Monzione v. U.S. Bank National Association, Trustee

Filing 10

///ORDER granting 5 Motion to Dismiss for Failure to State a Claim. Clerk shall close this case. So Ordered by Magistrate Judge Landya B. McCafferty.(gla)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Stephen B. Monzione
v.

Civil No. 12-cv-433-LM
Opinion No. 2013 DNH 012

U.S. Bank, N.A., as Trustee
for Mastr Asset Backed
Securities Trust 2006-FRE1

O R D E R
In an action that was removed from the New Hampshire
Superior Court, Stephen Monzione asserted two claims against his
mortgage holder, one under the New Hampshire Consumer Protection
Act (“CPA”), N.H. Rev. Stat. Ann. (“RSA”) ch. 358-A, and one
under the federal Truth in Lending Act (“TILA”).

Before the

court is defendant’s motion to dismiss both claims.

Monzione

objects, but only to the dismissal of his CPA claim.

Because

that claim is subject to a statutory exclusion and is time
barred, defendant’s motion to dismiss is granted.
The Legal Standard
Ruling on a motion to dismiss for “failure to state a claim
upon which relief can be granted,” Fed. R. Civ. P. 12(b)(6),
requires the court to conduct a limited inquiry, focusing not on
“whether a plaintiff will ultimately prevail but whether the
claimant is entitled to offer evidence to support the claims.”

Scheuer v. Rhodes, 416 U.S. 232, 236 (1974).

When considering

such a motion, a trial court “accept[s] as true all well-pled
facts in the complaint and draw[s] all reasonable inferences in
favor of plaintiffs.”

Plumbers’ Union Local No. 12 Pension Fund

v. Nomura Asset Acceptance Corp., 632 F.3d 762, 771 (1st Cir.
2011) (quoting SEC v. Tambone, 597 F.3d 436, 441 (1st Cir.
2010)).

To survive a Rule 12(b)(6) motion, a complaint “must

contain sufficient factual matter, accepted as true, to ‘state a
claim to relief that is plausible on its face.’”

González-

Maldonado v. MMM Healthcare, Inc., 693 F.3d 244, 247 (1st Cir.
2012) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009);
citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Background
The relevant factual background, drawn from Monzione’s
complaint, is as follows.

In September of 2005, Monzione

applied for a $100,000 loan from Fremont Investment & Loan
(“Fremont”), with repayment secured by a mortgage.

When he

applied for the loan, Monzione was: (1) unemployed; (2)
receiving no regular income other than $815 per month in Social
Security disability benefits; and (3) in possession of no
tangible assets other than the real property he mortgaged.

In

addition, he had a credit score of 532, due to a credit history
that included multiple defaults.

Even so, his loan application

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was approved, and he entered into a mortgage agreement with
Fremont on September 30, 2005.

Under the terms of that

agreement, he was obligated to make monthly payments of: (1)
$754.79 for the first twenty-four months of the repayment
period; (2) $894.90 for the next six months; and (3) $927.22 for
the final 330 months.

During the first twenty-four months,

Monzione’s monthly payment equaled ninety-three percent of his
monthly income.
In February of 2006, Monzione was notified that the
servicing of his loan was being transferred from Fremont to
American Servicing Company, as servicer for U.S. Bank, N.A.
(“U.S. Bank”).

Monzione defaulted on his loan, and in October

of 2008, U.S. Bank notified him that it was instituting
foreclosure proceedings.
While Monzione does not so allege in his complaint, he
acknowledges, in his objection to U.S. Bank’s motion to dismiss,
that: (1) he filed for bankruptcy protection; and (2) on January
27, 2009, he brought an adversary proceeding against U.S. Bank
in his bankruptcy case.

The complaint in that proceeding is all

but identical to the complaint Monzione filed in the New
Hampshire Superior Court.
(doc. no. 5-2).

See Def.’s Mot. to Dismiss, Ex. 1

Both complaints assert that by making what

Monzione calls a predatory loan, Fremont violated the New

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Hampshire CPA and the TILA.

Fremont’s successor in interest,

U.S. Bank, stands in Fremont’s shoes vis-à-vis Monzione’s
claims.

In the Bankruptcy Court, Judge Vaughn granted U.S.

Bank’s motion to dismiss Monzione’s TILA claim,1 but declined to
dismiss his CPA claim.
Discussion
Monzione concedes that U.S. Bank is entitled to dismissal
of his TILA claim, which leaves only his CPA claim.

