Everhart et al v. Citimortgage, Inc.
Filing
8
OPINION AND ORDER OF DISMISSAL granting 4 MOTION to Dismiss and Brief in Support. Case terminated on January 22, 2013(Signed by Judge Melinda Harmon) Parties notified.(htippen, )
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
ERIC EVERHART and VIRGINIA
EVERHART,
Plaintiffs,
VS.
CITIMORTGAGE, INC.,
Defendant.
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§
§
§
§
§
§
§
CIVIL ACTION H-12-1338
OPINION AND ORDER OF DISMISSAL
Pending before the Court in the above referenced cause,
removed from state court on diversity jurisdiction and alleging
fraud, wrongful foreclosure, slander of title, promissory estoppel,
and unreasonable collection, is Defendant CitiMortgage, Inc.’s
motion to dismiss (instrument #4) pursuant to Federal Rules of
Civil Procedure 8, 9, and 12(b)(6).
Plaintiffs Eric Everhart and
Virginia Everhart have failed to file a response.
Allegations in Plaintiffs’ Original Petition (#1-3, Ex. B-2)
In 2003 Plaintiffs purchased a home and property at 17235
Dakota Ridge Drive, Houston, Texas 77095-6927 (“the property”). In
July 2009, Eric Everhart lost his job and fell behind in his
mortgage payments.
In January 2010, he started his own business
and his finances significantly improved. In July 2010 he requested
a loan modification to bring his account current and provided all
paperwork required by Defendant to qualify for a modification.
-1-
Nevertheless on August 26, 2010 he received a letter from Defendant
stating that the modification was not approved due to negative net
present value (“NPV”).
Ex. 1 to #1-3, B-2.
Plaintiffs state that Eric Everhart had provided a Profit and
Loss Statement representing one month of his earnings, which
Defendant divided into twelve months and thus found a negative NPV.
Plaintiff
drew
this
error
to
the
attention
of
Defendants’s
representatives, who conceded they had made a mistake and asked
Plaintiff to make changes to reflect twelve months of earnings and
to resubmit his application.
Eric Everhart did so on November 4,
2010.
Ex. 2 to #1-3, B-2.
On December 3, 2010, he received a
letter
which
stated
that
CitiMortgage
could
not
approve
his
mortgage modification because currently the amount of principal
forbearance exceeded the limit available under the Home Affordable
Modification Program (“HAMP”).
Ex. #3 to #1-2, B-2.
He contacted
Defendant for an update, but was told there was not sufficient time
to submit his documentation and that his home was scheduled for
foreclosure on December 7, 2010.
Plaintiffs claim that they were
never notified in writing about the impending foreclosure date, but
only told by the representatives a few days before the foreclosure
took place.
Plaintiffs
representations,
allege
they
that
in
“understood
reliance
that
the
on
Defendant’s
December
7,
2010
foreclosure would not occur because they were still in the process
-2-
of applying for a loan modification.”
#1-3 at ¶ 13.
They also
state that they stopped paying money to Defendant and did not
retain a bankruptcy attorney to file a chapter 13 bankruptcy before
the foreclosure date based on Defendant’s representations.
They
assert that had they known that Defendant’s representations were
false and misleading, they would have sought other alternatives to
protect their home or would have filed for bankruptcy protection
before the foreclosure date.
Defendant proceeded with a Substitute Trustee’s sale of the
home on December 7, 2010.
Plaintiffs further complain that they have never been provided
with a copy of any conveyance from the original mortgagee, Lehman
Brothers
Bank,
FSB
to
Defendant,
either
directly
or
through
successors in interest, and “[i]t is believed that Defendant cannot
provide
original
documentation
showing
a
transfer
of
rights,
authorization to institute foreclosure proceedings by the previous
and present owner of promissory note and that Defendant’s actions
were a slander of Plaintiff’s title to the subject property.”
#1-
3, B-2 at ¶ 17.
