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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

WICHITA FALLS DIVISION

PHILLIP AND ELLEN COLLIER, §

ET AL., §

§

Plaintiffs, §

§

v. § Civil Action No. 7:04-CV-086-K

§

WELLS FARGO HOME MORTGAGE §

AS SUCCESSOR IN INTEREST TO §

NORWEST AND PARKER SQUARE §

BANK, §

§

Defendant. §

MEMORANDUM OPINION AND ORDER

Before the court is Defendant’s Motion for Summary Judgment, filed October

3, 2005. After review and consideration of the motion, response, reply, summary

judgment evidence, pleadings on file in this case, and the applicable law, the court has

determined that many of Plaintiffs’ claims are time-barred, and that Defendant did

not breach its mortgage contracts with Plaintiffs, did not violate RESPA, TILA, or the

DTPA, and did not commit any of the common law torts complained of by Plaintiffs.

Because Plaintiffs have not provided sufficient evidence raising a genuine issue of

material fact regarding any of their claims, Defendant is entitled to judgment as a

matter of law. Therefore, Defendant’s Motion for Summary Judgment is granted. 

 

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I. Factual and Procedural Background

Plaintiffs are a group of homeowners who obtained 30 year adjustable rate

mortgage loans from Parker Square Bank (“PSB”). When they obtained their

mortgages, Plaintiffs elected to participate in a program offered by PSB that enabled

them to make bi-weekly (instead of monthly) payments on their loans, effectively

causing one extra payment to be made on the loans each year. As part of the program,

Plaintiffs opened bank accounts at PSB, from which their bi-weekly loan payments

were automatically paid. Plaintiffs “expected” that under this program they would pay

off their mortgages in less than 20 years. Plaintiffs have provided no documentation

by Defendant that the term of their loans was less than 20 years. Instead, they rely

on their own expectation and the testimony of PSB’s former loan officer Donnie Park

(“Park”) that the loans were set up as 30 year adjustable rate mortgages with bi-weekly

payments and early payoff.

In 1999, the predecessor to Defendant Wells Fargo Home Mortgage purchased

the assets of Parker Square Bank, including the Plaintiffs’ mortgage notes. Between

1999 and 2000, Defendant reamortized each of the Plaintiffs’ mortgage notes for the

full 30 year term of the loans, maintaining the bi-weekly payments but lowering the

amount of each payment. Plaintiffs allege that Defendant made this change “quietly”

and never told them that the loans had been reamortized to the 30 year maturity

dates reflected in their mortgage notes. Plaintiffs admit, however, that they received

 

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“ARM Change Letters” showing the remaining number of payments on the note.

Each of these ARM Change Letters indicates that the number of payments remaining

(assuming that Plaintiffs continued making 26 payments per year) would cause the

loan to be fully paid off in 15-19 years.

Plaintiffs allege that they did not know of or consent to the change to their

loans by Defendant. They assert claims for breach of contract, fraud, negligence,

negligent misrepresentation, violations of the Texas Deceptive Trade Practices Act

(“DTPA”), Tex. Bus. & C. Code §17.41, et seq., violations of the Real Estate

Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601, et seq.,violations of the

Truth in Lending Act (“TILA”), 15 U.S.C. § 1601, et seq., and intentional infliction

of emotional distress. Defendant moves for summary judgment on all of Plaintiffs’

claims.

II. Summary Judgment Standard

Summary judgment is appropriate when the pleadings, affidavits and other

summary judgment evidence show that no genuine issue of material fact exists and the

moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex

Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2551 (1986). The moving party

bears the burden of identifying those portions of the record it believes demonstrate

the absence of a genuine issue of material fact. Celotex, 477 U.S. at 322-25, 106 S.Ct.

at 2551-54. Once a movant makes a properly supported motion, the burden shifts to

 

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the nonmovant to show that summary judgment should not be granted; the

nonmovant may not rest upon allegations in the pleadings, but must support the

response to the motion with summary judgment evidence showing the existence of a

genuine fact issue for trial. Id. at 321-25, 106 S.Ct. at 2551-54; Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 255-57, 106 S.Ct. 2505, 2513-14 (1986). All evidence and

reasonable inferences must be viewed in the light most favorable to the nonmovant.

United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993 (1962).

III. Defendant’s Motion for Summary Judgment

On various grounds, Defendant argues that Plaintiffs cannot produce sufficient

evidence raising a material issue of fact concerning any of their claims, and that

therefore Defendant is entitled to judgment as a matter of law. Each of Plaintiffs’

claims will be addressed separately below.

A. RESPA Claims

Defendant argues that Plaintiffs’ RESPA claims must be dismissed, because 1)

they are barred by limitations; and 2) Plaintiffs have not sufficiently alleged a RESPA

violation.

RESPA’s principle purpose is to protect home buyers from material nondisclosures in settlement statements and abusive practices in the settlement process.

Morequity v. Naeem, 118 F. Supp.2d 885, 900 (N.D. Ill. 2000); Cortez v. Keystone Bank,

Inc., 2000 WL 536666, *10. However, RESPA applies not only to the actual

 

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settlement process, but also to the servicing of federally regulated mortgage loans. 12

U.S.C. § 2605; Morequity, 118 F. Supp. at 900; Cortez, 2000 WL 536666 at *10.

