Reynoso v. Wells Fargo Bank, N.A. et al
MEMORANDUM AND OPINION, entered. GRANTING 25 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM , GRANTING 19 MOTION to Dismiss . Plaintiff is granted twenty-one (21) days to amend her Complaint to correct the deficiencies noted herein. Failure to do so will result in the dismissal of her deficient claims with prejudice. (Signed by Judge Melinda Harmon) Parties notified.(jdav, 4)
United States District Court
Southern District of Texas
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
MARIA D. REYNOSO,
WELLS FARGO BANK, N.A., et al,
September 26, 2017
David J. Bradley, Clerk
CIVIL ACTION NO. 4:16-CV-01059
OPINION AND ORDER
Pending before the Court in the above-referenced cause are Defendants Wells Fargo
Bank, N.A. (―Wells Fargo‖) and DIBS US, INC.‘s (―DIBS‖) Motions to Dismiss. Docs. 19, 25.
The remaining Defendants, Diaz Holding, LLC and Elvia Diaz, have not been served, and do not
participate in the pending Motions. Because the state record indicates that summons have not
been issued for their service of process Diaz holding, LLC and Elvia Diaz will be dismissed for
want of prosecution.
Plaintiff, Maria D. Reynoso, has not filed a response to either of Defendants‘ motions to
dismiss. Therefore, pursuant to Local Rule 7.4, the Motions are deemed unopposed. Having
considered Defendants‘ Motions, the facts in the record, and the applicable law, the Court
concludes that the Motions should be granted and Plaintiff‘s case dismissed without prejudice to
refiling to correct deficiencies in the pleadings.
As alleged in her Original Petition, filed on March 10, 2016, in the 165th Judicial District
Court in Harris County, Texas, Plaintiff files this lawsuit to challenge the foreclosure of the sale
of real property located at 6610 Bellaire Gardens, Houston, Texas 77072 (the ―Property‖). Doc.
1-5. Plaintiff purchased the Property on or about February 28, 2001. Id. ¶ 8. Plaintiff began to
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have financial problems in 2011 and allegedly reached out to Wells Fargo for assistance, but no
assistance was offered. Id. ¶ 9. As a result, on August 1, 2011, Plaintiff filed for bankruptcy. Id. ¶
10. During the bankruptcy, Plaintiff paid $34,492.34 to Wells Fargo in an attempt to keep her
On August 18, 2014, Plaintiff‘s bankruptcy was dismissed. Id. Plaintiff alleges that after
the bankruptcy she attempted to make her monthly payments, but Wells Fargo refused to accept
them. Id. ¶ 11. Plaintiff then submitted an application for a loan modification. Id. ¶ 12. Plaintiff
claims that before she received a response on the modification application she received another
Trustee Notice of Foreclosure Sale. Id. ¶ 13. On November 3, 2015, Wells Fargo followed
through with the foreclosure and sold the subject property to DIBS for $106,000. Id. ¶ 17.
On January 11, 2016, DIBS filed a forcible detainer to remove Plaintiff from the
Property. Id. ¶ 18. The Justice Court granted judgment in favor of DIBS. Id. Plaintiff then filed
an appeal of the eviction judgment. Id. ¶ 19.
On February 21, 2016, Plaintiff filed her Original Petition in this matter and on April 21,
2016, Wells Fargo removed the state-court action to federal court on the basis of federal-question
jurisdiction. Doc. 1 ¶ 12. Specifically, Plaintiff alleges Wells Fargo violated 12 C.F.R. §
1024.39.1 Accordingly, under 28 U.S.C. 1367, the Court has supplemental jurisdiction over the
remaining state-law claims.
Defendants subsequently filed their Motions to Dismiss. Docs. 19, 25. In their Motions,
Defendants maintain that Plaintiff fails to sufficiently plead her cause of action either because
necessary elements are omitted, or because she does not plead sufficient facts to support each
―Any action pursuant to the provisions of section 2605, 2607, or 2608 of this title may be
brought in the United States district court or in any other court of competent jurisdiction, for the
district in which the property involved is located.‖ 12 U.S.C. § 2614.
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claim. Docs. 19, 25. Plaintiff did not file a response. The Motions are now ripe for adjudication.
