MacKenzie v. Flagstar Bank, FSB

United States Court of Appeals
For the First Circuit

No. 13-1236

LYNNE MACKENZIE and JAMES MACKENZIE,

Plaintiffs, Appellants,

v.

FLAGSTAR BANK, FSB,

Defendant, Appellee,

HARMON LAW OFFICES, P.C.,

Defendant.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Marianne B. Bowler, U.S. Magistrate Judge]

Before

Howard, Selya, and Stahl,
Circuit Judges.

Christopher R. Whittingham for appellants.
Carol E. Kamm, with whom Jamie L. Kessler and Donn A. Randall
were on brief, for appellee.

December 30, 2013
 STAHL, Circuit Judge. Appellants Lynne and James

MacKenzie ("MacKenzies") filed an amended complaint alleging eleven

counts of state law violations related to the decisions of Flagstar

Bank, FSB ("Flagstar") to deny them a loan modification under the

Home Affordable Modification Program ("HAMP") and to foreclose on

their home.1 The district court dismissed the complaint. For the

following reasons, we affirm.

I. Background

The MacKenzies own property located at 277 Williams

Street in North Dighton, Massachusetts ("Property"). On May 24,

2007, they gave a promissory note ("2007 Note") in the amount of

$275,877.00 at the interest rate of 6.5% to Bankstreet Mortgage,

LLC ("Bankstreet") secured by a mortgage on the Property ("2007

Mortgage"). The MacKenzies executed the 2007 Mortgage with

Mortgage Electronic Registration Systems, Inc. ("MERS") as the

nominee for the lender. The 2007 Mortgage granted the right of

assignment and allowed for the severability of the mortgage and the

note.

Bankstreet assigned the 2007 Note to Flagstar. Flagstar

signed a Servicer Participation Agreement ("SPA") with Fannie Mae

(acting as the agent of the United States Department of Treasury),

agreeing to participate in HAMP. SPAs require loan servicers to

1
Harmon Law Offices, P.C. ("Harmon") was a defendant in the
case below, but it is not a party to this appeal.

-2-
offer loan modifications and foreclosure prevention services

pursuant to HAMP guidelines.

On July 21, 2009, the MacKenzies and Flagstar executed a

loan modification agreement ("2009 Agreement") reducing the

interest rate to 5.75%, extending the maturity date, and

capitalizing unpaid interest to arrive at a principal balance of

$279,575.23. The 2009 Agreement identifies the 2007 Mortgage as

the contract that it "amends and supplements." On October 31,

2010, the MacKenzies submitted an application to Flagstar for a new

modification. Flagstar denied that application on April 14, 2011.

On April 19, 2011, the MacKenzies filed another application with

Flagstar, this time for a loan modification pursuant to HAMP.

On May 3, 2011, MERS assigned to Flagstar the 2007

Mortgage as modified by the 2009 Agreement. The MacKenzies allege

on the basis of a loan investigation that the 2007 Mortgage had

been securitized into a Lehman Brothers trust prior to the

assignment. On May 11, 2011, Harmon filed a notice with the

Commonwealth of Massachusetts Land Court on behalf of Flagstar

claiming authority to foreclose on the Property.

Thereafter, Flagstar inexplicably began pursuing two

contradictory courses of action. Despite the May 11 notice, on

August 31, 2011, Flagstar evaluated the MacKenzies for a loan

modification under the HAMP guidelines and determined that they

were eligible. Nevertheless, Harmon sent the MacKenzies a notice

-3-
of foreclosure sale on October 4, 2011, stating that Flagstar would

conduct the sale on or after November 3, 2011. On October 19,

2011, the MacKenzies filed a complaint in the Massachusetts

Superior Court seeking injunctive relief to prevent the

foreclosure. On November 2, 2011, Flagstar sent the MacKenzies a

HAMP modification offer, but still scheduled a foreclosure sale for

November 16. On November 8, 2011, Flagstar "closed" the HAMP

modification offer.2 It then removed the pending state court case

to federal court on November 14, 2011, on the basis of diversity

jurisdiction. To date, as far as the record before us shows, a

foreclosure sale has not taken place.

