LaCourse et al v. Ocwen Loan Servicing, LLC et al
Filing
31
///ORDER granting 23 Motion to Dismiss for Failure to State a Claim. Clerk shall dismiss plaintiff's complaint and close the case. So Ordered by Judge Landya B. McCafferty.(gla) Modified on 4/8/2015 to modify filing date of 4/7/15 (gla).
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Raymond J. LaCourse and
Valerie LaCourse
v.
Civil No. 14-cv-013-LM
Opinion NO. 2015 DNH 077
Ocwen Loan Servicing, LLC
and Altisource Residential
Corp.
O R D E R
In a case that has been removed from the Rockingham County
Superior Court, Raymond and Valerie LaCourse have sued Ocwen
Loan Servicing, LLC (“Ocwen”) and Altisource Residential Corp.
(“Altisource”) in 11 counts, asserting claims arising out of
their unsuccessful attempt to obtain a modification of their
mortgage loan.
Before the court is defendants’ motion to
dismiss plaintiffs’ amended complaint for failure to state a
claim upon which relief can be granted.
12(b)(6).
Plaintiffs object.
See Fed. R. Civ. P.
For the reasons that follow,
defendants’ motion to dismiss is granted.
I. The Legal Standard
Under Rule 12(b)(6), the court must accept the factual
allegations in the complaint as true, construe reasonable
inferences in the plaintiff’s favor, and “determine whether the
factual allegations in the plaintiff’s complaint set forth a
plausible claim upon which relief may be granted.”
Foley v.
Wells Fargo Bank, N.A., 772 F.3d 63, 71 (1st Cir. 2014)
(citation omitted).
A claim is facially plausible “when the
plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.”
(2009).
Ashcroft v. Iqbal, 556 U.S. 662, 678
Analyzing plausibility is “a context-specific task” in
which the court relies on its “judicial experience and common
sense.”
Id. at 679.
II. Background
The factual background recited in this section is drawn
from plaintiffs’ first amended complaint.
In 2000, plaintiffs were granted a deed to a property in
Chester, New Hampshire.
In January 2011, they refinanced the
mortgage that secured repayment of the loan they used to
purchase that property.
In October 2011, plaintiffs did not make their scheduled
mortgage payment.
Three months later, they attempted to resume
making their payments.
Their mortgagee rebuffed that attempt
and told plaintiffs that they were in default.1
While the amended complaint does not say so directly, the
court infers that plaintiffs’ mortgagee was Bank of America,
which has been dismissed from this case by stipulation in May
2014, see doc. no. 14.
1
2
Also in October 2011, plaintiffs filed for bankruptcy under
Chapter 13.
Four months later, “their Chapter 13 bankruptcy was
converted to a Chapter 7 bankruptcy.”
no. 20) ¶ 21.
First Am. Compl. (doc.
Plaintiffs allege that their “mortgage debt was
discharged in bankruptcy in or around June 2013, and [that their
bankruptcy] case [was] closed in August 2013.”
Id. ¶ 22.
Later in their amended complaint, plaintiffs allege that
they “discharged in bankruptcy their mortgage and other debts.”
Id. ¶ 46.
While paragraph 46 could be read as alleging that
plaintiffs’ mortgage was discharged in bankruptcy, such a
reading is inconsistent with plaintiffs’ allegations that, after
they emerged from bankruptcy in August 2013: (1) their “mortgage
was transferred to Defendant Ocwen on September 16, 2013,”2 id. ¶
16; and (2) their “mortgage debt of $317,886 was allegedly
assigned [to Altisource] on or about January 7, 2014,” id. ¶ 23.
Because an allegation that plaintiffs’ mortgage was discharged
in bankruptcy is inconsistent with plaintiffs’ other allegations
From that somewhat ambiguous statement, the court infers,
favorably to plaintiffs, that Ocwen did not receive an
assignment of their mortgage and become plaintiffs’ mortgagee,
but, rather, took on the role of a mortgage servicer for the
mortgagee. That inference is favorable to plaintiffs because it
seems unlikely that Ocwen would be subject to liability under
the Federal Fair Debt Collection Practices Act, which is the
legal basis for Counts V, VI, and VII, if it was a mortgagee
rather than a mortgage servicer. See, e.g., Somin v. Total
Cmty. Mgmt. Corp., 494 F. Supp. 2d 153, 160 (E.D.N.Y. 2007).
2
3
concerning their mortgage’s post-bankruptcy existence, the court
construes paragraph 46 as alleging only that plaintiffs’ debt to
their lender was discharged in bankruptcy, but not their
mortgage.3
After they emerged from bankruptcy, plaintiffs applied to
Ocwen for a mortgage modification.4
In July 2014, Ocwen denied
plaintiffs’ application on grounds that their “debt to income
ratio exceeded the percentage necessary [to qualify for a
modification] and would create further hardship.”
Compl. ¶ 17.
First Am.
Plaintiffs’ mortgage was still in foreclosure when
they filed their amended complaint in September 2014.
At some point, Ocwen calculated plaintiffs’ income to be at
least $6,619.42 per month.
Plaintiffs, in turn, calculate their
income to be at least $6,698 per month.
However, plaintiffs
make no allegations about when Ocwen made those calculations,
the circumstances under which it did so, or how they,
This construction, in turn, is consistent with the general
rule that a discharge in bankruptcy extinguishes a borrower’s
debt to a lender but does not affect a secured creditor’s lien
on collateral that secures the borrower’s promise to repay the
lender. See, e.g., Worrall v. Fed. Nat’l Mortg. Ass’n, No. 13cv-330-JD, 2013 WL 6095119, at *6 (D.N.H. Nov. 20, 2013);
Collins v. Wealthbridge Mortg. Corp. (In re Collins), 474 B.R.
317, 320 (Bankr. D. Me. 2012).
