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Trieger v. Ocwen Loan Servicing, LLC

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

August 15, 2019

DAVID H. TRIEGER and JANET M. TRIEGER, Plaintiffs,
v.
OCWEN LOAN SERVICING, LLC and U.S. BANK NATIONAL ASSOCIATION AS TRUSTEE OF NRZ PASS-THROUGH TRUST IX, Defendants.

          MEMORANDUM OPINION AND ORDER

          Sam A. Lindsay United States District Judge.

         Before the court are Defendant U.S. Bank, N.A., as Trustee's Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) (Doc. 9), filed February 1, 2019; Defendant Ocwen Loan Servicing, LLC's Motion to Dismiss (Doc. 17), filed February 28, 2019; Plaintiffs[] David H. Trieger and Janet M. Trieger's Response to Defendant U.S. Bank, National Association, as Trustee's Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) (Doc. 21), filed March 8, 2019; and Defendant U.S. Bank, N.A., as Trustee's Brief in Support of its Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) (Doc. 22), filed March 22, 2019.

         After carefully considering the motions, briefs, record, and applicable law, the court grants Defendant U.S. Bank, N.A., as Trustee's Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) (Doc. 9) insofar as it seeks dismissal of Plaintiffs' breach of contract claim and denies the motion insofar as it seeks dismissal of Plaintiffs' standing challenge, fraud claim, and alleged violations of the Texas Property Code, Real Estate Settlement Procedures Act (“RESPA”) and Texas Debt Collection Act (“TDCA”); grants Defendant Ocwen Loan Servicing, LLC's Motion to Dismiss (Doc. 17) insofar as it seeks dismissal of Plaintiffs' breach of contract claim and RESPA violation asserted against it and denies the motion insofar as it seeks dismissal of Plaintiffs' standing challenge, fraud claim, and alleged violations of the Texas Property Code, RESPA, and TDCA; dismisses without prejudice Plaintiffs' claims for breach of contract against Defendants; dismisses with prejudice their RESPA claim against Ocwen; and grants Plaintiffs' request to amend their Petition with respect to their breach of contract claim pursuant to the court's instructions as herein set forth.

         I. Factual and Procedural Background

         On September 8, 2004, David H. Trieger and Janet M. Trieger (“Plaintiffs” or the “Triegers”) obtained a Texas Home Equity loan and executed a Texas Home Equity Note (the “Note”) in the amount of $80, 000, which was secured by a Texas Home Equity Security Instrument (the “Deed of Trust” or “Security Instrument”) in connection with the property (the “Property”) located at 9648 Fallbrook Drive, Dallas, Texas, 75243.[1] Pls.' Pet., Doc. 7-3 at 4-5, ¶ 11. The Note designates Homecomings Financial Network, Inc. as the original lender. Def.'s App., Doc. 11 at 12.[2]

         The Triegers allege that, on or about November 13, 2012, Homecomings Financial Network, Inc., by and through its nominee Mortgage Electronic Registration Systems, Inc. (“MERS”), executed and recorded an Assignment of Deed of Trust wherein the Note and Deed of Trust (collectively, the “Loan”) was assigned to Deutsche Bank Trust Company Americas (“Deutsche Bank”) as Trustee for RALI 2004-QS15 for the full amount of the Loan, namely, $80, 000. Pls.' Pet., Doc. 7-3 at 5, ¶ 12. A copy of the Assignment of Deed of Trust is attached to Plaintiffs' Original Verified Petition (the “Petition”). Doc. 7-3 at 49. The Triegers allege that, following this assignment, “there are no other assignment(s) of the Plaintiffs' Loan that have been recorded in the official real property records of the Dallas County Clerk's office.” Id. at 5, ¶ 13. In other words, Plaintiffs contend that Deutsche Bank is the only valid assignee of the Loan on record in the Dallas County Clerk's office.

         The Triegers contend that, on or about late 2012, they entered into an agreement with the Dallas County taxing authorities “to significantly reduce their property taxes because they qualified for an over 65 homestead exception.”[3] Id. at 5, ¶ 15. They contend that, during that same year, they suffered a significant financial hardship that caused them to default on their monthly payments towards the Loan. Id. at 6, ¶ 16. They were also unable to pay the 2012 property taxes, “but those taxes were already deferred as a result of the homestead exemption agreement that was reached with the Dallas County taxing authorities.” Id.

