Galvin et al v. EMC Mortgage Corporation et al
Filing
22
///ORDER granting in part and denying in part 10 Motion to Dismiss the Petitioners' Verified Ex Parte Petition for Preliminary Injunction, Declaratory Judgment, and Damages. Count 1-5 and 7-15 are DISMISSED. Count 6 may proceed against EMC Mortgage and Bank of New York Mellon. All other defendants will be terminated from the case. So Ordered by Chief Judge Joseph N. Laplante.(jb)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Mark B. Galvin and Jenny Galvin
v.
Civil No. 12-cv-320-JL
Opinion No. 2013 DNH 053
EMC Mortgage Corporation et al.
MEMORANDUM ORDER
In 2005, plaintiff Mark Galvin took out a $2.9 million
mortgage loan.
Four years later, he defaulted.
Galvin alleges
that although he entered a repayment plan with loan servicer EMC
Mortgage Corporation in order to cure this default, EMC began
foreclosure proceedings not long after.
Galvin and his wife have now brought a 15-count complaint
against EMC and several other entities involved in the servicing
and foreclosure of the loan.
The Galvins allege a variety of
malfeasance, including failing to properly apply their payments
and proceeding with foreclosure despite ongoing negotiations to
modify the loan.
This court has diversity jurisdiction over this
matter between the Galvins, who are New Hampshire citizens, and
defendants, various out-of-state entities, under 28 U.S.C. § 1332
(diversity) because 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 dint of the
Galvins’ claim under the Truth in Lending Act, 15 U.S.C. § 1601
et seq.
The defendants have moved to dismiss the complaint, arguing
that the Galvins have not stated a claim upon which relief can be
granted.
See Fed. R. Civ. P. 12(b)(6).
After hearing oral
argument, the court grants the motion as to all but one of the
Galvins’ claims–-that for breach of the implied covenant of good
faith and fair dealing in Count 6.
Before explaining the reasons
for doing so, however, a brief detour is necessary.
In their opposition memoranda, the Galvins coyly suggest
that, should the court dismiss certain counts of their complaint,
they will seek leave to amend in order to plead new allegations
in support of those counts.1
They referred to several of those
unpleaded allegations at oral argument, where they also advanced
a number of legal arguments and theories of recovery that were
similarly absent from both their complaint and memoranda.
This
type of conduct betrays a lack of respect for opposing counsel
1
The Galvins are reminded that such contingent statements do
“not constitute a motion to amend a complaint.” Gray v. Evercore
Restructuring L.L.C., 544 F.3d 320, 327 (1st Cir. 2008); see also
Fisher v. Kadant, Inc., 589 F.3d 505, 509-10 (1st Cir. 2009). If
they wish to amend their complaint, they must either obtain the
defendants’ written consent or file a motion for leave to do so
under Federal Rule of Civil Procedure 15(a)(2). The court takes
no position on whether such a motion would be granted, or whether
the amendments to which the Galvins allude state a claim for
relief.
2
and the court, who have expended significant resources attempting
to litigate and resolve the present motion, due in no small part
to the numerous (and largely meritless, as will be discussed in
due course) theories actually included in the Galvins’ complaint.
The defendants and the court should not be “required to shoot at
a moving target,” Gierbolini-Rosa v. Banco Popular de Puerto
Rico, 121 F.3d 695 (1st Cir. 1997) (table), but that is what the
Galvins have invited the court to do by relying upon facts and
theories not identified in their complaint or memoranda.
invitation is declined.
That
Any facts or theories not pleaded in the
complaint, and arguments absent from the Galvins’ memoranda, are
disregarded in the remainder of this order.
See Order of Feb.
12, 2013 (“No new arguments or claims outside the briefs and
pleadings will be entertained.”); see also Iverson v. City of
Boston, 452 F.3d 94, 103 (1st Cir. 2006) (under “raise-or-waive
rule,” represented parties must “incorporate all relevant
arguments in the papers that directly address a pending motion”
or waive them); In re Tyco Int’l, Ltd. Multidistrict Litig., 2004
DNH 047, 3-4 (court cannot take into account facts or allegations
found outside complaint when ruling on motion to dismiss).
At oral argument, the Galvins also withdrew over half the
counts pleaded in their complaint, disclaiming any intent to
pursue Counts 1, 3-5, 7-8, 10, and 12-13.
3
While the court
appreciates the Galvins’ attempt to narrow the issues truly in
dispute, it would have been more beneficial (and respectful) to
both the court and opposing counsel for the Galvins to make this
intent clear in their opposition memoranda, so as to avoid
unnecessary expenditures of time and effort.
Because the
parties’ arguments regarding those counts have been fully briefed
and considered by the court, this order examines each of those
counts, notwithstanding the Galvins’ withdrawal of them.
Turning now to the merits of the action:
•
Counts 1 and 15, which are premised upon EMC’s alleged
breach of the repayment plan agreement, are dismissed
because the repayment plan does not contain the promises
that the Galvins say were breached.
•
Count 2, which advances a variety of theories as to why the
defendants lack “standing” to foreclose, is dismissed, as
none of these theories states a plausible claim for relief.
•
Counts 3-5, which sound in negligence, are dismissed because
the allegations set forth in the complaint do not plausibly
support the conclusion that the defendants owed the Galvins
a duty outside the terms of their contracts.
•
Count 6, which seeks to recover for an alleged breach of the
implied covenant of good faith and fair dealing, is not
dismissed because the Galvins have alleged facts that, if
proven, could entitle them to relief on that claim.
•
Count 7, which rests on the premise that the Galvins are
intended third-party beneficiaries of a contract between EMC
and the federal government, is dismissed because that
premise is incorrect as a matter of law.
•
Counts 8 and 10, which seek to recover from EMC for fraud in
the inducement and negligent misrepresentation, are
dismissed because the Galvins have not pleaded those claims
4
with the specificity required by Federal Rule of Civil
Procedure 9(b).
•
Counts 9 and 11, which are premised upon supposedly false
statements made in an assignment of the Galvins’ mortgage,
are dismissed because the Galvins have identified no such
statements on the face of the assignment.
•
Counts 12 and 13, both of which are titled “avoidance of
mortgage,” are dismissed because the theories pleaded in
those counts do not entitle the Galvins to relief.
•
Finally, Count 14, a claim against EMC for violation of the
Truth in Lending Act, is dismissed because it is barred by
the applicable statute of limitations.
I.
Applicable legal standard
To survive a motion to dismiss under Rule 12(b)(6), a
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 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).
5
With the facts so
construed, “questions of law [are] ripe for resolution at the
pleadings stage.”
2009).
Simmons v. Galvin, 575 F.3d 24, 30 (1st Cir.
The following background summary is consistent with that
approach.
II.
Background
In 2005, Mark Galvin executed a promissory note in the
amount of $2,900,000, payable to Metrocities Mortgage, LLC.
