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Gilliam v. JPMorgan Chase Bank, N.A.

United States District Court, S.D. Texas, Houston Division

June 27, 2019

GRAHAM W. GILLIAM and DIANE W. GILLIAM, Plaintiffs,
v.
JPMORGAN CHASE BANK, N.A., Defendant.

          MEMORANDUM OPINION AND ORDER

          SIM LAKE UNITED STATES DISTRICT JUDGE.

         Plaintiffs Graham W. Gilliam ("Mr. Gilliam") and Diane W. Gilliam ("Ms. Gilliam") (collectively, "Plaintiffs") filed suit against JPMorgan Chase Bank, N.A. ("JPMC") alleging that JPMC is improperly attempting to foreclose on their real property located at 5530 Tilbury Drive, Houston, Texas 77056 (the "Property").[1]Plaintiffs allege a number of claims against JPMC, including quiet title, violations of the Texas Debt Collection Act ("TDCA"), a violation of the Texas Property Code, and violations of the Real Estate Settlement Procedures Act ("RESPA"), among others.[2] Pending before the court are Defendant JPMorgan Chase Bank, N.A.'s Motion to Strike or, in the Alternative, Motion to Dismiss Plaintiffs' Second Amended Complaint for Failure to State a Claim[3] ("JPMC's Motion to Strike/Motion to Dismiss") (Docket Entry No. 22); Defendant JPMorgan Chase Bank, N.A.'s Motion for Summary Judgment ("JPMC's MSJ") (Docket Entry No. 30); JPMorgan Chase Bank, N.A.'s Motion to Strike or, Alternatively, Objections to the Affidavit of Diane Werlein Gilliam[4] ("JPMC's Motion to Strike/Objections to Gilliam Affidavit") (Docket Entry No. 35); and Plaintiffs' Motion to Strike Objections and Answers of Defendant JP Morgan Chase Bank, N.A. ("Plaintiffs' Motion to Strike") (Docket Entry No. 36).

         I. Factual and Procedural Background

         On April 23, 2003, Ms. Gilliam executed a $499, 875.00 Adjustable Rate Note (the "Note") with Washington Mutual Bank, FA (the "Original Lender") to purchase the Property.[5] The Note was secured by a Deed of Trust, which granted the Original Lender a lien on the Property with a power of sale.[6] Upon closing Ms. Gilliam signed an Escrow Account Notification and Agreement (the "Escrow Waiver"), in which she agreed that the Loan would be established as a non-escrow loan and that she would pay all property taxes directly to the Harris County taxing authorities and all insurance payments directly to her insurer.[7]

         JPMC obtained servicing rights to the Loan from the Federal Deposit Insurance Corporation ("FDIC") on September 25, 2008.[8] The Deed of Trust was assigned to JPMC by the FDIC on the Original Lender's behalf on June 24, 2014.[9] Deutsche Bank National Trust Co. as Trustee for WAMU 2007-FLEX1 Trust (the "Trustee") is the current owner of the Loan.[10] JPMC is the servicer tasked with enforcing the Loan on the Trustee's behalf.[11]

         Mr. Gilliam contacted JPMC in early January of 2014 to inquire about establishing an escrow account for the Loan and having JPMC begin paying property taxes on Plaintiffs' behalf, starting with the 2013 tax bill due later that month.[12] JPMC sent a letter to Ms. Gilliam on January 14, 2014, informing her that JPMC created the requested escrow account.[13] JPMC timely paid Plaintiffs' 2013 property taxes.[14] On February 6, 2014, JPMC sent Ms. Gilliam an escrow analysis statement outlining the escrow shortage caused by JPMC's payment of Plaintiffs' 2013 property taxes .[15] JPMC and Ms. Gilliam agreed that the monthly payment on the Loan would be adjusted for 60 months to account for the shortage.[16] A monthly statement was sent to Ms. Gilliam confirming that the new amount due each month beginning March 1, 2014, would be $6, 433.33 ($2, 109.80 in principal and interest, and escrow of $4, 323.53 to (1) collect the escrow shortage caused by JPMC s payment of Plaintiffs' 2013 property taxes and (2) to set aside the amount due for Plaintiffs' 2014 property taxes) .[17] JPMC paid Plaintiffs' 2014 and 2015 property taxes in full.[18]

         JPMC alleges that Plaintiffs defaulted on the Loan in July of 2016.[19] In November of 2016 Plaintiffs submitted a personal check and a business check to JPMC in the amounts of $29, 171.12 and $7, 292.78, both of which JPMC rejected because they were insufficient to bring the Loan current and were not certified funds.[20] JPMC paid the Property's 2016 property tax bill of $40, 355.86 on Plaintiffs' behalf in December of 2016.[21] In March of 2017 Harris County tax authorities returned $31, 588.99 to JPMC because Plaintiffs had already paid a portion of their 2016 property taxes.[22] In July of 2017 Ms. Gilliam sent another personal check to JPMC.[23] JPMC again rejected Ms. Gilliam's attempted payment because it was not enough to bring the Loan current and was not certified funds. In December of 2017 JPMC paid $27, 625.00 in 2017 property taxes on Plaintiffs' behalf.[24] In February of 2018 Harris County refunded $23, 470.00 to JPMC because Plaintiffs had already paid a portion of their 2017 property taxes directly to taxing authorities.[25]

