1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Taniela F Kivalu, No. CV-24-02441-PHX-KML 10 Plaintiff, ORDER 11 v. 12 Axen Mortgage, et al., 13 Defendants. 14 15 Plaintiff Taniela F. Kivalu filed a complaint and a request for leave to proceed in 16 forma pauperis. (Doc. 1, 2.) Based on the financial information Kivalu provided, he is 17 entitled to proceed in forma pauperis. However, when a plaintiff proceeds in forma 18 pauperis “the court shall dismiss the case at any time if the court determines that . . . the 19 action . . . fails to state a claim on which relief may be granted.” 28 U.S.C. § 1915(e)(2). 20 Kivalu has not stated a claim for relief. 21 I. Background 22 Kivalu filed his original complaint on September 16, 2024, and an amended 23 complaint on September 26, 2024. (Doc. 1, 5.) Kivalu was entitled to amend his complaint 24 once without obtaining consent from the other parties or a court order. Fed. R. Civ. 25 15(a)(1). The amended complaint is therefore the operative complaint. 26 The amended complaint alleges that in 2022, Kivalu contracted with defendant 27 Axen Mortgage for a 30-year fixed mortgage. (Doc. 5 at 3.) The contract provided Kivalu’s 28 “Mortgage Insurance and Taxes” would be included in his monthly payment. (Doc. 5 at 3.) 1 Kivalu’s original monthly payment, including insurance and taxes, was $1,691.27. Kivalu 2 made monthly payments of $1,691.27 for two years after signing the agreement. (Doc. 5 at 3 4.) At some point after Kivalu and Axen Mortgage executed their agreement, Axen 4 Mortgage arranged for defendant United Wholesale Mortgage, LLC, to service the 5 mortgage, including collecting Kivalu’s payments. (Doc. 5 at 3.) 6 On July 3, 2024, United Wholesale informed Kivalu that his monthly payment had 7 increased by $206.22. (Doc. 5 at 4.) United Wholesale explained the increase was due to 8 changes in “mortgage insurance and taxes.” (Doc. 5 at 4.) That increase appears to be the 9 entire basis for this suit. That is, Kivalu seems to believe his original mortgage contract did 10 not allow for any increases in the monthly payment amount. (Doc. 5 at 4.) In August 2024, 11 Kivalu sent a letter to United Wholesale requesting an explanation of the increase in his 12 monthly payment. That letter also claimed Kivalu might “litigate and adjudicate [his] rights 13 in this contract” and, if he were to do so, his “fees are set at $250,000/hourly.” (Doc. 5 at 14 11.) 15 Based on these events the amended complaint asserts two possibly duplicative 16 claims against Axen Mortgage and Wholesale Mortgage. First, it alleges a breach of 17 contract claim and demands $150,000 in damages. Second, it alleges the “breach of 18 contract reflected action [sic] of negligence, reckless disregard to the safety of the Disabled 19 Veteran and welfare of others.” (Doc. 5 at 5.) In addition to the $150,000 damages 20 connected to the first claim, the amended complaint seeks punitive damages of $1.5 million 21 and an additional “120.00 million” for attorneys’ fees, “pain, suffering and humiliation.” 22 (Doc. 5 at 6.) 23 II. Analysis 24 Kivalu may pursue his claims only if the amended complaint contains “sufficient 25 factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” 26 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 27 544, 555 (2007) (internal citations omitted)). This is not a “probability requirement,” but a 28 requirement that the factual allegations show “more than a sheer possibility that a defendant 1 has acted unlawfully.” Id. A claim is facially plausible “when the plaintiff pleads factual 2 content that allows the court to draw the reasonable inference that the defendant is liable 3 for the misconduct alleged.” Id. “[D]etermining whether a complaint states a plausible 4 claim is context specific, requiring the reviewing court to draw on its experience and 5 common sense.” Id. at 663–64. 6 Kivalu is attempting to pursue breach of contract claims. To state a plausible breach 7 of contract claim, Kivalu must allege facts establishing the existence of a contract, how 8 that contract was breached, and the damages he suffered. Thomas v. Montelucia Villas, 9 LLC, 302 P.3d 617, 621 (Ariz. 2013) (recognizing elements of breach-of-contract claim). 10 Kivalu has alleged he had a contract with Axen Mortgage, but it is not clear whether he 11 believes that contract also included Wholesale Mortgage or if Kivalu had a separate 12 contract with Wholesale Mortgage. Moreover, the amended complaint does not provide 13 sufficiently plausible factual allegations that increasing Kivalu’s monthly payments due to 14 increases in insurance and taxes breached the underlying mortgage contract. 15 Kivalu’s property taxes and insurance premiums are paid through an escrow 16 account, a very common setup. See Cantero v. Bank of Am., N. A., 602 U.S. 205, 210, 144 17 S. Ct. 1290, 1295, 218 L. Ed. 2d 664 (2024) (noting “the vast majority of home mortgages 18 come with escrow accounts” that require the borrower make monthly payments and for the 19 bank “to pay the borrower’s insurance premium and property taxes on the borrower’s 20 behalf”). Given that insurance premiums and property taxes may differ year to year, most— 21 if not all—mortgage contracts with escrow accounts allow for such changes to monthly 22 payments. Cf. 12 C.F.R. § 1024.17 (discussing federal requirements for escrow accounts, 23 including how lenders must adjust the amounts paid into escrow accounts). Given the high 24 likelihood that Kivalu’s mortgage contract allowed for changes to his monthly payments 25 because of changes in insurance or taxes, the current allegations are not sufficient. 26 To state plausible claims for relief, Kivalu must allege specific facts showing that 27 his mortgage contract prohibits any change to his monthly payments. The contract would 28 need to specifically prohibit changes to the monthly payment when there are changes to 1 || amounts owed for taxes or insurance. The court will grant Kivalu one opportunity to amend 2|| his complaint. If he chooses to amend, Kivalu must 1) identify the contract he has with 3 || each of the named defendants; 2) identify the exact contractual provision he is relying on 4|| as prohibiting changes; and 3) attach a copy of the contract. 5 Accordingly, 6 IT IS ORDERED the Application for Leave to Proceed In Forma Pauperis (Doc. 7\| 2)is GRANTED. 8 IT IS FURTHER ORDERED the complaint (Doc. 1) is DISMISSED WITH LEAVE TO AMEND. No later than October 16, 2024, plaintiff shall file an amended 10 || complaint that includes a copy of the governing contract. The Clerk of Court is directed to 11 || enter a judgment of dismissal without prejudice in the event no amended complaint is filed _ by that date. 13 Dated this 2nd day of October, 2024. 14 16 LAA ALALLA me Honorable Krissa M. Lanham 17 United States District Judge 18 19 20 21 22 23 24 25 26 27 28 -4-