Sullivan v. Bank of America NA

Filing 18

Memorandum Opinion and Order granting in part and denying in part 17 MOTION to Dismiss Plaintiff's Amended Petition. The defendant's motion to dismiss is denied with respect to the breach of contract claim and granted with respect to the breach of fiduciary duty claim. (Ordered by Senior Judge A. Joe Fish on 12/10/2014) (jrr)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

GINA SULLIVAN,
Plaintiff,
VS.
BANK OF AMERICA, N.A.,
Defendant.

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CIVIL ACTION NO.
3:14-CV-3186-G

MEMORANDUM OPINION AND ORDER

Before the court is the defendant’s motion to dismiss the plaintiff’s amended
complaint under Federal Rule of Civil Procedure 12(b)(6) (docket entry 17). For the
reasons discussed below, the motion is denied with respect to the breach of contract
claim and granted with respect to the breach of fiduciary duty claim.
I. BACKGROUND
A. Factual Background
This dispute arises from the complete destruction by fire of a piece of real
property (the “property”) on August 20, 2010. Plaintiff’s Amended Original Petition
(“Complaint”) ¶ 10 (docket entry 15). To purchase the property, located in

Commerce, Texas, the plaintiff secured a mortgage loan from the defendant, Bank of
America. Id. ¶ 9; Defendant’s Motion to Dismiss Plaintiff’s Amended Complaint
(“Motion to Dismiss”) ¶ 2. At the time of the fire, the plaintiff still owned the
property. See Complaint ¶¶ 9-11. However, after the fire, the defendant informed
the plaintiff of its intention to proceed with a foreclosure sale on the property. Id.
¶¶ 10-11. In response, the plaintiff contacted the defendant to discuss the
outstanding balance on her loan. Id. ¶ 12. The parties then exchanged multiple
communications concerning the status of a hazard insurance policy that potentially
covered the fire damage. Id. ¶¶ 13-14. The plaintiff alleges that the policy was
current at the time of the fire. See id. ¶¶ 13-14. Any payout from the policy would
either lead to a reduction in the loan’s outstanding balance or require a repair of the
property. See Deed of Trust § 5(exhibit A, docket entry 17). In opposition to the
plaintiff’s allegations, the defendant contends that the policy lapsed prior to the fire
and thus does not affect the dispute. Complaint ¶¶ 13-14.
B. Procedural Background
The plaintiff filed this case in the 196th Judicial District Court of Hunt
County, Texas, on August 8, 2014. Plaintiff’s Original Petition (attachment 1,
docket entry 1). This original complaint included claims under the Fair Debt
Collection Practices Act and the Texas Finance Code. Id. ¶¶ 14-15. On the basis of
both federal question and diversity jurisdiction, the defendant removed the case to

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this court on September 5, 2014. Defendant’s Notice of Removal ¶¶ 4-10 (docket
entry 1). A week later, the defendant filed a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6). Defendant’s Motion to Dismiss Plaintiff’s Complaint
(docket entry 8). The court was unable to rule on this motion because the original
complaint lacked dates necessary to evaluate the defendant’s statutes of limitations
defenses. See Memorandum Opinion and Order dated October 10, 2014 at 1-3
(docket entry 14). Thus, it ordered the plaintiff to amend her pleadings to include
this pertinent information. Id. at 3. The plaintiff amended her complaint to include
the relevant dates and supplemented her allegations with claims for breach of contract
and breach of fiduciary duty. Compare Complaint ¶¶ 16-19, with Plaintiff’s Original
Petition ¶¶ 14-15. These dates confirmed that over three years had elapsed since the
accrual of any claims under the Fair Debt Collection Practices Act or the Texas
Finance Code.1 Order (docket entry 16). Because the Fair Debt Collection Practices
Act’s and the Texas Finance Code’s respective one-year and two-year statutes of
limitations have expired, Memorandum Opinion and Order at 1-2, the court
dismissed these claims. Order dated October 15, 2014 at 1-2. This dismissal left the