Plaintiffs claim that the foreclosure has damaged their
credit so they are unable to obtain a loan to buy back their
property or purchase any other property. They have also lost clear
title to the property and may lose the right to possession of it on
a temporary basis that will cause them to incur additional expenses
-3-
in relocation.
They represent that they have suffered mental
anguish and stress over potential loss of their home.
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
-4-
cognizable right of action”).
“Twombly jettisoned the minimum
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)(“To survive
a Rule 12(b)(6) motion to dismiss, the plaintiff must plead ‘enough
facts to state a claim to relief that is plausible on its face.’”),
citing Twombly, 127 S. Ct. at 1974).
“‘A claim has facial
plausibility when the pleaded factual content allows the court to
draw the reasonable inference that the defendant is liable for the
misconduct alleged.’”
Montoya v. FedEx Ground Package System,
Inc., 614 F.3d 145, 148 (5th Cir. 2010), quoting Ashcroft v. Iqbal,
129 S. Ct. 1937, 1940 (2009).
Dismissal is appropriate when the
plaintiff fails to allege “‘enough facts to state a claim to relief
that is plausible on its face’” and therefore fails to “‘raise a
right to relief above the speculative level.’”
Montoya, 614 F.3d
at 148, quoting Twombly, 550 U.S. at 555, 570.
“[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
-5-
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
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).
Even if a plaintiff fails to file a response to a motion to
dismiss despite a local rule’s mandate that a failure to respond is
-6-
a representation of nonopposition, the Fifth Circuit has rejected
the automatic granting of dispositive motions without responses
without the court’s considering the substance of the motion.
Watson v. United States, 285 Fed. Appx. 140, 143 (5th Cir. 2008),
citing Johnson v. Pettiford, 442 F.3d 917, 918 (5th Cir. 2006), and
Johnson v. Louisiana, 757 F.2d 698, 708-09 (5th Cir. 1985).
“The
mere failure to respond to a motion is not sufficient to justify a
dismissal with prejudice.”
Id.
Instead there should be a clear
record of delay or contumacious conduct and a finding that lesser
sanctions would not serve the system of justice.
Id., citing Luna
v. Int’l Ass’n of Machinists & Aerospace Workers Local #36, 614
F.2d 529, 531 (5th Cir. 1980).
In addition to Rules 8(a) and 12(b)(6), fraud claims must also
satisfy the heightened pleading standard set out in Federal Rule of
Civil Procedure 9(b): “In allegations alleging fraud . . ., a party
must state with particularity the circumstances constituting fraud
or mistake.
Malice, intent, knowledge, and other conditions of a
person’s mind may be alleged generally.”
A dismissal for failure
to plead with particularity as required by this rule is treated the
same as a Rule 12(b)(6) dismissal for failure to state a claim.
Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir.
1996).
The
Fifth
Circuit
interprets
Rule
9(b)
to
require
“specificity as to the statements (or omissions) considered to be
fraudulent, the speaker, when and why the statements were made, and
-7-
an explanation of why they were fraudulent.”
Plotkin v. IP Axess,
Inc., 407 F.3d 690, 696 (5th Cir. 2005).
Relevant Law
To state a claim for fraud under Texas law a plaintiff must
allege
(1)
that
the
defendant
made
a
representation
to
the
plaintiff, (2) that the representation was material, (3) that the
representation was false, (4) that when the misrepresentation was
made the defendant knew it was false or made it recklessly and
without knowledge of its truth, (5) that the defendant made it with
the intent that the plaintiff act on it, (6) that the plaintiff
relied on the representation, and (7) that the representation
caused injury to the plaintiff.
Shandong Yinquang Chem., Indus.
Jt. Stock Co. v. Potter, 607 F.3d 1029, 1032-33 (5th Cir. 2010),
citing Ernst & Young, LLP v. Pacific Mut. Life Ins. Co., 51 S.W. 3d
573, 577 (Tex. 2001).
A false representation is material if a
reasonable person would attach importance to and be induced to act
on the information.
Id. at 1033. “A promise of future performance
constitutes an actionable misrepresentation if the promise was made
with no intention of performing at the time it was made.”
