United States District Court, N.D. Texas, Dallas Division
ADA NOLES PROPERTIES, LLC, and JEREMY SEETON AS EXECUTOR FOR THE ESTATE OF ADA NOLES, Plaintiffs,
CITIMORTGAGE, INC., Defendant.
FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE
UNITED STATES MAGISTRATE JUDGE
D. STICKNEY UNITED STATES MAGISTRATE JUDGE.
case has been referred to the United States Magistrate Judge
for pretrial management. Before the Court is CitiMortgage,
Inc.'s (“Defendant”) Partial Motion to
Dismiss Counts 3-5 of Plaintiffs' First Amended Petition
[ECF No. 20] (“Partial Motion to Dismiss”). Ada
Noles Properties, LLC (“Ada Noles”) and Jeremy
Seeton (“Seeton”) (collectively,
“Plaintiffs”) have not filed a response and the
time to do so has passed. For the following reasons, the
undersigned respectfully recommends that the District Court
GRANT Defendant's Partial Motion to
Dismiss [ECF No. 20].
April 4, 2017, Ada Noles filed its Original Petition in the
413th Judicial District Court of Johnson County,
Texas. Pet. 1, ECF No. 1 at 9. Plaintiffs state that Ada
Noles entered into an agreement with Defendant on April 17,
2009 to borrow money (the “Loan”) which was
secured by real property located at 4445 County Road 616,
Alvarado, Texas 76009 (the “Property”). Am.
Compl. 2, ECF No. 16. Plaintiffs state that as a part of this
agreement, the parties executed a “Timely Payment
Rewards Rider” (“TPR Rider”) whereby
Defendant agreed to reduce the interest rate of the Loan by
1% if Ada Noles made a series of timely consecutive payments.
Am. Compl. 2, ECF No. 1 at 9. Plaintiffs state that such
timely payments were made, but Defendant did not give the
interest rate deductions. Am. Compl. 3, ECF No. 16. Ms. Ada
Noles passed away in 2015, and Seeton became the executor of
her estate. Am. Compl. 3, ECF No. 16. Plaintiffs state that
on July 11, 2016, Seeton asked Defendant to correct any
miscalculation of the Loan payments pursuant to the TPR
Rider. Am. Compl. 3, ECF No. 16. Plaintiffs state that
Defendant failed to respond or correct the miscalculation.
Am. Compl. 3, ECF No. 16. Plaintiffs state that
Defendant's claimed balance on the Loan was paid off, and
the Property has been transferred through probate to Ada
Noles. Am. Compl. 4, ECF No. 16. Plaintiffs allege the
following causes of action in their July 3, 2017 Amended
Petition: Count 1: Violation of 12 U.S.C. § 2605; Count
2: Breach of Contract: Count 3: Violation of the Texas
Deceptive Trade Practices Act (“DTPA”); Count 4:
Statutory Fraud; and Count 5: Common Law Fraud. Am. Compl.
4-9, ECF No. 16. On July 24, 2017, Defendant filed its
Partial Motion to Dismiss [ECF No. 20] seeking to dismiss
Plaintiffs' fraud claims.
may dismiss a claim under Federal Rule of Civil Procedure
(“Rule”) 12(b)(6) if the claim, when viewed in a
light most favorable to the plaintiff, fails to state a valid
claim for relief. See Collins v. Morgan Stanley Dean
Witter, 224 F.3d 496, 498 (5th Cir. 2000). In
considering a Rule 12(b)(6) motion to dismiss, the court
takes as true all facts pleaded in the complaint, even if
they are doubtful in fact. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). A court, at this
juncture, does not evaluate a plaintiff's likelihood of
success, but only determines whether a plaintiff has stated a
legally cognizable claim. Lone Star Fund V (U.S.), L.P.
v. Barclays Bank, P.L.C., 594 F.3d 383, 387 (5th Cir.
2010) (citing Ashcroft v. Iqbal, 556 U.S. 662
(2009)). In resolving a Rule 12(b)(6) controversy, the Court
may examine: (1) the complaint and documents attached to the
complaint; (2) documents attached to the motion to dismiss to
which the plaintiff refers and are central to the
plaintiff's claims; and (3) matters of public record.
