Motton et al v. Chase Home Finance, LLC et al

Filing 12

OPINION AND ORDER mooting 4 Motion to Dismiss; granting 4 Motion for More Definite Statement; granting 7 Motion to Amend; striking [7-1] proposed amended pitition. Pltf to file Amended Complaint within 3 weeks.(Signed by Judge Melinda Harmon) Parties notified.(htippen, )

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
LAWRENCE MOTTEN AND DONNA EVANS,§
§
Plaintiffs,
§
§
VS.
§
§
CHASE HOME FINANCE AND
§
WILMINGTON TRUST COMPANY, et al.§
§
Defendants.
§

CIVIL ACTION H-10-4994

OPINION AND ORDER
Pending before the Court in the above referenced cause,
removed from state court and alleging wrongful foreclosure, are
Defendant Chase Home Finance LLC’s (“CHF’s”) motion to dismiss for
failure to state a claim, or alternatively, motion for more
definite statement (instrument #4) and Plaintiffs Lawrence Motten
and Donna Evans’ request for leave of Court to file amended
petition (#18).
This case arises from a mortgage loan obtained by Plaintiffs,
secured by their homestead property at 10002 Williams Field Drive,
and serviced by CHF.

Plaintiffs ask the Court to invalidate a

foreclosure sale and issue a temporary, and ultimately a permanent,
injunction

barring

CHF

foreclosure

on

property

the

from

proceeding

and

with

prohibiting

its

Wilmington

Company (“Wilmington”) from going forward with eviction.

-1-

wrongful
Trust

Standard of Review
Federal Rule of Civil Procedure 8(a)(2) provides, “A pleading
that states a claim for relief must contain . . . a short and plain
statement of the claim showing that the pleader is entitled to
relief.”
pursuant

When a district court reviews a motion to dismiss
to

Fed.

R.

Civ.

P.

12(b)(6),

it

must

construe

the

complaint in favor of the plaintiff and take all well-pleaded facts
as true. Randall D. Wolcott, MD, PA v. Sebelius, 635 F.3d 757, 763
(5th Cir. 2011), citing Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir.
2009).
“While a complaint attacked by a Rule 12(b)(6) motion to
dismiss does not need detailed factual allegations, . . . a
plaintiff’s

obligation

‘entitle[ment]

to

to

relief’

provide

the

‘grounds’

requires

more

than

of

his

labels

and

conclusions, and a formulaic recitation of the elements of a cause
of action will not do . . . .”
S.

Ct.

1955,

1964-65

Bell Atlantic Corp. v. Twombly, 127

(2007)(citations

omitted).

“Factual

allegations must be enough to raise a right to relief above the
speculative level.”
Federal

Practice

Id. at 1965, citing 5 C. Wright & A. Miller,

and

Procedure

§

1216,

pp.

235-236

(3d

ed.

2004)(“[T]he pleading must contain something more . . . than . . .
a statement of facts that merely creates a suspicion [of] a legally
cognizable right of action”).

“Twombly jettisoned the minimum

notice pleading requirement of Conley v. Gibson, 355 U.S. 41 . . .
-2-

(1957)[“a complaint should not be dismissed for failure to state a
claim unless it appears beyond doubt that the plaintiff can prove
no set of facts in support of his claim which would entitle him to
relief”], and instead required that a complaint allege enough facts
to state a claim that is plausible on its face.”

St. Germain v.

Howard,556 F.3d 261, 263 n.2 (5th Cir. 2009), citing In re Katrina
Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007)(“To survive
a Rule 12(b)(6) motion to dismiss, the plaintiff must plead ‘enough
facts to state a claim to relief that is plausible on its face.’”),
citing Twombly, 127 S. Ct. at 1974).

See also Alpert v. Riley, No.

H-04-CV-3774, 2008 WL 304742, *14 (S.D. Tex. Jan. 31, 2008).

“‘A

claim has facial plausibility when the pleaded factual content
allows

the

court

to

draw

the

reasonable

inference

that

the

defendant is liable for the misconduct alleged.’” Montoya v. FedEx
Ground Package System, Inc., 614 F.3d 145, 148 (5th Cir. 2010),
quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1940 (2009). Dismissal
is appropriate when the plaintiff fails to allege “‘enough facts to
state a claim to relief that is plausible on its face’” and
therefore fails to “‘raise a right to relief above the speculative
level.’”

Montoya, 614 F.3d at 148, quoting Twombly, 550 U.S. at

555, 570.
In Ashcroft v. Iqbal, 129 S. Ct. at 1940, the Supreme Court,
applying the Twombly plausibility standard to a Bivens claim of
unconstitutional discrimination and a defense of qualified immunity
-3-

for government official, observed that two principles inform the
Twombly opinion: (1) “the tenet that a court must accept as true
all of the allegations contained in a complaint is inapplicable to
legal conclusions.” . . . Rule 8 ”does not unlock the doors of
discovery

for

a

plaintiff

armed

with

nothing

more

than

conclusions.”; and (2) “only a complaint that states a plausible
claim for relief survives a motion to dismiss,” a determination
involving “a context-specific task that requires the reviewing
court to draw on its judicial experience and common sense.”
“[T]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements do not suffice” under Rule
12(b).
specific

Iqbal, 129 S. Ct. at 1949.
facts,

not

merely

The plaintiff must plead

conclusory

allegations,

to

avoid

dismissal. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498
(5th Cir. 2000) “Dismissal is proper if the complaint lacks an
allegation regarding a required element necessary to obtain relief
. . . .“

Rios v. City of Del Rio, Texas, 444 F.3d 417, 421 (5th

Cir. 2006), cert. denied, 549 U.S. 825 (2006).
As noted, on a Rule 12(b)(6) review, although generally the
court may not look beyond the pleadings, the Court may examine the
complaint, documents attached to the complaint, and documents
attached to the motion to dismiss to which the complaint refers and
which are central to the plaintiff’s claim(s), as well as matters
of public record.

Lone Star Fund V (U.S.), L.P. v. Barclays Bank

-4-

PLC, 594 F.3d 383, 387 (5th Cir. 2010), citing Collins, 224 F.3d at
498-99; Cinel v. Connick, 15 F.3d 1338, 1341, 1343 n.6 (5th Cir.
1994).

See also United States ex rel. Willard v. Humana Health

Plan of Tex., Inc., 336 F.3d 375, 379 (5th Cir. 2003)(“the court may
consider . . . matters of which judicial notice may be taken”).
Taking judicial notice of public records directly relevant to the
issue in dispute is proper on a Rule 12(b)(6) review and does not
transform the motion into one for summary judgment.

Funk v.

Stryker Corp., 631 F.3d 777, 780 (5th Cir. Jan. 25, 2011).
Dismissal under Federal Rule of Civil Procedure 12(b)(6) is
“appropriate when a defendant attacks the complaint because it
fails to state a legally cognizable claim.”

Ramming v. United

States, 281 F.3d 158, 161 (5th Cir. 2001), cert. denied sub nom.
Cloud v. United States, 536 U.S. 960 (2002), cited for that
proposition in Baisden v. I’m Ready Productions, No. Civ. A. H-080451, 2008 WL 2118170, *2 (S.D. Tex. May 16, 2008).

See also

ASARCO LLC v. Americas Min. Corp., 382 B.R. 49, 57 (S.D. Tex.
2007)(“Dismissal “‘can be based either on a lack of a cognizable
legal theory or the absence of sufficient facts alleged under a
cognizable legal theory.’” [citation omitted]), reconsidered in
other part, 396 B.R. 278 (S.D. Tex. 2008).
When a plaintiff’s complaint fails to state a claim, the court
should generally give the plaintiff at least one chance to amend
the complaint under Rule 15(a) before dismissing the action with
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prejudice.

