Elizabeth Montalvo v. Specialized Loan Servicing LLC, et al
Filing
12
MEMORANDUM OPINION AND ORDER granting 11 Motion to Dismiss filed by Specialized Loan Servicing LLC. All causes of action are DISMISSED WITH PREJUDICE. Signed by Judge Jason K. Pulliam. (kc)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
ELIZABETH MONTALVO,
Plaintiff,
v.
Case No. SA-21-CV-00964-JKP
SPECIALIZED LOAN SERVICING
LLC, U.S. BANK NATIONAL ASSOCIATION,
Defendants.
MEMORANDUM OPINION AND ORDER
Before the Court is Defendants’ Motion to Dismiss pursuant to Federal Rule 12(b)(6) and
alternative Motion for Summary Judgment. ECF No. 11. Plaintiff Elizabeth Montalvo did not
respond. Upon consideration, Defendants’ Motion to Dismiss is GRANTED.
BACKGROUND
As represented in the Original Petition filed in state court, on February 16, 2007, Plaintiff
Elizabeth Montalvo’s former spouse, Rafael Montalvo, Jr., signed two promissory notes secured
by real property (“the Property”). The notes were for the purchase of the Property that was to be
Rafael and Elizabeth Montalvo’s residence. The first promissory note was secured by a first lien
Deed of Trust and was in the principal amount of $218,950; the second promissory note, the loan
that is the subject of this suit, was secured by a second lien Deed of Trust and was in the principal amount of $54,750 (“the Note”) payable to First Franklin Financial Corporation. Defendant
U.S. Bank is the successor in interest to the Note.1 At the same time of his execution of the Note,
Rafael Montalvo, Jr. and Elizabeth Montalvo executed two Deeds of Trust (“Deed of Trust”) to
secure each promissory note. Plaintiff Elizabeth Montalvo (Montalvo) was not a signatory, nor
obligated on either promissory note but joined in the execution of the Deeds of Trust as a nonborrowing spouse to evidence her consent to and perfection of the liens on the subject property in
accordance with Texas law.
On March 15, 2010, Rafael Montalvo, Jr. and Montalvo divorced. In her state-court Petition, Montalvo asserts she was awarded ownership of the Property and was ordered to make all
payments of principal, interest, and ad valorem taxes. SLS and U.S. Bank assert in their Motion
to Dismiss that no documents recorded in the Bexar County real property records show any
transfer or assignment of ownership of the Property to Montalvo. Neither Rafael Montalvo, Jr.
nor Montalvo refinanced the mortgage following their divorce, and therefore, Rafael Montalvo,
Jr. was the obligor on the Note. This disputed fact regarding ownership of the property is not pertinent to the Court’s determination of the points raised in this Motion to Dismiss.
SLS and U.S. Bank represent the Note came under default. On November 3, 2019, SLS
sent Rafael Montalvo, Jr., as the sole borrower, a Notice of Default and Notice of Intent to Accelerate. The default was not cured. On August 18, 2021, SLS, through foreclosure counsel, sent
a Notice of Acceleration and Notice of Trustee’s Sale to Rafael Montalvo, Jr. and to Montalvo.
On August 26, 2021, SLS posted the Property for foreclosure on October 5, 2021.
On September 15, 2021, Montalvo filed suit against SLS and U.S. Bank and obtained an
ex parte Temporary Restraining Order stopping the scheduled sale. In this suit, Montalvo asserts
causes of action for fraud, intentional infliction of emotional distress, and negligent misrepresen1
Effective September 11, 2015, SLS began servicing the loan. Neither SLS nor U.S. Bank have any interest in the
first lien mortgage on the Property.
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tation. Alternatively, Montalvo alleges the four-year statute of limitations to foreclose expired.
Montalvo seeks injunctive relief to preclude foreclosure.
U.S. Bank and SLS now file this Motion to Dismiss and alternative Motion for Summary
Judgment. Montalvo did not respond, and the time for doing so passed.
