Delprete v. Ditech

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

ANTHONY J. DELPRETE, et al., Plaintiffs/Appellants,

v.

DITECH FINANCIAL LLC, et al., Defendants/Appellees.

No. 1 CA-CV 17-0056
FILED 12-5-2017

Appeal from the Superior Court in Maricopa County
No. CV2014-051492
The Honorable Aimee L. Anderson, Judge

AFFIRMED

COUNSEL

Anthony J. Delprete, Elizabeth A. Delprete, Anthem
Plaintiffs/Appellants

Wolfe & Wyman LLP, Phoenix
By Colt B. Dodrill
Counsel for Defendants/Appellees
 DELPRETE, et al. v. DITECH, et al.
Decision of the Court

MEMORANDUM DECISION

Presiding Judge Lawrence F. Winthrop delivered the decision of the Court,
in which Judge Diane M. Johnsen and Judge Maria Elena Cruz joined.

W I N T H R O P, Presiding Judge:

¶1 Anthony J. Delprete and Elizabeth A. Delprete (the
“Delpretes”) appeal the superior court’s order of dismissal in favor of
Ditech Financial LLC (“Ditech”) and Federal National Mortgage
Association (“Fannie Mae”) (collectively “Defendants”). For the following
reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2 In 2004 the Delpretes purchased a residential property (the
“Property”) in Anthem. In 2006 the Delpretes refinanced the existing loan
secured by the Property and obtained a new loan for $417,000 from New
Century Mortgage Corp. (“Century Mortgage”). The 2006 loan was
evidenced by a promissory note (the “Note”), and secured by a deed of trust
on the Property, which listed Mortgage Electronic Registration Systems
(“MERS”) as beneficiary and nominee of Century Mortgage. In 2011 MERS
assigned the Deed of Trust to Bank of America, NA (“Bank of America”),
and in 2013 Bank of America assigned the Deed of Trust to Green Tree
Servicing LLC (“Green Tree”).

¶3 After the assignment in 2013, Green Tree notified the
Delpretes that future payments on the Note should be made to Green Tree.
The Delpretes requested Green Tree verify it owned the Note, and it did so
by sending the Delpretes a copy of the Note. Green Tree subsequently sent
the Delpretes a letter identifying Fannie Mae as the noteholder, but the
Delpretes were unable to verify Fannie Mae owned the Note, and stopped
making payments.1 In August 2015, Green Tree merged with Ditech. After
the Delpretes’ refusal to pay, Ditech recorded a notice of trustee’s sale on
the Property for January 2016. The Delpretes then paid Ditech, and Ditech
cancelled the trustee’s sale.

1 The Delpretes attached to their reply brief a screenshot which shows
Fannie Mae owns the Note and Ditech services the Note.

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¶4 In the meantime, the Delpretes in 2014 filed a complaint
against Century Mortgage, seeking quiet title, declaratory relief, and
rescission. Approximately one month later, the Delpretes moved for entry
of default based on Century Mortgage’s failure to respond to the complaint.
Century Mortgage filed a suggestion of bankruptcy with the court, stating
it had petitioned for relief under Chapter 11 of Title 11 of the United States
Code.

¶5 The superior court denied the Delpretes’ motion for entry of
default judgment without prejudice, finding the complaint was improperly
served because it was delivered to the “Blank Rome” law firm in Delaware
instead of to Century Mortgage. The court further found, contrary to the
Delpretes’ proposed judgment, that Bank of America owned the loan, and
the loan was not extinguished by Century Mortgage’s bankruptcy.2 In its
ruling, the court advised the Delpretes to consider filing an amended
complaint, with proper service of process.

¶6 Rather than file an amended complaint or properly serve the
original complaint, the Delpretes moved for declaratory judgment in July
2015, again identifying Century Mortgage as the sole defendant.3 The
superior court denied the motion, reiterating its previous ruling that the
complaint had not been properly served. The Delpretes next filed
“emergency” motions for summary judgment, which the superior court
denied, again based on improper service. In April 2016, the Delpretes filed
their first amended complaint, naming Ditech and Fannie Mae as
defendants.

¶7 In their amended complaint, the Delpretes sought: (1)
injunctive relief to stop the trustee’s sale of the Property; (2) declaratory
judgment that Defendants had no rights under the Note and the Deed of
Trust; (3) quiet title; (4) damages for the recording of a notice of trustee’s
sale; and (5) rescission. Defendants moved to dismiss and the Delpretes
responded, and in turn moved for summary judgment.

2 The Delpretes’ request for declaratory judgment proposed that the
superior court find that Century Mortgage’s bankruptcy “wipe[d] out the
loan.”
3 The Delpretes alleged Century Mortgage could not assign the Note
because of its bankruptcy; however, they did not support this allegation
with facts from the record or legal authority.

