Horne et al v. Bank of America N.A

Filing 22

Memorandum Opinion and Order...Plaintiffs have failed to state a claim upon which relief may be granted; all claims asserted by plaintiffs against deft are dismissed w/prej. (Ordered by Judge John McBryde on 2/28/2013) (wrb)

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IN THE UNITED STATES DISTRIC1 COURT
NORTHERN DISTRICT OF TEX~S
FORT WORTH DIVISION
MICHAEL E. HORNE, and
WANDA G. HORNE,

FEB 282013

CLERK, U.S. DISTRICT COURT

§

By

§

Deputy

§

Plaintiffs,

§
§

VS.

§

NO. 4:12-CV-622-A

§

BANK OF AMERICA, N.A.,

§
§

Defendant.

§

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.
defendant filed a reply.

Plaintiffs filed a response, and
After having considered all the

parties' filings and applicable legal authorities, the court
concludes that the motion to dismiss should be granted.
I.

Background
Plaintiffs initiated this removed action by a pleading filed
in the District Court of Tarrant County, 17th Judicial District,
against defendants, in Cause No. 348-252648-11, seeking damages

and injunctive relief related to the foreclosure of their
property.
Plaintiffs make the following factual allegations in their
complaint:
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"), was 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

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.

Plaintiffs received a nearly identical letter on June

I 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

14, 2012.

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;

(3)

(5) violations of section

392.304 (a) (19)2 of the Texas Finance Code;

(6)

infliction of emotional distress

(7) violations of the

("lIED");

Texas Deceptive Trade Practices Act
(9)

("DTPA");3

intentional

(8)

simple fraud;

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

2 Plaintiffs claim that defendant violated n§ 392.304(19);n the court assumes plaintiff intended to
list n§ 392.304(a)(19)."
3 In their responsive brief, plaintiffs state that they do not believe they can prove their DTPA
claim. Thus, the DTPA claim is dismissed.

3

foreclose--when [defendant] otherwise had every legal right to do
SOi" 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. ci v. 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
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.
4

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.

u.s.

Twombly, 550

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 on the basis of the information before the court

in plaintiffs' complaint, the court finds that plaintiffs'
allegations fall short of the pleading standards.

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)

5

(5)

lIED; and (7) 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, as they outline the elements for wrongful
foreclosure in their responsive brief.

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 any facts that can 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.

In their response, they claim not to know

what the sale price was, but contend that, because they had
equity in the property, they would have received money if
defendant had sold the property at fair-market value.

6

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.
Plaintiffs argue that their case falls under two exceptions
to the statute of frauds:
partial performance.

(1) promissory estoppel, and (2)

Texas law recognizes promissory estoppel

and partial performance "as equity-based exceptions to the
traditional statute of frauds;" however, the circumstances under
7

which the exceptions apply are limited,

"because otherwise the

exceptions would render the statute meaningless."
N.A. v. Gaubert, 286 S.W.3d 546, 553

Bank of Tex.,

(Tex. App.--Dallas 2009,

pet. dism'd w.o.j.).
"Promissory estoppel avoids the traditional statute of
frauds when the alleged oral promise is to sign an existing
document that satisfies the statute of frauds."

Id.

Nagle v. Nagle, 633 S.W.2d 796, 800 (Tex. 1982))

(emphasis in

original).

(citing

See Barcenas v. Fed. Home Loan Mortg. Corp., No. H-

12-2466, 2013 WL 286250, at *5 (S.D. Tex. Jan. 24, 2013)

(" [T]he

plaintiff must allege facts showing that the defendant promised
to sign an agreement satisfying the statute of frauds.").
Plaintiffs have not alleged that there was any document in
existence that could have satisfied the statute of frauds at the
time of the alleged promise, or any promise on the part of
defendant to sign an existing document.

Thus, they cannot meet

the requirements of the promissory estoppel exception to the
statute of frauds.
Under the partial performance exception, an oral agreement
that does not satisfy the traditional statute of frauds may be
enforced "if denial of enforcement would amount to a virtual
fraUd."

Exxon Corp. v. Breezevale Ltd., 82 S.W.3d 429,439 (Tex.

8

App.--Dallas 2002, no pet.).

The exception arises:

[W]hen there is strong evidence establishing the
existence of the agreement and its terms, the party
acting in reliance on the contract has suffered a
sUbstantial detriment for which he has no adequate
remedy, and the other party, if permitted to plead the
statute, would reap an unearned benefit. The partial
performance must be unequivocally referable to the
agreement and corroborative of the fact that a contract
actually was made.
The acts of performance relied upon
to take a parol contract out of the statute of frauds
must be such as could have been done with no other
design than to fulfill the particular agreement sought
to be enforced; otherwise, they do not tend to prove the
existence of the parol agreement relied upon by the
plaintiff.
Id. at 439-40.

