Fowler et al v. U.S. Bank, Natioanl Association, Successor Trustee et al
Filing
16
MEMORANDUM OPINION AND ORDER. (Signed by Judge Sim Lake) Parties notified.(rosaldana, 4)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
TIMOTHY FOWLER and CONNIE
FOWLER,
§
§
§
Plaintiffs,
§
§
v.
§
§
U.S. BANK, NATIONAL
ASSOCIATION, Successor Trustee
to BANK OF AMERICA, N .A., as
Successor Trustee to LASALLE
BANK, N.A. as Trustee for the
MERRILL LYNCH FIRST FRANKLIN
MORTGAGE LOAN TRUST, MORTGAGE
LOAN ASSET-BACKED CERTIFICATES,
SERIES 2007-FF1; BANK OF
AMERICA, N.A.; FIRST FRANKLIN,
a Division of NATIONAL CITY
BANK; and KH FINANCIAL, L.P.,
Defendants.
§
§
§
§
§
§
§
§
§
§
§
§
§
CIVIL ACTION NO. H-13-3241
§
MEMORANDUM OPINION AND ORDER
Plaintiffs Timothy and Connie Fowler
this action against defendants U.S.
Bank,
("Plaintiffs")
brought
National Association,
Successor Trustee to Bank of America, N. A., as Successor Trustee to
LaSalle Bank, N.A. as Trustee for the Merrill Lynch First Franklin
Mortgage
Loan
Series 2007-FFl
America")
Trust,
Mortgage
("U.S.
(collect i vely,
Bank"),
Loan
Asset-Backed
Bank of America,
"Defendants"),
Certificates,
N.A.
("Bank of
First Franklin Financial
Corporation ("First Franklin"), and KH Financial LP ("KH") in the
234th Judicial District Court of Harris County, Texas, where it was
filed under Cause No. 2013-65260.
Defendants
America removed the action to this court. 1
court
is Defendants U. s.
Bank,
u.s.
Bank and Bank of
Pending before the
National Association,
Successor
Trustee and Bank of America, N.A.'s Motion to Dismiss Pursuant to
Federal Rule of Civil
(Docket Entry No.6).
Procedure 12 (b) (6)
("Motion to Dismiss")
For the reasons explained below, the Motion
to Dismiss will be granted in part and denied in part.
I.
Factual and Procedural Background
On November I, 2006, Plaintiffs executed a promissory note and
deed of trust in favor of First Franklin to finance the purchase of
a home. 2
the
In order to obtain the mortgage loan Plaintiffs utilized
services
of
KH,
a
mortgage
broker. 3
The
Deed
of
Trust
identified First Franklin as the "Lender" and Mortgage Electronic
lDefendant First Franklin consented to the removal. Defendant
First Franklin Financial Corporation's Notice of Consent to
Removal, Docket Entry No.8. Defendants' Amended Notice of Removal
alleges that "Defendant KH Financial, LP is a now-defunct Illinois
limited partnership" that has not been properly served and has not
appeared in this litigation.
Amended Notice of Removal, Docket
Entry No.3, p. 3 ~ 3, p. 5 ~ 13.
(Page citations are to the
pagination imprinted at the top of the page by the federal court's
electronic filing system.)
20 r iginal Petition, Application for Temporary Restraining
Order, Temporary Injunction and Request for Disclosures ("Original
Petition"), attached as Exhibit B-1 to Notice of Removal, Docket
Entry No. I-I, p. 10 ~ 14; Adjustable Rate Note ("Note"), Exhibit A
to Original Petition, Docket Entry No. 1-2, p. 2; Deed of Trust,
Exhibit B to Original Petition, Docket Entry No. 1-2, p. 7.
30 r iginal
Petition, attached as Exhibit B-1 to
Removal, Docket Entry No. I-I, p. I, pp. 10-11 ~ 17.
-2-
Notice
of
Registration
Systems
("MERS")
as
the
"nominee
for
Lender
and
Lender's successors and assigns" and "the beneficiary under this
Security Instrument.,,4
MERS assigned the Deed of Trust to U.S.
Bank on December 10, 2012. 5
A foreclosure sale was scheduled for
November 5, 2013. 6
Plaintiffs filed their Original Petition in the 234th Judicial
District
Court
of Harris
County,
Texas,
on October 29,
2013. 7
Defendants removed the case to this court on November 4, 2013. 8 On
November
12,
2013,
Defendants
filed
their Motion
Plaintiffs responded on December 3, 2013. 10
to
Dismiss. 9
Defendants replied on
December 23, 2013. 11
4Deed of Trust, Exhibit B to Original Petition, Docket Entry
No. 1- 2, p. 7.
5Assignment of Deed of Trust,
Dismiss, Docket Entry No.6, p. 57.
Exhibit
B-2
to
Motion
to
6Notice of Foreclosure Sale, Exhibit C to Original Petition,
Docket Entry No. 1-2, p. 22.
70 r iginal Petition, attached as
Removal, Docket Entry No. 1-1.
Exhibit
8Notice of Removal, Docket Entry No.
Removal, Docket Entry NO.3.
1i
B-1
to
Notice
of
Amended Notice of
9Motion to Dismiss, Docket Entry No.6.
10Plaintiffs' Response to Defendants U.S. Bank, National
Association, Successor Trustee and Bank of America, N.A.'s Motion
to Dismiss Pursuant to Federal Rule of Civil Procedure 12 (b) (6)
("Response"), Docket Entry No.9.
llDefendants' Reply to Plaintiffs' Response
Motion to Dismiss ("Reply"), Docket Entry No. 12.
-3-
to Defendants'
II.
A motion
to
Applicable Law
dismiss
Procedure 12 (b) (6)
pursuant
to
Federal
Rule
of
Civil
for failure to state a claim for which relief
may be granted tests the formal sufficiency of the pleadings and is
"appropriate when a defendant attacks the complaint because it
fails
to
state
a
legally
cognizable
Ramming
claim."
United States, 281 F.3d 158, 161 (5th Cir. 2001).
v.
The court must
accept the factual allegations of the complaint as true, view them
in a light most favorable to the plaintiff, and draw all reasonable
inferences in the plaintiff's favor.
Id.
"When a federal court reviews the sufficiency of a
complaint, before the reception of any evidence either by
affidavit or admissions, its task is necessarily a
limited one. The issue is not whether a plaintiff will
ultimately prevail but whether the claimant is entitled
to offer evidence to support the claims."
Swierkiewicz v. Sorema N.A., 122 S. Ct. 992,
997
Scheuer
(1974)).
v.
Rhodes,
94
S.
Ct.
1683,
1686
(2002)
(quoting
To
avoid
dismissal a plaintiff must allege "enough facts to state a claim to
relief that is plausible on its face."
Twombly, 127 S. Ct. 1955, 1974 (2007).
Bell Atlantic Corp.
v.
Plausibility requires "more
than an unadorned, the-defendant-unlawfully-harmed-me accusation."
Ashcroft v.
Iqbal,
129 S.
Ct.
1937,
1949
(2009).
"A claim has
facial plausibility when the plaintiff pleads factual content that
allows
the
court
to
draw
the
reasonable
inference
defendant is liable for the misconduct alleged."
complaint
pleads
facts
that
are
-4 -
merely
consistent
that
the
"Where a
with
a
defendant's
liability,
possibility
and
The
127 S.
court
conclusions. "'
of
of
the
line
to
relief.
entitlement
"'not
between
Id.
/I
(internal quotation marks
accept
as
true
inferences,
factual
Chevron Corp.,
(quoting Plotkin v.
allegation
short
at 1966)
will
Ferrer v.
(5th Cir. 2005)).
relief./I
Ct.
unwarranted
allegations,
Cir. 2007)
stops
plausibility
(quoting Twombly,
omitted) .
it
conclusory
484 F.3d 776,
IP Axess Inc.,
legal
or
780
407 F.3d 690,
(5th
696
"[D] ismissal is proper if the complaint lacks an
regarding
a
required
element
necessary
to
obtain
Torch Liquidating Trust ex rel. Bridge Assocs. L.L.C. v.
Stockstill, 561 F.3d 377, 384
(5th Cir. 2009).
When considering a motion to dismiss courts are generally
"limited to the complaint, any documents attached to the complaint,
and any documents
attached to
the
motion
to
dismiss
central to the claim and referenced by the complaint."
Fund V (U.S.)
Cir. 2010)
I
L.P. v. Barclays Bank PLC,
that
are
Lone Star
594 F.3d 383, 387
(5th
(citing Collins v. Morgan Stanley Dean Witter, 224 F.3d
496, 498-99 (5th Cir. 2000)).
In addition, "it is clearly proper
in deciding a 12(b) (6) motion to take judicial notice of matters of
public record."
Cir. 2007)
Cir.1994))
Norris v. Hearst Trust, 500 F.3d 454, 461 n.9 (5th
(citing Cinel v. Connick, 15 F.3d 1338, 1343 n.6
(5th
When a party presents "matters outside the pleadings"
wi th a Rule 12 (b) (6)
motion to dismiss,
the court has "complete
discretion" to either accept or exclude the evidence for purposes
of the motion to dismiss.
Isquith ex rel. Isquith v. Middle South
-5-
Utilities, Inc., 847 F.2d 186, 194 n.3
"[i]f.
(5th Cir. 1988).
