Gonzales et al v. Bank of America, N.A.
OPINION AND ORDER granting 25 Motion for Summary Judgment in its entirety and the Pltfs' action is DISMISSED WITH PREJUDICE.(Signed by Magistrate Judge John R Froeschner) Parties notified.(sanderson, 3)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HEATHER M. GONZALES and
JOE GONZALES, III,
BANK OF AMERICA, N .A.,
CIVIL ACTION NO. G-12-292
OPINION AND ORDER
Before the Court, with the consent of the parties, is the Motion for Summary Judgment of
Defendant Bank of America, N.A. (Docket Entry ("Dkt.") No. 25). Plaintiffs Heather M.
Gonzales and Joe Gonzales, III filed a response to the Motion (Dkt. No. 26) and then Defendant
filed a reply. (Dkt. No. 27). The Court, after carefully considering the Motion, the response and
reply, and the applicable law, concludes that Defendant's Motion for Summary Judgment should
be GRANTED for all the reasons discussed herein.
This action was brought by Plaintiffs Heather M. Gonzales and Joe Gonzales ("the
Gonzaleseses") against Defendant Bank of America, N.A. ("BOA") after their home, located in
Manvel, Texas (hereinafter "the Propc:rty"), was threatened with a foreclosure sale.
The summary judgment evidence before the Court reflects that on or about July 15,2005,
the Gonzaleses obtained a mortgage to purchase the Property, secured by a Deed of Trust and
Promissory Note in favor of the lender DPH Mortgage, Ltd. (Dkt. No. 25, Ex. A). The Note
and the Deed of Trust were later transferred to Bank of America, N .A., which also acted as the
mortgage servicer. (Dkt. No.7 at 2, ,6).
The Gonzaleses made payments on the note, albeit not always timely, I until they failed to
make a payment for January 2010, and then again for June 2010. (Dkt. No. 25, Ex. A-3). The
loan remained delinquent, which prompted BOA to send a written notice of default to the
Gonzaleses. (Id., Ex. A-4). The notice, dated January 18,2011, notified the Gonzaleses that they
were required to cure the default on or before February 17,2011, and, if they failed, BOA would
accelerate the Note and they would risk foreclosure. (Id.). The Gonzaleses, while continuing to
make current monthly payments, failed to cure the default. (Id., Ex. A-3).
In or around July 2011, when they were four months behind on their mortgage, the
Gonzaleses applied for a loan modification. The Gonzaleses insist that BOA's representatives
verbally told them to stop making their mortgage payments while their request for loan
modification was considered. (Dkt. No. 25, Ex B at 23). The Gonzaleses also insist that the
third-party group (Mediation Group of America), who they began working with later to facilitate
and assist them with their loan modification efforts, also told them to stop making their mortgage
payments. (Id., Ex. B at 37, 39; Ex. C at 29).
On or about August 24,2012, the Gonzaleses were notified that their loan modification had
been declined and that their home was scheduled to be sold at foreclosure eleven days later. The
Gonzaleses promptly filed suit and the foreclosure sale was enjoined by Order of a state court
judge on August 31, 2012. (See Dkt. No.1). The Defendant timely removed the action to federal
court. Once in federal court, the Gonzaleses filed an amended complaint. (Dkt. No.7). In their
Dkt. No. 25, Ex. A-3.
Amended Complaint, the Gonzaleses allege a cause of action against the Defendant for breach of
contract, common law fraud and negligence. (ld.). The Defendant filed a Motion to Dismiss
which, after review, this Court granted with regard to Gonzaleses' claims for common law fraud
and negligence, but denied as to their remaining claim of breach of contract. (Dkt. No. 14).
The Defendant has now filed a Motion for Summary Judgment seeking dismissal of this
action in its entirety. (Dkt. No. 25). The Gonzaleses filed a response to the Motion (Dkt. No.
26), to which Defendant filed a reply.
(Dkt. No. 27).
Defendant's Motion for Summary
Judgment is now ripe for consideration.
II. STANDARD OF REVIEW
The Court analyzes the Defendant's Motion under the well-established summary judgment
standard. Fed. R. Civ. P. 56(c); see generally, Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986); Matsushita Elec. Indus. Co. v. Zemth Radio Corp., 475 U.S. 576, 586-87 (1986);
Burge v. Parish oiSt. Tammany, 187 F.3d 452,464 (5 th Cir. 1999); United States v. Arron, 954
F.2d 249,251 (5 th Cir. 1992).
A. Breach of Contract Claim
The Gonzaleses bring a cause of action against BOA for breach of contract.
Gonzaleses' claim is predicated on their understanding that their loan would be modified and that,
while their loan was being considered for modification, they were excused from performing their
obligations under the loan because BOA's representatives allegedly orally informed them to stop
making their loan payments. The Defendant maintains that it is entitled to summary judgment on
the Gonzales' breach of contract claim on the ground that they were in default under the contract
and this precludes them from maintaining a breach of contract claim. The Defendant also
maintains that the Statute of Frauds precludes their breach of contract claim.
A fundamental principle in the law is that "[a] party to a contract who is in default cannot
maintain a suit for breach of contract." GulfPipe Line Co. v. Nearen, 138 S.W.2d 1065, 1068
(Tex. 1940). The undisputed evidence in the record reflects the Gonzaleses were delinquent in
making their mortgage payments and on January 18, 2011, BOA sent them notice of default,
which was a point in time that preceded their request for a loan modification by several months.