The
note was secured by a mortgage on property in Rye, New Hampshire,
belonging to Galvin and his wife.
Both Galvins executed the
mortgage, which identifies Mortgage Electronic Registration
Systems, Inc. (“MERS”), as the mortgagee in its capacity “as
nominee for [Metrocities and its] successors and assigns.”
Mortg. (document no. 10-2) at 2.
The mortgage was subsequently
recorded in the Rockingham County Registry of Deeds.2
In 2009, Galvin failed to make the loan payments due for the
months of June, July, and August, leaving him over $40,000 in
2
As the recorded mortgage (Book 4537, Page 1719) is a matter
of public record, this court may take note of it without
converting defendants’ Rule 12 motion into a Rule 56 motion for
summary judgment. See Greene v. Rhode Island, 398 F.3d 45, 48-49
(1st Cir. 2005). And, as just mentioned, this court may also
consider “facts extractable from documentation annexed to or
incorporated by reference in the complaint.” Rederford, 589 F.3d
at 35. The mortgage is both attached to and referenced in the
Galvins’ complaint. All other documents cited or quoted in this
order are also either attached to the complaint, referred to
therein, or both.
6
arrears.
To cure this default, Galvin entered into a written
repayment agreement with his loan servicer, EMC.
The agreement,
which Galvin executed on September 27, 2009, called for him to
make six monthly payments of $9,900, with the last of the
payments due in February 2010.
Although the repayment agreement
makes no mention whatsoever of modification, refinancing, or
foreclosure, the Galvins allege that “Mr. Galvin understood
[that] successful satisfaction of his obligations under the
[agreement] would result in a permanent loan modification or
refinancing, and stop foreclosure proceedings.”
Compl. ¶ 36
(emphasis in original).
The Galvins allege that they made all six payments required
by the repayment agreement, and that EMC failed to credit their
account for those payments.
The Galvins concede, however, that
they did not make the regular monthly payments due under their
Note during this same time.3
On March 1, 2010, EMC sent them an
acceleration warning, asserting that Mr. Galvin had “failed to
pay the required monthly installments commencing with the payment
3
The complaint is silent as to whether the Galvins made
these payments, but their counsel acknowledged at oral argument
that they had not. Because this fact is undisputed, the court
takes notice of it for purposes of the present order. See Stoll
v. Principi, 449 F.3d 263, 264 (1st Cir. 2006) (when reviewing
motion to dismiss, court may, “for the sake of completeness,”
supplement facts gleaned from the complaint with “undisputed
facts”); McCloskey v. Mueller, 446 F.3d 262, 264 (1st Cir. 2006)
(similar).
7
due” for October 2009, leaving him over $80,000 in arrears.
Acceleration Warning (document no. 10-3) at 2.
Upon receiving this notice, Mr. Galvin immediately called
EMC, which told him that he could apply for a loan modification
through the federal government’s Home Affordable Modification
Program, or “HAMP.”
Following EMC’s instructions, Mr. Galvin
submitted application materials to EMC.
Over the next several
months, EMC repeatedly told him that it was working to help him
avoid foreclosure, and Mr. Galvin believed that “all collection
efforts, including foreclosure, would be suspended” while his
modification application was pending.
Compl. ¶ 44.
Notwithstanding Mr. Galvin’s belief, in late April 2010,
Harmon Law Offices informed the Galvins that EMC had retained it
to foreclose on their mortgage.
Over the next several months,
the foreclosure and modification processes proceeded on parallel
tracks.
EMC sent the Galvins a series of letters confirming that
it was reviewing their modification application, while Harmon
scheduled a foreclosure sale for the middle of June 2010.
At
around the same time (and presumably in anticipation of the
foreclosure), MERS assigned the Galvins’ mortgage to The Bank of
New York Mellon (“Mellon”), in its capacity as trustee for a
8
securitized mortgage trust.4
Harmon ultimately cancelled that
sale at EMC’s direction while EMC continued to review Mr.
Galvin’s application materials.
This was not before some damage
had already been done, the Galvins allege, as they had listed
their property for sale but the public notices of foreclosure
sale had impaired their ability to sell to “prospective buyers
[who] were willing to wait to see if they could purchase the
property at a lower price at an auction.”
Compl. ¶ 85.
According to the complaint, the application process was also
frustrating for the Galvins.
EMC repeatedly asked the Galvins to
send it information they had already submitted.
It also asked
them to submit information that did not exist:
on one occasion,
it requested a divorce decree (although the Galvins were not
divorced) and on another, requested a profit and loss statement
for Mr. Galvin’s self-employment (although Mr. Galvin was not
self-employed).
Although the Galvins believed they had submitted
everything EMC required, in October 2010, EMC notified them that
their application for a HAMP modification was denied for failure
to provide requested documents.
In the same letter, EMC informed
the Galvins that they might be eligible for other programs.
The
Galvins took no further action, and heard nothing from EMC until
4
On May 20, 2010, the assignment was recorded in the
Rockingham County Registry of Deeds at Book 5112, Page 0754.
9
March 2011, when it sent a letter informing them that the
servicing of their loan would be transferred from EMC to JPMorgan
Chase Bank, N.A., which would “use the ‘brand name’ EMC Mortgage
when servicing the loan.”
Compl. ¶ 74.
In June 2012, Harmon, acting on Mellon’s behalf, sent the
Galvins a Notice of Mortgage Foreclosure Sale informing them that
it had scheduled a foreclosure sale for August 1, 2012.
That
prompted the Galvins to file this action in Rockingham County
Superior Court on July 23, 2012, seeking to enjoin the sale.
N.H. Rev. Stat. Ann. § 479:25, II.
See
In addition to the facts just
related, the Galvins’ complaint alleges that beginning in April
2009, EMC “began making unexplained and questionable debits and
accountings to the loan.”
Compl. ¶ 91.
The defendants removed
the action to this court.
See 28 U.S.C. § 1441.
III. Analysis
A.
Counts 1 and 15 - Breach of contract and promissory
estoppel
The first and last counts of the Galvins’ complaint–-for
breach of contract and promissory estoppel, respectively--both
seek to recover for EMC’s alleged breach of the promises it
allegedly made in the September 27, 2009 repayment agreement.
Specifically, the Galvins claim that EMC violated that agreement
by (1) “commencing a foreclosure of the Galvins’ home immediately
10
after the Galvins satisfied their end of the deal” and (2)
“failing to act in good faith to modify the terms of the Note.”
Compl. ¶¶ 100-01, 189.
Defendants argue that both counts must be
dismissed because the repayment agreement “does not promise that
EMC will not seek to foreclose following the [repayment] period
and it says nothing about modifying the terms of the Note.”
Memo. in Supp. of Mot. to Dismiss (document no. 10-1) at 6-7; see
also id. at 25-26.
The defendants are correct.