3
Plaintiffs’ allegation that they applied for a mortgage
modification after they emerged from bankruptcy is yet another
reason why paragraph 46 of their amended complaint cannot
reasonably be read as alleging that their mortgage was
discharged in bankruptcy.
4
4
plaintiffs, relied upon any representations Ocwen may have made
concerning its calculations.
Moreover, plaintiffs allege
discrepancies between their income calculations and those made
by Ocwen, but they make no similarly specific allegations
concerning the parties’ calculations of plaintiffs’ debts.
Finally, plaintiffs allege:
If [their] mortgage was modified to re-amortize over
30 years, at an interest rate of 4%, their total
monthly mortgage payment, including principal,
interest, taxes and insurance would be approximately
$2,224. Resulting in a Debt to Income ratio of about
33%.
Plaintiffs have sufficient income and it appears that
they could pay their loan under a commercially
reasonable modification.
First Am. Compl. ¶¶ 27-28.
On October 16, 2013, plaintiffs’ attorney informed Ocwen
that he represented plaintiffs with regard to their mortgage
debt and that any further communications concerning that debt
should be addressed to him.5
After receiving the letter of
representation described above, Ocwen sent plaintiffs two
letters, one in October 2013, the other in December 2013.
In addition, plaintiffs’ attorney challenged three
elements of the $354,759.03 mortgage obligation Ocwen identified
as subject to recovery through foreclosure: (1) $26,696.11 in
interest: (2) $15,778.15 in escrow advances; and (3) a “suspense
balance” of $1,529.83.
5
5
With regard to Altisource’s connection to the events giving
rise to plaintiffs’ claims, the introduction to their amended
complaint alleges that
[t]he Note and Mortgage in question appear[ ] to have
been transferred to Altisource Residential Corporation
on or about January 17, 2014 when an Assignment of
Mortgage from Bank of America, NA to “Christina Trust,
A Division Of Wilmington Savings Fund Society, FSB,
Not In Its Individual Capacity But As Trustee Of ARLP
Trust 2,” was filed in the Rockingham County Registry
of Deeds at Book 5508, Page 0818.
First Am. Compl. ¶ 3.
The amended complaint’s factual
allegations mention Altisource three more times:
Defendant Altisource, through its agents, or
predecessors in interest have wrongfully denied the
plaintiffs’ modification.
. . . .
Ocwen acts with the [assent] of Altisource, for its
benefit, and subject to its control.
All Counts apply to Ocwen and to Altisource through
the theory of agency.
Id. ¶¶ 30, 39, 40.
That is, plaintiffs’ sole theory of
liability against Altisource is vicarious liability for the
actions of Ocwen.
Based upon the foregoing, plaintiffs assert that defendants
are liable to them for: negligent misrepresentation (Count I);
negligence (Count II); breach of the implied covenant of good
faith and fair dealing (Count III); estoppel (Count IV);
violation of the federal Fair Debt Collection Practices Act
6
(Counts V, VI, and VII); violation of New Hampshire’s Unfair,
Deceptive or Unreasonable Collection Practices Act (Count VIII);
violation of New Hampshire’s Consumer Protection Act (Counts IX
and X); and negligent infliction of emotional distress (Count
XI).6
III. Discussion
Defendants move to dismiss on a variety of grounds.
First, they argue that plaintiffs have failed to allege
sufficient facts to connect Altisource to this matter.
Next,
they contend that plaintiffs have brought claims arising from
things that took place during the course of the parties’
settlement negotiations, which is impermissible under the rules
of evidence.
Then, they address plaintiffs’ 11 counts
individually, identifying ways in which each of them fails to
state a claim upon which relief can be granted.
In the
discussion that follows, the court begins with defendants’ two
global arguments and then considers defendants arguments against
each of plaintiffs’ theories of recovery.
Plaintiffs’ first amended complaint also includes a count
labeled “Standing,” see doc. no. 20, at 18, but that “claim” was
dismissed, sua sponte, in the order granting plaintiffs’ motion
to amend, see doc. no. 22, at 4.
6
7
A. Altisource
Defendants first argue that plaintiffs have not adequately
alleged facts to support any theory of liability against
Altisource.
The court does not agree.
To be sure, plaintiffs have not alleged sufficient facts to
support any claim for direct liability against Altisource, nor
have they attempted to do so.
While questions concerning
Altisource’s relationship with Ocwen remain subject to
litigation on summary judgment and/or at trial, plaintiffs
adequately allege that: (1) by virtue of the January 2014
assignment, Altisource became their mortgagee; and (2) Ocwen
serviced their mortgage for Altisource.
That is sufficient to
allege an agency relationship between Ocwen and Altisource that
could make Altisource vicariously liable for actions undertaken
by Ocwen during the course of servicing plaintiffs’ mortgage.
Thus, Altisource is not entitled to a blanket dismissal of
plaintiffs’ claims against it.
B. Rules of Evidence
Next, defendants argue that all the claims against them
should be dismissed because: (1) plaintiffs originally filed
this action in November 2013, and based their claims exclusively
upon conduct by its former mortgagee, Bank of America; (2)
plaintiffs’ September 2014 amended complaint is based upon
conduct by Ocwen that took place after this suit was first
8
filed, and in the context of negotiations to settle the case;
and (3) the rules of evidence (both federal and state), bar the
introduction of evidence from settlement negotiation which,
necessarily bars plaintiffs from basing legal claims on things
that happened during the course of settlement negotiations.
That argument, asserted without the benefit of any legal
authority, is not persuasive.
A motion to dismiss tests the adequacy of a plaintiff’s
complaint.
See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974);
Guerra-Delgado v. Popular, 774 F.3d 776, 780 (1st Cir. 2014).
