French v. Melon Bank of New York
Filing
22
ORDER granting in part and denying in part 17 Motion to Dismiss. So Ordered by Judge Paul J. Barbadoro. Answer Follow Up on 11/28/2011.(mxm)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Harold French
v.
Civil No. 11-cv-00155-PB
Opinion No. 2011 DNH
The Bank of New York Mellon
MEMORANDUM AND ORDER
Harold French seeks to permanently enjoin the Bank of New
York Mellon (BONY)1 from foreclosing upon property located at 74
Route 127, in Warner, New Hampshire.
He argues that the
mortgage document is unenforceable because it does not
sufficiently describe the secured property, and alternatively,
that BONY cannot foreclose because it is not the holder of the
corresponding note.
French also seeks monetary damages against
BONY for alleged violations of the New Hampshire Unfair,
Deceptive or Unreasonable Collection Practices Act and its
federal cognate.
BONY moves to dismiss all counts for failure
to state a claim.
For the reasons discussed below, I grant in
part and deny in part the motion to dismiss.
1
BONY is trustee for the Certificate Holders of CWALT 2005-34CB,
a pool of securitized mortgages in a special purpose entity.
I.
BACKGROUND2
On July 7, 2005, Harold French obtained a loan from
Countrywide Home Loans, Inc. (“Countrywide”) that was to be
secured by an interest in real property.
He executed a note
with Countrywide and a mortgage with The Mortgage Electronic
Registration System, Inc. (“MERS”), acting as nominee for
Countrywide.
French alleges that the mortgage document he
signed is not valid because it did not include a legal
description of the secured property.
He further alleges that
Countrywide subsequently, and without his knowledge or consent,
inserted a legal description into the copy of the mortgage that
it filed at the Merrimack County Registry of Deeds.
In support of his claim that the mortgage document was
altered after he signed it, French avers that each page of the
mortgage document he signed on July 7, 2005 contained his
initials and was stamped with Countrywide’s bar code.
2
The final
The facts are drawn from the complaint (Doc. No. 16), and from
the documents provided by defendant that are central to the
complaint’s factual allegations. See Beddall v. State St. Bank
& Trust Co., 137 F.3d 12, 17 (1st Cir. 1998) (“When . . . a
complaint’s factual allegations are expressly linked to –- and
admittedly dependent upon –- a document (the authenticity of
which is not challenged), that document effectively merges into
the pleadings and the trial court can review it in deciding a
motion to dismiss under Rule 12(b)(6).”).
2
page of the document recorded in the registry, however, does not
contain French’s initials or a bar code.
That page is titled
“Exhibit ‘A’: Legal Description,” and contains three short
paragraphs describing the location and bounds of a tract of land
in Warner.
See Doc. No. 19-2.
French has proffered a page that
he asserts to be the genuine final page of the original
document.
That page is similarly titled “Legal Description
Exhibit A,” and unlike the other page, it contains his initials
and a bar code.
See Doc. No. 19-3.
Also unlike the allegedly
altered page, it is blank and does not contain a description of
any property.
Another part of the mortgage, however, does provide some
description of the property to be used as security.
On its
third page, the document states that the borrower agrees to
mortgage “the following described property located in the COUNTY
of MERRIMACK: SEE EXHIBIT ‘A’ ATTACHED HERETO AND MADE A PART
HEREOF.”
Underneath, the document continues: “Parcel ID Number:
[nothing is written in a blank space] which currently has the
address of 74 ROUTE 127, WARNER New Hampshire 03278 (‘Property
Address’).”
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At some point after entering into the secured loan
transaction, French began missing payments on the note.
In
response, BONY informed French that it would foreclose on the
Warner property.
On December 17, 2010, MERS assigned the
mortgage to BONY, and foreclosure proceedings commenced the
following day.
On December 20, French contacted BONY to explain that the
mortgage document was not legally enforceable because it did not
contain a legal description of the property.
Subsequent to that
communication, BONY continued to publicly advertise the
foreclosure auction of the property.
On March 1, 2011, French brought suit in New Hampshire
Superior Court seeking to enjoin BONY from conducting a
foreclosure auction.
A preliminary injunction was granted, and
BONY later agreed to a permanent injunction pending the outcome
of this litigation.
On March 30, BONY removed the action to
federal court.
II.
STANDARD OF REVIEW
In considering a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6), I “accept as true the well-pleaded
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factual allegations of the complaint, draw all reasonable
inferences therefrom in the plaintiff's favor and determine
whether the complaint, so read, sets forth facts sufficient to
justify recovery on any cognizable theory.”
