Motton et al v. Chase Home Finance, LLC et al
Filing
40
OPINION AND ORDER OF DISMISSAL granting 25 MOTION to Dismiss for Failure to State a Claim. This case is DISMISSED with prejudice. Case terminated on July 13, 2012(Signed by Judge Melinda Harmon) Parties notified.(htippen, )
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
LAWRENCE MOTTON AND DONNA EVANS,§
§
Plaintiffs,
§
§
VS.
§
§
CHASE HOME FINANCE AND
§
WILMINGTON TRUST COMPANY, et al.§
§
Defendants.
§
CIVIL ACTION H-10-4994
OPINION AND ORDER OF DISMISSAL
Pending before the Court in the above referenced cause,
removed from state court and alleging wrongful foreclosure, breach
of contract, and intentional infliction of emotional distress, are
Defendant
JPMorgan
Chase
Bank,
N.A.’s
(“Chase’s”)1
motion
to
dismiss for failure to state a claim (instrument #25), filed on
September 22, 2011, and motion for summary judgment (#39).
After carefully reviewing the record and the applicable law,
the Court concludes, for reasons stated below, that the motion to
dismiss for failure to state a claim should be granted with
prejudice.
Plaintiffs Lawrence Motton and Donna Evans were notified by
the Court (#38) on April 26, 2012 that they are now proceeding pro
se and that the deadline for responding to the long pending motion
to dismiss was May 21, 2012.
Chase then filed its motion for
1
JPMorgan Chase Bank, N.A. is successor by merger to Chase
Home Finance, LLC.
-1-
summary judgment on April 30, 2012.
Plaintiffs have failed to
respond to either motion or to move for an extension of time or
leave to amend.
Because of earlier problems with Plaintiffs’
representation by counsel, the parties have not participated in
discovery.
Therefore the Court chooses to deny without prejudice
as premature the motion for summary judgment and addresses the
motion to dismiss for failure to state a claim.
Nevertheless,
because copies of the two documents central to this suit (the Note
and the Deed of Trust) are attached to the motion for summary
judgment (Exhibits A-1 and A-2), and are more conveniently accessed
than through the state court records attached to the Notice of
Removal (#1), the Court cites to these summary judgment exhibits.
Procedural History
This case was removed by Chase from state court on diversity
jurisdiction
on
December
15,
2010,
before
the
Defendant, Wilmington Trust Company, had been served.
other
named
Chase then
filed its first motion to dismiss for failure to state a claim or,
alternatively, motion for more definite statement (#4). Plaintiffs
moved for leave to amend (#7), with a copy of their proposed
amended complaint attached.
motion
to
dismiss,
they
In Plaintiffs’ response (#8) to the
stated
that
their
proposed
amended
complaint would moot the issue. In a reply (#11), Chase complained
that (1) Plaintiffs’s motion was untimely by months, (2) Plaintiffs
had cited the wrong pleading standard for stating a claim, (3) as
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a matter of law Plaintiffs could not assert claims (a) for breach
of good faith and fair dealing because the parties’ relationship
was that of mortgagor and mortgagee and (b) for promissory estoppel
because of the existence of the mortgage contract, and (4) that the
proposed complaint failed to state plausible claims for breach of
contract, fraud, violation of the Real Estate Settlement Procedures
Act (“RESPA”), violation of Housing & Urban Development (“HUD”)
regulations, negligence and/or gross negligence because it was
devoid of supporting factual allegations.
On June 28, 2011 this
Court issued a lengthy Opinion and Order (#12), granting Chase’s
earlier motion for a more definite statement, striking the proposed
amended complaint, setting out in detail the correct standards for
pleading under Federal Rules of Civil Procedure 8, 12(b)(6), and
9(b), finding the proposed pleading “substantially deficient” in
facts and thus failing to state plausible claims, and pointing out
what Plaintiffs needed to address for each of their claims.
It
ruled that amendment of the claims for breach of duty of good faith
and fair dealing, promissory estoppel and retaliation under RESPA
would be futile, but granted Plaintiffs leave to amend their other
causes of action by July 19, 2011.
On September 8, 2011, after making several requests for
extension of time, Plaintiffs untimely filed the now controlling
pleading, their First Amended Complaint (#22), currently challenged
by Chase’s second motion to dismiss for failure to state a claim
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(#25).
The new complaint adds a defendant, “Mortgage Electronic
Registration Systems, Inc. (“MERS”), but there is no indication in
the record that Plaintiffs have met their obligation under Rule
4(c)(1) to have MERS served within the requisite 120 days (Rule
4(m)) or that MERS voluntarily made an appearance in this action.
