Miller v. Fnma

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

JEFFREY and MARGARET MILLER, husband and wife,
Plaintiffs/Appellants,

v.

FEDERAL NATIONAL MORTGAGE ASSOCIATION aka FANNIE MAE,
a corporation organized under the laws of the United States; SETERUS,
INC aka LENDER BUSINESS PROCESS SERVICES (LBPS), a foreign
corporation, Defendants/Appellees.

No. 1 CA-CV 14-0602
FILED 12-10-2015

Appeal from the Superior Court in Mohave County
No. B8015CV201104116
The Honorable Charles W. Gurtler, Jr., Judge

AFFIRMED

COUNSEL

William A. Miller, P.L.L.C, Scottsdale
By William A. Miller
Counsel for Plaintiffs/Appellants

Wright Finlay & Zak, L.L.P., Scottsdale
By Kim R. Lepore, Jamin S. Neil
Counsel for Defendants/Appellees
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MEMORANDUM DECISION

Presiding Judge Margaret H. Downie delivered the decision of the Court,
in which Judge Patricia A. Orozco and Judge Maurice Portley joined.

D O W N I E, Judge:

¶1 Jeffrey and Margaret Miller appeal from an adverse grant of
summary judgment and from the denial of their motion for new trial. For
the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2 The Millers defaulted on their mortgage loan obligations in
November 2009. At the time, Federal National Mortgage Associates
(“Fannie Mae”) held the promissory note and deed of trust for the Millers’
property, and Chase Bank serviced the loan. The Millers entered into a
forbearance agreement with Chase in January 2010 that required them to
make three reduced payments of $1945, followed by a June payment of
more than $11,700 to bring the account current. The Millers did not make
the June payment but continued paying the reduced amount through July
because they claimed Chase agreed to treat those payments as a trial
period for a permanent loan modification.

¶3 Seterus, Inc. took over the Millers’ loan servicing in August
2010. In September, Seterus sent the Millers a letter that stated:
1

Our records indicate that you successfully completed the
terms of your signed Forbearance Agreement established
through your prior loan servicer. . . . Please be advised, the
terms of your signed Forbearance Agreement do not contain
a guarantee of immediate Modification of the terms of your
signed Note and Deed of Trust. Rather, . . . “After the final
payment of the Forbearance Plan, regular payments will
become due in addition to any delinquent payments, fees,
and/or charges. If your account is not current once the

1 At the time, Seterus was known as Lender Business Process
Services.

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Forbearance period has ended, collection and/or foreclosure
activity will resume.”

¶4 The Millers communicated with Fannie Mae and Seterus
(collectively, “Lenders”) but did not work out a payment plan. They
made no mortgage payments after September 2010, and a trustee’s sale
was set for February 2011. Seterus postponed the sale with the
understanding the Millers would wire a payment of $2000, but the Millers
instead filed for bankruptcy. Lenders did not contact the Millers until
after their bankruptcy discharge in May 2011.

¶5 The trustee’s sale was re-set for July 5, 2011. Mrs. Miller
attended a debt counseling event on June 2, 2011 and discussed loan
workout options with Lenders’ representatives, but the trustee’s sale went
forward as scheduled, and Fannie Mae took possession of the property.

¶6 The Millers sued Lenders for breach of contract,
negligent/intentional misrepresentation, declaratory judgment, quiet title
(as to Fannie Mae only), and injunctive relief (as to Fannie Mae only). The
Millers attached two letters to their complaint (collectively, “the Letters”),
which on their face appeared to be authored by Lenders. One was
purportedly signed by Jason Smith on behalf of Seterus and included
terms of a “new note,” with payments to begin August 1, 2011. The other
letter was supposedly signed by Carolyn Patton on behalf of Fannie Mae
and included similar information but discussed a “permanent
modification after you pay your first three payments.”

¶7 After a lengthy and contentious discovery period, the trial
court dismissed the Millers’ breach of contract, quiet title, and declaratory
judgment claims as barred by Arizona Revised Statutes (“A.R.S.”) section
33-811(C). The court gave the Millers leave to amend to allege wrongful
foreclosure.

¶8 The court conducted a bench trial and ruled in favor of
Lenders on the remaining claims for negligent/intentional
misrepresentation and wrongful foreclosure. Among other things, the
court found the record “replete with instances of MARGARET MILLER’S
testimony not being credible” and ruled the Letters were obvious
forgeries.

¶9 The Millers filed a motion for new trial under Arizona Rule
of Civil Procedure (“Rule”) 59(a)(2), arguing Lenders committed
“discovery abuse” by not disclosing recorded phone calls and complete
electronic loan files — the existence of which the Millers learned of during

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depositions conducted roughly two months before trial. The trial court
denied the request to “relook at a discovery issue,” stating, “nowhere in
the 8 subsections of Rule 59(a), A.R.C.P. is this an enumerated basis or
cause by which a Judgment can be vacated and a new trial granted.” The
court instead analyzed the Millers’ motion under Rule 59(a)(4), dealing
with newly discovered evidence, and ruled the evidence at issue could
have been discovered through reasonable diligence.

