Burr et al v. JPMorgan Chase Bank, N.A. et al
Filing
17
MEMORANDUM AND ORDER denying in part, granting in part 11 MOTION to Dismiss Second Amended Complaint or Alternatively for More Definite Statement ( Amended Pleadings due by 4/11/2012.).(Signed by Magistrate Judge George C. Hanks, Jr) Parties notified.(jegonzalez, )
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
JOH N BURR and RUTH BURR,
Plaintiffs,
v.
§
§
8
9
CIVIL ACTION NO. 4: 11-CV-035 19
§
JPM ORGAN CHASE BANK, N.A.
and FEDERAL NATIONAL
MOI ZTGAGE ASSOCIATION
Defendants.
5
§
§
5
MEMORANDUM AND ORDER
Before the Court is the Defendants' Motion to Dismiss the Burrs' Second
Ame ided Complaint and Request for Preliminary Injunction (Dkt. # 1I). The Burrs did
not f le a response but represented that they were opposed to the motion at a hearing held
by the court.' Having considered the parties' briefing, the applicable legal authorities,
and ;dl matters of record, the Court GRANTS the Defendants' Motion, in part, and
DENIES the motion, in part.
On August 17, 200 1, Plaintiffs John Burr and Ruth Burr (the "Burrs") executed a
deed of trust and promissory note for approximately $73,000 to purchase a home. (Dkt. #
1
The Court admonished the parties on the record, and again admonishes them by this Order, that
failure to timely respond to a pending motion will be considered as no opposition to
any fi~ture
that n otion and the Court will act accordingly. S.D. Tex. L.R. 7.4.
2
For the purposes of this Memorandum and Order only, the Court assumes that the factual
allegations contained in the Burrs' Second Amended Complaint are true.
8
7
11). The promissory note was subsequently sold to Defendant Federal National
Mor gage Association ("FNMA"). FNMA appointed Defendant JPMorgan Chase Bank,
N.A ("JPMorgan") "to service the loan-that
is, to collect the monthly payments, make
sure that the taxes and insurance were paid, and generally act to protect FNMA's
inter&"
(Dkt. # 8 7 12).
The Burrs fell behind on their mortgage payments in the summer of 2009. (Dkt. #
8
7
13). The Burrs allege that they applied to JPMorgan for a modification of their
mortgage through the Home Affordable Modification Program ("HAMP"). HAMP is a
fede:.al mortgage assistance program for homeowners who are at imminent risk of or in
defaillt on mortgage loans. (Dkt. # 8 T[ 24). The United States Treasury Department
offers mortgage loan servicers, including JPMorgan, incentives to participate in loan
mod fications through HAMP. (Dkt. # 8 1 15). If borrowers meet HAMP's minimum
eligi~ility
guidelines, loan servicers must not commence foreclosure and must suspend
any Foreclosure proceedings already in progress. (Dkt. # 8
19). If a borrower is
ineli;;ible for a HAMP modification, the servicer must continue to suspend foreclosure
procc:edings while considering the borrower for other modification programs. (Dkt. # 8 7
20). If all measures short of foreclosure have been exhausted, the servicers must consider
a pn:-foreclosure sale and the servicers receive an incentive for each successful preforeclosure sale. (Dkt. # 8 7 23.)
The Burrs completed and signed a HAMP Loan Workout Plan, also known as a
Trial Period Plan, ("TPP") with JPMorgan. (Dkt. # 8 7 24; Dkt. # 11, Ex. A ). The Burrs
alleg :that, instead of identifying the modification under HAMP and explaining the "trial2
period," JPMorgan told the Burrs that they would "test" the modification for three to four
monchs before it would become permanent. The Burrs allege that under this "test," they
were to pay a modified monthly payment of $552.71 for a three- to four-month trial
period. (Dkt. # 8 7 24). The Burrs allege that, if they could successfully negotiate their
way through the "test period," then the modification would become permanent.
The Burrs allege that, although they continued to make these payments on time for
fiftec:n months, they were not contacted by either FNMA or JPMorgan regarding the
Burrs' loan. They allege that, in the sixteenth month after they began making the
mod fied payments, JPMorgan "suddenly reappeared" and offered the Burrs a permanent
mod fication of $956.00 per month with an increased interest rate of 7% (from an initial
propxal of 5%) and with an additional nine years added to the remaining term of the
note, (Dkt. # 8 7 26). The Burrs allege that this amount represented "nearly a seventythree percent increase over what they had been paying." (Dkt. # 8 7 27).
