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Penney v. Deutsche Bank National Trust Co.

United States District Court, D. Massachusetts

March 15, 2017

GERARD M. PENNEY, et al., Plaintiffs



         Plaintiffs Gerard and Donna Penney (individually, “Gerard” and “Donna, ” and collectively, “Plaintiffs”) filed suit against Deutsche Bank National Trust Company (the “Bank”), in its capacity as the trustee for the certificate holders of a mortgage-backed securities trust that holds the mortgage to the Plaintiffs' home located at 34 Anchor Drive, Sandwich, Massachusetts (the “Property”), and Ocwen Loan Servicing, LLC (“Ocwen”), the servicer of the loan for the Plaintiff's home (collectively, the “Defendants”). This suit arises out of the threatened foreclosure of the Property.

         Now pending before this Court is the Defendants' Motion to Dismiss for failure to state a claim [ECF No. 26], the Defendants' Motion to Strike Gerard's affidavit and exhibits attached to Plaintiffs' opposition to the motion to dismiss [ECF No. 33], and the Plaintiffs' request for a preliminary injunction, made in the Amended Complaint [ECF No. 21 at ¶ 83(i)]. For the reasons discussed below, the Court GRANTS in part and DENIES in part the Defendants' motion to strike and Defendants' motion to dismiss, and DENIES the Plaintiffs' request for a preliminary injunction.


         The following facts are taken from Plaintiffs' Amended Complaint [ECF No. 21 (hereinafter, the “Complaint”)] and supplemented by materials incorporated into the Complaint. See Rodi v. S. New England Sch. of L., 389 F.3d 5, 12 (1st Cir. 2004). The Plaintiffs are a married couple living in Sandwich, Massachusetts. Complaint at ¶¶ 1-2. On or about April 7, 1997, Donna and Gerard received the Property as grantees by a quitclaim deed and took title as tenants by the entirety. Id. at ¶ 5. On or about August 27, 2003, a Durable Power of Attorney was recorded in the Barnstable County Registry of Deeds, appointing Gerard as Donna's attorney-in-fact. Id. at ¶ 6. On or about July 25, 2005, Gerard executed an “Adjustable Rate Note, ” (the “Note”) with a “Balloon Note Addendum” (the “Addendum”) with H&R Block Mortgage Corporation as the lender. Id. at ¶ 8. This Note was for a 30-year, $405, 000 loan, which would reach maturity in August 2035. Id.; [ECF No. 27-1 at 2]. Gerard simultaneously executed a Mortgage on the Property as security for the Note.[1] Complaint at ¶ 12. It is not apparent from the pleadings why Gerard obtained this loan.

         Gerard signed the Mortgage on behalf of Donna, including an annotation that the execution on her behalf was pursuant to a Power of Attorney dated March 20, 2003. Id. at ¶¶ 12- 15; see also [ECF No. 27-2 at 11]. Donna did not personally sign either the Note or the Mortgage, and was not involved in the application process for the loan. Id. at ¶¶ 14, 15. Plaintiffs allege that Gerard was told he had to sign Donna's name on the Mortgage to receive the loan. Id. at ¶ 15. The Plaintiffs further allege that there was no Power of Attorney dated March 20, 2003, but state that a Durable Power of Attorney was recorded on August 27, 2003. Complaint at ¶¶ 6- 7. On or about October 6, 2006, Gerard executed a “Declaration of Homestead” for the Property in his sole capacity and recorded it in the Barnstable County Registry of Deeds. Id. at ¶ 16.[2]

         In May 2011, Donna was declared disabled. Id. at ¶¶ 6, 12. That same year, Gerard faced financial difficulties and fell behind on the mortgage payments. Id. at ¶ 17. The servicer on the loan, which the Court infers to be Ocwen, informed Gerard that he needed to apply for a loan modification under “the settlement relating to the Massachusetts Attorney General and that his loan would be included in the settlement.” Id. at ¶ 18. Gerard applied for a loan modification. Id. The Bank commenced foreclosure proceedings on October 16, 2012, and scheduled a foreclosure sale for November 14, 2012. Id. at ¶ 19. It is not clear what happened on that foreclosure sale date, although there is no indication that the Plaintiffs were foreclosed upon or lost their home. On September 3, 2013, Ocwen offered Gerard a loan modification. Id. at ¶ 20. Gerard responded that he could not make the loan payments under the offered modification because the monthly payment amount would equal his entire monthly income. Id. Ocwen agreed to reconsider the loan modification if Gerard submitted an updated income statement. Id. at ¶ 21. Gerard submitted the required paperwork. Id. On August 14, 2014, Ocwen wrote to Gerard that he had been denied a modification of his loan for failing to submit documentation in a timely manner. Id. at ¶ 22. The Plaintiffs allege that Ocwen represented to Gerard that he would be approved for a loan modification. Id. at ¶ 26. On February 12, 2016, the Bank's attorneys wrote to the Plaintiffs informing them that it intended to put the Property up for auction on March 9, 2016 at 2:00 PM. [ECF No. 13 at 20]. It is not clear what happened on that date, although it appears from the most recently amended complaint, filed on June 16, 2016, that the Plaintiffs had not been foreclosed on as of that date.

