UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Bridget Gasparik

v. Case No. 16-cv-147-AJ Opinion No.

Federal National Mortgage Association

O R D E R

In an action removed from state court, the plaintiff,

Bridget Gasparik, alleges that Federal National Mortgage

Association (“Fannie Mae”) violated state and federal law when

it foreclosed upon a home in Danbury, New Hampshire. Doc. no.

13. Fannie Mae moves to dismiss this action under Federal Rule

of Civil Procedure 12(b)(6) for failure to state a claim. Doc.

no. 14. The plaintiff objects. Doc. no. 15. For the following

reasons, Fannie Mae’s motion is granted.

Standard of Review

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 . . . set forth a plausible claim upon which

relief may be granted.” Foley v. Wells Fargo Bank, N.A.,

(1st Cir. 2014) (citation and 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.”

.

The scope of the court’s analysis on a Rule 12(b)(6) motion

is generally limited to “facts and documents that are part of or

incorporated into the complaint . . .” GE Mobile Water, Inc. v.

Red Desert Reclamation, LLC,

(D.N.H.

2014) (quoting Rivera v. Centro Medico de Turabo, Inc.,

(1st Cir. 2009)); see also Fed. R. Civ. P. 12(d).

As an exception to this rule, the First Circuit permits trial

courts to consider “documents the authenticity of which are not

disputed by the parties; official public records; documents

central to plaintiff's claim; and documents sufficiently

referred to in the complaint” without converting a motion to

dismiss into one for summary judgment.

(brackets omitted)

(quoting Rivera, 565 F.3d at 15).

Background

Accepting the factual allegations set forth in the

plaintiff’s complaint as true, the relevant facts are as

follows.

2 On July 31, 2006, the plaintiff’s father, Philip Catalano,

executed a promissory note in the amount of $208,050.00 to First

Call Mortgage Company, Inc. (“First Call”). Doc. no. 2-2.

Catalano alone signed the note. Id. at 3. The note secured a

mortgage on the property central to this case, located at 440

Route 4, Danbury, New Hampshire. Doc. no. 2-3. Catalano, the

plaintiff, and Rudy Gasparik are named as mortgagors, and all

three signed the mortgage. Id. at 2, 14. First Call is named

as the lender, and the Mortgage Electronic Registration Systems,

Inc. (“MERS”) is named as mortgagee as a nominee for First

Call’s successors and assigns. Id. at 2. The mortgage was

recorded with the Merrimack County Registry of Deeds on August

2, 2006. Id. at 2. On March 20, 2009, MERS assigned the

mortgage to Fannie Mae. Doc. no. 2-4, at 2. This assignment

was recorded with the Merrimack County Registry of Deeds on

March 26, 2009.1

1 The note, mortgage, and assignment of mortgage are attached as exhibits to Fannie Mae’s original motion to dismiss. See doc. no. 2. The plaintiff successfully moved to amend, which resulted in the original motion to dismiss being denied without prejudice pursuant to Local Rule 15.1(c). Fannie Mae has not reattached these documents to its present motion, but does make reference to them therein. See, e.g., doc. no. 14-1, at 2, 3. As these documents remain in the record, the plaintiff does not dispute their authenticity, and, at least as to the mortgage and assignment of mortgage, they are publicly recorded with a registry of deeds, the court will consider them in its present analysis. See GE Mobile Water, Inc.,

. 3 Catalano, who is elderly, resides on the property. The

plaintiff is responsible for his care. The plaintiff was also

responsible for paying the mortgage on the property, but fell

behind on these payments. Once the mortgage was in default,

Fannie Mae commenced foreclosure proceedings and scheduled a

foreclosure sale. The plaintiff reached out to Fannie Mae

seeking a resolution short of foreclosure. Fannie Mae indicated

that the plaintiff needed to pay the full amount in arrears in

order to cancel the foreclosure sale. The plaintiff indicated

that she would not be able to make any such payment until after

the scheduled date for the foreclosure sale, but offered to pay

the full arrearage at that time. Fannie Mae refused to postpone

the foreclosure sale. The plaintiff offered to make a payment

via credit card, which Fannie Mae also refused.