Federally regulated mortgage loans include any loans secured by a first or subordinate

lien on residential real property. 12 U.S.C. § 2602(1)(A); Morequity, 118 F. Supp. At

900. Servicing is defined as “receiving any scheduled periodic payments from a

borrower pursuant to the terms of any loan, including amounts for escrow accounts

described in § 10 [12 U.S.C. § 2609], and making the payments of principle and

interest and such other payments with respect to the amounts received from the

borrower as may be required pursuant to the terms of the loan.” 12 U.S.C. §

2605(I)(3); Morequity, 118 F. Supp.2d at 901. 

Under RESPA, the servicer of a federally regulated mortgage loan is required

to provide a written response within 20 days of receiving a “qualified written request”

for information about the servicing of such a loan unless the action requested is taken

within that period. 12 U.S.C. § 2605(e)(1); Rawlings v. Dovenmuehle Mortgage, Inc., 64

F. Supp.2d 1156, 1161 (M.D. Ala. 1999). A “qualified written request” is a written

correspondence that enables the servicer to identify the name and account of the

borrower and contains a statement of the reasons for the borrower’s belief that the

account is in error, or provides sufficient detail to the servicer regarding other

information sought by the borrower. 12 U.S.C. § 2605(e)(1)(B); Rawlings, 64 F.

Supp.2d at 1161-62; Vician v. Wells Fargo Home Mortgage, 2006 WL 694740, *3 (N.D.

 

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Ind. 2006). Additionally, RESPA requires the servicer to take corrective action within

60 days of receiving the request, or to conduct an investigation and provide the

borrower with a written explanation of the reasons for the action and the name and

telephone number of an employee of the servicer to whom the borrower can direct any

further inquiry on the matter. 12 U.S.C. § 2506(e)(2); Cortez, 2000 WL 536666 at

*10; In re Maxwell, 281 B.R. 101, 121 (Bankr. D. Mass. 2002).

1. Limitations Issues

Plaintiffs bring their RESPA claims under section 2605(e) of the statute. The

applicable statute of limitations for claims arising under 12 U.S.C. § 2605(e) is three

years. 12 U.S.C. § 2614. Plaintiffs filed their claims against Defendants in 2004.

Initially, Defendants argued that because Plaintiffs had all obtained their mortgages

by 1986, Plaintiffs’ claims expired at latest, in 1989. However, as is stated above,

RESPA also applies to the servicing of the loan. Morequity, 118 F. Supp. at 900.

Plaintiffs have set forth evidence showing that they (or their attorneys) wrote to

Defendant regarding their mortgages between January 2004 and March 2004.

Plaintiffs’ RESPA claims were filed in 2004, and are therefore timely filed under 12

U.S.C. § 2614.

2. Sufficiency of RESPA Claims

For purposes of summary judgment, it is undisputed that Plaintiffs each sent

Defendant a qualified written request as provided by section 2605(e)(1)(B) of RESPA.

 

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The summary judgment record further shows that Defendant sent responses to the

written requests of Plaintiffs Beavers, Burris, Collier and McKelvey, which satisfied the

requirements of RESPA . Defendant’s RESPA response letters to Plaintiffs Beavers,

Burris, Collier and McKelvey explained Defendant’s position that those Plaintiffs’

loans had been serviced correctly, provided them with information showing how their

notes were amortized and how their loan payments had been applied, noted that

interest rate changes had occurred, and gave each of these four Plaintiffs a payoff

statement for their notes. These letters were introduced into the record by Plaintiffs,

and are not disputed by Defendant. Although Plaintiffs argue in a conclusory fashion

that Defendant’s response letters were “in substance no response at all,” Plaintiffs cite

no authority in support of their argument that Defendant’s responses were insufficient

under RESPA. The court finds that there is no genuine issue of material fact whether

Defendant complied with the requirements of RESPA with respect to the claims of

Plaintiffs Beavers, Burris, Collier and McKelvey. 

Conversely, there is no proof in the summary judgment record showing that

Defendant provided a RESPA response to the qualified written requests of Plaintiffs

Bates and Fuller. Defendant argues, however, that even if it failed to respond to the

RESPA requests of Plaintiffs Bates and Fuller, those claims still fail because there is

no evidence that Plaintiffs Bates and Fuller (or any of the other Plaintiffs) have

suffered actual damages flowing from any inadequate response or failure to respond.

 

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See 12 U.S.C. § 2605(f)(1)(A) (damages awarded to borrower must be “as a result of”

the lender’s failure to comply with RESPA); Byrd v. Homecomings Financial Network, 407

F. 

Supp.2d 937, 946 (N.D. Ill. 2005) (party must show actual damage from a violation

of section 2605(e)(2)). 

