Kallie et al v. Citi Residential Lending, Inc. et al, No. 4:2018cv04238 - Document 15 (S.D. Tex. 2019)
Court Description: MEMORANDUM OPINION AND ORDER granting 5 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM , granting 6 MOTION to Dismiss (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)
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Kallie et al v. Citi Residential Lending, Inc. et al Doc. 15 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION DJUANA KALLIE and TERRY JOHNSON, § § § Plaintiffs, v. CITI RESIDENTIAL LENDING, INC.; OCWEN LOAN SERVICING, LLC; POWER DEFAULT SERVICES, INC.; AVT TITLE SERVICES, LLC; and DOES 1-X, Defendants. § § § § § § § § § § § CIVIL ACTION NO. H-18-4238 MEMORANDUM OPINION AND ORDER Plaintiffs Djuana Kallie and Terry Johnson ("Plaintiffs") sued defendants Citi Residential Lending, Inc. ( "Citi"), Ocwen Loan Servicing, LLC ( "Ocwen") ·' Power Default Services, Inc. ( "PDS") , AVT Title Services, LLC ( "AVT") , and Does 1-X in the 61st Judicial District Court of Harris County, Texas, for wrongful foreclosure, breach of the implied covenant of good faith and fair dealing, slander relief. 1 of title, negligence, and declaratory and injunctive Citi, Ocwen, and PDS (collectively, "Defendants") removed the action to this court on November 8, 2018. 2 Pending before the court are Defendant Citi Residential Lending, Inc.'s Motion to 1 See Plaintiffs Complaint for Wrongful Foreclosure, Breach of the Implied Covenant of Good Faith and Fair Dealing, Slander of Title, Negligence, and Declaratory Relief ("Complaint"), Exhibit D-2 to Notice of Removal, Docket Entry No. 1-6. 2 See Notice of Removal, Docket Entry No. 1. Dockets.Justia.com Dismiss and Brief in Support ( "Ci ti, s MTD and Servicing, Defendants Ocwen Loan 11 (Docket Entry No. 5) ) LLC and Power Default Services, Inc. , s Motion to Dismiss and Brief in Support ( "Ocwen and PDS 1 MTD S 11 ) (Docket Entry No. 6) For the reasons explained below, both motions will be granted. I. Factual Background Plaintiffs filed this action to avoid the foreclosure sale of their real property located at 2631 Palm Street, 77004 (the "Property October of Company, Property. 4 2005, LLC 11 ) • 3 Texas When Plaintiffs purchased the Property in they obtained ( "Argent Houston, 11 ) and financing executed a from Argent deed of Mortgage trust on the On April 8, 2009, Argent (By Citi as its Attorney-in- Fact) assigned its interest in the deed of trust to American Home Mortgage Servicing, Inc. ( "American 11 ) 5 On February 5, 2011, American assigned its interest in the deed of trust to Deutsche Bank National Trust Company, Inc., Asset-Backed as Trustee for Argent Securities, Pass-Through Certificates, Series 2005-WS See Ocwen and PDS,s MTD, Docket Entry No. 6., p. 1; Complaint, Exhibit D-2 to Notice of Removal, Docket Entry No. 1-6. 3 4 See Complaint, Exhibit D-2 to Notice of Removal, Docket Entry No. 1-6, p. 21 (including the deed of trust as Exhibit B). 5 See id. at 40 (including filing for Argent,s assignment of its interest in the deed of trust to American as Exhibit C) . 6 See id. at 43 (including filing for American,s assignment of its interest in the deed of trust to Deutsche Bank as Exhibit D) . -2- Ocwen is the mortgage servicer for Deutsche Bank. 7 PDS was the substitute trustee appointed to conduct a foreclosure sale of the Property. 8 initiate Plaintiffs foreclosure argue proceedings that on Ocwen the lacks authority Property because to Citi lacked the authority to execute the original assignment on behalf of Argent, state thereby rendering subsequent assignments void. court issued a temporary restraining order foreclosure sale of the Property on October 29, 2018. II. The preventing 9 Citi, Ocwen, and PDS's Motions to Dismiss Plaintiffs' Complaint includes claims for breach of the implied covenant of good faith and fair dealing and slander of title against all of the defendants. Plaintiffs' Complaint also alleges causes of action for wrongful foreclosure and negligence against Ocwen. Because Defendants' motions address similar grounds for dismissal, the court will address them together. A. Standard of Review The Federal Rules of Civil Procedure permit dismissal when a plaintiff fails to state a claim upon which relief can be granted. 