Bassie et al v. Bank Of America, N.A.
Filing
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MEMORANDUM OPINION AND ORDER granting 3 MOTION to dismiss for failure to state a claim. The dismissal is with prejudice and without leave to amend. (Signed by Judge Kenneth M. Hoyt) Parties notified.(dpalacios, )
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
R. EVERETT BASSIE, et al,
Plaintiffs,
VS.
BANK OF AMERICA, N.A.,
Defendant.
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CIVIL ACTION NO. 4:12-CV-00891
MEMORANDUM OPINION AND ORDER
I.
INTRODUCTION
Pending before the Court is the defendant’s, Bank of America, N.A. (“Bank of
America”), motion to dismiss pursuant to FED. R. CIV. P. 12(b)(6) (Docket No. 3), the plaintiffs’,
R. Everett Bassie and Eranda F. Bassie (“the plaintiffs”), response (Docket No. 6), and Bank of
America’s reply (Docket No. 10). Having carefully reviewed the parties’ submissions, the
record and the applicable law, the Court hereby GRANTS Bank of America’s motion to dismiss.
II.
FACTUAL BACKGROUND
This case concerns a mortgage foreclosure dispute. On February 14, 2003, the plaintiffs
executed a Note payable to America’s Wholesale Lender in the amount of $261,755.00, along
with a Deed of Trust, for the purchase of a house located at 14818 Honeymoon Bridge,
Sugarland, Texas. The Note and Deed were subsequently transferred to Bank of America.
The plaintiffs claim that after the Note was transferred in April of 2009, they noticed an
escalation in their monthly mortgage payments and, as a result, they made inquiries regarding the
assignment and transfer of mortgage and for an analysis of their escrow account. The plaintiffs
assert that after several months of experiencing dilatory tactics by Bank of America, they were
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approved for the “loan workout alternative” through the Home Affordable Mortgage Program
(“HAMP”),1 which offered them a “loan trial period” between January and March 2010. The
plaintiffs claim that despite their continued requests for a final decision, they never received a
response from Bank of America regarding the permanent loan modification. Ultimately, the
house was posted for foreclosure sale, which was scheduled for February 7, 2012, but it appears
that the district court of Fort Bend County, Texas, granted the plaintiffs’ motion to temporarily
enjoin the sale.2 Bank of America timely removed the case to this Court on the basis of diversity
of citizenship.
The plaintiffs assert claims for: (1) breach of contract based on Bank of America’s
alleged violations of HAMP guidelines and regulations of the Department of Housing and Urban
Development (“HUD”); (2) “wrongful foreclosure” based on violations of the Texas Property
Code; (3) violations of the Texas Debt Collection Practices Act (“TDCA”); and (4) negligence.
III.
CONTENTIONS OF THE PARTIES
A.
The Defendant’s Contentions
Bank of America argues that the breach of contract claims should be dismissed because
there is no provision in the Note or Deed requiring it to act in accordance with HAMP guidelines
or HUD regulations and the plaintiffs are merely attempting to raise a private cause of action to
enforce those regulations, which is not allowed by law. Bank of America contends that the
“wrongful foreclosure” claim under the Texas Property Code also fails because it complied with
the statute, and, in any event, because no foreclosure sale has occurred, the plaintiffs’ claim is
1
HAMP was established pursuant to the authority provided in the Emergency Economic Stabilization Act of 2008.
See Cade v. BAC Home Loans Servicing, LP, NO. H-10-4224, 2011 WL 2470733, at *2-3 (S.D.Tex. June 20, 2011).
2
Bank of America has noted that the foreclosure sale has not occurred, a representation that the plaintiffs have not
disputed.
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premature. Bank of America further argues that the claim under the TDCA should be dismissed
because its alleged conduct does not constitute “debt collection” under the statute. Lastly, Bank
of America argues that it has no legally cognizable duty to the plaintiffs upon which a negligence
claim can be based and such a claim is further barred by the “economic loss rule,” i.e., a tort
claim is not proper when the only injury alleged is one for economic damages.
B.
