4:25-cv-02639•Sutton v. Chung et al
Gesamter Gesetzestext
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION Ann Sutton, Plaintiff, v. John Chung and Idaho Housing & Finance Association, Defendants. § § § § § § § § Civil Action H-25-2639 MEMORANDUM AND RECOMMENDATION This case has been referred to the undersigned magistrate judge pursuant to 28 U.S.C. § 636(b)(1). ECF No. 19. Pending before the court are Defendants’ Motion to Dismiss, Plaintiff’s Motion for a Preliminary Injunction, Plaintiff’s Motion to Compel Supplemental Rule 7.1 Disclosure, and Plaintiff’s Motion for Judicial Notice of Public SEC Filings. The court recommends that Defendants’ Motion to Dismiss, ECF No. 32, be GRANTED, and that Plaintiff’s Motion for a Preliminary Injunction, ECF No. 17, be DENIED. Plaintiff’s Motion to Compel Supplemental Rule 7.1 Disclosure, and Motion for Judicial Notice of Public SEC Filings, ECF Nos. 23 and 24, are DENIED as MOOT. 1. Background Plaintiff Ann Sutton, proceeding pro se, alleges multiple claims related to the pending foreclosure on her home at 15700 Del Norte Drive, Conroe, Texas 77306 (the property). See First Am. Compl., ECF No. 15 at 4. Sutton filed suit in this court on June 6, 2025. ECF No. 1. Sutton attached thirteen exhibits to her Original Complaint, which she incorporated into her Amended Complaint along with two additional exhibits. ECF Nos. 7, 15, 18. Sutton states that Exhibit 1 attached to her Complaint is the promissory note she executed when she purchased her residence (the Note). United States District Court Southern District of Texas ENTERED February 10, 2026 Nathan Ochsner, Clerk Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 1 of 19
2 ECF No. 1 at 6. The attachment, however, appears to include only page one of two of the Note, as well as pages one and two of ten of the Deed of Trust that she executed when she purchased her home (the Deed of Trust). ECF No. 7 at 3–5. In its response, IHFA attached full copies of both the Note and the Deed of Trust. See ECF Nos. 32-1 and 32-2. As will be discussed later, the court will consider in its analysis the documents IHFA attached to its response. Thus, the following facts are taken from Sutton’s Amended Complaint, Sutton’s exhibits, and IHFA’s attachments. In April 2021, Sutton obtained a loan and executed the Note in the amount of approximately $215,023. ECF No. 15 at 4. The Note was secured by a lien on the property, described in the Deed of Trust. Id. The lender named in the Note was Inspire Home Loans, Inc. Sutton alleges that, shortly after the loan’s origination, it was transferred to Defendant Idaho Housing & Finance Association d/b/a HomeLoanServ (IHFA). Id. Sutton alleges that she was not properly informed of the transfer. Id. Sutton also alleges that the “loan was further securitized or transferred into a trust governed by a Pooling and Servicing Agreement (PSA)— again without any notice to Plaintiff.” Id. Between April and August 2024, Sutton sent multiple requests to IHFA, including a “Revocation of Power of Attorney” and various requests for information, which she refers to as “Qualified Written Requests and Debit Validation Requests” seeking all manner of information, including evidence of IHFA’s legal authority to collect or enforce the loan and production of the original Note bearing a wet signature. ECF No. 15 at 4. Sutton alleges that IHFA failed to provide a valid assignment of the Deed of Trust, a certified copy of the original promissory Note with proper endorsements, the name and contact information of the current creditor, and documentation showing compliance with the applicable PSA. Id. at 5. Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 2 of 19