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¶8 After hearing oral argument, the superior court denied the
Delpretes’ motion for summary judgment, finding the Delpretes’ motion
was based on “speculation and a general misunderstanding of not only
mortgage banking law, but also [] the Uniform Commercial Code,” and
granted Defendants’ motion to dismiss.

¶9 The Delpretes moved for reconsideration, but the court
denied the motion. The Delpretes timely appealed. We have jurisdiction
pursuant to Article 6, Section 9, of the Arizona Constitution, and Arizona
Revised Statutes (“A.R.S.”) sections 12-120.21(A)(1) (2016) and 12-
2101(A)(1) (2016).

ANALYSIS

¶10 We review de novo a superior court’s grant of a Rule 12(b)(6)
motion to dismiss.4 Coleman v. City of Mesa, 230 Ariz. 352, 356, ¶ 9 (2012).
A 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). See also Logan v.
Forever Living Prods. Int’l, Inc., 203 Ariz. 191, 193, ¶ 7 (2002) (finding a court
will grant a motion to dismiss if “the plaintiff should be denied relief as a
matter of law given the facts alleged.”). To determine whether a motion to
dismiss should be granted, we look to the sufficiency of the complaint.5 See
Cullen v. Auto-Owners Ins. Co., 218 Ariz. 417, 419, ¶ 7 (2008). In reviewing
the complaint, “the court must assume the truth of all of the complaint’s
material allegations, accord the plaintiffs the benefit of all inferences which
the complaint can reasonably support, and deny the motion unless certain
that plaintiffs can prove no set of facts which will entitle them to relief upon
their stated claims.” Gatecliff v. Great Republic Life Ins. Co., 154 Ariz. 502, 508
(App. 1987). See Jeter v. Mayo Clinic Ariz., 211 Ariz. 386, 389, ¶ 4 (App. 2005)
(stating the court does not “accept as true allegations consisting of
conclusions of law, inferences or deductions that are not necessarily

4 Because we affirm the superior court’s dismissal, we do not
specifically address each of the Delpretes’ arguments raised in their motion
for summary judgment.

5 “[E]xhibits, or public records regarding matters referenced in a
complaint, are not ‘outside the pleading,’ and courts may consider such
documents without converting a Rule 12(b)(6) motion into a summary
judgment motion.” Coleman, 230 Ariz. at 356, ¶ 9. See also Ariz. R. Civ. P.
10(c) (“A copy of a written instrument which is an exhibit to a pleading is a
part thereof for all purposes.”).

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implied by well-pleaded facts, unreasonable inferences or unsupported
conclusions from such facts, or legal conclusions alleged as facts.”).

¶11 All documents attached to the first amended complaint and
filed with the Defendants’ motion to dismiss are either public records or
central to the complaint.6 As such, we need not treat the superior court’s
grant of Defendants’ motion to dismiss as a motion for summary judgment.
See Strategic Dev. & Constr., Inc. v. 7th & Roosevelt Partners, LLC, 224 Ariz. 60,
64, ¶¶ 14-15 (App. 2010). Based on the allegations in the first amended
complaint and the associated documents, the Delpretes failed to allege any
facts, which if taken as true, establish a claim upon which relief can be
granted.

I. Injunction

¶12 The Delpretes’ request for an injunction to bar a trustee’s sale
on the Property is moot because Defendants cancelled the notice of sale.
However, even if the issue was not moot, the Delpretes are not entitled to
an injunction because they failed to state a claim for which relief can be
granted. To obtain injunctive relief, a party must demonstrate “actual or
imminent harm,” Home Builders Ass’n of Cent. Ariz. v. Kard, 219 Ariz. 374,
378, ¶ 18 (App. 2008), and a “strong likelihood that [it] will succeed at trial
on the merits.” Shoen v. Shoen, 167 Ariz. 58, 63 (App. 1990). The Delpretes
have not provided any information—beyond their stated belief that a
trustee’s sale “will cause irreparable injury”—that establishes imminent
harm or that they are likely to succeed on the merits. And, since Defendants
cancelled the notice of sale, the Delpretes cannot show any actual or
imminent harm.

6 The Delpretes attached copies of the following documents to their
amended complaint: (1) the warranty deed conveying the Property to the
Delpretes; (2) the Note; (3) the Deed of Trust securing the Note; (4) a notice
of rejection of executory contract between Century Mortgage and MERS; (5)
the assignment of the beneficial interest in the Deed of Trust from Century
Mortgage to Bank of America; (6) the assignment of the beneficial interest
in the Deed of Trust from Bank of America to Green Tree; (7) the Delpretes’
request that Green Tree produce the original promissory note; (8) a
screenshot of a Fannie Mae online “look up” search for the Delpretes; and
(9) the notice of the January 2016 trustee sale of the Property set for January
11, 2016.