The Plaintiffs’ Contentions
The plaintiffs contend that the HUD regulations were specifically incorporated into the
Note and Deed, and, therefore, they may raise a breach of contract claim based on Bank of
America’s failure to comply with the regulations. They also argue that the case law precluding
private rights of action through HAMP does not apply because their breach of contract claim is
not “wholly dependent on” HAMP. The plaintiffs allege that their claim under the TDCA should
not be dismissed because Bank of America is, in fact, a “debt collector” and it harassed and
subjected the plaintiffs to emotional distress while attempting to collect debt. Regarding their
negligence claim, the plaintiffs argue that, pursuant to the terms of the Note and Deed, Bank of
America failed to fulfill its duty to, inter alia, provide notice of transfer, assignment or sale of
the Note, to properly manage the loan and escrow account and to comply with the notice
provisions in the Deed.
IV.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) authorizes a defendant to move to dismiss for
“failure to state a claim upon which relief may be granted.” FED. R. CIV. P. 12(b)(6). Under the
demanding strictures of a Rule 12(b)(6) motion, “[t]he plaintiff's complaint is to be construed in
a light most favorable to the plaintiff, and the allegations contained therein are to be taken as
true.” Oppenheimer v. Prudential Sec., Inc., 94 F.3d 189, 194 (5th Cir. 1996) (citing Mitchell v.
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McBryde, 944 F.2d 229, 230 (5th Cir. 1991)). Dismissal is appropriate only if, the “[f]actual
allegations [are not] enough to raise a right to relief above the speculative level, on the
assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 1965, 167 L. Ed.2d 929 (2007).
Moreover, in light of Federal Rule of Civil Procedure 8(a)(2), “[s]pecific facts are not necessary;
the [factual allegations] need only ‘give the defendant fair notice of what the . . . claim is and the
grounds upon which it rests.” Erickson v. Pardus, 551 U.S. 89, 93, 127 S. Ct. 2197, 2200, 167
L. Ed.2d 1081 (2007) (per curiam) (quoting Twombly, 550 U.S. at 555, 127 S. Ct. at 1964).
Even so, “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires
more than labels and conclusions, and a formulaic recitation of the elements of a cause of action
will not do.” Twombly, 550 U.S. at 555, 127 S. Ct. at 1964 - 65 (citing Papasan v. Allain, 478
U.S. 265, 286, 106 S. Ct. 2932, 92 L.Ed.2d 209 (1986)).
Therefore, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v.
Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L. Ed.2d 868 (2009) (quoting Twombly,
550 U.S. at 570, 127 S. Ct. at 1974). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Ashcroft, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556, 127 S.
Ct. at 1955). “But where the well-pleaded facts do not permit the court to infer more than the
mere possibility of misconduct, the complaint has alleged-but it has not ‘show [n]’-‘that the
pleader is entitled to relief.’” Ashcroft, 556 U.S. at 679 (quoting FED. R. CIV. P. 8(a)(2)).
Moreover, when considering a 12(b)(6) motion to dismiss, the Court’s review is limited
to the allegations in the complaint and to those documents attached to a defendant’s motion to
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dismiss to the extent that those documents are referred to in the complaint and are central to the
claims. See Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004).
V.
ANALYSIS AND DISCUSSION
The Court grants Bank of America’s motion to dismiss because the plaintiffs have failed
to state a claim upon which relief can be granted.
A.
Breach of Contract
Under Texas law, to prove a breach of contract claim, a plaintiff must establish: (1) the
existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3)
breach of the contract by the defendant; and (4) damages sustained by the plaintiff as a result of
the breach. See Mullins v. TestAmerica, Inc., 564 F.3d 386, 418 (5th Cir. 2009) (citing Aguiar v.
Segal, 167 S.W.3d 443, 450 (Tex.App.-Houston [14th Dist.] 2005, pet. denied)).
