Munoz v. HSBC Bank USA, N.A.
Filing
16
OPINION AND ORDER granting 3 HSBC Motion to Dismiss for Failure to State a Claim and mooting 3 HSBC's alternative moiton for more definite statement.. Plaintiff is granted leave, if she is able, to file an amended complaint within 20 days or will result in dismissal of this action. (Signed by Judge Melinda Harmon) Parties notified.(htippen, )
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
LINDA VEDA MUNOZ,
§
§
Plaintiff,
§
§
VS.
§
§
HSBC BANK USA, N.A., as Trustee §
on behalf of ACE Securities
§
Corp. Home Equity Loan Trust and§
for the Registered holders of
§
ACE Securities Corp. Home Equity§
Loan Trust Series 2007-WM2,
§
Asset Backed Pass-Through
§
Certificates,
§
§
Defendant.
§
CIVIL ACTION H-12-0894
OPINION AND ORDER
Pending before the Court in the above referenced cause to set
aside the alleged wrongful foreclosure on Plaintiff Linda Veda
Munoz’s home and property at 6943 Fox Mesa Lane, Humble, Texas
77338 (“the property”), claiming violation of the Texas Business &
Commerce Code § 3.301, and seeking a declaratory judgment, is a
motion to dismiss under Federal Rule of Civil Procedure 12(b)(6)
or, alternatively, motion for more definite statement under Rule
12(e)(instrument #3) filed by Defendant HSBC Bank USA, N.A., as
Trustee on behalf of ACE Securities Corp. Home Equity Loan Trust
and for the Registered Holders of ACE Securities Corp. Home Loan
Trust Series 2007-WM2, Asset Backed Pass-Through Certificates
(“HSBC”).
This
case
was
removed
from
-1-
state
court
on
diversity
jurisdiction grounds.
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
-2-
notice pleading requirement of Conley v. Gibson, 355 U.S. 41 . . .
(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), citing
Twombly, 127 S. Ct. at 1974.
“‘A claim has facial plausibility
when the pleaded factual content allows the court to draw the
reasonable
inference
misconduct alleged.’”
that
the
defendant
is
liable
for
the
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.
“[T]hreadbare
recitals of the elements of a cause of action, supported by mere
conclusory statements do not suffice” under Rule 12(b). Iqbal, 129
S. Ct. at 1949.
The plaintiff must plead specific facts, not
merely conclusory allegations, to avoid dismissal.
Collins v.
Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000).
As noted, on a Rule 12(b)(6) review, although generally the
-3-
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
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).
“A
judicially noticed fact must be one not subject to reasonable
dispute in that it is either (1) generally known within the
territorial jurisdiction of the trial court or (2) capable of
accurate
and
ready
determination
by
resort
accuracy cannot reasonably be questioned.”
to
sources
whose
Fed. R. Evid. 201(b).
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
-4-
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). “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).
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
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.
-5-
[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).
Under Rule 12(e),
A party may move for a more definite statement of a
pleading to which a responsive pleading is allowed but
which is so vague or ambiguous that the party cannot
reasonably prepare a response. The motion must be made
before filing a responsive pleading and must point out
the defects complained of and the details desired. If
the court orders a more definite statement and the order
is not obeyed within 14 days after notice of the order or
within the time the court sets, the court may strike the
pleading or issue any other appropriate order.
Motions
for
more
definite
statement
are
“used
to
remedy
an
unintelligible pleading; they are not used to clarify a pleading
that lacks detail, and they are not intended to serve as a
substitute for discovery.”
Allstate Ins. Co. v. Donovan, Civ. A.
No. H-12-0432, 2012 WL 2577536, *19 (S.D. Tex. July 3, 2012, citing
Mitchell v. E-Z Way Towers, Inc., 269 F.2d 126, 132 (5th Cir. 1959).
The court has considerable discretion in deciding whether to grant
such a motion.
Ditcharo v. United Parcel Service, Inc., 376 Fed.
Appx. 432, 440 n.9 (5th Cir. 2010), citing Old Time Enterprises,
Inc. v. International Coffee Corp., 862 F.2d 1213, 1217 (5th Cir.
1989).
Motions
for
more
definite
statement
are
generally
disfavored. Russell v. Grace Presbyterian Village, No. 05-CV-0030P, 2005 WL 1489579, *3 (N.D. Tex. June 22, 2005), citing 5A Charles
-6-
Alan Wright & Arthur Miller, Federal Practice and Procedure § 1377
(2d ed. 1990).
For the reasons stated below, the Court finds that
Rule 12(e) relief is not appropriate because the problems are not
that the pleadings are unintelligible, but that in large part as a
matter of law they fail to state a cognizable cause of action for
wrongful foreclosure.
Relevant Law
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.”
(N.D. Tex. 2001).
In re Keener, 268 B.R. 912, 921
“Under Texas law a grossly inadequate price
would have to be ‘consideration so far short of the real value of
the property as to shock a correct mind, and thereby raise a
presumption that fraud attended the purchase.’”
Richardson v.
Wells Fargo Bank, N.A., No. 4:11-CV-359-A, 2012 WL 2511169, *9
(N.D. Tex. June 29, 2012), citing FDIC v. Blanton, 918 F.2d 524,
531 (5th Cir. 1990), quoting Richardson v. Kent, 47 S.W. 2d 420, 425
-7-
(Tex.
Civ.
App.--Dallas
1932,
no
writ)(“The
weight
of
Texas
authority rejects a determination of gross inadequacy where . . .
property sells for over 60% of fair market value.”).
Allegations of Plaintiff’s Original Petition (#1-4, Ex. A-2)
With the aid of two loans from WMC Mortgage Corp. and secured
through two vendors’ liens, one for $81,600.00 and the other for
$20,400.00,1 Plaintiff purchased the property on November 14, 2006.
It is her homestead and primary residence. She asserts that “[s]he
does not have family or friends in the State of Texas and has
nowhere to go if she loses her homestead.”
Orig. Pet. at ¶7.
