Cao v. Bsi Fin. Servs., Inc.

ANGELA CAO, Plaintiff, v. BSI FINANCIAL SERVICES, INC., CHRISTIANA TRUST, WILMINGTONSAVINGS FUND SOCIETY, STANWICH MORTGAGE LOAN TRUST SERIES2012-10 and STANWICH MORTGAGE ACQUISITION CO., INC., Defendant.

CIVIL ACTION NO. H-17-321

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

October 19, 2017

MEMORANDUM AND RECOMMENDATION

Pending before the court¹ are Defendant First American Title Insurance Company's ("First American") Motion to Dismiss (Doc. 19), Plaintiff Angela Cao's ("Plaintiff") Motion to Remand (Doc. 31), First American's Motion to Strike Joinder (Doc. 34), and Defendants BSI Financial Services, Inc. ("BSI"), Christiana Trust, a Division of Wilmington Savings Fund Society, FSB, as Trustee for Stanwich Mortgage Loan Trust Series 2012-10 ("Trust"), and Carrington Mortgage Services LLC's ("CMS") Motion to Strike (Doc. 35). The court has considered the motions, the responses, all other relevant filings, and the applicable law. For the reasons set forth below, the court RECOMMENDS that Plaintiff's motion to remand be DENIED, First American's motion to strike be GRANTED, Defendants BSI,Trust, and CMS's motion to strike be GRANTED, and that First American's motion to dismiss be GRANTED.

I. Case Background

Plaintiff filed this action in the 333^rd District Court of Harris County, Texas, requesting an injunction to halt the foreclosure of her property and alleging claims of usury and wrongful foreclosure.² After removal, Plaintiff amended her complaint to assert causes of action for fraud and misrepresentation, statutory fraud under Texas Business and Commerce Code § 27.01, slander of title and cloud on title, violation of Texas Civil Practice and Remedies Code § 12.002, negligence per se, gross negligence per se, aiding and abetting, breach of contract, and unfair debt collection practices.³

A. Factual Background

Joyce Love ("Love") purchased 4003 Feagan Street, Houston, Texas (the "Property")⁴ from Stiffel-Schwab Builders, LLC for $418,000 on January 3, 2006.⁵ Love obtained two loans for theproperty; one for $335,400 and the other for $83,600.⁶ Love did not live on the property or make any mortgage payments.⁷ John W. Follis, a substitute trustee acting for the mortgagee, the Bank of New York as Trustee for the Certificate Holders CWABS, Inc. Asset Backed Certificates, Series 2006-5 ("the Bank of New York"), non-judicially foreclosed upon the property on July 4, 2006.⁸ A substitute trustee's deed was executed on that date granting the property to the Bank of New York.⁹

On February 9, 2007, Plaintiff purchased the Property from the Bank of New York for $300,000.¹⁰ The closing took place on that date at United Title of Texas, with escrow agent Jason Vasek ("Vasek").¹¹ Plaintiff paid a cash down payment of $60,000 and received a loan of $240,000 from New Century Mortgage Corporation with a thirty-year term and interest rate of 6.575%.¹² The loan was secured with a deed of trust, the Bank of New York conveyed a special warranty deed to Plaintiff, and Plaintiff obtained a title insurance policy from First American.¹³ Plaintiff alleges thatat a later date, she learned that the Property was "riddled with unreleased liens, notes and anomalies in title" and that the substitute trustee's deed was "defective," meaning that "it is possible the Plaintiff did not receive fee title to said property."¹⁴ In the process of closing on the property, Plaintiff alleges that Vasek did not properly check the title and that some of the documents Plaintiff signed were notarized late by Vasek, rendering them invalid.¹⁵

BSI and Plaintiff signed a Modification Agreement on May 1, 2009, recalculating the payments to account for two years of property taxes that the lender had paid.¹⁶ The Modification Agreement also lowered Plaintiff's interest rate to 5.750%.¹⁷

BSI informed Plaintiff on January 7, 2011, that her default was cured and that she was current on her payments.¹⁸ BSI and CMS have both serviced Plaintiff's mortgage.¹⁹ After this date, Plaintiff alleges that:

BSI and its predecessor CMS continued engaging in a pattern and practice of declaring Plaintiff in default on her mortgage loan, incorrectly alleging that mortgage payments had not been made, returning payments, assessinglate fees that were in amounts not provided for in loan documents, placing insurance on the subject property despite the fact that property insurance was already insuring the property, purchasing mortgage protection insurance without Plaintiff's knowledge or approval, charging Plaintiff for attorney fees that were not entitled to receive, charging other fees that were not provided for in the loan agreements.²⁰

Plaintiff states that "BSI and CMS further engaged in the practice of wrongfully declaring Plaintiff in default on her mortgage loan and sending her notices of default and acceleration."²¹ Plaintiff was sent a notice from BSI in December 2016 for a non-judicial foreclosure.²²