Defendants’ argument does not test the adequacy of plaintiffs’
amended complaint, but rather, is premised upon its own factual
allegations concerning settlement negotiations between
themselves and plaintiffs.
If this case should happen to reach
summary judgment or trial, then defendants are, of course, free
to challenge the admissibility of various items of evidence on
which plaintiffs may attempt to rely.
But at this stage in the
proceedings, the rules of evidence provide no basis for
dismissing plaintiffs’ claims.
C. Count I
Count I is plaintiffs’ claim that defendants are liable to
them for negligent misrepresentation because Ocwen told them
that their “debt to income ratio exceeded the percentage
necessary and would create further hardship.”
9
First Am. Compl.
¶ 45.
That statement was false, plaintiffs contend, because
they “discharged in bankruptcy their mortgage and other debts,”
id. ¶ 46, and, as a consequence, “[u]pon information and belief
Defendant Ocwen inappropriately included the Plaintiff[s’]
discharged debt in [its] calculations,” id. ¶ 47.
Plaintiffs do
not, however, allege: (1) any specific discharged debt that
Ocwen inappropriately included in its calculations;7 or (2) the
effect that resulted from including allegedly discharged debts
in the calculation of their debt-to-income ratio.
Ocwen is
entitled to dismissal of Count I because plaintiffs’ complaint
does not adequately allege that they ever relied upon Ocwen’s
alleged misrepresentation of their debt-to-income ratio.
Under the common law of New Hampshire, the elements of a
claim for negligent misrepresentation “are a negligent
misrepresentation of a material fact by the defendant and
justifiable reliance by the plaintiff.”
Wyle v. Lees, 162 N.H.
406, 413 (2011) (citing Snierson v. Scruton, 145 N.H. 73, 78
(2000)).
Moreover, “[i]t is the duty of one who volunteers
information to another not having equal knowledge, with the
intention that he will act upon it, to exercise reasonable care
Nor have plaintiffs explained how their mortgage debt
could possibly have been included in Ocwen’s calculation of
their debt-to-income ratio.
7
10
to verify the truth of his statements before making them.”
Wyle, 162 N.H. at 413.
The principal problem with plaintiffs’ negligentmisrepresentation claim is that they allege no facts concerning
either action that Ocwen intended for them to take (or refrain
from), or action that they actually took (or refrained from), in
reliance upon the only statement alleged in Count I, i.e.,
Ocwen’s statement about their debt-to-income ratio.
Absent at
least some direct or inferential factual allegation concerning
the reliance element of plaintiffs’ negligent-misrepresentation
claim, Count I does not state a claim upon which relief can be
granted against Ocwen.
See Feingold v. John Hancock Life Ins.
Co. (USA), 753 F.3d 55, 60 (1st Cir. 2014).
And absent a
sufficient allegation of Ocwen’s direct liability, plaintiffs
have necessarily failed to state a claim for vicarious liability
against Altisource.
Thus, both defendants are entitled to
dismissal of Count I.
See id.
Furthermore, while plaintiffs cite the rule that those with
greater knowledge have a duty to verify the truth of statements
they make to those with lesser knowledge, see First Am. Compl. ¶
43, they allege no facts to support the proposition that they
had less knowledge than Ocwen had concerning the subject matter
of the statement at issue, which is the amount of their income
11
and the effect of their bankruptcy discharge on the amount of
their debts.
D. Count II
Count II is plaintiffs’ claim that defendants are liable to
them in negligence for engaging in essentially the same conduct
that underlies Count I.
id. ¶¶ 54-56.
Compare First Am. Compl. ¶¶ 45-47 with
Plaintiffs characterize that conduct as making
“misrepresentations and omissions regarding and throughout the
modification process.”
Id. ¶ 53.
Defendants are entitled to
dismissal of Count II because plaintiffs do not adequately
identify a duty that Ocwen owed them.
The New Hampshire Supreme Court has recently described the
elements of a common-law negligence claim:
To recover for negligence, the plaintiff must
demonstrate that the defendant had a duty to the
plaintiff, that [it] breached that duty, and that the
breach proximately caused injury to the plaintiff.
Pesaturo v. Kinne, 161 N.H. 550, 557, 20 A.3d 284
(2011). Absent the existence of a duty, the defendant
cannot be liable for negligence. Carignan v. N.H.
Int’l Speedway, 151 N.H. 409, 412, 858 A.2d 536
(2004).
England v. Brianas, 166 N.H. 369, 371 (2014).
“Whether a duty
exists in a particular case is a question of law.”
Id.
In a case involving claims against “a number of entities
involved in the origination, servicing, and eventual foreclosure
of [a] mortgage loan,” Moore v. Mort. Elec. Reg. Sys., Inc., 848
12
F. Supp. 2d 107, 113 (D.N.H. 2012), Judge Laplante had this to
say with respect to the plaintiffs’ negligence claim:
[U]nder New Hampshire law, the relationship between a
lender and borrower is contractual in nature, Ahrendt
v. Granite Bank, 144 N.H. 308, 311, 740 A.2d 1058
(1999), and . . . the existence of such a contractual
relationship typically prohibits recovery in tort, see
Wyle v. Lees, 162 N.H. 406, 409–10, 33 A.3d 1187
(2011). But New Hampshire law also recognizes that a
contracting party may be “owed an independent duty of
care outside the terms of the contract.” Id. at 410,
33 A.3d 1187. Thus, the New Hampshire Supreme Court
has concluded that a lender owes a borrower a duty not
to disburse its loan funds without authorization, Lash
v. Cheshire Cnty. Sav. Bank, Inc., 124 N.H. 435, 438–
39, 474 A.2d 980 (1984), and that a mortgagee, in its
role as seller at a foreclosure sale, owes a duty to
the mortgagor “to obtain a fair and reasonable price
under the circumstances.” Murphy v. Fin. Dev. Corp.,
126 N.H. 536, 541, 495 A.2d 1245 (1985).
Where the existence of such a duty is claimed,
though, “[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, 561 A.2d
1053 (1989).
