UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Jacques Elias, et al.
v. Case No. 15-cv-330-AJ Opinion No. 2017 DNH 068 Specialized Loan Servicing, LLC, et al.
MEMORANDUM AND ORDER
In an amended complaint, the plaintiffs, Jacques and Sabine
Elias, allege that the defendant, Specialized Loan Servicing
(“SLS”), mishandled their mortgage, thereby forcing their
property into foreclosure. Doc. no. 20. SLS moves for summary
judgment, doc. no. 30, and the plaintiffs object, doc. no. 35.1
For the following reasons, SLS’s motion is granted.
Summary Judgment Standard
Summary judgment is appropriate where “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also
Xiaoyan Tang v. Citizens Bank, N.A., 821 F.3d 206, 215 (1st Cir.
2016). “An issue is ‘genuine’ if it can be resolved in favor of
either party, and a fact is ‘material’ if it has the potential
of affecting the outcome of the case.” Xiaoyan Tang, 821 F.3d
1 SLS filed a reply to the plaintiffs’ objection. Doc. no. 37. The plaintiffs filed a notice of intent to file a surreply (doc. no. 39) but no surreply was filed. at 215 (internal quotation marks and citations omitted). At the
summary judgment stage, the court draws “‘all reasonable
inferences in favor of the non-moving party,’ but disregard[s]
‘conclusory allegations, improbable inferences, and unsupported
speculation.’” Fanning v. Fed. Trade Comm’n, 821 F.3d 164, 170
(1st Cir. 2016) (citation omitted), cert. denied, 85 U.S.L.W.
3324 (U.S. Jan. 9, 2017).
“A party moving for summary judgment must identify for the
district court the portions of the record that show the absence
of any genuine issue of material fact.” Flovac, Inc. v. Airvac,
Inc., 817 F.3d 849, 853 (1st Cir. 2016). Once the moving party
makes the required showing, “‘the burden shifts to the nonmoving
party, who must, with respect to each issue on which [it] would
bear the burden of proof at trial, demonstrate that a trier of
fact could reasonably resolve that issue in [its] favor.’” Id.
(citation omitted). “This demonstration must be accomplished by
reference to materials of evidentiary quality, and that evidence
must be more than ‘merely colorable.’” Id. (citations omitted).
“At a bare minimum, the evidence must be ‘significantly
probative.’” Id. (citation omitted). The nonmoving party’s
failure to make the requisite showing “entitles the moving party
to summary judgment.” Id.
2 Background
I. Factual Background
On September 8, 2006, Sabine Elias executed a promissory
note, which was secured by a mortgage on property located in
Amherst, New Hampshire. Doc. no. 30-3, at 9–12. Sabine Elias
alone signed the note and was named as sole borrower under the
mortgage. Id. at 12, 13. Both plaintiffs signed the mortgage.
Id. at 27.
On May 19, 2012, the plaintiffs entered into a loan
modification with Bank of America, which was the servicer of the
mortgage at that time (“2012 modification”). See doc. no. 30-5.
Under this modification, an amount of $102,535.12 was deferred
and treated as non-interest-bearing principal forbearance. Id.
at 5. If the plaintiffs met certain conditions specified in the
2012 modification agreement, including not falling more than
three months behind on their payments under the 2012
modification, this amount would be forgiven over the course of
three years. Id.
At some point after the 2012 modification was executed,
Bank of America informed the plaintiffs that they qualified for
better modification terms under a federal program (the “federal
modification”). Elias Aff. ¶ 6 (doc. no. 35-1). Bank of
America informed the plaintiffs that in order to qualify for the
federal modification, they would have to be two months behind on
3 their payments under the 2012 modification. Id. The plaintiffs
pursued this modification, falling two months behind on their
mortgage payments. Id. ¶ 7.
On November 1, 2012, Bank of America transferred service of
the plaintiffs’ loan to SLS. Doc. no. 30-3, at 31. At this
time, the plaintiffs had not received the federal modification
from Bank of America. On November 9, 2012, SLS sent the
plaintiffs a statement informing them of the transfer and
instructing them to send all future payments to SLS at an
address provided. Id. SLS specifically noted that as of
November 1, 2012, Bank of America “w[ould] not accept payments
from [the plaintiffs].” Id. The plaintiffs continued to make
payments to Bank of America, which were returned. Elias Aff. ¶
11. By the time the plaintiffs started sending payments to SLS,
they were more than three months behind on their mortgage
payments. Id. ¶ 14.