Plaintiff further claims that each of the documents states
that the Mortgage Electronic Registration Systems, Inc. (“MERS”),
defined as “a separate corporation that is acting solely as nominee
for Lender and Lender’s successors and assigns,” is the beneficiary
under this Security Instrument.”
She asserts that on February 26,
2008 MERS assigned the Note and Deed of Trust associated with this
loan out of the MERS system to HSBC, with the transfer document
1
Although Plaintiff claims copies of relevant documents are
attached to her Original Petition as Exhibits A-E, they were not
included under the e-filed Notice of Removal (#1). Accordingly the
Court requested that Plaintiff’s counsel file them, and they have
done so as instrument #14, entered on 10/22/12.
Exhibits A and B are Deeds of Trust on the two liens financing
the property, which reflect that the Lender is WMC Mortgage Corp.
They both indicate that MERS is the beneficiary of both security
instruments, solely as nominee for Lender and Lender’s successors
and assigns and the successors and assigns of MERS. Moreover, they
give MERS, as nominee for Lender and Lender’s successors and
assigns, inter alia the rights to foreclose and sell the property.
-8-
reportedly signed by Scott Anderson (“Anderson”), Vice President of
MERS.
Plaintiff questions whether Anderson, himself, signed the
transfer document (#14, Ex. G) and whether it is valid.
There are
no other documents giving any ownership of the property nor
promissory notes recorded in the Harris County Property Records.
She states that she never entered into a contractual relationship
with HSBC.
Nor did she receive any notices of default as required
by Texas Property Code § 51.002.
On
October
28,
2011
HSBC
foreclosure sale for $100,469.17.2
purchased
the
property
at
a
On or about October 28, 2011
HSBC filed an eviction suit against Plaintiff; the trial was set
for February 6, 2012.
2012,
seeking
injunction.
a
Plaintiff filed this suit on February 3,
temporary
restraining
order
and
temporary
The parties then agreed to the entry of a temporary
restraining order, which was signed by a judge.
The case was
removed to federal court on March 23, 2012.
Plaintiff
identifies
three
causes
of
action:
wrongful
foreclosure, violations of the Texas Business & Commerce Code §
3.301,3 and a declaratory judgment that the assignment of her home
2
#14, Ex. E.
3
Section 3.301 provides,
“Person to enforce” an instrument means (i) the holder of
the instrument, (ii) a nonholder in possession of the
instrument who has the rights of a holder, or (iii) a
person not in possession of the instrument who is
entitled to enforce the instrument pursuant to Section
-9-
equity loan to HSBC is invalid, along with an order that HSBC
“execute all documents necessary to clear title to the property.”
Maintaining that possession or control over a Deed of Trust is
irrelevant without a right to enforce the note, Plaintiff argues
that because the mortgage through the transfer of lien document
that
Anderson
purportedly
signed,
but
which
signature
she
questions, was transferred without the note, HSBC lacks the right
to foreclose on the property.
She argues that when the note is
split from the deed of trust, the note becomes unsecured.
Teas v.
Republic Nat’l Bank, 460 S.W. 2d 233, 243 (Tex. Civ. App.--Dallas
1970,
writ
ref’d
n.r.e.)4;
Restatement
(Third)
of
Property
3.309 or 3.418(d). A person may be a person entitled to
enforce the instrument even though the person is not the
owner of the instrument or in wrongful possession of the
instrument.
4
This
Court
agrees
with
interpretation of Teas, i.e., that
the
DeFranceschi
court’s
[a] mortgage created by a deed of trust is an interest
created by a written instrument providing security for
payment. The security is established by a note. See
Teas[, 460 S.W.2d at 243]. Because the deed of trust or
mortgage has no legal effect aside from the debt or
obligation, any transfer of the deed of trust without the
note automatically passes the debt. Indeed, the note
provides that its protections to the lender are enforced
through the deed of trust. . .
DeFranceschi v. Wells Fargo Bank, N.A., 837 F. Supp. 2d 616 , 622
(N.D. Tex. 2011).
The court in DeFranceschi summarized, “[A]
transfer of an obligation secured by a note also transfers the note
because the deed of trust and note are read together to evaluate
their provisions.” Id. at 623. In accord Willeford v. Wells Fargo
Bank, N.A., Civ. A. No. 3:12-CV-0448-B, 2012 WL 2864499, *3 (N.D.
Tex. July 12, 2012); McDonald v. Deutsche Bank Nat. Trust Co., Civ.
-10-
(Mortgages) § 5.4 cmt. a (1997).5
Plaintiff further maintains that
a person holding only a deed of trust suffers no default because
only the holder of the note is entitled to payment on it.
See
Restatement (Third) of Property (Mortgages) § 5.4 cmt. e (1997).
Mere possession of a deed of trust, without a concurrent right to
enforce the note, does not create any authority to foreclose.
Plaintiff questions whether Anderson signed the transfer of
lien (#14, Ex. C) and therefore HSBC lacks standing to foreclose.
Furthermore, because the note that was originated with the deed of
trust is a negotiable instrument as defined by § 3.201 of the Texas
Business & Commerce Code, it must be negotiated to enforce it.6
A. No. 3:11-CV-2691-B, 2012 WL 2122168, *3 (N.D. Tex. June 11,
2012); Malikyar v. BAC Home Loans Servicing, LP, No. 4:11-CV-417,
2011 WL 5837262, *5 (E.D. Tex. Oct. 28, 2011).
5
Comment e to Section 5.4 of the Restatement (3d) of Property
does not support Plaintiff’s arguments.
As will be discussed,
because MERS is a beneficiary and nominee for the originating
lender, here WMC Mortgage Corp., and its successors and assigns by
the express language in the deed of trust, under comment e the
circumstances here fall within the exception to the general rule
that a party holding only the deed of trust cannot enforce a
mortgage. Section 5.4 also provides that a “transfer
of an
obligation secured by a mortgage also transfers the mortgage unless
the parties to the transfer agree otherwise”).
