UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE

Mark B. Galvin and Jenny Galvin

v. Civil No. 12-cv-320-JL Opinion No.

EMC Mortgage Corporation et al.

BENCH TRIAL DECISION: FINDINGS OF FACT AND RULINGS OF LAW

Plaintiffs Mark and Jenny Galvin filed this action in

Rockingham County Superior Court seeking to enjoin defendant Bank

of New York Mellon (“Mellon”), in its capacity as trustee for the

holders of shares in a pool of securitized mortgages, from

foreclosing a mortgage on their property in Rye, New Hampshire.

Mellon and its co-defendants–-the servicer of the plaintiffs’

mortgage loan, EMC Mortgage Corp.; the original mortgagee,

Mortgage Electronic Registration System (“MERS”); and Mellon’s

alleged predecessor as trustee, JPMorgan Chase Bank, N.A.–-

removed the action to this court, see

, which has

jurisdiction under

(diversity).

The plaintiffs’ amended complaint, which they filed in this

court following removal (and following the court’s order granting

the defendants’ motion to dismiss as to 14 of the 15 claims in

the original complaint, see Galvin v. EMC Mortg. Corp.,

(“Galvin I”)), asserts claims for (1) a declaratory judgment

that the defendants may not foreclose; (2) violation of the Real Estate Settlement Procedures Act,

et seq., by

EMC; and (3) violation of the New Hampshire Consumer Protection

Act, or “CPA,” N.H. Rev. Stat. Ann. Ch. 358-A, by all defendants.

The plaintiffs waived the second of these claims before trial,

see Pls.’ Pretrial Statement (document no. 56) at 3, leaving only

their claims for declaratory judgment and violation of the CPA.

After denying the parties’ competing motions for summary

judgment on these two remaining claims, see Galvin v. EMC Mortg.

Corp.,

(“Galvin II”), the court conducted a one-day

bench trial. The plaintiffs and defendants each submitted a set

of proposed findings and rulings and a trial brief before trial;

the parties also jointly submitted a pre-trial statement of

agreed facts and a timeline of events. With the assistance of

these materials, the court makes the following findings of fact

and rulings of law, see Fed. R. Civ. P. 52(a), resulting in

judgment for the defendants on both counts.

Findings of Fact

I. The note and mortgage

1. On August 22, 2005, Mark Galvin executed a promissory note

in the amount of $2,900,000, payable to Metrocities

Mortgage, LLC.

2. Defendants presented the original promissory note to the

court for inspection at the bench trial. Plaintiffs did not

2 question the genuineness of the note, a copy of which was

entered into the record as defendants’ exhibit A. The note

consists of six numbered pages and a two-page “prepayment

note addendum.”

3. The sixth page of the note bears Galvin’s signature. On the

reverse of that page is an undated stamp that reads:

“Without recourse pay to the order of JPMorgan Chase Bank,

as Trustee.” The stamp bears the signature of Sam Kobari,

who is identified as an “AVP” of Metrocities.

4. The eight pages of the note and its addendum bear two hole

punches at the top of each page, but are held together by a

paperclip. Also attached to these pages by the paperclip is

a single-page document titled “Allonge to Mortgage Note.”

This document is undated, but was prepared at some point in

July 2014, after the stamp indorsing the note to “JPMorgan

Chase Bank, as Trustee” was placed on the note.

5. The page titled “Allonge to Mortgage Note” recites the date

and amount of the note, and identifies Galvin as the

“mortgagor” and Metrocities as the payee. The page bears

the signature of Cory J. Settoon, who is identified as a

“Vice President” and “Authorized Officer” of “JPMorgan Chase

Bank, N.A. f/k/a JPMorgan Chase Bank, as Trustee.” It

reads:

3 Pay to the order of The Bank of New York Mellon formerly known as The Bank of New York as successor Trustee to JPMorgan Chase Bank N.A. as Trustee for the Certificateholders of Structured Asset Mortgage Investments II Trust 2005-AR7 Mortgage Pass-Through Certificates, Series 2005- AR7[1]

Without Recourse

6. Frank Dean, a representative of JPMorgan, testified at trial

that Cory Settoon is, indeed, a JPMorgan employee authorized

to prepare allonges. Dean further testified to JPMorgan’s

belief that Mellon is entitled to enforce the note.

7. The note is secured by a mortgage on property at 17 Heather

Drive in Rye, New Hampshire, which is the primary residence

of Mark Galvin and his wife, Jenny. Both Galvins executed

the mortgage, which was later recorded at the Rockingham

County Registry of Deeds at Book 4537, Page 1719.

8. The mortgage names MERS as the mortgagee in its capacity “as

nominee for [Metrocities and its] successors and assigns.”

In the mortgage, the Galvins acknowledge that “MERS is a

separate corporation” from Metrocities, and agree to

“mortgage, grant and convey” the mortgaged property “to MERS

. . . and to the successors and assigns of MERS with

mortgage covenants, and with power of sale.”