Nor is there evidence in the record that Wilmington has ever been
served or made an appearance.
Thus the Court lacks jurisdiction
over them.
For relevant standards of review, the elements of Plaintiffs’
various causes of action, and the Court’s rulings thus far, the
Court hereby refers the parties to, and incorporates into this
document, its Opinion and Order of June 28, 2011 (#12).
Chase’s Motion to Dismiss For Failure to State a Claim (#25)
Chase charges that Plaintiffs’ First Amended Complaint, which
includes a statement incorporating their previous petition and
proposed
amended
complaint
and
exhibits
(despite
the
Court’s
rulings in #12), is also devoid of factual allegations supporting
their specific causes of action and thus fails to state plausible
claims.
Thus it fails to satisfy Rules 8 and 12(b)(6) and should
be dismissed in its entirety.
Chase
insists
that
Plaintiffs
conclusorily
claim
the
foreclosure was wrongful but fail to plead facts to support the
essential elements of a wrongful foreclosure cause of action:
(1)
a defect in the foreclosure sale proceedings, (2) a grossly
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inadequate selling price, and (3) a causal connection between the
two.
Charter Nat’l Bank--Houston v. Stevens, 781 S.W. 2d 368, 371
(Tex. App.-–Houston [14th Dist.] 1989, writ denied).
A wrongful
foreclosure requires a plaintiff to plead and ultimately prove an
irregularity that “must have caused or contributed to cause the
property to be sold for a grossly inadequate price.”
268 B.R. 912, 921 (N.D. Tex. 2001).
In re Keener,
Chase argues that Plaintiffs’
conclusory complaint fails to state a defect that occurred in the
foreclosure sale proceedings, fails to plead how the selling price
at foreclosure was grossly inadequate, and alleges no facts showing
the requisite causal connection between the two. This Court agrees
as to the latter two points, but questions the first.2
Furthermore Chase points out that both Plaintiffs’ Original
Petition and subsequent proposed amended complaint state that
Defendant had sent a notice of foreclosure sale to Plaintiffs
indicating that the sale was to occur on April 6, 2010, and the
sale was held on that date.
#1-1, IV ¶9; #7-1 ¶8.
Chase also
observes that Plaintiffs’ have ignored the Court’s direction (#12)
2
See, e.g., Tamplen v. Bryeans, 640 S.W. 2d 421 (Tex. App.-Waco 1982, writ ref’d n.r.e.)(Failure to provide notice under Texas
Property Code § 51,002 constituted an actionable defect in the
foreclosure sale). But the court in Tamplen found that because
Plaintiffs failed to allege a grossly inadequate selling price at
the foreclosure sale and a causal connection between the alleged
defect and the inadequate selling price, they failed to state a
claim. In accord Strange v. Flagstar Bank, FSB, Civ. A. No. 3:11CV-2642-B, 2012 WL 987584. *4 (N.D. Tex. Mar. 22. 2012).
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“to clarify their status to determine if they can assert a claim
for wrongful foreclosure.”
Chase concludes that thus the wrongful foreclosure cause of
action should be dismissed.
The Court agrees that dismissal of the claim is appropriate.
Even if Plaintiffs’ conclusory allegation that they never received
a notice of foreclosure did constitute a defect in the foreclosure,
they have failed to allege facts supporting the last two elements,
i.e., that the property was sold for a grossly inadequate amount
and that the defect caused that inadequate price.
To state a claim for breach of contract, Plaintiffs must show
(1)
the
existence
of
a
valid
contract;
(2)
performance
by
Plaintiffs; (3) breach by Defendant(s); and (4) damages resulting
from the breach.
Academy of Skills & Knowledge, Inc. v. Charter
Schools, USA, Inc., 260 S.W. 3d 529, 536 (Tex. App.-–Tyler 2008,
pet. denied). Chase observes that Plaintiffs initially claim there
is no contract, then that there is a contract and that Defendants
breached it in several ways, i.e., by violating (1) Paragraph 6(C)
of the Note3 (#39, Ex. A-1); (2) Paragraph 7 of the Note4 (id.); (3)
3
Paragraph 6(C), relating to “BORROWER’S FAILURE TO PAY AS
REQUIRED,” is titled “Notice of Default” and provides,
If I am in default, the Note Holder may send me a written
notice telling me that if I do not pay the overdue amount
by a certain date, the Note holder may require me to pay
immediately the full amount of Principal which has not
been paid and all the interest that I owe on that amount.
