Hall v. Bank of Amer.

2014 DNH 133

• Court: District Court, D. New Hampshire
• Decided: June 11, 2014
• Docket: 13-cv-387-JD
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Chester H. Hall, Jr.

v. Civil No. 13-cv-387-JD Opinion No. 2014 DNH 133 Bank of America, N.A. and Federal Home Loan Mortgage Corporation

O R D E R

Chester H. Hall, Jr. filed a petition to enjoin foreclosure

and then filed an amended petition and complaint against Bank of

America, N.A. and the Federal Home Loan Mortgage Corporation

(“FHLMC”) in state court. The defendants removed the case to

this court and moved to dismiss all claims.1 Hall objects.

Standard of Review

Under Federal Rule of Civil Procedure 12(b)(6), a defendant

may move to dismiss on the ground that the plaintiff’s complaint

fails to state a claim on which relief may be granted. In

assessing a complaint for purposes of a motion to dismiss, the

court “separate[s] the factual allegations from the conclusory

statements in order to analyze whether the former, if taken as

true, set forth a plausible, not merely conceivable, case for

relief.” Juarez v. Select Portfolio Servicing, Inc., 708 F.3d

269, 276 (1st Cir. 2013) (internal quotation marks omitted). “If

1 The Federal Housing Finance Agency’s motion to intervene was granted. the facts alleged in [the complaint] allow the court to draw the

reasonable inference that the defendants are liable for the

misconduct alleged, the claim has facial plausibility.” Id.

(internal quotation marks omitted).

The defendants appended documents to the motion, including

the note, the mortgage, assignments, Hall’s bankruptcy petition,

and Hall’s bankruptcy discharge. Hall appended documents to his

objection, including the mortgage and related documents, a subordination agreement, and documents from his bankruptcy case.

Because the documents the parties submitted are not objected to

and may be considered for purposes of a motion to dismiss, the

motion is not converted to one for summary judgment. Fed. R.

Civ. P. 12(d); see Watterson v. Page, 987 F.2d 1, 3-4 (1st Cir.

1993); accord Schaefer v. Indymac Mortg. Servs., 731 F.3d 98,

100, n.1 (1st Cir. 2013).

Background

In 2008, Hall refinanced his 2005 home mortgage with

Countrywide Bank, FSB. The interest rate on the mortgage loan

increased in 2008 because of the adjustable rate provision. Hall

could not afford the monthly payments after the interest rate

increase. Hall agreed to pay Countrywide $10,000 in order to

have a ten year interest only loan with a thirty year fixed

interest rate.

2 Countrywide continued to charge Hall both principal and

interest on the loan and the interest rate continued to change.

Hall fell behind on his payments. Bank of America, N.A.

succeeded Countrywide through merger. Hall again offered to pay

a lump sum, but Bank of America refused to accept his offer.

Hall attempted to engage in loss mitigation efforts without

success.

Hall filed for bankruptcy in April of 2011 and listed his mortgage as a debt to be discharged. He was granted a discharge

under 11 U.S.C. § 727 on January 30, 2012. Hall alleges that

Bank of America or FHLMC scheduled foreclosures approximately

twelve times based on his default on the 2008 mortgage. Bank of

America assigned Hall’s mortgage to FHLMC in March of 2014.

Discussion

Hall brings ten claims against Bank of America and FHLMC.2

He alleges fraud and misrepresentation in inducing the mortgage

and in loan modification, wrongful foreclosure and lack of

standing to foreclose, promissory estoppel, and failure to act in

good faith. The defendants move to dismiss on the grounds that

Hall cannot assert the claims challenging the validity of the

mortgage that he failed to disclose in the bankruptcy proceeding,

that the fraud and misrepresentation claims are time barred, that

2 A stipulation of dismissal was previously entered as to an eleventh claim.

3 the fraud and misrepresentation claims are not properly pleaded,

that the economic loss doctrine bars the tort claims, that the

claims challenging foreclosure fail as a matter of law, that Hall

fails to state a claim for promissory estoppel, and that Hall

fails to state a claim for violation of the implied covenant of

good faith and fair dealing. Hall objects, arguing that he is

asserting defenses to foreclosure, not claims that are subject to

the issues that the defendants raise; that he adequately pleaded fraud and negligent misrepresentation; that the defendants

breached the contract with him; that the defendants do not have

the authority to foreclose; and that he pleaded sufficient facts

to support his “promissory estoppel defense” and “good faith and

fair dealing defenses.”

A. Defenses Rather than Claims

In response to the motion to dismiss, Hall asserts, citing

Bolduc v. Beal Bank, SSB, 994 F. Supp. 82, 90 (D.N.H. 1998), that

his claims are more properly considered as affirmative defenses

to the defendants’ foreclosure efforts. Based on that reasoning,

Hall contends that the issues raised by the defendants in the

motion to dismiss do not apply to his complaint.

