UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
John J. Mudge, Jr. and Lisa Mudge
v. Civil No. 13-cv-421-JD Opinion No. 2014 DNH 179 Bank of America, N.A. and TD Bank, N.A.
O R D E R
John and Lisa Mudge brought suit in state court against Bank
of America, N.A. (“Bank of America”) and TD Bank, N.A. (“TD
Bank”) alleging claims that arose from the defendants’ conduct in
handling the Mudges’ mortgages and in attempting to foreclose on
their home. TD Bank removed the case to this court.1 The Mudges
and Bank of America have each moved for summary judgment.
Standard of Review
Cross motions for summary judgment proceed under the same
standard applicable to all motions for summary judgment, but the
motions are addressed separately. Sun Capital Partners III, LP
v. New England Teamsters & Trucking Indus. Pension Fund, 724 F.3d
129, 138 (1st Cir. 2013). When the party moving for summary
judgment bears the burden of proof on an issue, that party
1 The claims against TD Bank have been dismissed. “cannot prevail unless the evidence that he provides on that
issue is conclusive.” E.E.O.C. v. Union Indep. de la Autoridad
de Acueductos y Alcantarillados de P.R., 279 F.3d 49, 55 (1st
Cir. 2002) (internal quotation marks omitted). In addition,
Federal Rule of Civil Procedure 56 requires that a motion for
summary judgment be granted “against a party who fails to make a
showing sufficient to establish the existence of an element
essential to that party’s case, and on which that party will bear
the burden of proof at trial.” Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986). Therefore, an absence of evidence weighs
against the party with the burden of proof. Sanchez-Rodriguez v.
AT&T Mobility R.P., Inc., 673 F.3d 1, 14 (1st Cir. 2012).
Summary judgment is appropriate when “the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(a). “A genuine issue is one that can be resolved in favor
of either party, and a material fact is one which has the
potential of affecting the outcome of the case.” Jakobiec v.
Merrill Lynch Life Ins. Co., 711 F.3d 217, 223 (1st Cir. 2013)
(internal quotation marks omitted). In deciding a motion for
summary judgment, the court draws all reasonable factual
inferences in favor of the nonmovant. Kenney v. Floyd, 700 F.3d
604, 608 (1st Cir. 2012).
2 Background
In 2003, John and Lisa Mudge entered into a loan which was
secured by a mortgage on the Mudges’ home at 57 Sterling Avenue
in Hooksett, New Hampshire. Bank of America was at all relevant
times the loan servicer of the mortgage.
In June of 2009, when the Mudges encountered difficulty
making their monthly mortgage payments, they attempted to obtain
from Bank of America a mortgage modification agreement. Bank of
America informed the Mudges that they could not discuss a
mortgage modification unless they were in arrears. The Mudges
then stopped making their monthly mortgage payments.
The Mudges allege that over the next several years, Bank of
America refused to cooperate with them in their efforts to obtain
a modification. Specifically, the Mudges allege that Bank of
America repeatedly lost documents they submitted regarding
modification and refused mortgage payments because, Bank of
America stated, they were only partial payments. Although Bank
of America eventually offered them a trial modification, the
Mudges allege that the terms of the modification were either not
sufficiently conveyed to them or were identical to the terms of
their original payment plan.
Bank of America referred the home to foreclosure in
September of 2011. On November 28, 2011, the Merrimack County
3 Superior Court granted the Mudges’ petition to enjoin the
foreclosure. Bank of America subsequently moved in the superior
court to vacate the injunction. The superior court granted the
motion on April 22, 2013, and the Mudges’ motion to reconsider
the order was denied on May 23, 2013. This action followed.
After the complaint in this action was filed, as
demonstrated by the record evidence, the Mudges sold their home
in October of 2013. The proceeds of the sale fully paid off the
loan secured by the mortgage.2
Discussion
The Mudges bring claims against Bank of America for breach
of contract (Count I), negligent misrepresentation (Count II),
and breach of the covenant of good faith and fair dealing (Count
IV).3 The Mudges and Bank of America move for summary judgment.
