LANDYA McCAFFERTY, District Judge.
In a case that was removed from the New Hampshire Superior Court, Cheshire County, John Riggieri brings suit against Caliber Home Loans, Inc. ("Caliber"), Ocwen Loan Servicing, LLC ("Ocwen"), and U.S. Bank Trust, N.A. ("U.S. Bank"), alleging that defendants made misrepresentations in connection with a proposed loan modification offer. Riggieri also alleges that defendants generally acted in bad faith, and that their conduct resulted in a foreclosure auction at which his home was sold below market value.
Defendants move to dismiss under Federal Rule of Civil Procedure 12(b)(6), contending that the complaint fails to state a claim. Riggieri objects. For the reasons that follow, defendants' motions to dismiss are granted.
Under Rule 12(b)(6), 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."
In 2002, John Riggieri purchased a plot of land in Marlborough, New Hampshire (the "property"). On November 30, 2006, Riggieri and his then-wife, Nancy Gaunya, executed a promissory note in favor of Countrywide Home Loans, Inc. ("Countrywide") in the amount of $604,000 to finance the construction of a home on the property (the "note").
On June 9, 2009, Riggieri, Gaunya, and Countrywide entered into a "Modification of Note and Security Instrument," which amended certain of the note's terms (the "modified note").
Riggieri alleges that in September 2009 "there was a discrepancy in [his] escrow account." Doc. no. 17 at ¶ 18. As a result of the discrepancy, Harmon Law Offices began foreclosure proceedings on the property in November 2011. Riggieri alleges that he entered into a loan modification agreement and the foreclosure did not occur.
In August 2012, Bank of America, which had been the loan servicer, transferred servicing responsibilities to Ocwen. On September 14, 2012, Ocwen mailed Gaunya a letter, noting that she was approved to enter a new modification program which would reduce her principal balance and monthly mortgage payment (the "Ocwen letter").
Riggieri alleges that he did not become aware of the Ocwen letter until early 2013, well after the deadline for acceptance.
In February 2014, Ocwen began foreclosure proceedings on the property. Riggieri alleges that the foreclosure proceedings ended after he requested that Ocwen produce the original promissory note, and it could not.
In June 2015, Ocwen transferred servicing responsibilities on the loan to Caliber. Upon receiving notice of the transfer, Riggieri requested that Caliber honor the offer made in the Ocwen letter. Caliber refused to adjust the loan amount or Riggieri's interest rate. Shortly thereafter, Caliber mailed a notice of foreclosure to Riggieri and published a notice of foreclosure in the Manchester Union Leader. Riggieri alleges that at the time the foreclosure notice was mailed, he was traveling on a 27-day trip. Riggieri alleges that he had the post office put his mail on hold while he was traveling, from October 29 through November 23, 2015 and, therefore, did not receive notice of the foreclosure sale, which took place on the day he returned from the trip.
Both the mailed notice and the notice published in the Manchester Union Leader listed the property's address as "38 Shaker Farm Road, Marlborough, NH 03455," the same address that is listed in the mortgage, the note, and the modified note. Riggieri alleges that the property's actual address is "38 Shaker Farm Road South, Marlborough, NH 03455," which was the address listed in the Ocwen letter. Riggieri also alleges that the auctioneer at the foreclosure sale "admitted that all parties were unable to find the property initially," which Riggieri believes was caused by the incorrect address being listed in the notice. Doc. no. 17 at ¶ 48.
U.S. Bank, which held the mortgage at the time of the foreclosure, purchased the property at the foreclosure sale. According to the foreclosure deed, U.S. Bank purchased the property for $379,677.01.
Riggieri filed this lawsuit in state court on December 21, 2015. Defendants removed the case to this court on January 20, 2016, and moved to dismiss the complaint. Riggieri subsequently amended the complaint, and defendants move to dismiss the amended complaint. Riggieri objects.
