Gikas v. JPMorgan Chase Bank, N.A., et al. CV-11-573-JL 4/10/13

UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE

Haralambos Gikas

v. Civil N o . 11-cv-573-JL Opinion N o .

JPMorgan Chase Bank, N.A., et a l .

MEMORANDUM ORDER

Plaintiff Haralambos Gikas filed this action against the

servicer of his mortgage loan, JPMorgan Chase Bank, N.A., and the

original mortgagee, Mortgage Electronic Registration Systems,

Inc. (“MERS”), seeking relief for (1) their failure to provide

him with a permanent loan modification, and (2) their allegedly

wrongful conduct during the foreclosure of his mortgage. This

court has jurisdiction over this matter pursuant to

(a)(1) (diversity), because Gikas is a New Hampshire

citizen, Chase and MERS are out-of-state entities, and the amount

in controversy exceeds $75,000.

The defendants have moved for summary judgment, see Fed. R.

Civ. P. 5 6 , arguing that the undisputed material facts establish

that Gikas was not entitled to a modification as a matter of law

and that they did not participate in the foreclosure. After

hearing oral argument, the court grants the motion. As explained

in more detail below, the defendants are entitled to summary

judgment on Gikas’s modification-related claims because Gikas did not provide the information that, he acknowledged, was a

prerequisite to his eligibility for a modification. The

defendants are also entitled to summary judgment on Gikas’s

claims contesting the events surrounding the foreclosure,

including the provision of statutory notice under

, because it was Federal National Mortgage

Association–-not Chase or MERS–-that conducted the foreclosure,

and thus owed the statutory and common-law duties that Gikas

claims were breached.

I. Applicable legal standard

Summary judgment is appropriate where “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 dispute is “genuine” if it could reasonably be

resolved in either party’s favor at trial. See Estrada v . Rhode

Island,

6 , 62 (1st Cir. 2010) (citing Meuser v . Fed.

Express Corp.,

0 7 , 515 (1st Cir. 2009)). A fact is

“material” if it could sway the outcome under applicable law.

Id. (citing Vineberg v . Bissonnette,

0 , 56 (1st Cir.

2008)). In analyzing a summary judgment motion, the court “views

all facts and draws all reasonable inferences in the light most

2 favorable to the non-moving party.”

The following facts are

set forth accordingly.

II. Background

On November 2 6 , 2002, plaintiff Haralambos Gikas purchased

property at 10 Maplecrest in Newmarket, New Hampshire. Although

the record does not reflect the purchase price,1 Gikas testified

that he made an initial down payment that, when combined with

closing costs, totaled around $113,000. Less than a week later,

on December 2 , 2002, Gikas executed a promissory note in the

amount of $165,000 in favor of SIB Mortgage Corporation. The

note was secured by a mortgage on the Newmarket property; the

named mortgagee was defendant Mortgage Electronic Registration

Systems, Inc., or “MERS,” acting “as a nominee for [SIB] and

[its] successors and assigns.”

At some point, SIB indorsed Gikas’s note in blank, and

defendant JPMorgan Chase Bank, N.A. began servicing his loan on

behalf of the noteholder. The precise timeline of these events

is unclear, but Chase was servicing the loan at least by

September 2008, when it sent Gikas a notice of default informing

1 In his memorandum, Gikas represents that the purchase price was $265,000; though the court has no reason to doubt this representation, Gikas has identified no evidence substantiating i t . In any event, the purchase price is immaterial to the issues before the court.

3 him that, if he did not submit a payment of $1,923.75 within 30

days, foreclosure action would begin. Over the next nine months,

Chase sent Gikas a series of similar notices, but did not

foreclose as threatened. By June 2009, Gikas was nearly $5,000

in arrears, and on June 1 3 , Chase informed him that if he did not

submit a payment of $4,892.49 within 32 days, it would accelerate

the maturity of the loan and commence foreclosure. Gikas did not

make this payment.

