Opinion
22-CV-00181-DC-RCG
03-30-2023
REYNALDO RECIO, JR., Plaintiff, v. NEWREZ LLC d/b/a SHELLPOINT MORTGAGE SERVICING, Defendant.
REPORT AND RECOMMENDATION OF THE U.S. MAGISTRATE JUDGE
RONALD C. GRIFFIN, UNITED STATES MAGISTRATE JUDGE.
BEFORE THE COURT is Defendant NewRez LLC d/b/a Shellpoint Mortgage Servicing's (“Shellpoint”) Motion to Dismiss (Doc. 8). Plaintiff did not file a response. This case is before the Court through a Standing Order pursuant to 28 U.S.C. § 636 and Appendix C of the Local Court Rules for the Assignment of Duties to United States Magistrate Judges. After due consideration, the Court RECOMMENDS that Shellpoint's Motion to Dismiss be GRANTED. (Doc. 8).
All page number citations are to CM/ECF generated pagination unless otherwise noted.
I. Background
On July 29, 2022, Plaintiff Reynaldo Recio, Jr. (“Recio”) filed his Original Complaint against Shellpoint in the 244th District Court of Ector County, Texas in the case styled Reynaldo Recio, Jr. v. Newrez LLC, d/b/a Shellpoint Mortgage Servicing and assigned case number C-22-07-0850-cv. (Doc. 1 at 1). On August 23, 2022, Shellpoint removed the case to federal court on the basis of diversity jurisdiction under 28 U.S.C. §§ 1331, 1332, and 1441. Id.
In his Complaint, Recio asserts causes of action for: (1) negligence/negligent misrepresentation; (2) violation of the Texas Property Code § 51.002; (3) breach of contract; and he also seeks injunctive relief and attorneys' fees. (Doc. 1-1 at 4-11). Recio alleges he entered into a written contract with Shellpoint in September 2005 “for the purchase of a house and lot located at 3744 Dover Drive, Odessa, TX 79762.” (Doc. 1-1 at 4). The original purchase price was $538,365.00. Id. Though not directly addressed in Recio's Complaint, it appears that at some point during the life of the loan Recio began to have difficulties making payments and attempted to obtain a loan modification. (See id. at 5) (“Defendant avoided and evaded Plaintiff inquiries about an appeal of their modification application. Subsequently, without offering more than one loan workout alternative or replying to Plaintiff inquiries regarding an appeal to denial of a HAMP modification, the Defendant, forwarded a notice posting foreclosure sale of Plaintiff's property for August 2, 2022.”).
In paragraph eight of his Complaint, Plaintiff states he is alleging a violation of RESPA, 12 U.S.C. §§ 1024, et seq., however, that is the sole time Plaintiff mentions RESPA, as it does not appear as a heading like Plaintiff's other causes of action. (Doc. 1-1 at 3-4). Shellpoint also points this out in its Motion to Dismiss, but still includes argument as to why, if this were construed as a claim by Plaintiff, dismissal of it is proper. (Doc. 8 at 3, 12).
On October 14, 2022, Shellpoint filed the instant Motion to Dismiss seeking dismissal of Recio's Complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. As noted above, Recio failed to respond to Shellpoint's Motion to Dismiss. Pursuant to Local Rule CV-7(d)(2), “[i]f there is no response filed within the time period prescribed by this rule, the court may grant the motion as unopposed.” Local Rule CV-7(d)(2) sets the response time for a non-discovery or case management motion at 14 days. Nonetheless, the Court will address the merits of the Motion as “dismissing a case other than on its merits is disfavored.” Chavez v. Freedom Mortgage Corp., 1:20-cv-522-LY, 2021 WL 327703, at *2 (W.D. Tex. Feb. 1, 2021). Consequently, this matter is ready for disposition.
