Case 1:18-cv-00911-SM Document 18 Filed 02/14/19 Page 1 of 20

UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Robert and Debra Carideo, Plaintiffs

v. Case No. 18-cv-911-SM Opinion No.

PennyMac Loan Services, LLC, Defendant

O R D E R

In January of 2018, defendant, PennyMac Loan Services, LLC

(“PennyMac”) foreclosed the mortgage deed to plaintiffs’ home.

Seven months later, plaintiffs, Robert and Debra Carideo,

brought this action seeking to recover for various injuries and

harms they say PennyMac inflicted upon them. PennyMac moves the

court to dismiss all claims advanced against it, asserting that

none states a viable cause of action. For the reasons given,

that motion is granted in part and denied in part.

Standard of Review

When ruling on a motion to dismiss under Fed. R. Civ. P.

12(b)(6), the court must “accept as true all well-pleaded facts

set out in the complaint and indulge all reasonable inferences

in favor of the pleader.” SEC v. Tambone,

(1st Cir. 2010). Although the complaint need only contain “a Case 1:18-cv-00911-SM Document 18 Filed 02/14/19 Page 2 of 20

short and plain statement of the claim showing that the pleader

is entitled to relief,” Fed. R. Civ. P. 8(a)(2), it must allege

each of the essential elements of a viable cause of action and

“contain sufficient factual matter, accepted as true, to state a

claim to relief that is plausible on its face,” Ashcroft v.

Iqbal,

(2009) (citation and internal

punctuation omitted).

In other words, “a plaintiff’s obligation to provide the

‘grounds’ of his ‘entitlement to relief’ requires more than

labels and conclusions, and a formulaic recitation of the

elements of a cause of action will not do.” Bell Atl. Corp. v.

Twombly,

(2007). Instead, the facts alleged

in the complaint must, if credited as true, be sufficient to

“nudge[] [plaintiff’s] claims across the line from conceivable

to plausible.”

. If, however, the “factual

allegations in the complaint are too meager, vague, or

conclusory to remove the possibility of relief from the realm of

mere conjecture, the complaint is open to dismissal.” Tambone,

.

Background

The pertinent facts, as stated in plaintiffs’ amended

complaint and as they appear in recorded, publicly-available

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documents, are largely undisputed. In April of 2012, plaintiffs

obtained a loan in the principal amount of $192,632. As

security for that loan, they conveyed a first mortgage deed to

Mortgage Electronic Registration Systems, Inc., as nominee for

the lender, Alpine Mortgage, LLC. That mortgage deed was duly

recorded in the Hillsborough County Registry of Deeds. Three

years later, in May of 2015, that mortgage was assigned to

PennyMac. The assignment was also duly recorded in the registry

of deeds.

After plaintiffs defaulted on the promissory note, PennyMac

instituted foreclosure proceedings. Plaintiffs did not seek to

enjoin those proceedings. See generally N.H. Rev. Stat. Ann.

(“RSA”) 479:25, II(c). On January 11, 2018, PennyMac (through a

licensed auctioneer) conducted a foreclosure sale, at which

PennyMac was the high bidder. It purchased the property for

$197,019.70 and recorded the foreclosure deed in the registry of

deeds. At the time, the town of Pelham, New Hampshire, assessed

the value of the property at $269,000. Amended Complaint at

para. 19. Thus, the sale price at the foreclosure auction was

approximately 73 percent of assessed value.1

1 Plaintiffs assert, without factual support, that they believe the property might have been worth as much as $300,000.

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Seven months after the foreclosure sale, plaintiffs

instituted this action in state court. Defendant removed the

proceeding to this forum, invoking the court’s diversity

jurisdiction. See

and 1446. See also

.