II. Legal Standard
In order to survive a Rule 12(b)(6) motion to dismiss, a complaint, viewed in the light
most favorable to the plaintiff, must be ―plausible on its face.‖ Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)) (internal quotation
marks omitted). ―A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.‖ Id. While a court must accept all of plaintiff‘s allegations as true, it is not bound to
accept as true ―a legal conclusion couched as a factual allegation.‖ Twombly, 550 U.S. at 555
(quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)).
In her Original Petition, Plaintiff asserts the following claims against Wells Fargo: unfair
collection practices under the Texas Debt Collection Act (―TDCA‖), Tex. Fin Code §§ 392.001–
392.404, deceptive trade practices under the Texas Deceptive Trade Practices Act (―DTPA‖),
Tex. Bus. & Com. Code §§ 17.41–17.955, estoppel, breach-of-contract, violation of consumer
protection laws, and wrongful foreclosure. Doc. 1-5 ¶¶ 22, 26, 29, 43, 44, 48, 50. Plaintiff also
asserts her claims of unfair-collection and deceptive-trade practices against DIBS. Id. ¶¶ 22, 29.
A. Texas Debt Collection Act Claims
The TDCA prohibits debt collectors from using threats, coercion, or other wrongful
practices in the collection of consumer debts. See Gomez v. Wells Fargo Bank, N.A., No. 3:10–
CV–0381-B, 2010 WL 2900351, at *3 (N.D. Tex. July 21, 2010); Brown v. Oaklawn Bank, 718
S.W.2d 678, 680 (Tex. 1986). To state a claim under the TDCA, a plaintiff must allege that: (1)
the debt at issue is a consumer debt; (2) the defendant is a ―debt collector‖ within the meaning of
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the TDCA; (3) the defendant committed a wrongful act in violation of the TDCA; (4) the
wrongful act was committed against the plaintiff; and (5) the plaintiff was injured as a result of
the defendant‘s wrongful act. See Carey v. Fargo, No. CV H-15-1666, 2016 WL 4246997, at *4
(S.D. Tex. Aug. 11, 2016). Here, Plaintiff alleges that Wells Fargo and DIBS violated §§
392.304(a)(8), 392.303(a)(2), and 392.304(a)(19) of the TDCA. Doc. 1-5 ¶¶ 24b-c, 25a-e. The
Court will address each alleged violation in turn.
(1) Section 392.304(a)(8)
Section 392.304(a)(8) prohibits debt collectors from ―misrepresenting the character,
extent, or amount of a consumer debt.‖ Tex. Fin. Code § 392.304(a)(8). To state a claim for
violation of § 392.304(a)(8), Plaintiff must show that the debt collector ―made a
misrepresentation that led [her] to be unaware (1) that [she] had a mortgage debt, (2) of the
specific amount [she] owed, or (3) that [she] had defaulted.‖ Rucker v. Bank of Am., N.A., 806
F.3d 828, 831 (5th Cir. 2015) (citing Miller v. BAC Home Loans Servicing, L.P., 726 F.3d 717,
723 (5th Cir. 2013)). A misrepresentation is ―an affirmative statement‖ by the debt collector that
is ―false or misleading.‖ Robinson v. Wells Fargo Bank, N.A., 576 Fed. App‘x 358, 363 (5th Cir.
2014) (per curiam) (unpublished) (citing Verdin v. Fed. Nat’l Mortg. Ass’n, 540 Fed. App‘x 253,
257 (5th Cir. 2013)).
Here, Plaintiff does not allege that any purported misrepresentations caused her to believe
that she: (1) did not have a mortgage debt, (2) of the specific amount owed; or (3) she had not
defaulted. Miller, 726 F.3d at 723. Rather, Plaintiff provides statements that are conclusory in
nature, as they merely allege that the collection of attorney and inspection fees was unnecessary,
the property was sold at below market value, and Wells Fargo failed to send Plaintiff the surplus
funds after foreclosure. Doc. 1-5 ¶ 25b-e. Plaintiff makes no allegations related to a
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misrepresentation of the debt owed by Wells Fargo. Furthermore, Plaintiff makes no allegation
whatsoever in regards to DIBS. Therefore, Plaintiff fails to state a claim under §392.304(a)(8) of
the TDCA against either Wells Fargo or DIBS.