When interpreting a written
agreement, the court “give[s] the language used by the parties
its reasonable meaning, considering the circumstances and the
context in which the agreement was negotiated, and reading the
document as a whole.”
Birch Broad., Inc. v. Capitol Broad.
Corp., Inc., 161 N.H. 192, 196 (2010).
An agreement will be
given “the meaning intended by the parties when they wrote it,”
but in the absence of any ambiguity, “the parties’ intent will be
determined from the plain meaning of the language used in the
contract.”
Id.
The court cannot “rewrite the parties’ contract
and insert a provision which the parties had never intended to be
a part of the contract,” Lowell v. U.S. Sav. Bank of Amer., 132
N.H. 719, 726 (1990); nor does “[p]romissory estoppel . . .
permit circumvention of carefully designed rules of contract law
11
in the name of equity,” Rockwood v. SKF USA Inc., 758 F. Supp. 2d
44, 59 (D.N.H. 2010) (internal quotations omitted).
The plain, unambiguous language of the parties’ repayment
agreement does not contain any promise by EMC regarding loan
modification.
On its face, the agreement addresses only one
exceedingly narrow subject:
curing Mr. Galvin’s delinquency.
At
the very outset, it recites that “[t]his agreement is entered
into between [EMC] and [Mr. Galvin] for the delinquent amount
due.”
Repayment Agreement, Compl. Ex. E at 1 (emphasis added).
It notes that Mr. Galvin had failed to make the payments due for
June, July, and August of 2009, for a total past due amount of
$41,945.79.
It then sets out a schedule whereby Mr. Galvin is to
make six payments of $9,900.00 each (for a total of $59,400.00)
to cure this delinquency.
There is not the faintest suggestion that if Mr. Galvin
makes all six payments, EMC will modify the terms of his Note.
Nor does the complaint plead any facts from which one can infer
that the parties intended such a term to be a part of the
agreement,5 and as just mentioned, this court has no license to
5
At oral argument, the Galvins suggested that ¶ 36 of their
complaint demonstrated such an intent. That paragraph, however,
merely alleges that “Mr. Galvin understood successful
satisfaction of his obligations under the [agreement] would
result in a permanent loan modification or refinancing.” Compl.
¶ 36. It does not support the conclusion that both parties to
the agreement had such an understanding.
12
insert provisions to which the parties did not agree into a
contract.
Lowell, 132 N.H. at 726.
EMC did not break any
promise set forth in the agreement by “failing . . . to modify
the terms of the Note.”
Nor does the agreement provide that EMC will relinquish its
right to foreclose if Mr. Galvin makes all six payments.
The
agreement is admittedly ambiguous as to whether, upon repayment,
EMC could foreclose as a result of Mr. Galvin’s failure to make
his June-August 2009 mortgage payments; it is simply silent on
this point.
But even if this ambiguity is construed in the
Galvins’ favor, at best the agreement promises that EMC will not
seek to foreclose based upon that particular default.
It does
The Galvins also cited ¶ 187 of the complaint at oral
argument in support of their promissory estoppel claim. That
paragraph contains a bare assertion, unadorned by any meaningful
factual content, that “EMC induced Mr. Galvin to honor his part
of the [agreement], namely, make the requirement [sic] payments
under the repayment plan by promising Mr. Galvin he either would
be given a refinance or modification of his Note, and, most
importantly, that no foreclosure proceedings would take place.”
Compl. ¶ 187. To the extent this paragraph does not refer to the
terms of the agreement itself (which, as just discussed,
unambiguously do not contain such a promise), it does not make
out a claim for promissory estoppel. Such a claim arises under
New Hampshire law only “when one party has knowingly made
representations upon which the other reasonably has relied to his
detriment,” Appeal of Cloutier Lumber Co., 121 N.H. 420, 422
(1981), and the fulfillment of preexisting contractual
obligations “cannot amount to detrimental reliance,” Res-Care,
Inc. v. Omega Healthcare Investors, Inc., 187 F. Supp. 2d 714,
719 (W.D. Ky. 2001); see also, e.g., Eclipse Med., Inc. v. Am.
Hydro-Surgical Instruments, Inc., 262 F. Supp. 2d 1334, 1351-52
(S.D. Fla. 1999).
13
not, by any stretch of reason or language, promise that EMC will
forego foreclosing if Mr. Galvin defaults again–-as he did when
he failed to make his regular monthly mortgage payments beginning
in October 2009.
See Mortg. (document no. 10-2) at 4-5, ¶ 1; see
also supra n.3 & accompanying text.
EMC did not break any
promise set forth in the agreement by commencing foreclosure in
response to this second default.
Because the repayment agreement contains neither of the
promises upon which the Galvins premise Counts 1 and 15, those
counts are dismissed.
B.
Count 2 - Lack of standing
Count 2 of the complaint, captioned “Lack Of Standing,”
advances a smorgasbord of theories as to why the defendants have
no “standing” to foreclose on the Galvins’ mortgage.
The Galvins
say that defendants cannot foreclose because:
•
defendants did not comply with paragraph 22 of the mortgage,
which requires the mortgagee to provide the mortgagor with
notice of a default and 30 days to cure that default prior
to commencing foreclosure;
•
the note and mortgage were “bifurcated,” thereby rendering
the mortgage “void,” Compl. ¶ 109;
•
in assigning the Galvins’ mortgage and/or note, defendants
did not comply with the agreement creating the securitized
trust that purportedly owns their loan; and
•
the individual who signed the assignment of mortgage from
MERS to Mellon had a “conflict of interest,” id. ¶ 120.
14
Defendants argue that none of these theories entitles the Galvins
to relief.
As discussed below, they are correct.
Count 2 is
therefore dismissed.
1.
Compliance with the mortgage
Paragraph 22 of the Galvins’ mortgage, which is titled
“Acceleration; Remedies,” requires the mortgagee to “give notice”
to the Galvins “prior to acceleration following [their] breach of
any covenant or agreement” in the mortgage.
10-2) at 13.
Mortg. (document no.
The provision further requires that the notice
inform the Galvins of the actions they must take to cure their
breach and of the date by which those actions must be taken.
id.
See
And, “[i]f the default is not cured on or before the date
specified in the notice,” it permits the mortgagee “at its option
[to] require immediate payment in full of all sums secured by
this Security Instrument without further demand and [to] invoke
the STATUTORY POWER OF SALE and any other remedies permitted by
Applicable Law.”
Id. (capitalization in original).
The Galvins claim that defendants did not provide them with
the requisite notice prior to commencing foreclosure proceedings
in 2012.
At the same time, however, they acknowledge that in
March 2010, EMC sent them a notice of intent to foreclose, and do
not question that this communication complied in every respect
with ¶ 22.
Instead, the Galvins interpret ¶ 22 to require the
15
mortgagee to give notice before each “attempt to foreclose.”
Pls.’ Memo. in Supp. of Obj. to Mot. to Dismiss (document no. 13)
at 4.
