Olivares, Jr. v. Pyatt et al
Filing
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ORDER DISMISSING CLAIMS granting 25 Motion to Dismiss. The Court GRANTS the motion to dismiss (D.E. 25) and DISMISSES all claims against BONY, with respect to both damages and injunctive relief.(Signed by Judge Nelva Gonzales Ramos) Parties notified.(mserpa, 2)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
DAVID OLIVARES, JR.,
Plaintiff,
VS.
ANDRE R. PYATT, et al,
Defendants.
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§ CIVIL ACTION NO. 2:15-CV-81
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ORDER DISMISSING CLAIMS
Before the Court is Defendant Bank of New York Mellon’s (BONY’s)1 Motion to
Dismiss Plaintiff’s First Amended Original Complaint (D.E. 25), along with Plaintiff
David Olivares, Jr.’s (Olivares’s) response (D.E. 26) and BONY’s reply (D.E. 27). For
the reasons set out below, the Court GRANTS the motion (D.E. 25) and DISMISSSES all
of Olivares’s claims made against BONY in this action.
FACTS
According to his allegations,2 Olivares purchased a residence from Defendants
Andre R. Pyatt and Felicia Pyatt (the Pyatts) in 2005 at a time when the property secured
the payment of the Pyatts’ debt to their lender, Bank of New York Mellon (BONY),
through a duly recorded deed of trust lien (D.E. 27, p. 14 et seq). Olivares did not secure
BONY’s consent to an assumption of the Pyatt’s loan with BONY and obtained no
1
Bank of New York Mellon f/k/a The Bank of New York, as Trustee for the Certificateholders of CWALT, Inc.,
Alternative Loan Trust 2005-30CB. While Olivares previously sued Bank of America, N.A. as lender, the history of
the ownership of the note has not been placed in issue and the Court accepts Olivares’s allegations as true according
to the standard of review for motions to dismiss under Federal Rule of Civil Procedure 12. Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007).
2
Including omissions from allegations that BONY has identified and that Olivares has not supplemented or
explained.
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agreement with BONY regarding the property or the loan. Olivares, however, proceeded
to make payments to BONY over several years on the Pyatt’s account. In 2012, BONY
stopped accepting Olivares’s payments.
While Olivares sought an agreement with
BONY to permit him to keep the property and continue making payments, BONY did not
consent to any such agreement. Because the Pyatts were not making payments, the loan
went into default and BONY has attempted to foreclose its lien on the property.
On August 3, 2012, Olivares sued the lender and mortgage servicer in this court
regarding an attempted foreclosure of the lien. Olivares v. Bank of America, N.A., No.
2:12-cv-00276. While a motion for summary judgment filed by the lender and servicer
was pending in that case, the parties stipulated to a dismissal of those claims without
prejudice. Thereafter, Olivares took a default judgment against the Pyatts, who were also
sued in that case. The judgment awarded damages to Olivares in the full amount of his
payments made to purchase the property, including his down payment, loan payments
made on behalf of the Pyatts, attorney’s fees, and interest. To date, Olivares has been
unable to collect on that judgment.
In the meantime, it appears that Olivares maintained possession of the property, as
Olivares has admitted that no foreclosure has taken place. D.E. 26, pp. 5-6. He now sues
for damages and injunctive relief, complaining that BONY is attempting to foreclose
without giving him proper notices. He alleges that he has a right to prior notice and
opportunity to cure, given that BONY, by virtue of the previous lawsuit, has knowledge
of Olivares’s possession and claimed rights to the premises.
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DISCUSSION
A. Standard of Review
The test of pleadings under Rule 12(b)(6) is devised to balance a party’s right to
redress against the interests of all parties and the court in minimizing expenditure of time,
money, and resources devoted to meritless claims. Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 558 (2007). Federal Rule of Civil Procedure 8(a)(2) requires only “a short and
plain statement of the claim showing that the pleader is entitled to relief.” Furthermore,
“Pleadings must be construed so as to do justice.” Rule 8(e). The requirement that the
pleader show that he is entitled to relief requires “more than labels and conclusions[;] a
formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S.
at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)).
Factual allegations are required, sufficient to raise the entitlement to relief above
the level of mere speculation. Twombly, 550 U.S. at 555. Those factual allegations must
then be taken as true, even if doubtful. Id. In other words, the pleader must make
allegations that take the claim from conclusory to factual and beyond possible to
plausible.
