Boudreaux v. Flagstar Bank

Filing 10

ORDER & REASONS: ORDERED that Defendant's Rule 12(b)(6) Motion to Dismiss (Rec. Doc. 5 ) is GRANTED IN PART. FURTHER ORDERED that the motion is GRANTED with respect to Plaintiff's fraud and breach of implied contract claims. FURTHER ORDERED that the motion is DENIED with respect to Plaintiff's breach of contract claim. Signed by Judge Carl Barbier on 10/29/14. (sek)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
BOUDREAUX

CIVIL ACTION

VERSUS

NO: 14-1443

FLAGSTAR BANK

SECTION: “J” (3)

ORDER & REASONS
Before the Court is Defendant Flagstar Bank, FSB (Flagstar)'s
Rule 12(b)(6) Motion to Dismiss (Rec. Doc. 5), Plaintiff Martha
Boudreaux

(Boudreaux)'s

opposition

thereto

(Rec.

Doc.6),

and

Flagstar's reply. (Rec. Doc. 9) Having considered the motion and
memoranda of counsel, the record, and the applicable law, the Court
finds that the motion should be GRANTED IN PART for the reasons set
forth more fully below.
FACTS AND PROCEDURAL BACKGROUND
This litigation commenced when on April 30, 2014, Plaintiff
filed a Petition for Damages in state court. (Rec. Doc. 1-1) In the
petition, Plaintiff alleges that Defendant "engaged in a scheme to
defraud, harass, and intimidate Plaintiff in an attempt to steal
her home" when it negotiated the loan modification with Plaintiff,
induced her to fall behind on her mortgage, and then sought to
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foreclose on her home. Id. at 3.
Anticipating a decrease in income due to her husband's ailing
health, Plaintiff sought a loan modification on her home loan in
2012. Defendant informed her that she was an ideal candidate for a
loan modification because it would allow her to stop making monthly
payments. Id. at 3-4. Plaintiff further alleges that on or about
April 30, 2012, Defendant advised her to cease making monthly
payments because it would make her more likely to qualify for the
modification. Id. at 4. Defendant informed Plaintiff that she
should make two trial payments of $2500, and that these payments
would prevent foreclosure. Id. Plaintiff scheduled the first trial
payment for May 31, 2012. Id. On or about September 2012, however,
Plaintiff

received

"a

notice

that

her

home

was

headed

for

foreclosure" because Plaintiff had not provided the documentation
necessary to receive a modification. Id. At that time, Plaintiff
was

behind

suggestion

on
that

her

mortgage

such

payments

default

was

because

necessary

of

the

bank's

to

obtain

the

modification Plaintiff sought. Id. Plaintiff's husband filed for
bankruptcy on November 7, 2012, to prevent the foreclosure. Id.
Plaintiff alleges that shortly thereafter she received a monthly
statement from the bank that confirmed the loan modification, but
informed Plaintiff that her husband would have to dismiss the
bankruptcy case to process the modification. Id. at 5. Plaintiff
complied with Defendant's additional requests for documentation,

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but Defendant again sent Plaintiff a notice of foreclosure on
February 26, 2013. Id. Subsequently, when Plaintiff attempted to
make payments on her mortgage, Defendant refused to accept them,
which caused Plaintiff to incur further late charges and fees on
her loan. Id. at 6.
Based on these allegations, Plaintiff asserts three causes of
action in her petition. First, Plaintiff states that Defendant
engaged in fraud when it induced Plaintiff to enter into a loan
modification agreement and to stop making payments on the mortgage
contract without ever intending to provide Plaintiff with a loan
modification. Id. at 5. Defendant then sought to foreclose on the
home based upon Plaintiff's failure to make payments. Id. Second,
Plaintiff

alleges

that

Defendant

breached

its

contract

with

Plaintiff by refusing to accept mortgage payments that Plaintiff
made on the home and failing to account for all the payments that
Plaintiff made on the loan. Id. at 6. Third, Plaintiff asserts that
Defendant breached its implied contract with Plaintiff when it set
up two trial payments with Plaintiff but then accelerated payments
owed under the loan and foreclosed on the property. Id. at 7.
Plaintiff contends that these actions caused her to suffer damages,
attorney's fees, costs, and mental and emotional anguish. Id. at 57.
Defendant removed the state action to federal court on June
20, 2014, asserting bankruptcy and diversity jurisdiction. (Rec.