7 See id. at 49-50 (including Notice of Substitute Trustee Sale sent to Plaintiffs by Ocwen listing Deutsche Bank as the mortgagee on the deed of trust and Ocwen as the mortgage servicer as Exhibit F) . 8 See id. at 51 (including Notice of Substitute Trustee Sale listing PDS as a substitute trustee as Exhibit F) . 9 See Notice of Removal, Docket Entry No. 1, p. 2. -3- Fed. R. Civ. P. 12(b) (6). A Rule 12{b) (6) motion tests the formal sufficiency of the pleadings and is "appropriate when a defendant attacks the complaint cognizable claim." because it fails to state a legally Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001), cert. denied sub nom. Cloud v. United States, 122 S. Ct. must 2665 plead (2002). To defeat a motion to dismiss, "enough facts plausible on its face." 1955, 1974 (2007). to state a claim to a plaintiff relief that is Bell Atlantic Corp. v. Twombly, 127 S. Ct. In ruling on a Rule 12(b) (6) motion the court must "accept the plaintiff's well pleaded facts as true and view them in the light most favorable to the plaintiff." Chauvin v. State Farm Fire & Casualty Co., 495 F. 3d 232, 237 (5th Cir. 2007). B. Validity of the Assignments Plaintiffs' claims are based authority to assign Argent's American. on Citi's alleged lack interest in the deed of of trust to "[T]he law is settled in Texas that an obligor cannot defend against an assignee's efforts to enforce the obligation on a ground that merely renders election of the assignor . . Trust Company, 735 F.3d quotations omitted) . " 220, However, the assignment voidable at the Reinagel v. Deutsche Bank National 224 (5th Cir. 2013) (internal "Texas courts follow the majority rule that the obligor may defend on any ground which renders the assignment void." Id. Under Texas law "a contract executed on behalf of a corporation by a person fraudulently purporting to be -4- a corporate officer is, like any other unauthorized contract, not void, but principal." merely voidable at the election of the defrauded Id. at 226. Plaintiffs argue that Citi lacked authority to execute the original assignment to American on Argent's behalf. Plaintiffs state that "Citi has shown no relationship with Argent Mortgage Company, LLC in 2009" assign Argent's and therefore Citi was not authorized to interest in the deed of trust to American. 10 Plaintiffs claim that Citi's alleged lack of authority renders the assignment void (and Deutsche Bank's current interest in the deed of trust invalid) . However, Plaintiffs have provided the court with no evidence that Citi lacked authority from Argent to execute the assignment to American. Moreover, even if Citi lacked authority from Argent, the assignment would not be void ab initio, but merely voidable by Argent. Therefore, Citi's lack of authority, even if accepted as true, does not furnish Plaintiffs with a basis to challenge the assignment of the deed of trust to Deutsche Bank. c. Breach of the Implied Covenant of Good Faith and Fair Dealing Citi, Ocwen, and PDS argue that Plaintiffs have failed to state a claim for breach of the implied covenant of good faith and fair dealing as a matter of law. Texas law is clear that a duty of 10 See Complaint, Exhibit D- 2 to Notice of Removal, Docket Entry No. 1- 6 , p . 8 . -5- good faith and fair dealing "is not imposed in every contract but only in special imbalance in relationships bargaining marked power." by shared Federal trust Deposit or Insurance Corporation v. Coleman, 795 S.W.2d 706, 708-09 (Tex. 1990) does not recognize a covenant of good faith and an fair Texas dealing between "a mortgagor and [a] mortgagee" or between a "creditor and guarantor." Id. at 709i see also Tremble v. Wells Fargo Home Mortgage, Inc., 478 F. App'x 164, 167 (5th Cir. 2012) ("Texas has rejected the argument that a bank's prior permissive relationship with a mortgagor creates any duty to provide notice beyond that required by statute."). While Texas has adopted the UCC, imposes an implied duty of good faith and fair dealing, the UCC does not apply to real property liens like deeds of trust. Tex. Bus. & Comm. Code§ 9.109(d) (11) which See (excluding from the scope of UCC Chapter 9 "the creation or transfer of an interest in or lien on real property"). To state a