3 Attached as Exhibit 9 to Sutton’s Amended Complaint is a letter from HomeLoanServ to Sutton dated July 18, 2024. ECF No. 7 at 33–36. The letter contradicts many of Sutton’s own allegations. The letter shows the loan number, and states that it is a response to a request received on July 11, 2024. The letter states that HomeLoanServ is a department of Idaho Housing & Finance Association and is acting as servicer of the mortgage. Id. at 34. The letter includes HomeLoanServ’s email address, mailing address, and a phone number for Sutton to call with any questions. Id. In answer to Sutton’s query about whether IHFA had possession of the original promissory note, the letter states that “HomeLoanServ has the original Promissory Note.” Id. The letter further states that “HomeLoanServ is the Note Holder of [Sutton’s] loan.” Id. HomeLoanServ explained in the letter that Sutton’s obligation under the note had not been discharged and that her loan was in foreclosure due to default. Id. Attached to the letter was a copy of the original Note. Id. at 35–36. The letter encouraged Sutton to call to “discuss possible mitigation options that may be available for your loan to avoid a foreclosure sale.” Id. at 34. Exhibit 10 to Sutton’s Amended Complaint is a document titled Assignment of Deed of Trust. ECF No. 7 at 37. The document shows that on July 18, 2024, MERS, as beneficiary under the Deed of Trust, as well as nominee for Inspire Home Loans, Inc., assigned its interest in the Deed of Trust to IHFA. Id. The second page of the exhibit shows that the assignment was recorded in the Montgomery County property records on July 24, 2024. Id. at 38. IHFA initiated foreclosure proceedings. ECF No. 15 at 5. Sutton does not allege when that took place, but it appears from the context of the letter attached as Exhibit 9 that IHFA had not yet begun the foreclosure process as of July 18, 2024, the date of the letter. ECF No. 7 at 34 (encouraging Sutton to contact HomeLoanServ to “avoid a foreclosure sale”). According to Sutton, Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 3 of 19
4 IHFA does not now, and did not at the time of the initial attempted foreclosure, have proof of its standing or legal authority to foreclose. Id. Sutton filed suit in this court on June 6, 2025. ECF No. 1. Her Amended Complaint, the live pleading in the case, alleges causes of action for improper servicing and foreclosure without standing; violations of the Real Estate Settlement Procedures Act (RESPA), the Fair Debt Collection Practices Act (FDCPA), the Texas Property Code, the Truth in Lending Act (TILA), the Texas Business and Commerce Code, and the Fair Credit Reporting Act (FCRA); fraud and fraud in the factum; and unjust enrichment. ECF No. 15 at 6–15. Sutton seeks declaratory, injunctive, and monetary relief. Id. at 13–17. Sutton asserts her claims against IHFA and John Chung, who is the Chief Financial Officer of IHFA. The court refers to Chung and IHFA together as IHFA. IHFA has moved to dismiss all of Sutton’s claims for failure to state a claim. ECF No. 32. Sutton did not respond to the pending motion, but the court considers in its analysis her response to IHFA’s prior motion to dismiss, ECF No. 20. 2. Legal Standards Rule 12(b)(6) authorizes the court to dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). Under Rule 12(b)(6), the court determines whether the plaintiff’s complaint contains “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Calogero v. Shows, Cali & Walsh, L.L.P., 970 F.3d 576, 580 (5th Cir. 2020) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 4 of 19
5 possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678. Courts accept “all well-pleaded facts as true” and “view[] them in the light most favorable to the plaintiff.” Allen v. Walmart Stores, L.L.C., 907 F.3d 170, 177 (5th Cir. 2018) (quoting Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999)). “A plaintiff need only plausibly allege facts going to the ultimate elements of the claim to survive a motion to dismiss.” Cicalese v. Univ. of Tex. Med. Branch, 924 F.3d 762, 768 (5th Cir. 2019). “Factual allegations must be enough to raise a right to relief above the speculative level . . . on the assumption that all allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555. “[A] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable[.]” Id. at 556. Only statements of fact are to be taken as true. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. Conclusory allegations are “disentitled . . . to the presumption of truth.” Iqbal, 566 U.S. at 681. Thus, the court, in reviewing the plaintiff’s complaint, may neither “accept conclusory allegations” nor “strain to find inferences favorable to the plaintiffs.” Southland Sec. Corp. v. INSpire Ins. Sols., Inc., 365 F.3d 353, 361 (5th Cir. 2004). The court liberally construes pro se pleadings. Erickson v. Pardus, 551 U.S. 89, 94 (2007). When a plaintiff’s complaint fails to state a claim, the court should generally give the plaintiff a chance to amend the complaint under Rule 15(a) before dismissing the action with prejudice, unless doing so would be futile. See Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 329 (5th Cir. 2002); see also Ayers v. Johnson, 247 F. App’x 534, 535 (5th Cir. 2007) (“[A] district court acts within its Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 5 of 19
