Opinion
3:22-cv-00023-KC-LS
02-29-2024
MICHAEL C. SMART,[1]Plaintiff, v. EDCO PROPERTIES, INC., PRIME PRIME MORTGAGE LLC, PRIME ESCROW LLC, CIMARRON POINTE OWNER'S ASSOCIATION, INC., RAMSEY WAFAA ESPER RWE FAMILY TRUST, RAMSEY M. ESPER, an individual, and DOES 1-50, Inclusive. Defendants.
THIRD REPORT AND RECOMMENDATION OF THE MAGISTRATE JUDGE
LEON SCHYDLOWER UNITED STATES MAGISTRATE JUDGE
The District Court dismissed pro se plaintiff Michael C. Smart's (“Smart”) original complaint in which he sued his home loan lenders alleging racial discrimination over a disputed $1,513.83 loan service fee. The District Court then dismissed Smart's amended complaint alleging fraud and that the defendants did not correctly credit Smart's mortgage payments because he filed a state racial discrimination lawsuit against them. In his “final Amended Complaint,” which Smart styles his “Second Amendment (sic) Complaint,”Smart adds an Americans with Disability Act (“ADA”) claim to the fraud and retaliation claims alleged in his dismissed amended complaint.
Doc. No. 49, at 1.
Id.
1. Facts.
Smart's second amended complaint alleges that in 2015 he “executed a Promissory Note and Deed of Trust for the principal amount of $76,400 from Defendant Esper through Defendant RWE Family Trust.. .[and] [t]he holder of the promissory note is Michael Zimprich, Trustee for the Lender.” On March 23, 2021, Smart paid $4,094.62 to cure his mortgage default and avoid foreclosure.Thereafter, on March 27, 2021, Smart filed a complaint against “Defendant Esper and Defendants” with Texas state mortgage regulators alleging racial discrimination in the processing of his mortgage payments. On some unspecified date Plaintiff also complained to the state mortgage regulators that the payment he made to cure his mortgage default apparently did not extinguish a $1,513.83 loan service fee.On May 11, 2021, Smart filed a racial discrimination lawsuit in state court alleging that “Defendant Esper and Defendant” issued “default notices” to Smart because he is black when they did not issue such notices to “180 + white people clients.”Smart alleges that after he filed his lawsuit the defendants began to apply Smart's mortgage payments to the $1,513.83 mortgage fee, or “pocket[ed] [the] money,” instead of applying the payments to the mortgage principal.
Doc. No. 49, at 3-4, ¶ 14.
Id. at 5, ¶ 23.
Id. at 6, ¶ 24.
Id. at 6, ¶ 25.
Id. at 7, ¶ 28.
Id. at 7-8, ¶ 29.
2. The Law.
All defendants move to dismiss Smart's amended complaint for failure to state a claim under Rule 12(b)(6). A plaintiff must plead “enough facts to state a claim to relief that is plausible on its face” to defeat a Rule 12(b)(6) motion.A claim satisfies the plausibility test “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. 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.”While a complaint need not contain detailed factual allegations, it must set forth “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”In reviewing a Rule 12(b)(6) motion, the court must accept all well-pleaded facts in the complaint as true and view them in the light most favorable to the plaintiff.
Doc. No. 53.
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal citation omitted).
Twombly, 550 U.S. at 555.
Sonnier v. State Farm Mut. Auto. Ins. Co., 509 F.3d 673, 675 (5th Cir. 2007).
3. Smart's § 1981 retaliation claim fails.
Smart alleges in his § 1981retaliation claim that “Defendant Esper and Defendants” misapplied his monthly mortgage payments after Smart sued them in state court for racial discrimination. As a result, his mortgage principal remained unchanged notwithstanding his multiple monthly payments, presumably causing him financial loss. The elements of a § 1981 retaliation claim are (1) that the plaintiff engaged in activities protected by § 1981; (2) that an adverse action followed; and (3) a causal connection between the protected activities and the adverse action.
Body by Cook, Inc. v. State Farm Mut. Auto. Ins., 869 F.3d 381, 390 (5th Cir. 2017).
As to the first element, Smart's state court racial discrimination lawsuit is a protected activity.Regarding the second element, causing Smart financial loss by misapplying his mortgage payments and failing to credit his mortgage principal suffices as a § 1981 adverse action,at least at the Rule 12(b)(6) stage. To satisfy the third element, a causal connection between his state lawsuit and the misapplication of his mortgage payments, Smart alleges only that “Defendant Esper and Defendants” applied his monthly mortgage payments to the disputed $1,513.83 disputed mortgage fee, instead of the mortgage principal, “in retaliation for the plaintiff racial and ADA discrimination complaining to the [state mortgage regulators]” and because of his state lawsuit.However, he pleads no factual basis for this assertion whatsoever.
See id. (“assuming” that the filing of a racial discrimination lawsuit is a protected activity in a Section 1981 retaliation lawsuit).
