Sanchez v. Wells Fargo Bank, N.A. et al
Filing
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ORDER DENYING 4 Motion for Leave to File; GRANTING IN PART AND DENYING IN PART 5 Motion to Remand to State Court. Plaintiff shall have fifteen days from the date of this order to file her amended complaint consistent with this order. The Court DISMISSES Defendant Bruce Neyland from this action. Signed by Judge David A. Ezra. (aej)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
GLORIA SANCHEZ,
Plaintiff,
vs.
WELLS FARGO BANK, N.A., and
BRUCE NEYLAND,
Defendants.
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No. SA:14–CV–515–DAE
ORDER (1) DENYING PLAINTIFF’S MOTION TO REMAND AND
(2) GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION
FOR LEAVE TO FILE FIRST AMENDED COMPLAINT
Before the Court is a Motion to Remand (Dkt. # 4) and a Motion for
Leave to File First Amended Complaint (Dkt. # 5) filed by Plaintiff Gloria Sanchez
(“Plaintiff”). On November 13, 2014, the Court heard oral argument on both
Motions. Christopher J. Deeves, Esq., appeared at the hearing on behalf of
Plaintiff; Justin E. Allen, Esq., appeared at the hearing on behalf of Defendant
Wells Fargo Bank, N.A. (“Wells Fargo”). After reviewing the motions, and
considering the parties’ arguments at the hearing, the Court DENIES Plaintiff’s
Motion to Remand (Dkt. #4) and GRANTS IN PART AND DENIES IN PART
Plaintiff’s Motion for Leave to File First Amended Complaint (Dkt. #5).
1
BACKGROUND
I.
Factual Background
On October 29, 2002, Plaintiff obtained a mortgage to purchase the
property located at 630 Blue Bonnet North, Floresville, Wilson County, Texas
(“the Property”). In connection with the purchase, Plaintiff executed a promissory
note and a deed of trust. Wells Fargo is the holder of both the promissory note and
the deed of trust. (Dkt. # 1, Ex. B-2 ¶ 4.) By July or August 2013, Plaintiff had
fallen behind on her payments and contacted Wells Fargo about bringing the loan
current. (Id. ¶ 5.) Wells Fargo’s representative allegedly told Plaintiff that she
“did not need to worry about bringing the loan current,” and she should instead
apply for a loan modification. (Id. ¶ 5.)
Plaintiff did so, but on September 13, 2013, she received a letter from
Wells Fargo informing her that her application had been denied because she had
failed to submit all the required materials. The letter stated that while Wells Fargo
would continue to work with Plaintiff to help her avoid foreclosure, the foreclosure
process would continue. (Id. ¶ 6.)
On September 16, 2013, Wells Fargo sent Plaintiff another letter
allegedly returning prior partial payments “in order to avoid having to restart the
foreclosure process.” (Id. ¶ 11.) The letter also allegedly stated that Plaintiff was
not in a loan modification process and that foreclosure would continue. (Id.) On
2
September 17, 2013, Wells Fargo allegedly informed Plaintiff that it could not help
her obtain a loan modification. (Id.)
On September 20, 2013, Wells Fargo acknowledged that it had
received further documentation from Plaintiff and stated that she was being
considered for a loan modification program, but nonetheless informed her that it
would proceed with a foreclosure sale. (Id.) On September 24, 2013, Wells Fargo
allegedly informed Plaintiff that she had not submitted the proper documentation,
and although she was still in the loan modification process the foreclosure would
proceed “because there was not time to review her for a loan modification prior to
the foreclosure date.” (Id.)
On August 26, 2013, Wells Fargo appointed Defendant Bruce
Neyland (“Neyland”) as substitute trustee to proceed with the foreclosure sale. (Id.
¶ 7.) On October 1, 2013, the Property was sold at a foreclosure sale. (Id.)
II.
Procedural Background
On October 29, 2013, Plaintiff filed her first lawsuit concerning the
foreclosure of the Property in the 81st Judicial District Court of Wilson County,
Texas, naming Wells Fargo as the sole defendant. (Dkt. # 7, Ex. A.) Wells Fargo
removed the case to the Western District of Texas, invoking the federal court’s
diversity jurisdiction. (Id. Ex. B.) On December 23, 2013, Plaintiff filed a Motion
for Leave to Amend Pleadings, seeking to join Neyland as a defendant. (Id.) On
3
February 24, 2014, Judge Xavier Rodriguez denied Plaintiff’s motion. (Id. Ex. C.)
