Stauffer v. Premier Service Mortgage, LLC ( 2016 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
KARL and FABIANA STAUFFER, Plaintiffs/Appellants,
v.
PREMIER SERVICE MORTGAGE, LLC, et al., Defendants/Appellees.
No. 1 CA-CV 15-0026
FILED 9-20-2016
Appeal from the Superior Court in Maricopa County
No. CV2011-005567
The Honorable Katherine Cooper, Judge
AFFIRMED
COUNSEL
Ronald Warnicke PLC, Phoenix
By Ronald E. Warnicke
Co-Counsel for Plaintiffs/Appellants
Warnicke Law PLC, Phoenix
By Robert C. Warnicke
Co-Counsel for Plaintiffs/Appellants
Snell & Wilmer L.L.P., Tucson
By Andrew M. Jacobs, Robert A. Bernheim
Counsel for Defendant/Appellee U.S. Bank National Association
Wright, Finlay & Zak, LLP, Phoenix
By Kim R. Lepore, Jamin S. Neil
Counsel for Defendants/Appellees First American Title Insurance Company and
First American Servicing Trustee Solutions, LLC
OPINION
Judge Lawrence F. Winthrop delivered the decision of the Court, in which
Presiding Judge Peter B. Swann and Judge Donn Kessler joined.
W I N T H R O P, Judge:
¶1 Karl Stauffer and Fabiana Stauffer (the “Stauffers”) appeal the
trial court’s order granting a Rule 12(b)(6) motion to dismiss their complaint
for failure to state a claim. For the following reasons, we affirm.
FACTS AND PROCEDURAL HISTORY
¶2 In 2005, the Stauffers executed a promissory note secured by
a deed of trust on their residential property (the “Property”) in Scottsdale,
Arizona. The deed of trust listed Premier Service Mortgage, LLC
(“Premier”) as the lender; Stewart Title and Trust of Phoenix, Inc. (“Stewart
Title”) as the trustee; and Mortgage Electronic Registration Systems, Inc.
(“MERS”) as “acting solely as a nominee for Lender” and as “the beneficiary
under this Security Instrument.” On the same day, Premier executed an
Endorsement Allonge to the promissory note, endorsing the note to Ohio
Savings Bank.
¶3 The Stauffers defaulted on the note. In September and
October of 2010, First American Title Insurance Company (“First American
Title”) recorded three documents—Notice of Trustee Sale, Notice of
Substitution of Trustee, and Assignment of Deed of Trust (collectively
“Recorded Documents”)—with the Maricopa County Recorder. The
Recorded Documents gave notice that First American intended to hold a
trustee’s sale of the Property under the terms specified in the deed of trust,
and that, as the named beneficiary under the deed of trust, MERS had
2
STAUFFER v. PREMIER et al.
Opinion of the Court
appointed First American as a substitute trustee, and assigned the note and
the deed of trust to U.S. Bank National Association (“U.S. Bank”).1
¶4 In 2011, the Stauffers filed a complaint against First American
Title and First American Trustee Servicing Solutions, LLC (collectively
“First American”), Premier, and U.S. Bank. In the complaint, the Stauffers
alleged all defendants, except Premier, caused the recording of the
Recorded Documents, and that those documents contained false
statements. The Stauffers claimed that the recording violated Arizona
Revised Statutes (“A.R.S.”) § 33-420,2 which prohibits any person from
recording false or fraudulent documents that assert an interest in, or a lien
or encumbrance against, real property. The Stauffers also sought an order
quieting title in the Property.
