Goff v. HSBC Bank USA et al
Filing
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ORDER GRANTING 4 Motion to Dismiss for Failure to State a Claim. The Court dismisses all of Plaintiff's claims against Mitrisin. Signed by Judge Kathleen Cardone. (mc6)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
EL PASO DIVISION
JAMES GOFF,
Plaintiff,
v.
HSBC BANK USA and BEVERLY
MITRISIN,
Defendants.
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EP-13-CV-265-KC
ORDER
Before the Court is Defendant Substitute Trustee’s Motion to Dismiss (the “Motion”),
ECF No. 4, filed on September 27, 2013, by Defendant Beverly Mitrisin (“Mitrisin”) in the
above-captioned case (the “Case”). By the Motion, Mitrisin requests that the Court dismiss
Plaintiff’s claims against her for failure to state a claim pursuant to Federal Rule of Civil
Procedure 12(b)(6). For the following reasons, the Court GRANTS the Motion and dismisses
Mitrisin from the Case.
I.
BACKGROUND
On August 5, 2013, Plaintiff filed James Goff’s Original Petition for Declaratory
Judgment, Requests for Disclosure and Request for Production (the “Petition”), ECF No. 1-5, in
the County Court at Law No. 6 of El Paso County, Texas (the “State Court”). See HSBC Bank
USA’s Notice of Removal Under 28 U.S.C. § 1441 (the “Notice of Removal”), ECF No. 1, 1.
Although the Petition is scanty, it appears to allege the following facts, which the Court assumes
to be true for the purposes of the Motion: Plaintiff purchased certain real property in El Paso,
Texas (the “Property”) on or about October 6, 2006. Pet. 2. As part of this transaction, Plaintiff
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executed a deed of trust from Mortgage Electronic Registration Systems, Inc. Solely as Nominee
for Resmae Mortgage Corporation, its successors and assigns (the “Deed of Trust”) to secure a
purchase money loan (the “Note”) in the amount of $110,400.00. Id. The Deed of Trust was duly
recorded. Id. The Note was subsequently assigned to Defendant HSBC Bank USA (“HSBC”). Id.
This assignment was not recorded. Id. HSBC then instructed Mitrisin, as substitute trustee, to sell
the Property at foreclosure on the first Tuesday of August, 2013 (the “Foreclosure”). Id.
Plaintiff argues the Foreclosure would violate his statutory and contractual rights for
several reasons. First, Plaintiff alleges that Defendants did not give him notice of default and an
opportunity to cure, in violation of the Texas Property Code and the terms of the Deed of Trust.
Id. Second, Plaintiff alleges that Defendants violated the Texas Property Code by failing to send
him a signed, written notice of sale or substitution of trustee. Id. Third, Plaintiff alleges that
Defendants lack standing, legal authority, or any justification to pursue the Foreclosure, because
HSBC was not a holder in due course of the Note or the Deed of Trust and lacked valid
consideration to enter any contract with Plaintiff. Id.
Plaintiff therefore seeks a declaratory judgment that the Foreclosure would be invalid and
without force or effect. Id. at 3. Plaintiff additionally brings breach of contract and fraud claims
against both Defendants, as well as a breach of fiduciary duty claim against Mitrisin alone. Id.
The Petition also includes various requests for disclosure and a request for production. See id. at
4-6.
Additionally, the Petition requests a temporary injunction and a temporary restraining
order forestalling the Foreclosure. Id. at 6. The State Court granted Plaintiff a temporary
restraining order to this effect on August 5, 2013 (the “TRO”). See ECF No. 1-6. The State Court
then held a hearing on the propriety of continuing the TRO on August 12, 2013, but the docket
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reflects that one or more of the parties did not attend this hearing. See ECF No. 1-4 (listing the
“Result” of the hearing as “No Show”). Although it is not clear whether the TRO presently
remains in effect, there is no indication in the record that Defendants currently intend to proceed
with the Foreclosure.
