Bowser v. MTGLQ Investors, LP, Civil No. 15-cv-154-LM

• Decision Date: 11 August 2015
• Docket Number: Civil No. 15-cv-154-LM
• Citation: 2015 DNH 149
• Parties: Gary Bowser and Shannon Bowser v. MTGLQ Investors, LP and Ocwen Loan Servicing, LLC
• Court: U.S. District Court — District of New Hampshire

2015 DNH 149

Gary Bowser and Shannon Bowser
v.
MTGLQ Investors, LP and Ocwen Loan Servicing, LLC

Civil No. 15-cv-154-LM

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

August 11, 2015

ORDER

In the above-captioned matter, Gary and Shannon Bowser have sued MTGLQ Investors, LP ("MTGLQ") and Ocwen Loan Servicing, LLC ("Ocwen") in nine counts, asserting various claims arising out of their unsuccessful attempt to obtain a modification of their mortgage loan. Defendants filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), and the Bowsers objected. On June 30, 2015, the court held oral argument on defendants' motion to dismiss. During the hearing, and for reasons stated from the bench, the court dismissed seven of the nine counts. The court took under advisement defendants' motion as to the remaining two counts. For the reasons that follow, the court grants defendants' motion to dismiss in full.

I. Background

A. Factual Allegations

The factual allegations are drawn from the Bowsers' complaint. In 2005, the Bowsers purchased a property in Rye, New Hampshire, obtaining title by warranty deed. To secure the

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loan, they executed a mortgage that provided for a loan servicer to collect payments and otherwise manage their loan obligations.¹ In 2014, the Bowsers went into arrears on the loan. Ocwen, the loan servicer, returned their May 2014 partial payment, and instructed them to apply for a loan modification.

In accordance with Ocwen's instructions, the Bowsers applied for a modification under the Home Affordable Modification Program ("HAMP") in October 2014. The Bowsers allege that Ocwen, during the application review process, improperly based its assessment of their financial capabilities on the history of the loan rather than on their existing ability to pay. The Bowsers further allege that, despite their timely response to every request from Ocwen for supporting documentation, Ocwen insisted that their modification application was incomplete. As a result, Ocwen denied the Bowsers' application.

B. Procedural Backdrop

The Bowsers filed a nine-count complaint in Rockingham County Superior Court, asserting claims for: (I) negligence; (II) negligent misrepresentation; (III) fraud; (VI) equitable

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estoppel; (V) promissory estoppel; (VI) breach of the covenant of good faith and fair dealing; (VII) violation of New Hampshire's consumer protection statute (N.H. Rev. Stat. Ann. § 358-A); (VIII) negligent infliction of emotional distress ("NIED"); and (IX) a count entitled "Standing." Defendants removed the case to this court and promptly filed a motion to dismiss as to all nine counts (doc. no. 4), arguing that the Bowsers failed to state a claim on which relief can be granted.

At the June 30, 2015 hearing on the motion to dismiss, the Bowsers' counsel consented to dismissal of Counts III, IV, VII, and IX as to both defendants, and Counts I and VIII as to MTGLQ. After hearing argument on the remaining counts, the court granted defendants' motion to dismiss Counts I and VIII as to Ocwen, and Count V as to both defendants. The court took under advisement defendants' motion to dismiss as to Counts II and VI.

II. The Legal Standard

Under Fed. R. Civ. P. 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 and internal quotation marks omitted). A claim is

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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.

III. Discussion

Before ruling on the remaining two counts, and for the sake of clarity, the court begins by summarizing the reasoning behind its decision to orally grant, over the Bowsers' objection, defendants' motion to dismiss Counts I and VIII as to Ocwen, and Count V as to both defendants.

A. Counts Dismissed Orally at the Hearing

1. Count I - Negligence

At the hearing, the Bowsers objected to dismissal of Count I as to Ocwen. They argue that Ocwen is liable to them for negligently mishandling and wrongfully denying their loan modification application. Compl. ¶ 37. Specifically, the Bowsers allege that defendants breached a duty "by their misrepresentations and omissions throughout the holding of the loan, servicing of the loan, and the HAMP modification process." Id. ¶ 34.

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Under New Hampshire law, however, the contractual relationship between a lender and borrower typically precludes recovery in tort. Moore v. Mortg. Elec. Registration Sys., Inc., 848 F. Supp. 2d 107, 133 (D.N.H. 2012) (citing Wyle v. Lees, 162 N.H. 406, 409-10 (2011)). This principle, known as the "economic loss doctrine," operates on the theory that "[i]f a contracting party is permitted to sue in tort when a transaction does not work out as expected, that party is in effect rewriting the agreement to obtain a benefit that was not part of the bargain." Plourde Sand & Gravel Co. v. JGI E., Inc., 154 N.H. 791, 794 (2007) (quoting Tietsworth v. Harley-Davidson, Inc., 677 N.W.2d 233, 242 (Wis. 2004)). Thus, where a borrower claims the existence of a duty outside the contractual relationship, he has the burden of proving that the lender voluntarily engaged in "activities beyond those traditionally associated with the normal role of a money lender." Moore, 848 F. Supp. 2d at 133 (citing Seymour v. N.H. Sav. Bank, 131 N.H. 753, 759 (1989)). This burden extends to claims against mortgagees as well as loan servicers.² Id.

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The Bowsers' allegations, however, do not establish that Ocwen engaged in any extra-contractual conduct that would give rise to a cognizable duty. Nor does HAMP on its own create an independent duty. MacKenzie v. Flagstar Bank, FSB, 738 F.3d 486, 496 (1st Cir. 2013) (quoting Brown v. Bank of Am. Corp., No. 10-11085, 2011 WL 131128, at *4 (D. Mass. Mar. 31, 2011). They allege only that "Defendants lied when they claimed they could not complete the Plaintiffs' modification," and that "Defendants mishandled and wrongfully denied the Plaintiffs' modification application." Compl. ¶¶ 35, 37. Since the Bowsers do not allege any wrongdoing unconnected to Ocwen's handling of their mortgage and loan modification application, their negligence claim cannot overcome the economic loss doctrine. Thus, the court dismissed Count I as to Ocwen.

2. Count V - Promissory Estoppel

At the hearing, the court dismissed Count V as to both defendants over the Bowsers' objection. In their complaint, the Bowsers allege the following facts in support of their promissory estoppel claim:

Relying on the representations of the Defendants the Plaintiffs failed to pursue alternative options, resulting in the addition of unjust fees to their loan

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. . . Defendants promised to help Plaintiffs avoid the possibility of foreclosure. The Defendants intended such promises to induce Plaintiffs to continue making mortgage payments, which they did - all to the detriment of the Plaintiffs and the benefit of the Defendants. The Defendants should be estopped from foreclosing on the Plaintiffs' home.

Compl. ¶¶ 30, 84-85, 87 (emphasis added). They argue, in essence, that Ocwen promised not to initiate foreclosure activities while it reviewed the Bowsers' loan modification application. Because of this promise, the Bowsers allege that they did not pursue alternative options to prevent foreclosure. See compl. ¶ 30.

As evidence of Ocwen's promise, the Bowsers attached to their objection to defendants' motion to dismiss a copy of the Request for Mortgage Assistance ("RMA") form that they filed with their loan modification...