Zahiruddin v. Select Portfolio Servicing, Inc.
| Decision Date | 14 June 2017 |
| Docket Number | CIVIL ACTION H-16-1021 |
| Parties | SHAUKATH and MOHAMMED ZAHIRUDDIN, Plaintiffs, v. SELECT PORTFOLIO SERVICING, INC. and WELLS FARGO BANK, N.A., Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Pending before the court is a motion for summary judgment filed by Select Portfolio Servicing, Inc. ("SPS") and Wells Fargo Bank, N.A., as Trustee, on behalf of registered holders of First Franklin Mortgage Loan Trust, Mortgage Pass-Through Certificates, Series 2004-FF6, incorrectly named as Wells Fargo Bank, N.A. ("Wells Fargo as Trustee") (collectively, "Defendants"). Dkt. 13. Plaintiffs Shaukath and Mohammed Zahruddin (the "Homeowners") have requested that the court deny the motion. Dkt. 16. The court has reviewed the motion, response, reply, and applicable law, and the court is of the opinion that the Defendants' motion for summary judgement (Dkt. 13) should be GRANTED.
This is a foreclosure case. On April 22, 2004, the Homeowners obtained a home equity loan from First Franklin Financial Corporation ("First Franklin"), encumbering the Homeowners' real property located at 15103 Jones Road, Houston, Texas 77070 (the "Property"). Dkt. 13, Ex. A-1, A-2; Dkt. 16, Ex. 1. In May 2010, due to an alleged serious hardship, the Homeowners contacted Bank of America, N.A. ("BANA"), the original trustee to the Deed of Trust, and requested assistance with their mortgage payments. Dkt. 16 ¶ 6. During the teleconference, BANA allegedly informed the Homeowners that BANA would grant the Homeowners a loan modification, reducing the Homeowners' interest rate by 2% and their monthly payment from $2,867.00 per month to $1,200 per month. Dkt. 16 ¶ 6-7.
Relying on this representation, in July 2010, Homeowners began making payments towards their mortgage of approximately $1,200 per month. Dkt. 13, Ex. A, A-5. However, there is no evidence of a record memorializing the alleged oral agreement to modify the Homeowners' mortgage payments in writing, and there is no evidence indicating that BANA promised the Homeowners to create and sign a contract memorializing a modification of the Homeowners' mortgage. Dkt. 13 ¶¶ 6-8. When BANA received a mortgage payment from the Homeowners, BANA would either return the payments, hold the payments until they formed a full payment that was then applied to the loan, or use the payments towards property tax advances or other accrued tax advances. Dkt. 13, Ex. A ¶ 12. BANA's application of the Homeowners' mortgage payments in this manner is specifically contemplated in the Homeowners' Deed of Trust, which also states that such an application of partial mortgage payments does not waive the Defendants' rights to refuse partial payments or foreclose. Dkt. 13, Ex. A, A-2. The Homeowners continued to pay about $1,200 per month towards their mortgage for approximately five years. Dkt. 13, Ex. A, A-5.
On May 21, 2013, BANA sent a letter to the Homeowners which seems to respond to some grievances and concerns the Homeowners asserted against BANA. Dkt. 16, Ex. 2. In this 2013 letter, BANA summarized the Homeowners' alleged complaints and concerns as of 2013, including the Homeowners' position that BANA had agreed to modify the Homeowners' mortgage. Dkt. 16, Ex. 2 at 1. The 2013 letter also stated that BANA had not offered a loan modification to the Homeowners and that BANA had applied the Homeowners' payments appropriately. Id. at 1-5.BANA continued to act as the mortgage servicer for the Homeowners' loan until December 16, 2013, when servicing of the Homeowners' loan was transferred to SPS. Dkt. 13, Ex. A, A-4.
On June 30, 2014, First Franklin assigned the Homeowners' Deed of Trust to Wells Fargo as Trustee. Dkt. 13, Ex. A, A-3; Dkt. 16, Ex. 3. SPS is the present mortgage servicer and acts on behalf of Wells Fargo as Trustee. Dkt. 13, Ex. A, A-4. Defendants began the foreclosure process because the Homeowners were in serious default under their original mortgage agreement and the Homeowners had not received and were not eligible for an enforceable loan modification. Dkt. 13, Ex. A, A-7. On March 19, 2015, Defendants sent a Notice of Default and Intent to Accelerate to the Homeowners. Dkt. 13, Ex. A, A-8. On July 22, 2015, SPS sent a letter to the Homeowners notifying them that the Homeowners' last full payment1 was received on March 18, 2015, that the Homeowners' mortgage loan was in default, and that the Homeowners had to pay $126,299.57 by August 5, 2015 to cure the default. Dkt. 16, Ex. 4.
