UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Gary Bowser and Shannon Bowser
v. Civil No. 15-cv-154-LM Opinion No. 2015 DNH 149 MTGLQ Investors, LP and Ocwen Loan Servicing, LLC
O R D E R
In the above-captioned matter, Gary and Shannon Bowser have
sued MTGLQ Investors, LP (“MTGLQ”) and Ocwen Loan Servicing, LLC
(“Ocwen”) in nine counts, asserting various claims arising out
of their unsuccessful attempt to obtain a modification of their
mortgage loan. Defendants filed a motion to dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(6), and the Bowsers
objected. On June 30, 2015, the court held oral argument on
defendants’ motion to dismiss. During the hearing, and for
reasons stated from the bench, the court dismissed seven of the
nine counts. The court took under advisement defendants’ motion
as to the remaining two counts. For the reasons that follow,
the court grants defendants’ motion to dismiss in full.
I. Background
A. Factual Allegations
The factual allegations are drawn from the Bowsers’
complaint. In 2005, the Bowsers purchased a property in Rye,
New Hampshire, obtaining title by warranty deed. To secure the loan, they executed a mortgage that provided for a loan servicer
to collect payments and otherwise manage their loan obligations.1
In 2014, the Bowsers went into arrears on the loan. Ocwen, the
loan servicer, returned their May 2014 partial payment, and
instructed them to apply for a loan modification.
In accordance with Ocwen’s instructions, the Bowsers
applied for a modification under the Home Affordable
Modification Program (“HAMP”) in October 2014. The Bowsers
allege that Ocwen, during the application review process,
improperly based its assessment of their financial capabilities
on the history of the loan rather than on their existing ability
to pay. The Bowsers further allege that, despite their timely
response to every request from Ocwen for supporting
documentation, Ocwen insisted that their modification
application was incomplete. As a result, Ocwen denied the
Bowsers’ application.
B. Procedural Backdrop
The Bowsers filed a nine-count complaint in Rockingham
County Superior Court, asserting claims for: (I) negligence;
(II) negligent misrepresentation; (III) fraud; (VI) equitable
1 The complaint does not set forth the loan history in great detail. For instance, it is unclear if MTGLQ was the original mortgagee, or acquired the mortgage by assignment or other transfer of rights. Nonetheless, MTGLQ is the current mortgagee.
2 estoppel; (V) promissory estoppel; (VI) breach of the covenant
of good faith and fair dealing; (VII) violation of New
Hampshire’s consumer protection statute (N.H. Rev. Stat. Ann. §
358-A); (VIII) negligent infliction of emotional distress
(“NIED”); and (IX) a count entitled “Standing.” Defendants
removed the case to this court and promptly filed a motion to
dismiss as to all nine counts (doc. no. 4), arguing that the
Bowsers failed to state a claim on which relief can be granted.
At the June 30, 2015 hearing on the motion to dismiss, the
Bowsers’ counsel consented to dismissal of Counts III, IV, VII,
and IX as to both defendants, and Counts I and VIII as to MTGLQ.
After hearing argument on the remaining counts, the court
granted defendants’ motion to dismiss Counts I and VIII as to
Ocwen, and Count V as to both defendants. The court took under
advisement defendants’ motion to dismiss as to Counts II and VI.
II. The Legal Standard
Under Fed. R. Civ. P. 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.”
Foley v. Wells Fargo Bank, N.A., 772 F.3d 63, 71 (1st Cir. 2014)
(citation and internal quotation marks omitted). A claim is
3 facially plausible “when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). Analyzing plausibility is “a
context-specific task” in which the court relies on its
“judicial experience and common sense.” Id. at 679.
III. Discussion
Before ruling on the remaining two counts, and for the sake
of clarity, the court begins by summarizing the reasoning behind
its decision to orally grant, over the Bowsers’ objection,
defendants’ motion to dismiss Counts I and VIII as to Ocwen, and
Count V as to both defendants.