LEGAL STANDARD
When a party fails to respond to a motion, “the court may grant the motion as unopposed.” W.D. Tex. Civ. R. 7(d)(2). The Court may apply this terminal Local Rule to dispositive
motions. Suarez v. Ocwen Loan Servicing, LLC, No. 5:15-CV-664, 2015 WL 7076674, at
*2 (W.D. Tex. Nov. 12, 2015); Hernandez v. Deutsche Bank Tr. Co., No. EP-12-CV-282, 2012
WL 12887898, at *2 (W.D. Tex. Aug. 21, 2012). However, at its discretion, a Court may address
the motion on the merits “in the interests of thoroughness.” Suarez, 2015 WL 7076674, *2. Under the circumstances of this case, the Court declines to apply Local Rule 7(d)(2), which would
allow granting this dispositive motion as unopposed. Instead, the Court will examine the merits
of SLS and U.S. Bank’s Motion to Dismiss and alternative Motion for Summary Judgment.
Motion to Dismiss
To provide opposing parties fair notice of the asserted cause of action and the grounds
upon which it rests, every pleading must contain a short and plain statement of the cause of action which shows the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). To satisfy this requirement, the Complaint must plead
“enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 555558, 570. “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). The focus is not on whether the plaintiff will ulti-
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mately prevail, but whether that party should be permitted to present evidence to support adequately asserted causes of action. Id.; Twombly, 550 U.S. at 563 n.8. Thus, to warrant dismissal
under Federal Rule 12(b)(6), a Complaint must, on its face, show a bar to relief or demonstrate
“beyond doubt that the plaintiff can prove no set of facts in support of his claim which would
entitle him to relief.” Fed. R. Civ. P. 12(b)(6); Clark v. Amoco Prod. Co., 794 F.2d 967, 970 (5th
Cir. 1986). Dismissal “can be based either on a lack of a cognizable legal theory or the absence
of sufficient facts alleged under a cognizable legal theory.” Frith v. Guardian Life Ins. Co., 9 F.
Supp.2d 734, 737–38 (S.D.Tex. 1998). “Thus, the court should not dismiss the claim unless the
plaintiff would not be entitled to relief under any set of facts or any possible theory that he could
prove consistent with the allegations in the complaint.” Jones v. Greninger, 188 F.3d 322, 324 (5th
Cir. 1999) Vander Zee v. Reno, 73 F.3d 1365, 1368 (5th Cir. 1996).
In assessing a Motion to Dismiss under Federal Rule 12(b)(6), the Court’s review is
limited to the Complaint and any documents attached to the Motion to Dismiss, which are also
referred to in the Complaint and central to the plaintiff’s claims. Brand Coupon Network,
L.L.C. v. Catalina Mktg. Corp., 748 F.3d 631, 635 (5th Cir. 2014). When reviewing the Complaint, the “court accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.” Martin K. Eby Constr. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467
(5th Cir. 2004)(quoting Jones v. Greninger, 188 F.3d at 324).
A Complaint should only be dismissed under Federal Rule 12(b)(6) after affording every
opportunity for the plaintiff to state a claim upon which relief can be granted, unless it is clear
amendment would be futile. Foman v. Davis, 371 U.S. 178, 182 (1962); Hitt v. City of Pasadena, 561 F.2d 606, 608–09 (5th Cir. 1977); DeLoach v. Woodley, 405 F.2d 496, 496-97 (5th Cir.
1968). Consequently, when it appears a more careful or detailed drafting might overcome the
deficiencies on which dismissal is sought, a Court must allow a plaintiff the opportunity to
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amend the Complaint. Hitt v. City of Pasadena, 561 F.2d at 608–09. A court may appropriately
dismiss an action with prejudice without giving an opportunity to amend if it finds that the plaintiff alleged his best case or amendment would be futile. Foman, 371 U.S. at 182; DeLoach, 405
F.2d at 496–97.
