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Hosseini v. Capital One, N.A.

United States District Court, D. Massachusetts

November 16, 2016

CAPITAL ONE, N.A., Defendant.


          Judith Gail Dein, United States Magistrate Judge


         This case arises out of the efforts of the plaintiff, Mehdi Hosseini (“Hosseini”), to avoid the foreclosure of his home by obtaining a mortgage loan modification from the defendant, Capital One, N.A. (“Capital One”). Hosseini contends that on May 15, 2015, the parties entered into an oral contract under which Capital One agreed that as long as the plaintiff made three monthly trial period payments on a timely basis, it would provide him with a loan modification under which the outstanding amount of debt would not exceed $1.1 million. He further contends that the defendant breached the agreement by refusing to modify his mortgage loan unless he agreed to pay a principal amount of over $2 million. By his Second Amended Verified Complaint, Hosseini has asserted claims against Capital One for breach of contract (Count I) and for fraud (Count II), and is seeking, among other things, specific performance of the alleged oral agreement and a permanent injunction precluding Capital One from foreclosing on his property without further order of the court.

         The matter is presently before the court on “Capital One, N.A.'s Motion to Dismiss Plaintiff's Second Amended Verified Complaint” (Docket No. 22), by which Capital One is seeking the dismissal of the complaint on the grounds that it fails to state a claim pursuant to Fed.R.Civ.P. 12(b)(6), and that Hosseini has failed to plead fraud under the heightened pleading standard of Fed.R.Civ.P. 9(b). The matter is also before the court on the “Plaintiff's Motion for Preliminary Injunction” (Docket No. 1-6), pursuant to which the plaintiff is seeking an order preliminarily enjoining the defendant and anyone acting on its behalf “from foreclosing, transferring, conveying, assigning, pledging, alienating, hypothecating, encumbering, mortgaging, selling, or in any way diminishing or divesting Plaintiff of the real property located at 225 County Road, Lakeville, Massachusetts.” As described below, this court finds that Hosseini has failed to state a claim with respect to either Count of his complaint, and thus cannot show that he is likely to prevail on the merits of one or more of his claims for purposes of his motion for a preliminary injunction. Accordingly, and for all the reasons detailed herein, the defendant's motion to dismiss is ALLOWED, and the plaintiff's motion for a preliminary injunction is DENIED.


         When ruling on a motion to dismiss, the court must accept as true all well-pleaded facts, and give the plaintiffs the benefit of all reasonable inferences. See Cooperman v. Individual, Inc., 171 F.3d 43, 46 (1st Cir. 1999). “Ordinarily, a court may not consider any documents that are outside of the complaint, or not expressly incorporated therein, unless the motion is converted into one for summary judgment.” Alt. Energy, Inc. v. St. Paul Fire & Marine Ins. Co., 267 F.3d 30, 33 (1st Cir. 2001). “There is, however, a narrow exception ‘for documents the authenticity of which are not disputed by the parties; for official public records; for documents central to plaintiffs' claim; or for documents sufficiently referred to in the complaint.'” Id. (quoting Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993)). Applying these standards to the instant case, the relevant facts are as follows.[1]

         The Parties

         The plaintiff, Hosseini, is an individual who resides in Massachusetts. (Comp. (Docket No. 19) ¶ 2). He is also the former owner of Cross Roads R.V. and Camping (“Cross Roads”), an entity that was in the business of selling new and used recreational vehicles. (Id. ¶ 2). In 2004, Hosseini and his wife, Kim Woodbury (“Woodbury”), purchased a home in Lakeville, Massachusetts (the “Property”). (Id. ¶¶ 2, 4). ING Bank FSB (“ING”) was the holder of the mortgage on the Property. (Id. ¶ 3). On April 22, 2008, Hosseini and his wife refinanced the Property through ING. (Id. ¶ 5). Allegedly, the Property had an appraised value of $2.4 million at the time of the refinancing. (Id.).

         The defendant, Capital One, is a mortgage loan company that maintains its corporate offices in MacLean, Virginia. (Id. ¶ 3). On April 25, 2008, Capital One became the holder of the plaintiff's mortgage as a result of a merger with and/or assignment from ING. (Id.). In this action, Hosseini is attempting to enjoin Capital One from foreclosing on the Property, and compel Capital One to abide by the terms of an alleged oral agreement to reduce the principal amount due on his mortgage by over $925, 000 in connection with the modification of his mortgage loan.

         The Bankruptcy Action

         The plaintiff claims that Cross Roads, and much of the industry in which it operated, suffered near collapse following the financial crisis that hit the country in September 2008. (Id. ¶ 6). As a result, Hosseini allegedly experienced a drastic reduction in income. (Id.). In 2010, Cross Roads and Woodbury filed for bankruptcy protection. (Id.). The following year, Hosseini also filed for bankruptcy protection under Chapter 7 of the United States Bankruptcy Code. (See id.; Def. Exs. D-E). In his bankruptcy petition, Hosseini listed the current value of the Property as $699, 850, and the amount of the “[s]ecured” debt owed to Capital One on the mortgage as $2, 052, 841.01.[2] (Compl. ¶ 7; Def. Ex. A at Attachment 1). On October 24, 2011, the Bankruptcy Court issued a notice to the plaintiff's creditors in which it informed them in relevant part as follows:

There does not appear to be any property available to the trustee to pay creditors. You therefore should not file a proof of claim at this time. If it later appears that assets are available to pay creditors, you will be sent another notice telling you that you may file a proof of claim, and telling you the deadline for filing your proof of claim....