claim for breach of an implied duty of good faith and fair dealing, Plaintiffs must point to facts showing such an implied duty exists. The UCC's implied duty of good faith and fair dealing does not apply because the UCC is not applicable to real property liens. There is also no baseline duty of good faith and fair dealing between mortgagors and mortgagees under Texas law. Therefore, to assert a claim for breach of a duty of good faith and fair dealing, Plaintiffs must plead enough facts to show that a -6- "special relationship" existed between Plaintiffs and Citi, Ocwen, and PDS. Plaintiffs do not assert any additional facts tending to show that they had a special relationship with Citi, Ocwen, or PDS. Plaintiffs' claim for breach of the implied duty of good faith and fair dealing therefore fails as a matter of law. D. Slander of Title Citi, Ocwen, and PDS argue that Plaintiffs have state a claim for slander of title as a matter of law. failed to "To recover in an action for slander of title, a party must allege and prove: 1) the utterings and publishing of disparaging words; 2) that they were false; 3) that they were malicious; 4) that special damages were sustained thereby; 5) that the plaintiff possessed an estate or interest in the specific sale." property disparaged; Williams v. Jennings, and 6) the loss 755 S.W.2d 874, App. -- Houston [14th Dist.] 1988, writ denied). 879 of a (Tex. Texas courts have continually reaffirmed "the long-standing general rule . that in order to recover damages for [slander] of title, the plaintiff must allege the loss of a specific sale." Ellis v. Waldrop, 656 S . W. 2 d 9 0 2 , 9 0 4- 0 5 (Tex. 19 8 3 ) . Plaintiffs base their slander of title claim on the argument that Citi lacked authority to assign Argent's interest in the deed of trust. In their Complaint, Plaintiffs contend that "Defendants have collectively slandered Plaintiffs title by filing multiple 'Assignments of Deed of Trust' and have misled the court with their -7- slanderous filings." 11 As explained above, Plaintiffs have failed to show that Citi lacked authority to assign its interest in the deed of trust. authority, Even if Plaintiffs could show that Citi lacked Plaintiffs still lack a legal basis to challenge the assignment. Plaintiffs have also failed to plead facts showing they sustained special damages or that they lost a specific sale of the Property. Plaintiffs' slander of title claim against Defendants therefore fails as a matter of law. E. Wrongful Foreclosure Ocwen and PDS argue that Plaintiffs have failed to state a legally cognizable wrongful foreclosure claim. "The purpose of a wrongful foreclosure action is to protect mortgagors against those sales where, results in through an mistake, inequitably fraud, or low price." unfairness, Vallier v. the sale Nations tar Mortgage, LLC, 2018 WL 1319166, at *4 (S.D. Tex. February 1, 2018) (quoting In re Keener, 268 B.R. 912, 921 (Bankr. N.D. Tex. 2001)) (internal quotations omitted). "In Texas, to prevail on a claim of wrongful foreclosure a plaintiff must prove: foreclosure sale proceedings; price; ( 3) and a ( 2) a Mortgage grossly inadequate selling casual connection between the defect and the grossly inadequate selling price." GMAC (1) a defect in the Corp., 268 S.W.3d 11 Id. at *4 135, 139 (citing Sauceda v. (Tex. App. See Complaint, Exhibit D- 2 to Notice of Removal, Docket Entry No. 1-6, p. 8 ~ 28. -8- Corpus Christi 2008, no pet.) of possession foreclosure. is required (internal quotations omitted). to state a claim for Loss wrongful See Peterson v. Black, 980 S.W.2d 818, 823 (Tex. App. San Antonio 1998, no pet.) ("Recovery [for wrongful foreclosure] is conditioned on the disturbance of the mortgagor's possession based on the theory that the mortgagee must have committed a wrong similar to the conversion of personal property.") Plaintiffs do not dispute that a foreclosure sale has not yet occurred. 12 Plaintiffs therefore cannot (and do not) contend that Because the Property was sold for an inadequate selling price. there has been no foreclosure sale, wrongful Plaintiffs' foreclosure claim fails as a matter of law. F. Negligence Ocwen and PDS argue that Plaintiffs have failed to state a claim against Ocwen for negligence. "Tort obligations are those imposed by law when a person breaches a duty which is independent from promises made between the parties to a contract . v. Mafrige & Kormanik, Houston [1st Dist.] P.C., 1996, 927 S.W.2d 663, no writ) . 