Thomas et al v. EMC Mortgage Corporation et al
Filing
28
Memorandum Opinion and Order granting in part/denying in part 12 Motion for Summary Judgment filed by EMC Mortgage Corporation, Bank of New York Mellon Corporation re: 12 MOTION for Summary Judgment...deft's m/sj granted as to pltfs' c laims for breach of contract, unreasonable collection efforts, claims under the DTPA and negligent misrepresentation/gross negligence and that all such claims dism w/prej; denied as to pltfs' claims pursuant to RESPA, the TDCPA and for declartory and injunctive relief. (Ordered by Judge John McBryde on 11/23/2011) (wrb)
u.s. DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
FILED
IN THE UNITED STATES DISTRIC
NORTHERN DISTRICT OF TE
FORT WORTH DIVISION
PETE THOMAS, ET AL.,
.
§
CLERK, U.S. DISTRICT COURT
by
-----rD~e~~~ut=y~------
§
Plaintiffs,
NOV 23 2011
§
§
VS.
§
NO. 4:10-CV-861-A
§
EMC MORTGAGE CORPORATION,
ET AL.,
Defendants.
§
§
§
§
MEMORANDUM OPINION
and
ORDER
Now before the court is the motion for summary judgment
filed in the above action by defendants, EMC Mortgage Corporation
("EMC") and The Bank of New York Mellon, formerly known as The
Bank of New York as Successor Trustee to JP Morgan Chase Bank, as
Trustee for Certificate Holders of Bear Stearns Asset Backed
Securities, Inc. Asset Backed Certificates Series 2003-2
("Bank").
Plaintiffs, Pete Thomas ("Pete") and Lesa Thomas,
filed their response,l and defendants filed their reply.2
Having
now considered all of the parties' filings, the entire summary
judgment record, and applicable legal authorities, the court
lIn their reply defendants object to plaintiffs' forty-four page response brief, claiming it violates
the twenty-five page limit on briefs set by Local Civil Rule LR 7.2(c). Summary judgment briefs,
however, are governed by Local Civil Rule LR 56.5, which limits the length of a principal brief to no
more than fifty pages. Plaintiffs' response brief was well within this limit.
20 n November 7,2011, plaintiffs filed a motion for leave to file surreply supporting their
response to defendants' motion for summary judgment. Having considered such motion, the court
concludes that it should be denied.
concludes that the motion should be granted in part and denied in
part.
I.
Plaintiffs' Claims
Plaintiffs initiated this removed action by the filing on
october 29, 2010, of their original petition in the District
Court of Tarrant County, Texas, 67th Judicial District, asserting
claims and causes of action related to defendants' attempts to
foreclose on plaintiffs' property.
Plaintiffs asserted claims
against defendants for breach of contract, including breach of
the Real Estate Settlement Procedures Act ("RESPA"), anticipatory
breach of contract, breach of the common-law tort of unreasonable
collection efforts, violations of the Texas Debt Collection
Practices Act ("TDCPA") and Deceptive Trade Practices Act
("DTPA"), and negligent misrepresentation/gross negligence.
Plaintiffs also requested an accounting and sought declaratory
and injunctive relief.
II.
The Summary Judgment Motion
Defendants argued for summary judgment on plaintiffs' breach
of contract claim on the grounds that: plaintiffs admit they
breached the loan, their claim is based on a non-existent cause
of action, defendants did not violate RESPA, plaintiffs' reliance
on alleged promises does not constitute a breach of contract,
2
defendants do not owe plaintiffs a duty of good faith and fair
dealing, plaintiffs cannot establish that damages resulted from
the alleged appointment of a substitute trustee, and plaintiffs
have suffered no damages.
As to the claim of unreasonable collection efforts,
defendants contend summary judgment is warranted because there is
no evidence that defendants have engaged in conduct necessary to
establish such a claim, and because an arrearage dispute cannot
serve as a basis for such a claim.
Defendants further argue that: plaintiffs are not entitled
to relief under the TDCPA; plaintiffs cannot recover under the
DTPA because they are not consumers under the act and have not
suffered damages; defendants are entitled to summary judgment on
plaintiffs' request for an accounting and on their claim of
negligent misrepresentation/gross negligence; and plaintiffs are
not entitled to declaratory or injunctive relief.
III.
Undisputed Facts
The following facts are undisputed in the summary judgment
record:
On or about March 25, 1996, plaintiffs executed a deed of
trust to secure payment of a promissory note in the amount of
$401,250.00.
The note and deed of trust secured the purchase of
plaintiffs' home located in Colleyville, Tarrant County, Texas.