The Burrs allege that, although they believed that their loan had been permanently
mod:fied after the initial three-month trial period expired, JPMorgan had discounted the
loan during the fifteen months the Burrs were making reduced payments and then
reca~~italized discount into the loan. (Dkt. # 8 7 27). The Burrs allege that JPMorgan
the
neve - disclosed the possibility that their loan might be modified to an increased payment.
(Dkt. # 8 7 27).
In October 2010, the Burrs allege that an unnamed JPMorgan representative told
Mr. :3urr that he was being offered "a new (and presumably improved) modification."
(Dkt. # 8 T[ 28). Under the "new" program, the Burrs' loan would be modified to their
3
previous monthly payments of $552.71 starting November 1, 2010. Id. They allege that
the .TPMorgan representative also advised Mr. Burr not make a mortgage payment in
Octc ber 20 10. Id. The Burrs never heard from the representative again and the name and
locx ion of this representative are not alleged in the Burrs' Second Amended Complaint.
From November 2010 to August 201 1, the Burrs allege that they repeatedly
reap )lied for the original loan modification that they thought they had already been
gran:ed. These applications were never approved. Subsequently, JPMorgan foreclosed
on tl e Burrs' home. (Dkt. # 8 7 29).
The Burrs originally filed suit against Defendants in state court-first
filing an
Original Petition and Application for Temporary Injunction on August 30,201 1, and then
filinj; a First Amended Petition and Applications for Temporary Restraining Order and
Tem2orary Injunction on September 26, 201
he Defendants removed the case to
federal court and filed their initial Motion to Dismiss or Alternatively for More Definite
Statement and Brief in Support. (Dkt. # 1 and 4). In lieu of filing a response to the
Defendants' Motion to Dismiss, the Burrs filed a Second Amended Complaint and
Applications for Preliminary Injunctions ("Complaint")
asserting claims against
defertdants for breach of contract, promissory estoppel, and violations of the Texas
Fina~lce
Code arising from their handling of the modification of the Burrs' loan. (Dkt. #
8). I'ending before the Court is Defendants' Motion to Dismiss the Complaint pursuant
12(b)(6) for failing to state a claim upon which relief could be granted or in the
to R~.le
SUJ
plement to Notice of Removal (Dkt. # 2) at 6-1 5 , Plaintiffs' Original Petition at 19-3 1, and
Plaintiffs' First Amended Petition.
I
alterlative, pursuant to Rule 12(e) for a more definite statement of the claims asserted
agail 1st Defendants.
11.
RULE 12(b)(6) STANDARD FOR DISMISSAL
Rule 12(b)(6) requires that a complaint contain "a short and plain statement of the
claini showing that the pleader is entitled to relief." FED.R. CIV.P. 8(a)(2). To satisfy
this -equirement, the statement must provide the defendant with "fair notice of what the
plair tiff s claim is and the grounds upon which it rests." Swierkiewicz v. Sorema, 534
U.S. 506, 51 1, 122 S.Ct. 992, 152 L. Ed. 2d 1 (2002) (internal citations omitted); see also
Christopher v. Harbury, 536 U.S. 403, 416, 122 S.Ct. 2179, 153 L. Ed. 2d 413 (2002)
(the Aements of the plaintiffs claims "must be addressed by allegations in the complaint
suffiient to give fair notice to a defendant").
The district court may not dismiss a
coml~laintunder Rule 12(b)(6) "unless it appears beyond doubt that the plaintiff can
prov :no set of facts in support of his claim which would entitle him to relief." Conley v.
Gibs~n, U.S. 41,45-46, L. Ed. 2d 80,78 S.Ct. 99 (1957).
355
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure is
viewed with disfavor and is rarely granted. Manguno v. Prudential Prop. 6 Cas. Ins.
Co., 276 F.3d 720, 725 (5th Cir. 2002). The complaint must be liberally construed in
favoi*of the plaintiff, and all facts pleaded in the complaint must be taken as true. Id.
The :omplaint must, however, contain sufficient factual allegations, as opposed to legal
conc usions, to state a claim for relief that is "plausible on its face." See Ashcroft v.
