Lopez et al v. JPMorgan Chase Bank, National Association, Successor By Merger to Chase Home Finance, LLC et al

Filing 8

ORDER GRANTING 3 Motion to Dismiss ; DISMISSING as moot 3 Motion for More Definite Statement. Plaintiffs are ORDERED to file an amended complaint by 1/3/12. Signed by Judge Xavier Rodriguez. (rf)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION

ANTONIO LOPEZ, JR. and MARIA D.
LOPEZ,
Plaintiffs,
VS.
JP MORGAN CHASE BANK, N.A.,
SUCCESSOR BY MERGER TO
CHASE HOME FINANCE, LLC,
Defendant.

)
)
)
)
)
)
)
)
)
)
)
)

Civil Action No. SA-11-CA-0936-XR

ORDER
On this date, the Court considered Defendant JPMorgan Chase Bank’s Motion to Dismiss
or alternatively Motion for More Definite Statement (docket no. 3) and the response thereto.
BACKGROUND
Plaintiffs filed this lawsuit in state court on October 28, 2011, seeking injunctive relief to
prevent foreclosure on their home. Plaintiffs’ Original Petition and Motion for Temporary
Restraining Order and Temporary Injunction states that Plaintiffs financed their property through
Defendants “as current mortgagee secured by a Deed of Trust.” The Original Petition asserts that
the substitute trustee posted the residence for foreclosure sale on November 1, 2011, but that prior
to receipt of the foreclosure notice, Plaintiffs had contacted JPMorgan Chase Bank (“Chase”) for
modification of the loan and were told they “are considered for said modification.” Plaintiffs allege
that they were informed that “the modification documents would not be completed for sixty to ninety
(60-90) days and that the property would not be foreclosed upon during the process.” Plaintiffs
-1-

therefore “seek a Temporary Restraining Order to prevent the sale from taking place on November
1, 2011, and thereafter, a Temporary Injunction to prevent a sale from taking place without the
proper notice.” Plaintiffs further seek “such other further relief at law or in equity to which the
Plaintiffs may show themselves to be justly entitled.”
Plaintiffs obtained a temporary restraining order on October 28 from the presiding state
district judge, and a hearing was set for November 10 to determine whether the TRO should be made
into a temporary injunction and whether the home should be “prevented from foreclosure sale for
a specified amount of time until Plaintiffs’ modification loan can be completed and is in force.”
Before the hearing could be held, Chase removed the case to this Court on November 9, 2010.1 On
November 15, Chase filed the instant motion to dismiss or, alternatively, for more definite statement.
Defendant contends that Plaintiff’s original petition asserts no causes of action, but instead
seeks only injunctive relief to prevent the foreclosure sale. Further, Defendant argues, to the extent
Plaintiffs are generally alleging that Chase breached an oral agreement not to foreclose during a loan
modification review, the claim is barred by the statute of frauds governing agreements that cannot
be performed within one year. See TEX . BUS. & COMM . CODE § 26.01 (agreement that is not to be
performed within one year from the date of making the agreement is not enforceable unless it is in
writing and signed by the person to be charged with the agreement). Defendant asserts that
modifications of a note or deed of trust agreement, “which presumably are to last more than one

1

Chase asserts that this Court has jurisdiction based on diversity because the substitute
trustee was improperly joined. The Court agrees that the substitute trustee is a nominal party whose
citizenship is not relevant for determining diversity jurisdiction, and Plaintiffs subsequently agreed
to dismiss claims against the substitute trustee. Docket no. 4, 5. Because the relevant parties are
diverse and the amount in controversy exceeds $75,000, removal was proper on the basis of diversity
jurisdiction.
-2-

year,” fall within the statute of frauds and must be in writing.
In response, Plaintiffs state that they “have brought this suit against the Defendant Chase
seeking to enforce an agreement that this Defendant would not foreclose on their home while the
Plaintiffs’ application to modify their loan was being reviewed.” They contend that the “agreement
seeking to be enforced and preserved through this suit is the agreement that the Plaintiffs’ property
would not be foreclosed upon while the Defendant was reviewing the loan modification request,”
and that this agreement does not fall within the statute of frauds. Plaintiffs also argue that they have
stated a claim “because the request for the injunction involves the preservation of an existing right
in real estate” and thus “is a recognized cause of action for equitable relief.” Plaintiffs further
request an opportunity to replead should the Court conclude that the motion to dismiss has merit.
ANALYSIS
Plaintiffs’ Original Petition, filed in state court before removal, does not clearly assert a cause
of action against Chase. Rather, it appears primarily to seek injunctive relief to prevent the
foreclosure of the property “without the proper notice” and “until such time that [Defendant]
provides proper notice pursuant to the Texas Property Code.” Petition at 3.
Section 51.002 of the Texas Property Code requires compliance with its requirements in the
conduct of the sale of real property under a contract lien. Williams v. Bank of New York Mellon, Civ.
A. No. 3:09-CV-1622, 2010 WL 3359461 (N.D. Tex. Aug. 23, 2010). When a mortgagor is in
default, Section 51.002(d) of the Texas Property Code provides that “the mortgage servicer of the
debt shall serve a debtor in default under a deed of trust or other contract lien on real property used
as the debtor’s residence with written notice by certified mail stating that the debtor is in default
under the deed of trust or other contract lien and giving the debtor at least 20 days to cure the default
-3-

