Watson v. Citimortgage, Inc.
2011 U.S. Dist. LEXIS 113540
E.D. Tex.2011Background
- Plaintiffs Watson and Watson entered into a July 15, 2005 Note and Deed of Trust with Citimortgage, Inc.
- In June 2009 Plaintiffs fell behind on payments and filed for bankruptcy in October 2009, discharged January 2010.
- Between February and November 2010, Defendant discussed workout options and loan modification with Plaintiffs; Plaintiffs applied for HAMP but did not qualify.
- Defendant accelerated the loan in October 2010 and announced foreclosure; Plaintiffs were told of a three-month trial plan but dispute receipt of documentation.
- Plaintiffs filed suit in state court; Defendant removed the case to federal court and moved to dismiss under Rule 12(b)(6) or for a more definite statement.
- The court granted in part and denied in part the motion to dismiss, with several claims dismissed without prejudice and others allowed to proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty of good faith and fair dealing | Plaintiffs allege implied duty in lender-borrower contract. | No general duty absent special relationship or imbalance of power. | Duty not recognized; claim dismissed with no leave to amend. |
| Breach of Note and Deed of Trust | Defendant breached by failing to provide notice and accelerating without cure opportunity. | No breach without proper contractual notice and authority. | Claim survives; denied dismissal. |
| Breach of unilateral contract | Defendant promised modification/forbearance; Plaintiffs accepted by performance. | No binding unilateral contract; promises illusory and lacking consideration; statute of frauds applies to any modification. | Claim dismissed with prejudice; no amendment allowed. |
| TDCPA claim | Defendant made deceptive modifications while collecting penalties. | TDCPA claim lacking. | TDCPA claim survives dismissal; not dismissed. |
| DTPA standing | Consumers seeking relief under DTPA for lender actions. | Plaintiffs lack consumer status to invoke DTPA. | DTPA claim dismissed for lack of consumer standing. |
Key Cases Cited
- Narvaez v. Wilshire Credit Corp., 757 F.Supp.2d 621 (N.D.Tex. 2010) (intent required for misrepresentation; not merely negligent conduct)
- Biggers v. BAC Home Loans Servicing, LP, 767 F.Supp.2d 725 (N.D.Tex. 2011) (misrepresentation must be an existing fact and show pecuniary loss)
- Vanegas v. Am. Energy Servs., 302 S.W.3d 299 (Tex. 2009) (unilateral contract requires promise accepted by performance)
- Tex. La. & Deaf v. Sloane, 825 S.W.2d 439 (Tex. 1991) (statute of frauds requires writing to modify a loan)
- RT Realty, L.P. v. Texas Utilities Elec. Co., 181 S.W.3d 905 (Tex.App.-Dallas 2006) (accounting as remedy requires complex issues beyond legal relief)
- Riverside Nat’l Bank v. Lewis, 603 S.W.2d 169 (Tex. 1980) (borrowing money does not constitute a 'consumer' good or service)
- Sloane (Fed. Land Bank Ass’n of Tyler v. Sloane), 825 S.W.2d 439 (Tex. 1991) (modification of loan subject to statute of frauds; oral modification unenforceable)
- Narvaez v. Wilshire Credit Corp., 757 F.Supp.2d 621 (N.D.Tex. 2010) (absolute repudiation required for anticipatory breach claim)