Deutsche Bank and PHH Mortgage Corp. Announce “Predatory Lending” is Not Recognized in Texas Courts

LITX

Dykema represented Deutsche Bank and PHH Onity in these proceedings

Texas: The $4 Million Dollar Wrongful Foreclosure Judgment Against Deutsche Bank @deutschebank
and PHH Ocwen aka ONITY https://t.co/RxBRMDyK0R

— lawsinusa (@lawsinusa) August 18, 2024

Dennis v. PHH Mortgage Corporation, Deutsche Bank National Trust Company

(7:23-cv-00397)

District Court, S.D. Texas, Judge Ricardo H Hinojosa

NOV. 10, 2023 | REPUBLISHED BY LIT: AUG 27, 2024

Let’s not forget, folks – this applies to Fifth Circuit Clerk Christina Gardner, a federal government employee.

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DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S ORIGINAL PETITION

DEC 18, 2023 | REPUBLISHED BY LIT: DEC 27, 2023

Pursuant to Federal Rule of Civil Procedure 12(b)(6), Defendants PHH Mortgage Corporation (“PHH”)1 and Deutsche Bank National Trust Company, as Trustee for HarborView Mortgage Loan Trust 2007-2 (“Deutsche Bank”)2 (collectively, “Defendants”), by and through their attorneys, file this Motion to Dismiss Plaintiff’s Original Petition filed by Plaintiff Barbara Dennis (“Plaintiff”). Defendants respectfully show the following:

I.                   INTRODUCTION

Plaintiff is attempting to prevent Defendants from lawfully foreclosing on a mortgage lien secured against Plaintiff’s real property. Plaintiff alleges that Defendants issued a predatory mortgage loan and attempted to wrongfully foreclose on her home. Upon such allegations, Plaintiff requests declaratory and injunctive relief. Federal Rule of Civil Procedure 12(b)(6) requires that the plaintiff plead “enough facts to state a claim for relief that is plausible on its face.” Bell Atl.

1 Improperly named as PHH/Ocwen Loan Servicing LLC. PHH Mortgage Corporation merged with Ocwen Loan Servicing in 2019, with PHH Mortgage Corporation as the surviving entity.

2 Improperly named as Deutsche Bank National Trust Company, DOES 1-100. 100767.002402 4887-9923-2657.7

Corp. v. Twombly, 550 U.S. 544, 570 (2007). Because Plaintiff failed to meet this standard on each of her claims, this Court should dismiss Plaintiff’s Original Petition with prejudice.

II.                RELEVANT FACTS AND PROCEDURAL HISTORY

On November 14, 2006, Plaintiff executed a deed of trust securing a $184,839.00 promissory note against the real property located at 3309 San Andres St., Mission, Texas 78572 (the “Property”).3 The deed of trust is assigned of record to Deutsche Bank.4

In 2023, Plaintiff defaulted on the terms of her mortgage loan.5 Defendants subsequently moved for foreclosure.6 The foreclosure sale was set for November 7, 2023.7 On November 3, 2023, four days before the scheduled foreclosure sale, Plaintiff filed suit in the 139th state District Court of Hidalgo County, Texas alleging wrongful foreclosure and requesting injunctive and declaratory relief.8 Plaintiff subsequently obtained an ex parte temporary restraining order from the district court in Hidalgo County.9 Defendants timely removed the action to the Southern District of Texas, McAllen Division on November 10, 2023.10

3 See Pl.’s Pet. 5, ECF No. 1-1. See also Ex. 1 – Deed of Trust 1-3.

The Court may consider documents attached to a motion to dismiss “that are central to the claim and referenced by the complaint.”

Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010) (citing Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir. 2000)).

The Deed of Trust is also a public record, and this Court may take judicial notice of it.

See, e.g., PNC Bank, N.A. v. Ruiz, No. 22-50584, 2023 U.S. App. LEXIS 11505 at *8-9 (5th Cir. May 10, 2023).

4 See Ex. 2 – Assignment to Deutsche Bank. The Assignment is also a public record that this Court may take judicial notice of.

See, e.g., PNC Bank, 2023 U.S. App. LEXIS at *8-9.

5 See Pl.’s Pet. 6, ECF No. 1-1.

6 See id. at 4. See also Ex. 3 – Notice of [Substitute] Trustee Sale.

This Notice is recorded in the public property records, and this Court is permitted to take judicial notice of it.

See, e.g., PNC Bank, 2023 U.S. App. LEXIS at *8-9.