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Doc. 1) On October 2, 2014, Defendant filed its Motion to Dismiss
for Failure to State a Claim. (Rec. Doc. 5) Plaintiff opposed the
motion on October 14, 2014. (Rec. Doc. 6) Defendant filed its reply
on October 21, 2014. (Rec. Doc. 9)
PARTIES' ARGUMENTS
Defendant argues that Plaintiff's breach of contract and fraud
claims should be dismissed because they are barred by the Louisiana
Credit Agreement Statute (LCAS). (Rec. Doc. 5-1, p. 3). According
to the LCAS, "[a] debtor shall not maintain an action on a credit
agreement unless the agreement is [1] in writing, [2] expresses
consideration, [3] sets forth the relevant terms and conditions,
and [4] is signed by the creditor and the debtor." Id. (quoting La.
Rev. Stat. § 6:1122).
modification

would

Defendants assert that the alleged loan

constitute

a

credit

agreement

between

a

creditor and debtor under the Act. Id. As such, Plaintiff cannot
maintain an action based upon the alleged loan modification unless
she shows that the agreement was reduced to writing. Id. Even if
the LCAS does not bar Plaintiff's fraud claim, however, Defendant
argues that it has prescribed. Id.

at 6. Plaintiff's fraud claim

is delictual in nature and therefore a one-year prescriptive period
applies. Id. The period begins to run when the injury or damage is
sustained. Here, even if the second bankruptcy filing is taken as
the date of injury, then Plaintiff's fraud claim prescribed on
April 10, 2014. Id. However, Plaintiff did not file her petition

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for damages until April 30, 2014. Id. at 7. Defendant therefore
stresses that Plaintiff has failed to make out claims for fraud or
breach of contract arising from the loan modification negotiations.
Plaintiff argues that the LCAS does not apply. (Rec. Doc. 6,
p. 4) Plaintiff insists that the LCAS only precludes causes of
action based upon oral credit agreements. Id. Here, however, a
written contract meeting the requirements of the LCAS exists:
Plaintiff's original home mortgage loan. Id. at 6. Plaintiff argues
that each of her causes of action–for fraud, breach of contract,
and breach of implied contract–relate to that original, written
agreement. Id. Plaintiff therefore insists that the LCAS does not
bar her claims. Plaintiff further asserts that her fraud claim has
not prescribed. She agrees that Louisiana's one-year prescriptive
period for delictual actions applies, but disputes the date on
which the period began to run. She asserts that she did not become
aware

that

Defendant

had

no

intention

of

entering

the

loan

modification agreement and, thus, that she had been a victim of
fraud, until "well after" the second bankruptcy petition. She then
filed her petition for damages within one year of when she became
aware of the fraudulent conduct. Plaintiff therefore urges the
Court to deny Defendant's motion to dismiss.
LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal
where a plaintiff fails “to state a claim upon which relief can be

5

granted.” FED. R. CIV. P. 12(b)(6). When considering a motion to
dismiss

pursuant

to

Rule

12(b)(6),

a

court

must

accept

all

well-pled facts as true and must draw all reasonable inferences in
favor of the plaintiff. Lormand v. U.S. Unwired, Inc., 565 F.3d
228, 232–33 (5th Cir.2009); Baker v. Putnal, 75 F.3d 190, 196 (5th
Cir.1996). The Court is not bound, however, to accept as true legal
conclusions couched as factual allegations. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007).
To survive a Rule 12(b)(6) motion to dismiss, the plaintiff
must plead enough facts “to state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citing Twombly, 550 U.S. at 570). A claim is facially plausible
when the plaintiff pleads facts that allow the court to “draw the
reasonable

inference

that

the

defendant

is

liable

for

the

misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).
In order to be deemed legally sufficient, a complaint must
establish more than a “sheer possibility” that the plaintiff's
claims are true. Id. The complaint must contain enough factual
allegations to raise a reasonable expectation that discovery will
reveal evidence of each element of the plaintiff's claim. Lormand,
565 F.3d at 255–57. If there are insufficient factual allegations
to raise a right to relief above the speculative level, or if it is
apparent

from

the

face

of

the

complaint

that

there

is

an

insuperable bar to relief, however, the claim must be dismissed.

