Ramirez et al v. Wells Fargo Bank, N.A. et al

Filing 28

ORDER granting 9 Motion to Dismiss; denying 10 Motion to Remand; granting 22 Motion to Dismiss; denying as moot 23 Motion to Stay.(Signed by Judge Hilda G Tagle) Parties notified.(mserpa, 2)

United States District Court
Southern District of Texas

ENTERED
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
ROBERTO RAMIREZ, et al,
Plaintiffs,
VS.
WELLS FARGO BANK, N.A., et al,
Defendants.

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July 08, 2016
David J. Bradley, Clerk

CIVIL NO. 2:15-CV-480

MEMORANDUM AND ORDER
BE IT REMEMBERED that on July 8, 2016, the Court GRANTED Defendant
Wells Fargo, N.A.’s Motion to Dismiss, Dkt. No. 9; DENIED Plaintiffs’ Motion to
Remand, Dkt. No. 10; GRANTED Defendant Legare’s Motion to Dismiss, Dkt. No.
22; and DENIED AS MOOT Defendants’ Motion to Stay Discovery, Dkt. No. 23.
I.

Background
On October 27, 2015, Plaintiffs Roberto Ramirez and Angelina Adelia

Ramirez (“Plaintiffs”) filed an Original Complaint in Kleberg County District Court
alleging breach of contract and fraud against Defendants Wells Fargo, N.A. (“Wells
Fargo”) and Richard Neil Legare1 (“Legare”) and seeking declaratory judgment.
Orig. Compl., Dkt. No. 1-5. Plaintiffs state that they acquired twenty-two acres of
land, including a one-acre tract with a residence, on August 20, 2008. Dkt. No. 1-5
¶ 6. After being contacted by Legare, a representative of Wells Fargo, Plaintiffs
allege that they relied on Legare’s false representations to refinance their mortgage
loan on October 10, 2008. Id. ¶ 7. Plaintiffs claim that they were intentionally
misled by Defendants and did not fully understand the documents that they signed.

Id. ¶ 8. Upon receiving the initial mortgage payment notice in an amount higher
Plaintiffs identify Legare as “Richard Neil Legear.” Dkt. No. 1-5 ¶ 7. However, Defendants state
the correct name is “Richard Neil Legare.” See Dkt. No. 1 at 2. The Court therefore refers to
“Legare” throughout the order.
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than Plaintiffs expected, Plaintiffs allege that they contacted Legare, who informed
them they did not read the “fine print.” Id. In 2009, Plaintiffs made payments
under a temporary modified loan agreement. Id. ¶¶ 11–12. Plaintiffs allege that
Wells Fargo then entered into a “home affordable modification agreement” on
January 8, 2010.

Id. ¶ 13.

Plaintiffs state that they timely made mortgage

payments through July 2010, when they were informed that the modification
agreement was terminated. Id. ¶ 14. After receiving a notice for overdue payments
on May 4, 2010, Plaintiffs were unable to make payments and filed for Chapter 13
bankruptcy in the Corpus Christi Division of the Southern District of Texas. Id. ¶¶
15–16. Plaintiffs state that the bankruptcy was dismissed without prejudice when
a final decree was entered on July 16, 2014. Id. ¶ 16.
Plaintiffs seek a declaratory judgment that the January 8, 2010 modification
agreement is enforceable. Id. ¶ 18. Plaintiffs allege that Wells Fargo breached its
contract with Plaintiffs by requiring them to make payments in amounts larger
than those set forth in the modification agreement. Id. ¶ 19. As to Legare and
Wells Fargo, Plaintiffs assert a fraud claim based on the allegedly material and
intentionally false statements made by Defendants with respect to the loan
agreements. Id. ¶ 20. Plaintiffs allege that Defendants’ fraudulent conduct caused
Plaintiffs’ injuries. Id.
Defendants removed the instant case to this Court on November 24, 2015.
Dkt. No. 1. Shortly thereafter, Wells Fargo filed a motion to dismiss. Dkt. No. 9.
Plaintiffs filed a motion to remand, to which Wells Fargo responded. Dkt. Nos. 10,
12. Plaintiffs attempted to file an out-of-time response to Wells Fargo’s motion to
dismiss, which the Court struck.

Dkt. No. 16.

After seeking leave, the Court

permitted Plaintiffs to respond to Wells Fargo’s motion to dismiss after the response
deadline had passed. Dkt. No. 21. Legare then filed his motion to dismiss and a
motion to stay discovery. Dkt. Nos. 22, 23. Again, Plaintiffs filed an out-of-time
response to Legare’s motions without first seeking leave. Dkt. Nos. 24, 25. On June
6, 2016, the Court struck the responses and instructed Plaintiffs to file a motion
seeking leave to file the responses after the deadline.
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Dkt. No. 26.

