Frangos v. The Bank of New York Mellon et al

Filing 54

///ORDER granting 30 Motion to Dismiss. So Ordered by Judge Landya B. McCafferty.(gla)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE

Thomas Frangos
v.

Civil No. 16-cv-436-LM
Opinion No. 2017 DNH 232

The Bank of New York Mellon,
as Trustee for the Certificateholders of
CWABS, Inc., Asset Back Certificates,
Series 2005-AB2, et al.
O R D E R
Before the court is a motion to dismiss filed by defendant
Bank of America, N.A. (“Bank of America”).

Plaintiff Thomas

Frangos has brought a claim for misrepresentation against Bank
of America, alleging that it misrepresented the amount due for
one of plaintiff’s monthly mortgage payments.1

Pursuant to Rule

12(b)(6) of the Federal Rules of Civil Procedure, Bank of
America moves to dismiss the claim.

Plaintiff objects.

For the

reasons that follow, Bank of America’s motion to dismiss is
granted.

It is unclear whether plaintiff is also seeking relief
against Bank of America on Counts I and II (injunctive relief),
Count III (invalidity of mortgage), or Count V (declaratory
judgment and request for accounting). Because Bank of America
no longer services the loan, these claims appear to be moot as
to it. For this reason, the court reads the allegations against
Bank of America as limited to a claim for misrepresentation
(Count VI).
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STANDARD OF REVIEW
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)
(internal quotation marks 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.”

Ashcroft v. Iqbal, 556 U.S.

662, 678 (2009).
BACKGROUND
In late April 2005, plaintiff executed a promissory note in
favor of Optima Mortgage Corporation (“Optima”) in exchange for
a loan of $599,000.

The note was secured by a mortgage, which

plaintiff and Frances Frangos, his wife, executed in favor of
Mortgage Electronic Registration Systems, Inc., as nominee for
Optima.

The mortgaged property is located in Portsmouth, New

Hampshire.
In May 2009, Bank of America—then the servicer of the
mortgage loan—sent plaintiff a letter, in which “it stated that

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[p]laintiff owed $4,618.18 for th[e] month of May 2009.”
no. 20 at ¶ 21.

Doc.

According to plaintiff, this statement

regarding the amount owed was a misrepresentation, because “he
in fact owed only $1,773.08.”

Id. at ¶ 74.

Plaintiff further

alleges that he relied on this misrepresentation to his
detriment “because it caused him to believe that the lender
increased the monthly payments by more than $1,000 which he
could not afford to pay.”

Id. at ¶ 75.

As a result, Bank of

America’s misrepresentation allegedly “forced [him] into default
which ultimately resulted in initiation of foreclosure
proceedings.”

Id. at ¶ 76.

He seeks damages for, among other

things, his emotional distress, late fees, property management
fees, and foreclosure costs.
DISCUSSION
Bank of America moves to dismiss the claim for
misrepresentation (Count VI).

Bank of America raises a number

of grounds supporting dismissal, but its argument that the
economic loss doctrine bars the claim is dispositive.
As an initial matter, in his complaint, plaintiff does not
specify whether the claimed misrepresentation was intentional or
negligent.

See doc. no. 20 at 10 of 14.

The court construes

plaintiff’s claim as one for negligent misrepresentation, given
that plaintiff makes no allegation that Bank of America knew the
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statement was false or acted with conscious indifference to its
truth, a necessary element of a claim for intentional
misrepresentation.

See Tessier v. Rockefeller, 162 N.H. 324,

332 (2011) (“The tort of intentional misrepresentation . . .
must be proved by showing that the representation was made with
knowledge of its falsity or with conscious indifference to its
truth . . . .”).
Under New Hampshire law, 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).

Even

if a party sufficiently pleads a claim for negligent
misrepresentation, however, the party may be barred “from
recovering in tort under the economic loss doctrine.”

Julius v.

Wells Fargo Bank, N.A., No. 16-cv-516-JL, 2017 WL 1592379, at *4
(D.N.H. Apr. 28, 2017).
“The economic loss doctrine is a judicially-created
remedies principle that operates generally to preclude
contracting parties from pursuing tort recovery for purely
economic or commercial losses associated with the contract
relationship.”2

Wyle, 162 N.H. at 410 (quotation and internal

Although plaintiff also alleges damages for emotional
distress in relation to his negligent misrepresentation claim,
“plaintiffs cannot recover damages for mental and emotional
2

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quotation marks omitted).

Consequently, “the economic loss

doctrine bars negligent misrepresentation claims in a
traditional borrower-lender contractual relationship.”

Mader v.

Wells Fargo Bank, N.A., No. 16-cv-309-LM, 2017 WL 177619, at *3
(D.N.H. Jan. 17, 2017).

New Hampshire law recognizes two

exceptions to the doctrine: “[t]he first . . . arises when the
alleged negligent misrepresentation induced a contracting party
to enter into the contract,” and the second “applies in limited
circumstances where a negligent misrepresentation is made by a
defendant who is in the business of supplying information.”
Julius, 2017 WL 1592379, at *4-5 (quotation, brackets, and
internal quotation marks omitted).

Importantly, the second

exception covers only a misrepresentation that relates “to a
transaction other than the one that constitutes the subject of
the contract.”

Schaefer v. Indymac Mortg. Servs., 731 F.3d 98,

109 (1st Cir. 2013).
Here, plaintiff’s claim rests on a negligent
misrepresentation allegedly made in the course of performance of
the loan agreement, and therefore falls within the scope of the
economic loss doctrine.

See Dionne v. Fed. Nat’l Mortg. Ass’n,

No. 15-cv-056-LM, 2016 WL 3264344, at *13 (D.N.H. June 14, 2016)

distress in a claim for negligent misrepresentation.”
v. Global Realty, Inc., 124 N.H. 814, 818 (1984).
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Crowley

(economic loss doctrine applied to misrepresentations related to
mortgagee’s and servicer’s “attempts to collect the . . .
mortgage debt”).

Moreover, neither of the exceptions to the

doctrine applies.

The first exception does not apply here,

where plaintiff is alleging that the misrepresentation occurred
in the course of performance of the contract.

And the second

exception cannot apply, because the misrepresentation relates to
a transaction that constitutes the subject of the contract.

See

Schaefer, 731 F.3d at 109.
Plaintiff responds that the economic loss doctrine does not
apply because Bank of America, as the servicer, was not a party
to the loan agreement.

This court has previously considered,

and rejected, this exact argument.

See Bowser v. MTGLQ Inv’rs,

LP, No. 15-cv-154-LM, 2015 WL 4771337, at *2 n.2 (D.N.H. Aug.
11, 2015) (rejecting argument based on lack of contractual
privity because servicer’s duties sufficed to create agency
relationship with lender).

Accordingly, the claim is barred by

the economic loss doctrine, and the court dismisses Count VI of
the complaint.

As a result, plaintiff’s request for attorney’s

fees pursuant to the loan agreement (Count IV) is dismissed to
the extent that it pertains to Bank of America.

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CONCLUSION
For the foregoing reasons, defendant Bank of America,
N.A.’s motion to dismiss (doc. no. 30) is granted.
SO ORDERED.
__________________________
Landya McCafferty
United States District Judge
October 27, 2017
cc:

Counsel of Record

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