Great Plains Trust Co v. Morgan Stanley Dean Witter &

Co., 313 F.3d 305, 329 (5th Cir. 2002)(“District courts often afford
plaintiffs at least one opportunity to cure pleading deficiencies
before dismissing a case, unless it is clear that the defects are
incurable

or

the

plaintiffs

unwilling

or

unable

to

advise

amend

in

the
a

court

manner

that

that

they

will

are

avoid

dismissal.”); United States ex rel. Adrian v. Regents of the Univ.
of Cal., 363 F.3d 398, 403 (5th Cir. 2004)(“Leave to amend should
be freely given, and outright refusal to grant leave to amend
without a justification . . . is considered an abuse of discretion.
[citations omitted]”).

The court should deny leave to amend if it

determines that “the proposed change clearly is frivolous or
advances a claim or defense that is legally insufficient on its
face . . . .”

6 Charles A. Wright, Arthur R. Miller & Mary Kay

Kane, Federal Practice and Proc. § 1487 (2d ed. 1990).
Fraud

claims

must

also

satisfy

the

heightened

pleading

standard set out in Federal Rule of Civil Procedure 9(b): “In
allegations

alleging

fraud

.

.

.,

a

party

must

state

with

particularity the circumstances constituting fraud or mistake.
Malice, intent, knowledge, and other conditions of a person’s mind
may be alleged generally.”

A dismissal for failure to plead with

particularity as required by this rule is treated the same as a
Rule 12(b)(6) dismissal for failure to state a claim.

Lovelace v.

Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir. 1996).

-6-

The

Fifth Circuit interprets Rule 9(b) to require “specificity as to
the statements (or omissions) considered to be fraudulent, the
speaker, when and why the statements were made, and an explanation
of why they were fraudulent.”

Plotkin v. IP Axess, Inc., 407 F.3d

690, 696 (5th Cir. 2005).
Because “Rule 9(b) applies by its plain language to all
averments of fraud, whether they are part of a claim of fraud or
not,” it applies to statutory claims based on allegations of fraud.
Lone Star Ladies Inv. Club v. Schlotzky’s, Inc., 238 F.3d 363, 368
(5th Cir. 2001); Melder v. Morris, 27 F.3d 1097, 1100 n.6 (5th Cir.
1994).
CHF’s Motion to Dismiss
CHF

argues

that

the

Plaintiffs’

Original

Petition

and

Application for Injunctive Relief (#1, Ex. A-2) fails to plead a
viable cause of action. A plaintiff asserting wrongful foreclosure
must show (1) a defect in the foreclosure sale proceedings, (2) a
grossly inadequate selling price, and (3) a causal connection
between the defect and the grossly inadequate selling price.
Sauceda v. GMAC Mortgage Corp., 268 S.W. 3d 135, 139 (Tex. App.-Corpus Christi 2008, no pet.), citing Charter Nat’l Bank-Houston v.
Stevens, 781 S.W. 2d 368, 371 (Tex. App.--Houston [14th Dist.] 1989,
writ denied).

Moreover there must be evidence of an irregularity

that “must have caused or contributed to cause the property to be
sold for a grossly inadequate price.”
-7-

In re Keener, 268 B.R. 912,

921 (N.D. Tex. 2001). The plaintiff challenging a foreclosure sale
must plead and ultimately prove any irregularities that rendered
the sale invalid.

Id.

CHF insists that Plaintiffs here fail to

assert any facts supporting the elements of a wrongful foreclosure
action and provide no facts establishing a causal connection
between the defect in the foreclosure proceedings and the grossly
inadequate selling price. They also fail to show that the property
sold for an inadequate price..
Furthermore

Plaintiffs

appear

to

assert

a

claim

for

an

unspecified violation of the Real Estate Settlement Procedures Act
(“RESPA”), codified at 12 U.S.C. sec. 2601, et seq.

No provision

of the RESPA is cited, but the petition asserts that Plaintiffs
sent a “qualified written request” (“QWR”) to CHF which may be the
basis of the RESPA claim.

Under Section 2605 of RESPA states that

a servicer must respond to a QWR within sixty days of receiving the
request.

12 U.S.C. sec. 2605.

The response must either make

corrections in the borrower’s account or explain why the account is
correct or why the servicer cannot respond to the request and
provide the borrowers with the name and telephone number of a
person to whom the borrower can seek information.

Plaintiff plead

that CHR responded to their QWR and that they reviewed that
response and asked about alleged “discrepancies in the amount of
escrow impounds [for] taxes.”

Because they allege that they

communicated with a CHF employee about their concerns and received

-8-

the information they sought, CHF did not violate Section 2605 of
the RESPA.

Plaintiffs fail to specify any particular provision of

the RESPA that CHF purportedly violated, but broadly assert that
CHF “failed to follow the federal statutes under R.E.S.P.A. and
i[s] not entitled to proceed with the wrongful foreclosure.”
Because they fail to state a claim, their request for injunctive
relief also fails to state a claim supporting entry of a judgment.
Butnaru v. Ford Motor Co., 84 S.W. 3d 198, 210 (Tex. 2002).
Alternatively, CHF seeks a more definite statement under
Federal Rule of Civil Procedure 12(e) (When a pleading to which a
responsive pleading is permitted is so vague or ambiguous that a
party cannot reasonably be required to frame a responsive pleading,
the party may move for a more definite statement before submitting
a responsive pleading).
Plaintiffs’ Response and Motion for Leave to File Amended Petition
In their response (#8) and by motion (#7) Plaintiffs seek
leave to file an amended pleading (which should be titled a
“Complaint” in federal court) to cure the defects in their state
court Original Petition. Their proposed pleading is filed as #7-1.
The Court notes that in discussing the standard for pleading,
Plaintiffs fail to take into account the effect of Twombly and
Iqbal on pleading standards under Rule 12(b)(6), which the Court
has summarized earlier and which JPMC points out in its reply
(#11).

One of the reasons the Court chooses to permit Plaintiffs

-9-

to amend again is this confusion, especially since this case was
removed from state court where it was subject to Texas’ more
lenient notice pleading.
JPMorgan Chase Bank, National Association’s
Response in Opposition to #7
While CHF’s motion to dismiss addressed the Original Petition
drafted in state court, in response to Plaintiffs’ request for
leave to amend with their proposed pleading attached, JPMorgan
Chase Bank, National Association (“JPMC”), as successor by merger
to CHF, opposes the motion for leave to amend because Plaintiffs
waited nearly four months to file it and on the grounds that even
the proposed amended petition fails to state a claim that is
plausible on its fact and the requested amendment is futile.
Plaintiffs attempt in their proposed amended petition to assert
causes of action for promissory estoppel, breach of contract, and
breach of good faith and fair dealing, but their allegations “are
nonsensical, conclusory, and at times incomprehensible.”
JPMC contends that Plaintiffs provide no facts in support of
their claims of promissory estoppel and breach of good faith and
fair dealing. Furthermore, Plaintiffs cannot recover for a promise
under promissory estoppel when the promise is part of a valid
contract.

Fertic v. Spencer, 247 S.W. 3d 242, 250 (Tex. App.-–El

Paso 2007, pet. denied), citing Subaru, Inc. V. David McDavid
Nissan, Inc., 84 S.W. 3d 212, 226 (Tex. 2002)(“promissory estoppel
-10-

doctrine presumes no contract exists”).

Their claim for breach of

duty of good faith and fair dealing also fails because “[t]he
relationship of a mortgagor and mortgagee ordinarily does not
involve a duty of good faith.