In the summer of 2014, SLS offered the plaintiffs a new
loan modification (“2014 modification” or “2014 modification
agreement”). See doc. no. 20-3. SLS informed the plaintiffs
that to accept this offer, they must sign and return two
original copies of the 2014 modification agreement by August 31,
2014. Id. at 2.
The 2014 modification agreement indicated that an amount of
$102,535.12 had been deferred in a previous modification, which
4 would not accrue interest, but would remain due and owing at the
end of the loan and was “not a forgiveness of a partial debt . .
. .” Id. The plaintiffs believed that this amount had been
forgiven under the 2012 modification. They based this belief on
a 1099-C tax form issued by Bank of America on February 26,
2013, see doc. no. 20-5, at 5, which a tax professional had
informed them meant that forgiveness of this amount had actually
occurred, see Elias Aff. ¶ 31–32. The plaintiffs filled out
1040X and 982 tax forms based on this belief. See doc. no. 20-
5. Plaintiffs’ counsel conceded at the hearing that this belief
was mistaken, and that the $102,535.12 was not forgiven “as a
matter of law.”
There is no dispute in the record that the plaintiffs
signed the 2014 modification agreement on August 30, 2014, and
that they mailed at least one copy of that agreement to SLS that
day. There are two versions of the 2014 modification agreement
in the record, however,2 and the parties dispute which version
or versions the plaintiffs sent to SLS.
2 One version of this document is docketed as document number 20- 3. The other is docketed at both document number 20-4 and document number 30-3, at pages 36 through 38. For ease of citation, to the extent either of these documents can be cited to support a proposition in this order (i.e., they are identical), the court will only cite to document number 20-3. But to the extent the differences in these documents are relevant to a proposition in this order, the court will cite to the appropriate document or documents.
5 Both versions of the 2014 modification agreement contain
the same typed agreement language and both are signed by the
plaintiffs and dated August 30, 2014. Compare doc. no. 20-3
with doc. no. 20-4. In one version there is a handwritten
notation next to the reference to the $102,535.12 in prior
deferred principal, which states that “[t]his debt was cancelled
by [Bank of America] as of June 2. Form 1099-C attached.” Doc.
no. 20-3, at 5. Both plaintiffs initialed and signed next to
this notation. Id. The other version does not contain this
notation. See doc. no. 20-4, at 4.3
The plaintiffs alternatively contend that they only sent
the notated version of the 2014 modification agreement to SLS or
that they sent SLS both the notated and non-notated versions of
the agreement. SLS contends that it only received the non-
notated version. The only version of this document in the
plaintiffs’ records is the version with the notation. See Elias
Dep., at 6, 7 (doc. no. 37-1). The only version of this
document in SLS’s records is the version without the notation.
See doc. no. 30-3, at 36–38.
Though they dispute the issue of loan forgiveness, both
parties agree that the 2014 modification agreement went into
3 Though these documents differ in other minor respects, this notation is the sole difference relied upon by the plaintiffs in opposition to summary judgment. The court will limit its discussion accordingly. 6 effect, and the plaintiffs do not bring a claim challenging the
validity of this agreement. The plaintiffs were unable to
remain current under this agreement. Facing the prospect of
foreclosure, the plaintiffs filed the instant action.
II. Procedural Background
The plaintiffs originally filed suit against SLS and Bank
of America in state court. Doc. no. 1-1, at 4–12. The
defendants removed this action here (doc. no. 1) and Bank of
America moved to dismiss for failure to state a claim (doc. no.
13). The plaintiffs voluntarily dismissed Bank of America (doc.
no. 15) and were granted leave to amend their complaint. The
plaintiffs filed a three-count amended complaint against SLS on
January 4, 2016. Doc. no. 20.
SLS moved for summary judgment on all three counts. Doc.
no. 30. In reviewing this motion, the plaintiffs’ objection
(doc. no. 35) and SLS’s reply (doc. no. 37) the court determined
that a hearing was appropriate and additional briefing was
necessary. On February 2, 2017, the court issued a procedural
order scheduling a hearing and directing the parties to brief
three discrete issues. See Feb. 2, 2017 Procedural Order (doc.
no. 44) (hereinafter “supplemental briefing order”). The
parties timely submitted supplemental briefing (doc. nos. 46,
47, 49, 50) and the hearing was held on March 7, 2017.
7 Discussion
The plaintiffs bring claims against SLS for violations of
12 C.F.R. § 1024.38(b)(4) (“Count I”), for negligent
misrepresentation (“Count II”), and for breach of the covenant
of good faith and fair dealing (“Count III”). SLS moves for
summary judgment on all three counts.