2 It appears that the Mudges had also entered into a second mortgage agreement with TD Bank, which was partially paid off as a result of the sale. 3 The operative complaint is the Second Amended Complaint, dated August 29, 2013. Count III is listed as “RSA 358” and states that the claim has been dismissed. Compl. ¶ 30.
4 I. The Mudges’ Motion for Summary Judgment
In support of their motion for summary judgment, the Mudges
contend that Bank of America has not provided the location of the
original note and that the photocopy of the note that has been
provided “does not satisfy the criteria required by New Hampshire
law in several critical ways.” They argue that, therefore, “the
foreclosure request and all subsequent collection claims should
be void.” The Mudges also argue that Bank of America’s failure
to provide the note and other documents, its initiation of
foreclosure proceedings, and its failure to timely respond to
inquiries establish that Bank of America breached the implied
covenant of good faith and fair dealing. In addition, the Mudges
contend that Bank of America breached the mortgage agreement
because “[t]he fine print of the mortgage imposed obligations on
both sides to keep the other informed and provide updates and
respond timely.”
A. Whether Bank of America Holds the Note
The complaint alleges that the “Defendant’s original note
has not been produced, its location is unclear, and the photocopy
is endorsed in blank.” Compl. ¶ 15. In their summary judgment
motion, the Mudges appear to argue that this fact is undisputed
and entitles them to summary judgment on all of their claims.
5 The Mudges do not explain how the fact that Bank of America
was not the proper holder of the note at the time it sent the
foreclosure notice, even if undisputed, is relevant and material
to any of their claims in this action. The evidence shows, and
the Mudges concede, that Bank of America did not foreclose on the
Mudges’ home, the home has been sold, and the loan secured by the
mortgage was paid off in its entirety. Further, even if the note
issue were dispositive, the Mudges have not conclusively shown
that Bank of America did not hold the note.4 The Mudges,
therefore, cannot succeed on summary judgment based on the note.
B. Breach of Contract
The Mudges appear to argue that they are entitled to summary
judgment on their breach of contract claim because it is
undisputed that Bank of America did not respond to their
inquiries or communicate with them in a timely fashion. They
contend that this conduct violates certain provisions of the
mortgage agreement.
4 The Mudges argue that the photocopy of the note produced by Bank of America is deficient under New Hampshire law. Even if that fact were relevant to their claims, the Mudges did not include with their motion a photocopy of the allegedly deficient note.
6 Under New Hampshire law, “a breach of contract occurs when
there is a failure without legal excuse to perform any promise
which forms the whole or part of a contract.” Axenics, Inc. v.
Turner Constr. Co., 164 N.H. 659, 668 (2013) (internal quotation
marks and citation omitted). Although the Mudges argue that the
mortgage agreement contained language, specifically in the “fine
print,” that imposed an obligation on Bank of America to respond
to inquiries and communicate in a timely fashion, they do not
cite any actual language in the agreement to support their
argument. Indeed, the Mudges did not include with their motion a
copy of the mortgage agreement. Therefore, the Mudges are not
entitled to summary judgment on their breach of contract claim.5
C. Breach of Implied Covenant of Good Faith and Fair
Dealing
The grounds for the Mudges’ claim that Bank of America
breached the duty of good faith and fair dealing are not clear.
The complaint alleges only that Bank of America had a “duty to be
honest, fair and act in good faith with Plaintiffs” and that Bank
of America breached that duty. In their motion for summary
5 Bank of America included with its objection and its motion for summary judgment a copy of the mortgage agreement. The agreement does not contain any language supporting the Mudges’ argument as to their breach of contract claim.
7 judgment, the Mudges assert that Bank of America breached the
duty of good faith and fair dealing by failing to respond to them
in a timely manner, by failing to provide the note and
“accounting” in a timely manner, by wrongfully initiating
foreclosure proceedings, and by losing the tax returns the Mudges
submitted.