3
On or about March 25, 1996, plaintiffs also executed a Loan
Agreement Rider, which supplemented the note and deed of trust
and included the following pertinent provisions:
In addition to the covenants made in the Loan
Agreements, Borrower and Lender further covenant as
follows:
1.
The rights and obligations of Borrower and Lender
shall be determined solely from the written Loan
Agreements, and any prior oral agreements between
Lender and Borrower are superseded by and merged
into the Loan Agreements.
2.
The Loan Agreements may not be varied by any oral
agreements or discussions that occur before,
contemporaneously with, or subsequent to the
execution of the Loan Agreements.
3.
The following Notice is provided pursuant to section
26.02 of the Texas Business & Commerce Code:
THE WRITTEN LOAN AGREEMENTS REPRESENT THE FINAL
AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
Defs.' App. in Supp. of Mot. for Summ. J.
("Defs.' App.") at 41
(emphasis in original) .
Pete became unable to work in the fall of 2006 and
plaintiffs fell behind on their mortgage payments.
In January
2007 plaintiffs arranged a "repayment plan with EMC to get caught
up" on their payments.
PIs.' App. in Supp. of Their Objections
and Br. in Supp. of Their Resp. to Defs.' Mot. for Summ. J.
("PIs.' App.") at 2.
4
In March 2007, after noticing unexplained fees on their
mortgage statement, plaintiffs requested an accounting of their
entire mortgage history up to that point.
Defendants provided a
Customer Account Activity statement covering the period from
January 18, 2005, to April 20, 2007, rather than the full loan
period, as requested by plaintiffs.
Upon review Pete noted that
"numerous fees had been assessed" against the account, causing
the payments to be short the full amount and thus not credited to
their account.
Id.
Although Pete contacted defendants to
dispute the fees, he was unable to obtain any explanation.
During the "next couple of years," plaintiffs "worked out
several repayment plans with Defendants but were never able to
come to terms on a permanent modification of the loan."
Id.
In
2009, plaintiffs' mortgage was assigned to Bank.
Plaintiffs contacted defendants in August of 2009 to discuss
their eligibility for the "Making Homes Affordable Plan."
Plaintiffs were told they would not qualify for that program, but
that instead defendants could offer them three options regarding
their loan, including the option selected by plaintiffs: entering
into a repayment agreement, following which the past due balance
would be rolled back into the note, allowing plaintiffs to be
eligible for a reduced interest rate to permanently lower their
payments.
In August 2009, plaintiffs entered into a repayment plan
5
with defendants "while the loan modification was in process.,,3
rd. at 3.
The proposed repayment plan included a letter
informing plaintiffs that EMC had "established a repayment plan
on [their] loan" and that their "loan may be eligible for a
modification in the future."
PIs.' App. at 26.
The agreement
set forth terms and conditions of the repayment plan, including
the following pertinent provisions:
2.
Payments: We agree to pay the total
arrearage of $88,132.42, by making an
initial down payment of $4,875.26 by Western
Union Quick Collect on or before August 28,
2009 by 3:00 PM Central Standard Time.
Subsequent payments are due the 1st of each
month in the amount of $4,200.00.
Payments
begin October 1, 2009 and end December 1,
2009.
4.
Balloon Payments: This Agreement will not
fully cure our default. At the end of this
Agreement our arrearages will be $85,282.95.
We acknowledge the above stated payments
include only a portion of the total arrears
owed, and will not completely reinstate the
loan or cure the default . . .
10.
Borrower's Additional Representations and
Acknowledgments: . . . We acknowledge and
3When discussing the repayment plans, Pete's affidavit refers the court to App. 1C, 1D, IE, and
IF. The court is unable to locate pages or exhibits in plaintiffs' appendix with those markings, but has
nevertheless reviewed the documents attached to Pete's affidavit. Similarly, plaintiffs' brieffrequently
refers the court generally to "App. 1-6." Plaintiffs are reminded of their obligation to "identify specific
evidence in the record, and [] articulate the 'precise manner' in which that evidence support[s] [their]
c1aim[s]." Forsyth v. Barr, 19 F.3d 1527, 1537 (5th CiT. 1994) (internal citations omitted).
6
agree to the following:
a.
Our loan is in default and the default
continues to exist until we have fully
and completely performed all of the
terms of this Agreement. Our loan is
not considered reinstated until the
total delinquency is paid in full.
g.
Nothing in this Agreement modifies or
nullifies the terms of the Note and Deed
of Trust/Mortgage, which shall remain in
full force and effect.