Riggieri asserts five claims: (i) negligent misrepresentation; (ii) breach of the covenant of good faith and fair dealing; (iii) unjust enrichment; (iv) negligent infliction of emotional distress; and (v) "standing." Riggieri does not specify against which defendant he brings each claim, although he appears to allege that Caliber and U.S. Bank should be held liable for any of Ocwen's unlawful activity because they are "successors in interest" to Ocwen. Defendants move to dismiss all claims.
Riggieri alleges that Ocwen is liable for negligent misrepresentation because the Ocwen letter was "unbelievable" and offered "an extremely short timeline for acceptance." Doc. no. 17 at ¶ 60. Riggieri alleges that Caliber is liable for negligent misrepresentation because it "negligently failed to properly describe the property in the notice of foreclosure."
Under New Hampshire common law, the elements of a claim for negligent misrepresentation "are a negligent misrepresentation of a material fact by the defendant and justifiable reliance by the plaintiff."
Riggieri's complaint does not allege facts sufficient to support a claim for negligent misrepresentation based on the Ocwen letter. Other than vague and conclusory allegations that the letter was "misleading" or "worded . . . to avoid responses from consumers," doc. no. 17 at ¶¶ 62-63, Riggieri does not allege any facts to show a misrepresentation in the letter. To the contrary, Riggieri appears to allege that the offer contained in the letter was legitimate, because Ocwen was forced to offer a reduction on the loan as a result of its settlement with the Department of Justice.
Even if Riggieri had alleged a misrepresentation based on wording in the letter, the complaint fails to allege any justifiable reliance on such a representation. Indeed, Riggieri alleges that he did not discover the letter until several months after the deadline for responding had passed.
In addition, even if Riggieri's allegations were sufficient to support a negligent misrepresentation claim, the claim would nonetheless be barred by the economic loss doctrine. Under New Hampshire law, the contractual relationship between a lender and borrower typically precludes recovery in tort.
"There is no question that New Hampshire recognizes an exception to the economic loss doctrine for certain negligent misrepresentation claims."
The facts alleged in the complaint show that the economic loss doctrine applies to Riggieri's negligent misrepresentation claim based on the Ocwen letter. Riggieri does not allege that Ocwen voluntarily engaged in activities beyond those traditionally associated with the normal role of a money lender.
Although Riggieri asserts that Ocwen is in "the business of supplying information"
Therefore, even if Riggieri had plausibly alleged a claim for negligent misrepresentation based on the Ocwen letter, which he has not, the economic loss doctrine bars that claim.
Riggieri alleges that Caliber misrepresented the property's address in the notice of foreclosure, and that it improperly added fees and costs to Riggieri's loan. Neither allegation is sufficient to plead a claim for negligent misrepresentation.
Even assuming the truth of the allegation that Caliber misrepresented the property's address on the notice of foreclosure,
Riggieri's allegation concerning added fees is also insufficient to survive a motion to dismiss. Riggieri does not explain how the late fees could be considered a misrepresentation. Moreover, Riggieri alleges that he "was behind on his mortgage payments for 2300 days." Doc. no. 17 at ¶ 95. Pursuant to the terms of the mortgage, the lender was entitled to charge Riggieri additional fees and costs.
Accordingly, Riggieri's claim for negligent misrepresentation is dismissed.
Riggieri alleges that Ocwen violated the implied covenant of good faith and fair dealing in the mortgage agreement by sending him the allegedly misleading Ocwen letter. Riggieri also alleges that "defendants" breached the implied covenant in various ways, including by (i) keeping Riggieri "uninformed and off track with his loan," (ii) "moving to foreclose without. . . proper notice," (iii) "auctioning the . . . Property for substantially less than the property is worth," (iv) "failing to properly describe the property" in the foreclosure notices published in the Manchester Union Leader, (v) "add[ing] interest, late payments, and other fees" to Riggieri's loan, and (vi) accelerating Riggieri's loan and foreclosing on the property arbitrarily and without proper explanation. Doc. no. 17 at ¶ 85;
Under New Hampshire law, the implied covenant of good faith and fair dealing applies in three different contractual contexts: contract formation, termination of at-will contracts, and discretion in contract performance.