1

The court’s prior orders describe the plaintiff’s state statutory claim as
deriving from both the Texas Finance Code and the Texas Debt Collection Practices
Act. Compare Memorandum Opinion and Order at 2, with Order at 1. However,
these alternative descriptions refer to the same statutory provision, namely Texas
Finance Code § 392.304. See 16-242 DORSANEO, TEXAS LITIGATION GUIDE
§ 242.03[1] (noting that the Texas Debt Collection Practices Act was codified in the
Texas Finance Code at Chapter 392).
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plaintiff’s breach of contract and breach of fiduciary duty claims pending before this
court. Id. The defendant filed another motion to dismiss -- directed at the remaining
claims -- on October 27, 2014.2 The court now turns to the disposition of this
motion.
II. ANALYSIS
A. Applicable Law
1. General Motion to Dismiss Standard
“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.’” In re Katrina
Canal Breaches Litigation, 495 F.3d 191, 205 (5th Cir. 2007) (quoting Bell Atlantic
Corporation v. Twombly, 550 U.S. 544, 570 (2007)), cert. denied, 552 U.S. 1182
(2008). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not
need detailed factual allegations, a plaintiff’s obligation to provide the grounds of
[her] entitlement to relief requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555
(citations, quotation marks, and brackets omitted). “Factual allegations must be
enough to raise a right to relief above the speculative level, on the assumption that all

2

In its brief supporting the present motion to dismiss, the defendant
argues that the plaintiff fails to state a claim under either the Fair Debt Collection
Practices Act or the Texas Finance Code. Motion to Dismiss ¶¶ 6-9. The court does
not need to consider these arguments in light of its October 15, 2014 order.
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the allegations in the complaint are true (even if doubtful in fact).” In re Katrina
Canal,495 F.3d at 205 (quoting Twombly, 550 U.S. at 555) (internal quotation marks
omitted). “The court accepts all well-pleaded facts as true, viewing them in the light
most favorable to the plaintiff.” Id. (quoting Martin K. Eby Construction Company, Inc.
v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004)) (internal quotation
marks omitted).
The Supreme Court has prescribed a “two-pronged approach” to determine
whether a complaint fails to state a claim under Rule 12(b)(6). See Ashcroft v. Iqbal,
556 U.S. 662, 678-79 (2009). The court must “begin by identifying the pleadings
that, because they are no more than conclusions, are not entitled to the assumption
of truth.” Id. at 679. The court should then assume the veracity of any well-pleaded
allegations and “determine whether they plausibly give rise to an entitlement of
relief.” Id. The plausibility principle does not convert the Rule 8(a)(2) notice
pleading to a “probability requirement,” but “a sheer possibility that a defendant has
acted unlawfully” will not defeat a motion to dismiss. Id. at 678. The plaintiff must
“plead[ ] factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.” Id. “[W]here the well-pleaded
facts do not permit the court to infer more than the mere possibility of misconduct,
the complaint has alleged -- but it has not ‘show[n]’ -- ‘that the pleader is entitled to
relief.’” Id. at 679 (alteration in original) (quoting FED. R. CIV. P. 8(a)(2)). The court,

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drawing on its judicial experience and common sense, must undertake the “contextspecific task” of determining whether the plaintiff’s allegations “nudge” her claims
against the defendant “across the line from conceivable to plausible.” See id. at 679,
683.
2. Motion to Dismiss Standard Applied to Breach of Contract Claims
This court has previously noted that “[i]n Texas, there are four essential
elements to a breach of contract claim: ‘(1) the existence of a valid contract;
(2) performance or tendered performance by the plaintiff; (3) breach of contract by
the defendant; and (4) damages sustained by the plaintiff as a result of the breach.’”
Beauty Manufacturing Solutions Corporation v. Ashland, Inc., 848 F. Supp. 2d 663, 667
(N.D. Tex. 2012) (Fish, J.) (quoting Mullins v. TestAmerica, Inc., 564 F.3d 386, 418
(5th Cir. 2009)). In the present case, the defendant does not contest the validity of
the two contracts at issue: the deed of trust and the adjustable rate note.3 See Motion