II. Standard of Review
Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of a complaint for “failure to state a claim upon which relief can be granted.” When considering a Rule 12(b)(6) motion to dismiss, a court must “accept the complaint's well-pleaded facts as true and view them in the light most favorable to the plaintiff.” Johnson v. Johnson, 385 F.3d 503, 529 (5th Cir. 2004). Federal Rule of Civil Procedure 8 requires that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Thus, to survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (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, 556 U.S. 662, 678 (2009). A complaint need not include detailed facts to survive a Rule 12(b)(6) motion to dismiss. See Twombly, 550 U.S. at 555-56. However, a plaintiff must do more than recite the formulaic elements of a cause of action. See id. at 556-57. Additionally, the Court is not bound to accept as true a legal conclusion couched as a factual allegation in the complaint. See Iqbal, 556 U.S. at 678. Thus, although all reasonable inferences will be resolved in favor of the plaintiff, the plaintiff must plead “specific facts, not mere conclusory allegations.” Tuchman v. DSC Commc'ns Corp., 14 F.3d 1061, 1067 (5th Cir. 1994).
III. Discussion
A. Recio's Negligence Claim
Recio alleges Shellpoint “had a duty to Plaintiff to provide notice of any transfer, assignment, or sale of the note, to properly manage the loan and the escrow amount, to comply with the notice provisions contained in the deed of trust before accelerating the note and foreclosing on the property, and, when applying for a mortgage modification, to protect their rights and not mislead them.” (Doc. 1-1 at 4). Recio asserts Shellpoint's duty “can be found in the regulation of the Department of Housing and Urban Development (‘HUD') which is incorporated with the Deed of Trust,” and that “Defendant breached the duties it owed to Plaintiff and as a result of this breach Plaintiff was damaged.” Id.
Shellpoint argues dismissal of Recio's negligence claim is appropriate because (1) Recio did not plead facts adequately alleging negligence; (2) Shellpoint owes no duties to Recio; and (3) the economic loss rule under Texas law bars this claim. (Doc. 8 at 4).
“Under Texas law, the elements of a negligence claim are (1) a legal duty on the part of the defendant; (2) breach of that duty; and (3) damages proximately resulting from that breach.” Lane v. Halliburton, 529 F.3d 548, 565 (5th Cir. 2008) (quoting Sport Supply Grp., Inc. v. Columbia Cas. Co., 335 F.3d 453, 466 (5th Cir.2003)). “Duty is the threshold inquiry of any negligence case.” Ford v. Cimarron Ins. Co., Inc., 230 F.3d 828, 830 (5th Cir. 2000) (citing Greater Hous. Transp. Co. v. Phillips, 801 S.W.2d 523, 525 (Tex. 1990)). Moreover, in Texas, “[t]he existence of a duty is a question of law.” Nabors Drilling, U.S.A., Inc. v. Escoto, 288 S.W.3d 401, 404 (Tex. 2009) (citations omitted). Thus, to state a claim for negligence Recio must plead that Shellpoint owed him a valid duty under Texas law.
Recio asserts duties supplied by the mortgage-mortgagee relationship he had with Shellpoint. (Doc. 1-1 at 4). However, “[n]ot only does no special relationship exist between a mortgagor and a mortgagee, but ‘courts have held that there is no duty of care between them that would give rise to a negligence claim.' ” Thompson v. Bank of Am., N.A., 13 F.Supp.3d 636, 652 (N.D. Tex. 2014) (quoting Holloway v. Wells Fargo Bank, N.A., No. 3:12-CV-2184-G (BH), 2013 WL 1187156, at *21 (N.D. Tex. Feb. 26, 2013); and citing Milton v. U.S. Bank Nat'l Ass'n, 508 Fed.Appx. 326, 329 (5th Cir. 2013)).
