Horne et al v. Bank of America N.A
Filing
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Memorandum Opinion and Order...All claims and causes of action asserted by plaintiffs against defendant are dismissed with prejudice. (Ordered by Judge John McBryde on 12/6/2012) (wrb)
u.s. DISTRICT COLz:::r
NORTHERN DISTRICT OF TE}:;'>.S
FILED
IN THE UNITED STATES DISTRICT
NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
DEC -62012
CLERK, U.S. DISTRICT COt;nr~'
MICHAEL E. HORNE, and
WANDA G. HORNE,
B1 ____
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Deputy
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Plaintiffs,
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§
VS.
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NO. 4:12-CV-622-A
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BANK OF AMERICA, N.A. ,
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Defendant.
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MEMORANDUM OPINION
and
ORDER
Now before the court is the motion of defendant, Bank of
America, N.A., to dismiss the complaint of plaintiffs, Michael E.
Horne and Wanda G. Horne, for failure to state a claim upon which
relief may be granted, pursuant to Rule 12(b) (6) of the Federal
Rules of civil Procedure.
Plaintiffs filed no response.
After
having considered the complaint, the motion and accompanying
brief and appendix, and pertinent legal authorities, the court
has concluded that the motion to dismiss should be granted.
I.
Background
Plaintiffs initiated this action by a pleading filed in the
District Court of Tarrant County, 17th Judicial District, against
defendants, in Cause No. 348-252648-11.
Defendant removed the
action to this court, after which the court ordered plaintiffs,
by October 5, 2012, to file an amended complaint that complies
with the requirements of Rule 8(a), Rule 10, and, if applicable,
Rule 9, of the Federal Rules of civil Procedure, and with the
Local Civil Rules of the united states District Court for the
Northern District of Texas.
Plaintiffs failed to file an amended
complaint, and defendant subsequently filed the instant motion
based on plaintiffs' original state court petition.
Thus, the
court addresses plaintiffs' allegations and claims as presented
in such state court petition ("complaint").
Plaintiffs make the following factual allegations:
On October 11, 2005,1 a deed of trust was filed with
plaintiffs as grantors and defendant as mortgagee.
Plaintiffs
made the regularly scheduled mortgage payments until a slowdown
of their self-employed businesses and resulting decrease in
income caused them to become delinquent on the loan.
Plaintiffs
contacted defendant regarding a modification of the loan, and an
account representative, Janelle Eley ("EleY")lwas assigned to
them.
Eley told plaintiffs that the mortgage had been sent to
the foreclosure department, but that the modification would stop
the foreclosure sale.
Plaintiffs sent documents requested by
1 The date listed in the complaint, October 11,2005, appears to be an error, as defendants have
pointed out that plaintiffs' affidavits attached to their state court petition, and the deed of trust, list
October 11, 1995 as the correct date of the execution of the deed of trust.
2
Eley for such modification.
On May 24, 2012, Eley told
plaintiffs via telephone that the foreclosure sale had been
stopped.
13, 2012.
Plaintiffs received a letter from defendant dated June
The letter acknowledged receipt of plaintiffs' inquiry
about the loan and stated that defendant was in the process of
obtaining documentation and information to answer plaintiffs'
questions.
14, 2012.
Plaintiffs received a nearly identical letter on June
They received a third letter, dated July 16, 2012,
this time from Eley, thanking them for participating in the home
loan assistance program, but informing them that due to a recent
change in the status of the program, they would no longer be
assigned to a particular contact person.
Another letter dated
July 16, 2012, from Codilis & Stanwiarski, P.C., informed them
that their home was sold at a foreclosure sale on June 5, 2012,
and that they needed to vacate the property.
II.
Plaintiffs' Claims and Grounds of Defendant's Motion
The complaint alleges the following causes of action against
defendant:
fraud;
(1)
inadequacy of price;
(2) breach of contract;
(4) negligent misrepresentation;
392.304 (a) (19)
2
(3)
(5) violations of Section
of the Texas Finance Code;
(6)
intentional
2 Plaintiffs claim that defendant violated" § 392.304(19);" the court assumes plaintiff intended to
list" § 392.304(a)(19)."
3
infliction of emotional distress
("lIED");
Texas Deceptive Trade Practices Act
(7) violations of the
("DTPA");
(8) simple fraud;
(9) fraudulent inducement; and (10) statutory fraud.
Defendant
contends that the complaint fails to state a claim upon which
relief may be granted because (1) plaintiffs' claims are all
"[b]ased solely upon an alleged unenforceable promise not to
foreclose--when [defendant] otherwise had every legal right to do
so;" and (2) plaintiffs fail to allege facts sufficient to state
a claim for any cause of action against defendant.