Formosa
Plastics Corp. USA v. Presidio Engineers and Contractors, Inc., 960
S.W. 2d 41, 48 (Tex. 1998).
Nevertheless, “the mere failure to
perform a contract is not evidence of fraud.”
Id.
The economic loss doctrine bars tort claims when the parties’
relationship and their attendant duties arise from a contract.
-8-
Kiper v. BAC Home Loans Servicing, LP.,
F. Supp. 2d
, Civ.
A. Nos. H-11-3008, H-11-3363, 2012 WL 3185968, *9 (S.D. Tex. Aug.
2, 2012); Hurd v. BAC Home Loans Servicing, LP,
F. Supp. 2d
___, Civ. A. No. 3:11-CV-1752-M, 2012 WL 1106932, *12 (N.D. Tex.
Mar.
29,
2012)(“The
economic
loss
rule
“generally
precludes
recovery in tort for economic losses resulting from the failure of
a party to perform under a contract.”), citing Stanley Indus. of S.
Fla. v. J.C. Penney Corp., Inc., Civ. A. No. 3:05-CV-2499-L, 2006
WL 2432309, *5 (N.D. Tex. Aug. 18, 2006)(“In determining whether a
tort claim is merely a repackaged breach of contract claim, a court
must consider:
1) whether the claim is for breach of duty created
by contract, as opposed to a duty imposed by law; and 2) whether
the injury is only the economic loss to the subject of the contract
itself.”); see also Hurd, 2012 WL 1106932, *12 (same).
The
economic loss rule does not bar fraud and fraudulent inducement
claims against a loan servicer because the parties to a contract
had an independent duty not to commit the intentional tort of
fraud. Hurd, 2012 WL 1106932, *14 (and cases cited therein); Casey
v. Federal Home Loan Mortg. Ass’n., Civ. A. No. H-11-3830, 2012 WL
1425138, *3 (S.D. Tex. Apr. 23, 2012), quoting Formosa Plastics,
960 S.W. 2d at 46-47 (Because “the legal duty not to fraudulently
procure a contract is separate and independent from the duties
established
by
the
contract
itself
.
.
.
tort
damages
are
recoverable for a fraudulent inducement claim irrespective of
-9-
whether the fraudulent representations are later subsumed in a
contract or whether the plaintiff only suffers an economic loss
related to the subject matter of the contract”).
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
(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.”).
Under Texas law, slander of title is “a false and malicious
-10-
statement made in disparagement of a person’s title to property
which causes special damages.” Marrs and Smith Partnership v. D.K.
Boyd Oil and Gas Co., Inc., 223 S.W. 3d 1, 20 (Tex. App.--El Paso
2005, pet. denied).
The elements of slander of title are (1) the
uttering and publishing of disparaging words, (2) falsity, (3)
malice, (4) special damages, (5) possession of an estate or
interest in the property disparaged, and (6) the loss of a specific
sale.
Williams v. Jennings, 755 S.W. 2d 874, 879 (Tex. App.-
Houston [14th Dist.] 1988, writ denied); Casey v. Fed. Home Loan
Mortg. Assoc., Civ. A. No. H-11-3830, 2012 WL 1425138, *5 (S.D.
Tex. Apr. 23, 2012).
Under Texas law, the statute of frauds applies to loan
agreements for amounts exceeding $50,000.00 and requires that they
be in writing and signed by the party to be bound in order to be
enforceable.
Tex. Bus. Code Ann. § 26.02(a)-(b).
“‘Promissory
estoppel is a narrow exception to the statute of frauds.’”
Hurd,
2012 WL 1106932, at *10. quoting Schuhart v. Chase Home Fin., LLC,
Civ. A. No. C-05-385, 2006 WL 1897263, * 4 (S.D. Tex. July 10,
2006).
the
To state a claim for the defense of promissory estoppel,
plaintiff
must
allege
facts
showing
(1)
a
promise,
(2)
foreseeability of reliance on that promise by the promisor, and (3)
substantial
detriment.
reliance
on
the
promise
by
the
promisee
to
its
Henry Schein, Inc. v. Stromboe, 102 S.W. 3d 675, 686
n.25 (Tex. 2002), citing English v. Fischer, 660 S.W. 2d 521, 524
-11-
(Tex. 1983).
