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Saunders v. First Magnus Financial Corp.

United States District Court, D. New Hampshire

July 16, 2018

Janet Saunders and Peter Saunders
First Magnus Financial Corp., et al.



         Plaintiffs Janet Saunders and Peter Saunders have sued numerous banks, bank officials, attorneys and other individuals and businesses challenging, inter alia, the legitimacy of the promissory note and mortgage executed (or, as they allege, purportedly executed) in 2005 in connection with their purchase of a home in Kingston, NH, the previous year. Their Amended Complaint asserts claims of conversion, unjust enrichment, intentional infliction of emotional distress as well as substantive RICO violations and a RICO[1] conspiracy claim against roughly 50 individual and corporate defendants and 39 “on-defendant parties.”

         Before the court are separate motions to dismiss filed by five groups of defendants.[3] After reviewing the parties' submissions and conducting oral argument, [4] the court finds that plaintiffs have failed to state a claim upon which relief can be granted. See Fed.R.Civ.P. 12(b)(6). Defendants' motions are therefore granted.

         I. Applicable legal standard

         To state a claim for relief and withstand a motion to dismiss, the plaintiff must plead “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). 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) (internal quotations omitted). The court “need not, however, credit bald assertions, subjective characterizations, optimistic predictions, or problematic suppositions, ” and “[e]mpirically unverifiable conclusions, not logically compelled, or at least supported, by the stated facts, deserve no deference.” Sea Shore Corp. v. Sullivan, 158 F.3d 51, 54 (1st Cir. 1998) (internal quotations omitted). Guided by these standards, the court turns to the operative Amended Complaint.

         II. Factual background

         The court previously found that plaintiffs' 451-page, 881 paragraph Verified Complaint violated Fed.R.Civ.P. 8(a)(2) and ordered plaintiffs to file a Complaint in conformance with the federal rules.[5] The plaintiffs did so in a timely manner.[6]While the latter document is the operative Complaint, the court has carefully reviewed the plaintiffs' original Complaint (doc. no. 1) and Verified Complaint in an abundance of caution in recognition of their pro se status. Moreover, as indicated in the opening paragraph of the operative Amended Complaint, the plaintiffs have incorporated by reference the “rejected” Verified Complaint. The court relies on that document, which it refers to as the “Verified Complaint, ” for certain background facts.

         The plaintiffs purchased a home in Kingston, New Hampshire, in 2004. In 2005, plaintiffs executed a mortgage and note for $392, 000.[7] Plaintiff Peter Saunders executed the mortgage but did not sign the note.[8] The lender was defendant First Magnus Financial Corp., [9] while the mortgage was held by Mortgage Electronic Registration Systems, Inc. (MERS).[10] In December 2009, MERS, on the lender's behalf, assigned the mortgage to Wachovia Bank, [11] which subsequently merged with defendant Wells Fargo.

         Janet Saunders fell behind on her repayment obligations in late 2009, and her modification requests were denied.[12] Wells Fargo then set a foreclosure date of December 27, 2010, in response to which plaintiffs moved to enjoin the foreclosure (in addition to seeking damages for other alleged Wells Fargo actions) in state Superior Court.[13] In separate orders in 2013 and 2014, the Superior Court dismissed all of plaintiffs' claims against Wells Fargo. Saunders v. Wells Fargo, N.A., No. 218-2010-CV-1457 (N.H. Super. June 12, 2013 and Feb. 6, 2014). The New Hampshire Supreme Court affirmed those rulings. Saunders v. Wells Fargo, 2015 WL 11071265 (Feb 12, 2015). In so doing, the Court described the Saunders's arguments as: 1) Wells Fargo lacked the right to foreclose; 2) MERS's assignment was voidable due to false and forged documentation; 3) the Saunders's were defrauded “right from the beginning of the contract”; and 4) extrinsic fraud voids the Superior Court judgment.

