UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Douglas T. Sharp

V. Civil No. 14-CV-369-LM Opinion No.

Deutsche Bank National Trust Company/ As Trustee For Morgan Stanley ABS Capital Inc. Trust 2006-HE3

ORDER

In a case that has been removed from the Hillsborough

County Superior Court, Douglas Sharp seeks to enjoin Deutsche

Bank National Trust Company {"Deutsche Bank") from foreclosing

on his mortgage. He claims that Deutsche Bank cannot foreclose

because it: (1) lacks the authority to do so (Count I); and (2)

breached the implied covenant of good faith and fair dealing

(Count II). In addition, he seeks to amend his complaint to add

Wells Fargo Bank, N.A. ("Wells Fargo") as a defendant, and to

assert a claim that Wells Fargo and Deutsche Bank violated the

Real Estate Settlement Procedures Act (RESPA),

. Deutsche Bank objects to Sharp's motion to amend as

futile and moves to dismiss his complaint for failure to state a

claim upon which relief can be granted. The court heard oral

argument on Deutsche Bank's motion to dismiss on November 18, 2014. For the reasons that follow, Sharp's motion to amend is

denied, and Deutsche Bank's motion to dismiss is granted.

I. Background

The facts in this section are drawn from Sharp's Amended

Verified Complaint, document no. 1-1, his proposed Second

Amended Complaint, document no. 13-2, and certain documents that

are attached to those complaints or that are appropriately-

considered in conjunction therewith. See Foley v. Wells Fargo

Bank, N.A.,

, 71-72 {1st Cir. 2014); Watterson v.

Page,

(1st Cir. 1993) (describing documents

courts may consider when ruling on a motion to dismiss).

On December 21, 2005, plaintiff's father, Martin Sharp,^

executed a promissory note in favor of New Century Mortgage

Corporation ("New Century"), in exchange for a loan of $60,000.

On the same day that Martin executed the promissory note, Martin

and Douglas granted a mortgage to New Century to secure the

loan. The mortgage, in turn, encumbered a property in

Goffstown, New Hampshire, that Martin and Douglas owned as joint

tenants with the right of survivorship.

^ In this order, the court refers to plaintiff as "Sharp" or "Douglas" and refers to his father as "Martin." Notwithstanding the fact that the promissory note

identifies Martin as the sole borrower, see State Ct. R. {doc.

no. 3-1) 44 of 106, the mortgage defines the term ^^Borrower" to

mean ''Martin F[.] Sharp, a single person and Douglas T. Sharp [,]

a married person,"

at 2 of 106. In a section titled "Joint

and Several Liability; Co-signers; Successors and Assigns

Bound," the mortgage provides, in pertinent part:

Borrower covenants and agrees that Borrower's obligations and liability shall be joint and several. However, any Borrower who co-signs this Security Instrument but does not execute the Note (a "co signer"): (a) is co-signing this Security Instrument only to mortgage, grant and convey the co-signer's interest in the Property under the terms of this Security Instrument; (b) is not personally obligated to pay the sums secured by this Security Instrument; and (c) agrees that Lender and any other Borrower can agree to extend, modify, forbear or make any accommodations with regard to the terms of this Security Instrument or the Note without the co- signer's consent.

at 11 of 106. Additionally, in a section titled

"Acceleration; Remedies," the mortgage provides that if the

borrower defaults, and the default is not cured in a timely

manner, "Lender at its option may require immediate payment in

full of all sums secured by this Security Instrument without

further demand and may invoke the STATUTORY POWER OF SALE and

any other remedies permitted by Applicable Law."

at 14 of

106. New Century has executed two documents purporting to assign

the Sharps' mortgage. On December 28, 2005, New Century

executed a document titled "Assignment of Mortgage," which

appeared to assign the Sharps' mortgage to Deutsche Bank ("the

2005 assignment").

at 24 of 106. That document was

recorded in the Hillsborough County Registry of Deeds almost two

years later, on October 3, 2007. On February 27, 2012, Wells

Fargo, acting as attorney-in-fact for New Century, executed a

second document purporting to assign the Sharps' mortgage to

Deutsche Bank ("the 2012 assignment"). See

at 29 of 106.