Iqba,, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009). When there are
well-pleaded factual allegations, a court should presume they are true, even if doubtful,
5
and then determine whether they plausibly give rise to an entitlement to relief. Id. at
195C.
When a plaintiffs complaint fails to state a claim, the court should generally give
the 1laintiff at least one chance to amend the complaint before dismissing the action with
prejt .dice. Great Plains Trust Co v. Morgan Stanley Dean Witter & Co., 3 13 F.3d 305,
329 '5th Cir. 2002) ("District courts often afford plaintiffs at least one opportunity to cure
pleacling deficiencies before dismissing a case, unless it is clear that the defects are
incuiaable or the plaintiffs advise the court that they are unwilling or unable to amend in a
manlier that will avoid dismissal."); United States ex rel. Adrian v. Regents o the Univ.
f
o C,zl., 363 F.3d 398, 403 (5th Cir. 2004) ("Leave to amend should be freely given, and
f
outright refusal to grant leave to amend without a justification . . . is considered an abuse
of di;cretion."). 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 WRIGHT,
A.
ARTHUR MILLER MARYKAY KANE,FEDERAL
R.
&
PRACTICE PROC.5 1487 (2d ed. 1990).
AND
111.
ANALYSIS
The Burrs allege the following three causes of action in their Complaint: (1)
breac:h of contract; (2) promissory estoppel; and (3) violations of the Texas Finance
Code. (Dkt. # 8). The Defendants move to dismiss the Burrs' claims, arguing that the
Burn: have failed to plead facts which, if true, would establish any of these causes of
actio I against Defendants.
1.
Breach of Contract Claims
A plaintiff asserting a breach of contract claim under Texas law must allege (1) the
existence of a valid contract, (2) performance by plaintiff, (3) breach by defendant, and
(4) clamages resulting from the breach. Acad. o Skills & Knowledge, Inc. v. Charter
f
Sch., USA, Inc., 260 S.W. 3d 529, 536 (Tex. App.-Tyler
2008, pet. denied). Here,
althc ugh the Burrs have valid contracts with JPMorgan, including a promissory note and
a se1;urity instrument, the Complaint does not allege a breach of these original loan
documents. Instead, the Burrs allege that they have stated claims for breach of contract
becalse (1) their HAMP Loan Workout Plan, also known as a Trial Period Plan, ("TPP")
is a valid contract with Defendants for the permanent modification of their home loan,
and that Defendants breached this contract by not offering them a permanent loan
mod fication; and (2) Defendants breached their HAMP and HAFA program contracts
with FNMA by failing to follow various guidelines to offer the Burrs a permanent loan
and 1hat the B u m are intended beneficiaries of those
a.
agreement^.^
The Court disagrees.
Trial Period Plan.
The Burrs' allegation that Defendants breached the terms of the TPP by not
offering them a permanent modification is defeated by the plain language of the TPP
agref:ment. This language clearly states that any permanent modification is subject to the
HPFA is a sub-program of HAMP that offers the options of a short sale or a Deed-in-Lieu of
forec osure to homeowners who can no longer afford their mortgage payments. Backal v. Fargo,
No. 4:ll-CV-563,2011 U.S. Dist. LEXIS 139144, at * 2 (E.D. Tex. Nov. 3,2011).
receipt of a signed modification agreement.5 Although the TPP states that JPMorgan will
prov .de the borrower with a Home Affordable Modification Agreement if the borrower is
in ccmpliance with the TPP, it also unequivocally states that the TPP does not constitute
a permanent modification of the original loan. By signing the TPP, the Burrs attested that
they:
understand that this Plan is not a modification of the Loan Documents and
that the Loan Documents will not be modijied unless and until . . . (ii) [the
Burrs] receive a fully executed copy of a Modification Agreement, and (iii)
the Modification Eflective Date has passed.
