JOHN McBRYDE, District Judge.
Now before the court is the motion of defendants, BAC Home Loans Servicing, LP ("BAC"), and Federal National Mortgage Association ("Fannie Mae"), to dismiss in part the pleading of plaintiffs, Neil Gillespie and Ona Gillespie, for failure to state a claim upon which relief may be granted.
Plaintiffs initiated this removed action by a pleading filed in the District Court of Tarrant County, 348th Judicial District, on October 19, 2011, against defendants, in case No. 348-252648-11.
On December 22, 2011, plaintiffs filed a second amended complaint ("Complaint") to clarify their allegations. In summary, plaintiffs made the following allegations in their Complaint:
On September 14, 2007, plaintiffs executed a note in the principal amount of $194,750.00, which was secured by a deed of trust to their home at 2412 Forest Park Circle, Mansfield, Texas 76063. Compl. at 3-4. Mortgage Electronic Registration Systems, Inc. ("MERS"), was named as beneficiary and nominee for American Sterling Bank.
Plaintiffs made all of their regular payments on their loan through 2009.
At some point, plaintiffs received a "trial modification offer" which they "accepted . . . by making payments pursuant to the terms of the contract."
When plaintiffs attempted to make their September 2010 payment, however, BAC declined the payment because the property had been "placed in foreclosure."
Once plaintiffs learned of the foreclosure sale, they continued to communicate "repeatedly" with BAC about their application to modify the loan, but were unable "to resolve the situation."
On August 27, 2010, "[a]n Appointment of Substitute Trustee was purported to be executed by an attorney-in-fact on behalf of Defendant BAC," and was "placed of record" on September 10, 2010, "as Instrument D210221683."
On September 21, 2010, MERS, as nominee, "executed" an assignment of the note and deed of trust to BAC; this assignment was placed in the Tarrant County records as "Instrument D21 0244633."
After the foreclosure sale, "Fannie Mae refused to rescind the foreclosure or to stop eviction proceedings," despite BAC's written request for rescission.
In their Complaint, plaintiffs asserted claims against defendants for "Fraudulent Lien Related Instrument," breach of contract, negligent misrepresentation, wrongful foreclosure, unreasonable collection efforts, and for violations of the Texas Finance Code ("Finance Code"), the Texas Deceptive Trade Practices Act ("DTPA"), and the Texas Property Code ("Property Code"). As relief, plaintiffs sought compensatory, exemplary, and statutory damages, attorney's fees and costs, injunctive relief allowing them to maintain possession and regain title to the property, and declaratory relief barring any foreclosure and eviction proceedings.
On January 5, 2012, defendants filed their second motion to dismiss plaintiffs' claims for: (1) violations of the Finance Code; (2) violations of the DTPA; (3) violation of the Property Code; (4) wrongful foreclosure; (5) negligent misrepresentation; and (6) unreasonable collection efforts. With respect to these claims, defendants argued that plaintiffs' allegations failed to state a plausible claim for relief. Defendants did not move to dismiss the breach of contract or "fraudulent lien" claims. Plaintiffs filed a response, and defendants filed a reply.
The court now considers the standard of pleading, and applies these standards to the Complaint. Rule 8(a) (2) of the Federal Rules of Civil Procedure provides, in a general way, the applicable standard of pleading. It requires that a complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. P. 8(a) (2), "in order to give the defendant fair notice of what the claim is and the grounds upon which it rests,"
Moreover, to survive a motion to dismiss for failure to state a claim, the facts pleaded must allow the court to infer that the plaintiffs' right to relief is plausible.
Proceeding only on the basis of the information before the court in plaintiffs' Complaint, the court finds that the allegations for most of the claims fall short of the pleading standards. With respect to most claims, the Complaint fails to meet the standard set forth in Rule 8(a) (2), as interpreted by the Supreme Court in
The court considers plaintiffs' theories of recovery in the following order: first, the claim for violations of Finance Code; second, the claim for violations of the DTPA; next, the claim for negligent misrepresentation; next, the claim for violations of Property Code; next, the claim for wrongful foreclosure; and finally, the claim for unreasonable collection efforts.
