United States District Court, S.D. Texas, Houston Division
DANNY D. VESTAL, Plaintiff,
FEDERAL NATIONAL MORTGAGE ASSOCIATION and WELLS FARGO BANK, N.A., Defendants.
MEMORANDUM OPINION AND ORDER
LAKE, UNITED STATES DISTRICT JUDGE.
Danny D. Vestal ("Plaintiff"), sued defendants
Wells Fargo Bank, N.A. ("Wells Fargo") and Federal
National Mortgage Association ("Fannie Mae") in the
268th Judicial District Court of Fort Bend County,
Texas. Defendants Wells Fargo and Fannie Mae
(collectively "Defendants") timely removed to this
court. Pending before the court is
Defendants' Motion to Dismiss and Brief in Support
("Motion to Dismiss") (Docket Entry No. 22). For
the reasons stated below, the Motion to Dismiss will be
granted, and this action will be dismissed with prejudice.
Factual Allegations and Procedural
September 20, 2012, Plaintiff obtained a home-equity loan
from Embrace Home Loans, Inc. ("Embrace") in the
amount of $122, 400.00 to refinance a previous loan on 4434
Waterfall Way, Sugar Land, Texas 77479 ("the
Property"). Plaintiff simultaneously executed a Texas
Home Equity Security Instrument ("Security
Instrument") and a Texas Home Equity Affidavit and
Agreement ("Affidavit"). Embrace is a direct lender
of Fannie Mae. On June 17, 2016, Plaintiff sent Defendants a
Notice to Cure alleged constitutional violations contained in
the Security Instrument. Plaintiff alleged that (1)
Plaintiff's home equity loan exceeded 80 percent of the
fair market value of the property at the time of closing in
violation of Article XVI section 50(a) (6) (B) of the Texas
Constitution, and (2) Plaintiff and Embrace did not properly
execute a written acknowledgment of the property's fair
market value at the time of closing in violation of section
50(a)(6)(Q)(ix). Based on the alleged constitutional
violations, Plaintiff brings causes of action for breach of
contract, quiet title, declaratory judgment, and a permanent
injunction to preclude foreclosure on the property.
Defendants move to dismiss all claims for failure to state a
claim upon which relief can be granted under Federal Rule of
Civil Procedure 12(b) (6) . Plaintiff opposes Defendants'
Motion to Dismiss. Each claim will be analyzed under the
standard of review set forth below.
Standard of Review
the Federal Rules of Civil Procedure a pleading must contain
"a short and plain statement of the claim showing that
the pleader is entitled to relief." Fed.R.Civ.P.
8(a)(2). A plaintiff's pleading must provide the grounds
of his entitlement to relief, and "a formulaic
recitation of the elements of a cause of action will not do.
. . ." Bell Atlantic Corp. v. Twombly, 127
S.Ct. 1955, 1965 (2007). "'[N]aked assertion[s]'
devoid of 'further factual enhancement'" or
"[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
suffice." See Ashcroft v. Iqbal, 129 S.Ct.
1937, 1949 (2009). " [C]onclusory allegations or legal
conclusions masquerading as factual conclusions will not
suffice to prevent a motion to dismiss."
Fernandez-Montes v. Allied Pilots Ass'n, 987
F.2d 278, 284 (5th Cir. 1993). Instead, "[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."
Iqbal, 129 S.Ct. at 1949.
12(b)(6) motion tests the formal sufficiency of the pleadings
and is "appropriate when a defendant attacks the
complaint because it fails to state a legally cognizable
claim." Ramming v. United States, 281 F.3d 158,
161 (5th Cir. 2001), cert. denied sub nom. Cloud v.
United States, 122 S.Ct. 2665 (2002). To defeat a motion
to dismiss, a plaintiff must plead "enough facts to
state a claim to relief that is plausible on its face."
Twombly, 127 S.Ct. at 1974. The court does not
"strain to find inferences favorable to the
plaintiffs" or "accept conclusory allegations,
unwarranted deductions, or legal conclusions."
