False Recordings in Arizona Foreclosures

robo signing


The recent Arizona appellate court decisions, Stauffer and Huff, are significant because Arizona’s federal district courts had been regularly dismissing homeowner claims for false recordings on the pleadings, claiming that the statute 33-420 did not apply.  When reviewing issues of state law, the district court is charged with determining how the Arizona Supreme Court would interpret the state law.  Now we know how the Arizona appellate court interprets 33-420, and it isn’t the way the district courts were applying it.  Here’s an excerpt of a motion I wrote back in Sept. 2012, asking the district court to either reconsider dismissing my client’s 33-420 claims on the basis that the statute didn’t apply to these types of documents or this type of homeowner, or certifying the legal question to the Arizona Supreme Court:

The claims relate to false claims of interest, not to “show me the note,” but despite the disparaging label, one thing is clear: parties cannot run around making false claims to collect from borrowers when those parties do not own the loan.  As a Texas district court recently put it, “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 bank’s deed of trust.”  Miller v. Homecomings Financial, LLC, 2012 WL 3206237 at *5, __F. Supp.2d __(S.D. Tex. [Hous.] 2012)(denying servicer’s motion to dismiss).

Finally, the Court erred in accepting Defendant’s facts as true on a 12(b)(6) motion, instead of reading the Plaintiff’s allegations and the plausible inferences therefrom as true, the appropriate legal standard.  Plaintiff pled that Defendant did not own the loan, and that the Plaintiff was not in default to Defendant.  Yet the Court adopted wholesale Defendants’ allegation that Plaintiff was in default, stating “[a]t some point, Plaintiff defaulted on the note, and a Notice of Trustee’s Sale of the property was recorded . . .” (Doc. 11, p. 1, line 22).

A.        Plaintiff’s Claims Do Not Derive From Arizona Supreme Court’s Definition of Show-Me-the-Note. 

In Hogan, the Arizona Supreme Court narrowed the definition of “show me the note” espoused by the district court.  See Hogan v. Washington Mutual Bank, N.A., 277 P.3d 781, 782, 783 (2012).  The Court specified that a “show me the note” case is  a plaintiff’s claim to relief based solely upon the defendant’s failure to show the note prior to “commencing a foreclosure,” without affirmative allegations that the Defendants lacked an enforceable right in the note.  Hogan v. Washington Mut. Bank, 277 P.3d 781, 783 (Ariz. 2012), as amended (July 11, 2012)(“But Hogan has not alleged that WaMu and Deutsche Bank are not entitled to enforce the underlying note; rather, he alleges that they have the burden of demonstrating their rights before a non-judicial foreclosure may proceed.”).  As an ordinary part of the procedure, the non-judicial foreclosure statute does not specifically require that first—“before commencing” a sale—-that a foreclosing party show the note.  The Court never said that when a Plaintiff pleads evidence showing that a foreclosing party lacks authority to foreclose, that it can never be raised under any legal theory.  That would be nonsense.

The Hogan court pointed out what was missing from the Hogan Complaint:  (1) “Hogan does not dispute that he is in default under the deeds of trust and has alleged no reason to dispute the trustee’s right.” Hogan, 277 P.3d at 784. (2)  But Hogan has not alleged that WaMu and Deutsche Bank are not entitled to enforce the underlying note; rather, he alleges that they have the burden of demonstrating their rights before a non-judicial foreclosure may proceed. Id. at 783.  (3) Hogan’s complaints do not contest that each sale was noticed by a trustee who had recorded an instrument demonstrating that it was a successor in interest to the original trustee. Id.

Unlike Hogan, which was a wrongful foreclosure case, this Complaint alleged false statements in the recorded documents.  PLAINTIFF is not in default to these Defendants because none of these Defendants is a valid “beneficiary” under A.R.S. §33-801(1) or a valid “Lender” or successor as defined by PLAINTIFF’s Deed of Trust.

