Lath v. PennyMac Loan Services LLC et al

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Sanjeev Lath
v. 	Case No. 18-cv-928-PB
PennyMac Loan Services LLC
REPORT AND RECOMMENDATION
Pro se plaintiff Sanjeev Lath moves to supplement his
Amended Complaint. 	Doc. 29. 	Defendant PennyMac Loan Services
objects. 	Lath’s motion has been referred to the undersigned
magistrate judge for a report and recommendation. 	As discussed
below, the court recommends that the district judge deny the
motion.
Background
In his Amended Complaint, Lath alleged that he owned a
condominium unit in a building in Manchester, New Hampshire. 	In
2017, during the period when Lath owned the unit, the City of
Manchester found that the unit was in violation of several
provisions of the City of Manchester Housing Code (the “Housing
Code”). 	PennyMac foreclosed on the unit in March 2018.
Lath brought claims for a declaratory judgment (Count 1);
conversion (Counts 2 and 5); trespass (Count 3); and unjust
enrichment (Count 4). 	PennyMac answered the complaint and filed
a motion to dismiss as to Counts 1, 2, and 3. 	The motion to
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dismiss was granted as to Count 1 and denied as to Counts 2 and
3.
In his proposed supplemented complaint Lath alleges that in
October 2017, “the Manchester District Court issued a temporary
order prohibiting Lath to reside at his unit” so long as there
was a Housing Code prohibition on occupancy. 	Doc. 29-1 ¶ 19.
Lath also alleges that he moved out of the unit after PennyMac
foreclosed on it in March 2018.
Lath alleges that he continued to pay assessment fees,
which were charged to him by the unit’s homeowners’ association.
In the proposed supplemented complaint, Lath contends that these
payments were, in function, rent payments which created a
landlord-tenant relationship between him and PennyMac. 	Doc. 29-
1 ¶¶ 10-15. 	Based on that alleged landlord-tenant relationship,
Lath seeks to supplement his Amended Complaint with new claims
against PennyMac: breach of the covenant of quiet enjoyment and
breach of the warranty of habitability (labelled together as
Count 5)1 and constructive eviction (Count 6).
Discussion
PennyMac objects to Lath’s proposed supplement to the
Amended Complaint on the grounds that it is futile and that it
1 Between his Amended Complaint and his proposed
supplemented complaint, Lath has two counts enumerated as “Count
5.”
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is procedurally improper.2 	Lath filed a reply.3 	As discussed
further below, it is recommended that the district judge deny
Lath’s motion to supplement his complaint because it is futile.
A. 	Standard of Review
“On motion and reasonable notice, the court may, on just
terms, permit a party to serve a supplemental pleading setting
out any transaction, occurrence, or event that happened after
the date of the pleading to be supplemented.” 	Fed. R. Civ. P.
15(d). 	Leave to supplement pleadings should be freely given
“absent an adequate basis to deny amendment such as futility,
bad faith, undue delay or a dilatory motive.” 	Noonan v.
Wonderland Greyhound Park Realty LLC, 2011 WL 1232990, at *1 (D.
Mass. Mar. 30, 2011); see also Fed. R. Civ. P. 15(a).4
A proposed supplemented complaint is futile if it would
fail to state a claim upon which relief could be granted. 	See
Glassman v. Computervision Corp., 90 F.3d 617, 623 (1st Cir.
2 Because it is recommended that the district judge find
that the supplemented complaint is futile regardless of whether
it is proper under Federal Rule of Civil Procedure 15, the court
does not address PennyMac’s or Lath’s arguments on that subject.
3 Lath attached several exhibits to his reply (doc. no. 37).
Because PennyMac’s objection to Lath’s motion relates to the
futility of the supplemented pleading offered by Lath, the court
does not consider the exhibits presented by Lath in its analysis
under Rules 12(b)(6) and 15. 	See Fed. R. Civ. P. 12(d).
4 Motions to amend and motions to supplement are treated
under the same standard. 	See Alabama v U.S. Army Corps of
Engineers, 382 F. Supp. 2d 1301, 1309 (N.D. Ala. 2005).
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1996). 	The court applies the same standard as it applies to
motions to dismiss under Federal Rule of Civil Procedure
12(b)(6). 	Id.
The court accepts all well-pleaded facts as true and
resolves all reasonable inferences in the plaintiff’s favor.
See AER Advisors, Inc. v. Fidelity Brokerage Servs., LLC, 921
F.3d 282, 283 (1st Cir. 2019). 	The court, however, disregards
conclusory allegations. 	Manning v. Boston Med. Ctr. Corp., 725
F.3d 34, 43 (1st Cir. 2013). 	To determine whether a claim for
relief is stated, the court should use its “judicial experience
and common sense,” but it should also avoid disregarding a
factual allegation merely because actual proof of the alleged
facts is improbable. 	Id. (quoting Ashcroft v. Iqbal, 556 U.S.
662, 679 (2009)). 	Simply put, the complaint must allege
“factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged[.]” 	Iqbal, 556 U.S. at 678 (citing Bell Atlantic Corp.
v. Twombly, 550 U.S. 544, 556 (2007)).
B. 	Breach of Covenant of Quiet Enjoyment and Warranty of
Habitability (Count 5)
In Count 5 of his proposed supplemented complaint, Lath
alleges that PennyMac, as his landlord, breached the covenant of
quiet enjoyment under RSA 540-A and violated an implied warranty
of habitability.
