Ghattas v. Caliber Home Loans

ISAM Y. GHATTAS AND ISELA HERNANDEZ, Plaintiffs, v. CALIBER HOME LOANS, INC., Defendant.

CIVIL ACTION NO. 4:20-cv-0077

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

January 25, 2021

MEMORANDUM AND RECOMMENDATION

Plaintiffs Isam Y. Ghattas and Isela Hernandez have sued Defendant Caliber Home Loans, Inc., the servicer on their home equity mortgage loan, seeking $961,592 in damages based on their belief that Caliber wrongfully added escrow payments for property taxes to their monthly loan payments and then wrongfully declared them in default when they refused to pay the increased amount. Plaintiffs initially sued Defendant in state court on December 27, 2019 asserting claims for breach of contract, violation of the Texas Deceptive Trade, breach of fiduciary duty, breach of the duty of good faith and fair dealing, negligence, and unjust enrichment. After Plaintiffs filed an Amended Petition adding claims for violation of the Fair Debt Collection Practices Act, Defendant timely removed the lawsuit to federal court based on federal question jurisdiction under 28 U.S.C. § 1331. Plaintiffs filed an Amended Complaint on September 16, 2020 asserting causes of action for breach of contract, violations of RESPA, perjury, and breach of the duty of good faith and fair dealing.

This case is now before the Court on Plaintiffs' Motion for Summary Judgment (ECF 29) and Defendant's Amended Motion for Summary Judgment (ECF 41).¹ Having considered the parties' submissions and the law, the Court recommends that Plaintiffs' motion be DENIED and Defendant's motion be GRANTED.²

I. Background

The following timeline of undisputed facts is supported by the evidence submitted with the parties' summary judgment briefs and by the pleadings on file in this case:

2/4/2013

On February 4, 2013, Isam Y. Ghattas signed a Texas Home Equity Note

payable to ProLending Mortgage, LLC in the amount of $290,480 and a

Texas Home Equity Security Instrument granting a security interest in

property located at 18443 Dogwood Trail, Tomball, TX 77377 (Loan).

Ghattas also signed an Escrow Waiver Disclosure and Agreement.

8/31/2013

Defendant Caliber Home Loans, Inc. acquired the Loan and began acting as

the Loan servicer.

3/22/2018

Defendant notified Ghattas that 2017 Harris County property taxes for the

property were delinquent. Defendant instructed Ghattas to pay taxes and

notify Defendant by April 21, 2018 that taxes were paid, or "Caliber will

advance funds to pay the delinquent taxes [and] Caliber may establish a

mandatory impound for future taxes for the life of the loan." There is no

evidence that Plaintiffs contacted Defendant by April 21, 2018 as instructed.

5/18/2018

Defendant paid a $148.10 late fee to Harris County that remained unpaid by

Plaintiffs although Plaintiffs paid the taxes themselves.

5/22/2018

Defendant sent Ghattas an Escrow Account Disclosure Statement advising

that due to the late payment of property taxes the monthly payment on the

loan would include a $736.85 escrow payment (consisting of a base escrow

payment of $414.00 plus $322.85 per month to cover a projected shortage

   for the tax year 2018) beginning as of August 1, 2018. The added escrowpayment increased Plaintiffs' monthly payment from $1,264.19 to$2,001.04. Plaintiffs disagreed with the Defendant's opening of an escrowaccount on the loan and did not pay the added escrow amounts. Plaintiffscontinued to pay $1,264.19 per month and have never paid the increasedamount.  6/13/2018  Ghattas sent a certified letter to "Caliber Home Loans P.O. Box 650856Dallas, Tx 75265" providing documentation that Plaintiffs had paid the 2017property taxes, although due to an error, the payment was not received until"22 days beyond the due date of January 31st."  10/29/2018  Ghattas sent a second certified letter to the above address asserting error inDefendant's assessment of a past due amount on the Loan.  11/20/2018  Defendant served Notices of Default informing Plaintiffs that the Loan wasin default due to their partial payments and stating $3,664.34 must be paidbefore 12/25/2018 to cure the default. Plaintiffs did not cure the default.  1/23/2019  Ghattas sent a third letter to Defendant asserting an alleged error on hisaccount.  6/12/2019  Defendant filed an Application for Expedited Order under Rule 736 in HarrisCounty state court seeking an order allowing Defendant to foreclose on theproperty because the Loan was in default.  12/27/2019  Plaintiffs filed a state court petition asserting affirmative claims for reliefagainst Defendant. Plaintiff filed an Amended Petition in state court on12/30/2019 adding a claim for violation of the federal Fair Debt CollectionPractices Act (FDCPA).  1/9/2020  Defendant removed the case to this court based on federal questionjurisdiction based on the FDCPA claim.  2/13/2020  District Judge Sim Lake denied Plaintiffs' motion to remand (ECF 10).  5/28/2020  Defendant filed its first Motion for Summary Judgment (ECF 21).  8/4/2020  Plaintiffs filed their Counter Motion for Summary Judgment (ECF 29).  9/16/2020  Plaintiffs filed an Amended Complaint (ECF 40) asserting causes of actionfor (1) Breach of contract; (2) RESPA Deficiency Protocol Violation; (3)three separate violations of RESPA Error Resolution Procedures; (4) RESPA 

