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Martinez v. Cenlar FSB

United States District Court, D. Arizona

September 3, 2014

Maria Laura Martinez, Plaintiff,
v.
Cenlar FSB, Defendant.

ORDER

CINDY K. JORGENSON, District Judge.

Pending before the Court are two Motions. On March 3, 2014, Defendant filed a Motion for Judgment on the Pleadings. (Doc. 35). Then, on March 14, 2014, Plaintiff filed a Motion for Leave to Amend Complaint. (Doc. 39).

The Court reviewed the parties' pleadings and heard oral argument on August 25, 2014. The Court will grant the Motion for Judgment on the Pleadings in part and deny it in part and will grant the Motion for Leave to Amend the Complaint.

I. Background[1]

A. Facts

Plaintiff purchased a house in Tucson, Arizona on March 7, 2008. (Doc. 11 at ¶7). In the spring of 2010, Plaintiff lost her job and began experiencing financial difficulties. ( Id. at ¶8). On August 9, 2010, Plaintiff received a Notice of Trustee Sale. Id. at ¶9. After negotiating with her lender, MeriWest Credit Union, the Trustee Sale was cancelled and her mortgage payments were temporarily reduced. Id. However, one year later in August 2011, the temporary modification of her mortgage payments expired and her payment was increased. Id. at ¶10.

Plaintiff made the first two mortgage payments after the expiration of the temporary loan modification; however, she was unable to continue making payments. Id. at ¶11. On August 26, 2011, Defendant, Plaintiff's loan servicer, signed a contract with the Arizona Department of Housing, which is responsible for running the Arizona Hardest Hit Fund ("HHF") program. Id. at ¶14. The contract provides that "[u]pon notification that a borrower has been conditionally approved for HHF, the Servicer shall not initiate the foreclosure process or, if the borrower is already in the foreclosure process, [shall delay] a foreclosure sale for 45 days, with any extensions by mutual consent of the Eligible Entity and the Servicer." Id. at ¶15.

In April 2012, Plaintiff received a foreclosure notice. Id. at ¶12. In response, Plaintiff applied for the HHF program for assistance with her mortgage. Id. She was approved for Underemployment Assistance through the HHF, which provides a maximum monthly assistance of $2, 000 for a term of 24 months. Id. at ¶13. On June 26, 2012, Defendant received an "I" record from the Arizona Department of Housing indicating their intent to provide payment assistance to Plaintiff through the HHF program. Id. at ¶¶16, 19.

On July 3, 2012, Plaintiff's house was sold at an auction without Plaintiff's knowledge. Id. at ¶21. On July 6, 2012, Defendant sent an objection to the Arizona Department of Housing regarding Plaintiff's HHF assistance because the house had been foreclosed on July 3, 2012. Id. at ¶22. The sale of Plaintiff's house was irreversible, and Plaintiff was forced to vacate her home in July 2012. Id. at ¶¶23, 26.

B. Procedural History

On July 3, 2013, Plaintiff filed a Complaint. (Doc. 1). On July 25, 2013, Defendant filed a Motion to Dismiss Plaintiff's Complaint Pursuant to Fed.R.Civ.P. 12(b)(6). (Doc. 7). On August 14, 2013, Plaintiff filed a First Amended Complaint, (Doc. 11), which superseded her original Complaint. See F.D.I.C. v. Jackson, 133 F.3d 694, 702 (9th Cir. 1998). After the filing of Plaintiff's First Amended Complaint, the Court denied Defendant's Motion to Dismiss as moot. (Doc. 18). Defendant filed an Answer to Plaintiff's First Amended Complaint on September 3, 2013. (Doc. 16).

In her First Amended Complaint, Plaintiff alleges four claims for relief: breach of contract, wrongful foreclosure, breach of the covenant of good faith and fair dealing, and negligent performance of an undertaking. On March 3, 2014, Defendant filed a Motion for Judgment on the Pleadings. (Doc. 35). Then, on March 14, 2014, Plaintiff filed a Motion for Leave to Amend Complaint. (Doc. 39). Defendant filed a Response to Plaintiff's Motion on March 28, 2014. (Doc. 40). Plaintiff filed a Response to Defendant's Motion on April 1, 2014. (Doc. 41). Defendant filed a Reply in support of its Motion for Judgment on the Pleadings on April 8, 2014. (Doc. 44). Plaintiff filed a Reply in support of her Motion for Leave to Amend Complaint on April 9, 2014. (Doc. 46).