3

The defendant attached both the deed of trust and adjustable rate note
to its motion to dismiss. See Deed of Trust; Adjustable Rate Note (exhibit B, docket
entry 17). Under Texas common law, a deed of trust, or mortgage, secures a loan
agreement embodied in a note. See Lowery v. Bank of America, No. 04-12-00729-CV,
2013 WL 5762227, at *2 (Tex. App.--San Antonio Oct. 23, 2013, no pet.). Because
the complaint discusses a “mortgage” and “loan” the plaintiff held with the
defendant, Complaint ¶¶ 9, 12, 15, the court can consider the defendant’s
attachments “part of the pleadings” when ruling on the motion to dismiss. See Collins
v. Morgan Stanley Dean Witter, 224 F.3d 496, 499 (5th Cir. 2000) (quoting Venture
Associates Corporation v. Zenith Data Systems Corporation, 987 F.2d 429, 431 (7th Cir.
1993)).
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to Dismiss ¶ 4. Similarly, it does not allege that the plaintiff failed to properly tender
performance or did not suffer damages. See id. Instead, the defendant contends that
the plaintiff’s complaint fails to satisfy element three (i.e., identifying a contract
breach) at the pleading stage because it “does not identify any particular provision of
any contract that she contends [the defendant] violated.” See id. (emphasis in
original).
To withstand a motion to dismiss directed at element three, “a plaintiff must
identify a specific provision of the contract that was allegedly breached.” Innova
Hospital San Antonio, L.P. v. Blue Cross and Blue Shield of Georgia, Inc., 995 F. Supp. 2d
587, 602 (N.D. Tex. 2014) (O’Connor, J.); see, e.g., Motten v. Chase Home Finance,
831 F. Supp. 2d 988, 1003 (S.D. Tex. 2011) (granting a motion to dismiss because
plaintiffs “fail[ed] to provide the loan documents that were breached and to indicate
which provisions were breached”); American Realty Trust, Inc. v. Travelers Casualty and
Surety Company of America, 362 F. Supp. 2d 744, 753 (N.D. Tex. 2005) (Godbey, J.)
(“[T]he complaint must describe the alleged terms of the contract in a sufficiently
specific manner to give the defendant notice of the nature of the claim.”). If after
analyzing the pleadings the court is unable to identify one or more specific
contractual provisions at issue, then the “[p]laintiffs fail[ ] to allege enough facts
about the terms of [a contract] to raise their right to relief above the speculative
level.” Innova Hospital, 995 F. Supp. 2d at 603 (citing Twombly, 550 U.S. at 555).

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While “describ[ing] the alleged terms of the contract in a sufficiently specific
manner” could arguably require a plaintiff to explicitly identify the contractual
provision(s) at issue, such an interpretation ignores the main purpose of the
requirement: “to give the defendant notice of the nature of the claim.” American
Realty Trust, 362 F. Supp. 2d at 753. Relying on this purpose, this court has rejected
a requirement that a plaintiff “outline all the elements of the claim” at the pleading
stage. Innova Hospital, 995 F. Supp. 2d at 603. Instead, the “[p]laintiff[] must
provide enough factual allegations to draw the reasonable inference that the elements
exist.” Id. (emphasis added); see also Torch Liquidating Trust v. Stockstill, 561 F.3d
377, 384 (5th Cir. 2009) (emphasis added) (internal quotations omitted) (“To raise a
right to relief, the complaint must contain either direct allegations or permit properly
drawn inferences to support ‘every material point necessary to sustain a recovery.’”)
(emphasis added). Explicitly identifying the contractual provision(s) at issue is
certainly the simplest way to create this “reasonable inference.” Innova Hospital, 995
F. Supp. 2d at 603. However, even absent such explicit identification, the pleadings
as a whole may establish a “reasonable inference” that a particular contractual
provision was breached, thus providing essential notice to the defendant. Id.