On February 10, 2012, the MacKenzies served Flagstar with

a notice to rescind the 2009 Agreement. Flagstar did not accept

the notice as a valid recission. The MacKenzies filed an Amended

Complaint on February 14, 2012, raising eleven state law claims.

Flagstar filed a motion to dismiss and a request for declaratory

judgment, and the MacKenzies filed a motion for partial summary

judgment. The district court granted the motion to dismiss and

2
It is not clear from the record if Flagstar "closed" the
offer because the MacKenzies rejected it or for some other reason.
In the Amended Complaint, the MacKenzies alleged that the written
modification offer required them to make a previously undisclosed
initial payment of $8,634.58. According to the MacKenzies,
"Flagstar maliciously intended that [they] be unable to afford or
fulfill the terms of the modification offer with the lump sum
payment requirement." These allegations raise the inference that
the MacKenzies rejected the November 2 offer because they could not
afford the initial payment.

-4-
denied the request for declaratory judgment and the motion for

partial summary judgment. The MacKenzies appeal the dismissal.

II. Analysis

The MacKenzies state on appeal that they "do not press

Counts I, II, III, VI, VIII, and XI." The remaining counts are

breach of contract, based on violations of the implied covenant of

good faith and fair dealing (Count IV); violation of the

Massachusetts Consumer Credit Cost Disclosure Act ("MCCCDA"),

Mass. Gen. Laws ch. 140D, § 10 (Count V); rescission (Count VII);

negligence (Count IX); and promissory estoppel (Count X).

A. Implied Covenant of Good Faith (Count IV)

In Count IV, the MacKenzies allege that Flagstar

"breached the implied obligation of good faith under the

agreements," and "breached the implied covenant that neither party

shall do anything which will destroy or injure the other party's

right to receive the fruits of the contract." It is not clear on

the face of the complaint whether the MacKenzies intended to raise

these allegations pursuant to their mortgage with Flagstar or as

third-party beneficiaries of the SPA between Flagstar and the

federal government. The MacKenzies do not entirely clarify their

position on appeal. On one hand, they state that they "were third-

party beneficiaries of the SPA agreement [between the government]

and the servicer, Flagstar." They rely almost exclusively on In re

Cruz, however, in which the court denied injunctive relief as to a

-5-
third-party beneficiary claim but granted it with respect to a

claim for breach of good faith, on the basis of the duty mortgagees

owe to mortgagors. 446 B.R. 1, 4–5 (Bankr. D. Mass. 2011).

The district court rejected both possibilities. It held

that the MacKenzies are not third-party beneficiaries of the

agreements between Flagstar and the government. With respect to

the mortgage, it found that "Plaintiffs fail to allege any specific

duty or right that was violated by Flagstar in the 2009 agreement

between [the MacKenzies] and Flagstar." It observed further that

"under Massachusetts case law, absent an explicit provision in the

mortgage contract, there is no duty to negotiate for loan

modification once a mortgagor defaults" (internal quotation marks

omitted). Instead, a mortgagee's duty of good faith when acting

under a "power of sale" generally only extends to "reasonable

efforts to sell the property for the highest value possible"

(internal quotation marks omitted). Therefore, it concluded that

the MacKenzies had not stated a claim for breach of the covenant of

good faith and fair dealing.