The plaintiffs allege that they met all of their contractual obligations to secure a loan
modification under the Home Affordable Mortgage Program (“HAMP”) but Bank of America
has “failed to review and process all applications in a fair and objective fashion per its agreement
under” HAMP. The law is clear, however, that HAMP does not confer a private cause of action
upon mortgagors like the plaintiffs. See Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 559 n.4
(7th Cir. 2012) (noting that “[c]ourts have uniformly rejected these claims because HAMP does
not create a private federal right of action for borrowers against servicers”); Miller v. Chase
Home Fin., Inc., 677 F.3d 1113, 1116 (11th Cir. 2012) (no private cause of action under HAMP);
see also Easley v. Federal Nat. Mortg. Ass’n, No. 4:10-cv-03734, 2011 WL 6002644, at *5
(S.D.Tex. Nov. 30, 2011) (collected cases). Since there is no private cause of action pursuant to
HAMP, the Court concludes that the plaintiffs’ breach of contract claim, which is premised upon
alleged violations of HAMP guidelines, must be dismissed. See Denley v. Vericrest Fin., Inc.,
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No H-12-992, 2012 WL 2368325, at *2 (S.D.Tex. June 21, 2012) (dismissing breach of contract
claim based on alleged violations of HAMP regulations); Burr v. JP Morgan Chase Bank, N.A.,
No. 4:11-cv-03519, 2012 WL 1059043, at *4-5 (S.D.Tex. March 28, 2012) (rejecting breach of
contract claim under HAMP); see also Nolasco v. CitiMortgage, Inc., No. H-12-1875, 2012 WL
3648414, at *3 (S.D.Tex. Aug. 23, 2012) (noting the plaintiff’s concession that she “cannot base
a breach of contract claim on a HAMP” violation).3
Similarly, the plaintiffs’ breach of contract claim based on Bank of America’s alleged
failure to comply with regulations of the Department of Housing and Urban Development
(“HUD”) must be dismissed because those regulations, too, do not provide for a private cause of
action. See Roberts v. Cameron-Brown Co., 556 F.2d 356, 360-362 (5th Cir. 1977) (no private
cause of action for alleged failure to comply with guidelines of HUD handbook); Denley, 2012
WL 2368325, at *2 (HUD regulations “do no create or provide a private cause of action for a
mortgagor” and, as such, the breach of contract claim was dismissed); see also Cavil v.
Trendmaker Homes, Inc., No. G-10-304, 2010 WL 5464238, at *5 (S.D.Tex. Dec. 29, 2010).
Baker v. Countrywide Home Loans, Inc., No. CV-0916-B, 2009 WL 1810336, at *5
(N.D.Tex. June 24, 2009), upon which the plaintiffs rely, is distinguishable. In Baker, the court
held that a violation of HUD regulations may create a private cause of action if the regulations
are “explicitly incorporated” into the agreement. Baker, 2009 WL 1810336, at *5. Here, the
plaintiffs assert that HUD regulations are incorporated into the Note and Deed, but, as Bank of
America notes, the plaintiffs have failed to cite to any language in those documents to support
3
In an attempt to bypass the overwhelming legal authority against them, the plaintiffs argue that because their breach
of contract claim is “independent of violation of a HAMP agreement,” the case law precluding private rights of
action through HAMP does not apply. The Court rejects that argument because a reasonable reading of the petition
establishes that the plaintiffs’ breach of contract claims are, in fact, based on (and dependent upon) alleged HAMP
(and HUD) violations.
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their claim.4 In fact, a review of the documents (provided by Bank of America) establishes that
HUD regulations are not incorporated into the contract. Therefore, even under the holding in
Baker, the breach of contract claim still fails.5
B.
Wrongful Foreclosure
The plaintiffs appear to argue that the “attempted” foreclosure of their house was
wrongful under §51.002 of the Texas Property Code because they raised issues regarding their
loan and payment history and Bank of America did not respond to their application for a loan
modification and payment history. Under the law, however, claims under §51.002 may arise
only after the completion of the foreclosure and the mortgagor must have lost possession of the
home. See Denley, 2012 WL 2368325, at *3 (no claim for “wrongful foreclosure” until after the
foreclosure has taken place); Kew v. Bank of America, N.A., No. H-11-2824, 2012 WL 1414978,
at *6 (S.D.Tex. April 23, 2012) (because §51.002 “outlines the procedures for conducting a
foreclosure sale, claims for violating its notice requirements are cognizable only after a
foreclosure”); Motten v. Chase Home Finance, 831 F.Supp.2d 988, 1007 (S.D.Tex. 2011)
(“courts in Texas do not recognize” an action for “attempted” wrongful foreclosure; individuals
cannot recover on a theory of wrongful foreclosure if they have not lost possession of their
home).
