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Walker v. Willow Bend Mortgage Company, LLC

United States District Court, N.D. Texas, Dallas Division

April 11, 2019

J'MEI R. WALKER, Plaintiff,
v.
WILLOW BEND MORTGAGE COMPANY, LLC, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          SIDNEY A. FITZWATER SENIOR JUDGE

         In this action challenging an attempted foreclosure, defendant Wells Fargo Bank, N.A. (“Wells Fargo”) removed this case to this court based on diversity jurisdiction, contending that defendant Willow Bend Mortgage Company, LLC (“Willow Bend”) was improperly joined. Plaintiff J'Mei R. Walker (“Walker”) did not move to remand. Several months after the case was removed, Wells Fargo moved for summary judgment, but the court ordered the parties to brief the issue of improper joinder before it would consider the motion. The parties' jurisdictional briefing is now complete. For the reasons that follow, the court sua sponte dismisses defendant Willow Bend on the ground that it was improperly joined, and grants Wells Fargo's motion for summary judgment.

         I

         In July 2013 plaintiff Walker took out a mortgage loan from defendant Willow Bend in the amount of $269, 706.00.[1] The loan was secured by a deed of trust against Walker's property located on E. Oates Road in Garland, Texas. The deed of trust named Mortgage Electronic Registration Systems, Inc. (“MERS”) as beneficiary. According to Wells Fargo's evidence, MERS assigned the note and deed of trust to Wells Fargo in June 2014. The assignment appears to have been duly recorded in the official Dallas County land records.

         Walker has since defaulted on the loan. Wells Fargo's foreclosure counsel sent a notice of default to Walker on August 8, 2016, informing him that the debt had been accelerated and the full amount was due within 30 days. On January 11, 2018 Wells Fargo's foreclosure counsel sent an additional notice to Walker informing him that a foreclosure sale would take place on March 6, 2018.

         On March 5, 2018-the day before the scheduled foreclosure sale-Walker filed the instant lawsuit in Texas county court. His original petition and application for temporary restraining order alleges that the Dallas County land records do not reflect any assignment of his mortgage from Willow Bend to Wells Fargo; that his note does not bear an indorsement or allonge; that Wells Fargo did not send him the pre-foreclosure notices required by Texas law; that Wells Fargo failed to credit him for payments he made through some unspecified date in 2017;[2] and that Wells Fargo failed to respond to a request for a loan modification. Walker asserts that Wells Fargo violated the Texas Debt Collection Practices Act (“TDCPA”), Tex. Fin. Code Ann. §§ 392.001-404 (West 2016); that it failed to comply with Tex. Prop. Code Ann. § 51.002 (West 2014); and that it breached the contractual terms of the note and deed of trust. Walker also asserts that Willow Bend breached its fiduciary duty to him when it assigned his loan to Wells Fargo, because it knew about Wells Fargo's “pattern and practice of . . . disregard of applicable law in the servicing of mortgage loans.” Pet. ¶ 8. He seeks injunctive and declaratory relief, compensatory and exemplary damages, and attorney's fees and costs.

         Wells Fargo removed this case to this court based on diversity of citizenship, arguing that defendant Willow Bend, the only non-diverse defendant, was improperly joined. Wells Fargo now moves for summary judgment on all claims against it. Walker opposes the motion. At the court's request, the parties have also briefed the question whether the court has subject matter jurisdiction.

         II

         Wells Fargo contends that Willow Bend is improperly joined, and that the court therefore may exercise diversity jurisdiction over this case. The court agrees.

         A

         For a case to be removed based on diversity jurisdiction, “all persons on one side of the controversy [must] be citizens of different states than all persons on the other side.” Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1079 (5th Cir. 2008) (quoting McLaughlin v. Miss. Power Co., 376 F.3d 344, 353 (5th Cir. 2004)). “The jurisdictional facts that support removal must be judged at the time of the removal.” Gebbia v. Wal-Mart Stores, Inc., 233 F.3d 880, 883 (5th Cir. 2000) (citations omitted). Moreover, under 28 U.S.C. § 1441(b), a case cannot be removed based on diversity jurisdiction if any properly joined defendant is a citizen of the state in which the action is brought (here, Texas).

         The doctrine of improper joinder is a narrow exception to the rule of complete diversity, and it “entitle[s] a defendant to remove to a federal forum unless an in-state defendant has been ‘properly joined.'” Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc); see also Meritt Buffalo Events Ctr. LLC v. Cent. Mut. Ins. Co., 2016 WL 931217, at *2 (N.D. Tex. Mar. 11, 2016) (Fitzwater, J.). The doctrine allows federal courts to defend against attempts to manipulate their jurisdiction, such as by joining nondiverse parties solely to deprive federal courts of diversity jurisdiction. See Smallwood, 385 F.3d at 576. Because “the effect of removal is to deprive the state court of an action properly before it, removal raises significant federalism concerns.” Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, 281 (5th Cir. 2007) (quoting Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365-66 (5th Cir. 1995)). Therefore, the removal statute is strictly construed, with “any doubt about the propriety of removal [being] resolved in favor of remand.” Id. at 281-82. In determining whether a party was improperly joined, the court “resolve[s] all contested factual issues and ambiguities of state law in favor of the plaintiff.” Id. at 281. The party seeking removal bears a heavy burden to prove improper joinder. Smallwood, 385 F.3d at 574.