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II. Declaratory Judgment

¶13 The Delpretes next sought a declaration that Defendants have
no legal rights under the Note; however, their argument misapprehends
their duty to, at the very least, initially state a claim in their complaint for
which relief can be granted. See Ariz. R. Civ. P. 12(b)(6).

¶14 The Delpretes argued that the Note and the Deed of Trust had
not been “legally transferred” to Ditech. But they alleged no facts to
support their contention that those instruments were not properly assigned,
and instead made only conclusory allegations to that effect. Further, the
Delpretes would have the court disregard A.R.S. § 33-817, which provides
that a “transfer of any contract . . . secured by a trust deed shall operate as
a transfer of the security for such contract.” A.R.S. § 33-817 (2014). As the
superior court correctly found, under A.R.S. § 33-817 a deed of trust
automatically follows a promissory note. Thus, because Ditech holds the
Note by statutory transfer as a result of its merger with Green Tree, Ditech
also holds a beneficiary interest in the Deed of Trust.

III. Quiet Title

¶15 The Delpretes sought to quiet title, alleging they are the
Property’s legal owners. This assertion, however, is contrary to established
law that, under a deed of trust, “the trustee holds legal title until the loan
balance is paid.” Steinberger v. McVey, 234 Ariz. 125, 140, ¶ 65 (App. 2014)
(citing A.R.S. §§ 33–801(8), (10) (2007)). Further, a party “cannot seek to
quiet title solely based on the alleged weakness of his adversary’s title.” Id.
(citing Allison v. State, 101 Ariz. 418, 421 (1966)). The Delpretes did not
allege that they have paid the Note in full and did not allege any other facts
which otherwise undermine the Defendants’ legal ownership of the Note
and rights under the Deed of Trust; accordingly, the court did not err in
dismissing the Delpretes’ claim to quiet title.

IV. False Recording Act

¶16 The Delpretes also alleged Defendants violated A.R.S. § 33-
420 by recording the notice of trustee’s sale on the Property without a legal
right to foreclose. See A.R.S. § 33-420(A) (2014) (A person claiming an
interest in real property, “who causes a document asserting such claim to
be recorded . . . knowing or having reason to know that the document is []
groundless,” is liable for damages.). The Delpretes’ claim, however, fails.

¶17 In 2015, Green Tree sent the Delpretes a letter explaining it
was authorized to service the Note because Bank of America transferred its

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interest in the Note to Green Tree. Later, Ditech provided a certificate of
merger showing it merged with Green Tree in 2015. The Delpretes did not
provide any factual or legal support that suggests the documents
Defendants provided were groundless or false, and the Delpretes have
asserted no facts, which if taken as true, provide grounds for relief under
A.R.S. § 33-420.

V. Rescission

¶18 The Delpretes also sought rescission of the Note, arguing
Bank of America made misrepresentations and failed to make required
disclosures when refinancing the Note in 2012. The Delpretes alleged they
properly rescinded under the Truth in Lending Act (“TLA”) by sending a
letter demanding rescission in February 2015, within three years of the 2012
loan modification. The Delpretes’ claim for rescission is without legal merit
because the TLA does not allow or provide a basis for rescission of a home
refinancing in this setting, and in any event, the Delpretes failed to allege
the ability to tender the loan proceeds.

¶19 The TLA grants borrowers the right to rescind certain home
loans. Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 791 (2015).
The rescission right granted by the TLA, however, does not apply to
transactions for “a refinancing or consolidation (with no new advances) of
the principal balance then due and any accrued and unpaid finance charges
of an existing extension of credit by the same creditor secured by an interest
in the same property.” 15 U.S.C. § 1635(e)(2). Thus, a borrower cannot
rescind a refinancing “by the same creditor of an extension of credit already
secured by the consumer’s principal dwelling . . . [except] to the extent the
new amount financed exceeds the unpaid principal balance . . . .” 12 C.F.R.
§ 226.23(f)(2).

¶20 The Delpretes failed to allege specific facts, such as a new loan
advance, that would create a colorable claim for rescission of the 2012
refinancing under the TLA. Further, the Delpretes’ claim for rescission fails
for the additional reason that they did not allege they were able to tender
the loan proceeds. See Yamamoto v. Bank of N.Y., 329 F.3d 1167, 1170-71 (9th
Cir. 2003) (finding that for borrowers to seek rescission they must show the
ability to tender money or property to the creditor). See also 15 U.S.C.
§ 1635(b) (borrower must return the property or pay the property’s
reasonable value to creditor).

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CONCLUSION

¶21 We affirm the superior court’s order granting Defendants’
motion to dismiss. The Defendants, as the prevailing parties, are awarded
their costs on appeal, subject to compliance with Rule 21, ARCAP.

AMY M. WOOD • Clerk of the Court
FILED: AA

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