Southland Securities Corp. v. INSpire Ins. Solutions,
Inc., 365 F.3d 353, 361 (5th Cir. 2004) (internal
quotation marks and citations omitted). "[C]ourts are
required to dismiss, pursuant to [Rule 12(b)(6)], claims
based on invalid legal theories, even though they may
otherwise be well-pleaded." Flynn v. State Farm Fire
and Casualty Insurance Co. (Texas), 605 F.Supp.2d 811,
820 (W.D. Tex. 2009) (citing Neitzke v. Williams,
109 S.Ct. 1827, 1832 (1989)).
Breach of Contract
alleges that Defendants breached their agreement with
Plaintiff by failing to "conform strictly to provisions
of the Texas Constitution applicable to Extension of Credit
as defined by Section 50(a)(6)." Specifically, Plaintiff
brings a breach of contract action for Defendants'
alleged violation of sections 50(a)(6)(B) and 50 (a) (6) (Q)
(ix) of the Texas Constitution. Section 50(a)(6)(B) prohibits
a forced sale if the extension of credit secured by a
voluntary lien exceeds 80 percent of the fair market value of
the homestead on the date the extension of credit is made.
Tex. Const. art. XVI, § 50(a) (6) (B) . Section 50(a)
(6) (Q) (ix) requires the borrower and lender to sign a
written acknowledgment as to the fair market value of the
homestead property on the date the extension of credit is
made. Tex. Const, art. XVI, § 50(a) (6) (Q) (ix) .
50(a) of the Texas Constitution does not create a separate
cause of action, rather it "simply describes what a
home-equity loan must look like if a lender wants the option
to foreclose on a homestead upon borrower default."
Garofolo v. Ocwen Loan Servicing, L.L.C., 497 S.W.3d
474, 478 (Tex. 2016). But a borrower may assert
constitutional violations through a breach of contract action
when the constitutional forfeiture provision is incorporated
into the terms of the home-equity loan. Alexander v.
Wells Fargo Bank, N.A., 867 F.3d 593 (5th Cir. 2017);
Johnson v. Citigroup Mortgage Loan Trust Inc., Civil
Action No. 5:16-cv-1114-RCL, 2017 WL 3337268, at *9 (W.D.
Tex. Aug. 3, 2017); Garofolo, 497 S.W.3d at 484;
Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542, 546
(Tex. 2016). As such, the relevant statute of limitations for
the underlying breach of contract action controls.
Alexander, 867 F.3d 593; Johnson, 2017 WL
3337268, at *9. Actions for breach of contract are governed
by the four-year statute of limitations. Tex. Civ. Prac.
& Rem. Code Ann. § 16.051; Stine v.
Stewart, 80 S.W.3d 586, 592 (Tex. 2002) . A breach of
contract action accrues at the time of breach. Via Net v.
TIG Ins. Co., 211 S.W.3d 310, 314 (Tex. 2006);
Stine, 80 S.W.3d at 592.
with section 50(a) "is measured by the loan as it exists
at origination and whether it includes the terms and
conditions required to be foreclosure-eligible."
Garofolo, 497 S.W.3d at 4 78. The proper accrual
date for breach of contract for violation of section 50(a)
occurs at the date of closing. Alexander, 867 F.3d
593; Sims v. Carrington Mortgage Services, L.L.C.,
440 S.W.3d 10, 17 n.28 (Tex. 2014). Plaintiff's alleged
violations for failure to comply with the 80 percent rule of
section 50(a) (6) (B) and failure to include an
Acknowledgment of Fair Market Value under section
50(a)(Q)(ix) therefore accrued on September 20, 2012, the
date the loan was closed. Alexander, 867 F.3d 593;
Johnson, 2017 WL 3337268, at *11. Under the
four-year statute of limitations Vestal was therefore
required to raise a breach of contract claim by September 20,
2016. Because he filed his state court petition for breach of
contract on November 3, 2016, his claim is barred by
Quiet Title Action
also seeks to remove a cloud on title to the Property. A suit
to remove cloud or to quiet title exists "'to enable
the holder of the feeblest equity to remove from his way to
legal title any unlawful hindrance having the appearance of
better right.'" Essex Crane Rental Corp. v.
Carter, 371 S.W.3d 366, 388 (Tex. App. - Houston [1st
Dist.] 2012, pet. denied); Hahn v. Love, 321 S.W.3d
517, 531 (Tex. App. - Houston [1st Dist.] 2009, pet. denied).
The plaintiff has the burden of proof to establish his
superior equity and right to relief. Id. To do so
the plaintiff must show (1) an interest in a specific
property, (2) title to the property is affected by a claim by
the defendant, and (3) the claim, although facially valid, is
invalid or unenforceable. Vernon v. Perrien, 390
S.W.3d 47, 61-62 (Tex. App. - El Paso 2012, no pet.)
(citation omitted). The plaintiff must recover on the
strength of his own title, not on the weakness of a
defendant's title. Hurd v. BAC Home Loans Servicing,