Serna v. U.S. Bank, N.A.

• Decision Date: 09 January 2014
• Docket Number: CIVIL ACTION NO. H-13-2559
• Parties: JUAN SERNA, Plaintiff, v. U.S. BANK, N.A., Defendant.
• Court: U.S. District Court — Southern District of Texas

JUAN SERNA, Plaintiff, v. U.S. BANK, N.A., Defendant.

CIVIL ACTION NO. H-13-2559

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

Dated: January 9, 2014

MEMORANDUM & ORDER

Pending is Defendant U.S. Bank, N.A.'s Motion to Dismiss (Document No. 4). After carefully considering the motion, response, reply, and applicable law, the Court concludes as follows.

I. Background

Plaintiff Juan Serna ("Plaintiff") and his ex-wife Maria purchased a home at 21934 East Hammond Drive, Porter, Texas 77365 (the "Property") on or about October 14, 2004.¹ Plaintiff executed an Adjustable Rate Note (the "Note") to MILA, Inc. d/b/a Mortgage Investment Lending Associates, Inc. ("MILA") in the amount of $73,600.² To secure repayment of the loan, Plaintiff also executed a Deed of Trust on the Property (the "Deed of Trust") in which MILAis named as the lender.³ The Note and Deed of Trust were subsequently transferred to Defendant U.S. Bank, N.A. ("Defendant"), with America's Servicing Company ("ASC") acting as the loan servicer.⁴

Plaintiff alleges that he began to experience financial difficulties and, in an effort to remedy the situation, entered into debt restructuring negotiations with Defendant to modify the terms and conditions of the Note.⁵ Plaintiff alleges that he was offered a loan modification by ASC and that during the next several months he obtained and submitted financial documents in response to ASC's requests.⁶ Plaintiff further alleges that ASC's representatives informed him "that he was not allowed to make any mortgage payments while in loan modification status," that "he was to ignore any foreclosure notices that he received while in loan modification status," and "that they would not take any action to foreclose onthe Property while in loan modification status."⁷ Plaintiff alleges that while he was waiting for confirmation of the loan modification, believing that the discrepancy had been resolved, he was served with a Suit to Evict filed by Defendant.⁸

Plaintiff filed suit against Defendant, alleging that Defendant wrongly conducted a foreclosure sale of the Property on March 5, 2013, in which Defendant sold the Property to itself, and that Defendant "wrongfully attempted to enter upon and dispossess [the Plaintiff] of his Property."⁹ Plaintiff alleges causes of action for trespass to try title, breach of contract, and commonlaw fraud.¹⁰ Defendant moves to dismiss Plaintiff's Original Petition and to recover attorney's fees and costs.¹¹

II. Motion to Dismiss

A. Legal Standard

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). When a district court reviews the sufficiency of a complaint before it receives any evidence either by affidavit or admission, its task is inevitably a limited one. See Scheuer v. Rhodes, 94 S. Ct. 1683, 1686 (1974). The issue is not whether the plaintiff ultimately will prevail, but whether the plaintiff is entitled to offer evidence to support the claims. Id.

In considering a motion to dismiss under Rule 12(b)(6), the district court must construe the allegations in the complaint favorably to the pleader and must accept as true all well-pleaded facts in the complaint. See Lowrey v. Tex. A&M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997). To survive dismissal, a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1974 (2007). "A claim has facial plausibility when theplaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). While a complaint "does not need detailed factual allegations . . . [the] allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Twombly, 127 S. Ct. at 1964-65. "[A] formulaic recitation of a cause of action's elements will not do." Id. at 1965.

B. Analysis

1. Trespass to Try Title

Plaintiff's putative trespass to try title action is premised upon allegations that: "A. [Plaintiff] has physical control of the Property; B. [Plaintiff] owned or possessed the Property at the time of the injury; C. [Defendant] physically, intentionally, and voluntarily entered [Plaintiff's] Property; and D. [Defendant's] trespass caused an injury to [Plaintiff's] right of possession."¹²

"A trespass to try title action is the method of determining title to lands, tenements, or other real property." Tex. Prop. Code § 22.001(a). "To state a claim for trespass to try title, the plaintiff must allege, inter alia, that the defendant 'unlawfully entered upon and dispossessed him of such premises, stating the date, and withholds from him the possession thereof.'" Martinez v. CitiMortgage, Inc., CIV.A. H-13-0727, 2013 WL 2322999, at *2 (S.D. Tex. May 28, 2013) (Atlas, J.) (citing Tex. R. Civ. P. 783(e)) (granting motion to dismiss claim for trespass to try title where plaintiff maintained possession the property). Plaintiff has not alleged that Defendant dispossessed him of the Property--indeed, Plaintiff alleges that despite the foreclosure sale, he "has physical possession of the Property."¹³ Therefore, Plaintiff's claim for trespass to try title is dismissed.

