James et al v. Wells Fargo Bank, N.A.
Filing
15
MEMORANDUM OPINION AND ORDER granting 6 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM. (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
PERRY ALAN JAMES and
MARY LYNN JAMES,
§
§
§
§
§
Plaintiffs,
v.
CIVIL ACTION NO. H-14-0449
§
§
§
§
§
WELLS FARGO BANK, N.A.,
Defendant.
MEMORANDUM OPINION AND ORDER
Plaintiffs Perry Alan James and Mary Lynn James ("Plaintiffs")
brought
("Wells
this
action
in
Fargo")
against
the
defendant
284th
Wells
Judicial
Fargo
Bank,
District
Court
N .A.
of
Montgomery County, Texas, where it was filed under Cause No. 14-0201392-CV.
Wells Fargo removed the action to this court.
before the
court
is Defendant's Motion to Dismiss
Rule 12 (b) (6) and Brief in Support
En t ry No.6).
Pursuant to
("Motion to Dismiss")
For the reasons explained below,
Pending
(Docket
Wells Fargo's
Motion to Dismiss will be granted.
I.
Background
In connection with the refinancing of their home mortgage,
Plaintiffs executed a Note and Deed of Trust in favor of Amerigroup
Mortgage
Corporation
in 2002.1
The
mortgage
was
subsequently
1Plaintiffs'
Original
Petition
("Original
Petition"),
Exhibit B-2 to Defendant Wells Fargo Bank, N.A.'s Notice of Removal
(continued ... )
assigned to Wells Fargo.2
Plaintiffs fell behind on their payments
after plaintiff Perry Alan James was "injured on the job and began
collecting disability payments.,,3
Plaintiffs allege that Wells Fargo "agreed to work with [them]
in their delinquency" and "suggested modifying the note and putting
the delinquent payments on the end of the note.
,,4
However, "[e] ach
time Plaintiffs submitted the requested paper work,
failed to respond concerning the modification."s
[Wells Fargo]
Plaintiffs "sent
in documentation concerning the proposed modification" and Wells
Fargo "continued to accept payments and discuss a contemplated loan
modification" with Plaintiffs.6
Wells Fargo sold the property at
a foreclosure sale on February 7, 2012.7
On February 6,
Wells
Fargo
in
2014,
the
Plaintiffs brought this action against
284th
Judicial
District
Court
of
continued)
Under 28 U.S.C. § 1441 ("Notice of Removal"), Docket Entry No. 1-4;
Note, Exhibit A to Motion to Dismiss, Docket Entry No. 6-2; Deed of
Trust, Exhibit B to Motion to Dismiss, Docket Entry No. 6-3. Page
citations are to the pagination imprinted by the federal court's
electronic filing system at the top and right of the document.
1 ( •••
20 r iginal Petition, Exhibit B-2 to Notice of Removal, Docket
Entry No. 1-4, p. 2.
3Id.
SId.
6Id.
7Id. at 2, 5; Substitute Trustee's Deed, Exhibit C to Motion
to Dismiss, Docket Entry No. 6-4.
-2 -
Montgomery County, Texas, where it was filed under Cause No. 14-0201392-CV. 8
On February 24,
2014, Wells Fargo filed an answer in
the state court. 9 Wells Fargo removed the action to this court the
same day. 10
Dismiss. 11
On March 14,
2014,
Wells Fargo filed its Motion to
Plaintiffs filed their Response on April 30, 2014,12 and
Wells Fargo filed its Reply on May 7, 2014. 13
II.
Applicable Law
Wells Fargo has moved to dismiss Plaintiffs' Original Petition
for failure to state a claim under Federal Rule of Civil Procedure
12 (b) (6) 14
However,
because Wells
Fargo had already filed an
answer 15 to Plaintiffs' Original Petition, Wells Fargo's 12 (b) (6)
motion was untimely.
See Fed.
R.
Civ.
P.
12(b).
When a 12 (b)
motion is filed after the pleadings are closed "[s] uch motion []
80 r iginal Petition,
Exhibit B-2 to Notice of Removal, Docket
Entry No. 1-4; see also Register of Actions, Exhibit B-1 to Notice
of Removal, Docket Entry No. 1-3.
9Defendant Wells Fargo Bank, N.A.'s Original Answer and
Affirmative Defenses ("Answer"), Exhibit B-4 to Notice of Removal,
Docket Entry No. 1-6.
lONotice of Removal, Docket Entry No.1.
11Motion to Dismiss, Docket Entry No.6.
12Plaintiffs Perry Alan James and Mary Lynn James' Opposition
to Motion to Dismiss ("Response"), Docket Entry No. 13.
13Defendant's Reply to Plaintiff's Response
Motion to Dismiss ("Reply"), Docket Entry No. 14.
to Defendant's
14Motion to Dismiss, Docket Entry No.6.
15See Answer, Exhibit B-4 to Notice of Removal, Docket Entry
No. 1-6.
-3-
will be treated as a motion for judgment on the pleadings based on
a failure to state a claim on which relief may be granted."
v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999)
Jones
(per curiam)
The
court will therefore construe Wells Fargo's Motion to Dismiss as a
motion for judgment on the pleadings under Federal Rule of Civil
Procedure 12(c).
