Hines v. Wells Fargo Bank, N.A. et al
Filing
47
MEMORANDUM OPINION AND ORDER DENYING AS MOOT 46 MOTION for Judgment on the Pleadings,, GRANTING IN PART, DENYING IN PART 38 MOTION for Summary Judgment and MOTION to Dismiss.(Signed by Judge Gray H. Miller) Parties notified.(rkonieczny, 4)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
PATRICIA HINES,
Plaintiff,
v.
WELLS FARGO BANK, N.A., et al.,
Defendants.
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CIVIL ACTION H-13-00167
M EMORANDUM O PINION & O RDER
Pending before the court is a combined motion for summary judgment and motion to dismiss filed
by defendants Wells Fargo Bank, N.A. (“Wells Fargo”), America’s Servicing Company (“ASC”),
Deutsche Bank Trust Company as Trustee for Securitized Trust Morgan Stanley Home Equity Loan Trust
2007-1 (“Deutsche Bank”), and Mortgage Electronic Registration Systems, Inc. (“MERS”) (collectively,
“defendants”). Dkt. 38. The court has considered the motions, responsive briefing, record evidence, and
applicable law. For the reasons that follow, the motions (Dkt. 38) are GRANTED IN PART &
DENIED IN PART. Plaintiff Patricia Hines’s (“Hines”) claims are DISMISSED WITH PREJUDICE,
and defendants’ request for attorneys’ fees and costs is DENIED WITHOUT PREJUDICE. The court
will decide the issue of attorneys’ fees when it adjudicates defendants’ counterclaim. Defendants’ motion
for judgment on the pleadings (Dkt. 46) is DENIED AS MOOT.
I. BACKGROUND
Although the parties have drastically differing views of the applicable law in this case, the basic
facts are not in dispute. On October 10, 2006, Hines took out a home loan in the amount of $130,160.00
in favor of First NLC Financial Services, LLC (“First NLC”), the “Lender,” for the purchase of a home
in Spring, Texas. Dkt. 38, Ex. A (the promissory note). Hines contemporaneously executed a deed of
trust (the “deed”) to secure payment of the note.1 Dkt. 38, Ex. B (the deed). The deed named Mortgage
Electronic Registration Systems, Inc. (“MERS”) as the nominee for First NLC and its successors and
assigns.2 Id. at 1. The deed also specified that MERS had “the right to foreclose and sell the [home]; and
to take any action required of Lender including, but not limited to, releasing and canceling this Security
Instrument.” Id. at 3. On September 30, 2008, MERS recorded an assignment of the note and deed in
which MERS purported to assign the note and deed to Deutsche Bank. Dkt. 38, Ex. C (assignment).
Wells Fargo, through its subsidiary ASC, services the loan for Deutsche Bank. Dkt. 38, Ex. H
(declaration of Michael Dolan) at 2 ¶ 10.
The note required Hines to remit monthly payments to the Lender on the first day of each month
beginning December 1, 2006. Dkt. 38, Ex. A at 1 ¶ 3. Hines fell behind her payments, however, and she
defaulted under the terms of the note. Dkt. 38, Ex. H at 2 ¶ 11. In early October 2008, Hines and Wells
Fargo entered into a special forbearance agreement, and she was approved for a loan modification on
January 20, 2009. Id. at 2 ¶ 12; Dkt. 38, Ex. D (special forbearance agreement); Dkt. 38, Ex. E (first loan
modification agreement). After Hines defaulted again, the parties executed a second loan modification
on or about April 4, 2010. See Dkt. 38, Ex. H at 3 ¶ 13; Dkt. 38, Ex. F (second loan modification
agreement).
Hines defaulted a third time on her home loan, and on October 17, 2012, ASC sent Hines a notice
of default. Dkt. 38, Ex. H at 3 ¶ 14; Dkt. 38, Ex. G (notice). The notice required payment of the loan
delinquency by November 20, 2012, and it stated that failure to do so would result in acceleration of the
1
Courts interchangeably use the terms “deed of trust” and “mortgage” throughout the relevant case law. See Starcrest
Trust v. Berry, 926 S.W .2d 343, 351 (Tex. App.— Austin 1996, no writ) (defining “deed of trust” as a mortgage with power
to sell on default). This court will generally refer to the “deed of trust” in this opinion as simply the “deed.”
2
The MERS system is an “electronic mortgage registration system and clearinghouse that tracks beneficial ownerships
in, and servicing rights to, mortgage loans.” In re Mortg. Elec. Registration Sys. (MERS) Litig., 659 F. Supp. 2d 1368, 1370
(J.P.M.L. 2009).