6 discretion when dismissing a motion to amend that is frivolous or futile.”). 3. Analysis To determine whether a claim survives a Rule 12(b)(6) motion to dismiss, the court’s inquiry is usually limited to “(1) the facts set forth in the complaint, (2) documents attached to the complaint, and (3) matters of which judicial notice may be taken under Federal Rule of Evidence 201.” De Leon v. Munoz, No. 24- 40215, 2025 WL 957500, at *7 (5th Cir. Mar. 31, 2025). Documents that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the complaint and if they are central to plaintiff’s claim. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498–99 (5th Cir. 2000); De Leon, 2025 WL 957500, at *7. Sutton attached portions of the Note and Deed of Trust to her Original Complaint. ECF No. 7. Sutton incorporates those exhibits into her Amended Complaint. ECF No. 15 at 20. As mentioned, IHFA attached full copies of the Note and Deed of Trust to its Amended Motion to Dismiss. Because the Note and Deed of Trust are both referred to and are central to Sutton’s claims, the court considers the full versions of those documents as submitted by IHFA. A. Standing to Foreclose Before turning to each specific cause of action Sutton alleges in her Amended Complaint, the court will address an issue that Sutton raises throughout her pleadings—whether IHFA has standing to foreclose on Sutton’s property. Sutton bakes into all of her causes of action the notion that IHFA lacks standing. This argument is based on a misunderstanding of Texas law. The Fifth Circuit has addressed and rejected Sutton’s arguments in Martins v. BAC Home Loans Servicing, L.P., 722 Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 6 of 19
7 F.3d 249, 253 (5th Cir. 2013). There, Plaintiff presented an argument “conflating ownership of a note with constitutional standing.” Martins, 722 F.3d at 252–53. Plaintiff also argued that the servicer could not foreclose on her home mortgage loan because (1) the assignment was defective, and (2) even if it was a valid assignment of the mortgage, the servicer was only assigned the mortgage, and not the promissory note. Id. at 252–56. The Fifth Circuit found that Plaintiff’s argument merged two common theories on which mortgagees in wrongful-foreclosure cases often attempt to rely: the “show-me-the-note”1 theory and the “split-the-note” theory. Martins, 722 F.3d at 253. The show-me- the-note theory “posits that to foreclose, a party must produce the original note bearing a ‘wet ink signature.’” Id. The split-the-note theory is that the foreclosing “party must hold both the note and the deed of trust.” Id. at 254. The court rejected both theories. It held that in Texas, “[t]he original, signed note need not be produced in order to foreclose.” Martins, 722 F.3d at 254. Additionally, it held that “where the foreclosing party is a mortgage servicer, and the mortgage has been properly assigned[, t]he party to foreclose need not possess the note itself.” Id. at 255. In Martins, the evidence showed “a signed, notarized assignment document [from MERS to Defendant] that had also been recorded by the county clerk.” Id. at 252. The court found that Plaintiff’s argument failed, and that there was “no doubt” that the mortgage was transferred. Id. at 252–53. The same is true here. Much like the homeowner’s arguments in Martins, Sutton’s arguments merge common legal theories and principles. Sutton attached to her complaint the 1 According to Sutton, she is not asserting a “show-me-the-note” theory. ECF No. 20 at 3. Rather, she challenges “whether Defendants possess enforceable rights under Texas law.” Id. Sutton argues that if the Note and Deed are split, the lien may be void. Id. Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 7 of 19