         Following the New Hampshire Supreme Court's decision, Wells Fargo again attempted to foreclose. Four days before the scheduled sale, the Saunders' gifted the property to a friend, Barbara Hagan. Nevertheless, Wells Fargo purchased the property at foreclosure, and, on March 31, 2016, served an eviction notice on plaintiffs.[14] Approximately two months later, the Saunders' filed suit in this court, which they voluntarily dismissed within a few months, and again filed suit in January 2017. The operative five-count amended complaint (doc. no. 82) was filed in August 2017. The Complaint, though presumably filed in good faith by the pro se plaintiffs, is essentially a “[50-page and originally a 451-page] hodge podge of conclusory allegations about the process of securitizing . . . mortgages and reselling them to investors.” See Lariviere v. Bank of N.Y. as Tr., No. CIV.9-515-P-S, 2010 WL 2399583, at *4 (D. Me. May 7, 2010), report and recommendation adopted, No. CIV.09-515-P-S, 2010 WL 2399556 (D. Me. June 11, 2010).

         III. Analysis

         Much of the operative Amended Complaint, [15], the Verified Complaint, [16] and plaintiffs' specific allegations have been difficult for the court to comprehend and accordingly, to evaluate for sufficiency under Rule 12(b)(6). In an abundance of caution, and in deference to plaintiffs' pro se status, the court has taken these claims at face value, and evaluates them as they are named and characterized by the plaintiffs: claims of 1) conversion; 2) unjust enrichment; 3) intentional infliction of emotional distress; and 4) civil RICO.

         A. Conversion (Count 1)

         “Conversion is an intentional exercise of dominion or control over a chattel which so seriously interferes with the right of another to control it that the actor may justly be required to pay the other the full value of the chattel.” Muzzy v. Rockingham Cty. Trust Co., 113 N.H. 520, 523 (1973). “The gist of the action of conversion is the proof of wrongful deprivation of property to one entitled to possession.” Pac. & Atl. Shippers, Inc. v. Schier, 109 N.H. 551, 554 (1969).

         Plaintiffs claim that the defendants all played a role in converting the note Janet Saunders signed in 2005.[17] The basis of their claim is that by “securitizing”[18] the note, the defendants converted Janet Saunders's property.[19] The Saunders's conversion claim fails for two reasons: (1) because the mortgage -- signed by both plaintiffs -- explicitly states that it and the note can be sold; and (2) because the execution of a promissory note does not confer a right of possession to personal property during the pendency of the underlying debt, thus rendering a conversion of the note legally impossible under the facts alleged here.

         As to the first point, the mortgage contains the following provision: “The Note or a partial interest in the Note (together with [the Mortgage]) can be sold one or more times without prior notice to Borrower.”[20] Thus, even if the court were to accept the dubious proposition that the sale of the note was a “deprivation of property, ” it was not “wrongful” according its own terms.

         Next, and more fundamentally, a conversion claim does not lie under these facts, as courts have repeatedly rejected the Saunders's claim of right to possession of the note or that securitization somehow invalidates the obligation contained therein. See, e.g., Bukhari v. T.D. Serv. Co., No. 2:10-cv-000578-GMN-PAL, 2010 WL 2762794, *5 (D. Nev. July 13, 2010) (“Plaintiff's conversion claim is without merit. . . . [H]e was the maker of the promissory note.... As to [him], the promissory note therefore represented an obligation, not property or a right, and it is legally impossible for any action with respect to the promissory note to constitute conversion of anything owned by [him].”); Feller v. Indymac Mtg. Servs., No. 09-5720 RJB, 2010 WL 342187, *3 (W.D. Wash. Jan. 26, 2010) (holding that plaintiff failed to state a claim for conversion of a promissory note by her lender because “she has an obligation to pay the bearer of the note, which was IndyMac . . . The note is not property of the Plaintiff.”); Rieger v. Wells Fargo Bank, N.A., No. 3:13-CV-00749 JSC, 2013 WL 3835815, *7 (N.D. Cal. July 23, 2013) (quoting Bukhari and stating “[t]he same is true here”); see also, Andersen v. LaSalle Bank, N.A., No. 15-30107-MGM, 2016 WL 3093375 at *5 (D. Mass. June 1, 2016) (Mastroianni, J.); (“While securitization has many consequences, it did nothing to affect Plaintiff's rights and obligations under the Note and Mortgage.”); Orellana v. Deutsche Bank Nat'l Trust Co., No. 12-11982-NMG, 2013 WL 5348596 at *4 (D. Mass. Aug. 30 2013) (Boal, Mag. J.) (“[S]ecuritization by itself does not render a foreclosure invalid. . . . Orellana does not allege that he made unsuccessful attempts to pay down his loan, and fails to cite to any authority in support of his legal theories . . . Accordingly, the securitization of Orellana's note, by itself, does not support a claim for wrongful foreclosure.”) (Report and Recommendation adopted by Gorton, J., Sept. 20, 2013). Plaintiffs provide no contrary authority.

