McDonald v. Deutsche Bank National Trust Company et al
Filing
18
Memorandum Opinion and Order granting in part and denying in part 11 Motion to Dismiss. Defendants' Motion is granted with respect to Plaintiff's claim under subsection 392.303 of the TDCPA. However, Defendants' Motion is denied wit h respect to Plaintiff's claims for breach of contract and anticipatory breach of contract, negligent misrepresentation, unreasonable collection efforts, violations of subsections 392. 301 and 392.304 of the TDCPA, and any request for remedies. (Ordered by Judge Jane J Boyle on 6/11/2012) (ctf)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
ESTELA HUBERT MCDONALD,
Plaintiff,
v.
DEUTSCHE BANK NATIONAL TRUST
COMPANY, AS TRUSTEE FOR THE
CERTIFICATE HOLDERS OF THE
MORGAN STANLEY ABS CAPITAL 1
INC. TRUST PASS-THROUGH
CERTIFICATES, SERIES 2005-HE2,
BANK OF AMERICA, NA and
BAC HOME LOANS SERVICING, LP,
Defendants.
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CIVIL ACTION NO. 3:11-CV-2691-B
MEMORANDUM OPINION AND ORDER
Before the Court is Defendants’ Motion to Dismiss, filed November 21, 2011 (doc. 11). For
the reasons listed below, Defendants’ Motion to Dismiss is GRANTED in part and DENIED in
part.
I.
BACKGROUND
This lawsuit arises out of the foreclosure of real property. In September 2004, Plaintiff
McDonald purchased property located at 1504 Vida Court, Dallas County, Texas (“the Property”).
Am. Compl. (“Compl.”) ¶¶ 7, 9. To finance the purchase, McDonald executed a note payable
(“Note”) to Accredited Home Lenders, Inc. (“AHL”). Id. ¶ 9. To secure payment of the Note,
McDonald executed a Deed of Trust naming MERS as the nominee for AHL and its successors and
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assigns. Id. MERS then assigned the Deed of Trust to Deutsche Bank (“Deutsche”). Id. Bank of
America (“BOA”)1 acts as a servicer for Deutsche. Mot. to Dismiss ¶ 6.
In March 2007, McDonald’s spouse lost his job and thus her income was reduced. Id. ¶ 10.
In February 2010, McDonald called BOA with questions about its loan modification program. Id.
In March 2010, McDonald applied for a load modification under the Home Affordable Modification
Program (“HAMP”). Id. After McDonald sent in requested financial information, BOA responded
in June 2010 by increasing McDonald’s monthly payment from $721.35 to $1071.64, and by opening
an escrow account. Id. ¶ 11. After McDonald called BOA in July 2010 to inquire about the increased
payment amount, she was told to continue to pay $721.35 per month until her application for loan
modification was reviewed. Id. At that time, McDonald resubmitted her loan application materials.
Id.
In December 2010, McDonald called BOA to inquire about the status of her application, and
was again asked to re-send her materials. Id. ¶ 12. McDonald then received a letter dated December
24, 2010, wherein BOA advised her that it needed additional documents but that “no foreclosure
sale will be conducted and you will not lose your home during the [HAMP] evaluation.” Id. ¶ 13.
After having sent the requested documents, McDonald received another letter dated January 28,
2011, that repeated the demand for additional documents and reiterated that no foreclosure sale
would be conducted until after the HAMP valuation was completed. Id. On February 18, 2011,
McDonald received a latter from BOA indicating that her application for a loan modification had
1
Bank of America merged with BAC Home Loans Servicing, L.P., its servicing arm and wholly owned
subsidiary in 2011. For purposes of this Motion, the Court will make no distinction between the parties and
will refer to both as Bank of America (“BOA”).
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been denied, but that it would review her information to evaluate if other options would be available
to her. Id. ¶ 14.