In their Motion to Dismiss, SLS and U.S. Bank seek dismissal of all of Montalvo’s causes of action based upon the allegations on the face of the Petition. For this reason, the Court will
analyze SLS and U.S. Bank’s Motion to Dismiss first, and if necessary, determine the Motion for
Summary Judgment. The attachments to the Motion to Dismiss include loan documents that are
referenced in the Petition. The Court will review the loan documents to the extent necessary to
establish undisputed facts; however, these documents are not central to determination of the merits of Montalvo’s asserted causes of action. Because the Court will determine the Motion to Dismiss based upon the face of the Petition, these attached documents do not convert the Motion to
Dismiss to a Motion for Summary Judgment. See Brand Coupon Network, L.L.C., 748 F.3d at
635.
ANALYSIS
Fraud Cause of Action
The elements of a fraud cause of action in Texas are (1) the defendant made a material
representation; (2) the representation was false; (3) when the representation was made, the
speaker knew it was false or made it recklessly without knowledge of the truth; (4) the speaker
made the representation with the intent that the plaintiff act upon it; (5) the plaintiff justifiably
relied on the representation; and (6) the plaintiff thereby suffered injury. Shandong Yinguang
Chem. Indus. Joint Stock Co., Ltd. v. Potter, 607 F.3d 1029, 1032–33 (5th Cir. 2010)(citing Ernst
& Young, L.L.P. v. Pacific Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001)). A fraud cause of
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action is subject to the heightened pleading requirements of Federal Rule 9(b), which requires a
plaintiff to plead the facts supporting the claim with particularity. Fed. R. Civ. P. 9(b). To do so,
the plaintiff must specify the statements she contends to be fraudulent, identify the speaker, state
when and where the statements were made, and explain why the statements were fraudulent. Williams v. WMX Techs., Inc., 112 F.3d 175, 178 (5th Cir. 1997). This requires a plaintiff “set forth
the who, what, when, where, and how” of the alleged fraud. Benchmark Electronics, Inc. v. J.M.
Huber Corp., 343 F.3d 719, 724 (5th Cir. 2003). General allegations that an entity made false
representations without identifying the speaker do not satisfy the pleading requirement of Federal
Rule 9(b). See Sullivan v. Leor Energy, LLC, 600 F.3d 542, 551 (5th Cir. 2010).
To support her fraud cause of action, Montalvo alleges SLS and/or U.S. Bank made material and false representations to her which SLS and/or U.S. Bank knew at the time to be false.
Montalvo alleges SLS and/or U.S. Bank “represented to her the subject loan was in default when
in fact it has been in the process of successful and continuous payment since 2009.” Montalvo
alleges the Original Mortgagee (First Franklin) represented to Montalvo that a payment arrangement had been reached in 2009 which consolidated the two promissory notes. Montalvo alleges
SLS and U.S. Bank never intended to abide by the repayment terms and made a false representation of default with the intent that Montalvo act upon it.
Review of Montalvo’s Petition reveals she fails to specify the statements she contends to
be fraudulent, identify the speaker, state when and where the statements were made, and explain
why the statements were fraudulent. See Williams, 112 F.3d at 178. Montalvo fails to allege how
she acted in reliance on any alleged misrepresentation to her detriment. These general allegations
are insufficient to state a plausible cause of action for fraud. Montalvo alleges generally some of
the elements of the fraud cause of action but fails to provide the particularity required by Federal
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Rule 9(b) and fails to state a claim under Federal Rule 12(b)(6). See Farshchi v. Wells Fargo
Bank, N.A., No. CV H-15-1692, 2016 WL 2858903, at *6-7 (S.D. Tex. May 13, 2016). Importantly, even accepted as true, the allegation that SLS and U.S. Bank never intended to abide
by the repayment terms and made a false representation of default with the intent that Montalvo
act upon it does not support a fraud cause of action against SLS or U.S. Bank as a matter of law.
For these reasons, Montalvo fails to state a claim for fraud as a matter of law. See id.