B. Procedural Background

On December 28, 2016, Plaintiff filed this action in state court, and BSI and Trust removed it to this court on February 1, 2017.²³ On March 3, 2017, Plaintiff sought to remand this action to state court on the ground that it was untimely removed, but later withdrew that motion after the court required that Plaintiff distinguish the present facts from the holding in Murphy Brothers, Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344 (1999).²⁴ A scheduling order provided that amended pleadings be filed and newparties be joined by May 12, 2017.²⁵ Discovery was to end on August 18, 2017.²⁶

On May 12, 2017, Plaintiff filed an amended complaint, without leave of court adding First American, CMS, and Vasek as defendants.²⁷ Vasek was alleged to be a citizen of Texas.²⁸ On July 27, 2017, Defendant First American moved for an extension of the scheduling order on the grounds that Plaintiff had failed to make her initial disclosures and had failed to serve her expert disclosures on it in accordance with the scheduling order.²⁹ First American also filed a motion to compel Plaintiff's initial disclosures.³⁰ On August 11, 2017, Plaintiff filed a second motion to remand, contending that the joinder of Vasek defeated the court's diversity jurisdiction.³¹ Defendants filed motions to strike the claims against Vasek on September 12, 2017, and September 15, 2017.³²

II. Motion to Remand and Motions to Strike

The jurisdictional statutes allow removal of "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." 28 U.S.C. § 1441(a). A defendant may remove a case in which the amount in controversy exceeds $75,000 and the dispute is between citizens of different states. See 28 U.S.C. §§ 1332, 1441. Complete diversity refers to the requirement that the citizenship of each of the plaintiffs must be different from that of each of the defendants. Stafford v. Mobil Oil Corp., 945 F.2d 803, 804 (5^th Cir. 1991).

Defendants complain that Plaintiff failed to seek leave of court before filing the amended pleading that added Vasek. However, the court's scheduling order required leave of court only after the expiration of the deadline; amendments prior to the deadline did not need to be filed concurrently with a motion for leave to amend.³³ The court turns to the merits of Defendants' motions to strike.

When a plaintiff seeks to add a non-diverse party after removal and the joinder will destroy jurisdiction, "the court may deny joinder, or permit joinder and remand the action to the State court." 28 U.S.C. § 1447(e). "The decision between these two options rests squarely within the discretion of the district court." Richardson v. Wal-Mart Stores Tex., LLC, 192 F. Supp.3d719, 726 (S.D. Tex. 2016)(quoting Martinez v. Holzknecht, 701 F. Supp.2d 886, 889 (S.D. Tex. 2010)). When examining an amended pleading adding a nondiverse defendant, the court should look at it "more closely than an ordinary amendment." Moore v. Manns, 732 F.3d 454, 456 (5^th Cir. 2013)(citation omitted). The court should make the decision based on the analysis of several factors, including: (1) "the extent to which the purpose of the amendment is to defeat federal jurisdiction;" (2) whether the plaintiff "has been dilatory in asking for amendment;" (3) whether the plaintiff "will be significantly injured if amendment is not allowed;" and (4) "any other factors bearing on the equities." Id. (quoting Hensgens v. Deere & Co., 833 F.2d 1179, 1182 (5^th Cir. 1987)(also acknowledging that this analysis is the correct legal standard for deciding whether joinder of a non-diverse party should be allowed after removal).

A. Purpose of the Amendment

As to the first factor, "courts take into account considerations such as whether the plaintiff knew or should have known the identity of the nondiverse defendant when the state court suit was filed, whether the plaintiff states a valid claim against the nondiverse defendant, and the timing of the amendment." Agyei v. Endurance Power Prods., Inc., 198 F. Supp.3d 764, 770 (S.D. Tex. 2016)(citing Richardson v. Wal-Mart Stores Texas, LLC, 192 F. Supp.3d 719, 725-26 (S.D. Tex. 2016); Gallegos v. Safeco Ins. Co.of Ind., No. 09-CV-2777, 2009 WL 4730570, at *3-4 (S.D. Tex. Dec. 7, 2009)(unpublished)).

In her first amended complaint, Plaintiff alleges that Vasek, in his capacity as an escrow agent, did not adequately check Plaintiff's title and made misrepresentations at the closing on February 9, 2007, that she was receiving a clear title to the property. Defendants state that Plaintiff brought a prior state court action to stop foreclosure on this same property in 2012 and litigated it for three years before it was dismissed on the defendants' motion in 2015.³⁴ Defendants argue that Plaintiff therefore knew or should have known of Vasek's identity at the time of filing her second petition in state court. The court has not been supplied with the state court pleadings in the earlier action and cannot conclude...