I. 12 C.F.R. § 1024.38(b)(4)
At the hearing, plaintiffs’ counsel conceded,
notwithstanding arguments to the contrary in the plaintiffs’
supplemental briefing, that no private right of action exists
under 12 C.F.R. § 1024.38(b)(4) and that SLS was entitled to
summary judgment on this claim. SLS’s motion for summary
judgment is accordingly granted as to Count I.
II. Negligent Misrepresentation
SLS argues that there is no genuine dispute of material
fact in the record from which a reasonable trier of fact could
conclude that SLS made negligent misrepresentations to the
plaintiffs. SLS further argues that this claim is barred by the
economic-loss doctrine.
The court turns first to the economic-loss doctrine. Under
this doctrine, the contractual relationship between a lender and
a borrower typically precludes recovery in tort. See Moore v.
Mortg. Elect. Registration Sys., Inc., 848 F. Supp. 2d 107, 133
(D.N.H. 2012) (citing Wyle v. Lees, 162 N.H. 406, 409–10
8 (2011)). This principle is premised 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)).
This court has held on several occasions that the economic-
loss doctrine generally bars negligent misrepresentation claims
brought by mortgagors against loan servicers/lenders related to
a mortgage.4 Though there are certain recognized exceptions to
this doctrine, see, e.g., Plourde, 154 N.H. at 795–96, 799, the
plaintiffs have neither invoked an exception in this case nor
pointed to evidence from which a reasonable trier of fact could
conclude that such an exception applies. It is neither this
court’s responsibility to fashion arguments or theories for the
plaintiffs, see, e.g., Bartolomeo v. Liburdi, No. 97-0624-ML,
1999 WL 143097, at *3 (D.R.I. Feb. 4, 1999) (citation omitted),
nor its obligation to scour the record for evidence the
4 See, e.g., Mader v. Wells Fargo Bank, N.A., No. 16-cv-309-LM, 2017 WL 177619, at *3 (D.N.H. Jan. 17, 2017); Gasparik v. Fed. Nat'l Mortg. Ass'n, No. 16-CV-147-AJ, 2016 WL 7015672, at *4 (D.N.H. Dec. 1, 2016); Riggieri v. Caliber Home Loans, Inc., No. 16-CV-20-LM, 2016 WL 4133513, at *4-5 (D.N.H. Aug. 3, 2016); Bowser v. MTGLQ Inv'rs, LP, No. 15-CV-154-LM, 2015 WL 4771337, at *5 (D.N.H. Aug. 11, 2015). 9 plaintiffs themselves failed to identify, see, e.g., Foley v.
Wells Fargo Bank, N.A., 772 F.3d 63, 79 (1st Cir. 2014)
(citation omitted) (“[I]n the summary judgment context . . .
[judges] are not ‘pigs hunting for truffles in the record.”
(internal brackets and quotation marks omitted)). The
plaintiffs’ negligent misrepresentation claim is accordingly
barred by the economic-loss doctrine.
Even if the economic-loss doctrine did not apply, however,
SLS would still be entitled to summary judgment on the
plaintiffs’ negligent misrepresentation claim. The elements of
a common-law negligent misrepresentation claim are (1) a
negligent misrepresentation of a material fact by the defendant,
and (2) justifiable reliance by the plaintiffs. Wyle, 162 N.H.
at 413 (citation omitted). SLS has made the requisite showing
in its motion for summary judgment of an absence of any genuine
issue of material fact in the record as to either of these
elements. See doc. no. 30-1, at 14–18. The burden accordingly
shifts to the plaintiffs to demonstrate, with references to
materials of evidentiary quality, that a trier of fact could
reasonably resolve each of these elements in the plaintiffs’
favor at trial. See Flovac, 817 F.3d at 853.
The plaintiffs’ objection and supplemental briefing fail to
meet this burden. In their objection, the plaintiffs state that
their “negligent misrepresentation claim is grounded on the
10 argument that [SLS] signed them up for another modification with
worse terms when they had been approved for a previous
modification.” Doc. no. 35, at 7. They contend in their
supplemental briefing that the two versions of the 2014
modification agreement in the record support a claim for
negligent misrepresentation because they “put[] [SLS] on actual
notice that the [plaintiffs] w[ere] under the impression that a
modification ha[d] occurred . . . .” Doc. no. 47, at 3.
Neither of these statements identifies, or points to evidence
demonstrating, any misrepresentation of a material fact on the
part of SLS.