1. Third-Party Beneficiary Claim

The district court was correct in deciding that the

MacKenzies are not third-party beneficiaries of the SPA between

Flagstar and the government. It is a well-established principle

that "[g]overnment contracts often benefit the public, but

individual members of the public are treated as incidental

-6-
beneficiaries [who may not enforce a contract] unless a different

intention is manifested." Restatement (Second) of Contracts § 313

cmt. a (1981); see also Interface Kanner, LLC v. JPMorgan Chase

Bank, N.A., 704 F.3d 927, 933 (11th Cir. 2013); Klamath Water Users

Protective Ass'n v. Patterson, 204 F.3d 1206, 1211 (9th Cir. 1999)

("Parties that benefit from a government contract are generally

assumed to be incidental beneficiaries, and may not enforce the

contract absent a clear intent to the contrary."); Price v. Pierce,

823 F.2d 1114, 1121 (7th Cir. 1987).

District courts in this circuit, relying on Klamath, have

applied this general principle in the specific context of disputes

over HAMP modifications and have concluded that borrowers are not

third-party beneficiaries of agreements between mortgage lenders

and the government. See Dill v. Am. Home Mortg. Servicing, Inc.,

935 F. Supp. 2d 299, 302 (D. Mass. 2013); Teixeira v. Fed. Nat'l

Mortg. Ass'n, No. 10-cv-11649, 2011 WL 3101811, at *2 (D. Mass.

July 18, 2011) ("Although HAMP was generally designed to benefit

homeowners, it does not follow necessarily that homeowners like the

plaintiffs are intended third-party beneficiaries of the contracts

between servicers and the government."); Markle v. HSBC Mortg.

Corp. (USA), 844 F. Supp. 2d 172, 179-82 (D. Mass. 2011); Blackwood

v. Wells Fargo Bank, N.A., No. 10-cv-10483, 2011 WL 1561024, at *6

(D. Mass. Apr. 22, 2011) ("Massachusetts courts have consistently

rejected the argument that there is a private right of action under

-7-
HAMP by intended third party beneficiaries."); Speleos v. BAC Home

Loans Servicing, L.P., 755 F. Supp. 2d 304, 310 (D. Mass. 2010).

The reasoning of these district courts is persuasive. In

Teixeira, the court observed that the SPA in that case "does not

give any indication that the parties [to it] intended to grant

qualified borrowers the right to enforce the contract." 2011 WL

3101811, at *2. Instead, the SPA "appears to limit who can enforce

the contract's terms: 'The Agreement shall inure to the benefit of

and be binding upon the parties to the Agreement and their

permitted successors-in-interest.'" Id. The SPA in this case

contains identical language. While it is true that intended

beneficiaries "need not be specifically named in the contract,"

they must "fall[] within a class clearly intended by the parties to

benefit from the contract." Markle, 844 F. Supp. 2d at 181

(internal quotation marks omitted). The decision of the

contracting parties here specifically to identify themselves and

their successors as the contract's beneficiaries evinces their

intention to exclude third-party beneficiaries. Moreover, as the

court in Markle noted:

If plaintiffs were third-party beneficiaries, every
homeowner-borrower in the United States who has defaulted
on mortgage payments or is at risk of default could
become a potential plaintiff. Finding such a broad and
indefinite . . . class of third-party beneficiaries would
be inconsistent with the clear intent standard for
government contracts set by the Restatement.

