James et al v. Wells Fargo Bank, N.A., No. 4:2014cv00449 - Document 15 (S.D. Tex. 2014)
Court Description: MEMORANDUM OPINION AND ORDER granting 6 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM. (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)
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IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION PERRY ALAN JAMES and MARY LYNN JAMES, § § § § § Plaintiffs, v. CIVIL ACTION NO. H-14-0449 § § § § § WELLS FARGO BANK, N.A., Defendant. MEMORANDUM OPINION AND ORDER Plaintiffs Perry Alan James and Mary Lynn James ("Plaintiffs") brought ("Wells this action in Fargo") against the defendant 284th Wells Judicial Fargo Bank, District Court N .A. of Montgomery County, Texas, where it was filed under Cause No. 14-0201392-CV. Wells Fargo removed the action to this court. before the court is Defendant's Motion to Dismiss Rule 12 (b) (6) and Brief in Support En t ry No.6). Pursuant to ("Motion to Dismiss") For the reasons explained below, Pending (Docket Wells Fargo's Motion to Dismiss will be granted. I. Background In connection with the refinancing of their home mortgage, Plaintiffs executed a Note and Deed of Trust in favor of Amerigroup Mortgage Corporation in 2002.1 The mortgage was subsequently 1Plaintiffs' Original Petition ("Original Petition"), Exhibit B-2 to Defendant Wells Fargo Bank, N.A.'s Notice of Removal (continued ... ) assigned to Wells Fargo.2 Plaintiffs fell behind on their payments after plaintiff Perry Alan James was "injured on the job and began collecting disability payments.,,3 Plaintiffs allege that Wells Fargo "agreed to work with [them] in their delinquency" and "suggested modifying the note and putting the delinquent payments on the end of the note. ,,4 However, "[e] ach time Plaintiffs submitted the requested paper work, failed to respond concerning the modification."s [Wells Fargo] Plaintiffs "sent in documentation concerning the proposed modification" and Wells Fargo "continued to accept payments and discuss a contemplated loan modification" with Plaintiffs.6 Wells Fargo sold the property at a foreclosure sale on February 7, 2012.7 On February 6, Wells Fargo in 2014, Plaintiffs brought this action against the 284th Judicial District Court of continued) Under 28 U.S.C. § 1441 ("Notice of Removal"), Docket Entry No. 1-4; Note, Exhibit A to Motion to Dismiss, Docket Entry No. 6-2; Deed of Trust, Exhibit B to Motion to Dismiss, Docket Entry No. 6-3. Page citations are to the pagination imprinted by the federal court's electronic filing system at the top and right of the document. 1 ( ¢ ¢ ¢ 20 r iginal Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4, p. 2. 3Id. SId. 6Id. 7Id. at 2, 5; Substitute Trustee's Deed, Exhibit C to Motion to Dismiss, Docket Entry No. 6-4. -2 - Montgomery County, Texas, where it was filed under Cause No. 14-0201392-CV. 8 On February 24, 2014, Wells Fargo filed an answer in the state court. 9 Wells Fargo removed the action to this court the same day. 10 Dismiss. 11 On March 14, 2014, Wells Fargo filed its Motion to Plaintiffs filed their Response on April 30, 2014,12 and Wells Fargo filed its Reply on May 7, 2014. 13 II. Applicable Law Wells Fargo has moved to dismiss Plaintiffs' Original Petition for failure to state a claim under Federal Rule of Civil Procedure 12 (b) (6) 14 However, because Wells Fargo had already filed an answer 15 to Plaintiffs' Original Petition, Wells Fargo's 12 (b) (6) motion was untimely. See Fed. R. Civ. P. 12(b). When a 12 (b) motion is filed after the pleadings are closed "[s] uch motion [] 80 r iginal Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4; see also Register of Actions, Exhibit B-1 to Notice of Removal, Docket Entry No. 1-3. 9Defendant Wells Fargo Bank, N.A.'s Original Answer and Affirmative Defenses ("Answer"), Exhibit B-4 to Notice of Removal, Docket Entry No. 1-6. lONotice of Removal, Docket Entry No.1. 11Motion to Dismiss, Docket Entry No.6. 12Plaintiffs Perry Alan James and Mary Lynn James' Opposition to Motion to Dismiss ("Response"), Docket Entry No. 13. 13Defendant's Reply to Plaintiff's Response Motion to Dismiss ("Reply"), Docket Entry No. 14. to Defendant's 14Motion to Dismiss, Docket Entry No.6. 