Additionally, Recio states, “The duty of the Defendant can be found in the regulation of the Department of Housing and Urban Development (“HUD”) which is incorporated with the Deed of Trust.” (Doc. 1-1 at 4). This also does not plead a valid duty Shellpoint owed Recio because, as Shellpoint points out, “it is well established that a mortgagor has no private right of action for a mortgagee's failure to comply with HUD regulations.” Chavez v. Freedom Mortg. Corp., 1:20-cv-522-LY, 2021 WL 327703, at *3 (W.D. Tex. Feb. 1, 2021), report and recommendation adopted, 2021 WL 8053490 (W.D. Tex. Feb. 26, 2021) (citing Klein v. Wells Fargo Bank, N.A., No. A-14-CA-861-SS, 2014 WL 5685113, at *5 (W.D. Tex. Nov. 4, 2014) (“[HUD] regulations govern relations between the mortgagee and government, and give the mortgagor no claim for duty owed or for the failure to follow said regulations.”); Bassie v. Bank of Am., N.A., Civil Action No. 4:12-CV-00891, 2012 WL 6530482, at *3 (S.D. Tex. Dec. 13, 2012) (“[P]laintiffs' breach of contract claim based on Bank of America's alleged failure to comply with regulations of [HUD] must be dismissed because those regulations, too, do not provide for a private cause of action.”)); see also Gay v. Quicken Loans, LLC, MO:20-CV-00220-DC, 2021 WL 7184968, at *2 (W.D. Tex. Nov. 24, 2021) (J., Counts) (citing Roberts v. Cameron-Brown Co., 556 F.2d 356, 357 (5th Cir. 1977)). Thus, as Recio has not pleaded a duty owed to him by Shellpoint as a matter of law, his negligence claim should be dismissed.
Further, the Court is convinced that the economic loss rule also precludes Recio's negligence claim. Under Texas law, “[t]he rule generally precludes recovery in tort for economic losses resulting from the failure of a party to perform under a contract.” Lamar Homes, Inc. MidContinent Cas. Co., 242 S.W.3d 1, 12 (Tex. 2007) (citing Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494-95 (Tex. 1991)). The focus of the economic loss rule is “on determining whether the injury is to the subject of the contract itself.” Id. Effectively, the rule operates to “restrict[] contracting parties to contractual remedies for those economic losses associated with the relationship, even when the breach might reasonably be viewed as a consequence of a contracting party's negligence.” Id. at 12-13 (citing Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex. 1986)). Thus, a party states a tort claim when the duty allegedly breached is independent of the contractual undertaking and the harm suffered is not merely the economic loss of a contractual benefit. Chapman Custom Homes, Inc. v. Dall. Plumbing Co., 445 S.W.3d 716, 718 (Tex. 2014) (citing LAN/STV v. Martin K. Eby Constr. Co., 435 S.W.3d 234, 242-43 (Tex. 2014)). “In determining whether a tort claim is merely ‘a repackaged breach of contract claim,' district courts look at whether the claim alleges a breach of duty created by contract rather than one imposed by law and whether the injury is only the economic loss to the subject contract itself.” Gay, 2021 WL 7184968, at *2 (citing Johnson v. Wells Fargo Bank, NA, 999 F.Supp.2d 919, 930-31 (N.D. Tex. 2014)).
Here, Shellpoint argues that “Recio's negligence claim flows solely from obligations created by the note and deed of trust,” and “[t]he only harm he pleads is economic injury which is the subject of the loan agreements-‘additional charges to his loan balance and escrow account.' ” (Doc. 8 at 7) (quoting Doc. 1-1 at 5). The Court agrees, Recio did not respond to the instant Motion, and his Complaint does not allege a duty that arises outside the deed of trust. Accordingly, the Court holds the economic loss rule bars Recio's negligence claim.
B. Recio's Negligent Misrepresentation Claim
It is unclear whether Recio is also pursuing a negligent misrepresentation claim, as under the “Negligence” heading Recio also states “[a] Lender can be found liable to its customers for negligent misrepresentation in the servicing of the Loan.... Defendant failed to use reasonable care in communicating to Plaintiff the options of loss mitigation. Plaintiff relied on the representations to his detriment.” (Doc. 1-1 at 4). Further, “Defendant's mishandling of Plaintiff's loss mitigation constitutes a negligent misrepresentation.” Id. at 5. Therefore, the Court will address negligent misrepresentation as if it is a claim Recio asserts.
