Miller v. BAC Home Loans Servicing, L.P.

• Decision Date: 13 August 2013
• Docket Number: No. 12–41273.,12–41273.
• Citation: 726 F.3d 717
• Parties: James R. MILLER; Allene S. Miller, Plaintiffs–Appellants, v. BAC HOME LOANS SERVICING, L.P.; National Default Exchange, L.P., Defendants–Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

726 F.3d 717

James R. MILLER; Allene S. Miller, Plaintiffs–Appellants,

v.BAC HOME LOANS SERVICING, L.P.; National Default Exchange, L.P., Defendants–Appellees.

No. 12–41273.

United States Court of Appeals, Fifth Circuit.

Aug. 13, 2013.

Ralph Edwin Allen, Tyler, TX, for Plaintiffs–Appellants.

David Stewart Clancy, Esq., Andrew D. Thomas, Akerman Senterfitt, L.L.P., Dallas, TX, Mark D. Hopkins, Esq., Hopkins & Williams, P.L.L.C., Austin, TX, Christopher Hal Pochyla, Barrett, Daffin, Frappier, Turner & Engel, L.L.P., Addison, TX, for Defendants–Appellees.

Appeal from the United States District Court for the Eastern District of Texas.

Before STEWART, Chief Judge, and DAVIS and WIENER, Circuit Judges.

CARL E. STEWART, Chief Judge:

This case pertains to the foreclosure sale of the property located at 810 Corey Drive in Whitehouse, Texas, by Defendants–Appellees, BAC Home Loans Servicing (“BAC”) and National Default Exchange (“NDE”). Plaintiffs–Appellants, James and Allene Miller, appeal the district court's dismissal with prejudice of their claims against BAC and NDE under the Texas Debt Collection Act (“TDCA”), Tex. Fin.Code § 392.304(a), the Texas Deceptive Trade Practices Act (“DTPA”), Tex. Bus. & Com.Code § 17.41 et seq., and Texas common law.

For the reasons provided herein, we AFFIRM the district court's dismissal of the Millers' DTPA and Texas common law claims. We also AFFIRM the district court's dismissal of the Millers' TDCA claims under §§ 392.304(a)(8), (18), and (19). We REVERSE the district court's dismissal of the Millers' TDCA claims under § 392.304(a)(14) as well as the district court's denial of the Millers' request for an accounting from NDE. We REMAND for further proceedings consistent with this opinion.

I.

In December 2001, the Millers obtained a purchase money mortgage for the Corey Drive property from Nexstar Financial Corp (“Nexstar”). The mortgage note was secured by a deed of trust lien. Effective April 7, 2010, Nexstar assigned the note and lien to BAC, which proceeded to act as the loan servicer.

The Millers fell behind on their mortgage payments. Notwithstanding the effective assignment date of April 7, 2010, the Millers first received notice that their loan was in default from BAC on March 10, 2010.¹ The written notice warned the Millers that they faced loan acceleration and sale of the property at foreclosure auction unless they cured the default by April 9, 2010.

The Millers allege that between March 10, 2010 and May 3, 2010, they called BAC at least three times, and that each call resulted in an unfulfilled promise from a BAC call center representative to send them a loan modification application. Further, the Millers allege that at least one of the call center representatives assured them that there would be no need to make a pre-modification payment to cure the default.

On May 3, 2010, the Millers received a letter from BAC's foreclosure law firm stating that a foreclosure sale of the property would occur on June 1, 2010. The Millers allege that sometime between May 3, 2010, and May 18, 2010, a BAC foreclosure specialist named Victoria Masters informed them that she would make sure a loan modification application arrived, and that the foreclosure sale would be postponed while they attempted to modify their loan. The loan modification application arrived on May 18, 2010.

The Millers returned their completed application by mail on May 28, 2010. That same day, they were contacted by an agent of BAC who informed them that the foreclosure auction would proceed on June 1, 2010. On May 31, 2010, the Millers again spoke with Ms. Masters, the BAC foreclosure specialist. She informed them that no postponement had yet been approved, but that she would attempt to obtain such approval from Fannie Mae. Later that day, the Millers allege Ms. Masters represented to them that she had obtained approval from Fannie Mae for foreclosure postponement pending disposition of their loan modification application.

Notwithstanding this alleged representation of postponement, the foreclosure sale proceeded as scheduled on June 1, 2010. An individual named Carol Hampton acted as substitute trustee. The Millers allege that Ms. Hampton was an agent of NDE, acting at the behest of BAC.² The Corey Drive property sold at public auction. Sometime the following month, the Millers voluntarily vacated the property at the request of the purchaser.

II.

