Monday, July 17, 2017

Mortgagee or servicer may reverse acceleration and thereby reset limitations clock for subsequent foreclosure

Notice of acceleration may be rescinded, and loan default cured, so as to reinstate the original loan repayment terms, but it does not prevent a second foreclosure upon another default, which will not be be time-barred based on the date of original default and ensuing acceleration of maturity which the mortgagee/servicer undid by letter of rescission. 

Section 16.035(b) of the Texas Civil Practice and Remedies Code provides "[a] sale of real property under a power of sale in a mortgage or deed of trust that creates a real property lien must be made not later than four years after the day the cause of action accrues." A cause of action for non-judicial foreclosure accrues "when the holder actually exercises its option to accelerate" the maturity date of the loan. Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001).

LEEROY M. MYERS, ET AL., Plaintiffs,
v.
DITECH FINANCIAL LLC, ET AL., Defendants.

Civil Action No. H-16-1053.
United States District Court, S.D. Texas, Houston Division.
June 14, 2017.
ORDER 

STEPHEN WM SMITH, Magistrate Judge.

This case challenging defendants' right to foreclose on plaintiffs' property is before the court on defendants'[1] motion for summary judgment (Dkt. 23). Having considered the parties' submissions and the law, the court grants the motion.

Background

On March 27, 2006, Leeroy M. Myers signed a Texas Home Equity Note in the amount of $50,000. The lender was Home 123 Corporation. The loan was secured by a lien on the property located at 12215 Carola Forest Drive, Houston, Texas 77044, as evidenced by a Texas Home Equity Security Instrument, otherwise known as a deed of trust, signed by Leeroy M. Myers and Barbara C. Myers. In 2008, the deed of trust was assigned to Mortgage Electronic Registration Systems, Inc. MERS assigned the note and deed of trust to Litton Loan Servicing LP effective September 22, 2009.

On October 5, 2009 Litton notified plaintiffs it was accelerating the loan maturity date due to non-payment. Litton obtained a court order authorizing non-judicial foreclosure in 2010. However, Litton did not pursue foreclosure prior to January 26, 2011 when it assigned the deed of trust to Green Tree Servicing LLC. Thereafter, Green Tree accepted a payment from plaintiffs in January 2012 and applied it to the outstanding loan balance.

On August 19, 2013, counsel representing Green Tree sent plaintiffs a "Rescission of Acceleration" notice stating that "the notice of acceleration dated October 5, 2009 and all prior notices of acceleration" are rescinded, and instructing plaintiffs to continue making payments to Green Tree. Green Tree accepted and applied another payment on the debt on September 27, 2013.

On April 23, 2014, counsel representing Green Tree in its capacity as both the mortgage servicer and mortgagee of the note and deed of trust, sent a Notice of Default and Intent to Accelerate giving plaintiffs 30 days to cure the default in order to avoid acceleration and foreclosure.

On January 13, 2015 Green Tree sent another notice of default to plaintiffs. Plaintiff made no further payments. On October 30, 2015, Green Tree, now known as Ditech Financial, LLC, filed in state court an "Application for an Expedited Order under Rule 736 on a Home Equity Loan" seeking authorization for non-judicial foreclosure on the property for failure to pay the loan.

Plaintiffs filed suit in state court in February 2016. Defendants removed the case to this federal court based on diversity jurisdiction. Plaintiffs seek declaratory relief and to quiet title because:
[A]s the cause of action based on default accrued in October 2009 and no valid foreclosure had taken place six years later in 2015, the four-year statute of limitations to foreclose has expired, the lien and power of sale have expired, the Defendants cannot foreclose, and they must release the lien in the Deed of Trust immediately.
Dkt. 6 at 8. Plaintiffs also allege that Ditech violated the Fair Debt Collection Practices Act and Texas Debt Collection Act in the notices of default. Defendants seek summary judgment dismissing plaintiffs' case in its entirety.

Summary Judgment Standards

[omitted]

Analysis

Plaintiffs contend that the 4-year statute of limitations for defendants to foreclose on their property began running on October 5, 2009 and expired prior to Ditech's 2015 Application in state court seeking authority to foreclose.[2]

Section 16.035(b) of the Texas Civil Practice and Remedies Code provides "[a] sale of real property under a power of sale in a mortgage or deed of trust that creates a real property lien must be made not later than four years after the day the cause of action accrues."

A cause of action for non-judicial foreclosure accrues "when the holder actually exercises its option to accelerate" the maturity date of the loan. Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001). The issue here is whether Ditech effectively rescinded or abandoned the October 5, 2009 acceleration within the 4-year limitations period, thereby reinstating the parties' rights under the original deed of trust.
Section 16.038 of the Texas Civil Practice and Remedies Code was enacted in 2015 to address this issue.[3] Pursuant to § 16.038, an effective rescission or waiver can be made by serving a written notice by first class or certified mail. Graham v. LNV Corp., No. 03-16-00235-CV, 2016 WL 6407306 at *4 (Tex. App.-Austin Oct. 26, 2016, pet. denied).

The Fifth Circuit has also held that a lender may unilaterally rescind a notice of acceleration. Boren v. Nat. Bank Assoc., 807 F.3d 99, 106 (5th Cir. 2015)Nunnery v. Ocwen Loan Serv., LLC, 641 F. App'x 430, 433 (5th Cir. 2016). See also Costello v. U.S. Bank Trust, N.A., Civ. A. No. H-16-702, 2016 WL 5871459 at *4 (S.D. Tex. Oct. 7, 2016); Mendoza v. Wells Fargo Bank, N.A., Civ. A. No. H-14-554, 2015 WL 338909 at *5 (S.D. Tex. Jan. 23, 2015). In addition, acceleration of a note may be abandoned by the holder by acceptance of an installment payment. Wolf, 44 S.W.3d at 566-67Boren, 807 F.3d at 104Smither v. Ditech Fin. LLC, No. 16-20392, ___ F. App'x ___, 2017 WL 58314 at *5 (5th Cir. Mar. 10, 2017).
  