III.
Analysis
A.
The Rule 8(a) (2) Pleading Standards
The court now considers the standard of pleading, and
applies these standards to the Complaint.
Rule 8(a) (2) of the
Federal Rules of civil Procedure provides, in a general way, the
applicable standard of pleading. It requires that a complaint
contain "a short and plain statement of the claim showing that
the pleader is entitled to relief," Fed. R. Civ. P. 8 (a) (2),
"in
order to give the defendant fair notice of what the claim is and
the grounds upon which it rests," Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007)
(internal quotation marks and ellipsis
omitted). Although a complaint need not contain detailed factual
allegations, the "showing" contemplated by Rule 8 requires the
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plaintiffs to do more than simply allege legal conclusions or
recite the elements of a cause of action. See Twombly, 550 U.S.
at 555 & n.3. Thus, while a court must accept all of the factual
allegations in the complaint as true, it need not credit bare
legal conclusions that are unsupported by any factual
underpinnings. See Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct.
1937, 1950 (2009)
("While legal conclusions can provide the
framework of a complaint, they must be supported by factual
allegations.") .
Moreover, to survive a motion to dismiss for failure to
state a claim, the facts pleaded must allow the court to infer
that the plaintiffs' right to relief is plausible. Iqbal, 129 S.
ct. at 1950. To allege a plausible right to relief, the facts
pleaded must suggest liability; allegations that are merely
consistent with unlawful conduct are insufficient.
Twombly, 550
U.S. at 566-69. "Determining whether a complaint states a
[is] a context-specific task
plausible claim for relief .
that requires the reviewing court to draw on its jUdicial
experience and common sense." Iqbal, 129 S. ct. at 1950.
B.
Applying the Standards to the Complaint
Proceeding only on the basis of the information before the
court in plaintiffs' complaint, the court finds that plaintiffs'
allegations fall short of the pleading standards.
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The court
considers plaintiffs' theories of recovery in the following
order:
(1) inadequacy of price;
(2) breach of contract;
and negligent misrepresentation;
Texas Finance Code violation;
(3) fraud
(4) fraudulent inducement;
(6) DTPA violations;
(5)
(7) lIED; and
(8) statutory fraud.
1.
Inadequacy of Price
Though "inadequacy of price" is not a recognized cause of
action, it is an element of wrongful foreclosure in Texas.
Thus,
it appears that plaintiffs are attempting to allege a claim for
wrongful foreclosure.
To state such a claim, plaintiffs must
provide facts alleging (1) a defect in the foreclosure sale
proceedings;
(2) a grossly inadequate selling price; and (3) a
causal connection between the defect and the grossly inadequate
selling price.
Sauceda v. GMAC Mortg. Corp., 268 S.W.3d 135, 139
(Tex.App.--Corpus Christi 2008, no pet.).
Plaintiffs have not alleged a single fact that could support
a contention that the sale price was grossly inadequate.
They
allege that "the price obtained by Defendant was grossly
inadequate, thus depriving [plaintiffs] of significant earned
equity in their Home and providing grounds to set aside the
foreclosure."
Compl. at 7-8.
They do not even allege what the
sale price was, a critical fact necessary to state a claim for
wrongful foreclosure.
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In addition, plaintiffs base their claims on an allegation
that they were verbally informed via telephone that the
foreclosure had been stopped; however, such a statement is not
enforceable unless it is made in writing.
Texas law provides
that a loan agreement of $50,000.00 or more "is not enforceable
unless the agreement is in writing and signed by the party to be
bound or by that party's authorized representative."
Com. Code § 26.02.
Tex. Bus. &
Any modifications to such an agreement are
also required to be in writing in order to be enforceable.
Bank
of Tex., N.A. v. Gaubert, 286 S.W.3d 546, 555-56 (Tex.App.-Dallas 2009, pet. dism'd w.o.j.).
Plaintiffs make no allegations
that defendant ever gave them any kind of written confirmation of
a modification or written promise not to foreclose.
As it is
clear that defendant's alleged verbal statement that the
foreclosure would not take place does not comply with the statute
of frauds and is not an enforceable agreement, plaintiffs cannot
plausibly state a claim for relief based on such verbal
statement.
2.
Breach of Contract
Plaintiffs claim that defendant "failed to abide by the
terms of the Current Deed of Trust and other applicable loan
documents, damaging Plaintiff."
Compl. at 8.
They allege no
facts as to how defendant may have violated such terms, or which
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terms defendant may have violated, other than to claim in a
conclusory fashion that the foreclosure process was irregular.
Such a bare and conclusory allegation cannot state a claim for
breach of contract.
