Douglas v. Wells Fargo Bank, N.A.
Filing
33
MEMORANDUM OPINION AND ORDER granting 29 Motion to Dismiss filed by Wells Fargo Bank NA. The TDCA claim is DISMISSED with prejudice. But the foreclosure-sale claims are DISMISSED without prejudice and may be repleaded by 8/31/2018. (Ordered by Judge Jane J. Boyle on 7/24/2018) (aaa)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
JASON DOUGLAS and CHERYL
DOUGLAS,
Plaintiffs,
v.
WELLS FARGO BANK, N.A.,
Defendant.
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CIVIL ACTION NO. 3:17-CV-2588-B
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Wells Fargo Bank, N.A.’s (Wells Fargo) motion to dismiss.
Doc. 29. For the reasons that follow, the Court GRANTS the motion.
I.
BACKGROUND1
This is a foreclosure case. In July 2015, Plaintiffs Jason and Cheryl Douglas purchased their
home. Doc. 28, Pls.’ Second Am. Compl., ¶ 7. In connection with their purchase, the Douglases
executed a note for $415,266 and an accompanying deed. Id. Wells Fargo holds the note and the
deed. Id. ¶ 8.
The Douglases set up automatic payments with Wells Fargo in September 2016. Id. ¶ 9. Wells
Fargo then automatically collected payments from the Douglases’ bank account in September and
October. Id. But the Douglases failed to pay their mortgage after October. Id.
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The Court draws its facts from the Douglases’ Second Amended Complaint. Doc. 28.
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On January 17, 2017, Wells Fargo informed the Douglases that their payments were past due.
Id. ¶ 10. The letter stated that the Douglases owed $15,272.55 in past-due payments when in fact
they owed $9,163.53. Id. On March 3, 2017, Wells Fargo again informed the Douglases that their
payments were past due. Id. ¶ 11. This time, the letter stated that the Douglases owed $22,735.12
in past-due payments when in fact they owed $15,272.55. Id.
After receiving the second letter, the Douglases called a Wells Fargo representative and asked
whether they could make a $14,000 payment over the phone. Id. ¶ 12. The representative said the
$14,000 payment would be automatically drafted from the Douglases’ bank account “as part of a
repayment plan, or payment to bring the loan current.” Id.
Then on March 13, 2017, Wells Fargo sent an escrow shortage letter notifying the Douglases
that their May 2017 mortgage payment would increase to $3,199.86 and that no action was required.
Id. ¶ 13. The Douglases thought that their loan was no longer delinquent based on the
representative’s statement that the $14,000 payment would be automatically withdrawn from their
bank account and the escrow shortage letter’s indication that no action was required. Id. But Wells
Fargo did not draft the $14,000 from the Douglases’ bank account, and on May 2, 2017, a substitute
trustee sold the Douglases’ home at a foreclosure sale. Id. ¶ 14. The Douglases did not receive notice
of the sale. Id.
In August 2017, the Douglases filed suit in Texas state court. Wells Fargo removed the case
to this Court shortly thereafter. Doc. 1, Notice of Removal. In May 2018, the Court dismissed with
prejudice all of the Douglases’ claims against Wells Fargo except for their Texas-Debt-CollectionPractices-Act (TDCA) claim under Tex. Fin. Code § 392.304(a)(8), which the Court dismissed
without prejudice. Douglas v. Wells Fargo Bank, N.A., No. 3:17-CV-02588-B, 2018 WL 2064388,
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at *4 (N.D. Tex. May 2, 2018). The Douglases repleaded the remaining TDCA claim in their second
amended complaint and added claims to set aside the foreclosure sale, cancel the trustee’s deed, and
to quiet title and trespass to try title. Doc. 28, Pls.’ Second Am. Compl., ¶¶ 18–41. Wells Fargo then
filed a motion to dismiss, Doc. 29, which is ripe for review.
II.
LEGAL STANDARD
Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, a complaint must contain “a
short and plain statement of the claim showing that the pleader is entitled to relief.” Rule 12(b)(6)
authorizes the court to dismiss a plaintiff’s complaint for “failure to state a claim upon which relief
can be granted.” In considering a Rule 12(b)(6) motion to dismiss, “[t]he 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) (citation and quotations omitted).
To survive a motion to dismiss, a plaintiff must plead “enough facts to state a claim to relief
that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial
plausibility 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, 556 U.S. 662, 678
(2009). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Id.
III.
ANALYSIS
In their second amended complaint, the Douglases allege that Wells Fargo violated the
TDCA, seek to set aside the foreclosure sale, cancel the trustee’s deed, and quiet title and trespass
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to try title. See Doc. 28, Pls.’ Second Am. Compl. The Court will address the plausibility of these
claims below.
A.
TDCA
The Court previously dismissed the Douglases’ § 392.304(a)(8) claim without prejudice
because the Douglases failed to allege Wells Fargo “led them to think differently with respect to the
amount” they owed. Douglas, 2018 WL 2064388, at *2 (citing Miller v. BAC Home Loan Servicing,
L.P., 726 F.3d 717, 723 (5th Cir. 2013)). In the Douglases’ first amended complaint, the §
392.304(a)(8) claim relied almost exclusively on the January 17, 2017 and March 3, 2017 letters.
