Lee v. PHH Mortgage

• Court: District Court, D. Arizona
• Decided: August 22, 2025
• Docket: 4:24-cv-00057
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Allan Lee, et al., No. CV-24-00057-TUC-SHR

10 Plaintiffs, ORDER

11 v.

12 PHH Mortgage,

13 Defendant. 14 15 Pending before the Court is Plaintiffs’ Second Amended Complaint (Doc. 22-1), 16 Defendant’s Motion to Dismiss the Second Amended Complaint (Doc. 23), and 17 Defendant’s Request for Judicial Notice in Support of Defendant’s Motion to Dismiss 18 Complaint Pursuant to Federal Rules of Civil Procedure 12(b)(6) (Doc. 24). The Motion 19 to Dismiss is fully briefed. (Doc. 23; Doc. 28; Doc. 29.) For the reasons set forth below, 20 the Motion to Dismiss is granted, and Plaintiffs’ claims are dismissed with prejudice. 21 I. Factual Background 22 The Court detailed the factual background in its prior order dismissing the First 23 Amended Complaint. (See Doc. 21.) Because the parties and the Court are well aware of 24 the factual background, in lieu of repeating the factual background here, the Court will 25 integrate facts where needed for the analysis below. The facts remain largely unchanged 26 between Plaintiffs’ First and Second Amended Complaints. 27 . . . . 28 1 II. Procedural Background 2 On September 30, 2024, this Court granted Defendant’s Motion to Dismiss and 3 granted Plaintiffs leave to amend certain claims from Plaintiffs’ First Amended Complaint 4 (FAC). (Doc. 21; Doc. 15.) Plaintiffs were given leave to amend Counts 1, 5, and 7–9: 5 Plaintiffs’ allegation of securitization defects, Breach of Contract Claim as to Defendant’s 6 failure to comply with the dates of waiver, Breach of Implied Covenant of Fair Dealing 7 Claim as to Defendant’s “pattern of abuse,” FCRA Claim, Regulation X Claim, and Real 8 Estate Settlement Procedures Act (RESPA) Claim. (Doc. 21 at 22.) 9 III. Legal Standard 10 a. Judicial Notice Standard 11 A court may take judicial notice of a fact which “is not subject to reasonable dispute 12 because it: (1) is generally known within the trial court’s territorial jurisdiction; or (2) can 13 be accurately and readily determined from sources whose accuracy cannot reasonably be 14 questioned.” Fed. R. Evid. 201(b). Pursuant to Federal Rule of Evidence 201, a court may 15 take judicial notice of “matters of public record.” Lee v. City of Los Angeles, 250 F.3d 668, 16 689 (9th Cir. 2001); Snyder v. HSBC Bank, USA, N.A., 913 F. Supp. 2d 755, 768 (D. Ariz. 17 2012). However, courts may refuse to take judicial notice when the facts are subject to 18 reasonable dispute. See Fed. R. Evid. 201. 19 In many cases within the Ninth Circuit, courts have taken judicial notice of 20 documents for their existence while simultaneously refusing to take judicial notice of any 21 reasonably disputed facts within those documents. See Lee, 250 F.3d at 689 (“[A] court 22 may not take judicial notice of a fact which is ‘subject to reasonable dispute.’” (quoting 23 Fed. R. Evid. 201(b))); Hutchins v. HP Inc., 737 F. Supp. 3d 851, 858 (N.D. Cal. 2024) 24 (taking judicial notice of the existence of certain public records without taking judicial 25 notice of the truth of any facts asserted); In re Qualcomm Antitrust Litig., 292 F. Supp. 3d 26 948, 964 (N.D. Cal. 2017) (taking judicial notice of a document without taking judicial 27 notice of disputed facts contained in the document). 28 . . . . 1 b. Motion to Dismiss Standard 2 Rule 8(a) of the Federal Rules of Civil Procedure governs the pleading standard for 3 a complaint, requiring “a short and plain statement of the claim showing that the pleader is 4 entitled to relief.” A complaint must “contain sufficient factual matter, accepted as true, to 5 ‘state a claim to relief that is plausible on its face.’” Glazer Cap. Mgmt., L.P., 63 F.4th 6 at 763 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). While “[a]ll allegations of 7 material fact are taken as true and construed in the light most favorable to the nonmoving 8 party,” Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1003 (9th Cir. 2008), “[t]hreadbare 9 recitals of the elements of a cause of action, supported by mere conclusory statements, do 10 not suffice.” Plaskett v. Wormuth, 18 F.4th 1072, 1083 (9th Cir. 2021) (quoting Iqbal, 556 11 U.S. at 678). 