Martin v. Wells Fargo Bank, N.A., et al.

2016 DNH 016

• Court: District Court, D. New Hampshire
• Decided: January 19, 2016
• Docket: 15-cv-447-LM
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Michael Martin and Julie Martin

v. Civil No. 15-cv-447-LM Opinion No. 2016 DNH 016 Wells Fargo Bank, N.A. and North American Savings Bank, FSB

O R D E R

In a case that has been removed from the New Hampshire

Superior Court, Michael and Julie Martin, proceeding pro se,

seek to enjoin Wells Fargo Bank, N.A. (“Wells Fargo”) from

selling their home at a foreclosure sale. The Martins also seek

damages from Wells Fargo and North American Savings Bank, FSB

(“NASB”), alleging claims that arose from the defendants’

conduct in handling the Martins’ promissory note and mortgage

and in attempting to foreclose on their home. Before the court

is Wells Fargo’s motion to dismiss for failure to state a claim

upon which relief can be granted.1 See Fed. R. Civ. P. 12(b)(6).

The Martins object. For the reasons that follow, Wells Fargo’s

motion to dismiss is granted.

1 NASB has not filed a response to the complaint or otherwise appeared in this action. Standard of Review

Under Rule 12(b)(6), the court must accept the factual

allegations in the complaint as true, construe reasonable

inferences in the plaintiff’s favor, and “determine whether the

factual allegations in the plaintiff’s complaint set forth a

plausible claim upon which relief may be granted.” Foley v.

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

(citation omitted). A claim is facially plausible “when the

plaintiff pleads factual content that allows the court to draw

the reasonable inference that the defendant is liable for the

misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009). Analyzing plausibility is “a context-specific task” in

which the court relies on its “judicial experience and common

sense.” Id. at 679.

Because the Martins are proceeding pro se, the court is

obliged to construe their complaint liberally. See Erikson v.

Pardus, 551 U.S. 89, 94 (2007) (per curiam) (internal citations

omitted) (“a pro se complaint, however inartfully pleaded, must

be held to less stringent standards than formal pleadings

drafted by lawyers”). However, “pro se status does not insulate

a party from complying with procedural and substantive law.

Even under a liberal construction, the complaint must adequately

allege the elements of a claim with the requisite supporting

2 facts.” Chiras v. Associated Credit Servs., Inc., 12-10871-TSH,

2012 WL 3025093, at *1 n.1 (D. Mass. July 23, 2012) (quoting

Ahmed v. Rosenblatt, 118 F.3d 886, 890 (1st Cir. 1997) (internal

citation and quotation marks omitted)).

Where, as here, written instruments are provided as

exhibits to a pleading, the exhibits are “part of the pleading

for all purposes.”2 Fed. R. Civ. P. 10(c); see also Trans-Spec

Truck Serv. v. Caterpillar, Inc., 524 F.3d 315, 321 (1st Cir.

2008). When “a written instrument contradicts allegations in

the complaint to which it is attached, the exhibit trumps the

allegations.” Clorox Co. P.R. v. Proctor & Gamble Commercial

Co., 228 F.3d 24, 32 (1st Cir. 2000) (internal quotation marks

and citation omitted).

With its motion to dismiss, Wells Fargo submitted a copy of

the assignment of the Martins’ mortgage. See Ex. A to Mot. to

Dismiss (doc. no. 6-2). When the moving party presents matters

outside the pleadings to support a motion to dismiss, the court

must either exclude those matters or convert the motion to one

for summary judgment. Fed. R. Civ. P. 12(d). An exception to

Rule 12(d) exists “for documents the authenticity of which [is]

not disputed by the parties; for official public records; for

2 The Martins attached as exhibits to their complaint the promissory note and the mortgage.

3 documents central to the plaintiffs’ claim; or for documents

sufficiently referred to in the complaint.” Rivera v. Centro

Medico de Turabo, Inc., 575 F.3d 10, 15 (1st Cir. 2009)

(internal quotation marks and citation omitted). Because the

mortgage assignment is central to certain of the Martins’ claims

against Wells Fargo, the court may consider it without

converting the motion to one for summary judgment.

Background

On November 25, 2009, Michael Martin executed a promissory

note in favor of NASB, in exchange for a loan of $217,979. That

same date, Michael and Julie Martin granted a mortgage to NASB

to secure the loan. The mortgage encumbered the Martins’ home

at 79 Ford Farm Road in Milton, New Hampshire.