U.S. Bank

argues that it is entitled to dismissal of that claim because
Fremont’s extension of a loan to Monzione was an exempt
transaction under both RSA 358-A:3, I, and RSA 358-A:3, IV-a.
The court considers each argument in turn.
A. RSA 358-A:3, I
U.S. Bank first argues that as a mortgage banker, and as an
entity subject to the jurisdiction of the federal Office of the
Comptroller of the Currency, it is exempt from the CPA.2
Monzione disagrees, arguing that: (1) it is too early to
1

Specifically, Judge Vaughn ruled that Monzione had not
made factual allegations sufficient to state a TILA claim and
that the TILA claim was time-barred. See Def.’s Mot. to
Dismiss, Ex. 2 (doc. no. 5-3), at 4-5.
2

Given that Monzione’s loan was made by Fremont, and that
the basis for Monzione’s claim is Fremont’s conduct in making
that loan, it is not at all clear how U.S. Bank’s regulatory
status has any bearing on the viability of Monzione’s CPA claim.

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determine whether his loan was an exempt transaction due to
factual “ambiguities currently at issue surrounding [Fremont]’s
status and identity, at times relevant to this complaint,” Pl.’s
Mem. of Law (doc. no. 7-1), at 6, along with changes in New
Hampshire law “regarding lenders, servicers, originators and
brokers in response to federal mandates following the subprime
lending crisis,” id.; and (2) neither the state or federal
regulatory schemes that may apply to his loan purport to provide
exclusive remedies or bar a mortgagor’s recourse to the CPA.3
While its argument is slightly off target, U.S. Bank is entitled
to dismissal of Monzione’s CPA claim.
New Hampshire’s CPA includes several exemptions, including
one for
[t]rade or commerce that is subject to the jurisdiction of the bank commissioner, the director of
securities regulation, the insurance commissioner, the
public utilities commission, the financial institutions and insurance regulators of other states, or
federal banking or securities regulators who possess
the authority to regulate unfair or deceptive trade
practices.
RSA 358-A:3, I.

“The burden of proving exemptions from the

provisions of [the CPA] by reason of paragraph[ ] I . . . of

3

The court notes that while the New Hampshire statute on
which Monzione relies for that proposition, RSA 397-B:9, IV, is
part of the scheme for regulating loan services, his claim does
not arise from the servicing of a loan, but its origination.
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this section shall be upon the person claiming the exemption.”
RSA 358-A:3, V.
Notwithstanding U.S. Bank’s focus on its own regulatory
status, and Monzione’s focus on Fremont’s status at the time he
got his loan, the exemption on which U.S. Bank relies does not
depend on the identity or status of the entity seeking its
protection.

Rather, the dispositive question is whether

Fremont, by entering into a loan agreement with Monzione,
engaged in trade or commerce subject to the jurisdiction of one
or more of the individuals or agencies enumerated in RSA 358A:4, I.
“[T]o determine whether trade or commerce is ‘subject to
the jurisdiction of’ a regulator, the court ‘must examine the
statutes that define the regulator’s powers and authority.’”
LeDoux v. JP Morgan Chase, N.A., No. 12-cv-260-JL, 2012 WL
5874314, at *6 (D.N.H. Nov. 20, 2012) (quoting Elmo v. Callahan,
No. 10-cv-286-JL, 2012 WL 3669010, at *9 (D.N.H. Aug. 24, 2012);
citing Rainville v. Lakes Region Water Co., 163 N.H. 271, 275
(2012)) (brackets omitted).

“If those statutes grant [an

entity] the authority to supervise or regulate the trade or
commerce in which the [defendant’s] deceptive practice occurred,
then that trade or commerce is ‘subject to the jurisdiction of’
[that entity], and the CPA does not apply.”

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Elmo, 2012 WL

3669010, at *9 (citing Rainville, 163 N.H. at 275-76; State v.
Empire Auto. Grp., Inc., 163 N.H. 144, 146 (2011)).
When Fremont made its loan to Monzione, New Hampshire’s
banking code provided that “[t]he [banking] commissioner shall
have general supervision of all banks (except national banks),
trust companies, building and loan associations, credit unions,
Morris plan banks, small loan companies, and other similar
institutions in the state.”

RSA 383:9, I.