Ten days later, McDonald received a letter from BOA indicating that she was in default and
had to pay $4,255.43. Id. ¶ 15. On March 2, 2011, McDonald received a phone call from the BOA
collection department stating that she owed a balance of $4,605.7 and that her property would be
foreclosed. Id. McDonald continued to call and asked to speak with BOA representatives. Id. ¶¶ 1618. On March 23, 2011, McDonald spoke with a representative who recommended that she pay the
increased monthly amount, including the escrow payment. Id. ¶ 18. Then, on March 30, 2011,
McDonald again spoke with a BOA representative who instructed her to resubmit her loan
modification documents. Id. ¶ 19. McDonald received a statement dated April 28, 2011, indicating
that her past due payment was $6,429.94. Id. Defendants then posted the Property for foreclosure
on October 4, 2011. Id. ¶ 20.
McDonald filed this lawsuit against Defendants on September 29, 2011, in Dallas County,
Texas, which Defendants subsequently removed to this court. Notice of Removal ¶¶ 2-8. On
November 8, 2011, McDonald filed an Amended Complaint that features seven separate causes of
action: (1) breach of contract and anticipatory breach of contract; (2) breach of tort of unreasonable
collection efforts; (3) malice; (4) violation of Texas Consumer Credit Code and Debt Collection
Practices Act; (5) accounting; (6) negligent misrepresentation; and (7) declaratory judgment.
Compl. ¶¶ 22-53. McDonald claims, in short, that Defendants wrongfully created an escrow account,
offered misleading information, and increased her monthly payments.
Defendants filed this Motion to Dismiss on November 21, 2011. Defendants contend that
each of these causes of action must be dismissed as a matter of law. After McDonald filed a response,
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they elected not to file a reply brief. The Court will now address the merits of the Motion below.
II.
LEGAL STANDARDS
Under the Federal Rules of Civil Procedure, a complaint must contain “a short, plain
statement of the claim showing that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). A
plaintiff may support his claim for relief with any set of facts consistent with the allegations in the
complaint. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 563 (2007). Rule 12(b)(6) authorizes dismissal
of a complaint that fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6).
In analyzing a Rule 12(b)(6) motion, the Court “accepts ‘all well-pleaded facts as true, viewing them
in the light most favorable to the plaintiff.’” In re Katrina Canal Breaches Litig., 495 F.3d 191, 205
(5th Cir. 2007)(quoting Martin K. Eby Constr. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467
(5th Cir. 2004)). Such a motion should only be granted when the complaint does not include
“enough facts to state a clam to relief that is plausible on its face.” Twombly, 550 U.S. at 570.
A claim is plausible on its face “when the plaintiff pleads factual content that allows the court
to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft
v. Iqbal, 129 S. Ct. 1937, 1949 (2009). “The plausibility standard is not akin to a ‘probability
requirement,’ but asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.
Thus, to survive a motion to dismiss, “factual allegations must be enough to raise a right to relief
above the speculative level.” Twombly, 550 U.S. at 555. A complaint that offers “labels and
conclusions” or “a formulaic recitation of the elements of a cause of action” will not survive a motion
to dismiss. Iqbal, 129 S. Ct. at 1949. Thus, “[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.” Id.
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The Court’s review is limited to the allegations in the complaint and to those documents
attached to a defendant’s motion to dismiss to the extent that those documents are referred to in
the complaint and are central to the claims. Causey v. Sewell Cadilac-Chevrolet, Inc., 394 F.3d 285,
288 (5th Cir. 2004). Nevertheless, it is well established that dismissal under Fed. R. Civ. P. 12(b)(6)
is warranted where an affirmative defense, such as the statute of limitations, is apparent on the face
of the plaintiff's complaint. Jones v. Alcoa, Inc., 339 F.3d 359, 366 (5th Cir.2003); Kansa Reinsurance
Co. v. Congressional Mortgage Corp. of Tex., 20 F.3d 1362, 1366 (5th Cir.1994).
III.
