Frangos v. Bank of NY Mellon, et al.

2017 DNH 232

• Court: District Court, D. New Hampshire
• Decided: October 27, 2017
• Docket: 16-cv-436-LM
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Thomas Frangos

v. Civil No. 16-cv-436-LM Opinion No. 2017 DNH 232 The Bank of New York Mellon, as Trustee for the Certificateholders of CWABS, Inc., Asset Back Certificates, Series 2005-AB2, et al.

O R D E R

Before the court is a motion to dismiss filed by defendant

Bank of America, N.A. (“Bank of America”). Plaintiff Thomas

Frangos has brought a claim for misrepresentation against Bank

of America, alleging that it misrepresented the amount due for

one of plaintiff’s monthly mortgage payments.1 Pursuant to Rule

12(b)(6) of the Federal Rules of Civil Procedure, Bank of

America moves to dismiss the claim. Plaintiff objects. For the

reasons that follow, Bank of America’s motion to dismiss is

granted.

1 It is unclear whether plaintiff is also seeking relief against Bank of America on Counts I and II (injunctive relief), Count III (invalidity of mortgage), or Count V (declaratory judgment and request for accounting). Because Bank of America no longer services the loan, these claims appear to be moot as to it. For this reason, the court reads the allegations against Bank of America as limited to a claim for misrepresentation (Count VI). STANDARD OF REVIEW

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.” Foley v.

Wells Fargo Bank, N.A., 772 F.3d 63, 71 (1st Cir. 2014)

(internal quotation marks omitted). A claim is 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).

BACKGROUND

In late April 2005, plaintiff executed a promissory note in

favor of Optima Mortgage Corporation (“Optima”) in exchange for

a loan of $599,000. The note was secured by a mortgage, which

plaintiff and Frances Frangos, his wife, executed in favor of

Mortgage Electronic Registration Systems, Inc., as nominee for

Optima. The mortgaged property is located in Portsmouth, New

Hampshire.

In May 2009, Bank of America—then the servicer of the

mortgage loan—sent plaintiff a letter, in which “it stated that

2 [p]laintiff owed $4,618.18 for th[e] month of May 2009.” Doc.

no. 20 at ¶ 21. According to plaintiff, this statement

regarding the amount owed was a misrepresentation, because “he

in fact owed only $1,773.08.” Id. at ¶ 74. Plaintiff further

alleges that he relied on this misrepresentation to his

detriment “because it caused him to believe that the lender

increased the monthly payments by more than $1,000 which he

could not afford to pay.” Id. at ¶ 75. As a result, Bank of

America’s misrepresentation allegedly “forced [him] into default

which ultimately resulted in initiation of foreclosure

proceedings.” Id. at ¶ 76. He seeks damages for, among other

things, his emotional distress, late fees, property management

fees, and foreclosure costs.

DISCUSSION

Bank of America moves to dismiss the claim for

misrepresentation (Count VI). Bank of America raises a number

of grounds supporting dismissal, but its argument that the

economic loss doctrine bars the claim is dispositive.

As an initial matter, in his complaint, plaintiff does not

specify whether the claimed misrepresentation was intentional or

negligent. See doc. no. 20 at 10 of 14. The court construes

plaintiff’s claim as one for negligent misrepresentation, given

that plaintiff makes no allegation that Bank of America knew the

3 statement was false or acted with conscious indifference to its

truth, a necessary element of a claim for intentional

misrepresentation. See Tessier v. Rockefeller, 162 N.H. 324,

332 (2011) (“The tort of intentional misrepresentation . . .

must be proved by showing that the representation was made with

knowledge of its falsity or with conscious indifference to its

truth . . . .”).

Under New Hampshire 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 v. Lees, 162 N.H. 406, 413 (2011). Even

if a party sufficiently pleads a claim for negligent

misrepresentation, however, the party may be barred “from

recovering in tort under the economic loss doctrine.” Julius v.

Wells Fargo Bank, N.A., No. 16-cv-516-JL, 2017 WL 1592379, at *4

(D.N.H. Apr. 28, 2017).

“The economic loss doctrine is a judicially-created

remedies principle that operates generally to preclude

contracting parties from pursuing tort recovery for purely

economic or commercial losses associated with the contract

relationship.”2 Wyle, 162 N.H. at 410 (quotation and internal

2 Although plaintiff also alleges damages for emotional distress in relation to his negligent misrepresentation claim, “plaintiffs cannot recover damages for mental and emotional

4 quotation marks omitted). Consequently, “the economic loss

doctrine bars negligent misrepresentation claims in a

traditional borrower-lender contractual relationship.” Mader v.

Wells Fargo Bank, N.A., No. 16-cv-309-LM, 2017 WL 177619, at *3

(D.N.H. Jan. 17, 2017). New Hampshire law recognizes two

exceptions to the doctrine: “[t]he first . . . arises when the

alleged negligent misrepresentation induced a contracting party

to enter into the contract,” and the second “applies in limited

circumstances where a negligent misrepresentation is made by a

defendant who is in the business of supplying information.”

Julius, 2017 WL 1592379, at *4-5 (quotation, brackets, and

internal quotation marks omitted). Importantly, the second

exception covers only a misrepresentation that relates “to a

transaction other than the one that constitutes the subject of

the contract.” Schaefer v. Indymac Mortg. Servs., 731 F.3d 98,

109 (1st Cir. 2013).

Here, plaintiff’s claim rests on a negligent

misrepresentation allegedly made in the course of performance of

the loan agreement, and therefore falls within the scope of the

economic loss doctrine. See Dionne v. Fed. Nat’l Mortg. Ass’n,

No. 15-cv-056-LM, 2016 WL 3264344, at *13 (D.N.H. June 14, 2016)

distress in a claim for negligent misrepresentation.” Crowley v. Global Realty, Inc., 124 N.H. 814, 818 (1984).

5 (economic loss doctrine applied to misrepresentations related to

mortgagee’s and servicer’s “attempts to collect the . . .

mortgage debt”). Moreover, neither of the exceptions to the

doctrine applies. The first exception does not apply here,

where plaintiff is alleging that the misrepresentation occurred

in the course of performance of the contract. And the second

exception cannot apply, because the misrepresentation relates to

a transaction that constitutes the subject of the contract. See

Schaefer, 731 F.3d at 109.

Plaintiff responds that the economic loss doctrine does not

apply because Bank of America, as the servicer, was not a party

to the loan agreement. This court has previously considered,

and rejected, this exact argument. See Bowser v. MTGLQ Inv’rs,

LP, No. 15-cv-154-LM, 2015 WL 4771337, at *2 n.2 (D.N.H. Aug.

11, 2015) (rejecting argument based on lack of contractual

privity because servicer’s duties sufficed to create agency

relationship with lender). Accordingly, the claim is barred by

the economic loss doctrine, and the court dismisses Count VI of

the complaint. As a result, plaintiff’s request for attorney’s

fees pursuant to the loan agreement (Count IV) is dismissed to

the extent that it pertains to Bank of America.

6 CONCLUSION

For the foregoing reasons, defendant Bank of America,

N.A.’s motion to dismiss (doc. no. 30) is granted.

SO ORDERED.

__________________________ Landya McCafferty United States District Judge

October 27, 2017

cc: Counsel of Record