The March 2010 notice, they say, satisfied ¶ 22's notice
requirement with respect to defendants’ June 2010 “attempt to
foreclose,” which defendants abandoned while they engaged in
modification negotiations with Mr. Galvin.
But before defendants
could “attempt to foreclose” again in 2012, the Galvins say, ¶ 22
required a new notice.
The Galvins do not identify any specific language in the
text of ¶ 22 to support this interpretation.
Indeed, their
position is affirmatively at odds with ¶ 22.
By its terms, that
provision requires the mortgagee to give notice only once–“following Borrower’s breach of any covenant or agreement in this
Security Instrument.”
Mortg. (document no. 10-2) at 13.
If,
following that breach, the mortgagor fails to cure its default as
specified in the notice, the provision expressly states that the
mortgagee may “at its option . . . require immediate payment in
full of all sums secured by this Security Instrument without
further demand” or pursue other remedies, including foreclosure.
Id. (emphasis added).
The Galvins do not contend that Mr. Galvin cured his default
at any point after the March 2010 notice.
Defendants were
therefore entitled to commence foreclosure in 2012, even after
16
having abandoned a prior foreclosure attempt, “without further
demand”–-i.e., without sending a further notice.
See Wells Fargo
Fin. Kan., Inc. v. Temmel, 251 P.3d 112, 2011 WL 1877829, *2-3
(Kan. Ct. App. 2011) (where mortgagee sent notice before initial
foreclosure attempt and mortgagor did not cure default, similar
mortgage provision did not require mortgagee to resend notice
before commencing foreclosure a second time); cf. also New S.
Fed. Sav. Bank v. Pugh, No. E2009-02150-COA-R3-CV, 2010 WL
4865606, *5-6 (Tenn. Ct. App. Nov. 29, 2010) (acceleration notice
sent pursuant to substantially similar mortgage provision did not
become “stale and ineffective” because more than one year elapsed
before mortgagee commenced foreclosure).
Plaintiffs have not
stated a claim for relief based upon defendants’ alleged
noncompliance with the notice provision of the mortgage.
2.
“Bifurcation” of the note and mortgage
The Galvins also assert, in support of Count 2, that “[a]
deep and growing body of case law holds that separation, or
‘bifurcation,’ of a promissory note from a mortgage renders the
mortgage void.”
Compl. ¶ 109 (citing Zecevic v. U.S. Bank Nat’l
Ass’n, No. 10-E-196, slip op. at 5 (N.H. Super. Ct. Jan. 20,
2011)).
If any such body of case law exists, it is more aptly
characterized as shallow and stagnant.
Despite this bold
assertion in the Galvins’ complaint, their memorandum of law does
17
not cite a single case supporting their “bifurcation” theory.
Neither the Zecevic case cited in the complaint, nor any other
New Hampshire case of which this court is aware, has endorsed it.
And all of the extrajurisdictional authority this court located
(without plaintiffs’ assistance) expressly rejects it.
See,
e.g., Culhane v. Aurora Loan Servs., 708 F.3d 282 (1st Cir. 2013)
(“The law contemplates distinctions between the legal interest in
a mortgage and the beneficial interest in the underlying debt.
These are distinct interests, and they may be held by different
parties.”); Pehl v. Countrywide Bank, N.A., No. 12-MISC-465911,
2013 WL 324278, *3-4 (Mass. Land Ct. Jan. 29, 2013) (“The
splitting of a mortgage and note . . . does not invalidate or
otherwise void the mortgage.”); Greene v. Indymac Bank, FSB, No.
12-cv-347, 2012 WL 5414097, *2 (S.D. Miss. Nov. 6, 2012)
(“bifurcation” theory “finds no support in [the] law and has been
repeatedly discredited”); Morgan v. Ocwen Loan Servicing, LLC,
795 F. Supp.2d 1370, 1375 (N.D. Ga. 2011) (“Separation of the
note and security deed . . . does not render either instrument
void.”).
In the absence of contrary authority, the court cannot
accord relief to the Galvins on the basis of this theory.
Buried in the Galvins’ “bifurcation” theory is the kernel of
a more promising (but still unsuccessful) argument.
In advancing
this theory, the Galvins allege that although Mellon holds the
18
mortgage, it is not in possession of the note, Compl. ¶¶ 26, 111,
and argue that possession of the note is necessary for Mellon to
foreclose, id. ¶ 104.
A series of recent cases from the New
Hampshire Superior Court has lent credence to this argument,
holding that a foreclosing entity must acquire ownership of the
note before commencing foreclosure proceedings.
See, e.g.,
Deutsche Bank Nat’l Trust Co. v. Monchgesang, No. 09-C-0200, slip
op. at 7-8 (N.H. Super. Ct. March 27, 2012); Newitt v. Wells
Fargo Bank, N.A., No. 213-2011-CV-00173, slip op. at 3 (N.H.
Super. Ct. July 14, 2011); Zecevic, slip op. at 5-6.
These cases
are all based on venerable New Hampshire law “that a mortgage of
real estate is a mere incident to the debt for the security of
which the mortgage is given; that a transfer of the debt, ipso
facto, transfers the mortgage;” and that “[a]n assignment of the
mortgage without the debt passes nothing.”
24 N.H. 484 (1852).
Whittemore v. Gibbs,
Because ownership of the mortgage “follows”
ownership of the note in this manner, these recent Superior Court
cases have reasoned, a party does not acquire a mortgage–-and
with it the right to foreclose–-until it has acquired the note.
As Judge Delker of the Superior Court recently explained,
however, “the intention of the parties to the transaction can
override the common law principle that the debt and mortgage are
inseparable.”
Dow v. Bank of N.Y. Mellon Trust Co., No. 218-
19
2011-CV-1297, slip op. at 14-16 (N.H. Super. Ct. Feb. 7, 2012)
(citing Page v. Pierce, 26 N.H. 317, 324 (1853); Smith v. Moore,
11 N.H. 55, 62 (1840)); see also Page, 26 N.H. at 324 (mortgage
will follow the debt “in the absence of an agreement, express or
implied, to the contrary”).
Thus, the court must consider “the
intention of the parties . . . when the original debt and
mortgage were formed” to determine whether a mortgage is
alienable from the associated promissory note.
Dow, slip op. at
15.
Here, the parties plainly intended that the mortgage would
not follow the note.
The Galvins’ note and mortgage were held by
different entities from the very beginning:
the note by
Metrocities and the mortgage by MERS as nominee.
In signing the
mortgage, the Galvins acknowledged that MERS was “a separate
corporation” from Metrocities.
39).
Mortg. at 1 (document no. 7 at
They nonetheless agreed, in no uncertain terms, to
“mortgage, grant and convey [the subject property] to MERS . . .
and to the successors and assigns of MERS with mortgage
covenants, and with power of sale.”
