Case: 13-41015 Document: 00512652890 Page: 1 Date Filed: 06/04/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 13-41015 June 4, 2014
Lyle W. Cayce
JANICE JOHNSON, Clerk
Plaintiff – Appellant,
v.
JP MORGAN CHASE BANK, Successor By Merger to Chase Home Finance,
L.L.C.,
Defendant – Appellee.
Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 4:12-CV-285
Before DAVIS, ELROD, and COSTA, Circuit Judges.
PER CURIAM:*
Appellant Janice Johnson filed suit against JP Morgan Chase Bank (JP
Morgan) alleging breach of contract and violations of Texas Debt Collection Act
(TDCA) in connection with JP Morgan’s attempt to foreclose on Johnson’s
home. The district court granted summary judgment in favor of JP Morgan,
and Johnson appealed. We AFFIRM.
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
Case: 13-41015 Document: 00512652890 Page: 2 Date Filed: 06/04/2014
No. 13-41015
I.
Johnson obtained a loan to purchase the property located at 5617 Norris
Drive, The Colony, Texas 75056 (Property) on November 21, 2001, from Crest
Mortgage Company (Crest). The mortgage note was secured by a deed of trust
and was assigned to Washington Mutual (WaMu). The note and deed of trust
expressly provided that acceleration and foreclosure on Johnson’s loan were
subject to any limitations created by Housing and Urban Development (HUD)
regulations.
In 2002, Johnson was laid off from work and fell behind on her mortgage
payments. She ultimately filed for bankruptcy in 2003. In April 2006, Johnson
sent WaMu a payment, which WaMu rejected as insufficient to reinstate the
loan. WaMu then began foreclosure proceedings against the Property. In
response, Johnson filed a lawsuit against WaMu in state court. The suit was
stayed when WaMu went into receivership.
On March 7, 2012, MERS, as nominee for Crest, assigned “all rights
accrued and to accrue under the loan agreement” to JP Morgan. Under the
terms of the purchase and assumption agreement between JP Morgan and the
FDIC, JP Morgan explicitly did not assume liability for any borrower claims
arising from WaMu’s “lending or loan purchase activities.” On April 4, 2012,
JP Morgan sent Johnson notice that it would post the Property for a foreclosure
sale on May 1, 2012.
Johnson then filed suit in this case, and JP Morgan removed to federal
court. Johnson asserted that JP Morgan never sent her a notice of its intent
to accelerate, or gave her an opportunity to cure any alleged default. On
January 11, 2013, JP Morgan filed a motion for summary judgment. The
magistrate judge issued a report and recommendation that summary judgment
be granted, which was adopted by the district court. Johnson filed a motion to
reconsider, which was denied, and then appealed.
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II.
Johnson argues JP Morgan breached the loan contract by failing to
conduct a face-to-face meeting with her and failing to inform her of her
assistance options before proceeding with foreclosure. Johnson argues that JP
Morgan was required to take these actions because HUD regulation 24 C.F.R.
§ 203.604(b) was incorporated into the loan contract. 1 See Hernandez v. Home
Sav. Assoc. of Dall., 606 F.2d 596, 601 (5th Cir. 1979) (stating that HUD
regulations incorporated into mortgage documents become part of the
contract). However, the district court correctly determined that § 203.604(b)
is inapplicable to JP Morgan because Johnson was already more than three
months in default when JP Morgan acquired the loan.
Section 203.604(b) provides: “The mortgagee must have a face-to-face
interview with the mortgagor, or make a reasonable effort to arrange such a
meeting, before three full monthly installments due on the mortgage are
unpaid.” Id. The plain language of the regulation requires the face-to-face
meeting before three installments are unpaid. Johnson admits that she was
already more than three months behind when the loan was assigned to JP
Morgan. As a result, the timing of this particular obligation had already
passed when JP Morgan received the loan, and thus the obligation did not
1 In the proceedings below, Johnson also alleged that JP Morgan violated HUD
regulation § 203.606. In response, the district court concluded that this “violation was raised
for the first time in the objections and should not be considered by the court.”
Johnson has waived her § 203.606 claim by failing to brief it on appeal. See Adams v.
Unione Mediterranea Di Sicurta, 364 F.3d 646, 653 (5th Cir. 2004) (citations omitted). Even
if she had not waived this claim, the district court did not abuse its discretion in disregarding
this claim as it was not specifically raised in Johnson’s complaint. See Ashcroft v. Iqbal, 556
U.S. 662, 698–99 (2009); De Franceschi v. BAC Home Loans Servicing, L.P., 477 F. App’x 200,
204 (5th Cir. 2012) (unpublished but persuasive) (citing Cutrera v. Bd. of Supervisors of La.
State Univ., 429 F.3d 108, 113 (5th Cir. 2005)).
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apply to JP Morgan. 2 Because JP Morgan did not assume any of WaMu’s
liabilities, JP Morgan cannot be held responsible for WaMu’s alleged failure to
comply with § 203.604(b). Johnson’s breach of contract claim thus fails.
III.
Johnson next argues that JP Morgan violated § 392.301(a)(8), which
prohibits a debt collector from “threatening to take an action prohibited by
law.” Tex. Fin. Code Ann. § 392.301(a)(8). Johnson asserts that JP Morgan
did so by violating the HUD regulations, and seeks to recover for her loss of
creditworthiness and the stigma of foreclosure; mental anguish and acute
psychological trauma; and the value of the time lost attempting to correct JP
Morgan’s errors.
The magistrate judge determined that the economic loss rule precluded
Johnson’s TDCA claim because it was based exclusively on JP Morgan’s alleged
violations of the note and deed of trust. The magistrate judge further noted
that Texas courts do not ordinarily permit the recovery of mental anguish
damages arising from the breach of contractual duties, and found that Johnson
failed to “create a fact issue that she incurred the sort of severe mental harm
that would entitle her to mental anguish damages.” The district court adopted
the magistrate judge’s recommendation and granted summary judgment in
favor of JP Morgan on this claim, holding that the economic loss rule barred
Johnson’s claims, and that Johnson “cannot offer any evidence that [JP
Morgan] threatened any action prohibited by law.” The district court also
2 Without explanation or argument, Johnson also cites 24 C.F.R. § 203.605, which
requires the mortgagor to perform loss mitigation “[b]efore four full monthly installments
due on the mortgage have become unpaid.” Even assuming arguendo that Johnson has not
waived this argument by failing to adequately brief it on appeal, this regulation is similarly
inapplicable here because Johnson was more than four months behind in her payments at
the time that JP Morgan acquired her loan.
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agreed with the magistrate judge that Johnson had not created a fact issue
regarding her alleged mental anguish damages.
Johnson argues that the economic loss rule did not bar her claim for
mental anguish damages. We need not address the question of whether
Johnson’s claim for mental anguish damages is barred because Johnson has
failed to create a fact issue demonstrating that JP Morgan has violated or
threatened to violate any HUD regulation at issue in this case. See Thompson
v. Ga. Pac. Corp., 993 F.2d 1166, 1167–68 (5th Cir. 1993) (holding that
summary judgment may be affirmed on any grounds supported by the record).
As we stated above, JP Morgan did not violate § 203.604(b) of the HUD
regulations because this provision did not apply to JP Morgan. In her briefing
before this court, Johnson has not demonstrated how JP Morgan has violated
any other HUD regulation or otherwise “threaten[ed] to take an action
prohibited by law.” Accordingly, we AFFIRM the district court.
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