2
note. Dkt. 38, Ex. H at 3 ¶ 15; Dkt. 38, Ex. G at 1. Hines failed to cure her default within the requisite
time period, Dkt. 38, Ex. H at 3 ¶ 16, and no party has foreclosed on the home to date, in which Hines
still resides.
On January 11, 2013, Hines filed this lawsuit in the 127th Judicial District Court of Harris
County, Texas. Dkt. 1 (notice of removal) at 1 ¶ 1. Defendants timely removed the case to this court on
January 23, 2013. Id. at 1. In Hines’s live pleading, she asserts the following claims: a declaratory
judgment claim to prevent a wrongful foreclosure; fraud in the concealment; fraud in the inducement;
intentional infliction of emotional distress; slander of title; quiet title; rescission; violations of the Truth
in Lending Act and the Home Ownership and Equity Protection Act; violations of the Real Estate
Settlement Procedures Act; and other miscellaneous violations.
II. STANDARD OF REVIEW
Defendants have moved to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure
and/or moved for summary judgment under Rule 56 as to each of Hines’s causes of action.
A.
Motions to Dismiss
For most causes of action, Rule 8(a)(2) requires that the pleading contain “a short and plain
statement of the claim showing that the pleader is entitled to relief.” FED . R. CIV . P. 8(a)(2). In turn, a
party against whom claims are asserted may move to dismiss those claims when the pleader has failed
“to state a claim upon which relief can be granted.” FED . R. CIV . P. 12(b)(6). To meet this standard, a
pleading must offer “‘enough facts to state a claim to relief that is plausible on its face.’” In re Katrina
Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570, 127 S. Ct. 1955 (2007)). “Factual allegations must be 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
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doubtful in fact) . . . .” Twombly, 550 U.S. at 555 (citations omitted). While the allegations need not be
overly detailed, a plaintiff’s pleading must still provide the grounds of his entitlement to relief, which
“requires more than labels and conclusions,” and “a formulaic recitation of the elements of a cause of
action will not do . . . .” Id.; see also Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937 (2009)
(“[N]aked assertions devoid of further factual enhancement,” along with “legal conclusions” and
“[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements,” are
not entitled to the presumption of truth). “[C]onclusory allegations or legal conclusions masquerading
as factual conclusions will not suffice to prevent a motion to dismiss.” Fernandez-Montes v. Allied Pilots
Ass’n, 987 F.2d 278, 284 (5th Cir. 1993). Instead, “[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.” Iqbal, 556 U.S. at 678. Evaluating a motion to dismiss is a “contextspecific task that requires the reviewing court to draw on its judicial experience and common sense.” Id.
at 679.
If a party’s claim contains allegations of fraud, the pleading must meet a heightened standard and
“state with particularity the circumstances constituting fraud or mistake.” FED . R. CIV . P. 9(b); United
States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185–86 (5th Cir. 2009) (noting that Rule 9(b) does
not “supplant” Rule 8(a)). Instead, pleadings alleging fraud must contain “simple, concise, and direct
allegations of the circumstances constituting fraud, which . . . must make relief plausible, not merely
conceivable, when taken as true.” Id. at 186 (internal quotation marks omitted) (referring to the standard
enunciated in Twombly). The Fifth Circuit strictly interprets Rule 9(b) and requires the pleader “to
specify the statements contended to be fraudulent, identify the speaker, state when and where the
statements were made, and explain why the statements were fraudulent.” Hermann Holdings Ltd. v.
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Lucent Techs., Inc., 302 F.3d 552, 564–65 (5th Cir. 2002) (internal quotation marks omitted). “At a
minimum, Rule 9(b) requires that a plaintiff set forth the who, what, when, where, and how of the alleged
fraud.” Whiddon v. Chase Home Fin., LLC, 666 F. Supp. 2d 681, 690 (E.D. Tex. 2009) (internal
quotation marks omitted).
B.
Motions for Summary Judgment Under Rule 56
Once the case moves beyond the pleadings, summary judgment is proper if “the movant shows
that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter
of law.” FED . R. CIV . P. 56(a); see also Carrizales v. State Farm Lloyds, 518 F.3d 343, 345 (5th Cir.
2008). The movant bears the initial burden of informing the court of evidence, if any, that demonstrates
the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct.