Again, however, Chase did not foreclose. Instead, in

November 2009, it sent Gikas a letter informing him of his

potential eligibility for a loan modification under the federal

government’s Home Affordable Modification Program, or “HAMP.”

The letter enclosed a customized “Trial Period Plan” (“TPP”), and

went on to explain that if Gikas returned an executed TPP and

otherwise met the HAMP eligibility requirements, he could qualify

for a modification. Among other things, the letter explained,

Gikas would need to submit documents–-which were identified in

the letter-–verifying his income, and to make a series of reduced

mortgage payments. Once he had done s o , and Chase had confirmed

his eligibility for a modification under HAMP, Chase would then

“finalize [his] modified loan terms and send [him] a loan

modification agreement.” Letter of Nov. 2 0 , 2009 (document n o .

23-8) at 5 . Similarly, the TPP itself explained that if Gikas

4 did “not provide all information and documentation required by

[Chase], the [note and mortgage] will not be modified and this

Plan will terminate.”

( F ) .

Gikas signed the TPP and returned it to Chase along with a

HAMP “Hardship Affidavit,” which certified that he would “provide

all requested documents” and, like the TPP, acknowledged that if

he did “not provide all of the required documentation, [Chase]

may cancel the [modification] and may pursue foreclosure.”

Hardship Aff. (document n o . 23-9) at 2 . Gikas did not, however,

provide the income documentation identified in the cover letter,

prompting Chase to send him a letter in January 2010 requesting

that information again, and warning him that his modification

might be denied if he did not provide it within fifteen days.

Gikas claims he did not receive this letter, and thus did not

submit documents in response. A month later, Chase sent him a

substantially similar letter; again, though, Gikas claims he did

not receive i t , and thus did not respond. Although Gikas made

the payments required under the TPP, in August 2010, Chase sent

him a letter stating that it could not offer him a modification

under HAMP “because you did not provide us with the documents we

requested.” Notice of Expiration (document n o . 23-12) at 1 .

The following month, MERS, as nominee for SIB, assigned the

mortgage to Federal National Mortgage Association, better known

5 as “Fannie Mae”. That same day, Fannie Mae, through counsel,

sent Gikas a Notice of Foreclosure Sale informing him that it had

scheduled a sale of the Newmarket property for September 2 9 ,

2010. 2 Gikas claims he did not receive the notice, which

contained language informing him of his right to petition the

Superior Court to enjoin the sale. See

, I I . He therefore did not file such a petition, and the

sale went forward as scheduled. The high bidder at auction was a

third party, Maureen Staples, who purchased the property for

$165,670.

Gikas filed this action against Chase, MERS, and SIB in

Rockingham County Superior Court on November 7 , 2011. Chase and

MERS removed the action to this court. See

.

Following removal, Gikas amended his complaint to assert six

counts against those two defendants.3 On the defendants’ motion,

2 On three consecutive weeks leading up to the sale, Fannie Mae also published notice of the sale in the Manchester Union Leader, which, foreclosure counsel attests, is “a newspaper of statewide circulation and general circulation within” Newmarket. Lamper Aff. (document n o . 23-17) at 2 , ¶ 6. Gikas’s objection claims that the Union Leader “is not generally read in the Town of Newmarket,” Memo. in Supp. of O b j . (document n o . 26-1) at 6-7 & n.1, but cites only inapposite deposition testimony in support of this assertion (which the court finds somewhat dubious). But even if a genuine dispute were to exist as to this fact, it is immaterial to the court’s resolution of defendants’ motion. 3 SIB was also named as a defendant in the caption of the amended complaint, but this appears to have been a holdover from

6 this court dismissed Count 3 , a claim under the New Hampshire

Consumer Protection Act,

-A. See Order

of June 6, 2012. In due course, the defendants filed the present

motion, seeking summary judgment on the remaining five counts.

