Draehn v. Shellpoint Mortgage Servicing
3:16-cv-00248
N.D. Tex.Dec 19, 2016Background
- Plaintiffs Carol and Larry Draehn own real property in Kaufman County, Texas secured by a 2005 Note and Deed of Trust (DOT); MERS was the original nominee/beneficiary.
- The DOT/Note changed hands by recorded assignments: MERS→Bank of America (2011), Bank of America→Christiana Trust (2014), Christiana→J.P. Morgan (2014), and J.P. Morgan→Wilmington Trust NA (WTNA) (recorded 2015); Shellpoint is the current loan servicer.
- Plaintiffs allege imminent nonjudicial foreclosure and sued for breach of contract, wrongful foreclosure, and sought declaratory relief; they challenge assignments (including alleged split of note and DOT) and servicing/notice failures.
- Defendants moved to dismiss under Rule 12(b)(6): WTNA and Shellpoint moved together; Carrington (a foreclosure agent) moved separately.
- The magistrate judge recommended: grant Carrington’s motion in full; dismiss WTNA claims with prejudice; deny dismissal as to Shellpoint on breach-of-contract notice theory (Plaintiffs’ lone surviving claim); dismiss wrongful foreclosure and record-chain claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge assignments/PSA compliance (WTNA) | Assignment/PSA breach rendered assignments void; Plaintiffs can challenge chain of title | Plaintiffs lack privity or third‑party beneficiary status to enforce PSA; assignments are not void | Plaintiffs lack standing to challenge PSA or assignment defects; claims vs WTNA dismissed |
| "Split‑the‑note" theory (WTNA) | Note placed in trust in 2012 but DOT assigned in 2014, splitting note and security | Deed of trust transfer carries the debt; split‑the‑note theory rejected | Court rejects split‑the‑note; assignment to WTNA valid; claim fails |
| Breach of contract for failure to give notice of rate/payment changes (Shellpoint) | Shellpoint failed to provide required written notice of loan characteristic changes under the Adjustable Rate Note | Shellpoint is only servicer, not a party/holder of the Note or DOT, so no contract duty | Complaint sufficiently alleges a notice breach by Shellpoint to survive dismissal; claim remains |
| Claims vs Carrington (foreclosure agent) and wrongful foreclosure | Carrington unlawfully attempted foreclosure and failed to notify; imminent threat of foreclosure supports wrongful foreclosure | Carrington not a party to the Note/DOT; wrongful foreclosure requires an actual sale and proof of grossly inadequate price | Claims against Carrington dismissed for failure to plead facts; wrongful foreclosure dismissed (no sale alleged) |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (context‑specific plausibility standard for complaints)
- Sauceda v. GMAC Mortg. Corp., 268 S.W.3d 135 (Tex. App. 2008) (elements for breach of contract under Texas law)
- Reinagel v. Deutsche Bank Nat. Trust Co., 735 F.3d 220 (5th Cir. 2013) (borrowers lack standing to enforce PSA absent privity or third‑party beneficiary status)
- Ferguson v. Bank of N.Y. Mellon Corp., 802 F.3d 777 (5th Cir. 2015) (borrower may challenge an assignment only if the defect would render the assignment void)
- Vazquez v. Deutsche Bank Nat. Trust Co., 441 S.W.3d 783 (Tex. App. 2014) (assignment may be challenged as void where forgery or similar defect is alleged)