See, e.g., Van
Hauen v. Wells Fargo Bank, N.A., No. 4:12-CV-344, 2012 WL 416218.
*5 (E.D. Tex. Aug. 24, 2012), report and recommendation adopted,
2012 WL 4322518 (E.D. Tex. Sept. 20, 2012); Eskridge v. Fed. Home
Loan Mortg. Corp., 2011 WL 2163989, *5 (W.D. Tex. Feb. 24,
2011)(same); Odum v. Mortgage Electronic Registration Systems,
Inc., No.4:12-cv-959, 2012 WL 2376071, *2-3 (S.D. Tex. June 22,
2012).
6
“‘Negotiation’ is the ‘transfer of possession of the
instrument . . . by a person other than the issuer to a person who
thereby becomes a holder.’ Tex. Bus. & Com. Code § 3.201. If the
-11-
She points out that the note in this dispute has not been recorded
in the Real Property Records of Harris County.
Other than the
transfer-of-lien document supposedly signed by Anderson, there are
no other documents giving ownership of the property or promissory
notes recorded in the Harris County Property Records.
remains unclear if the note was negotiated.
Thus it
To enforce the note,
HBCS must have possession of the note unless, under § 3.301 (1) the
instrument has been lost, stolen or destroyed (and the enforcing
party was entitled to enforce it at the time the document was lost,
stolen or destroyed) or (2) the instrument was paid or accepted by
mistake. Plaintiff believes the note was not properly negotiated
and that Defendant lacks standing to foreclose.
HSBC’s Motion to Dismiss or for More Definite Statement (#3)
Insisting Plaintiff fails to state a plausible cause of action
for
wrongful
foreclosure
in
this
suit,
HSBC
emphasizes
that
Plaintiff fails to plead any facts that would support a finding of
either a defect in the foreclosure sale or a grossly inadequate
sales price.
Instead she pleads typical, and here meritless,
defenses to such a cause of action, e.g., that the deed of trust is
unenforceable because it has been bifurcated from the note, that
HSBC does not hold the note, and that she never received notice of
default in accordance with the Texas Property Code.
instrument is payable to an identified person, negotiation requires
both transfer of possession and written indorsement of the holder.
Id. at § 3.201(b).” 2012 WL 3206237, at *2.
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HSBC argues that Plaintiff’s claim under § 3.301 of the Tex.
Bus. & Comm. Code is actually for what would be an erroneous
declaration
that
HSBC
is
not
a
Plaintiff’s note and deed of trust.
person
entitled
to
enforce
HSBC asserts that she is not
entitled to such a declaration first because she lacks standing to
contest the assignment of her note and deed of trust because she is
not a party to the assignment.
Moreover, Plaintiff fails to plead
facts to support her theory that HSBC does not hold her note.
All
her allegations are conclusory, devoid of supporting facts.
Plaintiff challenges the validity of the assignment of the
deed of trust on the speculative grounds that “she does not believe
Scott Anderson signed the . . . transfer of lien and believes the
document to be invalid.”
#1-4, Ex. A-2 at ¶ 11.
Her allegations
that the signature on the assignment “differs greatly” from that on
other copies of assignments signed by Anderson for unrelated
properties (#14, Exs. F-J) and that the assignment is invalid, are
also speculative and subjective and should be dismissed under Rule
12(b)(6).
Fernandez-Montez v. Allied Pilots Assoc., 987 F.2d 278,
284 (5th Cir. 1993)(“conclusory allegations or legal conclusions
masquerading as factual conclusions will not suffice to prevent a
motion to dismiss”).
HSBC argues that because Plaintiff is not a party to the
assignment of her note and deed of trust, she is not entitled to
such a declaration because she lacks standing to contest the
-13-
assignment. To establish standing, a plaintiff must assert her own
legal rights and interest and cannot rely on the legal right and
interest of a third party.
(1975).
An
assignment
is
Warth v. Seldin, 422 U.S. 490, 499
a
contract
between
assignor
and
subsequent assignees. D Design Holdings, LP v. MMO Corp., 339 S.W.
3d 195, 200-01 (Tex. App.--Dallas 2011).
In Texas, mortgage
borrowers have no standing to contest an assignment from lender to
lender because the borrower is not a party to those agreements.
See, e.g., McAllister v. BAC Home Lonas Servicing, LP, No. 4:10-CV504, 2011 WL 2200672, *5 (E.D. Tex. Apr. 28, 2012), report and
recommendation adopted, 2011 WL 2183844 (E.D. Tex. June 6, 2011);
Allen v. Chase Home Fin., LLC, No. 3:10-cv-1058, 2011 WL 2683192,
*4 (E.D. Tex. July 26, 2011), report and recommendation adopted,
2011 WL 2690576 (E.D. Tex. July 11, 2011); Bittinger v. Wells Fargo
Bank, N.A., 744 F. Supp. 2d 619, 625-26 (S.D. Tex. 2010).
Thus the
Court should dismiss Plaintiff’s challenge of the assignment of her
note and deed of trust to HSBC.
Furthermore, the deed of trust here expressly provides for
assignment of her mortgage:
“The beneficiary of this security
Instrument is MERS (solely as nominee for Lender and Lender’s
successors and assigns) and the successors and assigns of MERS.”
By signing the deed of trust, Plaintiff agreed with its terms.
Therefore whether she entered into a contractual relationship
directly with HSBC relating to her property is irrelevant.
-14-
HSBC,
as an assignee of WMC Mortgage Corp., the originator of Plaintiff’s
mortgage loan, is entitled to enforce the terms of the deed of
trust.
In addition, asserts HSBC, contrary to Plaintiff’s conclusory
allegations and Texas law, the note and deed of trust are not
split.
Texas does not recognize a cause of action for bifurcating
a note from a deed of trust; instead bifurcation is usually an
unsuccessful defense to foreclosure.
Even if the Court considers
such allegations, they are only conclusions, not facts, and are not
supported by Texas law.