On March 14, 2016, the plaintiff filed a petition in state

court seeking, inter alia, an ex parte order restraining Fannie

Mae from foreclosing on the property. Doc. no. 6, at 27. The

state court denied the plaintiff’s petition on an ex parte basis

and scheduled a hearing for March 22, 2016. Id. at 19.

Following the hearing, the state court preliminarily enjoined

Fannie Mae from conducting the foreclosure sale. Id. at 16. On

April 14, 2016, Fannie Mae removed this matter to this court,

see doc. no. 1, and moved to dismiss for failure to state a

claim, doc. no. 2. The plaintiff moved to amend, doc. no. 10,

4 which the court granted over Fannie Mae’s objection. Fannie Mae

thereafter filed the present motion, seeking the dismissal of

the plaintiff’s amended complaint.

Discussion

The plaintiff’s amended complaint is comprised of seven

counts. Counts I, II, and V, hereinafter the “state tort

claims,” respectively allege negligence, negligent

misrepresentation, and negligent infliction of emotional

distress. Count III alleges a breach of the covenant of good

faith and fair dealing. Count IV alleges a violation of the New

Hampshire Consumer Protection Act, N.H. Rev. Stat. Ann (“RSA”) §

358-A. Count VI alleges a violation of the Real Estate

Settlement Procedure Act (“RESPA”),

, et seq.

Finally, Count VII addresses Fannie Mae’s legal standing to

foreclose on the property.

Fannie Mae moves to dismiss the amended complaint in its

entirety. First, Fannie Mae argues that the state tort claims

are barred by the economic loss doctrine. Next, Fannie Mae

contends that it has not violated the covenant of good faith and

fair dealing both because it had no duty to delay the

foreclosure in order to give the plaintiff time to seek loss

mitigation and because no such violation can be premised solely

upon the fact that it was exercising its bargained-for right to

5 foreclose. Third, Fannie Mae contends that it is exempt from

the CPA and, alternatively, that the plaintiff has not alleged

any conduct that could sustain a CPA claim. Similarly, Fannie

Mae argues that the plaintiff is not a borrower as defined by

RESPA and that she has failed to allege any pecuniary harm

arising from a purported RESPA violation. Lastly, Fannie Mae

contends that the plaintiff is barred by RSA § 479:25 from

raising her standing claim. The plaintiff objects to these

arguments on various grounds.

I. State Tort Claims

The court turns first to the plaintiff’s state tort claims.

As noted, Fannie Mae’s primary argument is that these claims are

barred by the economic loss doctrine. The court agrees.

Under New Hampshire law, the contractual relationship

between a lender and a borrower typically precludes recovery in

tort. See Moore v. Mortg. Elect. Registration Sys., Inc.,

(D.N.H. 2012) (citing Wyle v. Lees,

, 409–10 (2011)). This principle, known as the

“economic loss doctrine,” is premised on the theory that “[i]f a

contracting party is permitted to sue in tort when a transaction

does not work out as expected, that party is in effect rewriting

the agreement to obtain a benefit that was not part of the

bargain.” Plourde Sand & Gravel Co. v. JGI E., Inc.,

(2007) (quoting Tietsworth v. Harley–Davidson, Inc.,

(Wis. 2004)).

The economic loss doctrine is not absolute. The New

Hampshire Supreme Court (“NHSC”) has recognized that “a

contracting party may be ‘owed an independent duty of care

outside the terms of the contract.’” Moore,

(quoting Wyle,

).2 “Where the existence of

such a duty is claimed, though, the burden is on the

borrower . . . to prove the lender’s voluntary assumption of

activities beyond those traditionally associated with the normal

role of a money lender.”

(internal quotation marks and

brackets omitted) (quoting Seymour v. N.H. Sav. Bank,

(1989)). The plaintiff has not raised any such

argument in the present case.