         On or about early 2013, Plaintiffs contend that they received notice from Defendant Ocwen Loan Servicing, LLC (“Ocwen”) that “it had unilaterally, and without any regard for the existing tax defer[ment] agreement that Plaintiffs had made with Dallas County, paid the 2012 property taxes, ” and that, as a result, it had established an escrow account, “which increased the Plaintiffs' monthly loan payments from $495 per month to an astronomical $1, 400 per month.” Id. at 6, ¶ 17. In response to this notice, Plaintiffs allege that they called Ocwen to request that it cancel the escrow account and allow them to resume making their regular monthly payments of $495. Id., ¶ 18. Plaintiffs allege that this request “fell upon completely deaf ears, ” and Ocwen continued its collection activities as servicer for the loan mortgagee, Defendant U.S. Bank National Association (“U.S. Bank”). Id.

         The Triegers subsequently filed for bankruptcy on June 26, 2013, in the Northern District of Texas. Id. at 7, ¶ 19. Their Chapter 13 bankruptcy plan was confirmed on or about October 2, 2013, and they contend that, pursuant to the plan, they made loan payments to Ocwen in the amount of $695 per month. Id. at 8, ¶ 21. On August 30, 2017, the bankruptcy case was terminated. Ocwen subsequently demanded monthly payments for both the regular monthly payment on the Loan and the escrow account payments. Id. at 8, ¶ 24.

         On June 27, 2018, U.S. Bank filed the Application for an Expedited Order Under Rule 736 on a Home Equity Loan (the “736 Application”) in the 160th Judicial District Court of Dallas County, Texas. Id. at 8, ¶ 25. In the 736 Application, U.S. Bank asserted that it was the current mortgagee or mortgage owner of Plaintiffs' Loan, and it requested an order authorizing it to initiate non-judicial foreclosure proceedings on the Triegers' Property. Id. at 8-9, ¶ 25. Plaintiffs contend that “neither the [736] Application nor Affidavit attached to the Application filed by Defendants Ocwen and U.S. Bank include or provide a copy of any recorded assignment or transfer of lien instrument of the Plaintiffs' Loan to Defendant U.S. Bank, ” and it does not reflect that the Note was endorsed to U.S. Bank. Id. at 9, ¶ 26. The Triegers contend that the last recorded assignee of the Loan on record is Deutsche Bank, as Trustee, and, therefore, U.S. Bank is not the current mortgagee or owner of the Loan and does not, accordingly, have the authority to initiate foreclosure proceedings on the Property. Id.

         Plaintiffs further contend that, after the bankruptcy case terminated in August 2017, Defendants never sent them a notice of default and opportunity to cure detailing the exact amount owed to cure the default and providing at least thirty days to cure the default pursuant to paragraph 21 of the Deed of Trust and § 51.002(d) of the Texas Property Code. Id. at 9, ¶ 27. In light of Plaintiffs' position that U.S. Bank never received a valid assignment authorizing them to initiate foreclosure proceedings on the Property or direct Ocwen to collect on the Loan, Plaintiffs assert the following claims against Defendants: (1) breach of contract, (2) fraud, (3) violations of the Real Estate Settlement Procedures Act (“RESPA”), and (4) violations of the Texas Debt Collection Act (“TDCA”). Plaintiffs originally filed this action in the 134th Judicial District Court of Dallas County, Texas, and Defendants removed the action to federal court on February 1, 2019, based on diversity jurisdiction. Defs.' Am. Notice of Removal, Doc. 7 at 1-2. On January 11, 2019, U.S. Bank filed a counterclaim against the Triegers seeking a “judgment for judicial foreclosure allowing it to enforce its lien against the Property in accordance with the Security Instrument and Section 51.002 of the Texas Property Code.” Def.'s Original Countercl., Doc. 3 at 4.

         On February 1, 2019, U.S. Bank filed its Motion to Dismiss (Doc. 9), seeking to dismiss this action on two grounds. First, U.S. Bank asserts that all claims in the Petition should be dismissed against it because, pursuant to Federal Rule of Civil Procedure 12(b)(6) (“Rule 12(b)(6)”), the Triegers have failed to state a claim upon which relief can be granted. U.S. Bank alternatively argues that Plaintiffs' claims should be dismissed based on the doctrine of judicial estoppel because they failed to disclose the bases for their claims during the bankruptcy proceeding.

         On February 28, 2019, Ocwen filed its Motion to Dismiss (Doc. 9), arguing that Plaintiffs' claims should be dismissed pursuant to Rule 12(b)(6) for reasons similar to those advanced by U.S. Bank in its motion. Ocwen additionally joins U.S. Bank in its argument that Plaintiffs' claims should be barred by judicial estoppel and incorporates it into Ocwen's motion by reference.[4] Def.'s Mot. to Dismiss, Doc. 17 at 14, ¶ 28. As Defendants set forth several identical arguments in their respective motions, the court will consider both parties' arguments and briefs in its analysis.

