Thomasson et al v. First Horizon Home Loans et al

Filing 60

ORDER granting 23 Defendants' Motion to Dismiss. ORDER, to the extent that Plaintiffs' Response can be construed as a Motion for Judgment on the Pleadings, denying Plaintiffs' Response to Defendants Answer and Motion for Judgment on the Pleadings 51 . ORDER dismissing Counts 3, 4, 5, 6, 11, 12, and 13 from the Complaint. ORDER dismissing LoanCare, ServiceLink, Quality Loan Service Corporation, and McCarthy, Holthus & Levine as Defendants in this action. Signed by Magistrate Judge Michelle H Burns on 4/21/11.(TLJ)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Lincoln W. Thomasson and Tracy L.)
)
Thomasson, husband and wife,
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Plaintiffs,
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vs.
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First Horizon Home Loans, Metlife Home)
Loans, Loancare, Servicelink, Quality )
Loan Service Crop., McCarthy Holthus )
Levine, Federal Home Loan Mortgage )
Corporation (Freddie Mac), its assignees )
and/or Successors and Red White and Blue)
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Enterprises 1-10, inclusive,
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Defendants.
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No. CV 10-08192 PCT-MHB
ORDER

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This matter comes before the Court on consideration of a Motion to Dismiss filed by
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Defendants LoanCare, ServiceLink, Quality Loan Service Corporation, and McCarthy,
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Holthus & Levine (hereinafter, the “Defendants”) on November 23, 2010 (Doc. 23).
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Plaintiffs have filed a Response to Defendants Answer and Motion for Judgment on the
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Pleadings (Doc. 51) and Defendants have filed a Reply (Doc. 54). The request for oral
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argument will be denied because the parties have fully briefed the issues and oral argument
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will not aid in the Court’s decision. See Partridge v. Reich, 141 F.3d 920, 926 (9th Cir.

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1998); Lake at Las Vegas Investors Group, Inc. v. Pacific Malibu Development Corp., 933
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F.2d 724, 729 (9th Cir. 1991).

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BACKGROUND

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On October 12, 2010, Plaintiffs filed a 51-page Amended Complaint against Defendants, and

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other entities (Doc. 3). Defendants seek dismissal of the following causes of action set forth

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in the Complaint: Count 3, against Defendant Quality Loan Service Corporation for breach

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of contract (Id., at 29), Count 4, against Defendant LoanCare for breach of contract (Id., at

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31), Count 5, against Defendant ServiceLink for breach of contract (Id., at 33), Count 6,

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against Defendant McCarthy Holthus Levine for breach of contract (Id., at 35), Count 11,

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against Defendant Quality Loan Service Corporation, for beach of the covenant of good faith

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and fair dealing (Id., at 43), Count 12, against Defendant LoanCare for breach of the

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covenant of good faith and fair dealing (Id., at 44), and Count 13, against Defendant

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ServiceLink for breach of covenant of good faith and fair dealing (Id., at 45).

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Defendant LoanCare is a loan processing company; Defendant ServiceLink is a loan

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servicing company; Defendant Quality Loan Service Corp., is a foreclosure processing

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company; and McCarthy Holthus Levine, are attorneys at law, and serves as an agent for

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Freddie Mac. (Doc. 3, ¶¶ 3-4.)

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Plaintiffs allege in their complaint, as is pertinent here, that they refinanced the 2001

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purchase of their residence with a mortgage loan from Horizon Home Loans. (Doc. 3, ¶62.)

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In November, 2009, Plaintiffs defaulted on their mortgage. (Id.,¶ 65.) In March, 2010, they

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contacted their mortgage servicer, First Horizon Home Loans/MetLife Home Loans

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(hereinafter “First Horizon”) to ask for a loan modification. (Id., ¶ 67.) On April 13, 2010,

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a loan modification packet was received by Defendant LoanCare. (Id., ¶ 68.) Plaintiffs then

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received a Home Affordable Modification Program (“HAMP”) packet, and were considered

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by First Horizon for the HAMP program. (Id., ¶¶69-70.) On May 14, 2010, First Horizon

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advised Plaintiffs that they were being considered for the HAMP program. (Id., ¶ 70.)

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Although Plaintiff acknowledge that they were never notified of a denial of consideration,

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Plaintiffs “surmise that they were never considered.” (Id., ¶10, FN2.)