15See Answer, Exhibit B-4 to Notice of Removal, Docket Entry No. 1-6. -3- will be treated as a motion for judgment on the pleadings based on a failure to state a claim on which relief may be granted." v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999) Jones (per curiam) The court will therefore construe Wells Fargo's Motion to Dismiss as a motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). Rule 12(c) "'is designed to dispose of cases where the material facts are not in dispute and a judgment on the merits can be rendered by looking to the substance of the pleadings and any judicially noticed facts.'" Stanley Dean Witter & Co., Great 313 Plains F.3d 305, Trust 312 Co. v. Morgan (5th Cir. 2002) (quoting Hebert Abstract Co. v. Touchstone Props., Ltd., 914 F.2d 74, 76 (5th Cir. 1990) (per curiam)). A motion brought pursuant to Rule 12(c) should be granted if there is no issue of material fact and if the pleadings show that the moving party is entitled to judgment as a matter of law. Greenberg v. General Mills Fun Group, Inc., 478 F.2d 254, 256 (5th Cir. 1973). A motion for judgment on the pleadings is subject to the same standard as a motion to dismiss for failure to state a claim. In re Great Lakes Dredge & Dock Co. LLC, Cir. 2010) i 624 F.3d 201, 209 See (5th Guidry v. American Public Life Insurance Co., 512 F.3d 177, 180 (5th Cir. 2007) i Jones, 188 F.3d at 324. The court must accept the factual allegations of the complaint as true, view them in a light most favorable to the plaintiffs, reasonable inferences in the plaintiffs' favor. -4- and draw all Great Plains Trust Co., 313 F.3d at 312-13; Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001); Jones, 188 F.3d at 324. "When a federal court reviews the sufficiency of a complaint, before the reception of any evidence either by affidavit or admissions, its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Swierkiewicz v. Sorema N.A., 122 S. Ct. 992, 997 (2002) (quoting Scheuer v. Rhodes, 94 S. Ct. 1683, 1686 (1974)). To avoid dismissal a plaintiff must allege "'enough facts to state a claim to relief that is plausible on its face.'" MySpace, Inc., Atlantic Corp. Plausibility 528 F.3d 413, v. Twombly, requires "more 418 (5th Cir. 127 S. Ct. than an unadorned, unlawfully-harmed-me accusation." 1937, 1949 (2009). 2008) 1955, Ashcroft v. "A claim has facial Doe v. (quoting Bell 1974 (2007)). the-defendant- Iqbal, 129 S. Ct. plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference misconduct alleged." that rd. the defendant is liable for the "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, quotation marks omitted). 127 S. Ct. The court will at 1966) "'not accept as true conclusory allegations, unwarranted factual inferences, conclusions.'" 2010) Gentilello v. Rege, (quoting Plotkin v. 627 F. 3d 540, IP Axess Inc., -5- (internal 544 407 F.3d 690, or legal (5th Cir. 696 (5th Cir. " [D] ismissal 2005). allegation relief." regarding a is proper if the complaint required element necessary lacks an to obtain Torch Liquidating Trust ex rel. Bridge Assocs. L.L.C. v. Stockstill, 561 F.3d 377, 384 (5th Cir. 2009). When considering a motion to dismiss courts are generally "limited to the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss central to the claim and referenced by the complaint." that are Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010) (citing Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir. 2000)) i see also C.H., II ex rel. L.H. v. Rankin Cnty. Sch. Dist., 415 F. App'x 541, 545 (5th Cir. 2011) ("A district court may look to the pleadings and any documents attached thereto." (citing Great Plains Trust Co., 313 F.3d at 313)). The court may also take judicial notice of matters of public record. See Norris v. Hearst Trust, 500 F.3d 454, 461 n.9 (5th Cir. 2007) i Great Plains Trust Co., 313 F.3d at 312. When a party presents "matters outside the pleadings" with a motion under 12(c), the court has discretion to either accept or exclude the evidence for purposes of the motion. See Fed. R. Civ. P. 12(d); Isquith ex rel. Isquith v. Middle South Utilities, Inc., 847 F.2d 186, 194 n.3 (5th Cir. 1988). However," [i] f matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56" and "[a] 11 parties must -6- be given a reasonable opportunity to present all the material that is pertinent to the motion." Fed. R. Civ. P. 12(d) Plaintiffs have attached a copy of a January 6, 2012, letter sent by Wells Fargo's foreclosure counsel to Mary Lynn James 16 and a January 26, 2012, foreclosure counsel. 