Moore, 848 F. Supp. 2d at 133.
Here, the duty on which Count II rests is “an affirmative
duty to act as a reasonably prudent person would [which]
includes a duty to treat the Plaintiffs in good faith while
following all State and Federal Consumer Protection Laws and to
negotiate in a commercially reasonable manner.”
Compl. ¶ 52.
First Am.
Like the plaintiffs in Moore, who alleged that the
defendants, including several mortgage servicers, “owed them a
13
generalized ‘duty to act with reasonable care,’” Moore, 848 F.
Supp. 2d at 132, plaintiffs in this case have failed to allege
that Ocwen voluntarily assumed any duties “beyond those
traditionally associated with the normal role of a money
lender.”
Id. at 133.
Thus, Count II does not state a
negligence claim upon which relief can be granted against either
Ocwen or Altisource, which entitles both defendants to dismissal
of Count II.
E. Count III
Count III is plaintiffs’ claim that Ocwen breached the
covenant of good faith and fair dealing implied into its “verbal
agreement [with them] to seek [a] mutually beneficial and
commercially reasonable . . . mortgage workout resolution.”
First Am. Compl. ¶¶ 62-63.
Plaintiffs further allege that
“[t]he common purpose and justified expectation in this instance
was to avoid foreclosure to the benefit of the parties and
arrive at a reasonable alternative mutually beneficial to all
parties,” id. ¶ 65, and that Ocwen breached the implied covenant
“[b]y keeping the Plaintiffs uninformed of the specific details
of their modification review,” id. ¶ 67(a); and “[b]y wrongfully
denying the Plaintiffs’ modification application,” id. ¶ 67(b).
Defendants are entitled to dismissal of Count III because
plaintiffs have not adequately alleged any conduct by Ocwen that
breached the implied covenant of good faith and fair dealing.
14
As defendants point out, and plaintiffs do not dispute,
under New Hampshire law, “[a] necessary prerequisite to a claim
for breach of the implied covenant of good faith and fair
dealing is a contract between the parties.”
Moore, 848 F. Supp.
2d at 127; see also J&M Lumber & Constr. Co. v. Smyjunas, 161
N.H. 714, 724 (2011).
Unlike the plaintiffs in Moore, who
relied upon their mortgage as the contract underlying a claim
for breach of the covenant of good faith and fair dealing
against their mortgagee, plaintiffs in this case rely upon a
purported agreement between themselves and Ocwen, which was the
servicer of their mortgage.
In the “Factual Allegations” section of plaintiffs’ amended
complaint, they say nothing about an agreement between
themselves and Ocwen.
In Count III, however, plaintiffs allege:
Defendant Ocwen offered and the Plaintiffs accepted an
offer to work out [a] resolution with the mortgage.
The parties therefore had a verbal agreement [to] seek
[a] mutually beneficial and commercially reasonable
resolution.
The parties therefore had a verbal agreement for [a]
mortgage workout resolution.
First Am. Compl. ¶¶ 61-63.
Presumably in response to defendants’ argument that the
foregoing allegations are insufficient to plead the existence of
a contract, plaintiffs now describe the contract underlying
their breach-of-covenant claim slightly differently.
15
Specifically, they refer to a document from Ocwen’s web site
titled “Request for Mortgage Assistance (RMA)/Hardship
Affidavit” (“RMA”), which includes the following language:
NOTE TO BORROWERS WITH A FORECLUSURE SALE SCHEDULED IN
THE NEXT 37 DAYS:
If we receive your Complete Application for
modification* at least 7 business days before a
scheduled foreclosure sale date, we will not complete
the foreclosure action until we review and decision
your application.
* This ONLY applies if you wish to keep your property.
Foreclosure sales scheduled in the next 37 days cannot
be stopped if you wish to give back or sell your
property.
Pls.’ Obj. (doc. no. 24), Attach. 6, at *2.8
According to
plaintiffs:
[Their] completed application constitutes
acceptance of this offer. The Defendants[’]
consideration is the delayed foreclosure sale date and
the Plaintiffs’ consideration is sharing personal and
highly sensitive information with the Defendants.
There was clearly a meeting of the minds because when
the Defendants received the form, they delayed [the]
foreclosure sale as agreed upon.
Pls.’ Obj. 13.
Assuming, for the sake of argument, that there
was an agreement between the parties along the lines described
in the RMA, Count III faces an insurmountable problem:
Given the general similarity between the verbal promise
alleged in the amended complaint and the agreement described in
the RMA, the court will presume, favorably to plaintiffs, that
the RMA is incorporated into the amended complaint and, as a
consequence, is properly before the court. See Foley, 772 F.3d
at 72.
8
16
plaintiffs’ failure to allege any conduct by Ocwen of the sort
proscribed by the implied covenant of good faith and fair
dealing.
In New Hampshire, the implied covenant of good faith and
fair dealing applies to “three distinct categories of contract
cases: those dealing with standards of conduct in contract
formation, [those dealing] with termination of at-will
employment contracts, and [those dealing] with limits on
discretion in contractual performance.”
Genicom Corp., 132 N.H. 133, 139 (1989).
the third category.
Centronics Corp. v.
This case falls within
Within that category, the rule is that
under an agreement that appears by word or silence to
invest one party with a degree of discretion in
performance sufficient to deprive another party of a
substantial proportion of the agreement’s value, the
parties’ intent to be bound by an enforceable contract
raises an implied obligation of good faith to observe
reasonable limits in exercising that discretion,
consistent with the parties’ purpose or purposes in
contracting.
Id. at 143.