ANALYSIS
Defendants argue that each of Plaintiff’s claims must be dismissed as a matter of law because
they acted in accordance with the terms of the Deed of Trust. Furthermore, Defendants argue that
McDonald cannot plead any set of facts that would give rise to relief for her tort claims because she
is barred by the statute of frauds and other common law limitations that preclude relief. McDonald
argues in response that each of its claims is cognizable and should survive Defendant’s Motion. The
Court will address each of McDonald’s causes of action below.
A.
Breach of Contract and Anticipatory Breach of Contract
Defendants contend that McDonald’s claim for breach of contract must be dismissed as a
matter of law as a result of seven separate theories. McDonald argues, in response, that she has
stated a plausible claim, and that many of Defendants theories depend on evidence that has not
surfaced at this state of litigation. Under Texas law, “the essential elements of a breach of contract
claim are: (1) the existence of a valid contract; (2) performance or tendered performance by the
plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as
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a result of the breach.” Mullins v. TestAmerica, Inc., 564 F.3d 386, 418 (5th Cir. 2009) (quoting
Aguiar v. Segal, 167 S.W.3d 443, 450 (Tex. App.–Houston [14th Dist.] 2005, pet. denied)). In order
to prevail on a claim for anticipatory breach, a plaintiff must establish “(1) an absolute repudiation
of the obligation; (2) a lack of a just excuse for the repudiation; and (3) damage to the
non-repudiating party.” Gonzalez v. Denning, 394 F.3d 388, 394 (5th Cir. 2004). McDonald’s claims
rely primarily on her allegations that (1) Deutsche Bank was not a holder or owner of the Note, and
therefore cannot enforce it; and (2) that customer representatives repeatedly informed McDonald
that she was not responsible for paying the monthly fees after they had been raised.
Under Texas law, a deed of trust is a mortgage with a power to sell on default. DeFranceschi
v. Wells Fargo Bank N.A., No. 4-10-cv-455-Y, 2011 WL 3875338, at *4 (N.D. Tex. Aug. 31, 2011)
(citations omitted). The mortgage created by a deed of trust “is an interest created by a written
instrument providing security for payment.” Id. That security is established by a note. Id. Because
the deed of trust has no legal effect apart from the debt, a transfer of the deed of trust automatically
transfers the debt. Id. (citing Teas v. Republic Nat’l Bank, 460 S.W.2d 233, 243 (Tex. Civ. App.-1970,
writ ref’d n.r.e.)). In this case, the Note at issue explicitly provides that the lender may enforce the
Deed of Trust:
In addition to the protections given to the Note Holder under this Note, a Mortgage,
Deed of Trust, or Security Deed (the “Security Instrument”) dated the same date as
this Note, protects the Note Holder from possible losses which might result if
[Plaintiff] do[es] not keep the promises which [Plaintiff ] make[s] in this Note. That
Security Instrument describes how and under what conditions [Plaintiff] may be
required to make immediate payment in full of all amounts [Plaintiff] owe[s] under
this Note.
Def.’s App. 2, ¶ 11. The language of the Note, then, leaves no doubt that the holder of the Note has
the power to sell the Property on default.
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Under the Texas Property Code, a mortgagee may authorize a mortgage servicer to service
a mortgage and conduct a foreclosure sale. See TEX. PROP. CODE ANN. § 51.0025 (West 2007). The
Deed of Trust identifies MERS as the beneficiary and the nominee for the original lender and its
successors and assigns. Defs.’ App. 7. Thus, under the Texas Property Code, MERS is a mortgagee.
See TEX. PROP. CODE ANN. § 51.0001(4) (West 2007). As a mortgagee, then, MERS has the
authority to transfer the right to foreclose to a loan servicer, such as Deutsche, without producing
the original Note or Deed of Trust. See Sawyer v. Mortg. Elec. Registration Sys., Inc., No.
3–09–CV–2303–K, 2010 WL 996768, at *3 (N.D. Tex. Feb.1, 2010).
