L'Esperance v. HSBC Consumer Lending

2012 DNH 104

• Court: District Court, D. New Hampshire
• Decided: June 12, 2012
• Docket: CV-11-555-LM
• Status: Published

Opinion

L'Esperance v . HSBC Consumer Lending CV-11-555-LM 6/12/12 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Linda L’Esperance

v. Civil N o . 11-cv-555-LM Opinion 2012 DNH 104 HSBC Consumer Lending, Inc.; HSBC Finance Corporation; HSBC Group a/k/a HSBC Bank, NA a/k/a HSBC North American Holdings, Inc.; Household International, Inc.; Beneficial Corporation; Beneficial New Hampshire, Inc.; and Manhattan Mortgage Corporation

O R D E R

In her amended complaint, Linda L’Esperance asserts

thirteen claims against seven defendants. Those claims all

arise out of the origination and servicing of a pair of loans.

Before the court are two motions to dismiss: (1) document n o .

2 4 , filed by HSBC Group; and (2) document n o . 2 5 , filed by all

the defendants other than HSBC Group and Manhattan Mortgage

Corporation (“Manhattan Mortgage”). Notwithstanding the

pendency of two motions to dismiss, L’Esperance has filed a

pleading titled “Plaintiff’s Objection to Defendants’ Motion to

Dismiss,” document n o . 2 7 , that is supported by a memorandum of

law that addresses document n o . 25 but does not address document

n o . 2 4 . For the reasons that follow, HSBC Group’s motion to dismiss is granted in part and the second motion to dismiss is

granted in full, with prejudice.

The Legal Standard

A motion to dismiss for “failure to state a claim upon

which relief can be granted,” Fed. R. Civ. P. 12(b)(6), requires

the court to conduct a limited inquiry, focusing not on “whether

a plaintiff will ultimately prevail but whether the claimant is

entitled to offer evidence to support the claims.” Scheuer v .

Rhodes, 416 U.S. 2 3 2 , 236 (1974). To pass that test, the

complaint “must contain ‘enough facts to raise a reasonable

expectation that discovery will reveal evidence’ supporting the

claims.” Fantini v . Salem State Coll., 557 F.3d 2 2 , 26 (1st

Cir. 2009) (quoting Bell Atl. Corp. v . Twombly, 550 U.S. 5 4 4 ,

556 (2007)).

When considering a motion to dismiss under Rule 12(b)(6), a

trial court “accept[s] as true all well-pled facts in the

complaint and draw[s] all reasonable inferences in favor of

plaintiff[ ].” Plumbers’ Union Local N o . 12 Pension Fund v .

Nomura Asset Acceptance Corp., 632 F.3d 7 6 2 , 771 (1st Cir. 2011)

(quoting SEC v . Tambone, 597 F.3d 436, 441 (1st Cir. 2010)).

But, “naked assertions devoid of further factual enhancement

need not be accepted.” Plumbers’ Union, 632 F.3d at 771

(quoting Maldonado v . Fontanes, 568 F.3d 263, 266 (1st Cir.

2 2009)). Moreover, “[a] pleading that offers ‘labels and

conclusions’ or ‘a formulaic recitation of the elements of a

cause of action will not do.’” United Auto. Workers of Am.

Int’l Union v . Fortuño, 633 F.3d 3 7 , 41 (1st Cir. 2011) (quoting

Ashcroft v . Iqbal, 556 U.S. 6 6 2 , 678 (2009)).

“To survive a motion to dismiss, a complaint must contain

sufficient factual matter, accepted as true, to state a claim to

relief that is plausible on its face.” United Auto. Workers,

633 F.3d at 40 (citation omitted). On the other hand, a Rule

12(b)(6) motion should be granted if “the facts, evaluated in

[a] plaintiff-friendly manner, [do not] contain enough meat to

support a reasonable expectation that an actionable claim may

exist.” Andrew Robinson Int’l, Inc. v . Hartford Fire Ins. Co.,

547 F.3d 4 8 , 51 (1st Cir. 2008) (citations omitted). That i s ,

“[i]f the factual allegations in the complaint are too meager,

vague, or conclusory to remove the possibility of relief from

the realm of mere conjecture, the complaint is open to

dismissal.” Plumbers’ Union, 632 F.3d at 771 (citation

omitted).

Background

Much of the relevant background has been set out in the

court’s previous order in this case, document n o . 1 1 , and is not

repeated here in detail. L’Esperance’s claims arise out of her

3 dissatisfaction with the origination and servicing o f : (1) a

$385,699.40 loan to refinance the mortgage on her home; and (2)

a personal credit-line account with a credit limit of $11,500.

Both loans were extended by “Beneficial New Hampshire Inc.”

Defs.’ Mot. to Dismiss, Ex. A (doc. n o . 2 5 - 2 ) , at 3 ; Ex. B .

(doc. n o . 2 5 - 3 ) , at 2 ) . To secure the refinancing loan,

L’Esperance granted a mortgage on her home to “Beneficial New

Hampshire Inc.” Id., Ex. C (doc. n o . 2 5 - 4 ) , at 2 . The personal

credit-line account, which L’Esperance alleges was extended to

her as a source of funds to cover her closing costs, is not

secured by a mortgage. The court will introduce additional

factual allegations from L’Esperance’s amended complaint as they

are relevant to the disposition of specific claims for relief.

Discussion

A . HSBC Group’s Motion to Dismiss

In document n o . 2 4 , HSBC Group moves to dismiss on grounds

that L’Esperance has failed to allege sufficient facts to

demonstrate that it is an entity capable of being sued. In the

alternative, it joins in document n o . 2 5 . L’Esperance has not

responded to HSBC Group’s motion to dismiss or any of the

arguments advanced therein. While L’Esperance’s silence in

response to document n o . 24 could be taken as a concession that

HSBC Group is entitled to dismissal of all the claims against

4 i t , the court will, nonetheless, address the merits of the

arguments raised in document n o . 2 4 .

HSBC Group relies on Rule 17(b) of the Federal Rules of

Civil Procedure (“Federal Rules”), which provides, in pertinent

part:

Capacity to Sue or Be Sued. Capacity to sue or be sued is determined as follows:

(1) for an individual who is not acting in a representative capacity, by the law of the individual’s domicile;

(2) for a corporation, by the law under which it was organized; and

(3) for all other parties, by the law of the state where the court is located, except that:

(A) a partnership or other unincorporated association with no such capacity under that state’s law may sue or be sued in its common name to enforce a substantive right existing under the United States Constitution or laws

Fed. R. Civ. P. 17(b). Plainly, HSBC Group is not an

individual, and, as it correctly points out, L’Esperance has not

adequately alleged that it is a corporation. Thus, in HSBC

Group’s view, its capacity to be sued is governed by the law of

New Hampshire, under which “[a] voluntary association, except as

provided for by statute . . . has no legal existence apart from

the members who compose it,” Brooks v . Trs. of Dartmouth Coll.,

161 N.H. 685, 691 (2011) (quoting Shortlidge v . Gutoski, 125

5 N.H. 5 1 0 , 513 (1984)) (emphasis added by Brooks). The problem

with HSBC Group’s argument is that it seems not to account for

Rule 17(b)(3)(A), which allows suits against unincorporated

associations to enforce rights existing under federal law.

Because many of L’Esperance’s claims are based on federal

statutes, HSBC Group’s motion to dismiss is granted, but only in

part. HSBC Group is entitled to dismissal of the state-law

claims asserted in Counts III, 1 V I , V I I , I X , X , XI, 2 and XIII.

B . The Second Motion to Dismiss

In document n o . 2 5 , HSBC Consumer Lending, Inc.; HSBC

Finance Corporation; Beneficial New Hampshire (“Beneficial N H ” ) ;

Beneficial Corporation; and Household International, Inc. move

to dismiss. As noted, HSBC Group joins in this motion to

dismiss. The moving defendants first argue that L’Esperance has

again impermissibly relied on group pleading, and then they

identify specific deficiencies in each of her claims.

Based on L’Esperance’s failure to specifically identify any

1 While Count III appears to be based primarily on the federal Equal Credit Opportunity Act, it also includes a stray reference to the New Hampshire Fair Housing Act. See Am. Compl. ¶ 66. 2 While Counts VI (“Breach of Obligation of Good Faith”), VII (“Unconscionable Conduct”), and XI (“Willful and Oppressive Conduct”) do not identify in any meaningful way the law under which they purportedly arise, the court presumes that L’Esperance intended to assert the claims described in those counts under the common law of New Hampshire.

6 conduct by any defendant other than Beneficial N H , all the

moving defendants other than Beneficial NH are entitled to

dismissal of the claims against them. Beneficial N H , in turn,

is entitled to dismissal of all the claims asserted against it

because none of them can withstand the scrutiny demanded by Rule

12(b)(6).

1 . Group Pleading

In her amended complaint, L’Esperance describes various

interactions with Jennifer Halteman and/or Cathy Maranhao at an

office located at 75 Congress Street, Portsmouth, New Hampshire,

that resulted in the two loans at issue here. The loan

agreements for both loans identify the lender a s :

Beneficial New Hampshire 75 Congress Street Portsmouth, NH 03801

Defs.’ Mot. to Dismiss, Ex. A (doc. n o . 2 5 - 2 ) , at 3 ; Ex. B (doc.

no. 2 5 - 3 ) , at 2 . With regard to the relationships among

Beneficial NH and the other moving defendants, L’Esperance

alleges:

In connection with the two loans at issue in this litigation, that closed on October 2 3 , 2008, the Plaintiff presented at the Portsmouth location of Household International, Inc. to refinance the existing mortgage on her Seabrook, New Hampshire home.

While at the time the location of the branch office was identified as Household International, Inc., the nature of the loan originator was

7 represented on documentation provided to Plaintiff as being HSBC/Beneficial.

