Pradhan et al v. JP Morgan Chase Bank, NA
ORDER ADOPTING REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE for 14 Motion to Dismiss filed by JP Morgan Chase Bank, NA, 18 Report and Recommendation. ORDERED that defendant's Motion to Dismiss [Doc. #14] is GRANTED,and plaintiffs' case is DISMISSED with prejudice. All relief not previously granted is hereby DENIED. The Clerk is directed to CLOSE this civil action. Signed by Judge Ron Clark on 2/18/2013. (kls, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MAHESH PRADHAN and
JP MORGAN CHASE BANK, NA.,
CASE NO. 4:12cv539
Judge Clark/Judge Mazzant
ORDER ADOPTING REPORT AND
RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Came on for consideration the report of the United States Magistrate Judge in this action, this
matter having been heretofore referred to the United States Magistrate Judge pursuant to 28 U.S.C.
§ 636. On December 7, 2012, the report of the Magistrate Judge was entered containing proposed
findings of fact and recommendations that defendant’s Motion to Dismiss [Doc. #14] be granted
[Doc. #18]. On December 27, 2012, plaintiffs filed objections [Doc. #23]. On January 11, 2013,
defendant filed a response to plaintiffs’ objections [Doc. #24] .
Plaintiffs, appearing pro se, object by asserting that defendant needs to do the following: (1)
approve their application “Making Home Affordable;” (2) compensate for waste of time and
reimburse expenses due to the same application; (3) cure credit for defaulted payment to defendant;
(4) compensate for loss of job at Waffle House due to default payment; and (5) pay off all legal fees
and filing fees. Plaintiffs also assert that after defendant placed them in a forbearance plan
agreement, defendant held all payments which were made on time and put them into default and that
defendant denied their application.
Although plaintiffs are proceeding pro se, they still have an obligation to engage in this
lawsuit, which includes responding to motions. In this case, plaintiffs did not file a response to the
defendant’s motion to dismiss. The Magistrate Judge assumed that plaintiffs were not opposed to
the motion being granted after no response was filed pursuant to Local Rule CV-7(d). The
Magistrate Judge also found that plaintiffs have no plausible claims against defendant.
Defendant asserts that “[i]n order for the Court to disturb this finding, Plaintiffs must file a
written objection showing that the Recommendation is ‘clearly erroneous or contrary to law,’” citing
Fed. R. Civ. P. 72(a); Castillo v. Frank, 70 F.3d 382, 385-86 (5th Cir. 1995); 28 U.S.C. §
636(b)(1)(A). Defendant cites the incorrect standard of review. The citations provided by defendant
relate to the review of non-dispositive motions, such as a motion to compel. However, for a motion
to dismiss, a dispositive motion, the court looks to 28 U.S.C. § 636(b)(1)(B) and Fed. R. Civ. P.
72(b). In this case, plaintiffs filed timely objections, which requires the court to review de novo any
part of the Magistrate Judge’s report that has been properly objected to. See Fed. R. Civ. P. 72(b)(3).
However, although defendant cites the incorrect standard, the bank does assert that plaintiffs
have not identified the specific issues for which review is being sought and, instead, plaintiffs list
seven factual allegations included in the complaint. The court agrees that plaintiffs fail to assert
anything that would be considered a proper objection. Plaintiffs fail to establish how any claim
being asserted would be plausible.
Plaintiffs filed their “Original Petition and Request for Disclosure” in the 16th Judicial
District Court, Denton County, Texas, on July 17, 2012. On August 24, 2012, defendant filed its
Motion to Dismiss for Failure to State a Claim. The court then entered an order requiring plaintiffs
to file an amended complaint no later than October 5, 2012, that provides more factual details
supporting their claims, and denying defendant’s motion to dismiss as moot. On October 4, 2012,
plaintiffs filed the amended complaint. The amended complaint did not include any additional
factual allegations against defendant, as required by the court’s order. Plaintiffs merely incorporate
the allegations included in the first complaint into the amended complaint.
Plaintiffs fail to plead facts that would support a fraud or negligent misrepresentation claim.
Fed. R. Civ. P. 9(b) requires fraud to be pleaded with specificity, which was not done in this case.
Plaintiffs also fail to allege a single material misrepresentation.
