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Mukarugwiza v. Jpmorgan Chase Bank, N.A.

United States District Court, D. Arizona

June 30, 2015

Zawadi Mukarugwiza, Plaintiff,
JPMorgan Chase Bank NA, et al., Defendants.


NEIL V. WAKE, District Judge.

Before the court is Defendant MetLife Home Loans, LLC's ("MetLife") Motion to Dismiss Pursuant to Rule 12(b)(6) (Doc. 24). The Motion will be denied.


In 2009 Plaintiff Zawadi Mukarugwiza took out a home loan from MetLife and executed a deed of trust that named MetLife as beneficiary. (Doc. 20 at 2.) She began making full and timely monthly payments but soon fell into financial hardship after losing one of her two jobs. ( Id. ) To replace the lost income, Mukarugwiza turned to the Arizona Department of Housing ("Department"), which administers a program called Save Our Home Arizona ("Save Our Home"), funded by the U.S. Treasury Department's Hardest Hit Fund. ( Id. ) Save Our Home assists struggling borrowers by covering incoming arrearage, making a portion of monthly loan payments, and contributing to principal reduction upon borrowers' "graduation" from the program. ( Id. at 4.) In return for a guaranteed stream of payments, participating lenders must agree to "foreclosure abeyance" provisions that prohibit foreclosure of approved borrowers' homes. ( Id. ) The Hardest Hit Fund Agreement ("HHF Agreement") between the Department and MetLife, for instance, contains the following language: "Upon notification that a borrower has been conditionally approved for HHF, [MetLife] 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 consent of [the Department] and [MetLife]." (Doc. 20-2 at 2.)

The Department determined that Mukarugwiza met Save Our Home's qualifying criteria and conditionally approved her application on April 10, 2012. (Doc. 20 at 3.) Two weeks later, on April 23, 2012, the Department notified MetLife that it had issued final approval for Mukarugwiza. ( Id. ) As required by the program, Mukarugwiza executed a second deed of trust on her home in favor of the Department and had it recorded on May 15, 2012. ( See id. at 3-4.) Mukarugwiza and Save Our Home jointly made timely payments to MetLife following her enrollment in the program. ( Id. at 4.)

Despite receipt of these payments, and despite the foreclosure abeyance provision in MetLife's HHF Agreement, MetLife recorded a substitution of trustee on May 21, 2012, authorizing Quality Loan Service to sell the home at auction. ( Id. at 5.) MetLife also noticed a trustee's sale of Mukarugwiza's home for August 29, 2012, although no auction occurred on that date. ( Id. ) Sometime in 2013, MetLife sold Mukarugwiza's loan and associated servicing rights to JP Morgan Chase Bank ("JP Morgan"), which sold the home to IH2 Property at an August 29, 2013 trustee's sale. ( Id. at 6.) As a result of the foreclosure, the Department terminated Mukarugwiza's participation in Save Our Home. ( Id. at 6-7.) "Termination meant that house payment assistance ceased... and Save Our Home cancelled the disbursement of $34, 654 to her lender on her behalf, which would have cured all arrearage on the loan and brought it current." ( Id. at 7.) In addition, Mukarugwiza was unable to obtain a loan modification, and she was "disqualified... from the Save Our Home loan principal reduction feature, which in her case would have reduced the balance of her loan by $80, 000." ( Id. ) IH2 Property subsequently obtained a court order directing Mukarugwiza to surrender her home within five days. ( Id. )

Mukarugwiza filed suit in this court on January 16, 2015. (Doc. 1.) Her Verified Amended Complaint, submitted on April 13, 2015, seeks damages and declaratory relief on two counts of breach of contract, one count of wrongful foreclosure, and one count of negligent performance of an undertaking. Mukarugwiza does not seek rescission of the sale to IH2 Property. (Doc. 20 at 7.) The pending Motion urges dismissal of the Verified Amended Complaint for failure to state a claim upon which relief can be granted, as provided by Federal Rule of Civil Procedure 12(b)(6).


When considering a motion to dismiss, a court evaluates the legal sufficiency of the plaintiff's pleadings. Dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure can be based on "the lack of a cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). To avoid dismissal, a complaint need include "only enough facts to state a claim for relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).

On a motion to dismiss under Rule 12(b)(6), all allegations of material fact are assumed to be true and construed in the light most favorable to the non-moving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). However, the principle that a court accepts as true all of the allegations in a complaint does not apply to legal conclusions or conclusory factual allegations. Ashcroft v. Iqbal, 566 U.S. 662, 678 (2009). Further, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "The plausibility standard is not akin to a probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. To show that the plaintiff is entitled to relief, the complaint must permit the court to infer more than the mere possibility of misconduct. Id. If the plaintiff's pleadings fall short of this standard, dismissal is appropriate.


A. Breach of contract

MetLife argues the court must dismiss Mukarugwiza's first two causes of action, which allege breach of the HHF Agreement between the Department and MetLife, because she lacks "standing" to press those claims. (Doc. 24 at 7.) Where a plaintiff was not a party to a contract, her ability to sue for breach turns on whether she is an intended beneficiary, or merely an incidental beneficiary, of that contract. The parties agree that to "prove intended beneficiary status, the third party must show that the contract reflects the express or implied intention of the parties to the contract to benefit the third party.'" GECCMC 2005-C1 Plummer St. Office Ltd. P'ship v. JP Morgan Chase Bank, N.A., 671 F.3d 1027, 1033 (9th Cir. 2012). "The contract need not name a beneficiary specifically or individually in the contract; instead, it can specify a class clearly intended by the parties to benefit from the contract.'" Id. But establishing "third-party beneficiary status in the context of a government contract is a comparatively difficult task":

Parties that benefit from a government contract are generally assumed to be incidental beneficiaries, rather than intended beneficiaries, and so may not enforce the ...

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