2548 (1986). Only when the movant has discharged its initial burden does the burden shift to the
nonmovant to demonstrate that there is a genuine dispute of material fact. Id. at 322. A dispute is
“genuine” if the evidence is such that a reasonable jury could return a verdict for the nonmovant. See
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505 (1986); Cooper Tire & Rubber Co.
v. Farese, 423 F.3d 446, 454 (5th Cir. 2005). A dispute is “material” if its resolution could affect the
outcome of the action. Anderson, 477 U.S. at 248.
Rule 56 requires the nonmovant to go beyond the pleadings and show by affidavits, depositions,
answers to interrogatories, admissions on file, or other admissible evidence that specific facts exist over
which there is a genuine dispute for trial. Wallace v. Tex. Tech Univ., 80 F.3d 1042, 1047 (5th Cir.1996).
The nonmovant’s burden may not be satisfied by conclusory allegations, unsubstantiated assertions,
metaphysical doubt as to the facts, or a scintilla of evidence. Little v. Liquid Air Corp., 37 F.3d 1069,
1075 (5th Cir.1994); Wallace, 80 F.3d at 1047. Instead, the nonmovant must identify specific evidence
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in the record and articulate precisely how that evidence supports his or her claims. Ragas v. Tenn. Gas
Pipeline Co., 136 F.3d 455, 458 (5th Cir.1998). When the nonmovant fails to set forth specific facts, by
affidavits or otherwise, to show that there is a genuine dispute for trial, summary judgment is appropriate.
Topalian v. Ehrman, 954 F.2d 1125, 1132 (5th Cir.1992). Factual controversies are to be resolved in
favor of the nonmovant, “‘but only when there is an actual controversy, that is, when both parties have
submitted evidence of contradictory facts.’” Wallace, 80 F.3d at 1048 (quoting Little, 37 F.3d at 1075);
see also S.W.S. Erectors, Inc. v. Infax, Inc., 72 F.3d 489, 494 (5th Cir.1996). The court will not, “in the
absence of any proof, assume that the [nonmovant] could or would prove the necessary facts.” McCallum
Highlands, Ltd. v. Wash. Capital Dus, Inc., 66 F.3d 89, 92 (5th Cir.1995). Unless there is sufficient
evidence for a jury to return a verdict in the nonmovant’s favor, there is no genuine dispute for trial.
Anderson, 477 U.S. at 249–51.
III. ANALYSIS
Hines pled ten causes of action in her first amended complaint. The court considers the
defendants’ dismissal arguments for each claim.
A.
Lack of Standing/Wrongful Foreclosure
In her first claim, Hines apparently seeks a declaration from this court that any foreclosure of her
home would be wrongful because no defendant has standing to foreclose due to defects in the assignment
and securitization process.3 Specifically, her wrongful foreclosure allegations can be grouped into two
categories: (1) MERS lacked authority to assign the deed and note from First NLC to Deutsche Bank;
3
Hines’s claim must be one for declaratory relief because an attempted wrongful foreclosure claim is not recognized
under Texas law and a traditional wrongful foreclosure claim would not be ripe because Hines remains in possession of her
home. See Port City State Bank v. Leyco Constr. Co., 561 S.W .2d 546, 547 (Tex. Civ. App.— Beaumont 1977, no writ)
(finding no supporting authority for an attempted wrongful foreclosure claim under Texas law); Ayers v. Aurora Loan Servs.,
787 F. Supp. 2d 451, 454 (E.D. Tex. 2011) (“Plaintiff has not alleged an actual violation of the Texas Property Code because
no foreclosure sale has occurred.”).
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and (2) defendants did not comply with the securitization requirements of the applicable Pooling and
Servicing Agreement (“PSA”).4 Under recent Fifth Circuit case law, however, both of these grounds fail
and her wrongful foreclosure claim must be dismissed.
Hines contends that defendants cannot show an unbroken chain of title to enforce the note because
MERS had no authority to assign the note to Deutsche Bank. Dkt. 43 at 12–13. The defendants respond
that Hines lacks standing to challenge any assignments of her note and deed to which she was not a
contracting party. Dkt. 38 at 7–8. The defendants further respond that even if Hines has standing, she
has not shown that the defendants lack authority to foreclose. Id. at 10.
The Fifth Circuit recently issued a published opinion addressing each of these arguments. See
Reinagel v. Deutsche Bank Nat’l Trust Co., 722 F.3d 700 (5th Cir. 2013). In Reinagel, the mortgagors
defaulted on their note and sought to enjoin the foreclosure, contending that the assignments by which
the bank obtained the note and deed were invalid. Id. at 702. The Fifth Circuit initially held that the
mortgagors could argue that the transfers were void, because while “an obligor cannot defend against an
assignee’s efforts to enforce the obligation on a ground that merely renders the assignment voidable at
the election of the assignor, Texas courts follow the majority rule that the obligor may defend ‘on any
ground which renders the assignment void.’” See id. at 705 (quoting Tri-Cities Constr., Inc. v. Am. Nat’l
Ins. Co., 523 S.W.2d 426, 430 (Tex. Civ. App.—Houston [1st Dist.] 1975, no writ)); see also Ortiz v.