The parties engaged in informal settlement discussions,

during which former counsel to PennyMac agreed that his client

would review plaintiffs’ application for a “post-foreclosure

loan modification.” Plaintiffs completed and submitted such an

application. Approximately two weeks later, however, current

counsel for PennyMac informed plaintiffs that, “we have

discussed your proposal with our client, but they are not

inclined to review the Plaintiffs for a loan mod post-

foreclosure.” After it became clear that settlement was

unlikely, plaintiffs filed an Amended Complaint. In turn,

PennyMac filed the pending motion to dismiss.

Discussion

As a preliminary matter, the court notes that Plaintiffs’

Amended Complaint contains a count captioned “Fraud, Conversion,

Theft by Deception, Civil RICO,” in which they advance claims

against several individuals and one limited liability company

(the “California Entities”). But, plaintiffs acknowledge that

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they never attempted to serve any of those individuals or the

corporation. See Suggestion of Bankruptcy (document no. 17)

(“[I]t would not make economic sense for the beleaguered

plaintiffs in this case to spend additional money attempting to

serve [the California Entities].”). Plaintiffs have also

informed the court that the California Entities have filed for

bankruptcy protection, in a proceeding currently pending in the

Central District of California. Those parties were never

properly joined as defendants in this proceeding and, should

plaintiffs wish to pursue any claims against them, plaintiffs

must, of course, first seek leave of the bankruptcy court and

obtain relief from the automatic stay in that case. Because the

California Entities were never properly served, all claims

against them are dismissed without prejudice.2

As for PennyMac, plaintiffs’ Amended Complaint (document

no. 9), advances six state common law causes of action. The

court will address each in turn.

2 Although the record is unclear, it seems that the California Entities operated some type of business purporting to assist homeowners who had defaulted on their mortgage loans. Plaintiffs apparently enlisted their services (and paid them a fairly substantial amount of money). Ultimately, however, the California Entities provided no useful assistance to plaintiffs, who now claim they were victims of a fraudulent scheme.

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I. Count 1 - “Plea of Title”

Plaintiffs’ first claim is that PennyMac lacked the legal

authority to foreclose the mortgage. Plaintiffs’ reasoning is,

however, somewhat confusing. They claim that more than three

months after the foreclosure sale occurred, they “received

paperwork [from one of the California Entities] indicating that

the Mortgage was Assigned and [the] Note was and [sic] endorsed

over to West H&A and no longer held by the Defendant PennyMac.”

Amended Complaint at para. 29. See also Exhibit C to Amended

Complaint, “Assignment of Mortgage” (document no. 9-3)

(purporting to have been executed on March 19, 2018 - well after

the foreclosure sale). Perhaps not surprisingly, however, the

Amended Complaint fails to describe how a mortgage assignment,

prepared (but never recorded) after the foreclosure sale, could

have affected PennyMac’s authority to foreclose the mortgage

deed. Moreover, plaintiffs appear to acknowledge that the

untimely mortgage assignment was prepared without lawful

authority as part of the fraud scheme to which they say they

fell victim (as discussed in their claims against the California

entities). See, e.g., Amended Complaint at para. 73 (“The

[California Entities] lied to the Carideos, took their money,

took their mortgage payments, gave them false hope, false

promises, and also, although it remains to be proved, it appears

that they also provided fraudulent mortgage and note documents

6 Case 1:18-cv-00911-SM Document 18 Filed 02/14/19 Page 7 of 20

and caused the Carideos’ home to be taken by PennyMac.”)

(emphasis supplied).

As PennyMac points out: (1) the documents of record make

clear that PennyMac was the lawful holder of the mortgage deed

to plaintiffs’ home when it conducted the foreclosure sale; and

(2) a post-foreclosure, fraudulent effort to transfer that

mortgage deed (or the promissory note it secured) to a third

party is of no legal moment in this case.