These documents were provided to the Plaintiff by Jennifer Halteman, Assistant Vice President and Branch Sales Manager of “Beneficial, Member HSBC Group,” and/or Cathy Maranhao, both of HSBC Group and Beneficial branch office location 75 Congress Street, Portsmouth, New Hampshire. Plaintiff was additionally provided with cards for these persons associated with her loan identifying them to be employees of “Beneficial, Member HSBC Group.” These individuals and other individuals at this branch office were agents of Defendants HSBC Lending, HSBC Finance Corporation, HSBC Group, Household International Inc. and Beneficial Corp. Though Beneficial N H , Inc. now appears to Plaintiff to have been a separately incorporated entity and identified on the mortgage and some loan documentation, on information and belief, Beneficial N H , Inc. was a “branch office,” and agent and wholly owned subsidiary of Defendants HSBC Lending, HSBC Finance Corporation, HSBC Group, Household International Inc. and Beneficial Corp. Thus, the Plaintiff alleges that Defendants HSBC Lending, HSBC Finance Corporation, HSBC Group, Household International Inc. and Beneficial Corp. are responsible for the representations and actions of M s . Halteman and M s . Maranhao, are responsible for the acceptance and origination of the Plaintiff’s loans, and are additionally independently responsible for the violations and causes of action set forth herein as the servicers of the Plaintiff’s loans, at least from March 2009 forward.

Am. Compl. (doc. n o . 20) ¶¶ 24-26.

Based on the allegations described above, most of

L’Esperance’s claims are framed in the following way:

The Defendants Beneficial N H , Inc., Household International, Inc., HSBC Consumer Lending, Inc., HSBC Finance Corporation, HSBC Group a/k/a HSBC Bank, NA a/k/a HSBC North American Holdings, Inc. and Beneficial Corporation have violated and continue to violate the requirements of TILA and Regulation Z . . .

8 Am. Compl. ¶ 4 7 . Despite replacing the word “defendant” with a

list of six specific entities, L’Esperance has not solved the

group-pleading problem the court identified in its order

granting HSBC Consumer Lending’s motion to dismiss. To

paraphrase the Court of Appeals for the First Circuit, “each

defendant’s role in the [loan process] must be sufficiently

alleged to make [it] a plausible defendant.” Ocasio-Hernández

v . Fortuño-Burset, 640 F.3d 1 , 16 (1st Cir. 2011). L’Esperance

does not allege specific conduct by specific defendants, but,

rather, appears to base its claims on the idea that what one

defendant did, all defendants did. That is not enough.

Two defendants can be liable for the same conduct if they

did something jointly. If A and B intentionally hit C with a

stick they are both wielding, then C may have a cause of action

against A and B for battery. But here, the agreements

documenting the loans at issue identify one lender and one

lender only: Beneficial NH. The business cards and other

ancillary paperwork L’Esperance mentions in her complaint are

insufficient to transform any entity other than Beneficial NH

into her lender, and there is no factual support in the

complaint for L’Esperance’s assertion that her loan was

originated, by six different entities, “jointly and through

their affiliations with each other,” Am. Compl. ¶ 8 .

9 There i s , of course, the possibility of vicarious liability

for Beneficial NH’s conduct, which L’Esperance appears to

attempt to invoke with her allegations concerning Beneficial

NH’s status as a “a ‘branch office,’ and agent and wholly owned

subsidiary of Defendants HSBC Lending, HSBC Finance Corporation,

HSBC Group, Household International Inc. and Beneficial Corp.”

Am. Compl. ¶ 26 (emphasis added). While the statuses of “branch

office,” “agent,” and “wholly owned subsidiary” are not

necessarily mutually exclusive, L’Esperance’s imprecision,

coupled with her suggestion that Beneficial NH filled each of

those three roles, simultaneously, with respect to five separate

“home offices,” “principals,” and “corporate parents,” does

little to resolve the group-pleading problem or establish a

proper basis for imposing vicarious liability. Beyond that, the

idea that Beneficial NH was acting as a “branch office” or as an

“agent” would seem to be contradicted by the fact that

L’Esperance’s two loans were made by Beneficial N H , in its own

corporate name, rather than in the name of some “home office” or

“principal.” Finally, leaving aside the rather fanciful

corporate mechanics of Beneficial NH being “wholly owned” by

five other entities, its status as a wholly owned subsidiary, if

proven, would do nothing in terms of vicarious liability. As

Judge Duffy explained in an order partially granting a motion to

10 dismiss in a putative class action against a mortgage lender,

the lender’s parent corporation, and that corporation’s parent:

Golden West and Wachovia cannot be held liable for World’s actions simply because Golden West is World’s parent, and Wachovia is Golden West’s parent. See United States v . Bestfoods, 524 U.S. 5 1 , 61 (1998) (“It is a general principle of corporate law deeply ingrained in our economic and legal systems that a parent corporation . . . is not liable for the acts of its subsidiaries.”); Broussard v . Meineke Discount Muffler Shops, Inc., 155 F.3d 3 3 1 , 349 (4th Cir. 1998) (stating, in applying North Carolina law, “A corporate parent cannot be held liable for the acts of its subsidiary unless the corporate structure is a sham and the subsidiary is nothing but a mere instrumentality of the parent.” (internal quotation marks omitted)); Carroll v . Smith–Henry, Inc., 313 S.E.2d 649, 651 (S.C. C t . App. 1984) (“Stock ownership alone ordinarily does not render a parent corporation liable for the contracts of its subsidiary irrespective of whether the subsidiary is wholly owned or only partially owned . . . . ” ) .

Mincey v . World Sav. Bank, FSB, 614 F. Supp. 2d 6 1 0 , 622

(D.S.C. 2008) (parallel citations omitted); see also Leeman

v . Boylan, 134 N.H. 2 3 0 , 235-36 (1991) (acknowledging

parent corporation’s potential liability based on

independent duties but discounting application of vicarious

liability to parent corporation based solely on its

ownership of subsidiary).

In sum, based on L’Esperance’s failure to cure the group-

pleading problem identified in the court’s previous order, HSBC

Consumer Lending, Inc.; HSBC Finance Corporation; HSBC Group;

Household International, Inc.; and Beneficial Corporation are

11 each entitled to dismissal of all the claims against them.

Because the claim asserted in Count V under the Home

Affordable Modification Program (“HAMP”) does not list

Beneficial NH as a defendant, that claim is dismissed in its

entirety. With regard to the defendants actually named in Count

V , L’Esperance’s claim says:

Defendants Household International, Inc., HSBC Consumer Lending, Inc., HSBC Finance Corporation, HSBC Group a/k/a HSBC Bank and Beneficial Corporation, each individually or jointly with one or more of the other[s], interfaced with the Plaintiff regarding her loan modification, general loan servicing, and application under their financial hardship program as servicers.

Am. Compl. ¶ 8 4 . It is difficult to imagine a more

objectionable example of group pleading. See Ocasio-Hernández,

640 F.3d at 1 6 .

But, in any event, it is well established that there is no

private right of action under HAMP. See, e.g., Miller v . Chase

Home Fin., LLC, ___ F.3d ___, ___, 2012 WL 1345834, at *1-2

(11th Cir. Apr. 1 9 , 2012); Wigod v . Wells Fargo Bank, N.A., 673

F.3d 5 4 7 , 559 n.4 (7th Cir. 2012) (“[S]ome homeowners [have]

tried to assert rights arising under HAMP itself. Courts have

uniformly rejected these claims because HAMP does not create a

private federal right of action for borrowers against

servicers.”) (citations omitted). In its memorandum of law,

Beneficial NH cites approximately a dozen cases that stand for

12 the proposition that HAMP does not create a private right of

action. In an argument unencumbered by any citations of

authority, L’Esperance states that she “disagrees with

Defendants’ argument that the ‘courts have repeatedly ruled that

no private right of action exists under HAMP.’” Pl.’s Mem. of

Law (doc. n o . 2 7 - 1 ) , at 5 . Her argument is not persuasive

In addition, Counts VIII (asserting a claim against “[t]he

Defendants” under the federal Fair and Accurate Credit

Transactions Act), 3 and XI (asserting a claim against “all

defendants” for “willful and oppressive conduct”), 4 are both

dismissed for failure to sufficiently allege each defendant’s

role in the allegedly unlawful acts. See Ocasio-Hernández, 640

3 For what it is worth, L’Esperance did not bother to respond to Beneficial NH’s arguments in favor of dismissing Count VIII. Had that count adequately identified a defendant, it does not “contain enough facts to raise a reasonable expectation that discovery will reveal evidence supporting the claims [asserted therein].” Fantini, 557 F.3d at 26 (citation and internal quotation marks omitted). Moreover, it does not even rise to the level of offering labels and conclusions or formulaically reciting the elements of a cause of action. See United Auto. Workers, 633 F.3d at 4 1 . Dismissal of Count VIII, then, is doubly warranted. 4 The court explained in its previous order that “[w]illful and oppressive conduct is not a cause of action.” Order (doc. no. 1 1 ) , at 2 1 . The law has not changed. Yet, Count VII of L’Esperance’s original complaint has been revived as Count XI of her amended complaint, notwithstanding her acknowledgement that “willful and oppressive conduct will not be recited as a separate count,” Pl.’s Mem. of Law (doc. n o . 2 7 - 1 ) , at 3 . The court is perplexed. Even without the group-pleading problem, Count XI would be dismissed for the same reason the court dismissed the same claim just over four months ago.

13 F.3d at 1 6 . Given that L’Esperance has already had two bites at

this apple, the foregoing dismissals are with prejudice.

Consequently, all that remains of this case are L’Esperance’s

claims against Beneficial NH (asserted in Counts I-IV, V I , V I I ,

IX, X , and XIII) and Manhattan Mortgage (asserted in Counts I X ,

X , X I I , and XIII).

