Thornton et al v. Ditech Financial LLC et al
Filing
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ORDER granting 9 Motion to Dismiss; granting 11 Motion to Dismiss.(Signed by Judge Nelva Gonzales Ramos) Parties notified.(mserpa, 2)
United States District Court
Southern District of Texas
ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
ARTIST THORNTON, et al,
Plaintiffs,
VS.
DITECH FINANCIAL LLC, et al,
Defendants.
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September 17, 2018
David J. Bradley, Clerk
CIVIL ACTION NO. 2:18-CV-156
ORDER
Plaintiffs Artist Thornton and Elaine Thornton filed this action against Defendants
Ditech Financial, LLC (Ditech) and Bank of America, N.A. (BANA), complaining of
their conduct in the entirety of their mortgage loan and foreclosure processes. Before the
Court are two motions to dismiss filed by BANA (D.E. 9) and Ditech (D.E. 11). For the
reasons set out below, the motions are GRANTED.
A. Service and Default.
BANA initially failed to effect service of its motion on Plaintiffs. By Order (D.E.
16), the Court required BANA to re-serve its motion. An amended certificate of service
reflects that BANA re-served the motion on Plaintiffs at their address of record on
August 14, 2018. D.E. 18. According to Local Rule 7.3, the submission date for this
motion was September 4, 2018. While Ditech properly served its motion, Plaintiffs
sought an extension of time to respond. D.E. 15. By Order (D.E. 17), the Court required
Plaintiffs to file any response they may have to that motion on or before September 5,
2018.
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Under Local Rule 7.4, responses must be filed by the submission date and be
accompanied by authority. To date, Plaintiffs have not filed a response to either motion
and the time for doing so has expired.
“Failure to respond will be taken as a
representation of no opposition.” Id. Nonetheless, the Court reviews the motions on
their merits to determine if dismissal is warranted under Federal Rule of Civil Procedure
12(b)(6).
B. The Pleading Fails to Allege Sufficient Facts, Generally.
At issue, initially, is whether Plaintiffs have pled sufficient facts to support a claim
upon which relief may be granted. 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.” “Pleadings must be construed
so as to do justice.” Fed. R. Civ. P. 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. Id. at 555. In other words, the pleader must make
allegations that take the claim from conclusory to factual and beyond possible to
plausible. Id. at 557. The Twombly Court stated, “[W]e do not require heightened fact
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pleading of specifics, but only enough facts to state a claim to relief that is plausible on
its face.” Id. 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
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.” Id. at 681.
Plaintiffs’ pleading is replete with invocations of state and federal statutes, along
with recitations of various legal maxims from common law and constitutional principles,
with respect to allegations of concealment, misleading representations, mistake, unfair
and unconscionable acts, unlawful banking and lending practices, notary misconduct,
intrusion onto land, breach of fiduciary duty, wrongful foreclosure, and a denial of due
process and equal protection of the laws. Plaintiffs appear to request compensatory and
punitive damages, along with rescission of contract, injunctive relief, and attorneys’ fees.
In sum, Plaintiffs claim that they were duped into their mortgage loan, which they
did not understand and were not sufficiently creditworthy to obtain. And now they have
been treated unfairly. After defaulting on their note, they are surprised to find that
Defendants have a claim to foreclose on their property. However, in their 33-page
pleading and accompanying affidavit, the only fact they allege is the identification of the
mortgage loan transaction and its original principal amount.
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There are no facts to support their claims of wrongdoing. For instance, they do
not identify any material fact that was misrepresented or concealed. They do not identify
any fact evidencing a violation of mortgage lending or foreclosure requirements. They
do not assert that they are current on their loan payments, invalidating collection
procedures, generally. Instead, the pleading sets forth conclusory, formulaic charges that
are not entitled to the presumption of truth and which do not state a claim upon which
relief may be granted under the requirements of Twombly and Iqbal.
The Court GRANTS the motions to dismiss on the basis that the pleading fails to
allege facts sufficient to support any cause of action.
C. The Pleading Fails to Allege Sufficient Facts to Support Fraud Claims.
Defendants complain about Plaintiffs’ accusations of fraud. Federal Rule of Civil
Procedure 9(b) sets out a heightened fact-pleading standard for claims of fraud or
mistake. More specific fact allegations of the who, what, when, and where are required
before the case can proceed to discovery. Williams v. WMX Techs., Inc., 112 F.3d 175,
177-78 (5th Cir. 1997). Yet Plaintiffs do not set out such facts to demonstrate who
perpetrated a fraud, what statements were made and when they were made, or what
exactly that fraud was.
Thus the fraud allegations not only fail the Rule 8 pleading requirements, but fail
the Rule 9 heightened pleading requirements as well. The Court GRANTS the motions
to dismiss on the basis that the pleading fails to allege facts sufficient to support a fraud
claim.
