Williams v. Lakeview Loan Servicing, LLC et al
Filing
59
MEMORANDUM AND OPINION DENYING MOTION TO DISMISS granting 27 Opposed MOTION to Dismiss 1 Complaint .(Signed by Judge Charles Eskridge) Parties notified.(jengonzalez, 4)
Case 4:20-cv-01900 Document 59 Filed on 12/22/20 in TXSD Page 1 of 9
United States District Court
Southern District of Texas
ENTERED
December 22, 2020
David J. Bradley, Clerk
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
URSULA NICHOLE
WILLIAMS,
Plaintiff,
vs.
LAKEVIEW LOAN
SERVICING LLC and
LOANCARE LLC,
Defendants.
§ CIVIL ACTION NO.
§ 4:20-cv-01900
§
§
§
§ JUDGE CHARLES ESKRIDGE
§
§
§
§
§
§
MEMORANDUM AND OPINION
DENYING MOTION TO DISMISS
The motion by Defendant LoanCare LLC to dismiss the
claim against it for violation of the Texas Debt Collection Act is
denied. Dkt 27.
1. Background
LoanCare is a “mortgage loan subservicer” that “performs
servicing-related functions” for mortgages serviced by Defendant
Lakeview Loan Servicing, LLC. Dkt 1 at ¶ 3. Plaintiff Ursula
Nichole Williams holds a deed of trust that is insured by the
Federal Housing Administration and serviced by Lakeview and
LoanCare. Id at ¶ 11.
Williams alleges, “Defendants charge borrowers Pay-to-Pay
Fees of up to $15.00 for payment over the telephone, up to
$12.00 for IVR [interactive voice response] payment and up to
$10.00 for online payment.” Id at ¶ 12. She argues that because
her deed of trust is insured by the FHA, Lakeview and LoanCare
“are bound by the rules and regulations of the Secretary of
Housing and Urban Development.” Id at ¶ 5. And she claims that
Case 4:20-cv-01900 Document 59 Filed on 12/22/20 in TXSD Page 2 of 9
neither her deed of trust nor HUD rules and regulations
authorize the fees charged by LoanCare. Id at ¶¶ 63–64.
Williams brings class allegations against Lakeview and
LoanCare, asserting a claim under the Texas Debt Collection Act
regarding these fees. Id at ¶¶ 24–31, 60–63, 81–86. She also
asserts claims against both for breach of contract. Id at ¶¶ 32–55,
87–93.
Lakeview answered, claiming it was sued in error. Dkt 25.
For its part, LoanCare moved to dismiss pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure. Dkt 27. Williams
voluntarily dismissed her breach of contract claim against
LoanCare, leaving only the claim under the TDCA. Dkt 35. The
Court heard argument at an initial conference in October 2020.
2. Legal Standard
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires
a plaintiff’s complaint to provide “a short and plain statement of
the claim showing that the pleader is entitled to relief.” Rule
12(b)(6) allows the defendant to seek dismissal if the plaintiff fails
“to state a claim upon which relief can be granted.”
Read together, the Supreme Court has held that Rule 8 “does
not require ‘detailed factual allegations,’ but it demands more
than an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Ashcroft v Iqbal, 556 US 662, 678 (2009), quoting Bell
Atlantic Corp v Twombly, 550 US 544, 555 (2007). To survive a Rule
12(b)(6) motion to dismiss, the complaint “must provide the
plaintiff’s grounds for entitlement to relief—including factual
allegations that when assumed to be true ‘raise a right to relief
above the speculative level.’” Cuvillier v Taylor, 503 F3d 397, 401
(5th Cir 2007), quoting Twombly, 550 US at 555.
A complaint must therefore contain enough facts to state a
claim to relief that is plausible on its face. Twombly, 550 US at 570.
A claim has facial plausibility “when the plaintiff pleads factual
content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Iqbal,
556 US at 678, citing Twombly, 550 US at 556. This standard on
plausibility is “not akin to a ‘probability requirement,’ but it asks
for more than a sheer possibility that a defendant has acted
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unlawfully.” Iqbal, 556 US at 678, quoting Twombly, 550 US at
556.
Review on motion to dismiss under Rule 12(b)(6) is
constrained. The reviewing court must accept all well-pleaded
facts as true and view them in the light most favorable to the
plaintiff. Walker, 938 F3d at 735 (citations omitted). The court
must also generally limit itself to the contents of the pleadings
and its attachments. Brand Coupon Network LLC v Catalina
Marketing Corp, 748 F3d 631, 635 (5th Cir 2014) (citations
omitted).