The mortgage states that Mortgage Electronic Registration

Systems, Inc. (“MERS”) is the mortgagee as nominee for the

lender, NASB. On November 2, 2012, MERS, acting as nominee for

NASB, assigned the mortgage to Wells Fargo.

At some point in 2015, Wells Fargo notified the Martins

that they were in default and that it was instituting

foreclosure proceedings. Before the scheduled date of the

foreclosure auction, the Martins brought this action.

The Martins allege that NASB misrepresented itself to the

Martins prior to Michael Martin’s execution of the promissory

4 note, and that NASB took other unlawful actions to induce the

Martins to enter into the mortgage. The Martins also allege

that sometime in December 2009, NASB sold its interest in the

note and attempted to sell its interest in the mortgage to an

entity other than Wells Fargo, which, they allege, is unlawful.

They further allege that Wells Fargo lacks standing to foreclose

on their home.

Discussion

The Martins assert six claims: Fraud in the Concealment

(Count I); Unconscionable Contracts (Count II); Breach of

Fiduciary Duty (Count III); Intentional Infliction of Emotional

Distress (Count IV); Declaratory Relief (Count V); and Wrongful

Foreclosure (Count VI).

Wells Fargo moves to dismiss all of the claims brought

against it. It argues that Counts I – III do not allege any

wrongful conduct by Wells Fargo and are barred by the statute of

limitations. It asserts that Counts IV – VI are premised on the

erroneous allegation that Wells Fargo does not have standing to

foreclose. Wells Fargo contends that the mortgage, note, and

mortgage assignment show that it does have the authority to

foreclose. It also argues that the Martins cannot bring a claim

for wrongful foreclosure because it has not foreclosed on the

Martins’ home.

5 The Martins did not respond to Wells Fargo’s arguments in

their objection. Rather, in their objection, they contend that

they have standing to pursue their claims.3 They also argue that

the motion to dismiss should be denied because discovery has not

yet begun.

I. Claims Not Alleged Against Wells Fargo

Wells Fargo argues that the Martins’ claims for fraud in

the concealment, unconscionable contracts, and breach of

fiduciary duty are based on allegations that they were induced

to enter into the mortgage and that Michael was induced to

execute the promissory note, based on NASB’s unlawful conduct.

As such, Wells Fargo contends, the complaint does not allege

that it was involved with the Martins’ mortgage or note at their

inception and, therefore, Counts I – III do not allege any

wrongful conduct by Wells Fargo. It also argues that because

the claims arise out of the execution of the note and mortgage

in 2009, the claims are barred by the statute of limitations.

A. Count I: Fraud in the Concealment

The Martins allege in Count I that NASB concealed several

facts from them to induce them to enter into the note and

3 Wells Fargo does not challenge the Martins’ standing to pursue their claims.

6 mortgage. The alleged concealed facts include that NASB is not

a depository bank and that certain “Securitization Agreements”

existed which altered the nature of the loan.

The underlying loan documents show that Wells Fargo was not

a party to the note or mortgage at the time they were executed.

The complaint does not allege that Wells Fargo had any

involvement with the loan and/or mortgage at the time they were

executed, and it does not identify any facts that Wells Fargo

concealed. See Compl. ¶¶ 12-22. Therefore, the complaint does

not allege sufficient facts to make out a claim of fraud in the

concealment against Wells Fargo.

B. Count II: Unconscionable Contracts

The Martins allege in Count II that they were at a special

disadvantage when entering into the mortgage agreement with

NASB. They allege that NASB used its advantage to make the

Martins believe that they needed to meet certain industry

standard underwriting requirements in order to qualify for a

loan, made them believe that they had to give a “preliminary

signature” on the mortgage to lock in an interest rate, and that

NASB failed to clarify certain terms of the mortgage.

None of the allegations underlying Count II is directed

against Wells Fargo. See id. ¶¶ 23-30. Therefore, the

7 complaint does not state a claim for unconscionable contracts

against Wells Fargo.

C. Count III: Breach of Fiduciary Duty

The Martins allege in Count III that NASB breached its

fiduciary duty to them by failing to disclose to them that it

was not a legitimate creditor, that it only had a “personal

property interest over the real property collateral,” id. ¶ 35,

and by failing to comply with certain covenants in the mortgage

agreement.