¶5 U.S. Bank and First American moved to dismiss, arguing that
the complaint failed to state a claim upon which relief could be granted. In
granting that motion, the court found that (1) the Recorded Documents did
not constitute documents that asserted an interest in, or a lien or
encumbrance against, real property, as required under A.R.S. § 33-420(A);
(2) the Stauffers could not clear title under § 33-420(B) because that
subsection can be used only when false or fraudulent liens have been
recorded, which the Stauffers had not alleged; and (3) the Stauffers lacked
standing to seek to clear title because they were neither owners nor
beneficial title holders under § 33-420(B). The Stauffers appealed, and in
Stauffer v. US Bank Nat’l Ass’n, 233 Ariz. 22, 26–29, ¶¶ 15, 19, 22, 27, 308 P.3d
1173, 1177–80 (App. 2013), this court reversed the trial court, holding that
the Recorded Documents did assert an interest in the Property, that the
Stauffers thus could seek to clear title under § 33-420(B), and the Stauffers
had standing to clear title as owners of the Property.
¶6 While this case was on remand to the superior court, this
court issued another opinion, Sitton v. Deutsche Bank Nat’l Trust Co., 233
Ariz. 215, 311 P.3d 237 (App. 2013), where it held certain misstatements in
three recorded documents (notice of trustee’s sale, notice of substitution of
trustee, and assignment of note and deed of trust)—similar to the Recorded
Documents here—did not constitute material misstatements. Id. at 222,
¶ 34, 311 P.3d at 244. Relying on Sitton, U.S. Bank again moved to dismiss
1 The trustee’s sale was cancelled after the Stauffers filed the present
complaint.
2 Absent material revisions since the relevant date, we cite a statute’s
current version.
3
STAUFFER v. PREMIER et al.
Opinion of the Court
under Rule 12(b)(6) for failure to state a claim. First American joined the
motion with an additional argument that the case should be dismissed as
to First American as the trustee of the deed of trust under A.R.S. § 33-807(E);
the Stauffers did not timely respond to First American’s motion. The trial
court granted both motions, and entered under Rule 54(b) a final judgment
of dismissing all claims against U.S. Bank and First American.
¶7 The Stauffers timely appealed;3 we have jurisdiction pursuant
to A.R.S. § 12-2101(A)(1).
ANALYSIS
I. U.S. Bank
¶8 The Stauffers argue the trial court erred in granting U.S.
Bank’s motion to dismiss under Rule 12(b)(6) as they have alleged sufficient
facts in the complaint to support the materiality of the misstatements in the
Recorded Documents, and this second Rule 12(b)(6) motion is barred by
Rule 12(g) and the law of the case doctrine. We disagree.
A. Material Misstatement
¶9 We review de novo a trial court’s ruling on a Rule 12(b)(6)
motion. Coleman v. City of Mesa, 230 Ariz. 352, 355–56, ¶ 7, 284 P.3d 863,
866–67 (2012). A Rule 12(b)(6) motion to dismiss should be granted if the
complaint fails to state a claim upon which relief can be granted. Ariz. R.
Civ. P. 12(b)(6). In considering the motion, “the court must assume the
truth of all of the complaint’s material allegations, accord the plaintiffs the
benefit of all inferences [that] the complaint can reasonably support, and
deny the motion unless certain that plaintiffs can prove no set of facts [that]
will entitle them to relief upon their stated claims.” Gatecliff v. Great Republic
Life Ins. Co., 154 Ariz. 502, 508, 744 P.2d 29, 35 (App. 1987). The court,
however, does not “accept as true allegations consisting of conclusions of
law, inferences or deductions that are not necessarily implied by well-
pleaded facts, unreasonable inferences or unsupported conclusions from
such facts, or legal conclusions alleged as facts.” Jeter v. Mayo Clinic Ariz.,
211 Ariz. 386, 389, ¶ 4, 121 P.3d 1256, 1259 (App. 2005).
¶10 The facts alleged in the complaint do not support the legal
conclusion that the misstatements in the Recorded Documents are material;
3 Premier is not party to this appeal as it did not file or join the motion
to dismiss.
4
STAUFFER v. PREMIER et al.
Opinion of the Court
accordingly, the Stauffers have failed to state a claim upon which relief can
be granted under A.R.S. § 33-420. That statute provides:
A person purporting to claim an interest in, or a lien or
encumbrance against, real property, who causes a document
asserting such claim to be recorded in the office of the county
recorder, knowing or having reason to know that the
document is forged, groundless, contains a material
misstatement or false claim or is otherwise invalid is liable to
the owner or beneficial title holder of the real property for the
sum of not less than five thousand dollars, or for treble the
actual damages caused by the recording, whichever is greater,
and reasonable attorney[s’] fees and costs of the action.