Id., 550 U.S. at 557.
The Twombly court stated, “[W]e do not require
heightened fact pleading of specifics, but only enough facts to state a claim to relief that
is plausible on its face.” 550 U.S. at 570.
The Supreme Court, elaborating on Twombly, stated, “The plausibility standard is
not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a
defendant has acted unlawfully.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
“Threadbare recitals of the elements of a cause of action, supported by mere conclusory
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statements, do not suffice.” Id. In dismissing the claim in Iqbal, the Court stated, “It is
the conclusory nature of respondent's allegations, rather than their extravagantly fanciful
nature, that disentitles them to the presumption of truth.” 556 U.S. at 681.
In a Federal Rule of Civil Procedure 12(b)(6) context, the Court may consider: (a)
documents attached to the complaint or identified as central to the claims made therein;
(b) documents attached to the motion to dismiss that are referenced in the complaint; and
(c) documents that are subject to judicial notice as public record. Funk v. Stryker Corp.,
631 F.3d 777, 783 (5th Cir. 2011); Collins v. Morgan Stanley Dean Witter, 224 F.3d 496,
498–99 (5th Cir. 2000).
B. Mootness
Olivares claims that BONY has waived its motion to dismiss because it agreed to
the administrative termination of a previous motion to dismiss as moot and makes no
qualitatively different arguments for dismissal in the pending motion. This argument is
specious. The only reason the prior motion (D.E. 4) was moot was because Olivares had
amended his complaint. Absent unusual circumstances, the Court will terminate a motion
to dismiss that is directed at a pleading that has been superseded.
This is an
administrative action that is without prejudice to the merits of the motion. The Court
rejects Olivares’s argument that BONY cannot now be heard on the substantive issues
because of this administrative issue.
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C. Olivares’s Claims
1. Breach of Contract
Olivares sues for breach of contract, claiming that BONY had contractual
obligations to him under the deed of trust and financing agreements. D.E. 13, p. 4. In
particular, he alleges that he should have been given notice of default and an opportunity
to cure, notice of acceleration of the note, notice of the appointment of a substitute trustee
and the posting of foreclosure. Id. The Court considers Olivares’s claims under four
theories: (1) standard breach of a contract; (2) third-party standing to contest foreclosure;
(3) third-party beneficiary of the Pyatt contract; and (4) statutory notice requirements
under the Texas Property Code.
Standard Breach of Contract. Olivares has acknowledged that he does not have
a contract of his own with BONY—that BONY failed to respond to his efforts to enter
into an agreement that would acknowledge his interest in the property and provide him
with the right to pay the Pyatt’s indebtedness. D.E. 13, p. 3. He has supplied no
authority for the proposition that, by some operation of law, he should be substituted for
the Pyatts with respect to contractual rights they may have under their mortgage merely
because he purchased the property from them, subject to the mortgage lien.
Third-Party Standing. Instead, Olivares cites Goswami v. Metropolitan Savings
and Loan Ass’n, 751 S.W.2d 487, 489 (Tex. 1988) (third party affected by sale of
property has standing to complain; lien addressed in bankruptcy proceeding); American
Savings & Loan Ass’n v. Musick, 531 S.W.2d 581, 586 (Tex. 1976) (recognizing junior
lienholder’s standing to contest foreclosure sale but holding that there were no
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irregularities under the deed of trust); Estelle v. Hart, 55 S.W.2d 510, 513 (Tex. Comm’n
App. 1932, op. adopted) (recognizing the standing of a junior lienholder to make a claim
to recover property value in excess of senior lienholder’s debt); and Mercer v. Bludworth,
715 S.W.2d 693, 698 (Tex. App.—Houston [1st Dist.] 1986, writ ref’d n.r.e.) (subsequent
purchaser or junior lienholder may complain if sale is void under the mortgagor’s deed of
trust). He contends that these cases demonstrate that a third party may contest the
validity of a foreclosure sale when that third party has an interest in the property.
While that may be true, standing to bring a claim is only useful when one has a
viable claim to bring. Olivares’s claims are all centered on contractually-required notices
that he suggests BONY owed him, even though he has no contract with BONY. Because
he does not claim any defect in contractually-required notices sent to the Pyatts, who are
the mortgagors and only ones entitled to the contractual notices, his alleged third-party
standing is without a proper breach of contract claim.