Intentional Infliction of Emotional Distress
The elements of a cause of action for intentional infliction of emotional distress are: (1)
the defendant acted intentionally or recklessly; (2) the conduct was extreme and outrageous; (3)
the actions of the defendant caused the plaintiff emotional distress; and (4) the resulting emotional distress was severe. Bradford v. Vento, 48 S.W.3d 749, 758 (Tex. 2001); GTE Southwest,
Inc. v. Bruce, 998 S.W.2d 605, 611 (Tex. 1999). Conduct is extreme and outrageous only when it
is “so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of
decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.” Randall’s Food Mkts.v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995). “Whether a defendant’s
conduct is ‘extreme and outrageous’ is a question of law. The mere fact that a defendant’s conduct is tortious or otherwise wrongful does not, standing alone, necessarily render it ‘extreme
and outrageous.’” Bradford, 48 S.W.3d at 758. In Texas, a foreclosure sale that complies with
the terms of the loan agreements and the applicable law does not support a cause of action for
intentional infliction of emotional distress. Garza v. Deutsche Bank Tr. Co. Americas for Residential Accredit Loans, Inc. 2006-QS9, No. A-12-CV-741, 2012 WL 13029409, at *6 (W.D.
Tex. Oct. 24, 2012), report and recommendation adopted sub nom. Garza v. Deutsche Bank Tr.
Co. Americas for Residential Accredit Loans, Inc., No. A-12-CV-741, 2013 WL 12293489
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(W.D. Tex. Jan. 23, 2013); see also Wieler v. United Sav. Ass’n of Tex., FSB, 887 S.W.2d 155,
159 (Tex. App.—Texarkana 1994), writ denied sub nom. United Sav. Ass’n of Tex. v. Wieler,
907 S.W.2d 454 (Tex. 1995).
To support her cause of action for intentional infliction of emotional distress, Montalvo
alleges SLS and/or U.S. Bank engaged in outrageous conduct by leading her to believe a repayment arrangement or modification had been reached. Montalvo alleges SLS and U.S. Bank withheld information from her to cure any alleged default, and these actions caused her severe emotional distress.
This alleged conduct does not support this cause of action. As described, SLS and U.S.
Bank’s alleged conduct may be wrongful or callous but does not rise to the level of outrageous or
beyond all bounds of decency. See Randall’s Food Mkts., 891 S.W.2d at 644. The Court considers the fact that the potential loss of Montalvo’s home is distressful and of high importance to her
and her family; however, this alleged conduct, standing alone, is not so extreme and outrageous
to support a cause of action for intentional infliction of emotional distress as a matter of law. See
id. To the extent SLS and U.S. Bank’s alleged wrongful conduct is attributable to its attempt to
collect on the Note and/or foreclose on the property under the terms of the Note, this conduct also does not support this cause of action. Wieler, 887 S.W.2d at 159.
For this reason, the Court concludes, as presented, the allegations cannot support a cause
of action for intentional infliction of emotional distress as a matter of law.
Negligent Misrepresentation
In Texas, the elements of negligent misrepresentation are: (1) the representation is made
by a defendant in the course of his business, or in a transaction in which the defendant has a pecuniary interest; (2) the defendant supplies false information for the guidance of others in their
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business; (3) the defendant did not exercise reasonable care or competence in obtaining or communicating the information; and (4) the plaintiff suffers a pecuniary loss by justifiably relying on
the representation. Biggers v. BAC Home Loans Servicing, LP, 767 F. Supp. 2d 725, 734–35
(N.D. Tex. 2011). The false information complained of “must be a misstatement of an existing
fact rather than a promise of future conduct.” Id.; Westinde v. JPMorgan Chase Bank, N.A., No.
3:13-CV-3576, 2014 WL 4631405, at *10 (N.D. Tex. Sept. 16, 2014).
To support her cause of action for negligent misrepresentation, Montalvo alleges SLS
and/or U.S. Bank represented to her that a repayment arrangement had been reached. Montalvo
alleges SLS and U.S. Bank supplied her with false information regarding the status of the mortgage, these entities did not exercise reasonable care in making these representations, she justifiably relied upon the oral representation that she was not in default on the Note, and this reliance
caused her injury.
Montalvo fails to state a plausible claim. First, other than reciting conclusory allegations
of each element, Montalvo fails to allege how she justifiably relied upon these alleged negligent
misrepresentations to her detriment. See id. In any event, SLS and U.S. Bank’s purported representations regarding a loan payment modification is a statement of future action, and therefore, is
not actionable as a negligent misrepresentation cause of action. See Milton v. U.S. Bank Nat.
