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Douglas v. U.S. Bank National Association

United States District Court, First Circuit

May 6, 2013

Willard Douglas and Diane Douglas
v.
U.S. Bank National Association and Wells Fargo Home Mortgage No. 2013 DNH 071

ORDER

LANDYA McCAFFERTY, Magistrate Judge.

In a case that has been removed from the New Hampshire Superior Court, Willard and Diane Douglas ("the Douglases" or "petitioners") petitioned the court to enjoin a foreclosure sale that was scheduled for February 11, 2013. Petitioners claimed that if respondents held the sale without considering their request for a loan modification, they would breach the implied covenant of good faith and fair dealing. Before the court is respondents' motion to dismiss for failure to state a claim upon which relief can be granted. Petitioners object. For the reasons that follow, respondents' motion to dismiss is granted.

The Legal Standard

Ruling on 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). When considering such a motion, 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)). To survive a Rule 12(b)(6) motion, a complaint "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Gonz§lez-Maldonado v. MMM Healthcare, Inc. , 693 F.3d 244, 247 (1st Cir. 2012) (quoting Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009); citing Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007)).

Background

The facts in this section are drawn from the petition that initiated this case, augmented by documents appropriately incorporated therein. See Rivera v. Centro Medico de Turabo, Inc. , 575 F.3d 10, 15 (1st Cir. 2009) (citing Trans-Spec Truck Serv., Inc. v. Caterpillar, Inc. , 524 F.3d 315, 321 (1st Cir. 2008)); see also Banco Santander de P.R. v. Lopez-Stubbe (In re Colonial Mortg. Bankers Corp.) , 324 F.3d 12, 19 (1st Cir. 2003) ("matters of public record are fair game in adjudicating Rule 12(b)(6) motions, and a court's reference to such matters does not convert a motion to dismiss into a motion for summary judgment") (citing Boateng v. InterAmerican Univ., Inc. , 210 F.3d 56, 60 (1st Cir. 2000)).

In 2006, the Douglases received a home loan from Mortgage Lenders Network USA, Inc. ("MLN"). They gave a mortgage to secure their promise to repay the loan to Mortgage Electronic Registration Systems, Inc. ("MERS"). MERS assigned the mortgage to U.S. Bank National Association ("U.S. Bank"). Wells Fargo Home Mortgage services the Douglases' loan. The parties appear to agree that the Douglases fell behind on their payments.

At some point, the petition does not say when, U.S. Bank scheduled a foreclosure sale of the property the Douglases mortgaged. In December of 2012, the Douglases applied for a loan modification. About a month later, one of the respondents (the petition does not say which one), told the Douglases that their application had been prequalified for review and asked them to provide updated financial information. On February 6, 2013, the Douglases provided respondent with the information it requested.

The next day, upon learning that the foreclosure sale was still scheduled to go on, the Douglases filed a petition in the New Hampshire Superior Court seeking "a Preliminary, Temporary, and Permanent Injunction preventing the sale on February 11, 2013 to allow the Petitioner an opportunity to resolve this issue with the Respondent in a timely manner." Notice of Removal, Attach. 1 (doc. no. 1-1), at 3. They base their petition on the following legal theory:

Because Respondent represented that Petitioner has been pre-qualified to be reviewed for a loan modification application, and that Respondent would in fact review Petitioner's loan modification application, and because Petitioner has submitted a complete loan modification application, Respondent has breached the covenant of good faith and fair dealing by not postponing or cancelling the foreclosure sale date scheduled for Monday, February 11, 2013 so that Petitioner's loan modification application may be processed and Petitioner may be given either an acceptance or denial of his application.

Id. at 2. The same day the Douglases filed their petition, the Superior Court granted them a temporary injunction, see Resp't's Mot. to Dismiss, Ex. 4 (doc. no. 7-4), and issued an order of notice indicating that a hearing on the petition would be held on March 7, 2013, see State Ct. Rec. (doc. no. 6) 9. On March 5, 2013, respondents removed the case to this court. The record here includes no further information on the current status of either the foreclosure or the Douglases' application for a loan modification.

Discussion

Respondents move to dismiss. They argue that the implied covenant of good faith and fair dealing did not require them to: (1) modify the terms of the Douglases' loan; or (2) consider the Douglases' application for a loan modification. Petitioners respond by: (1) disavowing any argument that the implied covenant required respondents to modify their loan; and (2) contending that the covenant did require respondents to consider their application for a loan modification. Respondents have the better argument.

In New Hampshire, "every agreement [includes] an implied covenant that the parties will act in good faith and fairly with one another." Birch Broad., Inc. v. Capitol Broad. Corp. , 161 N.H. 192, 198 (2010) (citing Livingston v. 18 Mile Point Drive, Ltd. , 158 N.H. ...


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