The TPP further states that:
"[ilf prior to the Modification Effective Date . . . the Lender does not
provide [the borrower] with a fully executed copy o f . . . the ModiJication
Agreement. . . the Loan Documents will not be modified and the Plan will
terminate. ,,7
Pursuant to this language, even if the Burrs fulfilled all of their obligations under
the 'rPP as alleged in the Complaint, the TPP does not guarantee the permanent
mod fication of the Burrs' loan or obligate Defendants to modify the loan. The TPP
requres certain events to occur prior to the modification and makes the modification
dependent upon the discretion of the Defendants. In this case, there is no allegation in the
"ltl lough the court may not go outside the complaint when considering a motion to dismiss, the
court may consider documents attached to a motion to dismiss if the documents are referred to in
the p aintiff s complaint and are central to the plaintiffs claims. Scanlan v. Texas A & M Univ.,
343 1'.3d 533, 536 (5th Cir. 2003) (citing Collins v. Morgan Stanley Dean Witter, 224 F.3d 496,
498419 (5th Cir. 2000)); see also Causey v. Sewell Cadillac-Chevrolet, 394 F.3d 285, 288 (5th
Cir. .!004). The Court finds that the TPP, referred to by the Burrs in their Complaint and
attacl~edto the Defendants' Motion, is central to the Burrs' breach of contract claim. See
Com1)laint (Dkt. # 8) 77 24, 30; see also Motion (Dkt. # 11), Ex. A.
6
Mol ion (Dkt. # 1I), Ex. A 7 2(G) (emphasis added).
7
Mol ion (Dkt. # 1I), Ex. A 7 2(F) (emphasis added)
Complaint that the Burrs ever received a "fully executed copy of the Modification
Agreement." Thus, as a matter of law, Defendants' alleged failure to permanently
mod fy the Burrs' loan was not a breach of the TPP and this claim should be dismissed.
See Packley v. JPMorgan Chase Bank, Nut. Ass 'n, No. SA-1l-CV-387-XR, 201 1 U.S.
Dist. LEXIS 79323, at "11-12 (W.D. Tex. Jul. 21, 201 1); Pennington v. HSBC Bank
USA N.A., No. A-10-785 LY, 201 1 U.S. Dist. LEXIS 14744, at * 15-16 (W.D. Tex. Dec.
22,2 01 1) (collecting cases holding same).
b.
HAMP and HAFA Program Agreements
The Burrs also cannot state a breach of contract claim based on the HAMP and
HAF A program agreements because they cannot allege facts clearly establishing that they
are t:iird-party beneficiaries of these agreements. In analyzing the viability of the Burrs'
clainls as pled, the Court looks to the substantive law of contracts in the state of Texas.
Here, the Burrs assert third-party beneficiary status to Defendants' agreements with the
Secrcttary of the Treasury, made pursuant to HAMP and HAFA. Under Texas law,
estaklishing a third-party beneficiary claim is a difficult burden; there is a presumption
agair st the finding and enforcement of third-party beneficiary agreements. MJR Corp. v.
B & B Vending Co., 760 S.W.2d 4, 12 (Tex. App.-Dallas
1988, writ denied). The
contracting parties' intent is controlling in determining whether a party is a third-party
bene iciary of a contract. Corpus Christi Bank & Trust v. Smith, 525 S.W.2d 501, 503
(Tex, 1975); see also Sowell v. Northwest Cent. Pipeline Corp., 703 F. Supp. 575, 58 1
(N.D Tex. 1988). In determining intent, Texas courts presume that parties contract only
for t1.emselves and not for the benefit of third parties, unless the obligation to the third
9
part!. is clearly and fully spelled out. Talman Home Fed. Sav. & Loan Ass 'n o Ill. v. Am.
f
Bani:ers Ins., 924 F.2d 1347, 1351 (5th Cir. 1991); Corpus Christi Bank & Trust, 525
S.W 2d at 503-04; MJR Corp. v. B & B Vending Co., 760 S.W.2d 4, 10 (Tex. App.Dal1,is 1988, writ denied); see Republic Nat'l Bank o Dallas v. Nat'l Bankers Life Ins.
f
Co., 427 S.W.2d 76, 79 (Tex. Civ. App. 1968, writ ref d n.r.e.). In other words, a party
clairiing third-party beneficiary status will succeed or fail according to the contract
term;, "as disclosed within the four comers of the instrument." Greenville Indep. Sch.
Dist. v. B & J Excavating, Inc., 694 S.W.2d 410,412 (Tex. App.-Dallas
1985, writ ref d
n.r.e ); Republic Nat'l. Bank o Dallas, 427 S.W.2d at 79.
f
Here, the Burrs have not met their burden by alleging facts clearly evidencing a
legislative intent to provide borrowers with a legal cause of action for breach of contract
under HAMP or HAFA. As courts have repeatedly held, borrowers are not third-party
beneficiaries of a lending institution's HAMP and HAFA agreements. See Cade v. BAC
Horn e Loans Servicing, No. H- 10-4224, 201 1 U.S. Dist. LEXIS 65045, at * 12-13 (S.D.
