Dillon v. Servicing

• Decision Date: 13 January 2011
• Docket Number: No. 09–1469.,09–1469.
• Citation: 630 F.3d 75
• Parties: Michael C. DILLON, Plaintiff, Appellant,Jennifer Kresge, Plaintiff,v.SELECT PORTFOLIO SERVICING et al., Defendants, Appellees,PMI Group, Inc., Defendant.
• Court: U.S. Court of Appeals — First Circuit

630 F.3d 75

Michael C. DILLON, Plaintiff, Appellant,Jennifer Kresge, Plaintiff,

v.SELECT PORTFOLIO SERVICING et al., Defendants, Appellees,PMI Group, Inc., Defendant.

No. 09–1469.

United States Court of Appeals, First Circuit.

Heard Oct. 7, 2010.Decided Jan. 13, 2011.

Kevin Demko, with whom Richard H. Frankel was on brief, for appellant.William P. Breen, Jr., with whom Dorothy A. Davis and Eckert Seamans Cherin & Mellott, LLC were on brief, for appellees.Before LYNCH, Chief Judge, BOUDIN and HOWARD, Circuit Judges.LYNCH, Chief Judge.

In a New Hampshire state court action, Michael Dillon received an injunction against Select Portfolio Servicing (SPS) and associated entities that had engaged in illegal practices in seeking to foreclose upon his home mortgage. SPS and its associates did not obey the terms of the state court's order, and Dillon successfully moved for contempt and received relief.

In this later litigation, begun in a new lawsuit in New Hampshire state court and removed to federal court, Dillon alleges continued legal violations arising from the same facts by the same defendants as in the first suit but now seeks to add damages claims under new theories. The district court granted summary judgment to the defendants, holding that res judicata precludes this action. Applying New Hampshire law, we affirm.

I.

In March 2001, Dillon borrowed $100,300 from a division of Superior Bank, securing the debt with a mortgage on his home in Manchester, New Hampshire. Dillon made monthly mortgage payments to Superior Bank from May 2001 until July 2001 without incident. He made his August 2001 payment late, but included the required 5% late fee with the payment. Dillon sent his September and October 2001 payments to Superior Bank. On October 1, 2001, Superior Bank transferred the mortgage's servicing rights to SPS, then known as Fairbanks Capital Corporation.¹ A series of disputes ensued between Dillon and SPS, which led to both the preceding state court lawsuit and this lawsuit.

These disputes began immediately after the transfer. Neither SPS nor Superior Bank informed Dillon of the transfer until after the deadline for the October 2001 payment, but SPS nonetheless assessed late fees on the September and October 2001 payments Dillon initially sent to Superior Bank. SPS also secured an insurance policy on Dillon's home and began charging him premiums even though Dillon had provided proof of pre-existing insurance in accordance with the mortgage agreement. Beginning in January 2002, moreover, SPS began assessing fees, in varying and sometimes undisclosed amounts, in excess of the fees provided in the loan.

Dillon contested these actions in communications with SPS representatives, but his efforts were rebuffed. On January 28, 2002, Dillon made his January mortgage payment along with what he considered the appropriate 5% late fee. Dillon made a single payment in April 2002 for his February, March, and April monthly payments, along with 5% late fees for the February and March payments. He did not pay the additional fees that SPS demanded accompany these payments. SPS accepted the payments, as well as Dillon's monthly payment for May 2002, but it refused to accept Dillon's payments thereafter. In a June 2002 letter, SPS notified Dillon that it intended to accelerate the balance of the loan and foreclose on his mortgage.

In the months before this June 2002 letter, Dillon alleges, representatives from SPS called his home and cell phone “almost continuously during the day and evening,” saying that there was a pending foreclosure action against him. Shortly before he received the notice of pending foreclosure, Dillon filed a formal complaint with the New Hampshire Banking Department. Initially, the Banking Department persuaded SPS not to act on its intent to foreclose on Dillon's mortgage given the payment dispute. On December 23, 2003, however, SPS notified Dillon through its counsel that his home would be sold at a foreclosure auction on January 26, 2004.

During the course of these disputes, SPS and its legal counsel, Harmon Law Offices (Harmon), were subject to separate class action lawsuits concerning their loan servicing and debt collection practices. Dillon opted out of the lawsuit against Harmon on October 28, 2003. He did not opt out of the lawsuit against SPS, however, until shortly before the final approval of a settlement on May 13, 2004. A preliminary settlement agreement, reached on November 14, 2003, barred class members from bringing any claims against SPS and affiliated parties except for those asserted in an effort to defeat any pending foreclosure action. Dillon concedes that he was subject to the terms of this preliminary agreement until he opted out of the class.

