Johnson v. Wilmington Trust, N.A.

          MEMORANDUM AND RECOMMENDATION

          FRANCES H. STACY, UNITED STATES MAGISTRATE JUDGE.

         Before the Magistrate Judge, upon referral from the District Judge, is Wilmington Trust, N.A.'s ("Defendant") Motion for Summary Judgment (Document No. 21). Plaintiff has responded to the motion (Document No. 22), and Defendant has replied to Plaintiffs Response. (Document No. 23). Having considered the Motion, and the applicable law, the Magistrate Judge RECOMMENDS, for the reasons set forth below, that Defendant's Motion for Summary Judgment be GRANTED.

         I. Background and Allegations in Second Amended Complaint

         On January 26, 2018, Plaintiff, Joseph Johnson ("Johnson"), filed his Original Complaint in the 55th Judicial District Court of Harris County, Texas, Cause No. 2018-05439 ("the "State Court Action"). (Document No. 1 -1, Exhibit A). Plaintiff s State Court Action relates to a foreclosure sale scheduled for February 6, 2018, of property located at 11606 Lakewood Crossing, Tomball, Texas 77377 ("Property."). (Document No. 1-1, Exhibit 3, p. 32). On February 16, 2018, the state court judge entered a Temporary Restraining Order, which prohibited the scheduled Trustee's sale of the Property from going forward. (Document No. 1-3, p. 1-2). On February 16, 2018, Defendant timely removed the case to this Court on the basis of diversity jurisdiction. (Document No. 1). On February 23, 2018, Defendant filed a Motion to Dismiss. (Document No. 4). In response, Plaintiff filed his First Amended Complaint and Affidavit in Support. (Document Nos. 7, 8). Again, Defendant moved to dismiss Plaintiffs First Amended Complaint. (Document No. 9). Plaintiff responded to the motion to dismiss and simultaneously filed a Second Amended Complaint. (Document Nos. 10, 11). Defendant timely replied to Plaintiffs Response and moved to strike Plaintiffs Second Amended Complaint. (Document No. 15). The Court denied without prejudice Defendant's Motion to Dismiss and Defendant's Motion to Strike the Second Amended Complaint. (Document No. 10). Defendant filed its Answer to Plaintiffs Second Amended Complaint on October 5, 2018. (Document No. 18). Thereafter, a Scheduling Order was entered setting a discovery deadline of January 30, 2019. Defendant has moved for summary judgment on Plaintiffs Second Amended Complaint.

         In his Second Amended Complaint, Plaintiff alleges that, on or about September 2, 2005, Plaintiff and his wife, Margaret Johnson, executed an Adjustable Rate Note ("Note"), in the amount of $224, 950, as well as a Deed of Trust ("Deed"), which lists First Franklin as the Lender. Plaintiff further alleges that the Note and Deed were transferred to Defendant and that Nationstar Mortgage LLC ("Nationstar") is the loan servicer. Second Amended Complaint (Document No. 10, ¶ 5-6). Plaintiff states that he experienced financial difficulties in 2014 due to health-related issues, and "realizing that he may soon" default on his mortgage payments, he contacted Nationstar to discuss "loss mitigation options." Second Amended Complaint (Document No. 10, ¶ 7). Plaintiff alleges that he was offered a loan modification in November 2017. With respect to the loan-modification-review process, Plaintiff alleges, in pertinent part:

8. Johnson was offered a loan modification by Nationstar in November 2017. A Nationstar representative assured Johnson that if he gathered and submitted all of the required documents along with a loan modification application within 30-60 days, Wilmington would not foreclose on his property until his application had been accepted or denied and he had been provided the opportunity to appeal that decision if needed. Johnson immediately completed and submitted the loan modification application along with the requested documentation on November 27, 2017-this was Johnson's first complete loan modification. Johnson called Nationstar on December 28, 2017 to obtain a status update on his loan modification application and to ensure his home was safe. The Nationstar representative Johnson spoke with confirmed that his loan modification was received, complete, and under review. Additionally, the Nationstar representative reaffirmed what the previous Nationstar representative had told Johnson-that Nationstar would provide a full and fair loan modification review (including an appeal if needed) prior to Wilmington taking any action to foreclose on his Property. Further, the Nationstar representative stated that she was memorializing the conversation in her notes and that the agreement to deter any foreclosure proceedings pending loan modification review would be signed by her supervisor and mailed to Johnson-Johnson continues to await that agreement.