Mortg. (document no. 7) at
40; see also id. at 41 (agreeing that MERS could “exercise any or
all of [the interests granted by the Galvins], including, but not
limited to, the right to foreclose and sell the property”).
20
Virtually identical circumstances--a disunity of the note
and mortgage at the outset of the transaction and an express
agreement by the borrower that the named mortgagee or its
successors could foreclose–-confronted Judge Delker in Dow.
Given these circumstances, he concluded that the parties had not
intended for the mortgage and concomitant right to foreclose to
pass with the note, and held that the foreclosing entity in that
case–-which had demonstrated that it held the mortgage by
assignment (as Mellon does here), but not the note–-could proceed
with foreclosure.
Dow, slip op. at 17-18; see also Powers v.
Aurora Loan Servs., No. 213-2010-CV-00181 (N.H. Super. Ct. Feb.
14, 2011) (similar).
The Galvins have advanced no persuasive
argument as to why the same result should not obtain here.6
The
court therefore concludes that Mellon’s alleged lack of
possession of the underlying promissory note does not entitle the
Galvins to relief.
6
At oral argument, the Galvins directed the court’s
attention to ¶ 20 of the mortgage, which provides that “[t]he
Note or a partial interest in the Note (together with this
Security Instrument) can be sold one or more times without prior
notice to Borrower.” Mortg. (document no. 10-2) at 11, ¶ 20.
This, they say, shows that the mortgage and note could not be
transferred separately (an argument also alluded to in their
memoranda). The Court of Appeals rejected this argument as
“jejune” in a footnote in its Culhane opinion, noting that “this
language is permissive and by no means prohibits the separation
of the two instruments,” particularly given the fact that the
note and mortgage there were, as here, “separated upon their
inception.” 708 F.3d at 292 n.6.
21
3.
Compliance with the trust agreement
Although the Galvins contend that Mellon does not hold their
note, they also argue that even if the note had been assigned to
Mellon, this was done “in violation of the November 1, 2005 SAMI
II Trust Agreement,” the agreement that created the securitized
trust for which Mellon served as trustee.
Compl. ¶ 113.
To the
extent such a violation exists, it does not entitle the Galvins
to relief.
“As this court has previously explained, a borrower
lacks standing to challenge the transfer of a note on grounds
that would merely render the transfer voidable (as opposed to
void),” and “alleged noncompliance with a [trust agreement] is
precisely such a matter.”
Calef v. Citibank, N.A., 2013 DNH 023,
11 n. 4 (citing LeDoux v. JP Morgan Chase, N.A., 2012 DNH 194,
13-15; Butler v. Deutsche Bank Trust Co. Americas, No. 12-cv10337, 2012 WL 3518560, *7 (D. Mass. Aug. 14, 2012)).
4.
“Conflict of interest”
The Galvins also allege that the individual who executed the
assignment of mortgage from MERS to Mellon, Beth Cottrell, was an
employee of JPMorgan Chase and/or EMC.
As noted in Section II,
supra, that assignment was made to Mellon in its role as trustee
for a securitized mortgage trust.
Because JPMorgan Chase
preceded Mellon as trustee of that very same trust, the Galvins
assert, “Ms. Cottrell may have worked both on behalf of the
22
assignor (MERS) and assignee ([the trust]).”
Compl. ¶ 119.
This, they say, means that “Ms. Cottrell had a conflict of
interest.”
Id. ¶ 120.
This argument is wholly without merit.
As an initial matter, where Mellon had already succeeded
JPMorgan Chase as trustee at the time the assignment was made,
one cannot plausibly claim that Ms. Cottrell was acting on behalf
of both MERS and the trust at that time.
It requires no small
amount of logical contortion to weave a “conflict of interest”
from these facts.
Even assuming, however, that some conflict
arose from Ms. Cottrell’s employment by the former trustee of the
trust, that is not an infirmity the Galvins can assert to prevent
defendants from foreclosing.
“New Hampshire law recognizes the
general rule that a debtor cannot interpose defects or objections
[to an assignment] which merely render the assignment voidable at
the election of the assignor or those standing in his shoes.”
Drouin v. Am. Home Mortg. Servicing, Inc., 2012 DNH 089, 7
(quoting Woodstock Soapstone, Co., Inc. v. Carleton, 133 N.H.
809, 817 (1991)).
And it has long been recognized that a
conflict of the nature alleged here–-i.e., the signatory’s
employment by both the assignor and assignee–-at most makes an
assignment voidable by the assignor.
See, e.g., Irving Bank-
Columbia Trust Co. v. Stoddard, 292 F. 815, 819 (1st Cir. 1923);
cf. also Culhane, 708 F.3d at 294 (rejecting as “little more than
23
wishful thinking” the argument that signatory’s status as agent
of both assignor and assignee affected legitimacy of assignment).
Plaintiffs have not stated a claim for relief based upon Ms.
Cottrell’s supposed “conflict of interest.”
C.
Counts 3-5 - Negligence
Counts 3-5 of the Galvins’ complaint sound in negligence.
They
allege that EMC, Mellon, and MERS each owed the Galvins a duty of
some kind–-EMC “to act with reasonable care in administering the
loan,” Compl. ¶ 122; Mellon “to act with reasonable care in
retaining contractors and agents to administer the loan,” id. ¶
125; and MERS “to act with reasonable care in claiming or
asserting rights and powers over the Mortgage,” id. ¶ 128–-and
that they breached those duties.
The defendants, citing this
court’s decision in Moore v. Mortgage Electronic Registration
Systems, Inc., 848 F. Supp. 2d 107 (D.N.H. 2012), argue that the
Galvins cannot maintain a negligence claim because the only
duties the defendants owed to the Galvins were those defined by
the Galvins’ contracts.
The court agrees, and these counts are
dismissed.
As explained in Moore, “under New Hampshire law, the
relationship between a lender and borrower is contractual in
nature,” which “typically prohibits recovery in tort” under the
economic loss doctrine.
Id. at 133 (citing Wyle v. Lees, 162
24
N.H. 406 (2011); Ahrendt v. Granite Bank, 144 N.H. 308 (1999)).
Although there are cases in which “a contracting party may be
owed an independent duty of care outside the terms of the
contract,” id. (quoting Wyle, 162 N.H. at 410), “the 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,” id. (quoting
Seymour v. N.H. Sav. Bank, 131 N.H. 753, 759 (1989)).
The Galvins have not met that burden.
Rather, as in Moore,
the alleged duties they invoke concern the administration of the
loan and the assertion of “rights and powers” over the mortgage,
both of which “fall squarely within the normal role of a lender.”
Id.
Indeed, the Galvins have not even attempted to explain how
the defendants voluntarily assumed any “activities beyond those
traditionally associated with” that role.
They instead argue that because the relief they seek is
equitable, the economic loss doctrine cannot apply.