1 The Structured Asset Mortgage Investments II Trust 2005-AR7 is hereinafter referred to as the “SAMI II Trust.”

4 9. On May 5, 2010, Beth Cottrell, Vice President of MERS,

executed an assignment of the mortgage from MERS to “The

Bank of New York Mellon . . . as successor Trustee to

JPMorgan Chase Bank, N.A., as Trustee for the Certificate-

holders of [the SAMI II Trust].” On May 20, 2010, the

assignment was recorded at the Rockingham County Registry of

Deeds at Book 5112, Page 0754.

II. Galvin’s default and defendants’ foreclosure attempts

10. Galvin initially had no difficulty making payments on the

note, which were between $13,000 and $14,000 per month. In

August 2008, however, Galvin was unexpectedly terminated

from his job. According to Galvin, he was able to “hold

things together” for a while, but in June 2009, he stopped

making payments on the note.

11. When he began to experience difficulty making payments,

Galvin contacted EMC, his servicer from nearly the outset of

the loan, using the phone number provided on his monthly

statements. EMC ultimately offered Galvin an agreement that

he says he understood to be a loan modification (the

“Repayment Agreement”). The terms of this agreement were

memorialized in a written offer letter from EMC, which

Galvin signed on September 27, 2009, and returned to EMC.

5 12. As the court discussed in its order on the motion to

dismiss, despite Galvin’s claimed understanding of the

Repayment Agreement, that document’s plain language “does

not contain any promise by EMC regarding loan modification,”

and “addresses only one exceedingly narrow subject: curing

Mr. Galvin’s delinquency.” Galvin I,

.

13. The Repayment Agreement recited that, due to Galvin’s

failure to make the payments for June, July, and August of

2009, the loan was nearly $42,000 in arrears. The agreement

called for Galvin to make six monthly payments of $9,900

(for a total of $59,400), with the last payment due in

February 2010, to cure this delinquency. Galvin made all

six payments as required.

14. While making payments under the Repayment Agreement to cure

his delinquency, however, Galvin did not make any of the

usual monthly payments due under the note. In March 2010,

EMC sent Galvin a letter announcing that it intended to

foreclose on the mortgage because he had “failed to pay the

required monthly installments” on the note.

15. On April 27, 2010, Harmon Law Offices sent Galvin a letter

informing him that EMC had retained it to foreclose on the

mortgage. Harmon followed this letter up with another

letter on May 18, 2010, informing him that it had scheduled

6 a foreclosure sale for June 16, 2010. The May 18 letter

claimed that the “mortgage is currently held by The Bank of

New York Mellon . . . as successor Trustee to JPMorgan Chase

Bank, N.A., as Trustee for the Certificateholders of [the

SAMI II Trust].”

16. After he received these letters, and after a friend sent him

a newspaper clipping advertising a foreclosure sale of the

mortgaged property at Heather Drive, Galvin contacted EMC.

He claims that EMC representatives assured him that the

foreclosure sale would not go forward, and asked him to

submit additional information. Consistent with these

representations, no foreclosure sale took place in 2010.

17. Since making the final $9,900 payment due under the

Repayment Agreement in February 2010, Galvin has made no

further payments on the note. In the intervening four-and-

a-half years, Galvin also has not paid any taxes on the

property, instead relying upon EMC to make the payments.

18. In June 2012, Harmon Law Offices sent Galvin a letter

informing him that it had scheduled a foreclosure sale of

the property for August 1, 2012. The letter enclosed a

“Mortgagee’s Notice of Sale of Real Property,” which

asserted that the mortgage was held by “The Bank of New York

7 Mellon . . . as successor-in-interest to JPMorgan Chase

Bank, N.A., as Trustee for [the SAMI II Trust].”

19. After receiving Harmon’s letter, Galvin filed this action.

The foreclosure sale did not proceed as scheduled, and no

foreclosure sale has taken place to date.

20. As a factual matter, there was nothing unfair, deceptive, or

unreasonable about Mellon initiating foreclosure in either

2010 or 2012. By the time it began the process of formally

foreclosing (by sending Galvin a notice of foreclosure sale

on May 18, 2010), Mellon had received an assignment of the

mortgage from the original mortgagee. The Galvins did not

prove that Mellon lacked the ability to enforce the note at

that time, but even assuming that Mellon did not have that

ability, New Hampshire law was (and still is) unsettled on

whether it is necessary to hold the note in addition to the

mortgage in order to foreclose. Given the unsettled state

of the law, Mellon did not act unfairly, deceptively, or

unreasonably in beginning to foreclose the Galvins’ mortgage

following Mr. Galvin’s default given that Mellon held the

mortgage itself, which, again, included an explicit

agreement by the Galvins that the original mortgagee’s

successors and assigns could foreclose the mortgage.