Tex. June 20, 201 1); Backal v. Wells Fargo, No. 4:11-CV-563, 201 1 U.S. Dist. LEXIS
139144, at *7 (E.D. Tex. Nov. 3, 2011).
It is undisputed that defendant lending
institutions have an obligation to follow applicable contract laws, HAMP and HAFA
guidt:lines. However, as numerous courts have noted, borrowers do not have standing to
challznge compliance with these agreements by lending institutions. Simon v. Bank o
f
Am., N.A., No. 10-cv-00300-GMN-LRL, 2010 U.S. Dist. LEXIS 63480, 2010 WL
2609436, at "10 (D. Nev. June 23, 2010) (collecting cases). Asserting rights as a third
party amounts to asserting a private right of enforcement on a contract; absent clear
10
cont -actual intent to confer third-party beneficiary rights, the Burrs do not have standing
to b ~ i n g action for breach of contract under HAMP or HAFA. Id. Thus, this claim
an
should also be dismissed.
2.
Claim for Promissory Estoppel
To state a claim for promissory estoppel a plaintiff must plead facts showing (I) a
pron lise, (2) foreseeability of reliance by the promisor, and (3) substantial and reasonable
reliance by the promisee to its detriment, and (4) enforcement of the promise is necessary
to a~roid
injustice. Motten v. Chase Home Fin., No. H-10-4994, 201 1 U.S. Dist. LEXIS
6932 3, at
* 35 (S.D. Tex. June 28, 201 1).
As an alternative to their breach of contract
clair I, the Burrs allege that "Defendants promised to offer a modification under HAMP if
the Burrs qualified and made timely payments."
The Burrs argue that this was a
"promise made outside of the existing promissory note and deed of tmst contract."
(Cor nplaint 7 34).
a. Trial Period Plan
Texas courts have recognized promissory estoppel as an affirmative claim in
certs in limited circumstances:
Where the promisee has failed to bind the promisor to a
legally sufficient contract, but where the promisee has acted
in reliance upon a promise to his detriment, the promisee is to
be allowed to recover no more than reliance damages
measured by the detriment sustained.
E'he?ler v. White, 398 S.W.2d 93, 96 (Tex. 1985). Promissory estoppel, however, may
not Ile used to create a contract that does not otherwise exist. Id. at 96; see also Rice v.
Metro. Life Ins. Co., 324 S.W.3d 660, 674, 2010 Tex. App. LEXIS 7261, at
*
31-32
(Tex. App.-Fort
Worth August 3 1,2010) (mem. op.) (noting that breach of contract and
estoppel are mutually exclusive claims).
pron ~issory
To the extent that the Burrs base this claim on the alleged promise to permanently
mod fy the loan contained in the TPP, as the Court has found above, the TPP in no way
sets :orth a promise that a future loan modification would take place. Because there is no
guar mtee of a loan modification in the TPP, the Burrs cannot claim they relied to their
detri ment on such a promise. See Pennington v. HSBC Bank USA, Nut '1 Ass 'n, No. A10-CA-785 LY, 201 1 U.S. Dist. LEXIS 147411, at *30-31 (W.D. Tex. Dec. 22, 2011).
This is also true for any promise to the Burrs that they could qualify for a loan
mod fication by completing a TPP-a
loan modification; by the plain terms of the TPP,
therr was never a certainty, and the Burrs relied upon a promise of what might happen at
their own peril. The Burrs have failed to plead a promise and have failed to plead
reasonable reliance on any promises set forth by the TPP or any promise outside the TPP.
This claim should be dismissed.
b. Oral Promise
To the extent that the promissory estoppel claim is also based on an alleged oral
pron ~ise
made by Defendants in October 2010 to modify the Burrs' loan, this claim is
barrc d by the statute of frauds. In this case, Defendants argue that the principal balance
of tE~eloan was $73,000 and under Texas law, any loan agreement for an amount
exce :ding $50,000 must be in writing and signed by the party bound to it. See TEX.BUS.
& C(>M. CODE § 26.02(b) (2009) (stating statute of frauds for loan agreements). The
Burr: respond that the doctrine of promissory estoppel creates an exception to the statute
\
of fr: .uds for loan agreements.
