Melcher v. City of Kemah
3:14-cv-00288
S.D. Tex.Mar 9, 2016Background
- MHI settled a TWIA windstorm-damage suit for ~$220,000 after its Kemah property had been foreclosed and Melcher filed bankruptcy; attorneys took ~$100,000 in fees and costs and $120,000 was paid to First Bank (assignee of MHI’s SBA loan) on Nov. 1, 2012 to credit a deficiency.
- Plaintiffs (Melcher and MHI) later sued multiple defendants, including First Bank, alleging fraud, conversion, RICO, wrongful foreclosure, conspiracy, breach of contract, negligence, and other claims arising from the settlement distribution.
- First Bank moved to dismiss all claims under Fed. R. Civ. P. 12(b)(6); Plaintiffs did not file a response, so the court reviewed the amended complaint’s allegations on the merits.
- The court found many claims barred by statutes of limitation based on Plaintiffs’ own pleading dates of discovery (foreclosure known June 2009; settlement known by April 10, 2012; suit filed Aug. 26, 2014).
- The court also found Plaintiffs’ pleadings legally deficient for failure to plead fraud with particularity, to plead facts establishing fiduciary or trust relationships, or to identify any breached contract terms by First Bank.
- The magistrate judge recommended dismissal of all claims against First Bank with prejudice and gave parties a deadline to file objections to the report and recommendation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of claims (statute of limitations) | Claims accrue later under discovery rule; timely | Plaintiffs admitted knowledge dates that make claims untimely | Dismissed: limitations bar multiple claims; discovery rule inapplicable |
| Fraud and conspiracy | Multiple defendants (including First Bank) conspired and made false statements causing reliance and loss | Pleadings are conclusory and fail to allege who/what/when/where as required by Rule 9(b) | Dismissed: fraud/conspiracy claims fail for lack of particularity |
| Conversion / constructive trust / unjust enrichment | First Bank wrongfully received settlement/proceeds and should be liable or impressed with trust | No fiduciary/bailee relationship; debtor-creditor relationship precludes conversion/unjust enrichment | Dismissed: conversion/unjust-enrichment/constructive-trust claims fail |
| Breach of contract / DTPA / other torts (negligence, negligent misrepresentation, IIED, legal malpractice, §1983) | First Bank breached contract/committed consumer/business torts and other harms | Plaintiffs fail to identify contract terms; not a consumer under DTPA; First Bank not a law firm or state actor; pleadings lack essential facts | Dismissed: claims lack legal foundation or fail as matter of law |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading must state plausible claim, not conclusory allegations)
- Williams v. WMX Technologies, Inc., 112 F.3d 175 (5th Cir. 1997) (fraud allegations must identify who, what, when, where)
- United States ex rel. Doe v. Dow Chemical Co., 343 F.3d 325 (5th Cir. 2003) (failure to satisfy Rule 9(b) can warrant dismissal)
- Issa v. CompUSA, 354 F.3d 1174 (10th Cir. 2003) (Rule 12(b)(6) motion cannot be granted by default without merits review)
- Bush v. United States, 823 F.2d 909 (5th Cir. 1987) (claims subject to dismissal under Rule 12(b)(6) when barred by statute of limitations)
- Kaiser Aluminum & Chemical Sales, Inc. v. Abondale Shipyards, Inc., 677 F.2d 1045 (5th Cir. 1982) (statute-of-limitations dismissal on the face of the complaint)
- Fortune Production Co. v. Conoco, Inc., 52 S.W.3d 671 (Tex. 2000) (no unjust-enrichment recovery when express contract covers the dispute)
- Thigpen v. Locke, 363 S.W.2d 247 (Tex. 1963) (debtor-creditor relationship does not create fiduciary duties)