Defendant asserts that plaintiffs’ claim is barred by the economic loss doctrine. The
economic loss rule generally precludes recovery in tort where a plaintiff’s only injury is an economic
loss to the subject of a contract. Academy of Skills & Knowledge, Inc. v. Charter Schools, USA, Inc.,
260 S.W.3d 529, 541 (Tex. App. – Tyler 2008, pet. denied) (citing Lamar Homes, Inc. v. MidContinent Cas. Co., 242 S.W.3d 1, 12 (Tex. 2007); Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493,
495 (Tex. 1991)). “When the injury is only the economic loss to the subject of a contract itself, the
action sounds in contract alone.” UMLIC VP LLC v. T&M Sales and Envt’l Sys., Inc., 176 S.W.3d
595, 614 (Tex. App.-Corpus Christi 2005, pet. denied) (citing Jim Walter Homes, Inc. v. Reed, 711
S.W.2d 617, 618 (Tex. 1986)). The focus of the rule “is on determining whether the injury is to the
subject of the contract itself.” Academy, 260 S.W.3d at 541 (citing Lamar Homes, 242 S.W.3d at
12). The rule restricts contracting parties to contractual remedies for such economic losses, even
when the breach might reasonably be viewed as a consequence of a contracting party’s negligence.
Id. (citing Lamar Homes, 242 S.W.3d at 12-13). “If the action depends entirely on pleading and
proving the contract in order to establish a duty, the action remains one for breach of contract only,
regardless of how it is framed by the pleadings.” OXY USA, Inc. v. Cook, 127 S.W.3d 16, 20 (Tex.
App. – Tyler 2003, pet. denied). Thus, in order for a tort duty to arise out of a contractual duty, i.e.,
negligent failure to perform a contract, the liability must arise independent of the fact that a contract
exists between the parties; the defendant must breach a duty imposed by law rather than by the
contract. Janicek v. KIKK, Inc., 853 S.W.2d 780, 781-82 (Tex. App. – Houston [14th Dist.] 1993,
writ denied) (citing DeLanney, 809 S.W.2d at 494).
“[W]hen a written contract exists, it is more difficult for a party to show reliance on
subsequent oral representations.” Beal Bank, S.S.B. v. Schleider, 124 S.W.3d 640, 651 (Tex.
App.—Houston [14th Dist.] 2003, pet. denied). Generally, “negligent misrepresentation is a cause
of action recognized in lieu of a breach of contract claim, not usually available where a contract was
actually in force between the parties.” Airborne Freight Corp. Inc. v. C.R. Lee Enters., Inc., 847
S.W.2d 289, 295 (Tex. App.—El Paso 1992, writ denied); see Scherer v. Angell, 253 S.W.3d 777,
781 (Tex. App.—Amarillo 2007, no. pet) (explaining that “there must be an independent injury,
other than breach of contract, to support a negligent misrepresentation finding.”).
The nature of the injury, not the nature of the damages, affects the applicability of the
economic loss rule. See DeLanney, 809 S.W.2d at 494-95; see also Lamar Homes, 242 S.W.3d at
12. Therefore, the court examines plaintiffs’ allegations to determine whether the injuries alleged
are “to the subject of the contract itself.” Id. After review of plaintiffs’ allegations, the court must
conclude that the injuries complained of by plaintiffs are “to the subject of the contract itself.” See
Lamar Homes, 242 S.W.3d at 12-13; See also DeLanney, 809 S.W.2d at 494-95. Plaintiffs fail to
allege facts that would impose a duty upon defendant outside of the alleged contracts. Therefore,
this claim would be barred by the economic loss doctrine and should be dismissed as not plausible.
Section 27.01(a)(2) states that “Fraud in a transaction involving real estate or stock in a corporation
or joint stock company consists of a...false promise to do an act, when the false promise is (A)
material; (B) made with the intention of not fulfilling it; (C) made to a person for the purpose of
inducing that person to enter into a contract; and (D) relied on by that person in entering into that
contract.” Tex. Bus. & Com. Code Ann. § 27.01(a).
Defendant argues that section 27.01 of the Texas Business and Commerce Code applies only
to a fraudulent misrepresentation made to induce another party to enter into a contract for the sale
of land or stock. Tex. Bus. & Com. Code Ann. § 27.01(a); Burleson State Bank v. Plunkett, 27
S.W.3d 605, 611 (Tex. App.-Waco 2000, pet. denied) (citing Greenway Bank & Trust of Houston
v. Smith, 679 S.W.2d 592, 596 (Tex. App.-Houston [1st Dist.] 1984, writ ref’d n.r.e.)). Section
27.01 does not apply to loan transactions, even when they are secured by land. Dorsey v. Portfolio
Equities, Inc., 540 F.3d 333, 343 (5th Cir. 2008); Burleson State Bank, 27 S.W.3d at 611.