In their First Amended Complaint (“Complaint”) filed September 13, 2004,

Plaintiffs allege factually that Defendant improperly serviced their mortgages, costing

them additional interest, extending the term of the loan obligations, extending the

time their homes are subject to liens, and depriving them of the use of their money

and assets. Plaintiffs allege no additional facts in support of their RESPA claim, and

merely allege that “Defendant’s actions are a violation of the Real Estate Settlement

Procedures Act.” Complaint at ¶ 21. By the time Plaintiffs sent Defendant their

RESPA requests, the alleged improper servicing of their mortgages had already

occurred. Plaintiffs have alleged no damages which were caused by Defendant’s failure

to respond or inadequate response to the RESPA requests, and thus have failed to

sufficiently allege a violation of section 2605(e) of RESPA, which applies to the time

period after Plaintiffs sent their qualified written requests for information regarding

their loans. Byrd, 407 F. Supp.2d at 946. Therefore, for this additional reason, all of

the Plaintiffs have failed to raise a material issue of fact regarding their RESPA claims,

and Defendant is entitled to summary judgment on all of these claims. 

 

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B. TILA Claims

Defendant also moves for summary judgment on Plaintiffs’ Truth in Lending

Act claims, asserting 1) that these claims are barred by limitations; 2) that Plaintiffs

failed to allege facts constituting a TILA claim; and 3) that even if Plaintiffs had

alleged facts supporting a TILA claim, such claims would fail under the “subsequent

occurrence” test.

The purpose of TILA is to promote the informed use of credit by mandating a

meaningful disclosure of credit terms to consumers. 15 U.S.C. § 1601; Cousin v. Trans

Union Corp., 246 F.3d 359, 370 n.16 (5th Cir.), cert. denied, 534 U.S. 951(2001); Riviere

v. Banner Chevrolet, Inc., 184 F.3d 457, 459 (5th Cir. 1999). Therefore, TILA requires

that creditors disclose all credit terms to the consumer prior to the extension of credit,

so that the consumer can make an informed decision about various credit options

available, and avoid becoming unknowingly obligated to pay hidden and unreasonable

charges imposed by lenders. 15 U.S.C. § 1601; Landreneau v. Fleet Financial Group, 197

F. Supp.2d 551, 555 (M.D. La. 2002); see also 12 C.F.R. § 226.17(b) (creditor shall

make disclosures before consummation of the transaction). Additional disclosure

requirements apply to certain variable-rate transactions. 12 C.F.R. §§ 226.17(b),

226.19(b), 226.20(c). A variable-rate adjustment with or without a corresponding

adjustment to the payment in a variable-rate transaction secured by the consumer’s

principal dwelling is an event requiring new disclosures to the consumer. Id. at §§

 

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226.19(b), 226.20(c). 12 C.F.R. § 226.20(c)(1)-(5) require that the following

disclosures be made at least 25 but no more than 120 days prior to a rate adjustment:

(1) the current and prior interest rates;

(2) the index values upon which the current and prior interest

rates are based;

(3) the extent to which the creditor has foregone any increase

in the interest rate;

(4) the contractual effects of the adjustment, including the

payment due after the adjustment is made, and a

statement of the loan balance; and

(5) the payment, if different from that referred to in

paragraph (c)(4) of this section, that would be required to

fully amortize the loan at the new interest rate over the

remainder of the loan term.

12 C.F.R. § 226.20(c)(1)-(5).

1. Limitations Issues

Under TILA, a one-year statute of limitations applies. 15 U.S.C. § 1640(e);

FDIC v. Enventure V, 77 F.3d 123, 125 (5th Cir. 1996); Kelley v. Galveston Autoplex, 196

F.R.D. 471, 477 (S.D. Tex. 2000). Plaintiffs maintain that they received ARM

Change Letters from Defendant that violated TILA. It is undisputed that Plaintiffs

received ARM Change Letters from Defendant dated as follows:

Plaintiff ARM Change Letters

Dated

Date Suit Filed

Beavers February 10, 1999,

February 25, 1999,

January 5, 2000,

January 8, 2002,

January 3, 2003

March 30, 2004

 

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Bates July 13, 1999, 

July 6, 2000, 

July 5, 2001, 

July 9, 2002, 

July 2, 2003, 

July 9, 2004

August 31, 2004

Burris February 24, 1999,

January 5, 2000,

January 9, 2002,

January 3, 2003

March 30, 2004

Collier July 13, 1999, 

July 6, 2000, 

July 5, 2001, 

July 9, 2002, 

July 2, 2003

March 30, 2004

Fuller February 25, 1999,

January 13, 2000,

January 8, 2002,

January 3, 2003

March 20, 2004

McKelvey February 24, 1999,

January 8, 2002,

January 3, 2003

March 30, 2004

Plaintiffs argue that even though they filed the majority of their TILA claims

after the expiration of the one-year statute of limitations, the limitations period should

be tolled because Defendant allegedly concealed the changes to their loan

amortization schedule. The court disagrees. Each of the ARM Change Letters listed

above indicates the higher number of payments remaining on the note, and also

reveals the change to lower payments that would take the full 30 years to finish

paying off the note. Because they were informed of the number of payments

outstanding, Plaintiffs knew or should have known upon receipt of the ARM Change

 

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Letters that if they continued to make the new, lower bi-weekly payments their loans

would not be paid off until the end of the full 30 year loan term. The undisputed

facts show that there was no concealment by Defendant that would warrant tolling of

the statute of limitations. Therefore, Plaintiffs’ TILA claims accrued upon their

receipt of each of the ARM Change Letters containing this information, and Plaintiffs

cannot recover on any TILA claims brought more than one year following receipt of

the pertinent ARM Change Letter.