Furthermore the plaintiff must allege facts showing
that “the defendant promised to sign an agreement satisfying the
statute of frauds.”
Cavil v. Trendmaker Homes, Inc., Civ. A. No.
G-10-304, 2012 WL 170751, *7 (S.D. Tex. Jan. 19, 2012)(citing
“Moore” Burger, Inc. v. Phillips Pet. Co., 492 S.W. 2d 934, 937
(Tex. 1972)), appeal dism’d, No. 12-40195 ( 5th Cir. May 10, 2012).
An
alleged
oral
agreement
not
to
foreclose
while
a
loan
modification application is pending would alter the written loan
agreement in the promissory note and the deed of trust and thus
would be unenforceable unless memorialized in writing.
Enis v.
Bank of America, N.A., Civ. A. No. 3:12-CV-0295-D, 2012 WL 4741073,
*3 (N.D. Tex. Oct. 3, 2012).
The statute of frauds does not bar a
promissory estoppel claim based on an oral promise to sign an
existing written contract that satisfies the statute of frauds.
Nagle v. Nagle, 633 S.W. 2d 796, 800 (Tex. 1982); Sullivan v. Leor
Energy, LLC, 600 F.3d 542, 549 (5th Cir. 2010).
Although not clearly defined in Texas law, a claim for the
intentional
tort
of
unreasonable
collection
efforts
has
been
delineated as “efforts that amount to a course of harassment that
was willful, wanton, malicious and intended to inflict mental
anguish and bodily harm.”
EMC Mortgage Corp. v. Jones, 252 S.W. 3d
857, 868 (Tex. App.--Dallas 2008, no pet.). Generally Texas courts
apply this cause of action based on actual collection efforts, for
example telephone calls or physically approaching the debtor that
-12-
oversteps
the
bounds
excessive harassment.
of
routine
collection
methods
through
Id. at 8654-65 (lender sent a “large, very
intimidating Man” who was “yelling and screaming, demanded the keys
to the house, and told [plaintiffs’] family to get out”); Enis,
2012 WL 4741073, at *5.
Failure to respond to a request for
accounting, promising loan modification, and promising not to close
are not debt collection efforts, and allegations of such do not
show an intent to harass and inflict mental anguish.
Enis, 2012 WL
4741073, at *5 n.7, citing Smallwood v. Bank of America, No. 3:11CV-1283-D, 2012 WL 32654, *4 (N.D. Tex. Jan. 6, 2012); Sanghera v.
Wells Fargo Bank, N.A., Civ. A. No. 3:10-CV-2412-B, 2012 WL 555155,
*7 (N.D. Tex. Feb. 12, 2012)(“[T]he Court is unaware . . . how
promising not to foreclose on a property, can, without more, be
considered willful, wanton, or malicious harassment.”); and Swim v.
Bank of America, N.A., Civ. A. No. 3:11-CV-1240-M, 2012 WL 170758,
*7 (N.D. Tex. Jan. 20, 2012)(dismissing allegation that misleading
plaintiff
about
loan
modification
constituted
unreasonable
collection efforts).
Defendant’s Motion to Dismiss (#4)
Asserting that this suit is “nothing more than a tactic to
delay eviction,” they urge the Court to dismiss all claims for the
following reasons:
(1) Plaintiffs fail to satisfy heightened
pleading requirements under Rule 9(b) for their fraud claim, which
is also barred under the economic loss rule and the statute of
-13-
frauds; (2)Plaintiffs’ wrongful foreclosure claim fails because
Plaintiffs do not identify a defect in the foreclosure sale, a
grossly inadequate sale price or any connection between the two and
because they have not suffered any harm; (3) Plaintiffs’ slander of
title cause of action fails (a) for a lack of supporting facts, (b)
because their claim that Defendant’s foreclosure was a slander of
title is preempted by the Home Owners’ Loan Act (“HOLA”), 12 U.S.C.
