Moore et al v. Mortgage Electronic Registration Systems, Inc. et al
Filing
90
///ORDER granting in part and denying in part 52 Motion to Dismiss (Ocwen); granting in part and denying in part 53 Motion to Dismiss (MERS); granting in part and denying in part 54 Motion to Dismiss (Saxon); granting in p art and denying in part 60 Motion to Dismiss (Harmon); granting in part and denying in part 70 Motion to Dismiss (Morgan Stanley); granting in part and denying in part 71 Motion to Dismiss (Deutsche Bank); granting 80 Motion to Dismiss (WMC Mortgage Corp). So Ordered by Chief Judge Joseph N. Laplante.(jb)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Angela Jo Moore and M. Porter
Moore
v.
Civil No. 10-cv-241-JL
Opinion No. 2012 DNH 021
Mortgage Electronic Registration
Systems, Inc., et al.
MEMORANDUM ORDER
Plaintiffs Angela Jo Moore and M. Porter Moore, proceeding
pro se, have brought a 17-count complaint against a number of
entities involved in the origination, servicing, and eventual
foreclosure of their mortgage loan.
The Moores allege a variety
of malfeasance by the defendants, including misleading plaintiffs
about the terms of their loan, failing to respond to their
requests for information regarding their loan, and proceeding
with foreclosure despite ongoing negotiations to modify the loan.
The defendants have all filed motions to dismiss, arguing that
plaintiffs’ third amended complaint fails to state a claim upon
which relief can be granted.
See Fed. R. Civ. P. 12(b)(6).
This court has diversity jurisdiction over this matter
between the Moores, who are New Hampshire citizens, and
defendants, various out-of-state corporations, under 28 U.S.C.
§ 1332 since the amount in controversy exceeds $75,000.
The
court also has jurisdiction under 28 U.S.C. § 1331 (federal
question) and 1367 (supplemental jurisdiction) by virtue of the
Moores’ claims under various federal statutes.
After hearing oral argument, the court grants the motions in
part and denies them in part.
As explained in more detail below:
•
Count 1, a claim for “agency/respondeat superior,” is
dismissed because those doctrines are not causes of action
for which recovery can be granted, but bases for holding a
defendant vicariously liable for another’s conduct.
•
Counts 2 and 3, claims against defendant WMC Mortgage Corp.
for violation of the Truth in Lending Act and its
implementing regulation, Regulation Z, are dismissed because
the Moores did not file suit against WMC within the
statute’s limitations period. Plaintiffs’ remaining statelaw claims against WMC, including their claim for
“origination fraud” in Count 8, are likewise dismissed under
the applicable statute of limitations.
•
Count 4, a claim against defendant Ocwen Loan Servicing, LLC
under the Real Estate Settlement Procedures Act, is not
dismissed. Contrary to Ocwen’s argument, the Moores have
sufficiently pleaded that they suffered actual damages--in
the form of emotional distress--as a result of its statutory
violation.
•
Count 5, which makes claims against Ocwen and its codefendant Harmon Law Offices under the Fair Debt Collection
Practices Act, is not dismissed. Though Harmon argues that
it was not engaged in “debt collection” subject to that
statute, Harmon’s own representations in its letters to the
Moores suggest otherwise.
•
Count 6, a claim for violations of the New Hampshire Unfair,
Deceptive or Unreasonable Collection Practices Act, is
dismissed as to Harmon because the Moores have not pleaded
facts stating a plausible claim for relief under that
statute.
•
Count 7, a claim for breach of the covenant of good faith
and fair dealing, is dismissed because the Moores have not
pleaded facts showing the existence of a contract between
them and certain of defendants--which is a necessary element
2
of such a claim--and because they have not plausibly alleged
that the remaining defendants (with whom the Moores did have
a contractual relationship) committed any such breach.
•
Count 8, a claim for fraud, is dismissed as to Harmon
because the Moores have not pleaded their claim against it
with sufficient specificity. Count 8 is also dismissed
insofar as it claims fraud in the assignment of the Moores’
mortgage because they did not rely on the alleged fraud.
The Moores’ claim for “modification fraud” against Ocwen and
its co-defendant Saxon Mortgage Services, Inc., however, is
pleaded with the particularity required by Federal Rule of
Civil Procedure 9 and may proceed.
•
Count 9, a claim for fraud in the inducement against Saxon
and Ocwen, is dismissed because the Moores do not allege
that they entered into any transaction as a result of the
claimed fraud by either of these parties.
•
Counts 10, 12, and 13, claims against all defendants for
negligence, breach of assumed duty, and breach of fiduciary
duty, respectively, are dismissed because the allegations
set forth in the complaint do not support the conclusion
that any of the defendants owed the Moores a duty of any
kind (apart from, as to certain defendants, contractual
ones).
•
Count 11, a claim for intentional and negligent
misrepresentation against all defendants, is dismissed as to
Harmon and its co-defendants Mortgage Electronic
Registration Systems, Inc., Deutsche Bank National Trust
Company, Morgan Stanley ABS Capital I Holding Corp., and
Morgan Stanley ABS Capital I Inc. Trust 2007-HE5. The
claims against those defendants are not pleaded with the
particularity required of fraud claims by Federal Rule of
Civil Procedure 9. The Moores’ claim against Saxon and
Ocwen for intentional and negligent misrepresentation are,
however, sufficiently pleaded and may proceed.
•
Count 14, a claim for civil conspiracy against all
defendants, is dismissed. The Moores’ complaint does not
contain allegations sufficient to establish the existence of
an agreement among defendants to engage in a common course
of conduct. See Bell Atlantic Corp. v. Twombly, 550 U.S.
544 (2007).
3
•
Count 15, which makes claims for negligent and intentional
infliction of emotional distress against all defendants, is
dismissed. In the absence of a duty from the defendants to
the Moores, they cannot recover for negligent infliction of
emotional distress. Nor do defendants’ alleged actions
constitute the type of “extreme and outrageous conduct”
necessary to recover for intentional infliction of emotional
distress.
•
Count 16, a claim for promissory estoppel against Ocwen, is
dismissed as the Moores have not pleaded any facts
indicating that they relied to their detriment on Ocwen’s
alleged promise to hold off foreclosing for three months.
•
Finally, Count 17, a claim for “avoidance of note” against
“all defendants claiming to own the note and mortgage,” is
not dismissed. Though defendants argue that under New
Hampshire law, they need not possess the Moores’ promissory
note in order to foreclose on the associated mortgage,
possession of the note is a necessary prerequisite of a
claim to enforce it, which is what the Moores seek to avoid
through this count.
I.
Applicable legal standard
To survive a motion to dismiss under Rule 12(b)(6), the
plaintiff’s complaint must make factual allegations sufficient to
“state a claim to relief that is plausible on its face.”
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
In ruling on
such a motion, the court must accept as true all well-pleaded
facts set forth in the complaint and must draw all reasonable
inferences in the plaintiff’s favor.
See, e.g., Martino v.
Forward Air, Inc., 609 F.3d 1, 2 (1st Cir. 2010).
The court “may
consider not only the complaint but also “facts extractable from
4
documentation annexed to or incorporated by reference in the
complaint and matters susceptible to judicial notice.”
Rederford
v. U.S. Airways, Inc., 589 F.3d 30, 35 (1st Cir. 2009).
With the
facts so construed, “questions of law [are] ripe for resolution
at the pleadings stage.”
Cir. 2009).
Simmons v. Galvin, 575 F.3d 24, 30 (1st
The following background summary is consistent with
that approach.
II.
Background
A.
Origination of the Moores’ loan
In late 2006, a mortgage broker employed by First Guaranty
Mortgage contacted plaintiff Angela Jo Moore about refinancing
the mortgage on the Sandwich, New Hampshire home she shares with
her husband, plaintiff M. Porter Moore.
The broker, Joseph
Celone, told the Moores that if they refinanced through First
Guaranty’s “Credit Rebuilding Program,” they could lower their
monthly mortgage payments, which were $2,200 at the time.
With
Celone’s help, Mrs. Moore applied and was approved for an
adjustable rate loan in the amount of $452,000 from defendant WMC
Mortgage Corporation.
Though Mr. Moore’s name appeared on the
deed to the property, he was not a co-borrower on the loan.
Celone told the Moores that theirs was a “special” loan from
a brand-new Fannie Mae program designed specifically for the
5
self-employed.
He told them that, while they could expect their
mortgage payments for the first three months to be slightly
higher than their previous payments, Fannie Mae would
automatically send them paperwork-–which First Guaranty would
fill out and submit for no charge-–to enroll in the “special”
program.
According to Celone, once the Moores’ loan was
enrolled, their monthly mortgage payments would drop.
Prior to
closing, neither Celone nor WMC provided the Moores with certain
documents required by federal law, including an ARM disclosure
and Good Faith Estimate.
Closing on the Moores’ refinancing was scheduled to take
place at their home on December 18, 2006 at 6:00 p.m., but the
woman who performed the closing did not arrive until about 10:00
p.m.1
The closing was rushed, as the woman was concerned about
the deteriorating condition of the roads due to the weather and
claimed that her husband was waiting for her in the car.
She did
not provide the Moores with a copy of the closing documents, but
said she would either mail them or drop them off in the next
several days.
Despite this assurance, the Moores never received
copies of the closing documents, including a Notice of Right to
Cancel.
1
The third amended complaint does not identify this person
any more specifically.
6
After closing, the Moores discovered that the terms of
their loan were not what they had been led to believe.
Compared
to their previous monthly payment of $2,200, which covered
principal, interest, taxes, and insurance, their new monthly
payment was $3,400 and covered only principal and interest.
When
the Moores did not receive any paperwork from Fannie Mae to
enroll in the “special program” Celone had told them about, they
contacted First Guaranty.
A representative from First Guaranty
advised the Moores that Celone had been terminated due to his
“questionable business practices,” and attempted to persuade the
Moores to again refinance their loan-–an offer they declined.
Contrary to what Celone had told them, the Moores’ loan was never
enrolled in any Fannie Mae program, “special” or otherwise.
B.
Modification efforts and servicing
In June 2008, the Moores contacted their loan servicer,
defendant Saxon Mortgage Services, Inc., to seek a modification
because, under the terms of their adjustable rate loan, their
payments were increasing.
