TX Smith v Fannie Mae

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IN THE UNITED STATES D I S T R I C ~ ~ ~ T ~ ______ -.FOR THE NORTHERN DISTRICTDALLAS DIVISION

MARIO A. SMITH AND MARILOU M. SMITH

Plaintiffs, v.

F TEXAJSS. DISTRICT COURTNORTHERN DISTRICT OF TEXASFILED

SEP 3 0 2011CLERK, U.SBy /( , l

.....

FEDERAL NATIONAL MORTGAGE CIVIL ACTION NO. 3:11-CV-02032-FASSOCIATION AIKIA FANNIE MAE, BAC HOME LOANS SERVICING, L.P. FIKIA COUNTRYWIDE HOME LOANS SERVICING, L.P., MORTGAGE ELECTRONIC REGISTRATIONSYSTEMS, INC., MERSCORP, INC., AND BARRETT DAFFIN FRAPPIER TURNER & ENGEL, L.L.P.

Defendants. ORDER GRANTING DEFENDANTS' MOTION TO DISMISS

BEFORE THE COURT is Federal National Mortgage Association (improperly sued asFederal National Mortgage Association a/k/a Fannie Mae), Bank of America, N.A., as successorby merger to BAC Home Loans Servicing, LoP. (improperly sued as BAC Home LoansServicing, LoP. f/k/a Countrywide Home Loans Servicing, LoP.), Mortgage ElectronicRegistration Systems, Inc., and MERSCORP, Inc. (collectively "Defendants")'s Motion toDismiss (Doc. No.4). A Response in compliance with Northern District of Texas Rule 7.1(e)was due on September 12, 2011. When no Response was filed, the Court issued an Order toShow Cause on why the pending Motion should not be granted, or in the alternative, gave the

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Case 3:11-cv-02032-F Document 6 Filed 09/30/11 Page 1 of 8 PageID 119


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parties leave to file an alternative briefing schedule. To date, no Response has been filed. TheCourt determines that the motion should be and hereby is GRANTED.1

I. Facts and Procedural BackgroundThis is a mortgage loan modification case. On or about June 6, 2007, Plaintiff Mario A.

Smith obtained a loan in the amount of $152,250.00 from Aegis Wholesale Corporation("Aegis") to purchase the subject property. Plaintiff Marilou M. Smith did not sign thepromissory note. Plaintiffs signed a Deed of Trust naming MERS as the nominee for Aegis andits successors or assigns. The Deed of Trust states that "MERS is a beneficiary under theSecurity Interest." It was assigned to Bank ofAmerica.

The Smiths filed their Original Petition in Texas state court on July 14, 2011, andDefendants removed this action to federal court on August 15, 2011 (Doc. No.1). The Smithsassert the following causes of action: quiet title; violations of the Texas Debt Collections Act;violations of the Texas Deceptive Trade Practices Act; negligence; and wrongful foreclosure. OnAugust 22,2011, Defendants filed their Motion to Dismiss on all claims. (Doc. No. 38). To date,the Smiths have filed no Response nor have they made any communications to the Court as towhen a Response would be forthcoming.

II. Standard of ReviewTo survive a Rule 12(b)(6) motion to dismiss, a pleading must contain "a short and plain

statement of the claim showing that the pleader is entitled to relief." The pleading standard Rule8 announces does not require "detailed factual allegations," but it does demand more than anunadorned accusation devoid of factual support. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009).While a court must accept all of the plaintiffs allegations as true, it is not bound to accept as true

1 The resolves Doc. No.4.2

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"a legal conclusion couched as a factual allegation." Id at 1949-50 (quoting Bell Atl. Corp. v.Twombly, 550 U.S. 544, 555 (2007)).

A complaint must contain sufficient factual matter, accepted as true, to state a claim torelief that is plausible on its face. Twombly, 550 U.S. at 570. Where the facts do not permit thecourt to infer more than the mere possibility of misconduct, the complaint has stopped short ofshowing that the pleader is plausibly entitled to relief. Fed. Rule Civ. P. 8(a)(2); Iqbal, 129 S. Ct.at 1950. The court may consider documents attached to or incorporated in the complaint indeciding a motion to dismiss. Telltabs, Inc. v. Makor Issues & Rights, Ltd, 551 U.S. 308, 322(2007).

The Smiths' failure to respond to Defendants' Motion to Dismiss leads the Court tobelieve that the Motion is unopposed. In an abundance of caution, however, the Court willaddress the arguments made in Defendants' motion and evaluate them against the 12(b)(6)standard articulated above.

