Camper v. Select Portfolio Servicing Inc

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

ROSA CAMPER, §

§

Plaintiff, §

§ Civil No. 3:19-CV-00676-E

v. §

§

SELECT PORTFOLIO §

SERVICING, INC., et al. §

§

Defendants. §

MEMORANDUM OPINION AND ORDER

Before the Court is Defendants’ Motion for Judgment on the Pleadings

(Doc. 9). Upon review of the complaint, motion, Plaintiff’s response, and

Defendants’ reply, the motion is granted for reasons that follow.

Background

Plaintiff Rosa Camper initiated this lawsuit in state court against

Defendants Select Portfolio Servicing, Inc., Bank of America, N.A., and

Deutsche Bank National Trust Company, as trustee, in trust for registered

holders of Soundview Home Loan Trust 2007-WMC1, Asset-Backed

Certificates 2007-WMCI. Defendants removed the case to federal court. The

suit involves Plaintiff’s home mortgage. Plaintiff asserts six claims: two for

breach of contract, breach of implied duty of good faith and fair dealing,

promissory estoppel, fraud-negligent misrepresentation, and violations of

the Texas Deceptive Trade Practices Act. Defendants have moved under

Federal Rule of Civil Procedure 12(c) for judgment on the pleadings.

Rule 12(c) provides that “[a]fter the pleadings are closed but within

such time as not to delay the trial, any party may move for judgment on the

pleadings.” FED. R. CIV. P. 12(c). A motion brought pursuant to Rule 12(c) is

designed to dispose of cases where the material facts are not in dispute and

a judgment on the merits can be rendered by looking to the substance of the

pleadings and any judicially noticed facts. Great Plains Trust Co. v. Morgan

Stanley Dean Witter & Co., 313 F.3d 305, 312 (5th Cir. 2002). Such a motion

is subject to the same standard as a motion to dismiss under Rule 12(b)(6).

Doe v. MySpace, Inc., 528 F.3d 413, 418 (5th Cir. 2008). The central issue is

whether, in the light most favorable to the plaintiff, the complaint states a

valid claim for relief. Id. Although the Court must accept the factual

allegations in the pleadings as true, a plaintiff must plead “enough facts to

state a claim to relief that is plausible on its face.” Id. (quoting Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 570 (2007)). The Court takes well-pleaded factual

allegations in the complaint as true, but does not credit conclusory

allegations. Chhim v. Univ. of Tex. at Austin, 336 F.3d 467, 469 (5th Cir. 2016)

(citing Iqbal, 556 U.S. at 678).

The factual background in Plaintiff’s pleading is 29 paragraphs and is

difficult to understand. Plaintiff alleges that in 2006, she obtained a 30-year

mortgage loan on property in Dallas County from WMC Mortgage

Corporation. In 2013, “a Substitution of Trustee was filed,” and on March 7,

2014, “a Substitute Trustee for the Deed of Trust was signed.” On March 11,

2014, the property was foreclosed on. Plaintiff alleges that the servicing of

the loan was transferred to Defendant Select Portfolio Servicing (SPS) “while

a loan modification was under consideration” at Defendant Bank of America

(BOA). Plaintiff asserts that in March 2015, she hired an independent

consulting company to review her loan documents. According to Plaintiff,

“The review revealed significant discrepancies between the promises made

by SPS Defendant and the final loan.” Plaintiff alleges WMC sold the note for

money it did not have “to a party WMC . . . knew would be the first in a long

securitization chain, whereupon the Note, instead of being evidence of a debt,

became the loan itself, and was intended to be, and was, converted into, a

security, to be regulated by the Securities Exchange Commission, none of

which was disclosed.” Plaintiff alleges this transaction altered the contract.

Then the “monetized Note was eventually sold into a ‘Trust’, apparently

managed by a ‘Trustee’, both presently making beneficial claims to the Note

and both bound by a Pooling and Servicing Agreement (‘PSA’).” Plaintiff

alleges that had she known WMC would engage in a conspiracy to monetize

the Note, she would likely have not signed it.

The complaint alleges that SPS failed to do a number of things,

including: 1) notify Plaintiff that she may receive a copy of her payment

history and other documents; 2) reply to Plaintiff’s written request for a copy

of her payment history and other documents; 3) send Plaintiff a detailed

“plain language acclaim summary” at least 14 days prior to referral to

foreclosure attorney or trustee; 4) give Plaintiff an opportunity to reapply for

a loan modification; and 5) notify Plaintiff of the new foreclosure sale date

after the foreclosure schedule was delayed.

The complaint further alleges that the Deed of Trust and Promissory

Note have “taken two distinctly different paths.” The Deed of Trust was never

transferred, while the Promissory Note was combined with other loans and

mortgages, sold, and transferred. Plaintiff alleges that on March 21, 2007,

the Soundview Home Loan Trust 2007-WMC1 closed, and any assignments,

transfers, or conveyances of the Deed of Trust or Promissory Note after that

date are void. Plaintiff asserts her loan was transferred to another servicer

while a loan modification was pending.