The plaintiffs also contend in their supplemental briefing
that “[t]he issue of the loan being forgiven directly supports
the elements to show a negligent misrepresentation” because SLS
“knew or should have known that the loan had in fact been
forgiven by Bank of America.” Doc. no. 35, at 7. These
assertions similarly fail to identify any misrepresentation on
the part of SLS. Additionally, plaintiffs’ counsel conceded at
the hearing that no forgiveness actually occurred “as a matter
of law,” and that his clients merely held the belief that this
amount had been forgiven by Bank of America. In so conceding,
plaintiffs’ counsel necessarily abandoned any argument that SLS
made a negligent misrepresentation in this regard.
In light of this lack of identifiable misrepresentations in
11 the plaintiffs’ written filings, the court pressed plaintiffs’
counsel at the hearing to identify an actionable
misrepresentation attributable to SLS. Plaintiffs’ counsel was
unable to do so.
First, plaintiffs’ counsel appeared to argue that SLS
misrepresented having not received payments from the plaintiffs
when in fact the plaintiffs had sent these payments to Bank of
America. It is undisputed that SLS sent the plaintiffs a
statement on November 9, 2012, informing them that Bank of
America had transferred service of the plaintiffs’ loan to SLS,
that all future payments must be sent to SLS at the address
provided, and that as of November 1, 2012, Bank of America
““w[ould] not accept payments from [the plaintiffs].” Doc. no.
30-3, at 32. The plaintiffs have not pointed to any evidence in
the record supporting a conclusion that, despite this language,
payments sent to Bank of America after November 1, 2012, would
be considered received by SLS. Thus, no reasonable trier of
fact could conclude that SLS made a misrepresentation in this
regard.
Plaintiffs’ counsel also appeared to contend that SLS made
a misrepresentation by failing to take into consideration the
plaintiffs’ lack of sophistication. This assertion, when
assumed true, once again fails to identify any misrepresentation
on the part of SLS.
12 Finally, plaintiffs’ counsel contended that SLS made
misrepresentations to the plaintiffs by offering the plaintiffs
the 2014 loan modification when they were pursuing the federal
modification offered by Bank of America. This argument appears
to largely be a reiteration of the contentions raised in the
plaintiffs’ objection and supplemental briefing. As discussed
above, this argument fails to identify any misrepresentation of
a material fact attributable to SLS. It is accordingly
insufficient to defeat summary judgment.
In sum, the court concludes that the plaintiffs’ negligent
misrepresentation claim is barred by the economic-loss doctrine.
And even if it were not, the plaintiffs have pointed to no
evidence demonstrating that a trier of fact could reasonably
resolve this claim in their favor at trial. Accordingly, SLS’s
motion for summary judgment is granted as to Count II.
III. Good Faith and Fair Dealing
The plaintiffs’ specific theory as to how SLS breached the
covenant of good faith and fair dealing has been difficult to
pin down. Initially, the plaintiffs appeared to allege that SLS
either fraudulently altered the modified version of the 2014
agreement to create the version without the notation, or forged
the version without the notation. At the hearing, however,
plaintiffs’ counsel expressly disclaimed any allegation of fraud
on the part of SLS and instead relied more generally on the
13 existence in the record of the two versions of the 2014
modification in support of the plaintiffs’ good faith and fair
dealing claim. The court will focus its analysis accordingly.
“In every agreement, there is an implied covenant that the
parties will act in good faith and fairly with each other.”
Birch Broad, Inc. v. Capitol Broad. Corp., Inc., 161 N.H. 192,
198, 13 A.3d 224 (2010). New Hampshire law recognizes three
distinct categories of good faith and fair dealing claims: 1)
contract formation; 2) termination of at-will employment
agreements; and 3) limitations of discretion in contractual
performance. J & M Lumber & Const. Co. v. Smyjunas, 161 N.H.
714, 724 (2011).
This case plainly does not involve the termination of an
at-will employment agreement. And the plaintiffs have not
contended anywhere in their summary judgment filings (or,
indeed, argued at the hearing) that SLS was conferred discretion
under an agreement with the plaintiffs, that SLS abused this
discretion, and that this abuse somehow damaged the plaintiffs.
See Moore, 848 F. Supp. 2d at 129; Ahrendt v. Granite Bank, 144
N.H. 308, 313 (1999). Thus, the court’s analysis is limited to
the first category of good faith and fair dealing claims: those
involving contract formation.
In the context of contract formation, the covenant of good
faith and fair dealing is “tantamount to the traditional duties
14 of care to refrain from misrepresentation and to correct
subsequently discovered error, insofar as any representation is
intended to induce, and is material to, another party’s decision
to enter into a contract in justifiable reliance upon it.”