III. Arguments and AuthoritiesAs a threshold matter, the Court must dismiss each of the Smiths's claims since they are

premised on the erroneous theory that MERS could not be a beneficiary and could not lawfullyassign its interest in the Loan to Bank of America. Several recent cases have held that MERSmay execute such documents, see, e.g., Defranceschi v. Wells Fargo Bank, NA., No. 4:10-CV455-Y, 2011 WL 3875338, at *4 (N.D. Tex., Aug. 31, 2011) (Means, J.); Wigginton v. Bank ofNY. Mellon, No. 3:10--CV-2128-G, 2011 WL 2669071, at *2 n. 2 (N.D. Tex. July 7, 2011)(Fish, I); Allen v. Chase Home Fin., LLC, No. 4:11-CV-223, 2011 WL 2683192, at *3-4 (B.D.Tex. June 10,2011); Eskridge v. Fed Home Loan Mortg. Corp., No. W-IO-CA-285, 2011 WL

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2163989, at *5 (W.D. Tex. Feb. 24,2011) (Smith, J), and the Smiths have offered no evidence tothe contrary.

N or do the Smiths have standing to contest the assignment since they were not a party it.ld When a note is transferred from one mortgage to another, the interest in the subject deed oftrust goes along with it. As the Eskridge court recently explained,

As MERS is a beneficiary and nominee for both the originating lender and itssuccessors and assigns by the express language in the Deed of Trust, the situationfalls within an exception to the general rule that a party holding only the deed oftrust cannot enforce the mortgage. See Comment e to the Restatement (3d) ofProperty (Mortgages) 5,4. Section 5,4 additionally notes that a "transfer of anobligation secured by a mortgage also transfers the mortgage unless the parties tothe transfer agree otherwise." Plaintiff makes no allegations that the parties in thiscase agreed otherwise. Finally, while the Note may not specifically mentionMERS, the Note and Deed ofTrust must be read together in evaluating the terms... thus, the Note and Deed ofTrust are construed together as a single instrument.

ld ; see also Allen v. Chase Home Finance, LLe, No. 4:11-cv-233, 2011 WL 2683192, at *3-*4(E.D. Tex. June 10, 2010) (Mazzant, J.). Here, the subject of the deed of trust in this lawsuitexpressly provided that MERS held the deed of trust for the benefit of the original noteholderand its successor and assigns. Def.'s Mot. 17.

1. Failure to State a Claim/or Quiet TitleThe Smiths have stated a claim for quiet title insufficiently. They base their claim on a

single statement that "their Property is rife with clouds and therefore is unmarketable." Pls.'sOrig. Pet. 16. This claim rests on the Smiths' theories regarding MERS, and therefore cannotstand.

Moreover, to quiet title in his favor, the plaintiff "must allege right, title, or ownership inhimself or herself with sufficient certainty to enable the court to see he or she has a right ofownership that will warrant judicial interference." Wright v. Matthews, 26 S.W.3d 575, 578 (Tex.App.-Beaumont 2000, pet. denied). Here, the Smiths have not plead that they have superior

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title to the property over Defendants. On the contrary, they have pled little at all. The pleadingrules are detailed and formal,and require a plaintiff to prevail on the superiority of his title, noton the weakness of a defendant's title. See Allen, 2011 WL 2683192, at *4. Accordingly, theSmiths' claim to quiet title must be dismissed.

2. Texas Debt Collection ActA fundamental element of the Smiths' Texas Debt Collection Act (the "TDCA") claim is

demonstrating a misrepresentation. Reynolds v. Sw. Bell Tel., L.P., No. 2-05-356-CV, 2006 WL1791606, at *6-7 (Tex. App.-Fort Worth June 29, 2006, pet. denied). For a statement toconstitute a misrepresentation under the IDCA, a defendant must have made a false ormisleading assertion. The Smiths have not sufficiently alleged such an assertion, andaccordingly, their TDCA claim must be dismissed.

The Smiths have failed to show that Defendants have "us[ed] a deceptive means tocollect a debt" or "threaten[ed] to take an action prohibited by law." Tex. Fin. Code 392.304(a)(l9) & 30 1 a)(8). Rather, Defendants have only attempted to pursue their lawful,contractual rights to non-judicial foreclosure, and the TDCPA "does not prevent a debt collectorfrom . . . exercising or threatening to exercise a statutory or contractual right of seizure,repossession, or sale that does not require court proceedings." Id. at 392.301(b)(3); see Broyles,2011 WL 1428904, at *3 (rejecting TDCA claim in non-judicial foreclosure because "theFinance Code expressly allows a debt collector to threaten to exercise or exercise a contractual orstatutory right"); Voth v. Fed. Nat'l Mortg. Ass'n, No. 3-10-CV-2116-G-BD, 2011 WL1897759, at *4 (N.D. Tex. Apr. 22, 2011) ("Because BAC had a statutory right to foreclose onplaintiff's property and exercised that right in a procedurally correct manner, there is no violationof the TDCA or the DTPA."). Further, "[m]erely stating [a] defendant violated the TDCA,

