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McCarthy v. WPB Partners LLC

United States District Court, D. New Hampshire

July 26, 2016

Mary Hersey McCarthy
v.
WPB Partners, LLC Opinion No. 2016 DNH 122

          ORDER

          Landya McCafferty Judge.

         In a case that has been removed from the Strafford County Superior Court, Mary Hersey McCarthy has sued WPB Partners, LLC (“WPB”) in eight counts. Her claims arise from the manner in which WPB conducted a foreclosure sale of a property that she had mortgaged to secure the repayment of a loan. Before the court is defendant’s motion to dismiss five of plaintiff’s eight claims. Plaintiff objects. The court heard oral argument on defendant’s motion on July 8, 2016. For the reasons that follow, defendant’s motion to dismiss is granted.

         I. The Legal Standard

         Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, 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 facts recited in this section are drawn from plaintiff’s complaint or from court documents incorporated by reference therein. See Foley, 772 F.3d at 71-72 (citing Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993)).

         On December 21, 2006, McCarthy received a loan of $350, 000 from Investment Realty Funding, Inc. (“IRF”). In a promissory note, McCarthy agreed to repay the loan in 36 months, at an interest rate of 16.5 percent. The note also provides: (1) “The Borrower represents to the Lender that the proceeds of this Note will not be used for personal, family, or household purposes, ” doc. no. 9-1, at 5 of 15; and (2) “THIS PROMISSORY NOTE IS FOR BUSINESS PURPOSES ONLY, ” Id. at 6 of 15.

         McCarthy defaulted on her obligation to repay the loan. In response, WPB, which had acquired the note and the mortgage, initiated foreclosure proceedings. McCarthy sued WPB in state court to enjoin the foreclosure sale.[1] WPB asserted a counterclaim for breach of contract, based upon McCarthy’s failure to make the payments required by the promissory note. WPB removed the case to this court, where it was assigned to Judge McAuliffe and docketed as 11-cv-207-SM. As McCarthy and WPB were litigating 11-cv-207-SM, McCarthy declared bankruptcy, and WPB’s counterclaim was stayed for about six months.

         After 11-cv-207-SM was reopened, [2] Judge McAuliffe dismissed most of McCarthy’s claims and granted WPB summary judgment on the one claim that he had not dismissed. In addition to granting WPB summary judgment on McCarthy’s claim, Judge McAuliffe also granted WPB summary judgment on its counterclaim for breach of contract and awarded $433, 433.03[3] in liquidated damages.

         In its motion for summary judgment, WPB asserted that “[t]he amount due and payable under the Promissory Note including principal and accrued interest is currently $558, 048.49 as of July 31, 2012 with interest accruing at the per diem rate of $186.99.” Hersey, doc. no. 53-1, at 5. Judge McAuliffe characterized the amount of liquidated damages he awarded this way:

During the pretrial conference held on February 7, 2014, the court disclosed its intention to grant [WPB’s] motions for summary judgment. Following a discussion with respect to the existence of any material dispute related to calculating the liquidated damages amount, the parties agreed that the amount of $443, 443.03, as of September 6, 2011 (a date contemporaneous with the filing of the bankruptcy petition) would be appropriate. That amount represents a calculation decidedly in [McCarthy’s] favor, and an amount based in substantial part on [McCarthy’s] own expert’s opinion. By agreeing to entry of judgment in that amount, less than it reasonably could expect, [WPB] pragmatically recognized that the property’s value is substantially less than the judgment amount, and no useful purpose would be served by the expenditure of additional time and resources to arrive at a higher, more accurate, but unimportant figure.

         Hersey, doc. no. 64, at 4-5.

         Next, WPB moved the Bankruptcy Court for “relief from the automatic stay of 11 U.S.C. § 362(d)(1) and (2) [in order] to proceed against the [mortgaged] Property.” Hersey, doc. no. 77-2, at 2 of 9. In her complaint in this case, McCarthy makes the following allegations concerning the hearing the Bankruptcy Court held on WPB’s motion:

20. . . . [WBP] argued that its secured claim at the time of the November 20, 2014 hearing totaled approximately $672, 079.24, including principal, interest, attorney’s fees, and costs, with a continuing per diem increase of $183.30.
21. [WPB] failed to represent to the Bankruptcy Court that its judgment in [11-cv-207-SM] on the Plaintiff’s debt under the promissory note was limited to $433, 433.03.
23. The Bankruptcy Court made no mention in its Order of the . . . judgment amount [in 11-cv-207-SM] of $433, 433.03.