On March 31, 2014, Plaintiff voluntarily dismissed her suit without prejudice. (Id.
Ex. D.)
On April 8, 2014, Plaintiff filed the instant lawsuit in the 218th
Judicial District Court of Wilson County, Texas, this time naming both Neyland
and Wells Fargo as the defendants. (Dkt. # 1, Ex. B-2.) On June 6, 2014,
Defendants removed the case to this Court, invoking this Court’s diversity
jurisdiction. (Dkt. # 1, Ex. B-7.) On July 7, 2014, Plaintiff filed a Motion for
Leave to File First Amended Complaint (Dkt. # 4) and a Motion to Remand (Dkt.
# 5). On July 21, 2014, Defendants filed responses to both motions. (Dkts. ## 7,
8.) On July 25, 2014, Plaintiff filed replies to both responses. (Dkts. ## 12, 13.)
LEGAL STANDARD
I.
Motion to Remand
A defendant may remove to federal court any civil action brought in
state court over which the district court would have had original jurisdiction.
28 U.S.C. § 1441(a); Mumfrey v. CVS Pharmacy, Inc., 719 F.3d 392, 397 (5th Cir.
2013). Original jurisdiction may be based on either diversity of citizenship or the
existence of a federal question. Halmekangas v. State Farm Fire and Cas. Co., 603
F.3d 290, 295 (5th Cir. 2010). On a motion to remand, the removing party bears
the burden of establishing that one of these bases of jurisdiction exists. Shearer v.
4
Sw. Serv. Life Ins. Co., 516 F.3d 276, 278 (5th Cir. 2008). Diversity jurisdiction
exists where the amount in controversy exceeds $75,000 and there is complete
diversity of citizenship between the parties—in other words, every plaintiff must
be diverse from every defendant. 28 U.S.C. § 1332(a); Harvey v. Grey Wolf
Drilling Co., 542 F.3d 1077, 1079 (5th Cir. 2008); Caterpillar Inc. v. Lewis, 519
U.S. 61, 68 (1996).
To determine whether jurisdiction is present for removal, the court
considers the claims in the state court petition as they existed at the time of
removal. Louisiana v. Am. Nat. Prop. Cas. Co., 746 F.3d 633, 637 (5th Cir. 2014)
(citing Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir.
1995)). Because removal jurisdiction implicates federalism concerns, all
ambiguities must be construed in favor of remand. Barker v. Hercules Offshore,
Inc., 713 F.3d 208, 212 (5th Cir. 2013) (citing Manguno v. Prudential Prop. & Cas.
Co., 276 F.3d 720, 723 (5th Cir. 2002)).
II.
Motion for Leave to File First Amended Complaint
Courts should “freely give leave [to amend] when justice so requires.”
Fed. R. Civ. P. 15(a)(2). Following the Supreme Court’s guidance, the Fifth
Circuit uses five factors in determining whether to grant a party leave to amend a
complaint: 1) undue delay, 2) bad faith or dilatory motive, 3) repeated failure to
cure deficiencies by previous amendments, 4) undue prejudice to the opposing
5
party, and 5) futility of the amendment. Rosenzweig v. Azurix Corp., 332 F.3d
854, 864 (5th Cir. 2003) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).
An amendment is futile if it could not survive a motion to dismiss.
Rio Grande Royalty Co., Inc. v. Energy Transfer Partners, L.P., 620 F.3d 465, 468
(5th Cir. 2010). “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)).
DISCUSSION
I.
Motion to Remand
Plaintiff, a citizen of Texas, contends that the Court is required to
remand this case because she has stated a valid claim against Neyland, who is also
a citizen of Texas, thereby destroying the diversity giving rise to federal
jurisdiction. (Dkt. # 5 ¶ 11.) See 28 U.S.C. § 1332(a). Defendants counter that
Neyland must be dismissed from this case under Texas Property Code § 51.007
because he was sued in his official capacity as substitute trustee. (Dkt. # 7 ¶ 9.) In
the alternative, Defendants argue that Neyland was fraudulently joined and thus his
citizenship should not be considered for diversity purposes. (Dkt. # 7 ¶ 4.)
6
A.
