Cabacoff v. Wells Fargo Bank, N.A. et al
Filing
46
ORDER granting 36 Motion to Dismiss for Failure to State a Claim. So Ordered by Judge Paul J. Barbadoro.(jna)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Robert S. Cabacoff
v.
Case No. 12-cv-56-PB
Opinion No. 2012 DNH 188
Wells Fargo Bank, N.A. et al.
MEMORANDUM AND ORDER
Robert Cabacoff, a pro se plaintiff, has sued several
entities that own, service, or have some other connection to his
residential mortgage loan.
Most of his claims can be divided
into one of three broad categories.
One set of claims turn on
his contention that his loan servicer failed to properly respond
to his repeated requests to modify his loan.
Other claims stem
from the process by which ownership of his mortgage note was
separated from his mortgage, assigned multiple times without his
consent, pooled with other loans, and used as security for
investment certificates regulated under the federal securities
laws.
A third set of claims turn on what he asserts is a
fraudulent assignment of his mortgage.
The defendants have moved to dismiss Cabacoff’s amended
complaint for failure to state a claim.
For the reasons set
forth herein, I grant the defendants’ motion.
I.
A.
BACKGROUND1
The Loan
Robert and Ana Cabacoff obtained a $405,000 mortgage loan
from First Franklin, a division of National City Bank of
Indiana, (“First Franklin”) on August 21, 2006.
The mortgage
securing the loan names Mortgage Electronic Registration
Systems, Inc. (“MERS”) as the mortgagee.
The mortgage states
that MERS was acting “solely as a nominee for [First Franklin]
and [its] successors and assigns.”
The Cabacoffs’ loan was sold several times during the month
following the closing.
First Franklin sold the loan to First
Franklin Financial Corporation, which resold it as a part of a
package of loans to an affiliate of Lehman Brothers Holdings,
Inc. (“Lehman Brothers”).
Lehman Brothers assigned the package
of loans to the Structured Asset Services Corporation, which in
turn deposited the loans into the First Franklin Loan Trust
2006-FF15 (“Trust”).
Trust.
Wells Fargo was named as trustee of the
Certificates in the Trust were later sold to investors
1
I draw the facts from the Amended Complaint (Doc. No. 34) and
various documents attached thereto.
2
in transactions regulated by the federal securities laws.
B.
Loan Modification Requests
Cabacoff made multiple unsuccessful attempts beginning in
September 2010 to have the terms of his loan modified under the
Home Affordable Modification Program (“HAMP”).
During the
course of this effort, his loan servicer, Select Portfolio
Servicing, Inc. (“SPS”) violated HAMP guidelines by: (1)
requiring Cabacoff to abandon a pending bankruptcy petition in
order to be considered for a loan modification; (2) requiring
Cabacoff to make a good faith payment as a condition of further
negotiations; and (3) failing to provide information concerning
the methodology it was using to calculate the Net Present Value
(“NPV”) of his home.2
C.
Foreclosure Proceedings
On August 31, 2011, MERS purported to assign the mortgage
on the Cabacoffs’ property to Wells Fargo.
Approximately two
months later, Wells Fargo notified Cabacoff of its intention to
foreclose.
Cabacoff sought bankruptcy protection on November
2
The HAMP guidelines require lenders to determine a borrowers’
NPV in determining whether he is eligible for a loan
modification. See Home Affordable Modification Program, Base
Net Present Value (NPV) Model v.5.0 Model Documentation, June 1,
2012, https://www.hmpadmin.com/portal/programs/hamp.jsp#6.
3
14, 2011, but his petition was ultimately dismissed on April 2,
2012.
II.
STANDARD OF REVIEW
To survive a motion to dismiss under Rule 12(b)(6), a
plaintiff must make factual allegations sufficient to state a
plausible claim for relief.
662, 678 (2009).
See Ashcroft v. Iqbal, 556 U.S.
A claim is plausible when it pleads “factual
content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.
The
plausibility standard is not akin to a ‘probability
requirement,’ but it asks for more than a sheer possibility that
a defendant has acted unlawfully.”
Id. (citations omitted).
In deciding a motion to dismiss, I employ a two-pronged
approach.
See Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1,
12 (1st Cir. 2011).
First, I screen the complaint for
statements that “merely offer legal conclusions couched as fact
or threadbare recitals of the elements of a cause of action.”
Id. (citations, internal quotation marks, and alterations
omitted).
A claim consisting of little more than “allegations
that merely parrot the elements of the cause of action” may be
4
dismissed.
Id.
Second, I credit as true all non-conclusory
factual allegations and the reasonable inferences drawn from
those allegations, and then determine if the claim is plausible.
Id.
The plausibility requirement “simply calls for enough fact
to raise a reasonable expectation that discovery will reveal
evidence” of illegal conduct.
U.S. 544, 556 (2007).
Bell Atl. Corp. v. Twombly, 550
The “make-or-break standard” is that
those allegations and inferences, taken as true, “must state a
plausible, not a merely conceivable, case for relief.”
Sepúlveda-Villarini v. Dep’t of Educ. of P.R., 628 F.3d 25, 29
(1st Cir. 2010); see Twombly, 550 U.S. at 555 (“Factual
allegations must be enough to raise a right to relief above the
speculative level.”) (citation omitted).
Pro se pleadings are held to a less stringent standard than
those drafted by lawyers and are to be liberally construed in
favor of the pro se party.
See Estelle v. Gamble, 429 U.S. 97,
106 (1979) (quoting Haines v. Kerner, 404 U.S. 519, 520-21
(1972) (per curiam)); Ahmed v. Rosenblatt, 118 F.3d 886, 890
(1st Cir. 1997).
Still, pro se litigants must “comply with
procedural rules and substantive law.”
Blaisdell v. City of
Rochester, Civil No. 07-CV-390-JL, 2010 WL 3168312, *6 (D.N.H.
5
Aug. 10, 2010) (citing Eagle Eye Fishing Corp. v. U.S. Dept. of
Commerce, 20 F.3d 503, 506 (1st Cir. 1994).
I apply these standards in reviewing the motion to dismiss.
III.
ANALYSIS
Cabacoff has filed a rambling twelve-count complaint
setting forth approximately twenty claims for relief against
SPS, Wells Fargo, and MERS.3
He seeks unspecified “awards” and
“penalties” as well as orders requiring the defendants to
forgive his loan and reimburse him for all of the payments he
made in connection with the loan.
In the sections that follow,
I explain why Cabacoff has failed to state a viable claim for
relief.
A.
HAMP Claims
Cabacoff asserts claims against SPS in Count I for breach
of contract, breach of the duty of good faith and fair dealing,
and violations of various provisions of New Hampshire’s Uniform
Commercial Code.
All of these claims stem from SPS’s alleged
3
The amended complaint also names Wells Fargo Home Mortgage,
Inc., MERS Corp., and Friedman Law Associates, P.C. as
defendants. I dismiss the claims against these defendants
because the amended complaint does not plead facts that would
support a viable claim against any of them.
6
failure to abide by HAMP guidelines that were promulgated by the
Treasury Department and incorporated into the Servicer
Participation Agreement (“Participation Agreement”) between SPS
and the Federal National Mortgage Association (“Fannie Mae”).
To succeed on these claims, Cabacoff must either have a private
right of action to enforce the guidelines or he must qualify as
a third party beneficiary to the Participation Agreement.
I
address each theory in turn.
1.
Private Right of Action under HAMP
For a private right of action to exist, Congress must
create it either expressly or by implication.
Bonano v. East
Caribbean Airline Corp., 365 F.3d 81, 84 (1st Cir. 2004).
When
Congress does not provide an express right to sue, “the baseline
rule is that a federal statute ordinarily should be read as
written, in effect creating a presumption against importing by
implication a private right of action.”
San Juan Cable LLC v.
P.R. Telephone Co., Inc., 612 F.3d 25, 30 (1st Cir. 2010).
In the present case, the program that Cabacoff seeks to
enforce is an executive branch program that was enacted pursuant
to authority granted to the Treasury Department by the Emergency
Economic Stabilization Act of 2008 (“EESA”).
7
See Supplemental
Directive 09-01, Introduction of the Home Affordable
Modification Program, April 6, 2009, available at
https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd09
01.pdf.