These efforts were unsuccessful, and
in October 2008 the Moores stopped making their loan payments.
In April 2009, Saxon entered into a contract with the federal
government, under which it agreed to modify loans under the
government’s Home Affordable Modification Program (“HAMP”).
The
following month, Saxon sent a letter to Mrs. Moore informing her
7
that her loan was in default and that foreclosure proceedings had
been initiated.
The letter also told Mrs. Moore that Saxon
wanted to “help keep [her] in [her] home” and instructed her to
call to discuss her options.
Mrs. Moore contacted Saxon, which encouraged her to contact
a different company, Titanium Solutions, to pursue a loan
modification.
When Mrs. Moore contacted Titanium, it informed
her that it did not modify “jumbo loans” and referred her back to
Saxon.2
Mrs. Moore then contacted Saxon again, which also
informed her that it did not modify jumbo loans, and in fact, did
not even typically service jumbo loans.
Saxon told Mrs. Moore
that in order to modify her loan, she would need to seek out a
third-party company that would modify jumbo loans.
The Moores
requested that Saxon supply them with certain paperwork so they
could evaluate their situation, but Saxon failed to do so,
claiming on different occasions that it did not have the
documents on its premises, that its call centers did not deal
with paperwork, and that the Moores needed to request the
documents in writing.
2
A “jumbo loan,” also known as a non-conforming loan, “is a
loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits.”
U.S. Department of Housing & Urban Development, Glossary,
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/
sfh/buying/glossary (last visited Jan. 23, 2012).
8
In July 2009, the Moores received two letters from defendant
Harmon Law Offices informing them that Saxon had retained Harmon
to foreclose on their mortgage on behalf of defendant Mortgage
Electronic Registration Systems (“MERS”).
MERS, as nominee for
WMC, was the mortgagee of record for the Moores’ mortgage.
One
of the letters informed the Moores that the loan had been
accelerated so that the entire outstanding balance (at that time,
$493,555.36) was due immediately.
The Moores contacted Harmon to
verify the debt, but received no response, and thereafter heard
nothing further from Saxon or Harmon regarding the announced
foreclosure.
In November 2009, the servicing of the Moores’ loan was
transferred from Saxon to Ocwen Loan Servicing, LLC.
Later that
month, Ocwen sent the Moores a letter titled “Alternatives to
Foreclosure.”
The letter claimed that the process to review the
Moores’ loan for modification would take up to 30 days once Ocwen
had received all necessary information.
On December 7, 2009, the
Moores sent a notarized letter to Ocwen asking it to verify the
debt and to provide copies of all documents related to their
loan.
In February 2010, Harmon responded to the Moores’ letter,
but without providing any of the documents requested.
The Moores
sent Ocwen a second letter on March 23, 2010, via certified mail.
9
Though Ocwen signed for the letter, it never acknowledged receipt
of or otherwise responded to it.
Around the same time the Moores sent their first letter in
December 2009, Ocwen began calling their home, often multiple
times per day, in an effort to collect past due mortgage
payments.
These calls continued for months.
Ocwen, like Saxon,
had entered into a contract with the federal government to modify
loans under HAMP.
During the calls, Ocwen encouraged the Moores
to apply for a loan modification and told the Moores that they
would send a modification application and other related
documents.
C.
The Moores never received the promised documents.
Foreclosure proceedings and removal
In late January 2010, Ocwen sent the Moores a Reinstatement
Quote informing them that the total amount due by April 1, 2010
to reinstate their loan was $79,151.46.
Not long thereafter, on
February 20, 2010, Harmon sent Mr. and Mrs. Moore each a separate
Notice of Mortgage Foreclosure Sale.
The Notices informed the
Moores that a foreclosure sale of their property would take place
on March 18, 2010, on behalf of defendant Deutsche Bank National
Trust Company, as Trustee for the registered holders of Morgan
Stanley ABS Capital I Inc. Trust 2007-HE5 Mortgage Pass-Through
Certificates, Series 2007-HE5.
MERS had assigned the Moores’
10
mortgage to Deutsche Bank on February 18, 2010, in an assignment
reciting an effective date of November 16, 2009.3
The Moores continued to pursue a modification from Ocwen.
On March 16, 2010-–two days before the scheduled foreclosure
sale--a “Home Retention Consultant” from Ocwen e-mailed the
Moores paperwork to apply for a modification.
Ocwen instructed
the Moores that the completed paperwork would need to be returned
the following day.
It refused to reschedule the sale.
On March 17, 2010, the Moores filed suit against Ocwen,
MERS, Deutsche Bank, and Morgan Stanley ABS Capital I, Inc. in
Carroll County Superior Court, seeking, among other things, ex
parte emergency injunctive relief to prevent the foreclosure
sale.
The Superior Court provisionally granted an injunction
pending a hearing on the merits.
As a result, the scheduled
foreclosure sale did not take place.4
Following the hearing, on
March 25, 2010, the court denied the Moores’ request for
preliminary injunctive relief, finding, based upon an offer of
3
The assignment, which was filed with the Carroll County
registry of deeds on February 18, 2010, was signed by Juan Pardo
as Vice President of MERS. The Moores allege that Pardo is not
an employee of MERS, but of Ocwen, though they do not allege that
Pardo lacked authority from MERS to assign the mortgage.
4
The complaint alleges that on the date of the scheduled
sale, an auctioneer arrived at the Moores’ property and informed
them that the foreclosure sale had been rescheduled for April 20,
2010. But no foreclosure sale has actually taken place, and the
Moores confirmed at oral argument that they continue to occupy
the property.
11
proof from Deutsche Bank and Ocwen (who were represented by
Harmon at the hearing), that the Moores had not submitted all
necessary paperwork to pursue a modification of their loan.
The Moores subsequently sent Ocwen all paperwork necessary
to apply for a modification, and on May 17, 2010, filed a new
suit against Ocwen, MERS, and Saxon seeking to enjoin the
foreclosure.
This action included claims under the New Hampshire
Consumer Protection Act, N.H. Rev. Stat. Ann. § 358-A, the New
Hampshire Unfair, Deceptive or Unreasonable Collection Practices
Act, N.H. Rev. Stat. Ann. § 358-C, and for common law fraud and
negligence.
Ocwen, MERS, and Saxon removed the case to this
court, see 28 U.S.C. § 1441(a), invoking the court’s diversity
jurisdiction, see id. 1332.
After removal, the Moores amended
their complaint several times to add new defendants and counts,
culminating in the third amended complaint now before the court.
III.
Analysis
A.
Preclusive effect of prior state court action
Before turning to defendants’ arguments challenging the
sufficiency of specific counts of the complaint, the court
addresses a defense certain defendants have raised to this action
in its entirety.
Ocwen, MERS, and Deutsche Bank argue that the
outcome of the first state court action, in which the Moores were
12
denied preliminary injunctive relief, precludes them from
litigating their claims here under the doctrine of res judicata.
Their theory is that even though the Superior Court’s ruling did
no more than deny preliminary relief, “it is effectively a final
order where a foreclosure is pending and was treated that way by
the Court and the parties.”
This argument is without merit.
“New Hampshire law determines the preclusive effect this
court must give to judgments issued by the courts of that state.”
Estate of Sullivan v. Pepsi-Cola Metro. Bottling Co., Inc., 2004
DNH 014, at 4-5.
Under New Hampshire law, “[t]he doctrine of res
judicata prevents parties from relitigating matters actually
litigated and matters that could have been litigated in the first
action.”
omitted).
Gray v. Kelly, 161 N.H. 160, 164 (2010) (emphasis
As the parties asserting the defense of res judicata,
Ocwen, MERS, and Deutsche Bank bear the burden of proof as to the
applicability of that defense.
365-66 (1983).
elements:
Strobel v. Strobel, 123 N.H. 363,
They must demonstrate the following three
“(1) the parties are the same or in privity with one
another; (2) the same cause of action was before the court in
both instances; and (3) the first action ended with a final
judgment on the merits.”
Gray, 161 N.H. at 164.
In this case,
the third element--a final judgment on the merits--is absent.
13
The Superior Court’s denial of preliminary injunctive relief
did not constitute a final judgment on the merits.
In New
Hampshire, as elsewhere, “preliminary injunctions serve only to
preserve the status quo until a trial on the merits is held.”
N.H. Dep’t of Envtl. Servs. v. Mottolo, 155 N.H. 57, 61 (2007).
For that reason, the New Hampshire Supreme Court has held that
“it is generally inappropriate for a trial court at the
preliminary-injunction state to give a final judgment on the
merits.”
Id.
Contrary to the argument made by Ocwen, MERS, and Deutsche
Bank, there is no reason to believe the Superior Court departed
from that general rule here.
In fact, the court’s order
expressly recognized that it did not dispose of the case:
the
court stated that the Moores had not “shown a likelihood that
they will prevail on the merits of the case,” not that the Moores
did not or could not prevail.
The determination made by the
state court was merely that, in seeking a preliminary injunction,
the Moores had not presented sufficient evidence to support the
grant of injunctive relief.
That determination does not bar the
Moores from pursuing their claims against Ocwen, MERS, and
Deutsche Bank here.
See Veale v. Town of Marlborough, No. 92-
355-SD, 1994 WL 263700, *3 (D.N.H. April 11, 1994) (“[A] decision
on a preliminary injunction does not amount to a final judgment
14
on the merits, and issues litigated in a preliminary injunction
action are not res judicata and do not form a basis for
collateral estoppel.”).
Moreover, the record before the court does not indicate what
happened in the first state-court action after the state court
denied the Moores’ request for preliminary injunctive relief.
Deutsche Bank claims, without citation to any documents before
the court, that the Superior Court “closed its file after no
further filings were received and the appeal period expired.”
But Deutsche Bank does not explain how “closing the file” is
equivalent to dismissal with prejudice, entry of judgment, or
some other act amounting to a final adjudication on the merits.
Because Ocwen, MERS, and Deutsche Bank have not carried their
burden of proof, their motion to dismiss the claims against them
as barred by res judicata is denied.
B.
Count 1 - Agency/Respondeat Superior
Count 1 of the Moores’ complaint makes a claim for “Agency/
Respondeat Superior” against WMC, MERS, Deutsche Bank, Morgan
Stanley ABS Capital I Holding Corp., and Morgan Stanley ABS
Capital I Inc. Trust 2007-HE5 (the court will refer to the latter
two collectively as “the Morgan Stanley defendants”).