Texas Property Code § 51.007
Defendants claim that because Neyland was sued in his official
capacity, he should be dismissed from this case under Texas Property Code
§ 51.007. (Dkt. # 7 ¶ 9.) § 51.007 provides that a trustee named in a suit or
proceeding may include in the answer a verified denial stating that the trustee is
not a necessary party. Tex. Prop. Code § 51.007(a). The trustee must include a
statement of the basis for the trustee’s belief that the trustee was named as a party
solely in the capacity as a trustee under a deed of trust. Id. The plaintiff then has
thirty days to file a verified response rebutting the trustee’s verified denial. Id.,
§ 51.007(b). If the plaintiff fails to do so, the trustee “shall be dismissed from the
suit or proceeding without prejudice.” 1 Id., § 51.007(c). See also WAMCO
XXVII, Ltd. v. Casa Grande Cotton Fin. Co., 314 F. Supp. 2d 655, 657 (N.D. Tex.
2004) (dismissing defendant without prejudice based on plaintiff’s failure to file a
1
Texas Property Code § 51.007(a)–(c) reads in full:
(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.
7
verified response to verified denial); Vela v. U.S. Bank Nat. Ass’n, No. 5:13–CV–
868–DAE, 2014 WL 1219049, at *4 (W.D. Tex. Mar. 24, 2014) (same).
In this case, Neyland included a verified denial in his answer, filed on
May 19, 2014. (Dkt. # 1, Ex. B-4.) Plaintiff failed to file a verified response
within the thirty day period. Although Neyland has not filed a motion to dismiss,
the Court has the discretion to dismiss parties sua sponte. See McCullough v.
Lynaugh, 835 F.2d 1126, 1127 (5th Cir. 1988); Adams v. Chase Bank, No. 3:11–
CV–3085–M, 2012 WL 2122175 (N.D. Tex. May 11, 2012) adopted by Adams v.
Chase Bank, No. 3:11–CV–3085–M, 2012 WL 21309075, at *1 (N.D. Tex. June
12, 2012) (sua sponte dismissing defendant as improperly joined). Therefore,
dismissal of Neyland is proper under § 51.007.2
B.
Fraudulent Joinder
Although § 51.007 dictates the resolution of this Motion, the Court
addresses the fraudulent joinder arguments made by both parties for the sake of
thoroughness. District courts are prohibited from exercising jurisdiction over a suit
in which any party has been improperly joined to manufacture federal diversity
2
On November 6, 2014, Plaintiff filed a “Notice of Supplemental Authority.”
(Dkt. # 18.) In this document, Plaintiff admits that she should have submitted a
response to Neyland’s verified denial by June 18, 2014. (Id. at 4.) Nevertheless,
Plaintiff argues that because she included specific causes of action against Neyland
in her Proposed First Amended Complaint of July 7, 2014, Neyland was required
to file a second verified denial. (Id. at 5.) The Court disagrees. Neyland cannot be
required to file a denial to a proposed pleading. Because Plaintiff missed the
deadline to respond to Neyland’s verified denial, Neyland will be dismissed.
8
jurisdiction. Smallwood v. Ill. Cent. R. Co., 385 F.3d 568, 572 (5th Cir. 2004). If
the court finds that a defendant has been fraudulently joined, the court may
disregard that defendant’s citizenship for purposes of determining diversity
jurisdiction. Borden v. Allstate Ins. Co., 589 F.3d 168, 171 (5th Cir. 2009). A
showing of fraudulent joinder can arise in one of two ways: (1) actual fraud in the
pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause
of action against the non-diverse party in state court. Smallwood, 385 F.3d at 573
(quoting Travis v. Irby, 326 F.3d 644, 646–47 (5th Cir. 2003)). As there are no
allegations of actual fraud in this case, only the second method of establishing
fraudulent joinder is at issue.
To succeed under the second method, the defendant must demonstrate
that “there is no possibility of recovery by the plaintiff against an in-state
defendant, which stated differently means that there is no reasonable basis for the
district court to predict that the plaintiff might be able to recover against an in-state
defendant.” Id. To make such a determination, courts apply a Rule 12(b)(6)
analysis, looking to the allegations in the complaint to determine whether there is a
reasonable basis to predict whether the plaintiff might be able to recover against
the in-state defendant under state law. Id. Unlike in a traditional Rule 12(b)(6)
analysis, however, courts “retain discretion to pierce the pleadings and review
evidence on whether plaintiff has a viable cause of action against the non-diverse
9
defendant under state law.” Minella v. Bank of Am., N.A., No. SA-14-CV-174XR, 2014 WL 1330554, at *2 (W.D. Tex. Apr. 1, 2014); Smallwood, 385 F.3d at
573 (“the district court may, in its discretion, pierce the pleadings and conduct a
summary inquiry.”).