12 A lack of a cognizable legal theory or an absence of adequate facts alleged to support 13 the theory may be the basis for a dismissal. Robertson v. Dean Witter Reynolds, Inc., 749 14 F.2d 530, 533–34 (9th Cir. 1984). This means the complaint, when accepted as true, must 15 contain sufficient factual matter to state a claim on its face. Ashcroft v. Iqbal, 556 U.S. 16 662, 678 (2009). This “facial plausibility” exists when the factual content of the complaint 17 leads the court to draw a reasonable inference the defendant is liable for the alleged 18 misconduct. Id. A complaint which is found to state a plausible claim for relief will survive 19 a motion to dismiss. Id. at 679. 20 c. Pro Se Pleadings & Leave to Amend 21 A pro se plaintiff’s complaint must be construed liberally. Hebbe v. Pliler, 627 F.3d 22 338, 342 (9th Cir. 2010). A pro se litigant must be granted leave to amend his complaint 23 “if it appears at all possible that the plaintiff can correct the defect.” Lopez v. Smith, 203 24 F.3d 1122, 1130 (9th Cir. 2000) (quoting Balistreri v. Pacifica Police Dept., 901 F.2d 696, 25 701 (9th Cir. 1988)). “A district court may deny a plaintiff leave to amend if it determines 26 [the] ‘allegation of other facts consistent with the challenged pleading could not possibly 27 cure the deficiency’ . . . or if the plaintiff had several opportunities to amend its complaint 28 and repeatedly failed to cure deficiencies.” Telesaurus VPC, LLC v. Power, 623 F.3d 998, 1 1003 (9th Cir. 2010) (internal citations omitted). A district court may also deny 2 amendment if doing so would be futile. Novak v. U.S., 795 F.3d 1012, 1020 (9th Cir. 2015) 3 (“Futility alone can justify a court’s refusal to grant leave to amend.”). 4 Moreover, if an amended pleading fails to comply with the Court’s instructions in a 5 prior order, the action may be dismissed pursuant to Rule 41(b) of the Federal Rules of 6 Civil Procedure. Ferdik v. Bonzelet, 963 F.2d 1258, 1260–61 (9th Cir. 1992). Prior to 7 dismissal, the district court must provide a pro se plaintiff with notice of the deficiencies 8 to provide an opportunity to amend effectively. Id. To determine whether a case should 9 be dismissed for failure to comply with a court order, the Court must weigh five factors: 10 “(1) the public’s interest in expeditious resolution of litigation; (2) the court’s need to 11 manage its docket; (3) the risk of prejudice to the defendants; (4) the public policy favoring 12 disposition of cases on their merits; and (5) the availability of less drastic alternatives.” 13 Ferdik, 963 F.2d at 1260–61 (quoting Thompson v. Housing Auth., 782 F.2d 829, 837 (9th 14 Cir. 1986)). 15 IV. Analysis 16 A. Judicial Notice 17 Defendant offers two documents for judicial notice: (1) Assignment of Deed of 18 Trust recorded on or about April 8 [sic], 2007,1 in the Cochise County Recorder’s Office 19 as Document No. 070412133 (the First Assignment), and (2) Second Assignment of Deed 20 of Trust recorded on or about July 22, 2015, in the Cochise County Recorder’s Office as 21 Document No. 2015-13164 (the Second Assignment). (Doc. 24 at 3.) In their Response, 22 Plaintiffs state the “information that is contained in [Defendant’s Request for Judicial 23 Notice] is hearsay and not proof that the assignment of deed of trust was ever properly 24 signed.” (Doc. 28-1 at 12.) Plaintiffs allege the Second Assignment is “ineffective.” (Id.) 25 Moreover, Plaintiffs also allege the First Assignment has defects and, therefore, should be 26 “declared defective and void.” (Doc. 22-1 at 19.) Plaintiffs state the Second Assignment 27 is dated July 15, 2015. (Id.)