“In every agreement, there is an implied covenant that the
parties will act in good faith and fairly with one another.”
Birch Broadcasting, Inc. v. Capitol Broadcasting Corp., Inc., 161
N.H. 192, 198 (2010). When the issue is performance under an
agreement, the good faith obligation limits the discretion of
parties “to prohibit behavior inconsistent with the parties’
agreed-upon common purpose and justified expectations” and bad
faith conduct that would violate common standards of decency,
fairness, or reasonableness. Id. In other words, the good faith
and fair dealing obligation exists “only when the agreement
grants a contracting party discretion in performing his duties
under the agreement and an unreasonable exercise of that party’s
discretion causes harm to the other contracting party.” Ruivo v.
Wells Fargo Bank, N.A., 2012 WL 5845452, at *3 (D.N.H. Nov. 19,
2012); see also Moore v. Mortg. Elec. Registration Sys., Inc.,
848 F. Supp. 2d 107, 127 (D.N.H. 2012).
8 The Mudges do not provide a developed argument in their
motion as to how Bank of America breached the duty of good faith
and fair dealing.6 In particular, the Mudges do not identify
what discretion in the mortgage agreement was exercised
unreasonably by Bank of America. See Moore, 848 F. Supp. 2d at
129. They also do not explain how Bank of America’s actions were
inconsistent with the purpose of the mortgage agreement or with
the Mudges’ justified expectations under the agreement.7 The
Mudges cite no part of the mortgage agreement that supports their
claim. Therefore, the Mudges have not shown that they are
entitled to judgment as a matter of law on the breach of the duty
of good faith and fair dealing claim.
In addition, even if the Mudges’ theory that the Bank of
America’s actions or inactions breached the duty of good faith
6 For example, the Mudges’ most specific statement of the claim is that losing their tax returns, instruction to stop payments, a returned payment, delay, and failure to cooperate in the sale of the home breached the duty of good faith. They do not explain how any of those charged actions related to discretion conferred on Bank of America by the mortgage agreement. 7 In their objection to Bank of America’s motion for summary judgment, the Mudges expand their claim to include a charge that Bank of America wrongfully initiated foreclosure proceedings and deprived them of the benefit of modification of their mortgage. As is explained more fully in the context of the Bank of America’s motion, the Mudges cannot amend their complaint through their objection.
9 and fair dealing, to succeed on summary judgment, the Mudges
would have to show by conclusive evidence that Bank of America
acted as they claim. See E.E.O.C., 279 F.3d at 55. The record
evidence falls far short of that standard.8 Therefore, the
Mudges are not entitled to summary judgment on their breach of
the duty of good faith and fair dealing claim.
D. Negligent Misrepresentation
In their complaint, the Mudges allege that Bank of America
“had a duty to be honest and provide truthful representations.”
They further allege that Bank of America breached that duty by
misleading them and “failing to adequately communicate.” The
Mudges allege that they relied on unspecified representations
made by Bank of America and were misled when Bank of America made
“numerous material promises and failed to perform.
The Mudges do not move for summary judgment in their favor
on the negligent misrepresentation claim.
8 For example, Bank of America submitted the affidavit of Danielle Burnett, an Assistant Vice President, along with supporting evidence, that contradict statements made in Lisa Mudge’s affidavit. Therefore, even if Lisa Mudge’s affidavit would support an articulated theory of breach of the duty of good faith, which it does not, the record as to Bank of America’s actions is conflicting and is not conclusive in the Mudges’ favor.
10 II. Bank of America’s Motion for Summary Judgment
Bank of America argues that it is entitled to summary
judgment on all of the Mudges’ claims. It contends that although
it acted as the loan servicer for the mortgage at all relevant
times, it held the mortgage and therefore was a party to the
agreement for only one month. Bank of America contends that its
liability for a claim arising out of the mortgage must arise from
actions it took during that one month period, and further
contends that none of its actions breached the mortgage terms or
the implied covenant of good faith and fair dealing. Bank of
America also contends that the evidence demonstrates that it did
not make any misrepresentations, negligent or otherwise.