1 . Counts I & I I : TILA & HOEPA

In Count I , L’Esperance asserts three claims, purportedly

under the Truth in Lending Act (“TILA”) and a portion of the

Code of Federal Regulations that implements TILA, i.e.,

Regulation Z . Specifically, she asserts:

(1) a claim based o n : (a) 15 U.S.C. § 1639(h), which, with regard to certain mortgage loans, bars creditors from “engag[ing] in a pattern or practice of extending credit to consumers . . . based on the consumers’ collateral without regard to the consumers’ repayment ability”; and (b) 12 C.F.R. § 226.32(e)(1), a section that does not appear to exist in the Code of Federal Regulations, see Am. Compl. ¶ 4 7 ;

(2) a claim based on 15 U.S.C. § 1639(c) and 12 C.F.R. § 226.32(d)(6), which, with regard to certain mortgage loans, generally bar prepayment penalties,5 see Am. Compl. ¶ 4 8 ; and

5 The agreement covering L’Esperance’s refinancing loan states, in two different places: “You may prepay your loan in full or in part at any time without penalty.” Defs.’ Mot. to Dismiss, Ex. A (doc. n o . 2 5 - 2 ) , at 4 , 6. The agreement covering the personal credit-line account does not provide for fixed monthly payments, so the concept of prepayment would not seem to apply to that loan. Thus, the factual basis for the claim asserted in paragraph 48 is not readily apparent.

14 (3) a claim based on 15 U.S.C. § 1639(d) and 12 C.F.R. § 226.32(d)(4), which, with regard to certain mortgage loans, generally bar the imposition of a higher interest rate after a default than the rate that applied before default,6 see Am. Compl. ¶ 4 9 .

L’Esperance characterizes Count I as asserting claims under TILA

and characterizes Count II as asserting claims under the Home

Ownership and Equity Protection Act (“HOEPA”). 7 Yet, the claims

asserted in Counts I and II are substantially overlapping, and

all arise out of various provisions of either 15 U.S.C. § 1639

or Regulation Z . That said, in Count I I , L’Esperance asserts:

(1) a claim based on 15 U.S.C. § 1639(h) and 12 C.F.R. § 226.32(e)(1), the same authorities cited in the claim asserted in paragraph 4 7 , see Am. Compl. ¶ 51(1);

6 As 15 U.S.C. § 1639(d) and 12 C.F.R. § 226.32(d)(4) prohibit the imposition of a higher interest rate after a borrower defaults, the court is puzzled by L’Esperance’s citation of those provisions as authority for the claim she asserts in paragraph 4 9 , i.e., that the defendants violated “the requirements of HOEPA and Regulation Z by including a prohibited prepayment provision.” Moreover, L’Esperance makes no allegations concerning any increase in her interest rate, which would seem to further undermine the claim asserted in paragraph 49. 7 Judge Karlton has helpfully explained the relationship between TILA and HOEPA: “Section 1639 [of Title 15] codifies the Home Ownership and Equity Protection Act (‘HOEPA’), which amended TILA in 1994 to ‘combat predatory lending.’” Yulaeva v . Greenpoint Mortg. Funding, Inc., N o . CIV. S-09-1504 LKK/KJM, 2010 WL 5394859, at *3 (E.D. Cal. Dec. 2 1 , 2010) (quoting Henry v . Lehman Commercial Paper, Inc. (In re First Alliance Mortg. C o . ) , 471 F.3d 9 7 7 , 984 n.1 (9th Cir. 2006)). Based on the foregoing, it would appear that all of the so-called TILA claims in Count I , which are based on § 1639, are actually HOEPA claims.

15 (2) a claim based on 15 U.S.C. § 1639(c) and 12 C.F.R. § 226.32(d)(6), the same authorities cited in the claim asserted in paragraph 4 8 , see Am. Compl. ¶ 57(2);

(3) a claim based on 12 C.F.R. § 226.32(d)(4), one of the two authorities cited in the claim asserted in paragraph 49, 8 see Am. Compl. ¶ 57(3);

(4) a claim based o n : (a) 12 C.F.R. § 226.32(a)(1)(ii), which does not proscribe any conduct but, rather, specifies the loans to which § 226.32 applies; and/or (b) 12 C.F.R. §§ 226.32(b)(1)(i)-(iii), which are parts of the regulatory definition of “points and fees,”9 see Am. Compl. ¶ 57(4);

(5) a claim, citing no specific legal authority, that Beneficial NH “wrongfully document[ed] a closed-end, high-cost loan as an open-ended loan,”10 see Am. Compl. ¶ 57(5); and

8 This claim is as puzzling as the one asserted in paragraph 4 9 . While 12 C.F.R. § 226.32(d)(4) prohibits “[a]n increase in the interest rate after default,” the conduct on which the claim asserted in paragraph 57(3) is based is Beneficial NH’s origination of a loan with an interest rate more than ten percent above the yield on certain Treasury securities. L’Esperance is flatly incorrect if she believes that HOEPA bars loans with such interest rates. See 15 U.S.C. 1602(aa)(5) (2006) (“This subsection shall not be construed to limit the rate of interest or the finance charge that a person may charge a consumer for any extension of credit.”) HOEPA merely requires that when a lender makes a loan with such an interest rate, it must provide certain disclosures, see 12 C.F.R. § 226.32(c), and avoid certain terms, see § 226.32(d). 9 Like the claim asserted in paragraph 57(3), this claim appears to be based on an erroneous belief that HOEPA prohibits so-called “high-cost” mortgages, rather than regulating them. 10 This claim asserts that Beneficial NH’s conduct violated HOEPA, but cites no particular provision of HOEPA under which the alleged conduct is unlawful. Absent a citation to specific legal authority, paragraph 57(5) fails to state a claim on which relief can be granted.

16 (6) a claim based on 15 U.S.C. § 1639(a); 12 C.F.R. §§ 226.31(c)(1), (2)-(4); 11 and 66 Fed. Reg. 65,618, which generally pertain to disclosures that must be made by mortgage lenders, see Am. Compl. ¶ 57(6).

After eliminating L’Esperance’s references to C.F.R. provisions

that either do not exist or do not regulate conduct, Counts I

and II appear to assert claims based o n : 15 U.S.C. §§ 1639(a),

( c ) , ( d ) , and ( h ) ; 12 C.F.R. §§ 226.31(c)(1)-(2); and 12 C.F.R.

§§ 226.32(d)(4) and ( 6 ) . For the various statutory and

regulatory violations she asserts, L’Esperance seeks monetary

damages, rescission of her loan, and other equitable relief.

Beneficial NH argues that Counts I and II should be

dismissed because: (1) L’Esperance’s claim for monetary damages

is time-barred; (2) her claims based on the imposition of a

prepayment penalty fail as a matter of law because her loan

agreement expressly allowed prepayment without penalty; and (3)

her claim for rescission fails because she has not adequately

alleged that either of the loans at issue was a “high-cost” loan

that entitled her to the protection of HOEPA. L’Esperance

disagrees, but ineffectively.

11 12 C.F.R. § 226.31(c)(1) regulates the timing of disclosures for certain closed-end home mortgages, while § 226.31(c)(2) regulates the timing of disclosures for certain reverse mortgages. L’Esperance does not appear to allege that hers was a reverse mortgage, which calls into question her citation of § 226.31(c)(2). Moreover, Title 12 of the Code of Federal Regulations does not appear to contain either a § 226.31(c)(3) or a § 226.31(c)(4).

17 Beneficial NH’s first two arguments, neither of which

L’Esperance challenges, are both correct. Beneficial NH’s third

argument, however, is both correct and fully dispositive of the

claims asserted in Counts I and I I . Accordingly, the court’s

consideration of Counts I and II begins and ends with its ruling

that L’Esperance has failed, in the first instance, to allege

facts sufficient to support a determination that either of the

loans at issue in this case is subject to the protections of

HOEPA.

All four of the statutory provisions on which L’Esperance

bases the claims she asserts in Counts I and II expressly

pertain to “certain mortgages,” i.e., those “referred to in

section 1602(aa) of this title.” When L’Esperance received the

loans at issue in this case, Section 1602(aa) of Title 15

provided in pertinent part:

A mortgage referred to in this subsection means a consumer credit transaction that is secured by the consumer’s principal dwelling . . . if—

(A) the annual percentage rate at consummation of the transaction will exceed by more than 10 percentage points the yield on Treasury securities having comparable periods of maturity on the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor; or

(B) the total points and fees payable by the consumer at or before closing will exceed the greater of—

18 (i) 8 percent of the total loan amount; or

(ii) $400.

15 U.S.C. § 1602(aa)(1) (2006). All of the regulations on which

L’Esperance bases her claims in Counts I and II are subject to

the following coverage provision:

[T]he requirements of this section apply to a consumer credit transaction that is secured by the consumer’s principal dwelling, and in which either:

(i) The annual percentage rate at consummation will exceed by more than 8 percentage points for first-lien loans, or by more than 10 percentage points for subordinate-lien loans, the yield on Treasury securities having comparable periods of maturity to the loan maturity as of the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor; or

(ii) The total points and fees payable by the consumer at or before loan closing will exceed the greater of 8 percent of the total loan amount, or $400; the $400 figure shall be adjusted annually on January 1 by the annual percentage change in the Consumer Price Index that was reported on the preceding June 1 .

12 C.F.R. § 226.32(a)(1).

Regarding the pleading standards applicable to

L’Esperance’s claims, “[n]umerous . . . district courts have

held that a complaint must at least allege facts suggesting that

the loan [at issue] falls into one of [the] categories”

described by 15 U.S.C. § 1602(aa)(1). Yulaeva v . Greenpoint

Mort. Funding, Inc., N o . CIV. S-09-1504 LKK/KJM, 2010 WL

19 5394859, at *4 (E.D. Cal. Dec. 2 1 , 2010) (citing Biggins v .

Wells Fargo & Co., 266 F.R.D. 399, 411 (N.D. Cal. 2009); Palmer

v . GMAC Commercial Mortg., 628 F. Supp. 2d 186, 190 (D.D.C.

2009); Lynch v . RKS Mortg., Inc., 588 F. Supp. 2d 1254, 1260

(E.D. Cal. 2008)); see also Esoimeme v . Wells Fargo Bank, N o .

CIV S-10-2259 JAM EFB P S , 2011 WL 3875881, at *5 (E.D. Cal.

Sept. 1 , 2011). Bearing in mind the relevant pleading

requirements, the court turns to L’Esperance’s complaint.

