Casey v. Fed. Home Loan Mortg. Ass'n

RACHELLE CASEY AND GERALD CASEY, Plaintiffs, v. FEDERAL HOME LOAN MORTGAGE ASSOCIATION and BANK OF AMERICA, N.A., F/K/A BAC HOME LOANS SERVICING, LP, Defendants

CIVIL ACTION H-11-3830

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

Dated: April 23, 2012

ORDER

Pending before the court is a motion to dismiss filed by defendants Federal Home Mortgage Corporation, improperly named Federal Home Loan Mortgage Association, and Bank of America, N.A. ("BOA"), successor by merger to BAC Home Loans Servicing, L.P. ("BAC") (collectively, "Defendants"). Dkt. 4. Plaintiffs Rachelle and Gerald Casey have requested that the court deny the motion or, alternatively, grant them leave to amend. Dkt. 8. Having considered the motion, responsive briefing, and applicable law, the court is of the opinion that Defendants' motion to dismiss (Dkt. 4) should be GRANTED IN PART AND DENIED IN PART and the Caseys' motion to amend (Dkt. 8) should be GRANTED IN PART AND DENIED IN PART.

I. BACKGROUND

The Caseys purchased a home in Humble, Texas on or about April 28, 2000. Dkt. 1-1. They obtained financing for their purchase from BOA. Id. The Caseys assert that they contacted BOA and BAC, the servicer for the loan, numerous times prior to April 2011, as they were seeking a modification of their loan under the Making Homes Affordable program and other programs offered by BOA. Id. The Caseys state that BAC specifically instructed them not to make full payments asit would disqualify them for the modification program, so they made reduced payments during the modification application process. Id. Additionally, the Caseys assert that they were verbally assured that they had prequalified for modification and that foreclosure would not occur while they were in the process of applying for modification. Id. Defendants allegedly gave the Caseys a reduced amount to pay and accepted these reduced payment amounts until March 2011. Id. On or about March 15, 2011, BOA allegedly advised the Caseys that the modification was still pending and that there would be no foreclosure. Id. However, at some point Defendants initiated an acceleration of the mortgage note and posted the Casey's home for foreclosure. The Caseys allege that BOA proceeded with foreclosure on April 5, 2011. Id. Defendants subsequently instituted proceedings to evict the Caseys from their home. Id.

The Caseys filed a lawsuit against Defendants in the Eleventh Judicial District Court of Harris County, Texas on September 22, 2011, seeking a temporary restraining order and temporary injunction. Dkt. 1-1. Their petition asserts claims for fraud, wrongful foreclosure due to fraud, wrongful foreclosure due to failure to properly notice, slander of title, promissory estoppel, unreasonable collection, breach of duty of fair dealing, and failure to provide an accounting of funds prior to foreclosure. Id. The Caseys argue that they did not pay more money to BOA or file for bankruptcy or injunctive relief prior to April 5, 2011, because they relied on BOA's representations that a foreclosure sale would not occur if they made the required reduced payments and were still in the modification review stage. Id. The Caseys allege that it is their belief that Defendants intentionally misrepresented their intentions to prevent the Caseys from seeking judicial relief prior to foreclosure and they relied on these misrepresentations to their detriment. Id. The Caseys note that their credit has been damaged as a result of the foreclosure and that they therefore cannot obtain a loan to buy back their home and are unable to obtain financing for another home. Id. Additionally,the Caseys assert that they believe that Defendants failed to follow Texas requirements for acceleration and notice of foreclosure. Id. The Caseys also assert that Defendants failed to provide an accounting of their pre-foreclosure account or of the funds received or credited as part of the foreclosure sale, and they seek a court order requiring Defendants to provide these documents. Id.