On August 21, 2013, Mitrisin filed Defendant Beverly Mitrisin’s Original Answer (the
“Answer”), ECF no. 1-9, in the State Court. The Answer generally denies the allegations in the
Petition, except for the allegation that she is the trustee under the Deed of Trust. Answer 1. The
Answer also includes a verified denial pursuant to Texas Property Code 51.007 (the “Verified
Denial”), pleading that Mitrisin “is not a necessary party to [the Case] because she reasonably
believes she was named solely in the capacity as a trustee under a deed of trust.” See id. at 1-2.
The record does not reflect that Plaintiff ever filed a verified response to the Verified Denial as
required by Texas Property Code 51.007(b).
Also on August 21, 2013, HSBC removed the Case to this Court. See Notice of Removal.
Mitrisin consented to the removal. See ECF No. 1-13. Approximately one month after the
removal, Mitrisin filed the Motion. Plaintiff did not file a response to the Motion.
II.
DISCUSSION
A.
Standard
A motion to dismiss pursuant to Rule 12(b)(6) challenges a complaint on the basis that it
fails to state a claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6). When ruling on
a Rule 12(b)(6) motion, the Court must accept well-pleaded facts as true and view them in the
light most favorable to the plaintiff. Calhoun v. Hargrove, 312 F.3d 730, 733 (5th Cir. 2002);
Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000). Though a complaint
need not contain “detailed” factual allegations, a plaintiff’s complaint must allege sufficient facts
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“to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555, 570 (2007); accord Colony Ins. Co. v. Peachtree Constr., Ltd., 647 F.3d 248, 252 (5th Cir.
2011). “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.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
“[A] plaintiff’s obligation to provide the grounds of his entitlement to relief requires
more than labels and conclusions, and a formulaic recitation of the elements of a cause of action
will not do.” Twombly, 550 U.S. at 555 (internal quotation marks omitted); Gulf Coast HotelMotel Ass’n v. Miss. Gulf Coast Golf Course Ass’n, 658 F.3d 500, 506 (5th Cir. 2011).
Ultimately, the “[f]actual allegations [in the complaint] must be enough to raise a right to relief
above the speculative level.” Twombly, 550 U.S. at 555 (internal citation omitted). Nevertheless,
a “well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those
facts is improbable, and ‘that a recovery is very remote and unlikely.’” Twombly, 550 U.S. at
556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).
Whereas the bulk of Plaintiff’s claims are governed by the standard described above,
Plaintiff’s fraud claim is instead governed by Federal Rule of Civil Procedure 9(b), which
provides that “[i]n alleging fraud . . . a party must state with particularity the circumstances
constituting fraud . . . Malice, intent, knowledge, and other conditions of a person’s mind may be
alleged generally.” “Rule 9(b) requires, at a minimum, ‘that the plaintiff set forth the who, what,
when, where, and how of the alleged fraud.’” U.S. ex rel. Steury v. Cardinal Health, Inc., 625
F.3d 262, 266 (5th Cir. 2010) (internal quotation marks omitted) (quoting U.S. ex rel. Thompson
v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997); citing U.S. ex. rel.
Rafizadeh v. Cont’l Common, Inc., 553 F.3d 869, 872-73 (5th Cir. 2008)). “A dismissal for
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failure to plead fraud with particularity under Rule 9(b) is treated as a dismissal for failure to
state a claim under Rule 12(b)(6).” United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180,
185 n.8 (5th Cir. 2009) (citation and internal quotation marks omitted).
B.
Analysis
Mitrisin argues that because Plaintiff failed to object or file a timely verified response to
the Verified Denial, the Court should dismiss her from the Case pursuant to Texas Property Code
§ 51.007. Plaintiff has not responded to this argument.
Texas Property Code § 51.007 provides:
(a) The trustee named in a suit or proceeding may plead in the answer that the
trustee is not a necessary party by a verified denial stating the basis for the
trustee's reasonable belief that the trustee was named as a party solely in the
capacity as a trustee under a deed of trust, contract lien, or security instrument.
(b) Within 30 days after the filing of the trustee's verified denial, a verified
response is due from all parties to the suit or proceeding setting forth all matters,
whether in law or fact, that rebut the trustee's verified denial.
