Vu, v. Bank of America, N.A. et al

Filing 20

MEMORANDUM OPINION AND ORDER denying 6 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM, granting in part and denying in part 4 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM AND BRIEF IN SUPPORT. Plaintiff's claim for breach of warranty of title is dismissed. (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

PHUONG THAO T. VU,

§
§
§
§

Plaintiff,

v.

§

BANK OF AMERICA, N.A.i U.S.
BANK, N.A., AS TRUSTEE FOR
CERTIFICATE HOLDERS OF
CITIGROUP MORTGAGE LOAN TRUST,
INC. CERTIFICATE SERIES 2007AMC1i and CHASE HOME FINANCE,
Defendants.

§
§
§
§
§
§
§
§
§

CIVIL ACTION NO. H-14-3397

MEMORANDUM OPINION AND ORDER

Plaintiff Phuong Thao T. Vu ("Plaintiff") sued Defendants Bank
of America, N.A. ("BANA"), U.S. Bank, N.A. (collectively, the "BANA
Defendants"), and Chase Home Finance, LLC (now JPMorgan Chase Bank,
N.A., successor by merger, and hereinafter "Chase")
Judicial

District

No. 2014-64214. 1

Court

of

Harris

County,

Defendants timely removed. 2

Texas,

in the 113th
under

Cause

Pending before the

court are Defendant Bank of America, N.A.'s and U.S. Bank's Motion
to Dismiss Plaintiff's Original Complaint Pursuant to Fed. R. Civ.

1See Plaintiff's Original Petition, Application for Temporary
Restraining
Order,
and
Request
for
Temporary
Injunction
("Plaintiff's Original Petition"), Exhibit A-3 to Defendant
JPMorgan Chase Bank, N.A.'s Notice of Removal
("Notice of
Removal"), Docket Entry No. 1-1, pp. 11-24. Page citations are to
the pagination imprinted by the federal court's electronic filing
system at the top and right of the document.
2See Notice of Removal, Docket Entry No.1.

P. 12(b) (6) with Incorporated Memorandum of Law ("BANA Defendants'
Motion to Dismiss")

(Docket Entry No.6) and Defendant's Motion to

Dismiss for Failure to State a Claim and Brief in Support ("Chase's
Motion to Dismiss")

(Docket Entry No.4).

For the reasons stated

below, the BANA Defendants' Motion to Dismiss will be denied, and
Chase's Motion to Dismiss will be granted in part and denied in
part.
I .

This

case

arises

from

Background

the

BANA

foreclosure on Plaintiff's property.

Defendants'

attempted

u.S. Bank is the beneficiary

of a deed of trust signed by a prior owner of Plaintiff's property
(the "2006 Deed of Trust"), and BANA is u.S. Bank's loan servicer. 3
After the recording of the 2006 Deed of Trust,

the property was

sold twice in quick succession in 2006 and 2007, each new owner
again encumbering it with a mortgage. 4

In 2010 Chase foreclosed on

the property and then purchased it at auction. 5

In February of

3See Deed of Trust ("2006 Deed of Trust"), Exhibit 6 to
Original Petition, Exhibit A-3 to Notice of Removal, Docket Entry
No. 1-1, pp. 49-71; Assignment of Deed of Trust, Exhibit B to BANA
Defendants' Motion to Dismiss, Docket Entry No. 6-2; Notice of
Trustee's Sale, Exhibit 5 to Original Petition, Exhibit A-3 to
Notice of Removal, Docket Entry No. 1-1, p. 48.
4See General warranty Deed (November 2006), Exhibit C to BANA
Defendants' Motion to Dismiss, Docket Entry No. 6-3; Deed of Trust
(November 2006), Exhibit D to BANA Defendants' Motion to Dismiss,
Docket Entry No. 6-4; Warranty Deed With Vendor's Lien (December
2007), Exhibit E to BANA Defendants' Motion to Dismiss, Docket
Entry No. 6-5; Deed of Trust (December 2007), Exhibit F to BANA
Defendants' Motion to Dismiss, Docket Entry No. 6-6.
5S ee Substitute Trustee's Deed, Exhibit H to BANA Defendants'
Motion to Dismiss, Docket Entry No. 6-8.
-2-

2011 Plaintiff purchased the property from Chase, who transferred
it to Plaintiff by Special Warranty Deed. 6

On October 13, 2014,

BANA notified

to

Plaintiff

of

BANA's

intent

foreclose

on

the

property pursuant to the power of sale in the 2006 Deed of Trust.7
This litigation ensued.
II.