Breach of Contract

Plaintiff’s first claim is for breach of contract. Her complaint asserts

that she and Defendants entered into an agreement for a loan modification to

become permanent on a date determined by Defendants. Because Defendants

took Troubled Asset Relief Program (TARP) money, which was intended to

encourage lenders to restructure loans and avoid foreclosure, they were

required to follow certain Treasury Department guidelines. She alleges that

Defendants had a contract with the federal government and its agencies

under the Home Affordable Mortgage Program (HAMP), a loan modification

program. Defendants breached that contract (by breaching their agreement

with Plaintiff on a loan modification), and Plaintiff is a third-party

beneficiary “to the HARP contract.” The complaint does not identify what

HARP stands for and uses HAMP and HARP interchangeably. Plaintiff

contends she has been financially harmed by Defendants’ breach of their

HARP contract with the United States.

There is a strong presumption against third-party beneficiary

arrangements in Texas. James v. Wells Fargo Bank, N.A., No. 5:12-CV-042-C,

2012 WL 12878197, at *5 (N.D. Tex. July 18, 2012); see S. Tex. Water Auth. v.

Lomas, 223 S.W.3d 304, 306 (Tex. 2007). A party is presumed to contract

only for its own benefit, and any intent to benefit a third party must be clearly

apparent and will not be presumed. James, 2012 WL 12878197, at *5.

Therefore, the contracting parties’ intent to confer a benefit to a third party

must be clearly and fully spelled out, or enforcement by the third party must

be denied. Id.

Further, courts in this circuit have repeatedly held that borrowers are

not third-party beneficiaries of a lending institution’s HAMP agreements. Id.;

see Cade v. BAC Home Loans Servicing, No. H-10-4224, 2011 U.S. Dist. LEXIS

65045, at *12-13 (S.D. Tex. June 20, 2011); Backal v. Wells Fargo, No. 4:11-CV-

563, 2011 U.S. Dist. LEXIS 139144, at *7 (E.D. Tex. Nov. 3, 2011). While

lending institutions may have contractual obligations arising under HAMP

and related programs, borrowers do not have standing to challenge

compliance with these agreements. James, 2012 WL 12878197, at *5.

Plaintiff’s allegation that she is a third-party beneficiary is conclusory.

Without further explanation, she merely alleges that she is “a third-party

beneficiary to the HARP contract with the United States Government.”

Plaintiff has made no attempt to explain how it is clearly apparent that the

contracting parties’ intended to benefit her. Nor does her complaint present

facts to distinguish her case from those indicating she does not have standing

to complain about Defendants’ compliance with HARP or HAMP agreements.

Plaintiff’s fifth claim is also for breach of contract, specifically the

Pooling and Servicing Agreement. She alleges Defendants breached the PSA

by assigning the Promissory Note after the closing of the Soundview Home

Loan Trust. Plaintiff asserts she was a third-party beneficiary to the PSA.

She seeks an injunction setting aside the foreclosure of her property and

monetary damages.

Defendants move to dismiss this claim on grounds that Plaintiff lacks

standing challenge the assignment of the mortgage because Plaintiff is not a

party to the PSA. Defendants assert Plaintiff’s allegations that she is a third-

party beneficiary to the PSA are conclusory. The Court agrees. See Metcalf v.

Deutsche Bank Nat. Trust Co., No. 3:11-CV-3014-D, 2012 WL 2399369, at *4

(N.D. Tex. June 26, 2012). Without any supporting facts, Plaintiff merely

alleges she is a third-party beneficiary to the PSA. Plaintiff has failed to plead

a plausible breach of contract claim.

Breach of the Implied Covenant of Good Faith and Fair Dealing

Plaintiff also asserts a claim for breach of the implied covenant of good

faith and fair dealing against Defendants SPS and BOA. Plaintiff alleges that

the HARP contract with the United States Government included an implied

covenant of good faith and fair dealing. Plaintiff asserts Defendants’ breach

of the HARP contract was also a breach of this covenant, which adversely

affected Plaintiff as a third-party beneficiary.

For the same reasons Plaintiff does not have a plausible claim for

breach of the HARP contract, she does not have a plausible claim for breach

of the covenant of good faith and fair dealing. Her claim is based upon her

status as a third-party beneficiary to the contract, and she has not supported

that status with adequate facts.

In addition, even if Plaintiff can establish that she was a third-party

beneficiary, Texas law does not impose a generalized contractual duty of good

faith and fair dealing and, in fact, rejects it in almost all circumstances. Hux

v. S. Methodist Univ., 819 F.3d 776, 781 (5th Cir. 2016). In the absence of a

formal fiduciary relationship, the duty may exist if the parties are in a special

or confidential relationship. Id. The relationship must exist before and apart

from the contract or agreement that forms the basis of the controversy. Id.

