Sledge et al v. JP Morgan Chase Bank, N.A.
ORDER GRANTING 3 Motion to Dismiss for Failure to State a Claim, is GRANTED. Plaintiff's claims are DISMISSED WITH PREJUDICE. Signed by Judge Xavier Rodriguez. (wg)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
STEVEN V. SLEDGE AND ZULEMA L.
JP MORGAN CHASE BANK, N.A.,
Civil Action No. SA:13-CV-797-XR
On this day the Court considered Defendant’s motion to dismiss (docket no. 3). For the
following reasons, the Court GRANTS the motion.
A. Factual Background1
On or about March 14, 2008, Plaintiffs Steven V. Sledge and Zulema L. Sledge obtained
a mortgage to purchase the real property at 8426 Pale Horse Lane, San Antonio, Texas 78254.
The mortgage originally secured a debt of $201,731.00.2 In connection with the transaction,
Plaintiffs executed a promissory note and deed of trust. Defendant JP Morgan Chase Bank, N.A.
now holds and owns Plaintiffs’ mortgage.
In or around June 2012, Plaintiffs began having trouble making their mortgage payments,
and they applied for a loan modification with Defendant. At Defendant’s request, Plaintiffs sent
a modification application and supporting documents to Defendant. Plaintiffs allege that they
submitted some information at least ten times. Throughout the application process, Plaintiffs
The factual background is taken from the allegations in Plaintiffs’ complaint.
Deed of Trust at 2, Docket No. 3, Ex. A.
assert that Defendant told them, over the telephone, that they would be approved for a loan
By April 2013, Plaintiffs had not received a loan modification. After two additional
resubmittals of their modification application, Plaintiffs allegedly called Defendant in May 2013
to confirm receipt of their application materials.
Over the telephone, Defendant allegedly
confirmed receipt of Plaintiffs’ application, and told Plaintiffs that a scheduled foreclosure sale
of their property would not occur.3 Approximately three days later, Plaintiffs again called
Defendant. This time, however, Defendant allegedly stated that a scheduled foreclosure sale had
not and would not be postponed pending a review of their application. Defendant allegedly
explained to Plaintiffs that it would not have enough time to review their application before the
scheduled foreclosure sale, and, therefore, the foreclosure sale would not be postponed. A few
days after this phone conversation, on June 4, 2013, Defendant sold Plaintiffs’ property at a
B. Procedural Background
On August 20, 2013, Plaintiffs filed suit in the 131 Judicial District Court of Bexar
County, Texas. They asserted causes of action against Defendant for promissory estoppel and
wrongful foreclosure. They also requested that the Court declare the June 4, 2013 foreclosure
sale invalid. Finally, they applied for a restraining order to prevent Defendant from selling their
property or removing them from the property.
Defendant removed the action to this Court. On September 4, 2013, Defendant moved to
dismiss the case for failure to state a claim. In its motion, Defendant asserts that the Texas
statute of frauds prohibits the Court from enforcing the alleged oral promises to modify the
Plaintiffs do not explain how or when Defendant scheduled a foreclosure sale. Presumably the sale was scheduled
for June 4, 2013, the day the foreclosure sale actually occurred.
mortgage and to postpone the foreclosure sale. Further, Defendant asserts that Plaintiffs have not
adequately alleged the elements of either a promissory estoppel or wrongful foreclosure claim.
Plaintiffs responded to Defendant’s motion, and Defendant replied.
II. Legal Standard
A. Legal Standard for Deciding a Motion to Dismiss
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is 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)). A claim
for relief must contain (1) “a short and plain statement of the grounds for the court’s
jurisdiction”; (2) “a short and plain statement of the claim showing that the pleader is entitled to
the relief”; and (3) “a demand for the relief sought.” FED. R. CIV. P. 8(a). In considering a
motion to dismiss under Rule 12(b)(6), all factual allegations from the complaint should be taken
as true, and the facts are to be construed favorably to the plaintiff. Fernandez-Montez v. Allied
Pilots Assoc., 987 F.2d 278, 284 (5th Cir. 1993). To survive a 12(b)(6) motion, a complaint must
contain “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 (2007).
B. Documents that May Be Considered
The Supreme Court has held that in deciding a motion to dismiss, a court may consider
documents incorporated into the complaint by reference. Tellabs, Inc. v. Makor Issues & Rights,
Ltd., 551 U.S. 308, 322 (2007). The court may also consider any documents attached to the
complaint and any documents attached to the motion to dismiss that are central to the claim and
referenced by the complaint. Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383,
387 (5th Cir. 2010); see also Sullivan v. Leor Energy, LLC, 600 F.3d 542, 546 (5th Cir. 2010)
(quoting Scanlan v. Tex. A&M Univ., 343 F.3d 533, 536 (5th Cir. 2003) (holding that while the
court generally must not go outside the pleadings, “the court may consider documents attached to
a motion to dismiss that ‘are referred to in the plaintiff’s complaint and are central to the
plaintiff’s claim.’”). The district court may also take judicial notice of matters of public record.