Rule
12(c)
"'is
designed
to
dispose
of
cases
where
the
material facts are not in dispute and a judgment on the merits can
be rendered by looking to the substance of the pleadings and any
judicially noticed
facts.'"
Stanley Dean Witter
&
Co.,
Great
313
Plains
F.3d 305,
Trust
312
Co.
v.
Morgan
(5th Cir.
2002)
(quoting Hebert Abstract Co. v. Touchstone Props., Ltd., 914 F.2d
74, 76 (5th Cir. 1990)
(per curiam)).
A motion brought pursuant to
Rule 12(c) should be granted if there is no issue of material fact
and if the pleadings show that the moving party is entitled to
judgment as a matter of law.
Greenberg v. General Mills Fun Group,
Inc., 478 F.2d 254, 256 (5th Cir. 1973).
A motion for judgment on the pleadings is subject to the same
standard as a motion to dismiss for failure to state a claim.
In re Great Lakes Dredge & Dock Co. LLC,
Cir. 2010)
i
624 F.3d 201,
209
See
(5th
Guidry v. American Public Life Insurance Co., 512 F.3d
177, 180 (5th Cir. 2007) i Jones, 188 F.3d at 324.
The court must
accept the factual allegations of the complaint as true, view them
in
a
light
most
favorable
to
the
plaintiffs,
reasonable inferences in the plaintiffs' favor.
-4-
and
draw
all
Great Plains Trust
Co., 313 F.3d at 312-13; Ramming v. United States, 281 F.3d 158,
161 (5th Cir. 2001); Jones, 188 F.3d at 324.
"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
(2002)
(quoting
Scheuer v. Rhodes, 94 S. Ct. 1683, 1686 (1974)).
To avoid dismissal a plaintiff must allege "'enough facts to
state a claim to relief that is plausible on its face.'"
MySpace,
Inc.,
Atlantic
Corp.
Plausibility
528 F.3d 413,
v.
Twombly,
requires
"more
418
(5th Cir.
127
S.
Ct.
than
an
unadorned,
unlawfully-harmed-me accusation."
1937,
1949
(2009).
2008)
1955,
Ashcroft v.
"A claim has
facial
Doe v.
(quoting Bell
1974
(2007)).
the-defendant-
Iqbal,
129 S. Ct.
plausibility when the
plaintiff pleads factual content that allows the court to draw the
reasonable
inference
misconduct alleged."
that
rd.
the
defendant
is
liable
for
the
"Where a complaint pleads facts that are
merely consistent with a defendant's liability, it stops short of
the line between possibility and plausibility of entitlement to
relief."
Id.
(quoting Twombly,
quotation marks omitted).
127 S.
Ct.
The court will
at
1966)
"'not accept as true
conclusory allegations, unwarranted factual inferences,
conclusions.'"
2010)
Gentilello v. Rege,
(quoting Plotkin v.
627 F. 3d 540,
IP Axess Inc.,
-5-
(internal
544
407 F.3d 690,
or legal
(5th Cir.
696
(5th
Cir.
" [D] ismissal
2005).
allegation
relief."
regarding
a
is proper if the complaint
required
element
necessary
lacks an
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."
that
are
Lone Star
Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th
Cir. 2010)
(citing Collins v. Morgan Stanley Dean Witter, 224 F.3d
496, 498-99
(5th Cir. 2000))
i
see also C.H.,
II ex rel. L.H. v.
Rankin Cnty. Sch. Dist., 415 F. App'x 541, 545 (5th Cir. 2011)
("A
district court may look to the pleadings and any documents attached
thereto."
(citing Great Plains Trust Co., 313 F.3d at 313)).
The
court may also take judicial notice of matters of public record.
See Norris v. Hearst Trust, 500 F.3d 454, 461 n.9 (5th Cir. 2007)
i
Great Plains Trust Co., 313 F.3d at 312.
When a party presents "matters outside the pleadings" with a
motion under 12(c), the court has discretion to either accept or
exclude the evidence for purposes of the motion.
See Fed. R. Civ.
P. 12(d); Isquith ex rel. Isquith v. Middle South Utilities, Inc.,
847 F.2d 186,
194 n.3
(5th Cir.
1988).
However," [i] f
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"
and
"[a] 11
parties must
-6-
be given a
reasonable
opportunity to present all the material that is pertinent to the
motion."
Fed. R. Civ. P. 12(d)
Plaintiffs have attached a copy of a January 6, 2012, letter
sent by Wells Fargo's foreclosure counsel to Mary Lynn James 16 and
a January 26,
2012,
foreclosure counsel. 17
letter sent by Plaintiffs to Wells Fargo's
Exhibits attached to a complaint "are part
of the complaint 'for all purposes.'"
v. St. Luke's Episcopal Hosp.,
United States ex reI. Riley
355 F.3d 370, 375
(quoting Fed. R. Civ. P. 10(c))
(5th Cir. 2004)
Defendants have attached copies
of the Note, 18 Deed of Trust, 19 and Substitute Trustee's Deed. 20
Because these documents are matters of public record 21 of which the
court may take judicial notice, and are referenced in Plaintiff's
Original Petition,22 and are central to Plaintiffs'
claims,23 the
16Letter dated January 6, 2012 ("Notice of Acceleration"),
Exhibit A to Original Petition, Exhibit B-2 to Notice of Removal,
Docket Entry No. 1-4, p. 6.