§§ 1461 et seq., and (3) because Plaintiffs lack standing to
challenge Defendant’s right to enforce the mortgage; (4) Plaintiffs
cannot rely on the Making Homes Affordable program to support their
promissory estoppel claim, and they fail to identify any alleged
promises made by Defendant; (5) Plaintiffs cannot plead any alleged
conduct of Defendant that amounts to an intentional course of
harassment to support their unreasonable collection claim; and (6)
they are not entitled to their requested attorney’s fees or
exemplary damages because they have not pled any viable cause of
action against Defendant.
Regarding
the
first
reason,
Defendant
points
out
that
Plaintiffs fail to identify any of the essential elements of fraud
with the requisite particularity under Rule 9(b) and fail to state
what particular alleged representations were made, who made them,
when they were made or why they were made.
Any representation by
Defendant to stop the foreclosure sale would have been a promise to
act in the future, for which they must, but fail to, allege facts
-14-
showing Defendant made such a representation with the intent to
deceive and no intention to perform.
The Court agrees with both
contentions and dismisses the fraud claim for failure to state a
claim under Rules 12(b)(6) and 9(b).1
Defendants further maintain that Plaintiffs’ common-law fraud
claim
that
Plaintiffs
“understood”
from
Defendant
that
the
foreclosure would not take place because of the ongoing loan
modification review process is barred by the statute of frauds.
For the reasons the Court stated under “Relevant Law,” as a matter
of law it concurs.
Plaintiffs have not alleged that Defendant
orally promised to sign an existing written contract that satisfies
the statute of frauds, no less pleaded supporting facts.
Defendant
points
out
that
Plaintiffs
rely
on
the
same
allegations for their wrongful foreclosure claim as for their fraud
claims, and as indicated, these allegations fail to satisfy the
pleading-with-specificity requirement of Rule 9(b).
Furthermore
they do not plead a defect in the foreclosure proceedings or an
inadequate sale price nor a connection between the two, all
essential elements of such a claim. While Plaintiffs complain that
they did not receive a notice of the foreclosure sale, Defendant
1
Although Defendant argues that the common law fraud and
fraudulent inducement claim is barred under the economic loss rule,
for reasons indicated and cases cited above under “Relevant Law,”
the Court disagrees.
-15-
correctly points out that § 51.002(e)2 of the Texas Property Code
requires only constructive notice, i.e., service of notice is
complete when it is deposited in
U.S. certified mail, so the fact
that the borrower may not have received it is not dispositive.
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).
In addition under Texas law,
recovery under a wrongful foreclosure claim is based on the
mortgagor’s possession.
Petersen v. Black, 980 S.W. 2d 818, 823
(Tex. App.--San Antonio 1998, no pet.)(“Recovery [for wrongful
foreclosure] is conditioned on the disturbance of the mortgagor’s
possession “based on the theory that the mortgagee must have
committed
a
property.”).
wrong
similar
to
the
conversion
of
personal
Where the mortgagor’s possession is undisturbed, he
has no compensable damage.” Id. The Court agrees that Plaintiffs’
retention bars their wrongful foreclosure claim. Medrano v. BAC
Home Loans Servicing, LP., No. 3:10-CV-02565-M (BF), 2012 WL
4174890, *3 (N.D. Tex. Aug. 10, 2012)(“Plaintiffs never lost
possession of the Property and are seeking damages for an attempted
wrongful foreclosure.
An attempted foreclosure is not an action
2
Section 51.002(e) provides, “Service of a notice under this
section by certified mail is complete when the notice is deposited
in the United States mail, postage prepaid and addressed to the
debtor at the debtor’s last known address.”
-16-
recognized under Texas law.”)(and cases cited therein); Motten v.
Chase Home Finance, 831 F. Supp. 2d 988, 1007 (S.D. Tex. 2011).