Motions to Dismiss Under Rule 12 (b) (6)

Plaintiff has

asserted a

cause of action for quiet title

against the BANA Defendants and seeks related declaratory relief. 8
Plaintiff has also asserted causes of action against Chase for
breach of the implied covenant against encumbrances,
contract, and breach of warranty of title. 9
and Chase

have

moved

to dismiss

breach of

The BANA Defendants

Plaintiff's

complaint

in

its

entirety pursuant to Federal Rule of Civil Procedure 12(b) (6) for
failure to state a claim. 10

6S ee Special Warranty Deed, Exhibit 2 to Plaintiff's Original
Petition, Exhibit A-3 to Notice of Removal, Docket Entry No. I-I,
pp. 40-43.
7See Notice of Acceleration of Maturity, Exhibit 4 to
Plaintiff's Original Petition, Docket Entry No. I-I, pp. 46-47;
Notice of Trustee's Sale, Exhibit 5 to Plaintiff's Original
Petition, Docket Entry No. I-I, p. 49.
8See Plaintiff's Original
pp. 17-18 " 21- 25.
9S ee id. at 18-19 "

Petition,

Docket

Entry No.

I-I,

27-30.

10See BANA Defendants' Motion to Dismiss, Docket Entry NO.6;
Chase's Motion to Dismiss, Docket Entry No.4.
-3-

A.

Standard of Review
A motion

to

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 v.

(1974)).

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

Id.

consistent

that

the

"Where a
with

a

defendant's

liability,

possibility

and plausibility of

(quoting Twombly,
omitted) .

The

conclusions.'"

court

will

of

the

entitlement

"'not

to

line

between

relief."

Id.

(internal quotation marks

accept

as

true

inferences,

factual

(quoting Plotkin v.

allegation

short

Ferrer v. Chevron Corp.,

(5th Cir. 2005)).

relief."

stops

127 S. Ct. at 1966)

unwarranted

allegations,

Cir. 2007)

it

conclusory
or

484 F.3d 776,

IP Axess Inc.,

legal
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 reI. 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)).

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 reI. Isquith v. Middle South
-5-

Utilities, Inc., 847 F.2d 186, 194 n.3

(5th Cir. 1988).

However,

"[iJf . . . 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 "all parties must be given a
reasonable

opportunity

to

pertinent to the motion."
B.

present

all

the

material

that

is

Fed. R. Civ. P. 12(d).

BANA Defendants' Motion to Dismiss
In Plaintiff's Original Petition, Plaintiff asserts a cause of

action for quiet title against the BANA Defendants, requesting that
the

Court

determine

that

"Plaintiff's

interest

is

superior to

Defendants' claimed lien." 11 Plaintiff also seeks declarations that
(1) "the lien claimed by the Lender Defendants has been released or
has been paid and satisfied and is not subject to foreclosure," and
(2)

"the collection of the 2006 Maria Lopez debt secured by the

lien claimed by the Lender Defendants is time barred,

has been

waived, or barred by laches, and is not subject to foreclosure.,,12

11Id.

II

120riginal Petition, Exhibit A-3 to Notice of Removal, Docket
Entry No. I-I, p. 17.
In the alternative, Plaintiff requests a
declaration that Plaintiff is a bona fide purchaser for value
without notice.
Id. at 18.
However, Plaintiff alleges that the
2006 Deed of Trust was recorded prior to Plaintiff's purchase of
the property. See id. at 16-17. Under the Texas Property Code a
deed of trust is valid against a subsequent purchaser for value
without actual notice so long as the deed of trust has been
properly recorded.
See Tex. Prop. Code §§ 13.001-002. Plaintiff
took the property subject to the 2006 Deed of Trust.
-6-

A suit to quiet title under Texas law "exists to enable the
holder of the feeblest equity to remove from his way to legal title
any unlawful hindrance having the appearance of better right.
Gordon v.

West

Houston Trees,

Ltd.,

352

App.-Houston [1st Dist.] 2011, no pet.)
and citation omitted).
defendant's
appearance

claim
of

a

S.W.3d

32,

42

/I

(Tex.

(internal quotation marks

It requires a plaintiff to prove that the

" (1)
better

constitutes
right

to

a

hindrance

title

than

having

the

own,

that

its

(2) appears to be valid on its face, and that (3) for reasons not
apparent on its face, is not valid./I

Id.

"The effect of a suit to

quiet title is to declare invalid or ineffective the defendant's
claim to title./I

Id.

The BANA Defendants argue that "Plaintiff's action to quiet
title fails as a matter of law because the [2006 Deed of Trust] was
executed, recorded, and not released prior to Plaintiff's Deed./l13
As anticipated in a suit to quiet tittle,
claim appears valid on its face.

the BANA Defendants'

However, Plaintiff alleges that

the BANA Defendants' lien "has been satisfied by payment by one of
a number of other lenders on numerous subsequent conveyances.