Plaintiffs have not presented any legal authority to support their assertion that unilateral rescission or abandonment of acceleration is contrary to the Texas Constitution. Garofolo v. Ocwen Loan Serv., LLC, 497 S.W.3d 474 (Tex. 2016), does not support plaintiffs' position. Garofolo holds that foreclosure of a homestead is an available remedy for default on a home equity loan only if the underlying loan documents contain all the required terms and conditions set forth in the Texas Constitution. 497 S.W.3d at 478Garofolo does not hold that the holder of an otherwise constitutionally compliant note or deed of trust cannot unilaterally rescind or abandon a notice of acceleration. See id. at 479 ("The constitution prohibits foreclosure when a home-equity loan fails to include a constitutionally mandated term or condition, but it does not address post-origination enforcement of a loan's provision.").
The record conclusively establishes that Ditech effectively and timely rescinded the 2009 acceleration by its August 19, 2013 notice. Ditech also effectively abandoned the 2009 acceleration by other acts, including acceptance of an installment payment in September 2013. Ditech's cause of action for foreclosure therefore accrued at some point after September 2013. Defendants are not time-barred from seeking foreclosure, and the motion for summary judgment on plaintiffs' declaratory judgment and quiet title claims is granted.
  
Plaintiffs summary judgment response does not address their Fair Debt Collection Practices Act (FDCPA) claim based on the January 13, 2015 default letter or their Texas Debt Collection Act (TDCA) claim based on the 2015 state court Application for non-judicial foreclosure. Plaintiffs are deemed to have abandoned such claims. Alternatively, to the extent the FDCPA and TDCA claims are based on the assertion that Ditech wrongfully attempted to collect an expired debt, the claim is without merit for the reasons discussed above.
  
In addition, the January 13, 2015 notice does not contain an actionable false representation of "the character, amount, or legal status of the debt." 15 U.S.C. § 1692e(2)(A).

The January 13, 2015 letter states "You may be held personally liable under state law, if any, for any deficiency balance not realized from the sale of the property." Dkt. 6-5 at 3 (emphasis added). While Home Equity Loans are generally without recourse for personal liability against an owner and spouse, personal liability may exist if the loan was obtained through fraud. TEX. CONST. art. XVI, § 50(a)(6)(C). Thus, the letter, does not misrepresent the creditor's legal remedies. Finally, an FDCPA claim based on statements in the January 13, 2015 letter is barred by 15 U.S.C. § 1692k(d), which requires claims to be brought within one year from the date of the violation. Ditech is entitled to summary judgment on plaintiffs' FDCPA and TDCA claims.

Conclusion

For the reasons discussed above, Ditech's motion for summary judgment (Dkt. 23) is granted. The court will issue a separate final judgment.
   
[1] Plaintiffs have named as defendants Ditech Financial LLC, successor to Green Tree Servicing, and Fannie Mae, allegedly the holder of the note. As far as the court can tell, only Ditech has taken steps to foreclose on plaintiffs' property and the current record is unclear as to whether Fannie Mae currently holds the note. Nonetheless, counsel has filed the motion for summary judgment on behalf of both defendants.

[2] This is the only basis on which plaintiffs' first amended complaint challenges defendants' right to foreclose. Therefore, the court will not address the validity of the assignments of the note and deed of trust.


[3] Section 16.038 applies to notices of acceleration and notices of rescission served before, on, or after its June 17, 2015 effective date. See Graham, 2016 WL 6407306 at *4.


BEVERLY JOHNSON, et al., Plaintiffs,
v.
NATIONSTAR MORTGAGE, LLC, et al., Defendants.

Civil Action No. 4:15-CV-2083.
United States District Court, S.D. Texas, Houston Division.
March 31, 2017.

MEMORANDUM OPINION AND ORDER

KENNETH M. HOYT, District Judge.

I. INTRODUCTION

This case arises out of the alleged wrongful foreclosure of the plaintiff's real property located in Fort Bend County, Texas. Pending before the Court is the defendants', Nationstar Mortgage, LLC ("Nationstar") and U.S. Bank, National Association, as Successor Trustee to Wachovia Bank, N.A., as Trustee for the Holders of the MASTR Alternative Loan Trust 2003-7 (the "Trustee"), (collectively, the "defendants"), motion for summary judgment (Dkt. No. 8). The plaintiffs, Beverly Johnson and Aaron Dale Johnson (the "plaintiffs"), have filed a response in opposition to the motion (Dkt. No. 9) and the defendants have filed a reply in support of their motion for summary judgment as well as a motion for leave to file additional evidence, which this Court granted on September 13, 2016.[1] (See Dkt. Nos. 11 & 15). After having carefully considered the motions, response, reply, the record and the applicable law, the Court determines that the defendants' motion for summary judgment should be GRANTED.