This
argument is premised upon an apparent misunderstanding of the
doctrine.
As described by the New Hampshire Supreme Court, the
doctrine “preclude[s] contracting parties from pursuing tort
recovery for purely economic or commercial losses associated with
the contract relationship.”
Wyle, 162 N.H. at 410.
Thus,
applicability of the doctrine turns not on the nature of the
25
relief sought, but on the nature of the harm alleged.
If the
plaintiff seeks to premise a tort claim on economic or commercial
loss, the doctrine applies without regard to whether the
plaintiff seeks an award of damages to remedy a past loss or an
injunction to prevent future loss.
See, e.g., Schaefer v.
IndyMac Mortg. Servs., 2012 DNH 185, 6-9 (plaintiff’s tort claims
barred by economic loss doctrine although plaintiff sought
injunctive and other equitable relief, “not damages”).
Because
the Galvins’ negligence claims seek redress for economic harms
arising in the context of a contractual relationship, the
doctrine applies here.
Nor does this case fall within any exception to the
doctrine.
The Galvins suggest that their relationship with the
defendants is a “special relationship” falling within the socalled “professional negligence” exception described by the New
Hampshire Supreme Court in Plourde Sand & Gravel v. JGI Eastern,
Inc., 154 N.H. 791, 796-99 (2007).
But the New Hampshire Supreme
Court specifically noted in Plourde Sand & Gravel that this
exception is “narrow . . . and properly so,” and that it had
previously “declined to extend the special relationship
principle” beyond a few very specific factual scenarios–-none of
which involved lenders and borrowers.
Id. at 796-97.
Federal
courts sitting in diversity jurisdiction “have no license to
26
expand [state] law beyond its present limits,” Douglas v. York
Cnty., 433 F.3d 143, 153 (1st Cir. 2005), and this court will not
do so here (particularly where the state court of last resort has
repeatedly declined to do so itself).7
Because the defendants owed the Galvins no duty outside the
terms of their contracts, Counts 3-5 are dismissed.
D.
Count 6 - Breach of the implied covenant of good faith
and fair dealing
Count 6 of the Galvins’ complaint purports to state a claim
for breach of the implied covenant of good faith and fair dealing
7
Even if the court were inclined to entertain the Galvins’
invitation to expand the reach of the “professional negligence”
exception, it would not do so in this case. The Galvins have not
ventured to explain how their relationship with the defendants is
more akin to the types of relationships the New Hampshire Supreme
Court has found subject to the exception than to the vast
majority of contractual relationships that are not subject to it.
Simply citing Plourde Sand & Gravel–-which is essentially all the
Galvins have done here--is thin gruel upon which to urge this
court to recognize a novel principle of state common law.
As a further aside, to the extent the Galvins argue that
their claims are subject to the “negligent misrepresentation”
exception set forth in Wyle, 162 N.H. at 410-12, the court cannot
agree. As articulated in that case, that exception applies where
“one party has deliberately made material false representations
of past or present fact, has intentionally failed to disclose a
material past or present fact, or has negligently given false
information with knowledge that the other party would act in
reliance on that information in a business transaction with a
third party.” Id. at 411 (citing United Int’l Holdings, Inc. v.
Wharf (Holdings) Ltd., 210 F.3d 1207, 1226-27 (10th Cir. 2000)).
No such allegation appears in any of the negligence counts or,
for that matter, anywhere else in the complaint. Cf. also Part
III.F, infra.
27
against EMC and Mellon.
Because the allegations of the complaint
arguably make out such a breach, this claim is not dismissed.8
“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).
This covenant is subdivided “into three general
categories:
(1) contract formation; (2) termination of at-will
employment agreements; and (3) limitation of discretion in
contractual performance.”
Id.
based upon the third category.
The Galvins’ claim appears to be
“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.
In support of their claim, the Galvins have alleged that EMC
“disavowed” the September 27, 2009 repayment agreement, “[f]ailed
to Credit the Galvins’ account for payments made pursuant to
[that] agreement,” and “[r]an the Galvins through months of
8
Although both EMC and Mellon are named as defendants in
this count, the allegations contained within Count 6 are directed
entirely at EMC. At oral argument, the Galvins asserted that
Mellon, as the purported mortgagee or noteholder, could be held
liable for the conduct of EMC, its servicer and agent. While
this theory was inelegantly developed in the complaint and in the
Galvins’ memoranda, the court–-which remains skeptical--will
permit Count 6 to proceed against Mellon for the time being.
28
meaningless submissions while allowing their account to fall
further into default.”9
Compl. ¶ 135.
The complaint alleges
precious few facts to support the averment that EMC “disavowed”
the repayment agreement, and the court is skeptical whether the
final allegation supports a claim for breach of the covenant.
At
a minimum, though, accepting as true the Galvins’ allegation that
EMC did not credit their account for the payments they made under
that agreement, that would certainly be “behavior inconsistent
with the parties’ agreed-upon common purpose and justified
expectations” in entering the agreement.
As defendants point out, there may be some tension between
this allegation and the Galvins’ allegation, in paragraph 40 of
their complaint, that “EMC’s own records showed the Galvins made
$59,400 in payments” under the repayment agreement.
But, viewing
those allegations in the light most favorable to the Galvins, it
is plausible that EMC recorded its receipt of the Galvins’
payments, but did not apply those payments to the unpaid balance
of the Galvins’ loan.
Because this conduct, if proven, arguably
violates the implied covenant of good faith and fair dealing,
Count 6 will not be dismissed.
9
The Galvins also suggest that EMC did not “act in good
faith and deal fairly with the Galvins under the HAMP agreement
[it] made with the Federal Government.” Compl. ¶ 136. As
discussed in the following section, the Galvins may not premise
their claims upon any alleged violation of that agreement.
29
E.
Count 7 - Breach of contract - third party beneficiary
Count 7 of the Galvins’ complaint purports to state a claim
against EMC for breaching its Servicer Participation Agreement
(“SPA”), in which EMC contracted with the federal government to
participate in HAMP.
The Galvins allege that “the purpose for
the [SPA] was to provide debt relief to homeowners like the
Galvins,” such that they are the intended third-party
beneficiaries of the SPA.
Compl. ¶ 141.
Whatever the SPA’s
purpose, the Galvins are mistaken as to their status as thirdparty beneficiaries of that agreement.
This claim must,
therefore, be dismissed.
No extensive analysis is necessary.
In Moore, supra, this
court had occasion to examine the language of two substantially
similar SPAs.
Noting that “federal courts in this 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,” the court found the SPAs lacking any evidence of such
an intent.
848 F. Supp. 2d
at 128.
In fact, the court noted,
certain provisions of the SPAs--§§ 11E and 7--“support[ed] the
contrary conclusion.”
Id.
The court accordingly concluded that
the plaintiff borrowers in that case could not maintain a claim
for breach of the SPA--a conclusion that, the court observed, was
30
in accord with the views of “the overwhelming majority of courts
to have considered whether borrowers are the intended third-party
beneficiaries of SPAs.”