17Letter dated January 26, 2012 ("Dispute Letter"), Exhibit B
to Original Petition, Exhibit B-2 to Notice of Removal, Docket
Entry No. 1-4, p. S.
18Note, Exhibit A to Motion to Dismiss, Docket Entry No. 6-2.
19Deed of Trust, Exhibit B to Motion to Dismiss, Docket Entry
No. 6-3.
2°Substitute Trustee's Deed, Exhibit C to Motion to Dismiss,
Docket Entry No. 6-4.
21See Deed of Trust, Exhibit B to Motion to Dismiss, Docket
Entry No. 6-3, p. lSi Substitute Trustee's Deed, Exhibit C to
Motion to Dismiss, Docket Entry No. 6-4, p. 4.
22See Original Petition, Exhibit B-2 to Notice of Removal,
Docket Entry No. 1-4, pp. 2, 5i Notice of Acceleration, Exhibit A
(continued ... )
-7-
-----~,-----
court concludes that they can be considered without converting the
motion to dismiss to a motion for summary judgment.
III.
Analysis
Plaintiffs style their claims against Wells Fargo as
action for statutory and common law fraud,
(2)
an
an action to set
aside the foreclosure and to declare the sale void,
action for declaratory judgment. 24
(1)
and
(3)
an
Defendants have moved to dismiss
all of Plaintiffs' claims. 25
A.
Fraud
Plaintiffs allege causes of action for statutory and common
law fraud.
Plaintiffs
contend that
Wells
Fargo's
"statements
concerning the contemplated forbearance to amend the loan contract
or
revise
the
figures
as
to
the
amount
owed
misrepresentation of fact made to Plaintiffs. 1126
was
a
material
They allege in
their Original Petition that
[t]he parties to this lawsuit entered into conversations
pertaining to a contemplated modification agreement. On
22 ( ... cont inued)
to Original Petition,
Entry No. 1-4, p. 6.
Exhibit B-2 to Notice of Removal,
23See Original Petition, Exhibit B-2
Docket Entry No. 1-4, pp. 3-5.
Docket
to Notice of Removal,
24rd.
25Motion to Dismiss, Docket Entry No.6.
260riginal Petition, Exhibit B-2 to Notice of Removal, Docket
Entry No. 1-4, p. 3.
-8-
the strength of these conversations, property owners sent
in documentation concerning income and the like. Aside
from this information, Plaintiffs made several payments
accepted by the bank.
The lender continued to accept
payments and discuss a contemplated loan modification,
but never made any effort to adjust wrongful charges,
apply funds available to the loan prior to foreclosing. 27
Plaintiffs argue that because they "relied upon their conversations
[with Wells Fargo]
and,
in fact,
continued to send in payments
complied with the requests and
believing that the matter would
be resolved as represented," they have adequately alleged a cause
of action for fraud. 28
1.
Statutory Fraud
Plaintiffs bring their statutory fraud claim under
the Texas Business and Commerce Code. 29
However,
§
27.01 of
"[s] ection 27.01
only applies to misrepresentations of material fact made to induce
another to enter into a contract for the sale of land or stock."
Burleson State Bank v. Plunkett, 27 S.W.3d 605, 611 (Tex. App.-Waco
2000, pet denied).
"'A loan transaction, even if secured by land,
is not considered to come under the statute.'"
Equities,
Inc.,
540
F.3d
333,
343
(5th
Dorsey v. Portfolio
Cir.
2008)
(quoting
27Id. at 4; see also id. at 2.
~~
28Id. at 5; see also Response, Docket Entry No. 13, pp. 10-11
26-29.
29Although Plaintiffs do not cite any statute in their Original
Petition, they do recite the elements of a fraud claim under
§ 27.01.
See Original Petition, Exhibit B-2 to Notice of Removal,
Docket Entry No. 1-4, p. 4. Moreover, Plaintiffs' Response cites
§ 27.01 as the statutory basis for their fraud claim.
Response,
Docket Entry No. 13, pp. 9-10 ~ 25.
-9-
Burleson r 27 S.W.3d at 611).
Because Plaintiffs do not allege any
facts
for
regarding
parties r
§
a
contract
the
sale
of
land
between
the
27.01 does not apply, and Plaintiffs r statutory fraud
claims fail as a matter of law.
546 F. Apprx 477 r
482
See Massey v. EMC Mortgage Corp'r
(5th Cir. 2013); DorseYr
Ashton v. BAC Home Loans Servicing.
WL 3807756 r at *6
540 F.3d at 343;
L,P' r No.
4:13-CV-810 r 2013
(S.D. Tex. July 19, 2013); Pradhan v. JPMorgan
Chase Bank. N.A'r No. 4:12-cv-539 r 2013 WL 617061 r at *3 (E.D. Tex.
Feb. 19 r 2013).
2.
Common Law Fraud
To prevail on a fraud claim under Texas law a plaintiff must
prove that
(1)
the defendant made a material representation that
was false;
(2) the defendant knew the representation was false or
made it recklessly as a positive assertion without any knowledge of
its truth;
(3)
the defendant intended to induce the plaintiff to
act upon the representation;
fiably
relied
upon
the
representation;
thereby suffered an injury.
