Вы находитесь на странице: 1из 19

Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 1 of 19

1 2 3 4 5 6 7 8

Barbara J. Forde, #013220 BARBARA th FORDE, P.C. J. 20247 N. 86 Street Scottsdale, AZ 85255 (602) 721-3177 barbarajforde@gmail.com Attorney for Plaintiff UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA BRIAN P. MYERS, a married man as to his sole and separate property, Plaintiff, No. CV12-08135-PCT-SLG PLAINTIFFS RESPONSE TO MOTION TO DISMISS OF JPMORGAN CHASE BANK, U.S. BANK, AS TRUSTEE, AND MERS (Oral argument requested)

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

JPMORGAN CHASE BANK, NA, et al, Defendants.



Plaintiff Brian P. Myers (Myers) hereby responds to the Motion to Dismiss (the Motion) filed by the Defendants JPMorgan Chase Bank (Chase), U.S. Bank as Trustee for the Certificateholders of Structured Asset Mortgage Investments II, Inc., Bear Stearns ALT-A Trust, Mortgage Pass-Through Certificates, Series 2006-3 (U.S. Bank as Trustee), and MERS. The Motion must be denied; its foundation is on a false premise: that these Defendants are legally entitled to enforce the Note or Deed of Trust. The clear terms of the Note and Deed of Trust, as well as the documents governing the Trust and Arizona law, mandate denial of the Motion. II. FACTUAL BACKGROUND.

Given the voluminous factual detail relevant to this matter, and considering page limitations, Myers incorporates herein, the Factual Background in his Response to Defendant Quality Loan Service Corporations Motion to Dismiss (Doc. 14) at 1-7. Facts relevant to this Response, not in the Response to QLS, follow. Neither Chase, US Bank as Trustee, nor QLS received a written notification from the Lender of an occurrence of an event of default, of acceleration of the Note balance,

Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 2 of 19

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

and of Lenders election to cause the Property to be sold. This written notice is required, under the DOT, before foreclosure may be initiated. See FAC 44. As recently as May 29, 2012, Chase claimed to be the Lender. On May 29, 2012, Chase sent Plaintiff a Repayment Plan Agreement in which JP Morgan Chase Bank, N.A., claims that it is the Lender. See FAC 51. Chase attempted to mislead Plaintiff into believing that Chase is the Lender on his Loan, when in fact it is not. See FAC 52. But all the foreclosure documents signed, recorded, and pursuant to which Defendants seek to take Myers home, claim that U.S. Bank, as Trustee, is the beneficiary with purported authority to foreclose. Chase and US Bank as Trustee, acted improperly under the Note and Deed of Trust, the Pooling and Servicing Agreement (PSA) governing the Trust, and the law, by: 1) proceeding to foreclosure without being the Note Holder and Lender, knowing that they have no authority to do so; 2) initiating foreclosure without the Lenders sending the borrower the required 30-day notice of default first; 3) initiating foreclosure without obtaining written notice of default, acceleration of the debt, and election to foreclose, from the Note Holder and Lender; 4) purposely misleading the borrower into believing that Chase is the Lender; 6) presenting Plaintiff with a repayment plan which requires Plaintiff to pay all past-due balances but does not promise that the loan will be reinstated if Plaintiff fully performs; 7) proceeding on a foreclosure without standing to do so based on, including but not limited to: (a) violation of the PSA which required the placement of the Note into the Trust on or before the Trust closed in April of 2006; (c) their lack of status as Note Holder, therefore no Defendant is entitled to payment and no Defendant is secured by the DOT; (d) a lack of evidence that the Loan was properly placed into this Trust, or had any relation to any of the entities related to the Trust; (e) the inability to determine the identity of the beneficiary, the Note Holder or the Lender; and 9) knowingly proceeding with a trustees sale on false documents which are not sanctioned by the Lender, and which are signed by unauthorized individuals and entities, which further clearly show that the location of the Note, the identity of the


Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 3 of 19

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

beneficiary, the identity of the Note Holder, and the identity of the Lender, are all unknown under applicable legal principles. See FAC 53. On this Motion to Dismiss, these Defendants may not controvert any of these facts; they must accept these facts as true, and show that no claim has been stated, nevertheless. This, they cannot do; the Motion should be denied. III. ARGUMENT.

Defendants attempt to deflect honest consideration of Plaintiffs claims by asserting that Plaintiff is just another show-me-the-note borrower. See Motion at 2:4. Nothing could be further from the truth. Defendants either misunderstand the claims, or hope that this Court will. Plaintiffs claims arise out of the clear terms of the Note and Deed of Trust, as will be explained, below. A. Motion to Dismiss Standard.