In January 2004, shortly after he received the foreclosure notice, Dillon filed the petition in New Hampshire Superior Court we referred to earlier, seeking an injunction against foreclosure and other remedies. In his petition, Dillon alleged that SPS had engaged in predatory, harassing, and wrongful conduct. He alleged that (1) SPS was engaged in ongoing improper accounting practices and had wrongfully assessed late fees, misapplied payments, and misreported his balance, (2) SPS representatives had harassed him in combative and incessant phone calls, (3) the pending foreclosure action had prompted the paying tenants in his home to vacate the premises, leaving him with no source of income, and (4) SPS had failed to take reasonable steps to ensure that a reasonable price would be obtained at the planned mortgage sale.

The petition requested that the Superior Court enjoin the foreclosure sale, order the defendants to provide Dillon with an accounting of his arrearage and an opportunity to cure and reinstate the mortgage, and order “such other and further relief” as it “deem[ed] equitable and just.” The petition named as defendants Fairbanks Capital Corporation, LaSalle National Bank Association, Merrill Lynch Mortgage Capital Investors, and Harmon. Fairbanks Capital Corporation, as noted previously, is the former name of SPS. The Superior Court issued a temporary restraining order and, after a hearing, a preliminary injunction against actions in furtherance of the foreclosure sale.

Before proceeding to a bench trial, the Superior Court dismissed all claims against Harmon. The entity conducting the foreclosure sale on behalf of SPS, Harmon had sent Dillon multiple letters scheduling and rescheduling the foreclosure sale, including after the Superior Court's issuance of the temporary restraining order. The Superior Court held that Dillon no longer possessed any substantive claims against Harmon, as the preliminary injunction issued by the court precluded Harmon from taking further action against Dillon until after the resolution of the lawsuit.

On July 1, 2005, the Superior Court entered a permanent injunction against the remaining defendants. The court found that there was “no doubt that [SPS's] sleight of accounting resulted in improper assessments against plaintiff that, in turn, resulted in the ‘default’ and the acceleration of the mortgage.” Dillon v. Fairbanks Capital Corp., No. 04–E–25, slip op. at 2 (N.H.Super.Ct. July 1, 2005). It found that Dillon's conduct “was not contributory, as he should never have been placed in default to begin with.” Id. The defendants, the court held, “created a predatory scheme of penalties generating the default, contrary to the documents signed by the parties.” Id.

The permanent injunction included three requirements. First, it enjoined the defendants from “pursuing any foreclosure of plaintiff's property based on the default declared in June 2002.” Id. at 4. Second, it enjoined the defendants to “allow plaintiff an opportunity to reinstate the loan by resuming payments without penalties as of August 1, 2005.” Id. Third, it enjoined the defendants to “send a separate accounting to plaintiff, again without penalties, of the amounts it has paid for force placed insurance from March, 2002 through the present and for taxes paid on the property.” Id. The court stated that “[a]ll other requests by the parties are denied, as they have not been pleaded.” Id.

Shortly thereafter, Dillon returned to the Superior Court seeking an order of contempt or, in the alternative, a clarification of the court's prior order. On August 25, 2006, the Superior Court found SPS in contempt of its order of July 1, 2005. It held that SPS had (1) failed to provide Dillon with an opportunity to reinstate his loan because it had not provided him with accurate billing statements, (2) continued to assess late fees and charges for alleged missed payments, and (3) failed to clarify its reclassification of past payments between interest and principal and thus presumably violated the court's order that it allow Dillon to reinstate his loan without penalty. In the contempt order, the court reiterated the requirements of the preliminary injunction granted on July 1, 2005.

In December 2006, Dillon and his fiancee Jennifer Kresge filed this subsequent action in New Hampshire Superior Court, which was removed to federal court on the basis of diversity. The complaint named as defendants SPS, Harmon, Merrill Lynch Mortgage Investors, Merrill Lynch Mortgage Capital, LaSalle Bank National Association, and PMI Group, Inc. Dillon does not dispute that these are the same defendants he named in his initial action, with the exception of the addition of PMI Group, Inc.² The complaint listed twenty-four counts, including violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. It also enumerated state statutory and common-law claims including breach of contract, negligence, infliction of emotional distress, fraud, misrepresentation, defamation, unfair and deceptive commercial practices, unfair collection practices, interference with...