Summary
holding Plaintiff had no standing to challenge the assignment of the Note or the Deed of Trust because she was not a party to the assignments
Summary of this case from Draehn v. Wilmington Tr. Nat'l Ass'nOpinion
CIVIL ACTION NO. W-10-CA-285
02-24-2011
SHARON M. ESKRIDGE, Plaintiffs, v. FEDERAL HOME LOAN MORTGAGE CORPORATION and BAC HOME LOANS SERVICING, INC., Defendants.
ORDER
This removal action arises out of Plaintiff's allegation that Defendants wrongfully foreclosed on her property. She asserts claims based upon breach of contract, anticipatory breach of contract, negligent misrepresentation/gross negligence, and the common law tort of unreasonable collection efforts, as well as violations of the Texas Consumer Credit Code/Debt Collection Practices Act. She additionally seeks suit to quiet title and trespass to try title. Plaintiff requests monetary damages, an accounting and a declaratory judgment.
After removal, Defendants moved to dismiss Plaintiff's or, alternatively, a motion for more definite statement. The Court allowed Plaintiff to file an amended complaint in order to address the deficiencies noted in Defendant's motion. After her first amended complaint was filed, Defendants have now filed a partial motion to dismiss. Having reviewed Defendants' motion, Plaintiff's response, the pleadings and applicable legal authority, the Court is persuaded the motion is meritorious and should be granted.
I. BACKGROUND
Plaintiff alleges the following in her Amended Complaint:
Plaintiff and her ex-husband contracted with the Bank of Blue Valley ("Blue Valley") to obtain a mortgage on property they were purchasing in Buffalo, Texas. They executed a note payable to Blue Valley, which was secured by a Deed of Trust. The Deed of Trust named Mortgage Electronic Registration Systems, Inc. ("MERS") as the entity to service the Note. Although the Note itself does not mention MERS, it does provide that Blue Valley had the authority to transfer the Note. On August 1, 2006, Blue Valley assigned the servicing rights of the Note to BAC Home Loans Servicing, LP ("BAC"), formerly known as Countrywide Home Loans, Inc., and MERS assigned the Deed of Trust to BAC. The Note and Deed of Trust were eventually transferred to the Federal Home Loan Mortgage Corporation ("Freddie Mac").
Plaintiff and her husband divorced in 2007, and Plaintiff was awarded sole ownership of the property. Plaintiff notified BAC and provided BAC with a copy of the divorce decree. Plaintiff then filed for Chapter 11 bankruptcy, which was converted to Chapter 7 at the end of 2009. Plaintiff contacted BAC to ascertain the amount she owed in order to get her mortgage up-to-date. She was told to send $4,500, which she did in December of 2009. As she was not receiving monthly statements, Plaintiff contacted BAC in January 2010 to find out the amount of her January payment. She was informed that she only needed to send a payment of $900 as BAC's records showed Plaintiff to have money in a suspense account. Plaintiff sent the required amount, but still failed to receive monthly statements. She contacted BAC each month to find out how much she owed, and sent the amounts in order to keep her account current. The next two payments Plaintiff sent to BAC cleared Plaintiff's bank.
Toward the end of April 2010, Plaintiff discovered that her home was posted for foreclosure at the county clerk's office. She was also notified by her ex-husband that BAC had returned her April payment addressed to him at his post office box, along with a notice that BAC refused her payment because the payment was not made with "Certified Funds" as per the reinstatement policy. Plaintiff believed she had reinstated her loan by paying $4,500 in December. Plaintiff contacted BAC and was told that her mortgage account was in default. Plaintiff explained that she had been making her regular monthly payments since her reinstatement in December 2009 and that BAC had cashed her checks, until April 27, 2010. She was told to keep sending her payments and that BAC had canceled the foreclosure for May. She was also told that BAC would determine the amount Plaintiff needed to pay to bring her mortgage current and would send her a letter with an explanation of the amount owed.
Plaintiff sent in two payments in May 2010, but both payments were returned to her ex-husband. Her ex-husband did not inform her until July that both payments had been returned. After her second payment was mailed, Plaintiff received a letter from BAC which offered her an opportunity to apply for a modification of the mortgage loan. The letter gave Plaintiff until June 17, 2010 to submit the required financial information. The letter stated BAC would not foreclose on the property until a determination had been made regarding Plaintiff's eligibility.
When she failed to receive the reinstatement quote from BAC, Plaintiff contacted BAC again in order to find out how much she owed. She was instructed to make two payments - one for $7,400 on May 29, 2010 and another for$2,432.99 on May 31, 2010 -- all via Western Union Quick Collect, which would cure her default, reinstate the mortgage, and stop the foreclosure. Plaintiff did as instructed. On June 1, 2010, however, BAC foreclosed on Plaintiff's property and "struck off" the property to Freddie Mac for $141,121.62, an amount significantly less than the market value of the property. Plaintiff asserts that she never received a notice of default and right to cure, or a notice of trustee's sale. Freddie Mac is now attempting to evict Plaintiff from the property.
