Herold v. U.S. Bank NA et al

Filing 14

ORDER granting 8 Defendants' Motion to Dismiss. These claims are dismissed with prejudice. Signed by Judge Frederick J Martone on 9/13/11.(LSP)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Plaintiff,
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vs.
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U.S. Bank, N.A., as trustee for WaMu)
Mortgage Pass Through Certificate for)
WMALT Series 2007-OA3 Trust c/o)
JPMorgan Chase Bank, N.A., and)
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JPMorgan Chase Bank, N.A.,
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Defendants.
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James Herold,

No. CV 11-08108-PCT-FJM
ORDER

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The court has before it defendants' motion to dismiss (doc. 8), plaintiff's response
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(doc. 11), and defendants' reply (doc. 13).
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I. Background
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In January 2007, plaintiff executed a promissory note in favor of Washington Mutual
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Bank ("WaMu") for $512,000. This loan, secured by a deed of trust, was used to purchase
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a condominium in Lake Havasu City, Arizona. Plaintiff later defaulted on his loan payments
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and, in January 2009, began applying for loan modifications with WaMu and its successor
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in interest, Chase Bank ("Chase"). These loan modifications are governed by the Home
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Affordable Mortgage Program ("HAMP"). "HAMP aims to prevent avoidable home
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foreclosures by encouraging loan servicers to reduce the required monthly mortgage
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payments" and thereby enabling homeowners in or near default to obtain permanent loan

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modifications. Bourdelais v. J.P. Morgan Chase Bank, N.A., No. 3:10CV670-HEH, 2011

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WL 1306311, at *1 (E.D. Va. Apr. 1, 2011). In step one of a modification, the loan servicer

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offers the borrower a three-month Trial Period Plan ("TPP"). Step two, the permanent

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modification, occurs only if all conditions of the TPP agreement are met.

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Plaintiff alleges that he was approved for a loan modification program and would be

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required to make payments for a three-month trial period under his TPP. He also alleges that

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a Chase representative told him he would receive a permanent modification if he made all

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three trial payments. According to plaintiff, Chase's representative gave him an estimate of

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the payment amounts but Chase never communicated the exact amounts, and thus plaintiff

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was unable to make the payments.

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Chase assigned its interest in the deed of trust to U.S. Bank on March 30, 2011, and

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on that date U.S. Bank issued a notice of trustee's sale to plaintiff. The sale was scheduled

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for June 30, 2011. Plaintiff filed a motion for temporary restraining order on June 28, 2011,

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which the Superior Court of Arizona in Mohave County granted the next day. Notice of

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Removal, ex. 1 at 6, ex. 4 at 4-6. Plaintiff's amended complaint, filed July 6, 2011, alleges

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breach of contract and breach of the implied covenant of good faith and fair dealing. Plaintiff

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also seeks an accounting and injunctive and declaratory relief. The defendants filed a notice

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of removal on July 8, 2011 and a motion to dismiss on July 15, 2011.

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II. Legal Standard

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If a complaint does not state a plausible claim for relief on its face, it will not survive

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a Rule 12(b)(6), Fed. R. Civ. P., motion to dismiss for failure to state a claim. Ashcroft v.

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Iqbal, 556 U.S. ___, 129 S. Ct. 1937, 1950 (2009). "A claim has facial plausibility when the

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plaintiff pleads factual content that allows the court to draw the reasonable inference that the

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defendant is liable for the misconduct alleged." Id. at 1949. When ruling on a motion to

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dismiss, this court must accept a plaintiff's factual allegations and reasonable inferences as

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true, but is "not bound to accept as true a legal conclusion couched as a factual allegation."

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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 1965 (2007) (quoting
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Papasan v. Allain, 478 U.S. 265, 286, 106 S. Ct. 2932, 2944 (1986)). Dismissal under Rule

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12(b)(6) may be "based on the lack of a cognizable legal theory or the absence of sufficient

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facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d

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696, 699 (9th Cir. 1990).
III. Breach of Contract

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"To prevail on a claim for breach of contract, the plaintiff must prove the existence

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of a contract between the plaintiff and defendant, a breach of the contract by the defendant,

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and resulting damage to the plaintiff." Frank Lloyd Wright Found. v. Kroeter, 697 F. Supp.

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2d 1118, 1125 (D. Ariz. 2010). Plaintiff alleges that he and Chase had a contract agreeing

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to a loan modification and the defendants breached this contract by not supplying plaintiff

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with the information necessary for him to perform. Specifically, he appears to argue that the

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TPP itself is a contract between the parties, Chase never provided final payment amounts for

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his trial period, and plaintiff was thus unable to make trial payments. Additionally, plaintiff

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claims Chase promised in the TPP to permanently modify his loan and then later reneged on

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its promise. Nowhere does plaintiff identify a specific provision which was breached.

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Plaintiff follows this course of action because he knows he will be unsuccessful

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asserting a cause of action under HAMP. This court has previously recognized that private

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parties do not have standing to allege claims based on HAMP. Wright v. Chase Home Fin.

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LLC, No. 11-CV-0095-PHX-FJM, 2011 WL 2173906, at *2 (D. Ariz. June 2, 2011).