Martin v. Applied
Cellular Tech., 284 F.3d 1, 6 (1st Cir. 2002).
To survive a
motion to dismiss for failure to state a claim, the general
standard under Rule 8 of the Federal Rules of Civil Procedure is
that the complaint must “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)).
III.
ANALYSIS
French contends that the mortgage is invalid and
unenforceable because it fails to sufficiently describe the
secured property.
Because BONY continued to advertise the
foreclosure auction after being informed of the mortgage’s
invalidity, French contends that BONY violated both the New
Hampshire Unfair, Deceptive or Unreasonable Collection Practices
Act and the federal Fair Debt Collection Practices Act.
In the
alternative, French argues that even if BONY holds a valid
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mortgage instrument, it is without legal authority to foreclose
because it is not, or may not be, the holder of the note issued
with the mortgage.
A.
Compl. ¶¶ 49-51, Doc. No. 16.
Validity of Mortgage
I first address French’s claim that the mortgage is void
for lack of a legally sufficient description.
Under New
Hampshire law, the statute of frauds requires that contracts
transferring interests in land must be made in a writing that
“identif[ies] the parties, state[s] the price, and describe[s]
the land involved.”
(1971).
Cunningham v. Singer, 111 N.H. 159, 160
“A memorandum is sufficiently definite to satisfy the
statute of frauds if it is ‘reasonably certain from the contract
itself and the acts of the parties in performance of it what
land was intended.’”
Jesseman v. Aurelio, 106 N.H. 529, 532
(1965) (quoting White v. Poole, 74 N.H. 71, 73 (1906)).
Where
the document’s language is clear enough to “denot[e] a
particular lot of land, it is not essential that it should
contain a statement of its boundaries, its geographical location
or other designations frequently used in formal conveyances of
real estate.”
Id. at 532.
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At this stage of litigation, I must accept as true French’s
assertions that Countrywide altered the mortgage document after
its execution and prior to recording it in the Merrimack County
Registry of Deeds.
I must further accept as true that the
document currently possessed by French, which contains a blank
final page, is a true and accurate copy of the mortgage
document.
BONY argues that even if the final page of the mortgage
document is excised, the inclusion of the property’s address on
the document’s third page is sufficient to satisfy the statute
of frauds.
I agree.
French has failed to allege facts that
would establish that the address, even if unaccompanied by
further description, is not “sufficiently definite” to make
“reasonably certain” what parcel of land the mortgage document
covered.
See Jesseman, 106 N.H. at 532.
French has not alleged
that the address given on the document’s third page is different
than the address of the property he understood to have been
mortgaged, nor has he alleged any dispute at all between the
parties about the location or bounds of the property subject to
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the mortgage.3
I therefore grant BONY’s motion to dismiss on
this claim.
French raises a related claim for the first time in his
objection to the motion to dismiss, arguing that Countrywide’s
alteration of the mortgage renders the entire document
fraudulent, and that it is without legal effect unless BONY
seeks equitable reformation.
Pl.’s Mem. in Supp. of Obj. to
Mot. to Dismiss at 5-6, Doc. No. 19-1.
This argument is without
merit because even if the recorded document is a nullity, the
unrecorded document that French claims to be the true and
accurate mortgage can still be enforced against him.
See N.H.
Rev. Stat. Ann. § 477:7 (unrecorded mortgage is not valid
“against any person but the grantor and his heirs only”
(emphasis added)); Ouellette v. Butler, 125 N.H. 184, 188 (1984)
(failing to record interest in land does not render it
unenforceable as against those who have notice); Brown v.
Manter, 22 N.H. 468, 471 (1851) (“So far as the parties are
3
In his objection to the motion to dismiss, French states that
at one time he owned two separate parcels of land with the
mailing address of 74 Route 127. Pl.’s Mem. in Supp. of Obj. to
Mot. to Dismiss at 7, Doc. No. 19-1. Assuming the veracity of
French’s claim, he has still failed to allege any confusion or
discrepancy about what property was intended to be mortgaged.
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concerned or those who have notice of the existence of the deed,
the enrolment is not essential to its validity.”).
B.
Claims
I grant BONY’s motion to dismiss on the claims arising
under the New Hampshire Fair Debt Collection Act and the Fair
Debt Collection Practices Act.
Both claims are predicated on
the invalidity of the mortgage.
Because the mortgage is valid
and enforceable, both claims fail.
C.