However,
. matters outside the pleadings are presented to and not
excluded by the
court,
the motion must
be
treated as
one
for
summary judgment under Rule 56/1 and "all parties must be given a
reasonable
opportunity
to
pertinent to the motion./1
present
all
the
material
that
is
Fed. R. civ. P. 12(d).
Plaintiffs have attached copies of the Note, Deed of Trust,
and
other
document
documents
that
is
considered part
of
to
their
attached
the
to
780.
Accordingly,
a
complaint
12 (b) (6) dismissal proceeding.
at
Original
the
/I
"A
Petition.
complaint
and may
as
be
an
written
exhibit
considered
in
is
a
Ferrer v. Chevron Corp., 484 F. 3d
court
may
consider
these
documents
without converting the motion to dismiss to a motion for summary
judgment.
Attached to Defendants'
Motion to Dismiss
lS
a copy of an
Assignment of Deed of Trust recorded in the Official Public Records
of Real Property of Harris County, Texas, on December 18, 2012.12
Because this document is a matter of public record of which the
court may take judicial notice, the court concludes that it can be
considered without converting the Motion to Dismiss to a motion for
summary judgment.
Also attached to Defendants' Motion to Dismiss
are a Notice of Default from Bank of America to Plaintiffs dated
12Assignment of Deed of Trust,
Dismiss, Docket Entry No.6, p. 57.
-6-
Exhibit
B-2
to
Motion
to
March 13, 2013,13 and a Notice of Rescission of Acceleration of Loan
Maturity.14
Because
the
Notice
of
Default
is
referenced
in
Plaintiffs' Original Petition 15 and central to Plaintiffs' claims,
it can be considered without converting the Motion to Dismiss to a
motion for summary judgment.
The Notice of Rescission, however, is
"outside the pleadings," and the court will exclude it for purposes
of the Motion to Dismiss.
Isquith,
III.
Plaintiffs
their Original
injunctive
Plaintiffs'
avoid
allege
fifteen
substantive
Defendants
claims. 17
initially filed
Analysis
Petition in addition to
relief .16
dismissal
847 F.2d at 194 n.3.
by
have
in Texas
standard should apply."IB
that
moved
However,
to
action in
dismiss
Plaintiffs
"[b] ecause
state court,
of
seeking declaratory and
In their Response,
arguing
causes
this
all
of
attempt
to
lawsuit
was
the Texas state pleading
"because pleading requirements
13March 13, 2013, Correspondence from Bank of America to
Timothy Fowler & Connie Fowler ("Notice of Default"), Exhibit A-I
to Motion to Dismiss, Docket Entry No.6, p. 27.
14Notice of Rescission of Acceleration of Loan Maturity,
Exhibit B-3 to Motion to Dismiss, Docket Entry No.6, p. 60.
15See Original Petition, attached as Exhibit B-1 to Notice of
Removal, Docket Entry No. I-I, p. 8 ~ 2, p. 17 ~ 35, p. 35
~ 112 (d) .
16See id. at 17-40
~~
40-129.
17Motion to Dismiss, Docket Entry NO.6.
1BResponse, Docket Entry No.9, pp. 3-4 ~ 12.
-7-
are purely matters of federal law, the Court looks to the law of
this Court and this Circuit for the controlling Rule 12(b) (6) and
Rule 9(b) standards."
Berry v. Bryan Cave LLP, No. 3:08-CV-2035-B,
2010 WL 1904885, at *3
"'Even in cases
(N.D. Tex. May 11, 2010).
removed from state court, the adequacy of pleadings is measured by
Genella v. Renaissance Media,
the federal rules.'"
650,
652-53
(5th
Cir.
2004)
(quoting Varney v.
115 F. App'x
R.J.
Reynolds
Tobacco Co., 118 F. Supp. 2d 63, 67 (D. Mass. 2000)).
Defendants argue in their Reply that
"plaintiffs'
Response
fails to assert any opposition to Defendants' Motion to Dismiss"
with regard to several claims and request that the court "grant
Defendants'
However,
Motion
to
Dismiss
those
claims
as
unopposed. "19
"Rule 12 does not by its terms require an opposition;
failure to oppose a 12 (b) (6) motion is not in itself grounds for
granting the motion."
Servicios Azucareros de Venezuela, C.A. v.
John Deere Thibodeaux,
Inc.,
702 F.3d 794,
806
(5th Cir.
2012).
"Rather, a court assesses the legal sufficiency of the complaint."
rd.
Accordingly, the court will look to the Original Petition to
determine whether dismissal is warranted.
A.
Claims that Fail for Factual Insufficiency
A majority
of
Plaintiffs'
claims
consist
of
allegations
involving KH' s conduct as broker in securing Plaintiffs' mortgage. 20
19Reply, Docket Entry No. 12, p. 2
~
1.
20See Original Petition, attached as Exhibit B-1 to Notice of
Removal, Docket Entry No.1-I, pp. 17-30 ~~ 40-94.
-8-
Careful review of Plaintiffs' Original Petition reveals no factual
allegations against u.s.
Plaintiffs'
claims
for
Bank or Bank of America with regard to
negligent
misrepresentation,
breach
of
fiduciary duty, breach of agent-principal relationship and suit for
accounting,
violations of
§§
1746 (b) (9)
and
(24)
of
the Texas
§§
1750(a) (3)
Deceptive Trade Practices Act ("DTPA"), violations of
of the DTPA, or violations of the Real Estate Settlement Procedures
Act
("RESPA").
Because Plaintiffs have not pleaded any factual
content that would allow the court to draw a reasonable inference
that Defendants are liable for the misconduct alleged with regard
to these alleged causes of action,
dismissal is appropriate for
failure to state a claim as to these Defendants.
See Iqbal, 129
S. Ct. at 1949.
Plaintiffs also fail to make any factual allegations against
Bank of America with regard to their claims for common-law fraud,
fraud by non-disclosure, and statutory fraud under
Texas Business and Commerce Code.
§
27.01 of the
Accordingly, Plaintiffs' fraud
claims against Bank of America will be dismissed.
Although
Plaintiffs
do
not
make
any
factual
against u.S. Bank with regard to their fraud claims,
allegations
they argue
that u.S. Bank is liable for First Franklin's conduct during the
original loan transaction as First Franklin's "alleged successorin-interest.
21Id.
1121
at 21
However, the only alleged connection between u.S.
~
56.
-9-
Bank and First Franklin is the transfer of the Note and Deed of
Trust.
loan
Plaintiffs do not allege that
origination
process
or
in
u.s.
the
promissory note or the deed of trust.
Nat.
Trust Co., No. H-12-1630,
Bank was involved in the
execution
of
either
the
Cf. Husk v. Deutsche Bank
2013 WL 960679,
at *5
(S.D. Tex.
Neither the Note nor the Deed of Trust contains
Mar. 12, 2013)
any provision in which U. S.
Bank agrees
to be
liable
for
the
misconduct of First Franklin.
Moreover, Plaintiffs have not cited
-- and the court has not found -- a single case holding that under
Texas law a transferee of a promissory note is vicariously liable
for the transferor's
origination.
the
loan
In Belanger v. BAC Home Loans Servicing, L.P.,
F. Supp. 2d 873
law a
actions taken in the context of
839
(W.D. Tex. 2011), the court held that under Texas
transferee could not be held liable for the transferor's
negligence in approving a loan without securing accurate financial
information.
Id. at 876-77.
In Belanger the court relied on the
fact that the transferee had not been involved with the origination
of the home loan.
to
Plaintiffs'
disclosure,
Id. at 877.
actions
for
Belanger applies with equal force
common-law
and statutory fraud.
fraud,
fraud
by
non-
"The determining factor is not
that the transferor engaged in a certain type of misconduct
whether it be fraud or negligence -- but that the transferee had no
role in the loan origination and no contact with the borrower when
the alleged wrongdoing was committed."
*5.
Husk,
2013 WL 960679, at
Accordingly, the court concludes that U.S. Bank cannot be held
-10-
liable
for
First
Franklin's
involvement with the loan.
conduct
before
U. s.
Bank
had
any
Plaintiffs have therefore failed to
state a plausible claim for relief against
u.s.
Bank with regard to
their fraud claims.
B.
Remaining Claims
The remaining substantive causes of action in the "Causes of
Action" section of Plaintiffs' Original Petition are:
for violations of
Truth
§§
in
§
Lending
163 9 b ( c )
and
1746 (b) (12) of the DTPA;
Act
for
("TILA")
164 1 (g);
(3 )
(2) claims under the
violations
conversion;
(1) a claim
(4)
of
15
money
received; and (5) suit to remove cloud and quiet title.
U.S.C.
had
and
Plaintiffs
also seek a declaratory judgment for violations of a consent order
to which Bank of America is a party in addition to seeking other
declaratory and injunctive relief.
1.
Plaintiffs' Claims Under
§
1746 (b) (12) of the DTPA
Plaintiffs argue that Defendants violated
§
1746 (b) (12) of the
DTPA by representing that they had the right to receive payments
under the Note and the power to foreclose under the Deed of Trust
without proving that either the Note or Deed of Trust was ever
assigned to them. 22
Defendants argue that Plaintiffs' claims must
fail because Plaintiffs are not consumers under the DTPA. 23
22Id. at 24-25
~~
69-70.
23Motion to Dismiss, Docket Entry No.6, pp. 9-11
-11-
~~
14-17.
'(1)
"The elements of a DTPA claim are:
(2)
consumer,
the
defendant
engaged
in
the plaintiff is a
false,
misleading,
or
deceptive acts, and (3) these acts constituted a producing cause of
the consumer's damages.'"