None of the allegations in Count III is directed against

Wells Fargo. See id. ¶¶ 31-37. Therefore, the complaint does

not state a claim for breach of fiduciary duty against Wells

Fargo.

Accordingly, the complaint fails to state a claim for

relief against Wells Fargo for fraud in the concealment,

unconscionable contracts, or breach of fiduciary duty. Those

claims are dismissed as to Wells Fargo.4

II. Claims Arising Out Of Wells Fargo’s Authority To Foreclose

Wells Fargo argues that the Martins’ remaining claims are

based on the allegation that Wells Fargo does not have standing

4Because the complaint fails to state a claim for relief against Wells Fargo as to Counts I – III, the court does not address Wells Fargo’s statute of limitations argument.

8 to foreclose. It asserts that the mortgage assignment shows it

currently holds the mortgage and argues that, based on the

language of the mortgage, it has the authority to foreclose

regardless of whether it holds the note. It also asserts that

the documents attached to the Martins’ complaint show that Wells

Fargo does hold the note. Wells Fargo argues that, therefore,

it has the legal authority to foreclose, and that the complaint

does not allege any facts to support its conclusory assertion to

the contrary.

The mortgage states that MERS is acting “solely as a

nominee for Lender . . . and Lender’s successors and assigns.”

Mortg. (doc. no. 1-1) at 14. The mortgage expressly grants MERS

(solely as nominee for Lender and Lender’s successors and

assigns) the power of sale and “the right to foreclose and sell

the Property; and to take any action required of Lender.” Id.

at 15. Thus, “[t]he [mortgage] agreement plainly authorizes

MERS to act on the Lender’s behalf, albeit in a limited way,

thus evidencing the existence of an agency relationship.”

Bergeron v. N.Y. Cmty. Bank, 121 A.3d 821, 826 (2015).

The mortgage assignment, which was recorded on November 12,

2012, states that MERS, as nominee for NASB, its successors and

assigns, conveys the mortgage to Wells Fargo. See doc. no. 6-2.

The Martins have not argued that MERS lacked the authority to

9 assign the mortgage under the terms of the mortgage document.

See Woods v. Wells Fargo Bank, N.A., 733 F.3d 349, 354-56 (1st

Cir. 2013) (discussing MERS’s function and assignment

authority).

Thus, the mortgage authorizes MERS and its assignees to act

on behalf of the noteholder, and MERS assigned the mortgage to

Wells Fargo. Therefore, regardless of whether Wells Fargo holds

the note, the plain language of the mortgage gives it “the

authority, as agent of the noteholder, to exercise the power of

sale.” Bergeron, 121 A.3d at 827 (noting that if the language

of the mortgage establishes an agency relationship between the

assignee of MERS and the holder of the note, the assignee of

MERS has the authority to foreclose regardless of whether that

entity holds the note at the time of the foreclosure).

In addition, the underlying documents show that Wells Fargo

does hold the note. A “promissory note is a negotiable

instrument subject to the provisions of Article 3 of the Uniform

Commercial Code” (“UCC”). Galvin v. EMC Mortg. Corp., 27 F.

Supp. 3d 224, 233 (D.N.H. 2014) (internal quotation marks and

citation omitted). Under the UCC, the holder of an instrument

may enforce it. See N.H. Rev. Stat. Ann. (“RSA”) § 382-A:3-301.

“A holder is a person who is in possession of an instrument

drawn, issued, or indorsed to him or to his order.” LeDoux v.

10 JP Morgan Chase, N.A., No. 12-cv-260-JL, 2012 WL 5874314, at *5

(D.N.H. Nov. 20, 2012) (internal quotation marks and citation

omitted).

As alleged in the complaint and shown in the note, at the

outset of the loan, NASB held the note. See Note (doc. no. 1-1)

at 10-13. An allonge is affixed to the note. The allonge

refers to the loan number, the loan amount, the Martins’

property, and Michael Martin as the borrower. See id. at 13.

It also states: “Pay to the order of Wells Fargo Bank, N.A.

Without Recourse North American Savings Bank, F.S.B.” Id.