Plaintiff concedes that her original complaint contains no specific
cause of action against Neyland, but contends that her complaint contains
sufficient facts to establish a cause of action against Neyland. (Dkt. # 4 ¶ 1; Dkt.
# 13 ¶ 5.) Plaintiff’s argument appears to be based in large part on a sworn
statement made by Neyland in the substitute trustee’s deed, which affirms that “all
matters, duties and obligations of Mortgagee were lawfully performed.” (Dkt. # 5
¶ 4). Plaintiff asserts that this statement indicates that Neyland conducted an
independent investigation into the default and foreclosure process and confirmed
that Wells Fargo acted lawfully throughout. (Id.) Plaintiff further claims that in
reality, Defendants acted unlawfully when they (1) failed to provide her with
proper notices and (2) listed the Property in violation of the HAMP guidelines and
the Texas Debt Collection Practices Act. (Id.) Plaintiff argues that by listing the
Property in spite of these defects, Neyland violated the duty of fairness he owed to
her as substitute trustee. (Dkt. #5 ¶ 4; Dkt. # 13 ¶ 4.) For the reasons stated below,
the Court finds that Plaintiff cannot establish a valid cause of action against
Neyland under Texas law.
10
1.
Foreclosure Notice
Plaintiff claims that Neyland is liable to her based on an alleged
failure to provide her with proper notices. (Id.) Plaintiff’s complaint does include
allegations that Defendants failed to comply with the notice provisions included in
the deed of trust, which states that the trustee will “either personally or by agent
give notice of the foreclosure sale as required by the Texas Property Code as then
in effect.” 3 (Dkt. # 1, Ex. B-2 ¶ 7; Dkt. # 5, Ex. 2 at 3.)
Under Texas law, notice of sale must be given at least 21 days before
the date of the sale by serving written notice by certified mail on the debtor
obligated to pay the debt. See Tex. Prop. Code § 51.002(b). The notice need not
be received; rather, service is complete when the notice is deposited in the United
States mail, postage prepaid and addressed to the debtor. Id., § 51.002(e). The
affidavit of a person knowledgeable of the facts to the effect that service was
completed is prima facie evidence of service. Id. See also Vaillancourt v. PNC
Bank, N.A., — F.3d —, 2014 WL 5801401, at *6–7 (5th Cir. Nov. 4, 2014)
(finding sufficient evidence of service under § 51.002(e) where the defendant bank
produced a certified mail receipt and an affidavit averring that “[a]ll notices . . .
were served . . . by certified mail at the last known address of such debtor in
3
There is some dispute as to which Deed of Trust is actually at issue in the
litigation. (See Dkt. # 7 ¶ 4 n.2.) The Court here relies on the document put forth
by Plaintiff.
11
accordance with the law.”); Rodriguez v. U.S. Bank, N.A., No. SA–12–CV–345–
XR, 2013 WL 5173125, at *2 (W.D. Tex. Sept. 12, 2013) (finding prima facie
evidence of service of a notice of default where defendants produced an affidavit,
the notice, and the certified mail tracking numbers).
As stated previously, the Court has discretion to review summary
judgment-type evidence about whether the plaintiff has a viable cause of action
against the non-diverse defendant. Minella, 2014 WL 133054, at *2. Wells Fargo
has submitted a copy of a letter dated August 22, 2013, notifying Plaintiff that her
debt had been accelerated and that the substitute trustee would proceed with
foreclosure. (Dkt. # 7, Ex. E.) Wells Fargo also submitted an affidavit confirming
mailing of the notice and a copy of the letter’s tracking information. (Id.) The
Court finds that Defendants complied with the requirements of the Texas Property
Code as specified in the deed of trust. Therefore, Plaintiff has no cause of action
against Neyland based on a failure to provide her with appropriate notices under
Texas law.4
4
In Plaintiff’s “Notice of Supplemental Authority,” (Dkt. # 18), Plaintiff calls the
Court’s attention to Zarzurela v. Wells Fargo, No. 5:14-CV-499-OLG, slip op.