No.
H-12-2847,
Felchak v. JP Morgan Chase Bank, N.A.,
2013 WL 1966972,
at *3
(S.D.
Tex.
May 10,2013)
(quoting Doe v. Boys Clubs of Greater Dallas, Inc., 907 S.W.2d 472,
478
(Tex.
1995)).
"To be a
'consumer' under the DTPA,
a person
'must seek or acquire goods or services by lease or purchase' and
'the goods or services sought or acquired must form the basis of
[that person's]
complaint.'"
rd.
(quoting Fix v. Flagstar Bank,
FSB, 242 S.W.3d 147, 159 (Tex. App.-Fort Worth 2007, pet. denied)).
"Usually a loan transaction cannot be challenged under the DTPA
because the plaintiff sought or acquired money, which is not a good
or a service."
3095,
2013
Whittier v. Ocwen Loan Servicing, LLC, No. H-12-
WL 5425294,
at
*7
(S.D.
Tex.
Sept.
25,
2013)
"A
mortgage loan is not within the DTPA when the loan, rather than the
property sought to be purchased,
complaint."
rd.
is the basis of the plaintiff's
(citing Miller v. BAC Home Loans Servicing, L.P.,
726 F.3d 717, 725-26 (5th Cir. 2013).
Plaintiffs argue that they are consumers under the DTPA "based
on
goods"
because
their
mortgage
was
a
"purchase-money
mortgage loan" rather than a home equity loan.24
Plaintiffs may have qualified as
However, while
consumers with regard to the
24Response, Docket Entry No.9, pp. 5-6
-12-
home
~~
19-20.
original
loan
transaction,
their
"present
DTPA
claim
is
not
premised on any deceptive act related to the past original loan
transaction."
2013
WL
Davis v. Wells Fargo Bank, N.A.,
5488448,
at
*13
(S.D.
Tex.
6:11-CV-00047,
Sept.
2014
6-11-CV-47,
30,
585403
2013),
No.
Feb. 14, 2014).
Instead, Plaintiffs "complain of 'acts occurring
-- Defendants'
(S.D.
on
reconsideration,
years after the financing transaction'
WL
No.
Tex.
subsequent
loan servicing and foreclosure activities -- that are incidental to
the
original
purchasing
CitiMortgage,
Id.
objective."
Inc., No. H-11-2879,
(quoting
Gatling v.
2012 WL 3756581, at *13
(S.D.
Tex. Aug. 28, 2012)).
Because the basis of Plaintiffs'
claim is subsequent loan
servicing and foreclosure activities,
rather than the goods or
services acquired in the original loan transaction, Plaintiffs are
not consumers under the DTPA with regard to this claim.
("The transactions that are the focus of Plaintiffs' complaint are
not transactions in which Plaintiffs sought to acquire goodsi those
goods (the real estate) were previously acquired in the original
loan transactions.")
No. H-12-3422,
("Because
i
see also Hutchinson v.
2013 WL 5657822,
the
basis
of
at *5
plaintiff's
Bank of Am.,
N .A. ,
(S.D. Tex. Oct. 16, 2013)
claim
is
the
loan
and
foreclosure, and not the property for which the loan was acquired,
plaintiff has not created a fact question as to his status as a
consumer.")
claim,
i
Gatling 2012 WL 3756581, at *13
however,
is
not
premised
-13-
-----"
-----------"--,--""
on
("[Plaintiff's DTPA
[Defendant's]
allegedly
deceptive acts 'related to financing the purchase of [her] house,
but rather,
[she] complains the Bank wrongfully foreclosed on [her]
property. '
The DTPA does not
(quoting Brown v.
Bank of Galveston,
apply to
N.A.,
such a
claim."
930 S.W.2d 140,
144
(Tex. App.-Houston [14th Dist.] 1996), aff'd on other grounds, 963
S.W.2d
511
(Tex.
1998)));
Yetiv
v.
Chase
Home
Fin.
LLC,
No. 4:11-CV-01250, 2012 WL 112597, at *7 (S.D. Tex. Jan. 11, 2012)
(" [Plaintiff] must still 'demonstrate [that] his purchase of a home
forms the basis of his complaint' and that [Defendant's]
violations of
the DTPA arose out of the
[Plaintiff] purchased the home.
as
[Plaintiff's]
allegations
'alleged
transaction in which'
That requirement is not met here,
are not
based on the
transaction
through which he purchased the home or even the home itself."
(quoting
Chapa
v.
Chase
Home
Fin.
LLC,
No.
C-10-359,
2010
WL 5186785, at *9 (S.D. Tex. Dec. 15, 2010))).
Plaintiffs also argue that they are consumers under the DTPA
"based on services" because they "acquired mortgage loan services
the moment [they] began making payments; and the mortgage servicer
was compensated with a portion of every payment
[they]
made."25
However, "[s]ervicing a mortgage is not a service under the DTPA."
Khan v. Wells Fargo Bank, N.A., No 4:12-1116, 2013 WL 5323098, at
*4
(S.D.
Tex.
Sept.
20,
2013)
(citing Calvino v.
Conseco Fin.
Servicing Corp., No. A-12-CA-577-SS, 2013 WL 4677742, at *8 (W.D.
25Id. at 5
~
18; see also id. at 5-6
-14-
~
19.
Tex. Aug. 20, 2013)); see also Taylor v. Ocwen Loan Servicing, LLC,
No.
H-12-2929,
(" [Plaintiff]
2013 WL 3353955,
contends
that
she
at *7
is a
'received mortgage loan services from
with the purchase of her home.
rejected
an
identical
Accordingly,
July 3,
2013)
consumer because she has
[Servicer]'
in connection
In
Riverside.
If
603 S.w.2d 169, 175
(citing
(Tex. 1980))).
because Plaintiffs are not consumers under the DTPA,
their claims under
2.
Tex.
But the Texas Supreme Court
argument
Riverside Nat. Bank v. Lewis,
(S.D.
§
1746 (b) (12) will be dismissed.
Plaintiffs' Claims Under TILA
Plaintiffs allege two causes of action under TILA.
under 15 U.S.C.
§
The first
1639b(c) relates to the payment of a Yield Spread
Premium ("YSp lf ) from First Franklin to KH in connection with the
origination of Plaintiffs'
U.S.C.
§
1641 (g)
mortgage loan.
involves Defendants'
The second under 15
alleged failure to notify
Plaintiffs when the mortgage was assigned to U.S. Bank.
(a)
Plaintiffs' Claims Under 15 U.S.C.
§
1639b(c)
Plaintiffs allege that "Broker and Original Lender's conduct
in connection with the YSP violates 15 USC
§
1639B(c) because such
conduct amounts to a steering incentive for which this statute was
designed to prohibit. lf26
Plaintiffs seek to hold U.S. Bank liable
260riginal Petition, attached as Exhibit
Removal, Docket Entry No. I-I, pp. 28-29 ~ 87.
-15-
B-1
to Notice of
as
original
the
lender's
successor- in- interest. ({27
"alleged
Defendants argue that Plaintiffs' claims are barred by the threeyear statute of limitations for claims under
U.S.C.
§
§
1639b(c) .28
See 15
1640 (e) .
Under
§
1640 (e)
wi th respect
"[a] ny action
to
any
violation of [§ 1639b] may be brought in any United States district
court, or in any other court of competent jurisdiction, before the
end of the 3-year period beginning on the date of the occurrence of
the violation. ({
However,
§
1640 (k) (1) provides an exception to the
three-year statute of limitations for claims brought in the context
of a foreclosure:
Notwi thstanding any other provision of law, when a
credi tor, assignee, or other holder of a residential
mortgage loan or anyone acting on behalf of such
creditor, assignee, or holder, initiates a judicial or
nonjudicial foreclosure of the residential mortgage loan,
or any other action to collect the debt in connection
with such loan, a consumer may assert a violation by a
creditor of paragraph (1) or (2) of section 1639b(c) of
this title.
. as a matter of defense by recoupment or
set off without regard for the time limit on a private
action for damages under subsection (e).
15 U.S.C.
§
foreclosure
1640 (k) (1).
of
Because Defendants initiated a nonjudicial
Plaintiffs'
mortgage
loan,
Plaintiffs
would be
entitled to assert their claims under
§
1639b(c) notwithstanding
the three-year statute of limitations.
However, Plaintiffs' claims
27Id. at 29 ~ 89. Assignees such as U.S. Bank are potentially
liable for the TILA violations of assignors under 15 U.S.C. § 1641.
28Motion to Dismiss, Docket Entry No.6, p. 12
-16-
~
20.
fail because
§
1639b(c)
is not applicable to their 2006 mortgage
loan transaction.
Section 1639b(c) was enacted in 2010 as part of the Dodd-Frank
Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act"),
Pub.
L.
No.
111-203,
1403,
§
124
Stat.
Section 1403 of the Dodd-Frank Act amended
codified at 15 U.S.C.
1639b.
2139-40
(2010).
129B of TILA, which is
§
Dodd-Frank Act
1403, 124 Stat. at
§
The Dodd-Frank Act provided that the effective date for
2139.
§
§
1376,
1639b would be established by the rules implementing the act.
Dodd-Frank
Act
§
1400,
124
Stat.
at
2136
("[A]
section,
or
provision thereof, of this title shall take effect on the date on
which
the
final
regulations
implementing
such
section,
or
provision, take effect.") .