“[A] transfer of an obligation secured by
a note also transfers the note because the deed of trust and note
are read together to evaluate their provisions.”
DeFranceschi v.
Wells Fargo Bank, N.A., 837 F. Supp. 2d 616, 623 (N.D. Tex. Aug.
31, 2011), citing Eskridge v. Fed. Home Loan Mortg. Corp.. 2011 WL
2163989, *5 (W.D. Tex. Feb. 24, 2011); Allen v. Chase, 2011 WL
2683192, at *4; McAllister, 2011 WL 2200672, at *5-6. “Because the
deed of trust or mortgage has no legal effect apart from the debt
or obligation, any transfer of the deed of trust without the note
automatically passes the debt.”
DeFranceschi, 837 F. Supp. 2d at
622, citing Teas v. Republic Nat’l Bank, 460 S.W. 2d 233, 243 (Tex.
Civ. App;-Dallas 1970, writ ref’d n.r.e.).
Plaintiff’s speculation that HSBC is not the holder of her
note or that the assignments lack valid signatures is conclusory
and devoid of factual allegations to support her belief. Moreover,
-15-
although she complains that HSBC does not hold her note and that it
was not transferred even though it had to be in order to be
enforceable, there is no requirement under Texas law that HSBC must
present a copy of the note before it can foreclose, nor that the
note be recorded in the real property records prior to foreclosure
to establish ownership and/or possession of the note, nor that the
assignment of Plaintiff’s deed of trust be recorded in the real
property records prior to foreclosure.
Bittinger, 744 F. Supp. 2d
at 625 (“no legal ground for a wrongful foreclosure based on the
failure to record the deed of trust in the county real property
records”); Bennett v. JPMorgan Chase, Civ. A. No. 3:12-CV-212-N,
2012 WL 2864751, *4 (N.D. Tex. June 12, 2012).
Thus documents
recorded or not recorded in the Harris County real property records
are not evidence of HSBC’s authority or lack of authority to
foreclose on Plaintiff’s property.
Moreover
foreclosure.
loan
Plaintiff
to
state
a
claim
for
wrongful
The challenges to HSBC’s authority to enforce the
documents
conclusory.
fails
as
an
assignee
of
the
loan
originator
are
Plaintiff does not allege that HSBC did not send her
the proper foreclosure notices under § 51.002 under the Texas
Property Code, but only that she never received any notices. Under
§ 51.002(e), service of notice is effective upon placing the notice
in an envelope in the United States mail with postage prepaid; it
does not require that Plaintiff receive the notice.
-16-
The Court
agrees.
Adepo v. Litton Loan Servicing, L.P., No. 01-07-00708-CV,
2008 WL 2209703, *4 (Tex. App.--Houston [1st Dist.] May 29, 3008,
no pet.); Hill v. Fremont Inv. & Loan, No. 05-02-01438-CV, 2004 WL
1178607, *3 (Tex. App.--Dallas May 28, 2004).
Plaintiff also fails to allege facts showing key elements of
a wrongful foreclosure claim, i.e., that the subject property was
sold for a grossly inadequate sale price or that this price was
causally
related
proceedings.
to
an
alleged
defect
in
the
foreclosure
Again the Court concurs.
Alternatively, Defendant moves for a more definite statement
under Federal Rule of Civil Procedure 12(e).
Plaintiff’s Response (#8)
Plaintiff maintains that her pleadings are not conclusory, but
satisfy Rule 12(b)(6).
The Court agrees with HSBC that they do
not.
In particular Plaintiff focuses on the February 26, 2008
assignment of her property purportedly signed by Anderson (Ex. C to
#14) and copies of various transfer liens with varying signatures
of Anderson (exhibits F-J) and, without providing any facts or
specific reasons, suggests his signatures on Exhibit C and Exhibits
F-J are fraudulent and that the signatories lacked authority to
sign the assignment of mortgage; she concludes that therefore HSBC
does not hold the mortgage.
Plaintiff insists that the central issue here is whether HSBC
-17-
has the power to close on Plaintiff’s property.
She maintains it
is a fact issue and that it should be addressed after discovery on
summary judgment or at trial.
Furthermore she claims that HSBC was never a holder of the
Note or the Deed of Trust and therefore lacks authority to enforce
the Deed of Trust through a non-judicial foreclosure. She executed
a note payable to WMC Mortage Corp on November 13, 2006 and a Deed
of Trust that does not name HSBC as beneficiary, but MERS, solely
as WMC Corp.’s nominee.
The Note makes no reference to MERS.
Plaintiff contends that HSBC must show that the Note, in addition
to the Deed of Trust, was transferred to HSBC via assignment.
Plaintiff maintains that Defendant must prove a chain of custody of
the Note to show it can enforce or foreclose upon the Note because
HSBC bears the burden of proving it is the holder or owner of the
Note.
Plaintiff
claims
that
without
the
benefit
of
formal
discovery it is impossible to prove a negative and that she has
alleged sufficient facts showing that Defendant was never the
holder, transferee or owner of the Note.
Finally Plaintiff observes that while HSBC addressed her claim
for wrongful foreclosure, it failed to address her claim for
violations under the Texas Business & Commerce Code.
Defendant’s Reply (#9)
Defendant replies that although she asserts three causes of
action, Plaintiff alleges only a single cause of action here,
-18-
wrongful foreclosure, and that she does not allege a single fact
supporting it or her request for a declaration that HSBC is not a
person entitled to enforce a negotiable instrument under § 3.301 of
the Texas Business & Commerce Code.
She merely reiterates her
speculative and conclusory allegations.
She fails to allege facts
showing that the Note was improperly assigned or endorsed; instead
she states that she “believes that the original note was not
properly negotiated.”
She fails to specify the basis for her
belief or what the alleged “fraudulent activities” of Anderson are,
but speculates and subjectively interprets the signature on the
assignment of her deed of trust and on deeds of trusts of other
properties to which Plaintiff has no right or in which she has no
interests.