8 III. Galvin’s attempts to sell the property

21. In mid-2009, at around the same time that he signed the

Repayment Agreement with EMC, Galvin began marketing the

mortgaged property for sale. Galvin described the property

as what “some people might call . . . a trophy home, you

know, for people that could afford it,” consisting of 9700

square feet of living space–-including six en suite

bedrooms--with an additional 4500 square feet of partially-

finished living space. The Town of Rye had appraised the

property for just over $4.7 million at that time. After

consulting with several real estate brokers, Galvin listed

the property for sale at $7.4 million.

22. Galvin claims that while there were some showings, he

received only one offer to purchase the property for about

$4.5 million dollars. Although that price would have been

sufficient to pay off both of Galvin’s mortgages on the

property, he rejected the offer.

23. Galvin’s current realtor, Lauren Stone (who he called as a

trial witness), testified that a property in the Rye area

comparable to Galvin’s in terms of square footage, location,

and quality of construction had recently sold for $3.4

million after having been initially listed for $6.9 million.

9 24. Galvin says that he has received no offers on the property

since it was first advertised for foreclosure in 2010.

There was no evidence presented that suggested that Galvin’s

inability to sell the property was causally related to the

advertisement of the property for foreclosure in either 2010

or 2012. If anything, the evidence suggests that Galvin’s

inability to sell the property can be attributed to an

asking price well above both the appraised value of the

property and the sale price of a comparable property.

IV. Inspections of the property

25. In September 2009, shortly after Galvin’s June 2009 default,

EMC began conducting regular inspections of the property.

Over the course of the next three years, EMC conducted 26

inspections of the property, on the following dates:

September 3, 2009 October 20, 2011 September 25, 2009 December 8, 2011 May 5, 2010 January 20, 2012 June 9, 2010 February 7, 2012 November 18, 2010 February 8, 2012 December 28, 2010 February 25, 2012 February 10, 2011 February 29, 2012 March 4, 2011 March 6, 2012 March 28, 2011 March 31, 2012 April 20, 2011 May 11, 2012 May 13, 2011 May 31, 2012 July 12, 2011 July 13, 2012 August 1, 2011 July 19, 2012

26. These more or less once-monthly inspections were generally

reasonable in frequency. At least some of the five

10 inspections that occurred in the one-month period between

February 7 and March 6, 2012, were likely superfluous, but,

as a factual matter, these excessive inspections were not

unfair or deceptive. (In light of the foreclosure sale that

had been scheduled for August 1, 2012, it was not at all

unreasonable for EMC to conduct two inspections within one

week in mid- to late July 2012.)

27. The inspections were also reasonable in scope, as evidenced

by Galvin’s testimony that he never even saw any of the

inspectors who entered onto the property, and was notified

that the inspections had occurred only after the fact by

means of envelopes placed on the front door of the house.

28. Although Galvin claims that EMC did not notify him of these

inspections in advance, that he was “constantly” in contact

with EMC, and that he had informed EMC that he was living in

the property at the time the inspections occurred, none of

these factors render the inspections unreasonable (assuming

Galvin’s claims are true, a proposition the court is not

prepared to accept in light of his credibility deficit, see

¶¶ 30-34, infra). EMC was not required to blindly accept

Galvin’s representations that he was living in the property

even though he had not paid his mortgage in months, and

11 unannounced visits were more likely than announced ones to

reveal the actual condition of the property.

29. EMC charged $14 to Galvin’s account for each inspection of

the property, for a total of $364. This fourteen-dollar fee

per inspection was not unreasonable.

V. Witness credibility

30. Mark Galvin testified at trial. The court did not find him

to be a particularly credible witness. His delivery,

demeanor, and tone did not enhance his credibility, in some

instances undermined it, and generally created an impression

that Galvin was attempting to advocate or advance a position

or argument, as opposed to simply reporting recollected

facts.

31. The substance of Galvin’s testimony was no more convincing

than its delivery. Galvin’s claim that he believed that the

Repayment Agreement was to function as a loan modification,

for example, is hard to accept. As already noted, no

mention of any loan modification of any kind is made in that

document, the terms of which address only one subject:

curing Galvin’s default. See Galvin I,

.

While the court is not inclined to hold laypeople to the

same standards of contract interpretation it expects of

attorneys, Galvin is, by his own account, a sophisticated

12 businessperson who has started four successful companies and

has helped other people start over ten more. The court

seriously doubts that, were Galvin the one who had loaned

money rather than borrowed it, he would interpret the

Repayment Agreement in the manner to which he testified.

And, while Galvin suggested in his testimony that EMC had

led him to believe that the agreement was a modification, he

identified no specific statements by anyone at EMC to that

effect, and it is, again, implausible that someone as

business-savvy as Galvin would be so naïve as to rely upon

an oral representation regarding the agreement’s contents

that is at odds with the contents of the written instrument

itself.

32. Galvin’s claimed interpretation of the Repayment Agreement

illustrates another problematic aspect of his testimony as

well: a tendency to selectively insist upon or disregard

rigid technicality depending upon the situation before him.