Moreover, the Court agrees that Plaintiff have failed to allege the
elements of the claim, no less facts supporting them.
Defendant asserts that because this mortgage was originated by
Lehman Brothers, FSB, a federal savings bank, that Plaintiffs’
slander of title claim and challenge to CitiMortgage’s authority to
enforce the mortgage are preempted by HOLA.
The Fifth Circuit
Court of Appeals has not addressed the issue of preemption under
HOLA.3
3
Of the three Circuit Courts of Appeals that have addressed
The Seventh Circuit explains,
Enacted in 1933, HOLA is “a product of the Great
Depression of the 1930's [and] was intended to ‘provide
emergency relief with respect to home mortgage
indebtedness’ at a time when as many as half of all home
loans in the country were in default.” Fidelity Federal
Savings & Loan Ass’n v. de la Cuesta, 458 U.S. 141, 159
. . . (1982)(citations omitted). HOLA empowered what is
now the Office of Thrift Supervision [“OTS”] in the
Treasury Department to authorize the creation of federal
savings and loan associations, to regulate them, and by
its regulations to preempt conflicting state law. Id. at
161-62.
In re Ocwen Loan Servicing, LLC, Mort. Servicing Litig. 491 F.3d
638, 641-42 (7th Cir. 2007). One of ITS’s regulations, 12 C.F.R.
§ 560.2(a) allows federal savings and loans to “extend credit as
authorized under federal law . . . without regard to state laws
purporting to regulate or otherwise affect their credit
activities.” Id. at 642. Section 560.2(c), provides in relevant
part,
State laws that are not preempted. State laws of the
following types are not preempted to the extent that they
only incidentally affect the lending operations of
Federal
savings
associations
or
are
otherwise
-17-
it, the Seventh Circuit has concluded that state common law claims
generally are not preempted.
In re Ocwen Loan Servicing, LLC,
Mort. Servicing Litig. 491 F.3d 638 (7th Cir. 2007).
The Seventh
Circuit opined that under § 560.2(b) the OTS has “exclusive
authority to regulate the savings and loan industry in fixing fees
(including penalties), setting licensing requirements, prescribing
certain
terms
disclosure
of
in
mortgages,
credit
establishing
information
to
requirements
customers,
and
for
setting
standards for processing and servicing mortgages,” but it cannot
“deprive persons harmed by the wrongful acts of savings and loan
associations of their basic state common-law-type remedies.”
at 643.
Id.
It reasoned that because HOLA does not provide a private
right of action to consumers, they have little recourse in disputes
with federal savings banks except those state laws exempted from
inconsistent with the purposes of paragraph (a) of this
section:
(1) Contract and commercial law;
(2) Real property law;
(3) Homestead laws specified in 12 U.S.C. § 1462a(f);
(4) Tort law;
(5) Criminal law; and
(6) any other law that OTS, upon review, finds
(i) Furthers a vital state interest; and
(ii) Either has only an incidental effect on
lending operations or is not otherwise
contrary
to
the
purposes
expressed
in
paragraph (a) of this section.
Id. at 642-43. Furthermore, HOLA does not create a private right
to sue to enforce the provisions of the statute or the OTS’s
regulations.
Id. at 643, citing Burns Int’l Inc. v. Western
Savings & Loan Ass’n, 978 F.2d 533, 535-37 (9th Cir. 1992).
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preemption in § 560.2(c), so other than regulating federal savings
banks OTS permits states to maintain their state-law causes of
action
to
protect
their
citizens.
Id.
It
determined
that
traditional common law causes of action of fraud, breach of
contract, defamation, and slander of title usually avoid HOLA
preemption.
Id.
The Eighth and the Ninth Circuit Courts of
Appeals have found broad preemption.
(8th
Cir.
2009)(concluding
that
Casey v. FDIC, 583 F.3d 586
claims
under
the
Missouri
Merchandising Practices Act are preempted by HOLA), cert. denied,
130 S. Ct. 2061 (2010); Silvas v. E*Trade Mort. Corp., 514 F.3d
1001 (9th Cir. 2008)(holding that claims under the California Unfair
Competition Law are preempted by HOLA).4
Because the issue is
unresolved, the Court will not dismiss the slander of title claim
on the basis of HOLA preemption.
