Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—SDTex: Mortgagee Seeking Loan Modification Not a “Consumer” Under Texas Deceptive Trade Practices Act, (Nov 30, 2012)

By Tobias J. Gillett, J.D., LLM.

A mortgagee cannot bring a Texas Deceptive Trade Practices Act (DTPA) claim against a mortgage loan provider over a loan modification because a person seeking a loan modification does not qualify as a “consumer” under the DTPA, the federal district court in Houston has ruled (Brush v. Wells Fargo Bank, N.A., November 29, 2012, Rosenthal, L.).

In August 2007, Ronald Struble took out a loan from Profolio Home Mortgage Corporation to buy a home, and in 2008 Wells Fargo became owner and servicer of the loan. When he fell ill, his daughter, Kristina Lee Struble Brush, and her husband, Vernon Brush, moved into the house to take care of him. When he died intestate, his daughter inherited the house subject to the mortgage. However, prior to his death, Ronald Struble had fallen behind on his payments. A series of communications between Wells Fargo and the Strubles ensued, during which, the Strubles claimed, Wells Fargo agreed to modify the loan. However, Wells Fargo then attempted to foreclose. The Strubles sued, asserting a range of common law and state law claims against Wells Fargo, including one under the TDPA, and Wells Fargo moved for summary judgment.

A claim under the DTPA has three elements: “(1) the plaintiff is a consumer, (2) the defendant engaged in false, misleading, or deceptive acts, and (3) these acts constituted a producing cause of the consumer’s damages.” The DTPA defines a “consumer” as “an individual . . . who seeks or acquires by purchase or lease, any goods or services,” while the Texas Debt Collection Act defines a “consumer” as “an individual who has . . . an obligation, or an alleged obligation, primarily for personal, family, or household purposes and arising from a transaction or alleged transaction.” The DTPA also contains a tie-in provision that renders violations of certain other laws, including the TDCA, a deceptive act for purposes of the DTPA.

The Strubles alleged that since they met the definition of a “consumer” under the TDCA, they also qualified as consumers under the TDPA. The court disagreed, noting that “[a]lthough the DTPA’s text distinguishes the type of damages that plaintiffs bringing claims through tie-in statutes may recover, it does not exempt those claimants from proving consumer status.” The court found no evidence that the Brushes had “acquire[d] by purchase or lease, any goods or services.” The court cited Texas federal court case precedent for the proposition that a claim arising solely from a mortgage loan transaction did not satisfy the “goods or services” element of the DTPA. Therefore, the court found the Brushes did not fulfill all of the elements of a DTPA claim, and granted summary judgment to Well Fargo on that claim.

The court also granted Wells Fargo’s motion with respect to two of the Brushes’ contract claims, a promissory estoppel claim, a claim under the Fair Debt Collection Practices Act, and certain claims under the TDCA. However, it denied the motion with respect to one contract claim and certain other TDCA claims.

The case is Civil Action No. H-10-5016.

Reese W. Baker (Baker Assoc.) for Kristina Lee Struble Brush. George Anthony Kurisky, Jr. (Johnson DeLuca et al) for Wells Fargo Bank, N.A.

Cases: StateUnfairTradePractices TexasNews