Gonzales et al v. Bank of America, N.A.
Filing
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OPINION AND ORDER granting in part anddenying in part; denying 8 Motion to Dismiss only insofar as Plaintiffs rely on the concept of waiver of performance. It is, therefore, ORDERED that Plaintiffs fraud claim is DISMISSED. It is, therefore, ORDERED that 8 BOAs Motion to Dismiss the Plaintiffs negligence claim is GRANTED and that claim is DISMISSED..(Signed by Magistrate Judge John R Froeschner) Parties notified.(sanderson, )
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
GALVESTON DIVISION
HEATHER GONZALES
and JOE GONZALES, III
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V.
BANK OF AMERICA, N.A.
CIVIL ACTION NO. G-12-292
OPINION AND ORDER
Before the Court, with the consent of the Parties under 28 U.S.C. § 636(c), is the “Motion
to Dismiss Plaintiffs’ First Amended Complaint” of Defendant, Bank of America, N.A. (BOA);
the Motion seeks the dismissal of the First Amended Complaint of Plaintiffs, Heather Gonzales
and Joe Gonzales, III, in its entirety. Having considered all relevant submissions and applicable
law, the Court now issues this Opinion and Order.
At this juncture, in the absence of any substantive discovery, the Court must liberally
construe the Plaintiffs’ factual allegations, accepting them as true and drawing all reasonable
inferences from those allegations in their favor. Voest-Alpine Trading USA, Corp. v. Bank of
China, 142 F.3d 887, 891 (5th Cir. 1998)
Under this standard, the Court will briefly state its
understanding of the factual bases of the Plaintiffs’ three remaining claims.
The Plaintiffs purchased a home in Manvel, Texas, in July 2005, and executed a
Promissory Note and Deed of Trust which is now held and serviced by BOA. By October 2011,
Plaintiffs were having financial difficulties which prompted them to ask BOA to modify their loan
under the HAMP program. The Court infers from the allegations that Plaintiffs were not in
default at that time. According to Plaintiffs, “BOA’s representatives informed (them) that they
were not allowed to make any mortgage payments while in loan modification status because their
payments would simply be returned to them” . . . and “that they were to ignore any foreclosure
notices that they may receive while in loan modification.” (emphasis added)
Apparently, in
reliance on BOA’s instructions, Plaintiffs quit making payments on the Note. Then, on August
24, 2012, Plaintiffs were notified that their loan modification had been declined and that their
home was scheduled to be sold at foreclosure eleven (11) days later. Plaintiffs promptly filed suit
and the foreclosure sale was enjoined by Order of a state court judge on August 31, 2012. On
October 5, 2012, BOA removed the case to this Court. As of now, the Court believes that no
foreclosure has taken place.
Plaintiffs are presently asserting three causes of action against BOA: breach of contract,
common law fraud and negligence. The Court will address the claims individually.
BREACH OF CONTRACT
This Court agrees with BOA that the Statute of Frauds would bar any claim that its
representatives’ oral statements modified the Note and Deed of Trust. Hugh Symons Group, PLC
v. Motorola, Inc., 292 F.3d 466, 469 (5th Cir. 2002)
In the absence of a written agreement
modifying the loan agreement, or the Defendant’s promise to sign an existing document purporting
to do so, the Statute of Fraud bars relief. “Moore” Burger, Inc. v. Phillips Petroleum Co., 492
S.W. 2d 934, 937 (Tex. 1972)
Notwithstanding, the Court is not convinced that this resolves the issue because it also
appears that Plaintiffs are claiming that BOA’s representatives, while not in writing, induced them
to default on their mortgage. In other words, it appears that Plaintiffs are not strictly seeking to
enforce the oral agreement to modify the loan, but, instead, are asserting a more limited claim that
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BOA cannot assert that they are in default under the original loan because it was BOA’s
representations that induced the default. Under such circumstances, the law appears to recognize
that a distinction exists between seeking to enforce an agreement barred by the Statute of Frauds
and seeking to estop a party to an enforceable contract from asserting a breach. See Montalvo v.
Bank of America Corp., No. S.A.-10-cv-360-XR, 2012 WL 1078093, at *14-15 (W.D. Tex.,
Mar. 30, 2012)
This estoppel argument is in the nature of waiver or excuse. The Rule, which
is explained in the Restatement of Contracts, provides that “(w)here the parties to an enforceable
contract subsequently agree that all or part of a duty need not be performed or that a condition
need not occur, the Statute of Frauds does not prevent enforcement of the subsequent agreement
if reinstatement of the original terms would be unjust in view of a material change of position in
reliance on the subsequent agreement.” REST. 2D CONTRACTS § 150.