-8-
Id. at 182. Thus, the broadly accepted principle set forth in the

Restatement, from which we see no reason to deviate, applies

squarely to the circumstances of this case and forecloses the

MacKenzies' argument that they are third-party beneficiaries of the

SPA.3

2. Flagstar's Duty of Good Faith as Mortgagee

Despite their explicit claim to be third-party

beneficiaries of the SPA, the MacKenzies rely almost entirely on

Cruz, in which the court found that borrowers are not third-party

beneficiaries of SPAs, but nevertheless found a substantial

likelihood that the plaintiff would prevail on his claim for breach

of good faith. 446 B.R. at 3–5. Oddly, the court in that case

relied on Speleos, which rejected the good faith claim but allowed

a negligence claim to proceed. 755 F. Supp. 2d at 310–12. The

court in Cruz held that the "plaintiff's allegation . . . that

Wells Fargo breached its duty of good faith and reasonable

diligence is comparable to the negligence claim in Speleos." 446

3
The MacKenzies point to Parker v. Bank of Am., NA, a
Massachusetts state court case that found a borrower to be a third-
party beneficiary of an SPA between a mortgagee and the government.
No. 11-cv-1838, 2011 WL 6413615, at *7 (Mass. Super. Ct. Dec. 16,
2011). The court in Parker relied on Marques v. Wells Fargo Home
Mortgage, Inc., a district court case from California that reached
the same conclusion. No. 09-cv-1985, 2010 WL 3212131, at *3 (S.D.
Cal. Aug. 12, 2010). The court in Parker recognized, however, that
"every court in the District of Massachusetts (and as far as I
know, elsewhere) to consider the issue has rejected the Marques
holding." 2011 WL 6413615, at *7. Given the persuasiveness of the
authority to the contrary, the holding in Parker does not change
our analysis.

-9-
 B.R. at 4. The court did not explain, however, how the two

claims were comparable.

A more clearly reasoned case that reaches the same

conclusion as Cruz is Blackwood. 2011 WL 1561024, at *5. In that

case, the court pointed out that "[i]t is familiar law that a

mortgagee in exercising a power of sale in a mortgage must act in

good faith and must use reasonable diligence to protect the

interests of the mortgagor." Id. (quoting W. Roxbury Co-op. Bank

v. Bowser, 87 N.E.2d 113, 115 (Mass. 1949)) (internal quotation

marks omitted). It decided not to dismiss the breach of good faith

claim, because if "the defendants foreclosed when they lacked the

legal authority to do so, they acted in violation of their

obligation to protect the mortgagor." Id.

The problem with the decision in Blackwood is that "[t]he

concept of good faith 'is shaped by the nature of the contractual

relationship from which the implied covenant derives,' and the

'scope of the covenant is only as broad as the contract that

governs the particular relationship.'" Young v. Wells Fargo Bank,

N.A., 717 F.3d 224, 238 (1st Cir. 2013) (quoting Ayash v.

Dana–Farber Cancer Inst., 822 N.E.2d 667, 684 (Mass. 2005)). Here,

the 2007 Mortgage as modified by the 2009 Agreement is the only

contract between the MacKenzies and Flagstar. And as the district

court correctly pointed out, nothing in the mortgage imposes a duty

on Flagstar to consider a loan modification prior to foreclosure in

-10-
the event of a default. See Peterson v. GMAC Mortg., LLC, No. 11-

cv-11115, 2011 WL 5075613, at *6 (D. Mass. Oct. 25, 2011) ("Under

Massachusetts case law, absent an explicit provision in the

mortgage contract, there is no duty to negotiate for loan

modification once a mortgagor defaults." (citing Carney v. Shawmut

Bank, N.A., No. 07-P-858, 2008 WL 4266248, at *3 (Mass. App. Ct.

2008))).

It is true that mortgagees have "an independent duty at

common law to protect the interests of the mortgagor in exercising

a power of sale in a mortgage." Teixeira, 2011 WL 3101811, at *2.

"Typically, this entails mak[ing] reasonable efforts to sell the

property for the highest value possible." Armand v. Homecomings

Fin. Network, No. 12-cv-10457, 2012 WL 2244859, at *5 (D. Mass.

June 15, 2012) (alteration in original) (internal quotation marks

omitted). Thus, in the event of a foreclosure, the existence of a

duty of good faith is tied directly to the mortgagee's contractual

right to exercise a power of sale. But the implied covenant of

good faith "cannot 'create rights and duties not otherwise provided

for in the existing contractual relationship.'" Young, 717 F.3d at

238 (quoting Ayash, 822 N.E.2d at 684). It would therefore be an

error to extend the implied covenant to encompass a duty to modify

-11-
(or consider modifying) the loan prior to foreclosure, where no

such obligation exists in the mortgage.4

Because the MacKenzies are not third-party beneficiaries

of the SPA, and because Flagstar had no duty to modify the

MacKenzies' loan prior to foreclosure, the district court correctly

dismissed Count IV.

