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Linda L'esperance v. Consumer Lending

February 1, 2012


The opinion of the court was delivered by: Landya McCafferty United States Magistrate Judge


In an action that has been removed from the New Hampshire Superior Court, Linda L'Esperance has sued in eight counts, asserting claims arising from the origination and servicing of a refinancing loan. Before the court is a motion to dismiss filed by one of the six defendants, HSBC Consumer Lending, Inc. ("HSBC Lending"). L'Esperance objects. For the reasons that follow, HSBC Lending's motion to dismiss is granted, but without prejudice to L'Esperance filing an amended complaint.

The Legal Standard

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). That is, the complaint "must contain 'enough facts to raise a reasonable expectation that discovery will reveal evidence' supporting the claims." Fantini v. Salem State Coll., 557 F.3d 22, 26 (1st Cir. 2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).

When considering a motion to dismiss under Rule 12(b)(6), 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)). But, "naked assertions devoid of further factual enhancement need not be accepted." Plumbers' Union, 632 F.3d at 771 (1st Cir. 2011) (quoting Maldonado v. Fontanes, 568 F.3d 263, 266 (1st Cir. 2009)). Moreover, "[a] pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.'" United Auto., Aero., Agric. Implement Workers of Am. Int'l Union v. Fortuno, 633 F.3d 37, 41 (1st Cir. 2011) (quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)).

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." United Auto Workers, 633 F.3d at 40 (citation omitted). On the other hand, a Rule 12(b)(6) motion should be granted if "the facts, evaluated in [a] plaintiff-friendly manner, [do not] contain enough meat to support a reasonable expectation that an actionable claim may exist." Andrew Robinson Int'l, Inc. v. Hartford Fire Ins. Co., 547 F.3d 48, 51 (1st Cir. 2008) (citations omitted). That is, "[i]f the factual allegations in the complaint are too meager, vague, or conclusory to remove the possibility of relief from the realm of mere conjecture, the complaint is open to dismissal." Plumbers' Union, 632 F.3d at 771 (citation omitted).


The following facts are drawn from L'Esperance's complaint, plus two loan agreements and a mortgage that have been effectively merged into the complaint. See United Auto Workers, 633 F.3d at 39 (explaining that "when a complaint's factual allegations are expressly linked to -- and admittedly dependent upon -- a document (the authenticity of which is not challenged), that document effectively merges into the pleadings and the trial court can review it") (quoting Trans-Spec Truck Serv., Inc. v. Caterpillar Inc., 524 F.3d 315, 320 (1st Cir. 2008)).

On October 23, 2008, L'Esperance entered into agreements with Beneficial New Hampshire Inc. ("Beneficial NH"), for a home loan in the amount of $385,600.40 and a personal-credit-line account. Mot. to Dismiss, Ex. A (doc. no. 5-2), at 2, Ex. B (doc. no. 5-3), at 2. The home loan was secured by a mortgage. See id., Ex. C (doc. no. 5-4). The "Truth-in-Lending Disclosure" section of the home-loan agreement states that L'Esperance is obligated to make 288 monthly payments of $4,231.10 each, and lists the annual percentage rate of the loan as 12.498 percent.*fn1 See id., Ex. A, at 2. The agreement for the personal-credit-line account lists a monthly periodic rate of 1.999 percent and an annual percentage rate of 23.98 percent. See id., Ex. C, at 2. The purpose of the credit line was to cover closing costs associated with the home loan. L'Esperance alleges that the terms of her two loans are not beneficial to her, owing to their "usurious interest rates, . . . excessive costs, and atypical terms." Compl. ¶ 9.

Before L'Esperance entered into the two loan agreements, no defendant ever told her that she had the ability to negotiate the terms of her loans. At some point, some person -- the complaint does not say who -- told L'Esperance that if she paid her home loan on time for the first six months, the interest rate would be adjusted downward.*fn2 The complaint is ambiguous, at best, with regard to when that statement was made. Compare Compl. ¶ 10 (describing the statement as having been made "[w]hen it came to close the loan") with id. ¶ 39 (describing the statement as having been made "during the loan origination and servicing process"). After L'Esperance made payments on time for six months, she "went to adjust the rate on the loans down as had been promised to her," Compl. ¶ 10, but no downward adjustment was ever made. The complaint does not indicate to whom L'Esperance went to adjust her interest rate.

When L'Esperance got her loans, her "debt to income ratio was in excess of reasonable and lawful parameters."*fn3 Compl. ¶ 12. Specifically, repayment of the home loan alone requires approximately sixty percent of L'Esperance's monthly income, while repayment of both loans requires approximately 120 percent of her monthly income.

According to L'Esperance, defendants -- again, she does not say which one(s) -- agreed with the United States Treasury Department to participate in the Home Affordable Modification Program ("HAMP"), under which they were obligated to work with borrowers to modify their mortgages to help them avoid foreclosure. Defendants -- L'Esperance does not indicate which one(s) -- allowed her a temporary trial modification of her loan, under HAMP, but did not grant her a permanent modification on the same terms as the trial modification.

Based on the foregoing, L'Esperance filed an eight-count complaint, seven counts of which are at issue here. In pertinent part, L'Esperance's complaint describes the defendants in the following way:

Defendants HSBC Consumer Lending Inc. a/k/a and d/b/a Beneficial Company, LLC, are consumer lending and servicing branch offices and/or subsidiaries of Defendant HSBC Finance Corporation, a subsidiary of Defendant HSBC Group a/k/a HSBC Bank USA, NA a/k/a HSBC North American Holdings, Inc. (reportedly one of the ten largest bank holding companies in the United States with assets of US $366.3 billion on June 30, 2011), and other related names. On information and belief, HSBC Finance Corporation acquired Defendant Household International, Inc. in 2003, and Household International, Inc. had previously acquired Defendant Beneficial Corporation in 1998. These entities, jointly and through their affiliation with each other, originated two loans on the Plaintiff's Seabrook home, such loans closing on October 23, 2008.

Compl. ¶ 2. In its corporate disclosure statement, filed pursuant to Local Rule 7.5, HSBC Lending represents that "it is a wholly owned subsidiary of HSBC Finance Corporation (f/k/a Household International, Inc.), which is a wholly owned subsidiary of HSBC Holdings plc, a United Kingdom Corporation." Doc. no. 2, at 1.

In her complaint, L'Esperance makes the following claims:

(1) the "HBSC/Beneficial defendants"*fn4 are liable for "predatory lending, fraudulent and unfair practices, breach of obligation of good faith, and negligence," (Count I); (2) the "HBSC/Beneficial defendants" are liable for "mortgage compliance violations," (Count II); (3) the "HBSC/Beneficial defendants" are liable for "HOEPA, RESPA, FACTGA, ECOA and other statutory and common law violations," (Count III); (4) all defendants are liable for "negligent, fraudulent, or intentional misrepresentations," (Count IV); (5) the "HBSC/Beneficial defendants" are liable for "broken promises under HAMP and of obligations of good faith and contract in mortgage modification," (Count V); (6) all defendants are liable for ...

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