Instead, the plaintiff contends that the economic loss

doctrine should not apply in the first instance because she

never entered into a contractual relationship with Fannie Mae.

This argument is unpersuasive. At the time the mortgage was

2 For instance, the NHSC has held that “a lender owes a borrower a duty not to disburse its loan funds without authorization, Lash v. Cheshire Cnty. Sav. Bank, Inc.,

, 438–39 (1984), and that a mortgagee, in its role as seller at a foreclosure sale, owes a duty to the mortgagor ‘to obtain a fair and reasonable price under the circumstances.’ Murphy v. Fin. Dev. Corp.,

(1985).” Moore,

.

7 executed, MERS was named as mortgagee thereunder. Doc. no. 2-3

at 2. The mortgage expressly contemplates the assignment of the

mortgage by MERS, see id. at 2, 12, and MERS indisputably

assigned the mortgage to Fannie Mae prior to the foreclosure,

see doc. no. 2-4. The NHSC has approvingly cited Restatement

(Second) of Contracts § 317, see Dillman v. Town of Hooksett,

, 346–48 (2006), which allows for the liberal

assignment of contractual rights under common law unless 1) such

assignment “would materially change the duty of the obligor, or

materially increase the burden or risk imposed on him by his

contract, or materially impair his chance of obtaining return

performance, or materially reduce its value to him”; 2) “the

assignment is forbidden by statute or is otherwise inoperative

on grounds of public policy”; or 3) “assignment is validly

precluded by contract.” Restatement (Second) of Contracts §

317(a)(2). None of these conditions is present here. Thus,

MERS validly assigned its rights as mortgagee to Fannie Mae, and

privity of contract existed between the plaintiff and Fannie Mae

at the time of the foreclosure.3

The plaintiff next argues that, privity notwithstanding,

3 And even if privity did not exist, the NHSC has suggested, citing considerable authority from other states, that the economic loss doctrine still generally bars recovery in a tort for purely economic harm. See Plourde Sand & Gravel, 154 N.H. at 795–96.

8 the economic loss doctrine should not apply because a “special

relationship” exists between the plaintiff and Fannie Mae. The

NHSC, like many courts, has recognized that a plaintiff can

recover for purely economic harm “where there is a ‘special

relationship’ between the plaintiff and the defendant that

creates a duty owed by the defendant . . . .” Plourde Sand &

Gravel,

(formatting and citation omitted).

Beyond conclusorily stating that Fannie Mae “enjoys a ‘special

relationship’ in [its] role as mortgage servicer”, doc. no. 15,

at 2, however, the plaintiff has provided no basis for

concluding that her relationship with Fannie Mae was anything

other than purely contractual. Moore,

(citing Ahrendt v. Granite Bank,

(1999))

(“[U]nder New Hampshire law, the relationship between a lender

and borrower is contractual in nature . . . .”). The court can

identify no precedent supporting such a conclusion. Thus, this

argument too must fail.

Finally, the plaintiff argues that her negligent

misrepresentation claim is not barred because Fannie Mae is “in

the business of supplying information.” Doc. no. 15, at 2. The

NHSC has recognized such an exception to the economic loss

doctrine. Plourde Sand & Gravel,

(citation

omitted).

One who, in the course of his business, profession or

9 employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

Plourde Sand & Gravel,

(quoting Restatement

(Second) of Torts § 552(1)). This exception “is narrower than

the traditional tort claim” for negligent misrepresentation.

Id. (citation omitted).

Here, the plaintiff has not adequately pleaded the elements

of the negligent misrepresentation exception. Assuming arguendo

that Fannie Mae is “in the business of supplying information,”

the plaintiff has pleaded no facts from which the court can

reasonably infer that Fannie Mae supplied her with false

information. Nor has she pleaded any facts suggesting

justifiable reliance on her part.