Claim That BONY Does Not Hold the Note
Based on the manner in which MERS operates,4 French asserts
that MERS could not have passed the note to BONY when it
assigned BONY the mortgage, and therefore argues that “BONY does
not, or may not, hold the Note.”
French contends that BONY does
not have the power to foreclose on the mortgage unless it also
holds the note.
BONY responds that even if it is not the note-
holder, by virtue of having been assigned MERS’s interest in the
mortgage, it has the authority to foreclose.
In a footnote,
BONY also asserts that it is, in fact, the current holder of
4
For more detailed discussions of the role and operation of
MERS, see generally In re MERS Litig., 659 F.Supp.2d 1368, 1370
n.6 (J.P.M.L. 2009); MERS v. Neb. Dep’t of Banking and Fin., 704
N.W.2d 784, 785 (Neb. 2005); In re MERSCORP, Inc. v. Romaine,
861 N.E.2d 81, 83 (N.Y. 2006).
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both the mortgage and the note.
Def.’s Mem. in Resp. to Pl.’s
Obj. at 3 n.3, Doc. No. 21.
The New Hampshire Supreme Court has not recently addressed
the legal question of whether a mortgagee can foreclose on a
property even if it does not hold the note that was issued with
the mortgage.
Moreover, New Hampshire Superior Court judges
have reached contradictory conclusions on the issue.
Compare
Powers v. Aurora Loan Servs., No. 213-2010-CV-00181, slip op. at
*16 (N.H. Super. Feb. 14, 2011) (“The Court finds that the
assignment [of the mortgage] from MERS, as nominee for
GreenPoint, to Aurora is valid and that Aurora does have
standing to foreclose.”), with Zecevic v. U.S. Bank Nat’l
Assoc., No. 10-E-196, slip op. at *5 (N.H. Super. Jan. 20, 2011)
(“[T]o have jurisdiction and authority to foreclose, a party
must show that it is also the assignee of the underlying
promissory note because foreclosure of a mortgage may not be
brought by one who has no title to it and absent a transfer of
the debt, the assignment of the mortgage is a nullity.”
(quotation marks and citation omitted)).
Because BONY claims to be the holder of the note, I see no
reason to delve into a complex, and apparently unresolved,
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question of state law.
Accordingly, I deny BONY’s motion to
dismiss for failure to state a claim, without prejudice to
addressing the issue in a properly supported motion for summary
judgment.
Lastly, in his objection to the motion to dismiss, French
raises a new argument pertaining to the legality of MERS’s
assignment of the property to BONY.
French asserts that New
Hampshire law prohibits a corporation’s agent from transferring
real estate held by the corporation unless the agent was
“appointed by vote for that purpose.”
§ 477:2.
See N.H. Rev. Stat. Ann.
From this proposition, French deduces that BONY must
produce proof that Countrywide’s board of directors voted to
authorize MERS, and that MERS’s board of directors voted to
authorize Mark Lamper –- the assistant secretary whose signature
appears on the assignment document –- to assign the mortgage.
Pl.’s Mem. in Supp. of Obj. to Mot. to Dismiss at 8, Doc. No.
19-1.
In reply, BONY argues that French cannot introduce a new
theory of liability for the first time in an objection, and that
French has not even alleged that the agents who carried out the
transaction were not authorized.
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I conclude that French has failed to sufficiently plead
this claim.
First, his complaint is bereft of any factual
allegation that would support the claim.
Second, even in his
objection, he does not allege that the actions taken were not
properly authorized; rather, he alleges that BONY has a duty to
produce specific votes of boards’ of directors.
In the absence
of an allegation of unauthorized action, however, to force BONY
to produce proof of authorized action would flip the traditional
burden.
At the pleading stage, the plaintiff must show that he
is entitled to relief, Fed. R. Civ. P. 8; the burden is not on
the defendant to affirmatively show that his actions were in
concert with the law before plaintiff has even alleged a
violation.
IV.
CONCLUSION
For the foregoing reasons, BONY’s motion to dismiss (Doc.
No. 17) is granted in part and denied in part.
I deny the
motion to dismiss in regard to French’s claim for injunctive
relief on the basis that BONY does not hold the note.
the motion in all other respects.
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I grant
SO ORDERED.
/s/Paul Barbadoro___________
Paul Barbadoro
United States District Judge
November 14, 2011
cc:
Eugene F. Sullivan, III, Esq.
Jennifer Turco Beaudet, Esq.
Thomas J. Pappas, Esq.
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