Motta v. Flagstar Bank
1 CA-CV 16-0295
| Ariz. Ct. App. | Jun 6, 2017Background
- In 2008 Motta borrowed $389,700 secured by a deed of trust on a Glendale property; Deed named MERS as nominee/beneficiary and Bank as trustee; non-judicial foreclosure was authorized on default.
- Motta defaulted in May 2010; Bank contacted him about loss-mitigation, and MERS (as nominee) recorded a substitution of trustee and notices of trustee’s sale for early 2011.
- The Bank offered Motta a Home Affordable Modification trial period plan (TPP) that required execution and an initial payment by April 1, 2011; Motta did not sign or timely pay and the property sold at trustee’s sale on April 1, 2011.
- Motta claimed he attempted to contact the Bank the morning of the sale but presented no evidence he actually executed the TPP, wired funds, or otherwise acted to stop the sale before it occurred.
- Motta sued to invalidate the sale asserting negligent misrepresentation, violation of the Arizona Consumer Fraud Act, lack of authority to foreclose, false recording under A.R.S. § 33-420, and wrongful foreclosure; the trial court ruled for the Bank and this appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Motta proved reliance to support negligent misrepresentation and consumer-fraud claims | Motta relied on Bank’s promise not to foreclose while he pursued modification and would have made the required payment by April 1 if not for the sale | Bank argued Motta never intended or took necessary steps to accept TPP or pay; trial court found his testimony not credible | Court affirmed: Motta failed to prove reliance; judgment for Bank on these claims |
| Whether Bank’s conduct proximately caused Motta’s damages (wrongful foreclosure) | Bank’s alleged procedural or documentary defects caused an illegal/ wrongful foreclosure and Motta’s losses | Bank argued it had the right to foreclose after Motta’s default and Motta’s own default and inaction were the cause of the sale | Court affirmed: Motta failed to prove causation; foreclosure was a natural consequence of his default |
| Whether recorded documents were false such that Bank violated A.R.S. § 33-420 | Motta claimed Bank knew or should have known MERS was improperly identified as beneficiary and other recording defects existed | Bank argued recorded documents reflected the parties’ arrangements at the time and Motta produced only later materials to show alleged impropriety | Court affirmed: insufficient evidence Bank knew or had reason to know of any defects at time of recording |
| Whether Bank lacked authority to act through MERS/third parties in foreclosure | Motta contended foreclosure was effectuated through improper third parties (MERS and trustee Clarke) making the sale invalid | Bank pointed to Deed of Trust language consenting to MERS’ nominee role and Motta’s execution of the deed | Court affirmed earlier summary-judgment ruling for Bank that it was authorized to act through MERS/Clarke |
Key Cases Cited
- W. Techs., Inc. v. Sverdrup & Parcel, Inc., 154 Ariz. 1 (Ariz. Ct. App. 1986) (elements of negligent misrepresentation and reliance principles)
- Peery v. Hansen, 120 Ariz. 266 (Ariz. Ct. App. 1978) (consumer-fraud claim requires proof of reliance and damages)
- Sholes v. Fernando, 228 Ariz. 455 (Ariz. Ct. App. 2011) (appellate court will not reweigh evidence on appeal)
- In re MERS, 754 F.3d 772 (9th Cir. 2014) (discussion of wrongful-foreclosure theory and default as critical element)
- Collins v. Union Fed. Sav. & Loan Ass’n, 662 P.2d 610 (Nev. 1983) (wrongful-foreclosure requires foreclosure occur when no default exists)
- Lona v. Citibank, N.A., 134 Cal. Rptr. 3d 622 (Cal. Ct. App. 2011) (elements and required proof in wrongful-foreclosure claims)