Doc. 8, Pls.’ First Am. Compl., ¶¶ 26–27. In their second amended complaint, the Douglases add
that Wells Fargo’s oral agreement to draft $14,000 from the Douglases’ bank account, combined with
the March 13, 2017 letter stating that no action was required, led them to believe that their loan was
current. Doc. 28, Pls.’ Second Am. Compl., ¶ 12.
Wells Fargo argues its oral agreement to accept the Douglases’ $14,000 payment is subject
to and unenforceable under the statute of frauds and therefore cannot support the Douglases’ TDCA
claim. Doc. 29, Def.’s Mot. to Dismiss, 8–9. The Douglases do not address this argument in their
response.
The Court agrees with Wells Fargo that its oral agreement to accept $14,000 from the
Douglases is unenforceable under the statute of frauds because it modified the terms of the loan
agreement. “A loan agreement in which the amount involved in the loan agreement exceeds $50,000
in value is not enforceable unless the agreement is in writing and signed by the party to be bound or
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by that party’s authorized representative.” Tex. Bus. & Com. Code § 26.02(b).2 The statute of frauds
makes oral agreements unenforceable if they modify the terms of such a loan agreement. Dagher v.
Deutsche Bank Nat’l Tr. Co., No. 3:13-CV-3575-B, 2016 WL 4138631, at *4 (N.D. Tex. Aug. 4,
2016); Kruse v. Bank of N.Y. Mellon, 936 F. Supp. 2d 790, 794 (N.D. Tex. 2013). An oral agreement
allowing a borrower “to enter into a loan assistance or repayment plan” modifies the terms of the loan
agreement and is unenforceable under the statute of frauds. Deuley v. Chase Home Fin. LLC, No. H05-04253, 2006 WL 1155230, at *2 (S.D. Tex. Apr. 26, 2006). A TDCA claim fails if it is based only
on an oral agreement made unenforceable by the statute of frauds. Kruse, 936 F. Supp. 2d at 794.
Wells Fargo orally agreed to withdraw $14,000 from the Douglases’ bank account “as part
of a repayment plan, or payment to bring the loan current.” Doc. 28, Pls.’ Second Am. Compl., ¶ 12.
If construed as a repayment plan, Wells Faro’s oral agreement would have modified the terms of the
loan because repayment plans do so by definition. See Deuley, 2006 WL 1155230, at *2. And if
construed as an agreement to bring the loan current, the agreement would have modified the terms
of the loan by allowing the Douglases to pay less than what they owed—Wells Fargo agreed to accept
$14,000 even though the Douglases alleged they owed over $15,000. Doc. 28, Pls.’ Second Am.
Compl., ¶ 12. Because Wells Fargo’s oral agreement to accept the $14,000 payment is unenforceable
under the statute of frauds, the Douglases may not use it as a basis for their TDCA claim. See Kruse,
936 F. Supp. 2d at 794. And without the $14,000 oral agreement, nothing in the second amended
complaint suggests Wells Fargo led the Douglases to think differently with respect to the amount
they owed. So the Court DISMISSES with prejudice the Douglases’ § 392.304(a)(8) claim.
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The parties do not dispute that the Douglases’ mortgage exceeds the requisite amount and is
thus subject to the statute of frauds.
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B.
Suits to Set Aside the Foreclosure Sale and Cancel the Trustee’s Deed, Quiet Title, and
Trespass to Try Title3
The Douglases also seek to set aside the foreclosure sale, cancel the trustee’s deed, and to
quiet title and trespass to try title (collectively “foreclosure-sale claims”). Doc. 28, Pls.’ Second Am.
Compl., ¶¶ 31–41. Because the Douglases’ suit to quiet title and trespass to try title relies on the suit
to set aside the foreclosure sale, the Court will consider the foreclosure-sale claims together. Id.
In their complaint, the Douglases allege that Wells Fargo failed to comply with the deed and
the Texas Property Code by failing to give them notice of sale. Id. ¶ 36. So they seek to set aside the
foreclosure sale. Id. ¶¶ 35–36. Wells Fargo’s failure to provide notice also gives rise to the Douglases’
suit to quiet title and trespass to try title. Id. ¶¶ 37–41. Wells Fargo moves to dismiss the foreclosuresale claims on two separate grounds: (1) the Douglases do not allege that Wells Fargo failed to send
notice, and (2) the Douglases did not tender the full amount due. Doc. 29, Def.’s Mot. to Dismiss,
9–12.
1.
Notice
Wells Fargo argues that failure to receive notice of sale cannot form the basis of a suit to set
aside a foreclosure sale. Id. at 10. Rather, the Douglases must plausibly allege that Wells Fargo failed
3
The Douglases’ first amended complaint included a claim for wrongful foreclosure and in the
alternative a claim to set aside the foreclosure sale and cancel the trustee’s deed. Doc. 8, Pls.’ First Am.