II. MOTION TO DISMISS
When considering a dismissal for failure to state a claim upon which relief may be granted, the Court accepts as true "all well-pleaded facts" and views them in the light most favorable to the plaintiff. See Martin K. Eby Constr. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004). However, a plaintiff must allege specific facts, not conclusory allegations. Elliott v. Foufas, 867 F.2d 877, 881 (5th Cir.1989). Conclusory allegations, as well as unwarranted deductions of fact, are not admitted as true. Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir.1992). To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a plaintiff must plead "enough facts to state a claim for relief that is plausible on its face." Bell Atlantic Corp v. Twombly, 550 U.S. 544, 570 (2007) (emphasis added); see also In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007). "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, ___ U.S. ___, 129 S.Ct. 1937, 1949 (2009).
The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of 'entitlement to relief.'"Id., quoting Twombly.
"Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." In re Katrina, 495 F.3d at 205 (quoting Twombly). However, the Court need not accept as true legal conclusions. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements do not suffice." Ashcroft v. Iqbal, at 1949. Only those complaints which state a plausible claim for relief survive a motion to dismiss. Id. at 1950. In making this determination, the reviewing court must "draw on its judicial experience and common sense." Id. at 1950.
III. DISCUSSION
As in response to Defendants' first Motion to Dismiss, Plaintiff requests additional time to re-plead if the Court determines her theories of recovery are not properly pled. However, Plaintiff was given an opportunity to correct any pleading problems when the Court gave her the opportunity to file a First Amended Complaint. The deficiencies outlined in Defendants' second motion to dismiss are identical to the deficiencies previously pointed out in Plaintiff's original petition. Filing an additional amended complaint would obviously not correct the problem. As a result, Plaintiff's request for leave to amend is DENIED.
A. Negligent Misrepresentation. The elements of a cause of action for negligent misrepresentation are: "(1) the representation is made by a defendant in the course of his business, or in a transaction in which he has a pecuniary interest; (2) the defendant supplies 'false information' for the guidance of others in their business; (3) the defendant did not exercise reasonable care or competence in obtaining or communicating the information; and (4) the plaintiff suffers pecuniary loss by justifiably relying on the representation." Federal Land Bank Ass'n v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991). The type of misrepresentation contemplated is "a statement of existing fact, not a promise of future conduct." New York Life Ins. Co. v. Miller, 114 S.W.2d 114, 124 (Tex. App.-Austin 2003, no pet.). "A promise to do or refrain from doing an act in the future is not actionable because it does not concern an existing fact." BCY Water Supply Corp. v. Residential Inv., Inc., 170 S.W.3d 596, 603 (Tex. App.-Tyler 2005, no pet.).
Defendant argues that Plaintiff's amended complaint is insufficient to state a claim because the misrepresentation she identifies is of future conduct - that BAC would not foreclose on the Property if she complied with certain requirements. Plaintiff responds that BAC made numerous misrepresentations of existing fact, such as the amount she had to pay to bring her account current, the amounts she needed to pay to satisfy her monthly payments, and that a May foreclosure was cancelled. However, the only pecuniary loss that Plaintiff incurred as a result of any justifiable reliance was the foreclosure of the property itself. Accordingly, she has failed to state a claim for negligent misrepresentation.
Plaintiff's negligent misrepresentation claim is also unavailing due to the existence of a contract. Negligent misrepresentation is recognized "in lieu of a breach-of-contract claim, and is not usually available when a contract is in force between the parties." New York Life Ins. Co. v. Miller, 114 S.W.2d at 124. The ultimate issue is whether Defendants complied with the Note and Deed of Trust in foreclosing on Plaintiff's property.
B. Gross Negligence. A claim for gross negligence involves two components: "(1) viewed objectively from the actor's standpoint, the act or omission complained of must involve an extreme degree of risk, considering the probability and magnitude of the potential harm to others; and (2) the actor must have actual, subjective awareness of the risk involved, but nevertheless proceed in conscious indifference to the rights, safety, or welfare of others." Lee Lewis Const., Inc. v. Harrison, 70 S.W.3d 778, 785 (Tex. 2001). Gross negligence differs from ordinary negligence with respect to both components - "the defendant must be 'consciously indifferent' and his or her conduct must 'create an extreme degree of risk.' Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 21 (Tex. 1994). Plaintiff's amended complaint contains insufficient factual allegations to support a claim based upon gross negligence.
C. Common Law Unreasonable Collection Efforts. Unreasonable collection is an intentional tort that requires the Plaintiff to prove that the Defendants' actions amount "to a course of harassment that was willful, wanton, malicious, and intended to inflict mental anguish and bodily harm." EMC Mortg. Corp. V. Jones, 252 S.W.3d 857, 868 (Tex. App.-Dallas 2008 no pet.). There are no allegations in Plaintiff's complaint that would support a claim based upon unreasonable collection efforts.