As a preliminary matter, L’Esperance does not allege that

the personal credit line extended by Beneficial NH was secured

by her principal dwelling, and the agreement itself includes no

suggestion that it was. Thus, that loan is not covered by HOEPA

or the regulations on which L’Esperance relies. See 15 U.S.C. §

1602(aa)(1); 12 C.F.R. § 226.32(c)(1). Moreover, HOEPA’s

definition of covered mortgages expressly excludes

“transaction[s] under an open end credit plan,” 15 U.S.C. §

1602(aa)(1), a category that includes L’Esperance’s personal

credit-line account.12 Accordingly, in Counts I and I I ,

12 In Nelson v . JPMorgan Chase Bank, N.A., Judge Mauskopf, “[f]or argument’s sake . . . regard[ed] [a] Home Equity Line as a closed-end transaction,” 707 F. Supp. 2d 309, 314 (E.D.N.Y. 2009), but the home-equity line in that case, unlike the personal credit line in this case, was secured by the borrower’s dwelling,” see id. at 313. Moreover, unlike this case, where L’Esperance alleges only that the credit line was used to pay closing costs, the borrower in Nelson paid for a $500,000 home with the proceeds of a $400,000 mortgage loan and a $100,000

20 L’Esperance has failed to state a claim based on the personal

credit-line account because that loan is not a mortgage entitled

to the protection of HOEPA or 12 C.F.R. §§ 226.31 and 226.32.

L’Esperance has also failed to adequately allege facts that

would place her refinancing loan under the umbrella of

protection offered by HOEPA or 12 C.F.R. §§ 226.31 and 226.32.

In her amended complaint, she states: “The refinancing loan was

a high cost loan.” Am. Compl. ¶ 3 5 . But that is just a “naked

assertion[ ],” Plumbers’ Union, 632 F.3d at 7 7 1 , or a legal

conclusion, see United Auto. Workers, 633 F.3d at 4 1 , that

carries no weight as a factual allegation.

With regard to the first category of protected “high-cost”

loans, i.e., those with high annual percentage rates,

L’Esperance refers, in paragraph 57(3) of her complaint, to the

interest-rate triggers stated in 15 U.S.C. §1602(aa)(1)(A) and

12 C.F.R. § 226.32(a)(1)(i), and appears to allege, in a highly

conclusory fashion, that her interest rate exceeded the relevant

trigger point. In her memorandum of law, she refers to

allegations in her complaint concerning the interest rate on her

refinancing loan, the amount of her monthly payment, the total

repayment amount, the amount of her closing costs, and the

home-equity line of credit. See id. at 313 n.6. Given those differences, there is no good reason for this court to regard L’Esperance’s personal credit-line account as a closed-end transaction subject to HOEPA.

21 interest rate applicable to her personal credit-line account.

But, she has made no allegations concerning the yield on

Treasury securities with comparable periods of maturity on the

fifteenth day of the month before Beneficial NH received her

loan application. Thus, she has not alleged facts sufficient to

suggest that the interest rate on her loan reached the trigger

point that would have required Beneficial NH to comply with

HOEPA. See Esoimeme, 2011 WL 3875881, at *5 (dismissing HOEPA

claim where complaint failed to “allege any facts showing that

plaintiff’s loan [met] the specific thresholds necessary for

HOEPA to apply”); Kaliner v . Mort. Elec. Reg’n Sys., Inc. (In re

Reagoso), Bankr. N o . 06-12961, Adversary N o . 07-0047, 2007 WL

1655376, at *4 (Bankr. E.D. P a . June 6, 2007) (“Defendants next

correctly assert that the cause of action under HOEPA in Count I

must be dismissed because the Plaintiff fails to allege that the

loan the Reagosos obtained to refinance their home was one which

meets the specific requirements outlined by the Federal Home

Ownership and Equity Protection Act.”).

L’Esperance’s allegations are also insufficient with regard

to the second category of “high-cost” loans, i.e., those with

excessive points and fees, see 15 U.S.C. § 1602(aa)(1)(B) and 12

C.F.R. § 226.32(a)(1)(ii). In paragraphs 57(2) and (4) of her

complaint, L’Esperance mentions the points-and-fees ceiling, and

22 again, in a highly conclusory fashion, appears to allege that

the points and fees she paid qualify her loan for HOEPA

protection. But, she nowhere alleges either directly or with

any precision, just how much she paid in points and fees. Thus,

she has not alleged facts sufficient to suggest that the points

and fees on her loan exceeded the ceiling that would have

required Beneficial NH to comply with HOEPA. See Lynch, 588 F.

Supp. 2d at 1260 (“Plaintiffs’ Complaint, however, does not

allege any particular facts showing that the [points-and-fees]

percentage threshold for HOEPA protection was actually crossed

in this case. That failure alone subjects the claim to

dismissal.”) (citing Marks v . Chicoine, N o . C 06-06806 S I , 2007

WL 160992, at *8 (N.D. Cal. Jan. 1 8 , 2007); Justice v .

Countrywide Home Loans, Inc., N o . 3:05-CV-008, 2006 WL 141746,

at *2 (E.D. Tenn. Jan. 1 8 , 2006)); see also Biggins, 266 F.R.D.

at 411 (finding plaintiffs’ allegation that they “were required

to pay excessive fees, expenses, and costs which exceeded more

than 10% of the amount financed” insufficient to demonstrate

that their loan was covered by HOEPA).

Moreover, based on L’Esperance’s factual allegations and

the facts available in her loan agreement, it seems clear that

her points and fees came nowhere close to reaching the

applicable ceiling. In allegations related to her personal

23 credit-line account, L’Esperance seems to suggest that her

closing costs were approximately $11,500. In her loan

agreement, prepaid finance charges were listed as $12,686.

Those two figures, added together, come to just over $24,000.

But on a loan of $385,699.40, see Defs.’s Mot. to Dismiss, Ex. A

(doc. n o . 2 5 - 2 ) , at 5 , Beneficial NH was entitled to charge

$30,855.95 in points and fees before L’Esperance’s loan became a

“high-cost” loan under the provisions of 15 U.S.C. §

1602(aa)(1)(B) and 12 C.F.R. § 226.32(a)(1)(ii). In short, as

with the interest-rate trigger, L’Esperance has failed to

adequately allege that her loan included points and fees

sufficiently high to bring her loan within the protection of

HOEPA. See Lynch, 588 F. Supp. 2d at 1260 (determining that

plaintiffs’ points and fees did not meet HOEPA threshold, based

on calculations performed on figures derived from loan

settlement statement); Palmer, 628 F. Supp. 2d at 190 (same); In

re Reagoso, 2007 WL 1655376, at *4 (same).

In her memorandum of law, L’Esperance concludes her

discussion of her HOEPA claims in the following way:

The Plaintiff drafted her amendment in a conscientious and diligent effort to comply with the pleading requirements set forth by this Court. The Plaintiff feels she has alleged facts evidencing the high cost nature of this loan, and that she falls into the 3 year statutory period to claim rescission. If the Court should require additional facts, in the

24 interest of justice, the Plaintiff seeks leave to so amend.

Pl.’s Mem. of Law (doc. n o . 2 7 - 1 ) , at 5 . L’Esperance, of

course, cannot move for leave to amend her complaint in an

objection to a motion to dismiss. See LR 7.1(a)(1) (“Objections

to pending motions and affirmative motions for relief shall not

be combined in one filing.”). That said, the interests of

justice cut both ways. Justice demands that plaintiffs have a

fair opportunity to state legitimate claims against those they

think have wronged them, but justice also requires some degree

of protection for defendants from plaintiffs who are unable to

do s o .

In both her original complaint and her amended complaint,

L’Esperance asserted HOEPA claims based on her belief that

Beneficial NH extended her a high-cost loan. The criteria that

qualify a loan as “high cost” for purposes of HOEPA are plainly

spelled out in both the statute and its implementing

regulations. Indeed, the amended complaint expressly mentions

both the interest-rate trigger and the points-and-fees ceiling.

In its order granting HSBC Consumer Lending’s motion to dismiss,

without prejudice, the court provided L’Esperance with a rather

detailed tutorial on how to satisfy the federal pleading

standards. Given L’Esperance’s demonstrated knowledge of the

specific criteria that qualify a loan as a “high-cost” loan

25 under HOEPA, and the knowledge of federal pleading standards the

court presumes she gleaned from its previous order, her failure

to make sufficient allegations in her amended complaint merits

dismissal with prejudice.

2 . Count III: ECOA & FHA

In Count I I I , L’Esperance claims that Beneficial NH

discriminated against her because of her gender in violation of

15 U.S.C. § 1691(a)(1). 13 Beneficial NH moves to dismiss Count

III on grounds that L’Esperance’s ECOA claim is time-barred.

L’Esperance has not responded to Beneficial NH’s argument on

this point, apparently conceding its validity. Claims under

ECOA generally must be brought no “later than two years from the

date of the occurrence of the violation.” 15 U.S.C. § 1691e(f).

Because L’Esperance has alleged no ECOA violation that occurred

less than two years before she filed suit, and has alleged no

facts that would entitle her to the benefit of the statutory

exceptions to the two-year limitation period, see §§

1691e(f)(1)-(2), her ECOA claim is time barred. Accordingly,

Beneficial NH is entitled to dismissal of Count III.

13 That statute is a part of the Equal Credit Opportunity Act (“ECOA”). L’Esperance also attempts to assert a claim under the federal and state Fair Housing Acts in Count I I I , but provides no statutory citations. Accordingly, Count III is limited to a claim under ECOA.

26 3 . Count IV: RESPA

In Count IV, L’Esperance asserts that Beneficial NH

violated 12 U.S.C. §§ 2605 and 2607, two provisions of the Real

Estate Settlement Procedures Act (“RESPA”). Beneficial NH moves

to dismiss, arguing L’Esperance’s complaint fails to state a

claim under § 2607 and that her claim under § 2607 is time

barred. L’Esperance does not respond to Beneficial NH’s

meritorious argument on the § 2607 claim, apparently conceding

that the claim is indeed time barred. That leaves her claim

under § 2605.