Moreover, because plaintiffs failed to exercise their

statutory right to seek to enjoin the foreclosure sale before it

occurred, they are now barred from challenging PennyMac’s legal

authority to conduct that foreclosure. See RSA 479:25, II

(failure to institute a pre-foreclosure petition to enjoin the

foreclosure sale “shall thereafter bar any action or right of

action of the mortgagor based on the validity of the

foreclosure.”). See also Bank of N.Y. Mellon v. Dowgiert,

(2016) (failure of mortgagor to seek pre-

foreclosure injunction under RSA 479:25, II bars subsequent

challenge to mortgagee’s authority to foreclose the mortgage

deed); Brown v. Wells Fargo Home Mortg.,

,

, at *3 (D.N.H. June 20, 2016) (“Because the Browns did

not petition to enjoin the foreclosure sale before it occurred,

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to the extent that any of their claims challenge the

foreclosure’s validity and that they seek to have the sale

undone, the Browns are barred from doing so.”) (footnote

omitted).

Count 1 of plaintiffs’ amended complaint fails to state a

viable cause of action and must, therefore, be dismissed.

II. Count 2 - “Promissory or Equitable Estoppel”

The claim advanced in count two of plaintiffs’ amended

complaint is somewhat atypical. In it, plaintiffs assert that

during settlement negotiations aimed at resolving this

litigation, PennyMac’s legal counsel represented that PennyMac

was “willing to review” plaintiffs’ application for a loan

modification. Amended Complaint at para. 36. See also Exhibit

B to Amended Complaint (document no. 9-2), E-mail from

PennyMac’s former counsel, dated September 18, 2018.

Approximately ten days later, however, PennyMac’s counsel

informed plaintiffs that “We discussed your proposal with our

client, but they are not inclined to review the Plaintiffs for a

loan mod post-foreclosure.” E-mail dated October 8, 2018

(document no. 12-6). Shortly thereafter, settlement

negotiations broke down and plaintiffs amended their complaint

to include this claim based upon PennyMac’s representation that

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it was “willing to review” plaintiffs’ settlement proposal -

that is, that the parties modify the underlying loan on which

plaintiffs had defaulted.3

Despite the caption to count two - “Promissory or Equitable

Estoppel” - plaintiffs advance only a claim for the former.

Apparently recognizing that the facts of this case do not

support a claim for “equitable estoppel,” they no longer press

that claim and do not object to its dismissal. See generally

Great Lakes Aircraft Co. v. City of Claremont,

,

(1992) (discussing the distinction

between equitable estoppel and promissory estoppel).

In support of their promissory estoppel claim, plaintiffs

assert that they detrimentally relied upon PennyMac’s

representation that, in an effort to settle this litigation, it

was “willing to review” their proposal (and application) to

modify their loan post-foreclosure. As evidence of their

3 At this preliminary stage of the litigation, the record is, not surprisingly, sparse. But, the amount PennyMac paid at the foreclosure sale - $197,019.70 - suggests that it bid the entire amount then outstanding on plaintiffs’ loan. Indeed, plaintiffs themselves refer to that amount as the “alleged deficiency” on the loan. Amended Complaint at para. 19. It is, therefore, unclear what a “post-foreclosure loan modification” would involve, since the foreclosure sale appears to have extinguished plaintiffs’ loan obligations and there is no deficiency amount still owed.

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detrimental reliance, plaintiffs say they “maintained this

lawsuit [which they initiated], and incurred significant

expense, as well as delayed or forewent other actions, in

reliance on that promise.” Amended Complaint at para. 38. They

assert that “PennyMac must be estopped from breaching that

promise, or representation, and should review the Carideos for

loan modification as they say they would.”

at para. 42.

In their opposition to PennyMac’s motion to dismiss,

plaintiffs expound upon that claim, and the factual claims

supporting it, as follows:

Plaintiff’s claim for Promissory Estoppel has merit. PennyMac’s lawyer represented that they “are willing to review” the Carideo’s for modification. Then, [legal counsel] apparently convinced their client otherwise, and breached that promise. It is not only impolite and unreasonable, but also illegal under the law - a promise was made, and relied upon by the Carideos who have now been severely harmed by this ongoing litigation maintained by PennyMac’s successor counsel depriving all parties from any reasonable resolution. Thus, they should be estopped and directed to review the Carideos for modification in good faith on financial terms which appear to leave them qualified.

