Smith v. Wells Fargo Bank

• Decision Date: 18 August 2021
• Docket Number: 3:19-cv-02406-X-BT
• Parties: SHERI LYNN SMITH n/k/a CHARLI ROSE NICHOLS, Plaintiff, v. WELLS FARGO BANK N.A., Defendant, v. JEFFREY DONALD SMITH, Third-Party Defendant.
• Court: U.S. District Court — Northern District of Texas

SHERI LYNN SMITH n/k/a CHARLI ROSE NICHOLS, Plaintiff, v. WELLS FARGO BANK N.A., Defendant, v. JEFFREY DONALD SMITH, Third-Party Defendant.

No. 3:19-cv-02406-X-BT

United States District Court, N.D. Texas, Dallas Division

August 18, 2021

FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

REBECCA RUTHERFORD, UNITED STATES MAGISTRATE JUDGE

Before the Court in this removed civil action is DefendantWells Fargo Bank N.A.’s Motion for Summary Judgment(ECF No 38).For the following reasons, the Court should GRANT the Motion and enter a final judgment for an order authorizing Wells Fargo to foreclose on the property at issue.

Background

Because this is the fourth lawsuit PlaintiffSheri Lynn Smith n/k/a Charli Rose Nichols(Nichols) has filed to prevent the foreclosure of her home, the Court recites only the facts that are pertinent to resolving the pending motion.^[1]

On November 20, 2002, Nichols and her then-husband Jeffrey Donald Smith(together “Borrowers”) purchased a home in Rowlett, Texas (the “Property”) using proceeds from a mortgage loan (the “Loan”) obtained from Washington Mutual Bank, F.A. (the “Original Lender”).Def.’s Br. 5, 8 (ECF No. 39); Pl.’s Resp. 2 (ECF No. 41).The Borrowers concurrently executed a note (the “Note”) and a Deed of Trust (the “DOT”) granting a security interest in favor of the Original Lender.Def.’s Br. 8;9-10 Def.’s App., Ex. A-1 (Note)(ECF No. 40);12-19 Def.’s App., Ex. A-2 (DOT); Pl.’s Resp. 2.Four years later, on December 11, 2016, the Original Lender transferred the Loan to Wells Fargo.Def.’s Br. 8;25 Def.’s App., Ex. A-3 (Assignment); Pl.’s Resp. 2.Wells Fargo is the current holder of the Note and beneficiary of the DOT; it is also the servicer on the Loan. 5 Def.’s App., Ex. A (Penno Declaration).

The Note’s terms require the Borrowers to pay principal and interest on the first of each month.Note 9.The Note also provides that if the Borrowers fail to make payments as they become due, the maturity date of the Note accelerates, and the remaining unpaid balance becomes immediately payable in full.Id. at 10.The DOT similarly provides for the payment of principal and interest and any late fees on the debt evidenced in the Note, as well as authorization for acceleration of the maturity date of the Note and foreclosure of the Property if the Borrowers default.DOT 13-16, 18.

Nichols and Smith divorced in 2010. Am. Compl. 2 (ECF No. 30);Def.’sBr. 8.In the divorce proceedings, the state court issued an Agreed Decree of Divorce (“Divorce Decree”) awarding the Property to Nichols and requiring her to pay the indebtedness of the Note.Am. Compl. 2;Def.’sBr. 8;407, 411 Def.’s App., Ex. D (Divorce Decree).Nichols thereafter allegedly “explored options to refinance in order to remove [Smith] from the loan per the terms of the divorce decree.”Am. Compl. 2.In November 2014, she recorded a DOT to Secure Assumption and a Special Warranty Deed purportedly executed by Smith.^[2]Am. Compl. 2-3;Def.’sBr 8.Wells Fargo sent correspondence to Nichols and Smith on two occasions-on November 24, 2015 and March 10 2016-however, “explaining that the Divorce Decree and Special Warranty Deed did not release Smith from his obligations under the terms of the Note.”Def.’sBr. 9(citing78-79 Def.’s App., Ex. A-6;97-98 Def.’s App., Ex. A-9);see alsoAm. Compl. 2-3.Accordingly, Wells Fargo avers that Nichols and Smith both remain obligors under the Note.Def.’s Br. 9.

Borrowers failed to make their required payment on March 1, 2015.Def.’s Br. 10;5 Def.’s App., Ex.A;Id.Ex. A-4.And they failed to make each subsequent payment due thereafter.Id.Wells Fargo therefore sent Borrowers Notices of Default and Intent to Accelerate on October 27, 2015.104-27 Def.’s App., Ex. B-1.According to Wells Fargo, the amount due and owing on the Note was $178,108.99, as of September 1, 2020.Def’sBr. 17.This amount increases approximately $500 per month for each month after October 1, 2020.Id.

Nichols then filed several actions against Wells Fargo to prevent foreclosure.The Court granted Wells Fargo’s motions to dismiss in the first two cases filed by Nichols-the second time with prejudice.SeeNichols v. Wells Fargo Bank, N.A., 3:17-cv-02096-M-BH, 2018 WL 2164524, at * 6(N.D. Tex.Apr. 6, 2018), rec. adopted, 2018 WL 2150993(N.D. Tex.May 10, 2018);Nichols v. Wells Fargo Bank, N.A., 3:16-cv-02654.Nichols then sued Wells Fargo for a third time in August 2018, alleging wrongful disclosure and other various claims (the “Prior Lawsuit”).Def.’s Br. 1 n.1; Pl.’s Resp. 2;see alsoNichols v. Wells Fargo Bank, N.A., 3:18-cv-02184-B.

