United States District Court, N.D. Texas, Fort Worth Division
FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE
UNITED STATES MAGISTRATE JUDGE
RAY, JR. UNITED STATES MAGISTRATE JUDGE.
the Court are U.S. Bank National Association, as Trustee for
TBW Mortgage-Backed Trust Series 2006-5, TBW Mortgage
Pass-Through Certificates, Series 2006-5 (“U.S.
Bank”), and Ocwen Loan Servicing, LLC's
(“Ocwen”) (collectively “Defendants”)
Motion to Dismiss Amended Complaint and Brief in Support (ECF
No. 10) filed January 7, 2019; Jimmy Daniel and Christy
Daniel's (collectively “Plaintiffs”) Response
and Brief in Support (ECF No. 24) filed February 4, 2019; and
Defendants' Reply (ECF No. 26) filed February 19, 2019.
United States District Judge Reed O'Connor referred this
Motion and all related responses, replies, briefs in support,
appendices, etc., to the undersigned for determination or
recommendation on January 8, 2019. (ECF No. 21). After
considering the pleadings and applicable legal authorities,
the undersigned RECOMMENDS that Judge
O'Connor GRANT Defendants' Motion to
Dismiss and DISMISS Plaintiffs' claims
originally sued Defendants in state court to remove cloud on
title and for declaratory judgment, breach of a Rule 11
settlement agreement (“Rule 11 agreement”), and
violation of 12 C.F.R § 1024.41. Plaintiffs also sought
injunctive relief to stop a foreclosure sale of the real
property located at 6921 Hazeltine Drive, Fort Worth, Texas
76132 (the “Property”). (ECF No. 1-3). On October
12, 2018, Defendants removed the case to this Court based on
diversity jurisdiction. (ECF No. 1).
following allegations, taken as true, are derived from
Plaintiffs' First Amended Complaint (ECF No. 17)
(“FAC”). Plaintiffs initially purchased the
Property in August 2006. (Id. at 2). In connection
with the purchase, Plaintiffs executed a note in the
principal amount of $346, 750.00 and a Deed of Trust that
granted a security interest in the Property to secure
repayment of the note. (Id. at 10-22). Initially,
Mortgage Electronic Registration Systems, Inc.
(“MERS”), as beneficiary, held the Deed of Trust
as nominee for Taylor Bean & Whitaker Mortgage Corp.
(“TBW”), the lender. (Id. at 10). The
Deed of Trust was recorded on September 1, 2006 in the Real
Property Records of Tarrant County, Texas, as Instrument
Number D206272957. (Id. at 26). MERS assigned the
Deed of Trust as Instrument Number D211150470 to U.S. Bank,
care of American Home Mortgage Servicing, Inc.
(“AHMSI”), on June 21, 2011. (Id. at
27). A Transfer of Lien and a Corporate Assignment of Deed of
Trust were subsequently executed on July 16, 2014 and
February 17, 2016, respectively. (Id. at 28-29).
Plaintiffs contest the validity of all these assignments and
transfers. (ECF No. 17 at 6).
made all principal and interests payments due under the note
from August 2006 until August 24, 2009 when TBW filed a
voluntary petition under Chapter 11 of the United States
Bankruptcy Code. (Id. at 2-3). The bankruptcy
trustee in TBW's case did not authorize any of the
above-mentioned assignments. (Id.). For reasons not
stated in the FAC, Plaintiffs filed for Chapter 7 bankruptcy
protection in December 2009 and received a discharge on March
10, 2010. (Id. at 3). Prior to Plaintiffs receiving
the discharge, AHMSI obtained an order from the bankruptcy
court conditioning the automatic stay allowing it to
foreclose on the Deed of Trust. (Id.). U.S. Bank and
MERS sent to Plaintiffs on July 7, 2011 a notice of
acceleration and a notice of foreclosure sale scheduled for
August 2, 2011. (Id.). Plaintiffs filed suit and
obtained a temporary restraining order (“TRO”) on
August 1, 2011, restraining the foreclosure sale.