Id. at 128-29 & n.14.
The same result obtains here.
EMC’s SPA contains the same
two sections upon which this court’s analysis in Moore rested,
and the Galvins have neither explained how those sections are
consistent with their claimed third-party beneficiary status nor
pointed to any other sections of the SPA that would confer such
status.10
The Galvins do note that one of the “whereas” clauses
of the SPA states that the agreement’s “primary purpose” is “the
modification of first lien mortgage loan obligations and the
provision of loan modification and foreclosure prevention
services relating thereto.”
As another judge of this court has
pointed out, however, the fact that the parties may have entered
the SPA “with the intent of aiding home-loan borrowers does not
itself demonstrate the parties’ intent to secure an enforceable
right for non-parties . . . [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
10
Again, because the SPA is expressly referenced in the
complaint and forms part of the basis for the Galvins’ claims,
the court may consider it in ruling on this motion to dismiss.
See supra n.2. The SPA is also posted for public review at the
Treasury Department’s website. See http://tinyurl.com/EMCSPA
(last visited Mar. 28, 2012).
31
mind when creating the contract.”
Cabacoff v. Wells Fargo Bank,
N.A., 2012 DNH 188, 12-13 (Barbadoro, J.).
F.
Count 7 is dismissed.
Counts 8 & 10 - Fraud in the inducement and negligent
misrepresentation against EMC
Counts 8 and 10 of the Galvins’ complaint, for fraud in the
inducement and negligent misrepresentation, respectively, are
brought against EMC.
Those counts stem primarily from EMC’s
alleged “statements that the Galvins would be eligible for a loan
modification,” Compl. ¶¶ 147, 166, which, the Galvins claim, led
them to enter the September 27, 2009 repayment agreement and
otherwise harmed them.
To a lesser degree, the counts also rely
on allegedly false statements by EMC “that its services were
consumer-friendly and capable of providing debt relief to the
Galvins.”
Id. ¶ 168.
Neither count entitles the Galvins to
relief.
Both counts suffer from the same deficiency.
Both are
subject to Federal Rule 9(b)’s heightened pleading standard.
See
N. Amer. Catholic Educ. Programming Found., Inc. v. Cardinale,
567 F.3d 8, 13, 15 (1st Cir. 2009).
That rule, which states that
“[i]n alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake,”
Fed. R. Civ. P. 9(b), “means that a complaint rooted in fraud
must specify the who, what, where, and when of the allegedly
32
false or fraudulent representations.”
130.
Moore, 848 F. Supp. 2d at
Nowhere in the complaint, however, do the Galvins identify
who told them, or when and where they were told, that:
•
They “would be eligible for a loan modification.” The only
allegations in the complaint regarding EMC’s representations
about a possible loan modification are that EMC told Mr.
Galvin that (1) “he could apply for” or “might be eligible
for” a loan modification, Compl. ¶¶ 42, 64 (emphasis added);
and (2) he was in the process of being reviewed for a loan
modification, id. ¶¶ 49, 59-63. It goes without saying that
neither of these statements amounts to a representation that
the loan would be modified, as the Galvins suggest.
•
EMC’s “services were consumer-friendly and capable of
providing debt relief to the Galvins.” Again, while the
complaint alleges that EMC told the Galvins that it “was
working with” them “to help them avoid foreclosure,” id. ¶
45 (an allegation that is itself unaccompanied by any
further detail), this hardly qualifies as a statement that
this process would be “consumer-friendly” or “capable of
providing debt relief.”
The complaint also fails to identify what false or
misleading statements EMC made “concerning the Galvins’ payments
and whether the foreclosure had been stopped.”
While EMC told
Mr. Galvin that he had failed to make his “required monthly
installments commencing with the payment due” on October 1, 2009,
Acceleration Warning (document no. 10-3) at 2; see also Compl. ¶
39, Mr. Galvin did not, in fact, make those payments.
n.3 & accompanying text.
See supra
Similarly, while the complaint alleges
that EMC told the Galvins that it would stop the foreclosure sale
scheduled for June 2010, Compl. ¶¶ 52, 55, it also alleges that
EMC did, in fact, stop that sale, id. ¶ 58.
33
A party cannot be
held liable for fraud or negligent misrepresentation for speaking
the truth, cf. Akwa Vista, LLC v. NRT, Inc., 160 N.H. 594, 601
(2010) (elements of negligent misrepresentation); Snierson v.
Scruton, 145 N.H. 73, 77 (2000) (elements of fraud), and to the
extent EMC made any other, false statements regarding the
Galvins’ payments or stopping foreclosure, those allegations are
pleaded nowhere in the complaint.
G.
Counts 8 and 10 are dismissed.
Counts 9 & 11 - Fraud and negligent misrepresentation
arising from the assignment
Counts 9 and 11 of the complaint, for fraud and negligent
misrepresentation, respectively, are premised upon the theory
that “the Assignment of Mortgage [from MERS to Mellon] contained
materially false statements.”
Both counts fail.
Compl. ¶ 162; see also id. ¶ 171.
An essential element of these claims is a
false statement, see Akwa Vista, 160 N.H. at 601; Snierson, 145
N.H. at 77, yet the Galvins have failed to identify any such
statement in the assignment.
They suggest that the assignment
misrepresented MERS’s “status, power and authority with respect
to” the Galvins’ mortgage.
Id. ¶ 171.
All the assignment says
regarding MERS’s relationship to the Galvins’ mortgage, however,
is that MERS is the “holder of a mortgage from Mark B. Galvin and
Jenny Galvin,” Assignment of Mortg. (document no. 7) at 45–-which
it was.
Counts 9 and 11 are dismissed.
34
H.
Counts 12-13 - “Avoidance of Mortgage”
Counts 12 and 13 of the complaint are each titled “avoidance
of mortgage.”
Precisely what cause of action the Galvins mean to
assert is unclear; as this court has observed, “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.’”
Moore, 848 F. Supp. 2d at 137 n.18 (quoting 1
David G. Epstein et al., Bankruptcy § 6-1, at 498 (1992)).
As
this is not a bankruptcy case, this power would appear to have
little applicability here.
It may be the case that the Galvins’
purpose in bringing these claims is to seek a declaration that
the mortgage is void or unenforceable against them.
Whatever
their intent–-and they have not clarified it in their memoranda-it is clear that neither count states a plausible claim to
relief.
Count 12 rests solely on the proposition that “[b]ifurcating
the Mortgage from the Note rendered the Mortgage unenforceable.”
Compl. ¶ 176.
As already discussed in Part III.B.2 supra, this
proposition has no merit.
This count is therefore dismissed.