See Herrera v. Wells Fargo Bank, N.A., Civ. Action
No. H-13-68, 2013 WL 961511, at *2 (S.D. Tex. Mar. 12, 2013)
(citing Lone Star Fund V (U.S.), L.P., 594 F.3d at
387; Collins, 224 F.3d at 498-99; Cinel v.
Connick, 15 F.3d 1338, 1341, 1343 n.6 (5th Cir. 1994);
United States ex rel. Willard v. Humana Health Plan of
Tex., Inc., 336 F.3d 375, 379 (5th Cir. 2003); Funk
v. Stryker Corp., 631 F.3d 777, 780 (5th Cir. 2011)).
argues that Plaintiffs' fraud claims (Counts 3 through 5)
should be dismissed, because they are nothing more than
attempts to convert breach of contract claims into tort
claims. Mot. 4-5, ECF No. 20. Defendant argues that
Plaintiffs failed to identify any misrepresentation, and
Plaintiffs' only allegations in support of their fraud
claims pertain to the fact that Defendant failed to give an
interest rate reduction under the TPR Rider. Mot. 4, ECF No.
20. Defendant argues that Plaintiffs' mere allegation of
a breach of contract claim does not constitute an actionable
misrepresentation under Texas law, and that in order to be
actionable in tort, Plaintiffs must allege conduct that would
be actionable even in the absence of a contract. Mot. 4, ECF
No. 20 (citing Crawford v. Ace Sign, Inc., 917
S.W.2d 12, 14-15 (Tex. 1996)).
respect to the DTPA claim, Plaintiffs allege that
Defendant's inclusion of the TPR Rider “without the
intention that it be carried out” violated the DTPA,
and that “Defendant's failure to keep its promise
demonstrates that, at the time i[t] made the promise . . . it
did not have an adequate system in place to keep its promise
if she qualified and thus demonstrates that Defendant never
intended to keep its promise and thus mislead on the
existence and/or amount of a price reduction.” Am.
Compl. 6-7, ECF No. 16. Therefore, Plaintiffs basically
allege that Defendant's failure to perform under the TPR
Rider standing alone is evidence of Defendant's intent
not to perform at the time it entered into the agreement.
See Am. Compl. 6-7, ECF No. 16. Plaintiffs allege
elsewhere in their amended complaint that “since [Ada
Noles] did not get the benefit of qualifying, the
circumstantial evidence is that Defendant did not put into
place the operational or organizational functionality  to
recognize a qualifier under the rider, thus being unlikely to
keep its promises under the r[i]der.” Am. Compl. 3, ECF
No. 16. Plaintiffs similarly allege here that Defendant's
failure to perform is evidence of Defendant's intent not
to perform. Defendant argues that Plaintiffs' allegations
cannot form the basis of a fraud claim, because
Plaintiffs' only allegation with respect to the falsity
of the TPR Rider is that Defendant's statements in the
rider were false, because Defendant failed to perform under
the rider. Mot. 4, ECF No. 20. Defendant argues that,
“[f]or a promise of future performance to be the basis
of actionable fraud, it must have been false at the time it
was made. ‘Failure to perform, standing alone, is no
evidence of the promisor's intent not to perform when the
promise was made.'” Mot. 4, ECF No. 20 (quoting
Schindler v. Austwell Farmers Coop., 841 S.W.2d 853,
854 (Tex. 1992)). As Defendant argues, Plaintiffs'
allegations fail to allege a plausible DTPA claim and should
be dismissed. See Crawford, 917 S.W.2d at 14-15
(“Crawford's statements were nothing more than
representations that the defendants would fulfill their
contractual duty to publish, and the breach of that duty
sounds only in contract. The statements themselves did not
cause any harm. The failure to run the advertisement (the
breach of the contract) actually caused the lost profits, and
that injury is governed by contract law, not the
argues that Plaintiffs' allegations with respect to their
statutory and common law fraud claims are similarly premised
in that Defendant allegedly engaged in fraud by failing to
fulfill a contractual promise. Mot. 5, ECF No. 20 (citing Am.