II. Motion for Judgment on the Pleadings

A. Governing Standard

Fed.R.Civ.P. 12(c) provides that, "[a]fter the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings." Dismissal through a motion for judgment on the pleadings is appropriate "only if it is clear that no relief could be granted under any set of facts that could be proven consistent with the allegations.'" McGlinchy v. Shell Chemical Co., 845 F.2d 802, 810 (9th Cir.1988) ( quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984)). Judgment on the pleadings is appropriate when the moving party establishes that there are no material issues of fact to resolve and it is entitled to judgment as a matter of law. Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir.1989). "All allegations of fact of the opposing party are accepted as true." Austad v. United States, 386 F.2d 147, 149 (1967). Furthermore, all inferences reasonably drawn from the alleged facts must be construed in favor of the responding party. General Conference Corp. of Seventh-Day Adventists v. Seventh Day Adventist Congregational Church, 887 F.2d 228, 230 (9th Cir.1989). However, conclusory allegations are insufficient to defeat a motion for judgment on the pleadings. McGlinchy, 845 F.2d at 810.

The Court may consider any matter set forth in the complaint which is subject to judicial notice. Outdoor Media Group, Inc. v. City of Beaumont, 506 F.3d 896, 899 (9th Cir.2007). The Court may take judicial notice of "matters of public record" outside the pleadings without converting a motion for judgment on the pleadings into a motion for summary judgment. Fed.R.Evid. 201; see also Lexicon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 102 F.3d 1524, 1537 (9th Cir.1996), rev'd on other grounds, 523 U.S. 26 (1998) (holding that a district court may consider matters of public record, including court records that have a direct relation to the matters at issue, without converting a motion to dismiss into a motion for summary judgment); Mann v. GTCR Golder Rauner, L.L.C., 351 B.R. 714 (D.Ariz.2006) (same). The Court also may consider a document that is attached and referred to in the complaint without converting the motion into a motion for summary judgment if its authenticity is not questioned. Branch v. Tunnell, 14 F.3d 449, 453-454 (9th Cir.1994), overruled on other grounds, Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002).

B. Discussion

1. Breach of Contract

Defendant entered into a Servicer Participation Agreement (Agreement) with the Arizona Department of Housing on August 26, 2011, in which Defendant agreed to participate in the HHF program. (Doc. 11 at ¶31). The purpose of the HHF program is to assist unemployed homeowners to keep their homes by providing monetary assistance. ( Id. at ¶¶32, 33.) According to Plaintiff, Defendant breached the Agreement when it failed to delay the foreclosure proceedings in accordance with the terms of the Agreement despite receiving prior notice that Plaintiff had been approved for assistance through the HHF program. Id. at ¶51.

Defendant argues that Plaintiff does not have standing to bring a breach-of-contract claim against Defendant for allegedly breaching its Agreement with the Arizona Department of Housing. Defendant explains that the HHF program was created under the Making Home Affordable Act, which was an Act created under the Emergency Economic Stabilization Act (EESA). See 12 U.S.C. §§5201-5261. Since the HHF is a program created under the EESA, there is no private right of action upon which Plaintiff can base her breach of contract claim and it should be dismissed. See Miller v. Chase Home Finance, LLC, 677 F.3d 1113, 1116-1117 (11th Cir. 2012).

Plaintiff admits that there is no express private right of action embodied in the Economic Emergency Stabilization Act or the Home Affordable Modification Program (HAMP). (Doc. 41 at 6.) See Marks v. Bank of America, N.A., 2010 WL 2572988, *5-6 (D. Ariz. 2010) (the district court held that the mortgagor had no private right of action under HAMP).

However, Plaintiff argues that because she was approved for assistance through the HHF program and Defendant was so notified, and specific identifying information was provided to Defendant about Plaintiff, she was an intended third-party beneficiary to the Agreement between Defendant and the Arizona Department of Housing, which provided that upon receipt of notification of conditional approval, Defendant would not commence foreclosure proceedings for 45 days or if already in the foreclosure process would not conduct a sale for 45 days. Specifically, the Agreement provides:

Upon notification that a borrower has been conditionally approved for HHF, the Servicer shall not initiate the foreclosure process or, if the borrower is already in the foreclosure process, conduct a foreclosure sale for 45 days, with any extensions by mutual ...

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