"Historically, Regulation Z of the Board of Governors of the
Federal Reserve System (Board),
TILA."
(Dec.
12 CFR part 226, has implemented
Truth in Lending (Regulation Z), 76 Fed. Reg. 79768, 79768
22,
2011)
The
Board
published
originator compensation in 2010.
58509 (Sept. 24, 2010)
a
Truth in Lending,
(codified at 12 C.F.R.
the Board did not rely on
§
final
§
rule
on
loan
75 Fed. Reg.
226.36).
Although
1639b for authority to issue the rule,
it found the rule to be "consistent with" it.
rd. at 58509.
The
rule had an effective date of April I, 2011, and applied to "loan
originator
§
compensation
transactions
subject
to
[12
C.F.R.]
226.36(d) and (e) for which creditors receive applications on or
after April I,
2011."
Id. at 58530.
-17-
Furthermore,
"[c]ompliance
with the provisions of the final rule [was] not required before the
effective date./I
Id.
\\ [T] he Dodd-Frank Act transferred rulemaking authority for
TILA to the
[CFPB],
(Regulation Z),
§§
1062 -63,
effective July 21,
76 Fed. Reg.
124 Stat.
2011."
Truth in Lending
at 79768; see also Dodd-Frank Act,
at 20396-39; Designated Transfer Date,
Fed. Reg. 57252 (Sept. 20, 2010).
75
The CFPB published interim final
rules on December 22, 2011, that essentially recodified the Board's
loan
§
originator
1026.36.
rules
from
C.F.R.
226.36
§
to
12
C.F.R.
Truth in Lending (Regulation Z), 76 Fed. Reg. at 79768.
The CFPB did not rely on
rules.
12
§
1639b in issuing the
interim final
See id. at 79769-79771.
The CFPB proposed rules to implement
ln Lending Act
(Regulation Z);
Fed. Reg. 55272
(Sept. 7, 2012)
January 20,
§
1639b in 2012.
Truth
Loan Originator Compensation,
77
The final rules were issued on
2013,29 with an effective date of January 10, 2014. 30
29\\This final rule is issued on January 20, 2013, in accordance
with 12 CFR 1074.1. /I
Loan Originator Compensation Requirements
Under the Truth in Lending Act (Regulation Z), 78 Fed. Reg. at
11291. Under 12 C.F.R. 1074.1 a final CFPB rule is deemed issued
either when the rule is posted on the CFPB's website or when it is
published in the federal register, whichever is earlier.
The
original issuing document is available on the CFPB's website at
http://files.consumerfinance.gov/f/201301 cfpb final-rule loan-or
iginator-compensation.pdf.
30The CFPB later revised the effective date for certain
provisions of the rules to January 1, 2014. Amendments to the 2013
Mortgage
Rules
Under
the
Equal
Credit
Opportunity
Act
(Regulation
B) ,
Real
Estate
Settlement
Procedures
Act
(Regulation X) , and the Truth in Lending Act (Regulation Z) , 78
Fed. Reg. 60382 (Oct. 1, 2013)
-18-
Loan
Originator
Compensation
Requirements
Under
the
Truth
In
Lending Act (Regulation Z), 78 Fed. Reg. 11280 (Feb. 15, 2013)
Thus,
the
effective
date
of
15
U.S.C.
1639b(c)
§
was
January 10, 2014, although the conduct complained of by Plaintiffs
was also prohibited under 12 C.F.R.
2011.
226.36 as early as April 1,
§
Plaintiffs cite no authority, and the court is not aware of
any,
to
suggest
that
15
U.S.C.
1639b(c)
§
or
the
CFPB's
implementing regulations were intended to apply retroactively to
their 2006 mortgage loan.
"The operative presumption, after all,
is that Congress intends its laws to govern prospectively only."
Vartelas
v.
Holder,
132
S.
Ct.
Carranza-De Salinas v. Holder,
In
our
1491
700 F.3d 768,
('" [T] he presumption against
rooted
1479,
retroactive
jurisprudence,
and
fairness
dictate
see
i
a
also
(5th Cir. 2012)
legislation is
legal
deeply
doctrine
(quoting Landgraf v. USI Film
Products, 114 S. Ct. 1483, 1497 (1994))).
of
772
embodies
centuries older than our Republic.'"
tions
(2012)
that
"'Elementary considera-
individuals
should
have
an
opportunity to know what the law is and to conform their conduct
accordingly'"
and
thus
"'the
legal
effect
of
conduct
should
ordinarily be assessed under the law that existed when the conduct
took place.
Landgraf,
r "
114 S.
Carranza-De
Ct.
at
Salinas,
1497).
'"
700
[T] he
F. 3d at
772
essential
determining whether a statute applies retroactively,
the
new
provision
attaches
new
completed before its enactment.'"
-19-
legal
consequences
Id. at 773
(quoting
inquiry'
in
'is whether
to
events
(quoting Vartelas,
132 S. Ct. at 1491).
Here, the alleged violation occurred when the
YSP was paid at the loan closing on November I, 2006. 31
basis to infer otherwise, the court will presume that
does not apply retroactively to Plaintiffs'
transaction.
Without any
§
1639b(c)
2006 mortgage loan
Accordingly, Plaintiffs' claims under
§
1639b(c) will
be dismissed. 32
(b)
Plaintiffs' Claims Under 15 U.S.C.
§
1641(g)
Plaintiffs allege that "U.s. Bank failed to give [them] proper
notice
of
its
ownership as
violation of 15 U.S.C.
§
a
new creditor wi thin 30
1641(g) .33
Section 1641 (g) (1)
days"
in
provides
31See Original Petition, attached as Exhibit B-1 to Notice of
Removal, Docket Entry No. I-I, pp. 11-12 ~~ 18-24, pp. 28-29
~~
86-90; U.s. Department of Housing and Urban Development
Settlement Statement, Exhibit D to Original Petition, Docket Entry
No. 1-2, p. 24.
32Plaintiffs do not appear to argue that Bank of America is
liable under § 1639b(c).
They make no factual allegations
concerning Bank of America and assert no theory of potential
liability.
The court has already concluded that § 1639b(c) does
not
apply to
Plaintiffs'
2006
mortgage
loan transaction.
Accordingly, the court concludes that to the extent that Plaintiffs
attempt to state a cause of action against Bank of America under
§ 1639b(c), they have failed to do so.
330r iginal Petition, attached as Exhibit B-1 to Notice of
Removal, Docket Entry No.1-I, p. 29 ~ 92. Unlike the transaction
giving rise to Plaintiffs' alleged § 1639b (c) violation, which
occurred prior to enactment of the relevant statute, the assignment
of Plaintiffs' mortgage in 2012 occurred after enactment of
§ 1641(g) in 2009.
See Helping Families Save Their Homes Act of
2 0 0 9 , Pub. L . No . 111 - 2 2 , § 4 04 , 12 3 S t at. 163 2 , 1658 ( 2 0 0 9) .
Section 1641 (g) "became effective immediately upon enactment on
May 20, 2009, and did not require the issuance of implementing
regulations.
Regulation Z; Truth in Lending, 75 Fed. Reg. 58489,
58489 (Sept. 24, 2010).
II
-20-
that "not later than 30 days after the date on which a mortgage
loan is sold or otherwise transferred or assigned to a third party,
the creditor that is the new owner or assignee of the debt shall
notify the borrower in writing of such transfer.1/
include the
identity,
address,
The notice must
and telephone number of the new
creditor; the date of the transfer; information on how to reach an
agent or party with authority to act on behalf of the new creditor;
the location of the place where the transfer of ownership of the
debt is recorded; and any other relevant information regarding the
15 U.S.C.
new creditor.
§
1641 (g) (1) (A) - (E) .
Defendants argue that Plaintiffs have failed to state a claim
under
§
"u.s.
1641(g) because of their allegations that
Bank and
Bank of America are not the assignees of [their] mortgage loan.
1/34
Defendants also argue that without an allegation regarding the date
of assignment, Plaintiffs cannot show that they failed to receive
the required notice wi thin thirty days. 35
Response that
"u.s.
Plaintiffs argue in their
Bank claims to own the Note.
Since
u.s.
Bank
was not the original lender, an assignment of the Note must have
taken place for
u.s.
Bank's claim to be true.1/36
Plaintiffs point
34Motion to Dismiss, Docket Entry No.6, p. 11
~
19.
35Id.
36Response, Docket Entry No.9, p. 4 ~ 13; see also id. ~ 14
("If Defendants are truly saying that Plaintiffs' TILA claim under
15 U.S.C.
§ 1641(g)
fails because Defendants are not the
holder/owner of the Note, and Defendants are willing to stipulate
to such, then Plaintiffs are happy to concede that no violation
(cont inued ... )
-21-
out that "Defendants' Exhibit B-2 shows that an assignment occurred
on or about December 10,
Therefore,
2012.'137
Plaintiffs argue,
"Defendants' own exhibits support a claim upon which relief can be
granted. ,,38
In response to Defendants' arguments regarding the date
of the assignment, Plaintiffs argue that "[t]he very violation of
which Plaintiffs are complaining is that Plaintiffs received no
notice
of
an assignment,
and thus
Plaintiffs had no knowledge
regarding the date the assignment occurred.,,39
Contrary
to
Defendants'
arguments,
the
allegations
in
Plaintiffs' Original Petition do not foreclose the inference that
the Note was assigned to
u.s.
Bank.