A. Claims Arising Out of the Mortgage Agreement
The record evidence demonstrates, and the Mudges do not
dispute, that MERS assigned the mortgage to Bank of America on
September 21, 2011, and that Bank of America assigned the
mortgage to Federal National Mortgage Association on October 19,
2011. Bank of America argues, therefore, that it was a party to
the mortgage agreement, and could be liable for obligations or
duties arising out of the agreement, for only that one month
period. Bank of America further contends that the allegations in
the complaint concerning its actions between September 21, 2011,
11 and October 19, 2011, do not give rise to a claim for breach of
contract or a claim for breach of the implied covenant of good
faith and fair dealing. The Mudges contend that there are facts
material to their breach of contract claim and breach of the
implied covenant of good faith and fair dealing claim that are in
dispute.
1. Bank of America’s actions when it did not hold the
mortgage
Under New Hampshire law, to prove a breach of contract
claim, a plaintiff must “show (1) that a valid, binding contract
existed between the parties, and (2) that [the defendant]
breached the terms of the contract.” Wilcox Indus. Corp. v.
Hansen, 870 F. Supp. 2d 296, 311 (D.N.H. 2012). A breach of
contract claim ordinarily cannot be maintained against a non-
party to the contract. See Jaffe v. Catholic Med. Ctr., 2002 WL
31466416, at *2 (D.N.H. Nov. 4, 2002); Riesgo v. Heidelberg
Harris, Inc., 36 F. Supp. 2d 53, 59 (D.N.H. 1997). Thus, loan
servicers, who are not parties to a mortgage agreement, cannot be
held liable for breach of that agreement. See Moore, 848 F.
Supp. 2d at 127 (collecting cases); see also Chanthavong v. John
Doe Corp., 2012 WL 6840496, at *3 (D.R.I. Nov. 19, 2012)
(collecting cases).
12 Although the Mudges assert that Bank of America breached the
mortgage agreement throughout 2011 and 2012, because Bank of
America held the mortgage only from September 21, 2011, to
October 19, 2011, Bank of America’s conduct during only that one
month period can be considered when evaluating the Mudges’
contract claims.9
2. Bank of America’s actions when it held the mortgage
The complaint alleges only two acts by Bank of America
during the period when it held the mortgage: (i) it refused to
accept a mortgage payment from the Mudges in September of 2011
because it was a “partial payment” and (ii) it sent a foreclosure
notice on September 29, 2011. Neither of these actions is
sufficient to maintain a breach of contract claim or breach of
the covenant of good faith and fair dealing claim.
The Mudges allege, and the record evidence shows, that they
stopped making their monthly mortgage payments sometime in 2009
and did not begin to make payments again until May of 2011.
Under the terms of the mortgage agreement, the holder of the
9 The Mudges state in their objection, without elaboration, that “Bank of America cannot now avoid responsibility by relying on its ‘shell game’ of transferring the mortgage from entity to entity.” Obj. at 12. They offer no persuasive argument as to how Bank of America could be liable under a contract theory for actions taken when it did not hold the mortgage.
13 mortgage “may return any payment or partial payment if the
payment or partial payments are insufficient to bring the Loan
current.” Mortg. at ¶ 4 (document no. 33-2). The record
evidence demonstrates that in September of 2011, the Mudges made
a payment of $1,318.58. The mortgage statement for September of
2011 lists that amount as the “Home loan payment due 09/01/2011.”
Mortg. Stmt. at 1 (document no. 40-5). Under “Amount due on
09/01/2011,” however, the mortgage statement also shows past due
payments in the amount of $9,230.06 and a “partial payment
balance” of $4,365.20. Id. The Mudges’ payment of $1,318.58 in
September of 2011 was not sufficient to bring the loan current.