III. Analysis

A. Modification-related claims (Counts 1-2)

Counts 1 and 2 of the amended complaint seek recovery for

the defendants’ failure to provide Gikas with a permanent loan

modification. Count 1 alleges that the defendants, “[b]y failing

to offer [Gikas] permanent HAMP modifications [sic],” breached

the TPP, o r , in the alternative, broke a promise upon which Gikas

reasonably relied. Am. Compl. (document n o . 16) ¶¶ 49-50. Count

2 similarly alleges that the defendants breached the implied

covenant of good faith and fair dealing by “failing to offer a

permanent modification.”4

¶ 5 3 . The defendants argue that

the initial complaint, as none of the counts of the amended complaint are directed at SIB, and Gikas has voluntarily dismissed his claims against SIB. See Notice of Voluntary Dismissal (document n o . 1 2 ) . 4 Count 2 also alleges that the defendants breached the covenant by “foreclosing upon [Gikas’s] home when he had no actual notice and could not oppose the foreclosure before sale was made to a third person, and in allowing sale of the home at an unreasonably and unconscionably low sales price.” Am. Compl (document n o . 16) ¶ 5 3 . These theories do not entitle Gikas to relief for the reasons set forth in the following section.

7 they are entitled to summary judgment on this claim, pointing out

that Gikas failed to provide the documents Chase had requested,

which, as the TPP and Hardship Affidavit that he signed both

unambiguously stated, entitled Chase to terminate the TPP. The

court agrees.

As an initial matter, the court observes that the law does

not impose any generalized duty on lenders or servicers to modify

or restructure a loan. See, e.g., Ruivo v . Wells Fargo Bank,

N.A.,

9 1 , 12 (noting that the New Hampshire Supreme

Court “has never held that a bank has a tort duty to entertain a

borrower’s application to modify a lawful loan agreement” and

declining to recognize such a duty); L’Esperance v . HSBC Consumer

Lending, Inc.,

0 4 , 54 (refusing to recognize “the novel

proposition that a loan servicer has an enforceable tort duty to

modify loans”); c f . also Moore v . Mortg. Elec. Registration Sys.,

Inc.,

0 7 , 129-30 (D.N.H. 2012) (“[T]he covenant

of good faith and fair dealing in a loan agreement cannot be used

to require the lender to modify or restructure the loan.”). If

either of the defendants had any obligation to modify Gikas’s

loan, then, that obligation necessarily arose from the terms of

the TPP (which contain the only arguable promise of a

8 modification in the record that might support Counts 1 and 2 ) . 5

As the defendants have pointed out, though, those terms

unambiguously required them to provide Gikas with a permanent

modification only if he met several preconditions, one of which

was to provide certain documents at Chase’s request. See Part

I I , supra.

Gikas acknowledges that he failed to provide Chase with the

documents it requested. He argues, however, that because he did

not receive Chase’s January and February 2010 letters asking him

to submit documentation of his income, the defendants could not

deny him a permanent modification for failing to do s o . But, as

discussed in Part I I , supra, the cover letter Chase sent to Gikas

along with the TPP specifically listed a number of documents that

he would need to return along with the signed TPP. See Letter of

Nov. 2 0 , 2009 (document n o . 23-8) at 3 (stating that “[t]o accept

this offer, and see if you qualify for a Home Affordable

Modification, send the items below to CHASE HOME FINANCE, LLC, no

later than DECEMBER 2 0 , 2009” and providing a checklist of

documents). Among those documents were a “[c]opy of the two most

recent pay stubs” (if Gikas was a salaried employee) or a “[c]opy

5 This is consistent with the discussion between the court and counsel at the preliminary pretrial conference in this case. See Order of Apr. 3 , 2012 (“The breach of contract claim . . . will be limited to the HAMP Trial Period Plan-based claim.”).

9 of the most recent quarterly or year-to-date profit/loss

statement” (if Gikas was self-employed), id.--the very same

documents referenced in Chase’s January and February 2010

letters.