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1. 	Breach of Covenant of Quiet Enjoyment
RSA 540-A:2 forbids a landlord from “willfully violat[ing]
a tenant’s right to quiet enjoyment of his tenancy or
attempt[ing] to circumvent lawful procedures for eviction
pursuant to RSA 540.” 	RSA 540-A:2. 	PennyMac argues that it
cannot be held liable under RSA 540-A:2 because it is not Lath’s
landlord. 	Lath responds that PennyMac is his landlord because
the homeowners’ association’s assessment fees he paid were, in
function, rental payments.
Lath does not allege that he had a lease with PennyMac for
the unit. 	Potentially, a landlord-tenant relationship can arise
by operation of law if the alleged landlord demanded or accepted
rent from the would-be tenant. 	See Evans v. J Four Realty, LLC,
164 N.H. 570, 572-73 (2013); see also RSA 540-A:1 (defining
“landlord” as “an owner, lessor or agent thereof who rents or
leases residential premises . . . .”). 	Here, the homeowners’
association’s assessment fees cannot be construed as rental
payments to PennyMac, as they were demanded by the homeowners’
association, not PennyMac.
Lath points to RSA 356-B:46-a, which permits a homeowners’
association to collect past-due fees from rent paid from a
tenant to a landlord. 	RSA 356-B:46-a, however, has no relevance
to the circumstances alleged by Lath. 	Here, there was no
allegation that Lath paid rent to PennyMac, only that Lath paid
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assessment fees directly to the homeowners’ association. 	Lath
also contends that he had an implied duty to pay “rent” under
the Condominium Act, RSA chapter 356-B, or under the
circumstances. 	This argument does not aid Lath, however,
because PennyMac neither accepted nor demanded rent from him.
See Evans, 164 N.H. at 572-73.
Because PennyMac is not Lath’s landlord, Lath cannot bring
a claim for breach of the covenant of quiet enjoyment against
it. 	See RSA 540-A:2. 	Therefore, the district judge should find
that the claim is futile.
2. 	Breach of Implied Warranty of Habitability
Lath contends that, even if he cannot bring a claim against
PennyMac as a landlord under RSA 540-A:2, he can bring a claim
for breach of implied warranty of habitability as a tenant at
sufferance. 	See Crowley v. Fraizer, 147 N.H. 387, 391 (2001)
(“A defect that renders premises unsafe or unsanitary, and thus
unfit for living therein, constitutes a breach of the implied
warranty of habitability.”).
Lath is not a tenant at sufferance. 	“New Hampshire law
considers a homeowner who remains in a home lost to foreclosure
to be a tenant at sufferance . . . .” 	Bradley v. Wells Fargo
Bank, N.A., 2015 WL 5054584, at *3 (Aug. 26, 2015) (emphasis
added). 	But Lath alleges in his proposed supplemented complaint
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that he did not reside at the unit after the foreclosure sale.
Doc. 29-1 ¶ 23. 	Therefore, he cannot be a tenant at sufferance.
Even if Lath could claim a status as a tenant at
sufferance, New Hampshire case law indicates that no implied
warranty of habitability exists where there were no rental
payments made or demanded and where there was never a lease
agreement. 	See Kline v. Burns, 111 N.H. 87, 92 (1971) (“[I]n a
rental of an apartment as a dwelling unit, be it a written or
oral lease, for a specified time or at will, there is an implied
warranty of habitability by the landlord that the apartment is
habitable and fit for living.”). 	Further, the Housing Code
violations – and Manchester’s prohibition on his residency at
the unit based on those violations – were known to Lath, yet he
claims he began a tenancy at sufferance anyway. 	In these
circumstances, Lath has no claim to breach of implied warranty
of habitability. 	See id. at 93 (noting that a tenant can waive
a claim to breach of implied warranty of habitability).
C. 	Constructive Eviction (Count 6)
In Count 6 of his proposed supplemented complaint, Lath
alleges that PennyMac constructively evicted him from the unit
because it failed to remedy the Housing Code violations after
the foreclosure sale. 	New Hampshire prohibits the use of self-
help remedies to force a former owner out of a foreclosed-upon
property. 	E.g., Greelish v. Wood, 154 N.H. 521, 527 (2006).
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“[T]he critical question facing a factfinder in a wrongful post-
foreclosure eviction claim is whether the purchaser’s post-
foreclosure conduct evinces a wrongful ‘course of conduct
designed to force [the former homeowner] to leave’ the property
. . . .” 	Bradley, 2015 WL 5054584, at *3 (alteration in
original) (quoting Greelish, 154 N.H. at 522).
In his Amended Complaint, Lath alleged that he owned the
unit at the time the Housing Code violations arose. 	He still
owned the unit when the City of Manchester prohibited him from
residing at the unit due to the violations. 	Therefore, under
Lath’s own allegations, PennyMac had nothing to do with the
Housing Code violations or with Manchester’s prohibition on his
residency at the unit. 	On this basis, it cannot be reasonably
inferred that PennyMac engaged in a wrongful course of conduct
designed to force Lath to leave the property. 	Accordingly, the
district judge should find that Lath’s constructive eviction
claim is futile.
Conclusion
For the foregoing reasons, the court recommends that the
district judge deny Lath’s motion to supplement his Amended
Complaint (doc. no. 29).
Any objections to this Report and Recommendation must be
filed within fourteen days of receipt of this notice. 	See Fed.
R. Civ. P. 72(b)(2). 	The fourteen-day period may be extended
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upon motion. 	Failure to file specific written objections to the
Report and Recommendation within the specified time waives the
right to appeal the district court’s order. 	See Santos-Santos
v. Torres-Centeno, 842 F.3d 163, 168 (1st Cir. 2016); Fed. R.
Civ. P. 72(b)(2).
__________________________
Andrea K. Johnstone
United States Magistrate Judge
August 1, 2019
cc: 	Sanjeev Lath, pro se
Kevin P. Polansky, Esq.
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