Count 13 suggests that because Mrs. Galvin signed the
mortgage, but did not sign the promissory note, she “never
35
received consideration in exchange for granting an interest in
the Galvin’s [sic] home to MERS, and whatever interest she
purportedly granted in the Mortgage should be avoided and
declared void and of no effect.”
equally meritless.
Compl. ¶ 179.
This theory is
New Hampshire common law permitted a wife “to
mortgage her estate to secure the payment of her husband’s
debts,” as Mrs. Galvin did here.
Adams v. Adams, 80 N.H. 80, 85
(1921) (quoting Parsons v. McLane, 64 N.H. 478, 479 (1888)).
In
such cases, it was the extension of credit to the husband that
served as consideration for the wife’s promise.
Cf. New Eng.
Merchants Nat’l Bank v. Lost Valley Corp., 119 N.H. 254, 257
(1979) (extension of credit to third parties was sufficient
consideration for defendant’s agreement to guaranty the loan).
Although the New Hampshire General Court divested wives of this
capacity in 1876, see Adams, 80 N.H. at 85, it has long since
repealed that act, see N.H. Rev. Stat. Ann. § 460:2, thus
restoring the common-law rule.
See Duquette v. Warden, 154 N.H.
737, 742 (2007) (“The repeal of a statute which abrogates the
common law operates to reinstate the common-law rule, unless it
appears that the legislature did not intend such
reinstatement.”).11
Thus, Mrs. Galvin’s failure to sign the
11
The Galvins have identified, and the court has found, no
indication that the General Court did not intend its repeal to
reinstate the common-law rule.
36
underlying promissory note does not render the mortgage void.
See In re Winter, Bkrtcy. No. 07-10836, Adv. No. 09-1078, 2010 WL
750368, *2 (Bkrtcy. D.N.H. Feb. 3, 2010).
I.
Count 13 is dismissed.
Count 14 - Truth in Lending Act
Finally, Count 14 of the Galvins’ complaint claims that
Mellon violated 15 U.S.C. § 1641(g)(1), a provision of the Truth
in Lending Act (“TILA”), by failing to notify them of its
acquisition of their mortgage within 30 days of MERS’s May 5,
2010 assignment of that mortgage to it.12
Mellon argues that
this claim is barred by TILA’s one-year statute of limitations.
The court agrees.
TILA’s limitations provision requires that an action for
damages be brought “within one year from the date of the
occurrence of the violation.”
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
the date the disclosures should have been made.”
Moore, 848 F.
Supp. 2d at 120-21 (citing Rodrigues v. Members Mortg. Co., Inc.,
323 F. Supp. 2d 202, 210 (D. Mass. 2004)).
12
Applying this rule,
In pertinent part, § 1641(g)(1) requires that, “not later
than 30 days after the date on which a mortgage loan is sold or
otherwise transferred or assigned to a third party, the creditor
that is the new owner or assignee of the debt shall notify the
borrower in writing of such transfer.”
37
the Galvins’ TILA claim would have accrued on June 4, 2010-thirty days after the May 5 assignment.
See Squires v. BAC Home
Loans Servicing, LP, No. 11-cv-413, 2011 WL 5966948, *2 (S.D.
Ala. Nov. 29, 2011).
The Galvins did not file this action,
however, until July 23, 2012–-over two years later.
The Galvins argue that the limitations period should be
equitably tolled because, in light of Mellon’s failure to comply
with the statute, they had no way of discovering the assignment
had occurred within the limitations period.
This court will once
again assume, without deciding, that equitable tolling applies to
TILA claims.
See Moore, 848 F. Supp. 2d at 121 (noting that
“[s]ome district courts within this circuit have held that TILA's
statute of limitations may be subject to equitable tolling” but
declining to rule on the issue).
As the court noted in Moore,
“equitable 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,” such as “the
defendant preventing the plaintiff from asserting his rights in
some way, or the plaintiff’s inability to discover information
essential to the suit despite reasonable diligence.”
Id.
(internal quotations and citations omitted).
No such circumstances operate to save the Galvins’ TILA
claim in this case.
The Galvins themselves allege in their
38
complaint that the assignment in question was recorded in the
registry of deeds on May 20, 2010.
In other words, from that
date forward, Mellon made no secret of its possession of the
Galvins’ mortgage; the assignment was a matter of public record
that the Galvins easily could have discovered had they desired.
Thus, any tolling of the limitations period necessarily ended as
of that date.
Cf. Minneweather v. Wells Fargo Bank, N.A., No.
12-cv-13391, 2012 WL 5844682, *5 (E.D. Mich. Nov. 19, 2012)
(equitable tolling of § 1641(g)(1) claim inappropriate where
there was no evidence that defendant attempted to conceal
transfer).
Because the Galvins did not file their TILA claim
until well over two years later, Count 14 is dismissed as timebarred.13
13
While the time bar provides sufficient cause to dismiss
the Galvins’ TILA claim, the court perceives two other potential
problems with their claim. First, several courts have held that
a plaintiff must allege actual damages in order to state a claim
under § 1641(g)(1). See, e.g., Ramirez v. Kings Mortg. Servs.,
Inc., No. 12-cv-1109, 2012 WL 5464359, *12 (E.D. Cal. Nov. 8,
2012); but see Brown v. CitiMortgage, Inc., 817 F. Supp. 2d 1328
(S.D. Ala. 2011) (rejecting this view). The Galvins have not
alleged that they suffered any damages from Mellon’s alleged TILA
violation. Second, and more fundamentally, the statute’s plain
language appears to require notification only when ownership of a
debt is transferred, not when ownership of a mortgage or other
security interest in a loan is transferred. See 15 U.S.C. §
1641(g)(1) (requiring action by “the creditor that is the new
owner or assignee of the debt” (emphasis added)); see also
Connell v. CitiMortgage, Inc., No. 11-cv-443, 2012 WL 5511087, *6
(S.D. Ala. Nov. 13, 2012) (“According to the statute . . . the
‘mortgage loan’ is the credit transaction itself (i.e., the
Note), not the instrument securing that credit transaction (i.e.,
39
IV.
Conclusion
For the reasons set forth above, the defendants’ motion to
dismiss14 is GRANTED in part and DENIED in part.
7-15 are dismissed.
Counts 1-5 and
With the (potentially) meritorious thus
separated from the meretricious, count 6 may proceed against EMC
Mortgage Corporation and Bank of New York Mellon.
All other
defendants will be terminated from the case.
SO ORDERED.
Joseph N. Laplante
United States District Judge
Dated: April 2, 2013
cc:
Jamie Ranney, Esq.
Paul J. Alfano, Esq.
Peter G. Callaghan, Esq.
the Mortgage).”). As to this latter point, the Galvins claim in
their opposition memorandum that they also were not notified of
the transfer of their note (a claim they repeated at oral
argument), but no such allegation appears in the complaint. At
present, the court need not take a conclusive position on either
of these issues, and simply notes their existence for posterity.
14
Document no. 10.
40
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