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MOORE v. MERS | NH Dist. Court “defendants do not possess the note, and it is enforcement of the note which the Moores seek to avoid”

MOORE v. MERS | NH Dist. Court “defendants do not possess the note, and it is enforcement of the note which the Moores seek to avoid”

Angela Jo Moore and M. Porter Moore
Mortgage Electronic Registration Systems, Inc., et al.

Civil No. 10-cv-241-JL, Opinion No. 2012 DNH 021.

United States District Court, D. New Hampshire.

January 27, 2012.


JOSEPH N. LAPLANTE, District Judge.


After hearing oral argument, the court grants the motions in part and denies them in part. As explained in more detail below:

Count 4, a claim against defendant Ocwen Loan Servicing, LLC under the Real Estate Settlement Procedures Act, is not dismissed. Contrary to Ocwen’s argument, the Moores have sufficiently pleaded that they suffered actual damages—in the form of emotional distress—as a result of its statutory violation.

Count 5, which makes claims against Ocwen and its co-defendant Harmon Law Offices under the Fair Debt Collection Practices Act, is not dismissed. Though Harmon argues that it was not engaged in “debt collection” subject to that statute, Harmon’s own representations in its letters to the Moores suggest otherwise.

Count 6, a claim for violations of the New Hampshire Unfair, Deceptive or Unreasonable Collection Practices Act, is dismissed as to Harmon because the Moores have not pleaded facts stating a plausible claim for relief under that statute.

Count 8, a claim for fraud, is dismissed as to Harmon because the Moores have not pleaded their claim against it with sufficient specificity. Count 8 is also dismissed insofar as it claims fraud in the assignment of the Moores’ mortgage because they did not rely on the alleged fraud. The Moores’ claim for “modification fraud” against Ocwen and its co-defendant Saxon Mortgage Services, Inc., however, is pleaded with the particularity required by Federal Rule of Civil Procedure 9 and may proceed.

Count 11, a claim for intentional and negligent misrepresentation against all defendants, is dismissed as to Harmon and its co-defendants Mortgage Electronic Registration Systems, Inc., Deutsche Bank National Trust Company, Morgan Stanley ABS Capital I Holding Corp., and Morgan Stanley ABS Capital I Inc. Trust 2007-HE5. The claims against those defendants are not pleaded with the particularity required of fraud claims by Federal Rule of Civil Procedure 9. The Moores’ claim against Saxon and Ocwen for intentional and negligent misrepresentation are, however, sufficiently pleaded and may proceed.

Finally, Count 17, a claim for “avoidance of note” against “all defendants claiming to own the note and mortgage,” is not dismissed. Though defendants argue that under New Hampshire law, they need not possess the Moores’ promissory note in order to foreclose on the associated mortgage, possession of the note is a necessary prerequisite of a claim to enforce it, which is what the Moores seek to avoid through this count.

C. Foreclosure proceedings and removal

In late January 2010, Ocwen sent the Moores a Reinstatement Quote informing them that the total amount due by April 1, 2010 to reinstate their loan was $79,151.46. Not long thereafter, on February 20, 2010, Harmon sent Mr. and Mrs. Moore each a separate Notice of Mortgage Foreclosure Sale. The Notices informed the Moores that a foreclosure sale of their property would take place on March 18, 2010, on behalf of defendant Deutsche Bank National Trust Company, as Trustee for the registered holders of Morgan Stanley ABS Capital I Inc. Trust 2007-HE5 Mortgage Pass-Through Certificates, Series 2007-HE5. MERS had assigned the Moores’ mortgage to Deutsche Bank on February 18, 2010, in an assignment reciting an effective date of November 16, 2009.[3]


M. Count 17 — Avoidance of note

Finally, Count 17 of the complaint makes a claim for “avoidance of note” against “all defendants claiming to own the note [and] mortgage.” In support of this claim, the Moores allege that the defendants “have been unable or unwilling to provide the Plaintiffs with evidence that they hold the original of the Note or Mortgage,” that “[a]ctual possession of the original of the note is a necessary legal prerequisite to enforcement of the Note,” and that “[i]n the absence of an ability to show that [they possess] the original of the Note” none of the defendants “has a right to enforce the same.” Third Am. Compl. (document no. 47) at ¶¶ 184-86. While New Hampshire courts have not recognized a cause of action for “avoidance of note”[18] and a federal court sitting in diversity should not “create new doctrines expanding state law,” Bartlett v. Mut. Pharm. Co., Inc., 2010 DNH 164, at 16, the court interprets this cause of action as seeking a declaratory judgment that the defendants may not enforce the note against the Moores.[19] The only parties that have moved to dismiss this claim (and the only parties who appear to “claim to own the note and mortgage”) are Deutsche Bank and the Morgan Stanley defendants. They argue that under New Hampshire law, they need not possess the Note in order to foreclose on the mortgage.