So, as noted, Galvin insisted that the agreement served as a

loan modification–-an incredibly loose (and in this court’s

view, unsupportable) reading of the document. Yet when

asked by defendants’ counsel whether the 2010 letter from

Harmon Law Offices (described in ¶ 15, supra) informed him

that Bank of New York Mellon was the holder of the mortgage,

13 Galvin denied that and, in a combative tone of voice,

pointed out that the letter identifies “The Bank of New York

Mellon formerly known as The Bank of New York as successor

Trustee to JPMorgan Chase Bank, N.A., as Trustee for the

Certificateholders of [the SAMI II Trust]” as the holder of

the mortgage. While that is certainly true, Galvin’s

insistence on quoting directly from the letter’s language

while taking a considerably more lax view of the language of

the Repayment Agreement demonstrates an inconsistency and

selectivity that undermines Galvin’s credibility.

33. The substance of the testimony related in the two foregoing

paragraphs contributed to the appearance that Galvin was, at

a minimum, attempting to shade his testimony to his benefit.

Even in the absence of that testimony (and other testimony

like it), though, the court would not have found Galvin’s

testimony to be credible because, as related in ¶ 30, supra,

his overall demeanor, delivery, and tone, created an

impression of untrustworthiness.

34. In sum, the court did not credit much of Galvin’s testimony.

Accordingly, where that testimony was not corroborated by

some other evidence, the court has, for the most part,

disregarded it. Therefore, in the foregoing findings of

14 fact, the court has omitted certain claims Galvin made

during his testimony.

35. Lauren Stone, a real estate agent, also testified for the

Galvins. Based upon Stone’s demeanor, delivery, and tone,

the lack of any apparent motive for her to testify falsely,

and the general plausibility of her testimony when assessed

in light of the totality of the evidence presented, the

court found her to be a generally credible witness.

36. Frank Dean, a home loan research officer for JPMorgan,

testified for the defendants. Based upon Dean’s demeanor,

delivery, and tone, and the general plausibility of his

testimony when assessed in light of the totality of the

evidence presented, the court found him to be a generally

credible witness.

Rulings of Law

I. Declaratory judgment

37. Count 1 of the Galvins’ complaint seeks a declaratory

judgment under

, which permits

“[a]ny person claiming a present legal or equitable right or

title” to “maintain a petition against any person claiming

adversely to such right or title to determine the question

as between the parties.” The Galvins contend that Mellon is

not entitled to lawfully foreclose their mortgage under N.H.

15 Rev. Stat. Ann. § 479:25. As will be discussed in short

order, that contention is without merit.

38. Before addressing Mellon’s ability to foreclose under

§ 479:25 at present, however, the court pauses to address an

ancillary theory advanced in Count 1. In addition to

contending that Mellon may not currently foreclose, the

Galvins argue that Mellon likewise could not foreclose in

either 2010 or 2012, when it noticed foreclosure sales of

the Rye property. In noticing those sales, the Galvins say,

Mellon “negatively affected” their property’s value; they

seek damages for this alleged diminution in value. Pet’rs’

Trial Memo. (document no. 57) at 3.

39. The Galvins may not use their § 491:22 declaratory judgment

claim as a vehicle for challenging Mellon’s foreclosure

attempts in 2010 and 2012. As the language of the statute

itself, quoted above, suggests, a claim under § 491:22 is a

means to determine the existence of a legal or equitable

right or title at “present”–-i.e., at the time of judgment–-

and not a means “to enforce a claim against the defendant”

for past wrongs. Benson v. N.H. Ins. Guar. Ass’n,

(2004); see generally 5 Gordon J. MacDonald,

Wiebusch on N.H. Civil Practice & Procedure § 36.05 (4th ed.

2014). So, even assuming that Mellon could not have

16 lawfully foreclosed when it noticed foreclosure sales in

2010 and 2012, that may not serve as a basis for relief on

Count 1.2

40. Turning to Mellon’s ability to foreclose at present, the

court concludes that Mellon is entitled to foreclose the

Galvins’ mortgage under § 479:25.

41. Section 479:25 permits “the mortgagee or his assignee” to

conduct the foreclosure of a power of sale mortgage. As

discussed at length in Galvin II,

, the Galvins

assert that the statutory term “mortgagee” refers to the

entity that holds both a mortgage and the promissory note

associated with it, while the defendants maintain that a

“mortgagee” need hold only the mortgage. In its prior

order, this court declined to choose between the parties’

competing interpretations, instead electing to give the

2 In any event, the Galvins did not establish that they suffered any damages as a result of those foreclosure attempts. They presented no competent evidence establishing the actual value of the property prior to Mellon’s foreclosure attempts, or its value after them. While Mr. Galvin suggested that Mellon’s foreclosure attempts had contributed to his inability to sell the property, there was also no competent evidence supporting that theory, as discussed in ¶ 24, supra. And, perhaps even more fundamentally, if the Galvins suffered any damages of any kind as a result of Mellon’s foreclosure attempts, those damages were not caused by the fact that Mellon (as opposed to some other entity) was attempting to foreclose, but by the fact of the foreclosure proceedings themselves, which were occasioned by Galvin’s default on his payment obligations, and not by any wrongful conduct by Mellon or any other defendant.