As a preliminary matter, the contract described in the RMA
does not appear to have given Ocwen sufficient discretion to
deprive plaintiffs of a substantial proportion of the
agreement’s value.
For plaintiffs, the agreement’s value was a
delay of their foreclosure until Ocwen reviewed their
application for a mortgage modification and rendered a decision
on that application.
But, even if the contract did vest Ocwen
17
with discretion enough to deprive plaintiffs of that value, they
themselves allege that Ocwen did, in fact, “delay[ ] [the]
foreclosure sale as agreed upon,” and they further allege that
when they filed their amended complaint, several months after
Ocwen rendered a decision on their application for a
modification, their mortgage was still in foreclosure, which
means that the foreclosure sale was still on hold.
If Ocwen
fully performed its obligations under the agreement on which
plaintiffs base their claim, they cannot also claim that Ocwen
breached the implied covenant of good faith and fair dealing by
exercising its contractual discretion in a way that deprived
them of the value of their agreement.
Accordingly, as to the
covenant of good faith and fair dealing, plaintiffs have failed
to state a claim upon which relief can be granted, which
entitles both defendants to dismissal of Count III.
F. Count IV
Count IV is titled “Estoppel.”
In it, plaintiffs recite
the elements of both promissory estoppel and equitable estoppel.
Plaintiffs assert their claim(s) this way:
Defendants made intentional or negligent
[mis]representations of material facts: that if the
Plaintiffs provided the required documentation as part
of their modification application that their
modification application would be properly considered.
Plaintiffs remained unaware of the truth of the
matters misrepresented by the defendants and
reasonably relied on the representation that if they
18
continued to comply with the Defendants’ requests
throughout the modification process they would avoid
foreclosure.
Plaintiffs were induced to rely upon these
representations and suffered damages in the form of
additional late payments, added costs to their loan,
and legal and advocate fees because of their reliance
on Defendants’ promise that their loan modification
would be properly considered.
First Am. Compl. ¶¶ 72-74.
Under the theory of promissory estoppel, “a promise
reasonably understood as intended to induce action is
enforceable by one who relies upon it to his detriment or the
benefit of the promisor.”
Panto v. Moore Bus. Forms, Inc., 130
N.H. 730, 739 (1988) (citing Restatement (Second) of Contracts §
90 (1981)).
Furthermore, “application of promissory estoppel is
appropriate only in the absence of an express agreement.”
Great
Lakes Aircraft Co. v. City of Claremont, 135 N.H. 270, 290
(1992).
“Equitable estoppel, on the other hand, does not
involve a promise [but instead] serves to ‘forbid one to speak
against his own act, representations, or commitments to the
injury of one to whom they were directed and who reasonably
relied thereon.’”
Id. (quoting 28 Am. Jur. 2d Estoppel and
Waiver § 28, at 629).
As with the breach-of-covenant claim asserted in Count III,
plaintiffs have recast the promise on which Count IV is based.
They shift from: (1) a promise by Ocwen to properly consider
19
their application for a modification if they submitted all the
required documentation; to (2) a promise by Ocwen to forestall
foreclosure until it rendered a decision on plaintiffs’
application for a modification.
That move undermines a claim
for either promissory estoppel or equitable estoppel.
“[P]romissory estoppel is appropriate only in the absence
of an express agreement.”
(emphasis added).
Great Lakes, 135 N.H. at 290
But in Section V of their objection,
plaintiffs argue that the promise on which they base Count IV
was part of an express agreement.
12.
See Pls.’ Obj. (doc. no. 24)
Thus, plaintiffs have failed to state a claim for
promissory estoppel.
Even if the promise upon which plaintiffs
base their estoppel claim was not part of an express agreement,
plaintiffs also allege that Ocwen kept its promise to forestall
foreclosure, so there is nothing left of that promise for the
court to enforce, and the whole point of promissory estoppel is
to enforce promises that stand beyond the reach of a claim for
breach of contract.
See Great Lakes, 135 N.H. at 290.
Turning
to equitable estoppel, and presuming that plaintiffs are
actually asserting a claim under that theory, that claim fails
as a matter of law because “[e]quitable estoppel . . . does not
involve a promise,” Great Lakes, 135 N.H. at 290, and Count IV
is based upon nothing more than the promise described in Ocwen’s
RMA.
Because both of the estoppel claims asserted in Count IV
20
are based upon an express promise drawn from Ocwen’s RMA,
plaintiffs have failed to state a claim for either promissory
estoppel or equitable estoppel against either Ocwen or
Altisource.
Thus, they are entitled to dismissal of Count IV.
G. Counts V-VII
In Counts V, VI, and VII, plaintiffs assert claims arising
under the federal Fair Debt Collection Practices Act (“FDCPA”),
15 U.S.C. § 1692.
Plaintiffs seeking to recover under the FDCPA
must show that
(1) they have been the object of collection activity
arising from a consumer debt; (2) the defendant
attempting to collect the debt qualifies as a ‘debt
collector’ under the Act; and (3) the defendant has
engaged in a prohibited act or has failed to perform a
requirement imposed by the [Act].
Moore, 848 F. Supp. 2d at 124 (quoting Beadle v. Haughey, No.
Civ.04-272-SM, 2005 WL 300060, at *7 (D.N.H. Feb. 9, 2005);
citing Gilroy v. Ameriquest Mortg. Co., 632 F. Supp. 2d 132,
134–37 (D.N.H. 2009)).
Rather than dealing with plaintiffs’
FDCPA claims count-by-count, the court organizes this section in
terms of the various subsections of § 1692 that Ocwen is alleged
to have violated.
1. Section 1692c
Plaintiffs claim that Ocwen violated 15 U.S.C. §
1692c(a)(2) by contacting them in October and December 2013,
after they informed Ocwen that they were represented by counsel.
21
Plaintiffs have failed to state a claim upon which relief can be
granted because they have not adequately alleged that the
letters at issue were sent in connection with debt collection.