When the above facts are viewed in the light most favorable to Plaintiffs, it is

clear that nearly all of their TILA claims are barred by the one-year statute of

limitations. The only timely TILA claims are the claim of Plaintiff Bates based upon

the ARM Change Letter dated July 9, 2004, and the claim of Plaintiff Collier related

to the ARM Change Letter dated July 2, 2003. All of the other TILA claims brought

by Plaintiffs are barred by limitations, and must be dismissed.

2. Merits of Plaintiffs Bates and Collier’s TILA Claims

Plaintiffs Bates and Collier argue that the ARM Change Letters they received

within the limitations period (on July 9, 2004 and July 2, 2003, respectively) violated

TILA because they did not mention the change in the length of the note and resulting

change in the finance charge. The summary judgment evidence shows otherwise. The

Bates’ July 9, 2004 ARM Change Letter shows that 310 payments (approximately 11

 

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years of bi-weekly payments) are remaining on the loan at a current rate of 9%

interest. Therefore, the Bates’ ARM Change Letter does not fail to disclose the effects

of the reduction in the payment amount. Defendant is entitled to summary judgment

on this TILA claim.

Similarly, the Collier’s ARM Change Letter dated July 2, 2003 states that they

have 332 payments (more than 12 years of bi-weekly payments) remaining on their

loan, and that the current rate of interest was 5.75%. This evidence establishes that

Defendant did not make a misrepresentation in the ARM Change Letter regarding the

length of the note or the finance charge. Therefore, Defendant is also entitled to

summary judgment on this TILA claim. The court further notes that even if they were

not time-barred, all of the Plaintiffs’ other TILA claims would also fail because each

of the ARM Change Letters in the summary judgment record disclosed to Plaintiffs

the information required by 12 C.F.R. § 226.20(c)(1)-(5). 

3. “Subsequent Occurrence” Test

Finally, Defendant argues that any changes made to Plaintiffs’ mortgage loans

are not actionable under TILA’s “subsequent occurrence” test, 15 U.S.C. § 1634. This

section of the statue states that:

If information disclosed in accordance with this part is subsequently

rendered inaccurate as the result of any act, occurrence, or agreement

subsequent to the delivery of the required disclosures, the inaccuracy

resulting therefrom does not constitute a violation of this part.

Id. Generally, subsequent events do not affect the validity of initial disclosures or

 

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require the creditor to make further disclosures. Begala v. PNC Bank, 163 F.3d 948,

950-51 (6th Cir. 1998), cert. denied, 528 U.S. 868 (1999); In re Ross, 338 B.R. 266,

271-72 (Bankr. E.D. Pa. 2006); In re Sheppard, 299 B.R. 753, 760 (Bankr. E.D. Pa.

2003). However, the applicable regulations clarify that in certain circumstances,

including variable rate adjustments, further disclosure is mandated. Id., citing 12

C.F.R. § 226.20.

Because Plaintiffs’ loans were adjustable-rate transactions triggering further

disclosures under 12 C.F.R. § 226.20(c), Defendants cannot rely on the “subsequent

occurrence” rule to avoid liability on Plaintiffs’ TILA claims. However, although the

court finds that section 1634 of TILA does not apply here, Plaintiffs’ TILA claims still

fail because the undisputed evidence shows that the ARM Change Letters sent to each

of the Plaintiffs met the disclosure requirements of section 226.20(c).

C. Intentional Infliction of Emotional Distress

Defendant next moves for summary judgment on Plaintiffs’ state law claim for

intentional infliction of emotional distress. Under Texas law, the elements of this

claim are that 1) the defendant acted intentionally or recklessly; 2) the defendant’s

conduct was extreme and outrageous; 3) the defendant’s actions caused the plaintiff

emotional distress; and 4) the resulting emotional distress was severe. Hoffmann-La

Roche, Inc. v. Zeltwanger, 144 S.W.3d 438, 445 (Tex. 2004); Bryant v. Lucent

Technologies, 175 S.W.3d 845, 849 n.1 (Tex. App. – Waco 2005, pet. filed). 

 

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To be liable for intentional infliction of emotional distress, a defendant’s

conduct must be “so outrageous in character, and so extreme in degree, as to go

beyond all possible bounds of decency, and to be regarded as atrocious, and utterly

intolerable in a civilized community.” Creditwatch, Inc. v. Jackson, 157 S.W.3d 814,

817-18 (Tex. 2005), quoting Hoffmann-LaRoche, 144 S.W.3d at 445. Liability does not

extend to mere insults, indignities, threats, annoyances, petty oppressions or other

trivialities. Hoffmann-LaRoche, 144 S.W.3d at 445. It is for the court to determine,

in the first instance, whether a defendant’s conduct was extreme and outrageous, and

if reasonable minds may differ, the issue shall be submitted to the jury. HoffmannLaRoche, 144 S.W.3d at 445; GTE Southwest, Inc. v. Bruce, 998 S.W.2d 605, 612 (Tex.