B. MCCCDA (Count V) and Rescission (Count VII)

The MCCCDA provides borrowers in certain consumer credit

transactions, including the refinancing of a mortgage, with a

right of rescission and requires lenders to make certain mandatory

disclosures related to the terms of the loan. Mass. Gen. Laws ch.

140D, § 10. Section 10(f) of the statute extends the borrower's

right of rescission to a period of four years in the event that the

lender fails to make the required disclosures. Id. The MacKenzies

4
The Plaintiff's argument on appeal appears to conflate the
implied convenant of good faith and fair dealing, which attaches to
every contract, with the particular duty of a mortgagee to act in
good faith and use reasonable diligence in exercising its power of
sale. The two doctrines are distinct and have separate
underpinnings. Compare Sandler v. Silk, 198 N.E. 749, 751 (Mass.
1935) (explaining that the duty of good faith and reasonable
diligence "extends . . . not only [to] the mortgagor" but also to
"those holding junior encumbrances or liens") with Ayash v. Dana-
Farber Cancer Inst., 822 N.E.2d 667, 684 (Mass. 2005) (noting that
the "scope of the covenant [of good faith and fair dealing] is only
as broad as the contract that governs the particular
relationship"). Although we appreciate this distinction, we
nevertheless analyze the issues together because that is how they
arose in the context of this case. In the future, however, we wish
to make clear that the better practice is for litigants to
acknowledge the distinct nature of each doctrine and present their
arguments accordingly.

-12-
allege that the 2009 Agreement is a refinancing subject to the

terms of the MCCCDA and that Flagstar failed to make the required

disclosures. Accordingly, they seek to exercise their right of

rescission within the four-year period under section 10(f).

The district court held that "the 2009 [A]greement . . .

does not fall within the provisions of the MCCCDA." It pointed to

section 32.20 of title 209 of the Code of Massachusetts

Regulations, which provides that:

A refinancing occurs when an existing obligation that was
subject to 209 CMR 32.00 is satisfied and replaced by a
new obligation undertaken by the same consumer. A
refinancing is a new transaction requiring new
disclosures to the consumer. The new finance charge
shall include any unearned portion of the old finance
charge that is not credited to the existing obligation.
The following shall not be treated as a refinancing:

. . .

(b) A reduction in the annual percentage rate with a
corresponding change in the payment schedule.

. . .

(d) A change in the payment schedule or a change in
collateral requirements as a result of the consumer's
default or delinquency . . . .

209 Mass. Code Regs. 32.20; see also In re Washington, 455 B.R.

344, 350 (Bankr. D. Mass. 2011) (applying this section of the

regulations to the MCCCDA). The district court found that the 2009

Agreement was not a refinancing because it did no more than lower

the interest rate and change the payment schedule.

-13-
 In their initial brief, the MacKenzies sidestep section

32.20. They argue instead that the 2009 Agreement is not exempt

from disclosure requirements under section 10(e)(1)(B) of chapter

140D of the Massachusetts General Laws, which excludes refinancings

from the purview of the MCCCDA under certain circumstances. That

argument is beside the point. As the district court held, the

modification was not a refinancing and, thus, section 10(e)(1)(B)

does not apply. In their reply brief, however, the MacKenzies

contend that the 2009 Agreement was a refinancing because in

addition to lowering the interest rate and extending the payment

schedule, it involved a new lender and a new amount of principal.

But these points do not undermine the district court's decision.

First, Flagstar is not a "new lender"; it is the assignee

of Bankstreet, the original lender. It is axiomatic that an

"assignee 'stands in the shoes' of the assignor." R.I. Hosp. Trust

Nat'l Bank v. Ohio Cas. Ins. Co., 789 F.2d 74, 81 (1st Cir. 1986)

(quoting 10 W. Jaeger, Williston on Contracts § 432, at 182 (3d ed.