Life. Ins. CO'
r
and
(5)
the
plaintiff
Ernst & Young. L.L.P. v. Pacific Mut.
51 S.W.2d 573 r
Civil Procedure 9(b)
fraud claims.
(4) the plaintiff actually and justi-
577
(Tex. 2001).
Federal Rule of
imposes a heightened level of pleading for
A party bringing a fraud claim "must state with
particularity the circumstances constituting fraud or mistake.
Fed. R. Civ. P. 9(b).
II
The plaintiff must therefore "'specify the
statements contended to be fraudulent r identify the speaker, state
-10-
when and where
the
statements were
(5th Cir. 2010)
and explain why the
Sullivan v. Leor Energy, LLC,
statements were fraudulent.'"
F.3d 542, 551
made,
600
(quoting ABC Arbitrage v. Tchuruk,
291 F.3d 336, 350 (5th Cir. 2002)).
common
Plaintiffs'
law
fraud
claims
fail
to
meet
the
heightened pleading requirements of Rule 9(b)
Plaintiffs allege
that
the
they
forbearance
relied
to
on
amend
"statements
the
loan
concerning
contract" 30
and
contemplated
"conversat ions
pertaining to a contemplated modification agreement. "31
Plaintiffs
fail to state in sufficient detail what statements were fraudulent,
identify the speaker, or state when and where the statements were
made.
Cf.
Khan v.
Wells Fargo Bank,
N.A.,
WL 200492, at *6-7 (S.D. Tex. Jan. 17, 2014).
to
explain why
the
statements
were
No.
H-12-1116,
2014
Plaintiffs also fail
fraudulent
or provide
factual enhancement for their conclusory allegation that
any
"[t]he
misrepresentations were made with the knowledge of their falsity or
made recklessly without any knowledge of their truthfulness .
with the intention that they should be acted [upon] by Plaintiff. "32
The Dispute Letter attached to Plaintiffs' Original Petition,
in which Plaintiffs dispute the amount of certain "foreclosure
300riginal Petition, Exhibit B-2 to Notice of Removal, Docket
Entry No. 1-4, p. 3.
31Id. at 4 i see also id. at 2.
32Id. at 3-4.
-11-
fees" related to a foreclosure proceeding in 2007, does identify
Jesse
Swift,
stated,
a
representative
from December 2009
of Wells
Fargo,
until April
2010,
authority to review and remove/reduce the
excessive
or
inaccurate. ,,33
The
who
letter
"repeatedly
that
fees
if
further
he
had the
found to be
alleges
that
Plaintiffs "received a letter in June 2010 in which Jesse Swift
advised
[Plaintiffs]
removed. ,,34
that none of the fees would be reduced or
However,
Plaintiffs
have
not
explained why
these
statements are fraudulent, how Plaintiffs relied on them, or how
they caused Plaintiff to suffer any inj ury.
concludes
that
Plaintiffs'
fraud
Accordingly, the court
claims must
be
dismissed
for
failure to meet the heightened pleading requirements of Rule 9(b).
Plaintiffs'
frauds.
bars a
recover
fraud claims are also barred by the statute of
"Under Texas law,
fraud
as
claim to
damages
the
the
application of the statute of frauds
extent
benefit
that
of
a
the plaintiff
bargain
that
seeks
[]
to
cannot
otherwise be enforced because it fails t[o] comply with the statute
of frauds."
800-K,
Traynor v. Chase Home Finance, L.L.C., No. 3:11-CV-
2013 WL 704932,
at *3
(N.D.
Tex.
Feb.
27,2013)
(citing
Haase v. Glazner, 62 S.W.3d 795, 799 (Tex. 2001)).
As noted above, Plaintiffs' fraud claims are based on alleged
"statements"
and
"conversations"
regarding
a
"contemplated
33Dispute Letter, Exhibit B to Original Petition, Exhibit B-2
to Notice of Removal, Docket Entry No. 1-4, p. 8.
34Id.
-12-
modification" of their mortgage loan. 35
is governed by the statute of frauds.
Bank. N.A.,
law, a
505 F. App'x 361,
364
Plaintiffs' mortgage loan
See Gordon v. JPMorgan Chase
(5th Cir. 2013)
("Under Texas
'loan agreement in which the amount involved in the loan
agreement exceeds $50,000 in value is not enforceable unless the
agreement is in writing and signed by the party to be bound or by
that party's authorized representative. '"
Code
§
26.02(b))) .36
(quoting Tex. Bus. Com.
"When a written agreement is governed by the
statute of frauds, it cannot be materially modified by a subsequent
oral agreement.
719,
721
Servicing.
II
(Tex.
L.P.,
Id.
(citing Dracopoulas v.
1967))
722
i
see
F.3d
also
249,
Martins
256
(5th
Rachal,
v.
BAC
Cir.
411 S.W.2d
Home
2013)
("A
Loans
loan
agreement for more than $50,000 is not enforceable unless it is in
writing. . . .
An agreement regarding the transfer of the property
or modification of
a
loan must
therefore be
in writing
to be
valid.") .