That date must be at least 30 days after the date on
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Paragraph 19 of the Deed of Trust5 (#39, Ex. A-2); (4) Paragraph 22
which the notice is mailed to me or delivered by other
means.
Plaintiffs allege that “Defendants mailed a notice of default to
plaintiffs, however the defendant notice did not contain the DATE
the overdue amount must be paid. [sic] The letter only contained
the number of days, which by case law is not acceptable.” #22 at
p. 10, ¶ 42.a.i.
4
Paragraph 7, entitled “GIVING OF NOTICES,” provides,
Unless applicable law requires a different method,
any notice that must be given to me under this Note will
be given by delivering it or by mailing it by first class
mail to me at the Property Address above or at a
different address if I give the Note Holder a notice of
my different address.
Any notice that must be given to the Note Holder under
this Note will be given by delivering it or by mailing it
by first class mail to the Note Holder at the address
stated in Section 3(A) above or at a different address if
I am given a notice of that different address. [sic]
Plaintiffs allege, “The Defendant [not identified] received the
certified letter to vacate from the defendants Wilmington’s
attorney. However the plaintiffs address did not receive notice of
the foreclosure from any of the defendants. [sic]” #22 at p. 10,
42.a.ii.1.
5
Paragraph 19,
Acceleration,” states,
“Borrower’s
Right
to
Reinstate
If Borrower meets certain conditions, Borrower shall have
the right to have enforcement of this Security Instrument
discontinued at any time prior to the earliest of: (a)
five days before sale of the Property pursuant to any
power of sale contained in this Security Instrument; (b)
such other period as Applicable Law might specify for the
termination of Borrower’s right to reinstate; or (c)
entry of judgment enforcing this Security Instrument.
Those conditions are that Borrower: (a) pays Lender all
sums which then would be due under this Security
Instrument and the Note as if no acceleration had
occurred; (b) cures any default of any other covenants or
agreements; (c) pays all expenses incurred in enforcing
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After
of the Deed of Trust6 (#39, Ex. A-2); (5) RESPA; and (6) HUD
this Security Instrument, including, but not limited to,
reasonable attorneys’ fees, property inspection and
valuation fees, and other fees incurred for the purpose
of protecting Lender’s interest in the Property and
rights under this Security Instrument; and (d) takes such
actions as Lender may reasonably require to assure that
Lender’s interest in the Property and rights under this
Security Instrument, and Borrower’s obligation to pay the
sums secured by this Security Instrument, shall continue
unchanged. Lender may require that Borrower pay such
reinstatement sums and expenses in one or more of the
following forms, as selected by Lender: (a) cash; (b)
money order; (c) certified check, bank check, treasurer’s
check or cashier’s check, provided any such check is
drawn upon an Institution whose deposits are insured by
a federal agency, instrumentality or entity; or (d)
Electronic Funds Transfer.
Upon reinstatement by
Borrower, this Security Instrument and obligations
secured hereby shall remain fully effective as if no
acceleration had occurred.
However, this right to
reinstate shall not apply in the case of acceleration
under Section 18.
The First Amended Complaint does not make an allegation about this
provision.
6
Paragraph 22 reads,
Acceleration; Remedies. Lender shall give notice to
Borrower prior to acceleration following Borrower’s
breach of any covenant or agreement in this Security
Instrument (but not prior to acceleration under Section
18 unless Applicable Law provides otherwise). The notice
shall specify: (a) the default; (b) the action required
to cure the default; (c) a date, not less than 30 days
from the date the notice is given to Borrower, by which
the default must be cured; and (d) that failure to cure
the default on or before the date specified in the notice
will result in acceleration of the sums secured by this
Security Instrument and sale of the Property.
This
notice shall further inform Borrower of the right to
reinstate after acceleration and the right to bring a
court action to assert the non-existence of a default or
any other defense of Borrower to acceleration and sale.
If default is not cured on or before the date specified
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in the notice, Lender at its option may require immediate
payment in full of all sums secured by this Security
Instrument without further demand and may invoke the
power of sale and any other remedies permitted by
Applicable Law. Lender shall be entitled to collect all
expenses incurred in pursuing the remedies provide in
this Section 22, including, but not limited to,
reasonable attorneys’ fees and costs of title evidence.
For the purpose of this Section 22, the term “Lender”
includes any holder of the Note who is entitled to
receive payments under the Note.
If Lender invokes the power of sale, Lender or Trustee
shall give notice of the time, place and terms of sale by
posting and filing the notice at least 21 days prior to
sale as provided by Applicable Law. Lender shall mail a
copy of the notice to Borrower in the manner prescribed
by Applicable Law. Sale shall be made at public venue.