17 parties the opportunity to present evidence as to whether

Mellon holds both the note and mortgage. The court still

need not choose between those interpretations, because the

evidence at trial established that Mellon does, in fact,

hold both the Galvins’ note and their mortgage.

42. By virtue of the May 5, 2010 assignment from MERS, Mellon

holds the mortgage. Although the Galvins had previously

challenged the validity and effect of this assignment–-

challenges the court rejected in Galvin I,

, 22-

24, and Galvin II,

, 10-17--they did not renew

those challenges (or raise any new ones) in their written or

oral presentations to the court at trial.

43. Mellon also holds the note, and has the right to enforce it.

44. As the court has previously discussed:

[A] promissory note is a negotiable instrument subject to the provisions of Article 3 of the Uniform Commercial Code (“UCC”). Under the UCC, the holder of an instrument may enforce it.

-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. At the outset of the loan, then, Metrocities was the holder of the note.

Galvin II,

, 18 (alterations and case citations

omitted).

45. When Metrocities indorsed the note to “JPMorgan Chase Bank,

as Trustee” on the back of page six of the note, JPMorgan

18 became the holder of the note, with the concomitant power to

enforce it. Id.

46. When JPMorgan later indorsed the note to Mellon, using an

allonge attached to the note by means of a paperclip, Mellon

then became the holder of the note.

47. The Galvins have challenged both indorsements of the note,

raising two separate issues: first, that the stamped

indorsement on the back of page six of the note does not

identify the trust for which JPMorgan was acting as trustee

when the note was assigned to it; and second, that the later

indorsement to Mellon by allonge is affixed to the note only

by means of a paperclip, which the Galvins maintain is not a

“permanent affixation” of the allonge to the note, which

they say is required under the UCC. Neither challenge is

persuasive.

48. The fact that the indorsement on the back of page six does

not identify the trust for which JPMorgan was acting as

trustee has no significance. As this court previously

ruled, “when a note is indorsed to a party in its capacity

‘as Trustee,’ but the indorsement does not specify a

particular trust, that merely raises a factual question as

to the identity of the entity to which the note was

indorsed, rather than calling into question the authenticity

19 of the note or indorsement.” Id. at 21-22. Depending on

the answer, that factual question could have been

dispositive in this case: if Mellon succeeded JPMorgan as

trustee for that selfsame trust, then

-A:3-110(c)(2)(I)--which provides that an instrument

payable to “a person described as trustee or representative

of a trust or estate” is “payable to the trustee, the

representative, or a successor of either”--would entitle

Mellon, by virtue of its role as successor trustee, to

enforce the note without a further indorsement from

JPMorgan. See

Because, however, JPMorgan, acting in

its capacity as trustee, has specially indorsed the note to

Mellon, it is not necessary for the court to identify the

trust on behalf of which JPMorgan took the note and to

determine whether Mellon is JPMorgan’s successor as trustee.

In other words, even if Mellon is not JPMorgan’s successor,

it now holds the note, which has been indorsed to it.3

3 In an effort to demonstrate that Mellon succeeded JPMorgan as trustee, the defendants offered several exhibits. Among these were defendants’ exhibit J, an “Agreement of Resignation and Assumption” between JPMorgan and The Bank of New York Company, and exhibit K, an “Assignment and Assumption Agreement” between the same two entities. Both, the defendants claimed, demonstrated that Mellon--formerly known as The Bank of New York–-had succeeded JPMorgan as trustee of the SAMI II Trust. The court has not relied upon these documents. As related in the plaintiffs’ motion in limine (document no. 72), exhibit J was not produced to the plaintiffs until the eve of trial, and

20 49. With respect to the Galvins’ second challenge--to JPMorgan’s

indorsement of the note to Mellon--New Hampshire’s version

of the UCC does not require “permanent” affixation of an

allonge to a note. An earlier version of the UCC did

require an allonge to be “so firmly affixed” to a negotiable

instrument “as to become a part thereof.”

-A:3-202(2) (1993). Under that version of the

UCC, by which some states still abide, some courts took the

view that attaching an allonge to a note with a paper clip

was not sufficient affixation. See, e.g., HSBC Bank USA

N.A. v. Roumiantseva,

(N.Y. Sup. Ct. 2013)

(holding that allonge clipped to note by a paper clip “was

not firmly affixed to the note so as to become a part of the

note”); Lamson v. Commercial Credit Corp.,

,

(1975) (remarking that “a separate paper

pinned or paper-clipped to an instrument is not sufficient

for negotiation” under earlier version of UCC).

the defendants have provided no convincing justification for their lateness. The plaintiffs’ motion is granted as to that document, which is excluded from evidence pursuant to Federal Rule of Civil Procedure 37(c)(1). Exhibit K, for its part, makes no reference to the SAMI II Trust–-it simply refers to assets and liabilities described in other documents that were not provided to the court–-so the court is unable to ascertain its relevance, if any, to the issues in dispute in this case.