674 When the II (Tex. loss Farah App. or damage suffered by the plaintiff is the subject matter of a contract, the plaintiff's action typically sounds in contract rather than tort. 12 See Proposed Order on Plaintiff's Emergency Motion and Ex Parte Application for Temporary Restraining Order and Temporary Injunction [signed on October 29, 2018], Exhibit D-11 to Notice of Removal, Docket Entry No. 1-15, pp. 2-3. -9- See id. The elements of a cause of action for negligence under Texas law are: (1) the existence of a duty; (2) a breach of that duty; and (3) damages proximately caused by the breach. Western Investments, Inc. v. Urena, 162 S.W.3d 547, 550 (Tex. 2005). "To impose a tort duty upon parties to a contract, the court must first find that a special relationship exists between them." Farah, 927 S.W.2d at 675 (citing Aranda v. Insurance Company of North America, 748 S.W.2d 210, 212 (Tex. 1988)). "The relationship between a borrower and lender is usually neither a fiduciary relationship nor a special relationship." Id. Plaintiffs claim that Ocwen failed to deduct a payment from Plaintiffs' account Assistance Program. 13 during a trial period of Ocwen' s Plaintiffs argue that Ocwen' s deduct the payment constitutes negligence on Ocwen' s entitles Plaintiffs to recover. 14 Mortgage failure to part that Plaintiffs fail to show that any duty existed on Ocwen's part outside of the contract obligations imposed by the deed of trust. There is no evidence that a special relationship existed between Plaintiffs and Ocwen. Because Ocwen had no duty to Plaintiffs outside of the obligations imposed by the deed of trust, Plaintiffs' negligence claim fails as a matter of law. 13 See Complaint, Exhibit D- 2 to Notice of Removal, Docket Entry No. 1-6, p. 9 ~ 35. See id. ~~ 35-36 ("OCWEN states [that] it is the Plaintiffs who did not fulfill their obligation during the Trial Period of their Mortgage Assistance Program, however, it is OCWEN's negligence that has forced Plaintiffs into foreclosure."). 14 -10- III. Improper Joinder of AVT In their Notice of Removal Defendants argue improperly joined to this joinder a party must action. 15 show either: To that AVT was establish an " ( 1) actual improper fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court." Smallwood v. Illinois Central Railroad Company, 385 F.3d 568, 573 (5th Cir. 2004). in the Fifth Circuit In applying the second test courts "conduct a Rule 12 (b) ( 6)- type analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against" the allegedly improperly joined defendant. Id. Plaintiffs' Complaint asserts claims against all of the named defendants generally, but fails to make any specific allegations against AVT. would give therefore Plaintiffs also fail to plead or assert facts that rise to improperly a cause of joined action against AVT. this action by to AVT was Plaintiffs. Plaintiffs' claims against AVT will be dismissed. IV. Conclusion For the reasons explained above, Plaintiffs have failed to state a claim for wrongful foreclosure, breach of the implied duty of good faith and fair dealing, 15 slander of title, or negligence See Notice of Removal, Docket Entry No. 1, pp. 5-7. -11- against Ci ti, Defendant Ocwen, Citi or PDS as a matter of law. 16 Residential Lending, Inc.'s Accordingly, Motion to Dismiss (Docket Entry No. 5) and Defendants Ocwen Loan Servicing, LLC and Power Default Services, No. 6) are GRANTED. Inc.'s Motion to Dismiss (Docket Entry Plaintiffs' claims against Citi, Ocwen, and PDS will be dismissed with prejudice. Plaintiffs have failed to plead legally cognizable claims for relief against AVT. action. AVT was therefore improperly joined to this Plaintiffs' claims against AVT will be dismissed without prejudice. SIGNED at Houston, Texas, on this 31st day of January, 2019. UNITED STATES DISTRICT JUDGE 16 Because each of Plaintiffs' underlying claims warrant dismissal under Rule 12 (b) ( 6) , Plaintiffs' claims for injunctive and declaratory relief are moot. -12-
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