Schaefer v. IndyMac Mortgage Services et al

Filing 23

///ORDER granting 12 and 14 Motions to Dismiss for Failure to State a Claim. Clerk to enter judgment and close the case. So Ordered by Judge Joseph A. DiClerico, Jr.(dae)

UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEW HAMPSHIRE

Mark E. Schaefer
v.

Civil No. 12-cv-159-JD
Opinion No. 2012 DNH 185

IndyMac Mortgage Services et al.
O R D E R
Mark Schaefer brought suit in state court against IndyMac
Mortgage Services; OneWest Bank, FSB; Federal National Mortgage
Association; and Harmon Law Offices, P.C., alleging various state
law torts and breach of the implied covenant of good faith and
fair dealing arising from the defendants’ involvement in the
foreclosure of his home.

The defendants removed the case to this

court and move to dismiss the case.

Schaefer objects.

Background
On November 26, 2007, Mark Schaefer entered into a
refinancing loan with IndyMac Bank, FSB (“IndyMac Bank”) for
$211,296, which was secured by a mortgage on Schaefer’s home at
19 High View Circle in Gilford, New Hampshire.

OneWest Bank, FSB

(“OneWest”) was at all relevant times the loan servicer of the
mortgage.1
In 2009, Schaefer failed to make timely payments on his
mortgage, resulting in default.

Schaefer applied for and entered

into a mortgage modification agreement with OneWest that same
year.
Schaefer made his monthly payments consistent with the
requirements of his loan modification until late 2011, when he
again defaulted.

In January 2012, Schaefer obtained a loan

modification application from OneWest’s website.

On January 19,

2012, OneWest, which had been assigned the mortgage from IndyMac
Bank and also continued to act as the loan servicer, sent
Schaefer an invoice that included the total arrearage owed on his
loan.
On January 30, 2012, Harmon Law Offices, P.C. (“Harmon”),
sent Schaefer a letter informing him that it had been retained by
OneWest to foreclose on Schaefer’s home.

The letter provided

Schaefer with the total amount left on the mortgage and gave
instructions on how to request a reinstatement quote.

Schaefer

followed those instructions and twice requested a reinstatement

1

The actual loan servicer of the mortgage was IndyMac
Mortgage Services, a division of OneWest. To avoid confusion
with IndyMac Bank, the court will refer to the loan servicer of
the mortgage as OneWest.
2

quote through Harmon’s website, on February 6 and February 16,
2012.

Both times, Schaefer received the following automated

message: “Thank you.

Your request has been received.

We will

forward the reinstatement or payoff information to you when it is
obtained from your lender or servicer or the lender or servicer
will send this information to you directly.”

Schaefer did not

receive a reinstatement quote from either Harmon or OneWest in
response to his request.
On February 14, 2012, Schaefer received a foreclosure notice
from Harmon informing him that a foreclosure sale was scheduled
for March 12, 2012.2

On February 16, Schaefer faxed to OneWest a

loan modification packet, which included 28 pages of information
related to his application.

Three days later, Schaefer called

OneWest, and was told that OneWest did not receive a significant
portion of his application.

Schaefer promptly re-sent 19 pages

of his application.
In his application, Schaefer disclosed that another
individual, Kathryn Russell, was going to contribute to his
mortgage payment.

In a letter dated February 23, 2012, and by a

phone call, OneWest requested that Schaefer provide additional

2

At
mortgage
Mortgage
the loan

the time Schaefer received a foreclosure notice, the
had been assigned from OneWest to Federal National
Association (“Fannie Mae”). OneWest continued to act as
servicer.
3

financial information for Russell.

In the letter, Schaefer was

directed to fax all materials related to Russell to 1-866-2352366.
In a second letter from OneWest also dated February 23,
2012, Schaefer was advised that Elizabeth Milian and her team of
associates were assigned to his loan, and that Milian would be
Schaefer’s “customer contact manager” (the “Milian Letter”).

The

Milian Letter informed Schaefer that Milian and her team were
available “to help review your current situation and evaluate
possible workout options for your loan.”

The letter further

advised Schaefer that Milian and her team would be his point of
contact throughout the process, and that they would “be available
to answer any questions you may have while your loan is being
reviewed.”