28 1 The Assignment of Deed of Trust was recorded on or about April 6, 2007. (Doc. 24 at 5.) 1 The Court concludes both documents are proper subjects of judicial notice as they 2 are “matters of public record.” See Lee, 250 F.3d at 689. However, as discussed above, 3 “a court may take judicial notice of a document without taking judicial notice of reasonably 4 disputed facts contained in the document.” Qualcomm, 292 F. Supp. 3d at 964. Because 5 Plaintiffs dispute facts contained within both documents, the Court does not take judicial 6 notice of any facts in either document. 7 B. Miscellaneous Count: Allegations of Securitization Defects 8 The Court previously granted Plaintiffs leave to amend their allegations of 9 securitization defects to establish a cognizable legal theory which could survive 10 Defendant’s Motion under Rule 12(b)(6). (Doc. 21 at 5–6.) Although their claim is not 11 titled or numbered as a count, they have now attempted to allege a cognizable legal theory 12 pursuant to A.R.S. § 33-420, a statute governing false recordings. (Doc. 22-1 at 20 ¶ 136.) 13 However, Plaintiffs still do not allege standing, as the Court instructed them to do so in its 14 prior order. Plaintiffs’ allegations regarding the securitization defects still fail and, because 15 this is their second chance to provide factual allegations to establish standing and they did 16 not, the Court will dismiss this claim without leave to amend. 17 “[A]n action to declare an assignment void [can] only be brought by someone who 18 can demonstrate a concrete and particularized injury . . . fairly traceable to the challenged 19 assignment.” In re Mortgage Electronic Registration Systems Litig., CV 10-1547-PHX- 20 JAT, 2012 WL 932625, at *3 (D. Ariz. 2012). When no such injury is alleged, plaintiffs 21 do not have standing to assert a claim. Id. Moreover, purportedly defective assignments 22 do not constitute “some sort of document purporting to create an interest, lien, or 23 encumbrance, such as a lis pendens, mechanics lien, or the deed of trust itself,” under § 33- 24 420. As other judges have recognized, there is no authority applying this statute to 25 assignments of mortgages. Schayes v. Orion Fin. Group, Inc., CV–10–2658–PHX–NVW, 26 2011 WL 3156303, at *6 (D. Ariz. July 27, 2011) (collecting cases); see also In re 27 Vasquez, No. 4:08–BK–15510–EWH, 2010 WL 3084975, at *1 (Bankr. D. Ariz. August 28 5, 2010) (“In recording the Assignment, [defendant] was not purporting to claim an interest 1 in the Plaintiff’s property. A.R.S. § 33–420 simply does not apply to the facts here.”). 2 While Plaintiffs restructured their allegations to abide by this Court’s direction to 3 present short and plain statements, Plaintiffs do not adequately allege facts supporting any 4 cognizable legal theory for the alleged securitization defects. (Doc. 21 at 4–5; Doc. 22-1 5 at 17–18.) In fact, Plaintiffs’ allegations in the SAC do not substantively differ from those 6 contained within the FAC. (Compare Doc. 15-1 at 16 with Doc. 22-1 at 18–19.) Plaintiffs 7 have again not demonstrated their standing to challenge securitization defects. And 8 Plaintiffs could not, as a matter of law, bring a claim for defective assignments under 9 A.R.S. § 33-420, because assignments are not claims of an “interest in, or a lien or 10 encumbrance against, real property.” Because the only legal support for Plaintiffs’ claim 11 is A.R.S. § 33-420, and Plaintiffs could never cure the complaint’s deficiencies, the Court 12 dismisses the claim for defective assignments without leave to amend.2 13 C. Count 1: Breach of Contract 14 In this case, Plaintiffs were afforded an opportunity to amend their first amended 15 complaint with specific guidance from this Court on how to cure the deficiencies for their 16 Breach of Contract claim. (Doc. 21 at 7–8.) The Court’s Order was narrow, explaining no 17 damages allegations appeared in the FAC and allowing Plaintiff to add damages allegations 18 to successfully state a claim. Nevertheless, Plaintiffs failed to allege sufficient facts which 19 would establish a cognizable breach of contract claim. Moreover, any attempt to further 20 amend would be futile, given Plaintiffs’ failure to follow the Court’s explicit instructions 21 to explain how Plaintiffs were damaged. While Plaintiffs include conclusory allegations 22 such as “Plaintiffs suffered increased payments due to improper fees and charges,” this 23 allegation appears entirely premised upon Plaintiffs’ previously rejected legal theory 24 regarding the deferred principal balance being forgiven in two, rather than three 25 installments. Plaintiffs do not include any more factual allegations in this complaint from 26 2 In addition to finding leave to amend would be futile, the Court also finds, in the 27 alternative, the five Thompson factors favor dismissing these claims. See Ferdik, 963 F.2d at 1260–61. While public policy typically favors disposition of cases on their merits and 28 dismissal with prejudice is a harsher sanction, the other three factors indicate all of Plaintiffs claims should be dismissed. See id. 1 which the Court could better understand the propriety or nature of these fees. Without 2 including more facts to describe why these fees were improper and devoid of any 3 connection between the improper fees and an allegation of Defendant’s breach, the Court 4 can only reasonably infer from this failure no cognizable claim for breach of contract exists 5 under these facts and further amendment would be futile. Accordingly, Count 1 is 6 dismissed with prejudice and without leave to amend. 