Even if this argument is correct (and the court need not and does not reach that issue at this time), it is beside the point. On its face, Count 17 does not assert that defendants may not enforce the mortgage by foreclosing, but that they may not enforce the note—e.g., by attempting to collect the amount due under it. Under New Hampshire law, possession of a negotiable instrument such as the note is (with limited exceptions not invoked here) a prerequisite to its enforcement. See N.H. Rev. Stat. Ann. § 382-A:3-301. As the Moores have sufficiently alleged that the defendants do not possess the note, and it is enforcement of the note which the Moores seek to avoid, the motions to dismiss Count 17 are denied.

IV. Conclusion

For the reasons set forth above, WMC’s motion to dismiss[20] is GRANTED. The remaining defendants’ motions to dismiss[21] are each GRANTED in part and DENIED in part.  ……..

Accordingly, counts 4 and 6 may proceed against Ocwen; count 5 against Ocwen and Harmon; counts 8 and 11 against Saxon and Ocwen; and count 17 against Deutsche Bank and the Morgan Stanley defendants.


[1] The third amended complaint does not identify this person any more specifically.

[2] A “jumbo loan,” also known as a non-conforming loan, “is a loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits.” U.S. Department of Housing & Urban Development, Glossary, http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/ sfh/buying/glossary (last visited Jan. 23, 2012).

[3] The assignment, which was filed with the Carroll County registry of deeds on February 18, 2010, was signed by Juan Pardo as Vice President of MERS. The Moores allege that Pardo is not an employee of MERS, but of Ocwen, though they do not allege that Pardo lacked authority from MERS to assign the mortgage.

[4] The complaint alleges that on the date of the scheduled sale, an auctioneer arrived at the Moores’ property and informed them that the foreclosure sale had been rescheduled for April 20, 2010. But no foreclosure sale has actually taken place, and the Moores confirmed at oral argument that they continue to occupy the property.

[5] These claims include agency/respondeat superior (Count 1), breach of the implied covenant of good faith and fair dealing (Count 7), origination fraud (Count 8), negligence (Count 10), intentional and negligent misrepresentation (Count 11), breach of assumed duty (Count 12), breach of fiduciary duty (Count 13), civil conspiracy (Count 14), and negligent and intentional infliction of emotional distress (Count 15).

[6] TILA also contains a three-year statute of limitations for a claim seeking rescission of the loan. 15 U.S.C. § 1635(f). Here, the only relief the Moores seek for the alleged TILA violations in Counts 2 and 3 are damages and attorneys’ fees and costs, see Third Am. Compl. (document no. 47) at 20, ¶ 86, so the limitations period for rescission claims is not at issue.

[7] This view is extremely charitable to the Moores, given the court of appeals’ holding in Salois. There, the court held that because the loan documents contained all the information necessary for the plaintiffs to discover that they had been misled about the terms of their loan, and because “one who signs a writing that is designed to serve as a legal document is presumed to know its contents,” the “plaintiffs were on notice of their claims when they signed their loan documents.” 128 F.3d at 26 & n.10. In evaluating the Moores’ claims, this court has assumed, dubitante, that the loan documents themselves did not place the Moores on notice of their claims.

[8] Although this allegation appears in a separate count of the complaint, because the Moores are pro se the court reads their complaint “with an extra degree of solicitude.” Hecking v. Barger, 2010 DNH 032, at 4. The allegation specifically ties the Moores’ emotional distress to Ocwen’s alleged conduct—which includes its failure to respond to their letters—and to ignore it simply because it does not appear in the RESPA count itself would elevate form over substance. Indeed, in their objections to the motions to dismiss the Moores maintain that their emotional distress stemmed in part from Ocwen’s RESPA violations. See, e.g., Pls.’ Objection to Morgan Stanley Mot. to Dismiss (document no. 72) at 7-8, ¶ 24.