Yet even if the plaintiff had pleaded such facts, recovery

would nonetheless be barred by the economic loss doctrine. The

First Circuit, interpreting NHSC precedent, has read this

exception to apply “only [to] those representations that precede

the formation of the contract or that relate to a transaction

other than the one that constitutes the subject of the

contract . . . .” Schaefer v. Indymac Mortg. Servs.,

(1st Cir. 2013) (citing Wyle, 162 N.H. at 411–12). As

Fannie Mae was assigned the mortgage in this case, any purported

10 misrepresentation on Fannie Mae’s part necessarily occurred

after the mortgage was formed. And misrepresentations made in

the context of foreclosure proceedings inextricably relate to a

transaction central to the underlying contract, in this case the

mortgage itself. Thus, consistent with established First

Circuit precedent, the negligent misrepresentation exception

cannot apply in the present context.

In sum, the economic loss doctrine bars the plaintiff from

recovering on any of her state tort claims. Accordingly, Counts

I, II, and V are dismissed.

II. Good Faith and Fair Dealing

The court next considers Count III of the plaintiff’s

amended complaint, her claim for breach of the covenant of good

faith and fair dealing. Fannie Mae contends that this claim

must be dismissed both because it had no duty to provide the

plaintiff with the opportunity to seek loss mitigation prior to

foreclosure and because no violation of this covenant can be

premised solely upon the exercise of a bargained-for right.

Again, the court agrees.

“In every agreement, there is an implied covenant that the

parties will act in good faith and fairly with each other.”

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

,

(2010). The NHSC applies this covenant in

three contexts: 1) contract formation; 2) termination of at-will

11 employment agreements; and 3) limitations of discretion in

contractual performance. J & M Lumber & Const. Co. v. Smyjunas,

(2011). The plaintiff contends that Fannie

Mae violated the covenant in at least two ways: 1) “[b]y keeping

[her] uninformed and off track with her [loan] modification

application”; and 2) “[b]y ignoring [her] ability to pay and

keeping [her] waiting to achieve [a] work out resolution while

[Fannie Mae] continued to add interest, late payments[,] and

other fees to [her] loan.” Amend. Compl., doc. no. 13, ¶ 64.

Based on these allegations, the court assumes that the plaintiff

alleges that Fannie Mae abused its discretion under the mortgage

in the manner in which it pursued foreclosure.

As discussed above, there is privity of contract between

the parties.4 As such, the plaintiff’s good faith and fair

dealing claim turns on three questions: 1) whether the agreement

allows or confers discretion on Fannie Mae to deprive the

plaintiff of a substantial portion of the benefit thereunder; 2)

whether Fannie Mae exercised its discretion reasonably; and 3)

4 The plaintiff appears to contend in her amended complaint that she and Fannie Mae entered a subsequent contract to work toward a loan modification. See Amend. Compl. §§ 58–62. She has not, however, alleged any facts to support this legal conclusion. As such, the court need not assume its truth. See Ocasio-Hernandez v. Fortuno-Burset,

(1st Cir. 2011) (citation omitted) (“Unlike factual allegations, legal conclusions contained within a complaint are not entitled to a presumption of truth.”). 12 whether Fannie Mae’s abuse of discretion caused the damage

complained of. Moore,

(citations

omitted). The court considers each of these questions in turn.

As to the first question, the mortgage here expressly

grants Fannie Mae the authority to foreclose upon the property

in the event of default. Doc. no. 2-3, at 13; see also RSA §

479:19 et seq. The court therefore concludes that the mortgage

allows or confers on Fannie Mae the discretion to deprive the

plaintiff of her rights to the property.

Turning, then, to the second question, the court finds that

Fannie Mae exercised its discretion reasonably. “Courts have

generally concluded . . . that the covenant of good faith and

fair dealing in a loan agreement cannot be used to require the

lender to modify or restructure the loan.” Moore,

. “These decisions are consistent with New Hampshire

law that the applied covenant cannot be used to rewrite a

contract to avoid harsh results.”