Third-Party Beneficiary. Olivares has not alleged a viable claim that he is a
third-party beneficiary of the contract between BONY and the Pyatts. Under Texas law,
there is a presumption against third-party beneficiary agreements. City of Houston v.
Williams, 353 S.W.3d 128, 145 (Tex. 2011). To prove third-party beneficiary status,
Olivares must show (1) the contracting parties intended to secure a benefit for Olivares
and (2) the contracting parties entered into the contract directly for Olivares’s benefit.
Basic Capital Mgmt. v. Dynex Commercial, Inc., 348 S.W.3d 894, 900 (Tex. 2011).
Olivares’s arguments regarding third-party beneficiary status are conclusory. He
does not identify any term in the BONY/Pyatt loan transaction that was included for his
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benefit—or the benefit of any purchaser from the Pyatts. Rather, three clauses in the
deed of trust place limits on allowing a third-party assumption of rights and obligations of
the deed of trust:
• Lender’s acceptance of payments from a third party does not waive any
rights under the loan transaction. D.E. 27, p. 21, ¶ 12;
• Lender’s written consent is required for assumption of obligations under
the deed of trust. Id., ¶ 13;
• The deed of trust contains a due-on-sale clause. Id., p. 22, ¶ 18.
Olivares has identified no contractual term that could be construed as intending to secure
a benefit for him.
Texas Property Code.
Chapter 51 of the Texas Property Code requires a
foreclosing creditor to provide notices to “each debtor who, according to the records of
the mortgage servicer of the debt, is obligated to pay the debt” or “a debtor in default
under a deed of trust or other contract lien.” Tex. Prop. Code § 51.002(b)(3), (d). As
discussed above, Olivares was not the debtor entitled to notice under the deed of trust or
records of the mortgage servicer. While he may have paid some of the Pyatt’s debt, he
was not legally obligated to do so under any document by which BONY was granted the
right to foreclose. The Texas Property Code does not confer rights on such a person.
Consequently, Olivares has failed to state a claim pursuant to breach of contract
principles upon which relief may be granted. His claims fail under the substantive law or
the Twombly test of pleadings. The Court GRANTS the motion and DISMISSES the
breach of contract claims against BONY.
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2. Wrongful Foreclosure
Olivares has conceded that his wrongful foreclosure claim should be dismissed.
D.E. 26, pp. 5-6. The Court thus GRANTS the motion and DISMISSES the wrongful
foreclosure claims against BONY.
3. Federal Debt Collection Practices Act
BONY argues that Olivares has not alleged a viable claim for unfair debt
collection practices. And even if he had alleged wrongful conduct, Olivares cannot make
a claim under the FDCPA because BONY did not act as a “debt collector” with respect to
the attempted foreclosure of the deed of trust lien granted by the Pyatts. Perry v. Stewart
Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985) (mortgage companies or servicers
collecting mortgage debts by foreclosure are not “debt collectors”).
Olivares also relies on the Perry case, contending that BONY was a “debt
collector” because there is an exception to the mortgage company exemption if the loan
was in default when collection was assigned to a mortgage servicing company. Id.
Olivares asserts, without specific factual allegations to support the argument, that the loan
was in default when it was assigned to BONY. Olivares’s complaint does not contain
any allegations regarding the chain of ownership of the Pyatt’s note and servicing
obligations for the deed of trust. His assertion that the loan was in default due to his
previous litigation is not determinative of the relationship between BONY and the Pyatts.
Even if BONY could be sued as a debt collector in this instance, Olivares has
failed to allege sufficient facts to demonstrate wrongful conduct. As set out above,
Olivares did not have rights under the contract between BONY and the Pyatts. Nothing
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that Olivares complains about—the attempted foreclosure—was an effort to collect a debt
against Olivares. And Olivares has not alleged any irregularity in the foreclosure process
as to the Pyatt’s contractual rights. Consequently, Olivares has failed to state a claim
upon which relief can be granted as to BONY. The Court GRANTS the motion with
respect to claims made under the Federal Debt Collection Practices Act.