Plaintiffs allege that they
executed the Note "in favor of First Franklin" and that they "did
not
execute
any
other
promissory
connection with the property.,,40
notes
or
deeds
of
trust
They further allege that
in
"u.s.
Bank has asserted that it is the current holder of the Note. ,,41
Plaintiffs had a
Records of Real
title search performed in the Official Public
Property of Harris County,
Texas,
to determine
36 ( ... continued)
[of] 15 U.S.C. § 1641(g) []occurred. However, if Defendants were
holders of the Note and Deed of Trust, then their failure to
provide notice of assignment is a violation of TILA.") .
37Id.
~
16.
39Id. at 4
~
15.
4°Original Petition, attached as Exhibit
Removal, Docket Entry No.1-I, p. 10 ~ 14.
4lId.
~
16.
-22-
------ -----------
B-1
to Notice
of
whether Defendants had been assigned the Note or Deed of Trust, and
it failed to produce any assignment to U. S. Bank. 42
Plaintiffs sent
letters to Bank of America seeking "the name and address of the
owner/creditor or successor in interest"43 of their mortgage and
"the date of transfer and the location of the place where transfer
of ownership of the debt is recorded. "44
Plaintiffs allege in their
Original Petition that Defendants provided "nothing to indicate
that [U.S. Bank] is the current assignee of the Deed of Trust" and
that
"Plaintiffs have
never
received notice
that
the
Original
Lender sold and/or indorsed the Note and related Deed of Trust."45
On the basis of the title search and the lack of response from
Defendants,
complete
Plaintiffs
stranger
to
allege
the
that
Property
"[e]ither
or
an
Defendant's purported chain-of-title is void."46
pleading
their
§
1641 (g)
claim Plaintiffs
Defendant
assignment
lS
a
along
Nonetheless,
expressly adopt
in
the
42Id. at 16 ~ 33; Title Search, Exhibit J to Original Petition,
Docket Entry No. 1-3, p. 20.
43Request for Validation of Debt under TILA and FDCPA,
Exhibit H to Original Petition, Docket Entry No. 1-3, p. 15; see
also Qualified Written Request, Exhibit I to Original Petition,
Docket Entry No. 1-3, p. 18 ("Per U.S.C. 12 § 2605(k) & U.S.C. 15
§
1641(g) (1)
please provide the owner's name and contact
information such as address and telephone number.") .
44Qualified Written Request, Exhibit I to Original Petition,
Docket Entry No. 1-3, p. 18.
450riginal Petition, attached as Exhibit B-1 to Notice of
Removal, Docket Entry No. 1-1, pp. 37-38 ~~ 120-21; see also id. at
16 ~~ 28-33.
46Id. at 16
~
29.
-23-
assumption that
"U. S.
Bank is
the holder and or owner of
the
Note. ,,47
The pleadings indicate that Plaintiffs sought to determine
u.s.
Bank was assigned the Note but were unable to do so.
Accordingly,
Plaintiffs pleaded their claims in the alternative.
whether
See Fed. R. Civ. P. 8(d)
("A party may set out 2 or more statements
of a claim or defense alternatively or hypothetically, either in a
single count or defense or in separate ones.
If a party makes
alternative statements, the pleading is sufficient if anyone of
them is sufficient."); Vasquez v. Bridgestone/Firestone, Inc., 325
F.3d 665, 674 (5th Cir. 2003)
("Plaintiffs are permitted to plead
in the alternative."); Camp v. RCW
&
Co., Inc., No. H-05-3580, 2007
WL 1306841, at *8 (S.D. Tex. May 3, 2007)
("A plaintiff may plead
in the alternative with regard to closely interrelated Defendants
whose specific conduct and responsibility may not
knowable
when
a
plaintiff
files
suit,
enables the exact facts to be revealed.
and
be known or
pretrial
discovery
This is sufficient notice
pleading that precludes dismissal under Rule 12 (b) (6) ."), aff'd,
342 F. App'x 980
inconsistent."
F.3d 1066
Guevara,
(5th Cir. 2009).
Parra v. Mountain States Life Ins. Co. of Am., 52
(5th Cir.
No.
"Alternative pleadings may be
1995);
3:10-CV-545-F,
Aug. 18, 2010)
see also Wells Fargo Bank,
2010 WL 5824040,
at
*3
N.A.
(N.D.
v.
Tex.
("Although a plaintiff's allegations in a complaint
may generally be used by a defendant as admissions, a plaintiff is
47Id.
at 29
~
92.
-24-
[A defendant] may not
permitted to plead in the alternative . .
use allegations related to one claim as evidence to invalidate an
alternative claim."
omitted))
i
(citations omitted)
Sw. Bell Tel. Co. v. Fitch,
(internal quotation marks
643 F.
Supp.
2d 902,
908
(S.D. Tex. 2009)
("(A party] is permitted under federal procedural
rules
alternative
to
bring
(citing Fed.
R.
Civ.
P.
pleadings,
8(d)(2)-(3))).
even
if
inconsistent."
Accordingly,
the court
concludes that the allegations in Plaintiffs' Original Petition are
sufficient to state a claim under 15 U.S.C.
seek
Plaintiffs
§
statutory
§
damages
1641(g) 48
under
1640 (a) (2) (A) for Defendants' alleged violations of
Under
§
15
§
U.S.C.
1641 (g) .49
1640 (a), "any creditor who fails to comply with (§ 1641 (g)]
with respect to any person is liable to such person in an amount
equal
to
the
sum
of"
actual
and
statutory
damages.
Section
1640 (a) (2) (A) defines statutory damages as follows:
(i) in the case of an individual action twice the amount
of any finance charge in connection with the transaction,
(ii) in the case of an individual action relating to a
consumer lease under part E of this subchapter, 25 per
centum of the total amount of monthly payments under the
48If a notice of assignment in compliance with § 1641 (g)
existed, it would have been easy for Defendants to produce it in
the briefing on Defendants' pending motion, having produced various
other documents in support of the motion.
Since the court has
devoted substantial resources to this Memorandum Opinion and Order,
it is not inclined to consider any further argument or evidence on
this claim from Defendants in another pretrial motion.
The court
will therefore save this issue until trial.
49Plaintiffs do not allege any actual damages resulting from
U.S. Bank's alleged failure to provide proper notice of assignment
under § 1641 (g).
See id. at 29 ~~ 91-93.
Instead, "Plaintiffs
seek the maximum statutory damages allowed by law."
Id. ~ 93.
-25-
lease, except that the liability under this subparagraph
shall not be less than $200 nor greater than $2,000,
(iii) in the case of an individual action relating to an
open end consumer credit plan that is not secured by real
property or a dwelling, twice the amount of any finance
charge in connection with the transaction, with a minimum
of $500 and a maximum of $5,000, or such higher amount as
may be appropriate in the case of an established pattern
or practice of such failures; or (iv) in the case of an
individual action relating to a credit transaction not
under an open end credit plan that is secured by real
property or a dwelling, not less than $400 or greater
than $4,000.
In Koons Buick Pontiac GMC,
Inc. v. Nigh, 125 S. Ct. 460
(2004),
the Supreme Court made clear that the $200 floor and $2,000 ceiling
on
recovery
in
clause
(ii)
applies
to
statutory damages as defined in clause
the
general
(i).
measure
Id.
468.
at
of
In
addition, the court held that" [c] lause [(iv)] 50 removes closed-end
mortgages from clause
clause
[(iv)]
(i)' s
prescribes
[$ 200] / [$ 2 , 000] . 52
/I
governance only to the extent that
[$400] / [$4,000] 51
Accordingly,
brackets
the
proper
in
lieu of
measure
of
50At the time that Koons was decided, clause (iv) was codified
in § 1640 (a) (2) (A) (iii).
See Koons, 125 S. Ct. at 465.
The
current clause (iii) was added by the Credit Card Accountability
Responsibility and Disclosure Act of 2009, Pub. L. No. 111-24,
§ 107, 123 Stat. 1734, 1743 (2009).
SlAt the time that Koons was decided, the floor on statutory
damages for closed-end mortgages was $200 and the ceiling was
$2,000.
See Koons, 125 S. Ct. at 465.
These amounts were
increased to $400 and $4,000, respectively, by the Housing and
Economic Recovery Act of 2008, Pub. L. No. 110-289, § 2502(b), 122
Stat. 2654, 2857 (2008)
52At the time that Koons was decided,
under clause (i) was $100 and the ceiling
125 S. Ct. at 465.
These amounts were
$2,000, respectively, in 2010. Dodd-Frank
2153.
-26-
the floor for recovery
was $1,000.
See Koons,
increased to $200 and
Act § 1416, 124 Stat. at
statutory damages under
§
mortgage
Plaintiffs'
loan such as
1640(a) (2) (A) with regard to a closed-end
is
"twice the amount
of any
finance charge in connection with the transaction,U but "subject to
lower and upper limits of $400 and $4,000.u
Brown v. CitiMortgage,
Inc., 817 F. Supp. 2d 1328, 1331 (S.D. Ala. 2011)
see also Lenhart
v. EverBank, No. 2:12-CV-4184, 2013 WL 5745602, at *4
(S.D. W.Va.
Oct. 23, 2013); Pugh v. Bank of Am., No. 13-2020, 2013 WL 3349649,
at *17
(W.D.
Tenn.
July 2,
2013);
Beall v.
Quality Loan Servo
Corp., No. 10-CV-1900-IEG(WVG), 2011 WL 1044148, at *6
(S.D. Cal.