On March 2, 2016, the Homeowners filed a lawsuit against the Defendants in the 333rd Judicial District Court, Harris County, Texas, seeking a permanent injunction against the Defendants to prevent the foreclosure of their property. Dkt. 1 at 5-7. Their petition asserts a claim for promissory estoppel. Id. Homeowners protest Defendants' foreclosure action, alleging that Defendants knew of BANA's approval of their loan modification and are now reneging on the arrangement. Dkt. 16 at 8-12, Ex. 2.
On April 15, 2016, Defendants removed the matter to this court, asserting that this court has diversity jurisdiction. Dkt. 1. On January 4, 2017, Defendants filed a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56, to which Homeowners have filed a response, and Defendants have filed a reply. Dkts. 13, 16, 17. The motion is now ripe for disposition.
A court shall grant summary judgment when a "movant shows that 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] fact is genuinely in dispute only if a reasonable jury could return a verdict for the non-moving party." Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388, 392 (5th Cir. 2006). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548 (1986). If the party meets its burden, the burden shifts to the non-moving party to set forth specific facts showing a genuine issue for trial. Fed. R. Civ. P. 56(e). The court must view the evidence in the light most favorable to the non-movant and draw all justifiable inferences in favor of the non-movant. Envtl. Conservation Org. v. City of Dall, Tex., 529 F.3d 519, 524 (5th Cir. 2008).
Defendants seek summary judgment on all of the Homeowners' claims because (1) any promise by BANA modifying the Homeowners' mortgage is not enforceable unless the promise is memorialized in writing; (2) for promissory estoppel to supersede the writing requirement, there must be a promise by BANA to sign an existing contract that modifies the Homeowners' mortgage, yet evidence of this type of promise is not provided by the Homeowners; (3) Homeowners did not rely on BANA's promise to adjust their mortgage payments; and (4) Homeowners' failure to establish a claim giving rise to a plausible right of relief precludes them from injunctive relief.Dkt.13 at 5-9. The Homeowners ask the court to deny Defendants' motion for summary judgment because (1) the Defendants failed to meet their burden to prove that the statute of frauds affirmative defense bars the Homeowners' promissory estoppel claim, and (2) the Homeowners reasonably relied on the representations of BANA.
Promissory estoppel is an equitable doctrine that allows the enforcement of an unenforceable promise and is used to prevent injustice resulting from reasonable and detrimental reliance. See Wheeler v. White, 398 S.W.2d 93, 96 (Tex. 1965). "Texas courts have contemplated promissory estoppel claims as either independent claims or defenses to a statute of frauds defense." Martin-Janson v. JP Morgan Chase Bank, N.A., 536 F. App'x 394, 398 (5th Cir. 2013) (citing Ford v. City State Bank of Palacios, 44 S.W.3d 121, 138-40 (Tex. App.—Corpus Christi, 2001, no pet.). Here, the Homeowners' petition pleads promissory estoppel as an independent cause of action, and the Homeowners argue that promissory estoppel serves as an equity-based exception to the Defendants' statute of frauds affirmative defense. Dkt.16 ¶ 13.
"Under the doctrine of promissory estoppel, . . . a person may be bound by a promise that [the person] reasonably believed would induce action or inaction" by another, and in reliance on the promise, the other person is induced to act or forbears to act. Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249, 256 (5th Cir. 2013) (citing Moore Burger, Inc. v. Phillips Petroleum Co., 492 S.W.2d 934, 937 (Tex. 1972)). However, a promise relating to the sale of real estate or a real estate loan agreement must be in writing and signed by the party to be bound to satisfy the Texas statute of frauds. Martins, 722 F.3d at 256-57; See Tex. Bus. & Com. Code Ann. § 26.02(b) (West 2017). A "loan agreement means one or more promises, promissory notes, agreements, undertakings, security agreements, deeds of trust or other documents, or commitments, or anycombination of those actions or documents, pursuant to which a financial institution loans or delays repayment of or agrees to loan or delay repayment of money, goods, or another thing of value or to otherwise extend credit or make a financial accommodation." § 26.02(a)(2) (emphasis added). Because BANA allegedly promised to modify the Homeowners' mortgage agreement terms, a promise to make a financial accommodation by BANA must comport with the Texas statute of frauds. Martins, 722 F.3d at 256; See § 26.02(b)(4). However, if there is no writing memorializing a promise to modify a mortgage that satisfies the Texas statute of frauds, promissory estoppel has "been recognized as [an] equity-based exception[] to the traditional statute of frauds" when the "alleged oral promise is to sign an existing document that satisfies the statute of frauds." Bank of Texas, N.A. v. Gaubert, 286 S.W.3d 546, 553 (Tex....
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