Thus, the allonge serves to indorse the note to Wells Fargo,

making it the holder. See Galvin, 27 F. Supp. 3d at 233; see

also RSA §§ 382-A:-204(a), 382-A:3-205(a).5

The Martins do not raise any challenges to the allonge’s

validity. Therefore, the allonge demonstrates that the note was

indorsed to Wells Fargo, making Wells Fargo the holder of the

note.

A. Count IV: Intentional Infliction of Emotional Distress

The Martins allege in Count IV that Wells Fargo

intentionally caused them emotional distress by initiating

5 The allonge is undated. However, “New Hampshire law does not require an indorsement to be dated.” Galvin, 27 F. Supp. 3d at 234.

11 foreclosure proceedings despite having “no legal, equitable, or

actual beneficial interest whatsoever in the Property.” Compl.

¶ 42. As discussed above, the mortgage, note, and assignment of

the mortgage demonstrate that Wells Fargo has the legal

authority to initiate foreclosure proceedings. Therefore, the

Martins fail to allege sufficient facts to state a plausible

claim for relief for intentional infliction of emotional

distress.6

B. Count V: Declaratory Relief

The Martins seek to quiet title and ask for a declaratory

judgment from the court stating that defendants “have no

interest estate, right, title or interest” in their property.

Compl. ¶ 53. A successful petition to quiet title “quiets title

as against the world with respect to the land at issue.” Porter

v. Coco, 154 N.H. 353, 357 (2006); see RSA § 498:5-a. Because

of this, “[u]nder New Hampshire law, the party seeking to quiet

6 The Martins also include an allegation that they “did not default in the manner stated in the Notice of Default.” Compl. ¶ 47. The Martins do not provide any facts to support that allegation. The only document included in the record that bears on the manner of the Martins’ default is Exhibit D to their motion to enjoin the foreclosure, a letter to Michael from Wells Fargo Home Mortgage, dated August 9, 2015, that states the “loan is 11 payments past due, with a total amount due of $20,553.09.” Doc. no. 3-4 at 11. To the extent the Martins intended to allege that they did not default on their loan, they have failed to allege sufficient facts to state a plausible claim for relief.

12 title bears the burden of establishing his good title to the

property against the interests of all others.” Fadili v.

Deutsche Bank Nat’l Trust Co., 772 F.3d 951, 954 (1st Cir. 2014)

(citing Porter, 154 N.H. at 357).

The Martins have not pled facts that would allow the court

to draw a reasonable inference that they are entitled to relief.

As discussed above, the mortgage, note, and mortgage assignment

show that Wells Fargo has a valid interest in the property.

Therefore, the Martins’ claim for declaratory relief must be

dismissed.

C. Count VI: Wrongful Foreclosure

The Martins allege in Count VI that Wells Fargo does not

properly hold the note or mortgage and, therefore, have engaged

in a wrongful foreclosure.

“[A] necessary element of a wrongful foreclosure claim, as

the claim suggests, is that a foreclosure sale must have

occurred.” Worrall v. Fed. Nat’l Mortg. Ass’n, No. 13-cv-330-

JD, 2013 WL 6095119, at *3 (D.N.H. Nov. 20, 2013). The Martins

do not allege that a foreclosure sale has occurred and, as the

court observed in its November 3, 2015 order (doc. no. 4), the

foreclosure sale has been postponed indefinitely. Therefore,

the complaint does not state a claim for wrongful foreclosure.

13 In sum, the complaint fails to allege sufficient facts to

state any plausible claims for relief against Wells Fargo. The

court, therefore, grants Wells Fargo’s motion without prejudice

to the Martins’ ability to file a complaint that states

sufficient claims against Wells Fargo.

Conclusion

For the foregoing reasons, Wells Fargo’s motion to dismiss

(doc. no. 6) is granted without prejudice to the Martins’

ability to file an amended complaint setting forth facts

sufficient to state plausible claims against Wells Fargo. See,

e.g., Rodi v. S. New Eng. Sch. of Law, 389 F.3d 5, 20 (1st Cir.

2004). The Martins have until February 18, 2016, to file an

amended complaint. Failure to file an amended complaint within

this time frame will result in the dismissal of the Martins’

claims against Wells Fargo with prejudice.

SO ORDERED.

__________________________ Landya McCafferty United States District Judge

January 19, 2016

cc: Michael C. Martin, pro se Julie A. Martin, pro se David D. Christensen, Esq.