Sanchez v. Wells Fargo Bank N.A.
ORDER DENYING 5 Motion for Leave to File Amended Complaint Signed by Judge Xavier Rodriguez. (wg)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
WELLS FARGO BANK, N.A.,
Civil Action No. SA-13-CV-1069-XR
ORDER DENYING LEAVE TO AMEND
On this day, the Court considered Plaintiff’s opposed motion for leave to amend her
complaint (docket no. 5). For the following reasons, the Court DENIES her motion.
A. Factual Background1
On October 29, 2002, Plaintiff Gloria Sanchez obtained a mortgage to purchase the real
property located at 630 Blue Bonnet North, Floresville, Wilson County, Texas (the “Property”).
In connection with the transaction, Plaintiff executed a promissory note (the “Note”) and a deed
of trust (the “Deed of Trust).2 At some unspecified time, Defendant Wells Fargo Bank, N.A.
became the holder of the Note and Deed of Trust.
In or around July 2013, Plaintiff defaulted on her mortgage by failing to fully pay her
mortgage payments. Plaintiff contacted Defendant, and Defendant allegedly advised Plaintiff to
apply for a loan modification, which Plaintiff did. Thereafter, Plaintiff received a letter from
The facts are taken from the allegations in Plaintiff’s state-court petition. Docket No. 1-5.
Defendant filed copies of the Note and Deed of Trust with the Court. Docket No. 9, Exs. 1 & 2. The Note and
Deed of Trust show that Plaintiff entered into the mortgage on January 21, 2003. Regardless of whether Plaintiff
entered into the mortgage on October 29, 2002 or January 21, 2003, the Court’s analysis remains the same.
Defendant dated September 13, 2013. The letter allegedly states that Plaintiff’s request for a
modification had been denied because Plaintiff failed to submit required documents. Further, the
letter allegedly asserts that the foreclosure process will resume. Finally, the letter allegedly
states that Defendant will continue to work with Plaintiff to help her avoid foreclosure.
Plaintiff asserts that a few days after receiving the September 13, 2013 letter, she
received additional communications from Defendant. Among these communications was a letter
dated September 20, 2013. Plaintiff asserts that in this letter, Defendant acknowledges receiving
additional documents from Plaintiff and acknowledges that Plaintiff is being considered for a
loan modification. Nevertheless, the letter also allegedly states that Defendant will continue the
On or around September 24, 2013, Plaintiff asserts that she received one final preforeclosure letter. This last letter allegedly states that Plaintiff is in the loan modification
process. Nevertheless, the letter states that Defendant will sell the Property at a scheduled
foreclosure sale because Defendant does not have sufficient time to review Plaintiff’s mortgage
for a possible modification.
Plaintiff never received a modification. On October 1, 2013, the Property was sold at a
B. Procedural Background
On October 29, 2013, Plaintiff filed her lawsuit in the 81st Judicial District Court of
Wilson County, Texas. She asserts causes of action against Defendant for breach of contract,
violations of the Texas Deceptive Trade Practices Act (“DTPA”), fraud, and quite title. Plaintiff
also seeks declaratory and injunctive relief.
Plaintiff’s claims against Defendant are premised on alleged promises and representations
Defendant made in a consent order with the United States Department of the Treasury, Office of
the Comptroller of the Currency (the “Consent Order”).
In the Consent Order, Defendant
allegedly promised to offer foreclosure-prevention programs, such as mortgage modifications, to
its borrowers. Additionally, Defendant allegedly promised not to foreclose on any mortgages it
held while a mortgage was being considered for a modification. Plaintiff asserts that Defendant
violated these promises by foreclosing on Plaintiff’s mortgage while her application for a
modification was still under review. Further, Plaintiff asserts that the Deed of Trust incorporates
the promises made in the Consent Order. Therefore, according to Plaintiff, Defendant must offer
her an opportunity to apply for all of the foreclosure prevention programs that Defendant and the
federal government have made available to struggling homeowners.
Plaintiff asserts that
Defendant cannot foreclose until it has reached a decision on Plaintiff’s application for each of
On the day Plaintiff filed her lawsuit, the state court entered a temporary restraining
order, enjoining Defendant from evicting Plaintiff from the Property. Docket No. 1-7. The
temporary restraining order was later extended, and a temporary injunction hearing was set for
November 26, 2013. Docket No. 1-11. On November 22, 2013, Defendant filed an answer in
state court and then removed the case to this Court. Docket Nos. 1 & 1-14. Defendant asserts
that the Court has diversity jurisdiction to hear the case.