before notice of sale can be given under Subsection (b).” Under Subsection (b), the mortgagor’s
failure to cure the default results in acceleration of the sums secured by the Security Instrument and
sale of the property, for which the lender must give notice at least 21 days prior to the sale as
provided by subsection 51.002(b). However, Plaintiffs never allege that they did not receive notice
of default, and Plaintiffs’ pleading admits that Plaintiffs received notice of the scheduled foreclosure
sale. Plaintiffs allege no facts indicating that any notices they did receive were defective in some
way. Thus, it is unclear whether Plaintiffs are actually asserting a claim based on deficient notice,
and their current pleading does not allege facts in support of such a claim.
In their response to the motion to dismiss, Plaintiffs claim that the purpose of this suit is to
enforce an agreement by Chase not to foreclose on their home while their application to modify their
loan was being reviewed. This claim, rather than the failure to provide notice, appears to form the
true basis of Plaintiff’s lawsuit. The Court thus considers whether this claim states a cause of action.
Plaintiffs mistakenly assert that they may obtain equitable injunctive relief simply because
the dispute involves real property, citing Butnaru v. Ford Motor Co., 84 S.W.3d 198 (Tex. 2002).
In Butnaru, the Texas Supreme Court confirmed that injunctive relief requires a cause of action and
a probable right to the relief sought. The plaintiff established a probable right to relief on a tortious
interference claim. Although Plaintiffs assert that “Texas courts have allowed for injunctive relief
when the dispute involves the loss of real estate,” each of the cases cited by Plaintiffs involved
claims for specific performance. Thus, to be entitled to injunctive relief preventing foreclosure on
their property, Plaintiffs must establish a probable right to relief on a cause of action.
Plaintiffs seek to enforce an “agreement” that Plaintiffs’ property would not be foreclosed
upon while the Defendant was reviewing the loan modification request. However, these allegations,
-4-

standing alone, do not establish a cause of action. An essential element of a breach of contract claim
is the existence of a valid contract. Domingo v. Mitchell, 257 S.W.3d 34, 39 (Tex. App.–Amarillo
2008, pet. denied). The elements of a valid contract are (1) an offer, (2) acceptance in strict
compliance with the terms of the offer, (3) meeting of the minds, (4) a communication that each
party consented to the terms of the contract, and (5) consideration. Angelou v. African Overseas
Union, 33 S.W.3d 269, 278 (Tex. App.–Houston [14th Dist.] 2000, no pet.). Plaintiffs’ allegations
fail to establish the existence of a contract that could have been breached; at most, their allegations
establish a unilateral promise by Chase not to foreclose.
Nor do Plaintiffs’ current allegations establish a promissory estoppel claim, which requires
(1) a promise; (2) foreseeability of reliance by the promisor; and (3) substantial reliance by the
promisee to his detriment. English v. Fischer, 660 S.W.2d 521, 524 (Tex. 1983). Plaintiffs allege
no change in position in reliance on the alleged promise not to foreclose.
Judge Jack addressed similar allegations in Chapa v. Chase Home Finance, Civ. A. No. C10-359, 2010 WL 5186785 (S.D. Tex. Dec. 15, 2010):
Taken as a whole, Plaintiff’s allegations potentially indicate that Plaintiff believed
a contract was formed between himself and Chase during loan modification
negotiations, in which Chase promised to delay foreclosure pending the modification
process, and that “written declarations” potentially exist to evidence this alleged
contract. However, Plaintiff does not allege that Chase ever agreed to postpone
foreclosure (let alone that Chase did so in writing) or that Plaintiff gave consideration
in exchange for such a promise. Plaintiff also does not allege a contract arose under
the doctrine of promissory estoppel or allege facts indicating that he materially
changed his position in reliance on any promise from Chase not to foreclose on his
home. Nor do Plaintiff’s allegations raise a “reasonable expectation” that discovery
will reveal this missing elements.
Id. at *4. Similarly, Plaintiffs have not alleged facts establishing a plausible claim for breach of
contract or promissory estoppel.
-5-