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D. The FDCPA Claim Fails
Defendants complain that they are not debt collectors as that term is defined by the
Fair Debt Collection Practices Act (FDCPA) and that they are thus not liable for any
alleged violation of that statute. Debt collectors do not include a lender, mortgage
servicing company, or assignee of a debt, as long as the debt was not in default at the
time it was assigned. 15 U.S.C. §1692a(6); Gipson v. JPMorgan Chase, No. 3:13-CV2477-L, 2013 WL 3746003, at *2 (N.D. Tex. July 17, 2013) (citing Perry v. Stewart Title
Co., 756 F.2d 1197, 1208, modified on reh’g on other grounds, 761 F.2d 237 (5th Cir.
1985) (addressing attorney’s fees)).
Here, BANA is sued as the original lender and thus is not a debt collector under
the FDCPA.
D.E. 1-2 (Settlement Statement and Deed of Trust).
There are no
allegations that the loan was in default when it was assigned to Ditech, such that
Plaintiffs have failed to allege that Ditech was acting as a debt collector under the
FDCPA.
BANA further seeks dismissal of the FDCPA claims on the basis of the one-year
statute of limitations. 15 U.S.C. § 1692k(d). A motion to dismiss for failure to state a
claim upon which relief can be granted can be based not only on a plaintiff’s claims but
on matters that support an affirmative defense, such as limitations.
Even if some
allegations support a claim, if other allegations negate the claim on its face, then the
pleading does not survive the 12(b)(6) review.
A complaint is subject to dismissal for failure to state a claim
if the allegations, taken as true, show the plaintiff is not
entitled to relief. If the allegations, for example, show that
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relief is barred by the applicable statute of limitations, the
complaint is subject to dismissal for failure to state a claim;
that does not make the statute of limitations any less an
affirmative defense, see Fed. Rule Civ. Proc. 8(c). Whether a
particular ground for opposing a claim may be the basis for
dismissal for failure to state a claim depends on whether the
allegations in the complaint suffice to establish that ground,
not on the nature of the ground in the abstract.
Jones v. Bock, 549 U.S. 199, 215 (2007).
BANA claims that Plaintiffs’ causes of action accrued when the loan was
originated in March 2004. However, because Plaintiffs appear to complain of actions
taken at every step of the loan from formation to foreclosure, and because the claims are
not accompanied by fact allegations, the Court cannot discern when the claims may have
accrued. So while the Court GRANTS the motions to dismiss on the FDCPA claims,
they are dismissed for lack of factual pleading and because Defendants are not debt
collectors; they are not dismissed on the basis of limitations.
E. The DTPA Claim Fails Only For Insufficient Pleadings
Defendants also challenge Plaintiffs’ Texas Deceptive Trade Practices Act
(DTPA) claims. In particular, one element of any such claim is that plaintiffs must be
consumers as defined by that statute. Tex. Bus. Com. Code Ann. § 17.45(4). Defendants
argue that borrowers whose objective is merely to borrow money (rather than to purchase
or lease a good or service) are not consumers. However, whether this principle applies,
depends on the allegations. See generally Miller v. BAC Home Loans Servicing, 726 F.3d
717, 725 (5th Cir. 2013). Because of the deficiencies in Plaintiffs’ statement of their
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claims, it is difficult to determine whether a good or service is involved that would render
Plaintiffs consumers.
Therefore, the Court declines to dismiss the DTPA claims on the basis of
consumer status. Instead, those claims are dismissed under Rule 12(b)(6) for insufficient
pleadings.
F. The Wrongful Foreclosure Claim Fails.
Defendant Ditech challenges Plaintiffs’ suggestion that a lender does not have
standing to seek foreclosure or that it is required to produce the original note to be
entitled to foreclosure. Those theories of recovery have been discredited. Martins v.
BAC Home Loans Servicing, L.P., 722 F.3d 249, 254 (5th Cir. 2013). The wrongful
foreclosure theory is also improper because Plaintiffs have not been dispossessed of their
property. Foster v Deutsche Bank Nat’l Trust Co., 848 F.3d 403, 406 (5th Cir. 2017).
The Court thus GRANTS the Ditech motion to dismiss on the wrongful
foreclosure claim because it is premised on a theory not recognized in the law and
because there is no factual allegation that a foreclosure has taken place.
CONCLUSION
For the reasons set out above, the Court GRANTS the Defendants’ motions to
dismiss (D.E. 9, 11) and dismisses this action in its entirety with prejudice.
ORDERED this 17th day of September, 2018.
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NELVA GONZALES RAMOS
UNITED STATES DISTRICT JUDGE
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