A.R.S. § 33-420(A) (emphasis added).
¶11 The Stauffers alleged that the falsities in the Recorded
Documents are: 1) MERS purported to be the nominee of Premier, but
Premier had no interest in the note as it had endorsed the note to Ohio
Savings Bank; 2) the Notice of Trustee Sale, where First American acted as
the trustee, was executed by First American before it had been substituted
for Stewart Title as the trustee; 3) the signature of one signor appeared
different in the Statement of Breach from that contained in the Notice of
Substitution; the Stauffers alleged that those signatures could have been
forged; and 4) the Recorded Documents did not indicate the relationship
between the signor of a document and the entity the signor appeared to
represent, in violation of A.R.S. §§ 33-505 and -506.
¶12 The alleged “falsities” are relatively minor inconsistencies in
identifying the assignment dates and assignor’s identity; they are not
material misstatements. For a misstatement to be material, “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, 233 Ariz. at 221, ¶ 31, 311 P.3d at 243 (alteration in original) (quoting
Caruthers v. Underhill, 230 Ariz. 513, 521, ¶ 28, 287 P.3d 807, 815 (App. 2012));
accord Restatement (Second) of Torts § 538 (Am. Law Inst. 1977). Like the
Recorded Documents here, the documents in Sitton erred in reciting the
assignment dates and the identity of the assignor. Id. at 221, ¶ 32, 311 P.3d
at 243. Those misstatements were deemed not material to the borrowers
because the borrowers’ obligations or possible available actions remained
the same: to repay the loan according to the terms of the note, to try to
renegotiate the terms of the note, or to default and accept foreclosure. Id. at
222, ¶ 33, 311 P.3d at 244. Similarly, the Recorded Documents here do not
5
STAUFFER v. PREMIER et al.
Opinion of the Court
affect the legal obligations or choice of actions for the Stauffers. Although
the Recorded Documents here contain inconsistencies in the identity of the
assignor and the dates of the assignment, the Stauffers’ options as
borrowers remain the same: to pay the monthly installments, to renegotiate
the terms of the note, or to otherwise face foreclosure.
¶13 The Stauffers alleged in the complaint that the misstatements
were material because their credit had suffered and would continue to
suffer from the trustee’s sale, and they might have to pay the accelerated
amount of a junior loan secured with the Property or otherwise file for
bankruptcy as the loan secured with the junior lien would be accelerated
and become unsecured. The latter assertions regarding the junior lien are
moot because the lien has been released and the Stauffers have filed for
bankruptcy protection. Moreover, the Stauffers do not dispute they are in
default on the note, and their default and any notice concerning the same
would likely impair their creditworthiness. Similarly, their credit would
also be adversely affected by a notice of trustee’s sale, regardless of the
identities of the trustee or beneficiary. In short, the trial court properly
granted U.S. Bank’s Rule 12(b)(6) motion to dismiss.4
4 In their response to the second motion to dismiss and on appeal, the
Stauffers argue that, despite Arizona’s anti-deficiency statutes, a
misstatement concerning a beneficiary’s identity could be material. See
Sitton, 233 Ariz. at 222 n.6, ¶ 33, 311 P.3d at 244 n.6 (stating that a trustor
may, in reliance on the anti-deficiency statutes, decide not to contest a
trustee’s sale in favor of a putative beneficiary, where such decision
absolves the trustor of any liability in a sale for the true beneficiary, but may
leave the trustor still liable to the true beneficiary in a sale for any other
entity). We do not consider this purported material misstatement as it was
not alleged in the complaint. Even assuming it was timely alleged, on this
record, the Stauffers did not allege or provide any facts showing U.S. Bank
was not the true beneficiary. In contrast, in Steinberger v. McVey, 234 Ariz.
