Opinion ID: 1037562
Heading Depth: 2
Heading Rank: 2

Heading: DTPA Claims Against BAC

Text: The magistrate judge rejected the Millers’ claims under the DTPA, explaining that the statute protects “consumers” and that mortgagors (loan borrowers) are not consumers within the meaning of the statute. We agree that this is the general rule, but restate the test slightly differently to account for a necessary nuance. “The DTPA protects consumers; therefore, consumer status is an essential element of a DTPA cause of action.” Mendoza v. Am. Nat’l Ins. Co., 932 S.W.2d 605, 608 (Tex. App. 1996) (citation omitted). “In order to qualify as a consumer under the DTPA, two requirements must be established. First, the person must seek or acquire goods or services by purchase or lease. Second, the goods or 10 Case: 12-41273 Document: 00512339912 Page: 11 Date Filed: 08/13/2013 No. 12-41273 services purchased or leased must form the basis of the complaint.” Id. (citations omitted); see also Tex. Bus. & Com. Code § 17.45(4) (providing the statutory definition of consumer). “Generally, a pure loan transaction lies outside the DTPA because money is considered to be neither a good nor a service. However, subsequent cases have limited [this] doctrine.” Ford v. City State Bank of Palacios, 44 S.W.3d 121, 133 (Tex. App. 2001) (citations omitted). A loan sometimes may constitute a basis for consumer status under the DTPA. See, e.g., Walker v. F.D.I.C., 970 F.2d 114, 123 (5th Cir. 1992) (collecting citations in which Texas courts have departed from the “facially simple statement” that a “pure loan transaction lies outside the DTPA”); Flenniken v. Longview Bank & Trust Co., 661 S.W.2d 705, 706-08 (Tex. 1983) (rejecting the argument that plaintiffs could not qualify as consumers because their transaction with the defendant bank was a lending transaction, where the loan was used to finance the construction of a house). A mortgagor qualifies as a consumer under the DTPA if his or her primary objective in obtaining the loan was to acquire a good or service, and that good or service forms the basis of the complaint. Compare Flenniken, 661 S.W.2d at 708 (“[T]he Flennikens make no complaint as to the Bank’s lending activities. Unlike Lewis, the Flennikens did not seek to borrow money; they sought to acquire a house. The house thus forms the basis of their complaint.”), with Riverside Nat’l Bank v. Lewis, 603 S.W.2d 169, 175 (Tex. 1980) (“Lewis approached Riverside Bank with one objective; he sought to acquire money.”). Here, the Millers have alleged that their mortgage was a purchase money loan, meaning they obtained it to acquire their property on Corey Drive. However, the purchase money loan does not form the basis of the Millers’ complaint; rather, the Millers’ DTPA claim against BAC is based entirely on their attempted modification of that loan. Such modification is akin to refinancing in that it is not sought for the acquisition of a good or service, but 11 Case: 12-41273 Document: 00512339912 Page: 12 Date Filed: 08/13/2013 No. 12-41273 rather to finance an existing loan on previously acquired property. See Ayers v. Aurora Loan Servs., LLC, 787 F. Supp. 2d 451, 455 (E.D. Tex. 2011) (“[A] modification of an existing loan . . . is analogous to refinancing services. Refinancing is simply an extension of credit that does not qualify Plaintiff as a consumer.” (citations omitted)); Fix v. Flagstar Bank, FSB, 242 S.W.3d 147, 160 (Tex. App. 2007) (holding that “the refinance cannot qualify as a good or service under the DTPA” because the plaintiffs “had already purchased their house [and thus the] refinance merely extended credit” (citation omitted)). As in Ayers, “[h]ere, the alleged loan modification was not a part of the financing scheme to acquire a house. It is an entirely separate and distinct transaction, sought after the purchase of the house was complete.” 787 F. Supp. 2d at 455. The Millers’ complaint is therefore based on “a pure loan transaction,” meaning the Millers do not qualify as consumers under the DTPA. See Ford, 44 S.W.3d at 133 (citations omitted). Accordingly, we affirm the district court’s dismissal of the Millers’ DTPA claims.