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As a result of the economic downturn in the United States, and the resulting rise in

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home foreclosures, HAMP was launched by the Obama Administration, as part of the
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Troubled Asset Relief Program (“TARP”), to stem the escalating tide of home foreclosures.

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(Doc. 3, ¶ 5.) On May 5, 2010, First Horizon as a participating servicer with Freddie Mac

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entered into a HAMP agreement. (Id., ¶ 7.) Plaintiffs allege that they met the HAMP

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eligibility criteria to have their mortgage reviewed for modification. (Id., ¶ 8) (Id., ¶ 10.a.)

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On June 17, 2010, Plaintiffs received notification from Defendant Quality Service

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Corporation that a trustee sale of their home would be conducted, and on July 26, 2010,

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Plaintiffs received relocation assistance letter from Defendant McCarthy Holthus Levine.

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(Doc. 3, ¶¶ 71-72.) On August 6, 2010, Plaintiffs received an eviction notice. (Id., ¶ 73.)

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On August 14, 2010, Plaintiffs were advised by Defendant ServiceLink that it no longer had

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access to Plaintiffs’ file or information. A forcible detainer action was instituted and on

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September 10, 2010, the detainer was upheld in the Arizona Superior Court to remove

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Plaintiffs from their home. (Id., ¶¶ 75-76.)

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STANDARD OF REVIEW
A complaint must contain;
“(1) a short and plain statement of the grounds for the court’s jurisdiction,
unless the court already has jurisdiction and the claim needs no new
jurisdictional support;
(2) a short and plain statement of the claim showing that the pleader is entitled
to relief; . . .”
Fed. R. Civ. P. 8(a).

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“Pleadings must be construed to do justice.” Fed. R. Civ. P. 8(e).
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These pleading requirements are to be liberally construed. Swierkiewicz v. Sorema,
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N.A., 534 U.S. 506 (2002). The purpose of notice pleading is to “give the defendant fair
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notice of what the plaintiff’s claim is and the grounds upon which it rests.” In re Marino, 37
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F.3d 1354, 1357 (9th Cir. 1994). A Rule 12(b)(6) dismissal for failure to state a claim can be

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based on either: (1) the lack of a cognizable legal theory; or (2) insufficient facts to support
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a cognizable legal claim. See Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.
1990); Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984).

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All allegations of material fact are taken as true and construed in the light most
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favorable to the plaintiff. See Smith v. Jackson Terrier Network of N. Cal. v. Am. Kennel
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Club, Inc., 507 F.3d 1027, 1035 (9th Cir. 2005). Though the complaint need not contain

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detailed factual allegations, the factual allegations must be enough to raise the claimed right

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to relief above the speculative level and to create a reasonable expectation that discovery will

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reveal evidence to support the claim. Bell Atlantic Corp. v. Twombly 550 U.S. 544 (2007).

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In addition, the court must assume that all general allegations “embrace whatever specific

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facts might be necessary to support them.” Peloza v. Capistrano Unified Sch. Dist., 37 F.3d

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517, 521 (9th Cir.1994). Similarly, legal conclusions couched as factual allegations are not

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given a presumption of truthfulness, and “conclusory allegations of law and unwarranted

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inferences are not sufficient to defeat a motion to dismiss.” Pareto v. F.D.I.C., 139 F.3d 696,

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699 (9th Cir.1998). To survive a motion to dismiss, a complaint must contain sufficient

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factual matter, which, if accepted as true, states a claim to relief that is “plausible on its face.”

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Ashcroft v. Iqbal, —U.S. —, —, 129 S.Ct. 1937, 1949 (2009). The issue is not whether the

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plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to

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support the claims. See Gilligan v. Jamco Development Corp.,108 F.3d 246, 249 (9th Cir.

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1997).

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DISCUSSION

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Defendants assert that Plaintiffs have no standing to assert the claims against

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Defendants based upon the “HAMP contract between Defendants First Horizon . . . and

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Freddie Mac.” (Doc. 3, ¶18.) Defendants argue, that even if such a contract exists, Plaintiffs

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are not parties to the contract, nor are they third party beneficiaries. (Doc. 23, at 3.)

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Plaintiffs do not dispute that they are not parties to the contract, but argue that they are

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“intended third party beneficiar[ies]” to the HAMP agreement. (Doc. 51, at 1.)