1999).

Further, intentional infliction of emotional distress is a “gap-filler” tort,

judicially created for the limited purpose of allowing recovery in those rare instances

in which a defendant intentionally inflicts severe emotional distress in a manner so

unusual that the victim has no other recognized theory of redress. Hoffmann-LaRoche,

144 S.W.3d at 447, citing Standard Fruit and Vegetable Co. v. Johnson, 985 S.W.2d 62,

68 (Tex. 1998). The tort is not intended to supplant other available statutory or

common law remedies, and does not apply where the defendant intended to invade

some other legally protected interest, even if emotional distress results. Id. 

 

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Defendant contends that its conduct was not extreme and outrageous, and the

court agrees. Further, Plaintiffs have brought numerous other statutory and common

law claims to redress their alleged injuries. Because Defendant’s alleged illegal

conduct, if proven, would not go unremedied, there is no “gap” to be filled with a

claim for intentional infliction of emotional distress. Id. Plaintiffs make no argument

and cite to no evidence in their summary judgment response that would raise a

genuine issue of material fact regarding this claim. It is Plaintiffs’ burden to set forth

this evidence, and the court is not obligated to search the record in support of such

proof that would permit them to avoid summary judgment. Malacara v. Garber, 353

F.3d 393, 405 (5th Cir. 2003); Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458

(5th Cir. 1998). By failing to brief this claim, Plaintiffs have waived it. Rodriguez v.

ConAgra Grocery Prods. Co., 436 F.3d 468, 474 n.21 (5th Cir. 2006); Communication

Workers of Am. v. Ector County Hosp. Dist., 392 F.3d 733, 748 (5th Cir. 2004). For all

of the above reasons, the court enters summary judgment for Defendant on this claim.

D. Negligence and Negligent Misrepresentation Claims

Defendant next moves for summary judgment on Plaintiffs’ claims for

negligence and negligent misrepresentation, contending that these claims are barred

under the economic loss rule. The economic loss rule precludes recovery of economic

losses in negligence cases when the loss is the subject matter of a contract between the

parties. Southwestern Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494-95 (Tex. 1991);

 

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Tarrant County Hosp. Dist. v. GE Automation Services, Inc., 156 S.W.3d 885, 888 n.5

(Tex. App. – Fort Worth 2005, no pet. h.). Where a plaintiff asserts a tort claim

arising from a contract, the court looks to the substance of the claim, not the manner

in which it was pleaded, to determine the type of action that is brought. Jim Walter

Homes, Inc. v. Reed, 711 S.W.2d 617, 617-18 (Tex. 1986); Tarrant County Hosp. Dist.,

156 S.W.3d at 895. When the injury is only the economic loss to the subject of a

contract itself, the action sounds in contract alone. Tarrant County Hosp. Dist., 156

S.W.3d at 895, citing Southwestern Bell, 809 S.W.2d at 494.

Defendant argues that the only potential basis for a duty of care would be the

mortgage loan contracts with the Plaintiffs, and that no other basis for such a duty has

been asserted. In response, Plaintiffs argue that Defendant had a duty to disclose to

them that the loans would not mature as early as they expected. Plaintiffs contend

that this duty arises 1) when a person voluntarily discloses partial information but

fails to disclose the whole truth; 2) when a person makes a representation but fails to

disclose new information that makes the earlier representation misleading or untrue;

or 3) a person conveys a partial disclosure and conveys a false impression, citing

Columbia/HCA Healthcare Corp. v. Cottey, 72 S.W.3d 735, 744-45 (Tex. App. – Waco

2002, no pet. h.). The court finds that Columbia/HCA is distinguishable. The

portion of the opinion to which Plaintiffs cite discusses a claim of fraud by

nondisclosure (an intentional tort) and when a duty to disclose arises. 72 S.W.3d at

 

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744. Furthermore, as Defendant points out, the misrepresentations at issue in the

Columbia/HCA case were made prior to contract formation – not after the parties had

entered into a contract, as is the situation here. Id. at 744-45. Finally, the

Columbia/HCA case does not address or apply the economic loss rule, which is a

consideration here because it is undisputed that the parties had a contractual

relationship before any alleged tortious conduct by Defendant. Even if Defendant had

a duty to disclose as asserted by Plaintiffs, the court finds that Defendant disclosed

in the ARM Change Letters that Plaintiffs’ loans had more than a few years remaining

(and gave precisely the exact number of payments remaining) before they would be

fully paid. 

Alternatively, Plaintiffs contend that they have a special relationship with

Defendant that gives rise to a duty of care. The Texas courts have held that there is

no special relationship between a mortgagor and mortgagee. See UMLIC VP LLC v.

T&M Sales and Environmental Systems, Inc., 176 S.W.3d 595, 612 (Tex. App. – Corpus

Christi 2005, rev. denied) (Texas courts have found no special relationship between

mortgagor and mortgagee); Blanche v. First Nationwide Mortgage Corp., 74 S.W.3d 444,

453 (Tex. App. – Dallas 2002, no pet. h.) (same); Cole v. Hall, 864 S.W.2d 563, 568

(Tex. App. – Dallas 1993, writ dism’d w.o.j.) (same). Thus, there is no duty of care

that arises from Plaintiffs’ mortgage contracts that would support a claim of negligence

or negligent misrepresentation.