17 letter sent by Plaintiffs to Wells Fargo's Exhibits attached to a complaint "are part of the complaint 'for all purposes.'" v. St. Luke's Episcopal Hosp., United States ex reI. Riley 355 F.3d 370, 375 (quoting Fed. R. Civ. P. 10(c)) (5th Cir. 2004) Defendants have attached copies of the Note, 18 Deed of Trust, 19 and Substitute Trustee's Deed. 20 Because these documents are matters of public record 21 of which the court may take judicial notice, and are referenced in Plaintiff's Original Petition,22 and are central to Plaintiffs' claims,23 the 16Letter dated January 6, 2012 ("Notice of Acceleration"), Exhibit A to Original Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4, p. 6. 17Letter dated January 26, 2012 ("Dispute Letter"), Exhibit B to Original Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4, p. S. 18Note, Exhibit A to Motion to Dismiss, Docket Entry No. 6-2. 19Deed of Trust, Exhibit B to Motion to Dismiss, Docket Entry No. 6-3. 2°Substitute Trustee's Deed, Exhibit C to Motion to Dismiss, Docket Entry No. 6-4. 21See Deed of Trust, Exhibit B to Motion to Dismiss, Docket Entry No. 6-3, p. lSi Substitute Trustee's Deed, Exhibit C to Motion to Dismiss, Docket Entry No. 6-4, p. 4. 22See Original Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4, pp. 2, 5i Notice of Acceleration, Exhibit A (continued ... ) -7- -----~,----- court concludes that they can be considered without converting the motion to dismiss to a motion for summary judgment. III. Analysis Plaintiffs style their claims against Wells Fargo as action for statutory and common law fraud, (2) an an action to set aside the foreclosure and to declare the sale void, action for declaratory judgment. 24 (1) and (3) an Defendants have moved to dismiss all of Plaintiffs' claims. 25 A. Fraud Plaintiffs allege causes of action for statutory and common law fraud. Plaintiffs contend that Wells Fargo's "statements concerning the contemplated forbearance to amend the loan contract or revise the figures as to the amount owed misrepresentation of fact made to Plaintiffs. 1126 was a material They allege in their Original Petition that [t]he parties to this lawsuit entered into conversations pertaining to a contemplated modification agreement. On 22 ( ... cont inued) to Original Petition, Entry No. 1-4, p. 6. Exhibit B-2 to Notice of Removal, 23See Original Petition, Exhibit B-2 Docket Entry No. 1-4, pp. 3-5. Docket to Notice of Removal, 24rd. 25Motion to Dismiss, Docket Entry No.6. 260riginal Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4, p. 3. -8- the strength of these conversations, property owners sent in documentation concerning income and the like. Aside from this information, Plaintiffs made several payments accepted by the bank. The lender continued to accept payments and discuss a contemplated loan modification, but never made any effort to adjust wrongful charges, apply funds available to the loan prior to foreclosing. 27 Plaintiffs argue that because they "relied upon their conversations [with Wells Fargo] and, in fact, continued to send in payments complied with the requests and believing that the matter would be resolved as represented," they have adequately alleged a cause of action for fraud. 28 1. Statutory Fraud Plaintiffs bring their statutory fraud claim under the Texas Business and Commerce Code. 29 However, § 27.01 of "[s] ection 27.01 only applies to misrepresentations of material fact made to induce another to enter into a contract for the sale of land or stock." Burleson State Bank v. Plunkett, 27 S.W.3d 605, 611 (Tex. App.-Waco 2000, pet denied). "'A loan transaction, even if secured by land, is not considered to come under the statute.'" Equities, Inc., 540 F.3d 333, 343 (5th Dorsey v. Portfolio Cir. 2008) (quoting 27Id. at 4; see also id. at 2. ~~ 28Id. at 5; see also Response, Docket Entry No. 13, pp. 10-11 26-29. 29Although Plaintiffs do not cite any statute in their Original Petition, they do recite the elements of a fraud claim under § 27.01. See Original Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4, p. 4. Moreover, Plaintiffs' Response cites § 27.01 as the statutory basis for their fraud claim. Response, Docket Entry No. 13, pp. 9-10 ~ 25. -9- Burleson r 27 S.W.3d at 611). Because Plaintiffs do not allege any facts for regarding parties r § a contract the sale of land between the 27.01 does not apply, and Plaintiffs r statutory fraud claims fail as a matter of law. 546 F. Apprx 477 r 482 See Massey v. EMC Mortgage Corp'r (5th Cir. 2013); DorseYr Ashton v. BAC Home Loans Servicing. WL 3807756 r at *6 540 F.3d at 343; L,P' r No. 4:13-CV-810 r 2013 (S.D. Tex. July 19, 2013); Pradhan v. JPMorgan Chase Bank. N.A'r No. 4:12-cv-539 r 2013 WL 617061 r at *3 (E.D. Tex. Feb. 19 r 2013). 