The letter contained contact information, including a

fax number, which was different from the fax number provided in
the first letter.
On February 28, 2012, Schaefer faxed Russell’s financial
information to OneWest.

Schaefer, however, did not fax it to the

number provided in the first letter.

Instead, he faxed it to the

number provided in the Milian Letter.
Several days later, OneWest called Schaefer to ask about
Russell’s financial information.

Schaefer informed the OneWest

representative that he had faxed the information to the number
4

provided in the Milian Letter.

The representative told Schaefer

that the information should have been faxed to the number in the
first letter, and instructed him to fax the materials to that
number.

Schaefer faxed Russell’s information to that number on

March 9, 2012, three days before the scheduled foreclosure.
OneWest and Schaefer had no further contact prior to the
foreclosure.

On March 12, 2012, Fannie Mae conducted a

foreclosure auction of Schaefer’s home and was the high bidder
and purchaser of the property.

This action followed.

Standard of Review
When considering a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6), the court must determine whether the
facts alleged, when taken as true and in the light most favorable
to the plaintiff, state a claim on which relief can be granted.
Rederford v. U.S. Airways, Inc., 589 F.3d 30, 35 (1st Cir. 2009).
Under the notice pleading standard of Federal Rule of Civil
Procedure 8(a)(2), a plaintiff need provide only a short and
plain statement that provides enough facts “‘to raise a right to
relief above the speculative level . . . .’”

Ocasio-Hernandez v.

Fortuno-Burset, 640 F.3d 1, 12 (1st Cir. 2011) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

The court must

separate the factual allegations from any legal conclusions and
5

decide whether the factual allegations, taken as true, state a
plausible claim for relief.

Ocasio-Hernandez, 640 F.3d at 10-11

(applying Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009)).

Discussion
Schaefer brings claims for negligence, negligent
misrepresentation, intentional misrepresentation, and breach of
the contractual duty of good faith and fair dealing.3

The

defendants move to dismiss all of Schaefer’s claims.

A.

Tort Claims
Schaefer alleges that the defendants were negligent by

breaching ”a duty of care and competence in the handling of his
[loan] modification application.”

He further alleges that the

information provided in the Milian Letter constituted either a
negligent misrepresentation or an intentional misrepresentation.
The defendants argue that Schaefer’s negligence, negligent
misrepresentation, and intentional misrepresentation claims are
barred by the economic loss doctrine.

3

They further argue that

Schaefer also brings claims for temporary injunctive
relief, preliminary injunctive relief, and permanent injunctive
relief. In his opposition to the defendants’ motions to dismiss,
Schaefer explained that his claims for injunctive relief may be
considered a prayer for relief rather than separate causes of
action.
6

they did not owe Schaefer the duties of care he alleges and that,
even if they did, they did not breach those duties.

They also

contend that the Milian Letter does not contain a
misrepresentation.
“The economic loss doctrine is a ‘judicially-created
remedies principle that operates generally to preclude
contracting parties from pursuing tort recovery for purely
economic or commercial losses associated with the contract
relationship.’”

Wyle v. Lees, 162 N.H. 406, 410 (2011) (quoting

Plourde Sand & Gravel v. JGI Eastern, 154 N.H. 791, 794 (2007)).
“Thus, where a plaintiff may recover economic loss under a
contract, generally a cause of action in tort for purely economic
loss will not lie.”

Plourde, 154 N.H. at 794.

“[T]he rule

precludes a harmed contracting party from recovering in tort
unless he is owed an independent duty of care outside the terms
of the contract.”

Wyle, 162 N.H. at 410.

Where the existence of

such an additional duty is claimed, “[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) (internal quotation
marks and citations omitted).

7

Schaefer concedes that he has a contractual relationship
with OneWest,4 but argues that the economic loss doctrine does
not bar his tort claims because he is not “primarily seeking
economic damages.”

He contends that he is seeking an injunction

against eviction, an opportunity to reinstate his loan, and to
have his loan modification application fully and fairly
considered, not damages for economic loss.
Schaefer alleges that because of the defendants’ negligence,
negligent misrepresentation, and intentional misrepresentation,
he “has been damaged . . . by the loss of his home of 28 years
and any and all equity therein.”

The loss he describes is

economic - the loss of his property and the equity he held in the
property.