The
complaint maintains that Ocwen, Saxon, and Harmon were agents of
15
these other defendants, so that they are liable for the wrongful
conduct of Ocwen, Saxon, and Harmon.
Deutsche Bank argues, correctly, that agency and respondeat
superior are not independent causes of action, but doctrines
holding a principal vicariously liable for the unlawful conduct
of its agent.
See Dent v. Exeter Hosp., Inc., 155 N.H. 787, 792-
93 (2007) (describing agency); Porter v. City of Manchester, 155
N.H. 149, 152 (2007) (describing respondeat superior).
Therefore, to the extent the Moores are attempting to assert an
independent cause of action under either doctrine, they may not
do so and that cause of action is dismissed.
The court will,
however, consider the doctrines and their supporting factual
allegations in considering whether the complaint states claims
against WMC, MERS, Deutsche Bank, and the Morgan Stanley
defendants liable for the allegedly wrongful conduct of Ocwen,
Saxon, or Harmon.
C.
Counts 2 and 3 - Truth in Lending Act and the Moores’
state-law claims against WMC
In Counts 2 and 3 of their complaint, the Moores make claims
against WMC, the originator of their refinanced loan, for
violations of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601
et seq., and its implementing regulation, Regulation Z, 12 C.F.R.
Part 226.
The Moores allege that WMC failed to provide them with
16
the disclosures mandated by TILA and Regulation Z at or prior to
closing.
In addition, the Moores have brought various state-law
claims against WMC.5
WMC argues that all of the claims against
it are barred by the applicable statutes of limitations:
TILA’s
one-year statute of limitations, see 15 U.S.C. § 1640(e), in the
case of the Moores’ federal law claims; and New Hampshire’s
general three-year statute of limitations in the case of their
state-law claims, see N.H. Rev. Stat. Ann. § 508:4, I.
The court
agrees.
TILA’s limitations provision (which is also applicable to
claims under Regulation Z, see Nool v. HomeQ Servicing, 653 F.
Supp. 2d 1047, 1051 n.1 (E.D. Cal. 2009)) states that an action
for damages must be brought “within one year from the date of the
occurrence of the violation.”6
15 U.S.C. § 1640(e).
Where, as
here, the plaintiff’s claim is based upon insufficient or
nonexistent disclosures, the limitations period begins running on
5
These claims include agency/respondeat superior (Count 1),
breach of the implied covenant of good faith and fair dealing
(Count 7), origination fraud (Count 8), negligence (Count 10),
intentional and negligent misrepresentation (Count 11), breach of
assumed duty (Count 12), breach of fiduciary duty (Count 13),
civil conspiracy (Count 14), and negligent and intentional
infliction of emotional distress (Count 15).
6
TILA also contains a three-year statute of limitations for
a claim seeking rescission of the loan. 15 U.S.C. § 1635(f).
Here, the only relief the Moores seek for the alleged TILA
violations in Counts 2 and 3 are damages and attorneys’ fees and
costs, see Third Am. Compl. (document no. 47) at 20, ¶ 86, so the
limitations period for rescission claims is not at issue.
17
the date the disclosures should have been made.
Rodrigues v.
Members Mortg. Co., Inc., 323 F. Supp. 2d 202, 210 (D. Mass.
2004); see also Corcoran v. Saxon Mortg. Servs., Inc., No. 0911468-NMG, 2010 WL 2106179, *3 (D. Mass. May 24, 2010).
Applying
this rule, the limitations period on the Moores’ TILA and
Regulation Z claims began running on December 18, 2006, the date
of the loan’s closing.
The Moores did not even file this suit,
however, until May 17, 2010, and did not make any claims against
WMC until November 1, 2010-–nearly four years later.
Some district courts within this circuit have held that
TILA’s statute of limitations may be subject to equitable
tolling, such that the running of the limitations period can be
suspended in some instances.
See, e.g., Corcoran, 2010 WL
2106179 at *3; Darling v. W. Thrift & Loan, 600 F. Supp. 2d 189,
215 (D. Me. 2009).
Assuming, without deciding, that this
doctrine applies to claims under TILA, it cannot save the Moores’
claims.
“[E]quitable tolling of a federal statute of limitations
is appropriate only when the circumstances that cause a plaintiff
to miss a filing deadline are out of his hands.”
Salois v. Dime
Sav. Bank of N.Y., FSB, 128 F.3d 20, 25 (1st Cir. 1997).
Such
circumstances include the defendant preventing the plaintiff from
asserting his rights in some way, Corcoran, 2010 WL 2106179 at
*3, or the plaintiff’s inability to discover “information
18
essential to the suit” despite reasonable diligence, Darling, 600
F. Supp. 2d at 215.
While the Moores allege that the applicable limitations
periods should be tolled because “[t]he deceptive nature” of
WMC’s actions was “latent and self-concealing,” such that it
could not, through the exercise of reasonable care, be
discovered, Third Am. Compl. (document no. 47) at 17, ¶ 70, this
is belied by other allegations in the complaint.
In particular,
the complaint reveals that the Moores knew no later than three
months after closing, when the promised Fannie Mae paperwork did
not arrive and the amount of their monthly mortgage payments did
not drop, that something was amiss and that they had not received
what they thought they had bargained for.
Id. at 8, ¶ 31.
Thus,
the limitations period on the Moores’ TILA claims against WMC
began running, at the absolute latest, in March 20077-–some three
and a half years before they first asserted them.
Counts 2 and 3
are therefore dismissed as time-barred.
7
This view is extremely charitable to the Moores, given the
court of appeals’ holding in Salois. There, the court held that
because the loan documents contained all the information
necessary for the plaintiffs to discover that they had been
misled about the terms of their loan, and because “one who signs
a writing that is designed to serve as a legal document is
presumed to know its contents,” the “plaintiffs were on notice of
their claims when they signed their loan documents.” 128 F.3d at
26 & n.10. In evaluating the Moores’ claims, this court has
assumed, dubitante, that the loan documents themselves did not
place the Moores on notice of their claims.
19
The Moores’ state-law claims against WMC are likewise timebarred.
Again, all of WMC’s alleged misconduct was consummated
by the date of closing, and the Moores knew or reasonably should
have known of that misconduct no later than March 2007.
Under
New Hampshire law, a claim “may be brought only within 3 years of
the act or omission complained of” or “within 3 years of the time
the plaintiff discovers, or in the exercise of reasonable
diligence should have discovered, the injury and its causal
relationship to the act or omission complained of.”
Stat. Ann. § 508:4, I.
N.H. Rev.
The limitations period on the Moores’
state-law claims against WMC therefore expired, at the latest, in
March 2010.
Because the Moores did not assert their claims
against WMC until November 1, 2010, those claims are barred by
the statute of limitations, and are dismissed.
D.
Count 4 - Real Estate Settlement Procedures Act
Count 4 of the complaint, brought against Ocwen only, makes
a claim for violations of the Real Estate Settlement Procedures
Act (“RESPA”), 12 U.S.C. § 2605 et seq.
The Moores allege that
their December 7, 2009 and March 23, 2010 letters to Ocwen
constituted qualified written requests (“QWRs”) under 12 U.S.C.
§ 2605(e)(1)(B), so that, by failing to acknowledge their receipt
within 20 days or to respond within 60 days, Ocwen violated RESPA
and is liable to them for actual and statutory damages.
20
Ocwen
argues that the court should dismiss this claim because the
Moores have not pleaded facts supporting an award of either
actual or statutory damages.
This argument fails, however,
because the Moores allege that, as a result of Ocwen’s conduct,
they suffered emotional distress, which qualifies as “actual
damages” under RESPA.
In relevant part, RESPA requires the servicer of a
federally-related mortgage loan to respond to a borrower’s QWR by
acknowledging receipt within 20 business days, id.
§ 2605(e)(1)(A), and to provide certain information to the
borrower within 60 business days, id. § 2605(e)(2).
If the
servicer fails to fulfill these obligations, it may be held
liable for “any actual damages to the borrower as a result of the
failure,” or, “in the case of a pattern or practice of
noncompliance,” statutory damages.
Id. § 2605(f)(1).
Ocwen does not argue that the Moores’ letters were not QWRs
as defined by the statute, or that it responded to the Moores as
required.
Instead, as noted, Ocwen argues that it may not be
held liable under § 2605(f)(1) because the Moores have pleaded
neither actual damages from its alleged noncompliance nor a
“pattern or practice of noncompliance” that would entitle them to
statutory damages.
Ocwen is half right:
its failure to respond
to the Moores’ two letters does not make out a pattern or
21
practice of noncompliance with RESPA.
See Selby v. Bank of Am.,
Inc., No. 09-cv-2079-BTM, 2011 WL 902182, *5 (S.D. Cal. March 14,
2011) (holding that two instances of failing to respond to a QWR
did not constitute a pattern or practice of RESPA noncompliance);
Espinoza v. Recontrust Co., N.A., No. 09-cv-1687-IEG, 2010 WL
2775753, *4 (S.D. Cal. July 13, 2010) (same); McLean v. GMAC
Mortg. Corp., 595 F. Supp. 2d 1360, 1365 (S.D. Fla. 2009) (same);
In re Maxwell, 281 B.R. 101, 123 (Bkrtcy. D. Mass. 2002) (same).
The Moores have pleaded no other facts establishing the existence
of such a pattern or practice, and thus cannot recover statutory
damages.
The Moores have, however, stated a plausible claim for
actual damages under § 2605(f)(1)(A).
“In order to plead ‘actual
damages’ sufficiently, the plaintiff must allege specific damages
and identify how the purported RESPA violations caused those
damages.”
Okoye v. Bank of N.Y. Mellon, No. 10-cv-11563-DPW,
2011 WL 3269686, *17 (D. Mass. July 28, 2011) (citing cases).
While the Moores do not allege that they suffered any pecuniary
damages resulting from Ocwen’s alleged RESPA violations, they do
allege that, as a result of Ocwen’s entire course of conduct (and
that of other defendants), they have suffered “severe mental
22
anguish” and “emotional distress.”
Third Amended Complaint
(document no. 47) at ¶ 173.8
RESPA permits recovery for “any actual damages to the
borrower.”
