Bryan W. Hummel and Sandra M. Dahl Living Trust v. Rushmore Loan Managaement LLC
3:17-cv-08034
D. Ariz.Jun 8, 2017Background
- Plaintiffs: Brian W. Hummel and Sandra M. Dahl Living Trust (the Trust) own property in Mohave County; Borrowers (Hummel and Dahl) conveyed the property to the Trust in 2007 but previously executed multiple deeds of trust (notably DOT-4 in 2008).
- DOT-4 was recorded in Maricopa County in 2008, borrowers defaulted in January 2009, and acceleration occurred in February 2009; DOT-4 was not recorded in Mohave County until May 2011.
- DOT-4 passed through assignees (Countrywide → Bank of America → Ocwen → Residential Credit Solutions → Ditech → Rushmore), and Rushmore asserted a debt and scheduled trustee’s sales in 2017.
- The Trust sued for declaratory relief (ownership and barred foreclosure by statute of limitations), slander of title and trespass, and common-law fraud; Rushmore moved to dismiss under Rule 12(b)(6).
- The court: denied dismissal of the statute-of-limitations defense and related declaratory relief, but dismissed slander of title, trespass, and fraud claims (with leave to amend fraud and add adverse possession/quiet title claims).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to assert statute-of-limitations defense to non-judicial foreclosure | Trust may assert limitation defense because it is owner and in privity with borrowers (who would lose residence) | Only parties to the DOT (borrowers) or those in privity may raise the defense; Trust lacks standing | Denied dismissal: at this stage Trust plausibly in privity with borrowers; may assert the defense |
| Whether statute of limitations bars foreclosure (accrual date) | Accrual in Feb 2009 when borrowers defaulted; foreclosure rights expired before actions in 2017 | Statute never triggered; factual issue about accrual and recording | Dismissal denied: accrual/tolling factual dispute inappropriate to resolve on 12(b)(6) |
| Slander of title and trespass | Defendants falsely asserted title/foreclosure rights despite Trust ownership; damages resulted | No malice alleged for slander; no wrongful physical entry for trespass; claims legally deficient | Dismissed: slander of title lacks pleaded malice; trespass not ripe (no wrongful physical entry alleged) |
| Common-law fraud (Rule 9(b) pleading) | Alleged misrepresentations and conduct in foreclosure chain | Fraud claims are conclusory and fail to plead who, what, when, where, how as required by Rule 9(b) | Dismissed: complaint fails Rule 9(b); leave to amend granted for fraud and to add adverse possession/quiet title |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading must state a plausible claim for relief)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility standard for complaints)
- Balistreri v. Pacifica Police Dep’t, 901 F.2d 696 (sufficiency of claim survives 12(b)(6) if cognizable theory alleged)
- GlenFed, Inc. Sec. Litig., 42 F.3d 1541 (fraud claims must plead why statements were false)
- Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (Rule 9(b) requires who, what, when, where, how)
- Lopez v. Smith, 203 F.3d 1122 (leave to amend should be granted if plaintiff can cure defects)
- Acad. Life Ins. Co. v. Odiorne, 797 P.2d 727 (statute-of-limitations defense is personal privilege of debtor or one in privity)
- Hall v. Lalli, 977 P.2d 776 (privity requires substantial identity of interests and functional relationship)