Anderson v. J.P. Morgan Chase, CIVIL ACTION NO. H-13-1448

• Decision Date: 11 December 2013
• Docket Number: CIVIL ACTION NO. H-13-1448
• Parties: KERRY ANDERSON and DIANE ANDERSON, Plaintiffs, v. J.P. MORGAN CHASE, Defendant.
• Court: U.S. District Court — Southern District of Texas

KERRY ANDERSON and DIANE ANDERSON, Plaintiffs, v. J.P. MORGAN CHASE, Defendant.

CIVIL ACTION NO. H-13-1448

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

Dated: December 11, 2013

MEMORANDUM AND RECOMMENDATION GRANTING

DEFENDANT'S MOTION TO DISMISS

Pending in this case that has been referred to the Magistrate Judge pursuant to 28 U.S.C. § 636(b)(1)(B) is Defendant JPMorgan Chase Bank, N.A.'s Motion to Dismiss for Failure to State a Claim (Document No. 4). Having considered Defendant's Motion to Dismiss, Plaintiffs' Response in opposition (Document No. 5), Defendant's Reply (Document No. 7), the allegations in Plaintiffs' state court pleading, and the applicable law, the Magistrate Judge RECOMMENDS, for the reasons set forth below, that Defendant's Motion to Dismiss (Document No. 4) be GRANTED and Plaintiffs' claims DISMISSED pursuant to FED. R. CIV. P. 12(b)(6) for failure to state a claim.

I. Background and Procedural History

On April 2, 2013, Plaintiffs Kerry Anderson and Diane Anderson ("the Andersons") initiated this suit in the 400^th District Court of Fort Bend County, Texas, Cause No. 13-DCV-205251, complaining about the scheduled foreclosure on their residence. In their state court "First Amended Plaintiffs' Original Petition and Application for Temporary Restraining and Injunctive Relief" (referred to hereafter as "the Andersons' Pleading"), the Andersons alleged that they obtained amortgage loan from Kingston Mortgage Company in 2006, for the property located at 8415 Kelsey Pass, Missouri City, Texas 77459; that between 2007 and January 2008, the note was transferred to Defendant JPMorgan Chase ("Chase"), which became the note holder and mortgage servicer; that they contacted Chase in 2010 about a possible loan modification; that they filed a Chapter 13 bankruptcy proceeding in January 2011, and pursuant to a bankruptcy plan approved of and confirmed by the bankruptcy court, they paid Chase $55,625.94 in payments through June 2012; that upon the dismissal of their bankruptcy proceeding they resumed their efforts to "finalize a loan workout alternative plan," and that Chase has, despite their ongoing efforts to obtain a loan modification, "continued its efforts to accelerate their loan and initiate [a] foreclosure proceeding with a notice of sale set for April 2, 2013." Andersons' Pleading at 3-5 (Document No. 1-1) at 73-75. The Andersons asserted claims against Chase for: (1) improper notice of default and sale under § 51.002 of the Texas Property Code; (2) failure to provide information about the change in mortgage servicer, in violation of § 158.101 of the Texas Finance Code; (3) breach of contract, based on Chase's failure to provide them with the disclosures required by RESPA, and its failure to forego foreclosure while they were seeking a loan modification; (4) wrongful foreclosure; and (5) negligence/negligent misrepresentation.

Chase timely removed the case to this Court on the basis of diversity, and promptly filed a Motion to Dismiss, arguing that the Andersons have not stated a claim for which relief may be granted. The Andersons have filed a Response, to which Chase has filed a Reply. In connection with their Response to the Motion to Dismiss, the Andersons appear to raise with their briefing an additional breach of contract claim - that the payments they made on their loan through June 2012, were not credited to their account.

II. Standard of Review

Rule 12(b)(6) provides for dismissal of an action for "failure to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is said to be plausible if the complaint contains "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949. Plausibility will not be found where the claim alleged in the complaint is based solely on legal conclusions, or a "formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555. Nor will plausibility be found where the complaint "pleads facts that are merely consistent with a defendant's liability" or where the complaint is made up of "'naked assertions devoid of further factual enhancement.'" Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 557)). Plausibility, not sheer possibility or even conceivability, is required to survive a Rule 12(b)(6) motion to dismiss. Twombly, 550 U.S. at 556557; Iqbal, 129 S.Ct. at 1950-1951.