Thus, if a private right of action exists to enforce
HAMP, it must be found in the EESA.
None of the federal courts that have considered the issue
have held that HAMP is enforceable through a private right of
action.
See, e.g., Miller v. Chase Home Fin., LLC, 677 F.3d
1113, 1116 (11th Cir. 2012); Markle v. HSBC Mortg. Corp. (USA),
844 F. Supp. 2d 172, 184 n.12 (D. Mass. 2011) (collecting cases
in which courts found that “[n]either the EESA nor HAMP
guidelines provide a private right of action”).
Cabacoff has
not cited any provision of the EESA that supports a contrary
conclusion in this case, and he has not offered a reasoned
argument that would cause me to question the consensus view that
the HAMP guidelines are not enforceable through a private right
of action.
Accordingly, I decline to find that he has a right
to sue directly under the EESA.
8
2.
Third-party Beneficiary Claim
Under federal law,4 “only a party to a contract or an
intended third-party beneficiary may sue to enforce the terms of
a contract or obtain an appropriate remedy for breach.”
GECCMC
2005-C1 Plumer St. Office Ltd. P’ship v. JP Morgan Chase Bank,
Nat. Ass’n, 671 F.3d 1027, 1033-34 (9th Cir. 2012).
When the
contract in issue is a government contract,5 a plaintiff must
overcome an especially strong presumption that nonparties who
benefit from the contract are “incidental, rather than intended,
beneficiaries.”
Moore v. Mortg. Elec. Registration Sys., Inc.,
848 F. Supp. 2d 107, 128 (D.N.H. 2012).
The “distinction
between an intention to benefit a third party and an intention
that the third party should have the right to enforce that
4
The parties assume federal law controls, and I see no reason to
challenge that assumption. See Price v. Pierce, 823 F.2d 1114,
1119 (7th Cir. 1987) (stating that “parties to a lawsuit are,
within broad limits, entitled to determine what law shall govern
their dispute”).
5
I treat the Participation Agreement as a government contract
because Fannie Mae entered into the contract as a “financial
agent of the United States.” See Amended and Restated
Commitment to Purchase Financial Instrument and Servicer
Participation Agreement 1,
http://www.treasury.gov/initiatives/financialstability/programs/housingprograms/mha/Documents_Contracts_Agreements/093010selectportfoli
oservicingincSPA%28incltransmittal%29-r.pdf.
9
intention” is particularly important “where the promisee is a
governmental entity.”
Astra USA, Inc. v. Santa Clara Cnty., 131
S.Ct. 1342, 1348 (2011) (quoting 9 J. Murray, Corbin on
Contracts § 45.6, p. 92 (rev. ed. 2007)).
In such
circumstances, a plaintiff cannot establish third-party
beneficiary status merely by pointing to “a contract's
recitation of interested constituencies, vague hortatory
pronouncements, statements of purpose, explicit reference[s] to
a third party, or even a showing that the contract operates to
the third parties’ benefit and was entered into with them in
mind.”
GECCMC, 671 F.3d at 1033 (citations and quotations
omitted).
The court must examine the precise language of the
contract for a clear intent to rebut the presumption that the
[third parties] are merely incidental beneficiaries.”
Id. at
1033-34.
Neither the Supreme Court nor the First Circuit has
addressed the specific third-party beneficiary claims at issue
in this case.6
Accordingly, to discern whether the contracting
6
The Supreme Court recently addressed a third-party beneficiary
claim in the context of a different government contract. See
Astra USA, Inc. v. Santa Clara County, Cal., 131 S.Ct. 1342
(2011). Other courts have relied on Astra in denying HAMP10
parties clearly intended “to rebut the presumption that the
[third parties] are merely incidental beneficiaries,” id., I
turn to the text of the Participation Agreement and look for any
provisions evincing a “clear intent” to confer third-party
beneficiary status on borrowers.
See Moore, 848 F. Supp. 2d at
128 (D.N.H. 2012).
Cabacoff does not point to any specific language in the
Participation Agreement that demonstrates that the parties
intended to confer third-party beneficiary status on homeowners.