Here, Bank of America has noted that the foreclosure sale has not occurred, a
4
In their response, the plaintiffs mention that the Note and Deed of Trust state that the agreements are “governed by
federal law, explicitly.” The plaintiffs’ argument is not a model of clarity but, to the extent they may be arguing that
a reference to federal law in general automatically incorporates HUD regulations into the contract, the Court finds
such argument unpersuasive. “Federal law” is a general phrase and the contract cannot be read to incorporate
specific regulations from HUD or any other agencies unless they are explicitly mentioned in the agreement.
5
The plaintiffs assert that the following cases have approved breach of contract claims based on alleged violation of
HAMP and HUD guidelines: Smith v. Citimortgage, Inc., No. 4:10-CV693, 2012 WL 629058, at *2 (E.D.Tex. Feb.
27, 2012); Sanghera v. Wells Fargo Bank, N.A., No. 3:10-CV-2414-B, 2012 WL 555155, at *3-4 (N.D. Tex. Feb.
21, 2012); and Watson v. Citimortgage, Inc., 814 F.Supp. 2d 726, 731-733 (E.D.Tex. 2011). The Court disagrees
because the breach of contract claims in those cases were not specifically based on an alleged failure to comply with
either HAMP or HUD regulations.
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representation that the plaintiffs have not disputed.
Therefore, since there has been no
foreclosure and the plaintiffs are still in possession of their home, their claim must be dismissed.
C.
The Texas Debt Collection Practices Act
The plaintiffs claim a violation of the TDCA because they “were harassed and subjected
to emotional duress while [Bank of America] attempted to collect the debt. Specifically, [Bank
of America]” failed to timely respond to the plaintiffs’ attempt to cure and obtain a loan
modification. The plaintiffs’ claim seems to be based on TEX. FIN.CODE § 392.302, which
prohibits a collector from, inter alia, harassing, annoying, threatening, or abusing a person
during debt collection efforts. Preliminarily, the Court finds the plaintiffs’ conclusory statement
that they were harassed and subjected to emotional duress insufficient to raise a claim under the
statute. See Twombly, 550 U.S. at 555 (“a plaintiff’s obligation to provide the ‘grounds’ of his
‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of
the elements of a cause of action will not do”); see also Denley, 2012 WL 2368325, at *3. As far
as the allegation that Bank of America failed to respond to the plaintiffs’ attempt to cure and
obtain a loan modification, the Court concludes that it is not ground for relief under the TDCA.
See Denley, 2012 WL 2368325, at *3 (a claim for “harassment under § 392.302 does not include
a lender’s failure to respond to the borrower’s cure attempts or its failure to provide modification
alternatives”).
Further, the Court finds persuasive the holding that “failing to provide
information is itself not considered a collection effort.” Sanghera v. Wells Fargo Bank, N.A.,
No. 3:10-CV-2414-B, 2012 WL 555155, at *7 (N.D.Tex. Feb. 21, 2012) (albeit addressing a
common law claim for unreasonable collection efforts, the court concluded that the lender’s
alleged failure to provide information regarding right to cure or potential loan modification, did
not constitute a “collection” effort).
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D.
The Negligence Claims
To prove negligence, the plaintiffs must establish: (1) that the defendant owed them a
legal duty; (2) a breach of that duty; and (3) damages proximately caused by the breach. See
Western Investments, Inc., v. Urena, 162 S.W.3d 547, 550 (Tex. 2005). Texas, however, does
not generally recognize a fiduciary duty between a mortgagor and mortgagee. See Federal
Deposit Ins. Corp. v. Coleman, 795 S.W.2d 706, 708-709 (Tex. 1990); see also Motten, 831
F.Supp.2d at 1005-1006.
The plaintiffs claim that, based on the loan agreement which specifically incorporated
HUD regulations, Bank of America had a duty to provide them with “notice of any transfer,
assignment or sale of the note, to properly manage the loan . . . and to comply with the notice
provisions contained in the deed of trust.”