The sale must begin at the time stated in the notice of
sale or not later than three hours after that time and
between the hours of 10 a.m. and 4 p.m. on the first
Tuesday of the month. Borrower authorizes Trustee to
sell the Property to the highest bidder for cash in one
or more parcels and in any order Trustee determines.
Lender of its designee may purchase the property at any
sale.
Trustee shall deliver to the purchaser Trustee’s deed
conveying indefeasible title to the Property with
covenants of general warranty from Borrower. Borrower
covenants and agrees to defend generally the purchaser’s
title to the Property against all claims and demands.
The recitals in the Trustee’s deed shall be prima facie
evidence of the truth of the statements made therein.
Trustee shall apply the proceeds of the sale in the
following order:
(a) to all expenses of the sale,
including, but not limited to, reasonable Trustee’s and
attorneys’ fees; (b) to all sums secured by this Security
Instrument; and (c) any excess to the person or persons
legally entitled to it.
If the Property is sold pursuant to this Section 22,
Borrower or any person holding possession of the Property
through Borrower shall immediately surrender possession
of the Property to the purchaser at that sale.
If
possession is not surrendered, Borrower or such person
shall be a tenant at sufferance and may be removed by
writ of possession or other court proceeding.
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regulations.
Regarding the first breach of the Note’s ¶ 6(C), Chase
contends that the Note and Notice of Default speak for themselves.
The Notice of Default, sent to Lawrence Motton at the address of
the Property to be foreclosed upon, copy attached to the amended
Complaint (Ex. A), expressly states that the default must be cured
within 32 days of January 4, 2010.
with the terms of the Note.
The Notice of Default complies
Plaintiffs also do not state which
defendant(s) allegedly breached this provision.
breach
of
the
Note’s
¶
7,
Plaintiffs
do
About the second
not
identify
which
defendant violated it or which defendant was obligated to comply
with it.
not
Plaintiffs’ statement that “plaintiffs [sic] address did
receive
notice
of
the
foreclosure
sale
from
any
of
the
defendants,” Chase points to statements in previous pleadings
acknowledging that notice of the foreclosure sale was sent.
1,IV ¶ 9; #7-1, ¶ 8.
#1-
As to ¶ 19 of the Deed of Trust, Plaintiffs
do not specify any breach, nor do they allege that they complied
with its conditions.
The same is true regarding ¶ 22 of the Deed
of Trust.
This Court agrees.
It further finds that Plaintiffs’ claim
that they did not receive notice of default fails to state a claim
because it does not show that Chase failed to comply with the
The new pleading fails to specify which defendant breached ¶22 and
how.
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statutory requirement under Texas Property Code section 51.002(d)
and under the Deed of Trust, to serve notice.
Plaintiffs have not
alleged that Chase did not serve notice pursuant to the statute by
certified mail; instead they have conceded that notice was sent.
Under section 51.002(e), “Service of a notice under this section by
certified mail is complete when the notice is deposited in the
United States mail, postage prepaid and addressed to the debtor at
the debtor’s last known address.” There is no requirement that the
debtor have actually received it.
See, e.g. Gillespie v. BAC Home
Loans Servicing, LP, No. 4:11-CV-388-A, 2012 WL 1870923, *5 (N.D.
Tex. May 23, 2012).
Chase also contends that Plaintiffs’ allegations of violations
RESPA and of HUD regulations are fatally deficient.
Chase points
out that the Note and Deed of Trust do not incorporate either RESPA
or the HUD regulations.
The case Plaintiffs cite, Baker v.
Countrywide Home Loans, Inc., 3:08-CV-0916-B, 2008 WL 1810336 (N.D.
Tex. June 24, 2009), is clearly distinguishable from the instant
suit because in Baker the court found the Note and Deed of Trust
each contained an express specific provision incorporating HUD
regulations.
Id. at *2 & n.2.7
Because neither the Note nor the
7
Moreover this Court observes that the Honorable Jane Bland
continued, id.,
It is well established that the [HUD] regulations at
issue “deal only with the relations between the mortgagee
. . . and the government, and give the mortgagor . . . no
claim to duty owed nor remedy for failure to follow.” .
-11-
Deed of Trust expressly incorporates RESPA or the HUD regulations
here, violations of RESPA and HUD regulations cannot serve as the
basis for a breach of contract claim.
Finally, Plaintiffs assert a claim for intentional infliction
of emotional distress, a cause of action which Texas courts
construe
as
a
“gap-filler”
available
only
when
a
person
intentionally inflicts severe emotional distress in a manner so
unusual that the victim has no other recognized theory of redress.