CitiMortgage, Inc., — F. Supp. 2d —, 2013 WL 3157907, at *4 (S.D. Tex. 2013) (Miller, J.) (holding
4
“Securitization” refers to the “process of pooling loans and selling them to investors on the open market.”
Commonwealth Prop. Advocates, LLC v. Mortg. Elec. Registration Sys., Inc., 680 F.3d 1194, 1197 n.2 (10th Cir. 2011). A
PSA is one of many “complex, interrelated contracts” typically executed when a mortgage securitization trust is formed. Chase
Manhattan Mortg. Corp. v. Advanta Corp., No. Civ. A. 01-507 KAJ, 2005 W L 2234608, at *1 (D. Del. Sept. 8, 2005). In
a mortgage securitization, the securitizing party acquires mortgage notes, pools them together, and then sells them into a trust.
Id. Interests in the trust are sold to investors, and the money raised is used for new mortgages. BlackRock Fin. Mgmt. Inc.
v. Segregated Account of Ambac Assurance Corp., 673 F.3d 169, 173 (2d Cir. 2012). In this case, defendant Deutsche Bank
acted as the trustee for the Morgan Stanley Loan Trust 2007-1, which was the assignee of Hines’s promissory note and security
instrument. See Dkt. 38, Ex. C at 1.
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that plaintiffs could challenge an assignment on grounds that it did not occur because such an allegation
goes to the issue of validity ab initio). And while this holding extends to assignments in the
securitization process, a breach of the PSA would not render it void, and the mortgagors thus may not
challenge the resulting validity of the PSA itself. Reinagel, 722 F.3d at 708.
To the extent Hines is arguing that MERS’s assignment of the note and deed to Deutsche Bank
is procedurally or substantively irregular under the PSA, she has no standing to do so against any
mortgagee. Moreover, she also lacks standing to challenge the assignments to Deutsche Bank under
general Texas law because she is not arguing that there is a missing link in the chain of title. Instead, she
is essentially arguing that MERS lacked authority to assign the note and deed to an assignee, namely
Deutsche Bank. But an assignment executed by an unauthorized agent is not void under Texas law—it
is voidable at the election of the defrauded assignor. Id. at 706–07; Nobles v. Marcus, 533 S.W.2d 923,
926 (Tex. 1976) (holding that a contract executed by a person falsely claiming to be a corporate officer
is voidable by the defrauded corporation); 29 RICHARD A. LORD , WILLISTON ON CONTRACTS § 74:50 (4th
ed. 2012) (“If the objection to the validity of an assignment is not that it is void but voidable only at the
option of the assignor, or of some third person, the debtor has no legal defense whether or not action is
brought in the assignee’s name, for it cannot be assumed that the assignor is desirous of avoiding the
assignment.”). Hines has no standing to challenge MERS’s assignment on grounds that MERS lacked
the authority to do so.
But even assuming that Hines had standing to challenge MERS’s assignments, her substantive
objection would fail. Hines claims that without having the contractual right to assign the note, MERS’s
assignment of the deed is void under the common-law rule that the “assignment of the [mortgage] alone
is a nullity.” McCarthy v. Bank of Am., NA, No. 4:11-cv-356-A, 2011 WL 6754064, at *3 (N.D. Tex.
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Dec. 22, 2011) (quoting Carpenter v. Longan, 83 U.S. (16 Wall.) 271, 274 (1872)); see also Best
Fertilizers of Ariz., Inc. v. Burns, 571 P.2d 675, 676 (Ariz. Ct. App. 1977) (“The note is the cow and the
mortgage the tail. The cow can survive without a tail, but the tail cannot survive without the cow.”). But
these cases rely on sources outside Texas law, and Texas courts generally follow the Restatement
approach, under which a mortgage assignment presumptively “includes the note secured by the mortgage,
whether or not the instrument of assignment expressly references the note.” See RESTATEMENT (THIRD )
OF PROPERTY : MORTGAGES § 5.4(b) (1997) (“[A] transfer of a mortgage also transfers the obligation the
mortgage secures unless the parties to the transfer agree otherwise.”); Reinagel, 722 F.3d at 706 (agreeing
with the Restatement approach without deciding whether the Texas Supreme Court would hold likewise);
Bierwirth v. BAC Home Loans Servicing, L.P., No. 03-11-00644-CV, 2012 WL 3793190, at *4 (Tex.
