627 F. App'x 314
5th Cir.2015Background
- In 2001 the Wentzells took a mortgage from Bridges later assigned to JPMorgan Chase; the Deed of Trust allowed foreclosure after default for missed monthly payments.
- After Hurricane Katrina they fell behind, entered a 2006 Loan Modification with Chase (alleging an intended lower rate), and later allege an unexecuted 5.25% modification before May 2009.
- Mortgage statements from 2009 continued to show a 6.875% rate; the Wentzells claim Chase misreported or refused to correct the interest rate and they paid through July 22, 2009.
- Chase repeatedly initiated foreclosure; it foreclosed and purchased the Property at a May 16, 2013 sale, then filed an unlawful entry and detainer action; the Wentzells sued in chancery court (removed to federal court) seeking to set aside the foreclosure and reinstate the loan.
- The district court granted Chase’s Rule 12(b)(6) motion, dismissing the Petition with prejudice for failure to state a plausible claim; the Wentzells appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether equity can set aside the foreclosure and reinstate the loan based on Chase’s alleged misreporting of interest | Wentzell: Chase’s misreporting/representations caused their default and justify equitable relief | Chase: Plaintiff admits default (last payment July 22, 2009); no alleged conduct made them unable to pay; no unconscionable conduct | Court: Dismissed — pleading fails to allege conduct by Chase rising to unconscionable/inequitable standard and plaintiffs lack clean hands due to long nonpayment |
| Whether wrongful foreclosure claim was stated | Wentzell: (implied) foreclosure was wrongful because of servicer conduct/dual tracking and misrepresentations | Chase: Foreclosure complied with contractual/statutory requirements; no unlawful, bad faith, or negligent conduct alleged; Deed of Trust permits forbearance without waiver | Court: Dismissed — no allegations of violation of legal/contractual requirements or bad faith; dual-tracking theory not asserted below and waived |
| Whether promissory estoppel, detrimental reliance, or equitable estoppel support relief | Wentzell: Relied on Chase’s reported interest and representations to their detriment | Chase: No district-court presentation of these theories; no allegations that Chase promised to forbear foreclosure or excuse payments | Court: Waived at district court; even on the merits pleadings lack facts showing promise or forbearance to support estoppel or reliance |
| Whether leave to amend should be granted | Wentzell: Requests leave to amend on appeal to add facts | Chase: Opposed; no prior request in district court | Court: Denied — plaintiff never sought leave to amend below so appellate court will not grant amendment |
Key Cases Cited
- Toy v. Holder, 714 F.3d 881 (5th Cir. 2013) (standard for Rule 12(b)(6) plausibility review)
- Hale v. King, 642 F.3d 492 (5th Cir. 2011) (plausibility and pleading standard discussion)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility required to survive dismissal)
- Kansa Reinsurance Co. v. Cong. Mortg. Corp. of Tex., 20 F.3d 1362 (5th Cir. 1994) (affirmative defenses apparent on the face of the pleadings may justify dismissal)
- Nat'l Liab. & Fire Ins. Co. v. R & R Marine, Inc., 756 F.3d 825 (5th Cir. 2014) (federal courts in diversity apply federal procedural law)
- Johnson v. Gore, 80 So.2d 731 (Miss. 1955) (equity will not relieve mortgagor unless mortgagee’s conduct makes taking advantage unconscionable)
- Nat'l Mortg. Co. v. Williams, 357 So.2d 934 (Miss. 1978) (wrongful foreclosure recovery limited to unlawful, malicious, negligent, or bad-faith foreclosures)
- Lake Hillsdale Estates, Inc. v. Galloway, 473 So.2d 461 (Miss. 1985) (foreclosure is proper if constitutional, statutory, and contractual requirements are met)