Since the

Court’s order striking those responses, Plaintiffs have not filed a motion seeking
leave to respond.
II.

Legal Standards
A.

Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(6) states that a plaintiff’s claim may be
dismissed if it fails “to state a claim upon which relief can be granted.” Fed. R. Civ.
P. 12(b)(6). For a complaint to be sufficient, it “requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action . . . .”

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “A complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550
U.S. at 570).

“A claim has facial plausibility when the plaintiff pleads factual

content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).
In evaluating a plaintiff’s complaint in light of a defendant’s motion to
dismiss under Rule 12(b)(6), a court may “begin by identifying pleadings that,
because they are no more than conclusions, are not entitled to the assumption of
truth.” Id. at 679. The court may then determine whether the plaintiff’s wellpleaded facts allow the court to infer the plausibility of misconduct.

See id.

“Factual allegations must be enough to raise a right to relief above a speculative
level on the assumption that all the allegations in the complaint are true (even if
doubtful in fact).” Twombly, 550 U.S. at 555 (internal citations omitted).
B.

Motion to Remand

A civil action may be removed from state court to federal district court if the
federal court has either federal question or diversity jurisdiction over the case. 28
U.S.C. § 1441(a) (2012). Federal district courts have diversity jurisdiction over civil
cases when the amount in controversy exceeds $75,000.00 and when there is
complete diversity of citizenship between the parties.
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§ 1332(a).

Removal

jurisdiction should be strictly construed, Willy v. Coastal Corp., 855 F.2d 1160, 1164
(5th Cir. 1988), and ambiguities are resolved against removal, Acuna v. Brown &

Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000). “[T]he removing party bears the
burden of establishing that federal jurisdiction exists.” De Aguilar v. Boeing Co., 47
F.3d 1404, 1408 (5th Cir. 1995).
III.

Analysis
A.

Legare’s Motion to Dismiss

Legare argues that all claims against him should be dismissed because they
are barred by the statute of limitations, judicial estoppel, the economic loss rule,
and/or the statute of frauds. Dkt. No. 22 at 3–10. The Court considers Legare’s
statute of limitations argument first because it is dispositive of the motion. Legare
aruges that Plaintiffs’ fraud claims are based on representations made in 2008.
Dkt. No. 22 at 4. Pointing to the four-year statute of limitations for fraud claims in
Texas, Legare argues that Plaintiffs’ claims are barred because they failed to file
their complaint prior to the expiration of the four-year period. Dkt. No. 22 at 5.
“Under the Erie doctrine, federal courts apply the statute of limitations that
the forum state would apply.”

Huss v. Gayden, 571 F.3d 442, 450 (5th Cir. 2009).

In Texas, a plaintiff must bring suit for fraud not later than four years after the day
the cause of action accrues. Tex. Civ. Practice & Rem. Code § 16.004(a). Generally,
the statute of limitations for fraud claims does not begin to run until “the fraud is
discovered or until it might have been discovered by the exercise of reasonable
diligence.” Little v. Smith, 943 S.W.2d 414, 420 (Tex. 1997).
Plaintiffs only assert a fraud claim against Legare. See Orig. Compl., Dkt.
No. 1-5 ¶ 20.

The underlying factual allegations arise from Legare’s

communications with Plaintiffs beginning prior to October 10, 2008, when Plaintiffs
refinanced their loan. Id. ¶ 7. Plaintiffs allege that Legare, a representative of
Wells Fargo, offered to refinance the loan such that monthly payments would
amount to one-third or less of their monthly income. Id. Plaintiffs state that they
relied on Legare’s allegedly false representations to refinance their loan on October
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10, 2008. Id. Plaintiffs claim that they were intentionally misled by Defendants
and did not fully understand the documents that they signed. Id. ¶ 8. Plaintiffs
learned of this alleged fraud shortly after refinancing because the initial mortgage
payment notice was $1,073.34, an amount higher than what Plaintiffs arranged
with Legare.

Id.

¶ 8.

After discovering this discrepancy between what was

represented to them and what Plaintiffs allegedly agreed to, Plaintiffs state that
they called Legare and were told that they failed to read the “fine print.”

Id.

Plaintiffs claim to have had communications with Wells Fargo in 2010 when they
enter into a modification agreement, but Plaintiffs do not name Legare nor do they
claim that he was involved with these negotiations. See id. ¶ 13.
Plaintiffs failed to file a timely response to Legare’s motion to dismiss. The
Court nonetheless accepts as true Plaintiffs’ well-pleaded facts contained in their
complaint.

