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Steven D. Darocy and Judy C. Darocy v. Chase Home Finance

May 18, 2011

STEVEN D. DAROCY AND JUDY C. DAROCY,
PLAINTIFFS,
v.
CHASE HOME FINANCE, LLC, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., GRAND LENDING GROUP, L.P., CODILIS & STAWIARSKI, P.C., CTX MORTGAGE, CHASE MANHATTAN MORTGAGES CORPORATION, AND JP MORGAN/CHASE,
DEFENDANTS.



The opinion of the court was delivered by: Sam A. Lindsay United States District Judge

MEMORANDUM OPINION AND ORDER

Before the court are: (1) Defendants Chase Home Finance LLC, JPMorgan Chase Bank N.A., and Mortgage Electronic Registration Systems, Inc.'s Motion to Dismiss Plaintiffs' Third Amended Complaint for Failure to State a Claim, or Alternatively, Motion for More Definite Statement, filed November 23, 2010; (2) Defendant CTX Mortgage Company, LLC's Motion to Dismiss Plaintiffs' 3rd Amended Complaint, filed November 24, 2010; (3) CTX Mortgage Company, L.L.C.'s Suggestion of Dismissal of Grand Lending, L.P. Pursuant to FRCP 12(b)(1) and 12(b)(2), filed February 7, 2011; and (4) Plaintiffs', Darocy & Darocy, Motion to Reconsider Order Dismissing CTX Mortgage Company, L.L.C. from DTPA Claims, filed February 28, 2011.

After careful review of the motions, briefs, responses, replies, record, and applicable law, the court grants (1) Defendants Chase Home Finance LLC, JPMorgan Chase Bank N.A., and Mortgage Electronic Registration Systems, Inc.'s Motion to Dismiss Plaintiffs' Third Amended Complaint for Failure to State a Claim, and denies as moot the Alternative Motion for More Definite Statement; grants (2) Defendant CTX Mortgage Company, LLC's Motion to Dismiss Plaintiffs' 3rd Amended Complaint; grants (3) CTX Mortgage Company, L.L.C.'s Suggestion of Dismissal of Grand Lending, L.P. Pursuant to FRCP 12(b)(1) and 12(b)(2); and denies (4) Plaintiffs', Darocy & Darocy, Motion to Reconsider Order Dismissing CTX Mortgage Company, L.L.C. from DTPA Claims.

I. Background

Plaintiffs filed their Verified Original Petition on May 26, 2010, in County Court at Law No. 4, Dallas County, Texas. The case was removed to this court on June 25, 2010, on grounds that Plaintiffs' claims presented a federal question, and that complete diversity of citizenship existed between the parties and the amount in controversy exceeded $75,000, exclusive of interest and costs. The live pleading is Plaintiffs' Third Amended Complaint ("Complaint"), filed November 12, 2010. Plaintiffs' allegations relate to their home, located at 141 Bricknell Lane, Coppell, Texas 75019. They assert claims against Defendants Grand Lending Group, L.P. ("Grand Lending"); CTX Mortgage ("CTX"); Chase Home Finance LLC ("CHF"); JPMorgan Chase Bank, N.A. ("JPMC"); Mortgage Electronic Registration Systems, Inc. ("MERS"); and Codilis & Stawiarski, P.C. ("C&S") (collectively, "Defendants").

Plaintiffs contend that they entered into a Deed of Trust agreement with Grand Lending on June 22, 1999. They allege that they discovered fraud relating to the Deed of Trust and Promissory Note in January 2010, perpetuated by CTX, CHF, JPMC, and MERS. Plaintiffs assert that CHF, JPMC, and C&S are now unlawfully and deceptively foreclosing on their home, and that such actions constitute a violation of the Texas Deceptive Trade Practices Act. Plaintiffs also assert two claims against CTX specifically for violation of the Uniform Fraudulent Transfer Act and aiding and abetting deceptive trade practices. Defendants move to dismiss all of Plaintiffs' claims.

II. Standard for Rule 12(b)(6) - Failure to State a Claim

To defeat a motion to dismiss filed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007); Reliable Consultants, Inc. v. Earle, 517 F.3d 738, 742 (5th Cir. 2008); Guidry v. American Pub. Life Ins. Co., 512 F.3d 177, 180 (5th Cir. 2007). A claim meets the plausibility test "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal citations omitted). While a complaint need not contain detailed factual allegations, it must set forth "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (citation omitted). The "[f]actual allegations of [a complaint] must be enough to raise a right to relief above the speculative level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. (quotation marks, citations, and footnote omitted).

