United States District Court, D. New Hampshire
Norman Lombardo, et al.
Federal National Mortgage Association, et al.
REPORT AND RECOMMENDATION
K. Johnstone United States Magistrate Judge
plaintiffs, Norman and Kimberly Lombardo, brought this action
in state court against the defendants, Federal National
Mortgage Association (“Fannie Mae”) and Ditech
Financial LLC (“Ditech”), seeking to void a
foreclosure sale. The defendants removed the case to federal
court, and the plaintiffs subsequently amended their
complaint to include several additional counts under state
and federal law. Before the court for Report and
Recommendation is the defendants' motion to rescind
foreclosure sale and reinstate the mortgage. (Doc. no. 17.)
The plaintiffs object to rescission as requested by the
defendants. (Doc. no. 19.) The court held a hearing on
November 4, 2016. For the following reasons, the court
recommends that the district judge deny the defendants'
motion without prejudice.
March 17, 2016, Fannie Mae conducted a foreclosure sale and
agreed to purchase property in Derry, New Hampshire. At that
time, the plaintiffs held a mortgage to the property, but
were in default and pursuing a loan modification. The
plaintiffs contend that they accepted a loan modification
offer from the defendants prior to the foreclosure sale. The
defendants dispute this assertion.
March 30, 2016, the plaintiffs filed this action in state
court, seeking to void the foreclosure sale and prevent
Fannie Mae from recording the foreclosure deed. On that same
date, the state court issued an order temporarily enjoining
Fannie Mae from recording the foreclosure deed and permitting
the plaintiffs to record a lis pendens. The
plaintiffs recorded the lis pendens with the
registry of deeds on April 6, 2016. The foreclosure deed has
not been recorded.
defendants request that the court “exercise its
equitable powers and rescind the foreclosure sale, restore
the [m]ortgage to its pre-foreclosure priority, and dissolve
the lis pendens.” (Doc. no. 17, ¶ 14.) At
the hearing, the defendants contended, among other things,
that this relief is appropriate because it is consistent with
the plaintiffs' own request that the foreclose deed be
response, the plaintiffs contend that the defendants are not
entitled to rescission because they never requested such
relief in a counterclaim. The plaintiffs further argue that
rescission is not appropriate because there is a legitimate
factual dispute as to how to return the parties to the status
quo. The plaintiffs contend that this factual dispute is
central to the merits of their claims: namely, whether the
plaintiffs had properly and completely accepted a loan
modification offer from the defendants before the foreclosure
is an equitable remedy the granting of which is always a
matter within the sound discretion of the trial court,
depending upon the circumstances of each particular
case.'” Faiella v. Green Tree Servicing
LLC, No. 16-CV-088-JD, 2016 WL 4530452, at *1 (D.N.H.
Aug. 29, 2016) (quoting Ellis v. Candia Trailers &
Snow Equip., Inc., 164 N.H. 457, 462 (2012)).
order to rescind a transaction, “‘the court must
determine that the respective parties can be returned to the
status quo.'” Id. (quoting Derouin v.
Granite State Realty, Inc., 123 N.H. 145, 147 (1983)).
Such a determination “‘rests upon the relative
equities of the parties as determined by the trial
court.'” Id. (quoting Derouin,
123 N.H. at 147-48). “A court should grant rescission
‘only when in all the circumstances it appears right
and just to the parties to do so.'” Id.
(quoting Mooney v. Nationwide Mut. Ins.
Co., 149 N.H. 355, 357 (2003)).
present, the record is insufficiently developed for the court
to determine whether rescission would return the parties to
the status quo. The court therefore recommends that the
district judge deny the defendants' motion.
court recommends that this denial be without prejudice. If,
going forward, the defendants determine that a factual basis
has developed to support the rescission of the foreclosure
sale, the court recommends that they be allowed to renew
their request for such relief at that time. Similarly, should
the plaintiffs object to such a request, the court recommends
that they be allowed to re-raise, as part of their objection,
a contention that the defendants are not entitled to this
relief because they have not brought a claim against the
plaintiffs seeking rescission in this case. Finally, if the
parties reach a stipulation of specific facts supporting a
rescission of the foreclosure sale, the court recommends that
they be allowed to jointly move to rescind and submit the
stipulation in support of such a request. Absent a specific
factual basis for rescission, however, this court cannot
recommend that the district judge exercise his equity
authority to order this relief.
foregoing reasons, the court recommends that the district
judge deny the defendants' motion to rescind foreclosure
sale and restore mortgage (doc. no. 17) without prejudice.
Any objections to this Report and Recommendation must be
filed within fourteen days of receipt of this notice. See
Fed.R.Civ.P. 72(b)(2). Failure to file objections within the
specified time waives the right to appeal the district
court's order. See United States v. De