With respect to 12 U.S.C. § 2605, L’Esperance asserts the

following claim:

The Defendants violated Section 6 . . . of RESPA [i.e., 12 U.S.C. § 2605]. . . .

. . . Defendants Beneficial New Hampshire, Inc., Household International, Inc., HSBC Consumer Lending, Inc., HSBC Finance Corporation, HSBC Group a/k/a HSBC Bank and Beneficial Corporation, on information and belief . . . failed to provide sufficient, adequate, and timely disclosures and notices under RESPA, and therefore committed [a] further violation [of that statute].

The Plaintiff seeks monetary damages, actual and treble damages, and attorneys fees and costs for the originating Defendants’ violations of RESPA.

Am. Compl. §§ 74-76. The only other mention of RESPA appears in

the following paragraph from the General Allegations section of

L’Esperance’s complaint:

27 Further, the Defendants Household International, Inc., HSBC Consumer Lending, Inc., HSBC Finance Corporation, HSBC Group a/k/a HSBC Bank, NA a/k/a HSBC North American Holdings, Inc. and Beneficial Corporation, on information and belief, also failed to provide sufficient, adequate, and timely disclosures and notices under TILA, HOEPA, ECOA, FACTA, and RESPA.

Am. Compl. § 43. 14

The statute on which L’Esperance relies for her cause of

action in Count IV provides, in pertinent part:

Each person who makes a federally related mortgage loan shall disclose to each person who applies for the loan, at the time of application for the loan, whether the servicing of the loan may be assigned, sold, or transferred to any other person at any time while the loan is outstanding.

Each servicer of any federally related mortgage loan shall notify the borrower in writing of any assignment, sale, or transfer of the servicing of the loan to any other person.

Each transferee servicer to whom the servicing of any federally related mortgage loan is assigned, sold, or transferred shall notify the borrower of any such assignment, sale, or transfer.

12 U.S.C. §§ 2605(a), (b)(1) and (c)(1). Regarding civil

liability under the foregoing statutory provisions,

“[w]hoever fails to comply” with § 2605(c), or any provision of § 2605, is liable to the borrower for “any actual damages to the borrower as a result of the failure” and “any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section,

14 L’Esperance does not explain why Beneficial NH is mentioned in paragraph 75 but is not mentioned in paragraph 4 3 .

28 in an amount not to exceed $1,000.” § 2605(f)(1)(A)- (B).

Amaral v . Wachovia Mortg. Corp., 692 F. Supp. 2d 1226, 1231,

(E.D. Cal. 2010). “Absent factual allegations suggesting that

[a RESPA] Plaintiff[ ] suffered actual damages, [a] RESPA claim

is insufficiently pled and subject to dismissal.” Id. (citing

Molina v . Wash. Mut. Bank, N o . 09-CV-00894-IEG (AJB), 2010 WL

431439, at *7 (S.D. Cal. Jan. 2 9 , 2010); Lemieux v . Litton Loan

Servicing, L P , N o . 2:09-cv-02816-JAM-EFB, 2009 WL 5206641, at *3

(E.D. Cal. Dec. 2 2 , 2009); Garcia v . Wachovia Mortgage Corp.,

676 F. Supp. 2d 895, 909 (C.D. Cal. 2009)).

In its motion to dismiss, Beneficial NH points out that

L’Esperance’s only factual allegations concerning RESPA

liability and actual damages are that it collected fees in

association with her loan. That is insufficient, as a matter of

law, to state a claim based on § 2605. L’Esperance offers the

following counterargument:

The Defendants maintain that the Plaintiff must allege that she was harmed by the change in servicer without notice to her. Here, the Plaintiff has so alleged, and has specifically alleged harm in the withdrawal of servicing by the Defendants despite promises intended to induce her into entering the loan transaction that the loan interest would be adjusted downwards.

Pl.’s Mem. of Law (doc. n o . 2 7 - 1 ) , at 5 . L’Esperance’s argument

does not identify factual allegations in the complaint

29 sufficient to state a claim under 12 U.S.C. § 2605. Moreover,

the court has been unable to locate any allegations concerning a

change in servicer(s) of L’Esperance’s loan or any damages she

may have suffered as a result of a lack of notice. Accordingly,

Beneficial NH is entitled to dismissal of Count IV.

4 . Count VII: Unconscionable Conduct

Count VII is a claim for “unconscionable conduct.”

Unconscionable conduct is not a cause of action. Count VII is

dismissed.

5 . Count IX: Misrepresentation

Count IX is a claim for negligent, fraudulent, or

intentional misrepresentation. Beneficial NH moves to dismiss

Count I X , arguing that L’Esperance has failed to adequately

allege scienter. L’Esperance disagrees.

In its previous order, the court explained that “to the

extent that any of the claims in Count IV [i.e., L’Esperance’s

misrepresentation claim] require a showing of scienter,

L’Esperance’s allegation that ‘[t]he Defendants knew or should

have known that such representations were false,’ is

insufficient.” Order (doc. n o . 1 1 ) , at 18 (citation to the

record omitted). In her amended complaint, after describing the

purported misrepresentations on which Count IX is based,

30 L’Esperance states: “The Defendants made these loans15 to induce

the Plaintiff’s continued payment of and entry into the loans,

but all the while the Defendants knew or should have known that

such representations were false.” Am. Compl. ¶ 104. In

reliance on Rule 9 ( b ) , L’Esperance argues that she has

adequately alleged Beneficial NH’s state(s) of mind. She is

mistaken.

With regard to the relevant pleading standard, the Federal

Rules provide:

Fraud or Mistake; Conditions of Mind. In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.

Fed. R. Civ. P. 9 ( b ) . In L’Esperance’s view, her allegations of

defendants’ states of mind satisfy the second sentence of Rule

9(b). They do not.

In a case cited in the court’s previous order, the Court of

Appeals for this circuit explained:

Rule 9(b) requires not only specifying the false statements and by whom they were made but also identifying the basis for inferring scienter. Although the rule itself is not pellucid, precedent in this circuit, as in a number of others, is clear:

15 Context suggests that perhaps L’Esperance meant to say “Defendants made these statements” rather than “Defendants made these loans.”

31 The courts have uniformly held inadequate a complaint’s general averment of the defendant’s ‘knowledge’ of material falsity, unless the complaint also sets forth specific facts that make it reasonable to believe that defendant knew that a statement was materially false or misleading.

Greenstone v . Cambex Corp., 975 F.2d 2 2 , 25 (1st Cir. 1992) (Breyer, J.) (citations omitted), superseded by statute on other grounds, Private Securities Litigation Reform Act of 1995, Pub. L . N o . 104–67, 109 Stat. 737; see also Romani v . Shearson Lehman Hutton, 929 F.2d 875, 878 (1st Cir. 1991), similarly superceded by statute on other grounds.

North American provides no information in the complaint to suggest that the defendants feigned their original expressed intention to use the Alliance’s spectrum. The complaint says that Goldman Sachs never intended to follow its business plan but the assertion is not itself supported with particulars that suggest scienter and so just pushes the pleading deficiency back one stage; no particulars are pleaded which would suggest the elements of fraud in the inducement.

N . Am. Catholic Educ. Prog. Found., Inc. v . Cardinale, 567 F.3d

8 , 13 (1st Cir. 2009). Here, after acknowledging the Rule 9(b)

pleading standard in her memorandum of law, L’Esperance argues

that

[i]t can be reasonably inferred from the Plaintiff’s allegations of specific untruthful promises and inducements that the Defendants had the requisite scienter, which include, failure to use reasonable care in making these false statements (negligent misrepresentation), reckless disregard of the truth (fraud), or knowledge of their falsity (fraud).

Pl.’s Mem. of Law (doc. n o . 2 7 - 1 ) , at 8 . Based on her erroneous

belief that scienter may be inferred from a statement’s falsity,

32 L’Esperance does not even try to identify “specific facts that

make it reasonable to believe that [Beneficial NH] knew that

[its] statement[s] [were] materially false or misleading.”

Cardinale, 567 F.3d at 1 3 . Without such allegations,

L’Esperance has failed to state a claim for intentional

misrepresentation or fraud. Moreover, as she was provided quite

specific guidance on how to frame such a claim in the court’s

previous order, but has proffered an entirely fact-free

allegation of scienter, the court concludes that she is unable

to properly allege a claim for fraud. Thus, to the extent Count

IX asserts a fraud claim, dismissal is with prejudice.

Beneficial NH also argues that L’Esperance’s inability to

adequately allege facts establishing scienter dooms her claim

for negligent misrepresentation. “Scienter” is “[a] mental

state consisting of an intent to deceive, manipulate, or

defraud.” Black’s Law Dictionary 1463 (9th ed. 2009). Plainly,

scienter is an element of intentional misrepresentation. See

Tessier v . Rockefeller, 162 N.H. 3 2 4 , 332 (2011) (“The tort of

intentional misrepresentation, or fraud, must be proved by

showing that the representation was made with knowledge of its

falsity or with conscious indifference to its truth and with the

intention of causing another person to rely on the

representation.”) (quoting Patch v . Arsenault, 139 N.H. 313, 319

33 (1995)). Scienter, however, does not appear to be an element of

a claim for negligent misrepresentation, which requires a

plaintiff to prove “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) (citing

Snierson v . Scruton, 145 N.H. 7 3 , 78 (2000)).

However, in the context of negligent misrepresentation,

“[i]t is the duty of one who volunteers information to another

not having equal knowledge, with the intention that he will act

upon i t , to exercise reasonable care to verify the truth of his

statements before making them.” Wyle, 162 N.H. at 413. S o ,

while a plaintiff asserting a claim for negligent

misrepresentation is not compelled by Rule 9(b) to specifically

allege facts sufficient to support a reasonable inference of

scienter, such a plaintiff is still required, by Rule 8(a)(2),

to provide a short and plain statement showing that the

defendant failed “to exercise reasonable care to verify the

truth of his statements before making them,” Wyle, 162 N.H. at

413. Beneficial NH is entitled to dismissal of L’Esperance’s

negligent misrepresentation claim because she has alleged no

facts which, if proven, would establish that those who made the

statements at issue breached their duties to verify the truth of

the statements they made.