A. Counts Dismissed Orally at the Hearing
1. Count I - Negligence
At the hearing, the Bowsers objected to dismissal of Count
I as to Ocwen. They argue that Ocwen is liable to them for
negligently mishandling and wrongfully denying their loan
modification application. Compl. ¶ 37. Specifically, the
Bowsers allege that defendants breached a duty “by their
misrepresentations and omissions throughout the holding of the
loan, servicing of the loan, and the HAMP modification process.”
Id. ¶ 34.
4 Under New Hampshire law, however, the contractual
relationship between a lender and borrower typically precludes
recovery in tort. Moore v. Mortg. Elec. Registration Sys.,
Inc., 848 F. Supp. 2d 107, 133 (D.N.H. 2012) (citing Wyle v.
Lees, 162 N.H. 406, 409-10 (2011)). This principle, known as
the “economic loss doctrine,” operates on the theory that “[i]f
a contracting party is permitted to sue in tort when a
transaction does not work out as expected, that party is in
effect rewriting the agreement to obtain a benefit that was not
part of the bargain.” Plourde Sand & Gravel Co. v. JGI E.,
Inc., 154 N.H. 791, 794 (2007) (quoting Tietsworth v. Harley–
Davidson, Inc., 677 N.W.2d 233, 242 (Wis. 2004)). Thus, where a
borrower claims the existence of a duty outside the contractual
relationship, he has the burden of proving that the lender
voluntarily engaged in “activities beyond those traditionally
associated with the normal role of a money lender.” Moore, 848
F. Supp. 2d at 133 (citing Seymour v. N.H. Sav. Bank, 131 N.H.
753, 759 (1989)). This burden extends to claims against
mortgagees as well as loan servicers.2 Id.
2 The Bowsers argued at the motion to dismiss hearing that the economic loss doctrine does not apply to their tort claims against Ocwen because, as a loan servicer, Ocwen was not a party to their mortgage. The court disagrees. For one, Ocwen’s role in servicing the Bowsers’ loan on the mortgagee’s behalf is sufficient to create an agency relationship between Ocwen and the mortgagee. See LaCourse v. Ocwen Loan Servicing, LLC, No. 14-cv-013-LM, 2015 WL 1565250, at *3 (D.N.H. Apr. 7, 2015).
5 The Bowsers’ allegations, however, do not establish that
Ocwen engaged in any extra-contractual conduct that would give
rise to a cognizable duty. Nor does HAMP on its own create an
independent duty. MacKenzie v. Flagstar Bank, FSB, 738 F.3d
486, 496 (1st Cir. 2013) (quoting Brown v. Bank of Am. Corp.,
No. 10-11085, 2011 WL 131128, at *4 (D. Mass. Mar. 31, 2011).
They allege only that “Defendants lied when they claimed they
could not complete the Plaintiffs’ modification,” and that
“Defendants mishandled and wrongfully denied the Plaintiffs’
modification application.” Compl. ¶¶ 35, 37. Since the Bowsers
do not allege any wrongdoing unconnected to Ocwen’s handling of
their mortgage and loan modification application, their
negligence claim cannot overcome the economic loss doctrine.
Thus, the court dismissed Count I as to Ocwen.
2. Count V - Promissory Estoppel
At the hearing, the court dismissed Count V as to both
defendants over the Bowsers’ objection. In their complaint, the
Bowsers allege the following facts in support of their
promissory estoppel claim:
Relying on the representations of the Defendants the Plaintiffs failed to pursue alternative options, resulting in the addition of unjust fees to their loan
Moreover, in New Hampshire, purely economic losses are generally not recoverable in tort, and the economic loss doctrine bars such tort claims regardless of whether contractual privity exists between the parties. See Plourde Sand & Gravel Co., 154 N.H. at 795-96.
6 . . . Defendants promised to help Plaintiffs avoid the possibility of foreclosure. The Defendants intended such promises to induce Plaintiffs to continue making mortgage payments, which they did – all to the detriment of the Plaintiffs and the benefit of the Defendants. The Defendants should be estopped from foreclosing on the Plaintiffs’ home.