Also, as Hogan mandated,  PLAINTIFF pled affirmative facts showing material falsities in the recorded documents which challenge the beneficiary’s identity and authority, and the identity and authority of the trustee.

Defendants’ recorded transfers were plainly false.  PLAINTIFF pled how the Note was transferred from TBI Mortgage Company to Greenwich Capital Financial Products, Inc. to Greenwich Capital Acceptance, Inc. to the RBSGC Trust in 2007 or 2008.    The Deed of Trust is presumed to follow the note.  Vasquez v. Saxon Mortgage, Inc., 228 Ariz. 357, 266 P.3d 1053 (2011). Consequently, the December 19, 2008 Assignment (“First Assignment”) directly from TBI (who had divested its interest years before) to Deutsche Bank was false, even if the signatory had authority and worked for the alleged entity she signed for, which she didn’t.  The Second Assignment, in July 7, 2011, again tried to transfer TBI’s interest to Deutsche, via MERS.  Again, TBI had already divested its interest.  Finally, the Corporate Assignment purported to transfer an interest in the Deed of Trust from MERS to Wells Fargo Bank on July 19, 2011. (Compl. ¶ 26).

If the Note was validly conveyed into the Trust where Defendants claim that it is, then it went from TBI to Greenwich Capital Financial Products, Inc. to Greenwich Capital Acceptance, Inc. to the RBSGC Trust in 2007 or 2008 pursuant to the agreement that formed the Trust.   (Compl., ¶15).  Otherwise, it was not validly in this trust.  These facts show why the documents recorded by Defendants, evidencing a purported transfer of the beneficial interest via the First, Second, and Third Assignment, were false.

The transfers of interest are integral to the beneficiary’s claim of authority Only a beneficiary as defined by the statute—to be strictly construed—could validly appoint a trustee, and this could only occur “after a default” in the contract secured.  A.R.S. § 33-807; Deed of Trust ¶22 (only a “Lender” can order the power of sale, and only after a default to the “Lender” occurs). If these interests are false, as PLAINTIFF alleges, then PLAINTIFF has pled facts that contest the beneficiary’s identity, authority, and interest, and contest that the sale was noticed by a valid trustee, or that the trustee had an order to exercise the power of sale from a valid beneficiary. (Complaint ¶28).

B.        Claims Showing False Recorded Documents of Interest in Plaintiff’s Home Are Not Related to Splitting, But Rather, to Transfers to Parties Outside the Chain and Chronology of Title, and to False Statements of Ownership, Authority, and Employment

The Order stereotyped Plaintiff’s claims all into the “show me the note” category for dismissal.  (Doc. 11, p. 2, lines 22-24).  This was a manifest error in reading the facts as alleged by the Plaintiff.  Plaintiff pled about specific misrepresentations in recorded documents, and how each violated A.R.S. §33-420.  An employee claiming false authority is not “show me the note.”  Perjury is not “show me the note.”  Assigning interests one does not own for companies one does not work for is not “show me the note.”

A.R.S. §33-420 states:

A person purporting toclaim 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 misstatementor false claim or is otherwise invalid is liable to the owner or beneficial title holder of the real property  . . .

(emphasis added).

Plaintiff complained of material falsities in the three recorded “Assignments” of beneficial interest in the Deed of Trust.  After Schayes was decided, the Arizona Supreme Court has treated and called assignments of the beneficial interest in a deed of trust “interests in real property.”  Hogan, 277 P.3d at 784.  (“The trust deed transfers an interest in real property, securing the repayment of the money owed under the note. See A.R.S. §§ 33–801(4), –801(8), –801(9), –805, –807(A)”).   In re Vasquez, 228 Ariz. at 359 (“The recording statutes are designed to protect interests in property against claims of subsequent purchasers or creditors without notice. See, e.g., Buerger Bros. Supply Co. v. El Rey Furniture Co., 45 Ariz. 1, 6, 40 P.2d 81, 83 (1935) (“[I]t is the policy of the law of this state ‘that assignments of mortgages must be recorded as instruments affecting real estate in order to protect the holder of such assignment against subsequent purchasers without notice.’ ” (quoting Newman v. Fidelity Sav. & Loan Ass’n, 14 Ariz. 354, 358–59, 128 P. 53, 55 (1912))); Eardley v. Greenberg, 164 Ariz. 261, 265, 792 P.2d 724, 728 (1990) (“[A]ny person who receives an assignment of beneficial interest and does not record it is in jeopardy of having the assignment declared invalid as against a subsequent purchaser for value without notice.”)).  The Assignments were interests in real property contemplated by A.R.S. §33-420.