8 Assignment of the Deed of Trust, which was recorded in Montgomery County. ECF No. 7 at 37–38. The Assignment states that MERS assigned and transferred the Deed of Trust for the property to IHFA. Id. at 37. Sutton’s mortgage was transferred to IHFA. IHFA need not produce the wet-ink signature to foreclose. Martins, 722 F.3d at 253–54. Also, Sutton’s argument under the “split-the-note” theory is not supported under Texas law. Id. at 256. The court turns to each count of Sutton’s Amended Complaint. B. Count 1: “Improper Servicing and Foreclosure without Standing” Sutton alleges multiple state and federal statutory causes of action in “Count 1” of her Amended Complaint, which is titled “Improper Servicing and Foreclosure without Standing.” In addition to her standing theory, Sutton also alleges that IHFA failed to respond to her requests for various documents and information (including a copy of the Assignment of the Deed of Trust, the original wet-ink promissory note, the name and contact information of the current loan owner, and documentation showing compliance with the PSA). ECF No. 15 at 6–7. She alleges that IHFA has violated the Real Estate Settlement Procedures Act (RESPA), the Fair Debt Collection Practices Act (FDCPA), and Texas Property Code § 51.002. i. RESPA 12 U.S.C. § 2605(e) Sutton alleges that IHFA violated RESPA § 2605(e). ECF No. 15 at 6–7. Sutton alleges that she submitted multiple Qualified Written Requests to IHFA under RESPA and that IHFA failed to adequately respond to her requests. ECF No. 15 at 6–7. In Sutton’s “Notice of Intent to Sue,” attached to her Complaint, she states that IHFA provided her with a copy of the Note and account Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 8 of 19
9 statements. ECF No. 7 at 23. Sutton also includes a response from IHFA to her July 11, 2024, request for information. ECF No. 7 at 33–36. In that response, IHFA informed Sutton that it holds her Note and included a copy of the Note with the letter. Id. It appears that most of the documents and information that Sutton complains about not receiving are actually attached to her pleadings. To state a viable claim under § 2605(e), a plaintiff must show that their correspondence met the requirements of a QWR, that defendant failed to make a timely response, and that this failure caused plaintiff actual damages. Williams v. Wells Fargo Bank, N.A., 560 F. App’x 233, 241–42 (5th Cir. 2014). Sutton has not sufficiently alleged any element of her claim. To allege the first element of her claim, Sutton must allege that her correspondence met the requirements of a QWR. To qualify as a valid QWR, a request must relate to the “servicing” of the loan. 12 U.S.C. § 2605(e)(1)(A); In re Parker, 655 F. App’x 993, 997–98 (5th Cir. 2016). “Servicing” means “receiving any scheduled periodic payments . . . and making the payments of principal and interest[.]” 12 U.S.C. § 2605(i)(3). A borrower’s request is not a valid QWR where it seeks “proof of [the servicer’s] authority to collect payments under the promissory note and deed of trust[.]” In re Parker, 655 F. App’x at 997–98. Also, because the request must relate to servicing, general requests for information are insufficient and do not qualify as QWRs. Hollenshead v. Bank of Am., N.A., No. 18-CV-724, 2020 WL 4615096 (E.D. Tex. May 19, 2020), R. & R. adopted, 2020 WL 3496335 (E.D. Tex. June 29, 2020). “Courts routinely find that such letters cannot support a RESPA claim under § 2605(e).” Abor v. Planet Home Lending LLC, No. 24-CV-2205, 2025 WL 2945855, at *9 (N.D. Tex. Sept. 17, 2025). Sutton’s requests to IHFA do not relate to the servicing of the loan and are not valid QWRs. In her requests, Sutton seeks to Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 9 of 19
