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McCarthy v. WPB Partners, LLC

United States District Court, D. New Hampshire

June 13, 2017

Mary Hersey McCarthy
WPB Partners, LLC Opinion No. 2017 DNH 118


          Landya McCafferty United States District Judge

         Mary Hersey McCarthy originally brought this lawsuit in state court, alleging eight claims against WPB Partners, LLC (“WPB”) that arose from WPB's foreclosure and sale of McCarthy's mortgaged property. WPB removed the case to this court and filed a motion to dismiss five of McCarthy's eight claims, which the court granted. See doc. no. 10. McCarthy filed an amended complaint asserting three claims, and WPB asserted two counterclaims against McCarthy, alleging that she breached the promissory note and the mortgage. McCarthy moves for summary judgment on her claim that WPB breached the mortgage (Count I) and on WPB's counterclaims. WPB objects to the motion for summary judgment.


         A movant is entitled to summary judgment if it “shows that there is no genuine dispute as to any material fact and [that it] is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). In reviewing the record, the court construes all facts and reasonable inferences in the light most favorable to the nonmovant. Kelley v. Corr. Med. Servs., Inc., 707 F.3d 108, 115 (1st Cir. 2013).


         Through a promissory note dated December 21, 2006, McCarthy, whose name was then Mary Hersey, borrowed $350, 000 from Investment Realty Funding, Inc. and signed a mortgage the same day to secure the loan. The mortgaged property was undeveloped land on Mirror Lake in Tuftonboro, New Hampshire. WPB acquired the note and mortgage in August 2009 after Investment Realty filed for bankruptcy protection.

         Under the terms of the note, the loan of $350, 000 was subject to an interest rate of 16.5%, with monthly payments of interest for three years. At the end of the three-year period, the entire balance became due, and the interest rate rose to 19.5%. In the event of late payments, a late charge of 10% of the amount overdue would be assessed.

         When the note matured on December 21, 2009, WPB demanded payment. McCarthy failed to pay, and WPB began foreclosure proceedings. The foreclosure sale was scheduled for October 22, 2010.

         I. Previous Litigation Regarding the Foreclosure

         On October 4, 2010, McCarthy filed an action in state court seeking an accounting from WPB and an ex parte temporary restraining order to prevent the foreclosure sale. The court did not enter the temporary restraining order to stop the foreclosure sale because that order would have expired on October 20, before the scheduled sale on October 22. Instead, the court ordered service on WPB and scheduled a hearing for October 20. Following the hearing, the court ruled that McCarthy had shown a likelihood of success on her claim that the lender (Investment Realty) breached the loan agreement and granted a preliminary injunction to stop the foreclosure sale.

         WPB removed the case to federal court on October 25 and moved to dismiss McCarthy's claims. See Hersey v. WPB Partners, LLC, 10-cv-486-LM (D.N.H. 2010). In response to the motion to dismiss, McCarthy acknowledged that she had not alleged facts sufficient to support several of her claims, including her claims for breach of contract, violation of RSA 397-A, or predatory lending. The court determined that it lacked jurisdiction over the case because the amount in controversy for McCarthy's claims seeking injunctive relief and an accounting did not meet the jurisdictional requirement of 28 U.S.C. § 1332(a). For that reason, on February 9, 2011, the court remanded the case to state court pursuant to 28 U.S.C. § 1447(c) and closed the case.

         Back in state court, McCarthy moved to amend her complaint, and WPB moved for leave to file a counterclaim. The state court granted both motions, allowing McCarthy to add some but not all of the claims she sought leave to add, and allowing WPB to bring a counterclaim for breach of contract based on the note. On April 29, 2011, WPB again removed the case to federal court because, in light of McCarthy's amended complaint and its counterclaim, the amount in controversy exceeded the jurisdictional requirement of § 1332(a). See Hersey v. WPB Partners, LLC, 11-cv-207-SM (D.N.H. 2011).[1]

         Once back in federal court, McCarthy requested and was granted leave to file a second amended complaint, in which she sought a temporary injunction against the foreclosure sale and alleged claims for violation of Massachusetts General Laws Ch. 255E (Count I); violation of the Massachusetts usury law, ch. 271:49 (Count II); violation of RSA 397-A and the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601, et seq. (Count III); and breach of contract based on both the note and mortgage (Count IV). WPB moved to dismiss the second amended complaint. On September 6, 2011, while the motion to dismiss was pending, McCarthy filed a notice that she had filed for bankruptcy relief under Chapter 13 in the bankruptcy court for the District of New Hampshire. See In re Mary Hersey McCarthy, 11-13342-JMD (Bankr. N.H. Apr. 6, 2012) (hereinafter, the “Bankruptcy Action”).

         On December 5, 2011, the court in McCarthy I issued an order acknowledging that under 11 U.S.C. § 362, the case was automatically stayed in light of the Bankruptcy Action. See McCarthy I, doc no. 30. The court ordered the bankruptcy trustee to file a motion for substitution of party or another appropriate pleading by January 13, 2012, or the claims would be dismissed for failure to prosecute. On January 18, 2012, after the bankruptcy trustee had failed to submit a filing within the time allowed, the McCarthy I court dismissed McCarthy's claims for failure to prosecute. See id., doc. no. 31.

         On April 6, 2012, the court in the Bankruptcy Action granted WPB's motion for relief from the automatic stay for the purpose of permitting the case in McCarthy I to proceed. In its order granting the motion, the bankruptcy court noted that the relief from the stay was “limited to that relief necessary to resolve the matters raised in that case, including determining the validity of Movant's mortgage and the amount, if any due thereunder.” Bankruptcy Action, doc. no. 93, filed in McCarthy I, doc. no. 33-1.

         On April 10, 2012, WPB moved in McCarthy I to reopen the case in light of the bankruptcy court's order granting WPB relief from the stay. The court in McCarthy I granted the motion to reopen the case. After first denying McCarthy's motion to reinstate her four claims asserted in the second amended complaint, the court reinstated the claims in light of the bankruptcy trustee's decision to abandon the property.

         On January 29, 2013, WPB moved to dismiss all of McCarthy's claims, and McCarthy objected. The court granted WPB's motion as to Counts I, III, and IV, but denied the motion as to Count II, the usury claim. WPB then filed an answer to McCarthy's second amended complaint.

         On October 22, 2013, WPB moved for summary judgment on McCarthy's remaining usury claim and filed a separate motion for summary judgment on its counterclaim for breach of contract based on the note.[2] McCarthy objected to both motions.

         On February 11, 2014, the court issued an order that granted WPB's motions for summary judgment on both McCarthy's usury claim and WPB's counterclaim for breach of contract. With respect to the damages due on WPB's counterclaim, the court explained as follows:

During the pretrial conference held on February 7, 2014, the court disclosed its intention to grant defendant'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 plaintiff's favor, and an amount based in substantial part on plaintiff's own expert's opinion. By agreeing to entry of judgment in that amount, less than it reasonably could expect, defendant pragmatically recognized that the property's value is ...

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