Ass’n, 508 F.App’x 326, 329 (5th Cir. 2013); James v. Wells Fargo Bank, N.A., 533 Fed. Appx.
444, 448 (5th Cir. 2013). Additionally, Montalvo’s allegations that SLS and U.S. Bank inaccurately represented the status of default and “misrepresented the loan modification process” relate
to an alleged oral promise to provide a loan modification, so they also qualify as statements of
future action which cannot not form the basis of a negligent misrepresentation claim as a matter
of law. The allegations, therefore, cannot form the basis of a negligent misrepresentation action.
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Further accepting the pled facts as true, Montalvo’s claims regarding SLS and U.S.
Bank’s alleged oral misrepresentations about the loan modification do not support this cause of
action, as they may not be enforced under the statute-of-frauds doctrine. See Gamez v. Wells
Fargo Bank, N.A., No. 4:11–cv–919, 2013 WL 960464, at *5 (S.D.Tex. 2013); Owens v. BAC
Home Loans Servicing, L.P., No. H–11–2742, 2013 WL 1345209, at *5 (S.D.Tex. 2013); Carrington v. Bank of Am., N.A., No. CIV.A. H-12-1542, 2013 WL 265946, at *11 (S.D. Tex. Jan.
17, 2013)(all finding alleged oral false promises were unenforceable under the statute of frauds).
Montalvo failed to allege any representations made by SLS and U.S. Bank regarding
the loan modification outside of the oral statements. Accordingly, based upon the facts asserted,
Montalvo cannot assert a cause of action for negligent misrepresentation as a matter of law. SLS
and U.S. Bank’s Motion to Dismiss this cause of action may be granted on this basis as well.
Statute of Limitations
Pled in the alternative, Montalvo asserts SLS and U.S. Bank are prevented from proceeding on a foreclosure sale because the statute of limitations to bring an action for foreclosure has
run. Montalvo fails to allege the date or time she contends the statute of limitations began to run
or when it expired.
The statute of limitations bar is an affirmative defense to suit for the recovery of real
property under a lien or through foreclosure. See Deutsche Bank Nat. Tr. Co. v. Ra Surasak
Ketmayura, No. A-14-CV-00931, 2015 WL 3899050, at *10 (W.D. Tex. June 11, 2015), report
and recommendation approved sub nom. Deutsche Bank Nat’l Tr. Co. as Tr. v. Ketmayura, No.
A-14-CV-931, 2015 WL 13802506 (W.D. Tex. Oct. 9, 2015). As Montalvo correctly asserts,
“[a] person must bring suit for the recovery of real property under a real property lien or the
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foreclosure of a real property lien not later than four years after the day the cause of action accrues.” Tex. Civ. Prac. & Rem. Code Ann. § 16.035(a).
Montalvo’s assertion of statute of limitations bar under Section 16.035 does not apply in
this context, as this is not a suit for recovery of real property, and SLS and U.S. Bank do not assert a counterclaim for judicial foreclosure. Instead, Montalvo brings this action asserting causes
of action not related to suit for recovery of real property. In this context, any construed affirmative assertion of the statute of limitations bar as a claim or other preclusive action is inapposite,
and therefore, fails as a matter of law. Consequently, any construed affirmative assertion of the
statute of limitations bar shall be dismissed.
CONCLUSION
Based upon these findings and conclusions, the Court will not provide Montalvo an opportunity to amend the Petition. Controlling authority and Montalvo’s factual allegations on the
face of the Petition reveal she cannot state a plausible claim on any asserted cause of action.
Therefore, amendment would be futile.
For the reasons stated, SLS and U.S. Bank’s Motion to Dismiss for Failure to State a
Claim is GRANTED. All causes of action that are or may be asserted related to the facts supporting this action are DISMISSED WITH PREJUDICE. Any pending motions are dismissed
as moot. The Clerk of Court is directed to close the case. A separate final judgment will follow.
It is so ORDERED.
SIGNED this 30th day of July, 2022.
JASON PULLIAM
UNITED STATES DISTRICT JUDGE
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