Moreover, as HSBC showed earlier, it is settled law in Texas
that “a mortgagor does not have standing to challenge various
assignments of the note or pooling and servicing agreements because
the mortgagor is not a party to the assignment or agreements.”
Edwards v. Ocwen Loan Servicing, LLC, No. 9:10-cv-89, 2012 WL
844396, at *5 (E.D. Tex. Mar. 12, 2012).
She fails to allege that
there was a defect in the foreclosure sale and that it resulted in
a grossly inadequate sales price.
Thus her only cause of action
fails.
Plaintiff’s Supplemental Brief (#12)
Insisting she has stated a viable claim, Plaintiff relies on
-19-
a recent opinion, Miller v. Homecomings Fin., LLC,
F. Supp. 2d
, Civ. A. No. 4:11-cv-04416, 2012 WL 3206237 (S.D. Tex. Aug. 8,
2012), in which United States Magistrate Judge Stephen William
Smith recognized as a viable cause of action under Texas law the
right of homeowners to challenge a party’s right to foreclose on
their property.
Id. at *5 and 6 (“Texas courts routinely allow a
homeowner to challenge a chain of assignments by which a party
claims the right to foreclose.”).
The Court summarizes the holding in Miller.
Under the Texas
Property Code, only two parties have standing to commence a nonjudicial forfeiture sale:
acting
on
behalf
of
“the mortgagee or the mortgage servicer
the
current
mortgagee.”7
7
Id.
“Mortgage servicer” is defined, in Tex. Prop. Code §
51.0001(3)) as “‘the last person to whom the mortgagor has been
instructed by the current mortgagee to send payment for the debt
secured by the security instrument.’” Section 51.001(4) of the
Tex. Prop. Code defines “mortgagee” as “(A) the grantee,
beneficiary, owner, or holder of a security instrument; (b) a book
entry system; or (C) if the security interest has been assigned of
record, the last person to whom the security interest has been
assigned of record.” 2012 WL 3206237, *6 n.4. 2012 WL 3206237, *6
n.5.
The Court notes that, relevant to the situation before this
Court, in Kazmi v. BAC Home Loans Servicing, L.P., No. 4:11-CV-375,
2012 WL 629440, *6 (E.D. Tex. Feb. 3, 2012), citing In re:
Mortgage Electronic Registration Systems (MERS) Litig., 659 F.
Supp. 2d 1368 (U.S. Jud. Pan. Mult. Lit. 2009), the district court
explained that the Mortgage Electronic Registration Systems, Inc.
(“MERS”) is
an
electronic
mortgage
registration
system
and
clearinghouse that tracks beneficial ownerships in, and
servicing rights to, mortgage loans.
The system is
designed to track transfers and avoid recording and other
transfer fees that are otherwise associated with the
-20-
sale.
MERS is defined in Texas Property Code §
51.0001(1) as a “book entry system,” which means a
“national book system for registering a beneficial
interest in security instrument and its successors and
assigns.”
Furthermore, as is analogous to
the circumstances of the case
here, “‘[u]nder Texas law, where a deed of trust . . . expressly
provides for MERS to have the power of sale, then MERS has the
power of sale.’” Id., quoting Athey v. MERS, 314 S.W. 3d 161, 16566 (Tex. App.--Eastland 2010). The Kazmi court observed about the
case before it, in which the deed of trust authorized MERS to act
as the beneficiary, as the nominee of the lender and its
successors, and gave MERS “the right to foreclose and sell the
Property; and to take any action required of Lender,”
Under the Texas Property Code, a mortgagee may authorize
a mortgage servicer to service a mortgage and conduct a
foreclosure sale. See Tex. Prop. Code Ann. § 51.0025.
MERS is a mortgagee under the Texas Property Code. See
Tex. Prop. Code Ann. §51.001(4). Since the Deed of Trust
identifies MERS as the beneficiary and the nominee for
the original lender and its successors and assigns, this
makes MERS a mortgagee under the Texas Property Code. As
a mortgagee, MERS could authorize BAC to service the loan
and foreclose, regardless of whether MERS was the true
owner of the Note.
Id. at *5-6.
In accord, Allen v. Chase Home Finance, LLC, No.
4:11-CV-223, 2011 WL 2683292, *3-4 (E.D. Tex. June 10, 2011);
Richardson v. CitiMortgage, Inc, 2010 WL 4818556, *5 (E.D. Tex.
Nov. 22, 2010); Santarose v. Aurora Bank FSB, Civ. A. No. H-10-720,
2010 WL 2232819, *5 (S.D. Tex. June 2, 2010); Wigginton v. Bank of
New York Mellon, Civ. A. No. 3:10-CV-2128-G, 2011 WL 2669071, *3
Fed. Appx.
, No. 12-10136,
(N.D. Tex. July 7, 2011), aff’d,
2012 WL 4053793 (5th Cir. Sept. 14, 2012); Bierwirth v. BAC Home
Loans Servicing, L.P., No. 03-22-00644-CV, 2012 WL 3793190, *4-5
(Tex. App.--Austin Aug. 20, 2012). While § 51.0025 of the Texas
Property Code Ann. sets out certain conditions to be met for a
mortgage servicer like MERS to administer the foreclosure of
property on behalf of a mortgagee, it does not “require the
mortgage servicer to be the holder of the Note and Deed of Trust or
to produce the original loan documents.”
Sawyer v. Mortgage
Electronic Registration Systems, Inc., 2010 WL 996768, *3 (N.D.
Tex. Feb. 1, 2010), cited by Kazmi for that proposition, 2012 WL
629440, at *6.
The Kazmi court concluded, “As MERS is a
-21-
at *2. Judge Smith opined that when the party seeking to foreclose
is not the original mortgagee, it must be able to trace its rights
under the security instrument back to the original mortgagee by
either showing that it is the holder of the note secured by the
deed of trust by (1) possession of the note (either because it was
issued to that person or by “negotiation,” or (2) by proving
“‘successive transfers of possession and indorsement’ establishing
an ‘unbroken chain of the title.’“
Id.