In considering a Rule 12(b)(6) motion to dismiss, all well pleaded facts are to be taken as true, and viewed in the light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). But, as it is only facts that must be taken as true, the court may "begin by identifying the pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Iqbal, at 1950. It is only then that the court can view the well pleaded facts, "assume their veracity and [ ] determine whether they plausibly give rise to an entitlement to relief." Iqbal, at 1950.

III. Discussion - Plaintiff's Claims¹

A. Improper Notice Claim under § 51.002 of the Texas Property Code

In their first claim, the Andersons allege that Chase "violated the statutory requirements under the Texas Property Code § 51.002(d)" when it sent them "simultaneously" both a notice of default and a notice of sale. Andersons' Pleading at 5-6 (Document No. 1-1 at 75-76). According to the Andersons, "[a] mortgage servicer must comply with all provisions of § 51.002 of the Texas Property Code in order for a valid right to foreclose to arise" including that part which "provides that notice of default has a 20-day notice period separate and independent of the 21-day notice period required for notice of sale." Andersons' Pleading at 6 (Document No. 1-1 at 76).

The Texas Property Code imposes certain notice requirements prior to a foreclosure sale. As is relevant to this case and the Andersons' allegations, § 51.002(b) provides that "notice of the sale . . . must be given at least 21 days before the date of the sale," and § 51.002(d) provides that "the mortgage servicer of the debt shall serve a debtor in default under a deed of trust or other contract lien on real property used as the debtor's residence with written notice by certified mail stating that the debtor is in default under the deed of trust or other contract lien and giving the debtor at least 20 days to cure the default before notice of sale can be given under Subsection (b)." Under § 51.002 notice of default and notice of sale are not to be provided simultaneously. However, to maintain a claim under § 51.002 of the Texas Property Code based on insufficient or improper notice there must be a sale of the property. Landry v. Wells Fargo Home Mortg., Inc., No. EP-13-CV-144-KC, 2013 WL 5278497 *3 (W.D. Tex. Sept. 18, 2013) ("Because these provisions [§ 51.002 of the TexasProperty Code] set notice requirements based on the date of sale, a plaintiff can only bring a cause of action under either provision if she alleges that a sale has occurred."); Ayers v. Aurora Loan Services, LLC, 787 F.Supp.2d 451, 454 (E.D. Tex. 2011) (dismissing claim for violations of § 51.002 of the Texas Property Code for failure to state a claim where "no foreclosure sale ha[d] occurred"). Here, there has admittedly been no sale of the property made the basis of this suit. As such, the Andersons have not and cannot state a claim for violations of § 51.002 of the Texas Property Code, e.g., Crucci v. Seterus, Inc., No. EP-13-CV-317-KC, 2013 WL 6146040 *3 (W.D. Tex. Nov. 21, 2013) (dismissing claim for violation of § 51.002 of the Texas Property Code where foreclosure sale had not occurred), and that claim is subject to dismissal under Rule 12(b)(6).

B. Disclosure Claim under § 158.101 of the Texas Finance Code

In their second claim, the Andersons allege that Chase failed to provide them the notice required by § 158.101 of the Texas Finance Code of its status as their mortgage service. According to the Andersons, Chase "violated Section 158.101 of the Texas Finance Code, Residential Mortgage Loan Servicer Registration Act, [by] failing to provide a disclosure statement to Plaintiffs no later than 30 days after the mortgage servicer commences servicing the loan." Andersons' Pleading at 7 (Document No. 1-1 at 77). The Andersons further allege that they "never received the aforementioned disclosure notice when Defendant Chase assumed the mortgage servicer role from 'MERS' as is required under the Texas Finance Code and Administrative Code." Id. at 8 (Document No. 1-1 at 78).

Section 158.101 of the Texas Finance Code provides that "[a] registrant shall provide to the borrower of each residential mortgage loan the following notice not later than the 30th day after the registrant commences servicing the loan:

COMPLAINTS REGARDING THE SERVICING OF YOUR MORTGAGE SHOULD BE SENT TO THE DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, __(street address of the Department of Savings and Mortgage Lending). A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT _____ (telephone number of the Department of Savings and Mortgage Lending's toll-free consumer hotline).

Section 158.101 of the Texas Finance Code was enacted in 2011, and has an effective date of September 1, 2011. Based on the Andersons' own allegations, Chase began servicing their mortgage sometime "between 2007 and January 2008," well before the effective date of § 158.101 of the Texas Finance Code. The Andersons, therefore, cannot state a claim against Chase for violations of § 158.101 of the Finance Code because that provision did not exist at the time Chase became the mortgage...