The court first turns to the claim for violations of the Finance Code. Plaintiffs alleged that BAC alone violated section 392.301(a) (3) of the Finance Code and that both BAC and Fannie Mae violated sections 392.301 (a) (8) and 392.304 (a) (8) of the Finance Code.
The court concludes that plaintiffs have not stated sufficient facts in support of a claim for a violation of section 392.301(a) (3) against BAC. As to sections 392.301(a) (8) and 392.304(a) (8), the court concludes that plaintiffs have stated sufficient facts for a claim against BAC, but not Fannie Mae. Thus, the only surviving Finance Code claims are the section 392.301(a) (8) and 392.304(a) (8) claims against BAC.
The court first considers plaintiffs' section 392.301(a) (3) claim as asserted solely against BAC. Section 392.301(a) (3) of the Finance Code states that a debt collector is prohibited from "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). Plaintiffs alleged that "BAC represented to third parties, through incorrect credit reporting, that the consumer . . . was willfully refusing to pay a nondisputed consumer debt . . . when the debt was in dispute." Compl. at 13, ¶ 47.
Other than these wholly conclusory allegations, however, there are no facts pleaded to support such a claim. Plaintiffs do not allege when such representations were made, nor do plaintiffs identify who these third parties were or which underlying debt was in dispute.
The court next turns to the section 392.301(a) (8) claim as alleged against BAC. Section 392.301 (a) (8) provides that "[i] n debt collection, a debt collector may not use threats, coercion, or attempts to coerce that employ any of the following practices. . . threatening to take an action prohibited by law."
According to plaintiffs, BAC violated section 392.301(a) (8) by threatening to foreclose on the property: (1) with the knowledge that plaintiffs were not in default under the trial loan modification, Compl. at 12, ¶ 45; (2) without first giving plaintiffs notice of default and opportunity to cure,
First, plaintiffs alleged that because they had a "trial" modification agreement with BAC, they were not in default and could not be foreclosed upon.
Second, plaintiffs alleged that BAC's threat to foreclose was in violation of the law, because they were not given prior notice of default or opportunity to cure, as required by section 5l.002(d) of the Property Code. Even assuming this were true, the only statement alleged by plaintiffs in support of this claim is: "At no time did either Plaintiff receive a notice of default and opportunity to cure from BAC or anyone claiming to act for them."
Third, plaintiffs alleged that BAC lacked the authority to serve notice of the foreclosure sale, because "there was no valid recorded assignment of the lien" at the time the notice was issued.
Having considered the parties' arguments, the court concludes that there is not anything in the record to show what date constituted the date of the assignment of the note and deed of trust. In the document provided by defendants titled "Assignment of Note and Deed of Trust," the "effective" date of the assignment was August 13, 2010. Defs.' Br. in Supp. of Sept. 19, 2011 Mot. to Dismiss, App., Ex. 2. However, the actual date that the document was acknowledged by the signer before a notary public was well over a month later—September 21, 2010.
Accordingly, plaintiffs have alleged sufficient facts in support of their section 392.301(a) (8) claim against BAC.
The court next considers the section 392.301(a) (8) claim as asserted against Fannie Mae. Plaintiffs alleged that Fannie Mae violated section 392.301(a) (8), but this claim against Fannie Mae was wholly "predicated on the unlawful acts of BAC." Compl. at 14, ¶ 34. Plaintiffs have pleaded no facts to show that Fannie Mae engaged in any independent conduct, had any involvement in the alleged acts of BAC, or can be held responsible for such acts. The mere allegation, for instance, that Fannie Mae purchased the property at the foreclosure sale does not support a conclusion that Fannie Mae engaged in any conduct constituting a threat to undertake illegal action. In sum, plaintiffs fail to state a claim under section 392.301(a) (8) against Fannie Mae. This claim, therefore, is dismissed as to Fannie Mae, but not to BAC.