34 However, even if L’Esperance had adequately alleged that

those who made statements to her breached their duties to verify

the truth of the statements they made, her negligent misrepre-

sentation claim would be subject to dismissal for a more

fundamental reason: L’Esperance’s failure to allege facts

linking Beneficial NH to any of the purported misrepresenta-

tions. In Count I X , the only mention of Beneficial NH appears

in the following passage:

Though Beneficial N H , Inc. now appears to Plaintiff to have been a separately incorporated entity and identified on the mortgage and some loan documentation, on information and belief, Beneficial N H , Inc. was a “branch office,” and agent and wholly owned subsidiary of Defendants HSBC Lending, HSBC Finance Corporation, HSBC Group, Household International Inc. and Beneficial Corp. Thus, the Plaintiff alleges that Defendants HSBC Lending, HSBC Finance Corporation, HSBC Group, Household International Inc. and Beneficial Corp. are responsible for the representations and actions of M s . Halteman and M s . Maranhao, are responsible for the acceptance and origination of the Plaintiff’s loans, and are additionally independently responsible for the violations and causes of action set forth herein as the servicers of the Plaintiff’s loans, at least from March 2009 forward.

Am. Compl. ¶ 103(ii). Several things stand out. Most

importantly, while L’Esperance identifies five separate entities

that are, in her view, responsible for statements made by

Halteman and Maranhao, Beneficial NH is not one of them.

Allegations that Beneficial NH “was a ‘branch office,’ and agent

and wholly owned subsidiary” of five corporate entities who are

35 alleged to be responsible for the statements at issue is

insufficient to make Beneficial NH responsible for those

statements. If A has two agents, B and C , and B commits a tort,

A may be liable for B’s tort under agency law, but the mere fact

that B and C are both agents of A is no basis for holding C

liable for B’s tort. Absent any factual allegations linking

Beneficial NH to the alleged misrepresentations on which Count

IX is based, Beneficial NH is entitled to dismissal of Count IX

in its entirety.16

Finally, even if L’Esperance were to properly move for

leave to amend her complaint, and adequately alleged facts in a

second amended complaint under which Beneficial NH could be held

liable for Halteman’s statements, any such amendment would be

futile because L’Esperance’s misrepresentation claim would be

barred by the economic-loss doctrine.

The economic loss doctrine is a “judicially-created remedies principle that operates generally to preclude

16 Under other circumstances, the court’s obligation to “draw[ ] all reasonable inferences in favor of plaintiff[ ],” Plumbers’ Union, 632 F.3d at 7 7 1 , might counsel in favor of treating L’Esperance’s amended complaint as alleging that Halteman was an agent of Beneficial NH. But, the court’s previous order clearly placed L’Esperance on notice of her obligation to remedy the group-pleading problem in her original complaint and plead her causes of action with the requisite level of specificity. Given that L’Esperance’s amended complaint is a direct response to the court’s previous order, the court must presume that L’Esperance’s exclusion of Beneficial NH from her list of parties responsible for Halteman’s statements was deliberate.

36 contracting parties from pursuing tort recovery for purely economic or commercial losses associated with the contract relationship.” Plourde Sand & Gravel v . JGI Eastern, 154 N.H. 7 9 1 , 794 (2007) (quotation omitted). The doctrine “is based on an understanding that contract law and the law of warranty, in particular, is better suited than tort law for dealing with purely economic loss in the commercial arena.” Id. (quotation omitted); see Barton Drowning in a Sea of Contract: Application of the Economic Loss Rule to Fraud and Negligent Misrepresentation Claims, 41 Wm. & Mary L . Rev. 1789, 1796–97 (2000) (explaining that while contract law presumes that contracting parties “are able to allocate risks and costs of the potential nonperformance,” tort law provides a remedy where “it is impractical or impossible to negotiate either the terms of a sale or each party’s duty to the other” (quotation and ellipsis omitted)).

As such, the rule precludes a harmed contracting party from recovering in tort unless he is owed an independent duty of care outside the terms of the contract. Plourde Sand & Gravel, 154 N.H. at 794.

Wyle, 162 N.H. at 410 (parallel citation omitted). The Wyle

court further explained:

Many courts have distinguished those negligent misrepresentation claims that center upon an alleged inducement to enter into a contract from those that focus upon performance of the contract. [Barton, supra], at 1815; see Rich Products Corp. v . Kemutec, Inc., 66 F. Supp. 2d 9 3 7 , 977 (E.D. Wis. 1999) (explaining that a plaintiff may plead tort claims “stemming from misrepresentations which induce them to enter into a contract, so long as the representations . . . do not concern the quality or characteristics of the subject matter of the contract or otherwise relate to the offending party’s expected performance”), aff’d, 241 F.3d 915 (7th Cir. 2001).

Wyle, 162 N.H. at 411.

37 In Wyle, the court held that the plaintiff’s negligent

misrepresentation claim was not barred by the economic-loss

doctrine where the evidence at trial established that the

defendants made negligent misrepresentations that the premises

they intended to sell the plaintiff were licensed for immediate

occupancy when they were not, and that they had obtained all

necessary permits when they had not, conditions that were not

warranted or otherwise addressed by the parties’ agreement. See

id. at 412. Here, by contrast, the crux of L’Esperance’s

negligent misrepresentation claim is that her interest rate was

not lowered, despite Beneficial NH’s promise that it would b e .

That i s , the alleged misrepresentation on which L’Esperance’s

claim is based relates directly to Beneficial NH’s performance

of its agreement with her. Thus, even if L’Esperance were to

adequately allege facts making Beneficial NH liable for

Halteman’s statements, her negligent misrepresentation claim

would be barred by the economic-loss doctrine.

6. Count V I : Obligation of Good Faith

In Count V I , L’Esperance asserts that Beneficial NH

breached the implied covenant of good faith and fair dealing by

extending her a predatory loan that was not beneficial to her.

See Am. Compl. ¶ 88-89. In the words of her complaint:

Selling to Plaintiff and perpetuating loans that were not beneficial to her violated the Defendants

38 Beneficial New Hampshire, Inc., Household International, Inc., HSBC Consumer Lending, Inc., HSBC Finance Corporation, HSBC Group a/k/a HSBC Bank and Beneficial Corporation’s obligation to deal with the Plaintiff in good faith and with fairness.

Such actions breached the Beneficial New Hampshire, Inc., Household International, Inc., HSBC Consumer Lending, Inc., HSBC Finance Corporation, HSBC Group a/k/a HSBC Bank and Beneficial Corporation’s obligations of good faith and fair dealing to the Plaintiff.

Am. Compl. ¶¶ 90-91.

Beneficial NH argues that Count VI fails to state a claim

on which relief can be granted because rather than basing Count

VI on any of the three categories of conduct judicially

understood to be encompassed by the implied covenant of good

faith and fair dealing, L’Esperance bases her claim on the

allegedly onerous nature of the contractual terms themselves.

L’Esperance responds:

Here, the Plaintiff has alleged that the originating Defendants failed to deal with her in good faith based on the conduct alleged, including but not limited t o , making false representations and promises for adjustments to induce her reliance and entry into the mortgage note, in selling her a mortgage that was high cost and not beneficial to her (formation), and with regard to the servicing Defendants, in failing to deal fairly with her regarding her modification when she had complied with the trial period and was promised permanent modification, particularly whereas her financial hardship was induced by the Defendants. Therefore, the Plaintiff’s claim should not be dismissed.

39 Pl.’s Mem. of Law (doc. n o . 2 7 - 1 ) , at 6. The court is not

persuaded by any of L’Esperance’s three arguments.

As a preliminary matter, L’Esperance does not appear to

allege that Beneficial NH was a so-called servicing defendant,

so her third argument involves no conduct on Beneficial NH’s

part. Before discussing L’Esperance’s first and second

arguments, the court describes the law on which Count VI is

based.

In a recent opinion, the New Hampshire Supreme Court

described the implied covenant of good faith and fair dealing:

In every agreement, there is an implied covenant that the parties will act in good faith and fairly with one another. Livingston v . 18 Mile Point Drive, 158 N.H. 619, 624 (2009). In New Hampshire, there is not merely one rule of implied good-faith duty, but a series of doctrines, each of which serves a different function. Id. The various implied good-faith obligations fall into three general categories: (1) contract formation; (2) termination of at-will employment agreements; and (3) limitation of discretion in contractual performance. Id.

Birch Broad., Inc. v . Capitol Broad. Corp., 161 N.H. 1 9 2 , 198

(2010). L’Esperance’s two remaining arguments in support of

Count VI both invoke the first category of duties described in

Birch Broadcasting. In its seminal case on this area of the

law, the New Hampshire Supreme Court explained that in its

decisions setting standards of conduct in contract formation, the implied good faith obligations of a contracting party are tantamount to the traditional duties of care to refrain from misrepresentation and

40 to correct subsequently discovered error, insofar as any representation is intended to induce, and is material t o , another party’s decision to enter into a contract in justifiable reliance upon i t .

Centronics Corp. v . Genicom Corp., 132 N.H. 133, 139 (1989)

(citations omitted).

In Bursey v . Clement, the New Hampshire Supreme Court held

that a seller of real estate breached the implied covenant of

good faith and fair dealing by misrepresenting to the buyer the

number of lots into which he would be permitted to subdivide the

property he was seeking to purchase. See 118 N.H. 4 1 2 , 414-15

(1978). The rule of Bursey is that one may breach the implied

covenant of good faith and fair dealing, as it relates to

contract formation, by making misrepresentations concerning the

subject matter of a contract.

In Dawe v . American Universal Insurance Company, the New

Hampshire Supreme Court held that an insurance company, acting

through an adjuster, breached the implied covenant of good faith

and fair dealing by obtaining a release “signed by [its insured]

recit[ing] that it was in full and final settlement for all

injuries arising out of out of [her] accident,” 120 N.H. 4 4 7 ,

449 (1980), while telling her that “the settlement would [not]

release the [insurer] of liability for further medical

expenses,” id. The trial court “found that [the adjuster]’s

explanation of the release constituted misrepresentation which,

41 together with his failure to fully disclose to the [insured] her

other rights, resulted in an unconscionable settlement.” Id.