         II. Rule 12(b)(6) - Failure to State a Claim

         To defeat a motion to dismiss filed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007); Reliable Consultants, Inc. v. Earle, 517 F.3d 738, 742 (5th Cir. 2008); Guidry v. American Pub. Life Ins. Co., 512 F.3d 177, 180 (5th Cir. 2007). A claim meets the plausibility test “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. 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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations omitted). While a complaint need not contain detailed factual allegations, it must set forth “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (citation omitted). The “[f]actual allegations of [a complaint] must be enough to raise a right to relief above the speculative level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Id. (quotation marks, citations, and footnote omitted). When the allegations of the pleading do not allow the court to infer more than the mere possibility of wrongdoing, they fall short of showing that the pleader is entitled to relief. Iqbal, 556 U.S. at 679.

         In reviewing a Rule 12(b)(6) motion, the court must accept all well-pleaded facts in the complaint as true and view them in the light most favorable to the plaintiff. Sonnier v. State Farm Mutual Auto. Ins. Co., 509 F.3d 673, 675 (5th Cir. 2007); Martin K. Eby Constr. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004); Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). In ruling on such a motion, the court cannot look beyond the pleadings. Id.; Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999). The pleadings include the complaint and any documents attached to it. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir. 2000). Likewise, “‘[d]ocuments that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to [the plaintiff's] claims.'” Id. (quoting Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993)). In this regard, a document that is part of the record but not referred to in a plaintiff's complaint and not attached to a motion to dismiss may not be considered by the court in ruling on a 12(b)(6) motion. Gines v. D.R. Horton, Inc., 699 F.3d 812, 820 & n.9 (5th Cir. 2012) (citation omitted). Further, it is well-established and ‘“clearly proper in deciding a 12(b)(6) motion [that a court may] take judicial notice of matters of public record.”' Funk v. Stryker Corp., 631 F.3d 777, 783 (5th Cir. 2011) (quoting Norris v. Hearst Trust, 500 F.3d 454, 461 n.9 (5th Cir. 2007) (citing Cinel v. Connick, 15 F.3d 1338, 1343 n.6 (5th Cir. 1994)).

         The ultimate question in a Rule 12(b)(6) motion is whether the complaint states a valid claim when it is viewed in the light most favorable to the plaintiff. Great Plains Trust Co. v. Morgan Stanley Dean Witter, 313 F.3d 305, 312 (5th Cir. 2002). While well-pleaded facts of a complaint are to be accepted as true, legal conclusions are not “entitled to the assumption of truth.” Iqbal, 556 U.S. at 679 (citation omitted). Further, a court is not to strain to find inferences favorable to the plaintiff and is not to accept conclusory allegations, unwarranted deductions, or legal conclusions. R2 Invs. LDC v. Phillips, 401 F.3d 638, 642 (5th Cir. 2005) (citations omitted). The court does not evaluate the plaintiff's likelihood of success; instead, it only determines whether the plaintiff has pleaded a legally cognizable claim. United States ex rel. Riley v. St. Luke's Episcopal Hosp., 355 F.3d 370, 376 (5th Cir. 2004). Stated another way, when a court deals with a Rule 12(b)(6) motion, its task is to test the sufficiency of the allegations contained in the pleadings to determine whether they are adequate enough to state a claim upon which relief can be granted. Mann v. Adams Realty Co., 556 F.2d 288, 293 (5th Cir. 1977); Doe v. Hillsboro Indep. Sch. Dist., 81 F.3d 1395, 1401 (5th Cir. 1996), rev'd on other grounds, 113 F.3d 1412 (5th Cir. 1997) (en banc). Accordingly, denial of a 12(b)(6) motion has no bearing on whether a plaintiff ultimately establishes the necessary proof to prevail on a claim that withstands a 12(b)(6) challenge. Adams, 556 F.2d at 293.

         III. Analysis

         A. Breach of Contract Claim

         Although cast as a breach of contract claim, Plaintiffs assert in the Petition (Doc. 7-3) three separate issues: (1) breach of the Deed of Trust; (2) a violation of § 51.002(e) of the Texas Property Code; and (3) a lack of standing challenge. The court will address each issue in turn.

         The court first addresses Plaintiffs' standing argument. Plaintiffs assert that Defendants lack standing to enforce ...


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