December 24, 2012
District Court of Arizona finds homeowners do not have standing to challenge validity of assignments of deed of trust
In Campbell v. California Reconveyance Co., CV-11-00180-PHX-DGC, 2012 WL 5299099 (D. Ariz. Oct. 25, 2012), the court denied plaintiffs/homeowners, David & Marie Campbells’ motion for summary judgment, finding they lacked standing.
In July, 2006, plaintiffs received a loan from First Magnus Financial Corp, and signed a promissory note for $417,000 and a deed of trust. The deed of trust was then assigned by MERS to U.S. Bank in 2009. At trial, plaintiffs disputed the legitimacy of this assignment, claiming it was held on behalf of Chase rather than U.S. Bank (who were both defendants to this suit). Plaintiffs did not dispute that defendants’ counsel held the original note at trial.
In 2009, plaintiffs were accepted into a modification plan with Washington Mutual; however, after seven payments the modification was rescinded because their income was too high. Plaintiffs continued to make payments under the terms of the modified plan until August 2010, when Chase (who had since acquired Washington Mutual) returned the payment. In October 2010, California Reconveyance Company (“CRC”) filed a Notice of Trustee’s Sale, which had been postponed pending the outcome of this litigation.
First, plaintiffs sought a declatory judgment vacating the substitution of the trustee, the assignment of the deed of trust, and notice of the trustee’s sale based on alleged fraud or violations of the terms of the trust. Defendants argued plaintiffs lacked standing, citing multiple federal decisions for the proposition that “borrowers do not have standing to challenge assignments of deeds of trust related to their loans” (emphasis added).
The court agreed with defendants, finding plaintiffs were challenging assignments “to which they [were] not parties and in which they did not participate… [they] do not argue that the transactions somehow altered their legal rights or changed their obligations under the note and deed of trust.” The court went on to note that plaintiffs’ concrete and particularized injury claim, namely, that they would be vulnerable to future legal action by the true owner of the note, was insufficient based on both Arizona’s anti-deficiency law, Sec. 33-279(a), and the facts of the particular case. Since plaintiffs did not identify any entity other than the defendants who may have had an interest in the note and deed of trust, the principles of judicial estoppel would preclude defendants from changing their position at a later date. The court concluded that plaintiffs’ argument that the true owner may exist “somewhere” was “nothing more than conjecture” and thus plaintiffs lacked standing to challenge the assignments.
Additionally, the court dismissed plaintiffs’ claim for quiet title as Arizona law prohibits this relief until the mortgage is paid in full. The court also rejected plaintiffs’ claim that Chase breached its duty of good faith and fair dealing related to the renegotiation of the loan, as Chase never entered into a contract with plaintiffs. Similarly, plaintiffs’ request for an accounting on information related to the loan was denied, as plaintiffs did not allege any agency or trust relationship with Chase. Finally, injunctive relief was denied as summary judgment had been granted to defendants on all other claims.