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Angela Jo Moore and M. Porter Moore v. Mortgage Electronic Registration Systems

January 27, 2012


The opinion of the court was delivered by: Joseph N. Laplante United States District Judge

Opinion No. 2012 DNH 021


Plaintiffs Angela Jo Moore and M. Porter Moore, proceeding pro se, have brought a 17-count complaint against a number of entities involved in the origination, servicing, and eventual foreclosure of their mortgage loan. The Moores allege a variety of malfeasance by the defendants, including misleading plaintiffs about the terms of their loan, failing to respond to their requests for information regarding their loan, and proceeding with foreclosure despite ongoing negotiations to modify the loan. The defendants have all filed motions to dismiss, arguing that plaintiffs' third amended complaint fails to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6).

This court has diversity jurisdiction over this matter between the Moores, who are New Hampshire citizens, and defendants, various out-of-state corporations, under 28 U.S.C. § 1332 since the amount in controversy exceeds $75,000. The court also has jurisdiction under 28 U.S.C. § 1331 (federal question) and 1367 (supplemental jurisdiction) by virtue of the Moores' claims under various federal statutes.

After hearing oral argument, the court grants the motions in part and denies them in part. As explained in more detail below:

* Count 1, a claim for "agency/respondeat superior," is dismissed because those doctrines are not causes of action for which recovery can be granted, but bases for holding a defendant vicariously liable for another's conduct.

* Counts 2 and 3, claims against defendant WMC Mortgage Corp. for violation of the Truth in Lending Act and its implementing regulation, Regulation Z, are dismissed because the Moores did not file suit against WMC within the statute's limitations period. Plaintiffs' remaining state-law claims against WMC, including their claim for "origination fraud" in Count 8, are likewise dismissed under the applicable statute of limitations.

* Count 4, a claim against defendant Ocwen Loan Servicing, LLC under the Real Estate Settlement Procedures Act, is not dismissed. Contrary to Ocwen's argument, the Moores have sufficiently pleaded that they suffered actual damages--in the form of emotional distress--as a result of its statutory violation.

* Count 5, which makes claims against Ocwen and its co-defendant Harmon Law Offices under the Fair Debt Collection Practices Act, is not dismissed. Though Harmon argues that it was not engaged in "debt collection" subject to that statute, Harmon's own representations in its letters to the Moores suggest otherwise.

* Count 6, a claim for violations of the New Hampshire Unfair, Deceptive or Unreasonable Collection Practices Act, is dismissed as to Harmon because the Moores have not pleaded facts stating a plausible claim for relief under that statute.

* Count 7, a claim for breach of the covenant of good faith and fair dealing, is dismissed because the Moores have not pleaded facts showing the existence of a contract between them and certain of defendants--which is a necessary element of such a claim--and because they have not plausibly alleged that the remaining defendants (with whom the Moores did have a contractual relationship) committed any such breach.

* Count 8, a claim for fraud, is dismissed as to Harmon because the Moores have not pleaded their claim against it with sufficient specificity. Count 8 is also dismissed insofar as it claims fraud in the assignment of the Moores' mortgage because they did not rely on the alleged fraud. The Moores' claim for "modification fraud" against Ocwen and its co-defendant Saxon Mortgage Services, Inc., however, is pleaded with the particularity required by Federal Rule of Civil Procedure 9 and may proceed.

* Count 9, a claim for fraud in the inducement against Saxon and Ocwen, is dismissed because the Moores do not allege that they entered into any transaction as a result of the claimed fraud by either of these parties.

* Counts 10, 12, and 13, claims against all defendants for negligence, breach of assumed duty, and breach of fiduciary duty, respectively, are dismissed because the allegations set forth in the complaint do not support the conclusion that any of the defendants owed the Moores a duty of any kind (apart from, as to certain defendants, contractual ones).

* Count 11, a claim for intentional and negligent misrepresentation against all defendants, is dismissed as to Harmon and its co-defendants Mortgage Electronic Registration Systems, Inc., Deutsche Bank National Trust Company, Morgan Stanley ABS Capital I Holding Corp., and Morgan Stanley ABS Capital I Inc. Trust 2007-HE5. The claims against those defendants are not pleaded with the particularity required of fraud claims by Federal Rule of Civil Procedure 9. The Moores' claim against Saxon and Ocwen for intentional and negligent misrepresentation are, however, sufficiently pleaded and may proceed.

* Count 14, a claim for civil conspiracy against all defendants, is dismissed. The Moores' complaint does not contain allegations sufficient to establish the existence of an agreement among defendants to engage in a common course of conduct. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).

* Count 15, which makes claims for negligent and intentional infliction of emotional distress against all defendants, is dismissed. In the absence of a duty from the defendants to the Moores, they cannot recover for negligent infliction of emotional distress. Nor do defendants' alleged actions constitute the type of "extreme and outrageous conduct" necessary to recover for intentional infliction of emotional distress.