No Waiver: By executing this Agreement, EMC is
not waiving and shall not be deemed to have waived
any of our defaults under the loan documents nor
any of EMC's rights or remedies against us.
Moreover, any waiver by EMC of any breach of this
Agreement or the loan documents or any related
agreement shall not be deemed a continuing waiver
of any other or subsequent breach, whether of the
same or any other provision, and shall not in any
way impair any of EMC's rights or remedies.
We agree that this Agreement contains the
entire agreement of the parties relating to this
specific act of forbearance, that there are no
verbal agreements, and that such forbearance
cannot be amended, altered or modified without an
Agreement in writing executed by us and EMC.
PIs.' App. at 27-30 (emphasis in original).
Plaintiffs signed
the repayment agreement on August 27, 2009.
Plaintiffs paid the $4,875.26 down payment and began making
monthly payments in October 2009.
Over the course of the next
few months plaintiffs called defendants on multiple occasions
7
regarding the status of their loan modification and at various
times were told it was in process or in underwriting.
Defendants
told plaintiffs "they would not foreclose while [plaintiffs']
loan modification was under review."
Id. at 3.
Through the month of January 2010 plaintiffs attempted to
determine the status of their loan modification from defendants.
On one occasion defendants said that the loan had never been sent
to underwriting; another time defendants knew nothing about
plaintiffs' loan modification.
Later in January 2010 plaintiffs
were told defendants had no record that their loan modification
was being considered and plaintiffs would have to pursue another
modification or face foreclosure.
Plaintiffs then entered another repayment plan in January
2010.
The cover letter from defendants, dated January 25, 2010,
indicated it was "regarding [plaintiffs'] recent request for a
loan modification," and gave instructions for plaintiffs to
follow to "accept this Trial Plan."
Id. at 36.
The January 2010
Trial Plan required payments of $4,400 each on March 1, 2010,
April 1, 2010, and May 1, 2010.
The Trial Plan informed
plaintiffs that if they failed to comply with its terms,
defendants could terminate the Trial Plan and "commence or
continue collection and/or foreclosure proceedings according to
the terms of [plaintiffs'] Note and Security Instrument."
37.
Id. at
The Trial Plan further provided that "[i]f all payments are
8
made as scheduled," defendants would "consider a permanent
workout solution for your Loan."
Id.
Plaintiffs were reminded
that "[a]ll of the original terms of [their] Loan remain in full
force and effect, unless specifically mentioned."
Id.
Plaintiffs timely made the March payment, and also requested
another accounting of their loan from defendants.
failed to respond to this request.
Defendants
Plaintiffs paid the remaining
payments; however, the May 2010 payment was returned for
insufficient funds.
Following the rejection of their May 2010 payment,
plaintiffs contacted defendants about their remaining options.
"Defendants told [plaintiffs] their only recourse was a short
sale."
Id. at 4.
Plaintiffs listed their property for sale
during June, July, and August of 2010.
On or around August 4,
2010, defendants sent a letter informing plaintiffs that
defendants had selected a company to "facilitate and initiate a
loan modification review process."
Id.
In September 2010,
defendants' representative told plaintiffs that defendants "were
not going to foreclose on the property" and that defendants
needed a copy of the listing agreement, which plaintiffs
provided.
At some point, plaintiffs received a notice of
foreclosure sale from defendants; they also had additional
conversations with other representatives of defendants concerning
their loan but never reached any resolution.
9
IV.
Applicable Summary Judgment Principles
Rule 56(a) of the Federal Rules of civil Procedure provides
that the court shall grant summary judgment on a claim or defense
if there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.
Fed. R. civ.
P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247
(1986).
The movant bears the initial burden of pointing out to
the court that there is no genuine dispute as to any material
fact.
Celotex Corp. v. Catrett, 477 U.S. 317, 323, 325 (1986).
The movant can discharge this burden by pointing out the absence
of evidence supporting one or more essential elements of the
nonmoving party's claim, "since a complete failure of proof
concerning an essential element of the nonmoving party's case
necessarily renders all other facts immaterial."
Id. at 323.
Once the movant has carried its burden under Rule 56(a), the
nonmoving party must identify evidence in the record that creates
a genuine dispute as to each of the challenged elements of its
case.
Id. at 324.
See also Fed. R. Civ. P. 56(c)
("A party
asserting that a fact . . . is genuinely disputed must support
the assertion by
the record
citing to particular parts of materials in
.").