D. Texas Fair Debt Collection Practices Act. Section 392.304(a)(1) of the Texas Finance Code prohibits a debt collector from using a "fraudulent, deceptive, or misleading representation that employs . . . any other false representation or deceptive means to collect a debt or obtain information concerning a consumer." Under § 392.001(3), a creditor is defined as "a party, other than a consumer, to a transaction or alleged transaction involving one or more consumers." This section also defines "debt collection" as "an action, conduct, or practice in collecting, or in soliciting for collection, consumer debts that are due or alleged to be due a creditor." Tex. Finance Code § 392.001(5). A "debt collector" is defined as "a person who directly or indirectly engages in debt collection and includes a person who sells or offers to sell forms represented to be a collection system, device, or scheme intended to be used to collect consumer debts." Tex. Finance Code § 392.001(6). A "third party debt collector" is given the definition found in 15 U.S.C. § 1692a(6) - "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another."
In light of the foregoing definitions, Plaintiff has failed to allege sufficient facts to establish that Defendants are "debt collectors" or "third party debt collectors." See Catherman v. First State Bank of Smithville, 796 S.W.2d 299 (Tex. App.-Austin 1990). Additionally, she has alleged no facts which would constitute the attempt to collect a debt. Taking advantage of available remedies, whether contractual or statutory, in order to collect a debt that is owed is not a violation of the DCPA unless the creditor resorts to using false representations or other deceptive means to collect the debt. In the present case, the "misrepresentations" Plaintiff identifies were not made in an attempt to collect a debt, but were made at the request of the Plaintiff in trying to correct the arrears in her mortgage.
E. Quiet Title and Trespass to Try Title. Trespass to try title suits are governed by Chapter 22 of the Texas Property Code. Such an action "is a procedure by which rival claims to title or right of possession may be adjudicated," Yoast v. Yoast, 649 S.W.2d 289, 292 (Tex. 1983), and a plaintiff "must recover on the strength of his own title." Rogers v. Ricane Enters., Inc., 884 S.W.2d 763, 768 (Tex. 1994). In order to prevail in a trespass to try title action, the plaintiff must prove title to the disputed property by: "(1) proving a regular chain of conveyances from the sovereign, (2) establishing superior title out of a common source, (3) proving title by limitations, or (4) proving title by prior possession coupled with proof that possession was not abandoned." Caress v. Lira, ___ S.W.3d ___, 2010 WL 3566940 *1 (Tex. App.-San Antonio 2010) (citing Martin v. Amerman, 133 S.W.3d 262, 265 (Tex. 2004)). Plaintiff has no claim in this regard because she does not have title to the property. Freddie Mac now has title to the property.
Plaintiff argues that she has superior title because the Note and Deed of Trust were "split," as MERS had no authority under the Note to transfer either the Note and/or the Deed of Trust. As a result, any transfer of the Note to BAC was void. However, Plaintiff has no standing to contest the various assignments as she was not a party to the assignments. Even if she has standing, her allegations are without merit because MERS was given the authority to transfer the documents in the Deed of Trust.
The Restatement (3d) of Property offers no support for Plaintiff's claims. As MERS is a beneficiary and nominee for both the originating lender and its successors and assigns by the express language in the Deed of Trust, the situation falls within an exception to the general rule that a party holding only the deed of trust cannot enforce the mortgage. See Comment e to the Restatement (3d) of Property (Mortgages) § 5.4. Section 5.4 additionally notes that a "transfer of an obligation secured by a mortgage also transfers the mortgage unless the parties to the transfer agree otherwise." Plaintiff makes no allegations that the parties in this case agreed otherwise.
Finally, while the Note may not specifically mention MERS, the Note and Deed of Trust must be read together in evaluating the terms. "The general rule is that separate documents executed at the same time, for the same purpose, and in the course of the same transaction are to be considered as one instrument, and are to be read and construed together." CA Partners v. Spears, 274 S.W.3d 51, 66 n.9 (Tex. App.-Houston [14 Dist.], 2008) (citing Jones v. Kelley, 614 S.W.2d 95, 98 (Tex. 1982). Here, the Note and the Deed were both executed on July 6, 2006, for the purpose of securing a loan for the purchase of the property. Thus, the Note and the Deed are construed together as a single instrument. See id.; see also The Cadle Co. v. Butler, 951 S.W.2d 901, 908-09 (Tex. App.-Corpus Christi 1997, no writ). Accordingly, Plaintiff has no basis for an action based upon trespass to try title or quiet title. In light of the foregoing, it is
ORDERED that Defendants' Partial Motion to Dismiss Plaintiff's First Amended Complaint is GRANTED. The only remaining claim is one for breach of contract in relation to the allegedly improper foreclosure.
SIGNED on this 24 day of February, 2011.
/s/_________
WALTER S. SMITH, JR.
UNITED STATES DISTRICT JUDGE