The rule of Dawe is that one may breach the implied covenant of

good faith and fair dealing, as it relates to contract

formation, by making misrepresentations concerning the terms of

a contract.

The court further notes 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. The defendant in Bursey

failed to correct a statement that became false, before the

transaction was consummated, due to circumstances that were

known to him but not to the plaintiff. See 118 N.H. at 414-15.

The insurance adjuster in Dawe made a false statement about the

content of a document he proffered to the plaintiff. See 120

N.H. at 449. Under the circumstances, he had constructive

knowledge of the falsity of the statement he made. Given that

the implied covenant of good faith and fair dealing requires

contracting parties to deal fairly with one another, but does

not require perfection, the court concludes that for a pre-

formation misrepresentation to constitute a breach of the

covenant, it must be made with scienter. That i s , a pre-

formation negligent misrepresentation is certainly unfortunate,

42 but does not rise to the level of a breach of the implied

covenant of good faith and fair dealing.

Based on Centronics, Bursey, and Dawe, L’Esperance’s

argument that Beneficial NH breached the implied covenant of

good faith and fair dealing by “selling her a mortgage that was

high cost and not beneficial to her (formation),” Pl.’s Mem. of

Law (doc. n o . 2 7 - 1 ) , at 6, is entirely unavailing. For her

part, L’Esperance has identified no legal authority for the

proposition that the implied covenant of good faith and fair

dealing imposes a duty on one contracting party to insure that

the terms of a contract somehow “benefit” the other party.

Thus, the court agrees with Beneficial NH that one contracting

party does not breach the covenant by entering into an agreement

that includes terms that are not beneficial to the other

contracting party. L’Esperance could have avoided the

contractual terms she now finds oppressive by declining to

execute an agreement that included them and provided unambiguous

notice of their inclusion. Her loan agreement plainly stated

the amount of her monthly payments. Presuming that she knew her

own monthly income, the agreement gave her all the information

she needed to determine whether she could afford the monthly

payments.

43 Accordingly, to the extent Count VI states a claim at all,

it would be a claim that Beneficial NH breached the implied

covenant of good faith and fair dealing, as it pertains to

contract formation, by making false representations that induced

L’Esperance to enter into the loan agreement. The most glaring

problem with this claim, and the one that entitles Beneficial NH

to dismissal, is L’Esperance’s complete failure to adequately

allege scienter. As noted above, in the discussion of

L’Esperance’s misrepresentation claim, L’Esperance has not even

attempted to identify facts alleged in her complaint that would

establish scienter. That failure is fatal to both L’Esperance’s

claim for intentional misrepresentation and the claim asserted

in Count V I , that Beneficial NH breached the implied covenant of

good faith and fair dealing. Beyond that, L’Esperance has done

a wholly inadequate job of alleging: (1) a misrepresentation by

Halteman;17 (2) Halteman’s contemporaneous knowledge that the

17 L’Esperance alleges that Halteman told her that her interest rate would be lowered after six months and that the falsity of the promise was demonstrated when she was informed, six months after she entered into the loan agreement, “that the Defendants [which defendants, L’Esperance does not say] no longer originated consumer mortgages, and they only serviced such loans.” Am. Compl. ¶ 3 0 . L’Esperance does not explain how the fact that some unnamed defendants no longer originated mortgages falsified Halteman’s promise that her interest rate would be adjusted downward.

44 promises she made to L’Esperance was not going to be kept;18 and

(3) Beneficial NH’s responsibility for any statements Halteman

may have made.19

7 . Count X : RSA 358-A

Count X is a claim under New Hampshire’s Consumer

Protection Act (“CPA”), N.H. Rev. Stat. Ann. (“RSA”) ch. 358-A.

Beneficial NH moves to dismiss Count X , arguing that L’Esperance

has failed to allege conduct that is barred by the CPA.

The CPA claim L’Esperance attempts to assert in Count X is

both conclusory, see, e.g., Am. Compl. ¶¶ 108(a)-(d), and

inexplicably repetitive of her misrepresentation claim, compare

Am. Compl. ¶¶ 108(i)-(ix) with Am. Compl. ¶¶ 103(i)-(ix)). That

said, after stripping out several allegations that are too

18 Such allegations are necessary when a misrepresentation claim is based on a promise rather than a statement of present fact. See Thompson v . H.W.G. Group, Inc., 139 N.H. 6 9 8 , 700-01 (1995). L’Esperance’s allegation that “at the time [the] promises were made, Jennifer Halteman was aware, or should have been aware that such promises were false,” Am. Compl. ¶ 3 0 , is a “naked assertion[ ],” Plumbers’ Union, 632 F.3d at 7 7 1 , that is entitled to no weight as a factual allegation. 19 In paragraph 26 of her amended complaint, L’Esperance identifies five separate entitles as being responsible for Halteman’s representations and actions. Beneficial NH is conspicuously absent from that list.

45 conclusory to state a claim,20 the court construes Count X as

alleging the following conduct which, in L’Esperance’s view,

runs afoul of the CPA:

(1) “ma[king] false or misleading representations to borrowers, including but not limited to selling the Plaintiff overpriced loans that violated existing statutes, rules, regulations or laws, meant for the protection of the Plaintiff as a consumer, including but not limited to TILA, HOEPA, ECOA, FHA, RESPA, HAMP, and then poorly servicing them in violation of their legal obligations to her,” Am. Compl. ¶ 108(e);

(2) “[o]rigination of and perpetuation of these loans when the Plaintiff’s debt to income ratio was greater than 28/36% (housing debt ratio and back debt ratio both considered). Further, these loans, upon the terms they were issued, require the allocation of too many of the Plaintiff’s assets to payment of the mortgage for her to have sufficient residual monthly income to fully support the financial needs of her household. . . .” Am. Compl. ¶ 108;

(3) selling “overpriced, low quality loan products and loan servicing services,” Am. Compl. ¶ 108(iv);

20 For example, L’Esperance alleges that Beneficial NH’s conduct: (1) “was unfair, deceptive, oppressive, unconscionable, and contrary to public policy and generally recognized standards applicable to the consumer lending business,” Am. Compl. ¶ 108(a); (2) “violated the requirement of good faith and fair dealing,” id. ¶ 108(b); and (3) “violated existing statutes, rules, regulations or laws, meant for the protection of the Plaintiff as a consumer, including but not limited to TILA, HOEPA, ECOA, FHA, RESPA, [and] HAMP,” id. ¶ 108(c). In addition to being subject to dismissal because they are conclusory, the second and third claims described above also fail as a result of the court’s determination that L’Esperance has not stated a claim for breach of the implied covenant of good faith and fair dealing and has failed to state a claim under any of the federal statutes she cites.

46 (4) promising, through “Ms. Halteman in September 2008 and October 2008 that [L’Esperance] would not have a prepayment penalty and promis[ing] a 2 point lower interest rate,” Am. Compl. ¶ 108(v);

(5) failing to inform her “that she had the ability to negotiate the terms of the loan,” Am. Compl. ¶ 108(vi);

(6) promising that her “interest rate would adjust downwards after the first six months,” Am. Compl. ¶ 108(vii);

(7) “representing that [L’Esperance] was not eligible for modification or relief under her loans (including by letter of denial of Plaintiff’s application for assistance in Beneficial/HSBC’s Hardship Program was made t o , and denied by Beneficial, Member HSBC Group by letter dated August 2 8 , 2009 signed in name by a Kecia McPherson, Foreclosure Avoidance Program with a return address of 961 Weigel Drive, Elmhurst, Illinois. In this letter, Kecia McPherson of Beneficial, Member HSBC Group further represented that ‘We are willing to work with you during this difficult time,[’] but the denial simultaneously misrepresented that the Plaintiff’s existing and original loan terms would be perpetuated, and suggested wrongfully that they could be lawfully perpetuated). ” Am. Compl. ¶ 108(viii); and

(8) “extending a loan modification but only on temporary terms, . . . failing to advise the Plaintiff of her ability to negotiate her loan, [and] offering a loan on predatory and usurious terms,” Am. Compl. ¶ 108(ix).

In response to Beneficial NH’s argument that, with respect to

the origination of her loan, L’Esperance has alleged nothing

more than a breach of contract claim that is not cognizable

under the CPA, L’Esperance defends the viability of her CPA

claim in the following way:

47 Claims of this nature have been permitted in this Court.21 The Plaintiff has specifically alleged misrepresentation in inducement, that the Defendants sold her loans that were high cost and not beneficial to her, failed to advise her of her right to negotiate, and many instances of conduct in the origination, as well as in the servicing of the loan (failure to offer her permanent modification despite the fact that the Defendants had caused the hardship under which she sought relief). Such conduct sufficiently pleads violation of consumer protection, and conduct that constitutes unfair and deceptive practices. These allegations go well above an ordinary breach of contract claim. The Plaintiff was a consumer, not another business. Conduct violating standards pertaining to those inured to the rough and tumble world of business as between businesses (i.e. rascality) is not the requisite standard,22 yet is nevertheless sufficiently alleged here. The Plaintiff has sufficiently pled conduct that is deceptive, unfair, and in violation of consumer protection, and her claims should not be dismissed.

Pl.’s Mem. of Law (doc. n o . 2 7 - 1 ) , at 8 . The court will begin

with a brief description of the CPA and then address each of the

eight CPA claims it has distilled from Count X .

Under New Hampshire’s CPA, “[i]t shall be unlawful for any

person to use any unfair method of competition or any unfair or

21 L’Esperance cites no decisions from this court permitting such claims. 22 L’Esperance cites no authority for this proposition and, as it happens, the New Hampshire Supreme Court has applied the rascality test in cases involving CPA plaintiffs who were individual consumers. See, e.g., Beer v . Bennett, 160 N.H. 166, 171 (2010); Barrows v . Boles, 141 N.H. 3 8 2 , 390-91 (1996); c f . State v . Sideris, 157 N.H. 2 5 8 , 263-64 (2008) (applying rascality test in criminal prosecution under CPA where victim was individual consumer); State v . Moran, 151 N.H. 4 5 0 , 452-53 (2004) (same).