II. FACTUAL BACKGROUND AND PROCEDURAL OVERVIEW

On August 28, 2003, the plaintiffs purchased the real property located at 2911 Taylors Glen Ct., Katy, Texas 77494 (the "Property"). The Property's purchase was financed by a loan from Countrywide Home Loans, Inc. ("Countrywide") comprised of a Note in the principle amount of $349,750.00 (the "Note") payable to Countrywide. Simultaneously with the execution of the Note, the plaintiffs executed a Deed of Trust, conveying a security interest in the Property to Countrywide. The Deed of Trust expressly authorizes Mortgage Electronic Registration Systems, Inc. ("MERS"), to act as the beneficiary, solely as a nominee for Countrywide, its successors, and assigns. The Note and Deed of Trust were subsequently recorded in the Fort Bend County Property Records on July 19, 2004.
Sometime in 2009, the plaintiffs defaulted on their obligations under the Note and Deed of Trust and attempted to remedy their default by tendering less than the total amount due and owing. Their offer, however, was refused and the plaintiffs made no further payments thereafter. On August 7, 2009, the defendants, through their foreclosure counsel, notified the plaintiffs of their intent to accelerate the loan, setting the Property for a foreclosure sale on September 11, 2009.
On November 28, 2011, Countrywide assigned its interests in the Deed of Trust to Bank of America, N.A., Successor by Merger to BAC Home Loans Servicing LP f/k/a Countrywide Home Loans Servicing LP ("Bank of America"). The assignment to Bank of America was recorded in the Fort Bend County Property Records on December 1, 2011. On December 12, 2011, Bank of America sent another Notice of Default to Beverly Johnson. The Notice of Default sought only the past due balance on the mortgage rather than the entire balance due and owing on mortgage. Specifically, the Notice of Default stated that "[i]f the default is not cured on or before January 11, 2012, the mortgage payments will be accelerated with the full amount remaining accelerated and becoming due and payable in full, and foreclosure proceedings will be initiated at that time." (Dkt. No. 8, Ex. 6).
On April 5, 2012, Bank of America assigned its interest in the Deed of Trust to the Trustee (the "Trustee Assignment"). The Trustee's Assignment was recorded in the Fort Bend County Real Property Records on April 12, 2012. On May 5, 2015, the Property was sold at a foreclosure sale. The current mortgagee listed on the Substitute Trustee's Deed is MASTR Alternative Loan Trust 2033-7 Mortgage Pass Through Certificates, Series 2003-7, U.S. Bank National Association, as Trustee, Successor in Interest to Wachovia Bank, National Association, as Trustee W/A/T/A U.S. Bank National Association, as Successor Trustee to Wachovia Bank, N.A., as Trustee for the Holders of the MASTR Alternative Loan Trust 2003-7.
On June 11, 2015, the plaintiffs initiated an action against the defendants in the 400th Judicial District Court of Fort Bend County, Texas seeking a declaratory judgement: (1) that the lien and power of sale against their homestead has expired; (2) that the May 2015 foreclosure sale was wrongful and improper; and (3) to quiet title in their names. The plaintiffs also assert violations of the Texas Debt Collection Act ("TDCA") and the Fair Debt Collection Practices Act, 15 U.S.C § 1692e(5) ("FDCPA"), against the defendants and seek to prevent them from engaging in any future foreclosure or collection activity. On June 19, 2015, the defendants timely removed the state court action to this Court, which has jurisdiction pursuant to 28 U.S.C. § 1331.

III. SUMMARY JUDGMENT STANDARD

Rule 56 of the Federal Rules of Civil Procedure authorizes summary judgment against a party who fails to make a sufficient showing of the existence of an element essential to the party's case and on which that party bears the burden at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). The movant bears the initial burden of "informing the district court of the basis for its motion" and identifying those portions of the record "which it believes demonstrate the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323see also Martinez v. Schlumber, Ltd., 338 F.3d 407, 411 (5th Cir. 2003). Summary judgment is appropriate where "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c).
If the movant meets its burden, the burden then shifts to the nonmovant to "go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial." Stults v. Conoco, Inc., 76 F.3d 651, 656 (5th Cir. 1996) (citing Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995)Little, 37 F.3d at 1075). "To meet this burden, the nonmovant must `identify specific evidence in the record and articulate the `precise manner' in which that evidence support[s] [its] claim[s].'" Stults, 76 F.3d at 656 (citing Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir.), cert. denied, 513 U.S. 871, 115 S. Ct. 195, 130 L. Ed.2d 127 (1994)). It may not satisfy its burden "with some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence." Little, 37 F.3d at 1075 (internal quotation marks and citations omitted). Instead, it "must set forth specific facts showing the existence of a `genuine' issue concerning every essential component of its case." Am. Eagle Airlines, Inc. v. Air Line Pilots Ass'n, Intern., 343 F.3d 401, 405 (5th Cir. 2003) (citing Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998)).
"A fact is material only if its resolution would affect the outcome of the action, . . . and an issue is genuine only `if the evidence is sufficient for a reasonable jury to return a verdict for the [nonmovant].'" Wiley v. State Farm Fire and Cas. Co., 585 F.3d 206, 210 (5th Cir. 2009) (internal citations omitted). When determining whether a genuine issue of material fact has been established, a reviewing court is required to construe "all facts and inferences . . . in the light most favorable to the [nonmovant]." Boudreaux v. Swift Transp. Co., Inc., 402 F.3d 536, 540 (5th Cir. 2005) (citing Armstrong v. Am. Home Shield Corp.,333 F.3d 566, 568 (5th Cir. 2003)). Likewise, all "factual controversies [are to be resolved] in favor of the [nonmovant], but only where there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts." Boudreaux, 402 F.3d at 540 (citing Little, 37 F.3d at 1075 (emphasis omitted)). Nonetheless, a reviewing court is not permitted to "weigh the evidence or evaluate the credibility of witnesses." Boudreaux, 402 F.3d at 540 (quoting Morris, 144 F.3d at 380). Thus, "[t]he appropriate inquiry [on summary judgment] is `whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Septimus v. Univ. of Hous., 399 F.3d 601, 609 (5th Cir. 2005) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)).