As Shellpoint cites, the Chavez Court found almost identical pleadings for negligent misrepresentation to be barred by the economic loss rule. (Doc. 8 at 8); Chavez, 2021 WL 327703, at *3 (“Here, [Plaintiff's claim that [Defendant] made misrepresentations and failed to communicate his options of loss mitigation merely repackages his breach of contract claim as a negligent misrepresentation claim. [Plaintiff]'s negligent misrepresentation claim rests on his allegation that [Defendant] breached their Loan Agreement, and the alleged loss complained of is the subject matter of that Loan Agreement. Accordingly, his claim is barred by the economic loss rule.”). This Court has also found allegations in a similar complaint barred by the economic loss doctrine. See Gay, 2021 WL 7184968, at *2 (“Plaintiff did not respond to the instant Motion, and his Original Petition does not allege a duty that arises outside the deed of trust. Accordingly, the Court holds that the economic loss rule bars plaintiff's negligent misrepresentation claim.”) (citing Del Rio Trejo v. Bank of Am., N.A., No. 3:19-CV-01406-L, 2020 WL 982004, at *2 (N.D. Tex. Jan. 21, 2020), report and recommendation adopted as modified, 2020 WL 980951 (N.D. Tex. Feb. 28, 2020)). Based on a reading of Recio's Complaint the same is true here, additionally, the Court has already found Recio's negligence claim is barred by the economic loss doctrine. Therefore, the economic loss rule bars Recio's negligent misrepresentation claim as well.
C. Recio's Claim for Violation of Texas Property Code § 51.002
“Texas Property Code § 51.002 governs a foreclosure sale of real property pursuant to a deed of trust and provides specific requirements as to the time and place a foreclosure sale must be held, as well as to the notices that must be given before the sale.” Chavez, 2021 WL 327703, at *3 (citing TEX. PROP. CODE § 51.002(b)). In his Complaint, Recio asserts “Plaintiff's mortgage loan including Deed of Trust set out terms of default and acceleration in its covenants and as such when he received the notice of accelerations, he in fact did raise issues regarding his loan and payment history and pending loan workout alternatives as such until the disputes were resolved any notice to post his property for sale would be premature.” (Doc. 1-1 at 6). Recio further alleges that “if Defendant is allowed to proceed with the finalization of the foreclosure proceedings of Plaintiff's property, Plaintiff will suffer immediate and irreparable injury.” Id.
Shellpoint argues Recio's § 51.002 claim should be dismissed because his pleading is insufficient under Rule 12(b)(6) and because § 51.002 does not provide for an independent cause of action. (Doc. 8 at 9). As this Court has previously held, “Plaintiff's Texas Property Code claim fails as a matter of law because the Texas Property Code does not create a private cause of action or a remedy for a violation of § 51.002.” Gay, 2021 WL 7184968, at *3 (citing Del Rio Trejo, 2020 WL 982004, at *3; Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 569 (Tex. 2001)). Thus, Recio's Texas Property Code claim fails as a matter of law because the Texas Property Code does not create a private cause of action or a remedy for a violation of § 51.002.
D. Recio's Breach of Contract Claim
As to Recio's breach of contract claim, he alleges Shellpoint failed to comply with HUD regulations that must be followed prior to accelerating and foreclosing on a loan. (Doc. 1-1 at 7). Specifically, Recio claims Shellpoint breached “paragraphs 15, 16, 19, 20, and 22.” Id. Shellpoint allegedly breached those paragraphs by failing “to performed these actions and others under the Deed of Trust and Note,” and failing “to follow the foregoing steps and thus breached the contract with Plaintiff.” Id.
“Under Texas law, the elements of a breach of contract claim 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 to the plaintiff as a result of the defendant's breach.” Gay, 2021 WL 7184968, at *3 (citing Williams v. Wells Fargo Bank, N.A., 884 F.3d 239, 244 (5th Cir. 2018) (per curiam)). Here, Shellpoint argues dismissal is appropriate because “Recio does not allege he performed or tendered performance under the loan agreements, for example, by alleging the loan was not in default or he tendered the payments to cure any default. His failure to do so precludes his claim.” (Doc. 8 at 10) (internal citation omitted) (citing Gay, 2021 WL 7184968, at *4; Del Rio Trejo, 2020 WL 982004, at *4). Here, as in Gay, Recio fails to allege his performance or tendered performance. (See Doc. 1-1 at 6-7). Accordingly, Recio fails to state a claim for breach of contract and dismissal is appropriate.