It may prove either by
testimony or documentation that it is the owner of the note under
common law principles of assignment through a unbroken chain of
assignments.
Id. at *3.
As in the instant suit, the defendants in Miller argued that
plaintiffs did not have standing to challenge the assignment of
their mortgage.
from
federal
Judge Smith opined that the nine recent decisions
courts
cited
by
defendants
that
agreed
with
defendants’ proposition (six from the same magistrate judge) failed
to cite as authority any Texas case law or statute, and all but one
relied on a single federal case, Eskridge, 2011 WL 2163989, which
did not cite any authority at all.
He concluded, 2012 WL 3206237
beneficiary and nominee for both the originating lender and its
successors and assigns by the express language in the Deed of
Trust, the situation falls within an exception to the general rule
that a party holding only the deed of trust cannot enforce the
mortgage. Id., citing Eskridge v. Fed. Home Loan Mortg. Corp.,
No. 6:10-CV-00285-WSS, 2011 WL 2163989, *5 (W.D. Tex. Feb. 24,
2011), and Comment E to the Restatement (3d) of Property
(Mortgages) § 5.4. In accord Puente v. CitiMortgage, Inc., Civ. A.
No. 3:11-CV-2509-N, 2012 WL 4335997, *4 (N.D. Tex. Aug. 29, 2012).
-22-
at *6, “that under Texas law homeowners have legal standing to
challenge the validity or effectiveness of any assignment or chain
of assignments under which a party claims the right to foreclose on
their property” and to try to show an unexplained gap in chain of
title to question ownership of the note.
Id.
at *3.
Judge Smith
concluded that a transfer or assignment of a recorded mortgage must
be recorded in the office of the county clerk under Texas Local
Government Code § 192.007(a), and opined that “the absence of such
required filings is arguably some evidence that no such assignment
or transfer has occurred.
Id. at *4.
Alternatively, in response
to the argument that the plaintiffs had no standing to challenge an
assignment of the security interest because they were not parties
to the assignment, Judge Smith pointed to an established common law
rule in Texas that allows a debtor to assert against an assignee
any ground that renders the assignment void or invalid, such as a
broken chain of title, but not a ground that renders it only
voidable.
Id. at *4-5.
Defendant’s Supplemental Reply (#13)
HSBC replies that the Miller opinion is inapposite to the
facts in the instant case.
In Miller the plaintiffs pleaded that
there was a missing link in the chain of assignments that were
recorded in the real property records, specifically there was no
evidence of an assignment from the original lender, Homecomings
Financial Network, Inc., to JPMorgan Chase Bank. Despite this gap,
-23-
JPMorgan Chase in turn assigned the deed of trust lien to Mellon
Bank, which obtained an order under Texas Rule of Civil Procedure
to proceed with a foreclosure sale of the plaintiffs’ property in
dispute.
Judge Smith found the plaintiffs had stated a cognizable
claim for relief for wrongful foreclosure, trespass to try title,
and quiet title.
HSBC distinguishes this case on the grounds that Plaintiff has
failed to plead any facts indicating that Defendant lacks authority
to foreclose.
Furthermore her pleadings (#1-4. Ex. A-2) and their
attachments (#14, Ex. A) clearly demonstrate that HSBC is her
mortgagee with the power to foreclose the deed of trust lien.
She
asserts that she executed a promissory note in favor of WMC
Mortgage.
Her deed of trust (Ex. A) states that Plaintiff grants
a security interest in the property to MERS, solely as nominee for
Lender and Lender’s successors and assigns and the successors and
assigns of MERS.
Ex. A at pp. 1-2.
in trust, with power of sale.
Borrower conveyed the property
Ex. A, p.3.
Exhibit C, the
“Transfer of Lien,” acknowledges the transfer of lien from MERS, as
nominee for WMC Mortgage Corp., its successors and assigns, to HSBC
Bank USA, as Trustee on Behalf of ACE Securities Corp. Home Equity
Loan
Trust,
Certificates.
Series
2007-WM2,
Asset
Backed
Pass-Through
Thus there is no “missing link” in the chain of
assignments recorded in real property records.
According to Texas
Prop. Code § 51.0001(4), the current mortgagee of Plaintiff’s deed
-24-
of trust is indisputably HSBC.
As in its insistence that under Texas law borrowers lack
standing to contest assignments of trust liens because they are not
parties to the assignment, HSBC contends that because an assignment
is a contract between the assignor of a right and an assignee where
the assignee receives the authority to assert that right, such an
assignment is controlled by contract law.
It is basic law that a
person who is not a party to a contract cannot enforce or challenge
the
contract;
similarly
a
person
who
is
not
a
party
to
an
assignment lacks standing to contest it except under two limited
exceptions: (1) the primary exception where an assignee of a claim
sues the obligor for performance (and the obligor may defend the
suit on any ground that renders the assignment void, but not on a
ground which renders it only voidable) and (2) rarely Texas law
allows a defendant sued on a negotiable instrument to assert
defenses and claims held by others.
applies
to
this
suit,
so
Plaintiff
Neither, HSBC contends,
has
no
legal
basis
for
challenging the assignment of her deed of trust lien, and thus
fails to state a claim.
HSBC also points out that in contrast to Judge Smith’s
conclusion in Miller, a number of Texas federal courts have held
that borrowers lack standing to challenge MERS’s assignment of the
deed of trust lien because they were not parties to the assignment.
#13
at
p.
6
n.17
(listing
numerous
-25-
federal
cases
with
that
determination).
Chase Bank, N.A.,
The Court agrees.
F. Supp. 2d
See, e.g., Marsh v. JPMorgan
, 2012 WL 3756276, *3 (W.D.
Tex. Aug. 29, 2012); Medrano v. BAC Home Loans Servicing, LP, Civ.