IV. ANALYSIS AND DISCUSSION

A. Acceleration and Abandonment

The plaintiffs seek a declaratory judgment that the applicable four-year statute of limitations barred the defendants' foreclosure of the Property. Specifically, the plaintiffs contend that the defendants' right to foreclose on the Property expired on August 7, 2013, because the loan was accelerated four years prior, on August 7, 2009. The defendants, however, do not dispute that the loan was accelerated, but rather contend that the acceleration was abandoned prior to the running of the four-year statute of limitations period. Accordingly, the defendants maintain that they are entitled to a summary judgment on all of the plaintiffs' claims.
Section 16.035 of the Texas Civil Practice & Remedies Code sets forth the limitations period applicable to real property actions in Texas. Pursuant to Tex. Civ. Prac. & Rem. Code § 16.035(b), "[a] sale of real property under a power of sale in a mortgage or deed of trust that creates a real property lien must be made not later than four years after the day the cause of action accrues." Tex. Civ. Prac. & Rem. Code § 16.035(b); Clawson v. GMAC Mortg., LLC f/k/a GMAC Mortg. Corp., Civil Action No. 3:12-CV-00212, 2013 WL 1948128, at *2 (S.D. Tex. May 9, 2013.). Section 16.035(d) also provides that "[o]n the expiration of the four-year limitations period, the real property lien and a power of sale to enforce the real property lien become void." Tex. Civ. Prac. & Rem. Code § 16.035(d). With regard to the accrual date for limitations purposes, section 16.035(e) provides that for a note or obligation payable in installments and otherwise secured by a real property lien, "the four-year limitations period does not begin to run until the maturity date of the last note, obligation, or installment." Tex. Civ. Prac. & Rem. Code § 16.035(e); see also Callan v. Deutsche Bank Trust Co. Ams., 11 F. Supp.3d 761, 767 (S.D. Tex. 2014). Further, where, as here, the note or deed of trust contains an optional acceleration clause, the statute of limitations begins to accrue "when the holder actually exercises its option to accelerate." Boren v. U.S. Nat'l Bank Ass'n, 807 F.3d 99 (5th Cir. 2015)(quoting Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001)).
Acceleration, nevertheless, can be abandoned "by agreement or other action of the parties," which has "the effect of restoring the contract to its original condition, thereby restoring the note's original maturity date for purposes of accrual." Boren, 807 F.3d at 104 (citing Khan v. GBAK Props., 371 S.W.3d 347, 353 (Tex. App.-Houston [1st Dist.] 2012, no pet.) (internal quotations and citations omitted)). Such actions can include accepting payments of less than the amount due upon acceleration, without pursuing any available remedies upon maturity. Boren, 807 F.3d at 104. Moreover, § 16.038 of the Tex. Civ. Prac. & Rem. Code permits a lender to unilaterally rescind the acceleration of a loan. Tex. Civ. Prac. & Rem. Code § 16.038(a).
In this case, the summary judgment evidence establishes that while the defendants declared their intent to accelerate the loan on August 7, 2009, they, nevertheless, manifested their intention to abandon the acceleration when they issued a new Notice of Default to the plaintiffs on December 12, 2011. The new Notice of Default sought only the past due balance on the mortgage; it did not declare that the entire balance of the mortgage was due and owing. Specifically, the Notice of Default provided, "[i]f the default is not cured on or before January 11, 2012, the mortgage payments will be accelerated with the full amount remaining accelerated and becoming due and payable in full, and foreclosure proceedings will be initiated at that time." (Dkt. No. 8, Ex. 6). Thus, the limitations period was reset upon the defendants' issuance of the new Notice of Default on December 12, 2011 and the foreclosure sale date of May 5, 2015 was well within the four-year limitations period.[2] Further, the fact that the plaintiffs may have had a loan request modification pending at the time of the foreclosure sale does not serve to preclude or void the foreclosure. See Amezcua v. Ocwen Loan Servicing, LLC, CV No. 5:14-CV-1018-DAE, 2015 WL 671600, at *3 (W.D. Tex. Feb. 17, 2015) (reasoning that plaintiff's allegations that the defendant mortgagee moved forward with the foreclosure sale despite her pending loan modification are insufficient to establish the existence of a contract so as to constitute a breach thereof).
Since the plaintiffs' claims to quiet title and for violations of the TDCA and the FDCPA are premised on their contention that the statute of limitations expired prior to the defendants' foreclosure of the Property, those claims also fail matter of law.

B. Standing

The plaintiffs also maintain that the defendants lacked standing to foreclose on the Property. While the plaintiffs do not dispute that the Trustee is the last assignee of record to whom the Deed of Trust had been assigned, they, nonetheless, argue that: (1) the assignment to the Trustee was not timely made under the pooling and servicing agreement ("PSA") and, thus, is void; and (2) the name of the current mortgagee on the Substitute Trustee's Deed is inconsistent with that of the Trustee of record, and, therefore, renders the foreclosure sale void. The defendants, in contrast, contend that the plaintiffs do not have standing to challenge the timeliness of the assignment of the mortgage to the Trustee pursuant to the PSA and that any inconsistences in the description of the mortgagee reflects nothing more than a clarification of the proper current codification of the Trustee rather than an assignment to a different party and does not render the foreclosure sale void. This Court agrees.
The Fifth Circuit in Reinagel v. Deutsche Bank Nat'l Trust Co., established that under Texas law, borrowers, like the plaintiffs, "[had] no right to enforce [the PSA's] terms unless they [were] its intended third-party beneficiaries." 735 F.3d 220, 228 (5th Cir. 2013). It further concluded that even if the borrowers were third-party beneficiaries, such status, without more, would only give them the right to sue for a breach of the PSA, not automatically render the assignments void. Id. Here, the plaintiffs have neither argued that they are third-party beneficiaries nor have they presented any evidence to establish that the parties to the PSA intended any benefit to them. Thus, this Court determines that the plaintiffs lack standing to challenge the timeliness of any assignment, whether to the Trustee or otherwise, under the PSA.
Likewise, the plaintiffs' contention concerning the mortgagee's description also fails. Indeed, it is undisputed that the Deed of Trust was assigned by Bank of America to U.S. Bank, National Association, as Successor Trustee to Wachovia Bank, N.A., as Trustee for the Holders of the MASTR Alternative Loan Trust 2003-7. (Dkt. No. 8, Ex. 5). The Substitute Trustee's Deed also conveys the Property to the same entity, but denotes a new preferred nomenclature. The current mortgagee is listed on the Substitute Trustee's Deed as, "MASTR Alternative Loan Trust 2003-7 Mortgage Pass Through Certificates, Series 2003-7, U.S. Bank National Association, as Trustee, Successor in Interest to Wachovia Bank, National Association, as Trustee W/A/T/A U.S. Bank National Association, as Successor Trustee to Wachovia Bank, N.A., as Trustee for the Holders of the MASTR Alternative Loan Trust 2003-7." (Id., Ex. 9). The description on the Substitute Trustee's Deed reflects that the two nominally different descriptions are for the same entity. The phrase "W/A/T/A" stands for "Who Acquired Title As" and permits the preferred name categorization while also denoting that no change in ownership has occurred.