/114

Plaintiff argues that lack of a recorded release proves only that
no

release

has

been

recorded,

and

that

Plaintiff's

Original

Petition also gives fair notice of a limitations defense under

13BANA Defendants' Motion to Dismiss, Docket Entry No.6, p. 4.
14Plaintiff's Original Petition, Exhibit
Removal, Docket Entry No. 1-1, p. 17 , 21.
-7-

A-3

to Notice

of

Tex. Civ. Prac. & Rem. Code § 16.035.

Plaintiff contends that it

is plausible that the 2006 Deed of Trust has been satisfied and/or
that the BANA Defendants' cause of action accrued more than four
years prior to their attempted foreclosure.
While

it

is

a

close

call

given

the

arguably

conclusory

allegations in Plaintiff's Original Petition, the court agrees that
"[a]s a stranger to the Lopez loan, it is not reasonable to expect
that Plaintiff could have obtained the related documents without
the aid of discovery in time to both obtain a temporary restraining
order and/or to respond to the initial motion to dismiss herein." 15
In a 12(b) (6) motion "[t]he issue is not whether a plaintiff will
ultimately prevail but whether the claimant is entitled to offer
evidence to support the claims."
Viewed

in

the

light

most

Swierkiewicz, 122 S. Ct. at 997.

favorable

to

Plaintiff,

Plaintiff's

factual allegations are sufficient to state a claim for relief.

C.

Chase's Motion to Dismiss
Plaintiff asserts causes of action for breach of the Texas

Property Code's implied covenant against encumbrances, breach of
contract, and breach of warranty of title.

At the center of the

dispute is whether Chase warranted or covenanted, either expressly
or impliedly, that the property would be free of encumbrances.

In

15See Plaintiff's Response in Opposition to Defendants Bank of
America and u.s. Bank's Rule 12(b) (6) Motion to Dismiss for Failure
to State a Claim and Request for Leave to Amend Complaint, Docket
Entry No. 13, p. 7.
-8-

opposing each of Plaintiff's causes of action, Chase relies on the
limited covenant of title contained in the Special Warranty Deed
and

what

Chase

warranties.

argues

is

an

express

disclaimer

of

any

other

However, a "covenant against encumbrances is distinct

from the warranty of title and is intended to protect the grantee
against rights or interests in third persons that, while consistent
with the fee being in the grantor, diminish the value of the estate
conveyed./I

Spiller v.

Fid.

Nat.

Title

Ins.

Co.,

No.

03-97-

00501-CV, 1998 WL 717195, at *2 (Tex. App.-Austin Oct. 15, 1998, no
pet. )

(unpublished).

As discussed below,

Plaintiff has pleaded

plausible claims for breach of the covenant against encumbrances
and breach of contract.

Plaintiff's claim for breach of warranty

of title fails, however, and will be dismissed.
1.

Implied Covenant Against Encumbrances

Plaintiff's complaint alleges that Chase impliedly covenanted
that the property was free of encumbrances and that, to the extent
that the BANA Defendants have a valid lien,
covenant. 16

Chase breached that

Texas Property Code Section 5.023(a)

states that a

conveyance of real property carries with it an implied covenant
that the property is free of encumbrances "unless the conveyance

p. 19

16See Plaintiff's Original
~ 30.

Petition,
-9-

Docket Entry No.

1-1,

expressly provides otherwise. ,,17
the basis of a lawsuit.

§

A breach of that covenant may form

5.023(b).

Chase conveyed the property

at issue to Plaintiff via a special warranty deed that does not
reference
The

§

5.023 (a) or the implied covenant against encumbrances. 18

BANA Defendants

seek

to

enforce

conveyance from Chase to Plaintiff.

a

lien

that

predates

the

Chase argues that together

with the limited warranty of title in the Special Warranty Deed,
the "AS IS" clause disclaiming other warranties is sufficient to
disclaim the implied covenant created by

§

5.023 (a) .19

Chase cites

no authority for this proposition, and the court is persuaded that
Plaintiff has asserted a plausible claim for relief under the Texas
Property Code.
2.

Breach of Contract

Plaintiff asserts a claim for breach of contract. 20

To prevail

on a breach of contract claim under Texas law a plaintiff must
prove:

(1) the existence of a valid contract;

tendered performance by the plaintiff;

Code

(2) performance or

(3) breach of the contract

17"Encumbrance" includes a lien on real property.
§ 5.024.

Tex. Prop.

18See Special Warranty Deed, Exhibit 2 to Plaintiff's Original
Petition, DocketJEntry No. I-I, pp. 40-41.
19Chase's Motion to Dismiss, Docket Entry No.4, pp. 6-7;
Defendant Chase's Reply Brief in Support of Motion to Dismiss for
Failure to State a Claim, Docket Entry No. 18, p. 5.
20See
p. 19

Plaintiff's Original

Petition,

~ 29.