In her Response, McDonald argues that Deutsche was never a holder or owner of the Note,
and consequently cannot enforce it. Pl.’s Resp. 9. McDonald alleges that she executed a Note
payable to AHL, but that the Note makes no reference to MERS. Therefore, according to
McDonald, because MERS was not a holder or owner of the Note, it had not authority to transfer
the Note to Deutsche. Pl.’s Resp. 7. This theory has been roundly rejected by district courts in the
Fifth Circuit. See, e.g., Malikyar v. BAC Home Loans Servicing, LP, No. 4:11–CV–417, 2011 WL
5837262, at *5 (E.D. Tex. Oct. 28, 2011); Wiggington v. Bank of N.Y. Mellon, No. 3:10–CV–2128–G,
2011 WL 2669071, at *3 (N.D. Tex. Jul.7, 2011); DeFranceschi v. Wells Fargo Bank N.A., No. 4-10cv-455-Y, 2011 WL 3875338, at *4 (N.D. Tex. Aug. 31, 2011). “In other words, a transfer of an
obligation secured by a note also transfers the note because the deed of trust and note are read
together to evaluate their provisions.” DeFranchesci, 2011 WL 3875338, at *4. Therefore, when
MERS assigned the Deed of Trust to Deutsche Bank, it also assigned its power of sale. Id.2
2
Defendants also note correctly that McDonald lacks standing MERS’ assignment of the Deed of
Trust because she was not a party to the assignment. See Eskridge v. Fed. Home Loan Mrtg. Corp., N. W-10-
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McDonald further argues that Defendants waived their right to foreclose when it informed
her that she should continue to pay her original note payment while her loan modification was
pending. McDonald claims to have relied on this promise, which she argues constitutes a unilateral
contract that Defendants breached when it posted her property for foreclosure. Compl. ¶ 26.
Under Texas law, a “[w]aiver is the intentional relinquishment of a right actually known, or
intentional conduct inconsistent with claiming that right.” Ulico Cas. Co. v. Allied Pilots Ass’n, 262
S.W.3d 773, 778 (Tex. 2008). To prove waiver, a party must show “(1) an existing right, benefit, or
advantage held by a party; (2) the party’s actual knowledge of its existence; and (3) the party’s actual
intent to relinquish the right, or intentional conduct inconsistent with the right.” Id. Where waiver
is based on inference, “it is the burden of the party who is to benefit by a showing of waiver to
produce conclusive evidence that the opposite party [unequivocally manifested] its intent to no
longer assert its claim.” G.H. Bass & Company v. Dalsan Properties–Abilene, 885 S.W.2d 572, 577
(Tex.App.-Dallas 1994, no writ).
McDonald argues that Defendants waived any breach of contract when it instructed her to
make the $721.35 monthly payments rather than the increased amount. McDonald also claims that
Defendants acted inequitably and inconsistently when it informed her to continue to apply for a loan
modification, and that her house would not be foreclosed during that time. However, in making
these allegations, McDonald relies primarily on oral representations made by BOA representatives
via telephone, which fail to comply with the statute of frauds. The Texas statute of frauds requires
that “[a] loan agreement in which the amount involved in the loan agreement exceeds $50,000 in
CA-285, 2011 WL 2163989, at *5 (W.D. Tex. Feb. 24, 2011).
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value is not enforceable unless the agreement is in writing and signed by the party to be bound or
by that party’s authorized representative.” TEX. BUS. & COM. CODE ANN. § 26.02(b). Furthermore,
“both Texas state and federal courts have concluded that, generally, both the original loan and any
alleged agreement to modify the original loan are governed by section 26.02 and must be in writing.”
