on behalf of Miner Kennedy and its successors and assigns constitutes a secret agreement that became unenforceable upon the FDIC's acquisition of AmTrust's assets. If Plaintiff contends that the DOT itself is unenforceable, then adoption of Plaintiff's argument would essentially nullify all instruments securing loans acquired by the FDIC. If, however, Plaintiff contends that only MERS' nominal beneficiary designation is unenforceable, then he fails to explain why the DOT remains valid while the beneficiary designation contained therein does not.
Furthermore, the FDIC's own public records show that it both was aware of and accepted MERS' role in the mortgages it acquired. Section 5.12 of the Servicing Agreement states, in relevant part: "With respect to each Mortgage Loan registered on the MERS® System, Seller and Purchaser shall comply with all notice and transfer requirements of MERS® System and the Applicable Requirements." (Doc. 11, Ex. 3.) "One of the purposes behind § 1823(e) is to facilitate the purchase and assumption of failed banks as opposed to their liquidation." Newhart, 892 F.2d at 49. Employing D'Oench, Duhme to undermine the FDIC's purchase, assumption, and subsequent sale of a failed bank's assets is inconsistent with the doctrine's purpose. Plaintiff's legal position is unsupportable.
Next, Plaintiff alleges "to the extent that MERS purported in recorded documents to act as nominee on behalf of Miner Kennedy Associates and not as nominee for the FDIC, Miner Kennedy Associates is defunct and any action as its nominee is ineffective and false." (Doc. 1-1 at 45, ¶ 10.) Once again, Plaintiff's allegation contradicts documents properly subject to judicial notice, and is an unsupportable legal conclusion. In the Assignment, MERS does not purport to act as the nominee solely for Miner Kennedy. Rather, MERS assigned the DOT to Nationstar "as nominee for Miner Kennedy Assoc, its successors and/or assigns." (Doc. 1-1 at 80 (emphasis added).) Plaintiff alleges and Nationstar agrees that at some point AmTrust acquired the Loan, then the FDIC acquired AmTrust's assets. Therefore, AmTrust, the FDIC, and NYCB as the purchaser under the P&A are successors of Miner Kennedy.
Moreover, Plaintiff's legal contention is contrary to Arizona law. In Sitton v. Deutsche Bank National Trust Company, a plaintiff challenging the authority of the defendant bank to order a trustee's sale argued, among other things, that MERS lacked authority to make assignments on behalf of the original lender, SFG Mortgage, because the lender "had filed for bankruptcy and been dissolved by the corporation commission years before the record assignments were executed." 311 P.3d at 242-43. The Arizona Court of Appeals rejected this argument, explaining that "[t]he deed of trust clearly named MERS as SFG Mortgage's nominee and the beneficiary, and provided that MERS had the right to exercise SFG Mortgage's interests. MERS was the mortgagee of record and could assign the note and the deed of trust without regard to SFG Mortgage's legal status." Id. at 243. Thus, the fact that Miner Kennedy is defunct has no bearing on MERS' authority under the DOT to act on its behalf, or that of its successors and assigns.