3. Analysis
The Texas Debt Collection Act is part of the Texas Finance
Code. Its essential purpose “is to limit coercive and abusive
behavior by all those seeking to collect debts . . . .” Barzelis v
Flagstar Bank, FSB, 784 F3d 971, 977 (5th Cir 2015).
Section 392.303(a)(2) of the Texas Finance Code prohibits
debt collectors from using unfair or unconscionable means that
employ several enumerated practices, including that of
“collecting or attempting to collect interest or a charge, fee, or
expense incidental to the obligation unless the interest or
incidental charge, fee, or expense is expressly authorized by the
agreement creating the obligation or legally chargeable to the
consumer.”
The allegations by Williams are like those by plaintiffs in
Caldwell v Freedom Mortgage Corp, 2020 WL 4747497 (ND Tex),
Barnett v Caliber Home Loans, 2020 WL 5494414 (SD Tex), and
Dees v Nationstar Mortgage, LLC, 2020 WL 6749036 (SD Tex). The
district courts in each of those cases rejected motions to dismiss
under Rule 12(b)(6). Williams has likewise sufficiently pleaded
facts to support her argument that the fees charged by LoanCare
violate the TDCA.
LoanCare presses for the opposite result, arguing that several
independent reasons warrant dismissal.
First, LoanCare argues that Williams failed to allege her deed
of trust is a consumer debt as that term is used in the TDCA because
“three businesses list the Property as their business address.”
Dkt 27 at 14; see Texas Finance Code § 392.001(2). To the
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contrary, Williams directly alleges that the property is her
residence. Dkt 1 at ¶¶ 56, 82. This sufficiently pleads the
necessary factual allegation. See Castillo v Deutsche Bank National
Trust Co, 2014 WL 279675, *3 & n 2 (WD Tex); see also
Hetherington v Allied International Credit Corp, 2008 WL 2838264, *4
(SD Tex) (whether bank account was used primarily for personal
or commercial purposes is fact question for jury). LoanCare isn’t
entitled to introduce facts extraneous to the complaint at this
procedural juncture. Dees, 2020 WL 6749036 at *3; see also Brand
Coupon Network, 748 F3d at 635 (citation omitted).
Second, LoanCare argues that Williams doesn’t allege that it
collected or attempted to collect any fee from her and that she doesn’t
allege that it used any unfair or unconscionable means to collect, as
those terms are used in § 392.303(a)(2). Dkt 27 at 18–19. But this
ignores several of her pleaded allegations. For instance, Williams
alleges that she “makes loan payments online and over the phone,
and each time she does so, Defendants collect from her a Pay-toPay fee.” Dkt 1 at ¶ 60. She also alleges that “Defendants have
collected . . . no less than $444.00 in illegal Pay-to-Pay fees” from
her. Id at ¶ 22. And she alleges that the fees weren’t expressly
authorized “by the Secretary or otherwise by the deed of trust.”
Id at ¶ 64. This sufficiently identifies the exact means by which
LoanCare collected an allegedly unauthorized fee incidental to
her deed of trust. See Barnett, 2020 WL 5494414 at *3–4.
Third, LoanCare argues that the fees it charged Williams were
optional fees for services that she requested and chose to
purchase, so they weren’t incidental to her underlying debt, as that
term is used in § 392.303(a)(2). Dkt 27 at 19–20. The omittedcase canon instructs, “Nothing is to be added to what the text
states or reasonably implies (casus omissus pro omisso habendus est).
That is, a matter not covered is to be treated as not covered.”
Antonin Scalia and Bryan A. Garner, Reading Law: The
Interpretation of Legal Texts 93 (West 2012). The plain text of the
TDCA “provides no protection for lenders merely because their
collection of a fee was dependent upon a borrower’s selection of
the lender’s fee-based payment method.” Caldwell, 2020 WL
4747497 at *4; see also Barnett, 2020 WL 5494414 at *3 (SD Tex)
(collecting cases).