That document was recorded in the Hillsborough County Registry

of Deeds on March 13, 2012.

In April of 2007, after the 2005 assignment was executed,

but before i t was recorded. New Century filed for bankruptcy

protection. In 2008, the bankruptcy court ordered New Century

to convey all of its assets into a liquidating trust.

Martin Sharp died in 2009. Sometime after Martin's death,

the complaint does not say when, Douglas stopped making mortgage

payments. In June of 2014, Deutsche Bank sent him notice of a

foreclosure sale. He responded by sending a letter, titled

"Request for Postponement," to Deutsche Bank's mortgage

servicer, America's Servicing Company ("ASC"). The letter

states: I, Douglas T. Sharp, request to postpone the trustees sale of the property located at 28 Joffre St. Goffstown, N.H. 03102, to take place on July 24, 2014, in order to organize legal documentation as well as loan modification or sale of the property.

Second Am. Compl., Attach. 8 (doc. no. 13-10), at 6 of 12. In a

letter dated eight days later and addressed to Martin, ASC

stated:

We're writing to let you know that we've received an inquiry from Douglas Sharp on your behalf. Since we don't have authorization to respond directly to Douglas Sharp we will be responding to you.

We are currently reviewing the inquiry, and expect to complete our research and provide you with the results on or before August 04, 2012.

at 7 of 12. Four days after that, ASC wrote directly to

Douglas, explaining that he ''was able to receive certain

information for the loan but not the specific information he

requested." As the "Request for Postponement" does not include

any request for information, it is not clear what information

Sharp requested from ASC.

Shortly thereafter. Sharp filed an action in the

Hillsborough County Superior Court seeking to enjoin the

foreclosure sale. Subsequently, Sharp filed an amended

complaint claiming that Deutsche Bank had no authority to

foreclose on his mortgage and had violated the implied covenant

of good faith and fair dealing. On August 7, 2014, New

Hampshire Superior Court Judge Gillian Abramson issued a temporary injunction, enjoining Deutsche Bank from foreclosing

on Sharp's mortgage. Deutsche Bank removed the suit to this

court thereafter, and moved to dismiss Sharp's amended complaint

for failure to state a claim upon which relief can be granted.

In September of 2014, Mari DeBlois of The Way Home, a

housing advocacy group, reported to Douglas's counsel that she

had attempted to obtain information about Martin's loan from ASC

on Douglas's behalf, but had been repeatedly rebuffed on grounds

that she was not properly authorized to receive such

information. In February of 2015, after Deutsche Bank moved to

dismiss Sharp's amended complaint, but before the court ruled on

Deutsche Bank's motion, Sharp sent two letters to Wells Fargo,

one styled as a "request for information" pursuant to

, the other styled as a "notice of error" pursuant to

.

In his request. Sharp identified six different kinds of

information he was seeking, all related generally to the topic

of assuming Martin's status as the borrower of the loan that

Martin had received from New Century. Presumably as a result of

a typographical error in Sharp's request for information. Wells

Fargo construed i t as a request for the identity of the owner of

the mortgage loan, and provided only that information. In his notice of error. Sharp asserted that ASC; (1)

violated

(b)(7) by telling him that he was

not entitled to receive infonnation about his father's loan and

telling DeBlois that she was not properly authorized to receive

information about Martin's loan; and (2) violated

(b)(11) by telling DeBlois that she was not properly

authorized to receive information about Martin's loan. Wells

Fargo responded to Sharp's notice of error by sending him a

four-page letter explaining its decision not to provide him with

information about his father's loan.

Based upon the foregoing. Sharp now moves to amend his

complaint to: (1) add Wells Fargo as a defendant; and (2) add a

claim for damages under RESPA against Wells Fargo and Deutsche

Bank arising from the responses he received to his request for

information and his notice of error.

II. Discussion

The court begins with Sharp's motion to amend and then

turns to Deutsche Bank's motion to dismiss.