12 U.S.C. § 2605(f)(1) (emphasis added).
Because
RESPA is a consumer protection statute, the court construes this
language “liberally in favor of consumers,” as required by the
court of appeals, see Barnes v. Fleet Nat’l Bank, N.A., 370 F.3d
164, 171 (1st Cir. 2004), and concludes that “actual damages”
include damages for emotional distress (provided, of course, that
there is a causal relationship between that distress and the
alleged RESPA violation, something that Ocwen has not contested
in its motion to dismiss).
reached the same conclusion.
At least two courts of appeals have
See Catalan v. GMAC Mortg. Corp.,
629 F.3d 676, 696 (7th Cir. 2011) (“[E]motional distress damages
are available as actual damages under RESPA, at least as a matter
of law.”); McLean v. GMAC Mortg. Corp., 398 Fed. Appx. 467, 471
8
Although this allegation appears in a separate count of the
complaint, because the Moores are pro se the court reads their
complaint “with an extra degree of solicitude.” Hecking v.
Barger, 2010 DNH 032, at 4. The allegation specifically ties the
Moores’ emotional distress to Ocwen’s alleged conduct--which
includes its failure to respond to their letters--and to ignore
it simply because it does not appear in the RESPA count itself
would elevate form over substance. Indeed, in their objections
to the motions to dismiss the Moores maintain that their
emotional distress stemmed in part from Ocwen’s RESPA violations.
See, e.g., Pls.’ Objection to Morgan Stanley Mot. to Dismiss
(document no. 72) at 7-8, ¶ 24.
23
(11th Cir. 2010) (“[P]laintiffs . . . may recover for nonpecuniary damages, such as emotional distress and pain and
suffering, under RESPA.”).
The court acknowledges that some courts have reached a
different conclusion.
See Ramanujam v. Reunion Mortg., Inc., No.
09-cv-3030-JF, 2011 WL 446047, *5 (N.D. Cal. Feb. 3, 2011); In re
Tomasevic, 273 B.R. 682, 687 (M.D. Fla. 2002); Katz v. Dime Sav.
Bank, FSB, 992 F. Supp. 250, 255-56 (W.D.N.Y. 1997).
That
result, however, is at odds with both RESPA’s plain language,
allowing for recovery of “any actual damages,” see, e.g., Ali v.
Fed. Bureau of Prisons, 552 U.S. 214, 218-20 (2008) (noting that
the use of “any” suggests “a broad meaning”), and with its status
as a consumer protection statute, see Barnes, 370 F.3d at 171.
Interpreting RESPA to permit recovery for emotional distress,
moreover, is in accord with decisions from the courts of this
circuit interpreting the term “actual damages” as it appears in
other remedial statutes.
See, e.g., Fleet Mortg. Group, Inc. v.
Kaneb, 196 F.3d 265, 269-70 (1st Cir. 1999) (concluding that
“emotional damages qualify as ‘actual damages’” under automatic
stay provision of Bankruptcy Code); Sweetland v. Stevens & James,
Inc., 563 F. Supp. 2d 300, 303-04 (D. Me. 2008) (interpreting
term “actual damage” in Fair Debt Collection Practices Act to
24
encompass emotional damages).
Ocwen’s motion to dismiss this
count is therefore denied.
E.
Counts 5 and 6 - Fair Debt Collection Practices Act
and New Hampshire Unfair, Deceptive or Unreasonable
Collection Practices Act
In Counts 5 and 6 of their complaint, the Moores seek to
recover from Ocwen and Harmon for alleged violations of the Fair
Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et
seq., and its state-law analog, the New Hampshire Unfair,
Deceptive or Unreasonable Collection Practices Act (“UDUCPA”),
N.H. Rev. Stat. Ann. § 358-C.
Both statutes prohibit a broad
range of conduct by debt collectors.
Under the FDCPA, for
example, a “debt collector may not use any false, deceptive, or
misleading representation or means in connection with the
collection of any debt,” 15 U.S.C. § 1692e, and “may not use
unfair or unconscionable means to collect or attempt to collect
any debt,” id. § 1692f.
The UDUCPA similarly prohibits debt
collectors from “collect[ing] or attempt[ing] to collect a debt
in an unfair, deceptive or unreasonable manner as defined in this
chapter.”
N.H. Rev. Stat. Ann. § 358-C:2.
Both statutes
supplement these general prohibitions with more specific
prohibitions.
See generally 15 U.S.C. §§ 1692b-1692j; N.H. Rev.
Stat. Ann. § 358-C:3.
An aggrieved plaintiff may recover actual
25
or statutory damages under both statutes.
15 U.S.C. § 1692k(a);
N.H. Rev. Stat. Ann. § 358-C:4.
Ocwen has not argued that these claims should be dismissed
for any reason other than res judicata, which, as discussed in
Part III.A supra, is unavailing.
Harmon, on the other hand,
argues that both claims should be dismissed because it was not
engaged in the collection of a debt during its interactions with
the Moores, a necessary prerequisite to their recovery.
Harmon
also argues that the UDUCPA claim should be dismissed because the
Moores have failed to plead adequate facts in support of that
claim.
While Harmon’s first argument fails because the complaint
and supporting documents support a plausible inference that
Harmon was engaged in debt collection, its second argument
succeeds because the Moores have not pleaded facts sufficient to
show that Harmon engaged in any conduct that violated the UDUCPA.
Thus, while the Moores’ claim against Harmon under the FDCPA may
proceed, their UDUCPA claim against Harmon is dismissed.
1.
Debt collection
To recover under either the FDCPA or the UDUCPA, the Moores
must show that:
“(1) they have been the object of collection
activity arising from a consumer debt; (2) the defendant
attempting to collect the debt qualifies as a ‘debt collector’
under the Act; and (3) the defendant has engaged in a prohibited
26
act or has failed to perform a requirement imposed by the [Act].”
Beadle v. Haughey, 2005 DNH 016, at 7; see also, e.g., Gilroy v.
Ameriquest Mortg. Co., 632 F. Supp. 2d 132, 134-37 (D.N.H. 2009).
Harmon argues that the first of these elements is missing because
it was not engaged in collection activity, but, in prosecuting a
foreclosure against the Moores, “instead was enforcing its
client’s security interest.”
This argument is contrary to Harmon’s own communications
with the Moores.
In its initial letter on July 27, 2009, Harmon
informed them that their note had been accelerated “and the
entire balance [of $493,555.36] is due and payable forthwith and
without further notice.”9
That letter further informed the
Moores that they could reinstate the loan by paying enough to
bring the loan current, that they could call Harmon or visit its
website to order a reinstatement or payoff, and that they had the
right to dispute the validity of the debt.
From these statements
alone it is evident that the purpose of Harmon’s letter was not
only to enforce a security interest, but also to attempt to
collect the underlying loan debt.
9
The court may consider this letter, which is expressly
referenced in the complaint and forms part of the basis for the
Moores’ claims, without converting the motion to dismiss into a
motion for summary judgment. Giragosian v. Ryan, 547 F.3d 59, 65
(1st Cir. 2008).
27
Even more damaging to Harmon’s argument, though, are the
letter’s repeated references to Harmon’s “efforts (through
litigation or otherwise) to collect the debt,” which obliterate
the distinction Harmon now attempts to draw between collecting a
debt and enforcing a security instrument.
Moreover, in bold,
capital letters below the signature block, the letter states:
“PLEASE BE ADVISED THAT THIS OFFICE IS ATTEMPTING TO COLLECT A
DEBT AND THAT ANY INFORMATION OBTAINED WILL BE USED FOR THAT
PURPOSE.”
For Harmon now to argue that it was not engaged in
debt collection is, to put it charitably, unsupportable.
Cf.
Pettway v. Harmon Law Offices, P.C., No. 03-cv-10932-RGS, 2005 WL
2365331, *5 & n.10 (D. Mass. Sept. 27, 2005) (citing the selfsame
debt collection language as grounds for concluding that Harmon
was engaged in collection activity); In re Maxwell, 281 B.R. 101,
119 (Bkrtcy. D. Mass. 2002) (rejecting defendant’s argument that
it was not a debt collector because it sent plaintiff letters “in
which it represented to her that it was acting as a debt
collector under the FDCPA”).10
At the very least, then, Harmon’s actions in relation to the
July 27 letter constituted collection activity subject to the
10
Given the dearth of case law on the UDUCPA, these FDCPA
cases are also useful in interpreting the UDUCPA “because [the
FDCPA] contains provisions similar to the [UDUCPA].” Gilroy, 632
F. Supp. 2d at 136.
28
FDCPA and the UDUCPA.
It is not clear from the complaint whether
Harmon’s other communications with the Moores were intended to
encourage the Moores to pay their loan debt or were solely a part
of the foreclosure process.
But even assuming that Harmon is
correct that foreclosure does not constitute collection
activity,11 the July 27 letter--which also informed the Moores
that Harmon had been retained to foreclose on their mortgage-supports a plausible inference that Harmon’s foreclosure
activities were at least intermingled (if not coextensive) with
its more mainstream collection activities.
Without further
factual development, the Court is not able to conclude as a
matter of law that Harmon’s foreclosure-related activities were
not subject to the FDCPA and the UDUCPA.
See Pettway, 2005 WL
2365331 at *5 (“[A] defendant law firm whose foreclosure
11
There is some support for Harmon’s position, see, e.g.,
Beadle, 2005 DNH 016, at 7-12 (McAuliffe, J.) (concluding that
attorneys who conducted foreclosure proceedings were not subject
to FDCPA); see also Speleos v. BAC Home Loans Servicing, LP, No.
10-cv-11503-NMG, 2011 WL 4899982, *5-6 (D. Mass. Oct. 14, 2011)
(same), but the case law is not uniform on this point. One court
of appeals has held that the FDCPA may apply to efforts to recoup
a debt through foreclosure, expressing concern that to hold
otherwise “would create an enormous loophole in the Act
immunizing any debt from coverage if that debt happened to be
secured by a real property interest and foreclosure proceedings
were used to collect the debt.” Wilson v. Draper & Goldberg,
P.L.L.C., 443 F.3d 373, 376 (4th Cir. 2006); cf. also Piper v.
Portnoff Law Assocs., Ltd., 396 F.3d 227, 235 (3d Cir. 2005)
(“[T]he text of the FDCPA evidences a Congressional intent to
extend the protection of the Act to consumer defendants in suits
brought to enforce liens.”).