2. Breach of Contract

Plaintiff alleges that Defendant's actions constitute a breach of contract because: "A. There exists a valid, enforceable contract between [Plaintiff] and [Defendant]; B. [Plaintiff] has standing to sue for breach of contract; C. [Plaintiff] performed, tenderedperformance, or was excused from performing their contractual obligations; D. [Defendant] breached the contract; and E. The breach of contract by [Defendant] caused [Plaintiff's] injury."¹⁴ This is merely "a formulaic recitation" of elements of a breach of contract claim.¹⁵ See Twombly, 127 S. Ct. at 1965. Plaintiff additionally alleges, however, that Defendant's foreclosure sale of the Property was "in violation of the agreement between the parties and without proper and timely notice to the Plaintiff as required by the Note and Deed of Trust as well as the Texas Property Code."¹⁶ The Deed of Trust provides that "[i]f Lender invokes the power of sale, Lender or Trustee shall give notice of the time, place and terms of sale by posting and filing the notice at least 21 days prior to the sale as provided by Applicable Law."¹⁷ Plaintiff's allegation is sufficiently specific to identify this provision as the one that Defendant allegedly violated.

Defendant argues, however, that Plaintiff cannot establish the necessary element of performance because Plaintiff breached his contractual obligations by defaulting on his payments.¹⁸ Plaintiff contends that "[Defendant] cannot assert that [Plaintiff] is in default under the original loan because it was [Defendant's] representations that induced the default."¹⁹ Plaintiff acknowledges that the Statute of Frauds precludes enforcement of the oral representations on which he allegedly relies, but argues that his performance may still be excused based on those representations.²⁰ This precise argument has been rejected by this Court in a motion to dismiss based on similar allegations. See Martinez, 2013 WL 2322999, at *2 (Atlas, J.) (dismissing breach of contract claim because "allowing a borrower to avoid foreclosure by arguing that he was induced to default based on an oral promise not to foreclose during loan modification negotiations 'would allow Plaintiff to circumvent the statute of frauds by essentially enforcing an unenforceable modification agreement.'") (citing Montalvo v. Bank of Am. Corp., SA-10-CV-360-XR, 2013 WL 870088, at *8 (W.D. Tex.Mar. 7, 2013). Plaintiff's breach of contract claim is therefore dismissed.

3. Common Law Fraud

Plaintiff alleges that:

The actions committed by [Defendant] constitute common law fraud because [Defendant's] representatives ('ASC') made false and material misrepresentations to [Plaintiff] when informing [Plaintiff] that he was not allowed to make any mortgage payments while in loan modification status. Further, [Defendant's] representatives informed [Plaintiff] that he was to ignore any foreclosure notices that he received while in loan modification status. Moreover, [Defendant's] representatives informed [Plaintiff] that they would not take any action to foreclose on hi[s] Property while in loan modification status. [Defendant] knew that the representations were false or made these representations recklessly, as a positive assertion, and without knowledge of the truth. In addition, [Defendant] made these representations with the intent that [Plaintiff] act on them and [Plaintiff] relied on these representations which caused [Plaintiff's] injury.²¹

"To state a claim of fraud by misrepresentation under Texas law, a plaintiff must sufficiently allege (1) a misrepresentation that (2) the speaker knew to be false or made recklessly (3) with the intention to induce the plaintiff's reliance, followed by (4) actual and justifiable reliance (5) causing injury." Rio Grande Royalty Co., Inc. v. Energy Transfer Partners, L.P., 620 F.3d 465, 468 (5th Cir. 2010) (citing Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001)).

Fraud claims are subject to the heightened pleading requirements of Rule 9(b), which requires that "a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." FED. R. CIV. P. 9(b). The Fifth Circuit "interprets Rule 9(b) strictly, requiring a plaintiff pleading fraud to specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent. Put simply, Rule 9(b) requires the complaint to...