Mar. 2 1, 2011).
Defendants
argue
in their Reply
that
Plaintiffs
have
not
alleged any finance charge in connection with the assignment to
u.S. Bank.53
However, "imposition of the minimum sanction is proper
in cases such as this, where the finance charge is nonexistent or
undetermined. U
Mourning v.
S. Ct. 1652, 1664
the argument that
(1973).
§
Family Publications Serv.,
Inc.,
93
In Mourning the Supreme Court rejected
1640 "does not allow imposition of a civil
penalty in cases where no finance charge is involved but where a
regulation requiring disclosure has been violated,u reasoning that
the statute "provides that the penalty assessed shall be twice the
amount
of
the
finance
statutory minimum] . u54
charge
Id.
i
imposed,
but
not
less
than
[the
cf. Sellers v. Wollman, 510 F. 2d 119,
53Reply, Docket Entry No. 12, pp. 3-4
~~
5-6.
54At the time that Mourning was decided, the statutory minimum
under § 1640 was $100.
See Mourning, 93 S. Ct. at 1656; see also
(continued ... )
-27-
123
(5th Cir. 1975)
("[The argument]
that the consumer is not an
aggrieved debtor if he is not required to pay a finance charge is
effectively undercut by [Mourning] .").
Because Plaintiffs may be entitled to statutory damages under
§
1640 (a) (2) (A)
1
their failure
to plead any finance
charge
in
connection with the assignment does not require dismissal of their
complaint for failure to state a claim.
at 1333-36
(rejecting the argument
See Brown
1
817 F. Supp. 2d
"that statutory damages are
unavailable under TILA in the absence of related finance charges"
and denying the defendant/s motion to dismiss on that basis); see
also Foley v. Wells Fargo Bank, N.A.I 849 F. Supp. 2d 1345
(S.D. Fla. 2012)
1
1350-52
(adopting the Brown court/s reasoning to reject
the argument that a claim under
§
1641{g)
"must be dismissed for
failure to allege sufficient facts showing actual damages, or to
plead any finance charges associated with statutory damages"); cf.
Eby v. Reb Realty,
Inc.
1
495 F.2d 646
1
651
(9th Cir.
1974)
("By
providing a minimum recovery of $100 regardless of the presence of
a finance charge or its de minimis amount
1
Congress indicated that
the finance charge was to be no more than a convenient measure for
damages and not a remedial trigger upon which liability was to
depend."); Kleiner v. First Nat. Bank of Atlanta
698
(N.D. Ga. 1983)
which
depends
not
{"The damages provision is a
on
54 ( • • • continued)
Koons, 125 S. Ct. at
§ 1640 (a) ) .
the
finance
464-65
charge
(tracing the
-28-
l
97 F.R.D. 683,
'civil penalty'
incurred
amendment
but
on
the
history of
lender's failure to make disclosure.").
motion
§
to
dismiss
Plaintiffs'
claims
Accordingly, Defendants'
against
u. S.
Bank under
1641 (g) will be denied. 55
3.
Conversion
Plaintiffs allege that Bank of America has converted money
they paid under the Note by forwarding it to "the putative note
owner" and refusing to return it upon Plaintiffs' demand. 56
elements of a conversion cause of action are:
had legal possession of,
property;
"'The
(1) plaintiff owned,
or was entitled to possession of the
(2) defendant assumed and exercised dominion and control
over the property in an unlawful and unauthorized manner, to the
exclusion
(3)
of
and
inconsistent
with
plaintiff's
plaintiff made a demand for the property; and
refused to return the property. '"
(4)
rights;
defendant
Felchak, 2013 WL 1966972, at *3
(quoting Allan Reuber Chevrolet, Inc. v. Grady Chevrolet, Ltd., 287
55Plaintiffs do not appear to argue that Bank of America is
liable under § 1641(g).
They make no factual allegations
concerning Bank of America and assert no theory of potential
liability. By its terms, § 1641(g) applies only to Uthe creditor
that is the new owner or assignee of the debt.
15 u. S. C.
§
1641(g) (1);
see
Garcia
v.
universal
Mortgage
Corp.,
No. 3:12-CV-2460-L, 2013 WL 1858195, at *6 (N.D. Tex. May 3, 2013);
cf. Justice v. Ocwen Loan Servicing, LLC, No. 2:13-CV-00165, 2014
WL 526143, at *9 (S.D. Ohio Feb. 7, 2014) (citing Marais v. Chase
Home Fin. LLC, 736 F.3d 711, 716 (6th Cir. 2013».
Accordingly,
the court concludes that to the extent that Plaintiffs attempt to
state a cause of action against Bank of America under § 1641(g),
they have failed to do so.
II
560riginal Petition, attached as Exhibit
Removal, Docket Entry No. 1-1, p. 30 ~ 97.
-29-
B-1
to Notice of
S. W. 3d 877,
888
(Tex. App .-Dallas 2009,
Plaintiffs'
no pet.)).
conversion claim fails because "money that is not specific chattel
rd.
is not personal property that can be converted."
Mitchell Energy Corp. v.
Samson Res.
Co.,
80 F.3d 976,
(citing
984
(5th
Cir.1996)).
Texas jurisprudence holds that money can be the subject
of conversion, but only when it is in the form of
specific chattel, such as old coins, or when "the money
is delivered to another party for safekeeping, the keeper
claims no title, and the money is required and intended
to be segregated, either substantially in the form in
which it was received or as an intact fund."
Mitchell Energy, 80 F.3d at 984 (quoting Dixon v. State, 808 S.W.2d
721,
723
(Tex.
App.-Austin
1991,
writ
dism'd
w.o.j.)).
"An
obligation to pay money generally, however, is treated differently
under Texas
conversion
law.
'Where money is
only when
it
can
be
involved,
described
or
it
is
subject
identified
as
to
a
specific chattel, but not where an indebtedness may be discharged
by the payment of money generally.'"
Swenson,
611 S. W. 2d 886,
891
(Tex.
rd.
Ci v.
(quoting Crenshaw v.
App .-Austin 1980,
writ
ref'd n. r. e. ) ) .
Here, Plaintiffs allege that Bank of America converted their
Note payments by remitting them "to a third party,
note owner." 57
Under the Deed of Trust
the putative
"[p] ayments are deemed
received by Lender when received at the location designated in the
57rd.
-30-
Note or at such other location as may be designated by Lender."58
"Lender"
is defined to include "any holder of the Note who is
entitled to receive payments under the Note."59
that
Plaintiffs
"will
make
[their]
monthly
The Note provides
payments
at
150
ALLEGHENY CENTER MALL, PITTSBURGH, PA 15212 or at a different place
if required by the Note Holder."6o
The Deed of Trust describes the
"Loan Servicer" as the entity "that collects Periodic Payments due
under the Note and this Security Instrument and performs other
mortgage loan servicing Obligations under the Note, this Security
Instrument, and Applicable Law" and provides that "[i]f there is a
change of the Loan Servicer, Borrower will be given written notice
of the change which will state the name and address of the new Loan
Servicer,
the address to which payments should be made and any
other information RESPA requires in connection with a notice of
transfer of servicing. n6I
These provisions make clear that Plaintiffs' obligations under
the
Note
entailed
delivering
designated by the Lender.
their
payments
to
the
location
Neither party contends that Plaintiffs'
payments to Bank of America failed to satisfy these provisions.
58Deed of Trust, Exhibit B to Original Petition, Docket Entry
No. 1-2, p. 10 ~ 1.
59Id. at 7.
6°Note, Exhibit A to Original Petition, Docket Entry No. 1-2,
p. 2.
6IDeed of Trust, Exhibit B to Original Petition, Docket Entry
No. 1-2, p. 16 ~ 20 (emphasis added)
-31-
Accordingly,
Lender"
Plaintiffs' payments were "deemed received by [the]
when received by their loan servicer at the designated
location in accordance with the Note and Deed of Trust.
Because
this is a situation where "an indebtedness may be discharged by the
payment of money generally," Plaintiffs cannot state a claim for
Accordingly,
conversion under Texas law.
Plaintiffs'
claims for conversion will be dismissed.
4.
Plaintiffs' Claims for Money Had and Received
Plaintiffs argue that Defendants "have received money which
belongs to Plaintiffs" and that they "need this money back in order
to pay the
received'
true Note
Holder. ,,62
is equitable in nature."
S.W.3d 160, 162
(Tex. 2007).
"A claim for
'money had and
Best Buy Co. v. Barrera, 248
"The claim 'belongs conceptually to
the doctrine of unj ust enrichment.'"
Edwards v.
Mid-Continent
Office Distribs., L.P., 252 S.W.3d 833, 837 (Tex. App.-Dallas 2008,
pet. denied)
164
(quoting Amoco Prod. Co. v. Smith,
(Tex. App.-El Paso 1997, no writ)).
946 S.W.2d 162,
To establish a cause of
action for money had and received a plaintiff must show "'that a
defendant holds money which in equity and good conscience belongs
to him.'"
Felchak, 2013 WL 1966972, at *3
(quoting Edwards, 252
S.W.3d at 837).
Plaintiffs' claim for money had and received arises from their
allegation that u.S. Bank may not be entitled to payments due under
620riginal Petition, attached as Exhibit
Removal, Docket Entry No. I-I, p. 31 ~ 99.