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3. Breach of Fiduciary Duty Claims Against a Mortgagee4
Under Texas common law, “there is no general duty of good faith and fair
dealing in ordinary, arms-length commercial transactions in Texas.” Marketic v. U.S.
Bank National Association, 436 F. Supp. 2d 842, 855 (N.D. Tex. 2006) (Buchmeyer,
J.). Under two exceptions to this general rule, however, such a duty can arise when
“created by express language in a contract” or when “a special relationship of trust
and confidence exists between parties to [a] contract.” Lovell v. Western National Life
Insurance Company, 754 S.W.2d 298, 302 (Tex. App.--Amarillo 1988, writ denied)
(emphasis added). With respect to this latter exception, in a few limited
circumstances, plaintiffs have “assert[ed] a special relationship . . . that [justifies
imposing a] duty of good faith and fair dealing.” Federal Deposit Insurance Corporation
v. Coleman, 795 S.W.2d 706, 709 (Tex. 1990). For example, in Arnold v. National
County Mutual Fire Insurance Company, the Supreme Court of Texas recognized “a duty
on the part of insurers to deal fairly and in good faith with their insureds.” 725
S.W.2d 165, 167 (1987). To support its conclusion, the court detailed the “special
relationship” between the insured and insurer: “In the insurance context a special

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Courts interpreting Texas law use the phrases “duty of good faith and
fair dealing” and “fiduciary relationship/duty” interchangeably. See, e.g., Marketic v.
U.S. Bank National Association, 436 F. Supp. 2d 842, 855 (N.D. Tex. 2006)
(Buchmeyer, J.) (Although citing to cases analyzing the “duty of good faith and fair
dealing,” the court uses the phrase “fiduciary relationship.”). When providing direct
quotations, the court will preserve the original text. However, when speaking in its
own voice, it will use the term “fiduciary duty.”
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relationship arises out of the parties’ unequal bargaining power and the nature of
insurance contracts which would allow unscrupulous insurers to take advantage of
their insureds’ misfortunes in bargaining for settlement or resolution of claims.” Id.
Thus far, however, Texas courts have concluded that the characteristics of the
mortgagor-mortgagee relationship do not support similar reasoning. In fact, this very
court has explicitly stated that “a fiduciary relationship does not exist between a
mortgagor and mortgagee in Texas.” Marketic, 436 F. Supp. 2d at 855 (citing
Coleman, 795 S.W.2d at 708-09).
B. Application
1. The Plaintiff States a Claim for Breach of Contract
Although the complaint does not explicitly identify a contractual provision at
issue, its contents establish a “reasonable” or “properly drawn” inference that the
defendant breached section five of the deed of trust (“section five”). Innova Hospital,
995 F. Supp. 2d at 603; Stockstill, 561 F.3d at 384; see also Deed of Trust § 5. Section
five, entitled “Hazard or Property Insurance,” requires the plaintiff to keep insurance
on the mortgaged property -- subject to a standard mortgage clause. Id. If the
plaintiff fails to maintain insurance, section five grants the defendant the option to
purchase insurance on the property. Id. Any insurance proceeds “shall be applied to
restoration or repair of the Property damaged,” or if such restoration or repair is “not
economically feasible or [the defendant’s] security would be lessened, the insurance

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proceeds shall be applied to the sums secured by [the deed of trust], whether or not
then due, with any excess paid to the” plaintiff. Id.
According to the complaint, one of the parties5 held a current hazard insurance
policy on the property at the time of the fire. Complaint ¶¶ 13-14, 18. Furthermore,
“[b]y refusing to file a claim for the loss of the dwelling by fire and to furnish the
Plaintiff with the amount due on the debt in question, which was necessary for the
Plaintiff to file an insurance claim to repay the debt, the Defendant had effectively
prohibited the Plaintiff from continued performance of the terms of the contract . . ..”
Id. ¶ 18. Piecing these allegations together reveals that, according to the plaintiff, one
of the parties held a current insurance policy at the time of the fire and the defendant
breached its obligations with respect to this insurance policy. See Complaint ¶¶ 9-15,
18. At the motion to dismiss stage, the plaintiff treats these well-pleaded factual
allegations as true.6 In re Katrina Canal, 495 F.3d at 205.
5