The code further

provided:
The [banking] commissioner shall have exclusive
authority and jurisdiction to investigate conduct that
is or may be an unfair or deceptive act or practice
under RSA 358-A and exempt under RSA 358-A:3, I
. . . . The commissioner may hold hearings relative
to such conduct and may order restitution for a person
or persons adversely affected by such conduct.
RSA 383:10-d.
Based on the factual allegations in Monzione’s complaint,
Fremont was under the general supervision of the New Hampshire
banking commissioner when it loaned money to Monzione.
383:9, I.

See RSA

Moreover, Monzione’s CPA claim does nothing other

than allege unfair or deceptive acts under RSA chapter 358-A by
a mortgage lender, which is conduct over which the banking
commissioner had exclusive authority and jurisdiction.

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See RSA

83:10-d.4

Based on the foregoing, the court is compelled to

conclude U.S. Bank is entitled to dismissal of Monzione’s CPA
claim because that claim is based upon a transaction exempted
from the reach of the CPA by RSA 358-A:3, I.

See Maroun v. N.Y.

Mortg. Co. (In re Maroun), 427 B.R. 200, 204 (Bankr. D.N.H.
2010) (dismissing CPA claim against mortgage broker in reliance
on RSA 358-A:3, I).5

Finally, because the transaction in this

case is exempt from the CPA because it was trade or commerce
subject to the jurisdiction of the banking commissioner, it is
not necessary to address U.S. Bank’s argument that it is exempt
from the CPA because it is subject to the jurisdiction of a
federal banking regulator.

4

The plain language of RSA 383:10-d refutes Monzione’s
argument that the legislature did not intend for the banking
code to provide the exclusive remedy for claims such as the CPA
claim in this case, and the fact that RSA 383:10-d authorizes
the banking commissioner to order restitution refutes Monzione’s
argument that without a CPA claim, he would be without a remedy.
5

After Fremont made its loan to Monzione, but before In re
Maroun was decided, RSA chapter 397-A was amended to include a
provision outlawing various forms of fraud. See RSA 397-A:2,
VI. Thus, In re Maroun was decided under a slightly different
statutory scheme than the one in place at the time of
transaction in this case. See 427 B.R. at 204 (citing RSA 397A:2, VI). Still, RSA 383:10-d alone provides a sufficient basis
for determining that the transaction in this case is exempt from
the CPA.
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B. RSA 358-A:3, IV-a
U.S. Bank also argues that Monzione’s CPA claim is time
barred, by RSA 358-A:3, IV-a, because both the CPA claim in
Monzione’s bankruptcy case and the identical CPA claim in this
case were brought more than three years after he entered into
the loan agreement on which his claim is based.

Monzione argues

that the limitation period did not begin to run until U.S. Bank
began foreclosure proceedings against him, which was the first
time he reasonably could have determined that he had been
injured by the repayment obligations imposed by his loan
agreement with Fremont.

While U.S. Bank’s reliance on RSA 358-

A:3, IV-a is misplaced, the court still concludes that
Monzione’s CPA claim is time barred.
The CPA expressly exempts from its coverage “[t]ransactions
entered into more than 3 years prior to the time the plaintiff
knew, or reasonably should have known, of the conduct alleged to
be in violation of this chapter.”

RSA 358-A:3, IV-a.

U.S. Bank

treats that provision as if it were a three-year statute of
limitations.

It is not.

In a recent order, Judge Laplante addressed an argument
similar to the one U.S. Bank makes here:
Rather than requiring plaintiffs to bring suit within
three years of the date they learn of the violation,
section 358–A:3, IV-a exempts “[t]ransactions entered
into more than 3 years prior to the time the plaintiff

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knew, or reasonably should have known, of the conduct
alleged to be in violation of this chapter” from the
Consumer Protection Act. It does not govern the time
period within which a plaintiff must bring suit. But
see King v. Philip Morris, Inc., No. 99–C–856, 2000 WL
34016358, *12–13 (N.H. Sup. Ct. Nov. 2, 2000) (relying
on legislative history to reach the opposite
conclusion).
Forrester Envtl. Servs., Inc. v. Wheelabrator Techs., Inc., No.
10-cv-154-JL, 2011 WL 6300536, at *8 n.10 (D.N.H. Dec. 16,
2011).

Judge Laplante continued: “Because the Consumer

Protection Act contains no limitations provision applicable to
this action, the court will apply section 508:4, I’s general
statute of limitations to plaintiffs’ Consumer Protection Act
claim.”

