UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Brian Mader and Nancy Mader

v. Civil No. 16-cv-309-LM Opinion No.

Wells Fargo Bank, N.A.

O R D E R

Plaintiffs Brian and Nancy Mader, initially proceeding pro

se, filed a complaint to enjoin foreclosure of their property in

New Hampshire Superior Court, Rockingham County. The superior

court enjoined the foreclosure sale and scheduled a hearing.

Before the date of the hearing, defendant Wells Fargo Bank, N.A.

(“Wells Fargo”) removed the action to this court and now moves

to dismiss the Maders’ amended complaint. The Maders, now

represented by counsel, object.

Legal Standard

Under Federal Rule of Civil Procedure 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 v. Wells Fargo Bank, N.A.,

(1st

Cir. 2014) (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).

Background1

Brian and Nancy Mader are residents and mortgagors of a

property located at 47 Blossom Road in Windham, New Hampshire

(the “property”). On March 9, 2006, the Maders executed a

promissory note in favor of World Savings Bank, FSB (“WSB”), in

exchange for a $543,750.00 loan. The Maders granted a first

priority mortgage on the property to WSB to secure the loan (the

“mortgage”). Doc. no. 5-3.2 Wells Fargo is the successor-by-

merger to WSB. See Foley,

n.2.

1 The facts are drawn from the Maders’ amended complaint and the exhibits attached thereto. The court also considers the Maders’ mortgage, which is publicly recorded (Rockingham County Registry of Deeds, Book 4628, Page 1120). Additionally, the court considers the docket from the Maders’ bankruptcy proceeding, which is a public record and attached to Wells Fargo’s motion to dismiss. See Freeman v. Town of Hudson,

(1st Cir. 2013) (in deciding a motion to dismiss, the court may consider “documents the authenticity of which are not disputed by the parties; official public records; documents central to the plaintiffs’ claim; and documents sufficiently referred to in the complaint.”) (quoting Watterson v. Page,

(1st Cir. 1993)) (alterations omitted). 2 Wells Fargo previously attached both the note and mortgage to its motion to dismiss the original complaint, which the court denied, without prejudice, as moot. Although it was not re- attached to the present motion to dismiss, the court will consider the mortgage because it is publicly recorded. For 2 In 2007, the Maders began experiencing financial

difficulties. Their financial situation improved somewhat in

2010, and the Maders were approved for a loan modification.

Unfortunately, Mr. Mader was laid off shortly thereafter, and

the Maders began having difficulties making their mortgage

payments under the modification agreement.

On May 14, 2013, the Maders submitted a voluntary petition

for Chapter 13 bankruptcy. Doc. no. 13-2 at 2. On June 20,

2014, the Maders voluntarily converted their bankruptcy to a

Chapter 7 case.

. On February 13, 2015, the Maders

received a discharge of their personal liability on the debt

under

, but the mortgage remained a valid lien on

the property. See

.3

In 2016, the Maders sought a loan modification from Wells

Fargo, sending a letter of hardship and a set of complete

financial records. Wells Fargo requested and re-requested

documents from the Maders related to their modification

application. The Maders allege that Wells Fargo “misled the

[Maders] about the status of their modification request.” Doc.

simplicity, the court will cite to the previously attached mortgage, i.e., doc. no. 5-3.

3 The Maders have not alleged that the debt was reaffirmed or that they have made any mortgage payments since their discharge. 3 no. 11 at ¶ 15.4 Wells Fargo “discouraged the [Maders] from

seeking legal counsel to address this issue.” Id. at ¶ 16.

Wells Fargo also “falsely informed the [Maders] that the

modification would not affect their credit.” Id. at ¶ 18. “The

[Maders] only agreed to this modification with the knowledge

that it would not affect their credit.” Id. at ¶ 33.

Eventually, Wells Fargo denied the Maders’ request for a

modification.

At some point, Wells Fargo informed the Maders that it

intended to foreclose on the property and that it had scheduled

a foreclosure sale for July 7, 2016. On June 22, 2016, the

Maders, initially proceeding pro se, filed a complaint against

Wells Fargo in state court to enjoin foreclosure of the

property. The superior court issued a preliminary ex parte

order to enjoin Wells Fargo from foreclosing on the property and

scheduled a hearing for July 11, 2016.