See Wiley v. U.S. Bank, N.A., No. 3:11-CV-1241-B, 2012 WL 1945614, at *6 (N.D. Tex. May 30,
2012) (Boyle, J.) (quoting Montalvo v. Bank of Am. Corp., No. SA–10–CV–360–XR, 2012 WL
1078093, at *13 (W.D. Tex. March 30, 2012)); see also Homer v. Bourland, 624 F.2d 1142, 1148 (5th
Cir. 1984) (noting that material modifications to a contract must be in writing). Any statements
made by customer service representatives, then, cannot be offered to illustrate Defendants’ intent
to relinquish their right to collect a higher loan payment or to accelerate and foreclose under the
contract. Additionally, the Deed of Trust specifically states that “any forbearance by Lender in
exercising any rights or remedy, including, without limitation, Lender’s acceptance of payments from
third persons, entities or Successors in Interest of Borrower or in amounts less than the amount then
due, shall not be a waiver of or preclude the exercise of any right or remedy.” Def.’s App. 12, ¶ 12.
Given that the terms of the Deed of Trust preserve the right to enforce the debt, McDonald cannot
demonstrate that Defendants have expressed an unequivocal intent to relinquish that right.
McDonald further argues that the doctrine of promissory estoppel applies to Defendants’
statute of frauds defense. Under Texas law, when pleading the defense of promissory estoppel, a
plaintiff must establish the following: (1) a promise; (2) reliance thereon that was foreseeable to
promissor; and (3) substantial reliance by promisee to her detriment. Lozada v. Farrall & Blackwell
Agency, Inc., 323 S.W.3d 278, 291 (Tex. App-El Paso 2010, no pet.). Loan agreements, under Texas
law, include any agreement to delay repayment or to make financial accommodation. See Miller v.
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BAC Home Loans Servicing LP, No. 6:11-CV-22, 2012 WL 1206510, at *6 (E.D. Tex. Mar. 23,
2012). Furthermore, when seeking to circumvent the statute of frauds, a plaintiff must plead that
the “‘promise promised to sign a written document complying with the statute of frauds’ to create
an exception.” Id. (quoting Ford v. City Bank of Palacios, 44 S.W.3d 121, 139 (Tex. App.-Corpus
Christi 2001, no pet.)). Though McDonald has alleged that a number of customer representatives
assured her that it would not foreclose her property while her loan modification was under review,
she has not alleged that Defendants promised to execute a written document incorporating the
alleged agreement. Accordingly, McDonald has failed to state a plausible claim for relief under the
doctrine of promissory estoppel.
McDonald’s contention that Defendants have breached an implied duty of good faith and
fair dealing must also fail. Defendants rely primarily on the UCC, but as courts have noted, “because
the Deed of Trust places a lien on real property, it is not governed by the UCC.” Id. (quoting Water
Dynamics, Ltd. v. HSBC Bank USA Nat’l Ass’n, No. 4:11–CV–614–A, 2012 WL 34252, at *6 (N.D.
Tex. Jan. 6, 2012)); see also Vogel v. Travelers Indem. Co., 966 S.W.2d 748, 753 (Tex. App.-San
Antonio 1998, no pet.). Furthermore, Texas law does not impose a duty of good faith and fair
dealing on either the relationship of mortgagor and mortgagee or the relationship of creditor and
debtor. Fed. Deposit Ins. Corp. v. Coleman, 795 S.W.2d 706, 709 (Tex 1990). McDonald has also
failed to allege any kind of special relationship with Defendants that could, in theory, give rise to this
duty. Id.
McDonald finally argues that BOA was not authorized to disburse funds from her escrow
account. In her Complaint, McDonald alleges that before she had ever missed a payment on her
mortgage, “BAC wrongfully paid her insurance . . . created an escrow account without [her] consent
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and then increased [her] monthly payments.” Compl. ¶ 26. Both parties agree that the Deed of Trust
authorizes Defendants to pay McDonald’s insurance premium and open an escrow account. Def.’s
App. 9, ¶ 3. Defendants argue, and in fact concede that they assume, that McDonald applied for a
loan modification only because she had not “fulfilled her obligation to timely pay her mortgage.”