Even if Plaintiffs can establish an agreement by Chase not to foreclose or an agreed
modification of the existing mortgage agreement, it is possible that such an agreement would be
barred by the statute of frauds. If the applicable agreement is not to foreclose on the home while the
modification is being considered, but not an agreement to modify the terms of the original loan in
any way, then Defendant’s statute of frauds argument under section 26.01would likely fail because
there is no indication that the agreement would not be performed within a year. The Court notes,
however, that such an agreement could be subject to the statute of frauds in Texas Business &
Commerce Code § 26.02, which provides that loans from financial institutions in amounts greater
than $50,000 are not enforceable unless the loan agreement is in writing and signed by the parties
to be bound. Section 26.02(e) requires that each loan agreement that is subject to this section notify
the debtor or obligor, in a separate written document, about section 26.02(d)'s prohibition against
oral modifications. The sample language from 26.02(e) includes the following: “This written loan
agreement represents the final agreement between the parties and may not be contradicted by
evidence of prior, contemporaneous, or subsequent oral agreements of the parties.”
In Ellen v. F.H. Partners, Civ. A. No. 03-09-00310, 2010 WL 4909973 (Tex. App.–Austin
Dec. 1, 2010, no pet.), the Austin court of appeals held that the bank’s oral agreement to modify the
terms of the loan agreement by promising not to default or foreclose is an oral modification of a loan
agreement subject to the statute of frauds in § 26.02. Based on the summary judgment record, the
court of appeals concluded that “F.H. Partners orally agreed to modify the terms of the Loan
Agreement by promising to not default or foreclose before January 2009" and that this oral
modification was barred by the statute of frauds in § 26.02.
An agreement to not enforce one’s rights under a contract temporarily is not necessarily a
-6-

modification of that contract subject to the statute of frauds. See Horner v. Bourland, 724 F.2d 1142,
1148 (5th Cir. 1984) (“not every oral modification of the terms of a written contract falls within the
prohibition of the Statute of Frauds”); Givens v. Dougherty, 671 S.W.2d 877, 878 (Tex. 1984) (“It
goes without saying that a contract required to be in writing cannot be orally modified except in
limited circumstances such as extension of time for performance.”); but see Bank of Texas v.
Gaubert, 286 S.W.3d 546, 555 (Tex. App.–Dallas 2009, pet. dism’d w.o.j.) (oral agreement to
extend a loan subject to § 26.02 by four months is subject to § 26.02). The Ellen court expressly
found that “the alleged promise here was an oral agreement to change the terms of the Loan
Agreement.” However, section 26.02 may not apply if the oral agreement not to foreclose does not
contradict or materially alter any terms of the mortgage agreement. But see Gaubert, 286 S.W.3d
at 556 (noting that § 26.02 is more exacting and governs any agreement to delay repayment of
money). The question is whether the oral modification is a “material alteration” of the original
deal.2 Further, section 26.02 applies only if the required notice is given. TEX . BUS. & COM . CODE
§ 26.02(e), (f). There is insufficient information currently before the Court to determine whether
Chase allegedly agreed to a material alteration of the mortgage agreement, or even to determine
whether § 26.02 applies to the loan in question at all.3

2

In its Reply, Chase contends that Plaintiffs allege that Chase “breached an oral agreement
not to foreclose during loan modification review” and “the right to foreclose is a material alteration
of the underlying deed of trust.” However, Plaintiffs have not alleged that Chase agreed to give up
its right to foreclose, only that it agreed to postpone foreclosure temporarily. Thus, it is not clear
from the facts presented thus far that the alleged oral agreement materially altered the terms of the
original loan agreement.
3

Plaintiffs also contend that “oral modifications to the contract are allowed and enforceable,”
citing George Sheffield & Creed Corp. v. Gibson, Civ. A. No. 14-06-00483 (Tex. App.–Houston
[14th Dist.] 2008, no writ). However, that case involved an exception to the statute of frauds – full
performance. See also Bank of Texas v. Gaubert, 286 S.W.3d 546, 555 (Tex. App. – Dallas 2009,
-7-

Conclusion
Defendant’s motion to dismiss (docket no. 3) is GRANTED because Plaintiffs’ current
pleading fails to state a claim upon which relief can be granted. However, because Rule 15
contemplates an opportunity to replead and Plaintiffs have requested such an opportunity, the Court
will permit Plaintiffs to amend their complaint. Plaintiffs are ORDERED to file their amended
complaint no later than January 3, 2012. Defendant’s alternative motion for more definite
statement is DISMISSED AS MOOT.
It is so ORDERED.
SIGNED this 13th day of December, 2011.

_________________________________
XAVIER RODRIGUEZ
UNITED STATES DISTRICT JUDGE

pet. dism’d w.o.j.) (discussing exception of partial performance). Generally, if an agreement is
subject to the statute of frauds, then any subsequent oral modifications to that agreement would also
be subject to the statute of frauds, unless an exception is shown. If the agreement at issue in this case
is subject to the statute of frauds, Plaintiffs have not alleged facts that would establish an exception
to the statute of frauds.
-8-