         On March 2, 2016, Gerard and Donna filed suit in the Barnstable County Superior Court in Massachusetts against the Bank. [ECF No. 13 at 18].[3] They simultaneously filed a motion for a temporary restraining order and preliminary injunction to stop the imminent foreclosure of the Property. [ECF Nos. 1-3 at 5, 13 at 15, 20]. The hearing in state court on the motion for a temporary restraining order or preliminary injunction was scheduled for March 8, 2016. [ECF No. 13 at 13-14]. On March 8, 2016, the Bank removed the case from state court to this Court. Id. at 24. Plaintiffs filed an amended complaint on June 16, 2016. [ECF No. 21]. This Complaint includes a request for a temporary restraining order or preliminary injunction. Id. at ¶ 83(i). On July 18, 2016, the Defendants filed a motion to dismiss all counts in the Complaint for failure to state a claim [ECF No. 26], which the Plaintiffs opposed [ECF No. 31]. In support of their opposition to the motion to dismiss, the Plaintiffs also filed an affidavit from Gerard and copies of mortgage-related documents. [ECF Nos. 32, 32-1, 32-2]. On August 10, 2016, the Defendants filed a motion to strike the affidavit and mortgage-related documents [ECF No. 33], which the Plaintiffs opposed [ECF No. 37].

         In their Complaint, the Plaintiffs allege the following causes of action: Declaratory Judgment on numerous grounds (Count I); breach of contract (Count II); breach of the implied covenant of good faith and fair dealing (Count III); negligent and intentional infliction of emotional distress (Count IV); violation of federal and state debt collection practice laws (Count V); common law recoupment (Count VI); and recoupment and adjustment of the loan for the Property pursuant to Massachusetts General Laws chapter 140D (Count VII). [ECF No. 21]. The Defendants' motion to dismiss seeks dismissal of all seven counts. [ECF No. 26].


         To evaluate a complaint in the context of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) (“Rule 12(b)(6)”), the Court first “disregard[s] statements in the complaint that merely offer ‘legal conclusion[s] couched as . . . fact[ ]' or ‘threadbare recitals of the elements of a cause of action.'” Rodriguez-Ramos v. Hernandez-Gregorat, 685 F.3d 34, 40 (1st Cir. 2012) (quoting Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d 1, 12 (1st Cir. 2011)). Then, all “remaining, non-conclusory allegations are entitled to a presumption of truth, and we draw all reasonable inferences therefrom in the pleader's favor.” Id. The “make-or-break standard” in evaluating the complaint “is that the combined allegations, taken as true, must state a plausible, not a merely conceivable, case for relief.” Id. (quoting Sepulveda-Villarini v. Dep't of Educ. of P.R., 628 F.3d 25, 29 (1st Cir. 2010)).

         In deciding a Rule 12(b)(6) motion, a court is ordinarily limited to “the allegations contained within the four corners of the plaintiff's complaint.” Young v. Lepone, 305 F.3d 1, 10- 11 (1st Cir. 2002). A court may, however, consider documents “outside of the pleadings where they are undisputed, central to plaintiffs' claims, and sufficiently referred to in the complaint or incorporated into the movant's pleadings.” Gilmore, 535 F.3d at 52; see also Young, 305 F.3d at 11. “When, as now, a complaint's factual allegations are expressly linked to-and admittedly dependent upon-a document (the authenticity of which is not challenged), that document effectively merges into the pleadings and the trial court can review it in deciding a motion to dismiss under Rule 12(b)(6).” Beddall v. State St. Bank and Trust Co., 137 F.3d 12, 17 (1st Cir. 1998); see also Claudio-de León v. Sistema Universitario Ana G. Méndez, 775 F.3d 41, 46 (1st Cir. 2014); Carrero-Ojeda v. Autoridad De Energía Eléctrica, 755 F.3d 711, 716-17 (1st Cir. 2014). The Mortgage, Note, and Addendum are central to the Plaintiffs' claims and referred to in the Complaint. There is no dispute as to the authenticity of the copies of the Mortgage, Note, and Addendum attached to the Defendants' motion to dismiss. Therefore, the Court may refer to the Mortgage, Note, and Addendum when ruling on the Defendants' motion to dismiss.


         a. The Defendants' Motion to Strike

         The Defendants moved to strike [ECF No. 33] the affidavit written by Gerard and accompanying exhibits pertaining to the mortgage of the Property that were filed with the Plaintiffs' opposition to the motion to dismiss [ECF Nos. 32, 32-1, 32-2]. The Defendants argue that the affidavit amends the Complaint without complying with Federal Rule of Civil Procedure 15(a) (“Rule 15(a)”). In opposition to the motion to strike, the Plaintiffs argue that the motion should be summarily dismissed for failure to comply with the local rules and that the affidavit should not be dismissed because it only clarifies the pleadings.

