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Schaffer v. Suntrust Mortgage, Inc.

United States District Court, E.D. Texas, Sherman Division

July 18, 2017

LILLY HELENE SCHAFFER, Plaintiff,
v.
SUNTRUST MORTGAGE, INC. and THE BANK OF NEW YORK MELLON, as Trustee for CWMBS 2005-J4 Defendants.

          MEMORANDUM ADOPTING REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

          AMOS L. MAZZANT UNITED STATES DISTRICT JUDGE

         Came on 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.

         BACKGROUND

         This 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.

         Plaintiff 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 id.

         On June 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).

         On July 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. #18).

         On 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).

         On 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).

         ANALYSIS

         Common Law Fraud and Misrepresentation

         Plaintiff 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 appropriate.

         Plaintiff 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).

         The 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 ...


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