(W.D. Tex. Aug. 25, 2014). In that case, the district court found no fraudulent
joinder and granted the plaintiffs’ motion to remand where the plaintiffs alleged
the trustee had not mailed the requisite notices, and the bank produced copies of
letters addressed to one plaintiff which stated the bank’s intention to accelerate the
mortgage note if the plaintiffs did not cure their default. Id. at 9. However, that
case is clearly distinguishable from the instant case, in which Defendants have
produced copies of the notice of acceleration and sale, along with an affidavit and
12
2.
Duty of Fairness
Lastly, Plaintiff argues that posting the Property for sale violated the
HAMP guidelines and the Texas Debt Collection Practices Act (“TDCPA”). (Dkt.
# 5 ¶ 4.) According to Plaintiff, Neyland violated his duty of fairness as a trustee
by listing the Property in spite of these violations and by affirming Wells Fargo
acted lawfully despite these deficiencies. (Dkt. # 5 ¶ 4; Dkt. # 13 ¶ 4.) Defendants
respond that Neyland cannot be held liable for improper foreclosure proceedings in
this case because Texas Property Code § 51.007(f) protects trustees who rely in
good faith on information provided to them by the mortgagee. (Dkt. # 7 ¶ 10.)
Under Texas law, a substitute trustee has the duty to “act with
absolute impartiality and fairness to the grantor in performing the powers vested in
him by the deed of trust.” Marsh v. Wells Fargo Bank, N.A., 760 F. Supp. 2d 701,
708 (N.D. Tex. 2011); Hammonds v. Holmes, 59 S.W.2d 324, 347 (Tex. 1977).
“This duty is breached when the trustee fails to comply strictly with the terms of
the deed of trust or the notice and sale provisions of § 51.002 of the Texas Property
Code.” Id. However, a trustee has no affirmative duty to investigate into the
validity of foreclosure proceedings “beyond that required by the statute or the deed
copy of the letter’s tracking information. (Dkt. # 7, Ex. E.) The Zarzurela court
relied heavily on the facts that the bank had not produced an affidavit or other
“summary judgment-type evidence disproving Plaintiffs’ allegations,” and that the
letter was addressed to only one of the two plaintiffs. Zarzurela, slip op. at 9.
Here, Defendants have produced the appropriate evidence and shown that the letter
was properly addressed to the only plaintiff in this case.
13
of trust to ensure a fair sale.” Minella, 2014 WL 1330554, at *3 (citing First State
Bank v. Keilman, 851 S.W.2d 914, 924 (Tex. App.—Austin 1993, writ denied)).
Even though a trustee can be held liable for improper foreclosure proceedings,
Texas law protects trustees “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.” See Tex. Prop.
Code § 51.007(f).
In this case, Plaintiff argues that because she was attempting to obtain
a loan modification, posting the Property violated the HAMP guidelines and the
TDCPA. (Dkt. # 5 ¶ 4.) According to Plaintiff, these “irregularities” “call into
question” the trustee’s duty of fairness. (Id.) Furthermore, Plaintiff maintains that
Texas Property Code § 51.007(f) does not protect Neyland because he personally
alleged that the foreclosure had been conducted lawfully, meaning that he must
have “conducted an independent investigation” into the foreclosure process. (Id.)
According to Plaintiff, “[t]his is not his reliance on the facts provided to him by the
bank but an affirmative statement by him that these things were true.” (Id.)
Even if Plaintiff is correct, the Court finds that he was entitled to rely
on information provided to him by Wells Fargo in the course of any independent
investigation before signing the deed of trust affirming that the bank had acted
lawfully during the foreclosure process. See Tex. Prop. Code § 51.007(f); R & L
14
Inv. Prop., LLC v. Green, No. 3:12–CV–4171–O, 2014 WL 1807618, at *8–9
(N.D. Tex. May 6, 2014) (finding trustee not liable pursuant to § 51.007(f) where
trustee performed deficient calculations based on information provided by the
mortgagee, and noting that “[t]he evidence does not establish that Trustee’s
liability is based on his own acts or omissions, separate and apart from any reliance
on information provided by [the mortgagee]” (internal quotation marks omitted)).