If the evidence identified could not lead
a rational trier of fact to find in favor of the nonmoving party
as to each essential element of the nonmoving party's case, there
10
is no genuine dispute for trial and summary judgment is
appropriate.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587, 597 (1986).
v.
Analysis
A.
Breach of Contract/Anticipatory Breach of Contract
Plaintiffs allege a number of acts by defendants that they
contend amount to breach of contract, including that defendants:
attempted to wrongfully foreclose on the property and violated
the Texas Constitution and the Texas Property Code; failed to
comply with RESPA; improperly appointed a substitute trustee to
conduct the foreclosure; breached a unilateral, agreement based on
oral promises; and waived their right to foreclose by breaching
the duty of good faith and fair dealing.
To prevail on their breach of contract claim, plaintiffs
must establish, inter alia, that they performed or tendered
performance on a valid contract.
B & W Supply, Inc. v. Beckman,
305 S.W.3d 10, 16 (Tex. App.--Houston [1st Dist.] 2009, pet.
denied).
It is undisputed that plaintiffs breached the note in
2006 when they "fell behind on [their] payments."
2.
PIs.' App. at
Plaintiffs also admitted in their responses to defendants'
requests for admissions that by signing the note they were
agreeing to make monthly payments, and that they failed to make
one or more such payments.
Defendants argue that plaintiffs'
11
breach bars any recovery by plaintiffs for breach of contract.
1.
No Waiver
Without disputing their own breach, plaintiffs instead
contend that defendants waived their right to act on any such
breach by accepting payments after plaintiffs' default.4
Plaintiffs also argue that " [d]efendants breached the contract by
causing Plaintiffs' performance of the contractual obligation to
become impossible," and that defendants "themselves then breached
the contracts prior to any additional breach by Plaintiffs."
PIs.' Br. at 9.
The court does not find an adequate explanation
of, or factual support for, these allegations in plaintiffs'
brief.
The court need not puzzle at length over the meaning of
plaintiffs' allegations, however, because the court finds no
evidence to support waiver.
To prove waiver, plaintiffs must show, inter alia, "an
actual intent to relinquish the right {which can be inferred from
conduct)."
G.H. Bass & Co. v. Dalsan Props.--Abilene, 885 S.W.2d
572, 577 (Tex. App.--Dallas 1994, no writ)
omitted).
(internal citations
To prove waiver based on inference, plaintiffs have
the "onerous" burden to "produce conclusive evidence that the
opposite party unequivocably [sic] manifested its intent to no
4 In their reply, defendants contend that plaintiffs raised this argument for the first time in their
response. In the petition plaintiffs alleged only that defendants "waived their right under the Deed of
Trust contract to foreclose" and that they "waived their right to sell the property under the deed of trust."
Defs.' App. at 9. The petition did not allege waiver by accepting payments after plaintiffs' default.
Nevertheless, because defendants have briefed the issue, the court will consider the argument.
12
longer assert its claim."
Id.
(alteration in original) (internal
citations and quotation marks omitted).
Plaintiffs claim that
defendants waived their rights and remedies against plaintiffs by
accepting payments under the various repayment plans.
Defendants, in contrast, point to language in the note and
repayment plans that conclusively establishes they had no intent
to waive their right to pursue any remedies against plaintiffs.
On the subject of waiver, the note provides:
(D) No Waiver By Note Holder. If the Note Holder does
not take action to require me to pay immediately in
full any amounts I owe, the Note Holder will still have
the right to do so at a later time.
Defs.' App. at 27.
Similarly, the 2009 repayment plan includes
the following language:
No Waiver: By executing this Agreement, EMC is not
waiving and shall not be deemed to have waived any of
our defaults under the loan documents nor any of EMC's
rights or remedies against us. Moreover, any waiver by
EMC of any breach of this Agreement or the loan
documents or any related agreement shall not be deemed
a continuing waiver of any other or subsequent breach,
whether of the same or any other provision, and shall
not in any way impair any of EMC's rights or remedies.
PIs.' App. at 30 (emphasis in original).
The 2010 trial plan
likewise contains language indicating that all the terms of the
note and deed of trust remain in effect, which would include the
no-waiver provision.
All of the above language makes clear that
defendants had no intention of waiving any rights they had under
the note and deed of trust.
13
2.
No Recovery for Anticipatory Breach of Contract
Defendants argue that to the extent plaintiffs attempt to
ground their breach of contract claim on an alleged attempted
wrongful foreclosure, no such claim is recognized in Texas.
court agrees.