Texas courts have not specified whether equitable exceptions apply to Texas's
statu e of frauds for loan agreements.8 Courts that have considered an estoppel defense
as an exception to the statute of frauds for a loan agreement have relied on the following
legal principles:
For promissory estoppel to create an exception to the statute of frauds,
there must have been a promise to sign a written agreement that had been
prepared and that would satisfy the requirements of the statute of frauds.
It is the promise to sign a written agreement or enter into a written
agreement that is determinative. Promissory estoppel sufficient to
remove a contract from the statute of frauds requires that the promisor
agree to sign a document that had already been prepared or "whose
wording had been agreed upon" that would satisfy the statute of frauds.
A mere promise to prepare a written contract is not sufficient.1°
Here, the Burrs have not alleged the existence of a written agreement that had
been prepared or whose wording had already been agreed upon with the Defendants that
would satisfy the requirements of the statute of frauds. The Burrs allege a telephone
conv :rsation occurred in October 2010 wherein a JPMorgan representative told Mr. Burr
that le was being offered a new modification program and that he should not make a
See Bank of Texas, N.A. v. Gaubert, 286 S.W.3d 546, 554 (5th Cir. 2009) ("No case has
expressly held that the equitable exceptions to the traditional statute of frauds also apply to
sectic n 26.02 [(the loan statute of frauds)].").
For courts citing these legal principles, see George-Baunchand v. Wells Fargo Home Mortg.,
No. I[-10-3828, 201 1 U.S. Dist. LEXIS 143788, 2011 WL 6250785, at *7 (S.D. Tex. Dec. 14,
201 1: ; Wachovia Bank, Nut '1 Ass 'n v. Schlegel, No. 3:09-CV-1322-D, 2010 U.S. Dist. LEXIS
6601 ,2010 WL 26713 16, at "5 (N.D. Tex. June 30,2010),
l o MCntalvo v. Bank of America Corp. No. SA-10-CV-0360 XR, 2012 U.S. Dist. LEXIS 2071, at
* 9-10 (W.D. Tex. Jan. 6,2012) (citing 1001 McKinney Ltd. v. Credit Suisse First Boston Mortg.
Capilzl, 192 S.W.3d 20, 29 (Tex. App.-Houston
[14 Dist.] 2005, pet. denied) (citations
omitt :d).
mort,;age payment in October 2010. Notably, the Burrs do not allege that the Defendants
pron-ised to sign a written agreement that had been prepared and that would satisfy the
requirements of the statute of frauds, nor do they describe the wording of the agreement
the Ibefendants promised to sign. Deuley v. Chase Home Fin. LLC, H-05-04253, 2006
U.S. Dist. LEXIS 28414, "2-3 (S.D. Tex. April 26, 2006); Montalvo v. Bank o America
f
Cory;., SA-10-cv-0360, 2012 U.S. Dist. LEXIS 2071 (W.D. Tex. January 6, 2012). In
fact, the Complaint alleges that the Burrs never even knew which new modification
prog.am was being offered because they never heard from the representative again.
Simi arly, they do not know her name or location, and they admit they never received any
other information regarding the program from Defendants. (Dkt. # 8 7 28). In the absence
of al' egations that there was a promise to sign a written agreement that had already been
prepiired and that would satisfy the requirements of the statute of frauds, the Burrs cannot
state a promissory claim and this claim should also be dismissed."
" This
corresponds with the reasoning of the court in George-Baunchand:
[Tlhe plaintiffs argument that the promissory estoppel
exception to the statute of frauds applies is unpersuasive because
there is no evidence that [the defendant bank] promised to sign an
existing written loan modification agreement. For promissory
estoppel to create an exception to the statute of frauds, there must
have been a promise to sign a written agreement that had been
prepared and that would satisfy the requirements of the statute of
frauds. A promise to prepare a written contract is not sufficient.
The defendant must have promised to sign a particular agreement
which was in writing at the time. Viewed in the light most
favorable to [the plaintiff], the summary judgment evidence does
not reveal that [the bank] promised to sign an existing loan
modification agreement. The affidavit [the plaintiff] submitted in
opposition to the motion for summary judgment does not mention
the existence of a written loan modification agreement.