(citation omitted). This

court “has time and again held that lenders have no duty absent

explicit contractual language to modify a loan or forbear from

foreclosure.” Towle v. Ocwen Loan Servicing, LLC, No. 15-CV-

189-LM,

, at *2 (D.N.H. July 23, 2015). Here,

there is no language in the mortgage imposing such a duty upon

Fannie Mae. There was therefore no requirement that Fannie Mae

restructure the mortgage or otherwise forebear from foreclosing

13 while the plaintiff pursued loan modification or acquired funds

to pay the arrearage.

The plaintiff arguably contends that Fannie Mae improperly

refused payment from the plaintiff for the amount in arrears.

This contention is unavailing for at least two reasons. First,

as noted, Fannie Mae had no duty to postpone the foreclosure in

order to allow the plaintiff to make such a payment.

Accordingly, any contention that Fannie Mae violated the

covenant by failing to wait for the plaintiff must fail. And

while the mortgage does grant the borrower a right to reinstate

the mortgage by making a full payment of the arrearage and

meeting other conditions, it only contemplates certain forms of

payment, none of which are by credit card. Doc. no. 2-3, at 12.

Thus, Fannie Mae was fully within its rights to decline this

form of payment.

As Fannie Mae did not abuse its discretion under the

mortgage in the course of the foreclosure proceedings, the court

need not consider the third question. The plaintiff has not

stated a viable claim for breach of the covenant of good faith

and fair dealing. Accordingly, Count III is dismissed.

III. CPA

The court next considers the plaintiff’s CPA claim. The

plaintiff contends that Fannie Mae violated the CPA by: 1)

“[r]efusing to consider reasonable foreclosure alternatives”; 2)

14 “[r]efusing to [p]ostpone [f]oreclosure to consider commercially

reasonable alternatives”; and 3) “[f]ail[ing] to [e]xhaust

[a]dministrative [r]emedies prior to embarking on

[f]oreclosure.” Amend. Compl. ¶ 68. Fannie Mae contends that

it is exempt from the CPA and, alternatively, that the plaintiff

has not identified any conduct that would give rise to a CPA

violation. The court is persuaded by both arguments.

The CPA exempts from its purview “[t]rade or commerce that

is subject to the jurisdiction of . . . federal banking or

securities regulators who possess the authority to regulate

unfair or deceptive trade practices.” RSA § 358-A:3, I. The

director of the Federal Housing Finance Authority (“FHFA”) has

“general regulatory authority” over Fannie Mae “to ensure that

the purposes of [

et seq.], the authorizing

statutes, and any other applicable law are carried out.”

. The scope of this authority is broad, and can

reasonably be construed to reach unfair or deceptive trade

practices. See

(a). Accordingly, Fannie Mae is

subject to the jurisdiction of federal banking and securities

regulators such that the CPA does not apply.

Even if the CPA did apply, however, the plaintiff has still

not stated a viable claim thereunder. It is unlawful under the

CPA “for any person to use any unfair method of competition or

any unfair or deceptive act or practice in the conduct of any

15 trade or commerce within [New Hampshire].” RSA § 358-A:2. RSA

§ 358-A:2 contains a non-exhaustive list of conduct amounting to

a CPA violation. See id. § 358-A:2, I–XVI. Conduct not

specifically delineated can nonetheless give rise to a CPA

violation if it meets the so-called “rascality” test: i.e., it

“attain[s] 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) (citation omitted).

Here, the plaintiff has not specified any subsection of RSA

§ 358-A:2 that she believes Fannie Mae violated. She instead

alleges general violations of the CPA based on the conduct noted

above. As previously discussed, however, Fannie Mae was under

no obligation to consider alternatives to foreclosure or

otherwise forebear from foreclosure in order to allow the

plaintiff additional time to either modify the mortgage or pay

the arrearage. Nor has the plaintiff pleaded facts from which

the court could reasonably infer that Fannie Mae failed to

exhaust administrative remedies in a matter that would violate

the CPA. Simply put, even when taken as true, Fannie Mae’s

alleged conduct in this case does not rise to the level of

rascality to sustain a CPA claim.

