UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Jacques Elias, et al.

v. Case No. 15-cv-330-AJ Opinion No.

Specialized Loan Servicing, LLC, et al.

MEMORANDUM AND ORDER

In an amended complaint, the plaintiffs, Jacques and Sabine

Elias, allege that the defendant, Specialized Loan Servicing

(“SLS”), mishandled their mortgage, thereby forcing their

property into foreclosure. Doc. no. 20. SLS moves for summary

judgment, doc. no. 30, and the plaintiffs object, doc. no. 35.1

For the following reasons, SLS’s motion is granted.

Summary Judgment Standard

Summary judgment is appropriate where “there is no genuine

dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also

Xiaoyan Tang v. Citizens Bank, N.A.,

(1st Cir.

2016). “An issue is ‘genuine’ if it can be resolved in favor of

either party, and a fact is ‘material’ if it has the potential

of affecting the outcome of the case.” Xiaoyan Tang,

SLS filed a reply to the plaintiffs’ objection. Doc. no. 37. The plaintiffs filed a notice of intent to file a surreply (doc. no. 39) but no surreply was filed. at 215 (internal quotation marks and citations omitted). At the

summary judgment stage, the court draws “‘all reasonable

inferences in favor of the non-moving party,’ but disregard[s]

‘conclusory allegations, improbable inferences, and unsupported

speculation.’” Fanning v. Fed. Trade Comm’n,

(1st Cir. 2016) (citation omitted), cert. denied,

(U.S. Jan. 9, 2017).

“A party moving for summary judgment must identify for the

district court the portions of the record that show the absence

of any genuine issue of material fact.” Flovac, Inc. v. Airvac,

Inc.,

(1st Cir. 2016). Once the moving party

makes the required showing, “‘the burden shifts to the nonmoving

party, who must, with respect to each issue on which [it] would

bear the burden of proof at trial, demonstrate that a trier of

fact could reasonably resolve that issue in [its] favor.’”

(citation omitted). “This demonstration must be accomplished by

reference to materials of evidentiary quality, and that evidence

must be more than ‘merely colorable.’”

(citations omitted).

“At a bare minimum, the evidence must be ‘significantly

probative.’”

(citation omitted). The nonmoving party’s

failure to make the requisite showing “entitles the moving party

to summary judgment.”

2 Background

I. Factual Background

On September 8, 2006, Sabine Elias executed a promissory

note, which was secured by a mortgage on property located in

Amherst, New Hampshire. Doc. no. 30-3, at 9–12. Sabine Elias

alone signed the note and was named as sole borrower under the

mortgage. Id. at 12, 13. Both plaintiffs signed the mortgage.

Id. at 27.

On May 19, 2012, the plaintiffs entered into a loan

modification with Bank of America, which was the servicer of the

mortgage at that time (“2012 modification”). See doc. no. 30-5.

Under this modification, an amount of $102,535.12 was deferred

and treated as non-interest-bearing principal forbearance. Id.

at 5. If the plaintiffs met certain conditions specified in the

2012 modification agreement, including not falling more than

three months behind on their payments under the 2012

modification, this amount would be forgiven over the course of

three years. Id.

At some point after the 2012 modification was executed,

Bank of America informed the plaintiffs that they qualified for

better modification terms under a federal program (the “federal

modification”). Elias Aff. ¶ 6 (doc. no. 35-1). Bank of

America informed the plaintiffs that in order to qualify for the

federal modification, they would have to be two months behind on

3 their payments under the 2012 modification. Id. The plaintiffs

pursued this modification, falling two months behind on their

mortgage payments. Id. ¶ 7.

On November 1, 2012, Bank of America transferred service of

the plaintiffs’ loan to SLS. Doc. no. 30-3, at 31. At this

time, the plaintiffs had not received the federal modification

from Bank of America. On November 9, 2012, SLS sent the

plaintiffs a statement informing them of the transfer and

instructing them to send all future payments to SLS at an

address provided. Id. SLS specifically noted that as of

November 1, 2012, Bank of America “w[ould] not accept payments

from [the plaintiffs].” Id. The plaintiffs continued to make

payments to Bank of America, which were returned. Elias Aff. ¶

11. By the time the plaintiffs started sending payments to SLS,

they were more than three months behind on their mortgage

payments. Id. ¶ 14.