7 See Pl.’s Pet. 8, ECF No. 1-1.

8 See generally Pl.’s Pet., ECF No. 1-1.

9 See TRO and Order Setting Show Cause Hearing 28-33, ECF No. 1-1.

10 See Notice of Removal 1, ECF No. 1.

III.             APPLICABLE LEGAL STANDARD

When deciding a Rule 12(b)(6) motion to dismiss, the court analyzes the sufficiency of the complaint by “accepting all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.”

In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007).

However, “pleadings that . . . are no more than conclusions, are not entitled to the assumption of truth.”

Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).

Rule 12(b)(6) requires that the plaintiff plead “enough facts to state a claim to relief that is plausible on its face.”

Twombly, 550 U.S. at 570.

“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.”

Iqbal, 556 at 678.

IV.             ARGUMENTS AND AUTHORITIES

A.                 Plaintiff Failed to Plead any Viable Theory that Defendants Lacks Standing to Foreclose.

As an initial matter, Plaintiff alleges that Defendants lack standing to foreclose on the Property due to their failure to produce Plaintiff’s mortgage note and deed of trust.11

However, the Fifth Circuit expressly rejected the “show me the note” theory in Martins v. BAC Home Loans Servicing, L.P., clarifying that the last assignee of record for the deed of trust has the authority, either directly or through its mortgage servicer, to foreclose on the subject property. 725 F.3d 249, 253-54 (5th Cir. 2013).

Here, Deutsche Bank is the last assignee of record for Plaintiff’s Deed of Trust.12

As such, Deutsche Bank has the authority to foreclose on Plaintiff’s Property directly or through its servicer, PHH.13

Thus, Plaintiff fails to allege Defendants lack standing to foreclose.

11 See Pl.’s Pet. 4-5, ECF No. 1-1.

12 See Ex. 2.

13 See Ex. 3, at ¶¶ 5, 8.

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B.                 Plaintiff’s “Predatory Loan” Claim Must Be Dismissed.

Next, Plaintiff alleges that Defendants issued her a predatory loan in violation of Chapter 342 of the Texas Finance Code.14

However, Plaintiff’s claim fails for a number of reasons.

First, “predatory lending” has not been recognized as a cause of action in any court in Texas.

See Belanger v. BAC Home Loans Servicing, L.P., 839 F. Supp. 2d 873, 876 (W.D. Tex. 2011) (citing Brown v. Aurora Loan Servs., LLC, No. 4:11CV111, 2011 U.S. Dist. LEXIS 74757, at *4 (E.D. Tex. June 7, 2011)); see also Smith v. Nat’l City Mortg., No. A-09-CV-881 LY, 2010 U.S. Dist. LEXIS 86221, at *13 (W.D. Tex. Aug. 23, 2010); Tyler v. Ocwen Loan Servicing, No. 3:15-CV- 1117-N-BK, 2015 U.S. Dist. LEXIS 122663, at *6 (N.D. Tex. July 30, 2015).

Furthermore, “[a]lthough pro se plaintiffs are held ‘to a more lenient standard than lawyers when analyzing complaints, . . . pro se plaintiffs must still plead factual allegations that raise the right to relief above the speculative level.’”

English v. Freedom Mortg. Corp., No. 3:23-cv-00086, 2023 U.S. Dist. LEXIS 145004, at *3 (S.D. Tex. Aug. 18, 2023) (citing Chhim v. Univ. of Tex. at Austin, 836 F.3d 467, 469 (5th Cir. 2016)).

Here, Plaintiff fails to allege any facts in support of her claim that the loan was predatory. Plaintiff also fails to state which subsection of the Texas Finance Code Defendants allegedly violated.15 Federal Rule of Civil Procedure 8 requires that a pleading provide the defendant with “fair notice of what the . . . claim is and the grounds upon which it rests.”

Twombly, 550 U.S. at 555. Indeed, “[t]he district court and defendant should not have to fish a gold coin from a bucket of mud to identify the allegations really at issue.”

Kensu v. Corizon, Inc., 5 F.4th 646, 651 (6th Cir. 2021) (citing United States v. Lockheed-Martin Corp., 328 F.3d 374, 378 (7th Cir. 2003)).

In citing to Chapter 342 of the Texas Finance Code generally, Plaintiff

14 See Pl.’s Pet. 6, ECF No. 1-1.

15 See id.

deprives Defendants of fair notice of her actual claim.

Chapter 342 of the Texas Finance Code covers consumer loans, and spans fifty pages, thirteen subchapters, and over six-hundred sections.

