Zaida Villarreal v. Wells Fargo Bank, N.A.

Case: 15-40243 Document: 00513397338 Page: 1 Date Filed: 02/26/2016

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 15-40243 FILED
February 26, 2016
Lyle W. Cayce
Clerk
ZAIDA VILLARREAL,

Plaintiff–Appellant,

versus

WELLS FARGO BANK, N.A.,

Defendant–Appellee.

Appeal from the United States District Court
for the Southern District of Texas

Before JONES and SMITH, Circuit Judges, and FITZWATER, District Judge.*
JERRY E. SMITH, Circuit Judge:

Zaida Villarreal appeals the dismissal of her claims for breach of con-
tract, negligence, wrongful foreclosure, and violations of the Texas Deceptive
Trade Practices Act (“DTPA”). She also challenges the denial of her motion to
join a non-diverse defendant. The district court committed no error, and we
affirm.

* District Judge of the Northern District of Texas, sitting by designation.
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No. 15-40243
I.
Villarreal’s ex-husband, Oscar Ballesteros, borrowed $188,000 with a
promissory note from Wells Fargo Bank, N.A. (“Wells Fargo”), in March 2007
to purchase a residence at 201 Bales Road. The obligation was secured by a
deed of trust (“DOT”) that required payment of monthly mortgage installments
and property insurance and taxes; it authorized Wells Fargo to foreclose upon
default. Further, the DOT specified that Wells Fargo would send all notices to
the Bales Road address unless notified by first-class mail to send them else-
where. Villarreal signed the DOT but not the note.

Villarreal and Ballesteros were in divorce proceedings when they
defaulted on the note and DOT; Villarreal was awarded legal possession of the
house in August 2011, shortly after the default. Villarreal then became the
sole obligor. She cured the default in late 2011 but was $7,386.61 in default
by May 2013. Wells Fargo sent statutorily required notices of default, intent
to accelerate, and acceleration to the Bales residence and Ballesteros’s
mother’s residence. Villarreal did not cure the default, so Wells Fargo fore-
closed in July 2013.

Villarreal sued Wells Fargo and a local employee in Texas state court for
breach of contract, negligence, wrongful foreclosure, and violations of the
DTPA. Wells Fargo removed to federal court, contending that the local
employee had been fraudulently joined to defeat diversity jurisdiction, then
moved to dismiss Villarreal’s claims. Villarreal voluntarily dismissed the
employee and moved to amend to expand on her substantive claims against
Wells Fargo and to add a claim against Ballesteros for intentional infliction of
emotional distress (“IIED”). The district court denied amendment on the
ground that it would be futile and denied the motion to join Ballesteros.

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No. 15-40243
II.
We generally review for abuse of discretion the denial of a motion to
amend. Crostley v. Lamar Cty., Tex., 717 F.3d 410, 420 (5th Cir. 2013). A
district court may deny a proposed amendment for futility—meaning the
amended complaint would fail to state a claim upon which relief could be
granted. Stripling v. Jordan Prod. Co., LLC, 234 F.3d 863, 872–73 (5th Cir.
2000). We treat the denial of a motion to amend on such basis as we treat a
dismissal under Federal Rule of Civil Procedure 12(b)(6) and review it de novo.
Id. at 873; Taylor v. Books A Million, Inc., 296 F.3d 376, 378 (5th Cir. 2002).

When reviewing a dismissal under Rule 12(b)(6), we must “accept[] as
true the well-pled factual allegations in the complaint, and construe[] them in
the light most favorable to the plaintiff.” Taylor, 296 F.3d at 378. Dismissal
is proper “when a plaintiff fails to allege any set of facts in support of his claim
which would entitle him to relief,” id., or “if the complaint lacks an allegation
regarding a required element necessary to obtain relief.” 1

A district court is limited to considering the contents of the pleadings
and the attachments thereto when deciding a motion to dismiss under
Rule 12(b)(6). FED. R. CIV. P. 12(b)(6); Collins v. Morgan Stanley Dean Witter,
224 F.3d 496, 498 (5th Cir. 2000). The court may, however, also consider “[d]oc-
uments that a defendant attaches to a motion to dismiss . . . if they are referred
to in the plaintiff’s complaint and are central to her claim.” Collins, 224 F.3d
at 498–99 (alteration in original) (quoting Venture Assocs. Corp. v. Zenith Data
Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993)).