The promise was both definite and certain - they are willing to review - and the Carideos foreseeably and reasonabl[y] relied on that as any beleaguered homeowner would.

To the extent that there is any question as to those facts, they must be resolved in favor of the Plaintiffs at this nascent Motion to Dismiss stage.

10 Case 1:18-cv-00911-SM Document 18 Filed 02/14/19 Page 11 of 20

Objection to Motion to Dismiss (document no. 13) at 3-4

(emphasis supplied). In short, plaintiffs seem to allege that

PennyMac broke its promise - on which they justifiably relied to

their detriment - that it would (or was willing to) consider

plaintiffs’ proposed settlement offer.

New Hampshire common law provides that, under the doctrine

of promissory estoppel, “a promise reasonably understood as

intended to induce action is enforceable by one who relies upon

it to his detriment or to the benefit of the promisor.” Panto

v. Moore Bus. Forms, Inc.,

(1988) (citing

Restatement (Second) of Contracts § 90 (1981)). See also Great

Lakes Aircraft,

(noting that, in the absence of

an express agreement, the doctrine of promissory estoppel

“serves to impute contractual stature based upon an underlying

promise, and to provide a remedy to the party who detrimentally

relies on the promise.”).

Count 2 of plaintiffs’ amended complaint fails to set forth

the elements of a plausible and viable claim for promissory

estoppel. Among other things, it fails to allege that

plaintiffs reasonably relied to their detriment in any

meaningful way upon the settlement proposal that PennyMac

offered: to consider plaintiffs for a post-foreclosure loan

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modification. See generally Bowser v. MTGLQ Inv'rs, LP,

,

, at *3 (D.N.H. Aug. 11, 2015) (“The

court cannot reasonably infer that the [plaintiffs] could have

avoided foreclosure or would have “been better off in any way,

but for their reliance on [their loan servicer’s] supposed

promise to consider them for a loan modification.”) (quoting

MacKenzie v. Flagstar Bank, FSB,

(1st Cri.

2013) (applying Massachusetts law)). See also Ruivo v. Wells

Fargo Bank, N.A.,

,

, at *5 (D.N.H.

Nov. 19, 2012).

Moreover, the record suggests that PennyMac did “consider,”

but rejected, plaintiffs’ settlement proposal that PennyMac re-

work the loan on terms plaintiffs could afford. See E-mail from

PennyMac’s Legal Counsel dated October 8, 2018 (document no. 12-

6) (noting that counsel discussed plaintiffs’ settlement

proposal with PennyMac, but PennyMac determined that it was not

willing to re-work the terms of plaintiffs’ loan). And, of

course, PennyMac was under no legal obligation to settle this

litigation simply because plaintiffs believed they had offered a

resolution that was fair, just, and equitable. See Plaintiffs’

Memorandum in Opposition (document no. 13) at 1 (despite knowing

that plaintiffs had been “defrauded by a sophisticated

nationwide mortgage scheme . . . and with the knowledge that

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their own agent had authorized a resolution which could have

made everyone whole by way of modification - successor counsel

instead presses forward with this defense blindly pursuing what

may be his legal prerogative, but to their client’s detriment,

to the homeowners’ detriment, to the Investors on the

Note/Mortgage’s detriment.”).

Count 2 of plaintiffs’ amended complaint fails to state a

viable claim for either equitable estoppel or promissory

estoppel and must be dismissed.

III. Breach of Fiduciary Duty

Next, plaintiffs assert that PennyMac breached the

fiduciary duty of due diligence it owed to plaintiffs by

conducting a commercially unreasonable foreclosure sale, at

which it obtained an unreasonably low purchase price.