         On May 9, 2018, Plaintiffs sent JPMC a qualified written request notifying JPMC of alleged billing errors and attached another personal check for $51, 092.41.[26] JPMC received Plaintiffs' Qualified Written Request on May 14, 2018.[27] JPMC sent letters to Ms. Gilliam on May 15, 2018, and May 17, 2018, acknowledging its receipt of Plaintiffs' Qualified Written Request.[28] On June 1, 2018, JPMC returned the check attached to Plaintiffs' Qualified Written Request because it was insufficient to bring the Loan current and was not certified funds.[29] On June 8, 2018, JPMC sent a letter to Plaintiffs notifying them that additional time was needed to respond to Plaintiffs' Qualified Written Request.[30] JPMC responded to Plaintiffs' Qualified Written Request on June 11, 2018, with a determination that there was no error.[31] JPMC informed Plaintiffs that while an escrow analysis performed in May of 2018 showed an overage of $76, 246.49, the overage only existed in the event that Plaintiffs were current for the July 2018 payment.[32]Because Plaintiffs defaulted on the Loan in July of 2016, JPMC informed them that JPMC would not release any escrow surplus until all past due payments were collected.[33] The Loan currently remains due for the July 1, 2016, payment.[34]

         On August 6, 2018, Plaintiffs filed their original complaint.[35]Plaintiffs most recently amended their complaint on November 21, 2018.[36] JPMC paid Plaintiffs' 2018 property taxes in full on December 19, 2018.[37] JPMC filed its Motion to Strike/Motion to Dismiss on December 4, 2018.[38] JPMC filed its MSJ on March 14, 2019.[39] Plaintiffs responded to JPMC's MSJ on April 4, 2019.[40] JPMC replied to Plaintiff's Response on April 11, 2019.[41] Plaintiffs filed their Motion to Strike on April 22, 2019.[42] JPMC responded to Plaintiffs' Motion to Strike on April 29, 2019.[43] Plaintiffs replied on May 4, 2019.[44]

         II. JPMC's Motion for Summary Judgment

         A. Summary Judgment Standard

         Summary judgment is appropriate if the movant establishes that there is no genuine dispute about any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). Disputes about material facts are genuine "if the evidence is such that a reasonable jury could return a verdict for the nonroving party." Anderson v. Liberty Lobby, Inc., 106 S.Ct. 2505, 2510 (1986). The moving party is entitled to judgment as a matter of law if "the nonroving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Celotex Corp. v. Catrett, 106 S.Ct. 2548, 2552 (1986) .

         A party moving for summary judgment "must 'demonstrate the absence of a genuine issue of material fact,' but need not negate the elements of the nonmovant's case." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en bane) (per curiam) (quoting Celotex, 106 S.Ct. at 2553). "If the moving party fails to meet this initial burden, the motion must be denied, regardless of the nonmovant's response." Id. If the moving party meets this burden, Rule 56(c) requires the nonmovant to go beyond the pleadings and show by affidavits, depositions, answers to interrogatories, admissions on file, or other admissible evidence that specific facts exist over which there is a genuine issue for trial. Id. The nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 106 S.Ct. 1348, 1356 (1986).

         In reviewing the evidence "the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." Reeves v. Sanderson Plumbing Products, Inc., 120 S.Ct. 2097, 2110 (2000). The court resolves factual controversies in favor of the nonmovant, "but only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts." Little, 37 F.3d at 1075.

         B. Analysis

         Plaintiffs assert claims against JPMC for (1) quiet title, (2) violations of the TDCA, (3) a violation of Texas Property Code § 5.065, (4) unjust enrichment, (5) conversion, (6) violations of RESPA, (7) fraud and deceit or negligence, and (8) breach of contract.[45] Plaintiffs also seek declarations from the court that their title is superior to that of JPMC and that JPMC's pre-foreclosure activities are wrongful.[46] For the reasons explained below, JPMC is entitled to summary judgment on each of the claims in Plaintiffs' Complaint.

         1. Quiet Title (Second Cause of Action)

         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) (quoting Bell v. Ott, 606 S.W.2d 942, 952 (Tex. Civ. App. -- Waco 1980, writ ref'd n.r.e.)) . 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 the defendant's title. Hurd v. BAC Home Loans Servicing, LP, 880 F.Supp.2d 747, 767 (N.D. Tex. 2012); Ventura v. Wells Fargo Bank, N.A., Civil Action No. 4:17-075-A, 2017 WL 1194370, at *2 (N.D. Tex. March 30, 2017; Martin v. Amerman, 133 S.W.3d 262, 265 (Tex. 2004) (citation omitted).