Finally, we review for abuse of discretion the district court’s decision

1 Torch Liquidating Trust ex rel. Bridge Assocs. L.L.C. v. Stockstill, 561 F.3d 377, 384
(5th Cir. 2009) (quoting Campbell v. City of San Antonio, 43 F.3d 973, 975 (5th Cir. 1995)).
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No. 15-40243
whether to allow joinder of a non-diverse, non-indispensible party. Priester v.
JP Morgan Chase Bank, N.A., 708 F.3d 667, 672, 679 (5th Cir. 2013). “A dis-
trict court abuses its discretion if it: (1) relies on clearly erroneous factual find-
ings; (2) relies on erroneous conclusions of law; or (3) misapplies the law to the
facts.” Id. at 672 (quoting In re Volkswagen of Am., Inc., 545 F.3d 304, 310 (5th
Cir. 2008) (en banc)).

A.
Under Texas law, a plaintiff alleging a breach of contract must show
“(1) the existence of a valid contract; (2) performance or tendered performance
by the plaintiff; (3) breach of the contract by the defendant; and (4) damages to
the plaintiff resulting from that breach.” Wright v. Christian & Smith,
950 S.W.2d 411, 412 (Tex. App.—Houston [1st Dist.] 1997, no writ). Villarreal
urged that Wells Fargo breached its contract by failing to send notices to her
new residence at 100 East Yuma Avenue and to make automatic withdrawals
from her checking account for mortgage payments. But a plaintiff must allege
her own performance, because “a party to a contract who is [herself] in default
cannot maintain a suit for its breach.” Dobbins v. Redden, 785 S.W.2d 377,
378 (Tex. 1990).

At no point did Villarreal plead facts supporting the second element of
her breach-of-contract claim—that she performed under the contracts. In fact,
the notices that Wells Fargo sent to the Bales residence—and attached to its
motion to dismiss—revealed that Villarreal was in default by over $7,300.
Because Villarreal failed to allege any facts showing her own performance and
did not refute the facts in documents referred to in her complaint, central to
her claims, and attached to the motion to dismiss, the dismissal of the breach-
of-contract claim was proper.

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B.
Under Texas law, a negligence claim “has three elements: 1) a legal duty;
2) breach of that duty; and 3) damages proximately resulting from the breach.”
Van Horn v. Chambers, 970 S.W.2d 542, 544 (Tex. 1998). Contractual relation-
ships may create duties under contract and tort law, but “if the defendant’s
conduct . . . would give rise to liability only because it breaches the parties’
agreement, the plaintiff’s claim ordinarily sounds only in contract.” 2

Villarreal’s negligence claim relies on the same conduct that gave rise to
her breach-of-contract claim. She alleges Wells Fargo negligently failed to
make automatic withdrawals from her checking account to pay her mortgage
and negligently failed to send statutorily required notices to the Yuma resi-
dence. She never, however, asserts that either of those duties would exist but
for the contract between her and Wells Fargo. Thus, any damages stemming
from an alleged violation of those solely contractual duties are not redressable
in tort, so the dismissal of the negligence claim was proper.

C.
A wrongful-foreclosure claim under Texas law has three elements: “(i) ‘a
defect in the foreclosure sale proceedings’; (ii) ‘a grossly inadequate selling
price’; and (iii) ‘a causal connection between the defect and the grossly inade-
quate selling price.’” 3 The plaintiff must allege a grossly inadequate selling
price in “all but a specific category of cases” where the plaintiff alleges that the

2Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494 (Tex. 1991); Ortega v. City Nat’l
Bank, 97 S.W.3d 765, 777 (Tex. App.—Corpus Christi 2003, no pet.) (“Where the only duty
between parties arises from a contract, a breach of this duty will ordinarily sound only in
contract, not in tort.”).
3 Miller v. BAC Home Loans Servicing, L.P., 726 F.3d 717, 726 (5th Cir. 2013) (quoting
Sauceda v. GMAC Mortg. Corp., 268 S.W.3d 135, 139 (Tex. App.—Corpus Christi 2008,
no pet.)).
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No. 15-40243
defendant deliberately chilled the bidding at the foreclosure sale. 4

Villarreal alleges that Wells Fargo’s failure to send the statutorily
required notices to the Yuma residence was the relevant defect in the fore-
closure proceedings. She never alleges, however, that Wells Fargo disposed of
the house at a “grossly inadequate selling price,” nor does she allege that Wells
Fargo fraudulently chilled the bidding at the foreclosure sale. Thus, the
wrongful-foreclosure claim was properly dismissed. 5

