Lauren Peters v. JP Morgan Chase Bank, N.A.

Case: 13-50157 Document: 00512913661 Page: 1 Date Filed: 01/23/2015
REVISED JANUARY 23, 2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 13-50157
Fifth Circuit
FILED
January 23, 2015
LAUREN PETERS, Lyle W. Cayce
Clerk
Plaintiff - Appellant
v.
JP MORGAN CHASE BANK, N.A., successor by merger to Chase Home
Finance, L.L.C.,
Defendant - Appellee
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:12-CV-637
Before HIGGINBOTHAM, CLEMENT, and HIGGINSON, Circuit Judges.
PER CURIAM:*
Plaintiff- Appellant Lauren Peters (“Peters”) appeals the district court’s
grant of Defendant-Appellee J.P. Morgan Chase Bank’s (“Chase”) motion to
dismiss. Because the district court erred in holding that Peters did not plead
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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sufficient facts to state a breach of contract claim against Chase, we REVERSE
in part and REMAND.
FACTS AND PROCEEDINGS
A. Factual Background
On or about March 28, 1997, Peters executed a promissory note and
delivered a deed of trust for the residential property located at 6606 Robbie
Creek Cove, Austin, Texas. The deed was for $116,400. Uniform covenant 2
of the deed required Peters to pay property taxes and hazard or property
insurance, among other things, for the property. These payments were to be
held by the lender as “escrow items.” In the event Peters failed to pay, the
lender could pay the amount required to protect the value of the property; these
expenditures would be added to Peters’s debt.
Uniform covenant 4 of the deed stated: “Borrower shall pay all taxes,
assessments, charges, fines and impositions attributable to the Property [as
set forth in covenant 2]” or “Borrower shall pay them on time directly to the
person owed payment.” If Peters did pay taxes directly, she was required to
provide receipts to Chase.
Uniform covenant 5 set forth similar requirements for the payment of
hazard or property insurance. The “Planned Unit Development Rider,”
however, provided that if Peters’s owners’ association maintained an
acceptable hazard insurance policy, then Peters need not send hazard
insurance premiums as required in covenant 2 and would be considered in
compliance with covenant 5.
Peters paid her mortgage payments to Chase and her property tax and
insurance directly until 2009. It is unclear whether Peters provided the
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required receipts to Chase during this time. Without Peters’s knowledge, and
for unclear reasons, beginning in 2002, Chase created an escrow account that
also paid insurance and property taxes for the property. Per the terms of the
deed, Chase first applied Peters’s mortgage payments to the escrow account to
cover insurance and tax costs. The remainder was then applied to the
mortgage obligation. This resulted in double payment of tax and insurance
liabilities and underpayment of Peters’s mortgage obligation.
In 2009 Chase moved to foreclose on the property. Peters investigated
the reason for the foreclosure and discovered the double tax and insurance
payments. Ultimately, Peters entered into a temporary loan modification
agreement and the foreclosure was cancelled.
Peters continued directly paying her taxes and insurance and sending
mortgage premiums to Chase during 2010 and 2011. Chase, however, refused
Peters’s payments due to the “status of account.” Peters asked Chase for an
accounting of her account. Chase did not reply. In May 2012 Peters was again
notified that the property would be foreclosed upon. At this point, Chase sent
Peters an accounting which stated that she owed $50,000. 1
Peters supplemented her pleadings with a “Detailed Transaction
History” showing that she made mortgage payments to Chase from December
10, 2007 to February 10, 2010. She also attached a letter from Chase, dated
December 15, 2010, returning a payment “[d]ue to status of account.” Peters
alleges that Chase refused $21,352.55 in payments. She also filed a letter from
the United Services Automobile Association (USAA) confirming her
homeowner’s insurance for 2007–2009.
1 Peters contests this figure and claims that she owes approximately $31,000, half of
which is related to unpaid payments and half to Chase’s alleged misallocations.