FDIC v. Coleman, 795 S.W. 2d 706,

709 (Tex. 1990), citing English v. Fischer, 660 S.W. 2d 521, 522
(Tex. 1983).

Thus these two claims lack a legal basis and should

be dismissed.
As for Plaintiffs’ breach of contract claim, to state such a
claim Plaintiffs must allege (1) the existence of a valid contract,
(2) performance by Plaintiffs, (3) breach by Defendants, and (4)
damages resulting from the breach.

Acad. Of Skills & Knowledge,

Inc. V. Charter Schs., USA, Inc., 260 S.W. 3d 529, 536 (Tex. App.-Tyler 2008, pet. denied).

JPMC charges that “Plaintiffs do not

expressly allege a cause of action for breach of contract, and it
is unclear whether Plaintiffs attempt to assert such a claim.”
JPMC

insists

that

the

allegations

are

“convoluted

and

incomprehensible” to the point that Defendant cannot determine that
any support any of the elements of breach of contract and they
should be dismissed as conclusory and not plausible on their face.
In the section titled “Fraud,” Plaintiffs fail to identify any
facts supporting the elements of such a cause of action, i.e., (1)
Defendant

made

a

representation

to

Plaintiffs,

(2)

the

representation was material, (3) the representation was false, (4)
Defendant made the representation with knowledge that it was false

-11-

or made it recklessly, as a positive assertion without knowledge of
its truth, (5) Defendant made the representation with the intent
that Plaintiffs would act upon it, (6) Plaintiffs relied on the
representation,
injury.

and

(7)

the

representation

caused

Plaintiffs

Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W. 3d

768, 774 (Tex. 2009). Instead Plaintiffs spend most of the section
addressing usury law, which does not provide a cause of action for
Plaintiffs because here it is preempted by federal law.

12 U.S.C.

Sec. 1753f-7a.1

1

The Court notes that neither party briefed this question.
It appears JPMC may be correct.
Section 1735f-7a provides in
relevant part,
The provisions of the constitution or the laws of any
State expressly limiting the rate or amount of interest,
discount points, finance charges, or other charges which
may be charged, taken, received, or reserved shall not
apply to any loan, mortgage, credit sale, or advance
which is(A) secured by a first lien on residential
property . . .;
(B) made after March 31, 1980; and
(C) described in section 527(b) of the
National Housing Act (12 U.S.C. 1735f-5(b) . .
. .
Section 501(a)(1) of the Depository Institutions Deregulation and
Monetary Control Act (“DIDMCA”), 12 U.S.C. § 1735f-7a, preempts
state usury laws to the extent that those laws “expressly limit[]
the rate or amount of interest” that a borrower may be charged.
See, e.g., Wolfert v. Transamerica Home First, Inc., 439 F.3d
165,175 (2d Cir. 2006), citing Brown v. Investors Mortgage Co., 121
F.3d 472, 475-76 (9th Cir. 1997); Smith v. Fidelity Discount Co.,
898 F.2d 907 (3d Cir. 1990); In re Lawson Square, Inc., 816 F.2d
1236 (8th Cir. 1987). Plaintiffs should investigate the relevance
-12-

Plaintiffs’ claim of violation of the RESPA is conclusory and
is not plausible on its face.

Plaintiffs concede that JPMC

“responded to all complaint [sic],” but complain that JPMC “refused
to

stop

debt

collection

efforts

and

foreclosure

efforts

are

researched, addressed, and preferably corrected as required in the
plaintiff deed of trust and RESPA.[sic]”

JPMC objects that RESPA,

24 C.F.R, 3500.21(e), does not require JPMC to stop collection
efforts.
Plaintiffs also allege a failure to give “proper written
notice of the loan transference from Washington Mutual to Chase as
per her contract and section 6 of RESPA,” 12 U.S.C. sec. 2605.
JPMC

argues

that

RESPA

does

not

require

any

such

notice.

Furthermore Plaintiffs’ allegations are not factual, but consist
only of conclusory statements, and fail to state a claim to relief
that is plausible on its face.

Thus amendment is futile.

Plaintiffs seem to assert that Defendant violated Housing &
Urban Development (“HUD”) regulations, 24 C.F.R. §§ 203.605 and 24
C.F.R. 203.606 by their conclusory statement, devoid of facts or
identification of the allegedly wrongful conduct: “Defendant has
wholly failed to comply with the foregoing Code.”

Plaintiffs also

state that they sought modification of the loan, indicating that
JPMC did attempt loss mitigation.

The claim is also fatally

deficient and amendment is futile, argues JPMC.

of this statute to their usury claims before re-pleading.
-13-

The

only

statement

under

the

section

titled

“Wrongful

Foreclosure Proceedings” is “Plaintiff incorporates the foregoing
facts and allegations, with the same force and effect, as it fully
set forth above and other acts.”

There is no claim, and amendment

is futile, insists JPMC.
Plaintiffs
negligence

also

and/or

attempt

gross

to

assert

negligence,

but

causes
the

of

action

for

allegations

are

conclusory and lack any legal or factual basis.

They fail to

specify any recognized legal duty that Defendant breached, and they
repetitively assert that Plaintiffs trusted JPMC.

Alleged trust

does not create a duty.
They also cite Article 16, Section 50(a)(6)(B) of the Texas
Constitution and assert that Defendant violated this “statutory
provision.”

Article

16,

Section

50(a)(6)(B)

of

the

Texas

Constitution has no relevance to the facts of this case and does
not create a duty owed to Plaintiffs by JPMC.2

The allegations are

devoid of any legal foundation and any factual basis.
Plaintiffs’ second claim for fraud is also fatally deficient
because it does not allege any facts nor identify any wrongful
conduct by JPMC.

It is composed of conclusory statements that

loosely track the elements of a claim for fraud.

2

JPMC could not

The Court agrees.
Tex. Const. art. XVI § 50(a)(6)(B)
provides that the maximum amount of a home equity loan is 80% of
the fair value of the home less the amount of any other liens which
may exist on the home.
-14-

determine

from

the

“incoherent,

conclusory

allegations

any

wrongdoing by JPMC.”
Nor, argues JPMC, are Plaintiffs entitled to injunctive relief
under Texas law.

Under Texas law, a request for injunctive relief

without a cause of action supporting entry of a judgment is fatally
defective and does not state a claim.

Butnaru, 84 S.W. 3d at 210.

In sum because Plaintiffs’ motion is untimely and because
their proposed amended petition fails to state any cause of action
that is plausible on its face, but instead is devoid of factual
allegations

to

support

their

claims,

and

is

nonsensical

and

conclusory, amendment is futile and the motion for leave to amend
should be denied.

Court’s Ruling
The Proposed Amended Petition
Despite Defendants’ insistence to the contrary, the proposed
amended pleading does set forth some facts, though very few.

It

states that on or about November 24, 2004, Plaintiffs entered into
a written contract with BNC Mortgage Inc. that allowed Plaintiffs
to purchase the property at issue.
mortgager and servicer of the loan.

During 2008 CHF became the
Plaintiffs state vaguely that

after making payments to CHF for several months, they not only
incurred increases in the amount of their monthly payments, but
also experienced changes in their income and employment status
-15-

during the third quarter of 2009.

Around January 2010 they tried

to qualify for a HAMP loan modification3 with CHF.