(2) Section 392.303(a)(2)
Section 392.303(a)(2) prohibits using unfair or unconscionable means in debt collection
such as ―collecting or attempting to collect interest or a charge, fee, or expense incidental to the
obligation unless [the fee] is expressly authorized by the agreement creating the obligation or
legally chargeable to the consumer.‖ Tex. Fin. Code § 392.303(a)(2). Section 392.303(a)(2)
―does not create a cause of action to challenge assessed fees as unreasonable.‖ Rucker, 806 F.3d
Although reference to § 392.303(a)(2) is made in the Original Petition, Plaintiff fails to
allege any facts in support of Wells Fargo or DIBS‘ violation of § 392.303(a)(2). See Doc. 1-5 ¶
25b. In this regard, Plaintiff fails to: (1) identify the fee that is the subject of the claim; (2) allege
that the fee was not expressly authorized by the agreement creating the obligation; and (3)
describe the unfair or unconscionable means by which the fee was collected or attempted to be
collected. See generally Doc. 1-5 ¶¶ 24c, 25. Accordingly, Plaintiff fails to state a claim under §
392.303(a)(2) of the TDCA.
(3) Section 392.304(a)(19)
Section 392.304(a)(19) prohibits a debt collector from ―using any other false
representation or deceptive means to collect a debt or obtain information concerning a
consumer.‖ Tex. Fin. Code § 392.304(a)(19). ―To maintain a claim under section 392.304(a)(19),
[the plaintiff] would need to allege that [the defendant] made an ‗affirmative statement‘ that was
false or misleading.‖ Chavez v. Wells Fargo Bank, N.A., 578 Fed. App‘x 345, 348 (5th Cir.
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2014) (citing Verdin, 540 Fed. App‘x at 257).
Although § 392.304(a)(19) ―appears to be a catch-all, or residual, provision for
proceeding under the TDCA,‖ Miller, 726 F.3d at 724, here, Plaintiff fails to allege that Wells
Fargo made any affirmative statements that were false or misleading, see generally Doc. 1-5.
―Such a pleading is not sufficient to overcome dismissal under Rule 12(b)(6).‖ Miller, 726 F.3d
at 724. Plaintiff, thus, has not stated a claim upon which relief may be granted under §
B. Texas Deceptive Trade Practices Act Claims
The elements of a cause of action under the DTPA are: ―(1) the plaintiff is a consumer;
(2) the defendant committed acts ‗in connection with the purchase or lease of any goods or
services‘; (3) the defendant‘s acts were false, misleading or deceptive; and (4) the acts were a
producing cause of plaintiff‘s injuries.‖ Cushman v. GC Servs., L.P., 657 F. Supp. 2d 834, 842
(S.D. Tex. 2009), aff’d sub nom. Cushman v. GC Servs., L.P., 397 Fed. App‘x 24 (5th Cir. 2010)
(per curiam) (unpublished). To qualify as a consumer under the DTPA, ―the person must seek or
acquire goods or services by purchase or lease,‖ and ―the goods or services purchased or leased
must form the basis of the complaint.‖ Miller, 726 F.3d at 724–25. ―Generally, a pure loan
transaction lies outside the DTPA because money is considered to be neither a good nor a
service.‖ Id. at 725. However, ―a mortgagor qualifies as a consumer under the DTPA if his or her
primary objective in obtaining the loan was to acquire a good or service, and that good or service
forms the basis of the complaint.‖ Id. ―Subsequent actions related to mortgage accounts, for
example, extensions of further credit or modifications of the original loan, do not satisfy the
‗good or services‘ element of the DTPA.‘‖ Broyles v. Chase Home Fin., No. 3:10-CV-2256-G,
2011 WL 1428904, at *4 (N.D. Tex. Apr. 13, 2011) (citing Cuevas v. BAC Home Loans
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Servicing, LP, No. 4:10-CV-31, 2012 WL 4339063, at *4 (S.D. Tex. Sept. 19, 2012)).
Furthermore, ―the Texas Supreme Court has firmly established that a lawful foreclosure on a
security interest does not violate the DTPA.‖ Id. (citing Ogden v. Dickinson State Bank, 662
S.W.2d 330, 333 (Tex. 1983)).
In the present case, the basis of Plaintiff‘s complaint is Wells Fargo‘s alleged failure to
give Plaintiff a modification and Wells Fargo‘s subsequent ―rush‖ for foreclosure that did not
involve Plaintiff acquiring a good or service by purchase or lease. See Leon v. Citimortgage, Inc.,
No. 14-CV-001334, 2014 WL 12616136, at *2 (S.D. Tex. Aug. 5, 2014) (―[T]he allegations in
the original petition establish that Plaintiff is not a consumer under the DTPA, as the basis of
Plaintiff‘s complaint—discussions about loan modification programs, and the Defendant‘s
subsequent move for foreclosure—did not involve Plaintiff acquiring a good or service by
purchase or lease.‖ (citation omitted)). Rather, Plaintiff seeks to hold Wells Fargo liable for its
actions in servicing the loan, and thus the basis of the complaint is the loan and not the property.