In fact, the contract language suggests the opposite: that the
parties intended to foreclose claims by non-signatories.
related contract claims. See, e.g., Wigod, 673 F.3d at 581 n.4;
Allen v. CitiMortgage, Inc., CIV. CCB-10-2740, 2011 WL 3425665
(D. Md. Aug. 4, 2011); Warner v. Wells Fargo Bank, N.A., SACV
11-00480 DOC, 2011 WL 2470923 (C.D. Cal. June 21, 2011). Astra,
however, involved a government contract that was created
pursuant to a federal statute and the statutory terms were
included verbatim in the contract. Astra, 131 S.Ct. at 1345.
In that context, the Court held that Congress’s decision not to
include a private right of action in the statute was dispositive
of the plaintiff’s third-party beneficiary claim because
Congress’s decision “would be rendered meaningless” if the
affected parties could sue to enforce the contract as thirdparty beneficiaries. Id. at 1347. Here, in contrast, the HAMP
program is an executive branch program created pursuant to a
Congressional mandate set out in the EESA in very general terms.
The contract Cabacoff seeks to enforce does not merely
incorporate the language of the EESA. Therefore, Astra is not
dispositive of Cabacoff’s third-party beneficiary claim.
11
Section 11(E) states, “The Agreement shall inure to the benefit
of and be binding upon the parties to the Agreement and their
permitted successors-in-interest.”
See Participation Agreement,
http://www.treasury.gov/initiatives/financialstability/programs/housingprograms/mha/Documents_Contracts_Agreements/093010selectportfoli
oservicingincSPA%28incltransmittal%29-r.pdf.
Other courts have
concluded that this exact language is “incompatible with an
intent to bestow enforceable rights upon nonparties.”
Moore,
848 F. Supp. 2d at 128; Markle, 844 F. Supp. 2d at 182; Martinez
v. Bank of Am. Nat. Ass’n., No. 3:10-cv-00287-RCJ-RAM, 2010 WL
4290921 (D. Nev. Oct. 20, 2011).
See also Klamath Water Users
Protective Ass’n v. Patterson, 204 F.3d 1206, 1212 (9th Cir.
1999) (finding that similar language in a government contract
stating, “This contract binds and inures to the benefit of the
parties hereto, their successors and assigns,” indicated the
parties’ intent to limit the intended beneficiaries to the
contracting parties).
Moreover, the mere fact that Fannie Mae and SPS entered
into the Participation Agreement “with the intent of aiding
home-loan borrowers” does not itself demonstrate the parties’
12
intent to “secure an enforceable right for non-parties.”
Wright
v. Bank of Am., N.A., No. CV 10-01723 JF (HRL), 2010 WL 2889117,
at *4 (N.D. Cal. July 22, 2010).
See also Marks v. Bank of Am.,
N.A., 2010 WL 2572988 *5 (D. Ariz. 2010).
A court cannot infer
intent to confer third-party beneficiary status on a plaintiff
from the mere fact that the contracting parties had the
beneficiary in mind when creating the contract.
For example, in
Orff v. United States, 358 F.3d 1137 (9th Cir. 2004), the Ninth
Circuit “declined to extend enforceable rights to a group of
California farmers . . . despite the fact that the farmers were
explicitly referred to in and benefitted by the contract and
were clearly ‘in [the] mind’ of the contracting parties.”
GECCMC, 617 F.3d at 1034 (citing Orff, 358 F.3d at 1141, 1145).
In summary, Cabacoff has failed to overcome the presumption
that third party beneficiaries to government contracts are
incidental rather than intended beneficiaries.
Accordingly, I
join the majority of courts that have addressed the question in
concluding that a homeowner lacks the authority to enforce the
HAMP contract as a third-party beneficiary.
See, e.g., Moore,
848 F. Supp. 2d at 128 (collecting cases); but see Marques v.
Wells Fargo Home Mortg., Inc., 2010 WL 3212131, *4 (S.D. Cal.
13
Aug. 12, 2010) (concluding that homeowners have third-party
beneficiary status to enforce HAMP contracts).7
B.