1967)). Through the assignment, Flagstar obtained Bankstreet's

rights and obligations under the existing mortgage, including the

right to reach an agreement with the MacKenzies to modify the terms

of the loan. See Bank of Am., N.A. v. WRT Realty, L.P., 769 F.

Supp. 2d 36, 39 (D. Mass. 2011) (holding that the assignee of a

note and mortgage "enjoys all rights the assignor possessed"). The

fact that Flagstar exercised that right does not mean that the

-14-
"existing obligation . . . [was] satisfied and replaced by a new

obligation." 209 Mass. Code Regs. 32.20

Second, the change in the amount of principal was the

result of the capitalization of unpaid interest. In other words,

the entire principal balance under the 2009 Agreement was debt owed

under the original mortgage; it was not a new obligation replacing

the original obligation. See Sheppard v. GMAC Mortg. Corp., 299

B.R. 753, 762–64 (Bankr. E.D. Pa. 2003) (holding that the

capitalization of unpaid debt does not constitute a refinancing

under the Truth In Lending Act, 15 U.S.C. §§ 1601–1667f, on which

the MCCCDA is modeled, because the new obligation did not

completely replace the old one).

Thus, under the terms of section 32.20, the 2009

Agreement is not a refinancing. It is not subject to the

disclosure requirements of the MCCCDA, and the MacKenzies have no

right to rescind it under the statute. Therefore the district

court properly dismissed Counts V and VII.

C. Negligence (Count IX)

In Count IX, the MacKenzies claim that Flagstar "owed

[them] a duty . . . as third-party beneficiaries of the [SPA]

between a loan servicer and the federal government," and that

Flagstar "breached their obligations under the HAMP and other

related government programs which the SPA incorporates." To state

a claim for negligence under Massachusetts law, a plaintiff must

-15-
allege: "(1) a legal duty owed by defendant to plaintiff; (2) a

breach of that duty; (3) proximate or legal cause; and (4) actual

damage or injury." Primus v. Galgano, 329 F.3d 236, 241 (1st Cir.

2003) (internal quotation marks omitted). The district court

correctly concluded that the MacKenzies' allegations fall short

because as a matter of law Flagstar does not owe the MacKenzies any

legal duty under the circumstances of this case.

As we have said above, the MacKenzies are not third-party

beneficiaries of the SPA between Flagstar and the government.

Therefore, they cannot base their negligence claim on that

argument. The MacKenzies appear to argue in the alternative that

violations of HAMP give rise to a claim for negligence per se.

That argument fails as well.

"Generally, a duty of care arises from the relationship

of parties to one another: landlord and tenant, doctor and patient,

driver and passenger, etc." Brown v. Bank of Am. Corp., No. 10-cv-

11085, 2011 WL 1311278, at *4 (D. Mass. Mar. 31, 2011). The

relationship between a borrower and lender does not give rise to a

duty of care under Massachusetts law. See Corcoran v. Saxon Mortg.

Servs., Inc., No. 09-cv-11468, 2010 WL 2106179, at *4 (D. Mass. May

24, 2010) ("[A] lender owes no general duty of care to a

borrower."); Murray v. Am.'s Servicing Co., No. 200701716, 2009 WL

323375, at *5 (Mass. Super. Ct. Jan. 12, 2009). "[T]he existence

of a positive regulation imposing a duty on one actor does not by

-16-
itself create a similar duty as a matter of state tort common law."

Brown, 2011 WL 1311278, at *4.

