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Worrall v. Federal National Mortgage Association

United States District Court, First Circuit

November 20, 2013

J. Kirk Worrall, III, and Cecile Worrall
v.
Federal National Mortgage Association and Nationstar Mortgage, LLC Opinion No. 2013 DNH 158

ORDER

JOSEPH A. DiCLERICO, Jr., District Judge.

J. Kirk Worrall, III, and Cecile Worrall brought a petition in state court to enjoin the foreclosure sale of their home by Federal National Mortgage Association ("FNMA") and Nationstar Mortgage, LLC. The state court enjoined the foreclosure proceeding, and the defendants removed the case to this court.

After FNMA and Nationstar moved to dismiss the claims against them, the Worralls moved to amend their complaint, adding two law firms as defendants and alleging new claims.[1] The motion was granted, and the amended complaint was filed. FNMA and Nationstar have moved to dismiss the claims against them in the amended complaint.

Standard of Review

Federal Rule of Civil Procedure 12(b)(6) allows a defendant to move to dismiss on the ground that the plaintiff's complaint fails to state a claim on which relief can be granted. In assessing a complaint for purposes of a motion to dismiss, the court "separate[s] the factual allegations from the conclusory statements in order to analyze whether the former, if taken as true, set forth a plausible, not merely conceivable, case for relief." Juarez v. Select Portfolio Servicing, Inc., 708 F.3d 269, 276 (1st Cir. 2013) (internal quotation marks omitted). "If the facts alleged in [the complaint] allow the court to draw the reasonable inference that the defendants are liable for the misconduct alleged, the claim has facial plausibility." Id. (internal quotation marks omitted).

With their motion to dismiss, the defendants submitted a copy of the Worralls' mortgage document and a copy of the bankruptcy court's discharge order to the Worralls. When the moving party presents matters outside the pleadings to support a motion to dismiss, the court must either exclude those matters or convert the motion to one for summary judgment. Fed.R.Civ.P. 12(d). An exception to Rule 12(d) exists "for documents the authenticity of which [is] not disputed by the parties; for official public records; for documents central to the plaintiffs' claim; or for documents sufficiently referred to in the complaint." Rivera v. Centro Medico de Turabo, Inc., 575 F.3d 10, 15 (1st Cir. 2009) (internal quotation marks omitted). In addition, the court may consider documents that are susceptible to judicial notice. Jorge v. Rumsfeld, 404 F.3d 556, 559 (1st Cir. 2005).

With their amended complaint, the Worralls submitted a copy of the first page of their mortgage document and an unofficial copy of the "Assignment of Mortgage" of their mortgage to FNMA. The Worralls submitted the bankruptcy petition and schedules and their bankruptcy discharge with their objection to the motion to dismiss. The mortgage document is central to the claims against FNMA and Nationstar. The bankruptcy court's discharge order is a public record that also may be considered without converting the motion to one for summary judgment. See Barany-Snyder v. Weiner, 539 F.3d 327, 332 (6th Cir. 2008); Payne v. Central Defense Servs., LLC, 2013 WL 3974575, at *4 (W.D. Tenn. Aug. 2, 2013); Farahzad v. Lawyers Title Ins. Co., 2012 WL 4344325, at *2 (E.D.N.Y. Sept. 21, 2012). Therefore, the additional documents submitted by the parties may be considered without converting the motion to one for summary judgment.

Background[2]

The Worralls bought property at 99 Greenhill Road in Barrington, New Hampshire, with a mortgage and a promissory note dated June 1, 2007. The promissory note is payable to First Magnus Financial Corporation. The mortgage states that Mortgage Electronic Registration Systems, Inc. ("MERS") is the mortgagee as nominee for the lender, First Magnus.

In August of 2007, after the Worralls closed on the loan, the New Hampshire Banking Department suspended First Magnus's license to operate as a mortgage banker. First Magnus filed for bankruptcy protection on August 21, 2007, and its assets were transferred to a liquidating trust by May of 2008. The Worralls do not know whether First Magnus funded their loan.

Initially, Countrywide Home Loan Servicing held the servicing rights on the Worralls' loan. When Countrywide merged with Bank of America, Bank of America assumed the servicing rights on the loan. Bank of America continued to service the loan until May of 2013 when it transferred the servicing rights to Nationstar.

On December 12, 2011, MERS assigned the Worralls' mortgage to FNMA. That transfer was recorded with the Strafford County Registry of Deeds. Then, on February 3, 2012, MERS attempted to transfer the mortgage to Bank of America, and that transaction is also recorded with the Strafford County Registry of Deeds.

The Worralls filed for bankruptcy protection under Chapter 7 on September 10, 2010. The bankruptcy court issued a discharge order to the Worralls on December 15, 2010, which discharged them from debts including their liability under the mortgage note. The bankruptcy case was closed on January 5, 2011. Despite the discharge, the Worralls represent that they continued to make mortgage payments to Bank of America.

The Worralls allege that they never fell behind on their mortgage payments. They contend that in July of 2011, Bank of America refused their mortgage payments without explanation. They also allege that they worked with Bank of America through 2011 and 2012 to obtain a loan modification without success. The Worralls contend that Bank of America "dual-tracked" them, meaning that the bank considered them for "loss mitigation" while, at the same time, pursuing foreclosure.

When the servicing rights were transferred to Nationstar in May of 2013, the Worralls again applied for a loan modification. The Worralls contend that Nationstar "dual-tracked" them by proceeding to foreclosure after the Worralls had filed their application for loan modification. ...


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