10 “verify the legitimacy of the loan transfer” and asks IHFA for proof of ownership and standing. See, e.g., ECF No. 7 at 8, 19; see also Sutton’s Exhibits 3–6, ECF No. 7 at 8–26. Such requests are not QWRs. In re Parker, 655 F. App’x at 997–98; Abor, 2025 WL 2945855, at *9. As such, Sutton has not alleged the first element of her RESPA claim. Assuming that Sutton’s letters were valid QWRs, Sutton has failed to show the second element of her RESPA claim, which requires her to show that IHFA failed to make a timely response. As discussed, there is no requirement for IHFA to provide a wet- ink signature. Sutton’s Exhibit 9 shows that IHFA did respond to her requests. IHFA told her that it held the Note, that she was in default, and that she should contact HomeLoanServ. ECF No. 7 at 34. The letter provided contact information and the company’s hours of operation. Id. IHFA also attached to its Amended Motion to Dismiss another letter sent on July 25, 2024, containing the same information as the July 18, 2024 letter. ECF No. 32-3. Sutton did not respond to the Amended Motion, so the court considers the second letter in its analysis. As to the third element, “to survive a motion to dismiss under Rule 12(b)(6)[,] a plaintiff must allege actual damages resulting from a violation of § 2605.” Avila v. JPMorgan Chase Bank, N.A., No. H-14-3502, 2015 WL 1648940, at *3 (S.D. Tex. Apr. 13, 2015) (citing 12 U.S.C. § 2605(f)(1)(A)). In other words, a plaintiff must plead facts sufficient “to establish a causal link between the financing institution’s violation and their injuries.” Wilson v. Deutsche Bank Tr. Co. Ams., 2020 WL 3452298, at *7 (N.D. Tex. June 24. 2020) (citing Law v. Ocwen Loan Servicing, L.L.C., 587 F. App’x 790, 795 (5th Cir. 2014)). Conclusory allegations of actual damages are not sufficient. Thomas v. Ocwen Fin. Corp., No. 19-685, 2020 WL 13413468, at *3 (S.D. Tex. Feb. 27, 2020) (citing Avila, 2015 WL 1648940, at *3). Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 10 of 19
11 Sutton does not allege facts sufficient to establish a causal link between IHFA’s alleged failure to adequately respond and Sutton’s injuries. Sutton makes general conclusory assertions throughout her Amended Complaint that IHFA’s conduct caused her harm. Sutton’s complaint alleges that she suffered emotional distress and mental anguish (including confusion, financial uncertainty, anxiety, and “loss of confidence in the mortgage process”), harmed credit, financial harm, misapplied payments, and litigation expense. ECF No. 15 at 8, 10, 12, 14. It appears that Sutton has all of the documents and information she complains about not receiving, so it is unclear how she suffered any damages at all. Litigation fees and expenses are not actual damages under RESPA. Cross v. Bank of New York Mellon, 790 F. App’x 647, 648 (5th Cir. 2020). A court may award up to $2,000 in statutory damages under RESPA if the defendant engaged in a “pattern or practice of noncompliance.” 12 U.S.C. 2605(f)(1)(B). Sutton does not allege any facts showing that IHFA engaged in a pattern or practice of noncompliance. Cf. Allen v. Wells Fargo Bank, Nat’l Ass’n, No. 3:16-CV-0249, 2017 WL 3421067 (N.D. Tex. Aug. 9, 2017). Sutton’s conclusory assertion that IHFA’s “conduct reflects a pattern of improper servicing practices, deception, and disregard for consumer protection laws[,]” ECF No. 15 at 5, 7, is insufficient to state a claim for statutory damages under RESPA. Sutton’s pleading is insufficient to state a claim for a violation of RESPA, and IHFA’s motion should be granted as to Sutton’s RESPA claim. ii. FDCPA 15 U.S.C. § 1692g Sutton alleges that IHFA violated multiple provisions of the FDCPA, 15 U.S.C. § 1692g. ECF No. 15 at 6–7. Her claim appears to rest on the “split-the-note” and “show-me-the-note” theories, which the court has already addressed. She states that IHFA’s Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 11 of 19
12 conduct violates “FDCPA, for attempting to collect without validating the debt.” ECF No. 15 at 7. As discussed, however, IHFA provided a valid response to Sutton’s requests for information and IHFA has authority to foreclose. The court also notes that Sutton has not shown that IHFA falls within the scope of the FDCPA. Section 1692g of the statute imposes certain obligations on debt collectors. A “debt collector” under the FDCPA is “any person . . . who regularly collects or attempts to collect . . . debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692(a)(6). However, mortgage lenders and servicers are generally not “debt collectors” within the meaning of the FDCPA. Montgomery v. Wells Fargo Bank, N.A., 459 F. App’x 424, 428–29 n.1 (5th Cir. 2012); Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985). A mortgage lender or servicer