Texas courts "have not clearly accepted partial

performance as an exception to the statute of frauds in section
26.02."

Montalvo v. Bank of Am. Corp., 864 F. Supp.2d 567, 583

(W.D. Tex. 2012).
In Singh v. JPMorgan Chase Bank, N.A., No. 4:11-CV-607, 2012
WL 3904827, at *4 (E.D. Tex. Dec. 10, 2012), the court addressed
the issue of partial performance in the context of loan
modification.

In that case, the plaintiffs had been told that if

they made three payments pursuant to a trial payment plan, their
loan would be permanently modified and the past due amount would
be rolled into the loan.

Id. at *3.

The plaintiffs made their

payments, but their loan was not modified.

Id.

They were told

numerous times by the defendant that the modification process
would stop the foreclosure, but their home was foreclosed upon
9

anyway.

Id. at *2.

The court determined that the partial

performance exception was not applicable in the context of loan
modification discussions, and that the "alleged loan modification
lacks specificity" as to both payment amount and terms of the
modified loan and could not establish the necessary elements for
partial performance.

Id. at *4.

In this case, plaintiffs have pleaded no facts to indicate
that there was an agreement between the parties sufficient for
the partial performance exception to apply.

The only facts

alleged are that Eley told them that "the mortgage had been sent
to the foreclosure department, but that the Mortgage Modification
would stop the sale date," that plaintiffs sent some type of
documentation, and that Eley told plaintiffs via telephone that
the foreclosure sale had been stopped.

Compl. at 4.

None of

these facts can meet the requirements for the partial performance
exception, as the alleged statement by Eley is not even a promise
to modify, contains no terms or amounts, and is not nearly as
specific as the modification in Singh, where the court found that
the partial performance exception requirements were not
satisfied.

There is nothing alleged to indicate that there was

an agreement of any kind to actually modify plaintiffs' loan,
much less "a particular agreement sought to be enforced."

10

Thus,

plaintiffs cannot state a claim for wrongful foreclosure, and
such claim must be dismissed.
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
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., No. 12-10143, 2012 WL 5984943 at *2
30, 2012)
377, 378

(unpublished)
(Tex. 1990)

(5th Cir. Nov.

(citing Dobbins v. Redden, 785 S.W.2d

("It is a well-established rule that 'a

party to a contract who is himself in default cannot maintain a
suit for its breach.'")).
While not specifically pleaded, plaintiffs contend that
their breach of contract claim stems from the same alleged
promise not to foreclose that formed the basis of their claim for
wrongful foreclosure, and fails for many of the same reasons.
11

Plaintiffs also contend that defendant violated section 51.002 of
the Texas Property Code by failing to give the required notice,
yet they admit in their response that they were notified of the
foreclosure sale at least twenty-one days before the sale
occurred.

The contention seems to be that because defendant

allegedly told plaintiffs via telephone that the foreclosure sale
would not occur, that defendant was required to send and post a
new notice of sale.

Such a contention again relates to the

unenforceable, alleged promise not to foreclose, and must fail.
3.

Common Law Fraud and Negligent Misrepresentation Claims

Plaintiffs' common law fraud 4 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

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

4 Plaintiffs have alleged "fraud" and "simple fraud" within their complaint, which the court
addresses together as common law fraud.

12

(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.

Sw. Bell Tel. Co. v.

DeLanney, 809 S.W.2d 493, 494 (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).

Furthermore, the injury claimed by plaintiffs--foreclosure of
their home--is the subject of the contract itself.

13

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 a "false representation or
deceptive means to collect a debt or obtain information
concerning a consumer."

Tex. Fin. Code

§

392.304(a) (19).

Plaintiff recites a portion of the statutory provision, and then
alleges,

"Defendant has violated the statute by unconscionably
14

taking advantage of [plaintiffs]. Plaintiffs have been damaged by
Defendant's wrongful collection efforts."

Compl. at 9.

However,

plaintiffs allege no specific representations 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)); King v. Wells Fargo Bank, N.A., No. 3:11-CV-945M-BD, 2012 WL 1205163, at *3

(N.D. Tex. Mar. 20, 2012), adopted,

2012 WL 1222659 (N.D. Tex. Apr. 11, 2012); 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 (N.D. Tex. June 22,
2011) .
6.

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.
15

Twyman v. Twyman, 855

S.W.2d 619, 621 (Tex. 1993).

Extreme and outrageous conduct is

conduct "so 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 "extreme and outrageous" conduct required under Texas law.
7.

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.

"A 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 605,

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.
16

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.
Order
Plaintiffs have failed to state a claim upon which relief
may be granted.

Therefore,

The court ORDERS that all claims and causes of action
asserted by plaintiffs against defendant be, and are hereby,
dismissed with prejudice.
SIGNED February 28, 2013.

17