E. Recio's RESPA Claim
As stated earlier in a footnote, Recio's Complaint references bringing a claim for “violation of RESPA, 12 USC Sec. 1024, et seq.” in paragraph eight. (Doc. 1-1 at 3-4). However, the Complaint never references RESPA again. (See generally Doc. 1-1). “To recover on a RESPA claim, a claimant must show that actual damages resulted from a RESPA violation.” Chavez v. Freedom Mortg. Corp., 1:20-cv-522-LY, 2021 WL 327703, at *3 (W.D. Tex. Feb. 1, 2021), report and recommendation adopted, 2021 WL 8053490 (W.D. Tex. Feb. 26, 2021) (citing 12 U.S.C. § 2605(e), (f); Steele v. Quantum Servicing Corp., Civil Action No. 3:12-CV-2897-L, 2013 WL 3196544, at *6 (N.D. Tex. June 25, 2013)). Whilst examining a similar complaint, the Chavez Court stated “[w]hile [plaintiff's] Original Petition references RESPA generally, it fails to identify any specific provision of RESPA allegedly violated by Freedom. Further, [plaintiff] fails to allege any actual damages resulting from a RESPA violation. As such, [plaintiff's] RESPA claim must be dismissed.” Id. The exact same is true here, as Shellpoint argues, Plaintiff fails to state a claim for relief under RESPA and dismissal under Rule 12(b)(6) is appropriate.
F. Recio's Claims for Injunctive Relief, Declaratory Relief, and Attorney's Fees
Finally, Shellpoint moves for dismissal of Recio's declaratory and injunctive relief claims, as well as his claim for attorney's fees. (Doc. 8 at 12). Shellpoint argues dismissal is proper because “These claims should be dismissed with their underlying causes of action.” Id. (citing Johnson, 999 F.Supp.2d at 935; Ainsworth v. Wells Fargo Home Mortg., Inc., No. 3:14-CV-1942-M, 2014 WL 7273945, at *12 (N.D. Tex. Dec. 22, 2014); Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 484 (Tex. 2019)). The Court agrees, because “[c]laims for injunctive relief and declaratory relief are remedial in nature, and are therefore dependent on the plaintiff's assertion of a viable cause of action.” Chavez, 2021 WL 327703, at *4 (citing Collin Cty. v. Homeowners Ass'n for Values Essential to Neighborhoods, 915 F.2d 167, 170-71 (5th Cir. 1990); Ehninger v. PNC Bank N.A., NO. 4:19-CV-104-A, 2019 WL 1746296, at *2 (N.D. Tex. Apr. 18, 2019);Mbache v. Wilmington Trust, Nat'lAss'n, CIVIL ACTION NO. 4:15-CV-01846, 2016 WL 1162200, at *4 n.5 (S.D. Tex. Mar. 24, 2016)). Because Recio failed to plead any viable causes of action in this case, his requests for declaratory relief, injunctive relief, and attorney's fees are unavailable. Consequently, the Court finds dismissal of those claims appropriate.
IV. Recommendation
For the foregoing reasons, the Court RECOMMENDS that Defendant NewRez LLC d/b/a Shellpoint Mortgage Servicing's Motion to Dismiss be GRANTED and Reynaldo Recio, Jr.'s claims be DISMISSED WITHOUT PREJUDICE. (Doc. 8).
Instructions for Service and Notice of Right to Appeal/Object
In the event that a party has not been served by the Clerk with this Report and Recommendation electronically, pursuant to the CM/ECF procedures of this District, the Clerk is ORDERED to mail such party a copy of this Report and Recommendation by certified mail. Pursuant to 28 U.S.C. § 636(b)(1), any party who desires to object to this report must serve and file written objections within fourteen (14) days after being served with a copy. A party filing objections must specifically identify those findings, conclusions, or recommendations to which objections are being made; the District Judge need not consider frivolous, conclusive, or general objections. Such party shall file the objections with the Clerk of the Court and serve the objections on all other parties. A party's failure to file such objections to the proposed findings, conclusions, and recommendations contained in this report shall bar the party from a de novo determination by the District Judge. Additionally, a party's failure to file written objections to the proposed findings, conclusions, and recommendations contained in this report within fourteen (14) days after being served with a copy shall bar that party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the District Judge. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1428-29 (5th Cir. 1996).