may be a debt collector for purposes of the FDCPA if it becomes a mortgage lender or servicer after the debt was in default. Smith v. First Choice Loan Services Inc., No. 20-CV-00321, 2020 WL 5759967, at *3 (N.D. Tex. Sept. 28, 2020). IHFA does not fall within the definition of “debt collector” based on the pleadings before the court, given that IHFA was the servicer before the default occurred. IHFA’s motion should be granted as to Sutton’s FDCPA claim. iii. Texas Property Code § 51.002 Sutton argues that IHFA violated the Texas Property Code § 51.002 by attempting to foreclose without lawful authority. ECF No. 15 at 7. Again, based on Sutton’s own pleadings, IHFA appears to have authority to foreclose. In any event, § 51.002 does not create a private right of action.2 Carey v. Fargo, No. 15-1666, 2016 2 “[C]ourts have construed claims for violation of section 51.002 as claims for wrongful foreclosure[.]” See Carey, 2016 WL 4246997, at *3 (collecting cases). Sutton has not alleged that any foreclosure sale has taken place. Thus, she does not state a claim for wrongful foreclosure. See Bishop Glob. Family Tr. v. Select Portfolio Servicing, Inc., No. 25-CV-0560, Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 12 of 19
13 WL 4246997, at *3 (S.D. Tex. Aug. 11, 2016) (citing Ashton v. BAC Home Loans Servicing, L.P., No. 13-810, 2013 WL 3807756, at *4 (S.D. Tex. July 19, 2013)). IHFA’s motion should be granted as to Sutton’s claim under the Texas Property Code § 51.002. C. Count 2: Truth in Lending Act Violations and Lack of Standing to Enforce the Note and Deed of Trust3 i. TILA 15 U.S.C. § 1641 Sutton alleges that IHFA violated TILA by failing to “identify the true owner or provide documentation establishing [its] lawful authority to collect on or enforce the loan.” ECF No. 15 at 7–8. Sutton alleges that “Defendant has also presented itself as the lender in mortgage documents and communications despite not funding the loan, and has never produced a certified copy of a properly endorsed, wet-ink original promissory note.” ECF No. 15 at 8. Sutton brings her claims under 15 U.S.C. §§ 1641(f)(2) and (g).4 TILA § 1641(f) requires that, upon written request by the obligor, “the servicer shall provide the obligor, to the best knowledge of the servicer, with the name, address, and telephone number of the owner of the obligation or the master servicer of the obligation.” TILA § 1641(g) provides that “not later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer[.]” Again, Sutton’s claims are undermined by the very documents she attached to her Amended Complaint. IHFA/HomeLoanServ is the holder of the note; IHFA is the 2025 WL 1918848, at *3 (S.D. Tex. July 10, 2025) (holding that a foreclosure sale is a precondition to recovery for wrongful foreclosure). 3 The court addressed Sutton’s standing arguments above and need not address them again. 4 Sutton also generally cites 15 U.S.C. § 1601 et seq. ECF No. 15 at 8. Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 13 of 19
14 assignee of the deed of trust; and all of that information has been provided to Sutton. Again, to the extent that Sutton’s TILA claim is based on the “split-the-note” and/or “show-me-the-note” theories, the court has already disposed of those theories. Sutton has failed to plead a TILA claim. The court also notes that claims under § 1641(f) and (g) must be brought within one year and 30 days after the assignment of which plaintiff allegedly did not receive notice. 15 U.S.C. § 1640(e); Beltran v. Fed. Home Loan Corp., No. 23-CV-3999, 2025 WL 1843726, at *3 (S.D. Tex. Apr. 21, 2025). Sutton alleges that “[s]hortly after origination [which occurred in April 2021], the contract was transferred to Defendant Home Loan Serv, to which Plaintiff was not notified beforehand nor properly informed afterward.” ECF No. 15 at 4. To the extent that Sutton alleges lack of notice of an assignment that took place in 2021, her claim, which she brought in June 2025, is time-barred. IHFA’s motion should be granted as to Sutton’s TILA claim. ii. Texas Business and Commerce Code § 3.204 Sutton alleges that IHFA violated the Texas Business and Commerce Code § 3.204(a) because “an allonge [must] be ‘firmly affixed’ to the original instrument to be valid.” ECF No. 15 at 