Because Plaintiff only has consumer status to the extent that her complaint deals with the
property, not the loan itself, Plaintiff‘s DTPA has not pled a proper consumer claim under the
DTPA and her claim must be dismissed. See Thomas v. Ocwen Loan Servicing, LLC, No. CIV.A.
H:12-3497, 2013 WL 3245953, at *2–3 (S.D. Tex. June 25, 2013).
C. Estoppel Claim
Plaintiff asserts an equitable estoppel claim alleging that Wells Fargo is barred from
foreclosing because it accepted a financial accommodation during the bankruptcy proceedings.
Doc. 1-5 ¶ 28. Plaintiff also alleges that Wells Fargo failed to properly account for funds
received during the bankruptcy proceeding. Id. Equitable estoppel is generally, however, an
―affirmative defense, not an affirmative claim for relief.‖ Knapik v. BAC Home Loans Servicing,
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LP, 825 F. Supp. 2d 869, 871–72 (S.D. Tex. 2011). Equitable estoppel has been used ―to prevent
an opponent from pleading limitations, if the opponent, his agent, or representatives make
representations which induce the plaintiff to delay filing suit within the applicable limitations
period.‖ Cook v. Smith, 673 S.W.2d 235 (Tex. App.—Dallas 1984, writ ref‘d n.r.e.). In the
present case, Defendant is not asserting a statute-of-limitations defense. As such, Plaintiff‘s
estoppel claim fails to state a claim for relief.
D. Breach-of-Contract Claim
Plaintiff next alleges that Wells Fargo breached its Deed of Trust by failing to prove it
had standing to foreclose and for failing to provide notice of her right to cure in violation of
Texas Property Code § 51.002(d). Doc. 1-5 ¶¶ 40, 42. Wells Fargo contends that in order to
recover for breach of contract a plaintiff must establish first that there is a valid, enforceable
contract; second that the plaintiff performed or tendered performance of its contractual
obligations; third, that the defendant breached the contract, and fourth the defendant‘s breach
caused plaintiff‘s injury. Mullins v. TestAmerica, Inc., 564 F.3d 386, 418 (5th Cir. 2009) (citing
Aguiar v. Segal, 167 S.W. 3d 443, 450 (Tex. App.—Houston [14th Dist.] 2005, pet. denied).
―[A] party to a contract cannot enforce it or recover damages for its breach unless that
party shows that he or she. . .has performed the obligations imposed upon him. . .or unless the
party shows some valid excuse for failure to perform.‖ Carr v. Norstok Bldg. Sys., 767 S.W. 2d
936, 939 (Tex. App.—Beaumont 1989, no writ. Plaintiff has failed to plead that she performed
her obligations under the contract when she defaulted on her loan. Plaintiff‘s claim of breach of
E. Consumer Financial Protection Act Claim
Section 1024.39 of the Code of Federal Regulations requires a servicer to ―establish or
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make good faith efforts to establish live contact with a delinquent borrower not later than the
36th day of the borrower‘s delinquency and, promptly after establishing live contact, inform such
borrower about the availability of loss mitigation options if appropriate.‖ 12 C.F.R. § 1024.39(a).
Wells Fargo argues that Plaintiff fails to allege more than the mere possibility of misconduct.
Doc. 19 at 13.
Here, Plaintiff merely states that Wells Fargo ―failed to disclose all loss mitigation
options available to Plaintiff and they failed to disclose the reason for any denial of Plaintiff‘s
application.‖ Doc. 1-5 ¶ 45. However, Plaintiff does not provide facts demonstrating which loss
mitigations Wells Fargo failed to disclose. ―Simply cit[ing] these extensive regulations without
stating how [the defendant] allegedly violated them‖ is insufficient to state a claim. Ghanem v.
