Wright v. Chase Home Finance LLC et al

Filing 12

ORDER granting 5 defendants' Motion to Dismiss without prejudice; denying 8 and 9 plaintiff's Motion for Leave to Amend. Plaintiff shall have 30 days from the date this order is entered to file a motion for leave to amend in compliance with LRCiv. 15.1. Otherwise the clerk shall enter judgment of dismissal. Signed by Judge Frederick J Martone on 6/1/11.(TLJ)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Laurie F. Wright,
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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-11-0095-PHX-FJM
ORDER

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The court has before it defendants' motion to dismiss (doc. 5), plaintiff's response and
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motion for leave to file second amended complaint (docs. 8, 9), and defendants' reply in
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support of motion to dismiss and response to the motion for leave to amend (doc. 10).
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Plaintiff did not file a reply.
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Plaintiff entered into a mortgage loan transaction, secured by a deed of trust, with
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Chase to purchase property in Gilbert, Arizona. Sometime prior to June 1, 2009 plaintiff fell
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behind on her mortgage. Plaintiff sought a mortgage modification from Chase pursuant to
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the Home Affordable Mortgage Program ("HAMP"). In September 2009, Chase enrolled
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plaintiff in the HAMP Trial Period Plan. Under this plan, plaintiff's monthly mortgage
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payments were reduced temporarily while she was evaluated for a permanent loan
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modification. Plaintiff successfully made the required payments for at least seven months.
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In July 2010, Chase sent plaintiff a proposed loan modification. Plaintiff claims that the
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modification was worse than her original loan terms because it increased the overall loan
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amount, increased her monthly payments, shortened the payment period, and did not credit
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plaintiff for any payments made during the trial plan period. Plaintiff contacted Chase to ask

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why the terms were worse and why her prior payments were not credited. Plaintiff alleges

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that Chase instructed her to return the modification agreement unsigned so that it could look

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into it. Plaintiff then claims that Chase unreasonably construed this as a rejection. In August

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2010, plaintiff filed Chapter 7 bankruptcy. On October 18, 2010, defendant Tiffany & Bosco

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filed a motion to lift the automatic stay in plaintiff's bankruptcy so that defendants could

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initiate foreclosure. The Bankruptcy Court lifted the stay. Finally, on October 20, 2010,

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Chase rejected plaintiff's application for a loan modification because she failed to accept the

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modification within the required time. Neither party mentions the current status of the

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property.

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Plaintiff originally filed this action in the Superior Court of Arizona in Maricopa

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County. Defendants removed the action on the basis of diversity and federal question

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jurisdiction. Plaintiff's First Amended Complaint ("FAC") seeks damages, declaratory, and

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injunctive relief for alleged wrongdoing with regard to a mortgage loan under the following

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theories: (1) violation of HAMP; (2) breach of contract; and (3) breach of the covenant of

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good faith and fair dealing. Plaintiff also seeks an accounting. Defendants move to dismiss

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for failure to state a claim. In February, we extended the time in which the parties had to file

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a response or reply because they were negotiating a resolution (doc. 7). On April 5, 2011,

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however, plaintiff filed a response and her motion for leave to file a second amended

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complaint. Neither party mentions why a negotiated resolution was not reached.

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Defendants first move to dismiss counts one, two, three, and four because HAMP does

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not create a private right of action. Defendants argue that even though plaintiff labels her

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claims as breach of contract, breach of the covenant of good faith and fair dealing, and

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declaratory judgment, she is really alleging violations of HAMP. Plaintiff asserts that HAMP

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amended her note and deed of trust to impose additional duties on defendants. By failing to

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consider plaintiff for a loan modification, plaintiff claims that defendants violated HAMP and

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in turn, the note and deed of trust.

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Plaintiff lacks standing to assert any claims premised on a violation of HAMP.
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HAMP is not a contract between plaintiff and defendants, did not amend plaintiff's loan

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contracts, and does not contain a private right of action. See Puzz v. Chase Home Finance,

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__ F. Supp. 2d. __, 2011 WL 395423, *4 (D. Ariz. 2011). HAMP grants Fannie Mae, not

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individual borrowers, the right to sue to ensure compliance. Nor is plaintiff a third party

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beneficiary of HAMP, entitling her to sue for breach of contract. As the Supreme Court

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

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would be rendered meaningless if [

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enforce the contract. . .instead. " Astra USA, Inc. v. Santa Clara Cnty., __ U.S. __, 131 S.Ct.

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1342, 1348 (2011). A party cannot circumvent the lack of a private right of action by filing

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a breach of contract claim as a third party beneficiary when the statute does not demonstrate

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any intent to allow beneficiaries to enforce those terms. Id. at 1348-49. To the extent claims

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one, two, three, and four allege violations of HAMP, we dismiss them.

]entities could overcome that obstacle by suing to

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We next turn more specifically to plaintiff's breach of contract claims. Claim one is

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asserted against Chase and claim two is asserted against all defendants. Both claims allege

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the same thing, except that the second also includes a claim for injunctive relief to prevent

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foreclosure. Plaintiff alleges that defendants violated the note and deed of trust, as well as

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the Trial Payment Plan agreement. Defendants argue that plaintiff fails to identify what

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provisions of the contracts were breached. Plaintiff again relies on her argument that

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defendants violated the note and deed of trust, as amended by HAMP.