(Def. Ex. E at 2 (emphasis in original)).[3] It is undisputed that Capital One did not file a proof of claim in the bankruptcy action. (Compl. ¶ 7). On August 6, 2012, the Bankruptcy Court discharged the plaintiff's unsecured debt. (Def. Ex. A at Attachment 2). However, Capital One, as a secured creditor, retained its rights in the Property, including its right to pursue foreclosure. See In re Best, 540 B.R. 1, 9 (1st Cir. BAP 2015) (“Fundamentally, a discharge merely releases a debtor from personal liability on the discharged debt; when a creditor holds a mortgage lien or other interest to secure the debt, the creditor's rights in collateral, such as foreclosure rights, survive or pass through the bankruptcy” (quotations and citation omitted)).

         Hosseini's Efforts to Obtain a Loan Modification

         On or about March 31, 2014, Hosseini and his wife received a letter from Harmon Law Offices, P.C. (“Harmon”) notifying them that Harmon had been retained by the defendant to foreclose on the Property. (Compl. ¶ 9; Def. Ex. A at Attachment 3). Therein, Harmon informed the plaintiff that he had defaulted on his mortgage loan, and that

[u]nder the terms of the note and mortgage, there is outstanding through the date of this letter $1, 670, 000.00 in principal and $152, 161.92 in interest and other charges for a total of $1, 822, 161.92. Furthermore, attorney's fees and costs and other charges will continue to accrue pursuant to the terms of the loan documents.

(Def. Ex. A at Attachment 3). Harmon specifically acknowledged that Hosseini had been discharged in a Chapter 7 bankruptcy and was not personally liable for the amount of the outstanding mortgage debt. (Id.). Nevertheless, it stated that Capital One still had the right to foreclose on the Property if the default was not cured. (Id.).

         In response to the threat of foreclosure, Hosseini and Woodbury attempted to work with the defendant in order to find a solution that would enable them to remain in their home, and by December 2014, the plaintiff allegedly had begun the extensive process of applying for a loan modification. (See Compl. ¶¶ 10, 11). According to Hosseini, that process lasted until May 2015, and required him to provide a significant amount of information to Capital One, including appraisals of the Property, insurance records, credit reports, financial statements and other financial documents. (Id. ¶ 11). Furthermore, as part of its review of Hosseini's eligibility for a loan modification, Capital One arranged for a new appraisal of the Property, which was completed on April 1, 2015. (Id. ¶ 12). As of the date of the appraisal, the Property was valued at $1.1 million.[4] (Def. Ex. A at Attachment 6).

         On May 1, 2015, Capital One sent Hosseini and his wife a letter notifying them that they had been approved for two different workout options, a Repayment Agreement and a Capital One Modification Agreement. (Compl. ¶ 13; Def. Ex. F). It further instructed them to review the enclosed information describing the terms and conditions of each option, sign the letter next to one of the workout options “indicating your acceptance[, ]” and return a copy of the signed agreement to Capital One by May 18, 2015. (Def. Ex. F at 1). Attached to the letter under the heading, “Capital One Modification Program Approval Information” were several pages of information regarding the loan modification option. (Id. at 7-9). On the first page, Capital One stated, “[y]ou're approved to enter into a trial period plan under the Capital One Modification Program. This is the first step toward qualifying for more affordable mortgage payments.” (Id. at 7). It then explained that Hosseini would need to make three separate payments of $4, 554.10 by June 1, 2015, July 1, 2015 and August 1, 2015 respectively. (Id.). Moreover, Capital One stated that the existing loan requirements would remain in effect throughout the trial period, and that the mortgage loan would not be modified if the trial period plan (“TPP”) payments were untimely or the plaintiff failed to fulfill any other terms of the TPP. (Id.).

         The remaining pages contained additional information regarding the TPP and the Capital One Modification Program. (Id. at 8-9). Of particular significance, the defendant informed the plaintiff that his loan would not be modified until he made all of his TPP payments on time and both parties executed a modification agreement. (Id. at 8). It also informed him that it would not engage in foreclosure activities during the trial period, but that foreclosure activities “may be resumed if you fail[ ] to comply with the terms of the plan or don't qualify for a permanent modification.” (Id. at 9). Furthermore, Capital One emphasized the fact that the existing loan documents would remain in effect throughout the trial period. (Id.). Specifically, under the topic, “Additional Trial Period Plan Information and Legal Notices, ” Capital One emphasized as follows:

Your current loan documents remain in effect; however, you may make the trial period payment instead of the payment required under your loan documents:
• You agree that all terms and provisions of your current mortgage note and mortgage security instrument remain in full force and effect and you will comply with those terms. You also agree that nothing in the Trial Period Plan shall be understood or construed to be a satisfaction or ...

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