29
activities are beyond reproach might nonetheless be liable under
the FDCPA for related but less salubrious efforts to squeeze a
debtor into coughing up the underlying debt.”).
Neither claim
can be dismissed on this basis.
2.
UDUCPA violation
Harmon also argues that, even if it was engaged in
collection activity, the Moores have not adequately pleaded a
UDUCPA violation.
their FDCPA claim.)
(It has not made a similar argument as to
As just discussed, the UDUCPA bars a debt
collector from “collect[ing] or attempt[ing] to collect a debt in
an unfair, deceptive or unreasonable manner as defined in this
chapter.”
N.H. Rev. Stat. Ann. § 358-C:2.
The Moores allege
that Harmon violated this command in that it (a) “made materially
false representations as to the status of foreclosure proceedings
when [it] initially claimed to represent Saxon”; (b) “knew or
should have known that the lack of chain of title would prevent
[it] from foreclosing on the property; and (c) “willfully
withheld the truth from the Plaintiffs in connection with the
status, collection status, and foreclosure status of their loan.”
Third Am. Compl. (document no. 47) at ¶¶ 106-07.
But even
assuming that any of these acts, if proven, could support
recovery under the UDUCPA, the Moores have failed to allege facts
to support them.
30
First, the Moores’ blanket allegation that Harmon made
materially false representations as to the status of foreclosure
when it represented Saxon is unsupported by any facts pleaded in
the complaint.
As alleged in the complaint, Harmon’s only
communications with the Moores while it represented Saxon were
two letters sent in July 2009, and the only representation Harmon
made in those letters regarding foreclosure was that it had been
retained by Saxon to foreclose on the Moores’ mortgage.
The
Moores have not alleged that this statement was false, and the
remaining allegations in the complaint provide no basis for
plausibly concluding that it was.
Without factual support, the
Moores’ allegation, which tracks the statutory language, is
simply a “formulaic recitation of the elements of a cause of
action” that cannot serve as the basis for the UDUCPA claim.
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Second, the Moores’ allegation that Harmon “knew or should
have known” that there was not a chain of title that would allow
it to foreclose on the mortgage is similarly unsupported by any
factual allegations.
In its July 2009 letters, Harmon informed
the Moores that it had been retained to foreclose on a mortgage
held by MERS-–which at that time was the mortgagee of record.
When Harmon next contacted the Moores regarding foreclosure, on
February 20, 2010, it purported to represent Deutsche Bank--MERS’
31
successor as mortgagee by virtue of an assignment filed with the
registry of deeds two days before.
While the Moores raise
questions about the validity of that assignment in their
complaint, they allege no facts suggesting that Harmon should
have doubted its ability to foreclose on behalf of Deutsche Bank,
the mortgagee of record.
The Moores have not pleaded facts to
nudge this theory “across the line from conceivable to
plausible,” Twombly, 550 U.S. at 570, and it cannot support their
UDUCPA claim, either.
Third, the Moores’ claim that Harmon “willfully withheld the
truth” regarding “the status, collection status, and foreclosure
status” of their loan is likewise unsupported by any factual
allegations.
The court must confess some confusion as to what
“truth” Harmon supposedly withheld.
Nowhere in the complaint do
the Moores plead any facts suggesting that Harmon did not
candidly communicate with them regarding the collection of their
debt or foreclosure on their mortgage.
As with the Moores’ other
theories under the UDUCPA, in the absence of factual support this
allegation does not state a plausible claim to relief.
Because
the Moores have not pleaded any factual basis for holding Harmon
liable under the UDUCPA, Harmon’s motion to dismiss is granted as
to Count 6.
32
F.
Count 7 - Covenant of Good Faith and Fair Dealing
Count 7 of the complaint makes a claim against all
defendants for an alleged breach of the implied covenant of good
faith and fair dealing.
“In every agreement, there is an implied
covenant that the parties will act in good faith and fairly with
one another.”
Birch Broad., Inc. v. Capitol Broad. Corp., Inc.,
161 N.H. 192, 198 (2010).
Under New Hampshire law, this duty can
be subdivided “into three general categories:
(1) contract
formation; (2) termination of at-will employment agreements; and
(3) limitation of discretion in contractual performance.”
Id.
Here, the Moores appear to be asserting a claim based upon the
third category.
“While the third category is comparatively
narrow, its broader function is to prohibit behavior inconsistent
with the parties’ agreed-upon common purpose and justified
expectations as well as with common standards of decency,
fairness and reasonableness.”
Id.
The defendants have moved to dismiss this claim.
Those
defendants who did not contract with the Moores argue that the
Moores may not recover for a breach of the implied covenant from
them, while those defendants who did contract with the Moores
argue that the Moores have pleaded no facts establishing any
behavior that breaches the covenant.
33
The court will address
these arguments, both of which are correct and require dismissal
of this claim as to all defendants, in turn.
1.
Lack of contractual relationship
A necessary prerequisite to a claim for breach of the
implied covenant of good faith and fair dealing is a contract
between the parties.
“New Hampshire law has not recognized a
claim for breach of the implied covenant of good faith and fair
dealing outside of the contractual context.”
J&M Lumber and
Constr. Co., Inc. v. Smyjunas, 161 N.H. 714, 724 (2011).
Of the
eight defendants in this case, the Moores have not pleaded the
existence of a contract with three:
Saxon, Ocwen, or Harmon.12
Although Saxon and Ocwen allegedly serviced the Moores’ mortgage
on behalf of its holders, they were not themselves parties to the
mortgage (or any of the other loan documents) and cannot be held
liable for breach of any implied covenant included in that
contract.
See Vega v. Amer. Home Mortg. Servicing, Inc., No. CV-
10-02087, 2011 WL 2457398, *3 (D. Ariz. June 20, 2011)
(dismissing claim for breach of implied covenant against loan
servicer because servicer was not party to mortgage); Lomboy v.
SCME Mortg. Brokers, No. C-09-1160 SC, 2009 WL 1457738, *5 (N.D.
12
Deutsche Bank and one of the Morgan Stanley defendants,
Morgan Stanley ABS Capital I Holding Corp., also argue that the
Moores did not allege a contract with either of them. The
complaint alleges, however, that at various relevant times both
defendants owned or purported to own the Moores’ mortgage.
34
Cal. May 26, 2009) (same).
In the absence of a contractual
relationship, the Moores’ claim against these defendants for
breach of the implied covenant must be dismissed.
The Moores seek to avoid this result as to Saxon and Ocwen
by arguing that they breached the implied covenant inherent in
their HAMP Servicer Participation Agreements (“SPAs”) with the
federal government.
In order to recover for a breach of the
implied covenants inherent in the SPAs, to which they are not
parties, the Moores must demonstrate that they are the intended
third-party beneficiaries of those agreements.
See Numerica Sav.
Bank, F.S.B. v. Mountain Lodge Inn, Corp., 134 N.H. 505, 513
(1991).
They cannot do so.
The court looks to federal law in considering whether a
plaintiff is an intended third-party beneficiary of a contract to
which the United States is a party.
Speleos v. BAC Home Loans
Servicing, LP, 755 F. Supp. 2d 304, 307 (D. Mass. 2010).
As our
court of appeals has explained:
[T]he crux in third-party beneficiary analysis is the
intent of the parties. Because third-party beneficiary
status constitutes an exception to the general rule
that a contract does not grant enforceable rights to
nonsignatories, a person aspiring to such status must
show with special clarity that the contracting parties
intended to confer a benefit on him.
McCarthy v. Azure, 22 F.3d 351, 362 (1st Cir. 1994) (citations
and alterations omitted).
Moreover, federal courts in this
35
circuit have applied a presumption that parties who benefit from
a government contract are incidental, rather than intended,
beneficiaries, and “may not enforce the contract absent a clear
intent to the contrary.”
Teixeira v. Fed. Nat’l Mortg. Ass’n,
No. 10-11640-GAO, 2011 WL 3101811, *2 (D. Mass. July 18, 2011);
see also In re Bank of Am. Home Affordable Modification Program
(HAMP) Contract Litig., No. 10-md-2193-RWZ, 2011 WL 2637222, *3
(D. Mass. July 6, 2011); Nash v. GMAC Mortg., LLC, No. 10-cv-493,
2011 WL 2470645, *7 & n.9 (D.R.I. May 18, 2011).
Here, the SPAs
do not contain any provisions evincing a “clear intent” that
borrowers may enforce them, and in fact contain provisions
supporting the contrary conclusion.13
Indeed, § 11E of each SPA
provides that it “shall inure to the benefit of and be binding
upon the parties to the Agreement and their permitted
successors-in-interest,” as opposed to any other party.
A number
of courts have found this language incompatible with an intent to
bestow enforceable rights upon nonparties.
See Teixeira, 2011 WL
3101811 at *2 (noting that this language “appears to limit who
can enforce the contract's terms”); In re Bank of America, 2011
13
Again, because the SPAs are expressly referenced in the
complaint and form part of the basis for the Moores’ claims, the
court may consider them in ruling on this motion to dismiss. See
supra n.6. Both SPAs are also posted for public review at the
Treasury Department’s website: Saxon’s SPA is available at
http://tinyurl.com/SaxonSPA (last visited Jan. 23, 2012); Ocwen’s
at http://tinyurl.com/OcwenSPA (last visited Jan. 23, 2012).
36
WL 2637222 at *3 (noting that this language does not “suggest[]
any intent, let alone a ‘clear intent,’” to benefit borrowers and
in fact “compel[s] the opposite conclusion”); Alpino v. JPMorgan
Chase Bank, Nat’l Ass’n, No. 10-cv–12040–PBS, 2011 WL 1564114, *4
(D. Mass. Apr. 21, 2011) (identifying this as “clear language
limiting the class of actors who can enforce [the SPA’s] terms”).
The conclusion that the parties to the SPAs did not intend
third parties to be able to enforce them finds additional support
in § 7 of each contract, which provides a means of resolving any
disputes that may arise under the SPAs-–but between “Fannie Mae
and Servicer” (i.e., Saxon or Ocwen) only.
See Allen v.
CitiMortgage, Inc., No. CCB-10-2740, 2011 WL 3425665, *7 (D. Md.