The statute on which this claim is based, which is titled
“Communication in connection with debt collection,” provides, in
pertinent part:
Without the prior consent of the consumer given
directly to the debt collector or the express
permission of a court of competent jurisdiction, a
debt collector may not communicate with a consumer in
connection with the collection of any debt –
. . . .
(2) if the debt collector knows the consumer is
represented by an attorney with respect to such
debt and has knowledge of, or can readily
ascertain, such attorney’s name and address,
unless the attorney fails to respond within a
reasonable period of time to a communication from
the debt collector or unless the attorney
consents to direct communication with the
consumer.
15 U.S.C. § 1692c(a)(2) (emphasis added).
The October letter from Ocwen to plaintiffs was a response
to plaintiffs’ request for Ocwen to perform research regarding
their loan.
The letter concludes with the following notation:
This communication is from a debt collector attempting
to collect a debt; any information obtained will be
used for that purpose. However, if the debt is in
active bankruptcy or has been discharged through
bankruptcy, this communication is not intended as and
does not constitute an attempt to collect a debt.
22
Pls.’ Obj. (doc. no. 24), Attach. 2, at 1 (emphasis omitted).
Notwithstanding the first sentence of Ocwen’s disclaimer,
plaintiffs have failed to allege that the October letter was a
communication “in connection with the collection of [a] debt,”
15 U.S.C. § 1692c(a)(2), which is a necessary prerequisite for
liability under § 1692c(a)(2).
If the research plaintiffs requested concerned their
obligations under the mortgage lien against their property,
Ocwen’s letter could not have been connected to the collection
of a debt because a mortgage lien is not a debt.
As Judge
DiClerico recently explained:
Following a discharge in bankruptcy, an automatic
injunction precludes collection of discharged debts.
In re Canning, 706 F.3d 64, 69 (1st Cir. 2013).
Despite the broad scope of the discharge injunction, a
secured creditor is not barred from “recovering on
valid prepetition liens, which, unless modified or
avoided, ride through bankruptcy unaffected and are
enforceable in accordance with state law.” Id.
Worrall v. Fed. Nat’l Mortg. Ass’n, No. 13-cv-330-JD, 2013 WL
6095119, at *6 (D.N.H. Nov. 20, 2013) (emphasis added).
In
other words:
A bankruptcy discharge relieves the debtor of
personal liability for pre-petition debts. Absent
avoidance or modification, a discharge does not affect
a secured creditor’s lien in its collateral; the lien
survives and is enforceable after the bankruptcy
proceeding, or after obtaining relief from the
automatic stay, in accordance with state law. In re
Canning, 442 B.R. [165,] 170 [(Bankr. D. Me. 2011)];
In re Pratt, 462 F.3d [14,] 17 [(1st Cir. 2006)].
Therefore, a mortgagee may lawfully pursue its in rem
23
rights through foreclosure after a discharge has
entered, or after obtaining relief from the automatic
stay, but may not pursue a discharged debtor for
repayment of the note.
Collins v. Wealthbridge Mortg. Corp. (In re Collins), 474 B.R.
317, 320 (Bankr. D. Me. 2012) (emphasis in the original).
If,
on the other hand, the research plaintiffs requested concerned
debts that were discharged in bankruptcy, the disclaimer that
concludes the October letter makes clear that the letter was not
an attempt to collect those debts.
Either way, the October
letter was not connected to the collection of a debt, which
entitles defendants to dismissal of plaintiffs’ § 1692c(a)(2)
claim to the extent that claim is based upon the October letter.
The December letter, which also appears to have been a
response to a communication from plaintiffs, informed them that
Ocwen was assigning a “Relationship Manager” to “assist [them]
in identifying solutions for [their] mortgage questions.”
Obj. (doc. no. 24), Attach. 3.
Pls.’
Like the October letter, the
December 2013 bears a disclaimer:
Notice Regarding Bankruptcy: Please be advised that .
. . if you have received an Order of Discharge from a
Bankruptcy Court, this letter is in no way an attempt
to collect either a pre-petition, post petition or
discharged debt. . . . If you have received an Order
of Discharge in a Chapter 7 case, any action taken by
us is for the sole purpose of protecting our lien
interest in the underlying mortgaged property and is
not an attempt to recover any amounts from you
personally.
24
Id. (emphasis omitted).
Because plaintiffs’ mortgage was not a
debt, see Worrall, 2013 WL 6095119, at *6; In re Collins, 474
B.R. at 320, Ocwen’s December letter, which was all about
describing Ocwen’s procedure for helping plaintiff find
solutions for their mortgage questions, was not a communication
“in connection with the collection of [a] debt,” 15 U.S.C. §
1692c(a)(2).
Beyond that, Ocwen expressly disclaimed any intent
to collect a debt from plaintiffs.
So, as with the portion of
plaintiffs’ § 1692c(a)(2) claim that is based on the October
letter, the portion of that claim that is based on the December
letter must also be dismissed for failure to state a claim upon
which relief can be granted.
Thus, plaintiffs’ FDCPA claim
based on § 1692c is dismissed in its entirety.
2. Section 1692e
Plaintiffs claim that defendants are liable to them because
Ocwen violated four separate provisions of 15 U.S.C. § 1692e.
Specifically, they assert that Ocwen violated §§ 1692e(2), (5),
and (10) by attempting to collect debts that were discharged in
bankruptcy and violated § 1692e(11) by sending the two letters
that serve as the factual basis for their claim under §
1692c(a)(2).
Again, plaintiffs’ amended complaint falls short
of the mark.
15 U.S.C. § 1692e, which is titled “False or misleading
representations,” provides, in pertinent part:
25
A debt collector may not use any false, deceptive,
or misleading representation or means in connection
with the collection of any debt. Without limiting the
general application of the foregoing, the following
conduct is a violation of this section:
. . . .