A plaintiffs complaint need not contain detailed factual allegations. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1964 (2007). All a plaintiff must do is provide the grounds of his entitlement to relief, which is more than labels and conclusions. Id at 555, 127 S.Ct. at 1964 65. A well-pleaded complaint may proceed even if it appears that a recovery is very remote and unlikely. Id at 556, 127 S.Ct. at 1965 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683 (1974)). Rule 12(b)(6) does not countenance a dismissal based on a judges disbelief of a complaints factual allegations. Bell Atlantic, 550 U.S. at 556, 127 S.Ct. at 1965. Asking that a complaint contain plausible grounds for causes of action simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of [the asserted cause of action]. Id at 556, 127 S.Ct. at 1965. Iqbal further explained the plausibility standard by stating it is not akin to a probability requirement, but it does ask for more than a sheer possibility that a defendant acted unlawfully. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). Significantly, legal conclusions are allowed to provide the framework of a complaint, but they must be supported by factual allegations. Id. at 1950.


Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 4 of 19

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

Defendants are willing to assume every fact stated in the Complaint to be true for purposes of this motion to dismiss. See Motion at 2:13-14. Plaintiffs claims satisfy Rules 8 and 10; Plaintiff will address Defendants arguments in that regard, in responding to each argument, below. B. Myers Does Not Argue Show-Me-The-Note; A Valid Foreclosure Cannot Occur Without Valid Foreclosure Documents and Without Compliance with Conditions Precedent to Foreclosure.

As the banks and servicers routinely do in their motions to dismiss these cases, the Defendants make every attempt to transmute Plaintiffs claims under his Note and Deed of Trust into one for show-me-the-note. See, e.g., Motion at 6:3. Plaintiff makes no claim related to entitlement to enforce the note based on holder of the note status under the Uniform Commercial Code. 1 Myers claims arise out of the clear terms of the contracts between the parties on the loan: the Note and the Deed of Trust. Myers claims also relate to the contractual agreements in the form of the Assignments, the Substitution of Trustee, and Notice of Trustees Sale. Defendants assert that Myers allegations regarding enforcement of the terms of the Note and the Deed of Trust are novel legal arguments and unfounded conclusions. See Motion at 6:22-23. It is disturbing, indeed, to read that Chase, U.S. Bank as Trustee, and MERS, take the position that following the clear terms of the contracts would be novel. Review of their Motion shows no attempt whatever to even address the key allegations about the controlling contract terms. The Note defines the Note Holder as the Lender or anyone who takes the Note by transfer and who is entitled to receive payments under the Note. The Note states that only the Note Holder can provide the 30-day notice of default, and accelerate the balance under the Note. Under the Note, only the Note Holder is protected from possible losses for non-payment by the Deed of Trust. See FAC 11. No Defendant is the Note

Defendants engage in string citing in an effort to make their argument seem more compelling. See Motion at 6-7. None of the cases apply because they are based on UCC arguments. See, e.g., Mansour v. Cal-Western Reconveyance Corp., 618 F.Supp.2d 1178, 1181 (D.Ariz. 2009)(citing A.R.S. 47-3301 and finding that the show me the note argument under the UCC lacks merit, and that A.R.S. 33-807 does not require that the original note be presented before commencing foreclosure).

Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 5 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13

Holder, therefore the Defendants had no authority to declare a default, accelerate the balance, order foreclosure, or foreclose based on a breach of the Note. See, e.g., FAC 23-26; 29; 44; 45; 50; 53-61. Under the Deed of Trust, only the Lender can invoke the power of sale, and the Lender shall give written notice to Trustee of the occurrence of an event of default and of Lenders election to cause the property to be sold. See FAC 12 and Exhibit B thereto. Plaintiff has alleged that the Lender (whoever that is) did not notify anyone, in writing, of the 30-day cure period, declare a default, accelerate the balance, or order a foreclosure. See FAC 44; 45; 49; 57. Notably, the Defendants do not even attempt to argue that the Note Holder and Lender sent Myers or QLS letters declaring default, giving 30-day notice to reinstate, and accelerating the balance. QLS in its motion to dismiss, makes no such claim, either. See Doc. 10. Myers arguments are based on the clear, unequivocal and mandatory language of the Note and Deed of Trust. His arguments are all the more compelling because these


contracts are adhesion contracts with boilerplate terms, subject to no negotiation on his
15 16 17 18 19 20 21 22 23 24 25 26 27 28

part, drafted by the Lender, and presented to him on a take-it-or-leave-it basis. The Note and Deed of Trust must be construed against the drafter. How v. Fulkerson, 22 Ariz.App. 467, 470, 528 P.2d 853, 856 (1974). The terms of the Note and Deed of Trust do not contradict the statutory requirements; they therefore must be enforced as written. The Arizona Supreme Court has declared that the mere fact that the deed of trust statutes do not permit[] a court to use its equity powers to intervene in a trustees sale is of no consequence, as there is also no statute prohibiting it. Krohn v. Sweetheart Properties, Ltd., 203 Ariz. 205, 212, 52 P.3d 774, 781 (2002). The fact that the deed of trust statutes do not require something, does not mean that it cannot be required under the Note and Deed of Trust. Thus, as long as the statutes do not prohibit the terms found in the Note and Deed of Trust, those terms must be enforced. Id. The Arizona Supreme Court has now held that a deed of trust may be enforced only by, or in behalf of, a person who is entitled to enforce the obligation the mortgage secures. Hogan v. Wash. Mut. Bank, 277 P.3d 781, 783 (May 18, 2012). Further, the

Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 6 of 19

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

Arizona Court of Appeals has now clearly held that the Note is the primary instrument in a foreclosure proceeding: The Arizona statutes governing foreclosures, mortgages and deeds of trust are in accord with the interpretation that the contractual debt is foremost with any foreclosure or sale being secondary and merely a means of recovery on the original debt. A Trust deed is defined as a deed executed in conformity with this chapter ... to secure the performance of a contract or contracts .... A.R.S. 33-801(8)(Emphasis added). Section 33807(A) details when there can be a foreclosure under a trust deed: 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. *** The promissory note is the primary source of the debt. And, as the debt on the promissory note is primary, the foreclosure or trustees sale is ancillary to the collection of the debt, not the other way around. National Bank of Arizona v. Schwartz, -- P.3d --, 2012 WL 2459408 at *3 9 (June 26, 2012). Defendants next misstate Myers allegations about the MERS Assignment. Defendants argue that MERS is not a sham beneficiary under Arizona law and that challenges to the securitization process have been rejected. See Motion at 5. Myers does not even make these allegations. Myers alleges that the MERS Assignment, which purports to transfer the Note and Deed of Trust to U.S. Bank effective December 15, 2009, is void. The document is void because MERS never took possession of the Note, and was never entitled to any payments under the Deed of Trust. See FAC 29, 20. Therefore, as a matter of fact, the transfer cannot occur. Id. at 38. The MERS Assignment also fails to legally transfer the documents into the Trust in 2009, because according to the PSA, the Note had to be in the Trust by April 28, 2006, at the latest. Id. at 38. The MERS Assignment is further void, because it was signed by Greg Allen, an employee of Lender Processing Services (LPS), but he hides his identity and instead claims to be signing as MERS, not as an agent for MERS, or a Certifying Officer for MERS, or any other authorized capacity. Id. at 39; Exhibit F thereto. Allen is not an employee of MERS, therefore, the Assignment is invalid. See FAC 34, 39, Exhibit G thereto. MERS is not located in


Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 7 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13

Dakota County, Minnesota, but LPS is; therefore, the documents and Allens deposition support the fact that MERS did not sign the Assignment, and it is void. Id. The Defendants fail to address any of these well-plead facts; which must be deemed true. The cases cited by them, do not support dismissal. For instance, they cite Cervantes v. Countrywide Home Loans, Inc., 656 F.2d 1034, 1039-40 (9th Cir. 2011) to show that MERS is not a sham beneficiary, and that members of MERS can gain authority to sign for MERS. But Myers does not allege that MERS is a sham, or that no one can get authority to sign for MERS. Myers argues that MERS cannot transfer a Note it never had, and that an Assignment signed as MERS, by an employee of LPS pretending to be an employee of MERS, is void. Myers also does not argue that the securitization process cannot be legitimate; 2 he alleges, rather, that the Note cannot legally be transferred into the Trust in December of 2009, under the PSA. This renders the alleged transfer, void. Defendants discount the fact that MERS shows Chase as the Trustee/investor, and


that Chase itself claimed to be the Lender in May of 2012, while the Defendants
15 16 17 18 19 20 21 22 23 24 25 26 27 28

simultaneously attempt to foreclose on Myers by alleging that U.S. Bank is the beneficiary entitled to foreclose. Incredibly, they note that the observation is somewhat pointless. See Motion at 6:1. This comment brings to the forefront the attitude of banks and servicers in foreclosure matters: courts do not stop them from taking peoples homes regardless of whether they are the Note Holder or Lender, so pointing out these grave inconsistencies is, in Defendants consideration, a useless endeavor. Myers believes, however, that his claims will be heard; Defendants cannot simultaneously claim that Chase and U.S. Bank are both trustee for the investor. Next, contrary to the allegations of the FAC, and without any factual support of any kind, Defendants assert that [t]he servicer (Chase) is authorized to initiate the trustees sale on half [sic] of the beneficiary regardless of who now serves as the trustee of the trust, which is the beneficiary. See Motion at 6:7-9. Myers has alleged the precise opposite of this, in the FAC. See, e.g., FAC 11; 12; 14; 26; 44. On this

Thus, Thomas v. Wells Fargo Home Mortg., Inc., 2012 U.S. Dist. LEXIS 4895, *5-6 (2012) has no application.

Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 8 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13

Motion, those allegations must be deemed true and Defendants argument, wholly disregarded. C. Myers Has Stated A Claim for Quiet Title. Defendants argue that the quiet title claim should be dismissed because Myers has not offered to repay, and has not repaid, the loan amount, citing Salazar v. Lehman Bros. Bank, 2010 WL 3998047 at *7 (Oct. 12, 2010). But this requirement applies with respect to the beneficiary of the deed of trust, only. Eason v. IndyMac Bank, 2010 WL 1962309 *2 (D. Ariz. May 4, 2010); Silving v. Wells Fargo Bank, N.A., 2011 WL 2664246 *11 (D. Ariz. July 7, 2011). In Silving, the court found that, "A titleholder may have a superior claim to title as to one party and an inferior claim as to another." Id. Therefore, in ruling on a motion to dismiss for quiet title, the dispositive issue is whether plaintiff has a superior claim to title as against the defendants. Id. Myers has alleged that no Defendant is the true beneficiary under the Deed of Trust; only the Certificateholders of the Trust may arguably hold that position. The Lender/beneficiary under the Deed of Trust must


also be the Note Holder, entitled to payment. See FAC 11; 12; 14; 57; Exhibits A
15 16 17 18 19 20 21 22 23 24 25 26 27 28

and B thereto. No party to this action is the true beneficiary; no party is the Note Holder. Accordingly, Myers has stated a claim for quiet title as against the Defendants. Further, because here, as in Silving, the Defendants did not seek to dismiss the claim as to any specific Defendant, the Motion should be denied. See Silving, 2011 WL 2669246 *11. Several other exceptions to the requirement that a trustor tender or pay the debt before seeking quiet title, also apply. For instance, "[t]he tender rule does not apply to a void, as opposed to a voidable, foreclosure sale." Martinez v. America's Wholesale Lender, 2011 WL 2562937 *1 (9th Cir. 2011). When the purported trustee has no interest in the property thus lacking authorization to foreclose, any sale pursuant to that trustee's act would be void. Id. Further, any sale that occurs without satisfaction of the conditions precedent to sale, such as the required notices to the borrower and the trustee under the contracts, is void. Kekauoha-Alisa v. Ameriquest Mortgage Co., 674 F.3d 1083, 1089, 1091 (9th Cir. 2012).


Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 9 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

The allegations of the FAC fully demonstrate that the foreclosure trustee was not properly appointed, and lacked authorization from the Lender to effect the non-judicial foreclosure. Because the foreclosure documents are void and were not issued pursuant to instructions from the Lender, the tender rule does not apply. The Motion must be denied as to Count One. D. Myers Has Stated A Claim for Breach of the Duty of Good Faith.

Defendants claim that Myers cannot make a claim for breach of the duty of good faith, because Plaintiff is preventing the beneficiary from having the benefit of the bargain. See Motion at 7:16-23. But the Defendants fail to explain, what benefit is being denied. Accepting the FACs allegations as true, the beneficiary has been paid. See FAC 130-138. Further, and critically, these Defendants have no standing to make that argument for the beneficiary, as none of these Defendants are the Note Holder and Lender, entitled to enforce the loan. In addition, the Defendants have filed no counterclaim against Defendants, so they are barred from making these assertions. This argument must therefore be disregarded. Myers claim is well-plead. A party which manipulates its bargaining power to its


own advantage, may breach its duty of good faith without actually breaching a term of

the contract. Wells Fargo Bank v. Arizona Laborers, Teamsters Trust Fund, 201 Ariz.
18 19 20 21 22 23 24 25 26 27 28

474, 491, 38 P.3d 12, 29 64 (2002). A contracting party may not exercise a retained contractual power in bad faith. Id. at 492, 39 P.3d at 30 66. Here, Chase is pretending to be the Lender, as is U.S. Bank. MERS pretended to have the Note, and allowed an LPS employee to pretend to be MERS. QLS initiated, and is pursuing foreclosure, without have been told to do so, by the Lender. Chase offered a repayment plan that did not promise to reinstate the loan even if all past due amounts were paid in full. All parties continue to press toward foreclosure without having written notice of default and election to foreclose from the Note Holder and Lender. All Defendants are manipulating their bargaining power to their own advantage, exercising their power in bad faith. While they complain bitterly that the loan is in default, they refuse to comply with the terms of the contracts themselves. As the


Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 10 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13

Supreme Court of Arizona has said, the relevant inquiry will always focus on the contract itself, to determine what the parties did agree to. Rawlings v. Apodaca, 151 Ariz. 149, 154, 726 P.2d 565, 570 (1986). Defendants cite a California case to justify their position. De La Salle v. Americas Wholesale Lender, 2010 U.S. Dist. LEXIS 36319 at *2 (E.D. Ca April 13, 2010). 3 The case does no such thing. In De La Salle, the pro per borrower made no argument that the defendants did not have authority to foreclose under the note or deed of trust, or, apparently, under the foreclosure documents; she argued a breach for failure to give her a loan modification. The Court therefore found no breach of the duty of good faith and fair dealing, because there was no contractual duty to modify. Id. The allegations before this Court, were not at issue in De La Salle; the case is irrelevant. The Motion on Count Two should be denied. E. Myers Has Stated A Claim for Breach of Contract. Defendants argue that for Myers to state a claim for breach of contract, he must


allege an agreement, a right to seek relief, and a breach, citing a case which is Not for
15 16 17 18 19 20 21 22 23 24 25 26 27 28