125, 318 P.3d 419 (App. 2014), the plaintiffs alleged a prima facie, good faith
challenge to the foreclosing beneficiary’s chain of title. Moreover, even
assuming it was properly alleged, such a misstatement would not be
material to the Stauffers. The anti-deficiency statutes preclude deficiency
judgments against the Stauffers after a trustee’s sale, and the Stauffers
would not thereafter be liable to the true beneficiary even if the sale is in
favor of the wrong beneficiary. See A.R.S. § 33-814(G) (precluding actions
that seek deficiency); Hogan v. Wash. Mut. Bank, N.A., 230 Ariz. 584, 587,
¶ 11, 277 P.3d 781, 784 (2012) (denying a homeowner’s request to require
6
STAUFFER v. PREMIER et al.
Opinion of the Court
B. Rule 12(g)
¶14 The Stauffers argue the provisions of Rule 12(g) bar another
Rule 12(b)(6) motion after a Rule 12(b)(6) motion has already been filed and
ruled on. We disagree. Although Rule 12(g) precludes some defenses or
objections not raised in the first motion responding to a complaint, it does
not on this record preclude a subsequent Rule 12(b)(6) motion. See Ariz. R.
Civ. P. 12(g) & (h)(2).
C. Law of the Case
¶15 The Stauffers further argue the trial court erred in granting
U.S. Bank’s motion also because the law of the case doctrine precludes the
trial court from finding the complaint has failed to state a claim. The
Stauffers’ reliance on this doctrine is misplaced. The law of the case
doctrine “refers to a legal doctrine providing that the decision of a court in
a case is the law of that case on the issues decided throughout all
subsequent proceedings in both the trial and appellate courts, provided the
facts, issues and evidence are substantially the same as those upon which
the first decision rested.” Dancing Sunshines Lounge v. Indus. Comm’n, 149
Ariz. 480, 482, 720 P.2d 81, 83 (1986). However, if the issue was not resolved
in the first ruling, or if the applicable law has changed, the doctrine does
not apply. Id. at 482–83, 720 P.2d at 83–84; see Zimmerman v. Shakman, 204
Ariz. 231, 236, ¶ 15, 62 P.3d 976, 981 (App. 2003) (stating the law of the case
doctrine does not prevent a judge from reconsidering nonfinal rulings).
¶16 Here, the materiality issue was never decided in the earlier
ruling or in this court’s decision in Stauffer. The holding in Stauffer—that
the Recorded Documents assert an interest in the Property, that the
Stauffers could file an action to quiet title, and that they had standing to file
the action as the owner of the Property—does not have any bearing on the
materiality issue. Id. at 26–29, ¶¶ 15, 19, 22, 27, 308 P.3d at 1177–80. Further,
in Sitton, this court for the first time interpreted the term “material” in
A.R.S. § 33-420. Simply stated, the law of the case doctrine does not apply
here.
the beneficiary to “show the note” for fear of further collection efforts by
the original noteholder, reasoning the anti-deficiency statutes protect
against such occurrence by precluding deficiency judgments against
debtors whose foreclosed residential property consists of 2.5 acres or less).
7
STAUFFER v. PREMIER et al.
Opinion of the Court
II. First American
¶17 In addition to joining U.S. Bank’s motion to dismiss, First
American argued below that the Stauffers had waived their objections to its
motion by failing to timely respond, and also that the Stauffers failed to
state a claim because claims against a trustee that are not for breach of
trustee’s obligations must be dismissed under A.R.S. § 33-807(E). Because
we find the trial court did not err in granting U.S. Bank’s motion, we need
not address these alternative arguments.
III. Attorneys’ Fees and Costs
¶18 The Stauffers are not entitled to any award of attorneys’ fees
or costs because they did not prevail on appeal. In our discretion, we deny
First American’s request for attorneys’ fees. First American and U.S. Bank,
however, are awarded their costs on appeal, subject to compliance with
ARCAP 21.
CONCLUSION
¶19 The trial court’s judgment is affirmed.
AMY M. WOOD • Clerk of the Court
FILED: AA
8