Hoffman-La Roche, Inc. v. Zeltwanger, 144 S.W. 3d 438, 447 (Tex.
2003).
Chase argues that Plaintiffs’ complaint, itself, indicates
that it is not the only available remedy at law for them, nor have
they stated that it is their only available remedy.
Furthermore,
the First Amended Complaint fails to allege facts that suggest
conduct which is extreme and outrageous. See Tiller v. McLure, 121
S.W. 3d 709, 713 (Tex. 2003); A.H. Belo Corp. v. Corcoran, 52 S.W.
3d 375, 383 (Tex. App.--Houston [1st Dist.] 2001, pet. denied).
. . . Because the aim of the FHA 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 this reason, plaintiffs cannot sustain
a cause of action for wrongful acceleration and
foreclosure solely on the basis that the FHA and HUD
regulations were not complied with. [citations omitted]
Id. at *3, citing inter alia Roberts v. Cameron-Brown Co., 556 F.2d
356, 360 (5th Cir. 1977)(“We agree that application of the Cort
analysis [the National Housing Act and HUD’s Handbook] results in
the rejection of a private cause of action.”). In accord, Cavil v.
Trendmaker Homes, Inc., Civ. A. No. G-10-304, 2010 WL 5464238, *5
(S.D. Tex. Dec. 29, 2010).
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This Court agrees that the claim for intentional infliction of
emotional distress should be dismissed.
To state such a claim
under Texas law, a plaintiff must allege with supporting facts that
“(1) the defendant acted intentionally or recklessly; (2) the
defendant’s conduct was extreme and outrageous; (3) the defendant’s
actions caused the plaintiff emotional distress; and (4) the
resulting emotional distress was severe.
Hoffman-La Roche, 144
S.W. 3d at 445. Liability can only be imposed when the defendant’s
conduct was “‘so outrageous in character, and so extreme in degree,
as to go beyond all possible bounds of decency, and be regarded as
atrocious, and utterly intolerable in a civilized community,’”
Twyman v. Twyman, 855 S.W. 2d 619, 621 (Tex. 1993), quoting
Restatement (Second) of Torts § 46, cmt. d (1965); Burden v.
General Dynamics Corp., 60 F.3d 213, 218 (5th Cir. 1995). It is for
the
court
to
determine
in
the
first
instance
whether
the
defendant’s conduct may reasonable be regarded as so extreme and
outrageous as to allow recovery.
Brewerton v. Dalrymple, 997 S.W.
2d 212, 215-16 (Tex. 1999), citing Wornick Co. v. Casas, 856 S.W.
2d 732, 734 (Tex. 1993), and Restatement (Second) of Torts § 46
cmt. h (1965).
RESPA
This Court finds that Plaintiffs’ all-too-vague
allegations
of
failure
to
receive
adequate
notice
of
foreclosure from Defendants or notice of a transfer of Plaintiffs’
Note or failure to manage their account accurately will not
establish
a
claim
for
intentional
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infliction
of
emotional
distress. Moreover, because this RESPA cause of action is based on
Plaintiffs’ claim for wrongful foreclosure, and because Plaintiffs
have failed to adequately plead a claim for wrongful foreclosure,
that
failure
is
also
a
basis
for
dismissing
the
claim
for
intentional infliction of emotional distress.
Accordingly, for the reasons stated above, the Court
ORDERS that Chase’s motion for failure to state a claim (#25)
is
GRANTED.
Because
Plaintiffs
have
already
filed
three
complaints, the Court will not grant leave for another amendment.
Furthermore “[c]ourts may appropriately dismiss an action with
prejudice without giving an opportunity to amend when the plaintiff
fails to respond to a motion to dismiss after being specifically
invited to do so by the court, the defendant has specifically noted
the failure to respond, and the plaintiff has had ample opportunity
to amend the complaint.”
Mitchell v. Deutsche Bank & Trust Co.,
Civ. A. No. 3:10-CV-1812-BH, 2012 WL 1670168, *3 (N.D. Tex. 2012),
citing Rodriguez v. United States, 66 F.3d 95, 97 (5th Cir. 1995),
cert. denied, 516 U.S. 1166 (1996), citing George v. King, 837 F.2d
705, 708 n.2 (5th Cir. 1988).
Moreover, Plaintiffs have failed to
serve the other two named Defendants.
Accordingly, the Court
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ORDERS that this case is DISMISSED with prejudice.
SIGNED at Houston, Texas, this
13th
day of
July , 2012.
___________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE
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