The Millers filed suit on January 14, 2011, and amended their complaint on September 22, 2011, ultimately raising claims under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., the TDCA, the DTPA, and Texas common law. On October 17, 2011, BAC moved to dismiss the amended complaint under Federal Rule of Civil Procedure (“Rule”) 12(b)(6). The magistrate judge filed her report on March 23, 2012, in which she recommended that the district court dismiss all claims against both defendants.³

After the Millers timely objected to the magistrate judge's report, the district court proceeded to adopt the report upon de novo review. The district court entered final judgment against the Millers on April 11, 2012.

On May 8, 2012, the Millers moved to alter or amend the judgment pursuant to Rule 59(e). Among other things, the Millers argued that it was not fair for the district court to have dismissed their claims against NDE. The Millers emphasized that BAC's motion to dismiss had not addressed their request for an accounting of the foreclosure sale from NDE or for a distribution of excess profits from the sale.⁴ The Millers contended that they had not had a prior meaningful opportunity to justify those claims and, in their Rule 59(e) motion, provided legal arguments as to why those claims should survive scrutiny under Rule 12(b)(6).

In a second report, dated September 24, 2012, the magistrate judge addressed the Millers' Rule 59(e) motion. The magistrate judge recommended denial of the motion, explaining that the Millers' written objections to her first report had not encompassed the request for an accounting and distribution, even though the Millers could have objected to her prior failure to address the request. The magistrate judge further concluded that the Millers had not stated a claim for an accounting independent of their claims for wrongful foreclosure, which she already had addressed in her first report and the district court already had dismissed.

The Millers timely objected to this second report. Nevertheless, the district court proceeded to adopt it upon de novo review, thereby denying the motion to alter or amend the judgment. The Millers timely appealed. However, they only pursue some of their claims on appeal, namely their: (i) TDCA claims against BAC; (ii) DTPA claims against BAC; (iii) promissory estoppel claims against BAC; (iv) wrongful foreclosure claims against both BAC and NDE; and (v) request for an accounting from NDE and distribution of any excess profits.

III.

“We review de novo the grant of a 12(b)(6) motion to dismiss.” Gregson v. Zurich Am. Ins. Co., 322 F.3d 883, 885 (5th Cir.2003). “We generally review a decision on a motion to alter or amend judgment under Rule 59(e) for abuse of discretion.” Pioneer Natural Res. USA, Inc. v. Paper, Allied Indus., Chem. & Energy Workers Int'l Union Loc. 4–487, 328 F.3d 818, 820 (5th Cir.2003) (citations omitted). “To the extent that a ruling was a reconsideration of a question of law, however, the standard of review is de novo.” Id. (citations omitted).

IV.

A. TDCA Claims Against BAC

We acknowledge at the outset that the Millers do not appeal the district court's dismissal of their FDCPA claims. With respect to those claims, the magistrate judge rightly explained that the FDCPA distinguishes between “creditors” and “debt collectors.” Compare15 U.S.C. § 1692a(4) (creditors), with15 U.S.C. § 1692a(6) (debt collectors). She then observed that the FDCPA generally applies to debt collectors, but not to creditors, except “to the extent that [a creditor] receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.” 15 U.S.C. § 1692a(4).⁵ The magistrate judge finally noted that we previously have held that “mortgage servicing companies” and “debt assignees” are not debt collectors, and therefore are not regulated by the FDCPA, “as long as the [mortgage] was not in default at the time it was assigned” by the originator. Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir.1985) (citations omitted). Applying these principles, the magistrate judge concluded that BAC was not a debt collector, and thus was not subject to the FDCPA because, on the Millers' pleadings, BAC already had acquired the mortgage when the Millers defaulted on it.⁶

We recount the magistrate judge's FDCPA analysis because, immediately thereafter, the magistrate judge analyzed the Millers' comparable claims under the TDCA. The TDCA similarly distinguishes between creditors and debt collectors. CompareTex. Fin.Code § 392.001(3) (creditors), withTex. Fin.Code § 392.001(6) (debt collectors). Its prohibitions apply only to debt collectors. See Catherman v. First State Bank of Smithville, 796 S.W.2d 299, 302 (Tex.App.1990). The TDCA, however, also breaks out a third class of lien-holders, which it calls “third-party debt collectors.” SeeTex. Fin.Code § 392.001(7). It defines third-party debt collectors by expressly referencing the FDCPA definition of debt collectors found in 15 U.S.C. § 1692a(6).

In light of this reference, the magistrate judge concluded that the Millers' TDCA claims must fail for the same reasons that their FDCPA claims do. We reject this conclusion, which erroneously affords the lone third-party debt collectors reference talismanic significance despite the fact that the FDCPA is a “distinguishable, federal statute.” See Monroe v. Frank, 936 S.W.2d 654, 660 (Tex.App.1996) (citation and footnote omitted) (listing differences between...