Given the Gonzaleses' initial default, they are not entitled to maintain a cause of action for breach
of contract against the Defendant. Id.
However, more problematic is that their breach of contract claim is barred by the Statute
of Frauds. The Statute of Frauds, which is strictly adhered to in Texas, provides that "[a] loan
agreement in which the amount involved in the loan agreement exceeds $50,000 in value is not
enforceable unless the agreement is in writing and signed by the party to be bound or that party' s
authorized representative." SeeTEx. Bus. COM. CODE § 26.02. The law also requires that when
a modification relates to a matter that must be in writing, the modification must also be in writing.
See Bank of Texas NA. v. Gaubert, 286 S.W.3d 546, 555 (Tex. App.-Dallas, 2009, review
dism'd w.o.j.) (any verbal representation, which purports to alter the terms of a written loan
agreement that exceeds $50,000 in value, is unenforceable under the Texas Statute of Frauds );
Deuley v. Chase Home Finance, LCe, No. 4:05-CV..Q4253, 2006 WL 1155230, at *2 (S.D. Tex.
April 26, 2006) (explaining that under Texas law when an agreement purports to modify an
agreement that must be in writing, the modification must also be in writing or it is unenforceable).
"A plaintiff [who] seeks to enforce an alleged oral contract has the burden of proving that the
Statute of Frauds is satisfied" (Hugh Symons Group, PLC v. Motorola Inc., 292 F.3d 466,469
(5 th Cir. 2002» and, if they fail, it is fatal to their breach of contract claim. TEX. Bus. COM.
CODE § 26.02. Having considered the record before it, this Court fmds no evidence which
establishes that there were any written agreements to modify the parties' loan agreement. 2 Deuley,
2006 WL 1155230, at * 2. Since the Statute of Frauds is not satisfied, as is clearly the case here,
the Gonzaleses' claim for a breach of contract cannot proceed.
There are, of course, exceptions that the law recognizes to the defense of the Statute of
Frauds, which include promissory estoppel. EP Operating Co. v. M1C Energy Co., 883 S. W.2d
263, 268-69 (Tex.App.-Corpus Christi 1994, pet. denied). However, in addition to a plaintiff
being able to show the requisite elements of promissory estoppel,3 Texas law requires that a
plaintiff also be able to establish that the defendant promised to sign an existing agreement, which,
if signed, would satisfy the statute of frauds.
"Moore" Burger, Inc. v. Phillips Pet. Co., 492
S.W.2d 934, 937 (Tex. 1972). Because no such evidence exists in this record, the Gonzaleses
cannot rely on promissory estoppel to avoid the Statute of Frauds.
Nor can the Gonzaleses, to the extent that they might try, attempt to circumvent the Statute
of Frauds by arguing that the Defendant waived the right to enforce the Note and Deed of Trust.
See Milton v. U.S. Bank Nat'l Assn, 508 Fed.Appx. 326, 330 (5 th Cir. 2013); Gordon v. lP
Morgan Chase Bank, MA., 505 Fed. Appx. 361, 365 (5 th Cir. 2013). While it is true that the
The only written agreements between the parties in this case are the Note and the Deed of Trust.
3 The elements of a promissory estoppel claim are: (1) a promise; (2) reliance thereon that was
foreseeable to the promisor; and (3) substantial reliance by the promisee to his detriment." Miller v.
Raytheon Aircraft Co., 229 S. W.3d 358, 378-79 (Tex.App.-Houston [1st Dist.] 2007, no pet.) (citing
English v. Fischer, 660 S.W.2d 521, 524 (Tex.1983». In addition, while not necessarily a pleading
element, estoppel also requires a showing that "injustice can be avoided only by the enforcement of the
promise." See Zenor v. E1 Paso Healthcare Sys., Ltd., 176 F.3d 847, 864 n. 11 (5 th Cir. 1999).
District Court's decision in Montalvo !initially appeared to offer homeowners some safeguard in
the form ofan estoppel/waiver argument, the Court's subsequent decision in Montalvo I!has made
clear that, given Fifth Circuit decisions, even this theory can not be used to circumvent the Statute
of Frauds - particularly where, as is the case here, 4 the Deed of Trust contains a non-waiver
Montalvo v. Bank of America Corp., No. SA-1O-CV-360-XR, 2013 WL 870088
(W.D.Tex. March 7,2013); see also, Milton, 508 Fed.Appx. at 330 (finding unreasonable, as a
matter of law, the plaintiff s reliance on oral representations by customer service representatives
that were contradicted by the terms of the loan agreement); Watson v. Citimortgage, Inc., 530
Fed. Appx. 322, 326 (5 th Cir.2013) (finding that a non-waiver provision in a Deed of Trust is
generally sufficient, in and of itself, to defeat a homeowner's claim of waiver).
Accordingly, for all the foregoing reasons, it is the ORDER of this Court that Defendant
Bank of America, N.A.'s Motion for Summary Judgment (Doc. No. 25) is GRANTED in its
entirety and that Plaintiffs Heather M. Gonzales and Joe Gonzales' action is DISMISSED WITH
IT IS SO ORDERED.
DONE at Galveston, Texas, this
I ~ day of May, 2014.
4 The terms of the Deed ofTrust expressly provide that " [a]ny forbearance by Lender in exercising
any right or remedy ... shall not be a waiver of or preclude the exercise of any right or remedy." (Dkt.
No. 25, Ex. A (Deed of Trust) at 9, 112).
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