Sharp v. American Homes 4 Rent Properties Eight LLC et al
Filing
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Memorandum Opinion and Order granting 7 Defendant's Motion to Dismiss. The court GRANTS the plaintiff leave to amend his complaint by 7/24/2015. If no amended complaint is filed and served by that date, a judgment of dismissal will be entered. (Ordered by Senior Judge A. Joe Fish on 7/14/2015) (axm)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
MICHAEL W. SHARP,
Plaintiff,
VS.
AMERICAN HOMES 4 RENT
PROPERTIES EIGHT, LLC, ET AL.,
Defendants.
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CIVIL ACTION NO.
3:15-CV-1380-G
MEMORANDUM OPINION AND ORDER
Before the court is the defendant’s motion to dismiss (docket entry 7) under
Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim for relief. For the
reasons stated below, the court grants the defendant’s motion with respect to all of
the plaintiff’s claims. However, the court grants the plaintiff leave to amend his
complaint by July 24, 2015.
I. BACKGROUND
A. Factual Background
This case concerns a mortgage foreclosure on a principal residence. On or
about May 18, 2001, the plaintiff, Michael W. Sharp (“Sharp”), executed a note with
Imperial Mortgage Corporation that was secured by a deed of trust on the residence
at 1037 Winding Creek Drive, Cedar Hill, Texas 75104 (the “property”). Plaintiff’s
Original Petition (“Complaint”) ¶¶ 10-11 (docket entry 1, exhibit C-1).
Subsequently, Sharp fell into default, and Wells Fargo Bank, N.A. (“Wells Fargo”) -the current mortgage servicer -- sold the property at a foreclosure sale on March 4,
2014 to American Homes 4 Rent Properties Eight, LLC (AH4R). Complaint ¶¶ 12,
14-15.
Sharp alleges, however, that Wells Fargo breached provisions of the deed of
trust by failing to provide (1) notice regarding the application for loan modification
he submitted to Wells Fargo, (2) notice that he was in default and providing him at
least 20 days to cure, and (3) notice of foreclosure 21 days prior to the foreclosure
sale. Complaint ¶¶ 13-15, 19-32. Moreover, Sharp alleges that Wells Fargo violated
applicable Housing and Urban Development regulations by failing to have “a face-toface interview with [him], or make a reasonable effort to arrange such a meeting,
before three full monthly installments due on the mortgage [were] unpaid.”
Complaint ¶ 23. These violations, according to Sharp, imply that the foreclosure sale
“was ultimately done without authority and is therefore ineffective and may not pass
title.” Complaint ¶ 38. The result, Sharp contends, is that he possesses superior title
to AH4R and thus should succeed in his quiet title and declaratory judgment claims.1
1
Sharp also raises a claim for injunctive relief to restrain AH4R from
evicting him from the property. Complaint ¶¶ 40-42. The county court abated
AH4R’s eviction suit “pending a dispositive ruling” in the case pending before this
(continued...)
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Complaint ¶¶ 33-42; see also Plaintiff’s Response (“Response”) ¶¶ 16, 26 (docket
entry 13).
B. Procedural Background
Sharp filed his petition with the 298th Judicial District Court of Dallas
County, Texas on March 24, 2015. Notice of Removal ¶ 1 (docket entry 1). In the
petition, Sharp brings a quiet title claim, seeks injunctive relief, and requests
declaratory judgment against AH4R. Complaint ¶ 33-42. Sharp also pleads the
preceding claims, in addition to claims for breach of contract and regulatory
violations, against Wells Fargo.2 Complaint ¶¶ 19-42.
Claiming both federal question and diversity jurisdiction, the defendants
removed the case to this court on May 1, 2015. See Notice of Removal ¶ 6. Once in
1
(...continued)
court. See April 2, 2015 Order in Case No. CC-14-03878-A in the County Court at
Law Number 1, Dallas County, Texas; see also Motion to Dismiss, Exhibit 4
(providing the docket sheet of the relevant case). Thus, the need for injunctive relief
no longer exists.