         Doc. no. 1-1, at 4 of 14.

         In his order on WPB’s motion, Judge Deasy described WPB’s secured claim this way:

WPB’s managing member testified as to the amount of the secured claim that WPB has against the Property. On the day of the hearing, November 20, 2014, the claim totaled $672, 079.24, including principal, interest, attorney’s fees, and costs. The per diem increase on this claim is $183.30, which amounts to about $5, 500 a month ($180.30 * 30 days = $5, 499). The Debtor presented no evidence to the contrary. The Court, accordingly, accepts WPB’s accounting of its secured claim for the purpose of the Motion.

         Hersey, doc. no. 77-2, at 4 of 9 (emphasis added). There is nothing in the record before this court to suggest that WPB’s managing member disclosed to the Bankruptcy Court the amount of the judgment WPB won in 11-cv-207-SM. But, at the same time, Judge Deasy’s statement that McCarthy offered no evidence to counter the testimony introduced by WBP suggests that despite having had the opportunity to do so, McCarthy did not inform the Bankruptcy Court of the amount of WPB’s judgment against her.

         At the hearing in the Bankruptcy Court, WPB’s appraiser valued the mortgaged property at $535, 000. McCarthy’s appraiser valued it at $900, 000. Judge Deasy pegged the fair market value of the property at $705, 000.

         Taking into account both the amount of WPB’s secured claim ($672, 079.24) and the value of the mortgaged property ($705, 000), Judge Deasy determined that “[a]s of the [date of the] hearing, WPB had an equity cushion of slightly less than 5%.” Hersey, doc. no. 77-2, at 9 of 9. On that basis, he found that WPB had “proven that it lack[ed] adequate protection with regard to its secured claim.” Id. Accordingly, he granted WPB’s motion for relief from the stay and authorized WPB to “pursue its remedies against the Property.” Id. WPB conducted a foreclosure sale in March of 2015. WPB was the high bidder, and it purchased the property for $500, 000.

         In May of 2015, WPB filed a motion in 11-cv-207-SM asking Judge McAuliffe to grant a post-judgment attachment on McCarthy’s real and personal property, in order to protect its ability to collect the difference between the $500, 000 it received at the foreclosure sale and the amount it claimed it was then owed by McCarthy, $757, 486.79.[4] Judge McAuliffe denied WPB’s motion, noting that the motion itself “suggest[ed] that the foreclosure sale resulted in a monetary recovery that exceeded the judgment amount.” Hersey, doc. no. 91. Judge McAuliffe also noted that $433, 433.03 was “the amount [WPB’s] counsel specifically agreed to accept as the judgment amount in lieu of proving up damages at the time summary judgment was entered, ” and stated that it was “far too late for counsel or defendant to reconsider that reasonable choice.” Id.

         This action followed. In it, McCarthy asserts claims for breach of contract (Count I); breach of the duty of due diligence (Count II); breach of the duty of good faith (Count III); violation of the New Hampshire Unfair, Deceptive, or Unreasonable Collection Practices Act (“UDUCPA”), N.H. Rev. Stat. Ann. (“RSA”) ch. 358-C (Count IV); violation of the New Hampshire Consumer Protection Act (“CPA”), RSA ch. 358-A (Count V); violation of the federal Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq. (Count VI); negligent misrepresentation (Count VII); and enhanced compensatory damages (Count VIII).

         III. Discussion

         WPB moves to dismiss Counts IV through VII for failure to state a claim upon which relief may be granted, and moves to dismiss Count VIII on grounds that enhanced compensatory damages is not a cause of action. The parties have agreed to the dismissal of Count VIII. In the discussion below, the court considers each of the claims that McCarthy asserts in Counts VI through VII.

         A. Count IV: RSA 358-C

         In Count IV, McCarthy asserts that WPB violated RSA 358-C:3, VII, by failing to tell the Bankruptcy Court the amount of its judgment against her and by telling the Bankruptcy Court that she owed it $672, 079.24, rather than the $433, 433.03 that Judge McAuliffe had awarded in 11-cv-207-SM. She further asserts that WPB violated RSA 358-C:3, VIII, by improperly representing “to the Bankruptcy Court that its secured claim against [her] was subject to increase for ongoing attorney’s fees, despite the claim in fact being limited to the discrete amount of $443, 443.03.” Doc. no. 1-1, at 9 of 14. Defendant moves to dismiss Count IV, arguing that: (1) plaintiff has not adequately alleged that it, WPB, is a debt collector, as that term is defined in the ...


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