4
Indeed, even though the Ninth Circuit has concluded that
HOLA preempts, one court, in discussing HOLA preemption and inter
alia a claim for slander of title because the trustee’s sale was
invalid, dismissed the slander of title claim on the grounds that
the plaintiff failed to allege facts showing that the trustee’s
sale was unlawful and failed to allege tender of the amount of the
secured debt, as required by California law to maintain any cause
of action for irregularity in the sale procedure. Vann v. Wells
Fargo Bank, No. C 12-1181 PJH, 2012 WL 1910032, *15 (N.D. Tex. May
24, 2012). It did not include the slander of title claim among
those claims it dismiss on HOLA preemption. Id. See also Ayala v.
World Savings Bank, FSB, 616 F. Supp. 2d 1007, 1014 (C.D. Cal.
2009)(relying on the Seventh Circuit’s distinction in Ocwen between
the regulatory side and the common law side of the OTS’s authority,
concluding that “[s]lander of title is undoubtedly a tort law and,
therefore, even assuming that this slander of title incidentally
affects the lending operations of Wachovia, any presumption of
preemption is adequately rebutted is adequately rebutted by virtue
of § 560.2(c)(4).”).
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Defendant also urges dismissal of the slander of title claim
because Plaintiffs fail to allege any facts supporting the elements
of slander of title:
there are no allegations of disparaging
words,
or
maliciousness,
allegation
that
special
Defendant’s
actions
damages.
The
“constitute
a
conclusory
slander
Plaintiff’s [sic] title” does not satisfy Rule 12(b)6).
of
The Court
agrees.
Defendant further maintains that Plaintiffs lack standing to
challenge whether Defendant is the owner or current mortgagee of
the note because the assignment of the loan was a contract between
assignor and assignee to which Plaintiffs were not parties nor
third-party beneficiaries.
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 (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 lacks standing to challenge
that assignment.”)(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).
“[A]
borrower may not challenge the validity of assignments to which it
was not a party or third-party beneficiary.”
1956867, at *10.
The Court agrees.
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Livonia,
2010 WL
Eskridge v. Fed. Home Loan
Mortg. Corp.,
No. 6:10-CV-00285-WSS, 2011 WL 2163989, *5 (W.D.
Tex. Feb. 24, 2011); McAllister v. BAC Home Loans Servicing, LP,
No. 4:10-CV-504, 2011 WL 2200672, *5 (E.D. Tex. Apr. 28, 2012; 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 4550189, *5 (D. Ariz. Oct. 3, 2011).
Defendant also requests dismissal of Plaintiffs’ promissory
estoppel claim that Plaintiffs would review their application for
modification.
#1-3, Orig. Petition at p. 5.
Plaintiffs name HAMP
as the basis for their claim and assert they were entitled to a
review under that program. Defendant points out that Plaintiffs do
not have a private cause of action under HAMP and are not allowed
to bring a claim alleging a violation of it.
See, e.g., Cade v.
BAC Home Loans Servicing, LP, H-10-4224, 2011 WL 2470733, *2 (S.D.
Tex. June 20, 2011)(holding there is no private right of action
under HAMP and observing that the majority of district courts have
reached the same conclusion); Aleem v. Bank of America, 2010 WL
532330, *3 (C.D. Cal. Feb. 9, 2010)(no private right of action for
a HAMP violation).
The Court agrees that borrowers do not have a
private right of action to challenge compliance with HAMP.
See,
e.g., Nolasco v. CitiMortgage, Civ. A. No. H-12-1875, 2012 WL
3648414, *4 (S.D. Tex. Aug. 23, 2012)(and cases cited therein).