It is not entirely clear based on the complaint who held the insurance
policy. The complaint states that “[b]y refusing to file a claim for the loss, . . . the
Defendant had effectively prohibited the plaintiff from continued performance of the
terms of the contract . . ..” Complaint ¶ 18. This implies that the defendant held the
insurance policy because it possessed the power to file a claim for the loss. However,
in contradiction to the above language, the same paragraph states that the
defendant’s assistance was “necessary for the Plaintiff to file an insurance claim.” See
id.
6

While the defendant attached the deed of trust and adjustable rate note
to its motion to dismiss, it failed to attach a copy of either a current or expired
insurance policy covering the property. The court would have been able to consider
such an attachment when ruling on the motion to dismiss because the complaint
(continued...)
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These allegations state a claim for breach of section five. See Deed of Trust § 5.
As outlined above, section five requires the parties to use insurance proceeds to either
repair the property or reduce the plaintiff’s outstanding debt. See id. If the
defendant held the policy, then “refusing to file a claim for the loss of the dwelling”
would potentially breach section five. Complaint ¶ 18. If the plaintiff held the
policy, then the defendant’s failure to assist in the claims process could potentially
breach section five. See id. (See footnote five for a discussion of the ambiguity
surrounding who held the insurance policy.). In either case, the plaintiff’s allegations
state a plausible claim for breach of section five.
2. The Plaintiff Fails to State a Claim for Breach of Fiduciary Duty7
6

(...continued)
refers to an insurance policy. See Collins, 224 F.3d at 499; Complaint ¶¶ 13-14.
Absent such an attachment, however, the court must accept the plaintiff’s allegations
as true.
7

Without concluding whether the Texas Uniform Commercial Code
(“UCC”), TEX. BUS. & COM. CODE §§ 1.101 et seq., applies to the deed of trust or
adjustable rate note, the court notes that a fiduciary duty under tort law is distinct
from the “obligation of good faith” under the UCC. Id. § 1.304.
“Every contract or duty within [the UCC’s scope] imposes an obligation
of good faith in its performance and enforcement.” Id. Good faith “means honesty in
fact and the observance of reasonable commercial standards of fair dealing.” Id.
§ 1.201(20). The comments to the UCC emphasize that the “obligation of good faith
. . . does not support an independent cause of action for failure to perform or enforce
in good faith. Rather, [the obligation] means that a failure to perform or enforce, in
good faith, a specific duty or obligation under the contract, constitutes a breach of
that contract . . ..” Id. § 1.304 cmt. 1; see also Hildreth v. Merle Norman Cosmetics, Inc.,
No. 08-02-00402-CV, 2004 WL 736991, at *6 (Tex. App.--El Paso Apr. 6, 2004, no
(continued...)
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As discussed above, a fiduciary relationship between a mortgagor and
mortgagee is the exception rather than rule. See Marketic, 436 F. Supp. 2d at 855
(citing Coleman, 795 S.W.2d at 708-09). The plaintiff does not contend that the text
of the relevant documents explicitly creates a fiduciary duty. See Complaint ¶ 19.
Instead, the plaintiff alleges that the “special relationship” between her and the
defendant justifies imposing a fiduciary duty. See id.; Coleman, 795 S.W.2d at 709.
More specifically, the plaintiff states that “[a]s the mortgagor and mortgagee, Plaintiff
and Defendant had created an [sic] fiduciary relationship in which Defendant
exercised a position of dominance over Plaintiff. The Defendant owed a fiduciary
7