(c) If a party has no objection or fails to file a timely verified response to the
trustee's verified denial, the trustee shall be dismissed from the suit or proceeding
without prejudice.
(d) If a respondent files a timely verified response to the trustee's verified denial,
the matter shall be set for hearing. The court shall dismiss the trustee from the suit
or proceeding without prejudice if the court determines that the trustee is not a
necessary party.
(e) A dismissal of the trustee pursuant to Subsections (c) and (d) shall not
prejudice a party's right to seek injunctive relief to prevent the trustee from
proceeding with a foreclosure sale.
(f) A trustee shall not be liable for any good faith error resulting from reliance on
any information in law or fact provided by the mortgagor or mortgagee or their
respective attorney, agent, or representative or other third party.
Tex. Prop. Code Ann. § 51.007.
Because this Court’s jurisdiction is based on diversity pursuant to 28 U.S.C. § 1332, see
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Notice of Removal 3-6, the Court applies state substantive law and federal procedural law. See
Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-79 (1938). Therefore, under the Erie doctrine, Texas
Property Code § 51.007 only governs the outcome of the Case if that provision is properly
characterized as state substantive law. See Camacho v. Texas Workforce Comm’n, 445 F.3d 407,
409 (5th Cir. 2006) (citing Motorola Commc’ns & Elec., Inc. v. Dale, 665 F.2d 771, 774 (5th
Cir. 1982)); Exxon Corp. v. Burglin, 42 F.3d 948, 950 (5th Cir. 1995) (citing Erie, 304 U.S. at
64)).
This Court considered this question under nearly identical circumstances in Landry v.
Wells Fargo Home Mortgage, Inc., No. EP-13-CV-144-KC, 2013 WL 5278497 (W.D. Tex. Sept.
18, 2013) (Cardone, J.). The Court noted that “[t]he few district courts that have examined the
nature of § 51.007 have reached different conclusions” regarding whether that provision applies
in a federal case predicated on diversity jurisdiction. Landry, 2013 WL 5278497, at *3 (citing
Purported Lien or Claim Against Bond v. Barrett Daffin Frappier Turner & Engel, LLP, CA G12-188, 2013 WL 1619691, at *3 (S.D. Tex. Mar. 22, 2013); Leal v. Bank of N.Y. Mellon, CA C12-265, 2012 WL 5465978, at *5 (S.D. Tex. Oct. 22, 2012); Vanderbilt Mortg. & Fin., Inc. v.
Flores, CIV A. C-09-312, 2010 WL 3521727, at *3 n.1 (S.D. Tex. Sept. 8, 2010)). Faced with
this uncertainty, this Court ultimately concluded that it “need not decide this issue because
regardless of whether § 51.007 is applicable in federal court, [the p]laintiff ha[d] failed to state a
claim under either Texas Property Code § 51.002(b) or (d) upon which relief may be granted
against Defendant Mitrisin.”1 Landry, 2013 WL 5278497, at *3 (citing Twombly, 550 U.S. at
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Although §§ 51.002 and 51.007 are both from the Texas Property Code, § 51.002 is, unlike §
51.007, clearly substantive rather than procedural. There is therefore no question that § 51.002
applies in the Case. See Erie, 304 U.S. at 78-79. Accord Landry, 2013 WL 5278497, at *3-4
(applying § 51.002 in a federal diversity case).
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555-56).
The same is true here. For the following reasons, Plaintiff has failed to state a viable
claim against Mitrisin. Thus, the Court need not decide whether § 51.007 is applicable in
diversity cases. The Court therefore grants the Motion and dismisses all of Plaintiff’s claims
against Mitrisin.