The commentary to
the Rule goes on to provide:
b. Waiver. Where a contract is modified by subsequent agreement and the
contract as modified is within a provision of the Statute of Frauds, the modified
contract is unenforceable unless the Statute is satisfied. In such a case, if the
original contract was enforceable it is not rescinded or modified but remains
enforceable. See § 149. But the unenforceable modification may operate as a
waiver. See Uniform Commercial Code § 2-209(4). To the extent that the waiver
is acted on before it is revoked, it excuses the other party from performance of his
own duty and conditions of the duty of the waiving party. Cf. §§ 246, 247, 27880.
Given Plaintiffs’ pleadings, a strong argument appears to exist for the application of this
Rule. In Montalvo, the Court explained that “if a mortgagor changes her position and defaults in
reliance on an oral modification agreement which is unenforceable under the Statute of Frauds,
such that reinstatement of the original terms of the loan would be unjust, the mortgagor’s default
may be excused and the mortgagee estopped from asserting its rights (such as acceleration and
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foreclosure) triggered by the default. Such a claim does not attempt to enforce the unenforceable
oral agreement, but rather excuses the mortgagor’s default under the existing, enforceable loan
agreement.” In the instant case, the Court has assumed that the Plaintiffs were not in default when
BOA’s representatives told them they were “not allowed to make any mortgage payments”; the
mere fact that they were experiencing “financial difficulties” does not mean that they could not
have continued their payments. BOA’s argument that denial of the modification terminated any
excusal with the concomitant assumption that all missing payments would, therefore, be due in full
on August 24, 2012, would result in the inequitable and unjust result the Rule exists to preclude.
The Court is by no means suggesting that Plaintiffs will prevail on this claim, it is simply finding
that it cannot decide the issue without evidence outside the existing pleadings.
It is, therefore, ORDERED that BOA’s Motion to Dismiss (Instrument no. 8) the Plaintiffs’
breach of contract claim is DENIED only insofar as Plaintiffs rely on the concept of waiver of
performance.
FRAUD
BOA argues that Plaintiffs’ fraud claim fails because “the alleged misrepresentations were
not false.” As indicated above, the Court cannot, at this time, agree. But, in this Court’s opinion,
Plaintiffs’ fraud claim must still be dismissed. Under Texas law, the Economic Loss Rule
precludes recovery in tort when the loss complained of is the subject matter of a contract between
the parties. Clark v. Bank of America, N.A., 20012 WL 4793465 *5 (N.D. Tex.) (citing
Southwestern Bell Telephone Co. v. DeLanney, 809 S.W. 2d 493, 494 (Tex. 1992)
The
Economic Loss Rule applies to real estate transactions. Jim Walter Homes, Inc. v. Reed, 711
S.W. 2d 617, 618 ( Tex. 1986)
Plaintiffs have not alleged any independent injury outside the
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economic losses caused by BOA’s alleged breach of the contract, therefore, they cannot maintain
a claim for fraud. Rhodes v. Wells Fargo Bank, N.A., 2012 WL 5363424 *29-30 (N.D. Tex.)
It is, therefore, ORDERED that Plaintiffs’ fraud claim is DISMISSED.
NEGLIGENCE
BOA seeks the dismissal of Plaintiffs’ negligence claim on the ground that it owed no legal
duty to Plaintiffs because no special relationship exists between a mortgagor and a mortgagee
giving rise to a duty of good faith and fair dealing. White v. Mellon Mortgage, Co., 995 S.W.
2d 795, 800 (Tex. App. -- Tyler, 1999, no pet.)
This Court agrees, but it also believes that,
like their fraud claim, Plaintiffs’ negligence claim is barred by the Economic Loss Rule. See
Blanche v. First Nationwide Mortgage Corp., 74 F.3d 444, 452-53 (Tex. App. -- Dallas, 2002,
no pet.)
It is, therefore, ORDERED that BOA’s Motion to Dismiss (Instrument no. 8) the Plaintiffs’
negligence claim is GRANTED and that claim is DISMISSED.
DONE at Galveston, Texas, this
10th
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day of January, 2013.
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