The
In a wrongful foreclosure action "[r]ecovery is
conditioned on the disturbance of the mortgagor's possession
based on the theory that the mortgagee must have committed a
wrong similar to the conversion of personal property."
v. Black, 980 S.W.2d 818, 823
writ)
Peterson
(Tex. App.--San Antonio 1998, no
(internal citations omitted).
The mortgagor must have
suffered some loss of possession to recover for wrongful
foreclosure.
Id.; John Hancock Mut. Life Ins. Co. v. Howard, 85
S.W.2d 986, 988 (Tex. Civ. App.--Waco 1935, writ ref'd).
The
mortgagor has sustained no compensable damage when his possession
remains undisturbed.
Peterson, 980 S.W.2d at 823.
Here, it is undisputed that no foreclosure sale has occurred
and that plaintiffs have never lost possession of the property.
Accordingly, plaintiffs have no claim for wrongful foreclosure or
for attempted wrongful foreclosure.
For the same reason,
plaintiffs cannot recover for any alleged violation by defendants
in appointing a substitute trustee.
988-89.
See Howard, 85 S.W.2d at
Likewise, plaintiffs allege that defendants' attempted
wrongful foreclosure breached unspecified provisions of the Texas
Constitution and Texas Property Code.
14
These claims were asserted
in conclusory fashion and fail to allege any cognizable claim.
Plaintiffs in the response failed to direct the court to anything
supporting such claims, and summary judgment is warranted on them
as well.
3.
No unilateral Contract
The court agrees with defendants that summary judgment is
warranted as to plaintiffs' claim that defendants created a
unilateral contract.
Defendants' argument is based on the
following language in the Loan Agreement Rider:
THE WRITTEN LOAN AGREEMENTS REPRESENT THE FINAL
AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENT OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
Defs.' App. at 41 (emphasis in original).
This shows the
parties' agreement that the note and deed of trust could not be
modified by subsequent oral agreement.
Plaintiffs ignored this
argument and failed to address it in their response, and
accordingly directed the court to no authority requiring the
court to disregard the plain language of the parties' agreement.
Instead, plaintiffs argue that they "never claimed there was
a unilateral contract to modify the loan; instead, they assert
that Defendants promised Plaintiffs repeatedly over three years
that [they] would engage in the loan modification process with
Plaintiffs."
PIs.' Br. at 17.
It does not appear to the court
15
that plaintiffs have adequately alleged a unilateral, rather than
a bilateral, contract.s
Whatever plaintiffs have alleged,
however, their evidence shows defendants did exactly what
plaintiffs claim they promised to do:
they engaged in the loan
modification process with plaintiffs.
Plaintiffs allege that in 2007, 2009, and 2010 they entered
into the loan modification process with defendants, and they
provided copies of two of the written repayment plans.
Each of
the repayment plans, by its terms, was a prerequisite to a
permanent loan modification.
promises a loan modification.
None of the repayment plans
Rather, each gave plaintiffs the
opportunity to be considered for a permanent modification.
The
summary judgment evidence fails to support a conclusion that any
unilateral contract was formed or that defendants committed any
breach.
4.
No Breach of the Duty of Good Faith and Fair Dealing
A common-law duty of good faith and fair dealing "is not
imposed in every contract but only in special relationships
marked by shared trust or an imbalance in bargaining power."
FDIC v. Coleman, 795 S.W.2d 706, 708-09 (Tex. 1990).
The
relationship between a mortgagor and mortgagee does not
5"A bilateral contract is one in which there are mutual promises between two parties to the
contract, each party being both a promisor and a promisee." Vanegas v. Am. Energy Servs., 302 S.W.3d
299,302 (Tex. 2009) (internal citations omitted). Conversely, a unilateral contract "is created by the
promisor promising a benefit ifthe promisee performs." Id. It is apparent from the copies of the
repayment plans provided by plaintiffs that plaintiffs also made promises to perform.
16
ordinarily involve a duty of good faith, id. at 709, and
plaintiffs have alleged no facts, nor cited to authority, that
would remove their relationship with defendants from ordinary
consideration.
Plaintiffs in their petition also allege that defendants
waived their rights under the deed of trust because defendants
breached their duty of good faith and fair dealing, a duty
plaintiffs claim is imposed in the performance of every contract
by the Uniform Commercial Code, Texas Business & Commerce Code
1.201(20) and 9.102(c).
§§
Contrary to plaintiffs' assertions,
however, " [b]ecause the Deed of Trust places a lien on real
property, it is not governed by the UCC."
Vogel v. The Travelers
Indem. Co., 966 S.W.2d 748, 753 (Tex. App.--San Antonio 1998, no
pet.)