Therefore, Schaefer seeks to recover for economic

loss, as opposed to “personal injury and property damage.”
Plourde, 154 N.H. at 795; see also Deutsche Bank Nat. Trust Co.
v. Fadili, 2011 WL 4703707, at *8-*9 (D.N.H. Oct. 4, 2011)
(negligence claim based on failure to obtain security interest in
property barred by the economic loss doctrine); Bourne v. Stewart
Title Guar. Co., 2011 WL 635304, at *9-*10 (D.N.H. Feb. 16, 2011)

4

Schaefer sued OneWest and Fannie Mae for their actions
leading to the foreclosure of his home. He alleges that both are
liable for the actions of the other. The defendants do not
dispute that allegation and filed a joint motion to dismiss.
Therefore, for ease of reference, the court will refer to OneWest
when discussing allegations against the holders of the mortgage.
8

(negligence claims against a title company for failing to defend
against adverse claims to a house resulting in loss of the
property were precluded by the economic loss doctrine).5
Therefore, unless an exception applies, the economic loss
doctrine bars Schaefer’s claims for negligence, negligent
misrepresentation, and intentional misrepresentation.

1.

Negligence

Schaefer argues that the economic loss doctrine does not bar
his negligence claim because he was owed duties that were
independent of the defendants’ contractual obligations.

First,

Schaefer contends he was owed a statutory duty under RSA 479:18,
which gives mortgagors who have defaulted the right to reinstate
their loans.6

Schaefer argues that RSA 479:18 imposes an implied

duty upon lenders to provide borrowers with a reinstatement
amount.

Schaefer also contends that OneWest assumed a duty to

5

Schaefer offers no case law to support his argument that
the applicability of the economic loss doctrine is dependent on
the form of remedy the plaintiff seeks. Regardless, Schaefer
concedes that he does seek monetary damages in the event that
injunctive relief is not granted.
6

RSA 479:18 provides, “[a]ll lands conveyed in mortgage may
be redeemed by the mortgagor, after the condition thereof is
broken, by the payment of all demands and the performance of all
things secured by the mortgage and the payment of all damages and
costs sustained and incurred by reason of the nonperformance of
its condition, or by a legal tender thereof, before foreclosure.”
9

(1) provide a reinstatement amount which arose when Harmon
advertised the opportunity for reinstatement and (2) be truthful
and accurate when OneWest sent the Milian Letter.
To the extent that Schaefer bases his negligence claim on a
statutory duty under RSA 479:18, he has not alleged facts or
developed an argument sufficient to establish the existence of
that duty within the statute, see Marquay v. Eno, 139 N.H. 708,
715-16 (1995), or to show that a corresponding duty existed at
common law, see Stillwater Condo. Ass’n v. Town of Salem, 140
N.H. 505, 507 (1995) (“If no common law duty exists, the
plaintiff cannot maintain a negligence action, even though the
defendant has violated a statutory duty.”).

Nor has Schaefer

alleged facts or developed an argument sufficient to establish
that OneWest assumed duties based on Harmon’s letter or the
Milian Letter.7

7

Schaefer’s negligence claim against Harmon fails for the
additional reason that Harmon, as attorney to OneWest, does not
owe “a duty of care to a non-client whose interests are adverse
to those of a client.” MacMillan v. Scheffy, 147 N.H. 362, 365
(2001) (“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”) (internal quotation
marks and citation omitted). Harmon’s letter informing Schaefer
that he could request a reinstatement quote from Harmon’s website
specifically states that his “office has been retained by
[OneWest] to foreclose” on Schaefer’s mortgage. Schaefer’s
attempt to characterize Harmon as an independent debt collector
10

The defendants also argue that even if they owed Schaefer a
duty to provide a reinstatement amount, they did not breach that
duty because the January 19, 2012, invoice provided the
reinstatement amount.

Schaefer did not address the defendants’

arguments in his oppositions to the motions.

In his complaint,

however, Schaefer alleged that the invoice did not represent a
reinstatement amount because it did not include charges typically
included in a reinstatement amount.