-10-

Docket Entry No.

I-I,

by the defendant; and (4) damages to the plaintiff resulting from
the breach.
Cir.2003)
353

Lewis v. Bank of America NA, 343 F.3d 540, 544-45 (5th
(citing Palmer v. Espey Huston & Assocs., 84 S.W.3d 345,

(Tex. App.-Corpus Christi 2002,

Original
Plaintiff

Petition
which

states

agreed

that
that

pet.

"Chase
Chase

denied)).

executed a

would

convey

Plaintiff's
contract
title

to

with
the

Property free and clear of defects and encumbrances to Plaintiff. ,,21
Plaintiff's Response to Chase states that the contract at issue is
the contract for sale entered into by the parties, 22 which was later
amended by a "counterproposal" also signed by both parties. 23

From

the factual allegations in the complaint, it appears that Plaintiff
performed under the contract. 24

As alleged in the complaint, Chase

conveyed title to a property encumbered by a lien, which, if valid,

21Id.
22Plaintiff's Response in Opposition to Defendant JP Morgan
Chase Bank's Rule 12(b) (6) Motion to Dismiss for Failure to State
a Claim and Request for Leave to Amend Complaint ("Plaintiff's
Response to Chase"), Docket Entry No. 16, p. 6 , 14.
23Id.
Only the
Original Petition.
contract for sale to
need not rely on this

Counterproposal was attached to Plaintiff's
Plaintiff attached a copy of the original
Plaintiff's Response to Chase, but the court
document to decide Chase's Motion to Dismiss.

24Chase argues that by bringing this lawsuit Plaintiff is in
breach of the contract because Plaintiff "waived any claim arising
from any other matter which would be disclosed by search of the
public records."
Chase's Motion to Dismiss, Docket Entry No.4,
p. 6.
Chase chose to file a motion to dismiss instead of waiting
to file a motion for summary judgment supported by evidence. Under
the standard for reviewing a motion to dismiss Chase's argument has
no traction.
-11-

will damage Plaintiff's interest in the property.

Plaintiff has

pleaded a plausible claim for relief.
3.

Breach of Warranty of Title

Plaintiff asserts a claim for breach of warranty of title. 25
Under Texas law a claim for breach of warranty of title requires
some

form of

eviction,

either actual

purchaser from the property,
property's title.
Ltd.,

to

mere

of

the

cloud on the

See Green Tree Servicing, LLC v. lCA Wholesale,

eviction,

dismiss

(Tex. App.-Austin 2014,

Plaintiff

(collecting cases).

motion

constructive,

rather than a

439 S.W.3d 657,657 n.4

constructive

or

this

has

nor has

pleaded neither actual

Plaintiff

claim.

no pet.)

responded

Plaintiff

has

to

not

nor

Chase's

pleaded

a

plausible claim for breach of warranty of title.

III.

Conclusions and Order

The court concludes that Plaintiff has stated plausible claims
against the BANA Defendants for quiet title and declaratory relief
and against Chase for breach of covenant under the Texas Property
Code

and breach of

plausible

claim

for

contract i
relief

but

for

Plaintiff

breach

of

has

not

warranty

stated a
of

title.

Therefore, Defendant Bank of America, N.A.'s and U.S. Bank's Motion
to Dismiss Plaintiff's Original Complaint Pursuant to Fed. R. Civ.

25See Plaintiff's Original
p. 19 ~ 27.

Petition,

-12-

Docket Entry No.

1-1,

P.

12(b) (6)

(Docket Entry No.6)

is DENIED;

Defendant Chase's

Motion to Dismiss for Failure to State a Claim (Docket Entry No.4)
is GRANTED IN PART and DENIED IN PART; and Plaintiff's claim for
breach of warranty of title is DISMISSED.
Over the last few years a large number of mortgage foreclosure
cases

have

been

dispositive

filed

motions

are

in

this

filed

district.
in

such

A large
cases,

and

number
the

of

court

endeavors to rule promptly on those motions.

In this case both

defendants chose to file motions to dismiss,

which have proven

premature.

Had Defendants waited, some discovery might have shown

that Plaintiff's claims lacked merit,

and the court could have

ruled on fully briefed motions for summary judgment supported by
evidence.

However, having already expended time and energy ruling

on Defendants' motions to dismiss,

the court is not inclined to

allow another round of disposi ti ve motions.

Instead,

when the

parties appear for their initial conference on April 17, 2015, the
court will enter an expedited discovery schedule,

and this case

will be tried on the merits within 120 days.
SIGNED at Houston, Texas, on this the 9th day of April, 2015.

7

SIM LAKE
UNITED STATES DISTRICT JUDGE

-13-