3. Violations of the Finance Code
First, the Burrs argue that they have stated a claim against Defendants for violation
of Tt,xas Finance Code Section 392.301(a)(8) because they have alleged that JPMorgan's
threat to foreclose on the Burrs' home without properly considering the Burrs for HAMP
or H 4 F A was a threat to take an action prohibited by law. Complaint (Dkt. #8)
7 40.
Texas Finance Code Section 392.301(a)(8) prohibits defendants from threatening to take
an a:tion prohibited by law.
Tex. Fin. Code Ann.
5
392.301(a)(8) (West 2006).
How ~ e rthe Burrs do not allege facts establishing that HAMP and HAFA are anything
,
more than mere guidelines; nor do they allege that the programs prohibit or create
perq~~isites foreclosure.
to
Furthermore, it is well established that JPMorgan's
No. I[-10-3828, 201 1 U.S. Dist. LEXIS 143788, at "19 (S.D. Tex. Dec. 14, 201 1)
(citat ons omitted); see also I n re Harris, No. 10-39586, 2011 Bankr. LEXIS
2656. 201 1 WL 2708691, at *4-5 (Bankr. S.D. Tex. July 11, 2011) ("Promissory
estop )el does not apply here because [the debtor] does not allege that [the bank]
prom sed to sign a written agreement. For promissory estoppel to create an
excertion to the statute of frauds, there must have been a promise to sign an
existiig written agreement that had already been prepared. Here, . . . there was
neithfa an existing written forbearance agreement nor an existing written
agreenent to cancel the foreclosure proceeding. [The debtor] states that on
September 6, 2010, a [bank] agent told [the debtor] that she would contact their
attorr eys and inform them that they had agreed to cancel the foreclosure date of
September 7, 2010. However, [the debtor] provides no evidence that there was a
prom se by [the bank] to sign an existing document. A mere promise to prepare a
written contract is not sufficient."); Schlegel, No. 3:09-CV-1322-D, 2010 U.S.
Dist. LEXIS 66011, 2010 WL 2671316, at " 5 ("The [borrowers] have not
demo istrated any reason why the Texas statute of frauds does not preclude [them]
from relying on the alleged oral promises to support their affirmative
defenses. . . . For their promissory estoppel defense to survive the statute of
fraud::, the [borrowers] must adduce evidence that [the bank] made an oral
prom se to sign a writing extending the loans . . . or promised that the statute was
satisfied in relation to the new terms. The [borrowers] only assert that [bank]
empl(1yees promised that the loans would be extended, not that there was a
prom~se sign a writing to that effect. The defense therefore cannot survive the
to
statutl: of frauds.") (citations omitted).
foreclosure on the Burrs' home after the Burrs admittedly defaulted on their mortgage
loan is not an action prohibited by law. See Watson v. CitiMortgage, Inc., No. 4: 10-CV707, 2012 U.S. Dist. LEXIS 13527, at * 21 (E.D. Tex. Feb. 3,2012) ("Foreclosure is not
an action prohibited by law.") Accordingly, this claim should be dismissed.
Next, the Burrs argue that they have also stated a claim against Defendants for
violation of Texas Finance Code Section 392.304(a)(8), by alleging that Defendants
faileci to "account for fifteen months of trial payments and provide a status on the
permanent modification." (Dkt. # 8 7 41). Texas Finance Code Section 392.304(a)(8)
proh bits misrepresenting the character, extent, or amount of a consumer debt, or
misrc:presenting the consumer's debt status in a judicial or governmental proceeding.
Tex. Fin. Code Ann.
8
392.304(a)(8) (West 201 1). "For a statement to constitute a
misrc:presentation under the TDCA, the debt collector must have made an affirmative
state:nent that was false or misleading." Bellaish v. Chase Home Fin.,
LLC, No. H-102791, 201 1 U.S. Dist. LEXIS 119250, at "5 (S.D. Tex. Oct. 14, 201 1). Here, the Burrs
do n ~tallege that the Defendants ever made an affirmative misrepresentation. Rather, the
c
Burr!: allege that the Defendants failed to make statements required under the Trial Period
Plan. Thus, the Burrs' claim for violation of Texas Finance Code Section 392.304(a)(8)
shou d be dismissed.