The court finally turns to the section 392.304(a) (8) claim, as asserted against both defendants. Section 392.304(a) (8) of the Finance Code provides: "In debt collection or obtaining information concerning a consumer, a debt collector may not use a fraudulent, deceptive, or misleading representation" that "misrepresent[s] the character, extent, or amount of a consumer debt, or misrepresent[s] the consumer debt's status in a judicial or governmental proceeding." Tex. Fin. Code§ 392.304(a) (8).
The Complaint alleged that BAC "misrepresented the character of a consumer debt in the foreclosure process" and Fannie Mae did the same "in the forcible detainer matter." Compl. at 14, ¶ 49. In support, plaintiffs pointed to several specific statements made by BAC employees to show that BAC misrepresented the status of plaintiffs' loan during the foreclosure process.
However, there are no factual allegations pleaded with sufficient specificity to support a conclusion that Fannie Mae did likewise, or that Fannie Mae made such statements in a judicial proceeding in a manner amounting to a violation of section 392.304 (a) (8).
Thus, the Complaint has alleged sufficient factual allegations in support of a section 392.304(a) (8) claim against BAC. With respect to Fannie Mae, this claim is being dismissed.
The court now turns to the related issue of whether plaintiffs have pleaded a plausible DTPA claim against defendants. Plaintiffs contended they were entitled to recover under the DTPA for defendants' violations of the Finance Code by incorporation into the DTPA. As support, plaintiffs relied on the alleged violations of the Finance Code as their sole basis of recovery under the DTPA.
The allegations underlying the DTPA claims as to Fannie Mae are the same as those the court has already determined were factually insufficient under the Finance Code claim. Because the Finance Code claims against Fannie were dismissed in their entirety, the DTPA claim against Fannie Mae is also being dismissed in their entirety.
However, the court did conclude that as to BAC, plaintiffs alleged a sufficient factual basis in support of their section 392.301(a) (8) and 392.304 (a) (8) Finance Code claims. To the extent that plaintiffs' DTPA claim is derivative of their sections 392.301(a) (8) and 392.304(a) (8) Finance Code claims against BAC, BAC is not entitled to dismissal of the DTPA claim.
Plaintiffs base their negligent misrepresentation claim against BAC on allegations that BAC verbally misled and misrepresented that their loan was in the loan modification process and that foreclosure would not occur during this period before the foreclosure sale. Compl. at 15-17.
To state a claim for negligent misrepresentation, plaintiffs must allege that: (1) the representation was made by defendant in the course of its business or in a transaction in which it has a pecuniary interest; (2) defendant supplied false information for the guidance of others in their businesses; (3) defendant did not exercise reasonable care or competence in obtaining or communicating the information; and (4) plaintiffs suffered pecuniary loss by justifiably relying on the representation. Fed. Land Bank Ass'n of Tyler v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991).
In the Complaint, plaintiffs alleged that BAC misled them with false information regarding the status of the mortgage loan, the possibility of obtaining a loan modification, whether there had been a valid loan modification, and the scheduled date of foreclosure sale. Compl. at 15-17, ¶ 56-62. However, there are no factual allegations in the Complaint in support of justifiable reliance, in order to show that plaintiffs were justified in relying upon BAC's oral statements that it was "going to modify the loan."
The court now considers plaintiffs' claims concerning violations of the Property Code. Plaintiffs appear to contend that BAC was not the mortgage servicer, although this argument is not supported by other allegations in the Complaint suggesting otherwise. Compl. at 18. For instance, plaintiffs stated that they made payments to BAC and negotiated a loan modification under HAMP with BAC.
Moreover, after evaluating the Complaint, the court cannot discern what other factual allegations are pleaded in support of this claim. Plaintiffs generally allude to sections 51.001 and 51.0025 of the Property Code, without identifying which specific requirements were not followed.
Plaintiffs have failed to state a claim for a violation of the Property Code. This claim is therefore being dismissed.