A. Motion to Amend

1. The Legal Standard

Because the time for Sharp to file a motion to amend as of

right under Rule 15(a)(1) of the Federal Rules of Civil Procedure has run, the court's disposition of his motion falls

under Rule 15(a)(2). Rule 15(a)(2) provides that a party who is

no longer able to amend the complaint as of right may amend only

with the court's leave, and that "[t]he court should freely give

leave when justice so requires." Fed. R. Civ. P. 15(a)(2).

Because the proposed amendment seeks to add a new party, "the

motion is technically governed by Rule 21, which provides that

^the court may at any time, on just terms, add or drop a party.

. . ." Garcia v. Pancho Villa's of Huntington Vill., Inc.,

(E.D.N.Y. 2010) (citations omitted). "However,

the same standard of liberality applies under either [Rule 15(a)

or 2 1 ] I d . (internal quotation marks omitted).

The court may deny a motion to amend "for any adequate

reason apparent from the record," including futility of the

proposed amendment. Todisco v. Verizon Commc'ns, Inc.,

, 98 (1st Cir. 2007) (quoting Resolution Trust Corp. v. Gold,

(1st Cir. 1994)). "In assessing futility, the

district court must apply the standard which applies to motions

to dismiss under Fed. R. Civ. P. 12(b)(6)." Adorno v. Crowley

Towing & Transp. Co.,

(1st Cir. 2006).

Under Rule 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,

(citations and internal quotation marks omitted). A

claim is 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,

(2009). Analyzing

plausibility is "a context-specific task" in which the court

relies on its "judicial experience and common sense."

.

2. Analysis

In the RESPA claim that Sharp seeks to add to his

complaint, he asserts that Wells Fargo and Deutsche Bank: (1)

failed to provide him with the documentation he asked for in his

request for information, in violation of

(d)(1); and (2) failed to correct the mistakes he

identified in his notice of error or provide an adequate

explanation of their belief that no mistake had been made, in

violation of

,35(e)(1)(i). Deutsche Bank argues

that Sharp's motion to amend should be denied on grounds of

futility because Sharp lacks standing to bring the claim he

seeks to assert. Sharp lacks standing, according to Deutsche

Bank, because he was not a borrower on the loan that was secured by the mortgage that he and his father granted to New Century.

The court agrees.

The claim that plaintiff seeks to add is based upon several

different provisions in RESPA's regulations. Those provisions

describe the duties owed by mortgage loan servicers to

"borrowers."

(e) (1) (i) & 1024.36(d)(1).

RESPA itself also speaks of the duties owed by loan servicers to

borrowers. See^ e.g.,

(e)(1)(A) & (2). And,

when those duties are breached, RESPA establishes that a

violator is liable to a borrower. See

(f). The

statute and the regulations on which Sharp bases his claim speak

of duties owed by mortgage loan servicers to borrowers but say

nothing about duties owed to mortgagors. Neither RESPA nor its

regulations define the term "borrower." While a statutoiry

definition of the term "borrower" would certainly make it easier

for the court to determine whether Sharp has standing to bring a

RESPA claim, there is ample judicial authority on that point.

In a recent case out of the Eastern District of California,

the court construed the RESPA provisions at issue here. Singh

V. Wells Fargo Bank N.A., No. CIV 2:ll-cv-0401-GEB-JFM (PS),

(E.D. Cal. May 27, 2011), report and

recommendation adopted by

(E.D. Cal. July 11,

2011). In Singh, the plaintiff and his wife owned a parcel of

10 real property as joint tenants. Id. at *1. The plaintiff's

wife was the sole borrower on a loan that was secured by a

mortgage on the couple's property, and the mortgage listed both

the plaintiff and his wife as borrowers. See id. The plaintiff

sued the mortgagee in multiple counts, including one under

RESPA. See id. at *2. Magistrate Judge Moulds recommended

dismissal of the RESPA claim for failure to satisfy Rule 8(a)(1)

of the Federal Rules of Civil Procedure. See id. a t *3. He

also addressed the plaintiff's RESPA claim substantively. See

id. After pointing out that the complaint suggested that i t

might have been brought under either

or

, he had this to say:

Regardless of the particular section [of RESPA] identified by plaintiff, the RESPA claim must fail because he is not a borrower on the loan. See, e.g., Wilson V. JPMorgan Chase Bank, N.A., [No. CIV. 2:09- 863 WBS GGH,]

(E.D. Cal. [June 25,] 2010). Insofar as plaintiff contends there were RESPA violations at the time of the origination of the loan, plaintiff lacks standing as he did not sign the Promissory Note. See

To the extent plaintiff argues that he submitted a QWR [qualified written request] to Wells Fargo, Wells Fargo only had the duty to respond to QWRs sent "from the borrower"—in this case, [the plaintiff's wife]. Wells Fargo was under no obligation to respond to any requests sent by plaintiff. See

(e)(1)(A).

Id. at *4. Based upon the foregoing, the court determined that

the plaintiff's RESPA claim failed as a matter of law. See id.

11 Wilson involved a RESPA claim against a mortgage loan

servicer for failing to respond to the plaintiff's request for

information pursuant to 12 C.F.R, § 1024.36. See

, at *9. In Wilson, the plaintiff and her husband

mortgaged a property they owned jointly to secure a loan that

was made to the plaintiff's husband alone. See id. at *1. The

plaintiff's RESPA claim was based upon a qualified written

request {"QWR") 2 she submitted to the lender and the mortgage

loan servicer. See id. At some point before the plaintiff

filed suit her husband died. Judge Shubb dismissed the RESPA

claim this way:

P l a i n t i f f ' s RESPA claims must f a i l because she explicitly alleges that she was "not a borrower of the loan." Under RESPA, a servicer only has the duty to respond to QWRs sent "from the borrower," and accordingly defendant was under no obligation to respond to plaintiff's QWR. See

(e)(1)(A). Accordingly, plaintiff cannot recover for defendant's failure to respond to her improper QWR.

(citation to the record omitted).

Here, while Sharp points out that he was named as a

borrower in the mortgage, he does not allege that he was a

borrower on the loan and, indeed, the promissory note does not

bear his signature. Thus, with regard to his relationship to

2 "Qualified written request" is a statutory term for an inquiry from a borrower to a mortgage loan servicer. See

(e)(1)(B).

12 the loan that was secured by the mortgage on his property, Sharp

stands in the same position as the plaintiffs in Singh and

Wilson. Sharp has identified no judicial authority running

counter to Singh and Wilson, and the court has been unable to

locate any. Accordingly, the court concludes that Sharp lacks

standing to assert a claim under

(f) based upon

Wells Fargo's responses to his request for information and his

notice of error.^ Because he lacks standing, his motion to amend

must be denied on grounds of futility.

The court notes, however, that while plaintiff's RESPA

claim arises under

(f) and i t s related

regulations, i.e.,

& 1024.36, his reply

brief directs the court's attention to another regulation that.

3 At first blush. Sharp's argument for standing based upon his being listed as a borrower in the mortgage has some appeal. But the appeal is eroded by the mortgage itself, which distinguishes between mortgagors such as Martin, who assume an obligation to repay a loan by executing a promissory note, and mortgagors such as Douglas, who do not. Given that Martin executed the note on the same day that he and Douglas executed the mortgage, one could reasonably infer that Martin and Douglas made a conscious decision to protect Douglas from personal liability on the note. By extending various rights and protections to "borrowers" rather than "mortgagors" in RESPA, Congress appears to have limited the coverage of the provisions of RESPA on which Sharp bases his claim to the subset of mortgagors who, like Martin, both pledged security and faced personal liability for the repayment of a loan. Under that view of RESPA, forgoing the protections of that statute is the price a mortgagor pays for avoiding personal liability on a note.

13 in his view, establishes his standing. That regulation

provides:

(a) Reasonable policies and procedures. A servicer shall maintain policies and procedures that are reasonably designed to achieve the objectives set forth in paragraph (b) of this section.

(b) Objectives—(1) Accessing and providing timely and accurate information. The policies and procedures required by paragraph (a) of this section shall be reasonably designed to ensure that the servicer can:

(vi) Upon notification of the death of a borrower, promptly identify and facilitate commvinication with the successor in interest of the deceased borrower with respect to the property secured by the deceased borrower's mortgage loan.