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B. Procedural Background
Peters filed her original complaint in the 345th Judicial District of Travis
County, Texas, on June 4, 2012. Chase filed a notice of removal to federal court
on July 13, 2012, pursuant to 28 U.S.C. §§ 1441, 1446. Chase then filed a
motion to dismiss for failure to state a claim on July 20, 2012. Chase argued
that Peters “[did] not allege any specific cause of action . . . that would allow
for recovery of damages.” Peters responded on August 15 with a motion to
amend the pleadings. The district court, over Chase’s objection, granted
Peters’s motion to amend on August 23, 2012.
Peters’s amended complaint sets forth the facts described above. Peters
alleges several causes of action. Her main argument is that Chase lacked
authority to foreclose because the mortgage was not properly assigned. This
argument, however, is not before the court. 2 Peters also alleges breach of
contract, claiming that Chase “overcharged [her] and has breached its contract
by the force placement of insurance and taxes not permitted by the deed of
trust and note.” Peters makes two other claims: first, that she pleaded a viable
action seeking a declaratory judgment of the amount due on her mortgage
pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. § 2201, et seq.;
and, second, that she pleaded a viable cause of action for an accounting.
Chase moved to dismiss the first amended complaint for failing to state
a plausible claim for relief. Peters responded, in relevant part, that she
sufficiently pleaded a breach of contract claim because the amended complaint
2Peters’s principal argument at the district court was that Chase did not show it was
the owner or holder of the note. Peters admits that this argument is foreclosed by Martins v.
BAC Home Loan Servicing, L.P., 722 F.3d 249 (5th Cir. 2013), and raises it on appeal only to
preserve the argument.
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alleged that Chase misallocated Peters’s payments, which made it appear that
she was not paying her mortgage, which led to the foreclosure. Chase replied
that Peters cannot assert a breach of contract claim when she admits to being
$15,000 in arrears on her payments, in breach of the contract.
On December 17, 2012 the district court granted Chase’s motion to
dismiss. The district court described Peters’s amended complaint as offering
“a slew of causes of action” but only two factual bases: “(1) Chase overstates
Peters’s amount of arrearage, and (2) Chase lacks authority to foreclose . . . .”
The court further stated, “Peters admits she owes over $30,000 to Chase, and
half of that is from missed payments.” The court concluded that because Peters
was in arrears on her note and offered no other “basis in law or equity showing
she is entitled to relief,” Chase was “entitled to foreclose under the Deed of
Trust.” The district court’s opinion, however, principally addressed Peters’s
argument that Chase lacked authority to foreclose, and offered no substantive
analysis of the breach of contract, declaratory judgment, or accounting claims. 3
Peters filed a motion for a new trial and rehearing on January 14, 2013.
In this motion, Peters noted several factual errors made by the court. As to
breach of contract, Peters stated that she did not admit that she is in default,
that she never refused to make payments, and that she offered to tender the
correct amount. The court denied her motion on January 25, 2013. She filed
this timely appeal.
STANDARD OF REVIEW
3 The order categorizes Peters’s claims as “standing,” “authority to foreclose,” “quiet
title,” and “arrearage amount.” There is no explicit mention of Peters’s breach of contract
claim. The district court suggested that it dismissed Peters’s contract claim because “Peters
admits she owes over $30,000 to Chase,” but did not elaborate.
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Dismissal for failure to state a claim is reviewed de novo, accepting all
well-pleaded facts as true and viewing those facts in the light most favorable
to the plaintiff. Bowlby v. City of Aberdeen, 681 F.3d 215, 219 (5th Cir. 2012).
“To survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and
citation omitted). “Factual allegations must be enough to raise a right to relief
above the speculative level, on the assumption that all the allegations in the
complaint are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007) (internal citations and footnote omitted).
DISCUSSION
Peters’s breach of contract claim was sufficiently pleaded to overcome
Chase’s motion to dismiss for failure to state a claim. As a result, Peters’s
cause of action seeking a declaration of the amount due on her mortgage has
also been sufficiently pleaded.
It appears that the district court dismissed Peters’s breach of contract
claim because Peters was in arrears to Chase. R. at 229 (“Peters admits she
owes over $30,000 to Chase”). The district court is correct, as a general
principle, that an individual in breach cannot bring a cause of action for breach
against another contracting party. See, e.g., Sport Supply Group, Inc. v.
