Fox et al v. Ocwen Loan Servicing, LLC et al
ORDER denying 5 Motion to Dismiss for Failure to State a Claim; terminating as moot 19 Motion to Exceed Page Limit. So Ordered by Judge Joseph A. DiClerico, Jr.(gla)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Gail Fox and Ralph Wass
Civil No. 17-cv-193-JD
Opinion No. 2017 DNH 147
Ocwen Loan Servicing, LLC
and HSBC Bank USA, N.A., as Trustee
for SG Mortgage Securities Trust 2006-OPT2,
Asset Backed Certificates, Series 2006-OPT2
O R D E R
Gail Fox and Ralph Wass brought suit in state court to
enjoin the foreclosure sale of their home in Goffstown, New
Ocwen Loan Servicing, LLC and HSBC Bank USA, N.A.,
as trustee, removed the case and have moved to dismiss.
Standard of Review
When considering a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6), the court must determine whether the
plaintiff has alleged sufficient facts to support a plausible
claim for relief.
In re Curran, 855 F.3d 19, 25 (1st Cir.
The court accepts the properly pleaded facts as true and
takes inferences from the facts in the light most favorable to
the non-moving party.
67, 77 (1st Cir. 2016).
O’Shea v. UPS Retirement Plan, 837 F.3d
Conclusory allegations and mere
statements of the elements of a cause of action are not
sufficient to avoid dismissal.
Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007).
Ordinarily, a motion to dismiss under Rule 12(b)(6) is
decided based on the allegations in the complaint, along with
documents appended to the complaint.
See Fed. R. Civ. P. 12(d);
Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993).
to that rule allows the court to consider documents that are
referenced in the complaint and documents that are central to
the plaintiffs’ claims.
Claudio-De Leon v. Sistema Univ. Ana G.
Mendez, 775 F.3d 41, 46 (1st Cir. 2014).
The court may also
consider official public documents and matters that are subject
to judicial notice.
Haley v. City of Boston, 657 F.3d 39, 46
(1st Cir. 2011).
Fox and Wass bought the Goffstown property by warranty deed
on June 27, 2006.
They granted a mortgage on the Goffstown
property to Option One Mortgage Corporation in the amount of
$236,000, and the mortgage was recorded on July 24, 2006.1
They allege that Option One sold its mortgage servicing
business, along with all of its mortgages, to American Home
Mortgage Servicing Inc. on April 30, 2008.
Option One then
Although Fox and Wass alleged in the complaint that they did
not sign a mortgage to Option One, and instead signed a mortgage
to Sovereign Bank, they have now retracted those allegations.
changed its name to Sand Canyon Corporation in October of 2008
and did not hold any mortgages by 2009.
Sand Canyon purported
to assign the plaintiffs’ mortgage to HSBC in April of 2010, and
the assignment was recorded on April 28, 2010.
Fox and Wass allege that the assignment of their mortgage
from Sand Canyon to HSBC in 2010 failed because the mortgage had
been sold to American Home Mortgage Servicing in April of 2008.
As a result of the sale, Sand Canyon did not own their mortgage
at the time of the purported assignment to HSBC in 2010.
In May of 2010, Fox and Wass filed for bankruptcy
protection under Chapter 13.
In re Gail M. Fox and Ralph K.
Wass, Case No. 10-12175-JMD (Bankr. D.N.H. May 16, 2010).
their bankruptcy schedules dated May 10, 2010, Fox and Wass
listed American Home Mortgage Servicing, Inc. as the holder of a
claim on the Goffstown property in the amount of $275,141.68.
HSBC filed a proof of claim on the property as a secured
creditor in June of 2010, with the amount of arrearage listed as
$18,760.32 and the amount of the secured claim listed as
American Home Mortgage Servicing was listed as the
entity to receive notices and payment.
Under the terms of their plan, Fox and Wass were to pay
$733.00 each month for forty-five months, which would total
$32,985.00, to cover debts owed, including arrearages owed to
“HSBC/American Home Mortgage Servicing.”
scheduled ongoing payments to “HSBC Bank/American Home Mortgage
Servicing” were to be paid outside of the plan.
Their plan was
confirmed on August 2, 2010.
Fox and Wass did not make the regular mortgage payments
after filing their bankruptcy petition, causing a post-petition
arrearage to accrue.