[9] The court may consider this letter, which is expressly referenced in the complaint and forms part of the basis for the Moores’ claims, without converting the motion to dismiss into a motion for summary judgment. Giragosian v. Ryan, 547 F.3d 59, 65 (1st Cir. 2008).

[10] Given the dearth of case law on the UDUCPA, these FDCPA cases are also useful in interpreting the UDUCPA “because [the FDCPA] contains provisions similar to the [UDUCPA].” Gilroy, 632 F. Supp. 2d at 136.

[11] There is some support for Harmon’s position, see, e.g., Beadle, 2005 DNH 016, at 7-12 (McAuliffe, J.) (concluding that attorneys who conducted foreclosure proceedings were not subject to FDCPA); see also Speleos v. BAC Home Loans Servicing, LP, No. 10-cv-11503-NMG, 2011 WL 4899982, *5-6 (D. Mass. Oct. 14, 2011) (same), but the case law is not uniform on this point. One court of appeals has held that the FDCPA may apply to efforts to recoup a debt through foreclosure, expressing concern that to hold otherwise “would create an enormous loophole in the Act immunizing any debt from coverage if that debt happened to be secured by a real property interest and foreclosure proceedings were used to collect the debt.” Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373, 376 (4th Cir. 2006); cf. also Piper v. Portnoff Law Assocs., Ltd., 396 F.3d 227, 235 (3d Cir. 2005) (“[T]he text of the FDCPA evidences a Congressional intent to extend the protection of the Act to consumer defendants in suits brought to enforce liens.”).

[12] Deutsche Bank and one of the Morgan Stanley defendants, Morgan Stanley ABS Capital I Holding Corp., also argue that the Moores did not allege a contract with either of them. The complaint alleges, however, that at various relevant times both defendants owned or purported to own the Moores’ mortgage.

[13] Again, because the SPAs are expressly referenced in the complaint and form part of the basis for the Moores’ claims, the court may consider them in ruling on this motion to dismiss. See supra n.6. Both SPAs are also posted for public review at the Treasury Department’s website: Saxon’s SPA is available at http://tinyurl.com/SaxonSPA (last visited Jan. 23, 2012); Ocwen’s at http://tinyurl.com/OcwenSPA (last visited Jan. 23, 2012).

[14] In so holding, the court joins the overwhelming majority of courts to have considered whether borrowers are the intended third-party beneficiaries of SPAs. See Alpino, 2011 WL 1564114 at *3; Speleos, 755 F. Supp. 2d at 308.

[15] The apparent absurdity of the Moores’ attempt to sue MERS for an allegedly fraudulent transfer of its own interest in the mortgage has not escaped the court’s attention. The parties did not address this issue in their memoranda, though, so the court does not address it here.

[16] Claims for negligence—like claims for breach of an assumed duty or a fiduciary duty—”rest primarily upon a violation of some duty owed by the offender to the injured party.” Ahrendt v. Granite Bank, 144 N.H. 308, 314 (1999).

[17] It is worth noting here that New Hampshire does not permit an action for negligence to be premised upon the violation of a duty imposed by statute unless a similar duty existed at common law. Stillwater Condo. Ass’n v. Town of Salem, 140 N.H. 505, 507 (1995). The Moores have not argued that their negligence claims are premised on alleged RESPA, FDCPA, or UDUCPA violations, so the court need not address whether the duties imposed by those statutes existed at common law so as to permit a negligence claim against any of the defendants.

[18] In the only publicly available opinions that so much as mention this cause of action—in New Hampshire or elsewhere—the courts never reached the question of whether such a cause of action exists because the plaintiff conceded that his claim for avoidance of the note could not survive the defendants’ motion to dismiss. See Dillon v. Select Portfolio Servicing, 630 F.3d 75, 83 (1st Cir. 2011); Dillon v. Select Portfolio Servicing, 2008 DNH 019, at 20. The court observes that in typical legal usage, “avoidance” refers to the power of a bankruptcy trustee under the Bankruptcy Code to undo “some prebankruptcy transfers of the debtor’s property and most postbankruptcy transfers of estate property.” 1 David G. Epstein et al., Bankruptcy § 6-1, at 498 (1992).

[19] The court here reads the Moores’ complaint with an extra degree of solicitude. See supra n.8.

[20] Document no. 80.

[21] Documents nos. 52, 53, 54, 60, 70, and 71.

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