Defs.’ Mot. 13-14. However, McDonald makes clear in both her Complaint and Response that when
the escrow account was created, she hadn’t missed a payment on her mortgage, property taxes or
insurance. Pl.’s Resp. 21. McDonald alleges that Defendants opened the escrow account without her
permission, and as a result of this action, her monthly payments increased. Without any indication
that McDonald had failed to pay her mortgage, or had not paid her insurance premium directly, the
Court finds that McDonald has set forth allegations sufficient to state a plausible claim that
Defendants breached the contract when they created an escrow account without her consent.
Therefore, accepting her allegations as true, the Court finds that McDonald has stated a
plausible claim for breach of contract on the theory that Defendants were not authorized to pay her
insurance premium and open an escrow account. Accordingly, the Court finds that Defendants’
Motion, with respect to the claim for breach of contract, is DENIED.
B.
Texas Debt Collection Practices Act
McDonald alleges that Defendants violated the Texas Debt Collection Practices Act
(“TDCPA”), including sections 392.301, 392.303, and 392.304, by using “deceptive means” to
collect the debt and by wrongfully foreclosing on the Property. Pl.’s Resp. 22. Defendants move for
dismissal on the grounds that claims under the TDCPA are preempted by the National Bank Act3
3
Defendants cite to Watters v. Wachovia Bank, N.A., 550 U.S. 1, 12 (2007), in support of the
proposition that “when state prescriptions significantly impair [a national bank’s] exercise of authority . . .
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and that Defendants merely acted to protect their contractual right to foreclose.
i.
Subsection 392.301
Under the TDCPA, a debt collector is prohibited from using threats, coercion, or attempts
to coerce, including “threatening to take an action prohibited by law.” TEX. FIN. CODE §
392.301(a)(8) (West 2006). A “threat” is defined as “a communicated intent to inflict harm or loss
on another or another's property.” BLACK’S LAW DICTIONARY 1618 (9th ed. 2009). “Coercion” is
defined as “compulsion by physical force or threat of physical force.” Id. at 294. McDonald argues
that Defendants were prohibited from foreclosing on the Property after wrongfully creating an escrow
account. Pl.’s Resp. 24. As discussed supra Part III.A, the Court has denied Defendants’ Motion to
Dismiss with respect to McDonald’s claim for breach of contract. Accordingly, the Court has not
found, as a matter of law, that Defendants had the authority to initiate foreclosure proceedings.
Defendants’ Motion, with respect to subsection, is DENIED.
ii.
Subsection 392.303
Subsection 392.303(a)(2) of the Texas Finance Code prohibits debt collectors from
“collecting or attempting to collect interest or a charge, fee, or expense incidental to the [debt]
obligation unless the interest or incidental charge, fee, or expense is expressly authorized by the
agreement creating the obligation or legally chargeable to the consumer.” TEX. FIN. CODE §
392.303(a)(2). McDonald alleges that Defendants consistently misrepresented the amount she owed
under the [National Bank Act], the State’s regulations must give way.” However, Defendants have failed to
substantiate this argument beyond a conclusory statement, nor have they cited to a single court that has found
that the TDCPA is preempted by the National Bank Act. Given that Defendants must carry the burden of
demonstrating that McDonald’s claims must fail as a matter of law, the Court is not persuaded by the paucity
of this particular argument.
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on her mortgage loan, and when she complied with their requests to submit materials for loan
modification, they raised her fees. Compl. ¶¶ 43-44. However, under the terms of the statute, a debt
collector may charge additional fees if the parties have agreed to permit such charges under contract.
Both the Note and the Deed of Trust expressly authorize the debt collector to charge additional fees
and late charges. Defs. App. 2, 8-9. As the Court found supra Part III.A., Defendants did not waive
their right to foreclose, and therefore they did not waive the right add charges to McDonald’s debt.
Plaintiff provides no evidence and no explanation regarding how the alleged unlawful charges
violated the statute. Accordingly, Defendants’ Motion for with respect to McDonald’s claim for
violation of § 392.303(a)(2) under the TDCPA is GRANTED.
iii.