App.—Austin Aug. 30, 2012) (“Although [the mortgagor’s] note containing the express right to transfer
did not identify MERS, [the mortgagor’s] deed of trust did identify MERS, and because the note and deed
of trust must be read together when evaluating their provisions, MERS had the authority to assign the
note and the deed of trust.”). Under this approach, MERS’s authority to assign the deed, which Hines
does not contest, also gave it the authority to assign the note.
In sum, Hines’s challenges to the chain of title, which are essential to her request for declaratory
relief, may not be heard in this wrongful foreclosure action. The property records provided by the
defendant and referenced in Hines’s amended complaint show that Deutsche Bank is the mortgagee as
the current holder and owner of the note. Dkt. 38, Ex. C; TEX . PROP . CODE § 51.0001(4)(A) (defining
a “mortgagee” to include “the grantee, beneficiary, owner, or holder of a security instrument”). There
is also no genuine dispute of material fact that ASC is a “mortgage servicer” under Texas law as Hines
entered several modification agreements regarding payments to ASC as late as April 2010. Dkt. 38, Ex.
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H at 2 ¶ 10; TEX . PROP . CODE § 51.0001(3) (defining “mortgage servicer” to be the “last person to whom
a mortgagor has been instructed by the current mortgagee to send payments for the debt secured by a
security instrument”). As such, either Deutsche Bank or ASC is entitled to foreclose on the note and
deed. Rearden v. CitiMortgage, Inc., No. A-11-CA-420-SS, 2011 WL 3268307, at *4 (W.D. Tex. July
25, 2011) (explaining that a mortgagee or mortgage servicer may foreclose, regardless of their holder
status). Hines’s evidence, for which she provides no argument to explain its relevance, shows at best that
a purported Wells Fargo employee signed certain assignments in 2008, without authorization, as a
representative of MERS and Wells Fargo/ASC. See Dkt. 43, Ex. A. But as stated above, an assignment
signed by an unauthorized agent is not void, and Hines has no standing to challenge it. Reinagel, 722
F.3d at 706–07 (dismissing a challenge to an instrument signed by a third-party contractor who claimed
to be an employee of the principal because his “lack of authority, even accepted as true, does not furnish
the [plaintiffs] with a basis to challenge the second assignment”). Summary judgment is granted as to
Hines’s lack of standing/wrongful foreclosure claim.
B.
Fraud
Hines next alleges claims of fraud in the concealment and inducement. She contends that the
defendants defrauded her by not disclosing the incentives paid to complete the securitization of her loan,
which she argues “had a materially negative effect on [her] that was known by [defendants] but not
disclosed.” Dkt. 30 at 20–21 ¶ 76. Hines also contends that defendants committed fraud by affirmatively
misrepresenting that they were entitled to exercise the deed’s power of sale provision and that they were
legal holders or beneficiaries of the note and deed. Id. at 22–24.
The elements of fraud under Texas law are: “(1) a [material] misrepresentation that (2) the speaker
knew to be false or made recklessly (3) with the intention to induce the plaintiff’s reliance, followed by
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(4) actual and justifiable reliance (5) causing injury.” Rio Grande Royalty Co. v. Energy Transfer
Partners, L.P., 620 F.3d 465, 468 (5th Cir. 2010). When the plaintiff alleges fraud by omission, “[c]ourts
in Texas have consistently held that fraud by nondisclosure or concealment requires proof of all of the
elements of fraud by affirmative misrepresentation, including fraudulent intent, with the exception that
the misrepresentation element can be proven by the nondisclosure or concealment of a material fact in
light of a duty to disclose.” United Teacher Assocs. Ins. Co. v. Union Labor Life Ins. Co., 414 F.3d 558,
567 (5th Cir. 2005). A duty to disclose arises between parties in a confidential or fiduciary relationship
or between non-fiduciaries when “one party learns later that his previous affirmative statement was false
or misleading.” Union Pac. Res. Grp., Inc. v. Rhone-Poulenc, Inc., 247 F.3d 574, 586 (5th Cir. 2001);
Tempo Tamers, Inc. v. Crow-Houston Four, Ltd., 715 S.W.2d 658, 669 (Tex. App.—Dallas 1986, writ
ref’d n.r.e.) (a duty to disclose arises when “a party later learns that previous affirmative representations
are in fact false”).