Aug. 4, 2011) (relying in part on this language in determining
that borrowers may not enforce SPA).
That same section allows
legal action only after the parties have taken “all reasonable
steps to resolve disputes internally.”
Permitting third-party
suits to enforce the implied covenant inherent in the SPAs would
lead to the incongruous result that the actual parties to the
SPAs would be required to attempt to resolve disputes out of
court before filing suit, whereas third parties like the Moores
would face no such obstacle.
The Moores do not point to any other provision of the SPAs,
or allege any other facts, plausibly suggesting that they are
37
among the intended third-party beneficiaries of those agreements.
Accordingly, the Moores have failed to state a claim for breach
of the covenant of good faith and fair dealing under those
agreements.14
Count 7 is dismissed as to Saxon, Ocwen, and
Harmon.
2.
Breach of the covenant
The remaining defendants, who are alleged to be current or
former holders of the Moores’ mortgage, argue that the Moores
have failed to plead facts plausibly suggesting that any of them
breached the implied covenant inherent in the mortgage.
As noted
previously, the Moores premise their claim upon the third variant
of the implied covenant:
contractual performance.”
“limitation of discretion in
Birch Broad., 161 N.H. at 198.
Because the Moores have pleaded the existence of a contract
between themselves and the remaining defendants, whether they
have sufficiently alleged a breach turns on three key questions:
(1) “whether the agreement allows or confers discretion on the
defendant to deprive the plaintiff of a substantial portion of
the benefit of the agreement”; (2) “whether the defendant
exercised its discretion reasonably”; and (3) “whether the
14
In so holding, the court joins the overwhelming majority
of courts to have considered whether borrowers are the intended
third-party beneficiaries of SPAs. See Alpino, 2011 WL 1564114
at *3; Speleos, 755 F. Supp. 2d at 308.
38
defendant’s abuse of discretion caused the damage complained of.”
Scott v. First Am. Title Ins. Co., 2007 DNH 007, at 14 (citing
Ahrendt v. Granite Bank, 144 N.H. 308, 312-13 (1999)).
Answering these questions in the present case is complicated
by the fact that the Moores’ complaint and memoranda do not
identify any particular grant of discretion in the mortgage that
they believe was exercised unreasonably.
The court notes,
however, that the mortgage does confer some discretion on the
mortgagee as to acceleration and foreclosure, providing that the
“lender at its option may require immediate payment in full of
all sums secured by this Security Instrument without further
demand and may invoke the STATUTORY POWER OF SALE and any other
remedies permitted by Applicable Law.”
Even assuming this is the
grant of discretion upon which the Moores wish to premise this
claim, neither the complaint nor the Moores’ memoranda articulate
how that discretion was exercised unreasonably, so as to
frustrate the parties’ agreed-upon common purpose, justified
expectations, or common standards of decency.
As the New
Hampshire Supreme Court has observed, “parties generally are
bound by the terms of an agreement freely and openly entered
into,” and the implied covenant does not preclude a contracting
party from insisting on enforcement of the contract by its terms,
even when enforcement “might operate harshly or inequitably.”
39
Olbres v. Hampton Co-op. Bank, 142 N.H. 227, 233 (1997).
Therefore, the mere fact that some or all of the defendants
exercised their contractual right to foreclose on the Moores
after they defaulted on their mortgage payments does not amount
to a breach of the implied covenant.
See, e.g., Davenport v.
Litton Loan Servicing, LP, 725 F. Supp. 2d 862, 884 (N.D. Cal.
2010) (“As a general matter, a court should not conclude that a
foreclosure conducted in accordance with the terms of a deed of
trust constitutes a breach of the implied covenant of good faith
and fair dealing.”); cf. Olbres, 142 N.H. at 233 (ruling that
lender did not breach implied covenant in note by exercising its
right to set off debt against borrower’s deposit account).
The Moores also suggest that the defendants breached the
covenant of good faith and fair dealing by refusing to modify the
mortgage, or to engage in good-faith negotiations regarding
modification.
Courts have generally concluded, however, that the
covenant of good faith and fair dealing in a loan agreement
cannot be used to require the lender to modify or restructure the
loan.
See, e.g., FAMM Steel, Inc. v. Sovereign Bank, 571 F.3d
93, 100-01 (1st Cir. 2009) (applying Massachusetts law); Rosemont
Gardens Funeral Chapel-Cemetary, Inc. v. Trustmark Nat’l Bank,
330 F. Supp. 2d 801, 810-11 (S.D. Miss. 2004) (collecting cases).
These decisions are consistent with New Hampshire law that the
40
applied covenant cannot be used to rewrite a contract to avoid
harsh results.
See Olbres, 142 N.H. at 233.
The court sees no
reason to believe that the New Hampshire Supreme Court would
nevertheless allow the implied covenant to be used to require the
parties here to rewrite their contract.
Because the Moores have failed to state a claim for breach
of the implied covenant of good faith and fair dealing by any of
the alleged holders of their mortgage, Count 7 is dismissed as to
those defendants as well.
G.
Count 8 - Fraud
In Count 8 of their complaint, brought against Saxon, Ocwen,
MERS, Harmon, and WMC, the Moores make claims for three different
variants of common-law fraud:
“origination fraud” by WMC; “loan
modification” fraud by Saxon and Ocwen; and “assignments of
mortgage” fraud by MERS and Ocwen.
Before proceeding to the
specifics of each theory, the court notes that although Harmon is
identified as a defendant under the general heading for Count 8,
there are no allegations as to any fraudulent conduct by Harmon
within Count 8.
As already discussed in Part III.E.2 supra, the
Moores’ claims of fraudulent conduct by Harmon elsewhere in the
complaint are unsupported by any factual allegations.
therefore dismissed as to Harmon.
Count 8 is
In addition, as discussed in
Part III.C supra, the Moores’ claim for “origination fraud” by
41
WMC is barred by the applicable statute of limitations, so the
court need not decide whether the complaint nevertheless states
such a claim.
1.
“Loan modification” fraud
The Moores’ claims of “loan modification” fraud against
Saxon and Ocwen assert that:
both defendants said that they were
considering the Moores for a loan modification; these statements
were false; and Saxon and Ocwen knew or should have known that
they were false.
In reliance on these statements, the Moores
say, they wasted their time, resources, and finances in pursuit
of a modification.
Saxon and Ocwen argue that the Moores have
failed to plead fraud in accordance with the heightened standard
of Federal Rule of Civil Procedure 9(b).
Rule 9(b) provides that “[i]n alleging fraud or mistake, a
party must state with particularity the circumstances
constituting fraud or mistake.”
“This means that a complaint
rooted in fraud must specify the who, what, where, and when of
the allegedly false or fraudulent representations.”
Clearview
Software v. Ware, No. 07-cv-405-JL, 2009 WL 2151017, *1 (D.N.H.
July 15, 2009) (citing cases).
Saxon and Ocwen argue that,
despite this requirement, the Moores have not identified:
“(i)
which defendants made [the] representations and specifically the
person that made such representations, (ii) specifically when
42
such representations were made, (iii) how such representations
were false, and (iv) how the Moores relied upon them to their
detriment.”
But the Moores do specify the dates of the alleged
misstatements, as well as which defendant made them, and the
remaining deficiencies do not require dismissal of this claim.
The Moores allege that on May 26, 2009, Saxon sent them a
letter stating that its goal was to “help keep [them] in [their]
home” and encouraging them to contact a “Home Preservation
Specialist.”
Third Am. Compl. (document no. 47) ¶ 37.
They
further allege that Ocwen sent them a similar letter on November
20, 2009, which also informed them that the review process for a
modification would take “up to” 30 days.
Id. ¶ 46.
These
allegations are sufficiently specific as to who made the false
statements and when-–under the circumstances, it is not necessary
for the Moores to identify the particular employee of each
defendant who allegedly signed or authorized the letters.
See
Gilmore v. Sw. Bell Mobile Sys., L.L.C., 210 F.R.D. 212, 224
(N.D. Ill. 2001) (“Where there is a single corporate defendant
and the misrepresentations are sent in mass mailings that do not
themselves identify the author of the document, it is not
required that the allegations identify the specific person or
persons at the corporate defendant who authored the document or
were responsible for the document’s contents.”); Vista Co. v.
43
Columbia Pictures Indus., Inc., 725 F. Supp. 1286, 1302 (S.D.N.Y.
1989) (“Plaintiffs are not required to recite the precise
statement which the specific individual in the defendant
corporation made on a particular date.”).
The other allegations in the complaint make clear that the
Moores claim these statements were false in that neither Saxon
nor Ocwen intended to consider them for a modification in good
faith, and that the Moores detrimentally relied on these
statements by spending time, money, and effort on ultimately
unsuccessful loan modification discussions.
In any event, Rule
9(b)’s heightened pleading requirement “extends only to the
particulars of the allegedly misleading statement itself.
The
other elements of fraud . . . may be averred in general terms.”
Rodi v. S. New England Sch. of Law, 389 F.3d 5, 15 (1st Cir.
2004).
The Moores’ claim against Saxon and Ocwen for fraud in
the loan modification process may therefore proceed.
2.
“Assignments of mortgage” fraud
The Moores’ claim for “assignments of mortgage” fraud
against Ocwen and MERS rests on the notion that the assignment of
their mortgage from MERS to Deutsche Bank was fraudulent because
the individual who signed the assignment on behalf of MERS, Juan
Pardo, was not an employee of MERS at all, but of Ocwen.
Ocwen
and MERS argue that, even if Pardo did falsely state in the
44
assignment that he was a MERS employee, this misstatement did not
cause any harm to the Moores that can be recovered under a fraud
theory.
The court agrees.
Under New Hampshire law, a plaintiff can recover in fraud
only for “pecuniary loss caused to [it] by [its] justifiable
reliance upon the misrepresentation.”
Gray v. First NH Banks,
138 N.H. 279, 283 (1994) (quoting Restatement (Second) of Torts §
525 (1976)).
The Moores do not claim to have relied upon Pardo’s
alleged misrepresentation that he worked for MERS.
Instead, they
seem to suggest that it was Deutsche Bank who relied on that
statement, by accepting the assignment-–and that, had this not
occurred, Deutsche Bank never would have attempted to foreclose
on their mortgage.
