Barone v. Chase Home Finance LLC et al
Filing
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ORDER GRANTING defendants' motion to dismiss with prejudice (doc. 28). Because all the remaining claims are dismissed against all remaining defendants, the CLERK SHALL ENTER JUDGMENT. Signed by Judge Frederick J Martone on 8/19/2011.(KMG)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE DISTRICT OF ARIZONA
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Lady Jennifer Barone, individually and on)
behalf of a class of similarly situated)
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individuals,
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Plaintiff,
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vs.
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Chase Home Finance LLC,
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Defendant.
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No. CV 11-08016-PCT-FJM
ORDER
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The court has before it defendants' motion to dismiss remanded claims (doc. 28),
plaintiff's response (doc. 29), and defendants' reply.
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In 2005, Carmine Barone, plaintiff's ex-husband entered into a loan transaction,
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secured by a deed of trust, with Ampro Mortgage to purchase property in Prescott, Arizona.
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Carmine and plaintiff became joint tenants of the property in 2007. Following a divorce in
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2008, Carmine quitclaimed his interest in the property to plaintiff and plaintiff was awarded
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exclusive title to the property pursuant to a divorce decree. Plaintiff, however, was not a
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signatory on the note or deed of trust and does not allege that she ever became the obligor
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under the promissory note or the trustor on the deed of trust.
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At some point, the servicing of the note was transferred to defendant Chase. In July
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2009, plaintiff contacted Chase to request a loan modification. Plaintiff's payments were
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current. A representative from Chase informed her that she could not be considered for a
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modification until she was in default. Plaintiff alleges that in reliance on this statement, she
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missed her August 2009 payment and submitted a hardship letter. In September 2009,
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plaintiff received correspondence addressed to Carmine Barone from Chase to start the Home
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Affordable Modification Program ("HAMP") loan modification process. Plaintiff submitted
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the application and included the first modified payment. From October 2009 through
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September 1, 2010 plaintiff timely submitted trial payments of $620.00 to Chase and
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continued to attempt to secure a permanent loan modification. Plaintiff alleges that she
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submitted all requested information. Nevertheless, on October 12, 2010 a Notice of Trustee's
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Sale was recorded and a Trustee's Sale was scheduled for January 11, 2011. On November
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19, 2010, Chase informed plaintiff that it would not accept plaintiff's request for a loan
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modification because plaintiff was not a party to the original underlying loan.
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Plaintiff brought this action against Chase, MERSCORP Inc., and Mortgage
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Electronic Registration Systems Inc. The parties stipulated to postpone the Trustee's Sale
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(doc. 19). On April 4, 2011, Judge Teilborg granted the parties' motion to transfer the case
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to the consolidated multidistrict litigation, In re Mortgage Electronic Registration System
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(MERS) litigation, 09-MD-2119-JAT (doc. 25). After reviewing the complaint and motion
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to bifurcate, Judge Teilborg remanded certain claims to us (doc. 26). Accordingly, we now
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have claims 1-3 and 6 for (1) fraud in the inducement; (2) consumer fraud; (3) breach of the
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duty of good faith and fair dealing; and (4) unjust enrichment. Defendants seek dismissal of
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all four claims.
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Defendants first argue that plaintiff lacks standing. Defendants contend that all of
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plaintiff's claims arise from the denial of her loan modification request. Because plaintiff
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admits that she is neither an obligor on the promissory note nor a trustor on the deed of trust,
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defendants assert that plaintiff does not have standing to argue that she was wrongfully
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denied a loan modification. Plaintiff responds that the note and deed of trust do not form the
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foundation of her claims. Rather, Chase's actions in "inviting plaintiff to apply for a loan
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modification and assumption, and the months of contact with plaintiff" underlie the claims.
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Response at 7.
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A party must have standing. Elk Grove Unified School District v. Newdow, 542 U.S.
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1, 11, 124 S.Ct. 2301, 2308 (2004). The Constitution requires plaintiff to show that
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defendants' conduct caused her to suffer an injury in fact that may be redressed by a
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favorable judgment. Id. Here, plaintiff is not a party to the underlying promissory note or
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deed of trust. Although she has title to the property, there is no allegation that she became
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the obligor or trustor. To the extent that plaintiff's claims arise out of a refusal to modify the
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note and deed of trust, to which she is not a party, plaintiff lacks standing.
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Even if we assume that plaintiff's claims arise not from the underlying note and deed
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of trust, but from her individual dealings with Chase in attempting to assume and modify the
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note and deed of trust, the claims fail as a matter of law. Plaintiff asserts claims for
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fraudulent inducement and consumer fraud. Plaintiff alleges that Chase fraudulently induced
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her to default on the loan and make payments toward obtaining a loan modification for which
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she was not even eligible. Claims for fraudulent inducement and consumer fraud require,
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among other things, a false representation and detrimental reliance. Nielson v. Flashberg,
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101 Ariz. 335, 338, 419 P.2d 514, 517 (1966); Parks v. Macro-Dynamics, Inc., 121 Ariz.