* Count 16, a claim for promissory estoppel against Ocwen, is dismissed as the Moores have not pleaded any facts indicating that they relied to their detriment on Ocwen's alleged promise to hold off foreclosing for three months.

* Finally, Count 17, a claim for "avoidance of note" against "all defendants claiming to own the note and mortgage," is not dismissed. Though defendants argue that under New Hampshire law, they need not possess the Moores' promissory note in order to foreclose on the associated mortgage, possession of the note is a necessary prerequisite of a claim to enforce it, which is what the Moores seek to avoid through this count.

I. Applicable legal standard

To survive a motion to dismiss under Rule 12(b)(6), the plaintiff's complaint must make factual allegations sufficient to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In ruling on such a motion, the court must accept as true all well-pleaded facts set forth in the complaint and must draw all reasonable inferences in the plaintiff's favor. See, e.g., Martino v. Forward Air, Inc., 609 F.3d 1, 2 (1st Cir. 2010). The court "may consider not only the complaint but also "facts extractable from documentation annexed to or incorporated by reference in the complaint and matters susceptible to judicial notice." Rederford v. U.S. Airways, Inc., 589 F.3d 30, 35 (1st Cir. 2009). With the facts so construed, "questions of law [are] ripe for resolution at the pleadings stage." Simmons v. Galvin, 575 F.3d 24, 30 (1st Cir. 2009). The following background summary is consistent with that approach.

II. Background

A. Origination of the Moores' loan

In late 2006, a mortgage broker employed by First Guaranty Mortgage contacted plaintiff Angela Jo Moore about refinancing the mortgage on the Sandwich, New Hampshire home she shares with her husband, plaintiff M. Porter Moore. The broker, Joseph Celone, told the Moores that if they refinanced through First Guaranty's "Credit Rebuilding Program," they could lower their monthly mortgage payments, which were $2,200 at the time. With Celone's help, Mrs. Moore applied and was approved for an adjustable rate loan in the amount of $452,000 from defendant WMC Mortgage Corporation. Though Mr. Moore's name appeared on the deed to the property, he was not a co-borrower on the loan.

Celone told the Moores that theirs was a "special" loan from a brand-new Fannie Mae program designed specifically for the self-employed. He told them that, while they could expect their mortgage payments for the first three months to be slightly higher than their previous payments, Fannie Mae would automatically send them paperwork---which First Guaranty would fill out and submit for no charge---to enroll in the "special" program. According to Celone, once the Moores' loan was enrolled, their monthly mortgage payments would drop. Prior to closing, neither Celone nor WMC provided the Moores with certain documents required by federal law, including an ARM disclosure and Good Faith Estimate.

Closing on the Moores' refinancing was scheduled to take place at their home on December 18, 2006 at 6:00 p.m., but the woman who performed the closing did not arrive until about 10:00 p.m.*fn1 The closing was rushed, as the woman was concerned about the deteriorating condition of the roads due to the weather and claimed that her husband was waiting for her in the car. She did not provide the Moores with a copy of the closing documents, but said she would either mail them or drop them off in the next several days. Despite this assurance, the Moores never received copies of the closing documents, including a Notice of Right to Cancel.

After closing, the Moores discovered that the terms of their loan were not what they had been led to believe. Compared to their previous monthly payment of $2,200, which covered principal, interest, taxes, and insurance, their new monthly payment was $3,400 and covered only principal and interest. When the Moores did not receive any paperwork from Fannie Mae to enroll in the "special program" Celone had told them about, they contacted First Guaranty. A representative from First Guaranty advised the Moores that Celone had been terminated due to his "questionable business practices," and attempted to persuade the Moores to again refinance their loan---an offer they declined. Contrary to what Celone had told them, the Moores' loan was never enrolled in any Fannie Mae program, "special" or otherwise.

B. Modification efforts and servicing

In June 2008, the Moores contacted their loan servicer, defendant Saxon Mortgage Services, Inc., to seek a modification because, under the terms of their adjustable rate loan, their payments were increasing. These efforts were unsuccessful, and in October 2008 the Moores stopped making their loan payments. In April 2009, Saxon entered into a contract with the federal government, under which it agreed to modify loans under the government's Home Affordable Modification Program ("HAMP"). The following month, Saxon sent a letter to Mrs. Moore informing her that her loan was in default and that foreclosure proceedings had been initiated. The letter also told Mrs. Moore that Saxon wanted to "help keep [her] in [her] home" and instructed her to call to discuss her options.

Mrs. Moore contacted Saxon, which encouraged her to contact a different company, Titanium Solutions, to pursue a loan modification. When Mrs. Moore contacted Titanium, it informed her that it did not modify "jumbo loans" and referred her back to Saxon.*fn2 Mrs. Moore then contacted Saxon again, which also informed her that it did not modify jumbo loans, and in fact, did not even typically service jumbo loans. Saxon told Mrs. Moore that in order to modify her loan, she would need to seek out a third-party company that would modify jumbo loans. The Moores requested that Saxon supply them with certain paperwork so they could evaluate their situation, but Saxon failed to do so, claiming on different occasions that it did not have the documents on its premises, that its call centers did not deal with paperwork, and that the Moores needed to request the documents in writing.