Even if the county court chose to dissolve the order of abatement, this
court would still deny injunctive relief. To establish a right to the remedy of
injunctive relief, Sharp is required to show, inter alia, “a substantial likelihood of
success on the merits.” DSC Communications Corporation v. DGI Technologies, Inc., 81
F.3d 597, 600 (5th Cir. 1996). Because Sharp has failed to allege sufficient facts to
support his claim, he has not pleaded the necessary grounds for obtaining injunctive
relief.
2
Sharp concedes that he alleges the breach of contract, statutory, and
regulatory claims against only Wells Fargo. Response ¶ 13. These claims are only
relevant to the present motion to the extent they influence the quiet title claim
against AH4R.
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federal court, AH4R filed a motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6) on May 8, 2015. See Motion to Dismiss. According to AH4R,
although Sharp alleges no wrongdoing on the company’s part, he nonetheless names
the company as a defendant solely because it purchased the property. Id. ¶ 9. AH4R
additionally notes that Sharp fails to state that he is current on his mortgage
payments and alleges no facts that, if proved, would establish his superior title. Id.
¶ 17. Instead, Sharp challenges AH4R’s title by arguing that “the foreclosure sale was
wrongful and ultimately invalid.” Id. ¶ 17.
The plaintiff filed a timely response to the motion. See Response. The time
limit for filing a reply has passed and thus the motion is now ripe for decision. See
LOCAL CIVIL RULE 7.1(f) (“[A] party who has filed an opposed motion may file a
reply brief within 14 days from the date the response is filed.”).
II. ANALYSIS
A. Legal Principles
1. Rule 12(b)(6) Motion to Dismiss Standard
After a defendant removes an action from state court, federal courts must
apply the Federal Rules of Civil Procedures when analyzing a motion to dismiss. FED.
R. CIV. P. 81(c)(1) (“These rules apply to a civil action after it is removed from a state
court.”); see also Fowler v. General Insurance Company of America, Civil Action No. 3:14CV-2596-G, 2014 WL 5879490, at *1-2 (N.D. Tex. Nov. 13, 2014) (Fish, J.); Lewis
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v. Wells Fargo Bank, N.A., 939 F. Supp. 2d 634, 636-37 (N.D. Tex. 2013) (Fish, J.);
STEVEN S. GENSLER, 1 FEDERAL RULES OF CIVIL PROCEDURE, RULES AND
COMMENTARY, Rule 81 (2015) (“Defendants sometimes remove a case from a state
with pleading standards that are different from those applicable in federal court.
Whether more strict or more lenient, the federal standard will control postremoval.”).
“In considering a motion to dismiss for failure to state a claim, a district court
must limit itself to the contents of the pleadings, including attachments thereto.”
Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000) (citing FED.
R. CIV. P. 12(b)(6)). “To survive a 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 his
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
(internal citation, quotations marks, and brackets omitted). “Factual allegations must
be enough to raise a right to relief above the speculative level, on the assumption that
all the allegations in the complaint are true (even if doubtful in fact).” In re Katrina
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Canal, 495 F.3d at 205 (quoting Twombly, 550 U.S. at 555) (internal quotation marks
omitted). “The court accepts 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, 678-679 (2009). The court must “begin by identifying the pleadings
that, because they are no more than conclusions, are not entitled to the presumption
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 standard 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, drawing on its judicial experience and common sense, must undertake the
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“context-specific task” of determining whether the plaintiff’s allegations “nudge” his
claims against the defendant “across the line from conceivable to plausible.” See id.
at 680, 683.