(emphasis in original). For the purposes of

§ 1024.38, Sharp qualifies as a successor in interest to Martin.

See Consumer Fin. Prot. Bureau, Bulletin 2013-12, Implementation

Guidance for Certain Mortgage Servicing Rules,

,

at n.7 (2013). Notwithstanding his failure to cite §

1024.38(b)(iv) in his Second Amended Complaint, Sharp argues

that he "is protected by, and entitled to enforce, this

regulation." Pl.'s Reply Br. (doc. no. 16) 4. The court does

not agree.

Nothing in § 1024.38 suggests that RESPA creates a private

right of action to enforce that rule. And, indeed, i t does not.

14 As the Consumer Financial Protection Bureau explained in its

official interpretation of § 1024.38;

Ultimately, the Bureau agrees with the commenters that allowing a private right of action for the provisions that set forth general servicing policies, procedures, and requirements would create significant litigation risk. . . .

The Bureau believes that supervision and enforcement by the Bureau and other Federal regulators for compliance with and violations of § 1024.38 respectively, would provide robust consumer protection without subjecting servicers to the same litigation risk and concomitant compliance costs as civil liability for asserted violations of § 1024,38. . . .

Therefore, the Bureau is restructuring the final rule so that it neither provides private liability for violations of § 1024.38 nor contains a safe harbor limiting liability to situations where there is a pattern or practice of violations.

Mortgage Servicing Rules Under the Real Estate Settlement

Procedures Act {Regulation X),

, 10778-79

(Feb. 14, 2013). Based upon the foregoing, the court is

compelled to conclude that while Sharp is protected by

§ 1024.38(b)(iv), he has no private right of action against

defendants to enforce that rule. Moreover, Sharp's status as a

successor in interest for the purposes of § 1024.38 does not

make him a borrower for the purposes of §§ 1024.35 and 1024.36.

For all of these reasons. Sharp's motion to amend must be

denied.

15 B. Motion to Dismiss

Sharp claims that Deutsche Bank lacks the authority to

foreclose on his mortgage {Count I), and that i t violated the

covenant of good faith and fair dealing (Count II). Deutsche

Bank moves to dismiss both counts for failure to state a claim

upon which relief may be granted. The court addresses each

count in turn.

1. Count I - Authority to Foreclose

Sharp first claims that Deutsche Bank lacks the authority

to foreclose because i t cannot demonstrate that i t i s an

assignee of his mortgage, as required by N.H. Rev. Stat. Ann.

(^^RSA") § 479:25. That is so, Sharp contends, because neither

the 2005 assignment nor the 2012 assignment was legally

effective. He argues that the 2005 assignment is invalid

because it was not recorded until after New Century had filed

for bankruptcy. He argues that the 2012 assignment is invalid

because i t was neither executed nor recorded until a f t e r New

Century filed for bankruptcy.'^ Deutsche Bank contends that Sharp

^ At the November 18th hearing. Sharp suggested that the assignment document was invalid. However, he did not dispute the validity of the document in his complaint, and has not sought leave to amend his complaint to include such a claim. Thus, any such allegation is deemed waived. See Iverson v. City of Bos.,

(1st Cir. 2006).

16 has failed to state a claim because there is no requirement that

an assignment be recorded.

Sharp is correct that the power of sale incorporated into a

mortgage may be exercised only by "the mortgagee or his

assignee." RSA 479:25. In his complaint, Sharp alleges that

New Century assigned his mortgage to Deutsche Bank in 2005, and

he attached a copy of the 2005 assignment to his complaint.

Thus, according to the complaint, Deutsche Bank was the

assignee. Pursuant to RSA 479:25, therefore, Deutsche Bank had

the authority to exercise the power of sale in the mortgage.

Sharp argues that Deutsche Bank lacked the authority to

foreclose due to its untimely recording of the assignment.