         Improper joinder is established by showing that there was either actual fraud in the pleading of jurisdictional facts or that the plaintiff is unable to establish a cause of action against the nondiverse defendant in state court. Parsons v. Baylor Health Care Sys., 2012 WL 5844188, at *2 (N.D. Tex. Nov. 19, 2012) (Fitzwater, C.J.) (citing Smallwood, 385 F.3d at 573). Under the second alternative-the one at issue in this case-the test for improper joinder is “whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant, which stated differently means that there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant.” Smallwood, 385 F.3d at 573; see also Travis v. Irby, 326 F.3d 644, 648 (5th Cir. 2003) (explaining that terms “no possibility” of recovery and “reasonable basis” for recovery have essentially identical meaning, and holding that pleadings must show more than “any mere theoretical possibility of recovery”). To assess “whether a plaintiff has a reasonable basis of recovery under state law, ”

[t]he court may conduct a [Fed. R. Civ. P.] 12(b)(6)-type analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against the in-state defendant. Ordinarily, if a plaintiff can survive a Rule 12(b)(6) challenge, there is no improper joinder. That said, there are cases, hopefully few in number, in which a plaintiff has stated a claim, but has misstated or omitted discrete facts that would determine the propriety of joinder. In such cases, the district court may, in its discretion, pierce the pleadings and conduct a summary inquiry.

Smallwood, 385 F.3d at 573 (footnotes omitted).

         The analysis does not end with the conclusion that there is no possibility of recovery against the non-diverse defendant. “When the only proffered justification for improper joinder is that there is no reasonable basis for predicting recovery against the in-state defendant, and that showing is equally dispositive of all defendants rather than to the in-state defendants alone, ” the removing party has failed to show improper joinder. Id. at 575. This principle is sometimes called the “common defense rule.” See 14C Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 3723.1, at 362-63 (4th ed. 2018). Under the common defense rule, the court must remand the case “[i]f, but only if, the showing which forecloses [plaintiff's] claims against the non-diverse defendants necessarily and equally compels foreclosure of all their claims against all the diverse defendants.” Boone v. Citigroup, Inc., 416 F.3d 382, 391 (5th Cir. 2005).

         When deciding whether a defendant has been improperly joined, a federal district court must apply the federal pleading standard. See Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp. Ltd., 818 F.3d 193, 207-08 (5th Cir. 2016) (on rehearing). This standard requires the plaintiff to plead enough facts “to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “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.; see also Twombly, 550 U.S. at 555 (“Factual allegations must be enough to raise a right to relief above the speculative level[.]”). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘shown'-‘that the pleader is entitled to relief.'” Iqbal, 566 U.S. at 679 (alteration omitted) (quoting Rule 8(a)(2)). Furthermore, under Rule 8(a)(2), a pleading must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Although “the pleading standard Rule 8 announces does not require ‘detailed factual allegations, '” it demands more than “labels and conclusions.” Iqbal, 566 U.S. at 678 (quoting Twombly, 550 U.S. at 555). And “a formulaic recitation of the elements of a cause of action will not do.” Id. (quoting Twombly, 550 U.S. at 555).

         B

         Applying the controlling standard, Wells Fargo has met its heavy burden of proving that Willow Bend has been improperly joined. The only claim that Walker brings against Willow Bend is for breach of fiduciary duty. Walker's petition appears, however, to contradict itself as to the nature of the relationship between Walker and Willow Bend. At some points, the petition seems to allege that Willow Bend was itself a mortgagee. See, e.g., Pet. ¶ 4 (“Plaintiff executed a Note . . . and a Deed of Trust . . . for the benefit of Willow Bend covering the Property.”). At others, the petition suggests that Willow Bend was a mortgage broker, whose task was to secure financing on Walker's behalf. See, e.g., Id. ¶ 8 (“As an entity steering the financing of its newly constructed homes to a mortgage banker, Willow Bend had a fiduciary duty to bring a mortgage banker in to finance the transaction . . . on the best possible price and terms[.]”). Walker cites authority suggesting that a mortgage broker owes a fiduciary duty to its client. See Kelly v. Gaines, 181 S.W.3d 394, 413-15 (Tex. App. 2005), rev'd on other grounds, 235 S.W.3d 179 (Tex. 2007). But this authority is inapposite.

         A limited, summary assessment of the evidence submitted by the parties in relation to Wells Fargo's motion for summary judgment reveals that Willow Bend was a mortgage lender, not a mortgage broker. See Smallwood, 385 F.3d at 573-74 (recognizing district court's discretion to pierce the pleadings where plaintiff has omitted or misstated discrete facts that would determine propriety of joinder). Wells Fargo has submitted a note and deed of trust executed by Walker in favor of Willow Bend, as lender and mortgagee. The note and deed of trust are admissible evidence that the court may consider. See infra § IV. This evidence makes it clear that Willow Bend was not Walker's mortgage broker, but rather his lender.

         Because Willow Bend was Walker's mortgage lender, Walker's breach of fiduciary duty claim fails as a matter of law. In Texas, there generally is no fiduciary relationship between a mortgagor and mortgagee. See Wakefield v. Bank of Am., N.A., 2018 WL 456721, at *5 (Tex. App. 2018, no pet.) (citing Lovell v. W. Nat'l Life Ins. Co., 754 S.W.2d 298, 303 (Tex. App. 1988, writ denied)). Nor is there such a relationship between a loan servicer and its client. Williams v. Fed. Nat'l Mortg. Ass'n, 2012 WL 443986, at *3 (N.D. Tex. Feb. 13, 2012) (Robinson, J.). Texas courts have found fiduciary relationships between borrowers and lenders before, but only based on “extraneous facts and conduct, such as excessive lender control or influence in the borrower's business activities.” Wakefield, 2018 WL 456721, at *5 (quoting Bank One, Tex., N.A. v. Stewart, 967 S.W.2d 419, 442 (Tex. App. 1998, pet. denied)). Walker's petition ...


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