United States District Court, E.D. Texas, Sherman Division
MEMORANDUM ADOPTING REPORT AND RECOMMENDATION OF
UNITED STATES MAGISTRATE JUDGE
L. MAZZANT UNITED STATES DISTRICT JUDGE
for consideration the report of the United States Magistrate
Judge in this action, this matter having been heretofore
referred to the United States Magistrate Judge pursuant to 28
U.S.C. §636. On May 22, 2017, the report of the
Magistrate Judge (Dkt. #43) was entered containing proposed
findings of fact and recommendations that Defendants'
Motion for Summary Judgement (Dkt. #38) be granted in part
and denied in part.
case stems from the actions of the parties in processing
Lilly Helene Schaffer's (“Plaintiff”)
mortgage. In 2005, Plaintiff purchased the property located
at 6439 Bluffview Drive, Frisco, TX 75034 (the
“Property”), and executed a Note in the amount of
$1, 330, 000.00 (the “Note”) secured by a Deed of
Trust on the Property (the “Deed of Trust”)
(collectively, the Note and Deed of Trust are the
“Mortgage”) (Dkt. #24 at pp. 2-3, Dkt. #38-11).
The mortgage is currently owned by The Bank of New York
Mellon, as Trustee for CWMBS 2005-J4 (“BONY”),
and SunTrust Mortgage, Inc. (“SunTrust”) is the
mortgage servicer (collectively, BONY and SunTrust are
“Defendants”) (Dkt. #24-6). In 2013, Plaintiff
fell into default on her mortgage. See Id.
Defendants foreclosed on the Property in September of 2016
(Dkt. #38 at p. 1). Defendants report, and Plaintiff does not
contest, that Plaintiff has not made a payment since March
2013. See id.
initially filed suit in the 429th Judicial
District of Collin County in January 2016 against Defendants.
See case styled as Lilly Helene Schaffer v. The
Bank of New York Mellon, et al., Cause No.
4:16-cv-00047. Defendants removed the action to the United
States District Court for the Eastern District of Texas based
on diversity jurisdiction. See Id. On February 2,
2016, Plaintiff filed for bankruptcy, and the suit was
stayed. See Id. On April 12, 2016, Plaintiff's
bankruptcy case was dismissed. See Id. After
Plaintiff failed to file a required status report, the
District Court dismissed the suit without prejudice. See
30, 2016, Plaintiff again filed suit in the 429th
Judicial District of Collin County, seeking damages and a
temporary restraining order against Defendants regarding
their handling and service of Plaintiff's mortgage (Dkt.
#3). Plaintiff asserted several causes of action, including:
(1) common law fraud and misrepresentation, and violations of
(2) Regulation O of the Code of Federal Regulations, (3)
Federal Fair Debt Collection Practices Act
(“FDCPA”) and Texas Debt Collection Practices Act
(“TDCPA”), (4) Fair Credit Reporting Act
(“FCRA”), and (5) Real Estate Settlement
Procedures Act (“RESPA”) (Dkt. #3 at pp. 7-14).
Plaintiff later amended her Complaint to add an additional
cause of action under the Fair Housing Act
(“FHA”) (Dkt. #24 at pp. 8-10).
13, 2016, Defendants removed the action to the United States
District Court for the Eastern District of Texas based on
diversity jurisdiction (Dkt. #1). On August 26, 2016,
Plaintiff filed an Emergency Motion for Temporary Restraining
Order and Preliminary Injunction in effort to bar Defendants
from foreclosing on the Property (Dkt. #11). On September 2,
2016, the District Court denied Plaintiff's Motion (Dkt.
September 6, 2016, the foreclosure sale took place and BONY
purchased the Property (Dkt. #33). Plaintiff did not vacate
the property (Dkt. #32 at p. 3). Defendants then filed a
separate suit in the justice court of Collin County, Texas,
requesting that Plaintiff vacate the Property (Dkt. #36, Ex.
A). Plaintiff filed a Motion to Dismiss for Lack of
Jurisdiction, or in the Alternative, Plea in Abatement,
asserting that the action should be stayed until a final
determination is made in the present case (Dkt. #32, Ex. C,
at pp. 2-9). The justice court abated the case until this
matter is resolved, and ordered Plaintiff to make monthly
rent payments of $1, 100.00 to Defendants (Dkt. #33, Ex. A
(“$1, 100 rent on/or before Nov. 15 and on the 15th of
every month thereafter while abated”)). On December 16,
2016, the Court granted Defendants' Motion for Leave to
File a Counterclaim for declaratory judgment and forcible
detainer, formally bringing the question of possession before
the Court (Dkts. #27, #28).