On December 23, 2013, Plaintiff moved for leave to amend her complaint to add a nondiverse defendant. Docket No. 5. Plaintiff submitted a proposed first amended complaint, which
adds Bruce Neyland, the substitute trustee who sold the Property, as a defendant. Plaintiff
asserts that Mr. Neyland had a duty to verify that Defendant complied with the Consent Order
before selling the Property. Specifically, Plaintiff asserts that Mr. Neyland had a duty to verify
that Defendant offered Plaintiff all available foreclosure prevention options—and a duty to verify
that Defendant made a decision on those options—before foreclosing. Plaintiff asserts causes of
action against Mr. Neyland for breach of a fiduciary duty, negligence, and violation of the
DTPA.3 Defendant responded, and Plaintiff replied. Docket Nos. 9 & 10.
II. Legal Standard
Under 28 U.S.C. § 1332, a federal court has jurisdiction over controversies involving
disputes between citizens of different states where the amount in controversy exceeds $75,000.
Here, it is undisputed that Plaintiff is a citizen of Texas, Defendant is a citizen of South Dakota,
and the amount in controversy is greater than $75,000. See Docket No. 1, at 3–6. Accordingly,
the Court has subject matter jurisdiction through diversity jurisdiction to consider the case.
A court’s subject matter jurisdiction may be defeated by the addition of a non-diverse
defendant. See Doleac ex rel. Doleac v. Michalson, 264 F.3d 470, 477 (5th Cir. 2001)
(explaining that generally jurisdiction is determined at the time a suit is removed and postremoval developments to lower the amount in controversy or change the citizenship of a party
will not divest jurisdiction;
however, the addition of a non-diverse defendant will defeat
jurisdiction). Since joinder of a non-diverse defendant has such a drastic consequence on
jurisdiction, a court has discretion to permit or deny joinder. See 28 U.S.C. § 1447(e) (“If after
removal the plaintiff seeks to join additional defendants whose joinder would destroy subject
matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the
State court.”). While Federal Rule of Civil Procedure 15(a)(2) requires a court to “freely give
Plaintiff’s DTPA theory is that Mr. Neyland “engaged in an unconscionable act, by foreclosing on the [Property]
without verifying that the loan modification process was complete.” Docket No. 5-2, at 16.
leave to amend when justice so requires,” a district court should scrutinize a proposed
amendment to add a non-diverse defendant more closely than an ordinary amendment. Hensgens
v. Deere & Co., 833 F.2d 1179, 1182 (5th Cir. 1987).
When an amendment will defeat
jurisdiction, the court must balance the defendant’s right in “maintaining the federal forum with
the competing interest of not having parallel lawsuits.” Id. at 1182. Among the factors a court
should consider are: (1) the extent to which the purpose of the amendment is to defeat federal
jurisdiction; (2) whether the plaintiff has been dilatory in asking for the amendment; (3) whether
the plaintiff will be significantly injured if amendment is not allowed; and (4) any other factor
bearing on the equities. Id. “As a plaintiff will not be ‘significantly injured’ by the denial of a
clearly meritless claim, it is within the district court’s discretion to deny the amendment as futile
if there is no reasonable basis to predict that the plaintiff will be able to recover against the nondiverse, non-indispensable party sought to be added as a defendant.” Wilson v. Bruks-Klockner,
Inc., 602 F.3d 363, 368 (5th Cir. 2010). If the court permits amendment, then it must remand to
state court. Hensgens, 833 F.2d at 1182.
Plaintiff seeks to add the trustee, Mr. Neyland, as a non-diverse defendant for failing in
his alleged duty to ensure Defendant’s compliance with the Consent Order. Plaintiff asserts
causes of action against Mr. Neyland for breach of a fiduciary duty, negligence, and violation of
In Texas, a foreclosure trustee must “act with absolute impartiality and fairness” to both
the mortgagor and mortgagee.” Myrad Properties, Inc. v. LaSalle Bank Nat. Ass’n, 300 S.W.3d
746, 751 (Tex. 2009); Hammonds v. Holmes, 559 S.W.2d 345, 347 (Tex. 1977). Nevertheless, a
trustee is not a fiduciary to either party. See TEX. PROP. CODE § 51.0074(b)(2) (“A trustee may
not be held to the obligations of a fiduciary of the mortgagor or mortgagee.”). Moreover, the
Texas Property Code insulates trustees from liability 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 § 51.007(f).
While courts have allowed claims against trustees for their errors in noticing a property
for foreclosure sale or for their errors in the actual conduct of a sale, courts have generally
rejected attempts to hold trustees liable for mortgagees’ alleged errors in servicing their loans.
See e.g., Magers v. Bank of Am., N.A., EP-12-CV-00368-DCG, 2013 WL 705545, at *6 (W.D.