21 50. Over 20 years ago, however, New Hampshire adopted a revised

version of the UCC providing that an allonge need only be

“affixed to the instrument” to be considered “part of the

instrument.”

-A:3-204(a).

Although the court has found no case law discussing whether,

under this version of the UCC, an allonge may be “affixed”

to a note by means of a paper clip, many commentators have

taken the view that the omission of the adverb “firmly” from

the revised version allows just that. One respected

treatise remarks, for example:

[The revised] section merely requires that the paper be “affixed” to the instrument. Any manner of attaching the paper to the instrument would seem to be sufficient. There is no requirement that the paper containing the indorsement be firmly attached to the instrument. Stapling the paper to the instrument is clearly sufficient. Even paper clipping the allonge to the instrument should be sufficient.

6B Lary Lawrence, Anderson on the Uniform Commercial Code §

3-204:12R, at 240 (3d ed. 2003); see also 6 William D.

Hawkland et al., Hawkland’s Uniform Commercial Code Series §

3-204:3 (2012) (“Section 3-204(a) omitted old Article 3’s

requirement that the allonge be firmly affixed. Thus, a

paper clipped or stapled to an instrument is sufficient as

an allonge.”).

22 51. The court agrees with these authorities that attachment of

an allonge to an instrument by means of a paper clip is

sufficient to satisfy an § 382-A:3-204(a)’s requirement that

the allonge be “affixed to the instrument.” Cf. Federal

Home Loan Mortg. Corp. v. Madison, No. 09-cv-1508,

, at *4 (D. Ariz. July 12, 2011) (holding that an

“allonge is sufficiently affixed to the promissory note when

secured by an Acco fastener”). Accordingly, the allonge

indorsing the note from JPMorgan to Mellon complied with the

UCC.4

4 The Galvins’ pretrial motion in limine, see note 3, supra, also sought to exclude the allonge, which the defendants produced to the Galvins only 11 days before trial, from evidence. As grounds for excluding the allonge, the motion argues that the defendants’ failure to produce the allonge earlier violated Federal Rule of Civil Procedure 26(e)(1)’s requirement that parties supplement their discovery responses “in a timely manner.” As the Galvins acknowledge, however, the allonge was only created and affixed to the note shortly before it was produced to them. The defendants’ production of the allonge to the Galvins was therefore “timely”; the allonge could not have been produced earlier because it did not exist earlier. The Galvins also decry the execution of the allonge at such a late juncture as “trial by ambush.” Yet they have not cited, and the court is unaware of, any authority for the proposition that a party has an affirmative obligation to execute documents reflecting that it has transferred its property interest to another--as JPMorgan did in executing the allonge–-at a time that would be most convenient for its litigation opponents. The court understands the Galvins’ frustration at having litigated this entire case without the benefit of the allonge. In pursuing a theory of relief dependent upon Mellon not holding the note, though, the Galvins always ran the risk that even if (continued...)

23 52. Even assuming, moreover, that the allonge indorsing the note

to Mellon does not comply with the UCC, Mellon is still

entitled to enforce the note. Under

-A:3-203(a) & (b), transfer of a negotiable

instrument–-i.e., delivery of the instrument “by a person

other than its issuer for the purpose of giving to the

person receiving the delivery the right to enforce the

instrument”–-“vests in the transferee any right of the

transferor to enforce the instrument, including any right as

a holder in due course.” This is so “whether or not the

transfer is a negotiation.”

So when JPMorgan

relinquished the note to Mellon–-with, as JPMorgan

representative Frank Dean testified, the belief and

4 (...continued) Mellon did not, in fact, hold the note at the outset of this case, it would acquire the note at some time prior to judgment, effectively pulling the rug out from under their declaratory judgment claim. Were the court to ignore the allonge at this point, it would be willfully blinding itself to a fact of critical importance to that claim. Such willful blindness might result in a victory for the Galvins (at least on that claim), but it would be a hollow victory, because the judgment in their favor would be premised on a set of facts without any basis in reality. A judgment that ignores the allonge and declares that Mellon cannot foreclose because it does not hold the note is a judgment that is void ab initio. So, insofar as the motion in limine seeks to exclude the allonge, it is denied. Insofar as the motion seeks to exclude the “Docline” report produced by JPMorgan on the eve of trial, it is denied as moot, as the court did not rely on that document in making these findings and rulings.

24 expectation that Mellon would be entitled to enforce the

note–-that delivery gave Mellon the right to enforce the

note, even if the note was not negotiated by special

indorsement to Mellon. As the Permanent Editorial Board for

the Uniform Commercial Code has explained:

[A]ssume that the payee of a note sells it to an assignee, intending to transfer all of the payee’s rights to the note, but delivers the note to the assignee without indorsing it. The assignee will not qualify as a holder (because the note is still payable to the payee) but, because the transaction between the payee and the assignee qualifies as a transfer, the assignee now has all of the payee’s rights to enforce the note and thereby qualifies as the person entitled to enforce it. Thus, the failure to obtain the indorsement of the payee does not prevent a person in possession of the note from being the person entitled to enforce it[.]