As fully discussed infra (discussion, Part A),
however, the Note and Deed do not incorporate HUD regulations. Therefore, the Court finds
that Bank of America had no duty to the plaintiffs. Accordingly, the negligence claim based on
alleged HUD violations is dismissed.
See Denley, 2012 WL 2368325, at *4 (dismissing
negligence claim based on alleged HUD violations); Motten, 831 F.Supp.2d at 1006 (rejecting
negligence claim because the plaintiffs failed, as “a matter of law,” to identify a legally
cognizable duty owed to them).
The plaintiffs’ negligence claim is further precluded by the “economic loss rule,” which
provides that “tort damages are generally not recoverable unless the plaintiff suffered an injury
that is independent and separate from the economic losses recoverable under a breach of contract
claim.” Esty v. Beal Bank S.S.B., 298 S.W.3d 280, 301 (Tex.App.-Dallas 2009, no pet.). In this
case, the Court finds that the negligent conduct alleged against Bank of America is necessarily
based upon the Note and Deed. In other words, any harm that the plaintiffs allegedly suffered
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would be based on Bank of America’s purported failure to act pursuant to the terms of a
“contract,” i.e., the Note and Deed. Therefore, the plaintiffs’ negligence claim is barred.
See
Owens v. Bank of America, NA, No. H-11-2552, 2012 WL 912721, at *4 (S.D.Tex. March 16,
2012) (dismissing negligence claim because “the sole potential basis for the defendant’s liability
is contractual in nature by the terms of the Note and Deed of Trust”); see also Denley, 2012 WL
2368325, at *4.
The plaintiffs’ second negligence claim is based on the Real Estate Settlement Procedures
Act (“RESPA”). The plaintiffs seem to claim that, in violation of RESPA, they were not notified
of the transfer of their loan to Bank of America. They also claim that the purported “negligence
compromises [Bank of America’s] legal authority to foreclos[e]” and seek to cancel Bank of
America’s right to foreclose as a result. The Court finds the plaintiffs’ arguments unpersuasive.
Section 2605(c)(1) provides that, “[e]ach 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.” The plaintiffs must allege actual damages resulting from the
alleged RESPA violation. See Denley, 2012 WL 2368325, at *4; Akintunji v. Chase Home
Finance, L.L.C., No. H-11-389, 2011 WL 2470709, at *2 (S.D.Tex. June 20, 2011).
Furthermore, a court may award statutory damages for a violation of RESPA “in the case of a
pattern or practice of noncompliance.” 12 U.S.C. § 2605(f); see also Denley, 2012 WL 2368325,
at *4.
The Court agrees that the plaintiffs’ claim should be dismissed because they do not allege
actual damages or a pattern of noncompliance by Bank of America. See Denley, 2012 WL
2368325, at *4; Akintunji, 2011 WL 2470709, at *2; see also Collier v. Wells Fargo Home
Mortg., No. 7:04-CV-086-K, 2006 WL 1464170, at *3 (N.D.Tex. May 26, 2006) (the claims
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pursuant to RESPA were rejected because there was no evidence that the plaintiffs had “suffered
from actual damages flowing from any inadequate response or failure to respond” by the bank).
The Court is not persuaded by the plaintiffs’ claim that the purported “negligence compromises
[Bank of America’s] legal authority to foreclos[e]” and, therefore, Bank of America’s right to
foreclose should be cancelled. See Denley, 2012 WL 2368325, at *4 (finding no statutory or
case law to support an identical claim). The Court also notes that, according to the petition and
the affidavit of R. Everett Bassie, one of the plaintiffs, Bank of America and the plaintiffs have
had various dealings with each other since 2009 and the plaintiffs have known since that year
that Bank of America was the transferee servicer of the loan. Therefore, the portion of the
plaintiffs’ negligence claim that is based on purported violations of RESPA is also dismissed.
VI.
CONCLUSION
Based on the foregoing discussion, the Court grants Bank of America’s motion to dismiss
and, because, under the facts of this case, any amendment would be futile, the dismissal is with
prejudice and without leave to amend.
It is so ORDERED.
SIGNED on this 13th day of December, 2012.
___________________________________
Kenneth M. Hoyt
United States District Judge
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