Flowers v. Deutsche Bank National Trust Company et al

Filing 16

Order Accepting 12 Findings and Recommendations of the Untied States Magistrate Judge, granting in part and denying in part 4 Motion to Dismiss. Plaintiff is directed to file an amended pleading by 10/4/2013. (Ordered by Judge Sam A Lindsay on 9/13/2013) (aaa)

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
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Plaintiff,
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v.
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DEUTSCHE BANK NATIONAL TRUST
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COMPANY, as TRUSTEE for MORGAN
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STANLEY ABS CAPITAL I, INC., TRUST §
2006-NC4; WELLS FARGO BANK, N.A.
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d/b/a AMERICA’S SERVICING
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COMPANY; and NEW CENTURY
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MORTGAGE CORPORATION,
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Defendants.
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RAY FLOWERS,

Civil Action No. 3:12-CV-3890-L

ORDER
Before the court is Defendants’ Motion to Dismiss (“Motion to Dismiss”), filed on October
29, 2012 [Dkt. No. 4]. For the reasons herein discussed, the court grants in part and denies in part
Defendants’ Motion to Dismiss.
I.

Factual and Procedural Background
Plaintiff Ray Flowers (“Plaintiff”) originally brought this mortgage foreclosure action on

August 28, 2012, in the 134th Judicial District Court, Dallas County, Texas, against Deutsche Bank
National Trust Company, as Trustee for Morgan Stanley ABS Capital I, Inc., Trust 2006-NC4
(“Deutsche”); Wells Fargo Bank, N.A. d/b/a America’s Servicing Company (“Wells Fargo”); and
New Century Mortgage Corporation (“New Century”) (collectively, “Defendants”). Plaintiff asserts
claims for wrongful foreclosure, fraud, negligent misrepresentation, and unjust enrichment and seeks

Order - Page 1

a declaratory judgment and injunctive relief. The action was removed to federal court on September
26, 2012. Plaintiff’s claims pertain to property located at 5406 Northmoor Drive, Dallas, Texas,
75229. In 2006, Plaintiff executed an adjustable rate promissory note (“Note) payable to New
Century in the amount of $345,000 to purchase the Property. Plaintiff also executed a deed of trust
to secure payment on the Note.
On October 29, 2012, Defendants moved to dismiss Plaintiff’s claims pursuant to Federal
Rule of Civil Procedure 12(b)(6). The motion was referred to Magistrate Judge Paul D. Stickney,
who entered Findings, Conclusions and Recommendation of the United States Magistrate Judge
(“Report”) on July 31, 2013, recommending that Defendants’ motion to dismiss be granted and all
of Plaintiff’s claims be dismissed with prejudice. On August 28, 2013, Plaintiff filed objections to
the Report, to which Defendants responded. Having carefully reviewed the pleadings, file, and
record in this case, Plaintiff’s objections, Defendants’ response to the objections, and the findings
and recommendation of the magistrate judge, the court accepts in part and rejects in part
magistrate judge’s findings and recommendation as herein set forth.
II.

Plaintiff’s Objections
A.

Wrongful Foreclosure

Plaintiff objects to the magistrate judge’s determination that his wrongful foreclosure claim
should be dismissed. Plaintiff contends that, under Texas law, a wrongful foreclosure claim can be
based on procedural improprieties in the foreclosure process or the defendant’s lack of authority to
initiate foreclosure proceedings. Plaintiff asserts that his wrongful foreclosure claim is based on the
latter theory, that is, that Defendants lacked authority to foreclose on the Property at issue due to
improprieties in the assignment of his Note. Plaintiff therefore contends that the magistrate judge’s

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determination that he failed to state a wrongful foreclosure claim based on procedural improprieties
in the foreclosure process misses the point. Plaintiff also contends that the magistrate judge’s
determination that Wells Fargo had authority under the Texas Property Code as mortgage servicer
to foreclose on the Property does not account for his allegation that the entity for which Wells Fargo
was acting in foreclosing on the Property is not the lawful owner of the Note.
1.

Wrongful Foreclosure Based on Procedural Impropriety in Foreclosure Process

Plaintiff’s pleadings and Objections are not a model of clarity. At first glance, it appears
from Plaintiff’s pleadings that he is asserting only a wrongful foreclosure claim based on statutory
procedural improprieties in the foreclosure process even though he alleges in the factual background
section of his Original Petition that Defendants’ lacked authority to foreclose on the property. See
Pl.’s Original Pet. 8, ¶ 36. Although Plaintiff states that he has not alleged and apparently does not
intend to pursue a wrongful foreclosure claim based on procedural improprieties in the foreclosure
process, to avoid any confusion moving forward as to whether Plaintiff has stated a valid claim on
this ground, the court accepts the magistrate judge’s determination that Plaintiff has failed to state
a wrongful foreclosure claim based on this theory, as the determination in this regard is legally
correct.
2.