Furthermore, plaintiffs admit that they
failed to make timely payments and were therefore in default
under the agreement, which would prevent them from maintaining a
breach of contract action under Texas law.
See Thomas v. EMC
Mortg. Corp., 2012 WL 5984943 at *2 {5th Cir. Nov. 30, 2012}
{unpublished}
{Tex. 1990}
{citing Dobbins v. Redden, 785 S.W.2d 377, 378
{"It is a well-established rule that 'a party to a
contract who is himself in default cannot maintain a suit for its
breach. '
3.
II }
}
•
Common Law Fraud and Negligent Misrepresentation Claims
Plaintiffs' common law fraud 3 and negligent
misrepresentation claims are both tort claims that are barred as
a matter of law by the economic loss doctrine.
Under Texas law,
claims for these torts require injury to plaintiff independent of
an alleged breach of contract.
D.S.A., Inc. v. Hillsboro Indep.
Sch. Dist., 973 S.W.2d 662, 663-64 {Tex. 1998}
{per curiam} i
Pennington v. HSBC Bank U.S.A., Nat'l Ass'n, 2011 WL 6739609 at
*8 {W.D. Tex. Dec. 22, 2011}.
"When an injury is only the
3 Plaintiffs have alleged "fraud" and "simple fraud" within their complaint, which the court
addresses together as common law fraud.
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economic loss to the subject of a contract itself, the action
sounds in contract alone."
Id.
{quoting Formosa Plastics Corp.
USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 45
(Tex. 1998)).
Thus, tort damages are generally not recoverable
if the defendant's conduct would give rise to liability only
because it breaches the parties' agreement.
DeLanney, 809 S.W.2d 493, 494
Sw. Bell Tel. Co. V.
(Tex. 1991).
Although common law fraud and negligent misrepresentation
contain some different elements, each is a claim that could not
exist apart from. the underlying note and deed of trust.
Plaintiffs clearly had a contractual relationship with defendant
prior to any discussions regarding loan modification and
foreclosure proceedings, and, any discussions that took place
involved modifications to the existing contract.
Defendant could
not have made any representations regarding a modification of the
terms of the loan had there not been an original agreement
between the parties.
Plaintiff's tort claims for fraud and
negligent misrepresentation "flow solely from the obligations
created by the Note and Deed of Trust and would not exist but for
the contractual relationship between the parties."
See Rhodes v.
Wells Fargo Bank, N.A., No. 3:10-CV-2347-L, 2012 WL 5363424, at
*30 (N.D. Tex. Oct. 31, 2012) i wiley v. U.S. Bank, N.A., No.
3:11-CV-1241-B, 2012 WL 1945614, at *12 (N.D. Tex. May 30, 2012).
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Furthermore, the injury claimed by plaintiffs--foreclosure of
their home--is the subject of the contract itself.
4.
Fraudulent Inducement Claim
Under Texas law, a cause of action for fraudulent inducement
contains the same elements as a fraud claim, and also requires an
underlying contract which was induced fraudulently.
Kevin M.
Ehringer Enters., Inc. v. McData, 646 F.3d 321, 325 (5th Cir.
2011).
While similar to a fraud claim, fraudulent inducement is
generally not barred by the economic loss doctrine, as there is a
separate and independent legal duty not to fraudulently procure a
contract, and a party is not bound by a fraudulently procured
contract.
Here, the only enforceable agreement mentioned is the
original promissory note and deed of trust, and plaintiffs
provide no indication whatsoever of fraud surrounding that
agreement or causing them to be induced into signing it.
Thus,
plaintiffs cannot state a claim for fraudulent inducement.
5.
Finance Code Claim
To state a claim for violations of section 392.304(a) (19) of
the Texas Finance Code, plaintiffs must allege facts that
defendant, while engaged in collecting a debt or obtaining
information about a debt, used "false representation or deceptive
means to collect a debt or obtain information concerning a
consumer.H
Plaintiff recites a portion of the statutory
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provision, and then alleges,
"Defendant has violated the statute
by unconscionably taking advantage of [plaintiffs]. Plaintiffs
have been damaged by Defendant's wrongful collection efforts."
Pet. at 9.
However, plaintiffs allege no specific statements
other than Eley's statement that, as of May 24, 2012, the
foreclosure sale had been stopped, and there is nothing alleged
by plaintiffs indicating that the statement amounted to a false
representation or deceptive means to collect a debt from
plaintiffs.
No facts alleged anywhere in the petition can
support this theory.
See Wiley, 2012 WL 1945614 at *11
(explaining that a defendant's oral statements promising not to
foreclose and promising to provide a loan modification did not
amount to a violation of
§
392.304(a) (19)) i King v. Wells Fargo
Bank, N.A., No. 3:11-CV-945-M-BD, 2012 WL 1205163, at *3
(N.D.