V. CONCLUSION

Based on the foregoing discussion and analysis, the defendants' motion for summary judgment is GRANTED.
It is so ORDERED.


[1] The defendants have also filed an objection to the plaintiffs' Exhibit 11 as irrelevant and outside the scope of the plaintiffs' pleadings. Because the Court finds the document to be beyond the scope of the plaintiffs' pleadings and not properly before it, the defendants' objection to Ex. 11 is sustained. (See Dkt. No. 10). Similarly, the plaintiffs attempts to allege claims and/or defenses not asserted or initially raised in their complaint will be disregarded as not properly before the Court.

[2] To the extent that the plaintiffs maintain that they detrimentally relied on the initial acceleration so as to preclude the defendants' claim of abandonment and cause the statute of limitations to begin to run on the defendants' initial acceleration in August of 2009, the Court determines that the plaintiffs have failed to show detrimental reliance, as they have neither asserted nor presented any evidence that they relied on the acceleration and, thus, incurred legal or financial consequences as a result. See Bitterroot Holdings, L.L.C. v. MTGLQ Inv'rs, L.P., 648 F. App'x 414, 418-19 (5th Cir. 2016).


JOHN SMITHER; PATRICIA SMITHER, Plaintiffs-Appellants,
v.
DITECH FINANCIAL, L.L.C., Defendant-Appellee.

No. 16-20392.
United States Court of Appeals, Fifth Circuit.
Filed: March 10, 2017.


Appeal from the United States District Court for the Southern District of Texas, USDC No. 4:16-CV-38.
Before: STEWART, Chief Judge, and KING and DENNIS, Circuit Judges.

PER CURIAM:[*]

After Plaintiffs-Appellants John and Patricia Smither defaulted on their home equity loan, Defendant-Appellee Ditech Financial, L.L.C., applied for an order allowing it to proceed with foreclosure. The Smithers then filed the present suit, seeking a declaration that Ditech's right to foreclose was time-barred by Texas Civil Practice and Remedies Code § 13.605's four-year statute of limitations for foreclosure actions and asserting that Ditech had violated the Texas Debt Collection Act and Fair Debt Collection Practices Act. 

The district court granted Ditech's motion to dismiss and denied the Smithers' motion for reconsideration.

We AFFIRM.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 2006, John and Patricia Smither executed a home equity loan (the Loan), which was secured by their homestead in Houston, Texas (the Property).[1] The Smithers divorced in 2007, and John transferred his interest in the Property to Patricia, retaining a lien on the Property pursuant to the divorce decree. In July 2009, Bank of America, the then mortgagee, sent notices of acceleration to the Smithers (the 2009 Acceleration) and, in August 2009, applied in state district court for an order allowing it to proceed with foreclosure (the 2009 Foreclosure Suit). Patricia filed a Chapter 13 bankruptcy petition in September 2009, and Bank of America dismissed the 2009 Foreclosure Suit without prejudice in December 2009. Patricia's bankruptcy petition was dismissed in January 2010, but she refiled for bankruptcy shortly thereafter. On July 20, 2010, the bankruptcy court confirmed Patricia's bankruptcy plan, which provided for Patricia's surrender of the Property to Ditech Financial, L.L.C., the then-and-current mortgagee. However, in June 2011, Patricia's bankruptcy plan was amended to allow her to resume payment on the Loan. Patricia did not, however, resume payment, and on November 6, 2015, following the discharge of Patricia's other debts in her bankruptcy case, Ditech filed a new application for foreclosure in state district court (the 2015 Foreclosure Suit).
On November 20, 2015, the Smithers filed the instant suit against Ditech in state district court. The Smithers requested a declaration that Ditech's "lien on the Property [wa]s no longer enforceable." According to the Smithers, Texas Civil Practice and Remedies Code § 13.605 required Ditech to bring suit foreclosing on its lien on the Property within four years of the 2009 Acceleration, when Ditech's cause of action allegedly accrued.[2]Because the 2015 Foreclosure Suit was brought more than four years later, the Smithers asserted that it was "barred by the statute of limitations." The Smithers also asserted that Ditech had violated the Texas Debt Collection Act (TDCA) by "report[ing] the past-due amounts on the Loan on the [Smithers'] credit reports even though the debt is no longer enforceable."
On December 28, 2015, Ditech filed a general denial in state district court. After timely removing the lawsuit to federal district court on the basis of diversity jurisdiction, Ditech moved for dismissal under Federal Rule of Civil Procedure 12(b)(6). In pertinent part, Ditech argued that Bank of America's voluntary dismissal of the 2009 Foreclosure Suit constituted abandonment of the 2009 Acceleration, thereby restoring the Loan's maturity date to its original condition and rendering the 2015 Foreclosure Suit timely. Ditech also argued that the Smithers' TDCA claim failed because, inter alia, it was based on the Smithers' mistaken belief that their debt was no longer enforceable.
On February 3, 2016, the Smithers filed a response to Ditech's motion, as well as an amended complaint.[3] The amended complaint contained additional factual allegations and added two new claims against Ditech. First, it added an alternative claim under the TDCA, alleging that, even if Bank of America abandoned the 2009 Acceleration, Ditech "misrepresented the character, extent, or amount of a consumer debt in violation of Tex. Fin. Code § 392.304(a)(8)" by not reflecting that abandonment "on information provided to credit reporting agencies." Second, it added a claim that Ditech violated the Fair Debt Collection Practices Act (FDCPA) by "continuing to report the past-due amounts on the Loan and the foreclosure of the Loan on the [Smithers'] credit reports even though either the debt is no longer enforceable or the foreclosure was abandoned."
On April 15, 2016, the district court granted Ditech's motion to dismiss and dismissed the entire case with prejudice. The Smithers timely moved for reconsideration under Federal Rule of Civil Procedure 59(e),[4] arguing that the district court erred in dismissing their entire case with prejudice because their amended complaint asserted additional facts and additional causes of actions that were not addressed in Ditech's motion to dismiss. In response, Ditech argued that the Smithers' amended complaint, like their original petition, failed to state a claim upon which relief could be granted. The district court denied the Smithers' Rule 59(e) motion on May 27, and the Smithers timely appealed, challenging the "final order (judgment) of the District Court for Southern District of Texas, Houston Division, entered in this action on . . . May 27, 2016, at docket number 18."