Days before the scheduled hearing, Wells Fargo removed the

case to this court and subsequently moved to dismiss the Maders’

complaint for failure to state a claim. Doc. no. 5. The

Maders, now represented by counsel, did not object to Wells

4 The amended complaint contains several allegations regarding Wells Fargo’s response to the Maders’ loan modification request. These allegations, read in the light most favorable to the Maders, appear to reference the 2016 modification application that Wells Fargo denied, not the 2010 modification request that was approved. 4 Fargo’s motion to dismiss, but instead moved for leave to amend

their original complaint. Doc. no. 8. The court granted the

Maders’ motion to amend and denied, without prejudice, Wells

Fargo’s motion to dismiss as moot. Doc. no. 10.

Discussion

The Maders filed their amended complaint (doc. no. 11),

alleging seven separate claims: (I) negligence; (II) negligent

misrepresentation; (III) breach of the covenant of good faith

and fair dealing; (IV) violation of the New Hampshire Consumer

Protection Act (“CPA”),

-A; (V)

negligent infliction of emotional distress (“NIED”); (VI)

violation of the Real Estate Settlement Procedures Act

(“RESPA”),

(k); and (VII) lack of standing to

foreclose. Wells Fargo now moves to dismiss the amended

complaint (doc. no. 13) and the Maders object (doc. no. 14).

The court addresses each of the Maders’ claims below.

I. Count I: Negligence

The Maders assert a negligence claim in Count I of their

amended complaint. They allege that Wells Fargo owed the Maders

an affirmative duty to act reasonably, and that Wells Fargo

breached this duty by making “misrepresentations and omissions

through [its] handling of the [Maders’] loan.” Doc no. 11 at

5 ¶ 27. Wells Fargo argues that it owed no duty of care and that

the Maders’ claim is barred by the economic loss doctrine.

Under New Hampshire law, the contractual relationship

between a lender and borrower typically precludes recovery in

tort. Moore v. Mortg. Elec. Registration Sys., Inc.,

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

(2011)). Based on this rule, known as the “economic

loss doctrine,” a borrower cannot pursue tort recovery for

purely economic damages arising in the context of a contract

relationship with the lender. Schaefer v. IndyMac Mortg.

Servs.,

(1st Cir. 2013) (citing Plourde Sand &

Gravel Co. v. JGI E., Inc.,

(2007)) (further

citations omitted). New Hampshire law recognizes certain

exceptions to this rule, including when the lender voluntarily

assumes a duty outside the normal performance of the contract.

See Moore,

. In such a case, the borrower

must establish that the lender voluntarily engaged in

“activities beyond those traditionally associated with the

normal role of a money lender.”

(quoting Seymour v. N.H.

Sav. Bank,

(1989)).

Here, the Maders have not alleged any facts indicating that

Wells Fargo voluntarily assumed an extra-contractual duty. They

merely allege that Wells Fargo “kept the [Maders] off track and

misinformed regarding the [Maders’] modification application,”

6 doc. no. 11 at ¶ 29, “informed the [Maders] falsely that the

loan modification would not affect their credit,” id. at ¶ 32,

and “present[ed] themselves as experts in the field of mortgage

work out resolution.” Id. at ¶ 37. The Maders do not allege

any wrongdoing unrelated to their mortgage or loan modification

application and, as such, have not plausibly alleged that Wells

Fargo assumed a duty outside the traditional lender-borrower

relationship. See Bowser v. MTGLQ Investors, LP, No. 15-cv-154-

LM,

, at *2 (D.N.H. Aug. 11, 2015). Therefore,

the Maders’ negligence claim is barred by the economic loss

doctrine. Accordingly, Count I of the amended complaint is

dismissed.

II. Count II: Negligent Misrepresentation

In Count II, the Maders allege that Wells Fargo made

numerous misrepresentations related to the mortgage and loan

modification application, including that a loan modification

would not affect the Maders’ credit.

The elements of a negligent misrepresentation claim under

New Hampshire law are “a negligent misrepresentation of a

material fact by the defendant and justifiable reliance by the

plaintiff.” Wyle,

(citation omitted). “It is

the duty of one who volunteers information to another not having

equal knowledge, with the intention that he will act upon it, to

7 exercise reasonable care to verify the truth of his statements

before making them.”

(citation omitted).

Although the Maders allege that Wells Fargo made several

misrepresentations, the economic loss doctrine bars negligent

misrepresentation claims in a traditional borrower-lender

contractual relationship. See Schaefer,

; see

also Riggieri v. Caliber Home Loans, Inc., No. 16-cv-20-LM,

, at *4-5 (D.N.H. Aug. 3, 2016). However, the

economic loss doctrine does not bar negligent misrepresentation

claims between contracting parties if the misrepresentation

induced a party to enter into the contract. See Wyle,

. New Hampshire law also recognizes a narrow exception to

the economic loss doctrine when the defendant who made the

misrepresentation is “in the business of supplying information.”