It is undisputed that Gikas received the cover letter, as

evidenced by his submission of a signed TPP to Chase, and that he

nonetheless failed to submit the documents as directed. That he

claims not to have received Chase’s later requests for the same

documents is immaterial. Gikas has identified no language in the

TPP nor principle of law that required Chase to make multiple

requests for omitted documents. Because Gikas did not fulfill

the preconditions to a modification under the terms of the TPP,

the defendants were not obligated to provide him with one. See

Marquez v . Wells Fargo Bank, N.A., N o . 12-cv-11725-RGS,

, *2-3 (D. Mass. Jan. 8 , 2013) (dismissing TPP-based claims

where borrowers acknowledged that they failed to provide income

documentation). Summary judgment is granted to the defendants on

Counts 1 and 2 .

B. Foreclosure-related claims (Counts 4-6)

Counts 4 through 6 of Gikas’s amended complaint all seek

recovery for the events surrounding the foreclosure of Gikas’s

mortgage. Counts 4 and 5 allege that the defendants breached

10 fiduciary duties owed to Gikas and violated

, the statute governing foreclosure by power of sale, by

“foreclos[ing] without [Gikas] having actual notice” and selling

the property “at an unconscionably low and unreasonable price.”

Am. Compl. (document n o . 16) ¶ 6 2 ; see also

¶ 6 6 . Count 6

alleges that the defendants did not possess Gikas’s promissory

note, leaving them “with no standing to exercise foreclosure

under the mortgage.”

¶ 6 9 .

The problem common to all three counts, as defendants point

out, is that Chase and MERS did not conduct the foreclosure;

Fannie Mae did. In light of this undisputed fact, it is

difficult to see how Gikas can possibly recover from those

defendants for the alleged wrongs visited upon him during the

foreclosure. He nonetheless argues that Chase may be held liable

for those wrongs because “it continued to service the loan at the

time of the foreclosure proceedings and events leading up to the

foreclosure sale,” Memo. in Supp. of O b j . (document n o . 26-1) at

1 7 , and that MERS may be held liable because it was the original

mortgagee and assigned the mortgage to Fannie Mae “apparently for

the sole purpose of foreclosing,”

at 1 8 .

These arguments are unavailing. Under New Hampshire law, it

is the “mortgagee executing a power of sale,” not the servicer or

original mortgagee, which must observe “the statutory procedural

11 requirements” and “protect the interests of the mortgagor through

the exercise of good faith and due diligence” in the foreclosure

process. Murphy v . Fin. Dev. Corp.,

(1985);

see also

. If those requirements

were not met, that was Fannie Mae’s doing, not the defendants’.

Gikas has identified no doctrine under which Fannie Mae’s

liability for that shortcoming can be imputed to Chase (its

agent) or MERS (its predecessor), nor is the court aware of any.

And it should (but, unfortunately, apparently cannot) go without

saying that whether or not Chase and MERS had standing to conduct

the foreclosure is entirely irrelevant to the validity of the

sale when they did not, in fact, conduct the foreclosure. Cf.,

e.g., Crews v . Fannie Mae, N o . 2:11-cv-11656,

, *4

(E.D. Mich. Feb. 8 , 2012) (“Because Wells Fargo is the [entity]

that initiated the foreclosure, only Wells Fargo’s standing is

relevant.”). Summary judgment is granted to defendants on Counts

4 through 6.

IV. Conclusion

For the reasons set forth above, the defendants’ motion for

summary judgment6 is GRANTED. The clerk shall enter judgment

accordingly and close the case.

6 Document n o . 2 3 .

12 At oral argument, plaintiff orally renewed his motion to

amend the complaint to add a claim against Fannie Mae, which the

court previously denied. See Order of Feb. 2 7 , 2013. For the

reasons set forth in its prior order, that motion is DENIED.

SO ORDERED.

yAyV^TS^ Joseph N . Laplante Jnited States District Judge

Dated: April 1 0 , 2013

cc: Shenanne Ruth Tucker, Esq. Joseph Patrick Kennedy, Esq.

13