(Id.). The TRO subsequently expired without a
replacement temporary injunction. (Id. at 4). During
the pendency of that suit, Ocwen was substituted as mortgage
servicer. (Id.). On April 21, 2014, U.S. Bank and
Ocwen obtained summary judgment on Plaintiffs' claims
that (1) TBW had not properly assigned its rights under the
Deed of Trust to U.S. Bank and Ocwen or that U.S. Bank and
Ocwen lacked standing to enforce the Deed of Trust; (2)
Plaintiffs had suffered damages for defamation and slander of
their credit reputation; and (3) that U.S. Bank and Ocwen had
not breached a contract with Plaintiffs. (Id. &
5, 2014, Plaintiffs filed another bankruptcy case under
Chapter 13 of the United States Bankruptcy Code.
(Id.). The automatic stay as to the Property ended
on August 25, 2014 when Plaintiffs' Amended Chapter 13
Plan (the “Plan”) was filed. (Id.). The
Plan was confirmed on October 13, 2014. (Id.).
During Plaintiffs' second bankruptcy, Defendants
attempted to foreclose on the Property. (Id. at 5).
Plaintiffs again filed suit in state court and obtained a TRO
on February 6, 2017 restraining Defendants from foreclosing
on the Property. (Id.). In connection with the suit,
the parties mediated the case, and a Rule 11 agreement was
executed on March 26, 2018. (Id. at 33-35).
Plaintiffs nonsuited their claims against Defendants, and the
case was dismissed in April 2018. (Id. at 5).
Plaintiffs subsequently requested a loan modification from
Ocwen and completed the application on August 31, 2018.
again initiated foreclosure proceedings and scheduled a
foreclosure sale of the Property for October 2, 2018. (ECF
No. 1-3 at 11). Plaintiffs filed suit in state court to
forestall the foreclosure sale on October 1, 2018. (ECF No.
1). The case was removed to this Court on October 12, 2018.
(Id.). Plaintiffs amended their original petition on
December 10, 2018, and attached the Deed of Trust, the
above-mentioned transfer and assignments, the Rule 11
agreement, and TBW's notice of bankruptcy filing. (ECF
No. 17). The parties have fully briefed Defendants'
Motion, and it is now ripe for recommendation.
12(b)(6) of the Federal Rules of Civil Procedure permits a
party to move for dismissal of a complaint for failure to
state a claim upon which relief can be granted. The Rules
require that each complaint contain “a short and plain
statement of the claim showing that the pleader is entitled
to relief . . . .” Fed.R.Civ.P. 8(a). A complaint must
include sufficient factual allegations “to raise a
right to relief above the speculative level.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In
considering a Rule 12(b)(6) motion, courts “take all
well-pleaded facts as true, viewing them in the light most
favorable to the plaintiff . . . and ask whether the
pleadings contain ‘enough facts to state a claim to
relief that is plausible on its face.'”
Yumilicious Franchise, L.L.C. v. Barrie, 819 F.3d
170, 174 (5th Cir. 2016) (citing Twombly, 550 U.S.
at 547). “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). “Threadbare
recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice.”
Id. (citing Twombly, 550 U.S. at 555).
ruling on a motion to dismiss, a court may consider documents
outside the complaint when they are: (1) attached to the
motion to dismiss; (2) referenced in the complaint; and (3)
central to the plaintiff's claims. In re Katrina
Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir.
2007). Additionally, a court may take judicial notice of
matters of public record without converting a motion to
dismiss into a motion for summary judgment. See Randall
D. Wolcott, M.D., P.A. v. Sebelius, 635 F.3d 757, 763
(5th Cir. 2011) (“Generally, a court ruling on a
12(b)(6) motion may rely on the complaint, its proper
attachments, documents incorporated into the complaint by
reference, and matters of which a court may take judicial
notice.”) (citation and quotation marks omitted).
“The court may judicially notice a fact that is not
subject to reasonable dispute because it: (1) is generally
known within the trial court's territorial jurisdiction;
or (2) can be accurately and readily determined from sources
whose accuracy cannot reasonably be questioned.”
Fed.R.Evid. 201(b). Documents in these categories may
properly be considered without converting the motion to
dismiss into a motion for summary judgment. In re
Katrina, 495 F.3d at 205 (contracts that were attached
to the motion to dismiss, referred to in the complaint, and
central to the plaintiff's claims were properly
considered); Judy Chou Chiung-Yu Wang v. Prudential Ins.