Report of the Permanent Editorial Board for the Uniform

Commercial Code: Application of the Uniform Commercial Code

to Selected Issues Relating to Mortgage Notes, at 6 (Nov.

14, 2011), available at http://tinyurl.com/PEBReport (last

visited Aug. 29, 2014); see also, e.g., Unicredit Bank AG v.

Jue-Thompson, No. 12-cv-2468,

, *4 (D. Kan.

Nov. 26, 2013) (sale and delivery of note entitled

transferee to enforce instrument “without consideration of

any allonge”). That is essentially the situation here.

53. Mellon, which holds both the mortgage and note, qualifies as

a “mortgagee” under either side’s definition of the term.

25 It may therefore foreclose the Galvins’ mortgage pursuant to

. Judgment shall be entered in

favor of the defendants on Count 1.

II. Consumer Protection Act

54. In Count 2 of their complaint, the Galvins advance a claim

under the CPA,

-A. The Galvins

aver that the defendants committed actionable violations of

the CPA through two different courses of action: first, by

Mellon advertising their property for sale at foreclosure in

2010 and 2012 when it was not the “mortgagee,” as that term

is employed in

; and second, by

EMC conducting 26 inspections of their property over a

roughly three-year period from 2009 through 2012. None of

these actions violated the CPA.

55. The CPA prohibits the use of “any unfair method of

competition or any unfair or deceptive act or practice in

the conduct of any trade or commerce” within New Hampshire.5

-A:2. “While the statute provides

a list of specific acts that violate this command, the list

is not exhaustive and conduct ‘of the same type as that

5 The court assumes here, without deciding the issue, that Mellon’s 2010 and 2012 foreclosure attempts and EMC’s inspections of the Galvin’s property did occur in “the conduct of . . . trade or commerce.”

26 proscribed in the enumerated categories’ may also qualify as

unfair or deceptive.” Fin Brand Positioning, LLC v. Take 2

Dough Prods., Inc.,

(quoting New Hampshire

v. Sideris,

(2008)). In their complaint,

proposed rulings of law, and other pretrial filings, the

Galvins have not identified an enumerated provision of

§ 358-A:2 that they claim the defendants violated, so the

court presumes that their claim is made under § 358-A:2’s

“catch-all” provision. For non-enumerated conduct to

violate the CPA, “the objectionable conduct must attain a

level of rascality that would raise an eyebrow of someone

inured to the rough and tumble of the world of commerce.”

ACAS Acquisitions (Precitech) Inc. v. Hobert,

(2007).

56. “Whether a party has committed an unfair or deceptive act,

within the meaning of the [CPA], is a question of fact.”

CRMC Bethlehem, LLC v. N. Country Environ. Servs., Inc., No.

09-cv-344,

, *3 (D.N.H. July 29, 2010)

(quoting Chroniak v. Golden Inv. Corp.,

, 1146

(1st Cir. 1993)) (emphasis in original). As discussed at ¶¶

20 and 26-29, supra, the acts of which the Galvins complain

were not unfair or deceptive. For the sake of completeness,

the court will explain those findings in more detail here.

27 57. The Galvins’ claim that Mellon violated the CPA by

initiating foreclosure proceedings in both 2010 and 2012

comes up short. That claim rests primarily on the theory

that when Mellon initiated those proceedings, it was not the

“mortgagee,” as that term is employed in

, because it was not in possession of the note

associated with their mortgage at that time. As such, the

Galvins contend, those attempts to foreclose were unlawful.

There are several flaws in this theory. The most obvious is

the lack of any factual support for it: the Galvins did not

prove that Mellon was not in possession of the note when it

attempted to foreclose their mortgage in 2010 and 2012.

58. Setting that infirmity aside entirely, the Galvins’ claim

nonetheless fails. Even if one accepts the premises that

(1) a party is not a “mortgagee,” and thus cannot foreclose

under § 479:25, unless it holds the note; and (2) Mellon did

not possess the note during its foreclosure attempts, Mellon

did not act unfairly or deceptively in starting to foreclose

the Galvins’ mortgage in 2010 and 2012.