Texas courts have refused to impose a tort duty of good faith and fair dealing

on a mortgagor/mortgagee relationship. Id. at 781–82. Plaintiff has failed to

plead facts establishing that such a relationship exists in this case. She has

failed to plead a plausible claim for breach of the covenant of good faith and

fair dealing.

Promissory Estoppel

Plaintiff also asserts a claim for promissory estoppel against SPS and

BOA. She alleges Defendants “made a clear an unambiguous promise” to her

for the purpose of modifying the terms of her loan. “Such representations

were made with Plaintiff’s full reliance to Defendants that this would prevent

foreclosure of her home.” Plaintiff relied upon the promise that her loan

modification application was being reviewed on the merits. “[N]o such good

faith review was provided.”

A cause of action for promissory estoppel requires: (1) a promise by the

defendant; (2) foreseeable and actual reliance on the promise by the plaintiff

to her detriment; and (3) that enforcement of the promise be necessary to

avoid an injustice. Guajardo v. JP Morgan Chase Bank, N.A., 605 F. App’x 240,

248 (5th Cir. 2015). To support a claim for promissory estoppel, the alleged

promise must be sufficiently specific and definite that it would be reasonable

and justified for the promisee to rely upon it as a commitment to future

action. Id.; see Stolts v. Wells Fargo Bank, NA, 31 F.Supp.3d 876, 881 n.4 (S.D.

Tex. 2014) (promise that loan modification was “under consideration” would

not trigger promissory estoppel doctrine). The conclusory allegations in

Plaintiff’s complaint are not sufficiently specific to support a plausible claim

for promissory estoppel. She fails to plead any specifics as to what promise

each of the two Defendants she raises this claim against made or any specifics

about how and when each Defendant made the promise.

Further, Defendants have raised the statute of frauds in their motion

for judgment on the pleadings. If, as here, the oral promise is barred by the

statute of frauds, the plaintiff must show the promisor promised to sign a

written document that would satisfy the statute of frauds. Guajardo, 605 F.

App’x at 248–49 & n.6. Plaintiff failed to allege an additional promise that

Defendants would put their promise in writing. Plaintiff has failed to raise a

plausible promissory estoppel claim.

Fraud—Negligent Misrepresentation

Plaintiff also asserts a claim for fraud/negligent misrepresentation

against SPS and BOA. She alleges that they falsely represented to her that

they would assist her to avoid foreclosure “by way of a loan modification.”

She alleges Defendants had no reasonable grounds for believing this

representation to be true and failed to review her modification application.

Plaintiff reasonably relied on the representation and waited months for the

application to be processed. As a result, her credit history was damaged and

additional amounts were added to her loan amount.

Defendants assert Plaintiff has failed to comply with the heightened

pleading standard for fraud claims and also contend Plaintiff’s fraud and

negligent misrepresentation claims are barred by the economic loss doctrine.

In her response to the motion for judgment on the pleadings, Plaintiff

acknowledges that she needs to plead additional facts to support these claims

and requests leave to amend her complaint to do so. The Court grants

Defendants’ motion as to these claims.

DTPA Violations

Plaintiff’s last claim is against SPS and BOA for DTPA violations. She

incorporates all preceding paragraphs of her complaint and alleges that SPS

and BOA “engaged in false, misleading, or deceptive acts as described

hereinabove.”

Defendants assert Plaintiff has not pleaded a valid DTPA claim because

she is not a “consumer” under the statute. A mortgagor qualifies as a

consumer under the DTPA if her primary objective in obtaining the loan was

to acquire a good or service, and that good or service forms the basis of the

complaint. Miller v. BAC Home Loan Servicing, L.P., 726 F.3d 717, 725 (5th Cir.

2013). As far as the Court can tell, Plaintiff’s DTPA claim is based entirely on

an attempted modification of her home loan. Such modification is similar to

refinancing in that it is not sought for the acquisition of a good or service, but

rather to finance an existing loan on previously acquired property. Id.

Plaintiff’s attempted loan modification was not a part of the financing scheme

to acquire her house and is a “pure loan transaction.” See id. Plaintiff has not

alleged facts showing she qualifies as a consumer under the DTPA and has not

pleaded a plausible claim for DTPA violations.

For the foregoing reasons, the Court grants Defendants’ motion for

judgment on the pleadings. Although the Court is granting Defendants’

motion, it will permit Plaintiff to replead. Rather than dismiss Plaintiff’s

claims with prejudice, the Court will allow Plaintiff to file an amended

complaint within 30 days from the date of this order. See Great Plains Trust

Co., 313 F.3d at 329 (court should allow plaintiffs at least one opportunity to

cure pleading deficiencies before dismissing a case, “unless it is clear that the

defects are incurable or the plaintiffs advise the court that they are unwilling

or unable to amend in a manner that will avoid dismissal”).

SO ORDERED.

Signed March 23, 2020.

_____________________________

ADA BROWN

UNITED STATES DISTRICT JUDGE