2. Common Law Fraud To prevail on a fraud claim under Texas law a plaintiff must prove that (1) the defendant made a material representation that was false; (2) the defendant knew the representation was false or made it recklessly as a positive assertion without any knowledge of its truth; (3) the defendant intended to induce the plaintiff to act upon the representation; fiably relied upon the representation; thereby suffered an injury. Life. Ins. CO' r and (5) the plaintiff Ernst & Young. L.L.P. v. Pacific Mut. 51 S.W.2d 573 r Civil Procedure 9(b) fraud claims. (4) the plaintiff actually and justi- 577 (Tex. 2001). Federal Rule of imposes a heightened level of pleading for A party bringing a fraud claim "must state with particularity the circumstances constituting fraud or mistake. Fed. R. Civ. P. 9(b). II The plaintiff must therefore "'specify the statements contended to be fraudulent r identify the speaker, state -10- when and where the statements were made, and explain why the statements were fraudulent.'" Sullivan v. Leor Energy, LLC, F.3d 542, 551 (quoting ABC Arbitrage v. Tchuruk, (5th Cir. 2010) 600 291 F.3d 336, 350 (5th Cir. 2002)). common Plaintiffs' law fraud claims fail to meet the heightened pleading requirements of Rule 9(b) Plaintiffs allege that the they forbearance relied to on amend "statements the loan concerning contract" 30 and contemplated "conversat ions pertaining to a contemplated modification agreement. "31 Plaintiffs fail to state in sufficient detail what statements were fraudulent, identify the speaker, or state when and where the statements were made. Cf. Khan v. Wells Fargo Bank, N.A., WL 200492, at *6-7 (S.D. Tex. Jan. 17, 2014). to explain why the statements were No. H-12-1116, 2014 Plaintiffs also fail fraudulent or provide factual enhancement for their conclusory allegation that any "[t]he misrepresentations were made with the knowledge of their falsity or made recklessly without any knowledge of their truthfulness . with the intention that they should be acted [upon] by Plaintiff. "32 The Dispute Letter attached to Plaintiffs' Original Petition, in which Plaintiffs dispute the amount of certain "foreclosure 300riginal Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4, p. 3. 31Id. at 4 i see also id. at 2. 32Id. at 3-4. -11- fees" related to a foreclosure proceeding in 2007, does identify Jesse Swift, stated, a representative from December 2009 of Wells Fargo, 2010, until April who that authority to review and remove/reduce the excessive or inaccurate. ,,33 The letter fees if further "repeatedly he had the found to be alleges that Plaintiffs "received a letter in June 2010 in which Jesse Swift advised [Plaintiffs] removed. ,,34 that none of the fees would be reduced or However, Plaintiffs have not explained why these statements are fraudulent, how Plaintiffs relied on them, or how they caused Plaintiff to suffer any inj ury. concludes that Plaintiffs' fraud Accordingly, the court claims must be dismissed for failure to meet the heightened pleading requirements of Rule 9(b). Plaintiffs' frauds. bars a recover fraud claims are also barred by the statute of "Under Texas law, fraud as claim to damages the the application of the statute of frauds extent benefit that of a the plaintiff bargain that seeks [] to cannot otherwise be enforced because it fails t[o] comply with the statute of frauds." 800-K, Traynor v. Chase Home Finance, L.L.C., No. 3:11-CV- 2013 WL 704932, at *3 (N.D. Tex. Feb. 27,2013) (citing Haase v. Glazner, 62 S.W.3d 795, 799 (Tex. 2001)). As noted above, Plaintiffs' fraud claims are based on alleged "statements" and "conversations" regarding a "contemplated 33Dispute Letter, Exhibit B to Original Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4, p. 8. 34Id. -12- modification" of their mortgage loan. 35 is governed by the statute of frauds. Bank. N.A., law, a 505 F. App'x 361, 364 Plaintiffs' mortgage loan See Gordon v. JPMorgan Chase (5th Cir. 2013) ("Under Texas 'loan agreement in which the amount involved in the loan agreement exceeds $50,000 in value is not enforceable unless the agreement is in writing and signed by the party to be bound or by that party's authorized representative. '" Code § 26.02(b))) .36 (quoting Tex. Bus. Com. "When a written agreement is governed by the statute of frauds, it cannot be materially modified by a subsequent oral agreement. 