9. Accordingly, Johnson believed all was well and that approval of his loan modification application was imminent until he received a Notice of Acceleration and Notice of Trustee's Sale on January 4, 2018 informing him that his Property was posted for foreclosure sale on February 6, 2018. .. Johnson was shocked because the Nationstar representative he spoke with 6 days earlier assured him that Nationstar would not foreclose on his Property while in loan modification status. Apparently, Nationstar initiated foreclosure proceedings despite their assurances to Johnson, without formally accepting or denying the loan modification application, and without sending the appropriate notice of default, opportunity to cure the default, and notice of intent to accelerate the debt as required by the Texas Property Code thereby violating Johnson's due process rights as well the Deed of Trust.

         Second Amended Complaint (Document No. 10, ¶ 8-9). Plaintiff alleges claims of violation of Texas Property Code § 5.065, breach of contract, fraud, promissory estoppel, violation of the Real Estate Settlement Procedures Act ("RESPA"), violation of Texas Property Code § 51.002, violations of the Texas Debt Collection Act, and breach of duty of cooperation. Second Amended Complaint (Document No. 10, at 4-12). Plaintiff seeks actual, nominal, and exemplary damages as well as attorneys' fees. Second Amended Complaint (Document No. 10, at 12). Defendant has filed a motion for summary judgment, arguing that Plaintiff is not entitled to relief on any of his claims as a matter of law. (Document No. 21).

         II. Undisputed Facts

         The Plaintiff purchased the Property on January 23, 2003, from Perry Homes. Plaintiff obtained financing for the purchase of the Property for $195, 284.00 from New Century Mortgage Corporation. (Document No. 21 -2, Exhibit 1 Warranty Deed with Vendor's Lien recorded February 4, 2003 "Purchase Money Loan"). Thereafter, in September 2005, Plaintiff obtained a renewal and extension of the Purchase Money Loan from First Franklin, a Division of Nat. City Bank of IN in the amount of $224, 950.00. (Document No. 21-3, Exhibit 2, Adjustable Rate Note dated September 2, 2005 "Renewal and Extension Loan" and Document No. 21-4, Exhibit 3, Deed of Trust recorded September 13, 2005 "Deed of Trust"). The Plaintiff failed to make his September 1, 2012, mortgage payment and has made no further payments. (Document No. 21-1, Exhibit A-Affidavit of April Hawkins, ¶ 6). On April 4, 2016, Nationstar sent, by certified mail, postage prepaid, a notice of Plaintiffs default, along with an intent to accelerate the amounts due under the Note to Plaintiff at 11606 Lakewood Crossing Drive, Tomball, Texas 77377. (Document No. 21-5, Exhibit 4 "Notice of Default"). On December 28, 2017, Plaintiff was sent by certified mail a Notice of Acceleration and Posting and of the Trustee's Sale scheduled for February 6, 2018. (Document No. 21-6, Affidavit of Service of Notice of Acceleration and Posting, Exhibit B, and Document No. 21-7, Exhibit 5).