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Whether the TPP itself can be the basis for a breach of contract suit is an unsettled

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question, though most courts have dismissed such claims. See Rackley v. JPMorgan Chase

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Bank, N.A., No. SA-11-CV-387-XR, 2011 WL 2971357, at *3 (W.D. Tex. July 21, 2011)

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(collecting cases). Notably, while plaintiff claims the TPP is the contract on which he is

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suing, he failed to include this agreement with his complaint. The defendants attached an

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unsigned copy of this document to their reply in support of their motion to dismiss. Reply,

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ex. A.

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Even assuming a TPP could be an enforceable contract, the argument that it is
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enforceable in this case is unavailing. The second paragraph of the document states: "I

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understand that after I sign and return one copy of this Plan to the Lender, the Lender will

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review my modification package and send me written notice if I do not qualify for the Offer."

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Id. at 1. It appears that neither plaintiff nor defendants ever signed this document.

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Therefore, the TPP was merely an offer. Plaintiff did not accept this offer by words or

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conduct. He alleges he was unable to make the trial payments because he did not know the

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exact amount he needed to pay, but he has made no showing that he attempted to make a

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payment of any amount or that he paid the estimated amounts listed in the TPP. He has also

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failed to show that he provided Chase with required financial documentation. Plaintiff has

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not stated a claim for breach of contract on the basis of Chase's failure to provide exact

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amounts for his trial payments.

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As far as plaintiff alleges the TPP entitled him to permanent modification, he again

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fails to state a claim for breach of contract. His reading of the TPP is contrary to numerous

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provisions in the document which clearly state that temporary and permanent modification

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are separate. For instance, the TPP states that it is not a modification of the loan and "the

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Lender will not be obligated or bound to make any modification of the Loan Documents if

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the Lender determines that [borrower does] not qualify or if [borrower fails] to meet any one

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of the requirements under this Plan." Reply, ex. A § 2(G). Similarly, the borrower must

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agree that "all terms and provisions of the Loan Documents remain in full force and effect."

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Id. § 4(D). Whether or not the TPP is construed as a contract, defendants' denial of a

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permanent loan modification is not a breach of the terms of the TPP.

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IV. Breach of Implied Covenant of Good Faith and Fair Dealing

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Plaintiff also argues that the defendants breached their implied obligation of good

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faith and fair dealing by failing to provide plaintiff with information necessary for him to

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perform and by eventually declining to modify his loan. "Arizona law implies a covenant

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of good faith and fair dealing in every contract." Wells Fargo Bank v. Ariz. Laborers,

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Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 490, 38 P.3d

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12, 28 (2002). Without a contract, though, there is no covenant to breach. Because the TPP
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was not an enforceable contract, plaintiff does not have a viable claim based on an implied

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contractual covenant.

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V. Accounting

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Plaintiff seeks an accounting of amounts due under the loan but does not cite a single

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law underlying this right. As a result, he has not pled a plausible claim for relief. Even if

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his claim were pled with particularity, no state or federal law gives him a right to an

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accounting. "In Arizona, actions for an accounting are usually reserved to parties in a

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fiduciary relationship." Wright v. Chase Home Fin. LLC, No. 11-CV-0095-PHX-FJM, 2011

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WL 2173906, at *3 (D. Ariz. June 2, 2011). "Absent a special agreement, the debtor-creditor

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relationship is not a fiduciary relationship." Id. Arizona law provides a narrow statutory

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right to an accounting to homeowners facing foreclosure, but this right does not extend to the

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complete accounting apparently requested here. A.R.S. § 33-813(C); Kelly v. NationsBanc

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Mortg. Corp., 199 Ariz. 284, 286-87, 17 P.3d 790, 792-93 (Ct. App. 2001). Federal law

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does not provide a basis for an accounting, either. Borrowers have a right to receive certain

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information from a loan servicer under the Real Estate Settlement Procedures Act

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("RESPA"), but numerous courts agree that RESPA does not provide a statutory basis for an

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accounting. Brown v. Bank of America, N.A., No. CIV S-10-1758 LKK DAD PS, 2011 WL

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1253844, at *8 (E.D. Cal., Mar. 31, 2011) (citing cases). Plaintiff has not alleged that he

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submitted a qualified written request for information to his loan servicer, as required by

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statute. 12 U.S.C. § 2605(e)(1)(B). Nor has he alleged any actual damages, a required

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element of a RESPA claim. Id. § 2605(f)(1)(A). For the foregoing reasons, plaintiff's claim

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for an accounting is denied.

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VI. Injunctive and Declaratory Relief

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Finally, plaintiff's complaint includes claims for injunctive and declaratory relief. The

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claim for injunctive relief seeks a temporary restraining order to prevent foreclosure. As this

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order was granted by the Superior Court, this claim is moot. Both claims fail to state a cause

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of action. Under Arizona law, injunctions and declaratory judgments are "merely remedies

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that must be premised on some other legal theory." Carter v. HSBC Mortg. Corp., No. 10-5-

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CV-1002-PHX-MHM, 2010 WL 4792638, at *5 (D. Ariz. Nov. 18, 2010). Since this court

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has dismissed plaintiff's other causes of action, injunctive and declaratory relief are

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unavailable.

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Accordingly, IT IS ORDERED GRANTING defendants' motion to dismiss (doc.

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8). These claims are dismissed with prejudice because any amendment to the complaint

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would be futile.

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DATED this 13th day of September, 2011.

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