7 D. Count 2: Violation of 12 CFR § 1024 Regulation X 8 The Court’s prior Order also set forth how Plaintiffs could cure the deficiencies of 9 their Regulation X claim. (Doc. 21 at 14–15.) The Court specified Plaintiffs’ allegations 10 failed to state facts showing (1) “Defendant’s ‘policies and procedures’ were 11 ‘[un]reasonably designed’ regarding timely retrieval of a ‘borrower’s payment history,’” 12 and (2) “Plaintiffs requested Defendant provide a complete payment history, and on what 13 date, to determine whether Defendants failed to act in a ‘timely manner.’” (Id. at 15 14 (quoting 12 C.F.R. § 1024.40).) Notwithstanding this guidance, Plaintiffs still failed to 15 allege sufficient facts to establish Defendant failed to timely retrieve Plaintiffs’ complete 16 payment history in their SAC. The Court finds an additional attempt to amend would be 17 futile. As such, Count 2 is dismissed with prejudice and without leave to amend. 18 E. Count 3: Breach of Implied Covenant of Good Faith and Fair Dealing 19 Plaintiffs previously received guidance on how this Count was defective and the 20 way the deficiencies of the claim could be cured. (See Doc. 21 at 14–15.) This Court 21 stated Plaintiffs failed “to allege Defendant’s conduct ‘injure[d] the right of [Plaintiff] to 22 receive the benefits of the agreement.” (Id. at 12.) Plaintiffs continue to assert Defendant 23 “acted in both bad faith and unfair dealing” by “not forgiving the amount of $97,619.39 24 and counterfeiting a 1099-C.” (Doc. 22-1 at 46.) Additionally, Plaintiffs cite to 25 “contradicting statements, 1098’s, [and] charging excessive and unauthorized fees and 26 penalties without justification,” and failure to “communicate transparently and timely.” 27 (Id.) Yet, Plaintiffs still do not demonstrate how Defendant’s conduct injured their right to 28 receive the benefits of the agreement. This Court finds an additional attempt to amend 1 would be futile. Therefore, Count 3 will be dismissed with prejudice. 2 F. Count 4: Violation of the Fair Credit Reporting Act 3 Plaintiffs’ SAC reasserted allegations for a violation of the FCRA. Plaintiffs allege 4 “Defendant failed to conduct a reasonable investigation into disputed information reported 5 to credit bureaus, despite being notified by the Plaintiffs.” (Doc. 22-1 at 47.) Although 6 Plaintiffs did not cite the exact subsection of FCRA, their only cognizable claim would be 7 brought pursuant to 15 U.S.C. § 1681s-2(b)(1)(A)–(E). See also Nelson v. Chase 8 Manhattan Mortg. Corp., 282 F.3d 1057, 1058 (9th Cir. 2002). 9 A furnisher of credit information, such as a mortgage company, is required to 10 promptly investigate disputed information and take corrective action, when necessary, only 11 upon receiving notice of a dispute from a credit reporting agency (“CRA”). §§ 1681s- 12 2(b)(1), 1681i(a)(2); see also Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1155 13 (9th Cir. 2009) (“[N]otice of a dispute received directly from the consumer does not trigger 14 furnishers’ duties under subsection (b).”). Therefore, to state a claim under FCRA against 15 a furnisher, Plaintiffs must allege: (1) they contacted the CRA3; (2) the CRA(s) pursued 16 the claim; and (3) the CRA(s) contacted the furnisher regarding the dispute, triggering the 17 furnisher’s duty to investigate. 18 Because Plaintiffs have not alleged they contacted any CRA and the CRA then 19 contacted the furnisher, this Court finds Plaintiffs’ allegations still fail to state a claim for 20 relief. There can be no cognizable claim unless Plaintiffs allege facts indicating the CRA 21 contacted the furnisher, at the very least. 22 Moreover, the Court finds it would be futile to grant Plaintiffs leave to amend their 23 complaint to assert the CRA contacted Defendant as the furnisher. Plaintiffs’ willful 24 omission of any facts supporting this prerequisite indicates no such facts exist. Plaintiffs 25 attempted to bring a nearly identical claim against another furnisher in a prior case in this 26 court which Magistrate Judge Rateau dismissed with prejudice. (See Doc. 26 at 10–11 in 27 Case No. 4:23-cv-00517-JR.) In the motion to dismiss filed in that case, the defendant