March 15, 2017, Defendants filed the present Motion for
Summary Judgment (Dkt. #38). On March 29, 2017, Plaintiff
filed a response (Dkt. #40). On April 5, 2017, Defendants
filed a reply (Dkt. #41). On April 12, 2017, Plaintiff filed
a sur-reply (Dkt. #42). On May 22, 2017, the Magistrate Judge
issued a Report and Recommendation (the “Report”)
(Dkt. #43). On June 5, 2017, Plaintiff filed objections (Dkt.
#44). On June 16, 2017, Defendants filed a response (Dkt.
#46). On June 23, 2017, Plaintiff filed an additional
response (Dkt. #47).
Law Fraud and Misrepresentation
contends the Magistrate Judge incorrectly stated that
Plaintiff did not address the element of reliance in her
fraud claim (Dkt. #44 at p. 3). Plaintiff states, in her
Second Amended Complaint, she was “told not to make any
payments until it was resolved. Despite this, Plaintiff
continued to send in payment until SunTrust returned the
funds on or about October 9, 2014.” (Dkt. #24 at p. 4).
The Report and Recommendation notes this fact specifically
(Dkt. #43 at p. 4). Plaintiff objects, stating that, in its
response to the Motion for Summary Judgment, rather than the
Second Amended Complaint, she argued that the actionable
misrepresentation is Defendant's “instruction to
stop making monthly mortgage payments, which necessarily
caused a default under the terms of the loan, ” and
that SunTrust's instruction to not make payments
“would necessarily result in a default under the terms
of the Loan.” (Dkts. #44 at pp. 3-4; #40 at 11-12).
These statements suggest that an individual could
rely on the alleged misrepresentation to a default, but
Plaintiff's Second Amended Complaint demonstrates that
she did not rely on any statement to stop sending
payments. See Dkt. #24 at p. 4 (“Despite this,
Plaintiff continued to send in payment. . . .”).
Plaintiff objects, stating that the Magistrate Judge
“[a]pparently [relied] exclusively on this statement,
” but this statement, in and of itself, demonstrates
Plaintiff did not rely on the alleged misrepresentation.
Plaintiff does not allege reliance, and summary judgment is
also objects to the Magistrate Judge's conclusion that
the statute of frauds bars Plaintiff's fraud and
misrepresentation claim (Dkt. #44 at p. 4). Plaintiff asserts
that Defendants are the only entities with the ability to
modify Plaintiff's loan terms and, since nothing in the
Note or Deed of Trust governs how loan modification and loss
mitigation applications will be considered, Plaintiff is
forced to rely upon Defendants' statement that she must
stop making payments in order to be considered for a loan
modification or other loss mitigation (Dkt. #44 at p. 5).
Plaintiff objects to the Magistrate Judge's
characterization of the alleged misrepresentation- to stop
making monthly payments in order to be considered for loan
modification and loss mitigation-as within the four corners
of the Note and Deed of Trust, because the documents do not
provide requirements and/or procedures in order for
Defendants to consider Plaintiff for a loan modification
and/or loss mitigation (Dkt. #44 at p. 5). Plaintiff admits,
however, that Defendant's alleged instruction that she
stop making payments “was necessarily a breach of the
loan contract” (Dkt. #44 at p. 5).
Court agrees that the alleged instruction is
“necessarily a breach of the loan contract, ” in
direct opposition to the terms of the Mortgage contract, and
is therefore barred. See, e.g., Bush v. Wells Fargo Bank,
N.A., No. SA:13-CV-530-DAE, 2014 WL 12496571, at *1
(W.D. Tex. Apr. 24, 2014) (finding that a claim based on the
statement that “Wells Fargo's representatives
informed the Plaintiff that he was not allowed to make any
mortgage payments while in loan modification status”
was barred by the statute of frauds.); see also, Robinson
v. Bank of America, N.A., No. 3:13-CV-869-L-BK, 2013 WL
7877027, at *4 (N.D. Tex. Sep. 11, 2013) (“In this
case, Plaintiff's breach of contract claims are based on
their reliance on Defendant's representatives' oral
instructions not to make mortgage payments while their loan
modification application was pending, which, taken as true,
is nonetheless an oral modification of the ...