Shortly

afterward, CHF forwarded an Acceleration Warning Letter and Notice
to Plaintiffs of its Intent to Foreclose (copy attached as Ex. A).
Plaintiffs then retained an attorney who sent a QWR demanding
verification of the Plaintiffs’ alleged debt, pursuant to 13 U.S.C.
Sec. 2605(e) of RESPA, and requesting a review and evaluation of
their payment history, the balances on the debt that Plaintiffs
allegedly owed, the interest rate that CHF charged Plaintiffs, and
the insurance escrow impounds held or paid, in which Plaintiffs
identified some discrepancies from taxes that escalated the monthly
note payment from $1,450.00 to $2,200.00. (Copy attached as Exhibit
B).

CHF sent a partial response to the QWR, with a payment history

of plaintiffs accounts, but none of the other information they had
requested.

Plaintiffs’ attorney then entered into communications

with CHF’s Home Lending executive Office between January and March
of

2010;

he

was

ultimately

directed

to

the

Loss

Mitigation

Department around March 29, 2010 (copy attached as Exhibit C).
Defendants sent Plaintiffs a Foreclosure Notice, posting their
house for foreclosure on Tuesday, April 6, 2010.

Plaintiffs and

their attorney claim they did not receive that Notice and that the

3

HAMP, or the Home Affordability Modification Program, is a
mortgage assistance program announced by the Department of Treasury
on March 4, 2009 that aims to establish an affordable mortgage
payment by lowering the interest rate of a loan for those who
qualify.
-16-

Foreclosure sale was finalized on that date without any notice to
Plaintiffs or their attorney.

They received an April 12, 2010

“Notice to Vacate” the property, followed by service on them of an
Original Petition for Forcible Detainer by Defendant Wilmington on
or about July 22, 1010.

The eviction was heard in Justice Court

Precinct Four, Position Two, Harris County, Texas around April 3,
2010, with judgment in favor of Fannie Mae.

Plaintiffs appealed

the Eviction with an accelerated trial date of October 18, 2010
(copy of pleadings attached as Exhibit E).

Thus Plaintiffs filed

the instant action against Defendants for Defendants’ wrongful
action. Plaintiffs assert they are harmed because their homestead
is being taken and they will lose all of the money they have
invested in the property over approximately six years without
having a fair opportunity to protect it and without an adequate
remedy at law, so they seek injunctive relief.
The proposed amended pleading states that this action is to
stop Defendants from benefitting from the wrongful foreclosure of
Plaintiffs’ homestead at 10002 Williams Field Drive, Houston, Texas
77064, to

maintain the status quo with Plaintiffs’ remaining in

the home, which is currently in their possession, to compensate
Plaintiffs for emotional distress and economic loss caused by the
Defendants’ actions, and to punish Defendants CHF (servicer of
Plaintiffs’ mortgage loan), JPMC (mortgagor), and Wilmington Trust

-17-

Company (Trustee of Plaintiffs’ home) with punitive damages for
their intentional wrongful actions or inactions.
The proposed amended pleading expressly asserts twelve causes
of action against Defendants: (1) RESPA; (2) retaliation for making
a RESPA complaint; (3) promissory estoppel; (4) breach of contract;
(5) breach of good faith and fair dealing; (6) violation of the
Texas Constitution; (7) breach of warranty; (8) violations of Texas
Finance

Code

section

302.001;

(9)

fraud;

(10)

Housing

Urban

Development Regulation violation; (11) negligence; and (12) gross
negligence.
The Court finds the pleading in the proposed amended petition
is substantially deficient and fails to satisfy Rules 8, 12(b)(6),
and 9(b), as indicated below.
Regarding the RESPA claim, as best the Court understands the
amended pleading, Plaintiffs assert that the RESPA violations
include failure to give Plaintiffs written notice before Washington
Mutual transferred their loan to Chase; the servicer’s failure to
respond timely to their QWR, complaining about the amount owed on
their debt; the retaliatory actions of Washington Mutual, Chase and
Chase Finance Agents and/or Representative; Defendants’ wrongful
denial

of

Plaintiffs’

HAMP

application;

wrongful,

malicious,

intentional foreclosure on Plaintiffs’ home with out proper notice
to the parties, without allowing the Plaintiffs to exercise their
right to make good on the debt and keep their home, and Defendants’

-18-

refusal to stop debt collection efforts.

They seek rescission.

These conclusory allegations need to be linked to identified
provisions of RESPA and supported by factual allegations to meet
the standard for a plausible claim if they are to survive.4

4

Title 12 U.S.C. sec. 2605, titled “Servicing of mortgage
loans and administration of escrow accounts, provides,
(a) Disclosure to applicant relating to assignment, sale, or
transfer of loan servicing
Each person who makes a federally related mortgage loan shall
disclose to each person who applies for the loan, at the time of
application for the loan, whether the servicing of the loan may be
assigned, sold, or transferred to any other person at any time
while the loan is outstanding.
(b) Notice by transferor of loan servicing at time of transfer
(1) Notice requirement
Each servicer of any federally related mortgage loan shall notify
the borrower in writing of any assignment, sale, or transfer of the
servicing of the loan to any other person.
(2) Time of notice
(A) In general
Except as provided under subparagraphs (B) and (C), the notice
required under paragraph (1) shall be made to the borrower not less
than 15 days before the effective date of transfer of the servicing
of the mortgage loan (with respect to which such notice is made).
(B) Exception for certain proceedings
The notice required under paragraph (1) shall be made to the
borrower not more than 30 days after the effective date of
assignment, sale, or transfer of the servicing of the mortgage loan
(with respect to which such notice is made) in any case in which
the assignment, sale, or transfer of the servicing of the mortgage
loan is preceded by-(i) termination of the contract for servicing the loan for cause;
(ii) commencement of proceedings for bankruptcy of the servicer; or
-19-

(iii) commencement of proceedings by the Federal Deposit Insurance
Corporation or the Resolution Trust Corporation for conservatorship
or receivership of the servicer (or an entity by which the servicer
is owned or controlled).
(C) Exception for notice provided at closing
The provisions of subparagraphs (A) and (B) shall not apply to any
assignment, sale, or transfer of the servicing of any mortgage loan
if the person who makes the loan provides to the borrower, at
settlement (with respect to the property for which the mortgage
loan is made), written notice under paragraph (3) of such transfer.
(3) Contents of notice
The notice required under paragraph (1) shall include the following
information:
(A) The effective date of transfer of the servicing described in
such paragraph.
(B) The name, address, and toll-free or collect call telephone
number of the transferee servicer.
(C) A toll-free or collect call telephone number for (i) an
individual employed by the transferor servicer, or (ii) the
department of the transferor servicer, that can be contacted by the
borrower to answer inquiries relating to the transfer of servicing.
(D) The name and toll-free or collect call telephone number for (i)
an individual employed by the transferee servicer, or (ii) the
department of the transferee servicer, that can be contacted by the
borrower to answer inquiries relating to the transfer of servicing.
(E) The date on which the transferor servicer who is servicing the
mortgage loan before the assignment, sale, or transfer will cease
to accept payments relating to the loan and the date on which the
transferee servicer will begin to accept such payments.
(F) Any information concerning the effect the transfer may have, if
any, on the terms of or the continued availability of mortgage life
or disability insurance or any other type of optional insurance and
what action, if any, the borrower must take to maintain coverage.
(G) A statement that the assignment, sale, or transfer of the
servicing of the mortgage loan does not affect any term or
-20-

condition of the security instruments other than terms directly
related to the servicing of such loan.
(c) Notice by transferee of loan servicing at time of transfer
(1) Notice requirement
Each transferee servicer to whom the servicing of any federally
related mortgage loan is assigned, sold, or transferred shall
notify the borrower of any such assignment, sale, or transfer.
(2) Time of notice
(A) In general
Except as provided in subparagraphs (B) and (C), the notice
required under paragraph (1) shall be made to the borrower not more
than 15 days after the effective date of transfer of the servicing
of the mortgage loan (with respect to which such notice is made).
(B) Exception for certain proceedings
The notice required under paragraph (1) shall be made to the
borrower not more than 30 days after the effective date of
assignment, sale, or transfer of the servicing of the mortgage loan
(with respect to which such notice is made) in any case in which
the assignment, sale, or transfer of the servicing of the mortgage
loan is preceded by-(i) termination of the contract for servicing the loan for cause;
(ii) commencement of proceedings for bankruptcy of the servicer; or
(iii) commencement of proceedings by the Federal Deposit Insurance
Corporation or the Resolution Trust Corporation for conservatorship
or receivership of the servicer (or an entity by which the servicer
is owned or controlled).
(C) Exception for notice provided at closing
The provisions of subparagraphs (A) and (B) shall not apply to any
assignment, sale, or transfer of the servicing of any mortgage loan
if the person who makes the loan provides to the borrower, at
settlement (with respect to the property for which the mortgage
loan is made), written notice under paragraph (3) of such transfer.
(3) Contents of notice
-21-