The state court entered an order granting a temporary restraining order that prohibited Defendants from interfering or excluding the Caseys from their home pending final judgment in this case on September 22, 2011. Dkt. 1-1. On October 28, 2011, Defendants removed the case to this court, asserting that this court has diversity jurisdiction. Dkt. 1. On November 4, 2011, Defendants filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), to which the Caseys have filed a response and alternative motion to amend, and Defendants have filed a reply. Dkts. 4, 8, 9.

II. LEGAL STANDARD

"Federal Rule of Civil Procedure 8(a)(2) requires only 'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545, 127 S. Ct. 1955 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99 (1957)). In considering a 12(b)(6) motion, the court must accept the factual allegations contained in the complaint as true. Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982). Additionally, the court does not look beyond the face of the pleadings to determine whether the plaintiff has stated a claim under Rule 12(b)(6). Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of theelements of a cause of action will not do." Twombly, 550 U.S. at 554 (internal citations omitted). The supporting facts must be plausible—enough to raise a reasonable expectation that discovery will reveal further supporting evidence. Id.

III. ANALYSIS

Defendants move to dismiss all of the Caseys' claims, asserting that the Caseys have failed to assert a claim for which relief can be granted because (1) the fraud claim is barred by the economic loss doctrine and fails because they have not pleaded reasonable reliance; (2) the Caseys do not adequately assert a claim for wrongful foreclosure due to fraud because the alleged misrepresentation has no relationship to the three elements of wrongful foreclosure; (3) the Caseys' generalized allegations about Defendants' acceleration of the note and notice of foreclosure do not meet the plausibility pleading standard; (4) the slander of title claim fails because the Caseys do not provide a plausible basis to conclude that BAC lacked authority to foreclose; (5) the promissory estoppel claim is barred by the existence of a contract and by the statute of frauds; (6) the Caseys have not stated a claim for unreasonable debt collection; (7) Texas does not recognize an implied duty of good faith and fair dealing in contract; and (8) the Caseys have not pled any theory to support their request for an accounting. Dkt. 4. The Caseys argue that the statute of frauds in not applicable and that they have clearly pled the reliance element under their promissory estoppel theory. Dkt. 8. They request that the court deny Defendants' motion to dismiss; alternatively, they move for leave to file an amended petition. Dkt. 8.

A. Fraud

In Texas, to allege common law fraud, plaintiffs must allege "(1) that a material misrepresentation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as apositive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury." In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex. 2001). The Caseys contend that the representations Defendants made in connection with the potential loan modification and with the foreclosure were material misrepresentations upon which they relied to their detriment. Dkt. 1-1. Defendants argue that the Caseys' fraud claim fails based on the economic loss rule and because they failed to plead reasonable reliance. Dkt. 4 at 4.

1. Reliance

The Caseys assert that Defendants told them that they had prequalified for a modification of their home loan and that there would be no foreclosure during the modification process. Dkt. 1-1. Defendants argue that these allegations are insufficient to meet the pleading standards for a fraud claim because the Caseys have not pled that they reasonably relied on the alleged misrepresentation or misrepresentations. Dkt. 4. Defendants assert that it was unreasonable for the Caseys to rely on any representation that there would be no foreclosure during the modification process because the deed of trust specifically provides for acceleration and non-judicial foreclosure if the homebuyer is in default. Dkt. 4. The Caseys argue that their reliance on the alleged promise to postpone foreclosure during the loan modification process was not unreasonable since the HAMP guidelines prohibit foreclosure during modification review. Dkt. 8.

Viewing the facts in the light most favorable to the Caseys, as the court must, the court finds that the Caseys' claim that they relied on BAC's representation that it would not foreclose on the Caseys' home during the modification process is reasonable given the fact that BAC is a servicer for a sophisticated lender and should have been aware of all federal guidelines and the Caseys were merely ordinary borrowers who were attempting to modify their home loan through a programpromulgated by the federal government to help homeowners who are struggling to avoid foreclosure while the economy stabilizes. See generally Wigod v. Wells Fargo Bank, N.A., ____ F.3d ____, 2012 WL 727646, at *2-3 (7th Cir. ...