(2) The false representation of –
(A) the character, amount, or legal status
of any debt; or
. . . .
(5) The threat to take any action that cannot
legally be taken or that is not intended to be taken.
. . . .
(10) The use of any false representation or
deceptive means to collect any debt or to obtain
information concerning a consumer.
(11) The failure to disclose in the initial
written communication with the consumer and, in
addition, if the initial communication with the
consumer is oral, in that initial oral
communication, that the debt collector is
attempting to collect a debt and that any
information obtained will be used for that
purpose, and the failure to disclose in
subsequent communications that the communication
is from a debt collector . . .
Id.
The Seventh Circuit has held that it is a violation of §
1692e(2)(A) for a creditor to attempt to collect a debt that has
been discharged in bankruptcy.
See Ross v. RJM Acquisitions
Funding LLC, 480 F.3d 493, 495 (7th Cir. 2007).
But plaintiffs
do not adequately allege that Ocwen has attempted to collect a
26
debt that was discharged in bankruptcy.
As the court has
already explained, a bankruptcy discharge of a borrower’s debt
on a promissory note does not preclude the borrower’s mortgagee
from attempting to recover the collateral that secured the
borrower’s promise to repay his or her lender.
See Worrall,
2013 WL 6095119, at *6; In re Collins, 474 B.R. at 320.
Here, plaintiffs allege that their “mortgage debt was
discharged in bankruptcy.”
added).
First Am. Compl. ¶ 22 (emphasis
But they do not allege that their mortgage was modified
or avoided in such a way that it was extinguished by their
bankruptcy discharge.
And, they do not allege that Ocwen has
attempted to collect any debt Ocwen once owed to the holder of
its promissory note.
Because plaintiffs allege only that Ocwen
has attempted to enforce Altisource’s rights under the mortgage
against the collateral that secured repayment of their loan,
they have not adequately alleged any attempt by Ocwen to collect
a debt that has been discharged in bankruptcy.
Thus, as to §§
1692e(2), (5), and (10), plaintiffs have failed to state a claim
upon which relief can be granted against Ocwen or Altisource.
15 U.S.C. § 1692e(11) makes it unlawful for a debt
collector to fail to disclose, in a communication to a debtor,
that the communication is from a debt collector.
But, as with §
1692c(a)(2), the conduct prohibited by § 1692e must have
occurred “in connection with the collection of [a] debt,” id.
27
Because the court has already determined plaintiffs have failed
to allege that either the October letter or the December letter
was sent in connection with debt collection, plaintiffs’ §
1692e(11) claim also fails, which entitles defendants to its
dismissal.
3. Section 1692f
Finally, plaintiffs assert that Ocwen violated 15 U.S.C. §
1692f(1) because
it appears that the defendants sought to collect
interest, late charges, and other amounts which were
discharged in bankruptcy leading to a needless denial
of modification efforts which would both save the
plaintiffs[’] home, AND save both Ocwen and Altisource
the needless expense of foreclosure, especially where
no deficiency judgment may be had as the debt was
discharged in Bankruptcy.
First Am. Compl. ¶ 95.
The statute on which this claim is
based, which is titled “Unfair practices,” provides, in
pertinent part:
A debt collector may not use unfair or
unconscionable means to collect or attempt to collect
any debt. Without limiting the general application of
the foregoing, the following conduct is a violation of
this section:
(1) The collection of any amount (including any
interest, fee, charge, or expense incidental to
the principal obligation) unless such amount is
expressly authorized by the agreement creating
the debt or permitted by law.
15 U.S.C. § 1692f.
28
As the court has already explained, enforcing a lien on a
mortgaged property that survives a bankruptcy discharge is not
an attempt to collect a debt.
Moreover, based upon Worrall, In
re Collins, and defendants’ failure to allege any factual basis
for concluding that their mortgage was discharged in bankruptcy,
Ocwen is permitted by law to foreclose on plaintiffs’ mortgage.
And, plaintiffs have not alleged that the interest, late
charges, and other fees on which they base their claim were not
expressly authorized by their mortgage.
Absent an attempt to
collect an unauthorized debt, there can be no violation of §
1692f(1), which entitles both defendants to dismissal of
plaintiffs’ claim under that statute.
4. Summary
For the reasons detailed above, none of plaintiffs’ FDCPA
claims survive scrutiny under Rule 12(b)(6).
Thus, Counts V-VII
are dismissed.
I. Count VIII
Count VIII arises under New Hampshire’s Unfair, Deceptive,
or Unreasonable Collection Practices Act (“UDUCPA”), N.H. Rev.
Stat. Ann. (“RSA”) ch. 358-C, which is the “state-law analog” to
the federal FDCPA, Moore, 848 F. Supp. 2d at 123.
“Given the
dearth of case law on the UDUCPA, . . . FDCPA cases are . . .
useful in interpreting the UDUCPA ‘because [the FDCPA] contains
29
provisions similar to the [UDUCPA].’”
Id. at 125 n.10 (quoting
Gilroy, 632 F. Supp. 2d at 136).
Plaintiffs allege that Ocwen: (1) violated RSA 358-C:3, V,
by sending them letters in October and December 2013, after they
had directed Ocwen to communicate with them only through their
attorney; (2) violated RSA 358-C:3, VII; and (3) violated RSA
358-C:3, X, by attempting to collect “interest, late charges,
and other amounts which were discharged in bankruptcy,” First
Am. Compl. ¶ 105.
Defendants are entitled to dismissal of Count
VIII because they have not alleged that any of the conduct for
which they seek to hold defendants liable involved actual or
attempted debt collection.
RSA 358-C:3 prohibits a variety of acts when those acts are
committed by a debt collector in the process of collecting or
attempting to collect a debt.