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In order to recover as a third party under a contract, the party must show that the

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contract was made for its direct benefit, i.e., that it is an intended beneficiary of the contract.

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Klamath Water Users Protective Ass’n v. Patterson, 204 F.3d 1206 (9th Cir. 2000). In

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Klamath, the Ninth Circuit defines third party beneficiaries as follows:

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(1) Unless otherwise agreed between promisor and promisee, a beneficiary of
a promise is an intended beneficiary if recognition of a right to performance
in the beneficiary is appropriate to effectuate the intention of the parties and
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... (b) the circumstances indicate that the promisee intends to give the
beneficiary the benefit of the promised performance.
(2) An incidental beneficiary is a beneficiary who is not an intended
beneficiary.
Id., at 1211.

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To establish third party beneficiary rights, a party must show that the contract “reflects the

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express or implied intention of the parties to the contract to benefit the third party.” Id.

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The Court, in Hoffman v. Bank of America, 2010 WL 2635773 (N.D.Cal. 2010),

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specifically found that borrowers are not third party beneficiaries under the HAMP servicers

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agreement. In that case, the plaintiff had sought a preliminary injunction to enjoin

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defendants from foreclosing on his residence. The Court cited numerous cases “weighing

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decisively in favor of defendant,” that held that a borrower is not a third party beneficiary of

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the HAMP agreement, and also noted that “[a]s many courts have recognized, it would be

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unreasonable for a qualified borrower seeking a loan modification to rely on the HAMP

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servicer’s agreement as granting him enforceable rights since the agreement does not actually

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require that the servicer modify all eligible loans, nor does any of the other language of the

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contract demonstrate that the borrowers are intended beneficiaries.” Hoffman, 2010 WL *3-

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4. Accord, Marks v. Bank of America, N.A., 2010 WL 2572988 *5 (D.Ariz. 2010)

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(“plaintiff’s claim did not meet the requisite ‘clear intent’ standard, and that [w]hile the intent

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of the HAMP might be to benefit qualified borrowers, statements of purpose are not enough

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to defeat the presumption against intended beneficiaries under government contracts”);

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Schwartz v. Chase Home Finance, LLC, et. al., 2010 WL 5151326 *1 (D.Ariz. 2010)

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(HAMP is a federal law, not a contract between plaintiff and defendant).

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The Plaintiffs cite one case in support of their position: Marques v. Wells Fargo Home

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Mortgage, Inc., 2010 WL 3212131 (S.D. Cal. 2010). However, the “vast majority of courts

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to consider whether borrowers are intended beneficiaries of HAMP have determined that

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they are not.” Orcilla v. Bank of America, N.A., 2010 WL 5211507 *3 (N.D.Cal. 2010)

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(recognizing the Court’s disagreement with the Marques conclusion.)

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Even if Plaintiffs could establish that they are third-party beneficiaries under the

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HAMP contract, the Defendants are not parties to the HAMP agreement. Plaintiffs argue
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in their Reply that the Defendants nonetheless are liable as “agents” or “subagents” of the

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parties to the agreement, but provide no authority for that proposition. (Doc. 51, at 6-7.)

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Because Defendants are not parties to the HAMP agreement, Defendants can not be liable

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for a breach of the covenant of good faith and fair dealing that may be implied therein .

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CONCLUSION

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Plaintiffs lack standing to bring a suit for breach of contract or breach of the covenant

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of good faith and fair dealings against Defendants because Plaintiffs are incidental, not

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intended beneficiaries of the HAMP agreement, and in any event, Defendants are not liable

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as they are not parties to the HAMP agreement.

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IT IS THEREFORE ORDERED granting Defendants’ Motion to Dismiss (Doc.
23).

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IT IS FURTHER ORDERED, to the extent that Plaintiffs’ Response can be

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construed as a Motion for Judgment on the Pleadings, denying Plaintiffs’ Response to

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Defendants Answer and Motion for Judgment on the Pleadings (Doc. 51).

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IT IS FURTHER ORDERED dismissing Counts 3, 4, 5, 6, 11, 12, and 13 from the
Complaint.
IT IS FURTHER ORDERED dismissing LoanCare, ServiceLink, Quality Loan
Service Corporation, and McCarthy, Holthus & Levine as Defendants in this action.
DATED this 21st day of April, 2011.

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