         Although the Court may use certain documents to supplement the factual allegations of the complaint on a motion to dismiss, see Butler v. Balolia, 736 F.3d 609, 611 (1st Cir. 2013), Gerard's affidavit does not fall within this narrow category of documents. See U.S. Bank Nat'l Ass'n v. James, No. 09-89-P-S, 2009 WL 2448578, at *3-4 (D. Me. Aug. 9, 2009) (striking affidavit attached to opposition to motion to dismiss because it was not a document the court could review at that stage of the case). Rather, Gerard's affidavit touches on many of the allegations from the Complaint and effectively functions as an amendment to the Complaint. Rule 15(a) lays out the procedure a party must follow to amend a complaint before trial. It states that “a party may amend its pleading only with the opposing party's written consent or the court's leave.” Fed.R.Civ.P. 15(a)(2). Plaintiffs have obtained neither the opposing party's written consent nor this Court's leave. Accordingly, the Defendants' motion to strike is granted as to the affidavit.[4]

         The Court will not, however, strike Exhibit B attached to the affidavit. Exhibit B contains documents relating to the Mortgage that were already filed by the Defendants as exhibits to their motion to dismiss. Compare [ECF Nos. 27-1, 27-2] with [ECF Nos. 32-2]. Exhibit A will be struck because it was not referred to in the Complaint and is not susceptible to judicial notice. Accordingly, the Defendants' motion to strike is denied as it pertains to Exhibit B, but granted as to Exhibit A.

         b. Count II (Breach of Contract)

         Plaintiffs argue two theories of breach of contract: first, that the Defendants breached the contract memorialized by the Note and Addendum, and second, that they also breached agreements made during the loan modification negotiations. Complaint at ¶¶ 42-44. Specifically, Plaintiffs allege that “the addendum and the Note taken together did create a right for Gerard Penney to pay the loan in full on the maturity date, or in the alternative for the twelve months preceding the maturity date and the actions of the Bank and its agent's breached this right.” Id. at ¶ 43. The Plaintiffs also argue that Ocwen breached agreements it reached with Gerard during the loan modification process. Id. at ¶ 44. The Defendants assert that the Plaintiffs do not properly allege the existence of a contract that allows them to default and remain in default until maturity or one that entitles them to a loan modification. [ECF No. 27 at 7-8].

         Plaintiffs do not dispute that Massachusetts law governs the construction of the contracts in this case. See Wilson v. HSBC Mortg. Servs., 744 F.3d 1, 5 (1st Cir. 2014) (applying Massachusetts law when parties did not dispute that “Massachusetts law applies to all substantive issues in th[e] case”); [ECF No. 27-2 at 5]. “In order to state a viable breach of contract claim under Massachusetts law, plaintiffs must prove that [1] a valid, binding contract existed, [2] the defendant breached the terms of the contract, and [3] the plaintiffs sustained damages as a result of the breach.” Brooks v. AIG SunAmerica Life Assur. Co., 480 F.3d 579, 586 (1st Cir. 2007); see also Bulwer v. Mount Auburn Hosp., 46 N.E.3d 24, 39 (Mass. 2016).

         Courts may examine a contract's terms at the motion to dismiss stage to determine if the plain terms of the contract contradict a plaintiff's allegations. See Young v. Wells Fargo Bank, N.A., 717 F.3d 224, 232 (1st Cir. 2013) (examining contract's plain terms to determine that plaintiff failed to state a breach of contract claim based on the particular theory advanced); see also Clark v. Janssen Pharms., Inc., 606 F. App'x 592, 594 (1st Cir. 2015) (affirming district court's dismissal of a contract suit pursuant to Rule 12(b)(6) when the plain terms of the contract undermined the plaintiff's cause of action); Amerifirst Bank v. TJX Cos. Inc. (In re TJX Cos. Retail Sec. Breach Litig.), 564 F.3d 489, 499-500 (1st Cir. 2009) (same); Henning v. Wachovia Mortg., FSB, 969 F.Supp.2d 135, 147 (D. Mass. 2013) (reasoning that “[w]hen such documents [mortgage and note] contradict allegations in the complaint, the documents trump the allegations, ” and dismissing breach of contract claim where allegation was “flatly contradicted by the terms of the mortgage and note”); Suthers v. Amgen, Inc., 441 F.Supp.2d 478, 484 (S.D.N.Y. 2006).

         i. The breach of contract claim based on ...

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