59. As detailed at great length in Galvin II,

, 24-

32, New Hampshire law was, and is still, unsettled as to

whether the term “mortgagee” in § 479:25 requires possession

of the note, and one entirely plausible construction of that

28 term would require possession of the mortgage only. At the

time it instituted foreclosure proceedings in both 2010 and

2012, Mellon was the holder of the Galvins’ mortgage, by

virtue of the May 5, 2010 assignment from MERS.6

60. Given that the statute plausibly can be construed to permit

a party holding the mortgage only to commence foreclosure–-

and particularly in light of the Galvins’ express agreement,

in the mortgage itself, that MERS’ successors and assigns

could foreclose the mortgage by power of sale–-there was

nothing remotely unfair or deceptive about Mellon attempting

to foreclose the mortgage after Galvin had defaulted, even

if it did not also hold the note. To hold otherwise would

elevate every business decision taken on the basis of a

6 In their requested rulings of law, the Galvins assert that Mellon did not hold the mortgage “at the time of the May 18, 2010 foreclosure notice because NH law requires all assignments of mortgage to be recorded to be effective.” Pet’rs’ Am. Requests for Findings of Fact & Rulings of Law (document no. 69) at 7 (citing

-a). It is unclear whether the Galvins intend to pursue this theory, which is not presented anywhere else in their filings. Assuming that they do, they are incorrect. Section 477:3-a does not render assignments and other transfers of interests in real property ineffective until they are recorded; it provides only that they “shall not be effective as against bona fide purchasers for value” until recorded (emphasis added). This provision, which codifies the so-called “race-notice” rule of priority, see, e.g., Bilden Props., LLC v. Birin,

(2013), does not apply here, as Mellon was not attempting to assert its rights in the mortgage against a subsequent purchaser who acquired an interest in the property without notice of Mellon’s prior interest.

29 plausible, but ultimately mistaken, reading of a statute’s

language to a violation of the CPA.

61. The Galvins’ claim that EMC’s property inspections violated

the CPA also fails. That claim is premised on the theory

that the inspections EMC conducted from September 2009-July

2012, following Galvin’s default, were “unauthorized,

unreasonable, and excessive.” Pet’rs’ Trial Memo. (document

no. 57) at 7.

62. The inspections were, however, authorized, as were the

resultant charges to the Galvins’ account: paragraph 7 of

the mortgage itself permits “reasonable entries upon and

inspections of the Property,” and paragraph 14 allows for

the borrower to be charged “for services performed in

connection with Borrower’s default, for the purpose of

protecting Lender’s interest in the Property and rights

under this Security Instrument, including, but not limited

to, attorneys’ fees, property inspection and valuation

fees.” And, as discussed at ¶¶ 26-29, supra, those

inspections were also generally reasonable in frequency,

scope, and cost to the Galvins.

63. The five inspections that occurred in the one-month period

between February 7 and March 6, 2012, were likely excessive.

That, however, does not entitle the Galvins to relief under

30 the CPA. By conducting excessive inspections of the

property in that month, EMC may have breached paragraph 7 of

the mortgage, which, as noted, permits only “reasonable”

inspections of the property, or it may have breached the

implied covenant of good faith and fair dealing inherent in

the mortgage. Cf. Moore v. Mortg. Elec. Reg. Sys., Inc.,

(D.N.H. 2012) (covenant of good

faith and fair dealing prohibits unreasonable exercise of

discretion conferred on a party by the terms of an

agreement). The Galvins have not made claims for breach of

contract or for breach of the implied covenant, however;

they have made a claim under the CPA. And neither “[a]n

ordinary breach of contract claim,” Sideris,

, nor a claim for breach of the implied covenant, see PH

Grp. Ltd. v. Birch,

(1st Cir. 1993)

(applying Massachusetts analog to CPA), without more,

violates the CPA.

64. While there might well be circumstances in which a breach of

contract or of the implied covenant rises to the level of a

CPA violation, EMC’s conduct here does not fit the bill: it

is simply not of a kind with the categories of unfair acts

enumerated in § 358-A:2, and, in the court’s view, would not

“raise an eyebrow of someone inured to the rough and tumble

31 of the world of commerce.” ACAS Acquisitions,

. It is not “within the penumbra of some common-law

statutory or other established concept of unfairness”; it

cannot be characterized as “immoral, unethical, oppressive,

or unscrupulous”; and it did not cause “substantial injury.”

Milford Lumber Co., Inc. v. RCB Realty, Inc.,

(2001) (quoting FTC v. Sperry & Hutchinson Co.,

, 244-45 n.5 (1972)).

65. The Galvins have failed to establish that any of the

defendants committed an unfair or deceptive act or practice

prohibited by

-A. Judgment shall

be entered in favor of the defendants on Count 3.

Conclusion

Based on the foregoing, the court finds in favor of the

defendants on all counts. The plaintiffs’ motion in limine

(document no. 72) is GRANTED IN PART and DENIED IN PART as

outlined herein. The clerk shall enter judgment accordingly and

close the case.

Pursuant to

, Federal Rule of Civil

Procedure 54(d)(1), and Local Rule 54.1(a), the defendants, as

the prevailing parties, are entitled to costs other than

attorney’s fees. Should the defendants desire an award of such

32 costs, they shall file a bill of costs as set forth in the Local

Rule.

SO ORDERED.

Joseph N. Laplante United States District Judge

Dated: October 3, 2014

cc: Jamie Ranney, Esq. Timothy Laurent Chevalier, Esq. Peter G. Callaghan, Esq.

33