Nationstar Mortg., LLC, No. CIV.A. H-14-3091, 2015 WL 1932046, at *4–5 (S.D. Tex. Apr. 28,
2015) (citing Iqbal, 556 U.S. at 678). Accordingly, Plaintiff fails to allege adequate facts to
support her claim that Wells Fargo violated 12 C.F.R. § 1024.39, and her claim must be
F. Wrongful-Foreclosure Claim
Under Texas law, to state a claim for wrongful foreclosure a plaintiff must show (1) a
defect in the foreclosure sale proceedings; (2) a grossly inadequate selling price; and (3) a causal
connection between the defect and the grossly inadequate selling price. Sauceda v. GMAC
Mortg. Corp., 268 S.W.3d 135, 139 (Tex. App.—Corpus Christi 2008, no pet.) (citing Charter
Nat. Bank-Houston v. Stevens, 781 S.W.2d 368, 371 (Tex. App.—Houston [14th Dist.] 1989,
writ denied)). There must be allegations of fact that an irregularity ―must have caused or
contributed to cause the property to be sold for a grossly inadequate price.‖ Barcenas v. Fed.
Home Loan Mortg. Corp., 2013 WL 2886250, at*5 (S.D. Tex. Jan. 24, 2013) Plaintiff here
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makes no such allegations. Rather she alleges in her Original Petition (Doc. 1-5 at ¶48) ―There
was a defect in the foreclosure procedure when Wells Fargo Bank N.A. failed to send the
required certified notice of the Texas Property Code under section 51.002(d).‖ Because recovery
for wrongful foreclosure, however, ―is premised upon one‘s lack of possession of real property,
individuals never losing possession of the property cannot recover on a theory of wrongful
foreclosure.‖ Baker v. Countrywide Home Loans, Inc., No. 3:08–CV–0916–B, 2009 WL
1810336, *4 (N.D. Tex. June 24, 2009). Thus, courts in Texas ―do not recognize an action for
attempted wrongful foreclosure.‖ Id. See also, e.g., Sander v. Citimortgage, Inc., Civ. A. No.
4:09CV566, 2011 WL 1790732, *2 (E.D. Tex. Mar. 24, 2001) (―[I]ndividuals never losing
possession of th[e] property cannot recover on a theory of wrongful foreclosure.‖). In the present
case, Plaintiff has not lost possession of the Property. Doc. 1-5 ¶ 1. Moreover, under Texas law
in order to set aside, cancel, and rescind a foreclosure sale, a borrower is required to tender the
full amount due under the note. Lambert v. First Nat’l Bank of Bowie, 993 S.W. 2d 833, 835-36
(Tex. App.—Fort Worth 1999, pet. denied).
Thus, Plaintiff‘s allegations of wrongful
foreclosure, for inadequate notice, or any other reason, must be dismissed.
Defendants request dismissal of all claims with prejudice. Doc. 19 at 16; 25 at 3.
However, when a plaintiff‘s complaint fails to state a claim, the court should generally give the
plaintiff at least one chance to amend the complaint under Rule 15(a) before dismissing the
action with prejudice. Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d
305, 329 (5th Cir. 2002) (―District courts often afford plaintiffs at least one opportunity to cure
pleading deficiencies before dismissing a case, unless it is clear that the defects are incurable or
the plaintiffs advise the court that they are unwilling or unable to amend in a manner that will
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avoid dismissal.‖); United States ex rel. Adrian v. Regents of the Univ. of Cal., 363 F.3d 398, 403
(5th Cir. 2004) (citing Foman v. Davis, 371 U.S. 178, 182 (1962) (―Leave to amend should be
freely given, and outright refusal to grant leave to amend without a justification . . . is considered
an abuse of discretion.‖)). The court should only deny leave to amend if it determines that ―the
proposed change clearly is frivolous or advances a claim or defense that is legally insufficient on
its face. 6 Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and
Procedure § 1487 (2d. ed. 1990); Motten v. Chase Home Fin., 831 F. Supp. 2d 988, 994 (S.D.
Tex. 2011). Some of the claims in the present case are not clearly frivolous nor do they appear to
be legally insufficient on their face. Plaintiff should be given at least one chance to amend her
For the foregoing reasons, it is hereby
ORDERED that Defendants‘ Motions to Dismiss, Docs. 19, 25, are GRANTED It is
ORDERED that Plaintiff is granted twenty-one (21) days to amend her Complaint to
correct the deficiencies noted herein. Failure to do so will result in the dismissal of her deficient
claims with prejudice.
SIGNED at Houston, Texas, this 26th day of September, 2017.
UNITED STATES DISTRICT JUDGE
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