Texas courts have not interpreted Section 27.01 as broadly as plaintiffs would like this Court
to. See Grant-Brooks v. WMC Mortgage Corp., No. 3:02-cv-2455, 2003 WL 23119157, at *6 (N.D.
Tex. Dec. 9, 2003).
“An examination of section 27.01 shows that it is concerned with
misrepresentation of material fact made to induce another to enter into a contract for the sale of
land...,” and is inapplicable when there is no contract or sale of land between the parties. See Tex.
Commerce Bank Regan v. Lebco Constr., Inc., 865 S.W.2d 68, 82 (Tex. App.-Corpus Christi 1993,
writ denied) (quoting Nolan v. Bettis, 577 S.W.2d 551, 556 (Tex. Civ. App. Austin 1979, writ ref’d
n.r.e.)), overruled on other grounds by Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962
S.W.2d 507 (Tex. 1998); see also Life Ins. Co. Of Va. v. Murray Inv. Co., 646 F.2d 224, 227 n.2 (5th
Cir. 1981) (noting that section 27.01 “only reaches those transactions involving the actual or
potential sale or purchase of real estate.”). Section 27.01 does not apply to a party who merely
loaned money for the purchase of real estate. Tex. Commerce Bank Regan, 865 S.W.2d at 82 (citing
Greenway Bank & Trust v. Smith, 679 S.W.2d 592, 596 (Tex.App.-Houston [1st Dist.] 1984, writ
Based on the above authorities, it is clear that section 27.01 only applies to transactions
involving the sale or transfer of real estate from one party to another, and not the act of loaning
money, such as the agreement between a mortgagor and mortgagee. The court finds that because
there was neither a contract for nor a sale of land or stock between the parties involved in this case,
section 27.01 does not apply.
Defendant also asserts that plaintiffs are not consumers under the DTPA. To recover under
the DTPA, plaintiffs must show: (1) the plaintiff is a consumer; (2) the defendant can be sued under
the DTPA; (3) the defendant violated a specific provision of the DTPA; and (4) the defendant’s
violation is a producing cause of the plaintiff’s damages. Tex. Bus. & Com. Code Ann. §§ 17.4117.63; Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 649 (Tex. 1996). To qualify as a consumer,
a plaintiff must (1) seek or acquire goods or services and (2) the goods or services purchased or
leased must form the basis of the complaint. Modelist v. Deutsche Bank Nat. Trust Co., No. H-051180, 2006 WL 2792196, at*7 (S.D. Tex. 2006) (citing Sherman Simon Enters., Inc. v. Lorac Serv.
Corp., 724 S.W.2d 13, 14 (Tex. 1987)). Whether a plaintiff is a consumer under the DTPA is a
question of law. Id. (citing Holland Mortgage & Inv. Corp. v. Bone, 751 S.W.2d 515, 517 (Tex.
App.-Houston [1st Dist.] 1987, writ ref’d n.r.e.)).
In evaluating whether plaintiffs are consumers, the court must look to the object of the
transaction. Tex. Bus. & Com. Code Ann. § 17.45; La Sara Grain Co. v. First Nat’l Bank of
Mercedes, 673 S.W.2d 558, 567 (Tex. 1984). In La Sara Grain Company, the Texas Supreme Court
held that a lender may be subject to a DTPA claim if the borrower’s “objective” was the purchase
or lease of a good or service. La Sara Grain Co., 673 S.W.2d at 567. However, a person whose
objective is merely to borrow money is not a consumer, because the lending of money does not
involve either the purchase or lease of a good or service. Riverside Nat’l Bank v. Lewis, 603 S.W.2d
169, 173 (Tex. 1980).
In the present case, it is undisputed that plaintiffs’ claims arise out of a loan and do not
involve the purchase or lease of either goods or services. Plaintiffs did not seek to purchase or lease
any goods or services from defendant. Therefore, plaintiffs are not a “consumer” with respect to
their home loan.
Having received the report of the United States Magistrate Judge, and considering the
objections thereto filed by plaintiffs [Doc. #23], as well as defendant’s response [Doc. #24], this
court is of the opinion that the findings and conclusions of the Magistrate Judge are correct and
adopts the Magistrate Judge’s report as the findings and conclusions of the court.
It is, therefore, ORDERED that defendant’s Motion to Dismiss [Doc. #14] is GRANTED,
and plaintiffs’ case is DISMISSED with prejudice.
All relief not previously granted is hereby DENIED.
The Clerk is directed to CLOSE this civil action.
So ORDERED and SIGNED on February _____, 2013.
United States District Judge
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