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Jones v. Bock, 549 U.S. 199, 215 (2007); Twombly, 550 U.S. at 555;
Carbe v. Lappin, 492 F.3d 325, 328 n. 9 (5th Cir.2007).
DISCUSSION
"The Louisiana Credit Agreement Statute operates as a 'statute
of frauds' for the credit industry." EPCO Carbon Dioxide Prods.,
Inc. v. JP Morgan Chase Bank, NA, 467 F.3d 466, 469 (5th Cir.
2006)(quoting King v. Parish Nat'l Bank, 885 So. 2d 540, 546 (La.
2004)). The LCAS provides, "A debtor shall not maintain an action
on a credit agreement unless the agreement is in writing, expresses
consideration, sets forth the relevant terms and conditions, and is
signed by the creditor and the debtor." LA. REV. STAT. § 6:1122. "A
'creditor' is defined in [Louisiana Revised Statute section] 1121
as 'a financial institution or any other type of creditor that
extends credit or extends a financial accommodation under a credit
agreement with a debtor.'" Jesco Constr. Corp. v. Nationsbank
Corp., 2002-0057, p. 3 (La. 10/25/02); 830 So. 2d 989, 991. The
LCAS defines a credit agreement as “an agreement to lend or forbear
repayment of money or goods or to otherwise extend credit, or make
any other financial accommodation.” Id. (quoting LA. REV. STAT. §
6:1121). Thus, the LCAS "preclude[s] all actions for damages
arising from oral credit agreements, regardless of the legal theory
of recovery." Jenso Constr. Corp. v. Nationsbank Corp., 321 F.3d
501, 502 (5th Cir. 2003). Courts have applied this reasoning to bar
actions

for

damages

arising

from

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oral

forbearance

or

loan

modification negotiations or agreements regardless of the legal
theory of recovery and despite the existence of a written original
loan agreement.

See Hutchinson v JPMorgan Chase Bank, N.A., No.

13-5513, 2013 WL 6502848, at *3 (E.D. La. Dec. 11, 2013)(Feldman,
J.); Loraso v. JP Morgan Chase Bank, N.A., No. 13-4734, 2013 WL
5755638, at *6-7 (E.D. La. Oct. 23, 2013)(Barbier, J.); Landry ex
rel. Landry v. BAC Home Loans Servicing, L.P., No. 12-1046, 2013 WL
1767958, at *4 (E.D. La. Mar. 4, 2013)(Milazzo, J.).
The Court finds that the LCAS applies in this case, and that
it bars Plaintiff's fraud and breach of implied contract claims.
Both of these claims relate to Defendant's alleged oral assurances
regarding the availability of a loan modification. Such a loan
modification would constitute a credit agreement between a creditor
and a debtor. See Loraso, 2013 WL 5755638, at *6. Plaintiff
therefore cannot make out claims for fraud and breach of implied
contract relating to the loan modification negotiations absent a
written agreement. See id. at *6-7. Although Plaintiff has alleged
that the modification was confirmed in a bank statement, she
further alleged that the modification discussions were ongoing at
that time and has not alleged that a loan modification agreement
was ever reduced to writing. See, e.g., (Rec. Doc. 5-1, p. 5).
Thus, the Court concludes that Plaintiff has failed to state a
claim for fraud or breach of an implied contract.
By contrast, Plaintiff's breach of contract claim relates to

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her original, written agreement with Defendant. Plaintiff alleges
that Defendant's behavior during loan modification discussions
amounts to a breach of the then-existing written contract between
the parties. The LCAS therefore does not bar this claim, although
Plaintiff will have to show that Defendant's behavior actually
breached the original contract without reference to any assurances
made during the loan modification efforts or discussions.
Accordingly,
IT IS HEREBY ORDERED that Defendant's Rule 12(b)(6) Motion to
Dismiss (Rec. Doc. 5) is GRANTED IN PART.
IT IS FURTHER ORDERED that the motion is GRANTED with respect
to Plaintiff's fraud and breach of implied contract claims.
IT IS FURTHER ORDERED that the motion is DENIED with respect
to Plaintiff's breach of contract claim.
New Orleans, Louisiana this 29th day of October, 2014.

____________________________
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE

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