II. JURISDICTION

Before proceeding to the merits, we must address Ditech's apparent argument that we lack jurisdiction to consider the Smithers' challenge to the underlying dismissal because they did not explicitly identify the district court's dismissal order in their notice of appeal.[5] Federal Rule of Appellate Procedure 3(c)(1)(B) provides that "[t]he notice of appeal must . . . designate the judgment, order, or part thereof being appealed." "Rule 3's dictates are jurisdictional in nature," Gonzalez v. Thaler, 565 U.S. 134, 147 (2012)(quoting Smith v. Barry, 502 U.S. 244, 248 (1992)), but "a mere technical error in designating the proper judgment being appealed will not divest us of jurisdiction," Lockett v. Anderson, 230 F.3d 695, 700 (5th Cir. 2000). We "construe a notice of appeal liberally to avoid technical barriers to review"; thus, "[a] mistake in designating orders to be appealed does not bar review [(1)] if the intent to appeal a particular judgment can be fairly inferred and [(2)] if the appellee is not prejudiced or misled by the mistake." N.Y. Life Ins. Co. v. Deshotel, 142 F.3d 873, 884 (5th Cir. 1998). When a party appeals only the denial of a motion for reconsideration under Rule 59(e), "we can infer that the party meant to appeal the adverse underlying judgment." Lockett, 230 F.3d at 700see also, e.g., R.P. ex rel. R.P. v. Alamo Heights Indep. Sch. Dist., 703 F.3d 801, 808 (5th Cir. 2012) ("We have specifically treated appeals of 59(e) motions for reconsideration as appeals of the underlying judgment when the intent to do so was clear." (alterations omitted) (quoting Alberta Energy Partners v. Blast Energy Servs., Inc., 593 F.3d 418, 424 n.3 (5th Cir. 2010))). "[I]n determining the fairly inferred scope of the appeal," we "consider not only the notice, but also the appellant's brief." Williams v. Henagan, 595 F.3d 610, 616 (5th Cir. 2010) (per curiam).
Here, the Smithers' notice of appeal only designated the district court's May 27, 2016, order denying their Rule 59(e) motion. Nonetheless, we can infer from their appeal of the denial of the Rule 59(e) motion, together with the fact that the Smithers (and Ditech) fully briefed on appeal the issues raised by the underlying dismissal, that the Smithers clearly intended to also appeal this dismissal. See, e.g., R.P., 703 F.3d at 808Lockett, 230 F.3d at 700. Because Ditech has not asserted it was prejudiced by the omission of the dismissal from the notice of appeal, we have jurisdiction to review the underlying dismissal order. See, e.g., Alberta Energy Partners, 593 F.3d at 424 n.3Lockett, 230 F.3d at 700.

III. STANDARD OF REVIEW

"We generally review a decision on a motion to alter or amend judgment under Rule 59(e) for abuse of discretion." Pioneer Nat. Res. USA, Inc. v. Paper, Allied Indus., Chem. & Energy Workers Int'l Union Loc. 4-487, 328 F.3d 818, 820 (5th Cir. 2003). However, the standard of review is de novo where the ruling seeks reconsideration of a question of law. Id. We likewise review a district court's grant of a motion to dismiss de novo, accepting all well-pleaded facts as true and viewing them in the light most favorable to the plaintiff. Sullo & Bobbitt, 765 F.3d at 391.
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Aschroft v. Iqbal,556 U.S. 662, 678 (2009) (quoting Bell Atlantic 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." Id. "Where a complaint pleads facts that are `merely consistent with' a defendant's liability, it `stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 557).

IV. FAILURE TO STATE A CLAIM

The Smithers contend that the district court erred in dismissing their case and denying their motion for reconsideration because they stated a plausible claim (1) for a declaration that Ditech's right to foreclosure was time-barred by Texas Civil Practice and Remedies Code § 13.605's four-year statute of limitations for foreclosure actions; (2) that Ditech violated the TDCA; and (3) that Ditech violated that FDCPA. We begin our analysis with the Smithers' claim that Ditech is time-barred from foreclosing on its lien on the Property.