719, 721 Servicing. II (Tex. L.P., Id. (citing Dracopoulas v. 1967)) 722 i see F.3d also 249, Martins 256 (5th Rachal, v. BAC Cir. 411 S.W.2d Home 2013) ("A Loans loan agreement for more than $50,000 is not enforceable unless it is in writing. . . . An agreement regarding the transfer of the property or modification of a loan must therefore be in writing to be valid.") . Here, Plaintiffs allege that Wells Fargo "agreed to work with [them] in their del inquency," that Wells Fargo "suggested modifying the note and putting the delinquent payments on the end of the note," and that "[e]ach time [they] submitted the requested paper 350riginal Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4, pp. 2, 4. 36See Note, Exhibit A to Motion to Dismiss, Docket Entry No. 6-2, p. Ii Deed of Trust, Exhibit B to Motion to Dismiss, Docket Entry No. 6 -3, p. 1 i see also Notice of Acceleration, Exhibit A to Original Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4, p. 6. -13- work [Wells Fargo] failed to respond concerning the modification. 1137 Such representations by wells Fargo do not constitute an oral agreement to modify Plaintiffs' mortgage loan. Moreover, to the extent that Plaintiffs allege the existence of such an agreement, it would be Plaintiffs' unenforceable under the statute of frauds, and fraud claims based on that agreement would fail as a matter of law. See Traynor, 2013 WL 704932, at *3 ("Application of the statute of frauds to a contract vitiates a fraud claim based on the same facts.1I (quoting Collins v. Allied Pharmacy Mgmt., Inc., 871 936 S.W.2d writ))). 929, (Tex. App.-Houston [14th Dist.] 1994, no Accordingly, Plaintiffs' claims for common law fraud will be dismissed. 38 370riginal Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4, p. 2i see also id. at 4-5. 38Plaintiffs also allege that "at a time when no delinquency existed on the loan [Wells Fargo] without cause or justification locked the Plaintiffs out of the property many months before the sale. 1I Id. at 3. Plaintiffs further allege that "[s]uch action resulted in the loss of substantial personal property belonging to Plaintiffs that was located inside the property when it was stolen by vandals. 1I Id. Plaintiffs have not alleged any independent cause of action related to these allegations and appear to argue that they support their fraud claims as evidence of damages. See Response, Docket Entry No. 13, pp. 10-11 ~~ 28-29, pp. 12-13 ~ 33. The court has already concluded that Plaintiffs' fraud claims fail under Rule 9 (b) and the statute of frauds. Plaintiffs argue that their "common law fraud claim for out-ofpocket damages incurred in reliance on the alleged promise survives the statute of frauds. 1I Id. at 12 ~ 33 (citing 1001 McKinney Ltd. v. Credit Suisse First Boston Mortgage Capital, 192 S.W.3d 20 (Tex. App.-Houston [14th Dist.] 2005, pet. denied)). However, even if Plaintiffs could show that they suffered damages in reliance on an oral promise by Wells Fargo, Plaintiffs' allegations still fail to meet the requirements of Rule 9 (b). Accordingly, Plaintiffs' fraud claims related to these allegations will be dismissed. -14- B. Action to Set Aside the Foreclosure Sale Plaintiffs allege that "[t]his action is a suit in part to set aside the foreclosure sale of [their] home."39 In support of their "action to set aside the foreclosure sale," Plaintiffs allege that "[p]rior to foreclosing on the property, [Wells Fargo] did not send either the Notice of Default or the Notice of Foreclosure sale to the proper address, as required by the Deed of Trust and the Texas Property Code." 40 In its Motion to Dismiss, Wells Fargo construes Plaintiffs' allegations as a cause of action for rescission. 41 equitable However, " [u]nder Texas law, rescission is a remedy, not a separate cause of No. 4:13-CV-2331, 2014) Garnica action." Sebree, -Austin 1999, pet. denied)) No. May 3, 2013) fraud Argent Mortgage 2014 WL 1338703 at *10-11 {citing Scott v. Corp., v. 3:12-CV-2460-L, i Co., LLC, (S.D. Tex. March 27, 986 S.W.2d 364,368 (Tex. App. see also Garcia v. Universal Mortgage 2013 WL 1858195, at *12 (N.D. Tex. (dismissing a claim for equitable rescission based on "because Plaintiffs have not prevailed in any of their underlying claims" and were thus "not entitled to any remedy") In re Double S WL 3406295, at *5 Petroleum, Ltd. , No. 04-05-00643-CV, i 2005 (Tex. App.-San Antonio Dec. 14, 2005, no pet.) 390riginal Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4, p. 5. 