Tex. Feb. 26, 2013) (allowing a claim for wrongful foreclosure against a trustee where a debtor
alleged that she was not served with notice of a foreclosure sale); Johnson v. Ocwen Loan
Servicing, LLC, CIV.A. C-09-47, 2009 WL 2215103, at * 3 (S.D. Tex. July 22, 2009) (allowing
a claim for breach of duty against a trustee where the borrower alleged that he had not been
served with notice of the foreclosure sale); Mortberg v. Litton Loan Servicing, L.P., 4:10-CV668, 2011 WL 4431946 (E.D. Tex. Aug. 30, 2011) report and recommendation adopted, 4:10CV-668, 2011 WL 4440170 (E.D. Tex. Sept. 22, 2011) (dismissing claims against a trustee
where the plaintiff alleged no specific facts indicating the conduct by the trustee could be
distinguished from actions taken by the mortgage servicer); c.f. Eisenberg v. Deutsche Bank
Trust Co. Americas, SA-11-CV-384-XR, 2011 WL 2636135, at *2 (W.D. Tex. July 5, 2011)
(finding trustees were nominal parties where they were joined merely “because they were
requested by [the mortgagee] to proceed with the foreclosure sale”).
Here, Plaintiff’s claims are essentially that Defendant improperly serviced Plaintiff’s
mortgage by failing to comply with the Consent Order before it foreclosed. Plaintiff seeks to
hold Mr. Neyland liable for his failure to verify Defendant’s compliance with the Consent Order.
Plaintiff has alleged no other errors committed by Mr. Neyland.
On these facts, Plaintiff cannot state a claim against Mr. Neyland. Mr. Neyland is not a
fiduciary to Plaintiff. See TEX. PROP. CODE § 51.0074(b)(2). Thus Plaintiff cannot state a breach
of fiduciary duty claim against Mr. Neyland. Moreover, contrary to Plaintiff’s assertion, Mr.
Neyland had no duty to conduct an “independent investigation” into whether Defendant
complied with the Consent Order. See Docket No. 5-2, at 4. Mr. Neyland simply had a duty to
“act with absolute impartiality and fairness” in noticing the Property for foreclosure and selling
the Property. See Hammonds, 559 S.W.2d at 347. In carrying out that duty, he could rely on
Defendant’s representations that Plaintiff was in default and that Plaintiff had not cured her
default. See TEX. PROP. CODE § 51.007(f); Townsend v. Barrett Daffin Frappier Turner & Engel,
LLP, 09-12-00564-CV, 2013 WL 5874607, at *6. (Tex. App.—Beaumont Oct. 31, 2013, pet.
filed) (rejecting a borrower’s claim that a trustee breached a fiduciary duty by failing to verify
the whereabouts of the original note and deed of trust and by failing to verify whether there had
been an assignment to another party). Without an additional duty to verify the underlying basis
for the foreclosure, Mr. Neyland cannot be liable for negligence. See Nabors Drilling, U.S.A.,
Inc. v. Escoto, 288 S.W.3d 401, 404 (Tex. 2009) (“Negligence actions in Texas require a legal
duty owed by one person to another.”). Nor were Mr. Neyland’s actions “unconscionable” under
the DTPA since Plaintiff was in default at the time of the foreclosure sale and Mr. Neyland relied
on Defendant’s representations, as allowed by law. See TEX. BUS. & COMM. CODE § 17.50(a)(3)
(allowing a DTPA claim for “any unconscionable action”); TEX. PROP. CODE § 51.007(f) (stating
that a trustee shall not be liable for any good faith error resulting from reliance upon information
provided by a mortgagee).4
Since Plaintiff cannot state a claim against Mr. Neyland, Plaintiff is not significantly
injured by the Court’s denial of her proposed amended complaint adding a non-diverse party. See
Wilson, 602 F.3d at 368. Accordingly, it is within the Court’s discretion to deny the proposed
amendment. Id. Therefore, without considering the other Hensgens factor, the Court denies
Plaintiff’s motion for leave to amend her complaint.
For the foregoing reasons, the Court DENIES Plaintiff’s opposed motion for leave to
amend her complaint (docket no. 5).
It is so ORDERED.
SIGNED this 24st day of February, 2014.
UNITED STATES DISTRICT JUDGE
Moreover, the DTPA requires that a plaintiff be a “consumer.” See Doe v. Boys Clubs of Greater Dallas, Inc., 907
S.W.2d 472, 478 (Tex. 1995) (citing TEX. BUS. & COM. CODE § 17.50(a)(1)). This Court has recognized that under
Texas law, a plaintiff who seeks a mortgage modification and receives free services from the mortgage holder or
servicer in connection with the modification is not a consumer under the DTPA. Montalvo v. Bank of Am. Corp.,
864 F. Supp. 2d 567, 580 (W.D. Tex. Mar. 30, 2012).
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