In the summer of 2014, SLS offered the plaintiffs a new

loan modification (“2014 modification” or “2014 modification

agreement”). See doc. no. 20-3. SLS informed the plaintiffs

that to accept this offer, they must sign and return two

original copies of the 2014 modification agreement by August 31,

2014. Id. at 2.

The 2014 modification agreement indicated that an amount of

$102,535.12 had been deferred in a previous modification, which

4 would not accrue interest, but would remain due and owing at the

end of the loan and was “not a forgiveness of a partial debt . .

. .” Id. The plaintiffs believed that this amount had been

forgiven under the 2012 modification. They based this belief on

a 1099-C tax form issued by Bank of America on February 26,

2013, see doc. no. 20-5, at 5, which a tax professional had

informed them meant that forgiveness of this amount had actually

occurred, see Elias Aff. ¶ 31–32. The plaintiffs filled out

1040X and 982 tax forms based on this belief. See doc. no. 20-

5. Plaintiffs’ counsel conceded at the hearing that this belief

was mistaken, and that the $102,535.12 was not forgiven “as a

matter of law.”

There is no dispute in the record that the plaintiffs

signed the 2014 modification agreement on August 30, 2014, and

that they mailed at least one copy of that agreement to SLS that

day. There are two versions of the 2014 modification agreement

in the record, however,2 and the parties dispute which version

or versions the plaintiffs sent to SLS.

2 One version of this document is docketed as document number 20- 3. The other is docketed at both document number 20-4 and document number 30-3, at pages 36 through 38. For ease of citation, to the extent either of these documents can be cited to support a proposition in this order (i.e., they are identical), the court will only cite to document number 20-3. But to the extent the differences in these documents are relevant to a proposition in this order, the court will cite to the appropriate document or documents.

5 Both versions of the 2014 modification agreement contain

the same typed agreement language and both are signed by the

plaintiffs and dated August 30, 2014. Compare doc. no. 20-3

with doc. no. 20-4. In one version there is a handwritten

notation next to the reference to the $102,535.12 in prior

deferred principal, which states that “[t]his debt was cancelled

by [Bank of America] as of June 2. Form 1099-C attached.” Doc.

no. 20-3, at 5. Both plaintiffs initialed and signed next to

this notation. Id. The other version does not contain this

notation. See doc. no. 20-4, at 4.3

The plaintiffs alternatively contend that they only sent

the notated version of the 2014 modification agreement to SLS or

that they sent SLS both the notated and non-notated versions of

the agreement. SLS contends that it only received the non-

notated version. The only version of this document in the

plaintiffs’ records is the version with the notation. See Elias

Dep., at 6, 7 (doc. no. 37-1). The only version of this

document in SLS’s records is the version without the notation.

See doc. no. 30-3, at 36–38.

Though they dispute the issue of loan forgiveness, both

parties agree that the 2014 modification agreement went into

3 Though these documents differ in other minor respects, this notation is the sole difference relied upon by the plaintiffs in opposition to summary judgment. The court will limit its discussion accordingly. 6 effect, and the plaintiffs do not bring a claim challenging the

validity of this agreement. The plaintiffs were unable to

remain current under this agreement. Facing the prospect of

foreclosure, the plaintiffs filed the instant action.

II. Procedural Background

The plaintiffs originally filed suit against SLS and Bank

of America in state court. Doc. no. 1-1, at 4–12. The

defendants removed this action here (doc. no. 1) and Bank of

America moved to dismiss for failure to state a claim (doc. no.

13). The plaintiffs voluntarily dismissed Bank of America (doc.

no. 15) and were granted leave to amend their complaint. The

plaintiffs filed a three-count amended complaint against SLS on

January 4, 2016. Doc. no. 20.

SLS moved for summary judgment on all three counts. Doc.

no. 30. In reviewing this motion, the plaintiffs’ objection

(doc. no. 35) and SLS’s reply (doc. no. 37) the court determined

that a hearing was appropriate and additional briefing was

necessary. On February 2, 2017, the court issued a procedural

order scheduling a hearing and directing the parties to brief

three discrete issues. See Feb. 2, 2017 Procedural Order (doc.

no. 44) (hereinafter “supplemental briefing order”). The

parties timely submitted supplemental briefing (doc. nos. 46,

47, 49, 50) and the hearing was held on March 7, 2017.