As was true in Landry, Plaintiff’s claims that Mitrisin failed to provide Plaintiff sufficient
notice and an opportunity to cure all fail:
Under the Texas Property Code, before a foreclosure sale can be executed, the
note holder must give the debtor “written notice . . . stating that the debtor is in
default . . . and giving the debtor at least 20 days to cure the default before notice
of sale can be given.” Tex. Prop.Code Ann. § 51.002(d) (West 2013). Once these
criteria have been satisfied, the note holder must give the debtor “notice of the
sale . . . at least 21 days before the date of the sale.” Id. § 51.002(b). Because
these provisions set notice requirements based on the date of sale, a plaintiff can
only bring a cause of action under either provision if she alleges that a sale has
occurred.
Landry, 2013 WL 5278497, at *3 (citing Kew v. Bank of Am., N.A., CIV. A. H-11-2824, 2012
WL 1414978, at *6 (S.D. Tex. Apr. 23, 2012); Adams v. Bank of Am., 4:10-CV-709, 2011 WL
5080217, at *5 (E.D. Tex. Oct. 26, 2011), aff’d, 475 F. App’x 526 (5th Cir. 2012); Eisenberg v.
Deutsche Bank Trust Co. Americas, SA 11-CV-384-XR, 2011 WL 2636135, at *3 (W.D. Tex.
July 5, 2011)).
Like the plaintiff in Landry, “Plaintiff’s § 51.002 claims are insufficient because [h]e has failed
to allege that there has been a sale of [the P]roperty.” Id. at *4 (citing Kew, 2012 WL 1414978, at
*6). The Petition indicates that the Foreclosure has not yet occurred. See Pet. 2 (“[Plaintiff’s]
statutory rights and contractual rights would be violated by the sale of [the Property]” (emphasis
added)). See also id. at 6 (seeking injunctive relief to prevent the pending Foreclosure). Indeed,
the State Court filed an initial TRO forestalling the Foreclosure, and held a hearing, which one or
more of the parties did not attend, on the propriety of further extending the TRO. See ECF no. 16; ECF no. 1-4. Because there is no indication that the Foreclosure has occurred, “Plaintiff has
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failed to allege a § 51.002 claim upon which relief can be granted” against Mitrisin. Landry,
2013 WL 5278497, at *4 (citing Twombly, 550 U.S. at 555-56).
The Court likewise dismisses Plaintiff’s request for declaratory relief against Mitrisin.2
“A court may only rule on a request for declaratory judgment when a plaintiff alleges ‘facts from
which it appears there is a substantial likelihood that he will suffer injury in the future.’” Landry,
2013 WL 5278497, at *4 (quoting Bauer v. Tex., 341 F.3d 352, 358 (5th Cir. 2003)). Plaintiff has
failed to do so. The Petition alleges that the Foreclosure was scheduled for August 6, 2013, the
day after Plaintiff filed the Petition in State Court. See Pet. 2. The State Court granted Plaintiff
the TRO, thereby forestalling the Foreclosure. See ECF no. 1-6; ECF no. 1-4. As a result, the
“sale date has passed without a sale and there is no indication that a future sale is currently
scheduled. Accordingly, declaratory relief is not appropriate.” Landry, 2013 WL 5278497, at *4
(citing Calderon v. Bank of Am. N.A., --- F. Supp. 2d ----, SA:12-CV-00121-DAE, 2013 WL
1741951, at *13-14 (W.D. Tex. Apr. 23, 2013)). Therefore, “to the extent that Plaintiff is seeking
a declaratory judgment that any future sale would be invalid because of Defendant Mitrisin’s
alleged violations of § 51.002, this claim is also insufficient,” and the Court dismisses it. Id.
However, the Court’s analysis in Landry does not by itself dispose of all of Plaintiff’s
claims against Mitrisin, because there are ways in which the Petition differs from the petition at
issue in Landry. For one, the Petition includes a request for a temporary restraining order and a
temporary injunction that the petition in Landry did not include. See Pet. 6. However, this does
not provide a reason to keep Mitrisin in the Case. The State Court already granted Plaintiff’s
2
For the reasons explained in Landry, although Plaintiff requests relief under the Texas Uniform
Declaratory Judgments Act, see Pet. 2, the Court instead construes Plaintiff’s declaratory relief
claim as a claim brought under the federal Declaratory Judgment Act, because the Court applies
federal procedural law when sitting in diversity. See Landry, 2013 WL 5278497, at *4 n.2 (citing
Utica Lloyd’s of Tex. v. Mitchell, 138 F.3d 208, 210 (5th Cir. 1998); Hurd v. BAC Home Loans
Servicing, LP, 880 F. Supp. 2d 747, 769 (N.D. Tex. 2012)).