Finally, Plaintiff alleges that "[i]f the Note or the Deed of Trust were somehow transferred to Nationstar, Plaintiff alleges upon information and belief that said Note and Deed of Trust have been split and that no foreclosure or action on said Note can be commenced lawfully in Arizona because Nationstar does not own both instruments even if it became owner or holder of one of them." (Doc. 1-1 at 45, ¶ 9.) Defendants correctly point out that this "splitting of the note" theory has been rejected by Arizona courts and the Ninth Circuit. See In re Mortg. Elec. Registration Sys., Inc., 578 F. App'x 706, 707 (9th Cir. 2014) ("Appellant's claims were dismissed . . . because they were premised on the erroneous legal theory that assignments of the deed within [MERS] . . . were invalid under Arizona law because the note was `split' from the deed. That theory was rejected by our holding that, under Arizona law, `the split only renders the mortgage unenforceable if MERS or the trustee, as nominal holders of the deeds, are not agents of the lenders.'" (quoting Cervantes v. Countrywide Home Loans, 656 F.3d 1034, 1044 (9th Cir. 2011))); Hogan v. Washington Mut. Bank, N.A., 277 P.3d 781, 784 (Ariz. 2012) ("Hogan also claims that `the note and the trust deed go together' and `must be construed together.' Although this is generally true, the note and the deed of trust are nonetheless distinct instruments that serve different purposes. . . . [T]he dispositive question here is whether the trustee, acting pursuant to its own power of sale or on behalf of the beneficiary, had the statutory right to foreclose on the deeds of trust. Hogan does not dispute that he is in default under the deeds of trust and has alleged no reason to dispute the trustee's right." (internal citations omitted)).
Plaintiff claims that Nationstar's alleged misrepresentations in the Assignment, Substitution of Trustee, and Notice of Trustee's sale were material to him because they caused him to suffer credit damage, which in turn caused him to lose the security clearance required for him to serve on active duty in the Air Force. (Doc. 1-1 at 45-46, ¶ 12.) "A misrepresentation is material if a reasonable person would attach importance to its existence or nonexistence in determining [his or her] choice of action in the transaction in question." Sitton, 311 P.3d at 243 (internal quotations and citations omitted). Plaintiff's allegations of materiality are implausible. His credit was damaged because he failed to pay his mortgage. He cannot plausibly allege that three documents recorded after he defaulted had any effect on his decision to stop making mortgage payments.
Plaintiff's allegations mirror those in Coronado v. Chevy Chase Bank, where the plaintiffs similarly accused the defendant bank of recording documents falsely purporting to claim an interest in their property in violation of A.R.S. § 33-420. 554 F. App'x 549, 551 (9th Cir. 2014). In affirming the dismissal of the plaintiffs' claims, the Ninth Circuit concluded that, "any misstatements were not material to the [plaintiffs]. [They] admit they failed to make payments on the note. They were thus subject to foreclosure no matter who was assigned as beneficiary or when." Id. (internal quotations and citations omitted). Similarly, the Arizona Court of Appeals in Sitton held that "recorded assignments falsely represent[ing] the assignment dates and the identity of the assignor for whom MERS was then acting as nominee," were not material to the plaintiff "because the timing and sequence of assignments could have had no effect on [the plaintiff's] choice of actions." 311 P.3d at 243.
Citing dicta in Sitton, Plaintiff argues that he has adequately alleged materiality because Nationstar's alleged misrepresentations could leave him "exposed to otherwise non-recourse debt on the property . . . ." (Doc. 14 at 8.) After concluding that the alleged misrepresentations were not material to the plaintiff because they did not influence her decision to default, the court in Sitton hypothesized that:
311 P.3d at 244 n.6. Plaintiff's reliance on this footnote is misplaced. His case is distinguishable from the hypothetical situation described in Sitton because, as explained in part I, supra, Plaintiff has not plausibly alleged that Nationstar is not the true beneficiary. Absent factual allegations elevating Plaintiff's assertions above the speculative level, this Court cannot draw any inferences in his favor on this point.
Moreover, Sitton's discussion of the possible effects that a trustee's sale on behalf of an entity other than the true beneficiary could have on the anti-deficiency protections
Citing provisions in the Note entitling the holder to its reasonable attorneys' fees and costs incurred in enforcing the Note, Nationstar requests that it be awarded its reasonable attorneys' fees in defending this matter. (Doc. 11 at 2, 10.) Nationstar may move for attorneys' fees in a manner that complies with LRCiv 54.2.
For the foregoing reasons, Plaintiff has not plausibly alleged that Nationstar recorded or caused to be recorded documents containing material misstatements of fact or false claims in violation A.R.S. § 33-420. Accordingly,