Here, Plaintiffs allege that Wells Fargo "agreed to work with
[them] in their del inquency," that Wells Fargo "suggested modifying
the note and putting the delinquent payments on the end of the
note," and that "[e]ach time [they] submitted the requested paper
350riginal Petition, Exhibit B-2 to Notice of Removal, Docket
Entry No. 1-4, pp. 2, 4.
36See Note, Exhibit A to Motion to Dismiss, Docket Entry
No. 6-2, p. Ii Deed of Trust, Exhibit B to Motion to Dismiss,
Docket Entry No. 6 -3, p. 1 i see also Notice of Acceleration,
Exhibit A to Original Petition, Exhibit B-2 to Notice of Removal,
Docket Entry No. 1-4, p. 6.
-13-
work [Wells Fargo] failed to respond concerning the modification. 1137
Such representations by wells
Fargo do not
constitute an oral
agreement to modify Plaintiffs' mortgage loan.
Moreover,
to the
extent that Plaintiffs allege the existence of such an agreement,
it
would
be
Plaintiffs'
unenforceable
under
the
statute
of
frauds,
and
fraud claims based on that agreement would fail as a
matter of law.
See Traynor, 2013 WL 704932, at *3 ("Application of
the statute of frauds to a contract vitiates a fraud claim based on
the same facts.1I
(quoting Collins v. Allied Pharmacy Mgmt., Inc.,
871
936
S.W.2d
writ))).
929,
(Tex.
App.-Houston
[14th Dist.]
1994,
no
Accordingly, Plaintiffs' claims for common law fraud will
be dismissed. 38
370riginal Petition, Exhibit B-2 to Notice of Removal, Docket
Entry No. 1-4, p. 2i see also id. at 4-5.
38Plaintiffs also allege that "at a time when no delinquency
existed on the loan [Wells Fargo] without cause or justification
locked the Plaintiffs out of the property many months before the
sale. 1I
Id. at 3.
Plaintiffs further allege that "[s]uch action
resulted in the loss of substantial personal property
belonging to Plaintiffs that was located inside the property when
it was stolen by vandals. 1I
Id.
Plaintiffs have not alleged any
independent cause of action related to these allegations and appear
to argue that they support their fraud claims as evidence of
damages.
See Response, Docket Entry No. 13, pp. 10-11 ~~ 28-29,
pp. 12-13 ~ 33. The court has already concluded that Plaintiffs'
fraud claims fail under Rule 9 (b) and the statute of frauds.
Plaintiffs argue that their "common law fraud claim for out-ofpocket damages incurred in reliance on the alleged promise survives
the statute of frauds. 1I Id. at 12 ~ 33 (citing 1001 McKinney Ltd.
v. Credit Suisse First Boston Mortgage Capital, 192 S.W.3d 20 (Tex.
App.-Houston [14th Dist.] 2005, pet. denied)).
However, even if
Plaintiffs could show that they suffered damages in reliance on an
oral promise by Wells Fargo, Plaintiffs' allegations still fail to
meet the requirements of Rule 9 (b). Accordingly, Plaintiffs' fraud
claims related to these allegations will be dismissed.
-14-
B.
Action to Set Aside the Foreclosure Sale
Plaintiffs allege that "[t]his action is a suit in part to set
aside the foreclosure sale of [their] home."39
In support of their
"action to set aside the foreclosure sale," Plaintiffs allege that
"[p]rior to foreclosing on the property,
[Wells Fargo] did not send
either the Notice of Default or the Notice of Foreclosure sale to
the proper address, as required by the Deed of Trust and the Texas
Property Code." 40
In its Motion to Dismiss, Wells Fargo construes Plaintiffs'
allegations
as
a
cause
of
action
for
rescission. 41
equitable
However, " [u]nder Texas law, rescission is a remedy, not a separate
cause
of
No. 4:13-CV-2331,
2014)
Garnica
action."
Sebree,
-Austin 1999, pet. denied))
No.
May 3, 2013)
fraud
Argent
Mortgage
2014 WL 1338703 at *10-11
{citing Scott v.
Corp.,
v.
3:12-CV-2460-L,
i
Co.,
LLC,
(S.D. Tex. March 27,
986 S.W.2d 364,368
(Tex.
App.
see also Garcia v. Universal Mortgage
2013 WL 1858195,
at
*12
(N.D.
Tex.
(dismissing a claim for equitable rescission based on
"because
Plaintiffs
have
not
prevailed
in
any of
their
underlying claims" and were thus "not entitled to any remedy")
In
re
Double
S
WL 3406295, at *5
Petroleum,
Ltd. ,
No.
04-05-00643-CV,
i
2005
(Tex. App.-San Antonio Dec. 14, 2005, no pet.)
390riginal Petition, Exhibit B-2 to Notice of Removal, Docket
Entry No. 1-4, p. 5.
4°Id.
41Motion to Dismiss, Docket Entry No.6, pp. 7-9
-15-
~~
23-27.
(mem.
op.)
(" [R] escission is not a
'claim'
or a
legal cause of
action but an equitable remedy used as a substitute for monetary
damages
when
Plaintiffs'
such
damages
Accordingly,
inadequate. H) .
are
"action to set aside the foreclosure
sale" must be
supported by an independent cause of action. 42
Courts generally construe claims alleging failure to properly
notice under
~,
§
51.002 as claims for wrongful foreclosure.