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Fourth, LoanCare argues that the claim fails because its fees
are legally chargeable to her or expressly authorized by her agreement,
as those terms are used in § 392.303(a)(2). Dkt 27 at 20. Williams
asserts that the FHA insures her deed of trust, and that the HUD
rules and regulations incorporated into her deed don’t authorize
the fees charged by LoanCare. Dkt 1 at ¶¶ 5–11, 64. LoanCare
doesn’t cite any HUD regulation or deed provision that expressly
authorizes the fees it charged Williams—a glaring omission if
such authorization exists. See Caldwell, 2020 WL 4747497 at *4.
LoanCare instead argues that it wasn’t the deed of trust that
created her “‘obligations’ to pay fees,” but rather, it was her
“point-of-sale/service agreements” that did so. Dkt 38 at 12–13;
see also Dkt 27 at 23–24. This again introduces defensive matters
beyond the face of complaint, thus presenting “questions of fact
that are better suited in a motion for summary judgment.” See
Dees, 2020 WL 6749036, at *3.
LoanCare cites numerous cases from other jurisdictions that
found different service fees to be legally chargeable despite not
being expressly authorized. Dkt 27 at 20–22. But these cases
weren’t decided by reference to the TDCA. And most were
decided with reference to quote and fax fees, which differ in kind
from the pay-to-pay fees at issue here. For example, see Cappellini
v Mellon Mortgage Co, 991 F Supp 31, 39–40 (D Mass 1997)
(Massachusetts law, fax fees); Davis v Homecomings Finance, 2006
WL 2927701, *2–3 (WD Wash) (Washington law, fax fees);
Chatman v Fairbanks Capital Corp, 2002 WL 1338492, *3 (ND Ill)
(Illinois law, property-preservation fees); Jerik v Columbia National,
Inc, 1999 WL 1267702, *1 (ND Ill) (Illinois and Maryland law,
quote and fax fees); Beyer v Countrywide Home Loans Servicing LP,
2008 WL 1791506, *5 (WD Wash) (Washington law, expedited
service fees), aff’d, 359 F Appx 701 (9th Cir 2009).
In the absence of any authority finding that the fees at issue
here are legally chargeable under the TDCA, Williams sufficiently
pleads (at this stage) that the fees LoanCare charged her weren’t
expressly authorized by her deed of trust or otherwise legally
chargeable. See Dees, 2020 WL 6749036 at *3.
Fifth, LoanCare presents an argument that doesn’t appear to
have been reached by the other federal courts that have recently
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addressed pay-to-pay fees in the TDCA context. It argues that
the “TDCA only applies to debt collection and [Williams] only
alleges loan servicing.” Dkt 27 at 12. The argument collides in
several respects with the plain text of the TDCA.
The TDCA broadly defines consumer debt as “an obligation, or
an alleged obligation, primarily for personal, family, or household
purposes and arising from a transaction or alleged transaction.”
Texas Finance Code § 392.001(2). It then defines debt collection as
any “action, conduct, or practice in collecting, or in soliciting for
collection, consumer debts that are due or alleged to be due a
creditor.” Texas Finance Code § 392.001(5). Williams pleads that
LoanCare collected payments due on her debt, and that it violated
the TDCA by charging her unauthorized fees for making
payments on her debt. See Dkt 1 ¶¶ 22, 60–68; see also Dees, 2020
WL 6749036 at *2. That is sufficient at this stage.
To argue contrary, LoanCare asserts that the TDCA should
be considered identically to the federal Fair Debt Collection
Practices Act. It’s true that Texas courts “often interpret the
TDCA in accordance with the FDCPA.” Caldwell, 2020 WL
4747497 at *3 n 4. But distinctions between the TDCA and the
FDCPA cannot be ignored. For instance, LoanCare cites Miller v
BAC Home Loans Servicing, LP, 726 F3d 717, 722–23 (5th Cir
2013), asserting that the “Fifth Circuit recognizes [loan] servicers
may act as ‘debt collectors’ but not all loan-servicer conduct is
‘debt collection.’” Dkt 27 at 16. But the argument itself
acknowledges that loan servicers may in some contexts act as
debt collectors engaging in debt collection. See id at 16–17. And
the Fifth Circuit in Miller observed that the definition of
debt collector under the TDCA is stated more broadly than that in
the FDCPA. 726 F3d at 722 (citation omitted).