Subsection 392.303
Subsection 392.304(a)(8) of the TDCPA prohibits a debt collector from “misrepresenting
the character, extent, or amount of a consumer debt . . . .” TEX. FIN. CODE § 392.304(a)(8).
Subsection 392.304(a)(19) prohibits a debt collector from “using any other false representation or
deceptive means to collect a debt or obtain information concerning a consumer.” TEX. FIN. CODE
§ 392.304(a)(19). McDonald argues that Defendants misled her to apply for a loan modification,
wrongly opened an escrow account, and repeatedly told her that the Property would not be
foreclosed. Pl.’s Resp. 25.
“For a statement to constitute a misrepresentation under the TDCPA, Defendants must have
made a false or misleading assertion.” Narvaez v. Wilshire Credit Corp., 757 F.Supp.2d 621, 632 (N.D.
Tex. Dec. 29, 2010) (citing Reynolds v. Sw. Bell. Tel., L.P., No. 2–05–356–CV, 2006 WL 1791606,
at *7 (Tex. App.-Fort Worth June 29, 2006, pet. denied)). Here, McDonald has alleged a litany of
misleading or false statements from Defendants. Notably, McDonald was told on several occasions
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to pay her lower monthly mortgage fee of $721.35, and was misinformed about the outstanding
amount that she owed. Defendants do not dispute these statements, and accepting McDonald’s
pleadings as true, she has alleged a plausible claim that Defendants misrepresented the character of
her debt. Accordingly, Defendants’ Motion with respect to McDonald’s claims for violations of
sections 392.304(a)(8) and(19) under the TDCPA is DENIED.
C.
Unreasonable Collection Efforts
Under Texas law, unreasonable collection is an intentional tort without clearly defined
contours. EMC Mortg. Corp. v. Jones, 252 S.W.3d 857, 868 (Tex. App.-Dallas 2008, no pet.).
Generally, however, to establish a claim for unreasonable collection efforts, a plaintiff must
demonstrate that a lender’s conduct amounts to harassment that was “willful, wanton, malicious,
and intended to inflict mental anguish and bodily harm.” Id. (citations omitted). “The
reasonableness of conduct is judged on a case-by-case basis.” Kazmi v. BAC Home Loans Servicing,
L.P., No. 4:11-CV-375, 2012 WL 629440, at *11 (E.D. Tex. Feb. 3, 2012).
McDonald argues that Defendants have “exceeded the bounds of reason” by failing to
provide McDonald with the correct information regarding her loan modification and for continually
telling her to pay her regular monthly payment. Pl.’s Resp. 28. Defendants argue, in turn, that they
have merely exercised their right to foreclose and that their actions cannot be construed as a form
of harassment. Though the Court is not persuaded that a series of phone calls may amount to
harassment, McDonald’s allegations that Defendants repeatedly misinformed her about the status
of her loan modification, asked her to re-submit her loan materials, and misrepresented the amount
she owed may amount to harassment that is “willful, wanton, [and] malicious.” See Singh v. JP
Morgan Chase Bank, N.A., No. 4:11-CV-607, 2012 WL 669952, at *10 (E.D. Tex. Jan. 31, 2012).
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Accordingly, McDonald has stated a plausible claim for this tort, and Defendants’ Motion with
regard to this cause of action is hereby DENIED.
D.
Negligent Misrepresentation
McDonald alleges that Defendants made repeated false representations regarding her
mortgage account, which amounts to negligent misrepresentation. Compl. ¶¶ 49-51. A claimant
alleging negligent misrepresentation must show the following: (1) the representation is made by a
defendant in the course of his business, or in a transaction in which he has a pecuniary interest; (2)
the defendant supplies “false information” for the guidance of others in their business; (3) the
defendant did not exercise reasonable care or competence in obtaining or communicating the
information; and (4) the plaintiff suffers a pecuniary loss by justifiably relying on the representation.