4°Id. 41Motion to Dismiss, Docket Entry No.6, pp. 7-9 -15- ~~ 23-27. (mem. op.) (" [R] escission is not a 'claim' or a legal cause of action but an equitable remedy used as a substitute for monetary damages when Plaintiffs' such damages Accordingly, inadequate. H) . are "action to set aside the foreclosure sale" must be supported by an independent cause of action. 42 Courts generally construe claims alleging failure to properly notice under ~, § 51.002 as claims for wrongful foreclosure. Ashton, 2013 WL 3807756, at *4; Martinez-Bey v. Bank of Am., N.A., No. 3:12-CV-4986-G BH, 2013 WL 3054000, at *10-11 (N.D. Tex. June 18, 2013); Hill v. Wells Fargo Bank, N.A., No. V-12-11, 2012 Indeed, Plaintiffs WL 2065377, at *7-8 (S.D. Tex. June 6, 2012). state in adequate their notice Response to that [Wells their Fargo] Original of a Petition claim for "gives wrongful foreclosure for failure to comply with the adequate notices. ,,43 order to state a claim for wrongful foreclosure, In however, Plaintiffs must also allege a grossly inadequate selling price and a causal link between the procedural defect and the selling price. Miller v. BAC Home Loans Servicing, L.P., 726 F.3d 717, 726-27 (5th Cir. 2013) i Martins, 722 F.3d at 256. Because Plaintiffs have not 42To the extent that Plaintiffs seek rescission based on fraud, such claim fails for the reasons stated in § III.A, above. Cf. Garcia, 2013 WL 1858195, at *12 ("[T]he court will construe their remaining claims for rescission as a claim for the equitable remedy of rescission based on fraud. [T]he court determines that because Plaintiffs have not prevailed in any of their underlying claims, this claim is now moot as they are not entitled to any remedy.") . 43Response, Docket Entry No. 13, p. 8 ~ 22. -16- ---------,,--_._-----_._- -----.~------"-------,,-.----,----------- alleged either a grossly inadequate selling price or the requisite causal link, their Original Petition "lacks an allegation regarding a required element necessary to obtain relief." F.3d at 384. Stockstill, 561 Therefore, to the extent Plaintiffs seek to set aside the foreclosure sale based on a theory of wrongful foreclosure, such claim is dismissed. However, Plaintiffs' allegation that Wells Fargo "did not send either the Notice of Default or the Notice of Foreclosure sale to the proper address, contract. law are: as required by the Deed of Trust" sounds in "The elements of a breach of contract claim under Texas (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 resulting from the breach." Cir. 2003) Lewis v. Bank of Am. NA, 343 F.3d 540, 544-45 (citing Palmer v. Espey Huston & Assocs., (5th Inc., S.W.3d 345,353 (Tex. App.-Corpus Christi 2002, pet. denied». 84 The Fifth Circuit has held that a mortgagor who has defaulted on the underlying note cannot maintain a cause of action for a mortgagee's subsequent breach of the deed of trust because "a party in default cannot assert a claim for breach against the other party." Water Dynamics, Ltd. v. HSBC Bank USA, Nat. Ass'n, 509 F. App'x 367, 369 (5th Cir. 2013) (citing Dobbins v. Redden, 785 S.W.2d 377, 378 (Tex. 1990»; see also Thomas v. EMC Mortgage Corp., 499 F. App'x 337, 341 (5th Cir. 2012). 970 F. Supp. 2d 568, 580 But see Miller v. CitiMortgage, (N.D. -17- Tex. 2013) (noting that Inc., "the . breached are contractual terms that Plaintiff alleges were . terms that would come into effect if the lender claims a default and pursues acceleration, such as when, for example, the borrower to fails make Gatling payments"); CitiMortgage, v. Inc. , No. H-11-2879, 2013 WL 1625126, at *6 (S.D. Tex. April 15, 2013) ("The notices at issue presuppose that the recipient is in breach of her contractual obligations. Failure to provide the required Plaintiffs acknowledge that notice is nonetheless actionable."). " [t] he loan "putting fell the Accordingly, behind" delinquent Plaintiffs and that payments they on sought a end of the cannot maintain a cause modification the of Note. action ,,44 for breach of contract against Wells Fargo. Under Texas law, however, "[a]ny suit that involves a dispute over the title to land is, in effect, an action in trespass to try ti tIe, whatever its form and equitable relief is sought." 880, 883 regardless of whether Jordan v. Exxon Corp., (Tex. App.