Centronics Corp. v. Genicom Corp., 132 N.H. 133, 139 (1989).
This obligation “requires that if one party makes a
representation of a material fact to another party for the
purpose of inducing the other party to change his position or
enter into a contract, the party making the representation must
tell the truth.” Bursey v. Clement, 118 N.H. 412, 414 (1978)
(citations omitted). Additionally, “[o]ne who makes a
representation that is true when made is under a duty to correct
that statement if it becomes erroneous or is discovered to have
been false before the transaction is consummated.” Id.
(citations omitted).
SLS has again met its burden of showing an absence of any
genuine issue of fact in the record as to this claim. See doc.
no. 30-1, at 18–20. Thus, the burden shifts to the plaintiffs
to show, with reference to materials of evidentiary quality, the
existence of a genuine issue of material fact for trial. See
Flovac, 817 F.3d at 853. The plaintiffs have failed to meet
this burden. As discussed above, the plaintiffs have failed to
identify any misrepresentation or false statement attributable
to SLS. They have similarly failed to identify any statement
15 made by SLS that was true at the time it was made but became
erroneous or was discovered to be false before the parties
entered into the 2014 modification agreement. The plaintiffs
have therefore failed to demonstrate that a trier of fact could
reasonably resolve this claim in their favor.
The plaintiffs appear to contend that, before entering into
the 2014 modification, SLS had an obligation to correct the
plaintiffs’ mistaken belief that $102,535.12 had been forgiven
under the 2012 modification. This argument is premised on
plaintiffs’ counsel’s hypothesis at the hearing that the
plaintiffs sent both the notated and non-notated versions of the
2014 modification agreement to SLS, thereby putting SLS on
notice of their mistaken belief. Even assuming SLS received
both copies, however, this does not create a triable good faith
and fair dealing claim. The above precedent only contemplates a
party being obligated to correct an error when that party is
somehow responsible for causing that error in the first place.
See, e.g., Bursey, 118 N.H. at 414. The plaintiffs have not
identified any evidence supporting a conclusion that their
misunderstanding here with regards to the loan forgiveness was
somehow caused by SLS. Nor have they identified any precedent
supporting broader liability under the covenant of good faith
and fair dealing for any contracting party that fails to correct
a misapprehension on the part of another party to that contract.
16 Cf. L'Esperance v. HSBC Consumer Lending, Inc., No. 11-cv-555-
LM, 2012 WL 2122164, at *18 (D.N.H. June 12, 2012) (noting that
“it would appear that for pre-formation misrepresentation to be
a breach of the implied covenant of good faith and fair dealing,
the misrepresentation must have been made with scienter”).
Thus, their good faith and fair dealing claim cannot survive on
this basis.5
In sum, there is no genuine dispute of material fact in the
record that would allow the plaintiffs to go to trial on their
good faith and fair dealing claim. SLS’s motion for summary
judgment is accordingly granted as to Count III.
Conclusion
A trier of fact might reasonably conclude, based on the
5 Notably, the plaintiffs have not brought a claim seeking to void or rescind the 2014 modification based on their mistaken belief with regard to loan forgiveness. This is perhaps unsurprising, given that in the absence of this modification, the parties would be subject to the 2012 modification, and there is no dispute in the record that the plaintiffs were in default of that modification. See Elias Aff. ¶ 14 (admitting that the plaintiffs were more than three months behind on their payments under the 2012 modification at the time they started sending payments to SLS).
Additionally, at the hearing plaintiffs’ counsel characterized the notated version of the 2014 modification agreement as a “counteroffer,” which he conceded he had no evidence SLS ever accepted. This effectively negated any allegation in the plaintiffs’ written filings that the notated version of 2014 modification agreement was the operative version based on the plaintiffs’ understanding as to forgiveness of the $102,535.12. 17 record, that the plaintiffs harbored certain mistaken beliefs
when they entered into the 2014 modification. But a party’s
mistaken belief alone does not establish a triable claim for
negligent misrepresentation or breach of the covenant of good
faith and fair dealing. Here, despite the plaintiffs’ beliefs,
the undisputed facts in the record fail to sustain either claim.
SLS’s motion for summary judgment, doc. no. 30, is accordingly
granted.
In light of this determination, SLS’s motion to amend its
answer to the amended complaint (doc. no. 45) is denied as moot.
The clerk of the court shall enter judgment in accordance with
this order and close the case.
SO ORDERED.
__________________________ Andrea K. Johnstone United States Magistrate Judge
April 5, 2017
cc: Keith A. Mathews, Esq. Christopher J. Fischer, Esq.