Joe Reece v. U.S. Bank National Association
2014 U.S. App. LEXIS 15066
5th Cir.2014Background
- In 2004 Reece executed a promissory note secured by a Deed of Trust naming MERS as nominee/beneficiary; MERS assigned the Deed of Trust to U.S. Bank in 2012 and the assignment was recorded in Tarrant County.
- Reece defaulted; U.S. Bank purchased the property at a nonjudicial foreclosure sale and then filed forcible detainer proceedings to evict Reece.
- Reece sued in Texas state court seeking to enjoin eviction and alleging U.S. Bank lacked standing to foreclose and that U.S. Bank’s counsel committed fraud by asking if he wanted to settle before eviction.
- After an amended complaint, U.S. Bank removed the action to federal court and moved to dismiss under Fed. R. Civ. P. 12(b)(6).
- The district court dismissed for failure to state a claim; Reece appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraud by U.S. Bank's attorney (settlement inquiry) | Attorney’s question about settling was a material, false representation constituting fraud | The inquiry was not a false or material representation and plaintiff did not plead the elements of fraud | Dismissed — no actionable fraud; plaintiff failed to plead material or false representation or required elements |
| Fraudulent lien/recording (§ 12.002) | Recordings naming MERS as beneficiary were fraudulent because MERS never acquired a security interest | Assignment/recording were business/ownership acts, not intended to cause physical, financial, or mental injury required by statute | Dismissed — failed to allege intent to cause physical/financial injury or mental anguish and failed to show property wouldn’t be foreclosed absent assignment |
| Standing to foreclose (MERS’s power to assign) | MERS could not assign the Deed of Trust; U.S. Bank therefore lacked standing to foreclose | MERS may assign a deed of trust; a recorded assignment confers standing on the assignee to nonjudicially foreclose | Dismissed — Fifth Circuit precedent permits MERS assignments and gives assignee standing |
| IRS notice claim (Internal Revenue Code) | Foreclosure was unlawful because U.S. Bank failed to give IRS notice of sale | IRS notice requirement applies only where property is subject to a federal tax lien; no such lien alleged | Dismissed — plaintiff did not allege a federal tax lien, so the IRC notice provision is inapplicable |
Key Cases Cited
- Haase v. Countrywide Home Loans, Inc., 748 F.3d 624 (5th Cir.) (standard of review and Rule 12(b)(6) pleading principles)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S.) (plausibility standard for pleadings)
- In re FirstMerit Bank, N.A., 52 S.W.3d 749 (Tex.) (elements of common-law fraud under Texas law)
- Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249 (5th Cir.) (MERS may assign a deed of trust and assignee has standing to nonjudicially foreclose)