Wassef et al v. JPMorgan Chase Bank NA et al

Filing 27

ORDER, denying Plaintiffs' 24 Motion to Alter or Amend Judgment; the Clerk is directed to terminate this matter. Signed by Judge David G Campbell on 6/13/13.(REW)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Michael Wassef, husband, et al.,

No. CV-12-02480-PHX-DGC

Plaintiffs,

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v.

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JPMorgan Chase Bank, N.A.; U.S. Bank
National Association, as Trustee for J.P.
Morgan Mortgage Acquisition Trust 2006CH2, Asset Backed Pass-Through
Certificates, Series 2006-CH2,

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ORDER

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Defendants.

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Plaintiffs Michael and Angela Wassef filed a motion to alter or amend the

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judgment pursuant to Federal Rule of Civil Procedure 59(e), or for relief from judgment

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pursuant to Rule 60(b). Doc. 24. Plaintiffs seek the reinstatement of their claims for

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(1) breach of contract and breach of implied covenant of good faith and fair dealing, (2)

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specific performance and equitable reformation, and (3) declaratory judgment against

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Chase Bank, N.A. (“Chase”) and U.S. Bank National Association as Trustee for J.P.

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Morgan Mortgage Acquisition Trust 2006-CH2, Asset Backed Pass-Through Certificates,

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Series 2006-CH2 (“U.S. Bank”). For the reasons that follow, the Court will deny the

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motion.

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I.

Background.

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Plaintiffs allege that on March 12, 2012, they entered into a repayment plan

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(“Repayment Agreement”) with Chase to pay arrearages on their delinquent mortgage.

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Amended Complaint ¶¶ 11-13. In exchange, Chase agreed not to take legal action and to

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proceed as if no default had occurred. Id., ¶ 12. Plaintiffs allege that they made the

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payments required by the Repayment Agreement, but that Chase rejected them. Id.,

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¶¶ 14-18.

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Agreement. Id., ¶ 24. Plaintiffs filed an Amended Complaint alleging the three claims

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they seek to have reinstated, among others. Id., ¶¶ 28-75.

Chase later informed Plaintiffs that it was canceling the Repayment

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Defendants filed a motion to dismiss the Amended Complaint for failure to state a

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claim. Doc. 7. Defendants argued that the Repayment Agreement was not a valid

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contract because it lacked consideration. Doc. 7 at 5-6. The Court agreed, and ruled that

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Plaintiffs’ preexisting duty to pay arrearages could not constitute valid consideration.

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Doc. 22 at 4. Plaintiffs argued in their opposition to the motion to dismiss that

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consideration was valid on two other grounds. Doc. 15 at 4-5. First, Plaintiffs claimed

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that the express language of the agreement acknowledged valid consideration. Id. at 4.

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The Court found that the language did not indicate valid consideration because it did not

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impose obligations in addition to those already owed by Plaintiffs. Doc. 22 at 4-5.

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Second, Plaintiffs argued that consideration was valid because, under the Repayment

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Agreement, Chase had more rights than it would have had through foreclosure. Doc. 15

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at 4-5. The Court rejected this argument as well because Chase had not yet initiated

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foreclosure; thus, Plaintiffs had not forfeited any rights and they remained contractually

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obligated to cure their default. Doc. 22 at 5. The Court dismissed all Plaintiffs’ claims

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with prejudice pursuant to Federal Rule of Civil Procedure 12(b)(6). Doc. 22 at 13.

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II.

Legal Standard.

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The Court has discretion to reconsider and vacate its order granting dismissal. See

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Barber v. Hawaii, 42 F.3d 1185, 1198 (9th Cir. 1994); United States v. Nutri-Cology,

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Inc., 982 F.2d 394, 396 (9th Cir. 1992). Motions for reconsideration are disfavored,

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however, and are not the place for parties to make new arguments not raised in their

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original briefs. See Northwest Acceptance Corp. v. Lynnwood Equip., Inc., 841 F.2d 918,

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925-26 (9th Cir. 1988). Nor is it the time to ask the Court to rethink its analysis. See

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United States v. Rezzonico, 32 F. Supp. 2d 1112, 1116 (D. Ariz. 1998) (citing Above the
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Belt, Inc. v. Mel Bohannon Roofing, Inc., 99 F.R.D. 99, 101 (E. D. Va. 1983)).