-32-
B-1
to Notice of
the Note and Deed of Trust. 63
their
Response
that
However
"Defendants
l
Plaintiffs acknowledge in
Exhibit
I
B-2
shows
assignment occurred on or about December 10 1 2012.
1164
that
an
Plaintiffs
do not respond to Defendants l argument in the Motion to Dismiss
that Plaintiffs have failed to state a claim because they do not
allege any facts demonstrating that another putative "true Note
Holder
ll
exists. 65
No. A-12-CA-276-SS
Cf.
1
Kramer
v.
2012 WL 3027990
1
Fed.
Nat.
Mortgage
Ass/n l
at *5 (W.D. Tex. May 15
2012)
1
("Defendants did not sue [Plaintiff] at all l and . . . even if they
had l
their suit would have been on the deed of trust
associated
[Plaintiff]
promissory note.
[T]here
is
no
I
not the
suggestion
is being put in a position where he will have to pay
the same claim twice.
II
).
Indeed l the only arguments advanced by
Plaintiffs in their Response relate to their claims under TILA and
the DTPA. 66
As explained in
I I I. B. 3 above
§
I
under the Deed of
Trust Plaintiffs l payments are deemed received by the Lender when
delivered to the servicer at the location designated by the Lender.
Under the Note and Deed of Trust
the
return
of
these
I
Plaintiffs are not entitled to
payments.
Therefore
Plaintiffs
I
cannot
demonstrate that the money "in equity and good conscience belongs
toll them.
Felchak l 2013 WL 1966972
63Id. at 30-31
~~
1
at *3
{quoting Edwards
97-99.
64Responsel Docket Entry No. 9
1
p. 4
~
65Motion to Dismiss l Docket Entry No. 6
16.
1
p. 14 ~~ 26-27.
66S ee Response I Docket Entry No. 9 1 pp. 4-6 ~~ 13-20.
-33-
I
252
S.W.3d at 837).
Accordingly, Plaintiffs' claims for money had and
received will be dismissed.
5.
Suit to Remove Cloud and Quiet Title
A suit to quiet title under Texas law requires a plaintiff to
(1)
prove:
a valid equitable interest in a specific property,
(2) title to the property is affected by a claim by the defendant,
and (3)
although facially valid, defendant's claim is invalid or
unenforceable.
Bryant v. Bank of America, N.A., No. 4:ll-CV-448,
2012 WL 2681361, at *16 (E.D. Tex. June 6, 2012)
Duvall,
815 S.W.2d 285,293 n.2
denied) ) .
(citing Sadler v.
(Tex. App.-Texarkana 1991, pet.
A plaintiff in a suit to quiet title "must prove and
recover on the strength of his own title, not the weakness of his
adversary's title."
Fricks v. Hancock, 45 S.W.3d 322, 327
App.-Corpus Christi 2001, no pet.).
(Tex.
"The effect of a suit to quiet
title is to declare invalid or ineffective the defendant's claim to
title."
Gordon v.
West Houston Trees,
Ltd.,
352 S.W.3d 32,
42
(Tex. App.-Houston [1st Dist.] 2011, no pet.)
Plaintiffs allege
that
title by claiming that
[it]
"U. S.
Bank has
clouded Plaintiffs'
has a lien for security purposes on
Plaintiffs' Property and that Defendant has the power to foreclose
on said property. "67
Plaintiff further alleges that "there is no
proper chain of title making Defendant the assignee of the Original
670riginal Petition, attached as Exhibit
Removal, Docket Entry No. 1-1, p. 32 ~ 102.
B-1
to Notice of
-34-
----------------
Deed of Trust.
II
Plaintiffs acknowledge that they executed the
68
Deed of Trust. 69
They neither contest the Deed of Trust's validity
nor suggest that their own interest is superior to the Deed of
See
Trust.
Morlock,
L.L.C.
v.
JP
No. 12-20623, 2013 WL 2422778, at *2
Morgan
Chase
Bank,
N.A.,
(5th Cir. June 4, 2013).
Defendants have produced a copy of an Assignment of Deed of
Trust recorded in the Official Public Records of Real Property of
Harri s
County,
Texas,
on December 18,
2012. 70
Because
"[r] eal
Property records often contain transfers taking place many years in
the
past [, ]
Texas
'view [s]
with
suspicion and distrust
attempts to discredit certificates of acknowledgment,' under which
the
transfer is presumptively valid and contradicting evidence
'must
clear,
be
controversy. '"
cogent,
and
convincing
Morlock, 2013 WL 2422778, at *2
Stewart Mineral Corp., 202 S.W.3d 242, 248
pet. denied)).
beyond
reasonable
(quoting Ruiz v.
(Tex. App.-Tyler 2006,
Plaintiffs do not challenge the validity of the
Assignment in their Response.
Because Plaintiffs do not challenge
the Deed of Trust's validity or otherwise assert title superior to
that of u.S.
claim.
Bank,
See id.
they fail to advance a plausible quiet-title
(citing Fricks, 45 S.W.3d at 327).
Accordingly,
Plaintiffs' suit to remove cloud and quiet title will be dismissed.
68Id.
~
103.
69Id. at 10
~
14.
7°Assignment of Deed of Trust,
Dismiss, Docket Entry No.6, p. 57.
-35-
Exhibit
B-2
to
Motion
to
6.
Consent Judgment Violation
Plaintiffs
seek a
declaratory
judgment
regarding
Bank of
America's compliance with a consent judgment entered into between
Bank
of
America
and
the
United
States
on April
4,
2012,
in
United States v. Bank of America, No. 1:12-cv-00361-RMC, at Docket
Entry No.
11
(D.D.C.
Apr.
4,
2012).71
Defendants
argue
that
Plaintiffs do not have standing to bring a claim for a violation of
the consent judgment. 72
The court agrees.
Courts confronted with the same consent judgment have held
that homeowners like Plaintiffs do not have standing to bring a
claim
for
its violation.
See
e . 9 .,
l
No. 13-1418, 2014 WL 334196, at *6
Unrelated Consent
Judgment,
private
action
right
of
(D.D.C. Jan.
however,
allowing
McCain v.
Bank of Am.,
30,
simply does
third
2014)
not
parties,
("The
create a
such
as
the
plaintiff, to bring claims for alleged violations of the Judgments
Bagala v. Bank of Am., No. H-13-0160, 2013 WL 4523562,
.") i
at *2 (S.D. Tex. Aug. 27, 2013)
claim have
held
that
("Courts that have addressed this
'mortgagors
like
Plaintiffs
do
not
have
standing to enforce a consent decree that banks have entered into
wi th
the
government.'
Consent Decree
that
Addi t ionall y ,
there
indicates an intent
is
nothing
In
the
to confer standing on
7lOriginal Petition, attached as Exhibit B-1 to Notice of
Removal, Docket Entry No. 1-1, pp. 12-15 ~~ 2 5 - 2 7 i pp . 3 2 - 3 4
~~ 105-111.
72Motion to Dismiss, Docket Entry No.6, pp. 6-7
-36-
-------------
~~
9-10.
(citations omitted)
non-parties."
(quoting Reynolds v.
Bank of
Am., N.A., No. 3:12-CV-1420-L, 2013 WL 1904090, at *10 (N.D. Tex.
May 8,2013))); Choe v. Bank of Am., N.A., No. 3:13-CV-0120-D, 2013
WL 3196571, at *4
(N.D. Tex. June 25, 2013)
("It is well settled
that 'a consent decree is not enforceable directly or in collateral
proceedings by those who are not parties to it even though they
were intended to be benefited by it.'"
(quoting Blue Chip Stamps
v. Manor Drug Stores, 95 S. Ct. 1917, 1932 (1975))).
Furthermore,
Plaintiffs have not provided the court with a copy of the consent
judgment that they seek to enforce.
at *10.
Accordingly,
See Reynolds, 2013 WL 1904090,
Plaintiffs' claims against Bank of America
for violation of the consent judgment will be dismissed.
7.
Declaratory Judgment as to Procedural Defects
Plaintiffs seek a declaratory judgment regarding u.S. Bank's
compliance with the Deed of Trust provisions governing foreclosure
of their property.73
proper notice
that
Plaintiffs allege that they "were not given
the
because "[t]o the extent
underlying Note
[U.S.
Bank]
was
being
accelerated"
does not own the
[Deed of
Trust], the Notice of Acceleration was improper because it was sent
by the wrong party." 74
However,
as
noted in
§
III.B.5
above,
Defendants have produced an assignment demonstrating that U. S. Bank
730riginal Petition, attached as Exhibit B-1
Removal, Docket Entry No. I-I, pp. 34-36 ~ 112.
74Id. at 35
~
112(c).
-37-
--------,---'----'
to Notice of
in fact owns the Deed of Trust.7s
Accordingly, Plaintiffs are not
entitled to declaratory judgment on this issue.
Plaintiffs also allege that they "were not given proper notice
that the underlying Note was in default (and that Plaintiffs had an
opportunity to cure said default) ."76
Defendants have produced a
copy of a Notice of Default including the relevant cure provision
dated March 13,
number. 77
2013,
and the related certified mail
tracking
Under the Deed of Trust "[a] ny notice to Borrower in
connection with this Security Instrument shall be deemed to have
been given to Borrower when mailed by first class mail or when
actually delivered to Borrower's notice address if sent by other
means. "78
Under Texas law "' [a] ctual receipt of the notice is not
necessary.'
Instead,
'service of a notice
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.'"
Gossett v.
