Faiella v. Green Tree Servicing LLC, et al.

2016 DNH 153

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Ralph Faiella

v. Civil No. 16-cv-088-JD Opinion No. 2016 DNH 153 Green Tree Servicing LLC and Federal National Mortgage Association

O R D E R

Ralph Faiella brought a plea of title action in state court

against the Federal National Mortgage Association (“Fannie Mae”)

and Green Tree Servicing LLC, now known as Ditech Financial LLC

(“Ditech”), challenging the legality of a foreclosure that

Ditech and Fannie Mae conducted on his residence. The

defendants removed the case to this court. Fannie Mae moves to

rescind the foreclosure sale, rescind a related foreclosure deed

that it executed, and reinstate the mortgage with its original

priority. Faiella objects. The court held a hearing on the

motion on August 25, 2016.

A. Motion for Rescission

Fannie Mae “requests that the Court exercise its equitable

powers and rescind the Foreclosure Sale and the Foreclosure Deed

and restore the Mortgage to its pre-foreclosure priority.” At the hearing, Fannie Mae argued that its request was justified

because Fannie Mae was merely providing Faiella the relief he

requested in his complaint. In response, Faiella objects that

the proposed rescission would preclude certain offsets and

unasserted claims that he has against Fannie Mae arising out of

the wrongful foreclosure. At the hearing, Faiella also asserted

that Fannie Mae’s request for relief was improper because Fannie

Mae has not filed a counterclaim for rescission.

“Rescission is an equitable remedy the granting of which is

always a matter within the sound discretion of the trial court,

depending upon the circumstances of each particular case.”

Ellis v. Candia Trailers & Snow Equip., Inc., 164 N.H. 457, 462

(2012) (internal quotations omitted). Before a court can

rescind a transaction, however, “the court must determine that

the respective parties can be returned to the status quo.”

Derouin v. Granite State Realty, Inc., 123 N.H. 145, 147 (1983).

That determination “rests upon the relative equities of the

parties as determined by the trial court.” Id. at 47-48. A

court should grant rescission “only when in all the

circumstances it appears right and just to the parties to do

so.” Mooney v. Nationwide Mut. Ins. Co., 149 N.H. 355, 357

2 (2003).1 Because Fannie Mae is seeking the rescission, it bears

the burden of proving that remedy is appropriate.

Fannie Mae’s motion for the rescission seeks an affirmative

remedy. Fannie Mae, however, has not filed a counterclaim

seeking such a remedy. In the absence of a claim for

rescission, Fannie Mae is not entitled to the relief it

requests. See Vermont Mut. Ins. Co. v. Zamsky, 2012 WL 6864702,

at *1 (D. Mass. Dec. 17, 2012), report and recommendation

adopted (D. Mass. Jan. 11, 2013) (“[Defendants] seek to have the

Court enter a declaratory judgment in their favor. In my

judgment, they are not entitled to such affirmative relief

because they did not file a counterclaim seeking affirmative

relief.”).

1 Although the above-referenced cases concern the rescission of contracts, the rules of equity also apply when courts grant equitable relief from mortgage foreclosures. See Chase v. Ameriquest Mortg. Co., 155 N.H. 19 (2007) (noting that in action to enjoin mortgage foreclosure, “[a] court of equity will order to be done that which in fairness and good conscience ought to be or should have been done”); see also 59A C.J.S. Mortgages § 1167 (“The power to set aside a foreclosure sale is to be exercised with great care, and a proper basis for invoking the discretion of the court must be presented. A court of equity has the power to vacate a foreclosure sale based on considerations of equity and justice, but this power should be used sparingly and only when necessary for cogent reasons to correct a plain injustice or injury.”).

3 Nevertheless, Fannie Mae contends that its request is

proper because Faiella requested rescission in his plea of title

action. Importantly, however, Faiella objects to the rescission

remedy proposed by Fannie Mae. Therefore, even though both

parties may contemplate rescission of the foreclosure, there are

material differences concerning how such relief is to be

implemented. Without bringing and proving an affirmative claim

for rescission, Fannie Mae cannot unilaterally impose on Faiella

its version of the equitable relief underlying his plea of title

action.

Moreover, Fannie Mae fails to articulate any grounds

supporting the rescission that it seeks. The motion only

recounts the transactional history of Faiella’s mortgage, but

contains no factual or legal argument demonstrating that Fannie

Mae is entitled to rescission. Fannie Mae does not admit and

has not provided facts showing that a wrongful foreclosure

occurred or that the equities at issue favor the rescission.

Therefore, Fannie Mae has not met its burden of showing that it

is entitled to the rescission remedy that it proposes.

B. Request to Amend Complaint

During the hearing on Fannie Mae’s motion to rescind,

Faiella requested an opportunity to amend his complaint to add

damages claims against Fannie Mae. Given the early posture of

4 this case, the court will grant Faiella leave to file an amended

complaint asserting his damages claims against Fannie Mae.

Conclusion

For the foregoing reasons, defendant’s motion to rescind

the foreclosure sale and foreclosure deed (doc no. 25) is

denied.

Faiella must file his amended complaint on or before

September 19, 2016. Fannie Mae shall file a responsive pleading

within the time allowed under the Federal Rules of Civil

Procedure. If Faiella fails to amend his complaint, Fannie Mae

is granted leave to amend its answer to the operative complaint

in this action on or before October 11, 2016.

Both parties have filed proposed discovery plans. Doc.

nos. 23-24, 28. Those discovery plans (doc. nos. 23-24, 28) are

terminated as moot based on Faiella’s anticipated amended

complaint. The parties will submit a new joint discovery plan

on or before October 31, 2016. See Fed. R. Civ. P. 26(f)(2)-

(3); L.R. 26.1.

SO ORDERED.

__________________________ Joseph A. DiClerico, Jr. United States District Judge

August 29, 2016

5 cc: Amy B. Hackett, Esq. David Himelfarb, Esq. William C. Sheridan, Esq.