28 3 The Court addressed the requirements for providing notice to the CRA in its prior order and will not repeat those herein. 1 noted Plaintiffs failed to allege they disputed the credit information with a CRA or the 2 defendant/furnisher there received notice from a CRA that Plaintiffs disputed the 3 information. (Doc. 15 at 11 in Case No. 4:23-cv-00517-JR.) Plaintiffs failed to respond 4 to this aspect of defendant’s motion regarding FCRA’s requirements, so Judge Rateau 5 granted the motion to dismiss with prejudice on a nearly identical claim. In Judge Rateau’s 6 order dismissing that case, she once again noted the statutory requirements. (See Doc. 26 7 at 10–11 in Case No. 4:23-cv-00517-JR.) 8 Therefore, the Court finds Plaintiffs have been on notice of the factual allegations 9 required to state a claim against a furnisher under § 1681s-2(b) since at least January 2024. 10 Since then, they have filed multiple complaints attempting to raise claims under this 11 subsection but have never fully satisfied the statutory requirements. All the while, 12 Defendant has raised this issue through multiple motions to dismiss and Plaintiffs have still 13 failed to respond or remedy their allegations. Because Plaintiffs are unable to cure the 14 deficiencies of this claim and especially given their multiple failed attempts to do so after 15 being reminded of the requirements for this claim, this Court will dismiss this claim with 16 prejudice and without leave to amend. 17 G. Note Regarding Claims Not Realleged 18 All causes of action not alleged in an amended pleading are waived. Hal Roach 19 Studios v. Richard Feiner & Co., 896 F.2d 1542, 1546 (9th Cir. 1990) (“[A]n amended 20 pleading supersedes the original”). Because Plaintiffs’ SAC does not amend its allegations 21 to include a violation of the Real Estate Settlement Procedures Act (formerly Count 9), this 22 claim is hereby dismissed with prejudice. 23 V. Conclusion 24 IT IS ORDERED Defendant's Motion to Dismiss (Doc. 23) is GRANTED. 25 IT IS FURTHER ORDERED Defendant's Motion for Judicial Notice (Doc. 24) is 26 GRANTED. 27 IT IS FURTHER ORDERED Plaintiffs' Second Amended Complaint (Doc. 22) is 28 DISMISSED with prejudice and without leave to amend. Plaintiffs' claims are dismissed 1 || with prejudice, including those claims previously dismissed in the Court's prior order. 2 IT IS FURTHER ORDERED the Clerk of Court shall enter judgment accordingly 3 || and close this case. 4 Dated this 22nd day of August, 2025. 5 ‘

7 Honorable Scott H. Rash g United States District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

-10-