Here, Hines has not alleged any special relationship between herself and any of the defendants.
Further, she has not alleged with particularity what incentives were paid to third parties, why these
incentives were fraudulent, or how she relied on these payments to her detriment. She also failed to
identify any specific speaker of fraudulent statements, or when and where they were made, all of which
are necessary for properly pled fraud claims in federal court. Williams v. WMX Techs., Inc., 112 F.3d
175, 177 (5th Cir. 1997). Lastly, in light of the court’s dismissal of her wrongful foreclosure claim, Hines
has not properly pled any facts to support her contentions that defendants deceived her or that defendants
lacked the authority to foreclose. Hines did not move for leave to amend her complaint, and in any case
an amendment of her fraud claims would be futile. Hines’s claims of fraud in the concealment and
inducement are dismissed with prejudice.
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C.
Intentional Infliction of Emotional Distress
Hines alleges that defendants have engaged in outrageous conduct by fraudulently attempting to
foreclose or claiming that they have the right to foreclose as holders of the note and deed. Dkt. 30 at
24–25. Defendants move for summary judgment on Hines’s claim of intentional infliction of emotional
distress (“IIED”) because defendants have a legal right to foreclose and cannot have committed the tort
of IIED under Texas law. Dkt. 38 at 31–32. The court agrees with defendants.
To prevail on an IIED claim in Texas, a plaintiff must demonstrate: (1) intentional or reckless
conduct; (2) that is extreme or outrageous; (3) that caused emotional distress; and (4) that was severe in
nature. Burden v. Gen. Dynamics Corp., 60 F.3d 213, 218 (5th Cir. 1995). As to the second element,
the mere fact that conduct is tortious or otherwise wrongful does not render it “extreme or outrageous.”
Bradford v. Veneto, 48 S.W.3d 749, 758 (Tex. 2001). Rather, extreme or outrageous conduct must be
“so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency,
and to be regarded as atrocious, and utterly intolerable in a civilized community.” GTE Southwest, Inc.
v. Bruce, 998 S.W.2d 605, 611 (Tex. 1999) (internal quotation marks omitted). Moreover, beyond these
malleable definitions of what constitutes actionable conduct, Texas courts have made clear that conduct
associated with exercising a legal right is privileged and cannot be the basis for an IIED claim. Zurita
v. Lombana, 322 S.W.3d 463, 474 (Tex. App.—Houston [14th Dist.] 2010, pet. denied) (initiation and
prosecution of a lawsuit is not, as a matter of law, extreme or outrageous); Wieler v. United Savings Ass’n
of Tex., FSB, 887 S.W.2d 155, 159 (Tex. App.—Texarkana 1994, writ denied) (“Even if the creditor’s
conduct is extreme or outrageous, he does not commit the tort if he does no more than insist on his legal
rights in a permissible way.”); RESTATEMENT (SECOND ) OF TORTS § 46, cmt. g (1965).
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In this case, the pleading and proof demonstrate that defendants’ conduct was the mere assertion
of a legal right to foreclose under the deed, a showing which fails to support an IIED claim as a matter
of Texas law. And even assuming a defendant initiated the foreclosure process “with the specific intent
of inflicting emotional distress on the Plaintiff,” Dkt. 30 at 24 ¶ 98, which the summary-judgment
evidence does not support, this allegation is irrelevant when a defendant exercises its legal rights.
RESTATEMENT (SECOND ) OF TORTS § 46, cmt. g (1965) (“The actor is never liable, for example, where
he has done no more than to insist upon his legal rights in a permissible way, even though he is well
aware that such insistence is certain to cause emotional distress.”). Summary judgment is granted on
Hines’s IIED claim.
D.
Slander of Title
Hines alleges that the defendants’ notice of default and trustee’s sale slandered Hines’s valid title.
Dkt. 30 at 26–27. Defendants move for summary judgment on grounds that Hines has no evidence that
defendants acted falsely or maliciously and that Hines lost a specific sale as a result of defendants’
conduct. Dkt. 38 at 32–33.
Under Texas law, “‘[S]lander of title’ is defined as a false and malicious statement made in
disparagement of a person’s title to property which causes special damages.” Elijah Ragira/VIP Lodging
Grp., Inc. v. VIP Lodging Grp., Inc., 301 S.W.3d 747, 758 (Tex. App.—El Paso 2009, no pet.). The
necessary elements are “the uttering and publishing of disparaging words that were false and malicious,
that special damages were sustained, and that the injured party possessed an interest in the property
disparaged. . . . Further, the complaining party must demonstrate the loss of a specific sale.” Id. at 759
(citation omitted).