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without more factual allegations, is a legal conclusion couched as a factual assertion . . . [and]does not survive a motion to dismiss." McAllister, 2011 WL 2200672, at * 9. The Smiths havefailed to allege the elements of their TDCA claim, and as such, their claims for relief must bedismissed.

3. Texas Deceptive Trade PracticesActThe Smiths's allegations that Defendants violated the Texas Deceptive Trade Practice

Act must fail as a matter of law because the Smiths are not "consumers" under the DTPA. SeeHansberger v. EMC Mortg. Corp., 2009 WL 2264996, at *2 (Tex. App.-San Antonio 2009,review denied). To qualify as a consumer under the DTPA, one must seek or acquire goods orservices by purchase or lease. Tex. Bus. & Com. Code 17.45(4). Borrowing money does notconstitute the acquisition of a good or service. See Broyles v. Chase Home Fin., No. 3:10CV2256-G, 2011 WL 1428904, at *4 (N.D. Tex. Apr. 13,2011) (Fish, J.) ("subsequent actionsrelated to mortgage accounts-for example, extensions of further credit or modifications of theoriginalloan-do not satisfy the 'good or services' element of the DTPA"); Cavil v. TrendmakerHomes, Inc., No. G-I0-304, 2010 WL 5464238, at *4 (S.D. Tex. Dec. 29, 2010) (Froeschner, J.)("a mortgage or modification of a mortgage is not a good or service under the DTP A.").Therefore, because the Smiths cannot claim consumer status, they cannot maintain a DTP Aaction.

4. NegligenceThe Smiths' negligence claims must fail as a matter of law because they have failed to

allege that Defendants breached any duty to them. There is "no special relationship between amortgagor and mortgagee." Collier v. Wells Fargo Home Mort., No. 7:04-CV-86, 2006 WL1464170, at *8 (N.D. Tex. May 26, 2006) (Kinkeade, J.) (citing UMLIC VP LLC v. T & M Sales

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and Envtl. Systems, Inc., 176 S.W.3d 595, 612 (Tex. App.-Corpus Christi 2005, pet. denied."Absent a 'special relationship,' any duty to act in good faith is contractual in nature and itsbreach does not amount to an independent tort." UMLIC, 176 S.W.3d at 612 (citations omitted).Thus, no duty of care exists that would support a claim of negligence. Any duty to act in goodfaith stems from the Deed of Trust. Since the Smiths have failed to claim a duty, their negligenceallegation cannot survive a motion to dismiss.

5. Wrongful ForeclosureIn their Original Petition, the Smiths allege that Bank of America wrongfully foreclosed

on their property because "it was acting on an unsecured interest; that the property was sold for aprice not commensurate with its fair market value; and that there was a causal nexus betweenthese two circumstances." Orig. Pet. 25. In Texas, the elements of a wrongful foreclosure claimare (I ) a defect in the foreclosure sale proceedings; (2) a grossly inadequate selling price; and (3)a causal connection between the defect and the grossly inadequate selling price. Biggers v. BACHome Loans Servicing, LP, 767 F. Supp. 2d 725, 729 (N.D Tex. 2011) (Fitzwater, J.). Becausethe Smiths' allegations that the sales price on the property was grossly inadequate and that therewas a casual nexus between their perceived "defect" in the foreclosure and the allegedinadequate sale price are conclusory, these statements do not satisfy the requirement of Iqbal,and accordingly, the Smiths' claims for wrongful foreclosure must be dismissed.

6. Declaratory ReliefDeclaratory relief is a procedural device for granting a remedy. Sid Richardson Carbon &

Gasoline Co. v. Interenergy Res., Ltd, 99 F.3d 746, 752 n.3 (5th Cir. 1996). "[I]t does not createany substantive rights or causes of action." Id. In other words, the Smiths' request for declaratory

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relief cannot stand alone. Since no substantive claims on which to grant declaratory reliefremain, the request for declaratory relief must fail.

IV. Conclusion For the foregoing reasons, Defendant's Motion to Dismiss is GRANTED. IT IS SO ORDERED. SIGNED this ~ 1 J ; d a y of September, 2011.

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TX Smith v Fannie Mae

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