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Lacourse v. Ocwen Loan Servicing, LLC

United States District Court, D. New Hampshire

April 7, 2015

Raymond J. LaCourse and Valerie LaCourse
Ocwen Loan Servicing, LLC and Altisource Residential Corp. Opinion No. 2015 DNH 077


LANDYA McCAFFERTY, District Judge.

In a case that has been removed from the Rockingham County Superior Court, Raymond and Valerie LaCourse have sued Ocwen Loan Servicing, LLC ("Ocwen") and Altisource Residential Corp. ("Altisource") in 11 counts, asserting claims arising out of their unsuccessful attempt to obtain a modification of their mortgage loan. Before the court is defendants' motion to dismiss plaintiffs' amended complaint for failure to state a claim upon which relief can be granted. See Fed.R.Civ.P. 12(b)(6). Plaintiffs object. For the reasons that follow, defendants' motion to dismiss is granted.

I. The Legal Standard

Under Rule 12(b)(6), the court must accept the factual allegations in the complaint as true, construe reasonable inferences in the plaintiff's favor, and "determine whether the factual allegations in the plaintiff's complaint set forth a plausible claim upon which relief may be granted." Foley v. Wells Fargo Bank, N.A., 772 F.3d 63, 71 (1st Cir. 2014) (citation omitted). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Analyzing plausibility is "a context-specific task" in which the court relies on its "judicial experience and common sense." Id. at 679.

II. Background

The factual background recited in this section is drawn from plaintiffs' first amended complaint.

In 2000, plaintiffs were granted a deed to a property in Chester, New Hampshire. In January 2011, they refinanced the mortgage that secured repayment of the loan they used to purchase that property.

In October 2011, plaintiffs did not make their scheduled mortgage payment. Three months later, they attempted to resume making their payments. Their mortgagee rebuffed that attempt and told plaintiffs that they were in default.[1]

Also in October 2011, plaintiffs filed for bankruptcy under Chapter 13. Four months later, "their Chapter 13 bankruptcy was converted to a Chapter 7 bankruptcy." First Am. Compl. (doc. no. 20) ¶ 21. Plaintiffs allege that their "mortgage debt was discharged in bankruptcy in or around June 2013, and [that their bankruptcy] case [was] closed in August 2013." Id . ¶ 22.

Later in their amended complaint, plaintiffs allege that they "discharged in bankruptcy their mortgage and other debts." Id . ¶ 46. While paragraph 46 could be read as alleging that plaintiffs' mortgage was discharged in bankruptcy, such a reading is inconsistent with plaintiffs' allegations that, after they emerged from bankruptcy in August 2013: (1) their "mortgage was transferred to Defendant Ocwen on September 16, 2013, "[2] id. ¶ 16; and (2) their "mortgage debt of $317, 886 was allegedly assigned [to Altisource] on or about January 7, 2014, " id. ¶ 23. Because an allegation that plaintiffs' mortgage was discharged in bankruptcy is inconsistent with plaintiffs' other allegations concerning their mortgage's post-bankruptcy existence, the court construes paragraph 46 as alleging only that plaintiffs' debt to their lender was discharged in bankruptcy, but not their mortgage.[3]

After they emerged from bankruptcy, plaintiffs applied to Ocwen for a mortgage modification.[4] In July 2014, Ocwen denied plaintiffs' application on grounds that their "debt to income ratio exceeded the percentage necessary [to qualify for a modification] and would create further hardship." First Am. Compl. ¶ 17. Plaintiffs' mortgage was still in foreclosure when they filed their amended complaint in September 2014.