But a plaintiff does not state a claim for
fraud against the maker of a fraudulent statement when that
statement was relied upon solely by others, even if that reliance
forms a link in a chain of events that ends up causing harm to
the plaintiff.
See, e.g., Restatement (Second) of Torts § 537
cmt. a (1977).
The Moores’ theory of “assignment fraud,” then,
fails to state a claim against Ocwen or MERS,15 and is dismissed.
15
The apparent absurdity of the Moores’ attempt to sue MERS
for an allegedly fraudulent transfer of its own interest in the
mortgage has not escaped the court’s attention. The parties did
not address this issue in their memoranda, though, so the court
does not address it here.
45
H.
Counts 9 and 11 - Fraud in the inducement and
Intentional and negligent misrepresentation
Count 9 of the Moores’ complaint seeks to recover from Saxon
and Ocwen for fraud in the inducement, while Count 11 makes
claims against all defendants for intentional and negligent
misrepresentation.
These claims are also subject to the
heightened pleading standards of Federal Rule of Civil Procedure
9(b).
As noted in Part III.G.1 supra, to satisfy this standard
the Moores “must specify the who, what, where, and when of the
allegedly false or fraudulent representations.”
Clearview
Software, 2009 WL 2151017 at *1.
Except with respect to their allegations against Saxon and
Ocwen, the complaint’s allegations of misrepresentations by the
defendants are not pleaded with sufficient specificity.
Indeed,
the Moores do not identify any particular false statements by any
of these other defendants.
Accordingly, the Moores’
misrepresentation claims against those defendants in Count 11
must be dismissed.
Their claims against Saxon and Ocwen in Count
11 may proceed, though.
As discussed in Part III.G.1 supra, the
Moores’ allegations of misrepresentations by these two defendants
are pleaded with sufficient specificity.
The Moores’ claims for fraud in the inducement against Saxon
and Ocwen, however, must be dismissed.
A cause of action for
fraud in the inducement lies where one party has “procur[ed]
46
. . . a contract or conveyance by means of fraud or negligent
misrepresentation.”
681 (2005).
Van Der Stok v. Van Voorhees, 151 N.H. 679,
But the Moores do not allege that either Saxon or
Ocwen induced them to enter into a contract or conveyance through
fraud.
Instead, they premise this claim on the same conduct that
underlies their claims against Saxon and Ocwen for “loan
modification fraud” in Count 8 and intentional and negligent
misrepresentation in Count 11, i.e., those defendants’
representations regarding the modification status of their loan.
While those allegations state claims for fraud and intentional
and negligent misrepresentation against Saxon and Ocwen, they
fail to state a claim for fraud in the inducement.
Count 9 is
therefore dismissed.
I.
Counts 10, 12, and 13 - Duty-based claims
Counts 10, 12, and 13 of the complaint each make claims
that, to succeed, require the existence of some duty from the
defendants to the Moores.
Count 10 makes a straightforward
negligence claim; Count 12, a claim for breach of assumed duty;
and Count 13, a claim for breach of fiduciary duty.16
In their
motions to dismiss, the defendants each argue that they had no
16
Claims for negligence-–like claims for breach of an
assumed duty or a fiduciary duty-–“rest primarily upon a
violation of some duty owed by the offender to the injured
party.” Ahrendt v. Granite Bank, 144 N.H. 308, 314 (1999).
47
duty to the Moores, and that in the absence of a duty, the claims
against them in these counts must be dismissed.
While the Moores
counter that each of the defendants owed them a generalized “duty
to act with reasonable care,” the allegations of the complaint do
not plausibly establish the existence of any such duty.
These
counts must accordingly be dismissed.
Citing a bankruptcy case applying Massachusetts law,
defendants argue that “a lender owes no general duty of care to a
borrower.”
See, e.g., Deutsche Bank Mot. to Dismiss (document
no. 71) at 10 (citing In re Fordham, 130 B.R. 632, 646 (Bankr. D.
Mass. 1991)).
wholesale.
The court does not adopt the defendants’ position
Even if this is an accurate statement of
Massachusetts law, it does not necessarily reflect the law of New
Hampshire.
It is true that, under New Hampshire law, the
relationship between a lender and borrower is contractual in
nature, Ahrendt v. Granite Bank, 144 N.H. 308, 311 (1999), and
that the existence of such a contractual relationship typically
prohibits recovery in tort, see Wyle v. Lees, 162 N.H. 406, 2011
WL 4390732, *2 (N.H. Sept. 20, 2011).
But New Hampshire law also
recognizes that a contracting party may be “owed an independent
duty of care outside the terms of the contract.”
Id. at *3.
Thus, the New Hampshire Supreme Court has concluded that a lender
owes a borrower a duty not to disburse its loan funds without
48
authorization, Lash v. Cheshire Cnty. Sav. Bank, Inc., 124 N.H.
435, 438-39 (1984), and that a mortgagee, in its role as seller
at a foreclosure sale, owes a duty to the mortgagor “to obtain a
fair and reasonable price under the circumstances.”
Murphy v.
Fin. Dev. Corp., 126 N.H. 536, 541 (1985).
Where the existence of such a duty is claimed, though,
“[t]he burden is on the borrower, seeking to impose liability, to
prove the lender’s voluntary assumption of activities beyond
those traditionally associated with the normal role of a money
lender.”
Seymour v. N.H. Sav. Bank, 131 N.H. 753, 759 (1989).
As to the mortgagees, note-holders, and their loan servicers
named as defendants here–-MERS, Saxon, Ocwen, Deutsche Bank, and
the Morgan Stanley Defendants-–the Moores have not alleged facts
demonstrating that any of them did so.
Rather, the acts alleged
in the complaint relate entirely to those defendants’ attempts to
collect the Moores’ mortgage debt and to recoup their investment
through foreclosure, both of which fall squarely within the
normal role of a lender.
Though the Moores assert that Ocwen and
Saxon undertook additional duties when they entered into their
HAMP SPAs with the federal government, this argument runs afoul
of at least two principles of contract law:
first, that third
parties may not enforce a contract absent a clear intent to the
contrary, see Part III.F.1 supra, and second, that harmed parties
49
may not pursue tort claims for contractual breaches, see Wyle,
2011 WL 4390732 at *2-3.
The Moores may not, therefore, premise
a negligence claim upon an alleged breach of the HAMP SPAs.
The Moores’ claims against Harmon, which pursued the
foreclosure against the Moores on behalf of the other defendants,
also fail for lack of an alleged, apparent, or implied duty.
The
New Hampshire Supreme Court has expressly “decline[d] to impose
on an attorney a duty of care to a non-client whose interests are
adverse to those of a client.”
362, 365 (2001).
MacMillan v. Scheffy, 147 N.H.
In so holding, the court noted that “the
existence of a duty of the attorney to another person would
interfere with the undivided loyalty which the attorney owes his
client and would detract from achieving the most advantageous
position for his client.”
Id.
Accordingly, because the complaint does not support the
existence of a duty owed by any of the defendants to the Moores
outside the terms of their contracts,17 Counts 10, 12, and 13 are
dismissed.
17
It is worth noting here that New Hampshire does not permit
an action for negligence to be premised upon the violation of a
duty imposed by statute unless a similar duty existed at common
law. Stillwater Condo. Ass’n v. Town of Salem, 140 N.H. 505, 507
(1995). The Moores have not argued that their negligence claims
are premised on alleged RESPA, FDCPA, or UDUCPA violations, so
the court need not address whether the duties imposed by those
statutes existed at common law so as to permit a negligence claim
against any of the defendants.
50
J.
Count 14 - Civil conspiracy
Count 14 of the Moores’ complaint makes a claim against all
defendants for civil conspiracy.
New Hampshire courts define
civil conspiracy as “a combination of two or more persons by
concerted action to accomplish an unlawful purpose, or to
accomplish some purpose not in itself unlawful by unlawful
means.”
Jay Edwards, Inc. v. Baker, 130 N.H. 41, 47 (1987)
(quoting 15A C.J.S. Conspiracy § 1(1), at 596 (1967)).
The
elements of a cause of action for civil conspiracy are “(1) two
or more persons (including corporations); (2) an object to be
accomplished (i.e. an unlawful object to be achieved by lawful or
unlawful means or a lawful object to be achieved by unlawful
means); (3) an agreement on the object or course of action; (4)
one or more unlawful overt acts; and (5) damages as the proximate
result thereof.”
Id.
The Moores have failed to state such a
claim because they have not adequately alleged the existence of
an agreement between or among any of the defendants.
The Moores never squarely allege that the defendants agreed
to undertake any joint course of action.
At most, they ask the
court to infer that the defendants agreed to foreclose on their
mortgage from the fact that the defendants all allegedly
undertook wrongful acts in connection with the origination,
servicing, and foreclosure of the Moores’ mortgage.
51
This is akin
to the situation the Supreme Court confronted in Bell Atl. Corp.
v. Twombly, 550 U.S. 544 (2007).
There, the Court explained:
[S]tating such a claim [for conspiracy] requires a
complaint with enough factual matter (taken as true) to
suggest that an agreement was made. Asking for
plausible grounds to infer an agreement does not impose
a probability requirement at the pleading stage; it
simply calls for enough fact to raise a reasonable
expectation that discovery will reveal evidence of
illegal agreement. . . . [A]n allegation of parallel
conduct and a bare assertion of conspiracy will not
suffice. Without more, parallel conduct does not
suggest conspiracy, and a conclusory allegation of
agreement at some unidentified point does not supply
facts adequate to show illegality. Hence, when
allegations of parallel conduct are set out in order to
make a [conspiracy] claim, they must be placed in a
context that raises a suggestion of a preceding
agreement, not merely parallel conduct that could just
as well be independent action.
Id. at 556-57.
Thus, the mere fact that the defendants all took
actions directed at the Moores’ mortgage does not permit the
court to infer an agreement on an object to be accomplished or
course of action.
Because the Moores have alleged no “plausible
grounds to infer an agreement,” Count 14 must be dismissed.
K.
Count 15 - Negligent & intentional infliction of
emotional distress
In Count 15, the Moores make claims for negligent and
intentional infliction of emotional distress against all
defendants.
Among other things, the defendants argue that these
claims must be dismissed because damages for emotional distress
are not available in contract actions.
52
See Crowley v. Global
Realty, Inc., 124 N.H. 814, 817 (1984) (“[R]ecovery of damages
for mental suffering and emotional distress is not generally
permitted in actions arising out of breach of contract.”).