¶10 The Millers timely appealed. We have jurisdiction pursuant
to A.R.S. § 12-2101(A)(1), (B).

DISCUSSION

I. Waiver under A.R.S. § 33-811(C)

¶11 The Millers challenge the entry of summary judgment on
their breach of contract, quiet title, and declaratory judgment claims.
They frame the relevant inquiry as “whether the party claiming the
protection of A.R.S. § 33-811(C) waiver of defenses can affirmatively
mislead the borrower into believing that no foreclosure sale will occur.”

¶12 We review a grant of summary judgment de novo, viewing
the evidence and reasonable inferences therefrom in the light most
favorable to the non-moving party. Andrews v. Blake, 205 Ariz. 236, 240,
¶ 12 (2003). We review questions of law and statutory interpretation de
novo as well. E. Vanguard Forex, Ltd. v. Ariz. Corp. Comm’n, 206 Ariz. 399,
406, ¶ 19 (App. 2003). We also determine de novo the availability of
equitable relief. See Andrews, 205 Ariz. at 240, ¶ 12.

¶13 A.R.S. § 33-811(C) provides:

The trustor, its successors or assigns, and all persons to
whom the trustee mails a notice of a sale under a trust deed
pursuant to § 33-809 shall waive all defenses and objections
to the sale not raised in an action that results in the issuance
of a court order granting relief pursuant to rule 65, Arizona
rules of civil procedure, entered before 5:00 p.m. Mountain
standard time on the last business day before the scheduled
date of the sale.

A trustor who fails to enjoin a trustee’s sale before its completion waives
any claim of title to the property, as well as any claims dependent on the
sale. Morgan AZ Fin., L.L.C. v. Gotses, 235 Ariz. 21, 23–24, ¶ 7 (App. 2014).
“[O]nce a non-judicial foreclosure sale has taken place, the only defense

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that may be raised is lack of notice of the sale.” Steinberger v. McVey ex rel.
Cty. of Maricopa, 234 Ariz. 125, 136, ¶ 42 (App. 2014).

¶14 The Millers do not dispute that they received notice of the
July 5, 2011 trustee’s sale, arguing instead that Lenders’
“misrepresentations and omissions were the only reason why [they] failed
to take any action to prevent the trustee’s sale by filing suit or seeking an
injunction.” However, the record before the trial court at the time of its
summary judgment ruling included no representations by Lenders
regarding the trustee’s sale.2 And Seterus had previously advised the
Millers that: “If we already have started a foreclosure proceeding, it will
not be postponed unless we advise you in writing of such postponement.”
Even if the Letters could be viewed as legitimate at the summary
judgment stage, they do not address the trustee’s sale, let alone cancel or
postpone it.3

¶15 Based on the record before it, the trial court properly relied
on A.R.S. § 33-811(C) in dismissing the claims for breach of contract, quiet
title, and declaratory judgment.

II. Motion for New Trial

¶16 The Millers also contend the court should have granted their
motion for new trial because Lenders failed to disclose documents and
recordings critical to their claims. Specifically, they contend “[t]he
complete Pulse system records, the Impact system records, the recorded
telephone conversations, and the internal email communications are all
subject to Rule 26.1’s mandatory automatic disclosure obligation.”4
According to the Millers, failure to disclose such evidence entitles them to
a new trial under Rule 59(a)(2) for misconduct by the prevailing party,

2 The Millers concede in their opening brief that Lenders said
nothing about the trustee’s sale and that they simply assumed the sale
would not go forward.
3 Although Lenders alleged from the outset that the Letters were
forgeries, most of the evidence regarding that issue was presented at trial.
For purposes of our summary judgment analysis, we assume the
legitimacy of the Letters.
4 “Pulse” is a computer program that includes “[p]retty much
everything to do with the maintenance of the loan.” “Impact” is a
computer decision-making tool used “for forbearance plans, repayment
plans, [and] potential loan mods.”

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and they assert that the trial court erroneously analyzed the issue under
Rule 59(a)(4) (newly discovered evidence).

¶17 For the sake of argument, we assume without deciding that:
(1) Lenders were obligated to disclose and/or produce the evidence in
question; and (2) failure to disclose the information was misconduct under
Rule 59(a). We nonetheless find no reversible error.