At some point, Ocwen calculated plaintiffs' income to be at least $6, 619.42 per month. Plaintiffs, in turn, calculate their income to be at least $6, 698 per month. However, plaintiffs make no allegations about when Ocwen made those calculations, the circumstances under which it did so, or how they, plaintiffs, relied upon any representations Ocwen may have made concerning its calculations. Moreover, plaintiffs allege discrepancies between their income calculations and those made by Ocwen, but they make no similarly specific allegations concerning the parties' calculations of plaintiffs' debts. Finally, plaintiffs allege:

If [their] mortgage was modified to re-amortize over 30 years, at an interest rate of 4%, their total monthly mortgage payment, including principal, interest, taxes and insurance would be approximately $2, 224. Resulting in a Debt to Income ratio of about 33%.
Plaintiffs have sufficient income and it appears that they could pay their loan under a commercially reasonable modification.

First Am. Compl. ¶¶ 27-28.

On October 16, 2013, plaintiffs' attorney informed Ocwen that he represented plaintiffs with regard to their mortgage debt and that any further communications concerning that debt should be addressed to him.[5] After receiving the letter of representation described above, Ocwen sent plaintiffs two letters, one in October 2013, the other in December 2013.

With regard to Altisource's connection to the events giving rise to plaintiffs' claims, the introduction to their amended complaint alleges that

[t]he Note and Mortgage in question appear[ ] to have been transferred to Altisource Residential Corporation on or about January 17, 2014 when an Assignment of Mortgage from Bank of America, NA to "Christina Trust, A Division Of Wilmington Savings Fund Society, FSB, Not In Its Individual Capacity But As Trustee Of ARLP Trust 2, " was filed in the Rockingham County Registry of Deeds at Book 5508, Page 0818.

First Am. Compl. ¶ 3. The amended complaint's factual allegations mention Altisource three more times:

Defendant Altisource, through its agents, or predecessors in interest have wrongfully denied the plaintiffs' modification.
Ocwen acts with the [assent] of Altisource, for its benefit, and subject to its control.
All Counts apply to Ocwen and to Altisource through the theory of agency.

Id. ¶¶ 30, 39, 40. That is, plaintiffs' sole theory of liability against Altisource is vicarious liability for the actions of Ocwen.

Based upon the foregoing, plaintiffs assert that defendants are liable to them for: negligent misrepresentation (Count I); negligence (Count II); breach of the implied covenant of good faith and fair dealing (Count III); estoppel (Count IV); violation of the federal Fair Debt Collection Practices Act (Counts V, VI, and VII); violation of New Hampshire's Unfair, Deceptive or Unreasonable Collection Practices Act (Count VIII); violation of New Hampshire's Consumer Protection Act (Counts IX and X); and negligent infliction of emotional distress (Count XI).[6]

III. Discussion

Defendants move to dismiss on a variety of grounds. First, they argue that plaintiffs have failed to allege sufficient facts to connect Altisource to this matter. Next, they contend that plaintiffs have brought claims arising from things that took place during the course of the parties' settlement negotiations, which is impermissible under the rules of evidence. Then, they address plaintiffs' 11 counts individually, identifying ways in which each of them fails to state a claim upon which relief can be granted. In the discussion that follows, the court begins with defendants' two global arguments and then considers defendants arguments against each of plaintiffs' theories of recovery.

A. Altisource

Defendants first argue that plaintiffs have not adequately alleged facts to support any theory of liability against Altisource. The court does not agree.

To be sure, plaintiffs have not alleged sufficient facts to support any claim for direct liability against Altisource, nor have they attempted to do so. While questions concerning Altisource's relationship with Ocwen remain subject to litigation on summary judgment and/or at trial, plaintiffs adequately allege that: (1) by virtue of the January 2014 assignment, Altisource became their mortgagee; and (2) Ocwen serviced their mortgage for Altisource. That is sufficient to allege an agency relationship between Ocwen and Altisource that could make Altisource vicariously liable for actions undertaken by Ocwen during the course of servicing plaintiffs' mortgage. Thus, Altisource is not entitled to a blanket dismissal of plaintiffs' claims against it.