A. No. 3:10-CV-02565-M (BF), 2012 WL 4174890, *6 (N.D. Tex. Aug.
10, 2012); Hazzard v. Bank of America, N.A., Civ. A. No. C-12-127,
2012 WL 2339313, *3 (S.D. Tex. June 19, 2012); McAllister v. BAC
Home Loans Servicing, LP, No. 4:10-cv-504, 2011 WL 2200672, *5
(E.D. Tex. Aug. 28, 2011).
Moreover HSBC states that the facts in the cases cited by
Miller to show that Texas courts regularly allow a homeowner to
challenge the chain of assignments leading to a foreclosure are
distinguishable from those here, in which a borrower is attempting
to challenge a non-judicial foreclosure of a deed of trust.
(Miller’s authorities challenged the noteholder’s authority to
collect on a promissory note or to collect a retail installment
contract in cases in which the creditor either sued the borrowers
or counterclaimed against them.)
The case before this Court does
not involve claims or counterclaims asserted by a creditor on a
note or any other claim or counterclaim asserted against Plaintiff.
HSBC has not sued Plaintiff for anything, but has only exercised a
contractual remedy of non-judicial foreclosure under a deed of
trust, and Plaintiff agreed to that remedy in her deed of trust.
It is established law that Texas distinguishes between enforcement
of a promissory note and foreclosure, which enforces a deed of
-26-
trust, not the underlying note. Reardean v. CitiMorgage, Inc., No.
A-11-CA-420-SS,
2011
WL
3268307
(W.D.
Tex.
July
25,
2011)(“Foreclosure is an independent action against the collateral
and may be conducted without judicial supervision.
Enforcement of
a note, on the other hand, is a personal action against the
signatory and requires a judicial proceeding.”), citing Slaughter
v. Quails, 162 S.W. 2d 671 (Tex. 1942).
For all these reasons, HSBC urges the Court to conclude that
Plaintiff lacks authority to contest the assignment of the deed of
trust lien and has failed to state any viable claim for relief.
Court’s Decision
First, the Court agrees that in actuality Plaintiff has
asserted a single cause of action for wrongful foreclosure.
Her
second claim under § 3.301 of the Tex. Bus. & Comm. Code seeks a
declaration
that
HSBC
is
not
a
person
entitled
to
enforce
Plaintiff’s note and deed of trust and therefore the foreclosure
was defective and improper.
Thus the § 3.301 claim is part of
Plaintiff’s wrongful foreclosure cause of action, or alternatively,
part of her prayer for a declaratory judgment, her third claim.
The Declaratory Judgment Act8 “does not create an independent
8
“‘When a declaratory judgment action is filed in state court
and is subsequently removed to federal court, it is converted to
one brought under the federal Declaratory Judgment Act.’” Morlock,
LLC v. JP Morgan Chase Bank, N.A., Civ. A. No. H-12-1448, 2012 WL
3187918, at *7 (S.D. Tex. Aug. 2, 1012), quoting Bell v. Bank of
America Home Loan Servicing LP, No. 4:11-CV-02085, 2012 WL 568755,
*8 (S.D. Tex. Feb. 21, 2012).
-27-
source of federal jurisdiction, but merely provides a remedy if
there is, in fact a judicially remediable right.”
Mahfoud v. Bank
of America, NA, No. 3:12-CV-2651-0-BK, 2012 WL 4512075, *4 (N.D.
Tex. Aug. 31, 2012), citing Schilling v. Rogers, 363 U.S. 666, 677
(1960).
“The federal Declaratory Judgment Act does not create a
substantive cause of action but, instead, is merely a procedural
vehicle that allows a party to obtain an early adjudication of an
actual controversy arising under other substantive law.”
Morlock,
LLC v. JP Morgan Chase Bank, N.A., Civ. A. No. H-12-1448, 2012 WL
3187918, at *7 (S.D. Tex. Aug. 2, 1012).
adequately
plead
a
substantive
legal
If Plaintiff fails to
claim,
declaratory and injunctive relief fails as well.
her
request
for
Ayers v. Aurora
Loan Servs., LLC, 787 F. Supp. 2d 451, 457 (E.D. Tex. 2011); Cannon
v. JPMorgan Chase Bank, N.A., No. 4:11-CV-458, 2011 WL 6838615, *67 (E.D. Tex. Nov. 16, 2011), report and recommendation adopted,
2011 WL 6838614 (E.D. Tex. Dec. 29, 2011, appeal dism’d).
Second, it appears from the state court records that although
HSBC purchased the property at the foreclosure sale, Plaintiff
retains
possession
of
it.
To
bring
a
claim
for
wrongful
foreclosure under Texas law, Texas Property Code § 51.002 requires
that the mortgagor must have lost possession of her home.
Denley
v. Vericrest Financial, Inc., Civ. A. No. H-12-992, 2012 WL
2368325, *3 (S.D. Tex. June 21, 2012), citing Smith v. J.P. Morgan
Chase Bank N.A., No. H-10-3730, 2010 WL 4622209, *2 (S.D. Tex. Nov.
-28-
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.”), citing Baker
v. Countrywide Home Loans, Inc., Civ. A. No. 3:08-CV-0916-B, 2009
WL 1810336, *4 (N.D. Tex. June 24, 2009).
Thus if Plaintiff
retains possession of the property, this action must be dismissed.
The Court agrees with HSBC that as a matter of law that as a
non-party to the assignment of the lien, Plaintiff lacks standing
to contest it.
Pagosa Oil and Gas, LLC v. Marrs and Smith P’ship,
No. 08-07-00090, 2010 WL 450910, *4-5 (Tex. App.–-El Paso Feb. 10,
2010, pet. denied); Livonia Prop. Holdings, LLC v. 12840-12976
Farmington Road Holdings, LLC, No. 10-11589, 2010 WL 1956867, *9-10
(E.D. Mich. May 13, 2010)(“[F]or over a century, state and federal
courts around the country have [held] that a litigant who is not a
party
to
an
assignment
assignment”;“[A]
borrower
assignments
which
to
it
lacks
may
standing
not
was
not
to
challenge
a
party
challenge
the
or
that
validity
of
third-party
beneficiary.”)(citing Ifert v. Miller, 138 B.R. 159 (Bankr. E.D.