Co. of Am., 439 Fed.Appx. 359, 363 (5th Cir. 2011) (per
curiam) (citing Cinel v. Connick, 15 F.3d 1338, 1343
n.6 (5th Cir. 1994) (court may consider matters of public
record in deciding a Rule 12(b)(6) motion)).
FAC asserts (1) a claim to quiet title based on allegedly
invalid lien assignments; (2) breach of the Rule 11
settlement agreement; and (3) violation of 12 C.F.R. §
1024.41. Although not asserted in a separate claim,
Plaintiffs allege Defendants are barred by limitations from
enforcing the Deed of Trust. (ECF No. 17 at 4). Defendants
contend that Plaintiffs' (1) assertion of limitations and
claim the assignments are unauthorized are barred by judicial
estoppel and res judicata; (2) claim to quiet title fails to
state a claim because MERS was authorized to assign the Deed
of Trust, and Plaintiffs are not asserting the claim on the
strength of their own title; (3) breach of Rule 11 agreement
claim fails for failure to adequately plead damages; and (4)
claims under 12 C.F.R. § 1024.41 are insufficient to
state a claim.
Plaintiffs are judicially estopped from claiming Defendants
are not entitled to foreclose on the Deed of
doctrine of judicial estoppel prevents a party from asserting
a claim in a legal proceeding that is inconsistent with a
claim taken by that party in a previous proceeding.”
Reed v. City of Arlington, 650 F.3d 571, 573-74 (5th
Cir. 2011) (en banc). In the bankruptcy context,
“judicial estoppel must be applied in such a way as to
deter dishonest debtors, whose failure to fully and honestly
disclose all their assets undermines the integrity of the
bankruptcy system, while protecting the rights of creditors
to an equitable distribution of the assets of the
debtor's estate.” Id. at 574. Judicial
estoppel applies when “(1) the party against whom
judicial estoppel is sought has asserted a legal position
which is plainly inconsistent with a prior position; (2) a
court accepted the prior position; and (3) the party did not
act inadvertently.” Id. The Fifth Circuit has
held that “[j]udicial estoppel is particularly
appropriate where . . . a party fails to disclose an asset to
a bankruptcy court, but then pursues a claim in a separate
tribunal based on that undisclosed asset.” Jethroe
v. Omnova Solutions, Inc., 412 F.3d 598, 600 (5th Cir.
estoppel is an affirmative defense. See Reed, 650
F.3d at 576. Dismissal under Rule 12(b)(6) is normally not
appropriate on an affirmative defense, but “[i]f, based
on the facts pleaded and judicially noticed, a successful
affirmative defense appears, then dismissal under Rule
12(b)(6) is proper.” Hall v. Hodgkins, 305
Fed.Appx. 224, 227-28 (5th Cir. 2008) (per curiam) (citing
Kansa Reinsurance Co., Ltd. v. Cong. Mortgage Corp. of
Tex., 20 F.3d 1362, 1366 (5th Cir. 1994)).
inconsistent position relates to whether Defendants are
entitled to foreclose on the Deed of Trust. Plaintiffs claim
that Defendants cannot enforce the Deed of Trust because four
years have passed since the loan was accelerated, and the
assignment from MERS for TBW to U.S. Bank was not authorized
and is therefore invalid. (ECF No. 17 at 4, 6). “It
goes without saying that the Bankruptcy Code and Rules impose
upon bankruptcy debtors an express, affirmative duty to
disclose all assets, including contingent and
unliquidated claims.” In re Coastal Plains,
Inc., 179 F.3d 197, 207-08 (5th Cir. 1999) (emphasis in
original). And a debtor has a continuing obligation to
disclose all potential causes of action during the pendency
of a bankruptcy proceeding. E.E.O.C. v. Rock-Tenn Servs.
Co., 901 F.Supp.2d 810, 830 (N.D. Tex. 2012) (citing
In re Coastal Plains, Inc., 179 F.3d at 207-08).
Thus, a debtor takes an inconsistent position when after
filing a bankruptcy case a claim accrues triggering a duty to
disclose the claim to ...