Compl. ¶¶ 30, 84-85, 87 (emphasis added). They argue, in
essence, that Ocwen promised not to initiate foreclosure
activities while it reviewed the Bowsers’ loan modification
application. Because of this promise, the Bowsers allege that
they did not pursue alternative options to prevent foreclosure.
See compl. ¶ 30.
As evidence of Ocwen’s promise, the Bowsers attached to
their objection to defendants’ motion to dismiss a copy of the
Request for Mortgage Assistance (“RMA”) form that they filed
with their loan modification application. The RMA states, in
pertinent part, that “[i]f [Ocwen] receives your Complete
Application for modification at least 7 business days before a
scheduled foreclosure sale date, [Ocwen] will not complete the
foreclosure action until [they] review and decision [sic] [the]
application.” RMA (doc. no. 5-2) at 2. The Bowsers reiterated
at the hearing that the promise that forms the basis of their
promissory estoppel claim is indeed the one proffered in the
RMA.
Ordinarily on a motion to dismiss, if the court considers
documents outside the complaint, the court must convert the
7 motion into one for summary judgment. Foley, 772 F.3d at 73.
The First Circuit, however, recognizes a narrow exception “for
documents the authenticity of which are not disputed by the
parties; for official public records; for documents central to
the plaintiffs’ claim; or for documents sufficiently referred to
in the complaint.” Id. at 74 (quoting Watterson v. Page, 987
F.2d 1, 3 (1st Cir. 1993)). Defendants do not object to the
court’s consideration of the RMA in ruling on the motion to
dismiss. Because the RMA is central to the Bowsers’ promissory
estoppel claim, and its authenticity is not disputed, the court
will consider it for the purposes of this motion to dismiss.
At the hearing, the court found that the Bowsers failed to
state a claim as to Count V for two reasons. First, and most
importantly, the Bowsers do not allege in their complaint that
defendants failed to keep their promise to forestall
foreclosure. Indeed, they do not allege that defendants have
even scheduled a foreclosure sale. Second, although the Bowsers
allege that they neglected to pursue alternatives to foreclosure
in reliance on defendants’ promise, this allegation alone is
insufficient to demonstrate that their reliance was detrimental.
The court cannot reasonably infer that the Bowsers could have
avoided foreclosure or would have “been better off in any way,
but for their reliance on [their loan servicer’s] supposed
promise to consider them for a loan modification.” MacKenzie,
8 738 F.3d at 497 (applying Massachusetts law). Accordingly, the
court dismissed Count V as to both defendants.
3. Count VIII - NIED
Finally, the court orally dismissed Count VIII as to Ocwen
over the Bowsers’ objection. The Bowsers argue that Ocwen’s
failure to “deal with the Plaintiffs in a commercially
reasonable manner,” including mishandling their modification
application, caused numerous physical ailments, such as “loss of
appetite, upset stomach, head ache, sleeplessness, etc.” Id. at
¶¶ 107, 108.
“[A] claim for NIED, like any other negligence claim,
demands the existence of a duty from the defendant to the
plaintiff.” Moore, 848 F. Supp. 2d at 135 (quoting BK v. N.H.
Dep’t of Health & Human Servs., 814 F. Supp. 2d 59, 72 (D.N.H.
2011)). As discussed above with respect to their negligence
claim, see supra at 4-6, the Bowsers’ NIED claim fails to allege
a legally cognizable duty that Ocwen owed them outside the
traditional lender-borrower relationship. For this reason, the
Bowsers fail to state a claim for NIED against Ocwen. See Moore,
848 F. Supp. 2d at 135. On this basis, the court dismissed Count
VIII as to Ocwen.
9 B. Remaining Counts
Having granted defendants’ motion to dismiss as to Counts
I, III-V, and VII-IX at the hearing, the court now resolves the
remaining Counts II and VI.