Pa. 1992)(applying Texas law)), aff’d, 399 Fed. Appx. 97 (6th Cir.
Oct. 10, 2010), cert. denied, 131 S. Ct. 1969 (2011); Eskridge v.
Fed.
Home
Loan
Mortg.
Corp.,
No.
6:10-CV-00285-WSS,
2011
WL
2163989, *5 (W.D. Tex. Feb. 24, 2011); Kazmi v. BAC Home Loans
Servicing, L.P., No. 4:11-CV-375, 2012 WL 629440, *8 (E.D. Tex.
Feb. 3, 2012); In re MERS Litig., MDL No. 09-2119-JAT, 2011 WL
-29-
4550189, *5 (D. Ariz. Oct. 3, 2011).
Even if she did have standing to challenge the assignment, her
conclusory, speculative statement that Anderson may not have signed
the transfer of lien has neither factual support nor evidence to
support it.
Although she claims she needs discovery to prove it,
Iqbal clearly holds that Federal Rule of Civil Procedure 8 ”does
not unlock the doors of discovery for a plaintiff armed with
nothing more than conclusions.”
129 S. Ct. at 1940.
as
HSBC,
correctly
pointed
out
by
the
deed
of
Furthermore,
trust
here
demonstrates that the assignment of the mortgage to HSBC from WMC
Mortgage Corp. through MERS as WMC Mortgage Corp.’s nominee for
lender and lender’s successors and assigns and the successors and
assigns of MERS, which Plaintiff agreed to by signing the deed of
trust, was permissible and that HSBC does have authority to enforce
the terms of the deed of trust.
The deed of trust gave MERS the
authority to transfer the deed of trust and it gave MERS the power
to foreclose and to sell.
A.
No.
6:10cv119,
2010
Richardson v. CitiMortgage, Inc., Civ.
WL
4818556,
*5
(E.D.
Tex.
Nov.
22,
2010)(“Under Texas law where a deed of trust expressly provides
that MERS has the power of sale, MERS has the power of sale.”).
MERS transferred that deed to HSBC.
HSBC correctly showed that
under Texas law HSBC has the right to foreclose based on the deed
of trust alone, and that it did not have to record the document
with the county’s real property records.
-30-
Despite several submissions, Plaintiff fails to respond to
HSBC’s
point
that
she
had
not
alleged
facts
supporting
essential elements of a wrongful foreclosure cause of action:
two
a
defect in the foreclosure sale or a grossly inadequate sales price
caused by that defect.
Indeed her pleadings, with copies of
relevant documents attached as support, appear to indicate that the
sales price was not grossly inadequate. “Under Texas law a grossly
inadequate price would have to be ‘consideration so far short of
the real value of the property as to shock a correct mind, and
thereby raise a presumption that fraud attended the purchase.’”
Richardson v. Wells Fargo Bank, N.A., No. 4:11-CV-359-A, 2012 WL
2511169, *9 (N.D. Tex. June 29, 2012), citing FDIC v. Blanton, 918
F.2d 524, 531 (5th Cir. 1990), quoting Richardson v. Kent, 47 S.W.
2d 420, 425 (Tex. Civ. App.--Dallas 1932, no writ)(“The weight of
Texas authority rejects a determination of gross inadequacy where
. . . property sells for over 60% of fair market value.”).
Plaintiff
states
that
HSBC
purchased
foreclosure sale for $100,469.17.
the
property
at
the
#1-4, Ex. A-2, ¶15. The amount
of money she borrowed to purchase the property was $102,000.00.
Id. at ¶ 8.
As noted, 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 prejudice.
Great Plains Trust Co, 313 F.3d at 329 (5th
-31-
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
advise the court that they are unwilling or unable to amend in a
manner that will avoid dismissal.”).
Federal Rule of Civil
Procedure 15(a) provides in relevant part,
(1) Amending as a Matter of Course. A party may amend
its pleading once as a matter of course within:
(A) 21 days after serving it, or
(B) if the pleading is one to which a responsive pleading
is required, 21 days after service of a responsive
pleading or 21 days after service of a motion under Rule
12(b), (e), or (f), whichever is earlier.
(2)Other Amendments.
In all other cases a party may
amend its pleading only with the opposing party’s written
consent or the court’s leave. The court should freely
give leave when justice so requires.
A court has discretion in deciding whether to grant leave to amend.
Foman v. Davis, 371 U.S. 178, 181 (1962).
Since the language of
the rule “‘evinces a bias in favor of granting leave to amend,” the
court must find a “substantial reason” to deny such a request.
Ambulatory Infusion Therapy Specialists, Inc. v. Aetna Life Ins.
Co., Civ. A. No. H-05-4389, 2006 WL 2521411, *3 (S.D. Tex. Aug. 29,
2006), quoting Smith v. EMC Corp., 393 F.3d 590, 595 (5th Cir.
2004), and Mayeaux v. La. Health Serv. & Indem. Co., 376 F.3d 420,
425
(5th
Cir.
2004).
Factors
for
the
court
to
consider
in
determining whether a substantial reason to deny a motion for leave
to amend include “undue delay, bad faith or dilatory motive on the
-32-
part of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing
party, and futility of amendment.”
Wimm v. Jack Eckerd Corp., 3
F.3d 137, 139 (5th Cir. 1993).
The Court cannot be absolutely sure that amendment here would
be futile for the matters of law pointed out in this Opinion and
Order.
Accordingly it
ORDERS the following:
1.
HSBC’s motion to dismiss (#3) is GRANTED for the
reasons stated above;
2.
Plaintiff is granted leave, if she is able in
accordance with the law, to file an amended complaint
within twenty days of entry of this Opinion and Order;
failure to comply will result in dismissal of this
action; and
3. HSBC’s alternative motion for more definite statement
(#3) is MOOT.
SIGNED at Houston, Texas, this 22nd day of January, 2013.
___________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE
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