Plaintiff pled that not only did the signing employees lack authority to sign for the companies for which they signed, but the companies themselves lacked authority and lacked any ownership interest in the deed of trust itself.  (Compl., ¶51).  These entities could not transfer what they did not own. So even if there were rightful agents here—which Plaintiff contests—the agents cannot exceed the authority of the undisclosed principal.

significant misrepresentations by Defendants and their employees, including thatThat the DOT could be assigned directly from TBI to Deutsche as Trustee, when the Note had allegedly been separately conveyed through three different entities years earlier, pursuant to the ironclad requirements of Defendant’s own agreements. Otherwise, the Note was not legally conveyed to the Trust.  (Compl. ¶¶47-49)(cataloguing specific misrepresentations).

Misrepresenting one’s status, authority and interest on public records is not “show me the note.”  It is actionable regardless of whether a party ultimately gained some kind of nefarious interest or not.  It is actionable to lie on the land records when asserting interests, whether or not a party has the authority to foreclose.  Plainly, even if a party has the right to non-judicially foreclose, that party cannot lie on the land records to do so.

The Order also rejected a “splitting” argument that Plaintiff never asserted, claiming that “Plaintiff alleges that Defendants violated A.R.S. §33-420 because, when the deed of trust was separated from the promissory note, any lien on Plaintiff’s property was extinguished.”  (Doc. 11, p. 3, lines 21-23).   Plaintiff made no such argument.  The crux of the claims was not that the Note and Deed of Trust were split, but that parties were assigning interests that were not theirs at the time of the assignment (or ever), and in the names of entities for whom those employees did not even work, and who also did not own the interests, according to Plaintiff’s evidence. This was so even if—especially if— the Deed of Trust was presumed to follow the Note pursuant to Arizona law.  See Vasquez, 228 Ariz. at 357.

What the signers knew or should have known when they signed is a question of fact, and not appropriately dismissed on the pleadings.  See Pence v. Glacy, 207 Ariz. 426 (2004).  But it plausibly can be inferred that an employee knows which company he works for, and whether he has signing authority for numerous other entities, and if he lacks personal knowledge that his employer owns the interest it is asking him to execute, acknowledge, and assign, and has failed to investigate.


PLAINTIFF has complied with the Court’s mandate to present an amended complaint on or before September 7, 2012.  However, PLAINTIFF respectfully requests that the Court reconsider its dismissal on the pleadings of his wrongful recording claims, now moved to Counts Four and Five in his Amended Complaint, and his request to quiet title as to those wrongful recordings, for the reasons given herein.

Should the Court refuse to reconsider the dismissal of his A.R.S. §33-420 claims, and his quiet title claims, PLAINTIFF requests that the district court certify the questions of A.R.S.§33-420 applicability to assignments of the deed of trust, and application of the “tender rule” when a party is claimed not to owe the debt to that Defendant, to the Arizona Supreme Court. Again, PLAINTIFF is willing and able to tender to an appropriate party to whom he actually owes money.

Executed this 7th day of September, 2012.

This case would have been decided differently today because of the Stauffer case, and the Huff case.  That’s the significance, and that’s why these cases matter to Arizona homeowners.

It doesn’t mean the homeowner automatically wins, but it does mean that homeowner gets an opportunity for justice and to at least present his case.

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