In response to HSBC’s motion to lift the
stay to allow HSBC to pursue its remedies under the mortgage,
Fox and Wass entered a stipulation with HSBC to pay the postpetition arrearage.
The plan was amended accordingly.
December 4, 2012, the bankruptcy trustee reported that Fox and
Wass had met the requirements for discharge, and they were
granted discharges the next day.
The case was closed on January
Wass filed a second bankruptcy petition under Chapter 13 on
June 14, 2013.
HSBC filed a notice of appearance in the case on
June 24, 2013.
In his plan, Wass stated that the Goffstown
property had a mortgage that was not current with the mortgagee
listed as HSBC.
The plan was confirmed on August 8, 2013, and
listed HSCB as a secured creditor with a mortgage on the
The plan was modified on September 23,
2015, and still showed that the HSBC mortgage was not current.
The trustee moved to dismiss the case because Wass had not made
the payments required under the plan.
July 8, 2016.
The case was dismissed on
In April of 2017, Fox and Wass filed suit against Ocwen and
HSBC in state court to enjoin the foreclosure sale of the
property and seeking the costs of the suit under RSA 361-C:2.
Fox and Wass asked to postpone the foreclosure until the
defendants provided the “‘wet signature’ mortgage documents” to
prove that the mortgage being foreclosed is the mortgage that
Fox and Wass signed.
They also alleged that “the temporary
injunction will provide time to resolve the issue of whether the
respondents can prove they can lawfully foreclose under the
mortgage by a means other than an assignment from Sand Canyon.”
The defendants, Ocwen and HSBC, move to dismiss the claims
on the ground that the plaintiffs, Fox and Wass, are judicially
estopped from challenging the validity of the assignment of the
mortgage held by HSBC by their representations during the
The plaintiffs argue that judicial
estoppel does not apply in this case.
The defendants filed a
reply, and the plaintiffs filed a surreply.2
The plaintiffs moved for leave to exceed the page limit for
their surreply. Under Local Rule 7.1(e)(3), a surreply
memorandum is limited to five pages. The plaintiffs’ surreply
memorandum is five pages. The plaintiffs, who are represented
by counsel, apparently misunderstood the rule to apply to
exhibits they intended to append to the surreply. Because the
memorandum does not exceed the pages allowed, leave is not
“Judicial estoppel is an equitable doctrine that prevents a
litigant from taking a litigation position that is inconsistent
with a litigation position successfully asserted by him in an
earlier phase of the same case or in an earlier court
RFF Family P’ship, LP v. Ross, 814 F.3d 520, 527
(1st Cir. 2016).
Three conditions must be satisfied to impose
(1) the earlier and later litigation
positions of the party to be estopped must be clearly
inconsistent; (2) that party must have persuaded the court to
adopt and rely on the earlier position; and (3) that party must
stand to gain an unfair advantage if the new position is adopted
by the court.4
Id. at 528.
“Courts typically invoke judicial
estoppel when a litigant tries to play fast and loose with the
Id. at 527-28.
In diversity jurisdiction cases, the court applies the
substantive law of the forum state and federal procedural rules.
Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); Hanna v.
Plumer, 380 U.S. 460, 473 (1965). “Because judicial estoppel
appears neither clearly procedural nor clearly substantive,
there is a potential choice of law question of whether federal
or state law should govern in this diversity action.” RFF
Family P’ship, LP v. Ross, 814 F.3d 520, 528 n.5 (1st Cir.
2016). Here, the parties do not dispute that federal law
governs the issue.
Previously, the First Circuit did not necessarily require a
showing that the party to be estopped was attempting to achieve
an unfair advantage. Guay v. Burack, 677 F.3d 10, 16-17 (1st
A party may be judicially estopped from taking a position in
litigation in the district court that is inconsistent with his
The defendants challenge the plaintiffs’ assertions in this
case that HSBC does not hold their mortgage on the Goffstown
property because the assignment of the mortgage from Sand Canyon
to HSBC was invalid.
In support of the application of judicial
estoppel, the defendants contend that the plaintiffs did not
challenge the validity of the HSBC mortgage in the bankruptcy
proceedings and made contrary representations to the bankruptcy
Based on that position, the defendants argue, the
plaintiffs were granted a bankruptcy discharge.
