Zaida Villarreal v. Wells Fargo Bank, N.A.
814 F.3d 763
| 5th Cir. | 2016Background
- Villarreal (signed deed of trust but not the note) became sole obligor on a mortgage after divorce; defaulted and later cured but fell back into default of $7,386.61 by May 2013.
- Wells Fargo sent statutorily required default and acceleration notices to the property address and borrower’s relative; Villarreal did not cure and Wells Fargo foreclosed in July 2013.
- Villarreal sued in Texas state court claiming breach of contract, negligence, wrongful foreclosure, and DTPA violations; Wells Fargo removed, asserting fraudulent joinder of a local employee.
- Villarreal voluntarily dismissed the employee, sought to amend to expand claims and to join ex-husband Ballesteros (adding IIED); the district court denied amendment as futile and denied joinder of Ballesteros.
- The Fifth Circuit reviewed de novo the futility dismissal (Rule 12(b)(6) standards) and for abuse of discretion the denial of joinder of a non-diverse party, and affirmed dismissal of all claims and denial of joinder.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract — failure to send notices / automatic withdrawals | Villarreal: Wells Fargo breached by not sending notices to her Yuma address and not making automatic withdrawals | Wells Fargo: Villarreal was in default and did not allege she performed under the contract; notices attached show default | Dismissed — plaintiff failed to plead performance; documentary evidence showed default |
| Negligence based on same conduct | Villarreal: bank negligently failed to withdraw payments and send notices to new address | Wells Fargo: duties arise solely from the contract; remedy is contractual not tort | Dismissed — duties contractual; claims sound in contract, not tort |
| Wrongful foreclosure — defective sale | Villarreal: failure to send statutory notices was a defect in foreclosure | Wells Fargo: no allegation of grossly inadequate price or chilled bidding | Dismissed — no allegation of grossly inadequate sale price or chilled bidding exception |
| DTPA claim — consumer status for bank services | Villarreal: bank’s failure to make withdrawals violated DTPA | Wells Fargo: automatic withdrawal service is incidental to the loan, not a consumer good/service forming the basis of the complaint | Dismissed — services incidental to loan; plaintiff not a DTPA consumer |
| Joinder of non-diverse ex-husband (IIED) | Villarreal: sought to add Ballesteros as necessary defendant for IIED claim | Wells Fargo: amendment appeared intended to defeat federal jurisdiction; plaintiff dilatory; claim could proceed in state court | Denied — district court did not abuse discretion under Hensgens factors; motive and dilatory timing supported denial |
Key Cases Cited
- Stripling v. Jordan Prod. Co., LLC, 234 F.3d 863 (5th Cir. 2000) (futility standard for denial of leave to amend is reviewed like a Rule 12(b)(6) dismissal)
- Crostley v. Lamar Cty., Tex., 717 F.3d 410 (5th Cir. 2013) (abuse-of-discretion review for denial of motion to amend)
- Hensgens v. Deere & Co., 833 F.2d 1179 (5th Cir. 1987) (factors for allowing joinder of non-diverse nonindispensable party)
- Miller v. BAC Home Loans Servicing, L.P., 726 F.3d 717 (5th Cir. 2013) (wrongful-foreclosure requirements and chilled-bidding exception)
- Maginn v. Norwest Mortg., Inc., 919 S.W.2d 164 (Tex. App.—Austin 1996) (banking/ancillary loan services are incidental to loan and do not confer DTPA consumer status)
- Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493 (Tex. 1991) (where defendant’s duties arise only from contract, claim generally sounds in contract not tort)