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To plead a breach of contract claim, plaintiff must allege the formation of a contract,

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its breach, and damages. Frank Lloyd Wright Found v. Kroeter, 697 F. Supp. 2d 1118, 1125

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(D. Ariz. 2010). Here, plaintiff does not identify what specific provisions were breached.

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We already stated that plaintiff does not have standing to assert violations of HAMP, even

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as a breach of contract claim incorporating its terms. A liberal reading of the complaint

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suggests that plaintiff may be trying to allege that defendants violated the deed of trust by

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initiating foreclosure proceedings when plaintiff was not actually in default, or by failing to

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provide proper notice, or that defendants violated the Trial Plan Agreement. As pled,

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however, the FAC merely pleads conclusory statements and no more than "unadorned, the-3-

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defendant-unlawfully-harmed-me accusation[s]." Ashcroft v. Iqbal, __ U.S. __, 129 S.Ct.

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1937, 1949 (2009). We therefore, grant defendants' motion to dismiss claims one and two.

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Plaintiff's third claim for relief alleges a violation of the covenant of good faith and

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fair dealing arising from the note and deed of trust. By refusing to consider plaintiff for a

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loan modification the second time and noticing a trustee's sale, plaintiff alleges that

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defendants breached the covenant. Defendants argue that plaintiff cannot claim that anyone

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prevented her from receiving the benefit of the bargain.

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"The law implies a covenant of good faith and fair dealing in every contract," which

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requires that "neither party will act to impair the right of the other to receive the benefits

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which flow from their agreement." Rawlings v. Apodaca, 151 Ariz. 149, 153, 726 P.2d 565,

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569 (1986). Count three alleges that plaintiff was not considered for and did not receive a

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permanent loan modification. The note and deed of trust do not require defendants to modify

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the loan. Defendants could not have acted to impair the rights afforded to plaintiff in the note

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and deed of trust on this basis. We grant defendants' motion to dismiss count three.

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Plaintiff also seeks an accounting. Plaintiff does not allege whether she seeks an

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accounting pursuant to federal or state law. Defendants argue that the Real Estate Settlement

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Procedures Act, 12 U.S.C. § 2601, et. seq. ("RESPA"), governs a borrower's right to an

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accounting. Because plaintiff fails to even mention RESPA, defendants contend that plaintiff

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fails to plead a plausible claim for relief.

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Plaintiff seeks an accounting because defendants failed to credit payments plaintiff

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made during the trial period. However, plaintiff fails to identify any legal theory underlying

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her claim. In Arizona, actions for an accounting are usually reserved to parties in a fiduciary

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relationship. See Mollohan v. Christy, 80 Ariz. 141, 143-44, 294 P.2d 375, 376-77 (1956).

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Absent a special agreement, a debtor-creditor relationship is not a fiduciary relationship.

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Moreover, there is "no statutory requirement that the [homeowner] be supplied with a

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complete accounting." Kelly v. NationsBanc Mortg. Corp., 199 Ariz. 284, 286-87, 17 P.3d

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790, 792-93 (Ct. App. 2000); but see A.R.S. § 33-813(c) (imposing certain narrower

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accounting requirements). Because plaintiff fails to identify any claim under which she is
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entitled to an accounting, we dismiss her request for an accounting.

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Finally, plaintiff seeks a declaration that defendants violated HAMP and cannot

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foreclose until they prove she is in default. The Declaratory Judgment Act ("DJA") is

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"procedural only." Atena Life Ins. Co. v. Haworth, 300 U.S. 227, 240, 57 S.Ct. 461, 463

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(1937). Declaratory relief is not a theory of recovery, but merely offers an additional

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remedy. Because plaintiff fails to plead any claim entitling her to relief, her request for a

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declaratory judgment fails as a matter of law.

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Plaintiff requests leave to amend to cure any deficiencies in the FAC. Since plaintiff

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already amended her complaint once as a matter of right in state court she must seek leave

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to amend. Rule 15(a), Fed. R. Civ. P.; see also Butner v. Neustadterm, 324 F.2d 783, 785

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(9th Cir. 1963) (stating that a district court "takes the case as it finds it on removal and treats

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everything that occurred in the state court as if it had taken place in federal court"). Plaintiff

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fails to properly seek leave to amend because she does not attach a copy of the proposed

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amended pleading as an exhibit to the motion. See LRCiv. 15.1. Absent that, we cannot

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evaluate whether amendment would be futile. However, certain alleged facts, such as

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allegations that plaintiff was not in default, that defendants did not credit certain payments,

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and that defendants denied plaintiff a modification, despite her compliance with the trial plan,

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may entitle plaintiff to relief. We thus leave open the possibility for amendment. We urge

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plaintiff to seek the advice of counsel. If she does not have a lawyer, she may wish to call

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the Lawyer Referral Service of the Maricopa Bar Association at 602-257-4434.

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Therefore, IT IS ORDERED GRANTING defendants' motion to dismiss without

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prejudice (doc. 5). It is FURTHER ORDERED DENYING plaintiff's motion for leave to

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amend (docs. 8, 9). Plaintiff shall have thirty (30) days from the date this order is entered

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to file a motion for leave to amend in compliance with LRCiv. 15.1. Otherwise the clerk

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shall enter judgment of dismissal.

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DATED this 1st day of June, 2011.

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