-Texarkana 1991, no writ). legal or 802 S.W.2d "Trespass to try title is a statutory action with specific pleading requirements." Singha v. BAC Home Loans Servicing, L.P., WL 1492301, at *5 (5th Cir. April 17, 2014) Ann. § 22.001 (West); Tex. R. Civ. P. No. 13-40061, 2014 (citing Tex. Prop. Code 783). "To succeed, the 'plaintiff must usually (1) prove a regular chain of conveyances from the sovereign, (2) establish superior title out of a common 440 r iginal Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4, p. 2. -18- source, (3) prove title by limitation, or (4) prove title by prior possession coupled with proof that possession was not abandoned.'" rd. (quoting Martin v. Amerman, 133 S.W.3d 262, 265 (Tex. 2004)). "The rule has long been established in [Texas] that where a deed is absolutely void, a suit at law in trespass to try title may be maintained to recover the land without setting the deed aside " This is Slaughter v. Qualls, 162 S.W.2d 671, 674 (1942) because "[a] trustee has no power to sell the debtor's property, except such as may be found in the deed of trust; and the powers therein conferred must be strictly followed." rd. at 675. By the same reasoning, " [f]ailure to follow the terms of the deed of trust will give rise to a cause of action to set aside the trustee's University Sav. Ass'n v. deed. " S.W.2d 705, 706 (Tex. 1982) Springwoods Shopping Ctr., 644 (citing Slaughter v. Qualls, 162 S.W.2d 671 (1942)); see also F.D.r.c. v. Myers, 955 F.2d 348, 350-51 (5th Cir. 1992). Likewise, be set aside as properly No. and " [u]nder Texas law, a foreclosure sale may invalid if notice under section 51.002 timely SA-12-CV-345-XR, served." Rodriguez 2013 WL 3146844, v. at *8 U. S. is not Bank, N .A. , (W.D. Tex. June 18, 2013); see also Savers Fed. Sav. & Loan Ass'n v. Reetz, 888 F.2d 1497, 1502 n.6 (5th Cir. 1989); Fraley v. BAC Home Loans Servicing, LP, No. Jan. 10, 3:11-CV-I060-N-BK, 2012). 2012 Furthermore, WL 779130, although at "'minor *9 (N.D. defects otherwise valid foreclosure sale do not void it' to send the required notices is -19- not the Tex. in an [f] ailing type of minor noncompliance that the case law overlooks." Brush v. Wells Fargo Bank, Tex. N.A., 911 F. Kourosh Hemyari Supp. v. 2d 445, Stephens, 474 355 (S.D. S.W.3d 623, 2012) 628 (quoting (2011) (per curiam)); see also Shearer v. Allied Live Oak Bank, 758 S.W.2d 940, 942 (Tex. App.-Corpus Christi 1988, writ denied) ("The bank's failure to send notice by certified mail as required by law and as required by the deed of trust was sufficient reason for the trial court to set aside the foreclosure sale of the real property. Therefore, we find the evidence supports the trial court's judgment that the foreclosure sale of the real property subject to the deed of trust was void.") Civ. App.-Amarillo trustee's deed void Phipps v. Fuqua, 1930, writ ref'd) for failure to 32 S.W.2d 660, (holding comply with a 662 (Tex. substitute statutory and contractual notice requirements) . Here, Plaintiffs seek to Substi tute Trustee's Deed" "set aside the as void. 45 February 7, However, even if 2012 the Substitute Trustee's Deed is void, "[t] ender of whatever sum is owed condition on the mortgage debt is a precedent to the mortgagor's recovery of title from a mortgagee who is in possession and claims title under a void foreclosure sale. ,,46 Silvers Co., 709 S.W.2d 240, 246 Fillion v. David (Tex. App.-Houston [14th Dist.] 450riginal Petition, Exhibit B-2 to Notice of Removal, Docket Entry No. 1-4, p. 5. 46See Motion to Dismiss, Docket Entry No.6, pp. 7-9 ~~ 23-27; Reply, Docket Entry No. 14, pp. 2-3 ~~ 4-6. -20- --.----- 1986, writ ref'd n.r.e.) (citing Willoughby v. Jones, 151 Tex. 435, 251 S.W.2d 508 see also Lopez v. (1952)); Sovereign Bank, N.A., No. H-13-1429, 2014 WL 1315834, at *5 (S.D. Tex. March 31, 2014); cf. Slaughter, 162 S.W.2d at 677 ("Slaughter is in no position to complain of the judgment of the Court of Civil Appeals in so far as it permits Qualls to redeem the land from her upon the payment of the balance of the unpaid purchase money.") Courts have held that when a plaintiff fails to affirmatively plead tender of the outstanding balance the complaint is subject to dismissal for failure to state a claim. WL 3807756, at *7; Kaechler v. See, e.g., Ashton, 2013 Bank of Am., N.A., No. H-12-423, 2013 WL 127555, at *7 (S.D. Tex. Jan. 9, 2013); George-Baunchand v. Wells Fargo Home Mortgage, Inc., No. H-10-3828, 2012 WL 2122198, at *2 (S.D. Tex. June 11,2012); Hill, 2012 WL 2065377, at *8-9. Accordingly, because Plaintiffs do not plead that they have or will tender the outstanding balance on their mortgage debt, their "action to set aside the foreclosure" will be dismissed for failure to state a claim. 