B. Rules of Evidence

Next, defendants argue that all the claims against them should be dismissed because: (1) plaintiffs originally filed this action in November 2013, and based their claims exclusively upon conduct by its former mortgagee, Bank of America; (2) plaintiffs' September 2014 amended complaint is based upon conduct by Ocwen that took place after this suit was first filed, and in the context of negotiations to settle the case; and (3) the rules of evidence (both federal and state), bar the introduction of evidence from settlement negotiation which, necessarily bars plaintiffs from basing legal claims on things that happened during the course of settlement negotiations. That argument, asserted without the benefit of any legal authority, is not persuasive.

A motion to dismiss tests the adequacy of a plaintiff's complaint. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Guerra-Delgado v. Popular, 774 F.3d 776, 780 (1st Cir. 2014). Defendants' argument does not test the adequacy of plaintiffs' amended complaint, but rather, is premised upon its own factual allegations concerning settlement negotiations between themselves and plaintiffs. If this case should happen to reach summary judgment or trial, then defendants are, of course, free to challenge the admissibility of various items of evidence on which plaintiffs may attempt to rely. But at this stage in the proceedings, the rules of evidence provide no basis for dismissing plaintiffs' claims.

C. Count I

Count I is plaintiffs' claim that defendants are liable to them for negligent misrepresentation because Ocwen told them that their "debt to income ratio exceeded the percentage necessary and would create further hardship." First Am. Compl. ¶ 45. That statement was false, plaintiffs contend, because they "discharged in bankruptcy their mortgage and other debts, " id. ¶ 46, and, as a consequence, "[u]pon information and belief Defendant Ocwen inappropriately included the Plaintiff[s'] discharged debt in [its] calculations, " id. ¶ 47. Plaintiffs do not, however, allege: (1) any specific discharged debt that Ocwen inappropriately included in its calculations;[7] or (2) the effect that resulted from including allegedly discharged debts in the calculation of their debt-to-income ratio. Ocwen is entitled to dismissal of Count I because plaintiffs' complaint does not adequately allege that they ever relied upon Ocwen's alleged misrepresentation of their debt-to-income ratio.

Under the common law of New Hampshire, the elements of a claim for negligent misrepresentation "are a negligent misrepresentation of a material fact by the defendant and justifiable reliance by the plaintiff." Wyle v. Lees, 162 N.H. 406, 413 (2011) (citing Snierson v. Scruton, 145 N.H. 73, 78 (2000)). Moreover, "[i]t is the duty of one who volunteers information to another not having equal knowledge, with the intention that he will act upon it, to exercise reasonable care to verify the truth of his statements before making them." Wyle, 162 N.H. at 413.

The principal problem with plaintiffs' negligentmisrepresentation claim is that they allege no facts concerning either action that Ocwen intended for them to take (or refrain from), or action that they actually took (or refrained from), in reliance upon the only statement alleged in Count I, i.e., Ocwen's statement about their debt-to-income ratio. Absent at least some direct or inferential factual allegation concerning the reliance element of plaintiffs' negligent-misrepresentation claim, Count I does not state a claim upon which relief can be granted against Ocwen. See Feingold v. John Hancock Life Ins. Co. (USA), 753 F.3d 55, 60 (1st Cir. 2014). And absent a sufficient allegation of Ocwen's direct liability, plaintiffs have necessarily failed to state a claim for vicarious liability against Altisource. Thus, both defendants are entitled to dismissal of Count I. See id.

Furthermore, while plaintiffs cite the rule that those with greater knowledge have a duty to verify the truth of statements they make to those with lesser knowledge, see First Am. Compl. ¶ 43, they allege no facts to support the proposition that they had less knowledge than Ocwen had concerning the subject matter of the statement at issue, which is the amount of their income and the effect of their bankruptcy discharge on the amount of their debts.

D. Count II

Count II is plaintiffs' claim that defendants are liable to them in negligence for engaging in essentially the same conduct that underlies Count I. Compare First Am. Compl. ¶¶ 45-47 with id. ¶¶ 54-56. Plaintiffs characterize that conduct as making "misrepresentations and omissions regarding and throughout the modification process." Id . ¶ 53. Defendants are entitled to ...

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