Notably, the word “predatory” does not appear once throughout the entire Texas Finance Code. Therefore, Plaintiff’s “predatory loan” claim must be dismissed.

C.                 Plaintiff’s Wrongful Foreclosure Claim Must be Dismissed.

Plaintiff also fails to sufficiently plead wrongful foreclosure.

To prevail on a wrongful foreclosure claim in Texas, the Plaintiff must show (1) a defect in the foreclosure sale proceedings,

(2) a grossly inadequate selling price,

and

(3) a causal connection between the defect and the selling price.

Khan v. United States Bank, N.A., No. H-14-1711, 2014 U.S. Dist. LEXIS 181711, at *6 (S.D. Tex. Sept. 11, 2014) (internal citations omitted).

Further, if a plaintiff never loses possession of the Property, they fail to state claim of wrongful foreclosure.

Foster v. Deutsche Bank Nat’l Tr. Co., 848 F.3d 403, 406 (5th Cir. 2017) (internal citations and quotations omitted).

As such, Texas courts do not recognize a claim for attempted wrongful foreclosure. See id. at 406-07.

Plaintiff alleged wrongful foreclosure four days prior to the scheduled foreclosure sale.16 Without a foreclosure sale, Plaintiff’s cause of action for wrongful foreclosure necessarily fails because the elements of wrongful foreclosure cannot be met.

Furthermore, under Tex. Prop. Code § 51.016, the trustee conducting a foreclosure sale has fifteen (15) days to rescind the sale in a number of circumstances, including the trustee’s failure to meet statutory requirements.

Defendants deny any failure to meet the statutory requirements of a

16 See Pl.’s Pet. 7-8, ECF No. 1-1.

foreclosure sale; nonetheless, any foreclosure proceeding that may have occurred, has since been rescinded.17

Accordingly, Plaintiff’s claim for wrongful foreclosure is moot.

1.                  No defect occurred in the foreclosure sale proceedings.

Under the Texas Property Code, the requirements for a foreclosure proceeding include notice of sale to mortgagor, notice of default to mortgagor, as well as restrictions on an appropriate time, date and location for the sale to occur.

See Tex. Prop. Code § 51.002.

The Fifth Circuit has held that under the statute, only constructive notice of intent to sell is required.

See Robinson v. Wells Fargo Bank, N.A., 567 F. App’x 358 (5th Cir. 2014).

Plaintiff acknowledged receiving notice of the sale before it occurred, but does not say whether it was via certified mail or not.18

She loosely claims that Defendants failed to send certified mail of the foreclosure sale to “all debtors,” but even if she includes herself among “all debtors,” the Plaintiff had constructive notice prior to the sale.

Plaintiff alleges no other defects with the sale because, as shown herein, her Petition was filed prior to the sale and thus her claim for wrongful foreclosure was not ripe.19

17 See Update On Case and Motion for Refund of Bond Paid, Barbara Dennis 3309 San Andres St. Mission, Texas 78572 v. PHH/Ocwen Loan Servicing LLC Deutsche Bank National Trust Company, DOES 1-100, Cause No. C-4597-23-C, in the 139th Judicial District Court, Hidalgo County, Texas (Nov. 15, 2023).

Plaintiff filed this “Update” in the state court action after Defendants’ timely removal. See id.

18 See Pl.’s Pet. 4-5, ECF No. 1-1.

19 In a single instance, Plaintiff refers to Defendants’ foreclosure attempt as fraudulent and violative of a settlement agreement to which she is not a party.

It is unclear to what her fraud allegation relates, other than to the foreclosure generally. Given Plaintiff’s failure to plead fraud beyond mentioning it in passing, it appears Plaintiff meant the term to be synonymous with “wrongful foreclosure.”

See Pl.’s Pet. 4-5, ECF No. 1-1.

Additionally, Plaintiff’s “Update” to the state court after Defendants’ removal claims the foreclosure sale illegally went through and was rescinded afterward.

See supra n.17.

Even so, because the sale was rescinded, Plaintiff claimed that “this matter has been resolved between the parties,” and she has no claim for damages.

See Update On Case and Motion for Refund of Bond Paid, Barbara Dennis 3309 San Andres St. Mission, Texas 78572 v. PHH/Ocwen Loan Servicing LLC Deutsche Bank National Trust Company, DOES 1-100, Cause No. C-4597-23-C, in the 139th Judicial District Court, Hidalgo County, Texas (Nov. 15, 2023).