Ashton, 2013 WL 3807756, at *4; Martinez-Bey v. Bank of Am.,
N.A., No. 3:12-CV-4986-G BH, 2013 WL 3054000, at *10-11 (N.D. Tex.
June 18, 2013); Hill v. Wells Fargo Bank, N.A., No. V-12-11, 2012
Indeed, Plaintiffs
WL 2065377, at *7-8 (S.D. Tex. June 6, 2012).
state
in
adequate
their
notice
Response
to
that
[Wells
their
Fargo]
Original
of
a
Petition
claim
for
"gives
wrongful
foreclosure for failure to comply with the adequate notices. ,,43
order
to
state
a
claim
for
wrongful
foreclosure,
In
however,
Plaintiffs must also allege a grossly inadequate selling price and
a causal link between the procedural defect and the selling price.
Miller v. BAC Home Loans Servicing, L.P., 726 F.3d 717, 726-27 (5th
Cir. 2013)
i
Martins, 722 F.3d at 256.
Because Plaintiffs have not
42To the extent that Plaintiffs seek rescission based on fraud,
such claim fails for the reasons stated in § III.A, above.
Cf.
Garcia, 2013 WL 1858195, at *12 ("[T]he court will construe their
remaining claims for rescission as a claim for the equitable remedy
of rescission based on fraud.
[T]he court determines that
because Plaintiffs have not prevailed in any of their underlying
claims, this claim is now moot as they are not entitled to any
remedy.") .
43Response, Docket Entry No. 13, p. 8
~
22.
-16-
---------,,--_._-----_._-
-----.~------"-------,,-.----,-----------
alleged either a grossly inadequate selling price or the requisite
causal link, their Original Petition "lacks an allegation regarding
a required element necessary to obtain relief."
F.3d at 384.
Stockstill,
561
Therefore, to the extent Plaintiffs seek to set aside
the foreclosure sale based on a theory of wrongful foreclosure,
such claim is dismissed.
However, Plaintiffs' allegation that Wells Fargo "did not send
either the Notice of Default or the Notice of Foreclosure sale to
the proper address,
contract.
law are:
as required by the Deed of Trust" sounds in
"The elements of a breach of contract claim under Texas
(1) the existence of a valid contract; (2) performance or
tendered performance by the plaintiff;
(3) breach of the contract
by the defendant; and (4) damages to the plaintiff resulting from
the breach."
Cir.
2003)
Lewis v. Bank of Am. NA, 343 F.3d 540, 544-45
(citing Palmer v.
Espey Huston
&
Assocs.,
(5th
Inc.,
S.W.3d 345,353 (Tex. App.-Corpus Christi 2002, pet. denied».
84
The
Fifth Circuit has held that a mortgagor who has defaulted on the
underlying note cannot maintain a cause of action for a mortgagee's
subsequent breach of the deed of trust because "a party in default
cannot assert a claim for breach against the other party."
Water
Dynamics, Ltd. v. HSBC Bank USA, Nat. Ass'n, 509 F. App'x 367, 369
(5th Cir.
2013)
(citing Dobbins v.
Redden,
785 S.W.2d 377,
378
(Tex. 1990»; see also Thomas v. EMC Mortgage Corp., 499 F. App'x
337, 341 (5th Cir. 2012).
970
F.
Supp.
2d
568,
580
But see Miller v. CitiMortgage,
(N.D.
-17-
Tex.
2013)
(noting
that
Inc.,
"the
. breached are
contractual terms that Plaintiff alleges were .
terms that would come into effect if the lender claims a default
and pursues acceleration, such as when, for example, the borrower
to
fails
make
Gatling
payments");
CitiMortgage,
v.
Inc. ,
No. H-11-2879, 2013 WL 1625126, at *6 (S.D. Tex. April 15, 2013)
("The notices at issue presuppose that the recipient is in breach
of her contractual obligations.
Failure to provide the required
Plaintiffs acknowledge that
notice is nonetheless actionable.").
" [t] he
loan
"putting
fell
the
Accordingly,
behind"
delinquent
Plaintiffs
and
that
payments
they
on
sought
the
end
cannot maintain a
a
of
cause
modification
the
of
Note.
action
,,44
for
breach of contract against Wells Fargo.
Under Texas law, however, "[a]ny suit that involves a dispute
over the title to land is, in effect, an action in trespass to try
ti tIe,
whatever
its
form
and
equitable relief is sought."
880,
883
regardless
of
whether
Jordan v. Exxon Corp.,
(Tex. App.-Texarkana 1991, no writ).
legal
or
802 S.W.2d
"Trespass to try
title is a statutory action with specific pleading requirements."
Singha v.
BAC Home
Loans
Servicing,
L.P.,
WL 1492301, at *5 (5th Cir. April 17, 2014)
Ann.
§
22.001
(West);
Tex.
R.
Civ.
P.
No.
13-40061,
2014
(citing Tex. Prop. Code
783).
