Ouch v. Federal National Mortgage Ass'n
799 F.3d 62
| 1st Cir. | 2015Background
- Ouch and Hanna are borrowers who defaulted on mortgage loans securitized into trusts; servicers paid delinquency advances to trustees and initiated foreclosures.
- The loans involved FNMA and non-FNMA trust agreements, with servicers acting as intermediaries between borrowers and trustees.
- Ouch alleged under Massachusetts UCC that delinquency advances were payments on the debt, defeating default and rendering foreclosures improper.
- The district court denied leave to amend Ouch's complaint and dismissed Hanna's complaint with prejudice; appeals were consolidated.
- The court's analysis focused on whether the servicers acted with the intention to satisfy the debt, under Massachusetts law, to determine if the advances were payments 'on behalf of' borrowers.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Do delinquency advances count as payments on behalf of borrowers? | Ouch contends advances were payments to satisfy debt. | Defendants say advances are not payments on behalf of borrowers and were temporary cash-flow measures. | No; advances were not made with the intention to satisfy the debt. |
| Do proposed amendments plausibly state a claim after Twombly/Isthmian standard? | Ouch argues amendments would state a valid claim based on intent to pay debt. | Defendants contend amendments still fail to allege plausible intent to pay the debt. | No plausible claim; district court did not err in denying amendment. |
| Was Hanna's dismissal with prejudice proper? | Hanna argued for reconsideration or dismissal without prejudice based on the same theory as Ouch. | Defendants rely on the same reasoning as Ouch to support dismissal with prejudice. | Affirmed; Hanna's dismissal with prejudice was proper. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility pleading standard)
- United States v. Isthmian Steamship Co., 359 U.S. 314 (U.S. 1959) (intent to satisfy the debt governs payment doctrine)
- Luckenbach v. W.J. McCahan Sugar Refining Co., 248 U.S. 139 (U.S. 1918) (whether transfer operates as payment depends on party intent)
- Farmers Ins. Exch. v. RNK, Inc., 632 F.3d 777 (1st Cir. 2011) (contract language expresses parties' intent; plain language governs)
- Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282 (1st Cir. 2013) (Massachusetts law applied to contract interpretation in loan-privity context)
- Lister v. Bank of Am., 790 F.3d 20 (1st Cir. 2015) (references to standards for pleading and amendment)