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request for a TRO and held a hearing on the propriety of further extending the TRO. See ECF no.
1-6; ECF no. 1-4. Therefore, this issue does not appear to be currently before this Court.
Another difference between the Case and Landry is that Plaintiff also brings fraud and
breach of fiduciary duty claims against Mitrisin. For the following reasons, the Court dismisses
both of these claims pursuant to Federal Rule of Civil Procedure 12(b)(6). First, the Court
dismisses Plaintiff’s fraud claim against Mitrisin for failure to “state with particularity the
circumstances constituting fraud[.]” Federal Rule of Civil Procedure 9(b). As stated above, “Rule
9(b) requires, at a minimum, ‘that the plaintiff set forth the who, what, when, where, and how of
the alleged fraud.’” Steury, 625 F.3d at 266 (internal quotation marks omitted) (quoting
Thompson, 125 F.3d at 903; citing Rafizadeh, 553 F.3d at 872-73). The Petition includes only
threadbare assertions that Defendants “are attempting to foreclose on [the P]roperty without any
legal authority to do so.” See Pet. 2-3. This is insufficient to survive a motion to dismiss. See,
e.g., Shandong Yinguang Chem. Indus. Joint Stock Co., Ltd. v. Potter, 607 F.3d 1029, 1032-35
(5th Cir. 2010). Moreover, to establish fraud under Texas law, Plaintiff must show (1) a material
misrepresentation; (2) knowledge that the representation was false or reckless disregard for the
truth; (3) intention to induce Plaintiff to act upon the representation; (4) justifiable reliance on
the representation; and (5) injury. See, e.g., Ernst & Young L.L.P. v. Pac. Mut. Life Ins. Co., 51
S.W.3d 573, 577 (Tex. 2001). The Petition alleges none of these elements. See Pet. 2-3. Plaintiff
has therefore failed to state a fraud claim against Mitrisin upon which the Court may grant relief.
Plaintiff’s breach of fiduciary duty claim against Mitrisin is likewise defective. Although
Plaintiff’s argument on this point is not clear, he appears to allege that Mitrisin failed to
investigate whether HSBC could legally foreclose on the Property. See Pet. 3. Although Mitrisin
may very well have owed a duty to Plaintiff to organize and conduct the Foreclosure in an
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impartial and fair manner, see, e.g., Myrad Props., Inc. v. LaSalle Bank Nat’l Ass’n, 300 S.W.3d
746, 751 (Tex. 2009) (citing Hammonds v. Holmes, 559 S.W.2d 345, 347 (Tex. 1977); Tarrant
Sav. Ass’n v. Lucky Homes, Inc., 390 S.W.2d 473, 476 (Tex. 1965)), Plaintiff does not plead
sufficient factual matter from which the Court could infer that Mitrisin breached this duty. See
Iqbal, 556 U.S. at 678; Twombly, 550 U.S. at 555-56. Plaintiff does not explain what Mitrisin
failed to investigate or how her behavior fell short of any fiduciary duty she may have owed. See
Pet. 3. Moreover, the Court has no reason to believe that the Foreclosure ever occurred, so
Plaintiff cannot establish that Mitrisin’s alleged failure to investigate whether the Foreclosure
had any legal basis caused him any harm. See, e.g., Myrad, 300 S.W.3d at 751. The Court
therefore dismisses Plaintiff’s breach of fiduciary duty claim against Mitrisin.
III.
CONCLUSION
It is therefore ORDERED that the Motion is GRANTED. The Court dismisses all of
Plaintiff’s claims against Mitrisin.
SO ORDERED.
SIGNED this 30th day of October, 2013.
KATHLEEN CARDONE
UNITED STATES DISTRICT JUDGE
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