8. However, Chapter 3 of the Texas Business and Commerce Code does not apply to a mortgage note. Tex. Bus. & Com. Code § 3.104, cmt. 2 (“Article 3 is not meant to apply to contracts for . . . the sale or lease of real property . . .”); Bables v. Citimortgage, Inc., No. 16- CV-104, 2016 WL 1450201, at *2 (E.D. Tex. Apr. 13, 2016), R. & R. adopted, 2016 WL 2962681 (E.D. Tex. May 23, 2016); Clapp v. Wells Fargo, Nat’l Ass’n, No. 14-CV-035, 2014 WL 1677805 (N.D. Tex. Apr. 28, 2014). In any event, it appears that the allonge was firmly affixed to the Note. See ECF No. 32-1 at 2–3. Again, to the extent that Sutton’s claim under section 3.204 is based on the Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 14 of 19
15 “split-the-note” and/or “show-me-the-note” theories, the claim fails. IHFA’s motion should be granted as to Sutton’s claim under the Texas Business and Commerce Code § 3.204. D. Count 3: Violation of the Fair Credit Reporting Act Sutton alleges that IHFA violated the FCRA, 15 U.S.C. § 1681s-2(b), when it “reported the loan as delinquent, despite being notified of Plaintiff’s active dispute regarding the debt’s validity and Defendant’s legal authority to collect or enforce it.” ECF No. 15 at 9–10. “When a credit reporting agency notifies a ‘furnisher’ of credit information of a consumer dispute, the furnisher must ‘conduct an investigation,’ ‘report the results of the investigation,’ and ‘modify . . . delete . . . or . . . permanently block’ any inaccuracies.” Schultz v. HomeBridge Fin. Services, Inc., No. 24- 50193, 2025 WL 1467431 (5th Cir. May 22, 2025) (quoting 15 U.S.C. § 1681s-2(b)(1)(A)–(E)). “Liability under the FCRA attaches only after the furnisher of credit information has received notice of a dispute from a credit reporting agency[.]” Id. Sutton’s Amended Complaint is entirely conclusory. She merely tracks the elements of the statute without providing any facts. She does not say when or how she notified a credit reporting agency of any dispute. She does not say when or how a credit reporting agency notified IHFA of a dispute. She does not show that any information provided by IHFA to any credit reporting agency was inaccurate. She does not show how she was harmed by any failure on IHFA’s part. IHFA’s motion to dismiss Sutton’s FCRA claim should be granted. E. Count 4: Fraud and Fraud in the Factum The gist of Sutton’s fraud claims is that IHFA made misrepresentations when it held itself out as having authority to collect payments on the loan and then to foreclose on the Note and Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 15 of 19
16 Deed of Trust. She also claims to have been defrauded when IHFA failed to provide accurate information. She states that “Defendant’s objective was to extract payments without proving standing, while avoiding public disclosure of the loan’s securitized status.” ECF No. 15 at 11. In other words, Sutton is merely re- casting her statutory claims as fraud. Again, IHFA had and now has authority to foreclose. Sutton’s own documents demonstrate this. To allege a claim of fraud under Texas law, a plaintiff must allege: (1) a material misrepresentation; (2) the representation was false; (3) the defendant either knew the representation was false or recklessly asserted it without knowledge of its truth; (4) the defendant intended that the plaintiff should act upon the representation; (5) the plaintiff acted in reliance on the representation; and (6) the plaintiff was injured as a result. Harris Cnty. Tex. v. MERSCORP Inc., 791 F.3d 545, 558 (5th Cir. 2015) (quoting Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 337 (Tex. 2011)). Fraud in the factum is a misrepresentation about the nature of a writing that a person signs with neither knowledge nor reasonable opportunity to obtain knowledge of its character or essential terms. Henderson v. IberiaBank, No. 21-CV-3212, 2022 WL 2792218, at *9 (N.D. Tex. June 23, 2022), R. & R. adopted, No. 21-CV-3212, 2022 WL 2790644 (N.D. Tex. July 15, 2022), aff’d, No. 22-10773, 2023 WL 2733414 (5th Cir. Mar. 31, 2023). Sutton’s complaint does not allege facts to support a claim for fraud, fraud in the factum, or fraud in the inducement. Her claims are conclusory and rebutted in their entirety by her own documents. Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 16 of 19