Compl. 7, ECF No. 16). Defendant argues that these fraud
claims should also be dismissed, because Plaintiffs fail to
allege other facts regarding Defendant's intent, and they
lack allegations regarding essential elements. Mot. 5, ECF
No. 20. “The mere failure to perform a promise is not
of itself evidence of an intent not to perform[, ]” and
the “mere breach of contract or failure to perform a
contract is not evidence of fraud.” Stone v.
Enstam, 541 S.W.2d 473, 480-81 (Tex. Civ. App.-Dallas
1976, no writ) (citing Rapid Transit Co. v . Smith,
86 S.W. 322, 335 (1905); Precision Motors v.
Cornish, 413 S.W.2d 752, 756 (Tex. Civ. App.-Dallas
1967, writ ref'd n .r.e.); Morgan v. Box, 449
S.W.2d 499, 504 (Tex. Civ. App.-Dallas 1969, no writ));
Advanced Messaging Wireless, Inc. v. Campus Design,
Inc., 190 S.W.3d 66, 70 (Tex. Civ. App.-Amarillo 2005,
no pet.) (citing Schindler v. Austwell Farmers
Coop., 841 S.W.2d 853, 854 (Tex. 1992)). For the reasons
argued by Defendant, Plaintiffs' statutory and common law
fraud claims should also be dismissed.
further argues that Plaintiffs' fraud claims are
time-barred, because Plaintiffs allege that the parties
entered into an agreement on April 17, 2009, and Plaintiffs
would have or should have reasonably discovered through the
exercise of reasonable diligence that Defendant did not give
the interest rate reduction under the TPR Rider by the second
anniversary date in April of 2011, but Plaintiffs filed their
lawsuit approximately six years later on April 4, 2017. Mot.
6-7, ECF No. 20 (citing Cook-Bell v. Mortg. Elec.
Registration Sys., Inc., 868 F.Supp.2d 585, 589 (N.D.
Tex. 2012); Tex. Bus. & Com. Code § 17.565). As
Defendant points out, a claim under the DTPA is subject to a
two year statute of limitations. See Tex. Bus. &
Com. Code § 17.565 (“All actions brought under
this subchapter must be commenced within two years after the
date on which the false, misleading, or deceptive act or
practice occurred or within two years after the consumer
discovered or in the exercise of reasonable diligence should
have discovered the occurrence of the false, misleading, or
deceptive act or practice.”). In addition, as Defendant
also points out, “[i]t is undisputed that a claim for
statutory fraud under Tex. Bus. & Com.Code Ann. §
27.01 is subject to a four-year statute of limitations, which
begins to run when the plaintiff knows, or, in the exercise
of reasonable diligence, should have known, of the
defendants' alleged fraudulent conduct.”
Superior Air Parts, Inc. v. Kubler, No.
3:14-CV-3492-D, 2015 WL 567223, at *10 (N.D. Tex. Feb. 11,
2015) (citing Val-Com Acquisitions Trust v. Bank of Am.,
N.A., No. 4:10-CV-421, 2011 WL 4591959, at *4 (E.D. Tex.
Sept. 30, 2011); Ford v. Exxon Mobil Chem. Co., 235
S.W.3d 615, 617 (Tex. 2007)). As Defendant further points
out, “[i]n Texas, the statute of limitations for
[common law] fraud is four years. . . . Fraud claims accrue
on the discovery of the fraud or at such time as the fraud
might reasonably have been discovered through the exercise of
reasonable diligence.” Cook-Bell, 868
F.Supp.2d at 589 (citing Tex. Civ. Prac. & Rem. Code
§ 16.004(a)(4); Carroll v. Jaques, 927 F.Supp.
216, 223 (E.D. Tex. 1996); McMeens v. Pease, 878
S.W.2d 185, 188 (Tex. App.-Corpus Christi 1994, writ
denied)). In consideration of the foregoing, Plaintiffs'
fraud claims should also be dismissed because they are
time-barred as Defendant argues.
foregoing reasons, the undersigned respectfully recommends
that the District Court GRANT
Defendant's Partial Motion to Dismiss [ECF No. 20], and
dismiss with prejudice Counts 3 through 5 of Plaintiffs'