2.                  No grossly inadequate selling price or causal connection was present.

In wrongful foreclosure claims, the alleged defect causes an inadequate sale price.

See Khan, 2014 U.S. Dist. at *6.

In this case, Plaintiff wholly failed to plead, allege, or support an allegation that the selling price of the Property was grossly inadequate. Plaintiff failed to mention a selling price altogether.

Indeed, any such claim by Plaintiff would have been speculative, as she filed her complaint prior to the foreclosure sale date.20

Likewise, Plaintiff cannot and did not plead a causal connection between the defect and the selling price.

Accordingly, Plaintiff failed to plead or support any one of the essential elements of her claim, and her wrongful foreclosure claim must be dismissed.

D.                 No Underlying Claim Exists to Support Declaratory Judgment.

Third, Plaintiff’s request for declaratory judgment should be dismissed because it is not an independent cause of action.

See Hovanesian v. Quicken Loans, No. H-18-1687, 2019 U.S. Dist. LEXIS 240654, at *9 (S.D. Tex. 2019)

(construing plaintiff’s “request for declaratory judgment as a possible remedy predicated upon plaintiff’s cause of action for wrongful foreclosure, not as an independent claim.”);

see also Sid Richardson Carbon & Gasoline Co. v. Interenergy Res., 99 F.3d 746, 752 n.3 (5th Cir. 1996)

(“declaratory judgment is merely a theory of recovery” for the underlying cause of action).

Declaratory relief requires that

(1) a real controversy exist between the parties

and

(2) that the controversy can actually be determined by the declaration sought.

See Sneed v. Webre, 465 S.W.3d 169, 180 (Tex. 2015).

Here, Plaintiff is seeking a declaration from the Court that PHH “failed to provide mortgage assistance services to plaintiff on an equal footing with other similarly situated debtors and with

20 See Pl.’s Pet. 7, ECF No. 1-1.

an appropriate mortgage adjustment.”21

Plaintiff further seeks a declaration that she was not in default on her mortgage “at the time of the Notice of Trustee Sale was issued.”22

However, as shown herein, Plaintiff alleges no valid underlying claim to support such a remedy. Even so, Plaintiff admits she was in default at the time of her Petition.23

Plaintiff further admits that Defendant considered her application for a loan modification – not once – but twice.24

As such, no real controversy exists.

As a result, Plaintiff’s request for declaratory judgment should be dismissed.

D.   No Underlying Claim Exists to Support Injunctive Relief.

Plaintiff’s request for a temporary injunction enjoining Defendants from foreclosing on the Property is a remedy, not a cause of action, and should be dismissed along with her other claims.

Under Texas law, a prayer for injunctive relief without a cause of action supporting entry of judgment must be dismissed.

Pajooh v. Harmon, 82 Fed. App’x 898, 899 (5th Cir. 2003).

Where a plaintiff fails to adequately plead substantive legal claims, her claim for injunctive relief must fail.

See Smith v. Wells Fargo Bank, N.A., Civ. Action No. H-14-283, 2014 U.S. Dist. LEXIS 104443, at *6 (S.D. Tex. July 31, 2014)

(“Because all of plaintiff’s underlying claims fail as a matter of law, her requests for injunctive relief and attorneys’ fees likewise must be denied.);

see also Ayers v. Aurora Loan Servs., LLC, 787 F. Supp. 2d 451, 457 (E.D. Tex. 2011).

This is because a request for injunctive relief is not an independent cause of action but must arise from an underlying asserted cause of action.

Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002);

21 See Pl.’s Pet. 5, ECF No. 1-1.

22 See Pl.’s Pet. 5, ECF No. 1-1.

23 See Pl.’s Pet. 3, ECF No. 1-1.

24 See id.

see also Cook v. Wells Fargo Bank, N.A., 3:10-CV-0592-D, 2010 U.S. Dist. LEXIS 69239, 2010 WL 2772445, at *4 (N.D. Tex. July 12, 2010).

As shown herein, Plaintiff’s substantive claims fail under the Federal Rules of Civil Procedure.

Accordingly, Plaintiff has no underlying claim to support entry of injunctive relief, and Plaintiff’s claim for temporary injunction should therefore be dismissed with prejudice.

V.                CONCLUSION AND PRAYER

For each of the foregoing reasons, Defendants pray the Court grant this motion and dismiss the claims asserted by Plaintiff with prejudice. Defendants further request the Court award such other relief, in law or in equity, to which Defendants may be justly entitled.

Dated: December 18, 2023

Respectfully submitted,