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517, 520, 591 P.2d 1005, 1008 (Ct. App. 1970) (stating that an action for consumer fraud
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requires that "a false promise or misrepresentation made in connection with the sale or
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advertisement of merchandise and the hearer's consequent and proximate injury"). Here,
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plaintiff's allegations do not support her claims as a matter of law.
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Plaintiff claims she detrimentally relied on Chase's statements that she must be in
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default on her loan to be considered for a modification. Such a statement is not false and
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actually proved to be true. Once plaintiff was in default Chase considered her for a
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modification. See Narramore v. HSBC Bank USA, N.A., No. 09-CV-635-TUC-CKJ, 2010
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WL 2732815, *9 (D. Ariz. July 7, 2011) (concluding the same).
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Plaintiff also alleges that Chase misrepresented to plaintiff that she was eligible for
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a loan modification and assumption. Even viewing the facts in the light most favorable to
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plaintiff, however, all Chase ever represented to plaintiff was that it was considering her
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request to assume and modify the note and deed of trust. Chase never told plaintiff that she
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was guaranteed a loan modification and assumption. Chase did consider plaintiff's request,
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but ultimately decided not to grant her the assumption and modification. Chase is under no
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obligation to grant loan modifications. See e.g., Puzz v. Chase Home Finance, LLC., 763
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F. Supp. 2d 1116, 1121-22 (D. Ariz. 2011). Therefore, plaintiff's alleged injury of being
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denied a loan modification cannot support a claim for relief as a matter of law.
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Plaintiff also alleges detrimental reliance by making modified loan payments, $620.00
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instead of $1,395.98, to continue negotiations. These payments, however, were money
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already owed to Chase and allowed plaintiff to remain in her home. Regardless of plaintiff's
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motivations for making the payments, the only result was making payments to defendants
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that were already due. Plaintiff has alleged no injury for the payments, nor could she. See
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Narramore, 2010 WL 2732815 at *9; Steel v. JPMorgan Chase Bank, N.A., No. 2:10-CV-
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2263-PHX-RCJ, Dkt. No. 38 (D. Ariz. 2011). Accordingly, we dismiss plaintiff's claims for
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fraudulent inducement and consumer fraud.
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The third claim is for breach of the covenant of good faith and fair dealing. This
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claim fails because plaintiff is not a party to the relevant contracts and therefore cannot allege
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that anyone prevented her from receiving the benefit of the bargain. See Forbes v. BlueCross
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and BlueSheild, 176 Ariz. 407, 409, 861 P.2d 692, 694 (Ct. App. 1993) (holding that an
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insurer's duty of good faith and fair dealing did not extend to insured's wife because she was
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not a party to the policy); FDIC v. Craft, 157 F.3d 697, 706 (9th Cir. 1998) (finding that a
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wife lacked standing to assert claims arising from contract to which she was not a party).
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Plaintiff argues that a different "contract formed as a result of the totality of the
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circumstances related to the temporary loan modification agreement and assumption." In
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Narramore, the court considered whether negotiations related to a possible loan modification
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were sufficient to state a claim for breach of contract and breach of the covenant of good
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faith and fair dealing. 2010 WL 2732815 at *4. Absent any written agreement to negotiate
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in good faith or allegation of such, the court found that both claims failed as a matter of law.
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Id. at *5-6 see also Silving v. Wells Fargo Bank, NA, __ F. Supp. 2d __, 2011 WL 2669246,
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*13 (D. Ariz. July 7, 2011) (stating that the covenant of good faith does not typically extend
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to negotiations). We reach the same conclusion here.
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Plaintiff's final claim is for unjust enrichment. Plaintiff alleges that in the event a
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contract between her and Chase is not found, she is entitled to a return of the funds paid to
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Chase under the doctrine of unjust enrichment because Chase accepted funds it had no right
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to accept. One of the elements of an unjust enrichment claim is an absence of justification
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for the "enrichment" of the defendant and the "impoverishment" of the plaintiff. Cmty.
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Guardian Bank of Hamlin, 182 Ariz. 627, 989 P.2d 1005, 1009 (Ct. App. 1995). Here,
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plaintiff simply made reduced mortgage payments to Chase for the home she was living in.
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Chase had every right and justification to demand and receive the payments. Plaintiff was
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not impoverished by making them.
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THEREFORE, IT IS ORDERED GRANTING defendants' motion to dismiss with
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prejudice (doc. 28). Because all the remaining claims are dismissed against all remaining
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defendants, the CLERK SHALL ENTER JUDGMENT.
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DATED this 19th day of August, 2011.
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