The plaintiffs assert that they did not take a position
during the bankruptcy proceedings that is inconsistent with
their challenge to HSBC’s mortgage here.
Instead, they contend,
they admitted that the defendants purported to hold a valid
mortgage on their property during the bankruptcy proceedings
because they did not know of the allegedly faulty assignment.
Since that time, they assert, they have learned facts that show
the assignment is void.
Based on that new information, they are
challenging the defendants’ authority to foreclose under the
position in a prior bankruptcy proceeding. See, e.g., Town of
Lexington v. Pharmacia Corp., 2015 WL 1321457, at *5 (D. Mass.
Mar. 24, 2015); Flores-Febus v. MVM, Inc., 45 F. Supp. 3d 175,
179 (D.P.R. 2014); Murray v. Kindre Nursing Ctrs. West LLC, 2014
WL 4411044, at *5-*6 (D. Me. Sept. 8, 2014).
It is unclear whether the plaintiffs necessarily took an
inconsistent position in the bankruptcy proceedings.
acknowledging a mortgage on the property may not be inconsistent
with a later challenge to whether the proper party is attempting
See Mendaros v. JPMorgan Chase Bank, N.A., 2017
WL 2352143, at *4 (N.D. Cal. May 31, 2017).
In the specific
context of bankruptcy proceedings, however, the First Circuit
has held that “a failure to identify a claim as an asset in a
bankruptcy proceeding is a prior inconsistent position that may
serve as the basis for application of judicial estoppel.”
677 F.3d at 16.
The plaintiffs assert that they did not raise a challenge
to the assignment of the mortgage during the bankruptcy
proceedings because they did not know about the allegedly faulty
assignment at that time.
They further assert that if they had
known at the time of the bankruptcy proceedings that the
assignment to HSBC was invalid, they would have challenged the
In other words, they would have raised a legal
claim in the bankruptcy proceedings against their obligations
under the mortgage if they had been aware of the grounds for
The First Circuit has noted that “[s]ome circuits have held
that parties who fail to identify a legal claim in bankruptcy
schedules may escape the application of judicial estoppel if
they can show that they either lacked knowledge of the
undisclosed claims or had no motive for their concealment” but
did not resolve the issue in that case.
(internal quotation marks omitted).
Guay, 677 F.3d at 20
In fact, most courts that
have considered the issue have recognized an exception to the
application of judicial estoppel, based on a prior bankruptcy
proceeding, when the debtor failed to disclose a claim because
of a lack of knowledge or an inadvertent mistake.
Hartford Casualty Ins. Co., 675 F. App’x 856, 862 (10th Cir.
2017); Marshall v. Honeywall Tech. Sys. Inc., 828 F.3d 923, 932
(D.C. Cir. 2016) (citing and discussing cases); see also, e.g.,
Wilson v. PrimeSource Health Care of Ohio, Inc., 2017 WL
2869341, at *4 (N.D. Ohio July 5, 2017) (citing Sixth Circuit
precedent); Elhindi v. Cal. Dep’t of Corrs. & Rehab., 2017 WL
2633400, at *2 (E.D. Cal. June 19, 2017) (citing Ninth Circuit
precedent); Edwards v. Clinical Research Consultants, Inc., 2017
WL 2265834, at *6 (N.D. Ala. May 24, 2017) (citing Eleventh
Circuit precedent); Davis v. District of Columbia, --- F. Supp.
3d ---, 2017 WL 1208388, at *11-*12 (D.D.C. Mar. 31, 2017)
(recognizing exception but concluding it did not bar judicial
estoppel in that case); Khair-Dorsey v. WellSpan Health, 2017 WL
770590, at *5 (M.D. Pa. Feb. 28, 2017) (discussing presumption
of bad faith under Third Circuit precedent when party to be
estopped had knowledge and a motive to conceal claim); Lapointe
v. Target Corp., 2017 WL 1397311, at *5-*7 (N.D.N.Y. Feb. 14,
2017); Martin v. United States, 2017 WL 59070, at *10 (C.D. Ill.
Jan. 5, 2017); Bazzelle v. Compasspointe Healthcare Sys.¸ 2016
WL 6832643, at *4 (W.D. Ark. Nov. 18, 2016) (citing Eighth
In other contexts, the First Circuit has recognized that
“[j]udicial estoppel is applied with caution to avoid impinging
on the truth-seeking function of the court because the doctrine
precludes a contradictory position without examining the truth
of either statement.”