This argument that loan servicing by its very nature isn’t
debt collection under the TDCA is also undermined by the structure
of the TDCA and internal references within it. The next section
of the TDCA generally provides that “in debt collection,” a debt
collector may not deceptively fail to disclose the name of the
person to whom the debt has been assigned or is owed when
making a demand for money. Texas Finance Code § 392.304(a),
(a)(4). A further subsection within § 392.304 then exempts “a
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person servicing or collecting real property first lien mortgage loans
or credit card debts” from liability under § 392.304(a)(4). Texas
Finance Code § 392.304(b) (emphasis added). No such
exemption appears in § 392.303. Statutory construction “is a
holistic endeavor.” United Savings Association of Texas v Timbers of
Inwood Forest Associates, Ltd, 484 US 365, 371 (1988). The relatedstatutes cannon states, “Any word or phrase that comes before a
court for interpretation is part of a whole statute, and its meaning
is therefore affected by other provisions of the same statute.”
Scalia and Garner, Reading Law: The Interpretation of Legal Texts at
252. The Texas Legislature knows how to exempt mortgage loan
services when that is its intent. That intention is lacking as to
§ 392.303.
LoanCare also cites Kaltenbach v Richards, arguing that the
determination whether conduct is debt collection under the FDCPA
is a separate inquiry from that of whether a party is a debt collector.
Dkt 27 at 16, citing 464 F3d 524, 529 (5th Cir 2006). In other
words, LoanCare argues that it may collect a debt without being
a debt collector and thereby avoid liability for any violation of
§ 392.303. But as already noted, the Texas Legislature specifically
exempted mortgage loan servicers from liability under
§ 392.304(b) of the TDCA. Mortgage loan servicers wouldn’t
need an exemption from a statute that holds debt collectors liable
if they couldn’t in some circumstances be debt collectors. The
Fifth Circuit has held in other respects that “mortgage servicers
and assignees are debt collectors, and therefore are covered,
under the TDCA.” Miller, 726 F3d at 723, citing Perry v Stewart
Title Co, 756 F2d 1197, 1208 (5th Cir 1985). Other courts have
adopted that same understanding. Lamell v OneWest Bank, FSB,
LP, 485 SW3d 53, 62–63 (Tex App—Houston [14th Dist] 2015,
pet denied); Byrd v Lakeview Loan Servicing, 2020 WL 1529965, *6
(WD Tex).
Sixth, LoanCare argues Williams “cannot allege debt
collection because her loan was not in default so as to trigger a
right to collection.” Dkt 27 at 12, 15–17. The omitted-case
cannon is again instructive. “To supply omissions transcends the
judicial function.” Scalia and Garner, Reading Law: The
Interpretation of Legal Texts at 94, citing Iselin v United States, 270 US
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245, 251 (1926). The definitions of consumer debt and debt collection
are already quoted above. See Texas Finance Code §§ 392.001(2),
392.001(5). Neither refer to default. And there is no textual
reference to the term in § 392.303(a)(2). But the requirement of
default does appear in other contexts. Indeed, the very next
subsection states, “Notwithstanding Subsection (a)(2), a creditor
may charge a reasonable reinstatement fee as consideration for
renewal of a real property loan or contract of sale, after default, if
the additional fee is included in a written contract executed at the
time of renewal.” Texas Finance Code § 392.303(b) (emphasis
added); see also Texas Finance Code § 347.352 (referring to
acceleration of amounts in default).
This leaves no room for the textual construction requested
by LoanCare. To the extent it snip-cites certain cases, none
specifically considered this issue or went nearly so far as to state
that delinquency is a prerequisite to allegation of a TDCA claim.
See Dkt 27 at 16, citing Brown v Oaklawn Bank, 718 SW2d 678,
680 (Tex 1986); Thompson v Bank of America NA, 783 F3d 1022,
1026–27 (5th Cir 2015); and Langlois v Wells Fargo Bank NA, 581
Fed Appx 421, 427–28 (5th Cir 2014).
Seventh, LoanCare argues that the voluntary-payment
doctrine prevents the instant TDCA claim from going forward.
Dkt 27 at 27; Dkt 38 at 13–14. But again, as a defensive matter,
that doctrine “involves factual issues that are inappropriate for
resolution in a Rule 12(b)(6) context.” Caldwell, 2020 WL 4747497
at *4.
4. Conclusion
The objections and arguments by LoanCare may well
succeed at the summary judgment stage. But they are inadequate
grounds for dismissal solely on the pleadings.
The motion to dismiss by Defendant LoanCare LLC is
DENIED. Dkt 27.
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SO ORDERED.
Signed on December 22, 2020, at Houston, Texas.
Hon. Charles Eskridge
United States District Judge
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