         III. Standard of Review

         Rule 56(a) provides that "[t]he court shall grant summary judgment if the movant shows that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The moving party bears the burden of demonstrating that there exists no genuine issue of material fact. Brandon v. Sage Corp., 808 F.3d 266, 269-70 (5^th Cir. 2015) (citing Celotex Corp. v. Catrett, 106 S.Ct. 2548, 2553 (1986)). Once the moving party meets its burden, the burden shifts to the nonmovant, "who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists" and that summary judgment should not be granted. Norwegian Bulk Transp. A/S v. Int'l Marine Terminals P'ship, 520 F.3d 409, 412 (5^th Cir. 2008); see also Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5^th Cir. 1998).^[1] A party opposing a properly supported motion for summary judgment may not rest upon mere allegations or denials in a pleading, and unsubstantiated assertions that a fact issue exists will not suffice. Celotex, 106 S.Ct. at 2548. Instead, the non-movant "must go beyond the pleadings and come forward with specific facts indicating a genuine issue for trial to avoid summary judgment." Brandon, 808 F.3d at 270 (quoting Piazza's Seafood World, LLC v. Odom, 448 F.3d 744, 752 (5^th Cir. 2006)).

         In considering a motion for summary judgment, all reasonable inferences to be drawn from both the evidence and undisputed facts are to be viewed in the light most favorable to the nonmoving party. Darden v. City of Fort Worth, 880 F.3d 722, 727 (5^th Cir. 2018). "If the record, viewed in the light most favorable to non-movant, could not lead a rational trier of fact to decide in non-movant's favor, summary judgment is appropriate." Allen v. Radio One of Texas II, LLC, 515 Fed.Appx. 295, 299 (5^th Cir. 2013) (citing Kelley v. Price-Macemon, Inc., 992 F.2d 1408, 1413 (5^th Cir. 1993). On the other hand, if "the factfinder could reasonably find in [the nonmovant's] favor, then summary judgment is improper." Kelley, 992 F.2d at 1413. Even if the standards of Rule 56 are met, a court has discretion to deny a motion for summary judgment if it believes that "the better course would be to proceed to a full trial." Anderson v. Liberty Lobby, Inc., 106 S.Ct. 2505, 2513 (1986).

         The Magistrate Judge has considered the documents attached to Defendants' Motion (Document No. 21, Exhibits 21-1-21-7) and the exhibits attached to Plaintiffs Response to the Motion for Summary Judgment (Document No. 22-1 to 22-4).

         IV. Discussion

         A. Plaintiffs Claim for Violation of Texas Property Code § 5.065

         Plaintiff alleges that Defendant violated Texas Property Code § 5.065 by failing to provide "proper and timely notice of default, the opportunity to cure the default, and notice of intent to accelerate the debt which are required in order for Wilmington to foreclose on the Property." Second Amended Complaint (Document No. 10, ¶ 14). Defendant argues that undisputed summary judgment evidence shows that the provisions of subchapter D of § 5.065, including the notice and time to cure requirements, do not apply because Plaintiff purchased the Property in 2003 from Perry Homes in a traditional real estate transaction, i. e, he obtained a deed to the property subject to a lien securing repayment of the purchase money. See Document Nos. 21-2, 21-3, 21-4. The Magistrate Judge agrees.

         Section 5.065 is a part of chapter 5, subchapter D of the Texas property code, which governs "executory contracts for conveyance." See TEX. PROP. CODE ANN. § 5.061-85 (West 2014 & Supp. 2017); see also Graces v. Hernandez, No. 13-13-00242-CV, 2016 WL 2970686, at *4 (Tex. App.-Corpus Christi May 19, 2016, no pet.)(mem.op). "Subchapter D was enacted to protect purchasers who execute a "contract for deed." Weaks v. White,479 S.W.3d 432, 439 (Tex. App.-Tyler 2015, pet. denied)(citing Flores v. Millennium Interests, LTD.,185 S.W.3d 427, 435 (Tex. 2005)). "A contract for deed, unlike a typical secured transaction involving a deed of trust, is a financing arrangement that allows the seller to maintain title to the property until the buyer has paid for the property in full." Morton v. Nguyen, 412 S.W.3d 506, 509-510 (Tex. 2013). Because Defendant did not retain title to the property until after Plaintiff made all required payments on the underlying loan, there was no executory contract for the sale of the property and the provisions of subchapter D of the ...