The MacKenzies correctly point out that "violations of a

statute may constitute evidence of negligence," and that "[a] claim

for negligence based on a statutory or regulatory violation can

survive even where there is no private cause of action under that

statute or regulation." Both of those propositions are true, but

neither directly addresses the dispositive issue here: statutory or

regulatory violations cannot give rise to a negligence claim when

there is no independent duty of care between the parties. See

Seidel v. Wells Fargo Bank, N.A., No. 12-cv-10766, 2012 WL 2571200,

at *4 (D. Mass. July 3, 2012) ("HAMP . . . does not create an

independent duty for mortgag[ee]s where no other basis for that

duty exists. Thus, plaintiff's claim for negligence fails

. . . .") (internal citations omitted); Brown, 2011 WL 1311278, at

*4 ("[W]hile violation of a regulation such as HAMP may provide

evidence of a breach of a duty otherwise owed, it does not create

such a duty in the first place."); Markle, 844 F. Supp. 2d at 185.

Where an independent duty of care exists, the violation of a

statute or regulation can provide evidence of a breach of that

duty, even if the statute or regulation itself does not create a

private right of action. But in the absence of an independent

duty, a plaintiff cannot proceed with a negligence claim based

-17-
solely on a statutory or regulatory violation. Thus, the district

court properly dismissed Count IX.

D. Promissory Estoppel (Count X)

In Count X, the MacKenzies allege that "Borrowers and

Flagstar entered into an agreement that a foreclosure sale could be

conducted according to the terms of the Power of Sale in the 2009

Mortgage Loan and/or the 2007 Deed of Trust." According to the

MacKenzies, "[i]mplicit in these contracts is an agreement by

Flagstar that all documents recorded by Flagstar relative to the

2007 Deed of Trust or the 2009 Mortgage Loan shall be free from

fraud and shall be reliable." The MacKenzies claim that they

"relied on this promise of Flagstar to their detriment, and have

been damaged as a result of the failure of the [sic] Flagstar to

keep its promise."

Under Massachusetts law, to state a claim for promissory

estoppel "a plaintiff must allege that (1) a promisor makes a

promise which he should reasonably expect to induce action or

forbearance of a definite and substantial character on the part of

the promisee, (2) the promise does induce such action or

forbearance, and (3) injustice can be avoided only by enforcement

of the promise." Dill, 935 F. Supp. 2d at 304 (internal quotation

marks omitted). The district court dismissed Count X, finding that

the MacKenzies had recited the elements of a promissory estoppel

claim, but had "fail[ed] to articulate the facts to support th[ose]

-18-
elements." Specifically, "Plaintiffs fail[ed] to identify the

particular promise that they relied upon and the manner in which

such reliance was to their detriment."

Looking solely at the Amended Complaint, the district

court's decision is plainly correct. These allegations are a

textbook illustration of the type of "formulaic recitation of the

elements of a cause of action" that falls below the standard of

Federal Rule of Civil Procedure 8(a)(2). Ashcroft v. Iqbal, 556

U.S. 662, 678 (2009). On appeal, however, the MacKenzies try to

recharacterize their claim. Rather than focusing on implicit

contractual promises not to engage in fraud, they now argue that

Flagstar "engag[ed] in a course of conduct them [sic] for over two

years leading them to believe that the result would be a HAMP

modification." According to the MacKenzies, they "detrimentally

relied upon Flagstar's promises by, in part, awaiting determination

of HAMP eligibility and loan modification" instead of "seek[ing]

alternatives to foreclosure."

"[I]t is a virtually ironclad rule that a party may not

advance for the first time on appeal either a new argument or an

old argument that depends on a new factual predicate." Cochran v.

Quest Software, Inc., 328 F.3d 1, 11 (1st Cir. 2003). But even

considering these new arguments on their own terms, they fare no

better than the allegations below.

-19-
 The MacKenzies claim that "Flagstar strung [them] along

. . . from October 2009 through the fall of 2011 only to present

them with an offer just days before the foreclosure sale," thereby

creating a "reasonable expectation" that Flagstar would modify the

loan instead of pursuing foreclosure. These circumstances, the

MacKenzies argue, are similar to those in Dixon v. Wells Fargo

Bank, N.A., where the district court allowed a promissory estoppel

claim to survive a motion to dismiss. 798 F. Supp. 2d 336, 340–52

(D. Mass. 2011). Dixon is distinguishable from the present case,

however.