"To succeed,
the
'plaintiff must usually (1) prove a regular chain of conveyances
from the sovereign,
(2) establish superior title out of a common
440 r iginal Petition,
Exhibit B-2 to Notice of Removal, Docket
Entry No. 1-4, p. 2.
-18-
source,
(3) prove title by limitation, or (4) prove title by prior
possession coupled with proof that possession was not abandoned.'"
rd.
(quoting Martin v. Amerman, 133 S.W.3d 262, 265 (Tex. 2004)).
"The rule has long been established in [Texas]
that where a
deed is absolutely void, a suit at law in trespass to try title may
be maintained to recover the land without setting the deed aside
"
This is
Slaughter v. Qualls, 162 S.W.2d 671, 674 (1942)
because "[a]
trustee has no power to sell the debtor's property,
except such as may be found in the deed of trust; and the powers
therein conferred must be strictly followed."
rd. at 675.
By the
same reasoning, " [f]ailure to follow the terms of the deed of trust
will give rise to a cause of action to set aside the trustee's
University Sav. Ass'n v.
deed. "
S.W.2d 705, 706 (Tex. 1982)
Springwoods Shopping Ctr.,
644
(citing Slaughter v. Qualls, 162 S.W.2d
671 (1942)); see also F.D.r.c. v. Myers, 955 F.2d 348, 350-51 (5th
Cir. 1992).
Likewise,
be set aside as
properly
No.
and
" [u]nder Texas law, a foreclosure sale may
invalid if notice under section 51.002
timely
SA-12-CV-345-XR,
served."
Rodriguez
2013 WL 3146844,
v.
at *8
U. S.
is not
Bank,
N .A. ,
(W.D. Tex.
June 18,
2013); see also Savers Fed. Sav. & Loan Ass'n v. Reetz,
888 F.2d
1497, 1502 n.6 (5th Cir. 1989); Fraley v. BAC Home Loans Servicing,
LP,
No.
Jan.
10,
3:11-CV-I060-N-BK,
2012).
2012
Furthermore,
WL
779130,
although
at
"'minor
*9
(N.D.
defects
otherwise valid foreclosure sale do not void it'
to
send the
required notices
is
-19-
not
the
Tex.
in
an
[f] ailing
type
of minor
noncompliance that the case law overlooks."
Brush v. Wells Fargo
Bank,
Tex.
N.A.,
911 F.
Kourosh Hemyari
Supp.
v.
2d 445,
Stephens,
474
355
(S.D.
S.W.3d
623,
2012)
628
(quoting
(2011)
(per
curiam)); see also Shearer v. Allied Live Oak Bank, 758 S.W.2d 940,
942
(Tex.
App.-Corpus
Christi
1988,
writ
denied)
("The bank's
failure to send notice by certified mail as required by law and as
required by the deed of trust was sufficient reason for the trial
court to set aside the foreclosure sale of the real property.
Therefore, we find the evidence supports the trial court's judgment
that the foreclosure sale of the real property subject to the deed
of trust was void.")
Civ.
App.-Amarillo
trustee's
deed void
Phipps v.
Fuqua,
1930,
writ
ref'd)
for
failure
to
32 S.W.2d 660,
(holding
comply with
a
662
(Tex.
substitute
statutory and
contractual notice requirements) .
Here,
Plaintiffs seek to
Substi tute
Trustee's
Deed"
"set aside the
as
void. 45
February 7,
However,
even
if
2012
the
Substitute Trustee's Deed is void,
"[t] ender of whatever sum is
owed
condition
on
the
mortgage
debt
is
a
precedent
to
the
mortgagor's recovery of title from a mortgagee who is in possession
and claims title under a void foreclosure sale. ,,46
Silvers Co., 709 S.W.2d 240, 246
Fillion v. David
(Tex. App.-Houston [14th Dist.]
450riginal Petition, Exhibit B-2 to Notice of Removal, Docket
Entry No. 1-4, p. 5.
46See Motion to Dismiss, Docket Entry No.6, pp. 7-9 ~~ 23-27;
Reply, Docket Entry No. 14, pp. 2-3 ~~ 4-6.
-20-
--.-----
1986, writ ref'd n.r.e.)
(citing Willoughby v. Jones, 151 Tex. 435,
251 S.W.2d 508
see also Lopez v.
(1952));
Sovereign Bank, N.A.,
No. H-13-1429, 2014 WL 1315834, at *5 (S.D. Tex. March 31, 2014);
cf. Slaughter, 162 S.W.2d at 677 ("Slaughter is in no position to
complain of the judgment of the Court of Civil Appeals in so far as
it permits Qualls to redeem the land from her upon the payment of
the balance of the unpaid purchase money.")
Courts have held that when a plaintiff fails to affirmatively
plead tender of the outstanding balance the complaint is subject to
dismissal for failure to state a claim.
WL 3807756,
at *7; Kaechler v.
See, e.g., Ashton, 2013
Bank of Am., N.A., No. H-12-423,
2013 WL 127555, at *7 (S.D. Tex. Jan. 9, 2013); George-Baunchand v.
Wells Fargo Home Mortgage, Inc., No. H-10-3828, 2012 WL 2122198, at
*2
(S.D.
Tex.
June 11,2012);
Hill,
2012 WL 2065377,
at *8-9.