 

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All of Plaintiffs claims, no matter how they are pleaded, arise from the mortgage

contracts between the parties, and the damages claimed by Plaintiffs flow from

Defendant’s purported mishandling of Plaintiffs’ mortgage accounts. Therefore, the

economic loss rule applies to bar Plaintiffs’ claims for negligence and negligent

misrepresentation. The court will enter summary judgment for Defendant on these

claims.

E. DTPA Claims

Defendant moves for summary judgment on Plaintiffs’ DTPA claims, asserting

the well-established rule that a mere breach of contract does not constitute a false,

misleading or deceptive act in violation of the DTPA. Crawford v. Ace Sign, Inc., 917

S.W.2d 12, 14 (Tex. 1996); Bank One, Texas, N.A. v. Little, 978 S.W.2d 272, 281

(Tex. App. – Fort Worth 1998, rev. denied). Whether a breach of contract rises to the

level of a misrepresentation sufficient to trigger DTPA protection is a fact-driven

inquiry. Munawar v. Cadle Co., 2 S.W.3d 12, 18 (Tex. App. – Corpus Christi 1999,

rev. denied); Chilton Ins. v. Pate & Pate Enter. Inc., 930 S.W.2d 877, 890 (Tex. App.

– San Antonio 1996, writ denied). Whether the facts, once ascertained, constitute a

DTPA misrepresentation is a question of law. Id. 

The parties both acknowledge that the alleged nonperformance of the mortgage

contracts by Defendant will not sufficiently establish the factual basis for a DTPA

 

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claim. To support their allegation of a misleading or deceptive act, Plaintiffs argue

that Defendant knew Plaintiffs expected their loans to mature early, yet remained

silent as to the changes in the servicing of the loans or sent misleading information to

Plaintiffs in the ARM Change Letters they received. Plaintiffs further argue that

Defendant made misrepresentations in the formation of the lending contract that give

rise to a DTPA claim. 

The court disagrees with Plaintiffs’ characterization of the summary judgment

evidence. The ARM Change Letters, offered as Plaintiffs’ own summary judgment

evidence, show that each of the loans had over ten years of payments remaining after

the reamortization occurred. Based upon this proof, the court cannot find that

Defendant “remained silent,” misled, or failed to disclose to Plaintiffs the remaining

length of the loans. This information was repeatedly provided to Plaintiffs in the

ARM Change Letters. Plaintiffs’ allegation that misrepresentations were made when

they took out the loans is merely an assertion that Defendant said it would perform

the contract, and therefore misrepresented itself because it then failed to perform as

required by the contract. This factual contention does not turn a breach of contract

into a DTPA claim. The court holds as a matter of law that these facts as alleged by

Plaintiffs do not constitute a DTPA misrepresentation. Therefore, the court will enter

summary judgment for Defendant on Plaintiffs’ DTPA claims.

F. Fraud

 

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Defendant further moves for summary judgment on Plaintiffs’ fraud claims. In

support of its motion, Defendant argues that 1) Plaintiffs have failed to plead facts

that would support a fraud claim; and 2) that Plaintiffs’ fraud claims are barred by the

applicable statute of limitations.

1. Factual Allegations of Fraud

The elements of fraud are a material misrepresentation, which was false, and

which was either known to be false when made, or was asserted without knowledge

of its truth, which was intended to be acted upon, which was relied upon, and which

caused injury. Sears, Roebuck & Co. v. Meadows, 877 S.W.2d 281, 282 (Tex. 1994);

DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex. 1990). As an element of

Plaintiffs’ tort claim, they must plead and prove that Defendant knowingly made a

false representation at the time they entered into their mortgage contracts. Id. 

A promise of future performance constitutes an actionable misrepresentation

if the promise was made with no intention of performing at the time it was made.

Formosa Plastics Corp. USA v. Presidio Engineers and Contractors, Inc., 960 S.W.2d 41, 48

(Tex. 1998), citing Schindler v. Austwell Farmers Coop., 841 S.W.2d 853, 854 (Tex.

1992). The mere failure to perform a contract is not evidence of fraud. Id. Plaintiffs

must present evidence showing that Defendant made representations with the intent

to deceive, and no intention of performing as represented. Id. Further, Plaintiffs must

show Defendant’s intent at the time the representation was made. Id., citing Spoljaric v.

 

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Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986) (emphasis added). The

summary judgment record contains no evidence of any intent to deceive or intent not

to perform according to the contracts when they were entered into, and therefore

Plaintiffs have not sufficiently supported their fraud claim.