         On the facts alleged, no conversion occurred as a matter of law. Accordingly, Count 1 must be dismissed.[21]

         B. Unjust enrichment (Count 2)

         In Count 2, plaintiffs claim that “every iota of compensation earned by any Party - be it direct fee, referral fee, commission or override - who participated, directly or indirectly, in Plaintiffs' transaction - constituted unjust enrichment.”[22]

         “Unjust enrichment is an equitable remedy, found where an individual receives ‘a benefit which would be unconscionable for him to retain.'” Clapp v. Goffstown Sch. Dist., 159 N.H. 206, 210 (2009)(quoting Kowalski v. Cedars of Portsmouth Condo Ass'n, 146 N.H. 130, 133 (2001)) (emphasis in original). Plaintiffs' claim suffers from two legal defects and must be dismissed.

         First, the Saunders's unjust enrichment claim is premised on their conversion claim, which the court has already found to be legally insufficient. See Amended Complaint, doc no. 82, ¶ 66 (“Unjust enrichment has occurred specifically as a result of multiple acts of conversion . . . .”). Again, on the facts alleged, no conversion occurred as a matter of law.

         Next, under New Hampshire law, the court “cannot allow recovery under a theory of unjust enrichment when there is a valid, express contract covering the subject matter at hand.” Axenics, Inc. v. Turner Constr. Co., 164 N.H. 659, 669-70 (2013). Here, the parties' relationship is based on, and is governed by, the terms of the mortgage and note, pursuant to which, as previously noted, “[t]he Note or a partial interest in the Note (together with [the Mortgage]) can be sold one or more times without prior notice to Borrower.”[23] Thus, not only is there a contract governing the parties' mortgage loan-related relationship, the express language of that contract undercuts any claim of unconscionability on the part of any other defendant involved in the securitization of the Saunders's mortgage. And while the plaintiffs argue that any purported contract was void ab initio due to the lender's fraudulent failure to disclose that their mortgage would be unlawfully converted through securitization, the court has already concluded that on the facts alleged, there was no conversion as a matter of law.[24] Count 2 is therefore dismissed.

         C. Intentional infliction of emotional distress (Count 3)

         Plaintiffs next claim that the defendants intentionally caused them severe emotional distress by engaging in foreclosure-related actions despite having no legal right to do so.[25]

         In order to set forth a claim for intentional infliction of emotional distress, a plaintiff must allege that a defendant “by extreme and outrageous conduct, intentionally or recklessly cause[d] severe emotional distress to another.” Morancy v. Morancy,134 N.H. 493, 496 (1991) (quotation omitted). “In determining whether conduct is extreme and outrageous, it is not enough that a person has acted with an intent which is tortious or even criminal, or that he has intended to inflict emotional distress, or even that his conduct has been characterized by malice.” Mikell v. Sch. Admin. Unit No. 33, 158 N.H. 723, 729 (2009) (citation and quotations omitted). Rather, “[l]iability has been found only where the conduct has been so outrageous in character, and so extreme ...

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