17 F. Count 5: Unjust Enrichment Sutton alleges a claim for unjust enrichment. According to Sutton, IHFA “received and retained funds paid by Plaintiff that it had no legal right to collect.” ECF No. 15 at 12–13. Again, IHFA had authority to collect on the note and to foreclose. There are no facts to support a claim for unjust enrichment. Moreover, under Texas law, “an unjust enrichment claim is ‘unavailable when a valid, express contract governing the subject matter of the dispute exists[.’]” Matter of KP Eng’g, L.P., 63 F.4th 452, 457 (5th Cir. 2023). Because there is a valid, express contract governing Sutton’s loan, IHFA’s motion should be granted as to Sutton’s unjust enrichment claim. G. Count 6: Declaratory and Injunctive Relief Because the court finds that all of Sutton’s claims should be dismissed, she cannot obtain declaratory or injunctive relief. IHFA’s motion should be granted as to Sutton’s requests for declaratory and injunctive relief. H. Leave to Amend is Denied “Dismissing an action after giving the plaintiff only one opportunity to state his case is ordinarily unjustified.” Davoodi v. Austin Indep. Sch. Dist., 755 F.3d 307, 310 (5th Cir. 2014) (quoting Jacquez v. Procunier, 801 F.2d 789, 792 (5th Cir. 1986)). If the plaintiff seeks leave to amend, she “must give the court at least some notice of what . . . her amendments would be and how those amendments would cure the initial complaint’s defects.” Scott v. U.S. Bank Nat’l Ass’n, 16 F.4th 1204, 1209 (5th Cir. 2021) (citation omitted). The court may deny leave “[i]f the plaintiff does not provide a copy of the amended complaint [or] explain how the defects could be cured[.]” Id. (citation omitted). The court may also deny leave to amend when amendment would be futile or when the plaintiff chooses to stand on her complaint and argues that it Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 17 of 19
18 satisfies the pleading requirements. See Khoury v. Thota, No. 20-20578, 2021 WL 3919248, at *4 (5th Cir. Sep. 1, 2021) (affirming the district court’s denial of leave to amend when the plaintiff chose to stand on his complaint and argued that it satisfied the pleading requirements); Wimm v. Jack Eckerd Corp., 3 F.3d 137, 139 (5th Cir. 1993) (discussing futility of amendment as justification for denying leave to amend). Here, Sutton amended her complaint after IHFA filed its first Motion to Dismiss. Sutton has neither requested to amend her complaint for a second time nor has she responded to IHFA’s pending Motion to Dismiss. The court has no reason to believe that Sutton could further amend her First Amended Complaint to remedy its defects. Amendment would be futile. Therefore, any request for leave to amend is denied. I. Motion for a Preliminary Injunction Because the court finds that all of Sutton’s claims should be dismissed, she cannot obtain a preliminary injunction. Sutton’s Motion for a Preliminary Injunction, ECF No. 17, should be DENIED. J. Remaining Motions Sutton’s remaining motions, the Motion to Compel Supplemental Rule 7.1 Disclosure and Motion for Judicial Notice of Public SEC Filings, ECF Nos. 23 and 24, do not affect the court’s analysis and are DENIED as MOOT. 4. Conclusion The court recommends that Defendants’ Motion to Dismiss, ECF No. 32, be GRANTED, and Plaintiff’s Motion for a Preliminary Injunction, ECF No. 17, be DENIED. Plaintiff’s Motion to Compel Supplemental Rule 7.1 Disclosure, and Motion for Judicial Notice of Public SEC Filings, ECF Nos. 23 and 24, are DENIED as MOOT. Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 18 of 19
19 The parties have fourteen days from service of this Memorandum and Recommendation to file written objections. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72. Failure to timely file objections will preclude appellate review of factual findings or legal conclusions, except for plain error. See Thomas v. Arn, 474 U.S. 140, 147–49 (1985); Rodriguez v. Bowen, 857 F.2d 275, 276– 77 (5th Cir. 1988). Signed at Houston, Texas, on February 10, 2026. ______________________________________ Peter Bray United States Magistrate Judge Case 4:25-cv-02639 Document 35 Filed 02/10/26 in TXSD Page 19 of 19
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