Tex. Mar. 20, 2012), adopted, 2012 WL 1222659 (N.D. Tex. Apr. 11,
2012) i
Coleman v. Bank of Am., N.A., No. 3:11-CV-430-G-BD, 2011
WL 2516169, at *3 (N.D. Tex. May 27, 2011), adopted 2011 WL
2516668
6.
(N.D. Tex. June 22, 2011).
DTPA Claim
Plaintiffs allege that defendant violated DTPA by
misrepresenting services in connection with its loan modification
programs and by imposing requirements "not allowed by the loan
modification program."
Compl. at 10.
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However, to bring a cause
of action under DTPA, plaintiffs must be consumers as defined by
the statute and case law.
Tex. Bus. & Com. Code
§
17.45.
A
"consumer" for DTPA purposes is someone who "seeks or acquires by
purchase or lease, any goods or services."
Id. at
§
17.45(4).
In the context of loan modifications, a plaintiff is not seeking
such loan for the purpose of acquiring a good or service, but is
seeking to modify a loan that already exists.
See Ayers v.
Aurora Loan Servs., LLC, 787 F. Supp.2d 451, 455 (E.D. Tex. 2011)
(stating that where a plaintiff was seeking modification of an
existing loan, such action was "analogous to refinancing
services" and would not qualify the plaintiff as a consumer under
the DTPA); Cavil v. Trendmaker Homes, Inc., No. G-10-304, 2010 WL
5464238, at *4 (S.D. Tex. Dec. 29, 2010)
(" [A] mortgage or
modification of a mortgage is not a good or service under the
DTPA."); Riverside Nat'l Bank v. Lewis, 603 S.W.2d 169, 174 (Tex.
1980).
As plaintiffs cannot qualify as consumers under the DTPA,
they cannot state a claim for relief under the DTPA.
7.
lIED Claim
To state a claim for lIED, plaintiffs must allege facts that
could show (1) defendant acted intentionally or recklessly;
defendant's conduct was extreme and outrageous;
(2)
(3) defendant's
actions caused plaintiff emotional distress; and (4) the
resulting emotional distress was severe.
12
Twyman v. Twyman, 855
S.W.2d 619, 621 (Tex. 1993).
Extreme and outrageous conduct is
conduct Uso outrageous in character, so extreme in degree, as to
go beyond all possible bounds of decency, to be regarded as
atrocious, and utterly intolerable in civilized community."
Tiller v. McLure, 121 S.W.3d 709, 713
(Tex. 2003).
Plaintiffs clearly have no plausible claim for lIED.
While
they may feel that defendant's conduct was wrongful, they allege
no actions on the part of defendant that could rise to the level
of Uextreme and outrageous" conduct required under Texas law.
8.
Statutory Fraud Claim
Defendant asserts that plaintiffs cannot state a claim for
statutory fraud because the statute at issue, section 27.01 of
the Texas Business and Commerce Code, applies only to fraud in
real estate or stock transactions.
UA loan transaction, even if
secured by land, is not considered to come under the statute."
Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 343
2008)
(5th Cir.
(quoting Burleson state Bank v. Plunkett, 27 S.W.3d 60S,
611 (Tex.App.--Waco 2000, pet. denied)).
Plaintiffs base their
statutory fraud claim on alleged statements made by defendant in
the course of a loan or potential modification, and they do not
allege facts surrounding any kind of real estate transaction
between the parties.
Thus, plaintiffs have no claim for
statutory fraud.
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C.
Plaintiffs' Requests for Injunctive and Declaratory Relief
Because plaintiffs' substantive claims are being dismissed
for failure to state a claim upon which relief may be granted,
they are not entitled to a declaratory judgment based on such
claims, nor are they entitled to a temporary restraining order or
a temporary injunction.
See Marsh v. JPMorgan Chase Bank, N.A.,
--- F. Supp.2d ----, 2012 WL 3756276 (W.D. Tex. Aug. 29, 2012).
IV.
Conclusion
The court has afforded plaintiffs an opportunity to file an
amended complaint that complies with the requirements of the
Federal Rules of civil Procedure and the Local Civil Rules of
this court, alleging with particularity the facts that they
contend will establish their right to recover against defendants
as to each theory of recovery alleged.
Plaintiffs have failed to
file such amended complaint, and their original complaint fails
to state a claim upon which relief may be granted.
Therefore,
The court ORDERS that all claims and causes of action
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asserted by plaintiffs against defendant be, and are hereby,
dismissed with prejudice.
SIGNED December 6, 2012.
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