Securitization Claims
With the exception of Counts 4, 10, 11, and 12, all of
Cabacoff’s remaining claims challenge the process by which his
loan was securitized.
Among other things, he argues that: (1)
MERS could not serve as the mortgagee for his mortgage because
it was a mere shell corporation that never held the note that
the mortgage secured; (2) the assignments of his note were
improper because they were made without his consent and stripped
the assignors of assets that otherwise could be used to pay
future judgments against them; and (3) the process of pooling
his loan with other loans and using the loans as security for
other investments violates the securities laws, the antitrust
laws, the tax laws, and the federal RICO statute.
All of Cabacoff’s claims in this category are fatally
7
Cabacoff cursorily raises claims under the duty of good faith
and fair dealing; Section 1482 of the Dodd-Frank Wall Street
Reform Consumer Protection Act, 12 U.S.C. § 5219a (2010); and
Article 1-103(a) and (b), N.H. Rev. Stat. Ann. § 382-A:1-103,
and Article 1-203 of the New Hampshire Uniform Commercial Code.
N.H. Rev. Stat. Ann. § 382-A:1-102. Each of these claims
requires a predicate contract that Cabacoff is entitled to
enforce. No such contract exists in this case. Accordingly,
each claim fails.
14
flawed.
It is not unlawful as a general rule for a lender to
designate a nominee to serve as a mortgagee for a note held by
the lender.
Nor is it improper as a general rule for a lender
to assign a loan to a third party for valuable consideration.
Cabacoff has not pleaded any facts that suggest that First
Franklin’s use of MERS as a nominee for the mortgage was
unlawful.
Nor has he alleged either that his note included a
non-assignment clause or that the challenged assignments were
made for less than fair value.
Thus, he has no basis for his
arguments that the use of a nominee and the assignments of his
note were improper.
Cabacoff’s attempt to base claims on the securities laws,
the tax laws, and the antitrust laws are also unavailing.
Cabacoff does not have standing under the securities laws to
challenge the process by which his note was securitized because
he was neither a buyer nor a seller of the challenged
securities.
E.g., Plumbers’ Union Local No. 12 Pension Fund v.
Nomura Asset Acceptance Corp., 632 F.3d 762, 768 n.5 (1st Cir.
2011) (stating that plaintiff suing under § 11 and § 12(a)(2)
must be a buyer or seller of securities); Hill v. Gozai, 638
F.3d 40, 54 (1st Cir. 2011) (stating same for § 10(b)).
15
He also
lacks standing to enforce the tax laws.
See Simon v. E. Ky.
Welfare Rights Org., 426 U.S. 26, 46 (1976), (Stewart, J.,
concurring) (“I cannot now imagine a case, at least outside the
First Amendment area, where a person whose own tax liability was
not affected ever could have standing to litigate the federal
tax liability of someone else.”); Booth v. Ioane, 2012 WL
3839286 (E.D.Ca. Sept. 4, 2012) (“Section 7401 does indeed
prohibit a private party from enforcing the federal income tax
code or vindicating the interests of the Internal Revenue
Service.”); Schuloff v. Queens College Fdn., Inc., 994 F. Supp.
425, 428 (E.D.N.Y. 1998) (stating that the language in § 7401
supports denial of a private right of action to enforce the tax
code).
Because he does not allege an antitrust injury, his
antitrust claim is also defective.
E.g., New York Airlines,
Inc. v. Dukes Cnty., 623 F. Supp. 1435, 1450 (D. Mass. 1985)
(stating that to prevail on an antitrust claim a plaintiff must
allege an antitrust injury and citing cases from the Second,
Fourth, and Eighth Circuits that are in accord).
Cabacoff’s RICO claim suffers from multiple deficiencies.
Although he alleges generally that the defendants engaged in a
fraud scheme, he has failed to plead two predicate acts of fraud
16
with particularity, which is a requirement for a viable RICO
claim.
Ahmed v. Rosenblatt, 118 F.3d 886, 888 (1st Cir. 1997).
Further, he has not sufficiently alleged that his claimed
injuries were proximately caused by defendants’ predicate acts
of racketeering.
He cannot recover on a RICO claim without
proof that his claimed injuries were caused by the alleged
pattern of racketeering activity.