4. Texas Debt Collection Act
The same is true with respect to the TDCA. Olivares is required to show that he is
a consumer, that BONY is a debt collector, and that BONY engaged in wrongful conduct
in its foreclosure attempts. Tex. Fin. Code § 392.001 et seq. The necessary wrongful
conduct involves tactics that are false, fraudulent, misleading, deceptive, unfair, or
unconscionable. Olivares claims that BONY represented that the loan was in default
when it should not have been because Olivares had attempted to make the Pyatt’s
payments and that BONY charged false fees because those fees were assessed due to a
default that should not have happened had BONY accepted Olivares’s payments.
These allegations are not sufficient because, as demonstrated above, BONY did
not have an obligation to accept payments from Olivares and did not have to forbear from
assessing fees to the Pyatt’s account when the loan went into default. While Olivares
seeks leave to amend to specify the fees and charges about which he complains, greater
specificity will not change the fact that Olivares cannot show that BONY was required to
accept his payments and prevent the default and assessment of fees. The Court GRANTS
the motion and DISMISSES the claim of violation of the Texas Debt Collection Act for
failure to state a claim upon which relief may be granted.
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5. Texas Deceptive Trade Practices Act
Olivares has responded only with, “Defendant’s Motion to Dismiss Plaintiff’s
First Amended Complaint regarding his DTPA claim should be dismissed.” He has
failed to controvert BONY’s assertions that he is not a “consumer” and thus is not
entitled to bring a DTPA claim. Tex. Bus. & Comm. Code § 17.45(4); Doe v. Boys Clubs
of Greater Dallas, Inc., 907 S.W.2d 472, 478 (Tex. 1995).
The Court finds that Olivares has failed to allege facts to show that he is a
consumer with respect to the Pyatt’s loan transaction with BONY or any other transaction
with BONY. Olivares has further failed to allege facts that demonstrate that any conduct
that BONY has taken with respect to the property involves a false, misleading, or
deceptive act. The Court GRANTS the motion and DISMISSES all claims against
BONY related to the Deceptive Trade Practices Act for failure to state a claim upon
which relief may be granted.
6. Quiet Title
In his amended complaint and in his defense of his quiet title claims, Olivares
maintains only that he has superior claim of title over that of the Pyatts. D.E. 13, p. 7;
D.E. 26, p. 7. He does not claim to have superior title over BONY’s deed of trust lien,
which had already been recorded when Olivares purchased the property from the Pyatts.
Accordingly, BONY is entitled to judgment that Olivares has asserted no quiet title claim
against it. The Court GRANTS the motion and DISMISSES all claims related to quieting
title in the property to the extent that such claims were asserted against BONY.
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D. Double Recovery
Olivares previously sued the Pyatts and obtained a default judgment for damages
in the amount of all monies he paid to the Pyatts or on their account for the purchase of
the property, including his down payment, payments made to the lender, interest, and
attorney’s fees. According to BONY, the one satisfaction rule prevents Olivares from
recovering any additional damages because he has been fully compensated. Stewart Title
Guaranty Co. v. Sterling, 822 S.W.2d 1, 7-8 (Tex. 1991). Because of the Court’s rulings
on Olivares’s claims, the Court does not reach this issue.
E. Request to Amend
Olivares has requested leave to amend in order to supplement his allegations with
greater specificity. Under Foman v. Davis, 371 U.S. 178, 182 (1962), leave to amend
should be freely given unless other issues counsel against it, such as undue delay, bad
faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing party by virtue of
allowance of the amendment, and futility of amendment.
Olivares filed a lawsuit based on this subject matter before, which he dismissed
after summary judgment was requested by the lender. His complaints are based on the
conduct of a lender who owes him no duties and with which he has no cognizable
relationship. The lender seeks to foreclose a duly recorded lien against property securing
a debt that is in default. Olivares’s complaints about the default and resulting charges are
based on the argument that BONY had an obligation to accept his payments on behalf of
the Pyatts. The Court has rejected this argument. Greater specificity cannot overcome
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the legal barriers to these claims. The Court DENIES Olivares’s request for leave to
amend as futile.
CONCLUSION
For the reasons set out above, Olivares has failed to state a claim against BONY
upon which relief may be granted. The Court GRANTS the motion to dismiss (D.E. 25)
and DISMISSES all claims against BONY, with respect to both damages and injunctive
relief.
ORDERED this 26th day of August, 2015.
___________________________________
NELVA GONZALES RAMOS
UNITED STATES DISTRICT JUDGE
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