¶18 We will uphold the denial of a motion for new trial unless it
“reflects a manifest abuse of discretion given the record and circumstances
of the case.” Styles v. Ceranski, 185 Ariz. 448, 450 (App. 1996). The burden
of demonstrating that the trial court abused its discretion lies with the
party seeking to overturn the ruling. In re Estate of Long, 229 Ariz. 458,
464, ¶ 22 (App. 2012). A court abuses its discretion if there is “no evidence
to support its conclusion or the reasons given by the court are clearly
untenable, legally incorrect, or amount to a denial of justice.”
Searchtoppers.com, L.L.C. v. TrustCash LLC, 231 Ariz. 236, 241, ¶ 20 (App.
2012). We will affirm the trial court’s decision if it is correct for any
reason. Reyes v. Frank’s Serv. & Trucking, LLC, 235 Ariz. 605, 610, ¶ 16
(App. 2014).

¶19 Contrary to the Millers’ suggestion, “a new trial on grounds
of misconduct is never granted as a disciplinary measure.” Grant v. Ariz.
Pub. Serv. Co., 133 Ariz. 434, 451 (1982). The trial court was well aware of
the parties’ ongoing discovery disputes, stating at one point: “[T]he Court
appreciates and understands that you folks have not conducted
yourselves tremendously professional in the Court’s estimation with
respect to cooperation amongst each other. So that, as far as the Court is
concerned, is a given.” In denying the motion for new trial, the court
noted that the Millers could have filed “another Motion to Compel and/or
request sanctions. The failure to take appropriate action is deemed a
waiver.” We agree. Sanctions for discovery violations are within the trial
court’s “broad discretion.” Rustin v. Cook, 143 Ariz. 486, 490 (App. 1984).
The court may properly consider “the fact that no timely objection was
made and it was not until after the unfavorable verdicts that the trial court
was asked to act.” Id. By their own admission, the Millers learned of the
purportedly missing documents during pretrial depositions, yet filed no
additional discovery motions.

¶20 We also reject the Millers’ contention that whether to grant a
new trial “is not contingent on any determination that the undisclosed
documents would have had an effect on the outcome.” According to the
Millers, “[t]he analysis under Rule 60(c)(3) (and therefore Rule 59(a)(2))

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focuses on the unfairness of a party’s misconduct, not the reliability of the
resulting outcome,” and they rely on cases arising under Rule 60(c),
arguing there is “no difference between the analysis under Rule 60(c)
which applies once the judgment has been entered and Rule 59(a) which
applies immediately before judgment is entered.” We disagree.

¶21 Rule 59(a) and Rule 60(c) differ in more than just timing. A
motion for new trial based on misconduct under Rule 59(a) hinges on
whether the alleged misconduct materially affected the aggrieved party’s
rights. See Leavy v. Parsell, 188 Ariz. 69, 72 (1997). Thus, a new trial is
warranted “only when it appears probable that the misconduct actually
influenced the verdict.” Id. Relief based on misconduct under Rule 60(c),
on the other hand, “does not require a showing that the outcome of the
case would have been different but for the nondisclosure.” Norwest Bank
(Minn.), N.A. v. Symington, 197 Ariz. 181, 187, ¶ 26 n.1 (App. 2000); see also
Estate of Page v. Litzenburg, 177 Ariz. 84, 94 (App. 1993) (a sufficient basis
for denying a new trial motion may be an insufficient basis for denying
rule 60(c) relief).

¶22 The Millers have not established how any undisclosed
information would have affected the outcome. It was undisputed that
Lenders discussed the possibility of a loan modification with the Millers in
the month preceding the trustee’s sale. But the Letters and Mrs. Miller’s
testimony were the only evidence suggesting Lenders gave any assurance
a modification was in place. And the trial court determined the letters
were forgeries and Mrs. Miller’s testimony was incredible. Among other
things, the court noted that Mrs. Miller lied about being hospitalized as a
result of the foreclosure, knowing the president of Fannie Mae, and
having terminal cancer. The court also concluded the Millers’ handwriting
expert was not credible, whereas the Lenders’ expert offered credible
testimony and provided “example after example of MARGARET
MILLER’s handwriting as compared to the ‘signed’ names on the
[Letters].” Later, in awarding attorneys’ fees to Lenders, the court ruled
that the Millers prosecuted their claims “without substantial justification”
and stated that the entirety of their case “was built on a falsehood. That
falsehood was formulated by one person, that being MARGARET
MILLER.” We do not reweigh the evidence on appeal, and the credibility
of witnesses is for the trier of fact to determine, not the appellate court.
See State v. Gallagher, 169 Ariz. 202, 203 (App. 1991). Moreover, the
Millers’ suggestion that any undisclosed information would have
supported their position at trial is wholly speculative.

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¶23 Even if the trial court should have analyzed the motion for
new trial under Rule 59(a)(2), the Millers have failed to establish that they
were entitled to relief.

CONCLUSION

¶24 We affirm the judgment of the superior court. We deny the
Millers’ request for attorneys’ fees because they have not prevailed. See
A.R.S. § 12–341.01. In the exercise of our discretion, we deny Lenders’ fee
request. However, Lenders are entitled to recover their taxable costs on
appeal upon compliance with ARCAP 21.

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