Given the parties’ differing

interpretation of the invoice, whether it represented a
reinstatement amount cannot be decided for purposes of the
motions to dismiss.8
Accordingly, Schaefer’s negligence claim is dismissed
because it is barred by the economic loss doctrine and because he
fails to allege the existence or breach of a duty independent of
those associated with the mortgage loan.

and not subject to the holding of MacMillan is without merit.
8

The court notes, however, that Schaefer also alleged that
he “had access to money sufficient to reinstate his loan at an
amount reasonably related to the arrearage asserted in the
[January 19, 2012,] invoice.” Schaefer’s allegation supports the
defendants’ argument that the amount listed in the January 19th
invoice represented a reinstatement amount.
11

2.

Negligent Misrepresentation

Schaefer’s claim for negligent misrepresentation can avoid
dismissal under the economic loss doctrine, see Plourde, 154 N.H.
at 799, only when it is based on allegations of “independent,
affirmative representations unrelated to the performance of the
contract.”

Wyle, 162 N.H. at 412 (internal quotation marks and

citation omitted).

Thus, the alleged misrepresentation must not

“concern the quality or characteristics of the subject matter of
the contract or otherwise relate to the offending party’s
expected performance.”

Id. at 411 (internal quotation marks and

citation omitted).
Schaefer’s negligent misrepresentation claim is based on the
Milian Letter, which allegedly contained an incorrect fax number
and directed Schaefer to use the contact information in the
letter for all correspondence relating to his loan modification
application.

As with his claim for negligence, Schaefer fails to

allege facts suggesting OneWest’s “voluntary assumption of
activities beyond those traditionally associated with the normal
role of a money lender.”

Seymour, 131 N.H. at 759 (internal

quotation marks and citations omitted).

Representations made in

a letter concerning Schaefer’s application for a loan
modification “relate entirely to [the] defendants’ attempts to
collect [Schaefer’s] mortgage debt . . . which fall[s] squarely
12

within the normal role of a lender.”9

See Moore v. Mortg. Elec.

Registration Sys., Inc., 848 F. Supp. 2d 107, 133 (D.N.H. 2012);
see also L’Esperance v. HSBC Consumer Lending, Inc., 2012 WL
2122164, at *15-*16 (D.N.H. June 12, 2012).

Therefore,

Schaefer’s claim for negligent misrepresentation is barred by the
economic loss doctrine.
Harmon argues in his motion to dismiss that Schaefer’s
complaint does not allege any misrepresentations by Harmon and
therefore Schaefer has not asserted a claim for negligent
misrepresentation against Harmon.

In his opposition to Harmon’s

motion, Schaefer contends that “the statements on [Harmon’s]
website acknowledging reception of his request for a
reinstatement amount, which amount was never forthcoming,
constitute precisely such a misrepresentation.”

9

These

In his opposition, Schaefer suggests that his negligent
misrepresentation claim falls “within the exception to the
economic loss doctrine where a negligent misrepresentation is
made by a defendant who is in the business of supplying
information.” Other than the bare reference to this argument,
Schaefer does not discuss the apparent exception or why it
applies in this case. Mere passing allusions to an argument are
insufficient to address meaningfully a disputed issue. See
United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) (“Judges
are not expected to be mindreaders. Consequently, a litigant has
an obligation to spell out its arguments squarely and distinctly
. . . .”) (internal citations and quotation marks omitted).
Therefore, the court is “free to disregard” the argument in
determining the defendants’ motion. Higgins v. New Balance
Athletic Shoe, Inc., 194 F.3d 252, 260 (1st Cir. 1999).
13

allegations, however, were not made in the complaint, and
Schaefer may not make them for the first time in his opposition.
See, e.g., Fonte v. Bd. of Managers of Cont’l Towers Condo., 848
F.2d 24, 25 (2d Cir. 1988) (“allegations contained in legal
briefs or memoranda are . . . treated as matters outside the
pleadings for purposes of Rule 12(b)”).

Regardless, Schaefer

does not explain how Harmon’s website’s message that Harmon
received Schaefer’s request amounts to a misrepresentation.
Therefore, to the extent Schaefer asserts a claim for negligent
or intentional misrepresentation against Harmon, it is dismissed.

3.

Intentional Misrepresentation

Schaefer’s claim for intentional misrepresentation is based
on the same allegations as those underlying his negligent
misrepresentation claim; namely, the representations in the
Milian Letter describing the “process and contact information . .
. applicable to Mr. Schaefer’s modification application.”