48 deceptive act or practice in the conduct of any trade or

commerce within this state.” RSA 358-A:2. The balance of RSA

358-A:2 consists of a non-exclusive list of fourteen unlawful

acts. None of the conduct alleged in the amended complaint

falls into any of the categories listed in the statute.

For conduct not particularized by the CPA to qualify as unfair or deceptive, it must be of the same type as that proscribed in the enumerated categories. State v . Moran, 151 N.H. 4 5 0 , 452 (2004). Although the general provision of the CPA is broadly worded, not all conduct in the course of trade or commerce falls within its scope. ACAS Acquisitions v . Hobert, 155 N.H. 3 8 1 , 402 (2007).

State v . Sideris, 157 N.H. 2 5 8 , 262 (2008) (parallel citations

omitted). Moreover:

In determining which commercial actions not specifically delineated are covered by the act, [the New Hampshire Supreme Court has] employed the “rascality” test. [Sideris, 157 N.H.] at 263. Under the rascality test, the objectionable conduct must attain a level of rascality that would raise an eyebrow of someone inured to the rough and tumble of the world of commerce. Hobert, 155 N.H. at 402.

George v . Al Hoyt & Sons, Inc., 162 N.H. 123, 129 (2011)

(parallel citations omitted). With the foregoing principles in

mind, the court turns to L’Esperance’s eight putative CPA

claims.

In her first CPA claim, L’Esperance accuses Beneficial NH

of making “false or misleading representations to borrowers,

including but not limited to selling the Plaintiff overpriced

49 loans . . . and then poorly servicing them . . .” Am. Compl. ¶

108(e). While the CPA does proscribe various types of

misrepresentation, see, e.g., RSA 358-A:2, IV-VII, the claim

L’Esperance makes is nonsensical because the “misleading

representations” on which it is based are described as selling

and poorly servicing overpriced loans. There is no CPA claim

here.

In her second CPA claim, L’Esperance accuses Beneficial NH

of originating and perpetuating loans with monthly payments that

were too costly for her to afford. The monthly payments were

stated plainly on her two loan agreements. Thus, no deception

of any sort is alleged. There is no CPA claim here.

In her third CPA claim, L’Esperance accuses Beneficial NH

of selling her “overpriced, low quality loan products and loan

servicing services.” Am. Compl. ¶ 108(iv). There are no

allegations that Beneficial NH engaged in any of the allegedly

low-quality loan servicing L’Esperance complains o f , and because

the costs and qualities of her loan products were plainly stated

in her two loan agreements, there is no allegation of any

deception. There is no CPA claim here.

In her fourth CPA claim, L’Esperance alleges that Halteman

promised her that she would not have a prepayment penalty and

would be given an interest rate two points lower than the rate

50 she ultimately got. Leaving aside the lack of any allegations

sufficient to establish Beneficial NH’s liability for any

statements made by Halteman, discussed in detail above,

L’Esperance got a loan with no prepayment penalty, and to the

extent that her loan agreements plainly specified her interest

rates, she had the ability to decline the loans Beneficial NH

offered if she was dissatisfied with their interest rates. In

other words, L’Esperance has alleged no deceptive conduct.

There is no CPA claim here.

In her fifth CPA claim, L’Esperance accuses Beneficial NH

of failing to inform her “that she had the ability to negotiate

the terms of [her] loan.” Am. Compl. ¶ 108(vi). Because

Beneficial NH had no superior knowledge of L’Esperance’s right

to negotiate the terms of her loan, there was nothing deceptive

about Beneficial NH’s failure to inform her of that right.

In her sixth CPA claim, L’Esperance accuses Beneficial NH

of promising that her “interest rate would adjust downwards

after the first six months.” Am. Compl. ¶ 108(vii). For the

reasons given with respect to L’Esperance’s claims for

misrepresentation and breach of the implied covenant of good

faith and fair dealing based on this same allegation, there is

no CPA claim here.

51 In her seventh CPA claim, L’Esperance attempts to assert a

CPA violation based on representations by one Kecia McPherson

that she was ineligible for modification or relief. Absent any

allegations linking McPherson to Beneficial N H , there is no CPA

claim here.

In her final CPA claim, L’Esperance attempts to assert a

CPA violation based on “extending a loan modification but only

on temporary terms , . . . failing to advise [her] of her

ability to negotiate her loan, [and] offering a loan on

predatory and usurious terms.” Am. Compl. ¶ 108(ix). The court

has already explained why L’Esperance’s second and third

assertions do not state a claim under the CPA. L’Esperance’s

first assertion fails to state a CPA claim against Beneficial NH

because her complaint identifies only Household International,

Inc.; HSBC Consumer Lending, Inc.; HSBC Finance Corporation;

HSBC Group a/k/a/ HSBC Bank, NH a/k/a HSBC North American

Holdings, Inc.; and Beneficial Corporation as having been

involved in giving her a temporary loan modification rather than

a permanent one. Absent an allegation that Beneficial NH had

anything to do with L’Esperance’s temporary loan modification,

Because L’Esperance has failed to state a claim on which

relief can be granted under the CPA, under any of the eight

52 theories she advances, Beneficial NH is entitled to dismissal of

Count X .

8 . Count XIII: Negligence

L’Esperance’s final claim is that Beneficial NH is liable

to her in negligence, because it breached the duty of care it

owed her to originate her loan “in a reasonable manner and in

conformity with the standards imposed on the industry by

statute, regulation, and common law, so as to avoid causing

foreseeable damage to the Plaintiff.” Am. Compl. ¶ 121.

Beneficial NH moves to dismiss, arguing that

under New Hampshire law, the relationship between a lender and borrower is contractual in nature, Ahrendt v . Granite Bank, 144 N.H. 3 0 8 , 311 (1999), and that the existence of such a contractual relationship typically prohibits recovery in tort, see Wyle v . Lees, 162 N.H. 406, 409–10 (2011).

Moore v . Mortg. Elec. Reg’n Sys., Inc., ___ F. Supp. 2d ___,

___, 2012 WL 253834, at *18 (D.N.H. Jan. 2 7 , 2012) (parallel

citations omitted). L’Esperance responds by citing Dugan v .

Manchester Federal Savings & Loan Ass’n, 92 N.H. 44 (1942), and

contending, without citation to authority, that she “has alleged

that the Defendants’ actions put her into financial peril,

creating a separate and additional duty beyond contract and

beyond the traditional duties associated with the normal role of

53 money lender”23 and that “[w]hen servicing disadvantageous loans,

the Servicing Defendants owed further duty beyond contract to

offer permanent modification.” Pl.’s Mem. of Law (doc. n o . 27-

1 ) , at 9.

In Dugan, the New Hampshire Supreme Court acknowledged the

principal of law

that the mortgagee in the exercise of the power of sale acts as a trustee of the mortgagor, and in the performance of his right to sell must exercise good faith and reasonable diligence to protect the rights of the mortgagor and use reasonable efforts to obtain a fair price for the property, in properly advertising and conducting the sale.

92 N.H. at 4 7 . That rule of law, obviously, has no application

to the facts of this case where the issue is not the manner in

which a lender conducted a foreclosure sale, but, rather, the

manner in which a lender originated a loan. Moreover, in

addition to failing to allege that Beneficial NH was a servicing

defendant, in the first instance, L’Esperance has identified no

legal authority for the novel proposition that a loan servicer

has an enforceable tort duty to modify loans that a lender has

entered into improvidently. Finally, L’Esperance has no answer

for Beneficial NH’s persuasive and meritorious invocation of the

economic-loss doctrine as a bar to tort recovery under the

23 As with the duties L’Esperance says are owed by lenders to borrowers who are in financial peril, L’Esperance identifies no authority that describes “the traditional duties associated with the normal role of money lender,” whatever they may b e .

54 circumstances of this case. Accordingly, Beneficial NH is

entitled to dismissal of Count XIII.

Conclusion

For the reasons detailed above: (1) HSBC Group’s motion to

dismiss, document n o . 2 4 , is granted in part; and (2) the second

motion to dismiss, in which HSBC Group joins, document n o . 2 5 ,

is granted in full. Consequently, no claims remain against HSBC

Consumer Lending, Inc.; HSBC Finance Corporation; HSBC Group

a/k/a HSBC Bank, NA a/k/a HSBC North American Holdings, Inc.;

Household International, Inc.; Beneficial Corporation; and

Beneficial New Hampshire, Inc. Moreover, for reasons also

discussed above, this dismissal is with prejudice. L’Esperance

has had a full and fair opportunity to assert claims against

those involved in making her the loans she now wishes to walk

away from, and there is nothing in her amended complaint to

suggest that giving her yet a third bite at the apple will

result in anything other than another set of deficient claims.

Accordingly, this case is now limited to the claims against

Manhattan Mortgage asserted in Counts I X , X , XII and XIII, and

nothing more.

Finally, while document nos. 24 and 25 were pending,

L’Esperance filed a motion for leave to supplement the

memorandum of law in support of her objection to defendants’

55 motion to dismiss. That motion is denied. As best the court

can tell, L’Esperance seeks to supplement her objection to

dismissal by adding a request to amend her complaint. LR

7.1(a)(1) states that “[o]bjections to pending motions and

affirmative motions for relief shall not be combined in one

filing.” Because L’Esperance is moving to supplement her

objection to dismissal with a motion for affirmative relief,

resulting in a combination expressly prohibited by LR 7.1(a)(1),

her motion for leave to supplement her objection, document no.

30, is necessarily denied.

SO ORDERED. ^^T^X ^yCj^-j _ Landy^McCafferty United States Magistrate Judge June 12, 2012 f

cc: Jason D. Gregoire, Esq. Michael R. Stanley, Esq. Shenanne Ruth Tucker, Esq. John-Mark Turner, Esq.