Forrester, 2011 WL 6300536, at *8 n.10.

This court

will follow Judge Laplante’s lead.
New Hampshire’s general statute of limitations provides, in
pertinent part:
Except as otherwise provided by law, all personal
actions, except actions for slander or libel, may be
brought only within 3 years of the act or omission
complained of, except that when the injury and its
causal relationship to the act or omission were not
discovered and could not reasonably have been
discovered at the time of the act or omission, the
action shall be commenced within 3 years of the time
the plaintiff discovers, or in the exercise of
reasonable diligence should have discovered, the
injury and its causal relationship to the act or
omission complained of.
RSA 508:4, I.

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Monzione defends against U.S. Bank’s timeliness argument by
invoking the discovery rule:
Monzione could not have been aware of his
victimization under the principles of predatory loan
practices until he sustained actual damage from this
practice (inherent in the elements of predatory
lending is the inevitability that a mortgagor will
fail to maintain his mortgage payments, resulting in
the loss of his home through foreclosure and the
ability of the mortgagee to protect its investment
through the seizure and sale of the real property in
question). As plaintiff could not bring a predatory
lending claim against the defendant until he became
aware of the loss of his home, which occurred on or
about October 31, 2008, his claim, brought on January
27, 2009, was well within the parameters set forth in
the consumer protection act.
Pl.’s Mem. of Law (doc. no. 7-1), at 9-10.
Monzione’s own argument explains why he is not entitled to
the benefit of the discovery rule.

Monzione appears to argue

that he was not injured by Fremont’s conduct until U.S. Bank
initiated foreclosure.

But, he also argues that foreclosure was

inevitable from the moment he entered into the loan agreement.
Indeed, from that moment onward, he was obligated to make
monthly payments that consumed more than ninety percent of
monthly income.

In light of that factual allegation, it was not

necessary for the other shoe to drop, in the form of
foreclosure, to put Monzione on notice that he had been harmed.
As the New Hampshire Supreme Court has explained, in the
context of a legal malpractice case:

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While the plaintiff may not have understood the full
extent of the harm that would result from the loss of
his potential third-party claim [due to the alleged
negligence of his attorney], the discovery rule is not
intended to toll the statute of limitations until the
full extent of the plaintiff’s injury has manifested
itself. See Rowe v. John Deere, 130 N.H. 18, 23
(1987). Rather, that the plaintiff could reasonably
discern that he suffered some harm caused by the
defendant’s conduct is sufficient to render the
discovery rule inapplicable. See id.
Furbush v. McKittrick, 149 N.H. 426, 431 (2003) (parallel
citation omitted).

Cf. Patrick v. Morin, 115 N.H. 513, 515

(1975) (granting judgment for defendant in medical negligence
action based on statute of limitations, and explaining that
“[t]o delay the commencement of the running of the statute of
limitations until plaintiff’s ultimate degree of damage becomes
known would allow suits to be brought long after the event,
contrary to the intent and purpose of such statutes”) (citing
Dupuis v. Smith Props., Inc., 114 N.H. 625, 629 (1974)).
Given the factual allegations in Monzione’s complaint, he
cannot reasonably argue that he was unable to discern that he
had been harmed as soon as he executed the loan agreement.
maintains that default and foreclosure were inevitable.

He

The

inevitability of those events, in turn, arises from facts that
were at least as well known to Monzione as they were to Fremont,
i.e., the amount of his loan, the amount of the monthly payments
to which he agreed, and the amount of income and assets upon

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which he could draw to repay the loan.

Because, by Monzione’s

own reckoning, foreclosure was the inevitable result of his loan
from Fremont, and that inevitably was clearly foretold by facts
known to him at the time he took the loan, Monzione was
obligated to bring his CPA claim within three years of the date
on which he entered into the transaction at issue, i.e., no
later than October 1, 2008.

Even under the most generous view

of the facts alleged in his complaint, he did not do so.

Thus,

his claim is time barred, which provides a second justification
for its dismissal.
Conclusion
Because Monzione’s CPA claim arises from a transaction that
is exempted from that statute, and because that claim is
untimely, U.S. Bank’s motion to dismiss, document no. 5, is
granted.

Accordingly, the clerk of the court shall close this

case.
SO ORDERED.

__________________________
Landya McCafferty
United States Magistrate Judge
January 25, 2013
cc:

Paul M. Monzione, Esq.
Christopher J. Somma, Esq.

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