Fed. Home Loan Mortgage Corp.,
F. Supp. 2d 852, 859 (S.D. Tex. 2013)
Tex.
Prop.
Code
§
51.002(e);
WMC
75Assignment of Deed of Trust,
Dismiss, Docket Entry No.6, p. 57.
(citations omitted)
Mortgage
Exhibit
760riginal Petition, attached as Exhibit
Removal, Docket Entry No. I-I, p. 35 ~ 112(d).
Corp.
919
(quoting
v.
Moss,
B-2
to
Motion
to
B-1
to Notice of
77Notice of Default, Exhibit A-I to Motion to Dismiss, Docket
Entry No.6, p. 27.
78Deed of Trust, Exhibit B to Original Petition, Docket Entry
No. 1-2, p. 15 ~ 15.
-38-
No. 01-10-00948-CV, 2011 WL 2089777, at *7 (Tex. App.-Houston [1st
Dist.]
respond
May 19,
to
Plaintiffs'
2011,
this
no pet.)
evidence
Plaintiffs do not
(mem op.)).
in
their
Accordingly,
Response.
claim that they were not given a proper Notice of
Default has no merit.
Plaintiffs argue that Defendants lost their right to foreclose
under paragraph nineteen of the Deed of Trust when Plaintiffs made
their first monthly payment under the Note. 79
However, Plaintiffs
take the relevant provision out of context.
Paragraph nineteen
expressly
refers
Acceleration. "so
to
"Borrower's
Right
to
Reinstate
After
Plaintiffs do not contend that their loan was
accelerated prior to
their
first
monthly payment.
Therefore,
Plaintiffs' argument has no merit.
In addition, Plaintiffs allege that "[t]he Substitute Trustee
conducting the foreclosure sale on behalf of u.S.
Bank was not
appointed according to the terms of the Deed of Trust and no Notice
of Substitute Trustee was provided to Plaintiffs. "Sl
Plaintiffs
further allege that they "were not given proper notice of the
foreclosure
sale"
because
"the
Notice
of
Substitute
790riginal Petition, attached as Exhibit B-1
Removal, Docket Entry No. I-I, pp. 35 - 3 6 ~ 112 (e) .
Trustee
to Notice of
SODeed of Trust, Exhibit B to Original Petition, Docket Entry
No. 1-2, p. 16 ~ 19.
810riginal Petition, attached as Exhibit
Removal, Docket Entry No. I-I, p. 34 ~ 112 (a) .
-39-
B-1
to Notice of
Foreclosure Sale was not signed."82
Plaintiffs
appear
to
allege
a
In making these allegations,
cause
of
action
for
wrongful
foreclosure, as these allegations potentially represent a defect in
the
foreclosure
Servicing,
LP,
Jan. 24, 2012).
See Hunt v.
sale proceedings.
No.
C-11-261,
2012
WL 219330,
BAC Home Loans
at
*5
(S.D.
Tex.
Indeed, the only authority that Plaintiffs cite in
support of their claims is the portion of Hunt dealing with a claim
for wrongful foreclosure. 83
claim
for
wrongful
Id.
foreclosure,
In order to state a
at *4-*5.
however,
Plaintiffs
must
also
allege a grossly inadequate selling price and a causal link between
the procedural defect and the selling price.
however,
Id. at *5-*6.
there has not been a foreclosure sale. 84
Here,
Accordingly,
there does not appear to be "an actual controversy arising under
other substantive law" that could support an action for declaratory
judgment on any of Plaintiffs' alleged "procedural defects."
See
Morlock, L.L.C. v. JP Morgan Chase Bank, N.A., No. H-12-1448, 2012
WL 3187918,
at
*7
(S.D.
Tex.
Aug.
2,
2012)
(asserting that an
action for declaratory judgment "is merely a procedural vehicle
that allows a party to obtain an early adjudication of an actual
controversy arising under other substantive law" (citing Aetna Life
Ins. Co. of Hartford, Conn. v. Haworth, 57 S. Ct. 461, 463 (1937) i
82Id. at 34-35
~
112 (b) .
83Id.
84Motion to Dismiss, Docket Entry No.6, p. 18
-40-
~
34.
Lowe
v.
Ingalls
Shipbuilding,
1984))), aff'd, No.
Plaintiffs'
2013).
12-20623,
723
F.2d
1173,
2013 WL 2422778
1178
(5th
Cir.
(5th Cir. June 4,
claims for declaratory judgment for alleged
procedural defects will therefore be dismissed.
8.
Declaratory Judgment as to Standing
Plaintiffs allege that U.S.
foreclose. 8s
Bank does not have standing to
However, as explained in
§
III.B.5 above, U.S. Bank
is the current assignee of the Deed of Trust.
that
"[t]
0
have
the
definition
of
Trust]
However,
."86
power
Lender
of
under
sale,
U. S.
[paragraph]
22
Plaintiffs contend
Bank
of
must
meet
the
this
[Deed
of
paragraph 22 contains no such requirement. B7
Indeed, the Deed of Trust specifically grants the power of sale to
the Trustee and provides that
"MERS
(as nominee for Lender and
Lender's successors and assigns) has the right: to exercise any or
all .
. interests [granted by the Borrower], including, but not
limited to, the right to foreclose and sell the Property."BB
assigned these rights to U. S.
Bank. B9
Furthermore,
MERS
it is well
850riginal Petition, attached as Exhibit B-1 to Notice of
Removal, Docket Entry No. I-I, pp. 36-39 ~~ 115-125.
86Id. at 38
~
123.
B7See Deed of Trust, Exhibit B to Original Petition, Docket
Entry No. 1-2, p. 17 ~ 22.
BBld. at 9.
89See Assignment of Deed of Trust, Exhibit B-2 to Motion to
Dismiss, Docket Entry No.6, p. 57 (assigning all "right, title,
and interest" to the Deed of Trust to U.S. Bank).
-41-
established that the owner of the Deed of Trust need not own the
underlying Note in order to foreclose.
Trust Co.,
539 F. App'x 533, 536
Wiley v. Deutsche Bank Nat.
(5th Cir. 2013)
foreclose need not possess the note itself.'
("'The party to
So long as it is a
beneficiary named in the deed of trust or an assign, that party may
exercise its authority even if it does not hold the note itself."
(citations omitted)
L.P. ,
722
F.3d
(quoting Martins v. BAC Home Loans Servicing,
249,
255
(5th
Cir.
2013))).
Accordingly,
Plaintiffs' claims regarding Defendants' standing to foreclose will
be dismissed. 90
IV.
Leave to Amend
Plaintiffs request leave to amend their complaint
"if the
court determines that Plaintiffs have failed to state a claim."91
However, Plaintiffs have had ample opportunity to fully brief the
issues and have not explained how an amendment would save any of
90Plaintiffs also seek a declaratory judgment that Defendants'
attorney's fees are not reasonable and necessary and a permanent
injunction preventing Defendants from "charging Plaintiffs' account
for attorney's fees in connection with this action."
Original
Petition, attached as Exhibit B-1 to Notice of Removal, Docket
Entry No. 1-1, pp. 39-40 ~~ 128-29. However, Plaintiffs have not
alleged that Defendants have sought to recover any attorney's fees
in connection with this action. No argument or evidence has been
presented by either party on Defendants' entitlement to charge
Plaintiffs' account for attorney's fees or the reasonableness of
any fees sought to be recovered.
Because Defendants' entitlement
to recover their attorney's fees from Plaintiff and the reasonableness of any fees sought to be recovered cannot be determined at
this stage of the proceedings, the court declines to address the
issue at this time.
91Response, Docket Entry No.9, p. 6.
-42-
---- ---------------------------
their claims,
nor have they attached a
Plaintiffs'
amended complaint.
copy of their proposed
request for leave to amend will
therefore be denied.
V.
Conclusions and Order
For the reasons explained above,
Plaintiffs
have
failed
to
state
a
the court concludes that
plausible
claim
for
relief
against Bank of America under any theory of liability advanced in
their Original Petition.
All of Plaintiffs' claims against Bank of
America are therefore DISMISSED with prejudice.
For the reasons explained in § III.B.2(b)
concludes
that
against U.S.
explained in
Plaintiffs
state
a
Bank under 15 U.S.C.
§
plausible
§
above,
claim
1641 (g) .
the court
for
relief
For the reasons
III above, the court concludes that Plaintiffs have
failed to state a plausible claim for relief against U. S.
under
any
other
Accordingly,
§
1641(g),
theory
advanced
in
their
Original
Bank
Petition.
with the exception of their claims under 15 U.S.C.
all
of
Plaintiffs'
claims
against
U.S.
Bank
are
DISMISSED with prejudice.
Defendants U.S. Bank, National Association, Successor Trustee
and Bank of America, N.A.'s Motion to Dismiss Pursuant to Federal
Rule of Civil Procedure 12(b) (6)
(Docket Entry No.6) is therefore
GRANTED IN PART and DENIED IN PART.
For the reasons explained in
for
leave
to amend
§
(Plaintiffs'
page 6) is DENIED.
-43-
IV above, Plaintiffs' request
Response,
Docket Entry No.9,
Defendant First Franklin has not filed an answer.
Plaintiffs
will advise the court within fourteen days of the entry of this
Memorandum Opinion and Order whether they intend to proceed against
First Franklin and, if so, the status of service.
SIGNED at Houston, Texas, on this the 4th day of March, 2014.
SIM LAKE
UNITED STATES DISTRICT JUDGE
-44-
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