1. Count II - Negligent Misrepresentation
The Bowsers base their claim for negligent misrepresenta-
tion on two grounds. First, they point to defendants’ allegedly
false assurances that, if the Bowsers successfully completed
their application, they would be able to obtain a HAMP
modification.3 Compl. ¶ 44. Second, the Bowsers allege that
defendants’ made “inconsistent and inaccurate representations”
concerning the modification process. Id. at ¶ 47. Defendants
argue that Count II fails to allege facts sufficient to state a
negligent misrepresentation claim, and, in any event, is barred
by the economic loss doctrine. Both of defendants’ arguments
are meritorious.
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.” Wyle, 162 N.H. at 413 (citing Snierson v.
3 One of the major problems with the complaint is that it does not specify whether Ocwen or MTGLQ is at fault. Instead, the complaint refers throughout to Ocwen and MTGLQ jointly as “defendants” in each count. It appears, however, that the majority, if not all, of the Bowsers’ claims concern Ocwen’s alleged wrongdoing.
10 Scruton, 145 N.H. 73, 78 (2000)). Moreover, “[i]t is the duty
of one who volunteers information to another not having equal
knowledge, with the intention that he will act upon it, to
exercise reasonable care to verify the truth of his statements
before making them.” Id.
The Bowsers’ complaint does not allege facts sufficient to
support a claim for negligent misrepresentation because it fails
to allege how, if at all, defendants’ misrepresentations were
material to the Bowsers’ decisions concerning their loan
modification application. For example, the Bowsers allege that
defendants “falsely informed the Plaintiffs that the application
was not complete, despite the Plaintiffs’ compliance with all
documentation requests.” Compl. ¶¶ 29. Though this allegation
describes a potentially negligent misrepresentation, nothing in
the complaint clarifies how this statement was material or, for
that matter, how the Bowsers justifiably relied on the
defendants’ statement. The Bowsers allege that they “relied on
[defendants’] misrepresentations . . . to their detriment,”
Compl. ¶ 52, yet they allege no facts to support this
conclusion. As such, this allegation is merely conclusory and
therefore insufficient. Similarly, the allegations concerning
defendants’ duty to verify information are nothing more than
conclusory recitations of the “failure to verify” element:
“Defendants did not take care to verify that their
11 representations were correct before making them.” Compl. ¶ 51.
Such “[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements,” cannot suffice
to state a claim for relief under federal pleading standards.
Ashcroft, 556 U.S. at 678.
Even if the Bowsers’ allegations were sufficient to permit
a reasonable inference that defendants made negligent
misrepresentations of material fact regarding the loan
modification process, the claim would nonetheless be barred by
the economic loss doctrine. The First Circuit made clear in
Schaefer v. Indymac Morg. Serv. that where a complaint alleges
merely that a lender made misrepresentations “concern[ing] the
process by which the lender[] would decide whether or not to
exercise their contractual right to foreclose the mortgage . . .
[such a claim] is barred by the economic loss doctrine.” 731
F.3d 98, 109 (1st Cir. 2013). In Schaefer, as alleged in the
present case, the plaintiff mortgagor submitted a completed loan
modification application to the defendant lender/loan servicer,
after which defendant requested duplicative portions of the
application and gave plaintiff misleading or incorrect
information concerning the application process. Id. at 101-02.
The First Circuit acknowledged that New Hampshire law provides
an exception to the economic loss doctrine where negligent
misrepresentations induce a party to enter into a contract. Id.
12 at 108-09 (citing Wyle, 162 N.H. at 411). However, this
exception did not apply in Schaefer, because the defendant’s
alleged misrepresentations occurred during the contract’s
performance and concerned the subject matter of the contract,
i.e., the mortgage. Id. at 109.
Likewise, in the instant case, Ocwen’s offer to forestall
foreclosure was directly related to the Bowsers’ mortgage and
performance of the loan contract. The economic loss doctrine,
therefore, bars their negligent misrepresentation claim.
Accordingly, the court dismisses Count II.