Finally the Burrs argue that they have stated a claim against Defendants for
violaion of Texas Finance Code Section 392.304(a)(19) by alleging that JPMorgan
"dec~:ptively"told the Burrs that (1) if they "made the trial payments under HAMP,
[theill loan would be permanently modified" and (2) "they would be approved for
16
modification if they stopped paying in October 2010 and waited to reapply in
November." (Dkt. # 8
7
41). Texas Finance Code Section 392.304(a)(19) operates
effectively as a "catch-all" provision, in prohibiting a debt collector from "using any
other false representation or deceptive means to collect a debt or obtain information
concl:ming a consumer." Tex. Fin. Code Ann. 5 392.304(a)(19).
Defendants argue, in essence, that these allegations fail to state a claim because
they are simply implausible given the plain language of the TPP signed by the Burrs and
also -eferenced to in the Complaint. Based on this document, Defendants argue that the
Burr;; could not have been deceived in any way regarding permanent modification of
their loan. In support of their argument they cite to the language of the TPP, discussed in
the (lourt's analysis above, stating that the modification of the loan was not guaranteed
by rr erely applying for one and that no modification was to occur "unless and until [the
Bum;] . . . (ii) receive a fully executed copy of the Modification Agreement, and (iii) the
Mod fication Effective Date has passed."
However, it is not clear from the Complaint whether the Burrs' claims under this
section of the Code are based on promises made in connection to the TPP that the Burrs
signtd, or oral promises made by Defendants regarding another program. It is also not
clear what actual damages, if any, were caused by this conduct. Accordingly the Court
finds that Defendants' Motion to Dismiss the Burrs' claim under Section 392.304(a)(19)
shou d be denied and the Burrs should be granted leave to replead this claim and their
'*
dam: ges with greater specificity.
4.
Specificity of Allegations Under Rule 12(e)
Finally, Defendants argue that the Court should dismiss this action against FNMA,
or in the alternative, the Burrs should be required to replead under Rule 12(e) and identify
whic I of the Complaint's allegations are asserted against FNMA and which are asserted
agair st JPMorgan. See FED.R. CIV.P. 12(e): see also Motten v. Chase Home Fin., No.
H-10-4994, 201 1 U.S. Dist. LEXIS 69383, at
*
11 (S.D. Tex. Jun. 28, 201 1) ("When a
pleacing 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."). The Court
agrec s that the Complaint is not clear as to the claims and allegations being made against
FMh A separate and apart from those being made against JPMorgan. However, because
the Court finds it would not be futile to do so, the Court grants the Burrs leave to amend
their complaint to specify which claims and allegations are being made against FMNA.
Thus Defendants' Motion to Dismiss FNMA from this action on these grounds is denied.
111.
CONCLUSION
The Court GRANTS the Defendants' Motion to Dismiss the Burrs' claims for
breach of contract, promissory estoppel, and violations of Sections 392.301(a)(8) and
12
Del endants also move the Court to dismiss the Burrs' request for injunctive relief because they
have :lot set forth a valid cause of action to support the granting of this relief. Since, as noted
above, the Burrs have at least one claim that survives dismissal under Rule 12(b)(6) and the
Burrs are granted leave to amend their Complaint, Defendant's Motion is denied.
392.:;04(a)(8) of the Texas Finance Code. The Court DENIES the Defendants' Motion
to Dismiss the Burrs' claims for violation of Section 292.304(a)(19) of the Texas Finance
Code.
The Burrs are ORDERED to replead their claim for violation of Section
292.:;04(a)(19) of the Texas Finance Code with greater specificity as noted above within
14 dr ~ y s
from the date of this Order.
The Court GRANTS the Defendants' Motion for a More Definite Statement
regarding the conduct of the individual Defendants. The Burrs are ORDERED to
replead their claims to specify which claims and allegations are being made against
FMb A as noted above within 14 days from the date of this Order.
Based on the Court's review of the Complaint's allegations, the Court finds that it
may not be futile to allow the Burrs to replead this suit to state valid causes of action
agair st Defendants. Accordingly, the Court GRANTS the Burrs leave to amend their
Comdaint to state valid causes of action and actual damages caused to them by
Defendants' conduct within 14 days from the date of this Order. The Burrs are cautioned
that ,my new allegations must be sufficient with respect to facts and law to satisfy the
standards of Rule 11 and Rule 12(b)(6) in accord with the Court's discussion in this
Orde r.
SIGNED at Houston, Texas on arch AP 20 12.
7
-
George C. ~ a n Jr.
e
United States Magistrate Judge
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