A. Claim for Declaratory Relief

Under Texas law, "[a] person must bring suit for the recovery of real property under a real property lien or the foreclosure of a real property lien not later than four years after the day the cause of action accrues." Tex. Civ. Prac. & Rem. Code § 16.035(a). "On the expiration of the four-year limitations period, the real property lien . . . become[s] void." Id. § 16.035(d). Where, as here, the note secured by the real property lien is payable in installments, "the four-year limitations period does not begin to run until the maturity date of the last . . . installment." Id. § 16.035(e). However, if the note contains an option to accelerate payment upon default, "the action accrues . . . when the holder actually exercises its option to accelerate." Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001).
To effectively accelerate payment of a note, the noteholder must provide "(1) notice of intent to accelerate and (2) notice of acceleration." Id.see also Boren v. U.S. Nat. Bank Ass'n, 807 F.3d 99, 104 (5th Cir. 2015). The notice of intent to accelerate "must afford an opportunity to cure the default" and provide notice "that failure to cure will result in acceleration of the note and foreclosure." Ogden v. Gibraltar Sav. Ass'n, 640 S.W.2d 232, 233 (Tex. 1982). Once the requisite notice of intent is provided, notice of acceleration may take the form of the filing of a foreclosure action. See Burney v. Citigroup Glob. Mkts. Realty Corp., 244 S.W.3d 900, 903-04 (Tex. App.-Dallas 2008, no pet.). Notice of acceleration "cuts off the debtor's right to cure his default and gives notice that the entire debt is due and payable." Ogden, 640 S.W.2d at 234. However, once the noteholder has accelerated payment of the note, the holder may abandon that acceleration, which "`has the effect of restoring the contract to its original condition,' [and] thereby `restoring the note's original maturity date' for purposes of accrual." Boren,807 F.3d at 104 (quoting Khan v. GBAK Props., Inc., 371 S.W.3d 347, 353 (Tex. App.-Houston [1st Dist.] 2012, no pet.)); see also Holy Cross Church of God in Christ, 44 S.W.3d at 566-67.
In determining whether a noteholder has abandoned acceleration, Texas courts have referenced traditional principles of waiver. Boren, 807 F.3d at 105. "Under Texas law, the elements of waiver include: (1) an existing right, benefit, or advantage held by a party; (2) the party's actual knowledge of its existence; and (3) the party's actual intent to relinquish the right, or intentional conduct inconsistent with the right." Id. (quoting Thompson v. Bank of Am. Nat'l Ass'n, 783 F.3d 1022, 1025 (5th Cir. 2015)). One way in which Texas courts have recognized that a noteholder may evince its intent to waive a prior acceleration is by voluntarily nonsuiting an action to collect on the note or to foreclose on the lien securing the note. See Denbina v. City of Hurst, 516 S.W.2d 460, 463 (Tex. Civ. App.-Tyler 1974, no writ) ("[T]he City had a right to withdraw or revoke its option to accelerate payment, and effectively expressed its intent to do so by taking a non-suit."); see also, e.g., Costello v. U.S. Bank Tr., N.A., No. H-16-702, 2016 WL 5871459, at *4 (S.D. Tex. Oct. 7, 2016) ("Acceleration can be abandoned by . . . a creditor's voluntary dismissal of its claims against a debtor."), appeal docketed, No. 16-20739; Wells Fargo Bank v. Mata, No. A-14-CA-00909-SS, 2016 WL 7616627, at *4 (W.D. Tex. Oct. 12, 2016) ("[T]he first acceleration of Defendants' debt . . . was abandoned . . . when Plaintiff filed its motion for nonsuit in the First Foreclosure Action."); Bitterroot Holdings, LLC v. MTGLQ Inv'rs, L.P., No. 5:14-CV-862, 2015 WL 363196, at *6 (W.D. Tex. Jan. 27, 2015) ("[T]he prior Notices of Acceleration issued by [the lender] . . . were abandoned when [the lender] dismissed its claims without prejudice in state court."), aff'd, 648 F. App'x 414 (5th Cir. 2016) (per curiam).
In both their original petition and amended complaint, the Smithers alleged that Bank of America voluntarily dismissed the 2009 Foreclosure Suit. They concede that, at the motion to dismiss stage, we must accept this fact as true, but argue that the facts alleged nonetheless do not support the reasonable inference that Bank of America waived the 2009 Acceleration because there is "nothing in the [pleadings] to indicate that [Ditech] sent a second set of acceleration notices to the[m]."[6] In support, the Smithers point to Callan v. Deutsche Bank Tr. Co. Ams. (Callan I), 11 F. Supp. 3d 761 (S.D. Tex. 2014). There, the district court held that Deutsche Bank had not abandoned acceleration of a note when it dismissed a 2008 foreclosure action because Deutsche Bank "relied on the same November 6, 2007 notice of acceleration in filing its second foreclosure proceeding in February 2009." Id. at 769. According to the district court, Deutsche Bank's reliance on the prior notice of acceleration "ma[d]e clear that Deutsche did not abandon the acceleration by dismissing the 2008 action." Id. The district court further held that Deutsche Bank's subsequent rescission of the November 6, 2007 notice of acceleration was ineffective due to the borrower's detrimental reliance on the acceleration and, therefore, concluded that Deutsche Bank's third foreclosure action, filed in 2012, was time-barred. Id. at 772.
The Smithers' "reliance on . . . Callan [I] is misplaced." Leonard v. Ocwen Loan Servicing, L.L.C., 616 F. App'x 677, 680 (5th Cir. 2015) (per curiam). "[T]he district court [in Callan] later amended its judgment and held that, contrary to its earlier opinion, `Deutsche was entitled to rescind, and its [foreclosure application] . . . was not time-barred.'" Id. (omission and third alteration in original) (quoting Callan v. Deutsche Bank Tr. Co. Ams. (Callan II), 93 F. Supp. 3d 725, 737 (S.D. Tex. 2015)). Significantly, the district court's opinion in Callan II omitted the holding in Callan I that Deutsche Bank did not abandon acceleration of the note when it dismissed the 2008 foreclosure action—the holding upon which the Smithers almost entirely rest their case. Callan II, 93 F. Supp. 3d at 737-38.
But even if the Smithers' reliance on Callan I were not misplaced, the Smithers' position still must be rejected. The Smithers did not allege in either their original petition or their amended complaint that Ditech did not, in fact, provide them a second set of acceleration notices in connection with the 2015 Foreclosure Suit. Instead, they argue that the absence of an allegation as to separate acceleration notices supports the reasonable inference that no separate acceleration notices were provided and, therefore, that the 2009 Acceleration was not abandoned. We disagree. The original petition and amended complaint are devoid of any factual allegations that would support a reasonable inference that Ditech did not send separate acceleration notices,[7] much less support the inference that Bank of America did not abandon the 2009 Acceleration. Indeed, the credit reporting activity about which the Smithers also complain suggests that the 2009 Acceleration was, in fact, abandoned. For instance, in 2013, the Loan was reported as closed with a delinquency of $13,101—far less than the Loan's accelerated balance of $406,323.83.[8] Accordingly, the Smithers failed to state a plausible claim for declaratory relief.