Accordingly, because Plaintiffs do not plead that they have or will
tender
the
outstanding
balance
on
their
mortgage
debt,
their
"action to set aside the foreclosure" will be dismissed for failure
to state a claim. 47
47Plaintiffs cite Shearer to argue that" [w] here the Court sets
aside the foreclosure sale conducted wrongly by a Lender, the Court
puts the parties back in the position prior to the foreclosure
sale.
This does not mean that the note is forgiven - but it
also does not mean that the homeowner must payoff [] the loan on
demand." Response, Docket Entry No. 13, p. 9 , 24. In Shearer the
Texas appellate court, after affirming the trial court's judgment
that the foreclosure sale was void, noted that "[a]t the time of
trial, the Shearers allegedly owed approximately $38,763.17 in
principal plus $14,468.14 in interest on the note secured by the
(continued ... )
-21-
C.
Declaratory Judgment
Plaintiffs argue that their Original Petition "ha[s] made it
abundantly clear that they seek a declaration that the February 7,
2012 [foreclosure sale] was void" and that "[f]iling a declaratory
judgment
is
the precise vehicle accepted by the
Court"
in such cases. 48
However,
relief
pursuant
Texas
to
the
Texas
"district courts
Declaratory Judgment
Supreme
'cannot award
Act
because
declaratory judgment is procedural, not substantive, and federal
courts apply their own procedural rules.'"
Falk v. Wells Fargo
Bank, No. 3:09-CV-678-B, 2011 WL 3702666, at *4 (N.D. Tex. Aug. 19,
2011)
(quoting
Rhodes
v.
Prince,
No.
3:05-CV-2343-D,
2006
WL 954023, at *4 (N.D. Tex. April 11,2006), aff'd sub nom., Rhodes
v. City of Arlington, 215 F. App'x 329 (5th Cir. 2007)), aff'd sub
nom., Estate of Falk v. Wells Fargo Bank, N.A.,
541 F. App'x 481
(5th Cir. 2013).
47 ( ... cont inued)
deed of trust" and held that "[b]ecause the foreclosure sale was
void, this debt is revived and considered outstanding." 758 S. W. 2d
at 942-43.
Plaintiffs do not explain how the holding in Shearer
relieves them of the requirement to tender "whatever sum is owed on
the mortgage debt" in order to recover "title from a mortgagee who
is in possession and claims title under a void foreclosure sale."
Fillion, 709 S. W. 2d at 246.
Plaintiffs' argument appears to be
based on their contention that acceleration was wrongful due to
improper notice. However, even if Wells Fargo wrongly accelerated
the debt, Plaintiffs do not allege that they have tendered the
amount due on the mortgage absent acceleration. Accordingly, even
if "the sum [that] is owed on the mortgage debt" is interpreted to
be less than the total balance outstanding on the Note, Plaintiffs
still fail to adequately plead a cause of action to set aside the
foreclosure and resulting Substitute Trustee's Deed.
48Response, Docket Entry No. 13, p. 14 (citing Holy Cross
Church of God in Christ v. Wolf, 44 S.W.3d 562, 565 (Tex. 2001)).
-22-
"Because this action was removed from state court, 'the action
may be construed as
Judgment Act.'"
one brought
Miller,
under the
federal
970 F. Supp. 2d at 591
Declaratory
(quoting Hurd v.
BAC Home Loans Servicing, LP, 880 F. Supp. 2d 747, 769 (N.D. Tex.
2012)); see also Bell v. Bank of America Home Loan Servicing LP,
No. 4:11-CV-02085, 2012 WL 568755, at *8 (S.D. Tex. Feb. 21, 2012)
("When a declaratory judgment action is filed in state court and is
subsequently removed to
federal
court,
it
is converted to one
brought under the federal Declaratory Judgment Act.").
The federal
Declaratory Judgment Act does not create a substantive cause of
action but, instead, is merely a procedural vehicle that allows a
party to obtain an early adjudication of an actual controversy
arising under other substantive law.
Hartford,
Conn.
v.
Haworth,
57 S.
See Aetna Life Ins. Co. of
Ct.
461,
463
(1937);
Lowe v.
Ingalls Shipbuilding, 723 F.2d 1173, 1178 (5th Cir. 1984)
Because the court has concluded that Plaintiffs have failed to
state a plausible cause of action against Wells Fargo under any
substantive law,
requested
no basis remains for the declaratory judgment
in their Original
JPMorgan Chase Bank,
*10-14
(S.D.
Tex.
N.A.,
Oct.
25,
Petition.
No.
See Morlock,
H-13-0734,
2013);
Morlock,
2013
L.L.C.
v.
WL 5781240,
at
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),
aff'd,
No.
12-20623,
June 4, 2013).
-23-
2013 WL 2422778
(5th Cir.
IV.
Conclusions and Order
For the reasons explained above,
the court concludes that
Plaintiffs have failed to state a plausible claim for relief under
any
cause
of
action
advanced
in
their
Original
Petition.
Defendant's Motion to Dismiss Pursuant to Rule 12 (b) (6)
(Docket
Entry No.6) is therefore GRANTED.
SIGNED at Houston, Texas, on this the 21st day of May, 2014.
,
SIM LAKE
UNITED STATES DISTRICT JUDGE
-24-
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