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McLaughlin v. Bank America, N.A.

United States District Court, D. New Hampshire

March 18, 2015

Scott McLaughlin
v.
Bank America, N.A. and Bank of New York Mellon f/k/a The Bank of New York Opinion No. 2015 DNH 056.

ORDER

LANDYA McCAFFERTY, District Judge.

Scott McLaughlin is suing Bank of America, N.A. ("BANA") and Bank of New York Mellon ("BONY"). His claims arise from BANA's servicing of his mortgage and BONY's current attempt to foreclose upon it. Before the court is respondents' motion to dismiss McLaughlin's second amended petition. McLaughlin objects. For the reasons that follow, respondents' motion to dismiss is granted in part.

I. Background

The facts in this section are drawn from McLaughlin's second amended petition along with various documents that courts are allowed to consider when ruling on motions to dismiss filed under Rule 12(b)(6) of the Federal Rules of Civil Procedure. See Claudio-De León v. Sistema Univ. Ana G. Mendez, 775 F.3d 41, 46 (1st Cir. 2014). In December 2005, McLaughlin and his wife received a loan from Wilmington Finance ("Wilmington"). In exchange, they gave Wilmington a promissory note, and they gave a mortgage securing repayment of that note to Mortgage Electronic Registration Systems ("MERS"), "acting solely as a nominee for [Wilmington] and [Wilmington]'s successors and assigns." Resp't's Mem. of Law, Ex. B (doc. no. 15-3), at 1. MERS assigned the mortgage to BAC Home Loans Servicing ("BAC"). BAC's successor, BANA, assigned the mortgage to BONY. BANA, however, continued to service the mortgage. In early 2009, the McLaughlins began having trouble with the servicing of their mortgage. Thereafter, BANA began the process of foreclosing on it.

In August 2012, the McLaughlins filed a petition against BANA in the Cheshire County Superior Court (hereinafter "McLaughlin I") asking the court to: (1) rule that BANA violated the mortgage contract; (2) find the mortgage and the note to be void; and (3) "[h]alt any actions by [BANA] until all reasonable legal actions have been exhausted." Notice of Removal, Ex. A, at 4 of 48, McLaughlin v. Bank of Am., N.A., No. 12-cv-00386-SM (D.N.H. Oct. 11, 2012), ECF No. 1-1. Those requests for relief were based upon various factual allegations, including an allegation that, when BANA first attempted to foreclose on the McLaughlins' mortgage, it did not hold their note. See id. at 3.

In McLaughlin I, BANA removed the state-court action to this court. In an amended complaint, filed in response to an order of the court, the McLaughlins alleged that BANA did not have possession of both the note and the mortgage at the time it initiated foreclosure proceedings in August 2010. Am. Compl. ¶ 10, McLaughlin I, ECF No. 9. In March 2013, Judge McAuliffe dismissed McLaughlin I for failure to state a claim upon which relief could be granted.

At some point in 2013, McLaughlin does not say exactly when, he began negotiating a loan modification with BANA and BONY, at their invitation. That process has not resulted in either a loan modification or a formal denial.

In the meantime, BANA assigned the mortgage to BONY, and shortly thereafter, BONY began the process of foreclosing on it. In April 2013, in an effort to avoid that second attempt to foreclose on their mortgage, BONY foreclosure, the McLaughlins filed an ex parte petition against BANA and BONY in the Cheshire County Superior Court (hereinafter "second action"). The superior court granted the McLaughlins a temporary injunction, but later granted respondents' motion to dissolve the injunction and dismiss the case. Judge Kissinger based his ruling upon the res judicata effect of Judge McAuliffe's order of dismissal in McLaughlin I. In his order, Judge Kissinger characterized the complaint before Judge McAuliffe as asserting that BANA did not possess both the mortgage and the note when it initiated foreclosure proceedings. See Resp't's Mem. of Law, Ex. F (doc. no. 15-7), at 3.[1] Thereafter, he explained his conclusion that the claim before Judge McAuliffe and the claim before him were the same:

Although neither of the petitioners' complaints is particularly detailed, it appears that they have made the exact same allegations in both cases, including: (1) that [BANA] lacks the ability to foreclose based on a faulty chain of title....

Id. at 7. The New Hampshire Supreme Court ("NHSC") affirmed in an order dated April 3, 2014.

At some point after the NHSC affirmed Judge Kissinger's ruling, BANA and BONY scheduled a third foreclosure sale for July 23, 2014. On July 21, i.e., two days before the scheduled foreclosure sale, McLaughlin sent BANA a correspondence requesting proof of who owned his note, plus the following additional information:

a "complete life of loan transaction history, " certain applicable codes used by [BANA], MERS milestone reports, information pertaining to the pooling and servicing agreement related to the Trust of which [BONY] is allegedly Trustee, "copies of all collection notes and communications files, " "an itemized statement of the amount needed to fully reinstate the loan, " "all communications with any non-lawyer third-party providers, " "all Form P-309 screen shots of all system accounts, " the identities of all persons accessing the account from February 1, 2009 through the present, evidence of the negotiation history of the note, security logs showing terminals that had accessed the account since February 1, 2009, [the] FBI file number with respect to a break-in that occurred [on] July 24, 2010 and all notes and documents, including electronic and paper documents, as well as all transcripts of all recorded phone calls.

Second Am. Pet. (doc. no. 13) ¶ 18. While McLaughlin asked for various forms of information, his correspondence, as described in his second amended petition, did not claim that his account was in error or request any correction thereto. Neither BANA nor BONY ever responded to McLaughlin's request for information.

The day after McLaughlin sent his correspondence to BANA, which was also the day before the scheduled foreclosure sale, McLaughlin filed a complaint to enjoin the foreclosure, see N.H. Rev. Stat. Ann. § 479:25, II, in the Cheshire County Superior Court. Judge Kissinger granted a temporary injunction. Then, respondents removed the case to this court. In his second amended petition, filed on October 28, 2014, McLaughlin asserts the following claims: Lack of Power and Authority to Foreclose - No Proof of "Blue-Ink" Note (Count I); Lack of Power and Authority to Foreclose - Bifurcation of Note and Mortgage (Count II); Lack of Power and Authority - MERS Had No Title to Transfer (Count III); Failure to Mitigate Losses (Count IV); and Violation of 12 U.S.C. § 2605(e) (Count V). McLaughlin seeks relief in the form of: (1) preliminary and permanent injunctions barring BANA and BONY from foreclosing on his mortgage; and (2) damages for BANA's violation of 12 U.S.C. § 2605(e).

II. Discussion

Respondents move to dismiss Counts I, II, and III on grounds of res judicata and collateral estoppel, and move to dismiss counts IV and V on grounds that neither states a claim upon which relief can be granted.

A. Counts I, II & III

Respondents argue that the claims stated in Counts I, II, and III are barred by res judicata and collateral estoppel. They base that argument on the outcome of the McLaughlins' second action, which resulted in the NHSC's affirmance of Judge Kissinger's dismissal (which was itself based upon the res judicata effect of Judge McAuliffe's dismissal of McLaughlin I). Counts I, II, and III are, indeed, barred by res judicata.

Under New Hampshire law, the doctrine of res judicata is well established.

"The doctrine of res judicata prevents the parties from relitigating matters actually litigated and matters that could have been litigated in the first action." Appeal of Morrissey, 165 N.H. 87, 92, 70 A.3d 465 (2013) (quotation omitted). "The doctrine applies if three elements are met: (1) the parties are the same or in privity with one another; (2) the same cause of action was before ...

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