Specifically, they allege that PennyMac: failed to adequately

establish a pre-foreclosure reserve or “strike” price (it is

unclear whether PennyMac had an appraisal of the property);

neglected to adequately advertise the foreclosure auction and/or

the fact that the initial auction was postponed; conducted a

“deficient” auction; and, finally, sold their home at auction

for an unreasonably low price which deprived them of (what they

claim was) approximately $100,000 of equity in the home.

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Crediting those allegations as true - as the court must at this

stage - they are sufficient (if barely) to state a viable claim

that PennyMac failed to conduct the foreclosure auction in

accordance with its fiduciary obligation to act with due

diligence. See generally Murphy v. Financial Dev. Corp.,

(1985) (“[A] mortgagee executing a power of sale

is bound both by the statutory procedural requirements and by a

duty to protect the interests of the mortgagor through the

exercise of good faith and due diligence.”).4

Parenthetically, the court notes that plaintiffs do not

advance any claim that PennyMac breached its fiduciary duty of

good faith. And, it probably bears noting (just so all parties

are clear on the precise contours of what is being alleged) that

the factual allegations of the amended complaint would not

support a claim that PennyMac breached its duty of good faith.

See generally People’s United Bank v. Mountain Home Developers,

(D.N.H. 2012) (concluding that while

4 PennyMac disputes plaintiffs’ assertions and says the auction was conducted in strict compliance with the terms of the mortgage and all relevant New Hampshire laws governing foreclosure sales, including the obligations borne by foreclosing entities when a previously scheduled foreclosure is postponed. It also disputes plaintiffs’ assertion that the property had a fair market value of at least $300,000. Those, however, are issues more appropriately resolved on summary judgment.

14 Case 1:18-cv-00911-SM Document 18 Filed 02/14/19 Page 15 of 20

plaintiffs stated a viable claim for breach of the duty of due

diligence, they failed to state a claim for breach of the duty

of good faith). See also Murphy,

(“We first

note that the duties of good faith and due diligence are

distinct. One may be observed and not the other, and any

inquiry as to their breach calls for a separate consideration of

each. In order to constitute bad faith there must be an

intentional disregard of duty or a purpose to injure.”)

(citation and internal punctuation omitted).

IV. Count 4 - Unjust Enrichment

Next, plaintiffs assert that PennyMac has been unjustly

enriched by failing to obtain an adequate sale price for

plaintiffs’ home, acquiring title for itself at the foreclosure

sale, and (at least potentially) retaining the ability to sell

the home to a third party at a “significant profit.” Amended

Complaint at para. 57. As the New Hampshire Supreme Court has

observed,

Unjust enrichment is an equitable remedy that is available when an individual receives a benefit which would be unconscionable for him to retain. It is not a boundless doctrine, but is, instead, narrower, more predictable, and more objectively determined than the implications of the words unjust enrichment. One general limitation is that unjust enrichment may not supplant the terms of an agreement. It is a well- established principle that the court cannot allow recovery under a theory of unjust enrichment when

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there is a valid, express contract covering the subject matter at hand. This is so because restitution is subordinate to contract as an organizing principle of private relationships, and the terms of an enforceable agreement normally displace any claim of unjust enrichment within their reach.

Axenics, Inc. v. Turner Constr. Co.,

, 669–70 (2013)

(citations and internal punctuation omitted) (emphasis in

original).

To the extent plaintiffs have any viable claim for unjust

enrichment, it is entirely derivative of their breach of

fiduciary duty claim. That is, plaintiffs can only prevail if

they first demonstrate that PennyMac violated the fiduciary

duties imposed upon mortgagees by the New Hampshire Supreme

Court in Murphy. Nevertheless, at this preliminary stage of the

litigation, the court is inclined to allow plaintiffs to proceed

with their unjust enrichment claim. See generally Riggieri v.