Plaintiffs argue that Defendant committed fraud because it had a duty to

disclose the changes to the length of the loans to them, and failed to disclose that

information to them. Plaintiffs correctly state that a failure to disclose information

constitutes fraud provided that there is a duty to disclose. Glover v. Union Pacific Railroad

Co., 187 S.W.3d 201, 218 (Tex. App. – Texarkana 2006, pet. filed); Spring Window

Fashions Division, Inc. v. Blind Maker, Inc., 184 S.W.3d 840, 875 (Tex. App. – Austin

2006, no pet. h.) (emphasis added). Where there is no agreement or no other facts

present to support the existence of a fiduciary or special relationship, a failure to

disclose is not fraudulent. Glover, 187 S.W.2d at 218. As the court has stated at

length above, Plaintiffs have established no legal duty owed to them by Defendant

beyond their contractual relationship. See UMLIC, 176 S.W.3d at 612 (Texas courts

have found no special relationship between mortgagor and mortgagee); Blanche, 74

S.W.3d at 453 (same); Cole, 864 S.W.2d at 568 (same). Therefore, Plaintiffs cannot

salvage their fraud claim by asserting that there was a duty to disclose. 

Even if Defendant had a duty to disclose to Plaintiffs the changes to the

 

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amortization of their loans, the court finds that Defendant did disclose those changes

to Plaintiffs. The summary judgment record establishes that Defendant issued ARM

Change Letters to each of the Plaintiffs showing the number of payments left on their

mortgage notes. In each case, the number of payments remaining were specifically

enumerated and clearly exceeded the number of payments that would have been

required to pay off the loans in 20 years or less, when Plaintiffs were making larger biweekly payments. Thus, even if Plaintiffs had shown there was a duty to disclose, the

court would still enter summary judgment on this claim because that duty to disclose

was met.

2. Limitations Issues

Defendant’s second argument regarding Plaintiffs’ claims for fraud is that they

are barred by the statute of limitations. Fraud claims are subject to a four-year

limitations period. Tex. Civ. Prac. & Rem. Code § 16.004; Vial v. Gas Solutions, Ltd.,

187 S.W.3d 220, 229 (Tex. App. – Texarkana 2006, no pet. h.). A cause of action

accrues for limitations purposes when the claimant’s injury occurs. Murphy v.

Campbell, 964 S.W.2d 265, 270 (Tex. 1997); Vial, 187 S.W.3d at 229. To obtain

summary judgment on a limitations defense, a defendant must 1) conclusively prove

when the cause of action accrued; and 2) negate the discovery rule, if it applies and

has been pleaded or otherwise raised, by proving as a matter of law that there is no

genuine issue of material fact about when the plaintiff discovered, or should have 

 

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discovered, the nature of its injury. KPMG Peat Marwick v. Harrison County Hous. Fin.

Corp., 988 S.W.2d 746, 748 (Tex. 1999).

Plaintiffs do not dispute that they received ARM Change Letters indicating the

number of payments remaining on their loans. Each of the ARM Change Letters

showed a far greater number of payments than would be required to pay off the loans

in 20 versus 30 years. Therefore, it is clear from the summary judgment record that

Plaintiffs knew or should have known that Defendant had changed the repayment

schedules for their loans as of the date they received their first ARM Change Letters.

Each of the relevant ARM Change Letters and the dates the respective Plaintiffs filed

suit are:

Plaintiff First ARM Change

Letter Dated 

Date Suit Filed

Beavers February 10, 1999 March 30, 2004

Bates July 13, 1999 August 31, 2004

Burris February 24, 1999 March 30, 2004

Collier July 13, 1999 March 30, 2004

Fuller February 25, 1999 March 20, 2004

McKelvey February 24, 1999 March 30, 2004

All of the Plaintiffs first received notice from Defendant in 1999 that they had

many more payments remaining on their loans than they had anticipated based upon

the original bi-weekly payment amount. The applicable statute of limitations for each

Plaintiff’s fraud claims would have expired in 2003. None of the Plaintiffs brought

 

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their fraud claims against Defendant until 2004, more than four years later.

Therefore, Plaintiffs’ fraud claims were untimely and are barred by the statute of

limitations, Tex. Civ. Prac. & Rem. Code § 16.004.

G. Exemplary and Mental Anguish Damages

Defendants argue that Plaintiffs’ claims for mental anguish and exemplary

damages should be dismissed, because if they have a viable claim it arises from the

mortgage contracts and not under any tort theory. Mental anguish damages and

exemplary damages are not recoverable for a breach of contract. Twin City Fire Ins. Co.

v. Davis, 904 S.W.2d 663, 665 (Tex. 1995); Royal Maccabees Life Ins. Co. v. James, 146

S.W.3d 340, 351 (Tex. App. – Dallas 2004, rev. denied), citing Latham v. Castillo, 972

S.W.2d 66, 72 (Tex. 1998). 

Plaintiffs respond that they should receive mental anguish and exemplary

damages because their case “sounds in tort as well as contract.” (Plaintiffs’ Brief at

16). Recovery of such damages requires a finding of an independent tort with

accompanying actual damages. Twin City, 904 S.W.2d at 665. The court has

determined that there is no genuine issue of material fact regarding any of Plaintiffs’

tort-based claims, and that Defendant is entitled to judgment as a matter of law on

all of these claims. Therefore, Plaintiffs’ claims for exemplary and mental anguish

damages are also dismissed.

 

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H. Breach of Contract Claims

Defendant contends that it is also entitled to summary judgment on Plaintiffs’

breach of contract claims because they are untimely, and thus barred by limitations.