   violation pertaining to Escrow limits; (5) perjury; and (6) breach of duty ofgood faith and fair dealing.3  9/22/2020  The parties engaged in an unsuccessful mediation (ECF 42).  10/9/2020  Defendant filed an Amended Motion for Summary Judgment (ECF 41)(mooting ECF 21). 

II. Summary Judgment Standards

Summary judgment is appropriate if no genuine issues of material fact exist, and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). The party moving for summary judgment has the initial burden to prove there are no genuine issues of material fact for trial. Provident Life & Accident Ins. Co. v. Goel, 274 F.3d 984, 991 (5^th Cir. 2001). If a moving party meets its initial burden, the nonmoving party must go beyond the pleadings and must present evidence such as affidavits, depositions, answers to interrogatories, and admissions on file to show "specific facts showing that there is a genuine issue for trial." Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). A dispute about a material fact is "genuine" if the evidence could lead a reasonable jury to find for the nonmoving party. Hyatt v. Thomas, 843 F.3d 172, 177 (5^th Cir. 2016). "An issue is material if its resolution could affect the outcome of the action." Terrebonne Parish Sch. Bd. v. Columbia Gulf Transmission Co., 290 F.3d 303, 310 (5^th Cir. 2002). If the party moving for summary judgment bears the burden of proof on an issue he must "establish beyond peradventure all of the essential elements of the claim or defense to warrant judgment in his favor." Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986).

The court construes the evidence in the light most favorable to the nonmoving party and draws all reasonable inferences in that party's favor. R.L. Inv. Prop., LLC v. Hamm, 715 F.3d 145, 149 (5^th Cir. 2013). In ruling on a motion for summary judgment the Court does not "weigh evidence, assess credibility, or determine the most reasonable inference to be drawn from the evidence." Honore v. Douglas, 833 F.2d 565, 567 (5^th Cir. 1987). However, "[c]onclusional allegations and denials, speculation, improbable inferences, unsubstantiated assertions, and legalistic argumentation do not adequately substitute for specific facts showing a genuine issue for trial." U.S. ex rel. Farmer v. City of Houston, 523 F.3d 333, 337 (5^th Cir. 2008) (quoting Celotex, 477 U.S. at 325).

III. Analysis

The issues in this case have been fully briefed on cross-motions for summary judgment. Plaintiffs' claims are ripe for resolution as a matter of law.

A. Breach of Contract

Under Texas law, "[t]he elements of a breach of contract claim are (1) the existence of a valid contract, (2) performance or tendered performance by the plaintiff, (3) breach of the contract by the defendant, and (4) resulting damages to the plaintiff." Fieldtech Avionics & Instruments, Inc. v. Component Control.Com, Inc., 262 S.W.3d 813, 825 (Tex. App.-Fort Worth 2008, no pet.) (citing Harris v. Am. Prot. Ins. Co., 158 S.W.3d 614, 622-23 (Tex. App.-Fort Worth 2005, no pet.)). There is no dispute that the Loan documents constitute a valid contract. Plaintiffs cannot meet their burden to establish as a matter of law (for purposes of their own motion), or to create a genuine issue of material fact (forpurposes of Defendant's motion) that they performed as obligated by the Loan documents, or that Defendant breached its obligations under the Loan documents.

Plaintiffs do not deny that they paid their 2017 Harris County taxes 22 days late. They also do not deny that they have not made any of the $736.85 monthly escrow payments that Defendant began assessing as of August 1, 2018. Thus, the record establishes that Plaintiffs did not fully perform their contractual obligations. Plaintiffs argue that Defendant has breached the parties' contract because Texas Home Equity Loans do not require escrow accounts when the loan to value (LTV) ratio is under 80%. According to Plaintiffs, based on the estimated value of the subject property the LTV ratio for the Loan was well under 80%. But whether an escrow account is required by Texas mortgage law or usual practices in the industry is not the dispositive question. Isam Ghattas signed the Escrow Waiver and Disclosure Agreement which allows the lender to establish an escrow account in these circumstances:

The lender shall have the right to establish or reestablish an escrow account for the payment of the Escrow Items⁴ in accordance with the terms of the loan documents in the event that during the term of the mortgage loan:

• The Borrower fails to pay any of the Escrow Items in a prompt and timely manner;

• The Borrower fails to provide the Lender

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