Fed. Land Bank Ass’n of Tyler v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991).
However, a tort claim for negligent misrepresentation may be limited the economic loss rule.
Under Texas law, the economic loss rule precludes recovery in tort where a plaintiff’s injury is an
economic loss arising from a contract dispute. Acad. of Skills & Knowledge, Inc. v. Charter Sch., USA,
Inc., 260 S.W.3d 529, 541 (Tex. App.-Tyler 2008, pet. denied). That is, where the only injury
alleged is economic loss that is the subject of a contract, the economic loss rule eliminates a tort
remedy, even if the injury is the result of a contracting party’s negligence. Kazmi, 2012 WL 629440,
at *14. “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.” Id. (citing
Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 495 (Tex. 1991)).
Though Defendants argue that McDonald’s injuries arise solely from the Deed of Trust,
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McDonald alleges that she has experienced mental anguish and psychic trauma as a result of the
alleged misrepresentations. While McDonald’s complaint that her credit rating has declined is an
economic loss arising from her contractual relationship with Defendants, see Sanghera, 2012 WL
555155, at *6, she may recover damages that are outside the scope of the Note and Deed of Trust.
See Hurd v. BAC Home Loans Servicing, LP, No. 3:11–CV–1752–M, 2012 WL 1081994, at *12 (N.D.
Tex. Mar. 12, 2012). Given that she seeks damages for her mental anguish and psychic trauma,
which are beyond the economic loss caused by the contract, her claim is not barred by the economic
loss rule. Accordingly, Defendants’ Motion with respect to this claim is DENIED.
E.
Remedies
McDonald pleads three separate claims that are more properly considered remedies than
causes of action. First, McDonald argues that she is entitled to exemplary damages because
Defendants’ conduct was so unreasonable as to amount to malice. Compl. ¶¶ 37-38. “Exemplary
damages are authorized under the Texas Civil Practice and Remedy Code when the claimant proves
by clear and convincing evidence that the harm [with respect to which the claimant seeks recovery]
results from fraud, malice or gross negligence.” Biggers v. BAC Home Loans Servicing, LP, 767
F.Supp.2d 725, 735 (N.D. Tex. 2011) (quoting Dillard Dep’t Stores, Inc. v. Silva, 148 S.W.3d 370, 373
(Tex. 2004)). Exemplary damages are not available where a plaintiff seeks to recover damages
exclusively for a breach of contract. Jim Walter Homes v. Reed, 711 S.W.2d 617, 618 (Tex. 1986).
However, McDonald’s pleadings allege various damages that arise outside the scope of the Note and
Deed of Trust, including negligent misrepresentation. Thus, McDonald does not seek a remedy
exclusively for Defendants’ alleged breach of contract. Given that malice or gross negligence may
be inferred from either direct or indirect evidence, Corporate Wings, Inc. v. King, 767 S.W.2d 485,
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487 (Tex. App.-Dallas 1989, no pet.), the Court cannot say, as a matter of law, that McDonald
cannot establish a claim for exemplary damages.
Defendants also move to dismiss McDonald’s claims for accounting and declaratory
judgment. However, given that several of McDonald’s underlying claims have been pleaded
sufficiently to survive Defendants’ Motion, there is no proper basis for dismissing these remedies at
this time.
IV.
CONCLUSION
For the foregoing reasons, Defendants’ Motion to Dismiss is GRANTED in part and
DENIED in part. Defendants’ Motion is granted with respect to Plaintiff’s claim under subsection
392.303 of the TDCPA. However, Defendants’ Motion is denied with respect to Plaintiff’s claims
for breach of contract and anticipatory breach of contract, negligent misrepresentation, unreasonable
collection efforts, violations of subsections 392. 301 and 392.304 of the TDCPA, and any request
for remedies.
SO ORDERED.
SIGNED June 11, 2012
_________________________________
JANE J. BOYLE
UNITED STATES DISTRICT JUDGE
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