Funk v. Stryker Corp., 631 F.3d 777, 783 (5th Cir. 2011); see also Norris v. Hearst Trust, 500
F.3d 454, 461 n.9 (5th Cir. 2007) (“[I]t is clearly proper in deciding a 12(b)(6) motion to take
judicial notice of matters of public record.”).
In this case, Defendant attached Plaintiffs’ deed of trust to its motion to dismiss. This
document is referenced in the complaint and provided the authority for Defendant to foreclose.
Moreover, the deed of trust has been recorded and is a matter of public record. Finally, Plaintiffs
have not objected to Defendant’s use of this document to establish the original amount of the
mortgage. For these reasons, the Court takes judicial notice of the deed of trust and will consider
the document in ruling on Defendant’s motion to dismiss.
A. Promissory Estoppel
Although normally a defensive theory, promissory estoppel can be asserted as a cause of
action, where a promisor unjustly induces another to substantial action or inaction. MartinJanson v. JP Morgan Chase Bank, N.A., — F. App’x —, 2013 WL 3533682, at *4 (5th Cir. July
15, 2013); see e.g. Ford v. City State Bank of Palacios, 44 S.W.3d 121, 138–40 (Tex. App.—
Corpus Christi 2001, no pet.) “The requisites of promissory estoppel in Texas are: (1) a promise;
(2) foreseeability of reliance thereon by the promisor; and (3) substantial reliance by the
promisee to his detriment.” Ford, 44 S.W.3d at 139 (citing English v. Fischer, 660 S.W.2d 521,
524 (Tex. 1983)). “However, as when promissory estoppel is used as a defense, if the underlying
oral promise is barred by the statute of frauds, the plaintiff must show that the promisor promised
to sign a written document that would satisfy the statute of frauds.” Ford, 44 S.W.3d at 140.
In Texas, the statute of frauds requires that loan agreements in excess of $50,000 be in
writing to be enforceable. TEX. BUS. & COM. CODE § 26.02; see also Martins v. BAC Home
Loans Servicing, L.P., 722 F.3d 249, 256 (5th Cir. 2013). The statute defines “loan agreements”
to include “one or more promises, promissory notes, agreements, undertakings, security
agreements, deeds of trust or other documents, or commitments, or any combination of those
actions or documents, pursuant to which a financial institution loans or delays repayment of or
agrees to loan or delay repayment of money, goods, or another thing of value or to otherwise
extend credit or make a financial accommodation.” TEX. BUS. & COM. CODE § 26.02(a)(2). If a
contract falls within the ambit of the statute of frauds, then “any subsequent oral material
modification to the contract” also falls within the ambit of the statute of frauds. SP Terrace, L.P.
v. Meritage Homes of Tex., LLC, 334 S.W.3d 275, 282 (Tex. App.—Houston [1st Dist.] 2010, no
pet.); see Martins, 722 F.3d at 256 (“An agreement regarding the transfer of the property or
modification of a loan must . . . be in writing to be valid.”). Moreover, “[a]n agreement to delay
foreclosure is subject to the Texas statute of frauds, and, accordingly, must be in writing to be
enforceable.” Milton v. U.S. Bank N.A., 508 F. App’x. 326, 328–29 (5th Cir. 2013).
Here, Plaintiffs’ mortgage is subject to the statute of frauds since it includes a loan
agreement in the original amount of $201,731.00. See TEX. BUS. & COM. CODE § 26.02; Martins,
722 F.3d at 256; Deed of Trust at 2, Docket No. 3, Ex. A. Therefore, any modification of the
loan or any agreement to postpone a foreclosure sale of the property secured by the loan would
have to be in writing to be enforceable. See Martins, 722 F.3d at 256; Milton, 508 F. App’x at
Plaintiffs, however, do not allege that any of Defendant’s promises regarding
modification of the loan or postponement of a foreclosure sale were written. Nor do they allege
that Defendant promised to sign a written modification or a written promise to delay a
foreclosure sale which would itself comply with the statute of frauds.