Any notice required under paragraph (1) shall include
information described in subsection (b)(3) of this section.

the

(d) Treatment of loan payments during transfer period
During the 60-day period beginning on the effective date of
transfer of the servicing of any federally related mortgage loan,
a late fee may not be imposed on the borrower with respect to any
payment on such loan and no such payment may be treated as late for
any other purposes, if the payment is received by the transferor
servicer (rather than the transferee servicer who should properly
receive payment) before the due date applicable to such payment.
(e) Duty of loan servicer to respond to borrower inquiries
(1) Notice of receipt of inquiry
(A) In general
If any servicer of a federally related mortgage loan receives a
qualified written request from the borrower (or an agent of the
borrower) for information relating to the servicing of such loan,
the servicer shall provide a written response acknowledging receipt
of the correspondence within 20 days (excluding legal public
holidays, Saturdays, and Sundays) unless the action requested is
taken within such period.
(B) Qualified written request
For purposes of this subsection, a qualified written request shall
be a written correspondence, other than notice on a payment coupon
or other payment medium supplied by the servicer, that-(i) includes, or otherwise enables the servicer to identify, the
name and account of the borrower; and
(ii) includes a statement of the reasons for the belief of the
borrower, to the extent applicable, that the account is in error or
provides sufficient detail to the servicer regarding other
information sought by the borrower.
(2) Action with respect to inquiry
Not later than 60 days (excluding legal public holidays, Saturdays,
and Sundays) after the receipt from any borrower of any qualified
written request under paragraph (1) and, if applicable, before
taking any action with respect to the inquiry of the borrower, the
servicer shall--22-

(A) make appropriate corrections in the account of the borrower,
including the crediting of any late charges or penalties, and
transmit to the borrower a written notification of such correction
(which shall include the name and telephone number of a
representative of the servicer who can provide assistance to the
borrower);
(B) after conducting an investigation, provide the borrower with a
written explanation or clarification that includes-(i) to the extent applicable, a statement of the reasons for which
the servicer believes the account of the borrower is correct as
determined by the servicer; and
(ii) the name and telephone number of an individual employed by, or
the office or department of, the servicer who can provide
assistance to the borrower; or
(C) after conducting an investigation, provide the borrower with a
written explanation or clarification that includes-(i) information requested by the borrower or an explanation of why
the information requested is unavailable or cannot be obtained by
the servicer; and
(ii) the name and telephone number of an individual employed by, or
the office or department of, the servicer who can provide
assistance to the borrower.
(3) Protection of credit rating
During the 60-day period beginning on the date of the servicer's
receipt from any borrower of a qualified written request relating
to a dispute regarding the borrower's payments, a servicer may not
provide information regarding any overdue payment, owed by such
borrower and relating to such period or qualified written request,
to any consumer reporting agency (as such term is defined under
section 1681a of Title 15).
(f) Damages and costs
Whoever fails to comply with any provision of this section shall be
liable to the borrower for each such failure in the following
amounts:
(1) Individuals
-23-

In the case of any action by an individual, an amount equal to the
sum of-(A) any actual damages to the borrower as a result of the failure;
and
(B) any additional damages, as the court may allow, in the case of
a pattern or practice of noncompliance with the requirements of
this section, in an amount not to exceed $1,000.
(2) Class actions
In the case of a class action, an amount equal to the sum of-(A) any actual damages to each of the borrowers in the class as a
result of the failure; and
(B) any additional damages, as the court may allow, in the case of
a pattern or practice of noncompliance with the requirements of
this section, in an amount not greater than $1,000 for each member
of the class, except that the total amount of damages under this
subparagraph in any class action may not exceed the lesser of-(i) $500,000; or
(ii) 1 percent of the net worth of the servicer.
(3) Costs
In addition to the amounts under paragraph (1) or (2), in the case
of any successful action under this section, the costs of the
action, together with any attorneys fees incurred in connection
with such action as the court may determine to be reasonable under
the circumstances.
(4) Nonliability
A transferor or transferee servicer shall not be liable under this
subsection for any failure to comply with any requirement under
this section if, within 60 days after discovering an error (whether
pursuant to a final written examination report or the servicer's
own procedures) and before the commencement of an action under this
subsection and the receipt of written notice of the error from the
borrower, the servicer notifies the person concerned of the error
and makes whatever adjustments are necessary in the appropriate
account to ensure that the person will not be required to pay an
-24-

amount in excess of any amount that the person otherwise would have
paid.
(g) Administration of escrow accounts
If the terms of any federally related mortgage loan require the
borrower to make payments to the servicer of the loan for deposit
into an escrow account for the purpose of assuring payment of
taxes, insurance premiums, and other charges with respect to the
property, the servicer shall make payments from the escrow account
for such taxes, insurance premiums, and other charges in a timely
manner as such payments become due.
(h) Preemption of conflicting State laws
Notwithstanding any provision of any law or regulation of any
State, a person who makes a federally related mortgage loan or a
servicer shall be considered to have complied with the provisions
of any such State law or regulation requiring notice to a borrower
at the time of application for a loan or transfer of the servicing
of a loan if such person or servicer complies with the requirements
under this section regarding timing, content, and procedures for
notification of the borrower.
(i) Definitions
For purposes of this section:
(1) Effective date of transfer
The term
mortgage
servicer
transfer

“effective date of transfer” means the date on which the
payment of a borrower is first due to the transferee
of a mortgage loan pursuant to the assignment, sale, or
of the servicing of the mortgage loan.