         Plaintiffs allege that JPMC's claim to the Property is invalid and unenforceable. Plaintiffs do not challenge the validity of the Deed of Trust, only JPMC's right to enforce it. Plaintiffs contest the validity of the FDIC's assignment of the Original Lender's interest in the Deed of Trust to JPMC.[47]" [U]nder Texas law, facially valid assignments cannot be challenged for want of authority except by the defrauded assignor." Reinagel v. Deutsche Bank National Trust Co., 735 F.3d 220, 228 (5th Cir. 2013). Plaintiffs therefore lack standing to challenge the assignment to JPMC, or any other assignment of the Deed of Trust, because they are the borrowers and not the defrauded assignor.

         Furthermore, the documents attached to JPMC's MSJ show that the Deed of Trust created a valid lien (of which the Trustee is the owner and JPMC is the servicer) that remains on the Property. JPMC claims no interest in the Loan other than the right to enforce it on the Trustee's behalf. Plaintiffs present no evidence demonstrating that the Loan is invalid. JPMC is therefore entitled to summary judgment on Plaintiffs' quiet title claim.

         2. Violations of the TDCA (Third Cause of Action)

         Plaintiffs' Complaint alleges that JPMC violated several provisions of the TDCA by: (1) "[t]hreatening to take action prohibited by law, specifically seeking to sell the Property at a foreclosure sale" in violation of § 392. 301 (a) (8) of the TDCA; (2) "[u]sing a fraudulent, deceptive, or misleading representation that misrepresent(s) the character, extent, or amount of a consumer debt" in violation of § 3 92. 3 04(a) (8) of the TDCA; (3)" [m] is representing the status and nature of the services rendered by the debt collector" in violation of § 392.304(a) (14) of the TDCA; and (4)" [u] sing other false representations or deceptive means to collect a debt" in violation of § 392. 304 (a) (19) of the TDCA.[48] For the reasons explained below, Plaintiffs have failed to present sufficient evidence to raise a genuine issue of material fact with respect to their TDCA claims. JPMC will therefore be granted summary judgment on Plaintiffs' cause of action for violations of the TDCA.

         (a) Violation of § 392.301(a) (8)

         Section 392.301(a) (8) prohibits a debt collector from "threatening to take an action prohibited by law." Tex. Fin. Code § 392.301(a)(8). Section 392.301 (a) does not prevent a debt collector from "exercising or threatening to exercise a statutory or contractual right of seizure, repossession, or sale that does not require court proceedings." Id. § 392 .301 (b) (3) . As long as a debt collector has a contractual right to foreclose and the loan is in default, the debt collector does not violate § 392.301(a) by initiating foreclosure proceedings regardless of whether pre-foreclosure notice requirements were met. Rucker v. Bank of America, N.A., 806 F.3d 828, 831 (5th Cir. 2015).

         Plaintiffs allege that JPMC's actions in proceeding with foreclosure violate the TDCA because JPMC lacks authority to foreclose.[49] JPMC has standing to foreclose because JPMC, as the last assignee of record of the Deed of Trust, [50] is a mortgagee on the Loan. See Tex. Prop. Code § 51.0001(4). The Deed of Trust has a power of sale provision allowing nonjudicial foreclosure.[51] JPMC has presented uncontradicted evidence that Plaintiffs are in default. JPMC's actions are therefore not in violation of § 392.301(a) (8) of the TDCA because JPMC has a contractual right to institute nonjudicial foreclosure proceedings under the Deed of Trust and Plaintiffs are in default.

         (b) Violation of § 392.304(a)(8)

         Section 392.304(a)(8) of the TDCA prohibits a debt collector from "misrepresenting the character, extent, or amount of a consumer debt . ..." Tex. Fin. Code § 392. 304(a) (8) . Plaintiffs allege that JPMC "made significant misrepresentations about the status of the loan, the owner of the loan, and its alleged services . . . .'' [52] JPMC is the last assignee of record and the mortgagee on the Loan. JPMC has the right to enforce the Deed of Trust. There is no evidence that JPMC made any of the misrepresentations alleged by Plaintiffs. Plaintiffs have therefore failed to raise a genuine issue of material fact with respect to whether JPMC violated § 392.304(a) (8).

         (c) Violation of § 392. 304 (a) (14)

         Section 392.304(a) (14) of the TDCA prohibits a debt collector from "representing falsely the status or nature of the services rendered by the debt collector or the debt collector's business." Tex. Fin. Code § 392.304(a) (14). There is no evidence that JPMC misrepresented the services it performs for the Loan. Plaintiffs have therefore failed to raise a genuine dispute of material fact regarding JPMC's alleged violation of § 392. 304(a)(14).