(citing former UCC
§
9.104, now
§
9.109, excluding from the
scope of chapter nine "the creation or transfer of an interest in
or lien on real property") .
For the first time in the response, and in conclusory
fashion, plaintiffs allege that defendants' duty of good faith
and fair dealing actually arose under the note, rather than the
deed of trust, and is thus governed by chapter three of the UCC.
This claim, which was not raised in the petition but raised for
the first time in response to defendants' motion for summary
judgment, is not properly before the court.
Cutrera v. Bd. of
Supervisors of La. State, 429 F.3d 108, 113 (5th Cir. 2005).
17
Even if the court were inclined to consider this argument,
plaintiffs have directed the court to no authority in support
thereof.
5.
RESPA
Plaintiffs also appear to ground their breach of contract
claim, at least in part, on alleged violations by defendants of
RESPA.
On this point the petition states:
15.
. . . Furthermore . . . the Note and Deed of
Trust were issued subject to the provisions of the Real
Estate Settlement Procedures Act of 1974, as amended,
12 u.s.c. Section 2601 et. seq. A portion of each of
Plaintiffs' monthly payments included amounts toward ad
valorem taxes and insurance. Plaintiffs have requested
a transaction history of their mortgage loan pursuant
to the Real Estate Settlement and [sic] Procedure [sic]
Act. However, Defendants have not responded.
21.
. . . The Deed of Trust is specifically
subject to the terms of the Real Estate Settlement and
[sic] Procedures Act (Respa) [sic] and Defendants have
breached it by failing to comply. A breach of Respa
[sic] is a breach of the Deed of Trust contract.
Defs.' App. at 7, 8.
Plaintiffs argue that the deed of trust
states it will be governed by federal law; RESPA is a federal
law; defendants failed to comply with RESPA by not providing the
requested accounting; therefore, defendants breached the deed of
trust.
The court finds this argument unavailing.
The deed of trust mentions RESPA only in the following
context:
2.
. . . Lender may, at any time, collect and hold
18
Funds in an amount not to exceed the maximum amount a
lender for a federally related mortgage loan may
require for Borrower's escrow account under the federal
Real Estate Settlement Procedures Act of 1974 as
amended from time to time, 12 U.S.C. § 2601 et seq.
("RESPA"), unless another law that applies to the Funds
sets a lesser amount . . . .
PIs.' App. at 7.
The RESPA violation alleged in the petition--
failure to respond to defendants' written request--is not a
violation of the deed of trust provision cited above.
Thus, the
alleged breach of RESPA fails to allege a breach of contract.
What remains, however, is an alleged violation of a RESPA
provision requiring a loan servicer to timely respond to a
qualified written request from a borrower.
2605(e).
See 12 U.S.C.
§
Defendants' argument as to this provision is that
plaintiffs have failed to prove or allege that: their request was
in writing; it complied with RESPA requirements for a qualified
written request; was properly sent to defendants; or that
defendants failed to comply with RESPA when responding to the
request.
Defs.' Br. at 9.
Plaintiffs' summary judgment evidence shows that they
requested an "accounting" of their mortgage statement, that
defendants did not fully respond to the first request, and they
later failed to respond to a second request.
The court finds
this evidence sufficient to raise a fact issue as to whether
plaintiffs submitted a qualified written request to which
defendants failed to respond in violation of RESPA.
19
6.
Summary of Breach of Contract Claims
The court thus concludes that summary judgment is granted on
plaintiffs' breach of contract claim, but is denied as to
plaintiffs' RESPA claim under 12 U.S.C.
B.
2605(e).
§
Unreasonable Collection Efforts
Unreasonable collection is an intentional tort, the exact
contours of which are not clearly defined.
EMC Mortg. Corp. v.
Jones, 252 S.W.3d 857, 868 (Tex. App.--Dallas 2008, no pet.).
Courts have described the tort as collection efforts that amount
to "a course of harassment that was willful, wanton, malicious,
and intended to inflict mental anguish and bodily harm."
Id.;
Montgomery Ward & Co. v. Brewer, 416 S.W.2d 837, 844-45 (Tex.
civ. App.--Waco 1967, writ ref'd n.r.e.).
The court agrees with
defendants that there is no summary judgment evidence to support
such a claim.
Plaintiffs allege that defendants:
continually failed to
provide plaintiffs with correct information regarding their loan
modification, represented that no foreclosure would occur during
the loan modification process, misrepresented to plaintiffs that
their repayment plan would rollover into a loan modification,
and failed to give plaintiffs an accounting under RESPA.