(2) Servicer
The term “servicer” means the person responsible for servicing of
a loan (including the person who makes or holds a loan if such
person also services the loan). The term does not include-(A) the Federal Deposit Insurance Corporation or the Resolution
Trust Corporation, in connection with assets acquired, assigned,
sold, or transferred pursuant to section 1823(c) of this title or
as receiver or conservator of an insured depository institution;
and
(B) the Government National Mortgage Association, the Federal
National Mortgage Association, the Federal Home Loan Mortgage
-25-

Corporation, the Resolution Trust Corporation, or the Federal
Deposit Insurance Corporation, in any case in which the assignment,
sale, or transfer of the servicing of the mortgage loan is preceded
by-(i) termination of the contract for servicing the loan for cause;
(ii) commencement of proceedings for bankruptcy of the servicer; or
(iii) commencement of proceedings by the Federal Deposit Insurance
Corporation or the Resolution Trust Corporation for conservatorship
or receivership of the servicer (or an entity by which the servicer
is owned or controlled).
(3) Servicing
The term “servicing” means receiving any scheduled periodic
payments from a borrower pursuant to the terms of any loan,
including amounts for escrow accounts described in section 2609 of
this title, and making the payments of principal and interest and
such other payments with respect to the amounts received from the
borrower as may be required pursuant to the terms of the loan.
(j) Transition
(1) Originator liability
A person who makes a federally related mortgage loan shall not be
liable to a borrower because of a failure of such person to comply
with subsection (a) of this section with respect to an application
for a loan made by the borrower before the regulations referred to
in paragraph (3) take effect.
(2) Servicer liability
A servicer of a federally related mortgage loan shall not be liable
to a borrower because of a failure of the servicer to perform any
duty under subsection (b), (c), (d), or (e) of this section that
arises before the regulations referred to in paragraph (3) take
effect.
(3) Regulations and effective date
The Secretary shall, by regulations that shall take effect not
later than April 20, 1991, establish any requirements necessary to
carry out this section. Such regulations shall include the model
disclosure statement required under subsection (a)(2) of this
-26-

The Court has found no cognizable retaliation claim under
RESPA under the facts alleged in the complaint nor in this context,
since this suit was filed long after the foreclosure and Plaintiffs
have made no allegations to explain their conclusory claim of
retaliation.
To state a claim for promissory estoppel a plaintiff must
plead

(a)

a

promise,

(b)

foreseeability

of

reliance

by

the

promisor, (c) substantial and reasonable reliance by the promisee
to its detriment, and (d) enforcement of the promise is necessary
to avoid injustice.

Sipog Servs. Marine v. Wyatt Field Serv. Co.,

857 S.W. 2d 602, 605 (Tex. App.--Houston [1st Dist.] 1993, no writ).
To show detrimental reliance, a plaintiff must show that he
materially

changed

his

position

in

reliance

on

the

English v. Fischer, 660 S.W. 2d 521, 524 (Tex. 1983).

promise.

Promissory

estoppel does not apply to a promise covered by a valid contract
between the parties, but it does apply to a promise outside of the
contract.

Richter v. Wagner Oil Co., 90 S.W. 3d 890, 899 (Tex.

App.--San Antonio 2002, no pet.).

Plaintiffs’ pleading of this

claim, which overlaps others, is vague, unclear, and void of
specifics and factual support.

As best the Court understands the

proposed petition, Washington Mutual originally made a promise to
Plaintiffs of an interest rate below ten percent, which was

section.
-27-

incorporated into the Deed of Trust, as were Plaintiffs’[undefined]
contractual agreements and promissory note, which Washington Mutual
assigned or transferred or sold to Chase and Chase Finance, which
are

therefore

obligated

to

comply

with

these

obligations.

Plaintiffs further allege that they justifiably relied on the
promise

of

Chase

and

Chase

Finance

to

arrange

for

a

HAMP

modification package to protect their homestead and that injustice
can

only

be

avoided

by

enforcing

their

promises.

Moreover

Plaintiffs also assert they submitted written complaints to the
Finance

Company

and

Chase,

which

willingly

and

intentionally

refused to adhere to the [unidentified] terms of the contract under
RESPA and the Deed of Trust.

Defendants allegedly breached their

obligation to the Plaintiffs by not adhering to the terms of their
contract to stop all debt collection efforts and foreclosure until
Plaintiffs’
modification.
(were

complaints

challenging

the

debt

and

the

HAMP

It appears that these allegations would fall within

incorporated

into)

at

least

one

contract

between

some

parties, and if so, a promissory estoppel claim would not be
cognizable.

Plaintiffs need to plead specifically what promises

are in the contractual agreements and incorporated into the Deed of
Trust.

To sustain a promissory estoppel claim, they must indicate

which promises are outside any contract between the parties, as
well as show how and why these promises were reasonably relied upon
by Plaintiffs, and how Plaintiffs were injured thereby.

-28-

Plaintiffs’ breach of contract claims are similarly vague. To
state a claim for an enforceable contract, a plaintiff must allege
(1) an offer, (2) acceptance of the offer, (3) mutual assent or
“meeting of the minds” about the subject matter and the essential
terms of the contract, and (4) consideration or mutuality of
obligations.
(Tex. 2007).

Baylor Univ. v. Sonnichsen, 221 S.W. 3d 632, 635
Whether the parties have formed a contract is

determined by the objective standard of what the parties said and
how they acted, not by their subjective state of mind.

Texas

Disposal Systems Landfill, Inc. v. Waste Management Holdings, Inc.,
219 S.W. 3d 563, 589 (Tex. App.-–Austin 2007); Fiess v. State Farm
Lloyds, 202 S.W. 3d 744, 746 (Tex. 2006)(“[T]he parties’ intent is
governed by what they said, not by what they intended to say but
did not [emphasis in the original]).”).

Plaintiffs also allege

that Defendants are in breach of their contractual agreement with
the Plaintiffs by not complying with RESPA Servicing of the
Plaintiffs’ loan and loan modification, as outlined in the Deed of
Trust in accordance with the State of Texas Constitution.

Chase

breached promises to service and process Plaintiffs’ Application
for a HAMP modification, to respond to Plaintiffs’ questions on the
accounting of all payments received on Plaintiffs’ account and of
insurance payments on their account, and the offsetting of ad
valorem payments to Plaintiffs account, and to correct complaints
where applicable.

Plaintiffs fail to specify what parties entered

-29-

into what contracts, whether they were valid contracts, what the
key terms of each were, and what and how they were breached.

They

fail to provide the loan documents that were breached and to
indicate which provisions were breached. See, e.g., Chapa v. Chase
Home Finance LLV, Civ. A. No. C-10-358, 2010 WL 5186785, *5 (S.D.
Tex. Dec. 15, 2010), citing Smith v. Nat’l City Mortg., 2010 U.S.
Dist. LEXIS 86221 at *33-34 (W.D. Tex. Aug. 23, 2010)(dismissing
breach of contract claim in 12(b)(6) motion where plaintiffs did
not specify what provision or for that matter what contract was
allegedly breached), citing Mae v. U.S. Property Solutions, 2009
U.S. Dist. LEXIS 36126, 2009 WL 1172711, at *2 (S.D. Tex. Apr. 28,
2009)(dismissing breach of contract claim where property owner
failed

to

assert

which

provision

of

the

loan

was

allegedly

breached); and L.L.C., Powell v, Residential Mortg. Capital, 2010
U.S. Dist. LEXIS 59698, 2010 WL 2133011 at *7 (N.D. Cal. May 24,
2010)(holding that plaintiff’s allegation that “Defendants promised
to provide Plaintiff with an affordable loan” was vague, did not
allege where such a promise was memorialized or what consideration
was given for such a promise, and thus failed to show the existence
of a contract).
The Court agrees with Defendants that Plaintiffs’ fourth claim
for breach of good faith and fair dealing is not cognizable in the
context of mortgager and mortgagee.

“A claim for a breach of duty

of good faith and fair dealing is a tort action that arises from an

-30-

underlying contract.”

Cole v. Hall, 864 S.W. 2d 563, 568 (Tex.

App.–Dallas 1993, writ dism’d).

Initially whether such a duty

exists is a question of law for the court.
in all contractual relationships.

Id.

It does not exist

Chapa, 2010 WL 5186785, *6;

Great Am. Ins. Co. V. North Austin Mun. Util. Dist. Nol 1, 908 S.W.
2d 415, 418 (Tex. 1995); English, 660 S.W. 2d at 522.

The duty of

good faith and fair dealing is imposed only where there is a
“‘special

relationship

of

trust

and

confidence’

between

the

parties, marked by shared trust or an imbalance in bargaining
power.’”