2. Quiet Title Actions Under Texas Law
Through a quiet title action, a “plaintiff seeks to remove from his title a cloud
created by an allegedly invalid claim.” Turner v. AmericaHomeKey Inc., 514 F. App’x
513, 516 (5th Cir. 2013) (citations omitted) (unpublished). To succeed on a quiet
title claim under Texas law, a plaintiff must prove that: (1) he possesses an interest
in a specific property, (2) his title to the property is affected by the defendant’s
claimed interest, and (3) the defendant’s claim, although facially valid, is invalid or
unenforceable. Cook-Bell v. Mortgage Electronic Registration Systems, Inc., 868 F. Supp.
2d 585, 591 (N.D. Tex. 2012) (Fish, J.) (citing Cruz v. CitiMortgage, Inc., No. 3:11CV-2871-L, 2012 WL 1836095, at *4 (N.D. Tex. May 21, 2012) (Lindsay, J.)). A
plaintiff “must allege right, title, or ownership in himself or herself with sufficient
certainty to enable the court to see he or she has a right of ownership that will
warrant judicial interference.” Turner, 514 F. App’x at 516 (citing Wright v. Matthews,
26 S.W.3d 575, 578 (Tex. App.--Beaumont 2000, pet. denied)).
Importantly, a plaintiff must prove and recover on the strength of his own title,
not the weakness or invalidity of his adversary’s title. See, e.g., Kingman Holdings,
LLC. v. Everbank, No. 5:13-CV-1127-DAE, 2014 WL 1491257, at *5 (W.D. Tex.
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Apr. 14, 2014) (“Plaintiff cannot maintain a quiet title action because its allegations
speak only to alleged weaknesses in Defendant’s title, not to the strength of Plaintiff’s
own title.”); Fricks v. Hancock, 45 S.W.3d 322, 327 (Tex. App.--Corpus Christi 2001,
no pet.); Alkas v. United Savings Association of Texas, 672 S.W.2d 852, 857 (Tex. App.-Corpus Christi 1984, writ ref’d n.r.e.). Particularly relevant to this case, a plaintiff
must allege facts that he is “current on his loan payments and not in default such that
[he] would have an interest in the Property superior to any lienholder seeking to
foreclose” and any resulting purchaser at a foreclosure sale.3 Gray v. Wells Fargo Bank,
N.A., No. 4:12-CV-576, 2013 WL 3097800, at *2 (E.D. Tex. June 18, 2013), adopted
3
Sharp correctly notes that “[f]or a sale under a deed of trust to be valid,
the terms set out in the deed of trust must be strictly followed.” Response ¶ 22
(citing UMLIC VP, LLC v. T & M Sales and Environmental Systems, Inc., 176 S.W.3d
595, 609 (Tex. App.--Corpus Christi 2005, pet. denied)). The UMLIC VP court goes
on to note that when the foreclosing party fails to strictly follow the terms in the deed
of trust, the mortgagor may possess a valid claim for wrongful foreclosure. 176 S.W.3d
at 609. However, the court does not even discuss a quiet title claim in its opinion.
See id.
Additionally, Sharp notes that it would be “illogical for the Court to
conclude that Plaintiff cannot enforce [Defendant’s] obligations, assumed to be
contractual, which arise after Plaintiff’s default merely because Plaintiff is in default.
If that were appropriate, then the [alleged contractual notice provisions] would
become practically meaningless.” Response ¶ 25 (quoting Miller v. CitiMortgage, Inc.,
970 F. Supp. 2d 568, 580 (N.D. Tex. 2013 (Lindsay, J.)). The court made this
statement, however, when discussing the plaintiff’s breach of contract claim. Miller,
970 F. Supp. 2d at 579-80. Later in the same opinion, the court dismisses the
plaintiff’s quiet title claim by noting that she “has not alleged facts which, if proved,
would establish her superior title; nor does she allege that she is current on her
mortgage payments.” Id. at 590 (internal alterations, quotations and citation
omitted).