However, a recent decision from New Hampshire Superior Court

Judge Marguerite Wageling holds that "[n]othing in RSA 479:25

requires the mortgagee [to] record the mortgage or assignment of

the mortgage in order to trigger the statutory power of sale."

Fuller V. Fed. Nat'l Mortg. Ass'n, No. 218-2011-cv-00668, 2012

N.H, Super. LEXIS 55, at *9 (N.H. Super. Ct. Oct. 2, 2012).

Sharp has identified no authority to the contrary. Under New

Hampshire law, an assignee of a mortgage therefore has the right

to exercise the statutory power of sale without the assignment

having been recorded. Thus, the timing of Deutsche Bank's

recording of the assignment has no bearing on its status as an

17 assignee or its authority to foreclose. Accordingly, the

factual allegations underpinning Count I do not "set forth a

plausible claim upon which relief may be granted." Foley,

. For that reason, Count I is dismissed.

2. Count II - Good Faith and Fair Dealing

Sharp claims that Deutsche Bank breached the covenant of

good faith and fair dealing implied in his mortgage agreement by

"refus[ing] to deal with, or even acknowledge, Mr. Douglas

Sharp, and refus[ing] to voluntarily postpone the foreclosure

sale." Notice of Removal, Attach. 1 (doc. no. 1-1) K 34.

Deutsche Bank responds that exercising its bargained-for right

to foreclose following default does not amount to a breach of

the covenant of good faith and fair dealing. The court agrees.

In New Hampshire, every agreement includes "an implied

covenant that the parties will act in good faith and fairly with

one another." Birch Broad., Inc. v. Capitol Broad. Corp.,

(2010) (citing Livingston v. 18 Mile Point Drive,

Ltd.,

(2009)). The New Hampshire Supreme

Court has observed t h a t :

there is not merely one rule of implied good-faith duty, but a series of doctrines, each of which serves a different function. The various implied good-faith obligations fall into three general categories: (1) contract formation; (2) termination of at-will employment agreements; and (3) limitation of discretion in contractual performance.

18

{citations omitted). Like many similarly situated

plaintiffs, Sharp understands his claim to fall within the third

category of cases described in Birch, which involves limits on

the discretion a party may exercise when performing its

contractual obligations. See Rouleau v. U.S. Bank, N.A., No.

14-CV-568-JL,

, at *3 (D.N.H. Apr. 17, 2015);

Moore v. Mortq. Elec. Registration Sys., Inc.,

(D.N.H. 2012) . The function of that category ''is to

prohibit behavior inconsistent with the parties' agreed-upon

common purpose and justified expectations as well as with common

standards of decency, fairness and reasonableness." Birch

Broad., Inc. v. Capitol Broad. Corp.,

(2010)

(citing Livingston v. 18 Mile Point Drive, Ltd.,

(2009)).

Here, the mortgage expressly provides that, in the event

Sharp defaults on the mortgage, Deutsche Bank may exercise the

statutory power of sale. State Ct. R. (doc. no. 3-1) 14 of 106.

Thus, Deutsche Bank's exercise of that right is consistent with

the parties' "agreed-upon common purpose and justified

expectations . . .

As such, i t cannot serve as the

basis for a claim for breach of the implied covenant of good

faith and fair dealing. S^ Rouleau,

, at *5 ("a

party does not breach the duty of good faith and fair dealing

19 simply by invoking a specific, limited right that is expressly

granted by an enforceable contract"); see also Moore,

("the mere fact that some or all of the

defendants exercised their contractual right to foreclose on the

Moores after they defaulted on their mortgage payments does not

amount to a breach of the implied covenant") (citations

omitted). Accordingly, Count II does not state a claim on which

relief can be granted.

III. Conclusion

For the reasons detailed above. Sharp's motion to amend,

document no. 13, is denied, and Deutsche Bank's motion to

dismiss, document no. 4, is granted. The injunction issued by

Judge Gillian Abramson on August 7, 2014 is hereby dissolved.

The clerk of the court shall close the case.

SO ORDERED.

Landya tMcGaMerty United StaH^s District Judge

August 11, 2015

cc: Stephanie Anne Bray, Esq. Michael R. Stanley, Esq.

20