United States District Court, S.D. Texas, Houston Division
MEMORANDUM AND OPINION
Rosenthal Chief United States District Judge
plaintiff, Patrick Taylor, purchased property in Houston,
Texas, in 2005 with a mortgage loan secured by a note and
deed of trust. The defendants, Ditech Financial, LLC, the
Mortgage Electronic Registration System, and The Bank of New
York Mellon, initiated foreclosure proceedings on that
property in June 2016. Mr. Taylor sued in Texas state court
in August 2016, challenging the foreclosure. He obtained a
temporary restraining order enjoining the sale. The
defendants timely removed on the basis of diversity
jurisdiction. On December 9, 2016, the defendants moved to
dismiss under Federal Rule of Civil Procedure 12(b)(6).
(Docket Entry No. 12). Mr. Taylor has not responded to the
on the complaint, the motion, and the applicable law, the
motion to dismiss is granted, with prejudice as to some
claims and without prejudice and with leave to amend as to
others. Any amended pleading to follow this opinion must be
filed by June 30, 2017.
reasons for these rulings are stated below.
2005, Mr. Taylor purchased property located at 5247 Honeywine
Drive, Houston, Texas 77048. He signed a mortgage loan for
$89, 990.00, secured by a note and deed of trust. The
original note holder was Countrywide Home Loans, Inc.
2016, the defendants filed a Notice of (Substitute)
Trustee's Sale. On August 1, 2016, Mr. Taylor sued in
state court, claiming deficiencies in the securitization
process and asserting causes of action for theft by
deception, fraud, unfair and deceptive business practices,
unconscionability, and seeking to quiet title. (Docket Entry
No. 1, Exhibit D-2 at p. 6). Mr. Taylor also sought a
declaratory judgment, injunctive relief, and costs of suit.
(Id. at pp. 6, 7).
defendants moved to dismiss, arguing that the securitization
challenges fail as a matter of law because Mr. Taylor lacks
standing to assert them, that Mr. Taylor is unable to assert
claims under the Deceptive Trade Practices Act because he is
not a consumer, and that Mr. Taylor's quiet title claim
fails as a matter of law.
The Legal Standard Under Rule 12(b)(6)
12(b)(6) allows dismissal if a plaintiff fails “to
state a claim upon which relief can be granted.” In
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007), the Supreme Court confirmed that Rule 12(b)(6) must
be read in conjunction with Rule 8(a), which requires
“a short and plain statement of the claim showing that
the pleader is entitled to relief, ” Fed.R.Civ.P.
8(a)(2). To withstand a Rule 12(b)(6) motion, a complaint
must contain “enough facts to state a claim to relief
that is plausible on its face.” Twombly, 550
U.S. at 570; see also Elsensohn v. St. Tammany Parish
Sheriff's Office, 530 F.3d 368, 372 (5th Cir. 2008).
In Ashcroft v. Iqbal, 556 U.S. 662 (2009), the
Supreme Court elaborated on the pleading standards discussed
in Twombly. The Court explained that “the
pleading standard Rule 8 announces does not require
‘detailed factual allegations, ' but it demands
more than an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Id. at 678 (quoting
Twombly, 550 U.S. at 555). Iqbal explained
that “[a] claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. (citing
Twombly, 550 U.S. at 556). “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.” Id. (citing
Twombly, 550 U.S. at 556). When a plaintiff's
complaint fails to state a claim, the court should generally
give the plaintiff a chance to amend under Rule 15(a) before
dismissing the action with prejudice, unless it is clear that
to do so would be futile. See Great Plains Trust Co. v.
Morgan Stanley Dean Witter & Co., 313 F.3d 305, 329
(5th Cir. 2002). If it would be futile, the court should
dismiss with prejudice.
The Securitization Claims
Taylor claims that the defendants lack standing to foreclose
on his property because of deficiencies in the securitization
process. (Docket Entry No. 1, Exhibit D-2 at p. 5). Mr.
Taylor first asserts deficiencies in the assignment of the
note. “Under Texas law, facially valid assignments
cannot be challenged for want of authority except by the
defrauded assignor.” Reinagel v. Deutsche Bank
Nat'l Trust Co., 735 F.3d 220, 228 (5th Cir. 2013).
Mr. Taylor is not the defrauded assignor of the note and
cannot challenge the note's assignment.
Taylor argues that the splitting of the note and deed of
trust prevents the defendants from foreclosing. “Texas
courts have ‘rejected the argument that a note and its
security are inseparable by recognizing that the note and the
deed-of-trust lien afford distinct remedies on separate
obligations.'” Martins v. BAC Home Loans
Servicing, L.P., 722 F.3d 249, 255 (5th Cir. 2013)
(quoting Bierwirth v. BAC Home Loans Servicing,
L.P., No. 03-11-00644-CV, 2012 WL 3793190, at *3 (Tex.
App.-Austin Aug. 30, 2012, no pet.) (mem. op.)). The
split-the-note theory is “inapplicable under Texas law
where the foreclosing party is a mortgage servicer and the
mortgage has been properly assigned.” Id.
Here, defendant Ditech Financial, LLC, is the mortgage
servicer. (Docket Entry No. 1, Exhibit ...