Schwartz v. Chase Home Finance LLC et al

Filing 24

ORDER granting Defendants' 19 Motion to Dismiss; because we previously granted leave to amend, and because any further amendment would be futile, we dismiss the amended complaint with prejudice; the clerk shall enter judgment. Signed by Judge Frederick J Martone on 5/18/11.(REW)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Nicholas John Schwartz,
Plaintiff,

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vs.

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Chase Home Finance, LLC, et. al.,
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Defendants.
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No. CV-10-2120-PHX-FJM
ORDER

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The court has before it defendants' motion to dismiss plaintiff's amended complaint
(doc. 19) and plaintiff's response (doc. 23). Defendants did not file a reply.

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This cause of action arises out of a mortgage loan transaction, secured by a Deed of

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Trust, that plaintiff entered into with defendants to purchase a home in Glendale, Arizona.

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Plaintiff resided in that home for seventeen years until he defaulted on his mortgage in 2009.

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Plaintiff sought a loan modification, but defendants did not accept plaintiff's application and

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instead initiated foreclosure proceedings. Plaintiff claims that he was eligible for a loan

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modification under the Home Affordable Mortgage Program ("HAMP"). By refusing to

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modify his loan and foreclosing on the property, plaintiff alleges that defendants violated the

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HAMP agreement defendants entered into with the federal government.

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We dismissed plaintiff's original complaint for failure to state a claim, but granted

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leave to amend (doc. 13). Plaintiff's amended complaint is similar to his original complaint,

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albeit fewer claims and more detail. Plaintiff asserts three claims for relief: (1) breach of

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contract; (2) violation of the covenant of good faith and fair dealing; and (3) violation of the

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Arizona Deed of Trust Act.

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We dismissed plaintiff's original breach of contract claim because we found that

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plaintiff was essentially asserting a private right of action under HAMP, which does not

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exist. Plaintiff's amended complaint alleges substantially the same thing. Plaintiff claims

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that he is a third party beneficiary of HAMP, "and the contracts and agreements signed by

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defendants under them." Amended Complaint ¶ 40. Plaintiff alleges that defendants

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breached HAMP by failing to consider his loan modification application. Defendants argue

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that HAMP is not a contract between plaintiff and defendants nor is plaintiff a third party

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beneficiary of HAMP.

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As we stated in our previous order, HAMP is not a contract between plaintiff and

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defendants and HAMP does not contain a private right of action. See also Puzz v. Chase

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Home Finance, __ F. Supp. 2d. __, 2011 WL 395423, *4 (D. Ariz. 2011). HAMP grants

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Fannie Mae, not the individual borrowers, the right to sue to ensure compliance. As the

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Supreme Court recently stated, "[t]he absence of a private right to enforce the statutory [ ]

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obligations. . . would be rendered meaningless if [ ]entities could overcome that obstacle

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by suing to enforce the contract. . .instead " Astra USA, Inc. v. Santa Clara Cnty., __ U.S.

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__, 131 S.Ct. 1342, 1348 (2011). A party cannot circumvent the lack of a private right of

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action by filing a breach of contract claim based on third party beneficiary status when the

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statute does not demonstrate any intent to allow beneficiaries to enforce those terms. Id. at

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1348-49. Moreover, the majority of courts, including those in this district, find that

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borrowers are not third party beneficiaries of the HAMP services agreement. See Hoffman

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v. Bank of America, No. C 10-2171, 2010 WL 2635773 (N.D. Cal. June 30, 2010) (surveying

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cases); see also Thomasson v. First Horizon Home Loans, No. CIV 10-08192, 2011 WL

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1526969 (D. Ariz. April 22, 2011); Marks v. Bank of America, No. 03:10-cv-08039, 2010

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WL 2572988, *5, 8 (D. Ariz. June 22, 2010). Accordingly, we dismiss plaintiff's breach of

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contract claim with prejudice.
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Plaintiff's second claim for violation of the covenant of good faith and fair dealing

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similarly fails. First, it is substantially the same claim that we previously dismissed. Second,

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plaintiff cannot rely on the HAMP agreement as giving rise to the duty of good faith and fair

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dealing because plaintiff does not have standing to assert such a claim nor is he an intended

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third party beneficiary of HAMP. And finally, plaintiff again does not allege that the

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violation arises out of the Deed of Trust, the only contract to which plaintiff is a party. We

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grant defendants' motion to dismiss the breach of the covenant of good faith claim with

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prejudice.

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Plaintiff's final claim alleges a violation of the Arizona Deed of Trust Act, A.R.S. §

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33-801, et. seq. Defendants construe this as a claim for wrongful foreclosure, which they

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argue is not cognizable under Arizona law. We already dismissed plaintiff's wrongful

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foreclosure claim and plaintiff expressly abandoned it in the amended complaint.

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Nevertheless, plaintiff does not point to a provision in the Arizona Deed of Trust Act which

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is alleged to have been violated. Construing the complaint as liberally as possible, plaintiff

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seems to argue that defendants' decision to foreclose instead of modify plaintiff's loan

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agreement violates the Arizona Deed of Trust Act. There is no provision in the Arizona

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Deed of Trust Act requiring a loan servicer to modify a loan agreement before, or instead of,

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foreclosing on the property. This claim fails as a matter of law.

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Accordingly, it is ORDERED GRANTING defendants' motion to dismiss (doc. 19).

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Because we previously granted leave to amend, and because any further amendment would

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be futile, we dismiss the amended complaint with prejudice.

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The clerk shall enter judgment.

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DATED this 18th day of May, 2011.

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