In June 2019, Nichols and Wells Fargo reached an agreement in which Nichols would dismiss the Prior Lawsuit in exchange for loan modification review and $250 (the “Settlement Agreement”).Def.’s Br. 10;see265-315 Def.’s App., Exs. C-1 & C-2 (Settlement Agreement); Pl.’s Resp.2.Under the terms of the Settlement Agreement, Nichols had until July 21, 2019 to submit a complete loan modification application to Wells Fargo.Def.’s Br. 10, see Settlement Agreement 270.Even if Wells Fargo denied this application, Nichols agreed not to “take any action to delay, hinder, oppose, and/or interfere with the foreclosure of the Property.”Def.’sBr. 10; Settlement Agreement 270-71.

Nichols did not submit a loan modification application by the deadline, however, prompting Wells Fargo to send Notices of Acceleration/Notices of Sale to Borrowers on July 25, 2019.Def.’s Br. 10;101 Def.’s App., Ex. B (Forster Declaration);129-260 Def.’s App. Ex. B-2 (Notices of Acceleration).Wells Fargo further scheduled a foreclosure sale for October 1, 2019.SeeAm. Compl. 6-7(referencing Wells Fargo’s “threatened foreclosure sale”);Def.’sBr. 10; Notices of Acceleration 130, 136.

Thereafter, Nichols filed the present action in Texas state court seeking a temporary restraining order (TRO) prohibiting Wells Fargo from conducting the scheduled foreclosure sale.SeeNotice Removal, Ex. C-2, 2(Original Pet.)(ECF No. 1-5).The state court granted Nichols’s request and issued a TRO on October 1, 2019.Notice Removal, Ex. C-3, 3-4 (ECF No. 1-6)(TRO).Wells Fargo then answered Nichols’s Original Petition, see Notice Removal, Ex. C-5 (Original Answer)(ECF No. 1-8), before timely removing the case to this Court on October 10, 2019.See Notice Removal 1 (ECF No. 1).

On May 22, 2020, Nichols amended her Complaint.See Am. Compl.She now alleges only two causes of action: breach of the Settlement Agreement and fraudulent inducement.Am. Compl. 5.Specifically, Nichols claims that Wells Fargo breached the Settlement Agreement by preventing her from submitting a loan modification application on time.Pl.’s Resp. 2, 4.Nichols alleges the loan modification application-attached to the Settlement Agreement by Wells Fargo- required her to list a “hardship” that made repayment of the Loan difficult.Id.Nichols, however, claims that this prerequisite was not applicable to her circumstance, as she“has always been able to pay her mortgage.”Am. Compl. 3; Pl.’s Resp. 2, 4.Wells Fargo’s conduct also amounted to fraudulent inducement, according to Nichols, as she supposedly relied on Wells Fargo’s “false representations” promising loan modification review when Wells Fargo had no intention of providing a good faith review.Pl.’s Resp. 5.

Nichols therefore asks that the Court grant her actual damages due to: (1) loss of equity in the Property if Wells Fargo is permitted to foreclose; (2) lost time spent fighting foreclosure; (3) the payment of improper fees, expenses, and charges; and (4) mental anguish damages connected to Wells Fargo’s threats to foreclose.Id. at 6-7.Wells Fargo timely answered Nichols’s Amended Complaint (ECF No. 31).

Shortly after removal, Wells Fargo filed counterclaims against Nichols and a Third-Party Complaint against Smith (ECF No. 20).Wells Fargo first alleges that Nichols breached the Settlement Agreement by seeking to prevent the foreclosure of the Property.Counterclaim & Third-Party Compl.5.Due to this breach and the Borrowers’ default, Wells Fargo seeks (1) entry of an order of judicial foreclosure, including its debt, damages, and costs; (2) a writ of possession issued against Nichols, Smith, and anyone else claiming an interest in the Property; and (3) a declaratory judgment awarding Wells Fargo its reasonable and necessary attorneys’ fees and costs.Id. at 5-6.Both Nichols (ECF No. 26) and Smith (ECF No. 24) filed answers to Wells Fargo’s counterclaims and Third-Party Complaint.

Wells Fargo then filed its pending Motion for Summary Judgement requesting that the Court dismiss Nichols’s claims in their entirety and enter judgment in favor of Wells Fargo on its counterclaims and third-party claims for breach of contract, judicial foreclosure, and writ of possession.Id. at 3.Nichols filed a response (ECF No. 41), but no appendix or other evidence, and Wells Fargo replied (ECF No. 42).While Smith did not respond to Wells Fargo’s Motion, he included in his affidavit to Wells Fargo his desire for foreclosure to commence “as soon as possible.”81 Def.’s App., Ex. A-7;83 Def.’s App., Ex. A-8.Regardless, the time to file a response has passed.Accordingly, Wells Fargo’s Motion for Summary Judgment is ripe for determination.

Legal Standard

Summary judgment is proper when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”Fed. R. Civ. P. 56(a).A party seeking summary judgment bears the initial burden of showing the absence of a genuine issue for trial.Duffy v Leading Edge Prods., Inc., 44 F.3d 308, 312(5th Cir.1995)(citations omitted).The movant’s burden can be satisfied...