Plaintiffs also allege that defendants' representatives
called plaintiffs numerous times attempting to collect the debt,
and continued calling even after plaintiffs explained that they
20
were in a repayment plan.
Plaintiffs have directed the court to
no evidence supporting these allegations, and the court found
none in its review of plaintiffs' appendix.
Thus the court will
not consider the allegations of repeated phone calls.
The court finds the remaining allegations insufficient to
show a course of harassment that was "willful, wanton, malicious,
and intended to inflict mental anguish and bodily harm."
252 S.W.3d at 868.
Jones,
Plaintiffs rely on Jones to support their
claim, but the court finds the circumstances in that case to be
far more egregious than those alleged by plaintiffs.
For
example, the defendant in Jones not only followed through with a
foreclosure sale after telling the plaintiffs it would not do so,
it then sent a "very large, intimidating man" who pounded on the
door of the plaintiffs' home, forced his way into the foyer of
the home, and "began yelling and screaming" at plaintiffs to
remove their belongings because they no longer owned the house.
Id. at 864.
Although the defendant acknowledged its mistake in
foreclosing on the home, it immediately engaged a different law
firm to send an eviction letter to plaintiffs, and took several
months to rectify the error, during which time it caused
cancellation of plaintiffs' homeowners' insurance, failed to
credit payments made by plaintiffs to their account, continued to
report the foreclosure on the plaintiffs' credit report, retained
title to the home, and improperly paid a $10,000 judgment to
21
another of the plaintiffs' creditors on a disputed claim out of
the escrow funds without plaintiffs' consent.
Id. at 864-65.
None of the alleged acts of defendants corne close to those
found by a jury in Jones to constitute unreasonable collection
efforts.
At most, the essence of plaintiffs' allegations against
defendants is that they failed to clearly inform plaintiffs of
the amounts plaintiffs owed on their note and did not approve
plaintiffs for a permanent loan modification.
However, despite
this confusion, plaintiffs admit they were in default on the
note, even if they now question the total extent of the default.
Plaintiffs urge the court to consider a definition of
unreasonable collection efforts as "efforts which a person of
ordinary prudence in the exercise of ordinary care on his part
would not have exercised under the same or similar
circumstances."
Employee Fin. Co. v. Lathram, 363 S.W.2d 899,
901 (Tex. civ. App.--Fort Worth 1962), rev'd on other grounds,
369 S.W.2d 927 (Tex. 1963).
The language upon which plaintiffs
rely was a jury instruction submitted on the charge of
unreasonable collection efforts.
Id. at 901.
None of the
offensive conduct is described in the opinion, and plaintiffs
have directed the court to no authority where, on conduct similar
to that alleged here, a defendant was found to have engaged in
unreasonable collection efforts using that standard.
Accordingly, the court concludes that summary judgment is
22
warranted on this claim.
C.
TDCPA
Defendants argue, in conclusory fashion, that plaintiffs
cannot recover on their claims under the TDCPA because they "have
not identified any misrepresentation of the debt by Defendants,
any wrongful collection attempt, or any alleged damages."
Br. at 16.
Defs.'
Plaintiffs' summary judgment evidence, however,
alleges misrepresentations allegedly made by defendants, and also
alleges that the plaintiffs suffered damages such as "substantial
stress," "loss of sleep" which has affected Pete's "ability to
perform normally during daytime activity including work," and
other damages.
PIs.' App. at 5.
Plaintiffs have provided
sufficient evidence to overcome summary judgment on this claim.
D.
DTPA Claims
Plaintiffs expressly abandoned their DTPA claims in their
response, so no further discussion by the court is warranted,
except to note that such claims are dismissed.
E.
Negligent Misrepresentation/Gross Negligence
To prevail on their claim for negligent misrepresentation,
plaintiffs must show:
(1) defendants made a representation in the
course of their business, or in a transaction in which they had a
pecuniary interest;
(2) defendants supplied "false information"
for the guidance of others in their business;
(3) defendants
failed to exercise reasonable care or competence in obtaining or
23
communicating the information; and (4) plaintiffs justifiably
relied on the representations to their detriment.
Assln of Tyler v. Sloane, 825 S.W.2d 439, 442
Fed. Land Bank
(Tex. 1991).
The
type of misrepresentation contemplated is a statement of existing
fact, not a promise of future conduct.
BCY Water Supply Corp. v.
Residential Inv., Inc., 170 S.W.3d 596, 603
2005, pet. denied).
(Tex. App.--Tyler
"A promise to do or refrain from doing an
act in the future is not actionable because it does not concern
an existing fact."