(...continued)
pet.) (mem. op.) (noting that the “obligation of good faith” contained in the UCC
“does not support an independent cause of action for failure to perform or enforce in
good faith”) (emphasis added).
Texas common law, rather than the substantive scope of the UCC,
determines whether a contractual relationship is governed by a fiduciary duty. See
Coleman, 795 S.W.2d at 708-09. Furthermore, in sharp contrast to the “obligation of
good faith,” a fiduciary duty is an independent responsibility under tort law rather
than a contractual obligation. See 3-48 TEXAS TORTS AND REMEDIES § 48.02[8]
(discussing breach of fiduciary duty as a tort remedy that is inapplicable in most
contractual settings because “each party voluntarily enters into the relationship for
his or her own benefit after arms-length negotiations”); 1-14 TEXAS TORTS AND
REMEDIES § 14.11[1][a] (When discussing fiduciary duties as applied to real estate
brokers, the treatise states that the “relationship [between the broker and his client] is
governed not only by the contractual agreements. . ., but by the principles of agency
which superimpose certain fiduciary obligations on the broker and, in turn, subject
the broker to liability in tort as well as contract.”); Brosseau v. Ranzau, 81 S.W.3d
381, 398 (Tex. App.--Beaumont 2002, pet. denied) (“Breach of fiduciary duty is a
tort.”) (citing Hawthorne v. Guenther, 917 S.W.2d 924, 936 (Tex. App.--Beaumont
1996, writ denied)). Thus, breach of fiduciary duty qualifies as a tort law claim
independent of, albeit often related to, a breach of contract claim.
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duty to act with care and loyalty and act with full disclosure. This breach of fiduciary
duty, by failure to cooperate and assist Plaintiff in filing claim on insurance policy
[sic] for loss of the dwelling, led to the damages mentioned below.” Complaint ¶ 19.
This paragraph of the complaint contains truisms, unsupported conclusions, and
incorrect statements of the law, none of which support the plaintiff’s breach of
fiduciary duty claim.
The first sentence of paragraph nineteen directly conflicts with the Texas legal
principle that “a fiduciary relationship does not exist between a mortgagor and
mortgagee in Texas.” Marketic, 436 F. Supp. 2d at 855 (citing Coleman, 795 S.W.2d
at 708-09). The allegation that the “Defendant exercised a position of dominance
over Plaintiff,” included at the end of the first sentence, does not advance the
plaintiff’s claim. Complaint ¶ 19. While dominance, or an imbalance in bargaining
power, is one factor courts consider when determining whether to impose a fiduciary
duty in a particular relationship, see Lovell, 754 S.W.2d at 302-03 (citing Arnold, 725
S.W.2d at 167), the plaintiff fails to substantiate her conclusory statement with any
factual allegations. As is, the plaintiff’s statement is “no more than [a] conclusion[ ]”
that is “not entitled to the assumption of truth.” See Iqbal, 556 U.S. at 679. The
second sentence states that a fiduciary duty exists and then recites the definition of a
fiduciary duty. See Complaint ¶ 19. At no point, however, does the plaintiff present
any factual allegations supporting the existence of a fiduciary duty. See id. The last

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sentence suffers from the same flaw as the preceding two sentences. It characterizes
the plaintiff’s breach of contract claim as a breach of fiduciary duty claim, but it lacks
any factual allegations to support the existence of a fiduciary duty. See id. The
court’s reasoning does not prohibit extending fiduciary duties to new relationship
categories, but it does demand that plaintiffs “plead[ ] factual content” to justify the
court’s consideration of such extensions. Iqbal, 556 U.S. at 678 (emphasis added).
III. CONCLUSION
For the reasons discussed above, the defendant’s motion to dismiss is DENIED
with respect to the breach of contract claim and GRANTED with respect to the
breach of fiduciary duty claim.
SO ORDERED.

December 10, 2014.
___________________________________
A. JOE FISH
Senior United States District Judge

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