7 Discussion

The plaintiffs bring claims against SLS for violations of

(b)(4) (“Count I”), for negligent

misrepresentation (“Count II”), and for breach of the covenant

of good faith and fair dealing (“Count III”). SLS moves for

summary judgment on all three counts.

I.

(b)(4)

At the hearing, plaintiffs’ counsel conceded,

notwithstanding arguments to the contrary in the plaintiffs’

supplemental briefing, that no private right of action exists

under

(b)(4) and that SLS was entitled to

summary judgment on this claim. SLS’s motion for summary

judgment is accordingly granted as to Count I.

II. Negligent Misrepresentation

SLS argues that there is no genuine dispute of material

fact in the record from which a reasonable trier of fact could

conclude that SLS made negligent misrepresentations to the

plaintiffs. SLS further argues that this claim is barred by the

economic-loss doctrine.

The court turns first to the economic-loss doctrine. Under

this doctrine, 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

8 (2011)). This principle 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)).

This court has held on several occasions that the economic-

loss doctrine generally bars negligent misrepresentation claims

brought by mortgagors against loan servicers/lenders related to

a mortgage.4 Though there are certain recognized exceptions to

this doctrine, see, e.g., Plourde, 154 N.H. at 795–96, 799, the

plaintiffs have neither invoked an exception in this case nor

pointed to evidence from which a reasonable trier of fact could

conclude that such an exception applies. It is neither this

court’s responsibility to fashion arguments or theories for the

plaintiffs, see, e.g., Bartolomeo v. Liburdi, No. 97-0624-ML,

, at *3 (D.R.I. Feb. 4, 1999) (citation omitted),

nor its obligation to scour the record for evidence the

4 See, e.g., Mader v. Wells Fargo Bank, N.A., No. 16-cv-309-LM,

, at *3 (D.N.H. Jan. 17, 2017); Gasparik v. Fed. Nat'l Mortg. Ass'n, No. 16-CV-147-AJ,

, at *4 (D.N.H. Dec. 1, 2016); Riggieri v. Caliber Home Loans, Inc., No. 16-CV-20-LM,

, at *4-5 (D.N.H. Aug. 3, 2016); Bowser v. MTGLQ Inv'rs, LP, No. 15-CV-154-LM,

, at *5 (D.N.H. Aug. 11, 2015). 9 plaintiffs themselves failed to identify, see, e.g., Foley v.

Wells Fargo Bank, N.A.,

(1st Cir. 2014)

(citation omitted) (“[I]n the summary judgment context . . .

[judges] are not ‘pigs hunting for truffles in the record.”

(internal brackets and quotation marks omitted)). The

plaintiffs’ negligent misrepresentation claim is accordingly

barred by the economic-loss doctrine.

Even if the economic-loss doctrine did not apply, however,

SLS would still be entitled to summary judgment on the

plaintiffs’ negligent misrepresentation claim. The elements of

a common-law negligent misrepresentation claim are (1) a

negligent misrepresentation of a material fact by the defendant,

and (2) justifiable reliance by the plaintiffs. Wyle,

(citation omitted). SLS has made the requisite showing

in its motion for summary judgment of an absence of any genuine

issue of material fact in the record as to either of these

elements. See doc. no. 30-1, at 14–18. The burden accordingly

shifts to the plaintiffs to demonstrate, with references to

materials of evidentiary quality, that a trier of fact could

reasonably resolve each of these elements in the plaintiffs’

favor at trial. See Flovac,

.

The plaintiffs’ objection and supplemental briefing fail to

meet this burden. In their objection, the plaintiffs state that

their “negligent misrepresentation claim is grounded on the

10 argument that [SLS] signed them up for another modification with

worse terms when they had been approved for a previous

modification.” Doc. no. 35, at 7. They contend in their

supplemental briefing that the two versions of the 2014

modification agreement in the record support a claim for

negligent misrepresentation because they “put[] [SLS] on actual

notice that the [plaintiffs] w[ere] under the impression that a

modification ha[d] occurred . . . .” Doc. no. 47, at 3.

Neither of these statements identifies, or points to evidence

demonstrating, any misrepresentation of a material fact on the

part of SLS.

