United States District Court, D. New Hampshire
Mark L. Dove and Kathleen M. Stavaski,
The Bank of New York Mellon and Select Portfolio Servicing, Inc. Opinion No. 2016 DNH 041
Joseph N. Laplante United States District Judge.
This case involves a challenge to a bank’s authority to foreclose on a mortgaged property in light of the mortgage assignment, as well as a pair of contract-based theories of relief. Plaintiffs Mark Dove and Kathleen Stavaski financed their home purchase through a mortgage. Some six years after falling behind in their payments, and after multiple foreclosure sales were scheduled and cancelled, the plaintiffs filed a six-count complaint against the lending bank and loan servicer, alleging that defendant The Bank of New York Mellon breached the mortgage contract and, under several theories, lacked authority to foreclose on their property. They also allege that the Bank and Select Portfolio Servicing, Inc. (“SBS”), the loan servicer, breached the covenant of good faith and fair dealing by attempting to foreclose instead of taking other routes to loss mitigation, such as modifying the plaintiff’s loan or accepting a short sale of the property. This court has jurisdiction over this matter under 28 U.S.C. § 1332 (diversity).
The defendants have moved to dismiss the plaintiff’s complaint. See Fed.R.Civ.P. 12(b)(6). After considering the parties’ written submissions,  and for the reasons discussed more fully below, the court grants the defendants’ motion.
I. Applicable legal standard
To survive a motion to dismiss under Rule 12(b)(6), the plaintiff must state a claim to relief by pleading “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Martinez v. Petrenko, 792 F.3d 173, 179 (1st Cir. 2015) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). In ruling on such a motion, the court accepts as true all well-pleaded facts set forth in the complaint and draws all reasonable inferences in the plaintiff’s favor. See, e.g., Martino v. Forward Air, Inc., 609 F.3d 1, 2 (1st Cir. 2010). The court “may consider not only the complaint but also facts extractable from documentation annexed to or incorporated by reference in the complaint and matters susceptible to judicial notice.” Rederford v. U.S. Airways, Inc., 589 F.3d 30, 35 (1st Cir. 2009).
The following factual summary adopts the approach described above. In 2005, the plaintiffs purchased a house, financing it through a mortgage from CTX Mortgage. Mortgage Electronic Registration Systems, Inc. (“MERS”) was designated the lender’s nominee. MERS then assigned the mortgage to the Bank and recorded the assignment in the appropriate registry of deeds on October 30, 2009.
A few months after the assignment, plaintiff Dove lost his job and the plaintiffs began to fall behind on their payments. They pursued loss mitigation efforts through JP Morgan Chase, who plaintiffs allege claimed to hold the note and mortgage at that time,  including an attempted short sale of the home in 2011, which fell through.
In early 2013, the plaintiffs received a letter warning them that the Bank was accelerating their loan. The letter, dated February 22, 2013, indicated that foreclosure proceedings were being initiated on the Bank’s behalf. In early March, the Bank scheduled and notified plaintiffs of a foreclosure sale. Plaintiffs, in turn, demanded verification of the debt. The Bank’s foreclosure counsel replied, enclosing copies of the note, the mortgage, the mortgage assignment, and plaintiffs’ payment history, and informing plaintiffs that they could contact Chase to discuss loan modification. The same counsel also produced the original note for inspection by plaintiffs’ then-counsel.
In September 2013, the Bank scheduled a foreclosure sale. Around the same time, SPS -- which by then serviced the loan --engaged plaintiffs in a discussion of foreclosure alternatives. Plaintiffs pursued those alternatives, completing a loan modification application and finding a cash buyer who was ready to purchase the home through a short-sale. SPS, the plaintiffs allege, then interminably delayed both the loan modification and short sale processes, and the Bank contributed to the delay of the short sale, to the extent that both foreclosure alternative options fell through.
The plaintiffs sued the Bank in Grafton County Superior Court on May 28, 2015, asking the court to enjoin the Bank from foreclosing on the property, to declare that the Bank lacked power to foreclose, and to grant plaintiffs’ attorneys’ fees. The Bank removed the case to this court, see 28 U.S.C. § 1441, citing the court’s diversity jurisdiction, and then moved to dismiss. Plaintiffs amended their complaint, adding (1) SPS as a defendant, (2) a claim for breach of the implied covenant of good faith and fair dealing, and (3) a request for damages arising out of plaintiffs’ claim for defendants’ breaches of contract and the implied covenant of good faith and fair dealing. Defendants again moved to dismiss.
A. Count I - Breach of contract (the Bank)
The plaintiffs first allege that the Bank breached the mortgage contract when someone else -- not the Bank -- sent them an acceleration notice. The mortgage contract provides: “Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument, ” and provides the requisite content of that notice. Defendants' Ex. B (document no. 10-3) ¶ 22. The plain language of Paragraph 22, the plaintiffs argue, requires the “lender” -- here, the Bank -- to send the notice. The Bank claimed to hold the note and mortgage at the time the notice was sent. Amended Compl. ¶ 61. But, plaintiffs allege, Chase sent the notice. Id. ...