47 47Plaintiffs cite Shearer to argue that" [w] here the Court sets aside the foreclosure sale conducted wrongly by a Lender, the Court puts the parties back in the position prior to the foreclosure sale. This does not mean that the note is forgiven - but it also does not mean that the homeowner must payoff [] the loan on demand." Response, Docket Entry No. 13, p. 9 , 24. In Shearer the Texas appellate court, after affirming the trial court's judgment that the foreclosure sale was void, noted that "[a]t the time of trial, the Shearers allegedly owed approximately $38,763.17 in principal plus $14,468.14 in interest on the note secured by the (continued ... ) -21- C. Declaratory Judgment Plaintiffs argue that their Original Petition "ha[s] made it abundantly clear that they seek a declaration that the February 7, 2012 [foreclosure sale] was void" and that "[f]iling a declaratory judgment is the precise vehicle accepted by the Court" in such cases. 48 However, relief pursuant Texas to the Texas "district courts Declaratory Judgment Supreme 'cannot award Act because declaratory judgment is procedural, not substantive, and federal courts apply their own procedural rules.'" Falk v. Wells Fargo Bank, No. 3:09-CV-678-B, 2011 WL 3702666, at *4 (N.D. Tex. Aug. 19, 2011) (quoting Rhodes v. Prince, No. 3:05-CV-2343-D, 2006 WL 954023, at *4 (N.D. Tex. April 11,2006), aff'd sub nom., Rhodes v. City of Arlington, 215 F. App'x 329 (5th Cir. 2007)), aff'd sub nom., Estate of Falk v. Wells Fargo Bank, N.A., 541 F. App'x 481 (5th Cir. 2013). 47 ( ... cont inued) deed of trust" and held that "[b]ecause the foreclosure sale was void, this debt is revived and considered outstanding." 758 S. W. 2d at 942-43. Plaintiffs do not explain how the holding in Shearer relieves them of the requirement to tender "whatever sum is owed on the mortgage debt" in order to recover "title from a mortgagee who is in possession and claims title under a void foreclosure sale." Fillion, 709 S. W. 2d at 246. Plaintiffs' argument appears to be based on their contention that acceleration was wrongful due to improper notice. However, even if Wells Fargo wrongly accelerated the debt, Plaintiffs do not allege that they have tendered the amount due on the mortgage absent acceleration. Accordingly, even if "the sum [that] is owed on the mortgage debt" is interpreted to be less than the total balance outstanding on the Note, Plaintiffs still fail to adequately plead a cause of action to set aside the foreclosure and resulting Substitute Trustee's Deed. 48Response, Docket Entry No. 13, p. 14 (citing Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 565 (Tex. 2001)). -22- "Because this action was removed from state court, 'the action may be construed as Judgment Act.'" one brought Miller, under the federal 970 F. Supp. 2d at 591 Declaratory (quoting Hurd v. BAC Home Loans Servicing, LP, 880 F. Supp. 2d 747, 769 (N.D. Tex. 2012)); see also Bell v. Bank of America Home Loan Servicing LP, No. 4:11-CV-02085, 2012 WL 568755, at *8 (S.D. Tex. Feb. 21, 2012) ("When a declaratory judgment action is filed in state court and is subsequently removed to federal court, it is converted to one brought under the federal Declaratory Judgment Act."). The federal Declaratory Judgment Act does not create a substantive cause of action but, instead, is merely a procedural vehicle that allows a party to obtain an early adjudication of an actual controversy arising under other substantive law. Hartford, Conn. v. Haworth, 57 S. See Aetna Life Ins. Co. of Ct. 461, 463 (1937); Lowe v. Ingalls Shipbuilding, 723 F.2d 1173, 1178 (5th Cir. 1984) Because the court has concluded that Plaintiffs have failed to state a plausible cause of action against Wells Fargo under any substantive law, requested no basis remains for the declaratory judgment in their Original JPMorgan Chase Bank, *10-14 (S.D. Tex. N.A., Oct. 25, Petition. No. See Morlock, H-13-0734, 2013); Morlock, 2013 L.L.C. v. WL 5781240, at L.L.C. v. JP Morgan Chase Bank, N.A., No. H-12-1448, 2012 WL 3187918, at *7 (S.D. Tex. Aug. 2, 2012), aff'd, No. 12-20623, June 4, 2013). -23- 2013 WL 2422778 (5th Cir. IV. Conclusions and Order For the reasons explained above, the court concludes that Plaintiffs have failed to state a plausible claim for relief under any cause of action advanced in their Original Petition. Defendant's Motion to Dismiss Pursuant to Rule 12 (b) (6) (Docket Entry No.6) is therefore GRANTED. SIGNED at Houston, Texas, on this the 21st day of May, 2014. , SIM LAKE UNITED STATES DISTRICT JUDGE -24-
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