The plaintiffs also contend in their supplemental briefing

that “[t]he issue of the loan being forgiven directly supports

the elements to show a negligent misrepresentation” because SLS

“knew or should have known that the loan had in fact been

forgiven by Bank of America.” Doc. no. 35, at 7. These

assertions similarly fail to identify any misrepresentation on

the part of SLS. Additionally, plaintiffs’ counsel conceded at

the hearing that no forgiveness actually occurred “as a matter

of law,” and that his clients merely held the belief that this

amount had been forgiven by Bank of America. In so conceding,

plaintiffs’ counsel necessarily abandoned any argument that SLS

made a negligent misrepresentation in this regard.

In light of this lack of identifiable misrepresentations in

11 the plaintiffs’ written filings, the court pressed plaintiffs’

counsel at the hearing to identify an actionable

misrepresentation attributable to SLS. Plaintiffs’ counsel was

unable to do so.

First, plaintiffs’ counsel appeared to argue that SLS

misrepresented having not received payments from the plaintiffs

when in fact the plaintiffs had sent these payments to Bank of

America. It is undisputed that SLS sent the plaintiffs a

statement on November 9, 2012, informing them that Bank of

America had transferred service of the plaintiffs’ loan to SLS,

that all future payments must be sent to SLS at the address

provided, and that as of November 1, 2012, Bank of America

““w[ould] not accept payments from [the plaintiffs].” Doc. no.

30-3, at 32. The plaintiffs have not pointed to any evidence in

the record supporting a conclusion that, despite this language,

payments sent to Bank of America after November 1, 2012, would

be considered received by SLS. Thus, no reasonable trier of

fact could conclude that SLS made a misrepresentation in this

regard.

Plaintiffs’ counsel also appeared to contend that SLS made

a misrepresentation by failing to take into consideration the

plaintiffs’ lack of sophistication. This assertion, when

assumed true, once again fails to identify any misrepresentation

on the part of SLS.

12 Finally, plaintiffs’ counsel contended that SLS made

misrepresentations to the plaintiffs by offering the plaintiffs

the 2014 loan modification when they were pursuing the federal

modification offered by Bank of America. This argument appears

to largely be a reiteration of the contentions raised in the

plaintiffs’ objection and supplemental briefing. As discussed

above, this argument fails to identify any misrepresentation of

a material fact attributable to SLS. It is accordingly

insufficient to defeat summary judgment.

In sum, the court concludes that the plaintiffs’ negligent

misrepresentation claim is barred by the economic-loss doctrine.

And even if it were not, the plaintiffs have pointed to no

evidence demonstrating that a trier of fact could reasonably

resolve this claim in their favor at trial. Accordingly, SLS’s

motion for summary judgment is granted as to Count II.

III. Good Faith and Fair Dealing

The plaintiffs’ specific theory as to how SLS breached the

covenant of good faith and fair dealing has been difficult to

pin down. Initially, the plaintiffs appeared to allege that SLS

either fraudulently altered the modified version of the 2014

agreement to create the version without the notation, or forged

the version without the notation. At the hearing, however,

plaintiffs’ counsel expressly disclaimed any allegation of fraud

on the part of SLS and instead relied more generally on the

13 existence in the record of the two versions of the 2014

modification in support of the plaintiffs’ good faith and fair

dealing claim. The court will focus its analysis accordingly.

“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). New Hampshire law recognizes three

distinct categories of good faith and fair dealing claims: 1)

contract formation; 2) termination of at-will employment

agreements; and 3) limitations of discretion in contractual

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

(2011).

This case plainly does not involve the termination of an

at-will employment agreement. And the plaintiffs have not

contended anywhere in their summary judgment filings (or,

indeed, argued at the hearing) that SLS was conferred discretion

under an agreement with the plaintiffs, that SLS abused this

discretion, and that this abuse somehow damaged the plaintiffs.

See Moore,

; Ahrendt v. Granite Bank,

(1999). Thus, the court’s analysis is limited to

the first category of good faith and fair dealing claims: those

involving contract formation.

In the context of contract formation, the covenant of good

faith and fair dealing is “tantamount to the traditional duties

14 of care to refrain from misrepresentation and to correct

subsequently discovered error, insofar as any representation is

intended to induce, and is material to, another party’s decision

to enter into a contract in justifiable reliance upon it.”

Centronics Corp. v. Genicom Corp.,

(1989).