The court now turns to the wrongful foreclosure claim against BAC. To state a claim for wrongful foreclosure, plaintiffs must show: ¶ (1) a defect in the foreclosure sale proceedings; (2) a grossly inadequate selling price; and (3) a causal connection between the defect and the grossly inadequate selling price."
In a "wrongful foreclosure" claim, it is not enough to merely show a defect in the foreclosure process; the plaintiff must also show that an inadequate sales price resulted from the defect alleged.
Because the court cannot pinpoint the nature of the defect from the Complaint, the court cannot discern what caused the sales price to be rendered inadequate. Thus, plaintiffs have failed to plead sufficient factual allegations to show that BAC is liable for a wrongful foreclosure claim.
The court next evaluates plaintiffs' unreasonable collection claim against BAC. Unreasonable collection is an intentional tort that requires plaintiffs to prove that defendants' actions amount "to a course of harassment that was willful, wanton, malicious, and intended to inflict mental anguish and bodily harm."
The court has already afforded plaintiffs an opportunity to twice file an amended complaint that complies with the requirements of Rule 8(a) (2), alleging with particularity the facts that they contend will establish their right to recover against defendants as to each theory of recovery alleged.
For the reasons stated above, the court concludes that the following claims alleged against defendants should be dismissed because of plaintiffs' failure to correct their pleading defects: the claims asserted against BAC for negligent misrepresentation, wrongful foreclosure, and unreasonable collection; the claims asserted against Fannie Mae for violations of the DTPA and sections 392.301(a) (8) and 392.304(a) (8) of the Finance Code; and the claims against both defendants for violations of the Property Code and of section 392.301(a) (3) of the Finance Code. Accordingly, the above-described claims are being dismissed with prejudice.
The court, however, concludes that the allegations on the claims against BAC for violations of the DTPA and sections 392.301 (a) (8) and 392.304 (a) (8) of the Finance Code could state a claim entitling plaintiffs to relief, and that defendants' motion to dismiss as to those claims is denied.
Therefore,
The court ORDERS that the claims asserted by plaintiffs against Fannie Mae 1 for violations of the Property Code, the Finance Code, and the DTPA 1 be, and are hereby, dismissed with prejudice.
The court further ORDERS that the claims asserted by plaintiffs against BAC for negligent misrepresentation, wrongful foreclosure and unreasonable collection, and the claims for violations of the Property Code and section 392.301(a) (3) of Finance Code 1 be, and are hereby, dismissed with prejudice.
In their notice of removal, defendants alleged federal question jurisdiction pursuant to 28 U.S.C. § 1331, given that plaintiffs alleged certain state law claims in their state court petition that were preempted by the Fair Credit Reporting Act ("FCRA"), codified at 15 U.S.C. § 1681.
Additionally, in their notice of removal, defendants alleged the court had subject matter jurisdiction over the parties by reason of diversity jurisdiction. The court is not persuaded that the allegations in the second amended complaint show that the minimum amount in controversy has been met. Thus, the court declines to conclude that subject matter jurisdiction exists because of either federal question or diversity jurisdiction.
Compl. at 8-9. The first two options described in BAC's letter were: (1) Repayment Plan; and (2) Loan Modification. In the paragraph describing Loan Modification, BAC's letter allegedly stated:
First, the Assignment of the Note and Deed of Trust states that "8113/2010" was the "effective" date of assignment from MERS to BAC. Defs.' Br. in Supp. of Sept. 19, 2011 Mot. to Dismiss, App., Ex. 2 (stating "Date of Assignment: Effective: 8/13/2010"). However, this same document was not acknowledged by the signer, David Seybold, before the notary public, M.K. Huddleston, until over a month later—on September 21, 2010.
Second, the Appointment of the Substitute Trustee, known as Document No. D207341388, was recorded in the Tarrant County public records on September 10,2010. Defs.' Br. in Supp. of Sept. 19, 2011 Mot. to Dismiss, App., Ex. 3. This document shows that the appointment of substitute trustee was executed on August 27, 2010, by BAC, acting through its attorney-in-fact, Stephen C. Porter.