The plaintiffs in Bolduc sought an injunction to prevent

foreclosure on their home and alleged that the defendant had

violated the Equal Credit Opportunity Act, the Bank Holding

Company Act, the Truth in Lending Act, and New Hampshire

4 statutes. Id. at 86-88. The defendant argued that the Bolducs’

suit was barred by the Financial Institutions Reform, Recovery

and Enforcement Act (“FIRREA”), which imposes exhaustion

requirements for claims made against a failed bank after the FDIC

is appointed receiver. Id. at 88.

The FIRREA exhaustion requirement pertains to actions

seeking payment from FDIC-run banks. 12 U.S.C. § 1821(d)(13)(D).

The district court held that the FIRREA exhaustion requirement did not apply to the Bolducs because they were asserting defenses

against the bank’s efforts to collect from them rather than

claims against the bank for money. Id. at 90. On appeal, the

court also concluded that the Bolducs’ suit did not fall within

the FIRREA exhaustion requirement because the Bolducs were not

seeking payment from the bank. Bolduc v. Beal Bank, SSB, 167

F.3d 667, 671-72 (1st Cir. 1999).

Despite the breadth of the language used by the district

court in Bolduc, the case is limited to the issue it addresses,

the application of the FIRREA exhaustion requirement. The

appeals court decision makes the distinction plain. The FIRREA

exhaustion requirement is not an issue in this case.

Bolduc does not support the proposition asserted by Hall

that a suit to stop foreclosure proceedings alleges affirmative

defenses, not claims. Instead, the Federal Rules of Civil

Procedure govern the pleadings in this case. See Fed. R. Civ. P.

8. As the plaintiff, Hall alleges claims that are subject to the

defendants’ motion to dismiss.

5 B. Effect of Bankruptcy

The defendants contend that Hall cannot pursue his claims

for fraud, misrepresentation, promissory estoppel, and breach of

the duty of good faith and fair dealing in Counts I, II, III, IV,

VI, and X because Hall failed to raise those claims during the

bankruptcy proceeding and then received a discharge of the note.

In response, Hall acknowledges the general rule that a debtor in

a bankruptcy action is estopped from later litigating claims that were not disclosed during the bankruptcy proceeding. See Guay v.

Burack, 677 F.3d 10, 20-21 (1st Cir. 2012). He argues, however,

that judicial estoppel should not apply here because he did not

conceal the claims in the bankruptcy court.

In Guay, the court noted that some circuits have allowed an

exception to the rule of judicial estoppel when the debtor lacked

knowledge of undisclosed claims or did not intend to conceal the

claims. Id. at 20. The court left the question open, because

the facts in Guay did not require a decision, but strongly

suggested that the exception would not be recognized in this

circuit. Id. at n.7 (“We have never recognized such an exception

and have noted that deliberate dishonesty is not a prerequisite

to application of judicial estoppel. Schomaker v. United States,

334 Fed. Appx. 336, 340 (1st Cir. 2009) [parenthetical

omitted].”). Exceptions to judicial estoppel may arise when

“‘the party’s prior position was based on inadvertence or

mistake,’” or when a change in the governing law causes a change

in legal positions. Boston Gas Co. v. Century Indem. Co., 708

6 F.3d 254, 263 (1st Cir. 2013) (quoting New Hampshire v. Maine,

532 U.S. 742, 753 (2001)).

To the extent exceptions to judicial estoppel may exist,

they are not applicable here. Based on the complaint, Hall knew

the facts that he alleges in support of his claims in 2011 when

he filed for bankruptcy protection and before he received the

discharge in bankruptcy in January of 2012. Hall does not

suggest he was mistaken during the bankruptcy proceeding about the claims he now asserts or that the law has changed.

Hall does not dispute that if his claims are construed as

claims, rather than affirmative defenses, and if no exception

applies, he is judicially estopped by the bankruptcy proceeding

from asserting the claims he makes here in Counts I, II, III, IV,

VI, and X. Therefore, the defendants’ motion to dismiss Counts

I, II, III, IV, VI, and X is granted. Because the motion is

granted on the ground of judicial estoppel, the court need not

consider the alternative grounds raised by the defendants in

support of the motion to dismiss those claims.

C. Claims Challenging Foreclosure - Counts V, VII, VIII, and IX

The defendants move to dismiss Hall’s claims that challenge

foreclosure on the grounds that the defendants’ actions do not

breach the mortgage or note, wrongful foreclosure does not

pertain where foreclosure has not yet occurred, and the

bifurcation theory that the mortgage is void unless the same

party holds the note is not valid under New Hampshire law. Hall

7 objects, arguing that the defendants breached the contract by

foreclosing, that the bankruptcy discharge does not preclude the

requirement that the defendants prove their authority to

foreclose, that a claim of wrongful foreclosure is actionable

before foreclosure is complete, and that the defendants cannot

foreclose because they cannot show that they hold the note and

the mortgage.