Therefore, Neyland cannot be liable to Plaintiff for actions he undertook or
affirmations he made in good faith reliance on information provided to him by
Wells Fargo.
As stated above, the fraudulent joinder arguments ultimately do not
determine the outcome in this case because Texas Property Code § 51.007 requires
Neyland to be dismissed from this action. For that reason, the Court DENIES
Plaintiff’s Motion to Remand.
II.
Motion for Leave to File First Amended Complaint
Plaintiff requests leave from the Court to make the following
amendments to her complaint: (1) clarifications to her Deceptive Trade Practices
Act (“DTPA”) claims; (2) additional TDCPA claims; and (3) clarifications to her
breach of contract claims. (Dkt. # 4 ¶ 1; Dkt. # 12 ¶¶ 9–12.) The Court notes that
some of Plaintiff’s proposed amendments include additional allegations and causes
of action against Neyland. Because the Court has determined that Neyland must
15
be dismissed from this action, to the extent Plaintiff seeks to add or clarify claims
against Neyland, Plaintiff’s motion is denied as moot.
A.
Deceptive Trade Practices Act
First, Plaintiff seeks to amend her complaint in order to “clarify her
DTPA pleadings.” (Dkt. # 4 ¶ 1.) Defendants argue that such an amendment
would be futile because Plaintiff does not qualify as a “consumer” under the DTPA
and therefore cannot bring a claim under that Act. (Dkt. # 8 ¶ 16).
To state a valid DTPA claim, a plaintiff must establish that she is a
“consumer” under the DTPA. Tex. Bus. & Com. Code § 17.50(a); Doe v. Boys
Club of Greater Dall., Inc., 907 S.W.2d 472, 478 (Tex. 1995). To qualify as a
consumer under the DTPA, a plaintiff must have sought or acquired goods or
services by purchase, and those goods or services purchased or leased must form
the basis of the complaint. Tex. Bus. & Com. Code § 17.45(4); Cameron v. Terrell
& Garrett, Inc., 618 S.W.2d 535, 539 (Tex. 1981). Texas law clearly states that
borrowing money does not constitute the acquisition of a good or service.
Riverside Nat. Bank v. Lewis, 603 S.W.2d 169, 175–76 (Tex. 1980) (a person who
obtains a loan is not a consumer because the lending of money involves neither a
good nor a service); Montalvo v. Bank of Am. Corp., 864 F. Supp. 2d 567, 580
(W.D. Tex. 2012) (under Texas law, a plaintiff who seeks a mortgage modification
16
and receives free services from the mortgage holder or servicer in connection with
the modification is not a consumer under the DTPA).
In this case, because Plaintiff’s claims arise out of a loan, she does not
qualify as a “consumer” under the DTPA. Plaintiff, however, claims that the basis
of her DTPA claim is not the loan itself but the loan modification process.
Plaintiff characterizes the loan modification process as a service rather than a loan,
and thus argues that she constitutes a consumer under the DTPA. (Dkt. # 12 ¶ 6.)
Courts have rejected identical arguments in the past, and this Court finds the
reasoning in those cases persuasive. See Kennedy v. Wells Fargo, No. 11–CV–
957–FB, slip op. at 12 (W.D. Tex. Oct. 23, 2012) (“To the extent plaintiff bases
her DTPA claim, not on the lending of money, but on the review and subsequent
denial of her loan modification application, the Court finds plaintiff does not
constitute a consumer under that theory either.”); Owens v. BAC Home Loans
Serv., L.P., No. H–11–2742, 2012 WL 1494231, at *4 (S.D. Tex. Apr. 27, 2012)
(“Because the plaintiffs sought to modify their mortgage loan and not to acquire,
by purchase or lease, a ‘good’ or ‘service,’ they have not stated a viable DTPA
claim.”). Because Plaintiff does not qualify as a “consumer” under the DTPA, the
Court finds that allowing Plaintiff to amend her DTPA claim would be futile.
17
B.
Texas Debt Collection Practices Act
Next, Plaintiff requests leave to amend her complaint to include
TDCPA claims against Wells Fargo. (Dkt. # 4 ¶ 1.) Plaintiff claims that
Defendants’ conduct violates §§ 392.301(a)(3), 392.304(a)(8), 392.304(a)(12),
392.304(a)(13), and 392.304(a)(19) of the TDCPA. (Id.) Defendants respond that
Plaintiff’s proposed TDCPA allegations fail to state a plausible claim upon which
relief may be granted because Plaintiff’s allegations are wholly predicated on
Wells Fargo’s exercise of its contractual right of foreclosure. (Dkt. # 8 ¶ 20.)