Sedima, S.P.R.L. v. Imrex
Co., Inc., 473 U.S. 479, 481 (1985).
Accordingly, Cabacoff has
failed to plead a viable RICO claim.8
C.
Fraudulent Assignment Claims
In Counts 4, 11, and 12, and at other points in the amended
complaint, Cabacoff alleges that the defendants are liable for
8
Cabacoff raises several other claims that also fail. His
Fair Debt Collection Practices Act claim against MERS fails
because he has not alleged that MERS was attempting to collect a
debt. Beadle v. Haughy, No. Civ. 04-272-SM, 2005 WL 300060, *3
(D.N.H. 2005). His claim under Fed. R. Civ. P. 17(a) against
MERS is a nonstarter because 17(a) merely states a threshold
requirement for plaintiffs bringing suit; it does not provide a
theory of liability. United HealthCare Corp. v. Am. Trade Ins.
Co., Ltd., 88 F.3d 563, 569 (8th Cir. 1996). His claims for
misprision of felony and bank fraud fail because there is no
private right of action to enforce either criminal statute. See
Schneider v. Bank of Am., N.A., 2012 WL 761975, *8 (E.D.Ca. Mar.
12, 2012) (finding no private cause of action for bank fraud and
collecting cases in accord); Massad v. Greaves, 554 F. Supp. 2d
163, 166-67 (D. Conn. 2008) (finding same for misprision of
felony).
17
fraud to the extent that they participated in what Cabacoff
contends is a fraudulent assignment of his mortgage from MERS to
Wells Fargo.
Cabacoff argues that the assignment is fraudulent both
because MERS was not the mortgagee when the assignment was
allegedly made, and because Barbara Neale, who executed the
assignment, was not authorized to act on behalf of MERS.
Cabacoff seeks to support this claim with several arguments.
First, he asserts that MERS lacked authority to make the
assignment because it acquired the mortgage as First Franklin’s
nominee, and First Franklin was no longer in existence when the
assignment was purportedly made.
Second, he points to
representations in an October 25, 2006, Prospectus Supplement
for the offering of investment certificates by the Trust that
details a chain of loan assignments that culminated in an
assignment of First Franklin Mortgage loans to the Trust well
before August 31, 2011.
According to Cabacoff, these
assignments necessarily would have involved both his note and
his mortgage.
Thus, he asserts that MERS could not have been
the mortgagee as First Franklin’s nominee on August 31, 2011.
Finally, he argues that Neale lacked the authority to execute
18
the assignment on behalf of MERS because she was an employee of
SPS rather than MERS when she made the assignment.
Even if I assume that Cabacoff has pleaded his fraud claim
with particularity, he is not entitled to recover damages for
fraud because reliance is an essential element of a fraud claim,
see Van Der Stok v. Van Voorhees, 151 N.H. 679, 681 (2005), and
he has failed to allege that he relied to his detriment on the
fraudulent representations made in the assignment.9
D.
Due Process Claim
Cabacoff claims in Count 10 that a non-judicial foreclosure
violates the Fifth and Fourteenth Amendments of the United
States Constitution.
Cabacoff has not made this claim in
support of an attempt to enjoin a potential foreclosure.
Nor
has he alleged that he is facing an imminent threat of
foreclosure.
Accordingly, his claim is not ripe for review.
See Nat’l Park Hospitality Ass’n. v. Dept. of Interior, 538 U.S.
803, 807 (2003).
Thus, I dismiss it without prejudice.
9
In dismissing these claims, I do not determine whether
Cabacoff will be entitled to raise his fraud claim in a future
action to enjoin a foreclosure. Cabacoff has not sought such
relief in this action. Therefore, I have no reason to address
such a claim here.
19
IV.
CONCLUSION
For the aforementioned reasons, I grant defendants’ motion
to dismiss (Doc. No. 36).
All claims except Count 10 are
dismissed with prejudice.
Count 10 is dismissed without
prejudice.
SO ORDERED.
/s/Paul Barbadoro
Paul Barbadoro
United States District Judge
November 5, 2012
cc:
Robert S. Cabacoff, pro se
William P. Breen, Esq.
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