2. Count VI – Breach of the Covenant of Good Faith and Fair Dealing
Count VI is the Bowsers’ claim that Ocwen breached the
covenant of good faith and fair dealing implied in the parties’
agreement to “work out resolution [sic] with the mortgage.”
Compl. ¶ 91. The Bowsers claim that this agreement involved an
offer that was “definite in material terms,” and outlined
reasonably certain “promises and performances.” Id. at ¶ 92.
They allege that defendants violated the covenant implied in
this agreement by “misrepresenting the Plaintiffs’ qualification
status for modification,” and by “failing to raise and/or offer
alternative modification options.” Id. at ¶96. Defendants
counter that the Bowsers have not established that a contract
13 existed between the parties beyond the mortgage, and, as such,
the Bowsers have no basis for their claim.
The Bowsers do not dispute that under New Hampshire law,
“[a] necessary prerequisite to a claim for breach of the implied
covenant of good faith and fair dealing is a contract between
the parties.” Moore, 848 F. Supp. 2d at 127; see also J&M
Lumber & Constr. Co. v. Smyjunas, 161 N.H. 714, 724 (2011). In
Moore, this court held that a borrower cannot use the covenant
of good faith and fair dealing implied in a loan agreement to
require a lender to modify a loan. 848 F. Supp. 2d at 130; see
also Ruivo v. Wells Fargo Bank, N.A., No. 11-cv-466-PB, 2012 WL
5845452, at *4 (D.N.H. Nov. 19, 2012) (“[P]arties are bound by
the agreements they enter into and the court will not . . .
force a party to rewrite a contract so as to avoid a harsh or
inequitable result.”). Unlike the plaintiffs in Moore, who
relied on their mortgage as the contract underlying their claim
for breach of the covenant of good faith and fair dealing, the
Bowsers rely on the language of the RMA, which contains
defendants’ promise to forestall foreclosure while defendants
consider the modification application. Compl. ¶ 91; Pls.’ Obj.
(doc. no. 5) at 5-6.
Such a promise, however, cannot support their claim for
breach of the covenant of good faith and fair dealing. As Chief
Judge Laplante noted in Pro Mod Realty, LLC v. U.S. Bank Nat.
14 Ass’n, “[w]ords of promise which by their terms make performance
entirely optional with the ‘promisor’ whatever may happen . . .
do not constitute a promise . . . . [S]uch words are often
referred to as forming an illusory promise.” No. 13-cv-498-JL,
2014 WL 1379341, at *2 (D.N.H. Apr. 9, 2014) (quoting
Restatement (Second) of Contracts § 2 cmt. e (1981)).
Defendants’ promise did not bind them to any decision with
respect to the Bowsers’ application, and therefore cannot serve
as consideration for a contract. See Downeast Energy Corp. v.
Frizzell, No. 2010-0401, 2011 N.H. Lexis 102, at *2-3 (N.H. July
6, 2011); Schell v. Kent, No. 06-cv-425-JM, 2008 WL 4610006, at
*5 (D.N.H. Oct. 15, 2008). Without an exchange of
consideration, the parties did not form a contract, and without
a contract, the Bowsers cannot sustain a claim for breach of the
covenant of good faith and fair dealing. Moore, 848 F. Supp. 2d
at 127. Moreover, as discussed above with respect to the
Bowsers’ promissory estoppel claim, see supra at 5-8, the
Bowsers do not allege that defendants have initiated foreclosure
proceedings. Therefore, even if a valid contract existed
between the parties, there can be no breach of the covenant of
good faith and fair dealing where there is no allegation that
defendants have done anything other than fully comply with their
express obligations under the contract. Accordingly, the court
dismisses Count VI.
15 IV. Conclusion
For the foregoing reasons, defendants’ motion to dismiss
(doc. no. 4) is granted in full. The clerk of the court shall
dismiss the Bowsers’ complaint and close the case.
SO ORDERED.
__________________________ Landya McCafferty United States District Judge
August 11, 2015
cc: Keith A. Mathews, Esq. Jessica Suzanne Babine, Esq.