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Here, the pleading and proof fall far short of establishing a slander of title claim. Hines has not
stated any facts, nor does the evidence show, that defendants made any false or malicious statement
regarding their authority to foreclose. See Storm Assocs., Inc. v. Texaco, Inc., 645 S.W.2d 579, 588 (Tex.
App.—San Antonio 1982) (“A claim of title does not constitute malice where the claim is made under
color of title or upon reasonable belief that parties have title to the property acquired.”), aff’d sub nom.
Friedman v. Texaco, Inc., 691 S.W.2d 586 (Tex. 1985). Hines has also not alleged that she lost a specific
sale of her home to support a slander of title claim. Elijah Ragira, 301 S.W.3d at 759. Indeed, she
alleges just the opposite—that the defendants’ misconduct should lead the court to “quiet title to the
property in [her] name.” Dkt. 30 at 5 ¶ 14. For these reasons, summary judgment is granted on Hines’s
cause of action for slander of title.
E.
Quiet Title
Hines alleges that no defendant holds a perfected and secured claim to her home, and thus the
court should quiet title in her name and enjoin defendants from asserting any adverse interest in the home.
Dkt. 30 at 27–28. Defendants seek dismissal of this claim on grounds that Hines cannot show a superior
interest in the real property. The court agrees with defendants.
A claim for quiet title “‘enable[s] the holder of the feeblest equity to remove from his way to legal
title any unlawful hindrance having the appearance of better right.’” Bell v. Ott, 606 S.W.2d 942, 952
(Tex. Civ. App.—Waco 1980, writ ref’d n.r.e.) (quoting Thomson v. Locke, 1 S.W. 112, 115 (Tex.
1886)). “[T]he plaintiff has the burden of supplying the proof necessary to establish his superior equity
and right to relief.” Hahn v. Love, 321 S.W.3d 517, 531 (Tex. App.—Houston [1st Dist.] 2009, pet.
denied) (emphasis added). The effect, therefore, of a suit to quiet title is to establish that the defendant’s
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claim to title is “invalid or ineffective.” Gordon v. W. Houston Trees, Ltd., 352 S.W.3d 32, 42 (Tex.
App.—Houston [1st Dist.] 2011, no pet.).
As a matter of law, Hines cannot demonstrate a superior right to relief. Defendants’ claimed
authority to foreclose is valid, and this fact precludes Hines’s suit to quiet title. Hines’s quiet title claim
is dismissed with prejudice.
F.
Rescission
Hines contends that the court should rescind the note and accompanying documents due to the
defendants’ misconduct. Defendants respond that although it is unclear whether Hines is seeking
rescission under common-law principles of equity or under the Truth in Lending Act (“TILA”), her
request fails as a matter of law on either ground. Again, the court agrees with defendants.
First, if Hines’s request is premised on general principles of equity, she must come into the court
with clean hands. Vill. Med. Ctr., Ltd. v. Apolzon, 619 S.W.2d 188, 191 (Tex. Civ. App.—Houston [1st
Dist.] 1981, no writ). “The doctrine of unclean hands ‘closes the doors of a court of equity to one tainted
with inequitableness or bad faith relative to the matter in which he seeks relief, however improper may
have been the behavior of the defendant.’” Condom Sense, Inc. v. Alshalabi, 390 S.W.3d 734, 762 (Tex.
App.—Dallas 2012, no pet.) (quoting Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S.
806, 814, 65 S. Ct. 993 (1945)). Hines does not dispute that she is in default or that she has not tendered
the mortgage payments due. Accordingly, any claim for equitable rescission is dismissed with prejudice.
Second, assuming Hines is seeking rescission under TILA, that claim is subject to a three-year
statue of repose that cannot be equitably tolled. 15 U.S.C. § 1635(f); Beach v. Ocwen Fed. Bank, 523
U.S. 410, 419, 118 S. Ct. 1408 (1998). The loan documents show that Hines executed the note and deed
15
on October 10, 2006. See Dkt. 38, Exs. A, B. Because Hines filed suit in this case on January 11, 2013,
more than six years later, her TILA rescission claim is dismissed.
G.
Violation of TILA/HOEPA
Hines claims in her eighth cause of action that defendants violated TILA and the Home
Ownership and Equity Protection Act (“HOEPA”)5 by not making certain required disclosures “and not
taking into account the intent of [Congress] in approving this statute which was to fully inform home
buyers of the pros and cons of adjustable rate mortgages in a language (both written and spoken) that they
can understand and comprehend; and advise them to compare similar loan products with other lenders.”