And, the court recognizes that
there are cases in which judges in this district have rejected
defendants’ attempts to avoid liability under RSA 358-C:3 on
grounds that foreclosure does not qualify as debt collection for
purposes of the UDUCPA.
See, e.g., Pruden v. CitiMortgage,
Inc., No. 12-cv-452-LM, 2014 WL 2142155, at *8 (D.N.H. May 23,
2014); Moore, 848 F. Supp. 2d at 125.
But in both of those
cases, the defendants engaged in two intermingled activities,
trying to collect on a promissory note and attempting to
foreclose on the mortgage securing repayment of the note.
30
Here, by contrast, Ocwen did not begin servicing
plaintiffs’ mortgage until three months after the debt they owed
on their promissory note had been discharged in bankruptcy.
Thus, there was never any debt for Ocwen to attempt to collect,
only a mortgage to foreclose.
Absent any authoritative
construction of the UDUCPA to the contrary, and in light of the
strong parallels between the UDUCPA and the FDCPA, this court is
persuaded by Judge McAuliffe’s opinion in Beadle, 2005 WL
300060, at *3 (“Nearly every court that has addressed the
question has held that foreclosing on a mortgage is not debt
collection activity for purposes of the FDCPA.”), and concludes
that under the circumstances of this case, foreclosing on a
mortgage that has survived bankruptcy is not debt-collection
activity for purposes of the UDUCPA.
Absent any allegation of
debt-collection activity, plaintiffs’ claims under RSA chapter
358-C fail, which entitles defendants to dismissal of Count
VIII.
J. Count IX
Count IX is a claim under the New Hampshire Consumer
Protection Act (“CPA”), RSA ch. 358-A.
That claim is based upon
the following provision from the UDUCPA: “Any violation of the
provisions of this chapter shall also constitute an unfair and
deceptive act or practice within the meaning of RSA 358-A:2.”
RSA 358-C:4, VI.
Because plaintiffs have failed to state a
31
claim under the UDUCPA, they necessarily fail to state a
derivative CPA claim arising under RSA 358-C:4, IV.
Thus,
defendants are entitled to dismissal of Count IX.
K. Count X
Count X is a free-standing CPA claim in which plaintiffs
assert that Ocwen committed the prohibited acts of: (1)
“[r]efusing to consider reasonable foreclosure alternatives,”
First Am. Compl. ¶ 116(a); (2) “[m]isrepresenting Administrative
Remedies prior to Foreclosure,” id. ¶ 116(b); and (3)
“[i]mproperly holding up or denying Plaintiffs’ several
modification applications,” id. ¶ 116(c).
Defendants are
entitled to dismissal of Count X because all the conduct
underlying plaintiffs’ CPA claims took place in the course of
exempt transactions.
The CPA provides that “[t]rade or commerce that is subject
to the jurisdiction of the bank commissioner” is exempt from the
CPA.
RSA 358-A:3, I.
As a mortgage servicer, Ocwen is “subject
to the jurisdiction of the New Hampshire Bank Commissioner
pursuant to N.H. Rev. Stat. Ann § 397-B.”
Aubertin v. Fairbanks
Capital Corp., No. Civ. 04-358-PB, 2005 WL 331351, at *2 (D.N.H.
Feb. 11, 2005).
Attached to their objection to defendants’
motion to dismiss, plaintiffs have submitted correspondence both
to and from the Banking Department concerning a complaint they
filed with the Department against Ocwen.
32
And, according to a
letter to plaintiffs from the Department, their complaint
remains open.
See Pls.’ Obj. (doc. no. 24), Attach. 7, at 2.
Notwithstanding plaintiffs’ argument that the Banking Department
gave them “implied permission,” Pls.’ Obj. 21, to continue this
litigation, the Banking Department does not have the power to
suspend the exempt-transactions provision of the CPA nor has it
ceded its jurisdiction over plaintiffs’ complaint about Ocwen.
Because Count X arises from transactions in trade or commerce
that is subject to the jurisdiction of the bank commissioner,
the claims stated in Count X are barred by RSA 358-A:3, I, which
entitles defendants to dismissal.
L. Count XI
Count XI is plaintiffs’ claim that defendants are liable to
them for negligent infliction of emotional distress.
That claim
is based upon plaintiffs’ allegations that defendants engaged in
“extreme and outrageous conduct in failing to deal [with them]
in a commercially reasonable manner, and by mishandling [their]
modification, and then by finally continuing to keep [their]
property in foreclosure.”
First Am. Compl. ¶ 120.
As a result
of that conduct, plaintiffs claim to have suffered “loss of
appetite, upset stomach, head ache, sleeplessness, etc.”
Id. ¶
121.
“[A] claim for [negligent infliction of emotional distress],
like any other negligence claim, demands the existence of a duty
33
from the defendant to the plaintiff.”
Moore, 848 F. Supp. 2d at
135 (quoting BK v. N.H. Dep’t of Health & Human Servs., 814 F.
Supp. 2d 59, 72 (D.N.H. 2011)).
The court has ruled that
plaintiffs have failed to state a claim for negligence because
they failed to identify a legally cognizable duty they were owed
by Ocwen.
For this same reason, plaintiffs have also failed to
state a claim for negligent infliction of emotional distress, see
Moore, 848 F. Supp. 2d at 135.
Defendants are therefore entitled
to dismissal of Count XI.
IV. Conclusion
For the reasons detailed above, defendants’ motion to
dismiss, document no. 23, is granted.
The clerk of the court
shall dismiss plaintiffs’ complaint and close the case.
SO ORDERED.
__________________________
Landya McCafferty
United States District Judge
April 7, 2015
cc:
Jessica Suzanne Babine, Esq.
Keith A. Mathews, Esq.
John F. Skinner, III, Esq.
34
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