Id.
(citations omitted) .
Plaintiffs' response, relying on Pete's affidavit, describes
the alleged representations made by defendants to plaintiffs, all
of which involve actions which may be performed in the future.
The only possible allegations of existing fact are that
defendants told plaintiffs their loan modification was in
process, and later, that it was in underwriting.
However,
plaintiffs fail to allege how they relied on these
representations to their detriment.
An additional hurdle for plaintiffs is that all of their
alleged damages and causes of action flow from the note and deed
of trust.
Generally,
"negligent misrepresentation is a cause of
action recognized in lieu of a breach of contract claim, not
usually available where a contract was actually in force between
the parties."
Airborne Freight Corp. Inc. v. C.R. Lee Enters.,
Inc., 847 S.W.2d 289, 295 (Tex. App.--EI Paso 1992, writ denied).
24
As explained by the Texas Supreme Court:
If the defendant's conduct--such as negligently burning
down a house--would give rise to liability independent
of the fact that a contract exists between the parties,
the plaintiff's claim may also sound in tort.
Conversely, if the defendant's conduct--such as failing
to publish an advertisement--would give rise to
liability only because it breaches the parties'
agreement, the plaintiff's claim ordinarily sounds only
in contract.
Southwestern Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494 (Tex.
1991).
Plaintiffs have identified no conduct of defendants that
would give rise to liability outside of the note and deed of
trust as would sustain a claim of negligent misrepresentation.
To establish their claim of gross negligence requires
plaintiffs to show that "(1) when viewed objectively from the
actor's standpoint, the act or omission complained of must
involve an extreme degree of risk, considering the probability
and magnitude of the potential harm to others; and (2) the actor
must have actual, sUbjective awareness of the risk involved, but
nevertheless proceed in conscious indifference to the rights,
safety, or welfare of others."
Lee Lewis Constr., Inc. v.
Harrisson, 70 S.W.3d 778, 785 (Tex. 2001)
(internal citation
omitted) .
The court finds no support for this claim in the summary
judgment record.
Plaintiffs have directed the court to no
summary judgment evidence showing defendants had "actual,
subjective knowledge" of any "extreme degree of risk" to
25
plaintiffs and that they acted "in conscious indifference to any
such rights."
Nor does the response direct the court to any
authority holding that the circumstances alleged here would
warrant a finding of gross negligence.
Accordingly, summary
judgment is warranted on plaintiffs' negligent misrepresentation/
gross negligence claims.
F.
Declaratory Judgment and Temporary Restraining Order
The petition seeks relief under the Texas Uniform
Declaratory Judgments Act, section 37.002 of the Texas civil
Practice & Remedies Code.
When a case is removed to federal
court, however, the court instead considers application of the
federal Declaratory Judgment Act ("Act"), 28 U.S.C.
seq.
§
2201, et
See Utica Lloyd's of Tex. v. Mitchell, 138 F.3d 208, 210
(5th Cir. 1998).
The Act is a procedural device that creates no
sUbstantive rights, but only provides relief when a justiciable
controversy exists between the parties.
Aetna Life Ins. Co. v.
Haworth, 300 U.S. 227, 239-41 (1937).
Defendants' argument as to plaintiffs' request for
declaratory judgment is primarily based on their contention that
if the court grants their motion for summary judgment in its
entirety, no justiciable controversy remains between the parties.
As the court has denied summary judgment on at least one of
plaintiffs' claims, summary judgment is denied as to plaintiffs'
claim for declaratory relief.
26
Defendants rely on the same argument in support of their
motion for summary judgment on plaintiffs' request for injunctive
relief, and for the same reason, the motion is denied on this
claim as well. 6
VI.
Order
Therefore,
The court ORDERS that defendants' motion for summary
judgment be, and is hereby, granted as to plaintiffs' claims for
breach of contract, unreasonable collection efforts, claims under
the DTPA, and negligent misrepresentation/gross negligence, and
that all such claims be, and are hereby, dismissed with
prejudice.
The court further ORDERS that defendants' motion for summary
judgment and be, and is hereby, denied as to plaintiffs' claims
pursuant to RESPA, 12 U.S.C.
§
2605(e), the TDCPA, and for
declaratory and injunctive relief.
SIGNED November ~, 2011.
6Plaintiffs' response states only that "[p]laintiffs' request for injunctive relief is not a cause of
action and should not be dismissed via summary judgment." Pis.' Br. at 37. It is not clear to the court
what plaintiffs mean by this statement. The court assumes the parties will address this issue along with
the other issues that remain for trial.
27
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