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Any motion to alter or amend judgment pursuant to Rule 59(e) must “be filed no

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later than 28 days after entry of the judgment.” Fed. R. Civ. P. 59(e). A judgment may

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not properly be reopened under Rule 59 “‘absent highly unusual circumstances[.]’”

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Weeks v. Bayer, 246 F.3d 1231, 1236 (9th Cir. 2001) (citation omitted). The Court may

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do so only if (1) it is presented with newly discovered evidence, (2) it committed clear

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error or the initial decision was manifestly unjust, or (3) there is an intervening change in

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controlling law. See Sch. Dist. No. 1J, Multnomah County, Or. v. ACandS, Inc., 5 F.3d

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1255, 1263 (9th Cir. 1993); Zimmerman v. City of Oakland, 255 F.3d 734, 740 (9th Cir.

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2001). “This requirement is a high hurdle … to meet.” Weeks, 246 F.3d at 1236.

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The Court may grant a motion for relief from judgment pursuant to Rule 60(b)

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only “upon a showing of (1) mistake, surprise, or excusable neglect; (2) newly discovered

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evidence; (3) fraud; (4) a void judgment; (5) a satisfied or discharged judgment; or

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(6) extraordinary circumstances which would justify relief.” Id. at 1263; see Fed. R. Civ.

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P. 60(b); Allmerica Fin. Life Ins. & Annuity Co. v. Llewellyn, 139 F.3d 664, 666 (9th Cir.

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1997) (stating that party must show “extraordinary circumstances” to obtain relief under

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Rule 60(b)(6)).

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III.

Analysis.

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Plaintiffs base their claims for relief under Rules 59(e) and 60(b) on clear error.

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Plaintiffs allege that the Court committed two clear errors. First, Plaintiffs claim the

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Court erred in finding that the Repayment Agreement was not a valid contract for failure

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of consideration. Second, Plaintiffs claim the Court erred in denying them an opportunity

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to amend their complaint. Clear error is an exacting standard that requires a clear

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conviction of error. Teamsters Local 617 Pension and Welfare Funds v. Apollo Group,

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Inc., 282 F.R.D. 218, 220 (D. Ariz. 2012). The movant must show “wholesale disregard,

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misapplication, or failure to recognize” controlling law. Id.

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A.

Count 1: Lack of Consideration.

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In response to Plaintiffs’ motion, the Court conducted further research regarding
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the validity of consideration for the Repayment Agreement. The Court was unable to

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find any authority to support an argument that the mere restructuring of preexisting

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contractual payments is valid consideration in Arizona.

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financial agreement in a manner that provides all of the benefit to one party and all of the

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detriment to the other is not a valid contract. See K-Line Builders, Inc. v. First Federal

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Sav. & Loan Ass’n, 677 P.2d 1317, 1321 (Ariz. Ct. App. 1983) (holding that there was no

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consideration for an agreement that raised the interest rate in an existing lending

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contract). Valid consideration requires that there be a mutuality of obligations, and

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mutuality fails where only one party is obligated to perform. See Carroll v. Lee, 712 P.2d

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923, 926 (Ariz. 1986). Just as the revision in K-Line lacked consideration because one

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party bore the entire burden and the other reaped the entire benefit, the Repayment

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Agreement lacks consideration because Chase is the only party burdened.

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received a less advantageous payment schedule and Plaintiffs received the benefit of

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restructured payments. Consideration fails because there is no mutuality of obligations.

Restructuring a preexisting

Chase

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Plaintiffs argue that the Court’s reasoning overlooks A.R.S. § 44-121, which says

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that “every contract in writing imports a consideration.” Doc. 24 at 3; see also A.R.S.

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§ 44-121. Plaintiffs argue that this statute confirms that the written Repayment

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Agreement included valid consideration. Id. at 3-4.

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This is a new argument that should have been raised in Plaintiffs’ original briefs.
Plaintiffs cannot raise it for the first time in a motion for reconsideration.