§ 392.301(a)(3) of the TDCPA prohibits debt collectors using
“threats, coercion, or attempts to coerce” in the course of “representing or
threatening to represent to any person other than the consumer that a consumer is
wilfully refusing to pay a nondisputed consumer debt when the debt is in dispute
and the consumer has notified in writing the debt collector of the dispute.” Tex.
Fin. Code § 392.301(a)(3). Plaintiff’s proposed amended complaint is devoid of
allegations that Wells Fargo notified any third party that Plaintiff wilfully refused
to pay a nondisputed consumer debt. As such, the Court finds that Plaintiff is
unable to state a claim under this section and granting her leave to amend her
complaint to include such a claim would be futile.
§ 392.304(a)(8) prohibits debt collectors from using “fraudulent,
deceptive, or misleading representation” to misrepresent “the character, extent, or
18
amount of a consumer debt, or [misrepresent] the consumer debt’s status in a
judicial proceeding.” Tex. Fin. Code § 392.304(a)(8). § 392.304(a)(19) prohibits
debt collectors from “using any other false representation or deceptive means to
collect a debt or obtain information concerning a consumer.” Tex. Fin. Code
§ 392.304(a)(19). “For a statement to constitute a misrepresentation under the
TDCA, the debt collector must have made an affirmative statement that was false
or misleading.” Forbes v. CitiMortgage, Inc., 998 F. Supp. 2d 541, 551 (S.D. Tex.
2014).
Generally speaking, courts have allowed claims to proceed under
these sections where the plaintiffs alleged their mortgagees promised not to
foreclose during the loan modification process, but proceeded with foreclosure
nonetheless. See, e.g., Stapp v. Bank of Am., N.A., No. 4:11CV203, 2012 WL
3853440, at *7 (E.D. Tex. Sept. 5, 2012) (plaintiffs pled sufficient facts to survive
dismissal of § 392.304(a)(8) claim where they alleged the mortgagee “informed
Plaintiffs that the loan was being modified and foreclosure was being postponed
while Defendants ultimately proceeded with foreclosure on the Property”); Swim
v. Bank of Am., N.A., No. 3:11-CV-1240-M, 2012 WL 170758, at *6 (N.D. Tex.
Jan. 20, 2012) (plaintiff stated a valid § 392.304(a)(19) claim where plaintiff
alleged defendant foreclosed on the property during the loan modification process
despite informing plaintiff that it would not).
19
Plaintiff makes no such assertion in this case. On the contrary,
Plaintiff admits that Wells Fargo notified her that the foreclosure process would
continue while she applied for a loan modification. (Dkt. # 4, Ex. 1 ¶ 7.) Plaintiff
does allege that “Defendant represented to the Plaintiff in the consent order that the
foreclosure process would not continue until a decision on her modification was
made,” (Id. ¶ 11), but this is not an “affirmative statement” made by Defendant.
Rather, according to Plaintiff’s complaint, the consent order was the result of a
settlement between Wells Fargo, the federal government, and the Comptroller of
Currency. (Id. ¶ 10.)
However, the Court finds that Plaintiff’s timeline of events as relayed
in her complaint does allege that Wells Fargo misrepresented the status or
character of her debt in various pieces of correspondence. On September 13, 2014,
in a letter discussing the required documentation for a loan modification, Plaintiff
alleges that Wells Fargo told her it would “work with Plaintiff to help avoid
foreclosure,” indicating that she was in the loan modification process. (Dkt. # 1,
Ex. B-2 ¶ 6.) On September 16, 2014, Plaintiff alleges Wells Fargo informed her
that she was not in a loan modification process. (Id. ¶ 11.) Four days later, on
September 20, 2014, Plaintiff alleges Wells Fargo informed her that she was in the
loan modification process. (Id.) The Court finds these allegations sufficient at this
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stage of the proceedings to state a claim under § 329.304(a)(8), and Plaintiff must
be allowed to amend her complaint to add a claim under this section.