Dkt. 30 at 29–30 ¶ 126. Defendants respond that this claim is not properly pled and barred by limitations.
The court agrees that Hines’s TILA claim is untimely.
As a threshold matter, the court has already dismissed Hines’ TILA claim for equitable relief,
namely rescission. See Part III.F, supra. By contrast, TILA claims for money damages are subject to a
one-year statute of limitations that accrues on the date of the alleged nondisclosure. 15 U.S.C. § 1640(e).
The Fifth Circuit has held that the mere nondisclosure of required information is insufficient to toll the
statute. Moor v. Travelers Ins. Co., 784 F.2d 632, 633 (5th Cir. 1986) (“To clothe himself in the
protective garb of the tolling doctrine, a plaintiff must show that the defendants concealed the reprobated
conduct and despite the exercise of due diligence, he was unable to discover that conduct.”); Kelley v.
Galveston Autoplex, 196 F.R.D. 471, 478 (S.D. Tex. 2000) (explaining that “fraudulent conduct, beyond
the nondisclosure itself, is necessary to permit the one-year period to be equitably tolled”). Here, Hines’s
5
Congress passed HOEPA in 1994 as an amendment to TILA, and it provides additional disclosure obligations for
lenders who issue high-cost mortgage loans. In re Williams, 330 B.R. 534, 537 n.7 (Bankr. M.D. La. 2005). Because HOEPA
and TILA share the same statute of limitations, the court will refer to the combined legislation as “TILA” for purposes of its
limitations analysis. 15 U.S.C. § 1635(f); id. § 1640(e); Lechner v. Citimortgage, Inc., No. 4:09-cv-302-Y, 2009 W L
2356142, at *4 (N.D. Tex. July 29, 2009).
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pleading and the facts show that she filed her case more than six years after the closing of her loan, and
she also has not alleged or shown sufficient facts to support tolling of the limitations period. Hines’s
TILA claim is dismissed with prejudice.
H.
Violation of RESPA
Hines contends that defendants’ practice of exchanging certain payments among themselves was
fraudulent and violated the Real Estate Settlement Procedures Act (“RESPA”). Dkt. 30 at 31–32; id. at
32 ¶ 138. RESPA provides that “[n]o person shall give and no person shall accept any fee, kickback, or
thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to
or a part of a real estate settlement service involving a federally related mortgage loan shall be referred
to any person.” 12 U.S.C. § 2607(a). RESPA also prohibits any person from giving or accepting “any
portion, split, or percentage of any charge made or received for the rendering of a real estate settlement
service in connection with a transaction involving a federally related mortgage loan other than for
services actually performed.” Id. § 2607(b). RESPA claims under § 2607 are subject to a one-year
statute of limitations, which begins to run from the date of closing. See 12 U.S.C. § 2614; Snow v. First
Am. Title Ins. Co., 332 F.3d 356, 359 & n.3 (5th Cir. 2003) (affirming dismissal of plaintiffs’ RESPA
claims as time-barred and explaining that the statute of limitations begins to run when the violation is
alleged to have occurred).
As explained above, the evidence shows that Hines closed on her home loan on October 10, 2006.
She filed the instant suit on January 11, 2013, more than six years after the violation is alleged to have
occurred. Hines has not offered any evidence supporting tolling, if any, and thus her RESPA claim is
barred. Summary judgment is granted on Hines’s RESPA claim.
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I.
Miscellaneous Allegations
Hines alleges, for her tenth cause of action, that she and her homestead are protected by three
statutes: Texas Property Code § 51.002, Texas Business and Commerce Code § 1.201(21), and Article
XVI, section 50 of the Texas Constitution. Beyond this general statement, however, Hines fails to state
any facts, or provide any proof for that matter, to support the element of damages related to the alleged
violations of these statutes. Without any evidentiary support, these claims are dismissed with prejudice.
IV. CONCLUSION
For the foregoing reasons, defendants’ motions (Dkt. 38) are GRANTED IN PART & DENIED
IN PART. Hines’s claims are DISMISSED WITH PREJUDICE, and defendants’ request for
attorneys’ fees and costs is DENIED WITHOUT PREJUDICE. The court will decide the issue of
attorneys’ fees when it adjudicates defendants’ counterclaim. Defendants’ motion for judgment on the
pleadings (Dkt. 46) is DENIED AS MOOT.
It is so ORDERED.
Signed at Houston, Texas on October 28, 2013.
___________________________________
Gray H. Miller
United States District Judge
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