         (d) Violation of § 392. 304 (a) (19)

         Section 392.304 (a) (19) is a catch-all provision that prohibits a debt collector from using any false representation or deceptive means to collect a debt not specifically articulated elsewhere in the statute. Tex. Fin. Code § 392. 304 (a) (19); Williams v. Wells Fargo Bank, N.A., 560 Fed.Appx. 233, 240-41 (5th Cir. 2014). "To violate the TDCA using a misrepresentation, the debt collector must have made an affirmative statement that was false or misleading." Kruse v. Bank of New York Mellon, 936 F.Supp.2d 790, 792 (N.D. Tex. 2013) (emphasis in the original) (internal quotation marks and citations omitted); see also Williams, 560 Fed.Appx. at 241.

         Plaintiffs allege that JPMC made misrepresentations to Plaintiffs falling under § 392.304's catch-all provision. Plaintiffs have failed to present evidence identifying a specific, affirmative statement by JPMC that was false or misleading. JPMC is a mortgagee under Texas law and has the authority to foreclose under the Deed of Trust. Plaintiffs present no evidence that JPMC is not the mortgagee. There is no evidence that the amount due on the Loan alleged by JPMC is incorrect. Plaintiffs have failed to raise a genuine dispute of material fact regarding JPMC s alleged violation of § 392. 304 (a) (19).

         3. Violation of Texas Property Code § 5.065 (Fourth Cause of Action)

         Section 5.065 is part of chapter 5, subchapter D of the Texas Property Code, which governs "executory contracts for conveyance." See Tex. Prop. Code §§ 5.061-85. "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). "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, 509-10 (Tex. 2013) .

         Plaintiffs allege that JPMC violated § 5.065 of the Texas Property Code by failing to send Plaintiffs notices of default and intent to accelerate required by§ 51.002(d).[53] Section 5.065 of the Texas Property Code does not apply to the Loan. When the Loan was executed, title to the Property was conveyed to Ms. Gilliam by a general warranty deed.[54] Because the Original Lender did not retain title to the Property until after Plaintiffs made all required payments on the Loan, there was no executory contract. Accordingly, JPMC is entitled to summary judgment on Plaintiffs' claim that JPMC violated Texas Property Code § 5.065.

         4. Unjust Enrichment (Fifth Cause of Action)

         Texas courts recognize an independent cause of action for unjust enrichment. See Pepi Corp. v. Galliford, 254 S.W.3d 457, 460 (Tex. App. -- Houston [1st Dist.] 2007, pet. denied) (citing HECI Exploration Co. v. Neel, 982 S.W.2d 881, 891 (Tex. 1998)). "Unjust enrichment occurs when a person has wrongfully secured a benefit or has passively received one which it would be unconscionable to retain." Eun Bok Lee v. Ho Chang Lee, 411 S.W.3d 95, 111 (Tex. App. -- Houston [1st Dist.] 2013, no pet.). "When a person has been unjustly enriched by the receipt of benefits in a manner not governed by contract, the law implies a contractual obligation upon that person to restore the benefits to the plaintiff." Id. A cause of action for "unjust enrichment is unavailable when a valid, express contract governing the subject matter of the dispute exists." See id. at 112 (citing Fortune Production Co. v. Conoco, Inc., 52 S.W.3d 671, 683-84 (Tex. 2000)).

         Plaintiffs base their unjust enrichment claim on JPMC's alleged lack of authority to collect payments on the Loan.[55]Plaintiffs do not contest the validity of the Note or the Deed of Trust. A cause of action for unjust enrichment is not available to Plaintiffs because valid contracts (i.e., the Note and the Deed of Trust) govern their rights and obligations under the Loan. Plaintiffs present no evidence that JPMC lacks authority to collect payments on the Loan. JPMC is therefore entitled to summary judgment on Plaintiffs' unjust enrichment claim.

         5. Conversion Sixth Cause of Action)

         "To succeed on a conversion claim under Texas law, the plaintiff must prove that' (1) he legally possessed the property or was entitled to it; (2) the defendant wrongfully exercised dominion and control over the property, excluding the plaintiff; (3) the plaintiff demanded the property's return; and (4) the defendant refused.'" United States v. Boardwalk Motor Sports, Ltd., 692 F.3d 378, 381 (5th Cir. 2012) (citing Arthur W. Tifford, PA v. Tandem Energy Corp., 562 F.3d 699, 705 (5th Cir. 2009)). "Conversion claims for money must meet additional requirements." Id. "Actions for conversion of money are available in Texas only where money is (1) delivered for safekeeping; (2) intended to be kept segregated; (3) substantially in the form in which it is ...


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