In fact, Plaintiffs
acknowledge recent Fifth Circuit cases dismissing similar claims brought by mortgage borrowers
against their lenders for breach of alleged oral mortgage modifications and breach of alleged
promises not to foreclose. See Resp. at 4, Docket No. 4 (citing Martins, 722 F.3d at 256–57,
Water Dynamics, Ltd. v. HSBC Bank USA, N. A., 509 F. App’x 367, 369 (5th Cir. 2013); Gordon
v. JPMorgan Chase Bank, N.A., 505 F. App’x 361, 364 (5th Cir. 2013).
distinguishing these cases, Plaintiffs instead appeal to “traditional notions of substantial justice
and fair play.” Resp. at 4. However, under Texas law and Fifth Circuit precedent, regardless of
perceived injustice, the statute of fraud bars enforcement of the alleged oral promises.
Accordingly, Defendant’s motion to dismiss is granted as to Plaintiffs’ promissory estoppel
B. Wrongful Foreclosure
Plaintiffs also assert a cause of action for wrongful foreclosure and request that the
foreclosure sale be rescinded. Their claim is based solely on the alleged broken promises.
In Texas, “[t]he elements of a wrongful foreclosure claim are: (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.). A foreclosure sale may also be
set aside as invalid if the notices required by Chapter 51 of the Texas Property Code are not
properly and timely served. See TEX. PROP. CODE. § 51.002(b), (d) (requiring a twenty days’
notice of mortgage default and right to cure and a twenty-one days’ notice of sale); Savers Fed.
Sav. & Loan Ass’n v. Reetz, 888 F.2d 1497, 1501 n.6 (5th Cir. 1989) (recognizing that under
Texas law “a sale without the required twenty-one days’ notice is invalid or void”); Ogden v.
Gibraltar Sav. Ass’n, 640 S.W.2d 232, 232-34 (Tex. 1982) (reversing a take-nothing judgment
on a wrongful foreclosure claim on the basis that any attempted acceleration was ineffective
because the mortgagee did not give proper notice of its intent to accelerate).
Here, Plaintiffs have not alleged a defect in the foreclosure sale proceedings. They have
only alleged broken verbal promises, which, as explained above, are not legally enforceable.
Further, Plaintiffs have not alleged a grossly inadequate sales price, a causal connection between
the alleged defect and the grossly inadequate sales price, or any violation of the statutory notice
requirements. See Fed. Deposit Ins. Corp. v. Blanton, 918 F.2d 524, 531 (5th Cir. 1990)
(recognizing that, under Texas law, a selling price is not grossly inadequate if the property sells
for at least 60% of its fair market value). Accordingly, Plaintiffs have not stated a claim for
C. Declaratory and Injunctive Relief
The Fifth Circuit has held that when a complaint purports to assert an independent cause
of action for declaratory judgment alongside another cause of action, the request for declaratory
judgment should be construed as a theory of recovery predicated upon the accompanying claim.
Sid Richardson Carbon & Gasoline Co. v. Interenergy Res., Ltd., 99 F.3d 746, 752 n.3 (5th Cir.
1996). Accordingly, district courts dismiss requests for declaratory relief when all pleaded causes
of action fail. See, e.g., Scott v. Bank of Am., No. SA:12-CV-917-DAE, 2013 WL 1821874, at *9
(W.D. Tex. Apr. 29, 2013); Amaro v. U.S. Bank N.A., No. 3:12-CV-3776-B, 2013 WL 1187284,
at *4 (N.D. Tex. Mar. 22, 2013); Marsh v. JPMorgan Chase, 888 F. Supp. 2d 805, 815 (W.D.
Tex. 2012). Here, Plaintiffs fail to state a viable independent cause of action, and, therefore,
Plaintiffs’ claim for declaratory relief is dismissed.
Finally, Plaintiffs’ request for an injunction enjoining Defendant from attempting to sell
or remove Plaintiffs from the property is denied as their request is not supported by a viable
underlying cause of action. See Anderson v. Jackson, 556 F.3d 351, 360 (5th Cir. 2009); See e.g.
Von Scheele v. Wells Fargo Bank, N.A., SA-12-CV-00690-DAE, 2013 WL 5346710, at *6 (W.D.
Tex. Sept. 23, 2013.
For the foregoing reasons, Defendant’s motion to dismiss (docket no. 3) is GRANTED.
Accordingly, Plaintiffs’ claims are DISMISSED WITH PREJUDICE.
The Clerk is
directed to enter final judgment pursuant to Rule 58 and to close this case. Defendant is awarded
costs of court and shall file a Bill of Costs pursuant to the Local Rules.
It is so ORDERED.
SIGNED this 7th day of January, 2014.
UNITED STATES DISTRICT JUDGE
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