In July 2009, the Moores received two letters from defendant Harmon Law Offices informing them that Saxon had retained Harmon to foreclose on their mortgage on behalf of defendant Mortgage Electronic Registration Systems ("MERS"). MERS, as nominee for WMC, was the mortgagee of record for the Moores' mortgage. One of the letters informed the Moores that the loan had been accelerated so that the entire outstanding balance (at that time, $493,555.36) was due immediately. The Moores contacted Harmon to verify the debt, but received no response, and thereafter heard nothing further from Saxon or Harmon regarding the announced foreclosure.

In November 2009, the servicing of the Moores' loan was transferred from Saxon to Ocwen Loan Servicing, LLC. Later that month, Ocwen sent the Moores a letter titled "Alternatives to Foreclosure." The letter claimed that the process to review the Moores' loan for modification would take up to 30 days once Ocwen had received all necessary information. On December 7, 2009, the Moores sent a notarized letter to Ocwen asking it to verify the debt and to provide copies of all documents related to their loan. In February 2010, Harmon responded to the Moores' letter, but without providing any of the documents requested. The Moores sent Ocwen a second letter on March 23, 2010, via certified mail.

Though Ocwen signed for the letter, it never acknowledged receipt of or otherwise responded to it.

Around the same time the Moores sent their first letter in December 2009, Ocwen began calling their home, often multiple times per day, in an effort to collect past due mortgage payments. These calls continued for months. Ocwen, like Saxon, had entered into a contract with the federal government to modify loans under HAMP. During the calls, Ocwen encouraged the Moores to apply for a loan modification and told the Moores that they would send a modification application and other related documents. The Moores never received the promised documents.

C. Foreclosure proceedings and removal

In late January 2010, Ocwen sent the Moores a Reinstatement Quote informing them that the total amount due by April 1, 2010 to reinstate their loan was $79,151.46. Not long thereafter, on February 20, 2010, Harmon sent Mr. and Mrs. Moore each a separate Notice of Mortgage Foreclosure Sale. The Notices informed the Moores that a foreclosure sale of their property would take place on March 18, 2010, on behalf of defendant Deutsche Bank National Trust Company, as Trustee for the registered holders of Morgan Stanley ABS Capital I Inc. Trust 2007-HE5 Mortgage Pass-Through Certificates, Series 2007-HE5. MERS had assigned the Moores' mortgage to Deutsche Bank on February 18, 2010, in an assignment reciting an effective date of November 16, 2009.*fn3

The Moores continued to pursue a modification from Ocwen. On March 16, 2010---two days before the scheduled foreclosure sale--a "Home Retention Consultant" from Ocwen e-mailed the Moores paperwork to apply for a modification. Ocwen instructed the Moores that the completed paperwork would need to be returned the following day. It refused to reschedule the sale.

On March 17, 2010, the Moores filed suit against Ocwen, MERS, Deutsche Bank, and Morgan Stanley ABS Capital I, Inc. in Carroll County Superior Court, seeking, among other things, ex parte emergency injunctive relief to prevent the foreclosure sale. The Superior Court provisionally granted an injunction pending a hearing on the merits. As a result, the scheduled foreclosure sale did not take place.*fn4 Following the hearing, on March 25, 2010, the court denied the Moores' request for preliminary injunctive relief, finding, based upon an offer of proof from Deutsche Bank and Ocwen (who were represented by Harmon at the hearing), that the Moores had not submitted all necessary paperwork to pursue a modification of their loan.

The Moores subsequently sent Ocwen all paperwork necessary to apply for a modification, and on May 17, 2010, filed a new suit against Ocwen, MERS, and Saxon seeking to enjoin the foreclosure. This action included claims under the New Hampshire Consumer Protection Act, N.H. Rev. Stat. Ann. § 358-A, the New Hampshire Unfair, Deceptive or Unreasonable Collection Practices Act, N.H. Rev. Stat. Ann. § 358-C, and for common law fraud and negligence. Ocwen, MERS, and Saxon removed the case to this court, see 28 U.S.C. § 1441(a), invoking the court's diversity jurisdiction, see id. 1332. After removal, the Moores amended their complaint several times to add new defendants and counts, culminating in the third amended complaint now before the court.

III. Analysis

A. Preclusive effect of prior state court action

Before turning to defendants' arguments challenging the sufficiency of specific counts of the complaint, the court addresses a defense certain defendants have raised to this action in its entirety. Ocwen, MERS, and Deutsche Bank argue that the outcome of the first state court action, in which the Moores were denied preliminary injunctive relief, precludes them from litigating their claims here under the doctrine of res judicata. Their theory is that even though the Superior Court's ruling did no more than deny preliminary relief, "it is ...

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