In Dixon, "Wells Fargo convinced the Dixons that to be

eligible for a loan modification they had to default on their

[mortgage] payments." Id. at 346. But once the Dixons defaulted,

instead of modifying the loan, the bank initiated foreclosure

without any warning. Id. at 339. "[I]t was only because they

relied on this representation and stopped making their payments

that Wells Fargo was able to initiate foreclosure proceedings."

Id. at 346. Thus, in that case, the plaintiffs alleged both a

"specific promise" and a "legal detriment that . . . was a direct

consequence of their reliance on [that] promise." Id. at 343.

Here, the MacKenzies have done neither. The fact that

Flagstar considered the MacKenzies for a loan modification multiple

times over a two-year period is not a promise, implicit or

otherwise, to consider them for further loan modifications prior to

-20-
initiating foreclosure. Moreover, the MacKenzies' argument ignores

that Flagstar did in fact offer them a loan modification under HAMP

on November 2, 2011, which they apparently rejected because they

could not afford the initial payment. Thus, even if Flagstar had

made an implicit promise to offer them a loan modification, it

appears to have fulfilled that promise.

Additionally, the MacKenzies have not alleged any facts

that would allow us to infer that their decision not to seek

"alternatives to foreclosure" was detrimental to them. In other

words, there is no reason for us to believe the MacKenzies would

have successfully avoided foreclosure, or been better off in any

way, but for their reliance on Flagstar's supposed promise to

consider them for a loan modification. Therefore, the MacKenzies

have failed to adequately plead the elements of a promissory

estoppel claim, and the district court correctly dismissed Count X.

E. Validity of the Mortgage Assignment to Flagstar

The MacKenzies' final argument asserts that they "have

standing to challenge Flagstar's authority to foreclose on their

home" under Culhane v. Aurora Loan Services of Nebraska, 708 F.3d

282 (1st Cir. 2013). They claim that "the trust into which the

2007 Mortgage Loan was sold and securitized has since been

[d]issolved. Consequently, . . . MERS had nothing to assign to

Flagstar on [the] date of the assignment." The MacKenzies conclude

that "[b]ecause Flagstar received nothing from the assignment it

-21-
has no authority to commence foreclosure proceeding[s] on the

MacKenzies' home."

The MacKenzies are correct that Culhane supports their

standing to challenge the assignment of the mortgage. The

plaintiff in Culhane, however, challenged the assignment under

Massachusetts General Laws chapter 183, section 54B. Id. at

293–94. Here, the factual allegations related to purported defects

in the assignment are not tethered to any legal claim before us on

appeal. In the amended complaint, these allegations appeared in

the context of the MacKenzies' claim for fraud (Count I) and

perhaps (it is not entirely clear) the claim for violations of

Massachusetts General Laws chapter 93A (Count III). The MacKenzies

chose not to pursue those claims on appeal. It is not apparent

that these allegations are relevant to any of the remaining counts.

At oral argument, counsel for the MacKenzies attempted to

find a home for these orphaned allegations by suggesting that they

are related to the negligence claim. But the MacKenzies premise

their negligence claim on Flagstar's alleged failure to follow HAMP

guidelines, not on any defects in the assignment. Furthermore, for

the reasons discussed above, the negligence claim fails because

Flagstar does not owe a duty of care to the MacKenzies. Thus, even

accepting as true the MacKenzies' allegations regarding the

defective assignment, we would not be able to grant any relief,

-22-
because the MacKenzies have not preserved on appeal any legal

theory on which they might recover.

III. Conclusion

For the foregoing reasons, we affirm the district court's

dismissal of the amended complaint.

-23-