Accordingly, Count IV of the plaintiff’s amended complaint

is dismissed.

16 IV. RESPA

The court turns to the plaintiff’s RESPA claim. The

plaintiff alleges that Fannie Mae failed to respond to numerous

requests to avoid foreclosure, in violation of

(k). Fannie Mae contends that the plaintiff does not have

standing to bring a RESPA claim because she did not sign the

promissory note. The court need not reach this argument,

however, because even if the plaintiff did have standing to

bring a RESPA claim, she has failed to allege a violation of

(k).

Under RESPA, the servicer of a mortgage “shall not fail to

take timely action to respond to a borrower’s requests to

correct errors relating to . . . avoiding foreclosure . . . .”

(k)(1)(C). Though the plaintiff asserts that

Fannie Mae failed to respond to “numerous requests . . . to

avoid foreclosure,” Amend. Compl. § 83, she has not alleged any

facts to support this assertion. On the contrary, the

plaintiff’s amended complaint is replete with allegations that

Fannie Mae did in fact respond to the plaintiff’s requests to

avoid foreclosure, and each time refused to do so. The court

therefore views this as “an example of a conclusory statement

that, though presented as an assertion of fact, simply describes

[a] legal conclusion.” Ocasio-Hernandez,

. In

this context, the legal conclusion is that Fannie Mae violated

17 RESPA.

Even were the court to construe this assertion as an

allegation of fact, however, the plaintiff’s RESPA claim would

still fail. Subsection 2605(k)(1)(C) does not make it unlawful

to fail to respond to any requests to avoid foreclosure, but, as

relevant here, to “requests to correct errors relating to[,]”

among other things, “avoiding foreclosure.”

(emphasis

added). The plaintiff has nowhere asserted that she made a

request to correct an error relating to avoiding foreclosure,

let alone that Fannie Mae failed to respond to such a request.

This is fatal to her RESPA claim.

Accordingly, Count VI of the plaintiff’s amended complaint

is dismissed.

V. Standing to Foreclose

Finally, the court turns to Count VII of the plaintiff’s

amended complaint, which addresses Fannie Mae’s legal standing

to foreclose on the property. The plaintiff suggests that

Fannie Mae may not have standing to foreclose on the property

because it may not be able to produce the promissory note. This

argument fails for several reasons.

First, the plaintiff has not alleged any concrete harm, and

merely speculates that Fannie Mae’s standing to foreclose might

become an issue at some point in the future. The plaintiff has

accordingly failed to plead any injury-in-fact that this court

18 may redress. See Hochendoner v. Genzyme Corp.,

(1st Cir. 2016) (discussing the requirements of Article III

standing).

Next, Fannie Mae has in fact produced the note in question,

as evidenced by the note’s attachment as an exhibit to Fannie

Mae’s original motion to exist.

Finally, to the extent that the plaintiff attempts to argue

that Fannie Mae does not have the authority to foreclose because

it is not the current holder of the promissory note, this

argument also fails. The NHSC has held that when MERS is acting

as nominee to the lender, as is the case here, see doc. no. 2-3,

at 2, an agency relationship exists between MERS and the lender.

See Bergeron v. N.Y. Cmty. Bank,

(2015). Under

such circumstances, the assignee of MERS’s interests as nominee

has the authority to foreclose regardless of whether it holds

the note at the time of foreclosure.

at 70–71. It is

therefore immaterial whether Fannie Mae currently holds the

note.

Accordingly, Count VII of the amended complaint must also

be dismissed.

Conclusion

In sum, the plaintiff’s amended complaint, doc. no. 13,

fails to state any plausible claim for relief. Fannie Mae’s

19 motion to dismiss, doc. no. 14, is granted. The clerk of court

is directed to enter judgment accordingly and close the case.

SO ORDERED.

__________________________ Andrea K. Johnstone United States Magistrate Judge

December 1, 2016

cc: Keith A. Mathews, Esq. David D. Christensen, Esq. Michael R. Stanley, Esq.

20