See id. (“assuming” that the failure to make the plaintiffs' auto body shop a preferred provider for an insurance company was an adverse action in a Section 1981 retaliation lawsuit).
Doc. No. 49, at 10, ¶ 35.
Smart's § 1981 retaliation claim fails because his conclusory assertion and subjective belief that the defendants allegedly misapplied his mortgage payments in retaliation for Smart filing the state lawsuit, devoid of any factual allegations whatsoever, simply does not suffice to state a viable claim. With no facts and only a bare conclusory assertion about causation, Defendants' motion to dismiss Smart's § 1981 claim should be granted.
4. Smart's ADA Retaliation Claim Fails.
Smart's ADA claim under 42 U.S.C. § 12203 is an exact reiteration of his § 1981 retaliation claim.“The ADA prohibits discrimination on the basis of physical or mental disability by public or private employers, see generally § 12112; entities who administer public service benefits or programs, see generally § 12132; and entities who own, lease, or operate places of public accommodation, see generally § 12182.”Defendants, private home mortgage lenders, do not fall within the statute's ambit.Moreover, Smart makes the same conclusory assertion that “Defendant Esper and Defendants” applied his monthly mortgage payments to the disputed $1,513.83 disputed mortgage fee, instead of the mortgage principal, “in retaliation for the plaintiff racial and ADA discrimination complaining to the [state mortgage regulators]” and because of his state lawsuit.Again, with no facts and only a bare conclusory assertion about causation, Smart fails to state a claim and Defendants' motion to dismiss the ADA retaliation claim should be granted.
Doc. No. 49, at 11-13.
Saragusa v. Countrywide, 2016 U.S. Dist. LEXIS 34544,*17, 2016 WL 1059004, (E.D. La. Mar. 17, 2017), aff'd, 707 Fed.Appx. 797, 797 (5th Cir. 2017) (“[f]inding no error” in “the dismissal of various claims arising out of a home mortgage loan and the denial of [a] Rule 60(b) motion for relief from judgment”).
See id.
Doc. No. 49, at 12-13, ¶ 41.
5. Smart's state fraud claim fails.
Smart alleges in his fraud claim that defendant Esper made numerous misrepresentations to Texas state mortgage regulators in two letters that Smart attached to his second amended complaint. The letters, both dated in April 2021, contain Esper's explanations to the regulators about his dealings with Smart and were apparently generated after the regulators made inquiries to Esper about Smart's complaints.
Doc. Nos. 49-1 and 49-2.
Texas fraud claims require a plaintiff to show (1) a material misrepresentation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury.Fraud claims can be based on misrepresentations to third parties if the defendant makes the misrepresentation with the intent or knowledge the plaintiff will learn of it, with the intent to deceive the plaintiff, if in fact the plaintiff was so deceived to his injury.
Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 337 (Tex. 2011).
See Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 578 (Tex. 2001).
Smart explains in his second amended complaint that the state mortgage regulator, not Smart, relied on the alleged misrepresentations.Given Smart's failure to allege that he relied on or was deceived by any alleged misrepresentation,and given his failure to allege that a misrepresentation on which he personally relied injured or damaged him, Smart's fraud claim fails and should be dismissed.
Doc. No. 49, at 16 (“5. The [state mortgage regulators] relied upon Defendant Esper false statement.”).
Bohnsack v. Varco, L.P., 668 F.3d 262, 274 (5th Cir. 2012) ("[F]raud does not exist unless the defendant's representations induced the plaintiff to take a particular course of action. It is not necessary that the representations were the sole inducement, but the representations relied upon must have been a material factor in inducing the plaintiff's action.").
6. Leave to Amend.
Ordinarily, a pro se plaintiff should be granted leave to amend his complaint unless he has already pled his “best case.”Smart's second amended complaint is the third complaint that the court has analyzed, and this is the Magistrate Judge's Third Report and Recommendation. Smart has been given ample opportunity to plead his best case. Accordingly, I recommend that no further leave to amend be granted.
See Brewster v. Dretke, 587 F.3d 764, 767-768 (5th Cir. 2009).
Recommendations.
I recommend that the defendants' motion to dismiss [Doc. No. 53] Smart's second amended complaintbe GRANTED for failure to state a claim as to all claims. I further recommend that all remaining motions be DENIED AS MOOT.
Doc. No. 49.
SO RECOMMENDED.
NOTICE
THE PARTIES HAVE FOURTEEN DAYS FROM SERVICE OF THIS REPORT AND RECOMMENDATION TO FILE WRITTEN OBJECTIONS. 28 U.S.C. § 636(b)(1)(C); FED. R. CIV. P. 72(b). FAILURE TO FILE TIMELY OBJECTIONS MAY PRECLUDE APPELLATE REVIEW OF FACTUAL FINDINGS OR LEGAL CONCLUSIONS, EXCEPT FOR PLAIN ERROR. ORTIZ V. CITY OF SAN ANTONIO FIRE DEP'T, 806 F.3D 822, 825 (5TH CIR. 2015).