The allegedly fraudulent conduct took place in 2008, and Plaintiffs

learned of the injury that same year upon receipt of the initial mortgage payment
after refinancing. See Orig. Compl., Dkt. No. 1-5 ¶¶ 7–8. Based on the four-year
statute of limitations, Plaintiffs had to file their claim against Legare by the end of
2012. Although the exact month of receipt of the initial payment was not alleged in
the complaint, this information would not alter the analysis because Plaintiffs’
original complaint was not filed in state court until October 27, 2015. See Dkt. No.
1-5. Thus, Plaintiffs’ claim against Legare is barred by the statute of limitations.
The Court therefore GRANTS Legare’s motion to dismiss.
B.

Motion to Remand

In the Notice of Removal, Wells Fargo states the action is properly removed
to this Court under diversity jurisdiction. Dkt. No. 1 ¶ 7. Wells Fargo claims that
the consent of Legare is not required for removal of the action because Legare was
“fraudulently joined.” Dkt. No. 1 ¶ 4 (citing to Getty Oil Corp. v. Ins. Of North Am.,
841 F.2d 1254, 1261 (5th Cir. 1988)). In their motion to remand, Plaintiffs argue
that the case should be remanded because Legare is a citizen of Texas. Dkt. No. 10.
Defendants argue in response that Legare was fraudulently joined. Dkt. No. 12.
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Neither party disputes that the amount in controversy requirement is met. See 28
U.S.C. § 1332(a).
Having dismissed all claims against Legare, the Court need not analyze
whether he was fraudulently joined. The only remaining Defendant, Wells Fargo, is
a citizen of South Dakota because its main office is located in South Dakota. Dkt.
No. 1 ¶ 12. Plaintiffs are citizens of Texas. Orig. Compl., Dkt. No. 1-5 at 1. The
Court therefore has jurisdiction under § 1332(a). Accordingly, the Court DENIES
Plaintiff’s motion to remand.
C.

Wells Fargo’s Motion to Dismiss

Alleging that Plaintiffs filed the instant action merely to avoid foreclosure of
their property, Wells Fargo argues that Plaintiffs’ breach of contract and fraud
claims are barred by the statute of limitations. Dkt. No. 9 at 4–5. Wells Fargo also
argues that Plaintiffs’ claims are barred by judicial estoppel for their failure to
disclose the subject property as an asset before the bankruptcy court. Dkt. No. 9 at
5–6. It analyzes the following factors for judicial estoppel: (1) whether the party
asserted a legal position that is plainly inconsistent with a prior position; (2)
whether a court accepted the prior position; and (3) whether the party acted
inadvertently. Dkt. No. 9 at 6–9. Additionally, Plaintiffs’ fraud claim against Wells
Fargo fails because it is barred by the economic loss rule, as Plaintiffs cannot show
any loss independent of the loan. Dkt. No. 9 at 10. Finally, Wells Fargo argues that
Plaintiffs are not entitled to declaratory relief because they failed to plead a
cognizable claim. Dkt. No. 9 at 11.
In response, Plaintiffs allege that their claims are not barred by the statute of
limitations because they did not discover the injuries until after 2012. Dkt. No. 15
at 2.

Plaintiffs refer to the statute of limitations under the Deceptive Trade

Practices Act (“DTPA”). Dkt. No. 15 at 4. Plaintiffs’ complaint, however, does not
state a cause of action under the DTPA, so any statute of limitations argument
under this statute is not relevant. In addition to the DTPA, Plaintiffs cite to several
other statutes that are not relevant here because Plaintiffs did not allege a cause of
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action under these statutes.

See Dkt. No. 15 at 5 (referring to the statute of

limitations for conveyance of realty, breach of fiduciary, and debt claims under the
Texas Civil Practice and Remedies Code). Regarding Wells Fargo’s judicial estoppel
defense, Plaintiffs state that they did not list its claim as an asset because they did
not know that the July 10, 2010 bank letter was untrue. Dkt. No. 15 at 9. Plaintiffs
then allege that Wells Fargo’s failure to appear at the bankruptcy court hearing
resulted in abandonment of that claim to the debtor. Dkt. No. 15 at 9–10.
1.

Breach of Contract

The Court first examines Wells Fargo’s statute of limitations argument. For
actions with no express limitations period, the action must be commenced no later
than four years after the day the cause of action accrues. Tex. Civ. Prac. & Rem.
Code § 16.051. The Supreme Court of Texas has limited the application of the
discovery rule for the statute of limitations of breach of contract claims. See Via

