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Houston v. Countrywide Bank, Fsb

United States District Court, N.D. Mississippi, Oxford Division

June 10, 2014



MICHAEL P. MILLS, District Judge.

This cause comes before the court on Defendants' Bank of America, N.A. (BANA), Successor by Merger to BAC Home Loans Servicing, LP and Successor by Merger to Countrywide Bank, FSB (Countrywide); Federal National Mortgage Association (Fannie Mae); and ReconTrust Company, N.A. (ReconTrust) (collectively the "Defendants") motion to dismiss [Doc. 5] pursuant Rule 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiffs Herman and Monica Houston (Plaintiffs) have not responded. Upon due consideration of the memoranda and relevant law, the court is now prepared to rule.


On May 9, 2007, Plaintiffs obtained a loan in the principal amount of $51, 000.00 from Countrywide Bank, FSB. The Promissory Note (Promissory Note [A]) was secured by a Deed of Trust (Deed of Trust [A]) for 5.00 acres of a 29.76 acres tract of land located at 242 Old Street Road, Byhalia, Mississippi XXXXX-XXXX. On November 10, 2007, Plaintiffs obtained an additional loan in the principal amount of $363, 050.00 from Countrywide Bank, FSB. This additional Promissory Note (Promissory Note [B]) was secured by a Deed of Trust (Deed of Trust [B]) for the entire 29.76 acres of the same tract of land in Deed of Trust [A]. ReconTrust Company, N.A., was the designated Trustee for Deed of Trust [B] with Countrywide Bank, being the designated Beneficiary. Pursuant to an Assignment of Deed of Trust filed on February 1, 2011, Deed of Trust [B] was assigned from Countrywide Bank to BAC Home Loans Servicing, LP.

Plaintiffs subsequently defaulted on their loan payments under Promissory Note [B]. In December 2011, Plaintiffs received a letter from ReconTrust informing them that a Substituted Trustee's Notice of Sale was scheduled for February 15, 2012. On that date, ReconTrust foreclosed on the entire 29.76 acres tract of land secured by Deed of Trust [B], and executed a Trustee's Deed to Bank of America, N.A., Successor by Merger to BAC Home Loans Servicing, LP. Also on that day, BANA conveyed the property via execution of a Special Warranty Deed to Federal National Mortgage. Fannie Mae ultimately prevailed on an eviction proceeding against the borrowers, and Plaintiffs were locked out of the property on April 3, 2014.

On April 1, 2014, Plaintiffs brought this suit against the Defendants. Although Plaintiffs' complaint fails to provide individual counts, a liberal reading of the complaint suggests claims for reformation of Deed of Trust [B], fraudulent misrepresentation, and negligent misrepresentation. Plaintiffs ask for relief in the form of an injunction staying their removal from the property by Fannie Mae until the case is decided on its merits and a declaratory judgment setting aside the foreclosure sale and Special Warranty Deed to Fannie Mae and BANA along with any other subsequent deeds.

I. Motion to Dismiss Standard

When considering a motion to dismiss under Rule 12(b)(6), courts accept as true all wellpleaded facts in the complaint, and those facts are viewed in the light most favorable to the plaintiff. Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982). However, courts do not accept conclusory allegations as true. Id. For a complaint to be viable, it must contain "sufficient factual matter" to make the claim facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "A formulaic recitation of the elements of a cause of action" is insufficient. Id. (citations omitted). Courts are generally reluctant to grant a motion to dismiss for failure to state a claim, so such motions are only granted when the "plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Kaiser, 677 F.2d at 1050. Further, the Fifth Circuit has "approached the automatic grant of a dispositive motion, such as a grant of summary judgment based solely on a litigant's failure to respond, with considerable aversion, " and it has "permitted such dismissals only when there is a record of extreme delay or contumacious conduct." See Luera v. Kleberg Cnty. Tex., 460 F.App'x 447, 449 (5th Cir. 2012).


A. Reformation Claim.

Plaintiffs contend that it was their intent for the same 5.00 acres of land which secured Deed of Trust [A] to also be the security for Deed of Trust [B]. In support, Plaintiffs aver that it was only upon foreclosure that they discovered the entire 29.76 acres tract of land was the security for Deed of Trust [B]. As such, Plaintiffs request that the court reform and modify Deed of Trust [B] to reflect the aforementioned 5.00 acres as security and that the County Clerk be directed to enter the judgment in the land records to reflect the reformation.

In Mississippi, a person is charged with knowing the contents of any document that he executes. Andrus v. Ellis, 887 So.2d 175, 180 (Miss. 2004). However, "a valid contract may be reformed in some instances where a mistake has been made." Ivison v. Ivison, 762, So.2d 329, 335 (Miss. 2000). Reformation of a contract is justified under the following circumstances:

[W]hen (a) the erroneous part of the contract is shown to have occurred by a mutual mistake, i.e., the party seeking relief is able to establish to the court's satisfaction that both parties intended something other than what is reflected in the instrument in question, or (b) the error has arisen by the unilateral mistake of one party and that mistake is accompanied by evidence of some sort of fraud, deception, or other bad faith activity by the other party that prevented or hindered the mistaken party in the timely discovery of the mistake.

Brown v. Chapman, 809 So.2d 772, 774 (Miss. Ct. App. 2002) (citing McCoy v. McCoy, 611 So.2d 957, 961 (Miss. 1992)). However, "[t]he mistake that will justify a reformation must be in the drafting of the instrument, not the making of the contract." Ivison, at 335-36 (internal citations omitted). Further, "[h]e who comes into equity must come with clean hands.... [W]henever a party, who, as actor, seeks to set the judicial machinery in motion and obtain some remedy, has violated conscience, or good faith, or other equitable principle, in his prior conduct, then... the court will refuse to interfere on his ...

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