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by District Court Judge Richard A. Shell’s order on September 6, 2013 (see docket
entry 13 in relevant case); see also Jaimes v. Federal National Mortgage Association, 930
F. Supp. 2d 692, 698 (W.D. Tex. 2013) (“Based on the facts alleged by [the
plaintiff], it appears he defaulted on his mortgage, and his home was subsequently
foreclosed . . .. Those facts do not state a claim for quiet title. . ..”). The court will
only use its equity power to quiet title in favor of a plaintiff when he “supply[s] the
proof necessary to establish his superior equity and right to relief.” Hahn v. Love, 321
S.W.3d 517, 531 (Tex. App.--Houston [1st Dist.] 2009, pet. denied).
3. The Declaratory Judgment Act
Although Sharp filed this suit in Texas state court, “[w]hen a declaratory
judgment action filed in state court is removed to federal court, that action is in effect
converted into one brought under the federal Declaratory Judgment Act, 28 U.S.C.
§§ 2201, 2202.” Redwood Resort Properties, LLC v. Holmes Company Limited, No. 3:06CV-1022-D, 2007 WL 1266060, at *4 (N.D. Tex. Apr. 30, 2007) (Fitzwater, J.)
(citing I2 Technologies US, Inc., v. Lanell, No. CIV. A. 3:02-CV-0134-G, 2002 WL
1461929, at *7 n.5 (N.D. Tex. July 2, 2002) (Fish, C.J.)). “The federal Declaratory
Judgment Act (“DJA”) does not create a substantive cause of action”; rather, a
declaratory judgment action is purely a “vehicle that allows a party to obtain an early
adjudication of an actual controversy arising under other substantive law. Metropcs
Wireless, Inc. v. Virgin Mobile USA, L.P., No. 3:08-CV-1658-D, 2009 WL 3075205, at
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*19 (N.D. Tex. Sept. 25, 2009) (Fitzwater, C.J.) (internal quotations and citations
omitted). The DJA imposes no duty to declare rights. Id. Instead, it provides
“[f]ederal courts [with] broad discretion to grant or refuse a declaratory judgment.”
Id.
B. Application
1. Sharp Fails to State a Quiet Title Claim
Sharp fails to state a quiet title claim because the complaint contains no
assertions regarding the strength of his own title. See, e.g., Kingman Holdings, 2014
WL 1491257, at *5. Rather, the complaint focuses entirely on the alleged
weaknesses of the defendant’s interest in the property. Complaint ¶¶ 32, 34, 38.
Sharp defaulted on his loan, and thus Wells Fargo foreclosed upon the property. See
Complaint ¶¶ 13-15, 23-26. Absent an allegation that Sharp is “current on his loan
payments and not in default,” the court must dismiss his quiet title claim. Gray,
2013 WL 3097800, at *2. Moreover, because Sharp has failed to allege facts to
support his quiet title claim -- his only substantive claim against AH4R -- the court
refuses to consider his request for a declaratory judgment.
2. Leave to Replead
“[D]istrict courts often afford plaintiffs at least one opportunity to cure
pleading deficiencies before dismissing a case, unless it is clear that the defects are
incurable or the plaintiffs advise the court that they are unwilling or unable to amend
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in a manner that will avoid dismissal.” Lopez-Santiago v. Coconut Thai Grill, No. 3:13CV-4268-D, 2014 WL 840052, at *5 (N.D. Tex. Mar. 4, 2014) (Fitzwater, C.J.)
(quoting In re American Airlines, Inc., Privacy Litigation, 370 F. Supp. 2d 552, 567-68
(N.D. Tex. 2005) (Fitzwater, J.)). Because the plaintiff is potentially capable of
alleging claims that could avoid dismissal, the court grants the plaintiff leave to
amend his pleadings.
III. CONCLUSION
For the reasons stated above, the defendant’s motion to dismiss is GRANTED.
The court GRANTS the plaintiff leave to amend his complaint by July 24, 2015. If
no amended complaint is filed and served by that date, a judgment of dismissal will
be entered.
SO ORDERED.
July 14, 2015.
___________________________________
A. JOE FISH
Senior United States District Judge
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