This
argument is not persuasive because, as the Moores point out, the
conduct alleged in this case is not limited to contractual
violations, but includes tortious behavior and violations of
several consumer protection statutes.
The claims must
nonetheless be dismissed for other reasons.
Because negligent
infliction of emotional distress (NIED) and intentional
infliction of emotional distress (IIED) are two separate claims
with different elements, the court addresses them separately.
1.
Negligent infliction of emotional distress
“The elements of a claim for negligent infliction of
emotional distress include:
(1) causal negligence of the
defendant; (2) foreseeability; and (3) serious mental and
emotional harm accompanied by objective physical symptoms.”
Tessier v. Rockefeller, 162 N.H. 324, 2011 WL 4133840, *12 (N.H.
Sept. 15, 2011).
As already discussed above, see Part III.I
supra, the Moores have not stated a claim for negligence against
the defendants, and therefore cannot maintain a claim for NIED,
either.
Indeed, as this court recently observed, “a claim for
NIED, like any other negligence claim, demands the existence of a
53
duty from the defendant to the plaintiff.”
BK v. N.H. Dep’t of
Health & Human Servs., -- F. Supp. 2d --, 2011 DNH 157, 29-30.
2.
Intentional infliction of emotional distress
“In order to make out a claim for intentional infliction of
emotional distress, a plaintiff must allege that a defendant by
extreme and outrageous conduct, intentionally or recklessly
caused severe emotional distress to another.”
Tessier, 2011 WL
4133840 at *11 (quotations and alterations omitted).
“formidable standard.”
This is a
Franchi v. New Hampton Sch., 656 F. Supp.
2d 252, 267 (D.N.H. 2009).
“[I]t is not enough that a person has
acted with an intent which is tortious or even criminal, or that
he has intended to inflict emotional distress, or even that his
conduct has been characterized by malice.”
4133840 at *11.
Tessier, 2011 WL
Instead, the defendant’s conduct must be “so
outrageous in character, and so extreme in degree, as to go
beyond all possible bounds of decency, and to be regarded as
atrocious, and utterly intolerable in a civilized community.”
Id.
The defendants argue that the conduct the Moores allege does
not meet this high standard, and the court agrees.
the Moores allege the following.
Essentially,
Both Saxon and Ocwen, after
entering contracts with the federal government to modify mortgage
loans, told the Moores--who had already defaulted on their
54
mortgage--that they were committed to helping them remain in
their home.
Despite these representations, and in possible
breach of their contracts with the federal government, Saxon and
Ocwen made either weak or nonexistent efforts toward helping the
Moores obtain a loan modification.
Ocwen promised to send the
Moores modification application documents but never did so.
At
different times, both Saxon and Ocwen retained Harmon to
institute foreclosure proceedings or to collect the Moores’
outstanding mortgage debt on behalf of the entity or entities
that held the Moores’ mortgage and note.
Both Ocwen and Harmon
ignored or refused to respond to the Moores’ letters, including
requests for debt verification under the FDCPA and a qualified
written request under RESPA.
And, after Ocwen told the Moores
that it would not foreclose for three months, it scheduled a
foreclosure sale on behalf of Deutsche Bank just a month later.
While, as described elsewhere in this order, some of this
conduct may have been unlawful, the court cannot say that any of
defendants’ alleged actions, whether viewed individually or in
conjunction with one another, “go beyond all possible bounds of
decency,” or are “atrocious and utterly intolerable in a
civilized community.”
Cf. Alpino v. JPMorgan Chase Bank, Nat’l
Ass’n, No. 10–0679, 2011 WL 1564114, *8 (D. Mass. April 21, 2011)
(dismissing claim for IIED where, “[a]t most, the defendant
55
failed to consider the plaintiff for a mortgage modification
under HAMP and then failed to operate an open and fair
foreclosure sale”); Davenport v. Litton Loan Servicing, LP, 725
F. Supp. 2d 862, 884 (N.D. Cal. 2010) (dismissing claim for IIED
where servicer allegedly refused to negotiate refinance with
plaintiff, did not comply with statutory requirements for
foreclosure, and did not consider plaintiff for alternatives to
foreclosure).
This is not meant to minimize the consequences of
the defendants’ alleged actions:
the court recognizes that “home
foreclosure is a terrible event and likely to be fraught with
unique emotions and angst.”
Davenport, 725 F. Supp. 2d at 884.
But the defendants’ actions cannot, as a matter of law, be called
“utterly intolerable in a civilized community.”
The Moores’
claim for IIED is dismissed.
L.
Count 16 - Promissory Estoppel
Count 16 of the Moores’ complaint makes a claim for
promissory estoppel against Ocwen.
Under the theory of
promissory estoppel, “a promise reasonably understood as intended
to induce action is enforceable by one who relies on it to his
detriment or to the benefit of the promisor.”
Panto v. Moore
Bus. Forms, Inc., 130 N.H. 730, 738 (1988) (citing Restatement
(Second) of Contracts § 90 (1981)).
The Moores allege that
Ocwen’s January 2010 “Reinstatement Quote,” which informed them
56
that the “total amount due to reinstate” as of April 1, 2010 was
$79,151.46, constituted a promise “that no action would be taken
towards foreclosure” prior to April 1, 2010.
(document no. 47) at ¶ 178.
Third Am. Compl.
According to the Moores, Ocwen then
breached this promise on February 20, 2010, when it sent them two
Notices of Foreclosure Sale informing them that a sale had been
scheduled for March 18, 2010.
Ocwen argues that this claim must
be dismissed because, among other things, the Moores have not
alleged that they detrimentally relied upon the reinstatement
quote.
The court agrees.
The Moores have not alleged any facts suggesting that,
insofar as the Reinstatement Quote was a promise to hold off on
foreclosing, they relied on this promise to their detriment or to
Ocwen’s benefit.
There are simply no allegations in the
complaint that in the short time between when Ocwen made the
promise (in January 2010) and when it allegedly broke it (in
February 2010), the Moores did or forewent anything in reliance
on the Quote, detrimental to them, beneficial to Ocwen, or
otherwise.
estoppel.
M.
The Moores have not stated a claim for promissory
Count 16 is dismissed.
Count 17 - Avoidance of note
Finally, Count 17 of the complaint makes a claim for
“avoidance of note” against “all defendants claiming to own the
57
note [and] mortgage.”
In support of this claim, the Moores
allege that the defendants “have been unable or unwilling to
provide the Plaintiffs with evidence that they hold the original
of the Note or Mortgage,” that “[a]ctual possession of the
original of the note is a necessary legal prerequisite to
enforcement of the Note,” and that “[i]n the absence of an
ability to show that [they possess] the original of the Note”
none of the defendants “has a right to enforce the same.”
Am. Compl. (document no. 47) at ¶¶ 184-86.
Third
While New Hampshire
courts have not recognized a cause of action for “avoidance of
note”18 and a federal court sitting in diversity should not
“create new doctrines expanding state law,” Bartlett v. Mut.
Pharm. Co., Inc., 2010 DNH 164, at 16, the court interprets this
cause of action as seeking a declaratory judgment that the
defendants may not enforce the note against the Moores.19
The
18
In the only publicly available opinions that so much as
mention this cause of action-–in New Hampshire or elsewhere-–the
courts never reached the question of whether such a cause of
action exists because the plaintiff conceded that his claim for
avoidance of the note could not survive the defendants’ motion to
dismiss. See Dillon v. Select Portfolio Servicing, 630 F.3d 75,
83 (1st Cir. 2011); Dillon v. Select Portfolio Servicing, 2008
DNH 019, at 20. The court observes that in typical legal usage,
“avoidance” refers to the power of a bankruptcy trustee under the
Bankruptcy Code to undo “some prebankruptcy transfers of the
debtor’s property and most postbankruptcy transfers of estate
property.” 1 David G. Epstein et al., Bankruptcy § 6-1, at 498
(1992).
19
The court here reads the Moores’ complaint with an extra
degree of solicitude. See supra n.8.
58
only parties that have moved to dismiss this claim (and the only
parties who appear to “claim to own the note and mortgage”) are
Deutsche Bank and the Morgan Stanley defendants.
They argue that
under New Hampshire law, they need not possess the Note in order
to foreclose on the mortgage.
Even if this argument is correct (and the court need not and
does not reach that issue at this time), it is beside the point.
On its face, Count 17 does not assert that defendants may not
enforce the mortgage by foreclosing, but that they may not
enforce the note-–e.g., by attempting to collect the amount due
under it.
Under New Hampshire law, possession of a negotiable
instrument such as the note is (with limited exceptions not
invoked here) a prerequisite to its enforcement.
Stat. Ann. § 382-A:3-301.
See N.H. Rev.
As the Moores have sufficiently
alleged that the defendants do not possess the note, and it is
enforcement of the note which the Moores seek to avoid, the
motions to dismiss Count 17 are denied.
IV.
Conclusion
For the reasons set forth above, WMC’s motion to dismiss20
is GRANTED.
The remaining defendants’ motions to dismiss21 are
20
Document no. 80.
21
Documents nos. 52, 53, 54, 60, 70, and 71.
59
each GRANTED in part and DENIED in part.
Counts 1, 2, 3, 7, 9,
10, 12, 13, 14, 15, and 16 of the Third Amended Complaint are
dismissed in their entirety.
Count 6 of the Third Amended
Complaint is dismissed as to Harmon only; Count 8 as to WMC,
MERS, and Harmon only; and Count 11 as to WMC, MERS, Harmon,
Deutsche Bank, and the Morgan Stanley Defendants only.
The
motions are denied as to all other counts.
Accordingly, counts 4 and 6 may proceed against Ocwen; count
5 against Ocwen and Harmon; counts 8 and 11 against Saxon and
Ocwen; and count 17 against Deutsche Bank and the Morgan Stanley
defendants.
SO ORDERED.
Joseph N. Laplante
United States District Judge
Dated:
cc:
January 27, 2012
Angela Jo Moore (pro se)
M. Porter Moore (pro se)
Joshua D. Shakun, Esq.
Brian S. Grossman, Esq.
Peter G. Callaghan, Esq.
Edmund J. Boutin, Esq.
David A. Scheffel, Esq.
Eric Epstein, Esq.
60
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