Furthermore, insists Defendant, Plaintiffs have pleaded no
facts supporting the essential elements of a promissory estoppel
-21-
claim:
a
promisor,
promise,
and
detriment.
foreseeability
substantial
of
reliance
reliance
by
the
thereon
by
the
promissee
to
his
English v. Fischer, 660 S.W. 2d 521, 524 (Tex. 1983).
Moreover a promise must be sufficiently definite to be enforced for
such a claim.
Gilmartin v. KVTV-Channel 13, 985 S.W. 2d 553, 558-
59 (Tex. App.--San Antonio 1998, no pet.). Plaintiffs merely state
that “Defendant through its employees and agents entered into an
oral contract for application and participation in the [HAMP]
program with Plaintiffs,” one that is barred by the statute of
frauds. #1-3 at page 5. Such conclusory allegations fail to state
a claim for promissory estoppel. Fernandez-Montes v. Allied Pilots
Ass’n, 987 F.2d 278, 284 (5th Cir. 1993)(“[C]onclusory allegations
or legal conclusions masquerading as factual conclusions will not
suffice to defeat a motion to dismiss.”).
This Court agrees that
Plaintiffs have failed to plead a claim for promissory estoppel
under Rule 12(b)(6).
Defendant argues that Plaintiffs’ unreasonable collection
claim should be dismissed because Plaintiffs have failed to allege
that Defendant engaged in any egregious or unreasonable collection
activities
harassment.
that
would
amount
to
an
intentional
course
of
Plaintiffs also admit that they became delinquent on
their mortgage payments in July 2009.
#1-3 at ¶ 7.
Despite the
delinquency in payments, Defendant reviewed Plaintiffs twice for a
modification of their loan.
#1-3 at ¶¶ 9 and 11.
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In addition,
Plaintiffs still remain in possession of the property.
Where a
borrower admits he defaulted on his mortgage payment obligations,
simply initiating foreclosure proceedings does not, as a matter of
law, constitute the kind of “willful, wanton, [and] malicious
conduct that the tort of unreasonable efforts aims to prevent.”
Mitchell v. Chase Home Fin., LLC, Civ. A. No. 3:06-CV-2099-K, 2008
WL 623395, *6 (N.D. Tex. Mar. 4, 2008); Steele v. Green Tree
Servicing, LLC, Civ. A. No. 3:09-CV-0603-D, 2010 WL 3565415, *6
(N.D. Tex. Sept. 7, 2010)(finding defendant’s debt collection
efforts in foreclosing on plaintiff’s home not unreasonable because
“a reasonable fact-finder could only find that the [plaintiffs]
were in default” and the plaintiffs presented no other evidence of
unreasonable collection tactics).
Here, too, the Court concurs
with Defendant.
Last, because Plaintiffs have not pled any viable causes of
action, their request for exemplary damages and attorney’s fees
should be dismissed.
The Court agrees.
See, e.g., Bryant v. Bank
of America, N.A., No. 4:11-CV-448, 2012 WL 2681361, *16 (E.D. Tex.
June 6, 2012)(“[B]ecause the Court has recommended dismissal of all
of Plaintiff’s claims, there is no basis for an award of exemplary
damages in this case.”); Fankhauser v. Fannie Mae, No. 4:10cv274,
2011 WL 5600295, *10-11 (E.D. Tex. Oct. 24, 011)(granting summary
judgment in favor of Defendant because plaintiff had no viable
cause of action and therefore no basis to recover attorney’s fees).
-23-
For
the
reasons
indicated
where
this
Court
agrees
with
Defendant’s arguments, the Court
ORDERS
that
Defendant’s
motion
to
dismiss
under
Rules
8,12(b)(6), and 9(b) (#4) is GRANTED. Because Plaintiffs, although
represented by counsel, have failed to respond to Defendants’
motion to dismiss, the Court assumes from their silence that they
have
no
basis
on
which
to
oppose
Defendants’
dismissal and nor to seek leave to amend.
arguments
Accordingly the Court
ORDERS that this case is CLOSED.
SIGNED at Houston, Texas, this 22nd day of January, 2013.
___________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE
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for
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