Chapa, 2010 WL 5186785, *6, citing Smith v. Nat’l City

Mortg., 2010 U.S. Dist. LEXIS 86221, *36 (W.D. Tex. Aug. 23, 2010),
quoting Federal Deposit Ins. Corp. V. Coleman, 795 S.W. 2d 706,
708-09 (Tex. 1990).

“‘The relationship of mortgagor and mortgagee

ordinarily does not involve a duty of good faith.’” Chapa, 2010 WL
5186785, *6, quoting Coleman, 795 S.W. 2d at 7-9.

Nor does the

relationship between a creditor and a guarantor, or between a
lender and a borrower, support a duty of good faith.
802 S.W. 2d at 399.

Id.; Cole,

Plaintiffs have not alleged any facts that

would demonstrate a special relationship with Defendants that would
give rise to a duty of good faith here.
Plaintiff’s

bare-bones,

conclusory

claim

that

Defendants

violated the Texas Constitution fails to meet the standard for a
plausible

claim

under

Rule

12(b)(6).

It

may

be

related

to

Plaintiffs’ usury charge under the Texas Finance Code sec. 32.001,
-31-

discussed infra. Contracts for usurious interest are prohibited by
the Texas Constitution, article XVI, section 11 and the Texas
Finance Code Annotated section 302.09(b). Sturm v. Muens, 224 S.W.
3d 758, 761 (Tex. App.–-Houston [14th Dist.] 2007).

Nevertheless

Plaintiffs must address the preemption issue under the DIDMCA
identified in footnote 1 of this opinion and order.
Plaintiffs’ conclusory assertion that Defendants breached
warranties is similarly bare of any facts.
Relating to Plaintiffs’ claims of fraud and violations of the
Texas

Finance

elements

for

Code
a

sec.

valid

202.001,

contract

and

set

without

out

by

satisfying

the

Court

the

supra,

Plaintiffs assert that Washington Mutual made a gratuitous promise
to Plaintiffs and “misrepresented to Plaintiffs in the truth and
lending statement, that Plaintiffs’ interest rate would be below
ten percent, but the interest on the loan of money or extension of
credit for which Plaintiffs contracted with Chase was in excess of
ten percent, in violation of Texas’ usury laws.

Tex. Finance Code

sec. 302.001. They also claim that Chase and Chase Finance should
be required to comply with the same promise and should correct the
Deed of Trust and the Promissory Note. At the same time Plaintiffs
state,

“The

Promissory

Note

permits

imposition

of

usurious

interest, and hence that Chase illegally contracted for the right
to charge usurious interest.” Not only must Plaintiff consider the
preemption issue under the DIDMCA, but to allege common law fraud,

-32-

Plaintiffs must plead with factual particularity under Rule 9(b),
but have not, that (1) a material representation was made, (2) that
the representation was false, when the representation was made, (3)
the speaker knew it was false or made it recklessly without any
knowledge of the truth and as a positive assertion, (4) that the
speaker made the misrepresentation with the intent that the other
party should act upon it, (5) the party acted in reliance on the
misrepresentation, and (6) the party thereby suffered injury.
re

Firstmerit

Bank,

N.A.,

52

S.W.3d

749,

758

(Tex.

In

2001).

Plaintiff must plead the “who, what, when, and where” of the
allegedly fraudulent misrepresentation or conduct.
Plaintiffs’ claim for breach of HUD regulations, citing 24
C.F.R. section 203.605 (“Loss Mitigation Performance”), 203.501
(“Loss Mitigation”), 203.606 (“Pre-foreclosure review”), asserts
that Chase and Chase Finance failed to conduct a Loss Mitigation
Evaluation and did not provide Plaintiffs with the required thirtyday notice before any foreclosure proceedings in violation of HUD
regulations.

The Court notes that a number of courts have held

that there is no private cause of action for violation of HUD
regulations.

See, e.g., Wells Fargo Home Mortgage, Inc. V. Neal,

922 A.2d 538, 543-44 (Md. 2007)(citing authority across the country
rejecting argument that a violation of the HUD regulations creates
a private cause of action); Baker v. Countrywide Home Loans, Inc.,
3:08-CV-0916-B,

2009

WL

1810336,

-33-

*3

(N.D.

Tex.

June

24,

2009)(“Because the aim of the [Federal Housing Act] and the HUD
regulations is to govern the relationship between mortgagees and
the government, courts have recognized that violations of such
provisions fail to give rise to a private cause of action” for
wrongful foreclosure.)(and cases cited therein).

An exception has

been recognized where the HUD regulations are incorporated into a
contract between mortgagee and the government so that it permits a
basis for a breach of contract claim).

Baker, 2009 WL 1810336 at

*5 (A “failure to comply with regulations made part of the parties’
agreement may give rise to liability on a contract theory because
the parties incorporated the terms into their contract.

Indeed,

courts have recognized that claims for failure to comply with HUD
regulations . . . are best classified as a breach of contract.”),
citing Buis v. Wells Fargo Bank, N.A., 401 F. Supp. 2d 612, 616
(N.D. Tex. 2005)..

Plaintiffs have conclusorily asserted that

paragraph 9(d) of the Deed of Trust incorporates the rules and
regulations of the Secretary of HUD, but have not indicated which
ones and have not provided a copy of that document.

Nor have they

provided factual support for their bare-bones allegation that the
three cited HUD regulations were violated by Defendants; indeed, a
pointed out by JPMC they seem to contradict that allegation.
For their negligence claim, Plaintiffs must allege (1) the
existence of a legal duty, breach of that duty, and damages
proximately caused by the breach.

-34-

Van Horn v. Chambers, 970 S.W.

2d 541, 544 (Tex. 1998).

Without citing any authority, Plaintiffs

claim they “placed their trust and goodwill into the hands” of
Chase

and

trusted

modifications

that

services,

Chase

“had

protecting

a

duty

to

Plaintiffs

Plaintiffs
home

of

managing

Plaintiffs escrow account and loan account [sic]” and assert it
breached that duty.
duty.

Moreover Plaintiffs call it a “fiduciary”

As noted, the relationship of a mortgagor and a mortgagee

does not give rise to a duty of good faith and fair dealing, no
less a fiduciary duty.

Coleman, 705 S.W.2d 706; White v. Mellon

Mortg. Co., 995 S.W. 2d 795, 800 (Tex. App.--Tyler 1999, no pet.);
In re Thrash, 433 B.R. 585, 597 (Bkrtcy. N.D. Tex. 2010).

Texas

does not recognize a fiduciary duty owed by a lender to a borrower.
Williams v. Countrywide, 504 F. Supp. 2d 176, 192 (S.D. Tex. 2007);
Esty v. Beal Bank, S.S.B., 298 S.W. 3d 280, 304 (Tex. App.--Dallas
1009, no pet.).

The Texas Supreme Court has held that a duty of

good faith is imposed in a contract where there is a “special
relationship” characterized “by shared trust or an imbalance in
bargaining power.”

Coleman, 795 S.W. 2d at 708-09.

But Texas

courts have held that such a “special relationship” does not apply
to the relationship between a mortgagor and mortgagee.

See, e.g.,

Lovell v. Western Nat’l Life Ins. Co., 754 S.W. 2d 298, 303 (Tex.
App.-–Amarillo 1988, writ denied); Collier v. Wells Fargo Home
Mortg., No, 7:04-CV-K, 2006 WL 1464170, *8 (N.D. Tex. May 26,
2006)(and cases cited therein).
-35-

Nor is there any duty to act

reasonably toward other people generally. Thrash, 433 B.R. at 597,
citing THPD, Inc. v. Cont’l Imps., Inc., 260 S.W. 3d 593, 616 (Tex.
App.--Austin 2008, no pet.). Nor, as Plaintiffs assert, does Chase
have a recognized “duty to Plaintiffs of modification services,
protecting Plaintiffs[‘] home.”