Columbia Cas. Co., 335 F.3d 453, 465 (5th Cir. 2003) (holding that, “[u]nder
Texas Law, the elements of a breach of contract claim” include “performance
by the plaintiff”). There are, however, possible exceptions to this rule, which
are sufficiently raised by Peters’s complaint to warrant remanding the case.
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If Chase’s alleged breach—the misapplication of Peters’s payments to an
escrow account, resulting in default—constituted a material breach, then
Peters may not have been required to continue to comply with the contract.
“‘[W]hen one party to a contract commits a material breach of that contract,
the other party is discharged or excused from any obligation to perform.’” X
Technologies, Inc. v. Marvin Test Sys., Inc., 719 F.3d 406, 413 (5th Cir. 2013)
(quoting Hernandez v. Gulf Grp. Lloyds, 875 S.W.2d 691, 692 (Tex. 1994)).
Since Peters alleged that Chase breached what could be considered a material
term, she sufficiently raised the possibility that she was excused from
continuing to pay on the mortgage. 4 Though this court has not directly
addressed these circumstances, in comparable circumstances the Seventh
Circuit reversed the district court’s grant of summary judgment. See Catalan
v. GMAC Mortg. Corp., 629 F.3d 676, 691–92 (7th Cir. 2011).
Similarly, Peters could argue that Chase’s rejection of her mortgage
payments, even if not a material breach, rendered performance impossible and
that, as a result, any subsequent breach does not bar her claim. See, e.g., Miller
v. Baum, 400 F.2d 176, 178 (5th Cir. 1968). Accordingly, we reverse and
remand for further factual development and consideration of Peters’s breach
of contract claim. See Allied Elevator, Inc. v. E. Texas State Bank of Buna, 965
F.2d 34, 38 (5th Cir. 1992) (reversing summary judgment and remanding to
determine if an allegedly breached term—which was not considered by the
district court—was material, excusing plaintiffs from paying the amount due).
4“Whether a breach is material is a question of fact.” X Technologies, Inc., 719 F.3d
at 414. We, therefore, reach no conclusion about whether Chase breached the contract or
whether the allegedly breached term was material.
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That Peters has sufficiently pleaded a breach of contract cause of action
also affects her declaratory judgment and accounting claims. The district court
may have dismissed Peters’s declaratory judgment claim on the grounds that
there was no controversy between the parties because Peters had breached the
deed and thus did not have a “substantial and continuing controversy,” see
Bauer v. Texas, 341 F.3d 352, 358 (5th Cir. 2003) (citations omitted), as
required by 28 U.S.C. § 2201. As discussed above, however, Peters has alleged
that there is a breach of contract claim. This claim can “presently be litigated
and decided” based on the facts before the district court and therefore states a
claim for declaratory judgment. Brown & Root, Inc. v. Big Rock Corp., 383 F.2d
662, 665 (5th Cir. 1967). Further, Chase is incorrect that Peters has not
properly alleged that the available remedy will not redress the injury: Peters
pleaded that she could prevent foreclosure if a declaratory judgment were
issued. R. at 208 (“Plaintiff also stands ready to tender that payment . . . .”).
Lastly, the district court’s dismissal of Peters’s request for an accounting
as a separate equitable cause of action is affirmed. Peters has not shown that
the requested accounting is so “‘complex that adequate relief cannot be
obtained by law.’” Watson v. Citimortgage, Inc., 814 F. Supp. 2d 726, 737 (E.D.
Tex. 2011) (quoting Brown v. Cooley Enters., Inc., No. 3:11–CV–0124–D, 2011
WL 2200605, at *1 (N.D. Tex. June 7, 2011)). But, the district court’s dismissal
of Peters’s accounting claim as a remedy is reversed. The determination of
whether an accounting is an appropriate remedy should be made if Chase is
found to be liable under the breach of contract claim.
CONCLUSION
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For the foregoing reasons, we REVERSE the district court’s dismissal of
Peters’s breach of contract claim and declaratory judgment claim. We
REMAND the case to the district court for further proceedings.
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