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Jimenez v. Flagstar Bank, F.S.B.

United States District Court, Fifth Circuit

December 5, 2013




On this date the Court considered Defendant Flagstar Bank, F.S.B.'s motion for summary judgment (docket no. 12). For the following reasons, the Court GRANTS the motion.

I. Background

A. Factual Background

On July 23, 2008, Plaintiffs Leonard M. Jimenez and Carmen M. Jimenez entered into a mortgage with Infinity Alliance, Inc. d/b/a 1st Choice Lending for the purchase of property located at 7503 Forest Stream, Live Oak, Texas 78233. Plaintiffs executed a promissory note (the "Note") and a security agreement (the "Deed of Trust") in connection with the transaction.[1] Thereafter, it is undisputed that the Note and Deed of Trust were transferred to Defendant Flagstar Bank, F.S.B. ("Flagstar").[2]

Sometime in 2011, Plaintiffs began having trouble making their mortgage payments.[3] In January 2012, Plaintiffs received a notice of default, informing them of their right to cure their alleged mortgage default by paying the amount of $2, 809.67.[4] Though the record is not entirely clear, Plaintiffs likely cured their default at this time.[5] Nevertheless, by March 2012, Plaintiffs again were behind on their mortgage payments.[6] On March 26, 2012, Plaintiffs entered into a forbearance agreement with Flagstar (the "Forbearance Agreement").[7] Through this agreement, Plaintiffs and Flagstar agreed that Plaintiffs' account would be, "allowed to remain delinquent as long as the terms of this agreement [were] followed."[8] Furthermore, pursuant to the agreement, Plaintiffs' monthly mortgage payments were reduced for the months of April to July 2012 by about $300 per month.[9] Plaintiffs assert that they made all of their required payments under the Forbearance Agreement on time.[10]

Soon after entering into the Forbearance Agreement, on April 3, 2012, Flagstar sent Plaintiffs a second notice of default and right to cure, stating that Plaintiffs were in default on their mortgage loan obligations by $2, 809.67.[11]

Thereafter, in the summer or fall of 2012, as the Forbearance Agreement was set to expire or after it had already expired, Plaintiffs and Flagstar began discussing a permanent loan modification. Plaintiffs assert that Flagstaff promised Plaintiffs a permanent loan modification if Plaintiffs paid all of their payments under the forbearance agreement on time, which Plaintiffs assert they did.[12] On September 28, 2012, Flagstar sent Plaintiffs a proposed loan modification agreement (the "Proposed Modification Agreement"). The Proposed Modification Agreement would bring the loan current by granting Plaintiffs a "partial claim, " through which funds in the amount of $3, 538.49 would be advanced to Plaintiffs and applied to Plaintiffs' loan to bring it current.[13] The Proposed Modification Agreement would also lower the interest rate and extend the time for repayment of the loan.[14]

By its terms, however, the Proposed Modification Agreement was not effective immediately. The agreement required Plaintiffs, "to make and execute other documents or papers as may be necessary to effectuate the terms and conditions of [the Proposed Modification Agreement] which, if approved and accepted by [Flagstar] shall bind [Plaintiffs]."[15] Additionally, the September 2012 letter sent with the Proposed Modification Agreement stated, "[t]his modification agreement will not be binding or effective unless and until it has been signed by both you and [Flagstar]."[16] The letter also conditioned effectiveness on there being no adverse changes to Plaintiffs' income since the initial review conducted by Flagstar and Plaintiffs' payment of closing costs.[17] The letter also noted that, "collection activity will continue pending the modification agreement becoming binding and effective."[18] Finally, "temporary payment coupons" were enclosed with the letter to help Plaintiffs keep track of their required monthly payments until they began receiving their modified payment statements.[19]

Plaintiffs assert that they did not receive this September 2012 letter.[20] Nevertheless, Plaintiffs continued to pay Flagstar the lower monthly payment amounts they had been paying since April 2012.[21] In October, Plaintiffs even paid a slightly higher amount to cover the closing costs that Flagstar requested before the Proposed Modification Agreement was to become effective.[22]

In October or November 2012, Flagstar sent, and Plaintiffs received, another letter with a copy of the Proposed Modification Agreement.[23] Due to an error in the spelling of Plaintiff Carmen Jimenez's name in the Proposed Modification Agreement, Plaintiffs were unable to execute the agreement during October or November 2012.[24]

In early December 2012, Flagstar sent, and Plaintiffs received, a notice of acceleration and notice of foreclosure sale, listing a scheduled foreclosure sale date of January 1, 2013.[25] After receiving the notice, Plaintiffs allegedly called Flagstar, and were told, "not to worry about [the scheduled foreclosure sale] and that [Flagstar] would ask for an extension."[26] However, Plaintiffs were never told, on that day or later, that they actually received an extension or that the sale was postponed.[27]

On December 24, 2012, Flagstar sent Plaintiffs a corrected copy of the Proposed Modification Agreement.[28] The agreement was sent with the same form letter as that sent in September 2012, and it stated, the Proposed Modification Agreement "must be returned to us within 14 days with closing funds, no later than January 7, 2013."[29] The letter also contained the same set of "temporary payment coupons, " as in the September letter, with the last coupon stating, "[y]our 4th modified payment is due on January 1, 2013, in the amount of $1, 092.79 [the modified payment amount]."[30] Finally, the December letter noted, just as the September letter did, that "collection activity [would] continue pending the modification agreement becoming binding and effective."[31]

On January 1, 2013, Plaintiffs' property was sold at a foreclosure sale to Defendant American Homes 4 Rent Properties One, LLC ("American Homes").[32] Though the evidence is in dispute, Plaintiffs assert that they sent a signed copy of the Proposed Modification Agreement along with their January 2013 mortgage payment to Flagstar the first week of January 2013.[33] Flagstar asserts that it never received a signed copy of the Proposed Modification Agreement, and that regardless, it never signed it.[34] Finally, Plaintiffs assert that Flagstar refused their January 2013 payment.[35]

B. Procedural History

On February 25, 2013, Plaintiffs filed suit in the 166th Judicial District Court of Bexar County, Texas, naming Flagstar and American Homes as Defendants. Through their state-court petition, which remains their live pleading, Plaintiffs assert causes of action against Flagstar for wrongful foreclosure, breach of contract, fraud, and promissory estoppel. Plaintiffs also seek declaratory and injunctive relief to rescind the sale and prevent Defendants from removing Plaintiffs from the property. The state court granted Plaintiffs' request for a temporary restraining order. Thereafter, Flagstar answered, and on March 8, 2013, removed the action to this Court.[36]

On September 11, 2013, Flagstaff filed its motion for summary judgment, challenging Plaintiffs' claims as factually or legally insufficient.[37] Plaintiffs responded, asserting disputed facts, and Flagstaff replied. In its reply Flagstar ...

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