As the Thrash bankruptcy court

opined, 433 B.R. at 596,
[T]here is little guiding authority to enlighten this
court as to whether there is a recognized duty to conform
to a certain standard of conduct that might: (a) be owed
from a mortgage lender or servicer to its borrower; and
(b) give rise to a negligence claim. Negligence has been
defined as a failure to use ordinary or due care; that
is, failing to act as a person of ordinary prudence would
have acted under the same or similar circumstances. Webb
v. Glenbrook Owners Ass’n, Inc., 298 S.W. 3d 374, 388 n.6
(Tex. app.-Dallas 2009, no pet.). But there must be a
legally cognizable duty recognized (by statute or common
law) before actions should be analyzed under the
reasonably prudent person test.
As a matter of law, Plaintiffs have not identified a legally
cognizable duty owed by Defendants to Plaintiffs under the law, nor
shown with supporting facts a breach of that duty and damages
caused by the breach in their dispute.

Thus they have failed to

state a negligence claim.5
5

Plaintiffs have failed to distinguish their negligence
claims from their breach of contract claims.
This Court would
point out that
where there is a contract between the parties, the duty
must arise independently of the fact that a contract
exists between the parties (i.e., there must be an
independent obligation/duty imposed by law). Am. Nat’l
Ins. Co. v. IBM Corp., 933 S.W. 2d 685, 686 (Tex. App.-San Antonio 1996, writ denied).
In other words, a
contractual relationship between parties may create
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Under Texas law, gross negligence is a heightened form of
negligence requiring a plaintiff to allege and ultimately prove (1)
an act or omission that, viewed objectively from the actor’s
standpoint, involved “‘an extreme degree of risk’” and (2) the
actor had actual, subjective awareness of the risk and proceeded
anyway with a “conscious indifference.”

Thrash, 433 B.R. at 600.

citing Lane v. Halliburton, 529 F.3d 548, 565 (5th Cir. 2008), and
Guzman v. Inter Nat’l Bank, No. 13-07-00008-CV, 2008 WL 739828, &34 (Tex. App.-–Corpus Christi Mar. 20, 2008, no pet.)(lender’s
actions/non-disclosures

that

ultimately

allegedly

resulted

in

foreclosure on the plaintiff’s house did not give rise to a gross
negligence claim).

If a plaintiff fails to allege a negligence

claim giving rise to actual damages, he cannot maintain a gross
negligence claim for punitive damages. Nowzaradan v. Ryans,
S.W. 3d

, No. 14-10-00801, 2010 WL 3418308, *4 (Tex. App.--

Houston [14th Dist.] May 26, 2011), citing Newman v. Tropical

duties under both contract and tort law.
Jim Walter
Homes, Inc. v. Reed, 711 S.W. 2d 617, 618 (Tex. 1986)(the
“nature of the injury” most often determines whether a
contract duty or duty-imposed-by-law is breached; when
“the injury is only the economic loss to the subject of
a contract itself, it sounds in contract alone”).
A
plaintiff carries the burden of proving the existence and
violation of an independent obligation imposed by law.
Am. Nat’l Ins. Co., 933 S.W. 2d at 686; Ranger Conveying
& Supply Co. v. Davis, 254 S.W. 3d 471 (Tex. App.-Houston [1st Dist.] 2007, pet. denied).
Thrash, 433 B.R. at 596.
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Visions, Inc., 891 S.W. 2d 713, 721 (Tex. App.--San Antonio 1994,
writ denied).
As

a

final

matter,

Plaintiffs

are

claiming

wrongful

foreclosure even though that cause of action is not listed among
the twelve causes of action discussed previously. Under Texas law,
to state a claim for wrongful foreclosure a plaintiff must allege
(1) a defect in the foreclosure sale proceedings, (2) a grossly
inadequate selling price, and (3) a causal connection between the
defect and the grossly inadequate selling price. Sauceda, 268 S.W.
3d at 139.

As defects Plaintiffs here claim they did not receive

notice of the foreclosure and that Defendants foreclosed on their
home on April 6, 2010 without allowing them to exercise their right
to make good on the debt and keep it and failure to conduct a loss
mitigation analysis.

It is unclear from the amended petition

whether Plaintiffs are still in possession of their home or whether
they have been evicted following appeal of the forcible detainer
judgment in favor of Fannie Mae.

In Baker v. Countrywide Home

Loans, Inc., No. 3:08-CV-0916-B, 2009 WL 1810336, *4 (N.D. Tex.
June 24, 2009), the court recognized that the measure of damages
for wrongful foreclosure is lost equity (i.e., the difference
between the value of the property at the date of foreclosure and
the remaining balance due on the indebtedness), which is based on
“a tort theory of recovery to compensate the aggrieved for his lost
possession of the property.”

Therefore, “[b]ecause recovery is

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premised

upon

one’s

lack

of

possession

of

real

property,

individuals never losing possession of the property cannot recover
on a theory of wrongful foreclosure.

As such, courts in Texas do

not recognize an action for attempted wrongful foreclosure.”

Id.

See

No.

also,

e.g.,

Sander

v.

Citimortgage,

Inc.,

Civ.

A.

4:09CV566, *2 (E.D. Tex. Mar. 24, 2001)(“Recovery [for wrongful
foreclosure] is premised upon loss of possession of real property,
and individuals never losing possession of that property cannot
recover on a theory of wrongful foreclosure.”); Smith v. J.P.
Morgan Chase Bank N/A, Civ. A. No. H-10-3730, 2010 WL 4622209, *2
(S.D. Tex. Nov. 4, 2010)(“Under Texas law, even if a mortgage
holder wrongfully attempts foreclosure, there is no claim for
wrongful foreclosure if the mortgagor does not lose possession of
the home”; “[b]ecause recovery is based on the lack of possession
of

real

property,

individuals

never

losing

possession

cannot

recover on a theory of wrongful foreclosure.”); Peterson v. Black,
980 S.W. 2d 818, 823 (Tex. App.--San Antonio 1998)(“Recovery for
wrongful foreclosure is conditioned on the disturbance of the
mortgagor’s possession based on the theory that the mortgagee has
committed

a

property.”).

wrong

similar

to

the

conversion

of

personal

Thus Plaintiffs need to clarify their status to

determine if they can assert a claim for wrongful foreclosure.
After reviewing Plaintiffs’ Amended Petition (#7-1), for
reasons indicated above, the Court agrees with JPMC that the

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proposed pleading does not satisfy the requirements of Rules 8,
9(b) and 12(b)(6).

Nevertheless, the Court finds that JPMC has

failed to show that amendment is necessarily futile except as to
Plaintiffs’ claims for breach of duty of good faith and fair
dealing, which is not cognizable in the relationship between the
parties here, promissory estoppel if the alleged promise also falls
under a contract, and retaliation under RESPA. Thus the Court will
permit Plaintiffs one more opportunity to state a claim that
satisfies the standards of Rules 8, 12(b)(6), and 9(b) in accord
with the Court’s discussion here. Therefore the Court
ORDERS that CHF’s (and now JPMC’s) motion for more definite
statement (#4) and Plaintiffs’ motion for leave to amend (#7) are
GRANTED, although the Court also
ORDERS that the proposed Amended Petition (#7-1) is STRICKEN.
Plaintiffs shall file an Amended Complaint within three weeks of
entry of this order. Defendants’ current motion to dismiss (#4) is
MOOT.
SIGNED at Houston, Texas, this

28th

day of

June , 2011.

___________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE

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