D.
A claim under the DTPA has three elements: “(1) the plaintiff is a con-
sumer, (2) the defendant engaged in false, misleading, or deceptive acts, and
(3) these acts constituted a producing cause of the consumer’s damages.” Doe
v. Boys Clubs of Greater Dall., Inc., 907 S.W.2d 472, 478 (Tex. 1995) (citing
TEX. BUS. & COM. CODE § 17.50(a)(1)). To qualify as a consumer, the plaintiff
“must have sought or acquired goods or services by purchase or lease,” and
those “goods or services . . . must form the basis of the complaint.” Melody
Home Mfg. Co. v. Barnes, 741 S.W.2d 349, 351–52 (Tex. 1987). “[T]he key
principle in determining consumer status is that the goods or services
purchased must be an objective of the transaction, not merely incidental to it.” 6

In Maginn, the court refused to find that the plaintiff was a consumer

4Guajardo v. JP Morgan Chase Bank, N.A., 605 F. App’x 240, 245 (5th Cir. 2015) (per
curiam) (citing Miller, 726 F.3d at 727); see also Martins v. BAC Home Loans Servicing, L.P.,
722 F.3d 249, 256 (5th Cir. 2013); Campbell v. Bravo Credit, 2015 WL 502234, at *4 (S.D.
Tex. Feb. 5, 2015); Charter Nat’l Bank—Hous. v. Stevens, 781 S.W.2d 368, 371 (Tex. App.—
Houston [14th Dist.] 1989, writ denied).
5 See Miller, 726 F.3d at 727 (“Because the [chilled-bidding] exception does not apply,
and because the Millers do not dispute their failure to have alleged a grossly inadequate
selling price, we affirm the district court’s dismissal of their wrongful foreclosure claims.”).
6 Maginn v. Norwest Mortg., Inc., 919 S.W.2d 164, 166 (Tex. App.—Austin 1996, no
writ) (quoting First State Bank v. Keilman, 851 S.W.2d 914, 929 (Tex. App.—Austin 1993,
writ denied)).
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No. 15-40243
when he sought credit checks and mortgage-closing assistance (“ancillary
banking services”) that were “typically incidental to the loan itself” and that
“served no purpose apart from facilitating [the] mortgage loan.” Id. at 166–67.
Villarreal bases her DTPA claims on Wells Fargo’s failure to make automatic
withdrawals to pay the loan. Those “services” cannot form the basis of a DTPA
claim because they are “incidental to the loan” and would “serve[] no purpose
apart from facilitating [the] mortgage loan.” Id. Thus, the dismissal of the
DTPA claim was proper.

III.
“The district court, when confronted with an amendment to add a
nondiverse nonindispensible party, should use its discretion in deciding
whether to allow that party to be added.” Hensgens v. Deere & Co., 833 F.2d
1179, 1182 (5th Cir. 1987). The court should “scrutinize that amendment more
closely than an ordinary amendment” and “consider a number of factors to
balance the defendant’s interests in maintaining the federal forum with the
competing interests of not having parallel lawsuits.” Id. “[T]he court should
consider the extent to which the purpose of the amendment is to defeat federal
jurisdiction, whether plaintiff has been dilatory in asking for amendment,
whether plaintiff will be significantly injured if amendment is not allowed, and
any other factors bearing on the equities.” Id.

The district court concluded that Villarreal’s purpose was to defeat diver-
sity jurisdiction because she sought to add Ballesteros only after she had vol-
untarily dismissed her claims against Wells Fargo’s local employee. Addition-
ally, the court considered that Villarreal knew of any claims she may have had
against Ballesteros long before she sought to join him. The court found that
Villarreal had been dilatory because more than two months passed between
the filing of her original complaint and her attempt to join Ballesteros, against

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No. 15-40243
whom she would have known she had an IIED claim at least as early as when
she filed her complaint. 7 The court concluded that Villarreal would not be sig-
nificantly injured because she could pursue her unrelated IIED claim against
Ballesteros in state court, and she did not challenge that finding. Finally, the
court noted that interactions between Villarreal and Ballesteros may still be
governed by their existing divorce decree. In short, “[t]he court [] applied the
correct legal standard, and its findings of fact were not clearly erroneous[, and
so i]t did not abuse its discretion . . . .” Priester, 708 F.3d at 679.

AFFIRMED.

7 See Gallegos v. Safeco Ins. Co. of Ind., 2009 WL 4730570, at *4 (S.D. Tex. Dec. 7,
2009) (listing additional cases in which courts found two-month delay to be dilatory).
8