Riggieri argues that the Ocwen letter was misleading and that Ocwen failed to follow up with him after he did not respond in a timely manner, to ensure that he took advantage of the loan modification offer. Riggieri contends that these actions constitute a breach of the implied covenant of good faith and fair dealing in the mortgage agreement.
As discussed above, Riggieri has not adequately alleged that the Ocwen letter was misleading in any way. Regardless, "[c]ourts have generally concluded . . . that the covenant of good faith and fair dealing in a loan agreement cannot be used to require the lender to modify or restructure the loan." Moore, 848 F. Supp. 2d at 130;
Therefore, to the extent Riggieri attempts to base his breach of the implied covenant of good faith and fair dealing claim on the Ocwen letter or Ocwen's failure to offer him a loan modification in general, that claim is dismissed.
Riggieri alleges that defendants kept him "uninformed and off track with his loan." Doc. no. 17 at ¶ 85(a). Riggieri does not explain how any defendant withheld information from him or got him "off track" with his loan. These bare allegations are insufficient to state a plausible breach of the implied covenant of good faith and fair dealing by any defendant.
Riggieri alleges that defendants breached the implied covenant of good faith and fair dealing because he did not receive actual notice of the foreclosure prior to the sale. Riggieri alleges, however, that he did not receive notice prior to the foreclosure because he had taken a 27-day trip and asked the post office to hold his mail during that time.
Further, Riggieri does not explain how his lack of receipt of prior notice of the foreclosure sale could give rise to a claim for breach of the implied covenant of good faith and fair dealing. The mortgage states that the manner in which the lender must provide the borrower with notice of a foreclosure is "prescribed by Applicable Law." Doc. no. 20-3 at ¶ 22. New Hampshire law "requires that the foreclosing party send notice to the mortgagor's last known address by registered or certified mail at least twenty-five days before the sale."
Therefore, Riggieri's alleged lack of actual notice does not give rise to a claim for breach of the implied covenant of good faith and fair dealing.
Riggieri alleges that the property was auctioned off "for substantially less than the property is worth." Doc. no. 17 at ¶ 85(c). Although not specifically alleged in the complaint, the foreclosure deed, which was attached to another motion filed by Caliber and U.S. Bank, shows that U.S. Bank purchased the property for $379,677.01.
Riggieri offers no support for his theory that the implied covenant of good faith and fair dealing in a mortgage agreement requires a certain sale price at a foreclosure auction. Outside of the mortgage agreement, a mortgagee has a common law duty to make a reasonable effort to obtain a fair price.
In addition, Riggieri fails to provide factual allegations to support any claim that the sales price was too low. His complaint, therefore, is insufficient to allege bad faith.
Therefore, the complaint does not state a claim for breach of the implied covenant of good faith and fair dealing based on the purchase price at the foreclosure sale.
Riggieri alleges that Caliber inaccurately listed the property's address in the notice of foreclosure published in the Manchester Union Leader.
Riggieri alleges that Caliber "negligently failed to properly describe the property in the notice of foreclosure." Doc. no. 17 at ¶ 67. As discussed above, the duty of good faith and fair dealing applies when a party unreasonably exercises discretion granted to it in an agreement. Riggieri does not identify the portion of the mortgage agreement that confers discretion upon the mortgagor with respect to properly advertising or providing accurate notice of the foreclosure sale.
Riggieri alleges that defendants have "continued to add interest, late payments, and other fees to [his] loan," doc. no. 17 at ¶ 85(e), in violation of the implied covenant of good faith and fair dealing. The terms of the mortgage provide that failure of the borrowers to make their required monthly mortgage payments permits the lender to collect late fees and interest. Riggieri alleges that he was more than six years late on his mortgage payments, and does not allege that defendants added any fees prior to his default. Therefore, based on the allegations in the complaint and the express terms of the mortgage agreement, defendants were entitled to charge Riggieri fees and interest after he was in default.