This obligation “requires that if one party makes a

representation of a material fact to another party for the

purpose of inducing the other party to change his position or

enter into a contract, the party making the representation must

tell the truth.” Bursey v. Clement,

(1978)

(citations omitted). Additionally, “[o]ne who makes a

representation that is true when made is under a duty to correct

that statement if it becomes erroneous or is discovered to have

been false before the transaction is consummated.”

(citations omitted).

SLS has again met its burden of showing an absence of any

genuine issue of fact in the record as to this claim. See doc.

no. 30-1, at 18–20. Thus, the burden shifts to the plaintiffs

to show, with reference to materials of evidentiary quality, the

existence of a genuine issue of material fact for trial. See

Flovac,

. The plaintiffs have failed to meet

this burden. As discussed above, the plaintiffs have failed to

identify any misrepresentation or false statement attributable

to SLS. They have similarly failed to identify any statement

15 made by SLS that was true at the time it was made but became

erroneous or was discovered to be false before the parties

entered into the 2014 modification agreement. The plaintiffs

have therefore failed to demonstrate that a trier of fact could

reasonably resolve this claim in their favor.

The plaintiffs appear to contend that, before entering into

the 2014 modification, SLS had an obligation to correct the

plaintiffs’ mistaken belief that $102,535.12 had been forgiven

under the 2012 modification. This argument is premised on

plaintiffs’ counsel’s hypothesis at the hearing that the

plaintiffs sent both the notated and non-notated versions of the

2014 modification agreement to SLS, thereby putting SLS on

notice of their mistaken belief. Even assuming SLS received

both copies, however, this does not create a triable good faith

and fair dealing claim. The above precedent only contemplates a

party being obligated to correct an error when that party is

somehow responsible for causing that error in the first place.

See, e.g., Bursey,

. The plaintiffs have not

identified any evidence supporting a conclusion that their

misunderstanding here with regards to the loan forgiveness was

somehow caused by SLS. Nor have they identified any precedent

supporting broader liability under the covenant of good faith

and fair dealing for any contracting party that fails to correct

a misapprehension on the part of another party to that contract.

16 Cf. L'Esperance v. HSBC Consumer Lending, Inc., No. 11-cv-555-

LM,

, at *18 (D.N.H. June 12, 2012) (noting that

“it would appear that for pre-formation misrepresentation to be

a breach of the implied covenant of good faith and fair dealing,

the misrepresentation must have been made with scienter”).

Thus, their good faith and fair dealing claim cannot survive on

this basis.5

In sum, there is no genuine dispute of material fact in the

record that would allow the plaintiffs to go to trial on their

good faith and fair dealing claim. SLS’s motion for summary

judgment is accordingly granted as to Count III.

Conclusion

A trier of fact might reasonably conclude, based on the

5 Notably, the plaintiffs have not brought a claim seeking to void or rescind the 2014 modification based on their mistaken belief with regard to loan forgiveness. This is perhaps unsurprising, given that in the absence of this modification, the parties would be subject to the 2012 modification, and there is no dispute in the record that the plaintiffs were in default of that modification. See Elias Aff. ¶ 14 (admitting that the plaintiffs were more than three months behind on their payments under the 2012 modification at the time they started sending payments to SLS).

Additionally, at the hearing plaintiffs’ counsel characterized the notated version of the 2014 modification agreement as a “counteroffer,” which he conceded he had no evidence SLS ever accepted. This effectively negated any allegation in the plaintiffs’ written filings that the notated version of 2014 modification agreement was the operative version based on the plaintiffs’ understanding as to forgiveness of the $102,535.12. 17 record, that the plaintiffs harbored certain mistaken beliefs

when they entered into the 2014 modification. But a party’s

mistaken belief alone does not establish a triable claim for

negligent misrepresentation or breach of the covenant of good

faith and fair dealing. Here, despite the plaintiffs’ beliefs,

the undisputed facts in the record fail to sustain either claim.

SLS’s motion for summary judgment, doc. no. 30, is accordingly

granted.

In light of this determination, SLS’s motion to amend its

answer to the amended complaint (doc. no. 45) is denied as moot.

The clerk of the court shall enter judgment in accordance with

this order and close the case.

SO ORDERED.

__________________________ Andrea K. Johnstone United States Magistrate Judge

April 5, 2017

cc: Keith A. Mathews, Esq. Christopher J. Fischer, Esq.

18