See Schaefer,

(citing Plourde,

).

The Maders assert that their claim is not barred because

Wells Fargo is in the business of supplying information.

Despite the Maders’ allegation, the First Circuit has made clear

that negligent misrepresentation claims asserted against loan

servicers do not fall within this limited exception to the

economic loss doctrine. See Schaefer,

; see

also Riggieri,

, at *5. Thus, the court cannot

plausibly conclude that Wells Fargo is in the business of

supplying information.

8 Moreover, because Wells Fargo denied the Maders’ 2016 loan

modification application, the Maders cannot plausibly allege

that they were induced into entering into that contract. As

alleged, the misrepresentations did not operate to induce the

Maders into entering into a contract, but instead “occurred

during the [mortgage’s] performance and concerned the subject

matter of the . . . mortgage.” Bowser,

at *5

(citing Wyle,

). Representations between

contracting parties that are related to the mortgage and

performance under the mortgage cannot form the basis of a tort

claim. In sum, because the Maders were not induced into

entering into a loan modification agreement, their negligent

misrepresentation claim is barred by the economic loss doctrine.

Therefore, Count II of the amended complaint is dismissed.

III. Count III: Breach of the Covenant of Good Faith and Fair Dealing

In Count III, the Maders allege that Wells Fargo breached

the implied covenant of good faith and fair dealing in at least

two ways: 1) “[b]y keeping [them] uninformed and off track with

their modification application”; and 2) “[b]y ignoring [their]

ability to pay and keeping them waiting to achieve [a] work out

resolution while [Wells Fargo] continued to add interest, late

payments and other fees to [their] loan.” Doc. no. 11 at ¶ 66.

The Maders argue that “[i]t is not a breach of the covenant of

9 good faith and fair dealing to foreclose, but it is a violation

to exercise discretion in such a way that the [Maders] are

forced in to foreclosure despite their attempts to pay or modify

the loan.” Doc. no. 14 at 5.

Under New Hampshire law, “[i]n every agreement, there is an

implied covenant that the parties will act in good faith and

fairly with one another.” Birch Broad., Inc. v. Capitol Broad.

Corp.,

(2010) (citation omitted). However,

“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,

(citing cases). This

court has repeatedly held that “lenders have no duty absent

explicit contractual language to modify a loan or forbear from

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

cv-189-LM,

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

cases); see also Ruivo v. Wells Fargo Bank, N.A., No. 11-cv-466-

PB,

, at *4 (D.N.H. Nov. 19, 2012) (“Parties are

bound by the agreements they enter into and the court will not

use the implied covenant of good faith and fair dealing to force

a party to rewrite a contract so as to avoid a harsh or

inequitable result.”).

Under the terms of the Maders’ mortgage, modifying the loan

was a discretionary choice, and both the borrower and lender had

to agree in writing to any modification. See doc. no. 5-3 at 12

10 ¶ 23. Although the amended complaint recites the necessary

elements of a contract, the Maders have pled no facts showing

that the parties had an enforceable agreement to modify the

loan. Moreover, because the mortgage did not require Wells

Fargo to consider the Maders’ modification application, Wells

Fargo’s alleged conduct in processing and ultimately denying the

Maders’ application while pursuing foreclosure does not support

a good faith and fair dealing claim. See, e.g., Frangos v. Bank

of Am., N.A., No. 13-cv-472-PB,

, at *3-4 (D.N.H.

July 24, 2014); Schaefer v. IndyMac Mortg. Servs., No. 12-cv-

159-JD,

, at *6 (D.N.H. Oct. 16, 2012)

(“[B]ecause the defendants were not required to consider

Schaefer’s loan modification application, they similarly cannot

be liable for preparing to foreclose on Schaefer’s home while

simultaneously considering his loan modification application.”),

aff’d,

(1st Cir. 2013).

The Maders’ claim is identical to the plaintiff’s good

faith and fair dealing claim in Gasparik v. Fed. Nat’l Mortg.

Ass’n, which the court dismissed for failure to state a claim.

No. 16-cv-147-AJ,

, at *4-5 (D.N.H. Dec. 1,

2016). Here, as in Gasparik, the mortgage did not require Wells

Fargo to “restructure the mortgage or otherwise forebear from

foreclosing while the [Maders] pursued loan modification or

acquired funds to pay the arrearage.” Id. at *5. Thus, despite

11 the Maders’ efforts to modify the loan, Wells Fargo’s conduct

does not give rise to a claim for breach of the implied covenant

of good faith and fair dealing. Accordingly, Count III of the

amended complaint is dismissed.