Caliber Home Loans, Inc.,

,

, at *9

(D.N.H. Aug. 3, 2016) (suggesting that under limited

circumstances “a claim for unjust enrichment may be viable,

despite the mortgage agreement, if the defendant obtained title

to the property based on impropriety or misconduct in the

foreclosure proceeding.”). Whether PennyMac engaged in

impropriety or misconduct in the foreclosure proceeding can

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likely be resolved on a more complete record, at summary

judgment.

V. Remaining Claims.

Plaintiffs two remaining claims - negligence (count 5) and

breach of the covenant of good faith and fair dealing (count 6)

- require little discussion. Neither states a viable claim for

relief.

Plaintiffs negligence claim is based upon their assertion

that PennyMac was “negligent” insofar as it failed to give

adequate public notice of its decision to postpone the

originally-scheduled foreclosure sale and failed to sell the

property at a commercially reasonable price. Those duties are

imposed by the New Hampshire Supreme Court’s opinion in Murphy,

New Hampshire statutory law governing foreclosure sales, and,

perhaps, the terms of the mortgage deed itself. See Murphy,

. Plaintiffs have properly pled a breach of

fiduciary duty claim. They do not, however, have an independent

common law claim that, by violating those statutory and/or

fiduciary duties, PennyMac was also negligent.

But, say plaintiffs, PennyMac also breached a duty to

“detect and alert the Carideos to the apparent mortgage fraud of

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[the California Entities].” Amended Complaint at para. 61.

Simply stated, PennyMac had no such duty - whether at common

law, under New Hampshire statutory law, the terms of the

mortgage, or the holding in Murphy. Under the circumstances

pled, plaintiffs have no negligence claim against PennyMac and,

therefore, that count must be dismissed.

Finally, plaintiffs assert that PennyMac violated the

covenant of good faith and fair dealing that is implicit in all

New Hampshire contracts. Specifically, they assert that

PennyMac’s “actions have been patently inconsistent with

fairness, decency and reasonableness.” Amended Complaint at

para. 66. Moreover, say plaintiffs, PennyMac violated that

covenant “by their failure to work with the Plaintiffs and to

obtain an adequate price at auction.”

at para. 67. This

court has previously addressed, and rejected, such claims under

similar circumstances. See, e.g., People’s United Bank,

(discussing conduct that qualifies as a

violation of the duty of good faith). See generally McCarthy v.

WPB Partners, LLC,

,

, at *7 (D.N.H.

Oct. 16, 2017); Sharp v. Deutsche Bank Nat. Tr. Co.,

,

, at *8 (D.N.H. Aug. 11, 2015); Ruivo,

, at *3–4.

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Plaintiffs’ claim that PennyMac violated the covenant of

good faith and fair dealing fails to state a viable claim for

relief and must be dismissed.

Conclusion

For the foregoing reasons, as well as those set forth in

defendant’s legal memoranda, defendant’s motion to dismiss

(document no. 12) is granted in part and denied in part.

Plaintiffs’ claims of “Plea of Title” (count 1),

“Promissory or Equitable Estoppel” (count 2), Negligence (count

5), and Breach of the Covenant of Good Faith and Fair Dealing

(count 6) are all dismissed for failure to state a viable claim

for relief. And, because the California Entities were never

properly served and joined as defendants in this proceeding,

plaintiffs’ claim of “Fraud, Conversion, Theft by Deception,

Civil RICO” (erroneously captioned as count 8) is dismissed

without prejudice.

What remain, then, are plaintiffs’ claims of Breach of the

Fiduciary Duty of Due Diligence (count 3) and, at least

tentatively, Unjust Enrichment (count 4).

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SO ORDERED.

____________________________ Steven J. McAuliffe United States District Judge

February 14, 2019

cc: John F. Skinner, III, Esq. Michael Joseph Reed, Esq. Kevin P. Polansky, Esq.

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