Therefore, under the terms of the mortgage agreement, Bank of
America was not obligated to accept the September of 2011
payment, and its refusal to do so does not constitute a breach of
contract.10
Nor have the Mudges shown that Bank of America’s act of
sending the foreclosure notice can give rise to a breach of
10 Although the Mudges assert that Bank of America had accepted payments prior to September of 2011, under the terms of the mortgage agreement, the acceptance of those payments does not waive any of the lender’s rights. See Mortg. at ¶ 1 (document 33-2) (“Lender may accept any payment or partial payment insufficient to bring the Loan current without waiver of any rights hereunder or prejudice to its rights to refuse such payment or partial payments in the future . . . .”).
14 contract claim.11 The Mudges argue that the foreclosure notice
constituted a breach of contract because they were not in
default. They contend that they were not in default because they
had made payments which were simply not accepted and “[d]ocuments
regarding the mortgage and payment history and charges were not
provided.”
As the court explained above, the Mudges had not made their
monthly mortgage payments from sometime in 2009 until May of 2011
and, therefore, Bank of America had the authority to return
payments which did not bring the loan current. The Mudges do not
point to any language in the mortgage agreement that imposes an
obligation on Bank of America to provide the Mudges with their
payment history prior to issuing a notice of foreclosure. In
addition, regardless of whether such actions could give rise to a
breach of contract claim if Bank of America had foreclosed on the
Mudges’ home, it is undisputed that Bank of America did not
11 As with several of their past filings, the Mudges repeatedly argue in their objections that Bank of America has not shown that it was the proper holder of the note and, therefore, did not necessarily have the power to foreclose. As the court has discussed in previous orders, because Bank of America did not foreclose on the Mudges’ home, and instead the Mudges sold their home and paid off the entire balance due under the note, whether Bank of America was the proper holder of the note is irrelevant to any of the Mudges’ claims in this case.
15 foreclose on the home. Therefore, the record evidence shows that
Bank of America did not breach the mortgage agreement.
The Mudges argue that Bank of America’s refusal of the
September 2011 payment and issuance of the foreclosure notice
should still constitute a breach of the covenant of good faith
and fair dealing even if it does not give rise to a breach of
contract claim. However, “‘parties generally are bound by the
terms of an agreement freely and openly entered into,’ and the
implied covenant does not preclude a contracting party from
insisting on enforcement of the contract by its terms, even when
enforcement ‘might operate harshly or inequitably.’” Moore, 848
F. Supp. 2d at 129 (quoting Olbres v. Hampton Co-op Bank, 142
N.H. 227, 233 (1997)). Although the Mudges suggest that Bank of
America can be liable for not engaging in good faith negotiations
regarding modifying their loan and instead pursuing its
contractual right to foreclose, that is simply not a basis for a
breach of the implied covenant of good faith and fair dealing
claim. See Milford-Bennington R.R. Co., Inc. v. Pan Am Railways,
Inc., 2011 WL 6300923, at *5 (D.N.H. Dec. 16, 2011) (“[T]he duty
of good faith and fair dealing ordinarily does not come into play
in disputes . . . if the underlying contract plainly spells out
both the rights and duties of the parties and the consequences
16 that will follow from a breach of a specified right.”); see also
Centronics, 132 N.H. at 143-45.
Accordingly, Bank of America is entitled to summary judgment
on the Mudges’ claims for breach of contract and breach of the
implied covenant of good faith and fair dealing.
B. Negligent Misrepresentation
Under New Hampshire law, the elements of a negligent
misrepresentation claim are “a negligent misrepresentation of a
material fact by the defendant and justifiable reliance by the
plaintiff.” Wyle v. Lees, 162 N.H. 406, 413 (2011). Negligence
is based on “the duty of one who volunteers information to
another not having equal knowledge, with the intention that he
will act upon it, to exercise reasonable care to verify the truth
of his statements before making them.” Id. A misrepresentation
is made when a defendant knew or should have known that his
statements were false. Id. In addition, the misrepresentation
must have caused the plaintiff harm or injury, or stated in other
terms, the plaintiff must have reasonably relied on the
misrepresentation to his detriment. See id.; Snierson v.