Wrongful Foreclosure Based on Defendants’ Alleged Lack of Authority to Foreclose

The court, however, sustains Plaintiff’s objection that dismissal of his wrongful foreclosure
claim is premature to the extent it is based on the theory that Defendants lacked authority to foreclose
on the Property. The court again notes that Plaintiff’s pleadings and Objections are not a model of
pellucid draftsmanship, as they tend to confuse matters rather than clarifying them. While Plaintiff
questions Wells Fargo’s status as mortgage servicer in his Objections, as correctly noted in the
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Report, he alleges on “information and belief” in his pleadings that Wells Fargo was the mortgage
servicer for Morgan Stanley. Plaintiff nevertheless does allege in his Original Petition that New
Century sold the Note in 2006 to Morgan Stanley (with Wells Fargo as the mortgage servicer) and
Wells Fargo, as attorney-in-fact for New Century, purportedly assigned the Note to Deutsche Bank
in 2008 after New Century no longer owned the Note.
Based on the foregoing allegations, which the court must accept as true, the court concludes
that Plaintiff has stated a claim for wrongful foreclosure based on Wells Fargo’s alleged lack of
authority to initiate foreclosure proceedings on the Property at issue because, as alleged by Plaintiff,
New Century had no interest in 2008 to assign the Note to Deutsche, as it had previously transferred
the Note. Given the alleged impropriety in the 2008 assignment, Plaintiff’s allegation that Wells
Fargo was acting as the mortgage servicer is of no moment, as any authority Wells Fargo had as
mortgage servicer was necessarily based on the authority of the owner of the Note. The court
therefore rejects the magistrate judge’s determination that Plaintiff has failed to state a wrongful
foreclosure claim based on Defendants’ lack of authority to foreclose on the Property.
Accordingly, to the extent Plaintiff intended to assert a wrongful foreclosure claim based on
procedural improprieties in the foreclosure process, the court will grant Defendants’ motion to
dismiss Plaintiff’s wrongful foreclosure claim on this theory. The court, however, will deny the
motion to dismiss Plaintiff’s wrongful foreclosure claim to the extent that the claim is based on
Plaintiff’s theory that Defendants lacked authority to foreclose on the Property as a result of the
allegedly improper assignment of the Note.

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B.

Fraud and Negligent Misrepresentation

Plaintiff objects to the magistrate judge’s recommendation that his fraud and negligent
misrepresentation claims be dismissed for failure to state a claim. Defendants moved for dismissal
of these claims on the ground that Plaintiff’s pleadings failed to meet Federal Rule of Civil
Procedure 9(b)’s heightened pleading standard. The magistrate judge concluded that Plaintiff’s
pleadings as to these claims are merely a “formulaic recitation” of the elements for fraud and
negligent misrepresentation and that Plaintiff’s pleadings therefore failed to satisfy Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 570 (2007). Report 5. The court agrees with the magistrate judge’s
determination that Plaintiff’s pleadings as to these claims are insufficient to satisfy Twombly. The
court nevertheless sustains Plaintiff’s objection and will allow him to replead these claims with
more particularity because he has not previously amended his pleadings. Moreover, because this
case was removed from state court, Texas’s “fair notice” pleading standard rather than the stricter
federal standard applies. Chandler Mgmt. Corp. v. First Specialty Ins. Corp., No. 3:12-CV-2541-L,
2013 WL 395577, at *6 (N.D. Tex. Jan. 31, 2013) (citing De La Hoya v. Coldwell Banker Mexico,
Inc., 125 F. App’x 533, 537-38 (5th Cir. 2005)). The court therefore rejects the magistrate judge’s
recommendation that Plaintiff’s fraud and negligent misrepresentation claims be dismissed and will
deny Defendants’ motion to dismiss these claims.
C.

Unjust Enrichment

Plaintiff objects to the magistrate judge’s recommendation that his claim for unjust
enrichment be dismissed. The Report correctly notes that “under Texas law, unjust enrichment is
a quasi-contractual claim based on the absence of an express agreement.” Report 5 (citing Fortune
Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 684 (Tex. 2000)). Thus, there can “be no claim for unjust
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enrichment when there is a binding contract between the parties.” Bircher v. Bank of New York
Mellon, 2012 WL 3245991, at *6 (N.D. Tex. Aug. 9, 2012). As already discussed, however, Plaintiff
contends that no binding contract between the parties exists as a result of the improper assignment.
The court therefore sustains the objection and rejects the magistrate judge’s recommendation that
Plaintiff’s unjust enrichment claim be dismissed for failure to state a claim upon which relief can be
granted. Accordingly, dismissal of this claim is not proper and Defendants’ motion to dismiss as to
this claim will be denied.
D.

Declaratory Judgment and Injunctive Relief

Plaintiff objects to the magistrate judge’s recommendation to dismiss his request for a
declaratory judgment and injunctive relief. The magistrate judge determined that Plaintiff’s request
for declaratory and injunctive relief should be denied because no substantive claims remain. Given
that the court has determined that dismissal of all of Plaintiff’s claims is premature, the court
sustains Plaintiff’s objection and rejects the magistrate judge’s recommendation as to Plaintiff’s
request for declaratory and injunctive relief. Accordingly, the court will deny Defendants’ motion
to dismiss on this ground.
III.

Conclusion
For the reasons explained, the court accepts the magistrate judge’s findings and

recommendation as to any wrongful foreclosure claim by Plaintiff based on procedural improprieties
in the foreclosure process and grants Defendants’ Motion to Dismiss Plaintiff’s wrongful
foreclosure claim based on this theory. The court rejects the magistrate judge’s findings and
recommendation that Plaintiff’s claim for wrongful foreclosure claim, based on Defendants’ alleged
lack of authority to foreclose on the Property, should be dismissed for failure to state a claim. The
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court also rejects the magistrate judge’s findings and recommendation that Plaintiff’s claims for
fraud, negligent misrepresentation, unjust enrichment, declaratory judgment, and injunctive relief
should be dismissed at this juncture for failure to state a claim. Accordingly, the court denies
without prejudice Defendants’ Motion to Dismiss these claims. Plaintiff is directed to file an
amended pleading by October 4, 2013, that satisfies Rule 9(b)’s heightened pleading standard as to
his fraud and negligent misrepresentation claims. Failure to do so will result in dismissal of
Plaintiff’s fraud and negligent misrepresentation claims with prejudice pursuant to Rule 12(b)(6)
or without prejudice pursuant to Rule 41(b) for failure to comply with a court order.
It is so ordered this 13th day of September, 2013.

_________________________________
Sam A. Lindsay
United States District Judge

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