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In addition, this new argument does not change the outcome of the motion to

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dismiss. Section 44-121 creates a presumption of consideration, with the burden of proof

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on the party claiming a lack of consideration. Bank of the West, Inc. v. Organic Grain &

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Milling, Inc., No. CV-08-2220-PHX-FJM, 2010 WL 995459, at *1 (D. Ariz. Mar. 2010);

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see also Dunlap v. Fort Mohave Farms, Inc., 363 P.2d 194, 198 (Ariz. 1961). The Court

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honored that presumption by taking all allegations of the Amended Complaint as true.

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Defendants then carried their burden of showing that the Repayment Agreement lacked

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valid consideration. Defendants successfully rebutted the presumption of consideration
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imported in written agreements.

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Plaintiffs claim that the presumption established by § 44-121, coupled with the

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language of the Repayment Agreement – “in consideration of the Recitals above, the

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mutual promises contained herein” – creates a question of fact to be resolved at trial. The

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Court disagrees.

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dismiss if the allegations in the complaint suffice to establish the defense. Jones v. Bock,

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549 U.S. 199, 215 (2007).

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consideration. It alleged that in exchange for withholding legal action, Chase would

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accept the “monthly payment of $4,562.89 due under the Modification Agreement” plus

Affirmative defenses may properly be considered on a motion to

The complaint was sufficient to establish a failure of

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“payment of arrearages due under the Modification Agreement.”

Amended Complaint

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¶¶ 11-13. The Amended Compliant establishes that Plaintiffs’ promise to Chase in the

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Repayment Agreement, including the payment of arrearages, was a preexisting legal

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obligation and therefore failed as consideration. Plaintiffs have not shown clear error.

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B.

Count Two: Opportunity to Amend the Complaint.

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Plaintiffs claim that they expressly requested permission to cure pleading

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deficiencies through amendment, and that it was clear error to deny them that

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opportunity. Doc. 24 at 4. Chase argues that amendment was futile because Plaintiffs

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failed, both in opposition to the motion to dismiss and in the pending motion, to show

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that amending the complaint could cure the defects. Doc. 25 at 5. The Court agrees.

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Leave to amend a complaint should be freely given when justice requires.

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Klamath-Lake Pharmaceutical Ass’n v. Klamath Medical Serv. Bureau, 701 F.2d 1276,

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1292 (9th Cir. 1983) (holding that a proposed amendment would not affect the outcome

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of the lawsuit). Futile amendments should not be permitted. Id. The decision to allow

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leave to amend is at the Court’s discretion. Id. Denying leave to amend without a

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justifying reason is an abuse of discretion. Foman v. Davis, 371 U.S. 178, 182 (1962).

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Plaintiffs argue that leave to amend should have been granted unless it appeared

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beyond doubt that no set of facts could be proved that would entitle them to relief.

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Doc. 24 at 4; see also DCD Programs, Ltd. V. Leighton, 833 F.2d 183, 188 (9th Cir.
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1987) (finding that the district court erred in denying leave to amend without giving any

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explanation of the reason). The Court concluded and concludes again, however, that

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Plaintiffs could not cure the defects in the Amended Complaint. Chase argued in the

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motion to dismiss that the Repayment Agreement was not a valid contract for lack of

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consideration. Doc. 7 at 5. In response, Plaintiffs failed to present the Court with any

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facts that would support their claim that consideration for the contract was valid. Doc. 22

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at 4-5, 12-13. Although Plaintiffs argue that the Court should have granted them leave to

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amend, they still do not make any showing that they could cure the defects through

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amendment. Doc. 24 at 4. Nor have they provided any evidence in their documents

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supporting reconsideration that supports the finding of valid consideration.

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Klamath-Lake, Plaintiffs did not propose an amendment that would alter the outcome of

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the case. Unlike DCD Programs, the Court had a valid reason for denying leave to

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amend, and gave an explanation of that reason in the order dismissing the Amended

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Complaint. Doc. 22 at 12-13. Because Plaintiffs’ proposed amendment was futile, the

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Court did not commit clear error in denying leave to amend the complaint.

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IT IS ORDERED:

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Plaintiffs’ motion to alter or amend judgment (Doc. 24) is denied.

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2.

The Clerk is directed to terminate this matter.

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Dated this 13th day of June, 2013.

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As in