IV. Count IV: Violation of the CPA

Count IV alleges that Wells Fargo committed unfair and

deceptive practices in violation of the CPA. In their objection

to Wells Fargo’s motion to dismiss, the Maders conceded that

Wells Fargo is exempt from the CPA and voluntarily dismissed the

claim. Doc. no. 14 at 5. Count IV of the amended complaint is

therefore dismissed.

V. Count V: NIED

In Count V, the Maders allege that Wells Fargo’s actions

have caused the Maders to suffer severe emotional distress.

“The elements of a claim for negligent infliction of emotional

distress include: (1) causal negligence of the defendant; (2)

foreseeability; and (3) serious mental and emotional harm

accompanied by objective physical symptoms.” Tessier v.

Rockefeller,

(2011) (internal quotation marks

omitted). “[A] claim for NIED, like any other negligence claim,

demands the existence of a duty from the defendant to the

plaintiff.” Moore,

(quoting BK v. N.H.

12 Dep’t of Health & Human Servs.,

(D.N.H.

2011)).

As discussed above, the Maders failed to state a claim for

negligence because they have not plausibly alleged that Wells

Fargo owed them a voluntarily assumed duty. For the same

reason, the Maders’ claim for NIED must also fail. Accordingly,

Count V of the amended complaint is dismissed.

VI. Count VI: Violation of RESPA

Count VI of the amended complaint alleges that Wells Fargo

violated RESPA. The Maders cite language in RESPA which

prohibits servicers from “fail[ing] to take timely action to

respond to a borrower’s requests to correct errors relating to

allocation of payments, final balances for purposes of paying

off the loan, or avoiding foreclosure, or other standard

servicer’s duties.”

(k)(1)(C) (emphasis added).

The Maders allege that Wells Fargo failed to respond to the

Maders’ requests to avoid foreclosure.

The Maders allege no facts to support a plausible claim

under § 2605(k)(1)(C). That subsection addresses a borrower’s

request to correct errors relating to, among other things, a

borrower’s attempt to avoid foreclosure. The Maders have not

alleged that they made any request to Wells Fargo to correct an

13 error, or that Wells Fargo failed to respond to such a request.

See Gasparik,

, at *7.

The Maders appear to be asserting a claim under

, a regulation under RESPA requiring servicers to follow

certain procedures in evaluating a borrower’s loss mitigation

application. In certain circumstances, a servicer is required

to evaluate a borrower’s complete loss mitigation application

for all available loss mitigation options. However, the

provisions of § 1024.41 do not require a servicer to offer a

borrower a loan modification.

(a).

The Maders allege that they sent Wells Fargo a letter of

hardship and a complete set of financial records in their loan

modification application. Although the Maders assert that Wells

Fargo failed to respond to their request to avoid foreclosure,

the Maders acknowledge that Wells Fargo eventually denied their

modification application. See doc. no. 11 at ¶ 17. Thus, the

Maders’ amended complaint establishes that Wells Fargo did in

fact respond to the Maders’ request to avoid foreclosure and

evaluate their modification application. While the Maders were

dissatisfied with Wells Fargo’s ultimate decision to deny their

application, RESPA does not require Wells Fargo to grant them a

modification. Therefore, the Maders have not alleged a

plausible claim under RESPA. Accordingly, Count VI is

dismissed.

14 VI. Count VII: Standing

The Maders’ final count addresses Wells Fargo’s standing to

foreclose on the property. The Maders suggest that in order to

have standing to foreclose, Wells Fargo must produce a properly

executed promissory note. This claim fails for two reasons.

First, the Maders do not actually allege that Wells Fargo

does not hold the promissory note. Rather, the Maders merely

suggest that if Wells Fargo cannot produce the note, it would

lack standing to foreclose. Thus, this count consists of a

wholly speculative assertion with no factual basis.

Second, it appears that Wells Fargo can in fact produce the

promissory note, as Wells Fargo attached the note to its motion

to dismiss the original complaint. See doc. no. 5-2. Because

Wells Fargo is the successor-by-merger to WSB, the original

holder of the note, “it is implausible to infer that Wells Fargo

is not, in fact, the present holder of the note.” Mason v.

Wells Fargo Bank, N.A., No. 14-cv-77-JL,

, at *4

n.4 (D.N.H. June 17, 2014). Accordingly, Count VII is

dismissed.

15 Conclusion

For the foregoing reasons, Wells Fargo’s motion to dismiss

(doc. no. 13) is granted. The clerk of court shall enter

judgment accordingly and close the case.

SO ORDERED.

__________________________ Landya McCafferty United States District Judge

January 17, 2017

cc: Keith A. Mathews, Esq. Michael R. Stanley, Esq.

16