Publication. Silvas v. GMAC Mortgage, LLC, 2009 WL 4573234 (D. Ariz. Jan 5, 2010). Defendants only argue that Plaintiff has not identif[ied] a clause or provision of the contract that was breached. See Motion at 8:15-16. This assertion is patently untrue. As Myers has repeatedly alleged, the Defendants have breached the Note and Deed of Trust by failing to obtain a written declaration of default and an election to foreclose, from the Note Holder and Lender, before initiating foreclosure. See, e.g., FAC 44; 45; 49; 53; 54; 57; 60; 67; 76; 93; 94. These requirements set forth in the Note and Deed of Trust, with respect to the steps the Note Holder and Lender must go through to initiate foreclosure, are conditions precedent to the ability of the Defendants to foreclose. See Kekauoha-Alisa, 674 F.3d at 1091. See also, Martenson v. RG Financing, 2010 WL 334648 at *9 (D. Ariz. Jan. 22, 2010)(contractual rights to notice and cure must be satisfied before sale of the collateral is commenced). Defendants compliance with the stated contract terms was a condition precedent to their right to foreclose. Myers did not

This case is not published on Westlaw.


Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 11 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

receive a 30-day notice of default from the Lender, and no Defendant received a written declaration of default and election to foreclose, from the Lender. Their failure to obtain these documents before initiating foreclosure, is a breach of contract; the Motion should be denied. 4 F. The Defendants Have Not Articulated Adequate Grounds to Dismiss Count Four for Fraudulent Concealment.

The Defendants argue that the fraud counts should be dismissed because they are not specific enough regarding reliance, causation, and damages. But fraudulent concealment does not require a showing of reliance or causation: One party to a transaction who by concealment or other action intentionally prevents the other from acquiring material information is subject to the same liability to the other, for pecuniary loss as though he had stated the nonexistence of the matter that the other was thus prevented from discovering. Wells Fargo Bank v. Arizona Laborers, Teamsters and Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 496, 38 P.3d 12, 34 (2002). It is the intentional act of preventing another from learning a material fact that is significant, and this act is always the equivalent of a misrepresentation. Id. at n. 22. Fraudulent concealment also lies when the act of the defendant caused the plaintiff to refrain from acting. In re Bender, 2010 WL 6467681 at *8 (9th Cir. BAP Nov. 15, 2010). The Defendants concealed the fact that they did not receive any writing from the Lender declaring default, accelerating the balance, and electing to foreclose, before initiating foreclosure, in breach of the terms of the Deed of Trust. See FAC 100. This concealment took the form of pretending that U.S. Bank is the Lender, and then pretending that Chase is the Lender. They have also fraudulently concealed the fact that no Defendant is the Lender, and therefore the Defendants have no authority to enforce the Note and Deed of Trust. Id. They further concealed the fact of unauthorized signatures


on the foreclosure documents, and other facts rendering them void, as well as their failure

to properly place the Note into the Trust before it closed in 2006. Id.
26 27 28

The other case cited by Defendants has no application. Colonial Sav. v. Gulino, 2010 WL 1996608 at *4 (D.Ariz. May 19, 2010)(plaintiff argued source of funds not from the lender, no proof given that borrowers payments being properly applied to the loan, and contract breached by selling the loan).

Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 12 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13

This concealment has caused Myers damages in the form of having to file suit to protect his home, incurring of attorneys fees, loss of opportunity to negotiate with the Note Holder and Lender which has an actual stake in the outcome and presumably would exercise sound business judgment in its choices. See FAC 102. These damages are cognizable. See, e.g., USF&G Co. v. Frohmiller, 71 Ariz. 377, 380, 227 P.2d 1007, 1009 (1951)(attorneys fees are recoverable as damages, if the wrongful act of the defendant has involved the plaintiff in litigation with others or placed him in such relation with others as makes it necessary to incur such expense to protect his interest). The wrongful act of each Defendant has required Myers to involve himself in litigation with the other Defendants to stop the illegal foreclosure; therefore, his fees and costs, are damages. 5 Plaintiff has suffered other damages/harm. Because Plaintiff does not know the identity of his Lender, Plaintiff has been denied the opportunity to negotiate with the real party in interest. If the real party in interest, entitled to payments, exercised sound business judgment, this lawsuit may have been unnecessary. The law is clear: a


homeowner at risk of losing his home, by definition has established irreparable harm.
15 16 17 18 19 20 21 22 23 24 25 26 27 28

Zinni v. M&I Marshall & Ilsley Bank, 2010 WL 537723 at *2 (D. Ariz. Feb. 12, 2010). Plaintiff has stated a claim for fraudulent concealment against these Defendants. G. Plaintiff has Adequately Plead a Claim for Fraud. To state a claim for fraud, "[n]o formal language is necessary, so long as all the elements of fraud are found in the complaint as a whole." Parks v. Macro-Dynamics, Inc., 121 Ariz. 517, 520, 591 P.2d 1005, 1008 (Ct. App. 1979). The particularity rule may be relaxed as to matters peculiarly within the opposing party's knowledge. Wool v. Tandem Computers Inc., 818 F.2d 1433, 1439 (9th Cir. 1987). "Such 'an exception exists where, as in cases of corporate fraud, the plaintiffs cannot be expected to have personal knowledge of the facts constituting the wrongdoing.'" Id. See also Buena Vista, LLC v. New Resource Bank, 2010 WL 3448561 at *7 (M.D. Cal. August 31, 2010)("[A]s to matters peculiarly within the opposing party's knowledge, allegations based on information and belief may satisfy Rule 9(b) if they also state the fact upon which the

If the Court finds causation is required, the concealment was clearly the cause of Myers need to file suit and suffer damages in the form of attorneys fees and costs.

Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 13 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13

belief is founded."). Specificity in fraud counts is required only to give defendants notice of the misconduct which is alleged to constitute the fraud charged, so that they can defend against the charge. Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). Plaintiff has certainly provided the Defendants with sufficient detail of the conduct which constitutes fraud. See, e.g., FAC 26, 37-40, 42-51, 54, 56-61, 104-115. He has shown causation through the fact that Defendants utter disregard for the clear terms of the contracts, and the terms of the PSA which were breached, allowed the Defendants to proceed to foreclosure. Id. Myers has shown damages as detailed in Section F, including attorneys fees and costs, and the loss of an opportunity to deal with the party with a real business interest in the loan, rather than with parties motivated to keep the borrower in default. Myers reliance is detailed in his FAC, including failing to hire an attorney until the day before the sale, failing to hire forensic/securitization experts to determine the true identity of the Lender and Note Holder and allow Myers to either work with the real party in interest with rational business judgment about the wisdom of foreclosure versus


modification, or learn that the loan had been paid. Id. at 112.
15 16 17 18 19 20 21 22 23 24 25 26 27 28

Most of the information about the fraud is held by the Defendants, who intentionally concealed, and continue to conceal, the truth from Plaintiff. The Defendants cannot be granted dismissal on a fraud claim lacking in detail because the Defendants have successfully hidden the truth from Plaintiff. The Motion should be denied. H. The Consumer Fraud Count is Well-Plead. In seeking to dismiss the consumer fraud count, the Defendants only argue that Myers has not plead a false promise or misrepresentation made in connection with the sale or advertisement of merchandise and his consequent and proximate injury. See Motion at 9. Neither reasonable reliance, nor damages, are necessary to state a claim for consumer fraud. An injury occurs with unreasonable reliance on false or misrepresented information. Kuehn v. Stanley, 208 Ariz. 124, 129, 91 P.3d 346, 351 (Ct. App. 2004). The consumer fraud statute does not require actual deception or damage. Myers has alleged the necessary elements. See, e.g., FAC 117-119 (initiated foreclosure without written instructions from the Lender to do so, including a notice of default and acceleration and election to foreclose, and without the Lenders having given the Plaintiff

Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 14 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13

a 30-day written notice of default and a later notice of acceleration.); 42-49 (describing the unauthorized signing and recording of the Substitution and NTS); 44 (initiating sale in breach of the Note and Deed of Trust); 38; 45; 47; 51; 52 (claiming that U.S. Bank is entitled to foreclose, then pretending that Chase is the Lender); 122 (describing damage to credit, incurring of attorneys fees and costs, deprivation of ability to communicate and negotiate directly with the Note Holder and Lender). The Arizona courts have specifically held that in a lawsuit regarding foreclosure, a consumer fraud claim may be asserted. Holeman v. Neils, 803 F.Supp. 237, 243, (D.Ariz. 1992)(the definition of merchandise includes real estate). Plaintiff has adequately alleged consumer fraud. Count Six must be allowed to stand. I. Negligence Per Se Has Been Well-Plead. The Defendants assert that Plaintiff does not have standing to argue that the foreclosure documents are void and therefore their recording is a violation of A.R.S. 33-420, citing three different cases decided by the same U.S. District Court Judge. This


Court need not follow those rulings, but even if followed, review of those decisions
15 16 17 18 19 20 21 22 23 24 25 26 27 28

shows that Myers does have standing. Myers first notes, that simply because one District Court Judge has ruled in a certain way, does not bind other District Court Judges, to do the same. Hart v. Massanari, 266 F.3d 1155, 1174 (9th Cir. 2001). This is particularly so, where there can be respectful disagreement for sufficient legal reasons. Id. The case upon which Defendants dismissal argument rests, is In re Mortgage Electronic Registration Systems (MERS), 2012 WL 1931365 (D. Ariz. May 25, 2012). In MERS, the Judge notes that he has repeatedly held that Arizona Revised Statutes section 33-420 does not apply to assignment of mortgages or deeds of trust and Plaintiff lacks standing to assert robosigning allegations. Id. at 4. The Court in MERS provides no analysis, only citation to his two past cases on the subject: In re Mortgage Elec. Registration Sys. (MERS) Litigation, 2011 WL 4550189 at *5 (D. Ariz. Oct. 3, 2011), and Henkels v. JPMorgan Chase Bank, N.A., 2012 WL 10380 at *2-3 (D.Ariz. Jan. 3, 2012). In the 2011 MERS decision, the Court cited a District Court decision which specifically refused to rule that A.R.S. 33-420 did not apply to assignments of deeds of

Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 15 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13

trust, and notices of trustees sales, because no state law had decided whether those documents were a claim of interest in, or a lien or encumbrance against, real property. Schayes v. Orion Financial Group, Inc., 2011 WL 3156303 at *6 (D. Ariz. July 27, 2011). The Schayes Court acknowledged that a notice of sale arguably asserts on interest in real property. Id. After all, an assignment of a deed of trust, if valid, transfers the Lender/beneficiarys secured interest in the property to the assignee. Without doubt, the holder of an assignment of a deed of trust is a person purporting to claim an interest in, or a lien or an encumbrance against, real property. A.R.S. 33-420(A). Any argument to the contrary goes against the most basic tenets of the law, and clear statutory interpretation. Taking the MERS ruling to its logical conclusion, any entity with an assignment of a deed of trust, has no claim, lien or encumbrance against the real property, and therefore, cannot foreclose. If the Defendants want to press this position, then their motion must be denied because they have no claim, lien or encumbrance against the


Property. Asserting that an assignee of a deed of trust does not purport to claim an
15 16 17 18 19 20 21 22 23 24 25 26 27 28

interest in the plaintiffs property, is simply unsupported in fact. The Henkels case is no more persuasive. In Henkels, there appears to have been no dispute that Chase or its assigns were entitled to initiate foreclosure proceedings. 2012 WL 10380 at *3. Then without any analysis, the Henkels Court concluded that plaintiffs injury in being foreclosed upon is not fairly traceable to Defendants conduct, described as filing a[n assignment of deed of trust] it allegedly knew to be forgery. Id. Myers respectfully submits, the opposite. It is precisely the void, forged and invalid documents which, if Defendants have their way, will be the cause of the foreclosure. 6

Plaintiffs default is not the cause. See, e.g, Kekauoha-Alisa, 674 F.3d at 1091 (if the conditions in the contracts are not fulfilled by the purported lender, such as following its terms and complying with the applicable statutes, the right to enforce the contract does not come into existence).


Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 16 of 19

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

Further, the Henkels Court qualified its ruling, by stating that the plaintiff would have standing to argue the assignment is void: if Plaintiff alleged that he was unable to determine which party he owed payments to based on a suspected fraudulent assignment of the note, because Plaintiffs own rights would be affected and he would have suffered an injury in fact attributable to Defendants alleged fraudulent conduct. Id. Myers has, in fact, alleged that he does not know the identity of the Note Holder and Lender, that MERS claimed to transfer the Note in 2009, but MERS did not possess the Note and Mr. Allen is an LPS employee without authority to sign for MERS. Myers also alleged that the PSA shows the Note had to be in the Trust by April 28, 2006, but Defendants tried to move the Note to the Trust in 2009. Chase claimed in May of 2012 that it is the Lender and the MERS database says Chase is the investor, U.S. Bank claims to also be the entity entitled to foreclose. See FAC 37; 38; 39; 40; 51; 56; 60; 65. All of these well-plead allegations supported by documents attached to the FAC, show that Myers has been unable to determine to which entity he owes payments. Therefore, under Henkels, Myers has standing to challenge the void foreclosure documents, and to argue that recording them is a violation of A.R.S. 33-420. A Texas District Court eloquently explained why borrowers have standing to challenge void foreclosure documents, and suffer plain and severe prejudice if the wrong entity is allowed to foreclose: Defendants final (and weakest) argument is that homeowners like plaintiffs will not be prejudiced if the chain of assignments from original lender to foreclosing entity were immune to debtor challenge. After all, the argument apparently goes, the Millers owe the money to somebody. In truth, the potential prejudice is both plain and severeforeclosure by the wrong entity does not discharge the homeowners debt, and leaves them vulnerable to another action on the same note by the true creditor. Banks are neither private attorneys general nor bounty hunters, armed with a roving commission to seek out defaulting homeowners and take away their homes in satisfaction of some other banks deed of trust. MasterCard has no right to sue for debts rung up on a Visa card, and that remains true even if MasterCard has been assigned the rights of another third party like American Express. Unless and until a complete chain of transactions back to the original lender is shown, MasterCard remains a stranger to the original transaction with no claim against the debtor. And that is a fair description of this case in its present posture. In sum, a standing issue is lurking here, but only as to the defendants, not the plaintiffs. The court concludes that under Texas law homeowners have legal standing to challenge the validity or effectiveness of any assignment or chain

Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 17 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

of assignments under which a party claims the right to foreclose on their property. Accordingly, the plaintiffs have properly stated claims. Miller v. Homecomings Financial, LLC, 2012 WL 3206237 at *5-6 (S.D. Tx. Aug. 8, 2012). The foreclosure documents assert a claim of interest in, or a lien or encumbrance against, real property. Further, Myers has standing to contest their void nature, and make this claim for negligence per se. This is confirmed by further confirmed by Arizonas common law. See, e.g., Greene v. Reed, 15 Ariz.App. 110, 112, 486 P.2d 222, 224 (1971)(A debtor may assert against an assignee all equities or defenses existing against the assignor prior to notice of the assignment, and any matters rendering the assignment absolutely invalid or ineffective). Far from being outlandish, as Defendants claim, Myers negligence per se count is well-plead and supported by authority. The Motion should be denied. J. Myers Claim of Payment/Discharge Should Not Be Dismissed. The Defendants assert that Myers allegation that the Note may have been destroyed and is therefore discharged, or paid by other sources, is ridiculous and absurd. See Motion at 10:16-17; 19-20. But given the conflicting information regarding the


location of the Note provided to Myers by the Defendants, it is clear that they do not

know where the Note is; destruction and discharge is just as likely as not. What is
18 19 20 21 22 23 24 25 26 27 28

ridiculous, is that the Defendants have provided Myers with so many versions of events; Myers has merely pointed them out. The Defendants claim the Note is in the Trust which closed on April 28, 2006, but then claim that MERS just transferred the Note to the Trust in the MERS Assignment in 2009. Defendants claim that Chase is the Lender and investor, then state in foreclosure documents that U.S. Bank, is the Trustee for Trust investors. The Deed of Trust requires, that if the Note balance is paid, the Deed of Trust be released. Upon payment of all sums secured by this Security Instrument, Lender shall release this Security Instrument. See FAC 136, Exhibit B, 23 (emphasis supplied). This provision applies regardless of who made payment or why; Lender has an unqualified duty to release the Deed of Trust.


Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 18 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13

Given the manner in which real estate investment trusts are insured, Myers alleged, plausibly, that insurance has already paid the balance due on his Note. See FAC 134. Defendants claim that Arizona courts have rejected these allegations in other cases. But the decisions cited do not apply. For instance, one decision dismissed a claim made by a plaintiff, that a credit default swap may have paid the balance. Yares v. Bear Stearns Residential Mortg. Corp., 2011 WL 2531090 (D. Ariz. June 24, 2011). That claim was dismissed based on the nature of a credit default swap, and based on plaintiffs claim that her note should be cancelled due to that payment. Id. at *6. The Yares plaintiff did not base her payment count on applicable statutes, the inconsistent positions of the Defendants regarding the location of the note, or terms of the deed of trust. Yares does not apply. 7 Here, Myers has offered support for his assertion that he is entitled to the benefit of any such payments. The Deed of Trust specifically states that it shall be released


upon payment of the sums secured by it. See FAC 136, Exhibit B, 23. Under
15 16 17 18 19 20 21 22 23 24 25 26 27 28

applicable law, in particular A.R.S. 47-3601, 47-3602, and 47-3604(A)(1), and the terms of the Deed of Trust, Myers has stated claims for payment and discharge. Defendants are the ones seeking a free house, as they have already been paid, and now want the real estate, as well. IV. CONCLUSION. Based on the foregoing, Plaintiff Brian Myers respectfully requests that this Court deny the Motion to Dismiss filed by the Defendants. Plaintiff has stated claims upon which he can be granted relief against these Defendants. Plaintiff further requests an award of his attorneys fees and costs incurred under A.R.S. 12-341.01, and for having to respond to, and participate in oral argument on, this motion to dismiss.

Watson v. U.S. Bank N.A., 2011 WL 2746333 (D. Ariz. July 15, 2011) also does not apply. In that case, Plaintiffs have not offered any support for their claim that they would be entitled to an offset on that basis [of insurance payments]. Id. at *3. Here, Myers has offered such support. See FAC 136, Exhibit B, 23.


Case 3:12-cv-08135-SLG Document 23 Filed 08/16/12 Page 19 of 19

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

RESPECTFULLY SUBMITTED this 16th day of August, 2012.

BARBARA J. FORDE, P.C. /s/Barbara J. Forde Barbara J. Forde, Esq. 20247 N. 86th Street Scottsdale, AZ 85255 Attorney for Plaintiff The foregoing e-filed this 16th day of August, 2012, with: Clerk of the District Court COPY of the foregoing delivered through the e-filing system this 16th day of August, 2012, to: The Honorable Sharon L. Gleason United States District Court 222 West 7th Avenue, Box 50 Anchorage, AK 99513-9513 Douglas C. Erickson MAYNARD CRONIN ERICKSON CURRAN & REITER, P.L.C. 3200 North Central Avenue Phoenix, AZ 85012-2443 Attorneys for JPMorgan Chase Bank, U.S. Bank as Trustee, and MERS Paul M. Levine MCCARTHY, HOLTHUS, LEVINE 8502 E. Via de Ventura, Suite 200 Scottsdale, AZ 85254 Attorney for Quality Loan Service Corp.

_/s/ Barbara J. Forde_______________