Accordingly, Riggieri's allegations based on fees and interest are insufficient to state a claim for breach of the implied covenant of good faith and fair dealing in the mortgage agreement.
Riggieri alleges that defendants breached the implied covenant of good faith and fair dealing "[b]y failing to accelerate or start foreclosure proceedings for such an extended period. . . ." Doc. no. 17 at ¶ 97. Riggieri admits he was in default for more than six years and lays blame on defendants for waiting so long to foreclose. Nothing in the terms of the mortgage requires the mortgagee to foreclose immediately upon the mortgagor's default. Moreover, it is difficult to see how the mortgagee's forbearance in exercise of its right to foreclose in this case could constitute a breach of the duty of good faith and fair dealing.
In sum, none of Riggieri's allegations is sufficient to state a plausible claim for relief against any defendant for breach of the implied covenant of good faith and fair dealing in the mortgage agreement. Accordingly, Riggieri's claim based on the implied covenant is dismissed.
Riggieri alleges that U.S. Bank "has been unjustly enriched by [the] reduced purchase price as they purchased a home for way less than the home is worth" after providing improper notice of the foreclosure. Doc. no. 17 at ¶ 104.
"The doctrine of unjust enrichment is that one shall not be allowed to profit or enrich himself at the expense of another contrary to equity."
In the context of a foreclosure sale, a claim for unjust enrichment may be viable, despite the mortgage agreement, if the defendant obtained title to the property based on impropriety or misconduct in the foreclosure proceeding.
In addition, even if the claim were not precluded by the mortgage agreement, to the extent Riggieri relies on the value of the property as a basis for unjust enrichment, he does not allege facts to show that U.S. Bank received an unconscionable benefit. Through the original loan, on November 30, 2006, Riggieri and Gaunya received $604,000. By September 2012, the amount due on the loan was $609,000. When the property was sold at the foreclosure sale, Riggieri had not made mortgage payments for more than six years. The property was sold to U.S. Bank for $379,677.01.
Riggieri does not allege that the sale price is less than the fair market value of the property, much less that the fair market value exceeds the amount due on the mortgage. He also does not allege that U.S. Bank is seeking to recover any deficiency from him.
Riggieri alleges that "Defendants have made various negligent misrepresentations to the Plaintiff," doc. no. 17 at ¶ 109, which led to physical injuries, such as loss of appetite, upset stomach, sleeplessness, and severe mental anguish.
To make out a negligent infliction of emotional distress claim, the plaintiff must show: "(1) causal negligence of the defendant; (2) foreseeability; and (3) serious mental and emotional harm accompanied by objective physical symptoms."
Riggieri alleges that the "Defendant" did not have standing to foreclose on the property because Ocwen could not produce the original note when Riggieri requested it. Although New Hampshire law does not recognize a cause of action of "standing," it appears that Riggieri is attempting to allege a claim for wrongful foreclosure based on the fact that Ocwen did not produce the original note when he requested it, in 2014, long before the foreclosure sale in November 2015.
U.S. Bank held the mortgage at the time of the foreclosure. Under the terms of the mortgage agreement, U.S. Bank had "the authority, as agent of the noteholder, to exercise the power of sale."
Accordingly, defendants are entitled to dismissal of Riggieri's complaint.
For the foregoing reasons, defendants' motions to dismiss (doc. nos. 20 and 21) are granted.
While the motions to dismiss were pending, Caliber and U.S. Bank filed a motion seeking a declaration that the inadvertent recording of the foreclosure deed is void, pending the outcome of this litigation (doc. no. 32). In light of this order, which disposes of this litigation, the motion (doc. no. 32) is terminated as moot.
The clerk of court is directed to enter judgment accordingly and close the case.
SO ORDERED.