Compl., ¶ 34. But Wells Fargo’s motion to dismiss the Douglases’ first amended complaint did not address
the Douglases’ suit to set aside the foreclosure and cancel the trustee’s deed. So although the Court
granted the Douglases an opportunity to replead only the TDCA claim, Douglas, 2018 WL 2064388, at
*4, the claims to set aside the foreclosure sale and cancel the trustee’s deed remains. The Douglases’ first
amended complaint also included a suit to quiet title and trespass to try title against the Veteran’s
Administration (VA), Doc. 8, Pls.’ First Am. Compl., ¶¶ 57–61. But because Wells Fargo since took title
from the VA, the Douglases plead these claims against Wells Fargo in their second amended complaint.
Doc. 31, Pls.’ Resp., ¶ 8.
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to properly send notice. Id. Wells Fargo argues that the Douglases’ suit to set aside the foreclosure
sale must be dismissed because the Douglases never allege that Wells Fargo failed to send
notice—only that they didn’t receive it. Id. Because the suit to quiet title and trespass to try title rely
on the failure to provide notice of sale, Wells Fargo contends that these claims must also be
dismissed. Id. at 11–13. But the Douglases argue that their failure to receive notice is some evidence
that Wells Fargo did not properly send notice. Doc. 31, Pls.’ Resp. to Mot. to Dismiss, ¶ 49.
The Court agrees with Wells Fargo. Section 51.002 of the Texas Property Code requires
lenders to notify homeowners of a foreclosure sale at least twenty-one days before the date of sale by
“serving written notice of the sale by certified mail on each debtor who . . . is obligated to pay the
debt.” Tex. Prop. Code § 51.002(b)(3). “Service of a notice under this section by certified mail is
complete when the notice is deposited in the United States mail, postage prepaid and addressed to
the debtor at the debtor’s last known address.” Id. § 51.002(e). “There is no requirement that [the
borrower] receive the notice”—only that the lender send the notice. Martins, 722 F.3d at 256.
The Douglases plead that they did not receive notice of the foreclosure sale. Doc. 28, Pls.’
Second Am. Compl., ¶¶ 14, 36. But they do not plausibly allege that Wells Fargo failed to properly
send notice. Id. Although the Douglases respond that their failure to receive notice is evidence that
Wells Fargo did not properly send notice, their complaint is devoid of any such allegation. Doc. 31,
Pls.’ Resp. to Mot. to Dismiss, ¶ 49. So the Court finds that the Douglases have failed to state a claim
to set aside the foreclosure sale and cancel the trustee’s deed. Because the Douglases rely on the
failure to provide notice for the alleged invalidity of Wells Fargo’s title, the Court finds that the
Douglases have failed to state a claim in their suit to quiet title and trespass to try title.
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2.
Tender
Wells Fargo also argues that the Douglases’ foreclosure-sale claims must fail because the
Douglases have not tendered the full amount due under the note. Doc. 29, Def.’s Mot. to Dismiss,
10. But the Douglases urge a narrow construction of the cases that Wells Fargo cites. Doc. 31, Pls.’
Resp. to Mot. to Dismiss, ¶¶ 43–45. Specifically, the Douglases argue that each case but one involved
a rescission of the foreclosure sale—not a suit to set aside the foreclosure sale. Id. ¶ 43. And in the
case that did not involve a rescission, the lender held possession of the property. Id.
The Court agrees with Wells Fargo. “For a foreclosure sale to be set aside or cancelled, the
mortgagor must tender the amounts due and owing under the note and deed of trust.” Falk v. Wells
Fargo Bank, No. 3:09-CV-678-B, 2011 WL 3702666, at *7 (N.D. Tex. Aug. 19, 2011). “Texas courts
have made clear that ‘a necessary prerequisite to the . . . recovery of title . . . is tender of whatever
amount is owed on the note.’” White v. BAC Home Loans Servicing, LP, No. 3:09-CV-2484-G, 2010
WL 4352711, at *5 (N.D. Tex. Nov. 2, 2010) (quoting Fillion v. David Silvers Co., 709 S.W.2d 240,
246 (Tex. App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.). The Douglases fail to provide any
valid support that their suit to set aside the foreclosure sale does not require a tender of the amount
due. Doc. 31, Pls.’ Resp. to Mot. to Dismiss, ¶¶ 43–45. So the Court finds that Douglases’
foreclosure-sale claims also fail because they have not tendered the amount due on the note.
For both of these reasons, the Court DISMISSES the Douglases’ foreclosure-sale claims
without prejudice.
IV.
CONCLUSION
The Court GRANTS Wells Fargo’s motion to dismiss. The TDCA claim is DISMISSED
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with prejudice. But the foreclosure-sale claims are DISMISSED without prejudice and may be
repleaded by August 31, 2018.
SO ORDERED.
SIGNED: July 24, 2018
______________________________
JANE J. BOYLE
UNITED STATES DISTRICT JUDGE
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