Watson v. Citimortgage, Inc.
2011 U.S. Dist. LEXIS 113540, 2011 WL 4526980, 814 F.Supp. 2d 726 (2011)
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Rule of Law:
Under the Texas Deceptive Trade Practices Act (DTPA), a person who only borrows money is not considered a 'consumer' because the lending of money is not the acquisition of a 'good or service.' Therefore, a borrower lacks standing to bring a claim against their mortgage lender under the DTPA.
Facts:
- In July 2005, Phillip and Janine Watson entered into a mortgage agreement with Citimortgage, Inc.
- By June 2009, the Watsons had fallen behind on their mortgage payments.
- After a bankruptcy discharge in January 2010, the Watsons engaged in discussions with Citimortgage from February to November 2010 regarding loan modification options.
- On October 2, 2010, Citimortgage sent the Watsons a notice of acceleration and scheduled a foreclosure sale for November 2, 2010.
- On October 7, 2010, Citimortgage sent the Watsons an email stating that their mortgage assistance request had been approved and a solution package would be delivered shortly.
- On October 20, 2010, the Watsons received a letter from Citimortgage rescheduling the foreclosure sale for December 7, 2010.
- During a phone call on October 25, 2010, a Citimortgage representative informed the Watsons that they were approved for a three-month trial payment plan, but the Watsons never received written documentation for this plan.
- The Watsons did not make any payments under the alleged trial plan.
Procedural Posture:
- Phillip and Janine Watson (Plaintiffs) filed their Original Petition against Citimortgage, Inc. (Defendant) in a Texas state district court.
- The state court issued a Temporary Restraining Order, which cancelled the scheduled foreclosure sale.
- Citimortgage removed the case to the U.S. District Court for the Eastern District of Texas, a federal trial court, based on diversity jurisdiction.
- Citimortgage filed a Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6), asking the district court to dismiss all of the Watsons' claims for failure to state a claim upon which relief can be granted.
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Issue:
Under the Texas Deceptive Trade Practices Act (DTPA), is a person who borrows money to finance a home considered a 'consumer' with standing to sue?
Opinions:
Majority - Schell, J.
No. A person who borrows money is not a 'consumer' with standing to sue under the Texas Deceptive Trade Practices Act (DTPA). The court's reasoning is that the DTPA requires a plaintiff to have sought or acquired 'goods or services' by purchase or lease, and Texas courts have consistently held that borrowing money does not constitute the acquisition of a good or service. The court cited precedent like 'La Sara Grain Co. v. First Nat’l Bank of Mercedes' and 'Riverside Nat’l Bank v. Lewis' to support the conclusion that a person seeking only to borrow money is not a consumer under the statute. Because the Watsons' claims stemmed from their mortgage loan, they did not qualify as 'consumers' and therefore lacked standing to bring a DTPA claim.
Analysis:
This decision reinforces a critical limitation on the scope of the Texas Deceptive Trade Practices Act (DTPA) in the context of mortgage lending. It clarifies that borrowers cannot leverage the DTPA's consumer protections against lenders, forcing them to rely on other legal theories like breach of contract or negligent misrepresentation, which have different elements and standards of proof. The case serves as a practical guide for litigators, distinguishing between plausible and implausible claims in foreclosure defense cases under the heightened 'Twombly' and 'Iqbal' pleading standards. By dismissing the DTPA and duty of good faith claims as legally non-viable while allowing the negligent misrepresentation claim to proceed based on specific factual allegations, the opinion illustrates the fact-intensive nature of modern motion to dismiss practice.