For

the reasons discussed regarding Schaefer’s negligent
misrepresentation claim, Schaefer’s intentional misrepresentation
claim is barred by the economic loss doctrine.
Accordingly, because the complaint does not support the
existence of a duty owed by OneWest to Schaefer outside the terms
of their contract, or any duty owed by Harmon to Schaefer,
14

Schaefer’s negligence, negligent misrepresentation, and
intentional misrepresentation claims are dismissed.

B.

Contract Claim
Schaefer alleges that OneWest breached the implied covenant

of good faith and fair dealing in the note and mortgage.

He

argues that OneWest’s actions denied him “any reasonable
opportunity to have his circumstances and modification
application reviewed by [OneWest].”10

He further alleges that

OneWest placed his modification application and his mortgage on a
“dual track” in which it was simultaneously being considered for
modification and foreclosure, and that such actions breached the
implied covenant of good faith and fair dealing.

OneWest

contends that it does not have a contractual obligation to modify
Schaefer’s loan, and therefore, cannot have breached an implied
covenant of good faith and fair dealing in not modifying it.
“In every agreement, there is an implied covenant that the
parties will act in good faith and fairly with one another.”

10

Schaefer’s complaint alleges a claim for breach of the
implied covenant of good faith and fair dealing against Harmon as
well. In his opposition to Harmon’s motion to dismiss, Schaefer
notes that he is not asserting that claim against Harmon.
Therefore, to the extent Schaefer’s complaint suggests a claim
against Harmon for breach of the implied covenant of good faith
and fair dealing, that claim is dismissed.
15

Birch Broad. Inc. v. Capitol Broad. Corp., Inc., 161 N.H. 192,
198 (2010).

Where a plaintiff’s claim is based on a defendant’s

performance of a contract, as opposed to formation of a contract,
the implied covenant “prohibit[s] behavior inconsistent with the
parties’ agreed-upon common purpose and justified expectations as
well as with common standards of decency, fairness and
reasonableness.”

Id. (internal quotation marks and citation

omitted).
Citing Moore, Schaefer concedes that the covenant of good
faith and fair dealing cannot be used to require a lender to
modify or restructure a loan.

See Moore, 848 F. Supp. 2d at 130.

He argues, however, that “he was entitled to a full and fair
consideration of his application for a modification,” and that
the defendants failure to consider his application breached the
implied covenant of good faith and fair dealing.

Moore, however,

addressed allegations that a lender refused to modify a mortgage
“or to engage in good-faith negotiations regarding modification.”
Id.

The court held that neither allegation stated a claim for

breach of the implied covenant of good faith and fair dealing.
See id.

Regardless, Schaefer does not offer any support for his

theory that the covenant cannot be used to require a lender to
modify a loan but can be used to require a lender to consider an
application to modify a loan.
16

In addition, because the defendants were not required to
consider Schaefer’s loan modification application, they similarly
cannot be liable for preparing to foreclose on Schaefer’s home
while simultaneously considering his loan modification
application.

Nor does Schaefer offer any support that the “dual

track” process was done in bad faith.
To the extent that Schaefer alleges a breach of the implied
covenant of good faith and fair dealing based on a lender’s
statutory duty to provide borrowers with a reinstatement amount
under RSA 479:18, that claim similarly fails.

Even if Schaefer

had alleged facts to support such a duty, which he has not, that
duty is statutory and does not arise from the parties’ contract.
Therefore, it cannot be the basis of a claim for breach of the
implied covenant of good faith and fair dealing.

See, e.g., J &

M Lumber & Constr. Co., Inc. v. Smyjunas, 161 N.H. 714, 724
(2011).
Accordingly, Schaefer’s claim for breach of the implied
covenant of good faith and fair dealing is dismissed.

Conclusion
For the foregoing reasons, the defendants’ motions to
dismiss the complaint (document nos. 12 and 14) are granted.

17

The clerk of court shall enter judgment accordingly and
close the case.

SO ORDERED.

____________________________
Joseph A. DiClerico, Jr.
United States District Judge
October 16, 2012
cc:

Thomas R. Lavallee, Esquire
Walter L. Maroney, Esquire

18