§ 392.304(a)(12) prohibits debt collectors from using “fraudulent,
deceptive, or misleading representation” to represent “that a consumer debt may be
increased by the addition of attorney’s fees, investigation fees, service fees, or
other charges if a written contract or statute does not authorize the additional fees
or charges.” Tex. Fin. Code § 392.304(a)(12). Similarly, § 392.304(a)(13)
prohibits debt collectors from using “fraudulent, deceptive, or misleading
representation” to represent “that a consumer debt will definitely be increased by
the addition of attorney’s fees, investigation fees, service fees, or other charges if
the award of the fees or charges is subject to judicial discretion.” Tex. Fin. Code
§ 392.304(a)(13). Nowhere in Plaintiff’s proposed amended complaint does she
allege that Defendants even mentioned attorney’s fees, investigation fees, service
fees, or other charges to her. Therefore, Plaintiff cannot state a claim under either
of these sections and granting her leave to amend her complaint to include these
claims would be futile.
C.
Breach of Contract
Finally, Plaintiff requests leave to amend her complaint to expand
upon her breach of contract claim against Wells Fargo on the grounds that Wells
Fargo failed to give her “the opportunity to pursue the range of default-curing
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options” before foreclosing on the Property. (Dkt. # 12 ¶¶ 9–12.) Defendants
argue that her breach of contract claim would fail because (1) Wells Fargo was not
legally obligated to provide Plaintiff with multiple opportunities to cure her
default, (2) Plaintiff was in default before applying for a loan modification and
before the foreclosure sale, and (3) Plaintiff has no private cause of action based on
alleged HAMP and HAFA guideline violations. (Dkt. # 8 ¶¶ 21–23.)
The essential elements of a breach of contract claim under Texas law
are: “(1) the existence of a valid contract; (2) performance or tendered performance
by the plaintiff; (3) breach of the contract by the defendant; and (4) damages
sustained by the plaintiff as a result of the breach.” Smith Int’l, Inc. v. Egle Grp.,
LLC, 490 F.3d 380, 387 (5th Cir. 2007) (citing Valero Mktg. & Supply Co. v.
Kalama Int’l, LLC, 51 S.W.3d 345, 351 (Tex. App.—Houston [1st Dist.] 2001, no
pet.)).
“It is a well established rule that a party to a contract who is himself
in default cannot maintain a suit for its breach.” Dobbins v. Redden, 785 S.W.2d
377, 378 (Tex. 1990) (citation and internal quotation marks omitted). See also
Richardson v. Wells Fargo Bank, N.A., 873 F. Supp. 2d 800, 809 (N.D. Tex. 2012)
(granting summary judgment on breach of contract claim to defendant mortgagee
where plaintiff was behind on her mortgage payments, although plaintiff was
participating in the HAMP plan); Owens v. Bank of America, NA, No. H–11–
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2552, 2012 WL 912721, at *4 (S.D. Tex. Mar. 16, 2012) (“plaintiffs have
undisputedly not performed their contractual obligations because they have not
stayed current on their mortgage payments”).
In this case, Plaintiff bases her claims on the deed of trust, which she
appears to allege incorporates the terms of the consent order. (Dkt. # 4, Ex. 1
¶¶ 11, 30.) She claims that Wells Fargo breached the terms of the deed of trust by
failing to provide her with multiple opportunities to cure her default. (Id. ¶ 30.)
However, Plaintiff also clearly acknowledges that she was behind on her payments
and in default before the alleged breach by Wells Fargo occurred. (Id. ¶ 6.)
Plaintiff therefore cannot maintain a cause of action for breach of contract against
Wells Fargo. As such, giving Plaintiff leave to amend her complaint to reflect this
claim would be futile. For these reasons, the Court GRANTS IN PART AND
DENIES IN PART Plaintiff’s Motion for Leave to File First Amended Complaint.
CONCLUSION
For the reasons stated above, the Court hereby DENIES Plaintiff’s
Motion to Remand (Dkt. # 4) and GRANTS IN PART AND DENIES IN PART
Plaintiff’s Motion for Leave to File First Amended Complaint (Dkt. # 5). Plaintiff
shall have fifteen days from the date of this order to file her amended complaint
consistent with this order. The Court DISMISSES Defendant Bruce Neyland from
this action.
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IT IS SO ORDERED.
DATED: San Antonio, Texas, November 13, 2014.
_____________________________________
David Alan Ezra
Senior United States Distict Judge
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