Scruton, 145 N.H. 73, 78 (2000); BAE Sys. Info. & Elec. Sys.
Integration Inc. v. SpaceKey Components, Inc., 2011 WL 5040705,
at *14 (D.N.H. Oct. 24, 2011).
17 The Mudges allege that they were “misled when Defendant made
numerous material promises and failed to perform.” Compl. ¶ 27.
The complaint identifies two representations by Bank of America:
(i) “Defendant told Plaintiffs they could not discuss a
modification until they stopped paying and were in arrears,” id.
¶ 4; and (ii) “Plaintiffs received a letter from Defendant
informing them that their property had been referred to
foreclosure because they had not received payment within the past
ninety (90) days,” id. ¶ 8.
The record evidence demonstrates that Bank of America is
entitled to summary judgment on the Mudges’ negligent
misrepresentation claim. With regard to the first
representation, nothing in the record suggests that the
representation was false, and the Mudges do not allege that Bank
of America guaranteed they would obtain a modification. As to
the second representation, the Mudges have not shown how, even if
the statement was a misrepresentation, they relied on that
statement or how their reasonable reliance on that statement
caused any injury.12
12 For example, had Bank of America omitted the reference to payments in the foreclosure notice, the effect of the foreclosure notice would have been the same. Therefore, the Mudges have not alleged that a misrepresentation caused any harm or injury.
18 The Mudges point to certain other representations in their
objection which they argue can sustain a negligent
misrepresentation claim. For example, they assert that “Bank of
America proceeded to foreclosure even though Defendant Bank of
America representatives had repeatedly verbally stated that it
would not initiate foreclosure.” Obj. at ¶ 9. They also assert
that a Bank of America employee “told Plaintiffs he would accept
payments and arrange for the modification. He promised if
Plaintiff sent the checks in, the foreclosure would be cancelled.”
Id. ¶ 19. These allegations are not contained in the complaint,
and the Mudges may not amend their complaint through their
objection.13
Conclusion
For the foregoing reasons, the Mudges’ motion for summary
judgment (document no. 33) is denied. Bank of America’s motion
for summary judgment (document no. 35) is granted. Bank of
America’s motions to quash notices of deposition (document no. 68)
13 The complaint and the Mudges’ objection refer to Bank of America’s failure to respond or communicate, which are not representations, let alone misrepresentations. See, e.g., Akwa Vista, LLC v. NRT, Inc., 160 N.H. 594, 601 (2010) (to prevail on a claim for negligent misrepresentation a plaintiff must first show “that the defendants made a representation”).
19 and for leave to file a reply (document no. 71) are terminated as
moot.
The clerk of court shall enter judgment accordingly and close
the case.
SO ORDERED.
____________________________ Joseph A. DiClerico, Jr. United States District Judge
August 27, 2014
cc: Peter G. McGrath, Esq. William Philpot, Jr. Esq.
20 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
v. Civil No. 13-cv-421-JD
Bank of America, N.A. and TD Bank, N.A.
Correction to Order Issued on August 27, 2014 (Document No. 72)
The “Conclusion” in the order issued on August 27, 2014,
(document no. 72) provides the wrong document numbers for the
summary judgment motions that were denied and granted. The
“Conclusion” in that order is struck in its entirety and is
replaced with the following:
For the foregoing reasons, the Mudges’ motion for
summary judgment (document no. 35) is denied. Bank of
America’s motion for summary judgment (document no. 33)
is granted. Bank of America’s motion to quash notices
of deposition (document no. 68) and motion for leave to
file a reply (document no. 71) are terminated as moot.
The clerk of court shall enter judgment accordingly
and close the case.
____________________________ Joseph A. DiClerico, Jr. United States District Judge
September 3, 2014 cc: Peter G. McGrath, Esq. William Philpot, Jr., Esq.