Defendant also argues in the alternative that it did not breach the mortgage contracts

with Plaintiffs, and that Plaintiffs have not suffered any damages from the alleged

breach.

1. Limitations Issues

The parties agree that a four-year statute of limitations applies to actions for

breach of contract. Anderson v. Cocheu, 176 S.W.3d 685, 689 (Tex. App. – Dallas

2005, rev. denied); Morriss v. Enron Oil & Gas Co., 948 S.W.2d 858, 869 (Tex. App.

– San Antonio 1997, no writ). They further agree that most actions for breach of

contract accrue at the time of the breach. Anderson, 176 S.W.3d at 689, citing Stine v.

Stewart, 80 S.W.3d 586, 592 (Tex. 2002). Defendant argues that each of the

Plaintiffs received notice of the reamortization of their loans when they received their

first ARM Change Letters in 1999, and therefore Plaintiffs’ breach of contract claims

accrued at that time. Thus, Defendant asserts that because the applicable statute of

limitations expired in 2003, their breach of contract claims filed in 2004 were

untimely. 

Plaintiffs respond that their contractual claims were timely filed because 1) the

mortgages were “continuing contracts”; 2) the discovery rule applies; and 3)

 

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Defendant fraudulently concealed facts supporting their breach of contract claims.

The court disagrees. In a “continuing contract,” the contemplated performance and

payment is divided into several parts or, where the work is continuous and indivisible,

the payment for work is made in installments as the work is completed. Hubble v. Lone

Star Contracting Corp., 883 S.W.2d 379, 381-82 (Tex. App. – Fort Worth 1994, writ

denied), citing Godde v. Wood, 509 S.W.2d 435, 441 (Tex. App. – Corpus Christi 1974,

writ ref’d n.r.e.). Plaintiffs have cited no cases treating a mortgage contract such as

those at issue here as a continuing contract. The court also has found no support for

this assertion in Texas case law. 

Plaintiffs’ arguments regarding the discovery rule and alleged fraudulent

concealment are also unavailing. It is undisputed that Plaintiffs received ARM

Change Letters in 1999 indicating that they had many more payments left on their

mortgage notes than would have been required to pay them off under the original

amortization schedule. Presented with these facts, Plaintiffs knew or should have

known at that time that Defendant had allegedly breached their mortgage contracts.

There is no evidence in the record establishing that Defendant concealed this

information. In fact, the record shows the opposite – that Defendant disclosed this

information in each of the ARM Change Letters Plaintiffs received. Although

Plaintiffs have shown that they (understandably) attempted to correspond with

Defendant regarding the status of their mortgages before bringing suit, they still

 

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needed to remain mindful of the approaching limitations period. Because they failed

to file their claims within that 

four-year period, Plaintiffs’ breach of contract claims are barred by the statute of

limitations.

2. Merits of Plaintiffs’ Breach of Contract Claims

In the event that the statute of limitations does not preclude these claims, they

still fail on their merits. The elements of an action for breach of contract are 1) a valid

contract; 2) the plaintiff performed or tendered performance; 3) the defendant

breached the contract; and 4) the plaintiff was damaged as a result of that breach.

Case Corp. v. Hi-Class Business Sys. of Am., 184 S.W.3d 760, 769 (Tex. App. – Dallas

2005, no pet. h.); Crowder v. Scheirman, 186 S.W.3d 116, 118-19 (Tex. App. –

Houston [1st Dist.] 2005, no pet. h.). A breach of contract occurs when a party fails

to perform an act that it has expressly or impliedly promised to perform. Case Corp.,

184 S.W.3d at 769-70, citing Methodist Hosps. of Dallas v. Corporate Communicators, Inc.,

806 S.W.2d 879, 882 (Tex. App. – Dallas 1991, writ denied).

Defendant argues that it did not breach the mortgage contracts because they

are 30-year mortgage notes by their express terms. Plaintiffs do not deny that the

contracts provide for a 30-year term, but respond that the reamortization of the notes

was a breach of contract, because the inclusion of language regarding the bi-weekly

 

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payments “equals early pay off of the notes.” (Plaintiffs’ Brief at 18, emphasis in

original). The court agrees with Defendant that by reamortizing the notes to provide

for payoff in 30 years instead of 20, it did not breach the contracts since the parties

agreed to a 30-year term. Plaintiffs were informed of this change in 1999, and still

could have chosen to pay off their notes early. For these reasons, the court finds that

Defendant did not breach the contracts, and further finds that Plaintiffs were not

damaged by Defendant’s actions, as they were informed of the change and could have

voluntarily applied extra funds toward an early payoff but chose not to. As the court

has stated, Plaintiffs’ breach of contract claims are untimely. However, even if they

had been timely filed, the court holds as a matter of law that these claims are without

merit and are dismissed.

IV. Conclusion

For the foregoing reasons, Defendant’s Motion for Summary Judgment is

granted, and Plaintiffs’ claims are hereby dismissed with prejudice. All other

pending motions are denied as moot. Judgment will be entered by separate

document. 

SO ORDERED. 

 Signed May 26th , 2006.

 s/Ed Kinkeade 

ED KINKEADE 

 UNITED STATES DISTRICT JUDGE

 

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