In reviewing a Rule 12(b)(6) motion, the court must accept all well-pleaded facts in the complaint as true and view them in the light most favorable to the plaintiff. Sonnier v. State Farm Mutual Auto. Ins. Co., 509 F. 3d 673, 675 (5th Cir. 2007); Martin K. Eby Constr. Co. v. Dallas Area Rapid Transit, 369 F. 3d 464, 467 (5th Cir. 2004); Baker v. Putnal,75 F.3d 190, 196 (5th Cir. 1996).

In ruling on such a motion, the court cannot look beyond the pleadings. Id.; Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999), cert. denied, 530 U.S. 1229 (2000). The pleadings include the complaint and any documents attached to it. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir. 2000). Likewise, "'[d]ocuments that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to [the plaintiff's] claims.'" Id. (quoting Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993)).

The ultimate question in a Rule 12(b)(6) motion is whether the complaint states a valid claim when it is viewed in the light most favorable to the plaintiff. Great Plains Trust Co. v. Morgan Stanley Dean Witter, 313 F.3d 305, 312 (5th Cir. 2002). While well-pleaded facts of a complaint are to be accepted as true, legal conclusions are not "entitled to the assumption of truth." Iqbal, 129 S. Ct. at 1950 (citation omitted). Further, a court is not to strain to find inferences favorable to the plaintiff and is not to accept conclusory allegations, unwarranted deductions, or legal conclusions. R2 Invs. LDC v. Phillips, 401 F.3d 638, 642 (5th Cir. 2005) (citations omitted). The court does not evaluate the plaintiff's likelihood of success; instead, it only determines whether the plaintiff has pleaded a legally cognizable claim. United States ex rel. Riley v. St. Luke's Episcopal Hosp., 355 F.3d 370, 376 (5th Cir. 2004).

III. Analysis

There are four pending motions, and the court will address each motion separately in conducting its analysis.

A. Motion to Dismiss filed by CHF, JPMC, and MERS

CHF, JPMC, and MERS move to dismiss Plaintiffs' Complaint. From the court's reading of the Complaint, Plaintiffs assert only a deceptive trade practices claim against CHF, JPMC, and MERS. Plaintiffs' Uniform Fraudulent Transfer Act claim is directed solely at CTX. Accordingly, the court considers whether Plaintiffs have stated a cognizable legal claim for deceptive trade practices against CHF, JPMC, and MERS.

Plaintiffs allege that CHF, JPMC, and MERS are liable under the Deceptive Trade Practices Act because they: (1) caused confusion over the source of the Promissory Note's funding; (2) failed to disclose information about the methods by which the Note or Deed would be sold, monetized, and securitized; and (3) engaged in unconscionable actions by initiating foreclosure on Plaintiffs' residence without being a holder in due course. Plaintiffs contend that such conduct entitles them to relief under the Act because they are "consumers" as defined by the statute.

CHF, JPMC, and MERS argue that Plaintiffs' claim fails as a matter of law because it rests on fatally flawed assumptions that are contradicted by the Texas Property Code. They further argue that Plaintiffs do not have standing to assert a deceptive trade practices claim because Plaintiffs are not "consumers" under the Act. Finally, they argue that Plaintiffs' claim is time-barred by the statute of limitations. The court will first analyze the procedural issues before it delves into the substance of Plaintiffs' factual allegations.

The Act defines a "consumer" as one who "seeks or acquires by purchase or lease, any goods or services [from CHF, JPMC, and MERS] . . . ." Tex. Bus. & Comm. Code Ann. § 17.45 (West 2011). When a party obtains a loan "inextricably intertwined" in the purchase or lease of a good or service, that party may qualify as a "consumer." Knight v. International Harvester Credit Corp., 627 S.W.2d 382, 389 (Tex. 1982). The determining factor is whether the purchase or lease of a good or service was "an objective of the transaction, not merely incidental to it." FDIC v. Munn, 804 F.2d 860, 865 (5th Cir. 1986).

In this case, Plaintiffs admittedly took out a mortgage loan to purchase their residence. The record is undisputed that neither CHF, JPMC, nor MERS was the original lender on the Promissory Note, and that none of them had dealings with Plaintiffs at the time the loan was executed. Plaintiffs nevertheless attempt to characterize themselves as "consumers" in relation to these defendants because CHF, JPMC, and MERS allegedly "wished to benefit" from the mortgage loan transaction. Compl. 3 ΒΆ 12. Even if the court accepts Plaintiffs' assertion as true, a defendant who merely "wishes to benefit" from a certain transaction with a plaintiff does not necessarily make that plaintiff a "consumer"; the defendant must offer goods or services that are sought by the ...


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