Net v. TIG Ins. Co., 211 S.W.3d 310, 314 (Tex. 2006) (“Some contract breaches may
be inherently undiscoverable and objectively verifiable. But those cases should be
rare, as diligent contracting parties should generally discover any breach during the
relatively long four-year limitations period provided for such claims.”).
According to Plaintiffs’ complaint, Wells Fargo breached the contract,
specifically the January 8, 2010 modification agreement, on May 4, 2010. See Orig.
Compl., Dkt. No. 1-5 ¶ 15 (claiming that Plaintiffs received a notice dated May 4,
2010 in which they were told they owed overdue payments). Plaintiffs claim that
they only knew that Wells Fargo “said certain things to them,” but they “did not
discover that the Bank’s positions were wrongful, unjustified positions until about
2014.” Dkt. No. 15 at 2. Notwithstanding Texas court jurisprudence that narrows
the discovery rule in breach of contract claims, Plaintiffs’ complaint states that they
received notice of this alleged breach on May 4, 2010. Dkt. No. 1-5 ¶ 15. Wells
Fargo has met its burden to show that Plaintiffs’ breach of contract claim is barred
by the statute of limitations. Plaintiffs present no argument for tolling the statute
of limitations nor do they present evidence to demonstrate a different date of breach
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than that alleged in the complaint.

Thus, Plaintiffs’ breach of contract claim

against Wells Fargo is barred by the four-year statute of limitations. The Court
GRANTS Wells Fargo’s Motion to Dismiss Plaintiffs’ breach of contract claim.
2.

Fraud

Similar to Legare’s fraud claim, the Court dismisses the fraud claim against
Wells Fargo as barred by the statute of limitations.

The underlying factual

allegations cited in the complaint in reference to the fraud claim occurred in 2008.
Orig. Compl., Dkt. No. 1-5 ¶ 20. Although Plaintiffs claim in the motion to dismiss
that they discovered the injury in 2012, this claim relates to their breach of contract
claim rather than fraud claim. Dkt. No. 15 at 2. Indeed, in the complaint itself
Plaintiffs allege that they became aware of the allegedly fraudulent representations
the day they received the initial mortgage payment in 2008 because it was an
amount higher than they had agreed.

Dkt. No. 1-5 ¶ 7.

Plaintiffs filed their

original complaint in October 2015 in state court. Dkt. No. 1-5. Plaintiffs’ fraud
claim against Wells Fargo is thus barred by the four-year statute of limitations.
The Court therefore GRANTS Wells Fargo’s motion to dismiss as to the fraud
claim.
3.

Declaratory Judgment

The court examines Plaintiffs’ claim for declaratory judgment under the
Federal Declaratory Judgment Act because federal courts apply federal procedural
law in diversity cases pursuant to the Erie doctrine. See Utica Lloyd’s of Texas v.

Mitchell, 138 F.3d 208, 210 (5th Cir. 1998) (holding that the Texas Declaratory
Judgment Act is not substantive law); see also Bell v. Bank of Am. Home Loan

Servicing LP, No. 4:11–cv–02085, 2012 WL 568755, at *8 (S.D. Tex. Feb. 21, 2012)
(converting a declaratory judgment action filed in state court to an action brought
under the Federal Declaratory Judgment Act after it was removed based on
diversity jurisdiction). “The federal declaratory judgment act is a procedural device
that creates no substantive rights.” DeFranceschi v. Wells Fargo Bank, N.A., 837 F.
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Supp. 2d 616, 625 (N.D. Tex. 2011).

Accordingly, “a plaintiff cannot use the

Declaratory Judgment Act to create a private right of action where none exists.”

Reid v. Aransas Cty., 805 F. Supp. 2d 322, 339 (S.D. Tex. 2011). A claim for
declaratory relief is merely a procedural remedy that allows a party to obtain an
early adjudication of an actual controversy “arising under other substantive law.”

Id.
Plaintiffs fail to explain upon what grounds the Court should declare that
they are not in default on their mortgage obligations. Plaintiffs state that they “are
entitled to a declaratory judgment that the modification agreement is enforceable,
restructures the loan in compliance with Texas law, and maintains the terms of the
original extension of credit for the 2008 home equity loan.” Dkt. No. 1-5 ¶ 18.
Having dismissed Plaintiffs’ breach of contract and fraud claims, the Court finds
that Plaintiffs have failed to state a claim upon which declaratory relief may be
granted.
Accordingly, the Court DENIES Plaintiffs’ request for declaratory judgment.
D.

Motion to Stay Discovery

Having disposed of all claims against Legare and Wells Fargo, the Court
DENIES AS MOOT Defendants’ Motion to Stay Discovery.

IV.
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Conclusion

For the foregoing reasons, the Court:


GRANTS Defendant Wells Fargo, N.A.’s Motion to Dismiss, Dkt. No. 9;



DENIES Plaintiffs’ Motion to Remand, Dkt. No. 10;



GRANTS Defendant Legare’s Motion to Dismiss, Dkt. No. 22; and



DENIES AS MOOT Defendants’ Motion to Stay Discovery.

SIGNED this 8th day of July, 2016.
___________________________________
Hilda Tagle
Senior United States District Judge

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