1. Wrongful Foreclosure - Breach of Contract - Count V

In support of his breach of contract claim, Hall alleges:

“[Hall’s] first and second mortgage allow foreclosure only in the event that [he] defaults on his obligations under the Note and/or Mortgage. BOA [Bank of America] claims that [Hall] defaulted by not making his monthly mortgage payments. Hall could not afford his monthly mortgage payments, because Countrywide Bank, FSB and/or BOA breached the terms of his contract by increasing his monthly interest rate and by charging him principal in addition to interest.

First Am. Verified Petition & Complaint, ¶ 40. He further

alleges that as a result of Bank of America’s “own breach,” he

defaulted, and Bank of America “attempted foreclosure.” He

concludes that “[a]s a proximate result of BOA’s wrongful

foreclosure, [he] has suffered losses. . . .” Id. ¶ 42.

The defendants assert that the only contract that is still

enforceable is the mortgage because the note has been discharged

in bankruptcy. The defendants further assert that once Hall

defaulted, they were allowed to proceed with foreclosure as

provided by the mortgage and the power of sale statutes, RSA

8 § 477:25-:27-a, § 477:29, and § 479:25. Therefore, they contend,

they did not breach their contract with Hall.

In his objection, Hall contends that in 2008, after the

parties executed the note and mortgage, he entered into a new

agreement with Countrywide that provided new payment terms. In

support, Hall cites paragraph 12 of his complaint which states

that in early 2008 his interest rate increased because of the

adjustable rate provision so that he could not afford his monthly payments and that he agreed to pay $10,000 to Countrywide “in

exchange for a ten (10) year interest-only loan at a thirty (30)

year fixed rate.” Hall now asserts that his breach of contract

claim can be based on his allegations about a separate contract.

Hall apparently does not intend to pursue the breach of

contract claim alleged in Count V of his amended complaint, that

the defendants breached the mortgage and note. As the defendants

point out, Hall cannot amend his complaint to assert a new claim

by allegations in his objection to the motion to dismiss.3

To the extent Hall intended to allege a claim of wrongful

foreclosure, he has not alleged facts to support that claim. See

Worrall v. Fed. Nat’l Mortg. Ass’n, 2013 WL 6095119, at *3

(D.N.H. Nov. 20, 2013).

3 Hall is represented by counsel.

9 2. Counts VII, VIII, and IX

Hall challenges the defendants’ power and authority to

foreclose. In Count VII, Hall alleges that FHLMC lacks the power

and authority to foreclose because it does not hold the mortgage

or the note. In Count VIII, Hall alleges that the defendants

cannot foreclose because under New Hampshire law the note and

mortgage must be transferred together and it appears that the

note and mortgage have been “bifurcated.” In Count IX, Hall alleges that the defendants breached a duty owed to him to act in

good faith and with due diligence by foreclosing or threatening

to foreclose without first determining whether they had a right

to foreclose.

In support of their motion to dismiss, the defendants have

demonstrated, through copies of the note, mortgage, and public

documents, that Countrywide Bank provided a refinance loan to

Hall in 2008 in exchange for the note and the mortgage on Hall’s

property. In 2009, Countrywide merged with Bank of America.

Bank of America held the note and mortgage on Hall’s property

through the bankruptcy proceeding, resulting in discharge of the

note in January of 2012, until it assigned the mortgage to FHLMC

in March of 2014. FHLMC is the record holder of the mortgage.

Because the note is no longer enforceable, having been

discharged in bankruptcy, and FHLMC holds Hall’s mortgage, the

defendants move to dismiss the claims challenging their authority

to foreclose. Hall acknowledges that he did not file a

reaffirmation agreement as to the loan and does not dispute that

10 the note was discharged through his bankruptcy proceeding. Hall

makes a convoluted argument that because he intended to keep his

home when he originally filed for bankruptcy protection under

Chapter 13, he can hold “[FHLMC] to its burden of proving that it

has the power and authority to foreclose.”

The defendants have demonstrated that FHLMC holds the

mortgage to Hall’s home and that the note is unenforceable.

Therefore, Hall’s claims challenging the defendants’ power and authority to foreclose lack merit and are dismissed.

Conclusion

For the foregoing reasons, the defendants’ motion to dismiss

(document no. 23) is granted. All claims in the amended petition

and complaint are dismissed with prejudice.

SO ORDERED.

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

June 11, 2014

cc: Jennifer Turco Beaudet, Esq. Mark Sutherland Derby, Esq. Stephen T. Martin, Esq. Thomas J. Pappas, Esq. David W. Rayment, Esq.