Perry v. Blum, 629 F.3d 1, 11 (1st Cir.
2010) (internal quotation marks omitted).
The Supreme Court has
cautioned “that it may be appropriate to resist application of
judicial estoppel when a party’s prior position was based on
inadvertence or mistake.”6
New Hampshire v. Maine, 532 U.S. 742,
753 (2001) (internal quotation marks omitted).
It is appropriate in this case to consider whether the
plaintiffs’ prior position, which accepted HSBC as the holder of
a valid mortgage on the property and did not assert a claim to
The First Circuit has stated that a party is not
automatically excused from the application of judicial estoppel
when the earlier inconsistent statement was made in good faith.
Guay, 677 F.3d at 16. More recently, however, the First Circuit
has stated that judicial estoppel “should be employed when a
litigant is playing fast and loose with the courts and when
intentional self-contradiction is being used as a means of
obtaining an unfair advantage.” John Hancock Life Ins. Co. v.
Abbott Labs., --- F.3d ---, 2017 WL 2962228, at *6 (1st Cir.
July 12, 2017) (emphasis added).
challenge the validity of the mortgage assignment, was based on
inadvertence or mistake.7
The plaintiffs here represent that
they learned facts to support a challenge to the validity of the
mortgage assignment only weeks before filing suit to stop the
They also contend that they had no motive to
conceal grounds to challenge HSBC’s mortgage in the bankruptcy
proceedings because if the mortgage had not been properly
assigned, they would not have owed payments to HSBC.
response, the defendants contend that the plaintiffs knew during
the bankruptcy proceedings about their theory that they signed a
different mortgage, not the mortgage to Option One, and
therefore could have challenged the validity of the mortgage
The defendants cite In re Knigge, 479 B.R. 500, 507-08 (8th
Cir. B.A.P. 2012), as being strikingly similar to this case.
There, however, the debtors knew about their challenge to the
validity of the security interest but nevertheless obtained a
bankruptcy discharge without pursuing the issue or reserving
their rights to do so.
Similarly, in Pelletier v. U.S. Bank Nat’l Ass’n, 2013 WL
6175665, at *1 (D.N.H. Nov. 26, 2013), the debtors challenged
the bank’s motion to lift the stay on the ground that the bank
had not shown that it was the holder of the note and the
mortgage. Then, the debtors entered into a stipulation with the
bank in order to avoid lifting the automatic stay in which the
debtors acknowledged that the bank was the current holder of
their mortgage. Id. at *2. The debtors later brought an
adversary action in which they asserted that the bank did not
hold the note and mortgage. Id. The bankruptcy court applied
judicial estoppel based on the stipulation to preclude the
debtors’ adversary claim, which was affirmed on appeal. Id. at
The defendants also fault the plaintiffs’ counsel for
failing to find the information they now rely on to challenge
the mortgage during the bankruptcy proceedings.
Although the defendants dispute the plaintiffs’
representation that they did not know about the assignment issue
during the bankruptcy proceedings, that question cannot be
resolved based on the record available for purposes of a motion
In addition, the plaintiffs appear to have had no
motive during the bankruptcy proceedings to conceal a claim to
challenge the assignment of the mortgage purportedly held by
HBSC because the plaintiffs remained obligated to pay the
mortgage through both bankruptcy proceedings.
judicial estoppel cannot be applied here in the context of a
motion to dismiss.
For the foregoing reasons, the defendants’ motion to
dismiss (document no. 5) is denied.
As is noted above, the plaintiffs have withdrawn the
allegations that they signed a different mortgage. In response,
the defendants argue at length that the plaintiffs and their
counsel are engaging in gamesmanship and that the court should
infer that the plaintiffs were aware of problems with the
mortgage at the time of the bankruptcy proceedings. The
inferences the defendants suggest do not follow from the
The plaintiffs’ motion for leave to exceed the page limit
(document no. 19) is terminated as moot.
Joseph DiClerico, Jr.
United States District Judge
August 3, 2017
James D. Kelly, Esq.
John S. McNicholas, Esq.
Peter N. Tamposi, Esq.
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