B. TDCA Claim

In their amended complaint, the Smithers asserted, in relevant part, that Ditech "misrepresented the character, extent, or amount of a consumer debt in violation of Tex. Fin. Code § 392.304(a)(8)" by not reflecting the abandonment of the 2009 Acceleration "on information provided to credit reporting agencies."[9] To state a claim under § 392.304(a)(8), a plaintiff must plausibly allege a misrepresentation led him or her to be unaware (1) that he or she had a mortgage debt, (2) of the specific amount owed, or (3) that he or she had defaulted. See Rucker v. Bank of Am., N.A., 806 F.3d 828, 832 (5th Cir. 2015)Miller v. BAC Home Loans Servicing, L.P., 726 F.3d 717, 723 (5th Cir. 2013)see also Robinson v. Wells Fargo Bank, N.A., 576 F. App'x 358, 363 (5th Cir. 2014) (per curiam). The Smithers' amended complaint fails to make any such allegation. Accordingly, the Smithers failed to state a plausible claim that Ditech violated the TDCA.

C. FDCPA Claim

The Smithers asserted in their amended complaint that Ditech violated the FDCPA "[b]y continuing to report the past-due amounts on the Loan and the foreclosure of the Loan on the [Smithers'] credit reports even though either the debt is no longer enforceable or the foreclosure was abandoned." The FDCPA prohibits "false, deceptive, or misleading representation[s] or means in connection with the collection of any debt." 15 U.S.C. § 1692e. A claim under the FDCPA must be brought within one year from the date the violation occurs. 15 U.S.C. § 1692k(d). Here, the only credit reporting activity that is alleged to have occurred within the one-year limitations period is a report by Greentree Financial Services that foreclosure proceedings were initiated in 2015. The Smithers have failed to show how Greentree Financial Services is related to Ditech or how that specific report was false, deceptive, or otherwise misleading. Moreover, the Smithers have failed to raise any basis for tolling limitations as to any other alleged misrepresentation. Accordingly, the Smithers failed to state a plausible claim that Ditech violated the FDCPA.

V. CONCLUSION

For the foregoing reasons, the judgment of the district court is AFFIRMED.
[*] 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.
[1] This factual background is drawn from the allegations in the Smithers' pleadings, which the court must accept as true in considering whether dismissal was appropriate. See Sullo & Bobbitt, P.L.L.C. v. Milner, 765 F.3d 388, 391 (5th Cir. 2014).
[2] § 16.035 states, in part, that "[a] person must bring suit for the recovery of real property under a real property lien or the foreclosure of a real property lien not later than four years after the day the cause of action accrues." Tex. Civ. Prac. & Rem. Code § 16.035(a).
[3] The parties dispute whether the Smithers' amended complaint was timely filed under Federal Rule of Civil Procedure 15(a)(1)(B), such that it, rather than the Smithers' original petition, should be considered in analyzing whether the Smithers stated claims upon which relief could be granted. Rule 15(a)(1)(B) allows a party to amend its pleadings "once as a matter of course within . . . 21 days after service of a responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier." The Smithers assert that their amended complaint was timely because it was filed within 21 days of Ditech's motion to dismiss. Ditech counters that the amended complaint was untimely because it was filed more than 21 days after Ditech filed its general denial in state court. We need not, and do not, resolve this dispute because, as discussed infra, the Smithers' amended complaint and original petition both fail to state a claim upon which relief can be granted.
[4] Although styled as a motion for new trial pursuant to Federal Rule of Civil Procedure 59(a), we construe the Smithers' motion as a motion to alter or amend the judgment under Rule 59(e) because there was no trial. See Calhoun v. FBI, 546 F. App'x 487, 489 n.2 (5th Cir. 2013) (per curiam)Patin v. Allied Signal, Inc., 77 F.3d 782, 785, n.1 (5th Cir. 1996). Indeed, on appeal, both parties analyze the Smithers' motion as a Rule 59(e) motion to reconsider the district court's dismissal order.
[5] In its cursory treatment of this issue, Ditech asserts that we are not required to consider the underlying dismissal, but does not specifically assert that we lack jurisdiction over that order. Nonetheless, the Smithers interpret and brief Ditech's argument as a challenge to our jurisdiction.
[6] The Smithers also argue that Bank of America and Ditech made statements inconsistent with abandonment of the 2009 Acceleration—namely, that Bank of America and Ditech reported to credit agencies "that the Property was in the process of foreclosure or in foreclosure" following the voluntary dismissal of the 2009 Foreclosure Suit. According to the Smithers' own argument, however, these statements would be consistent with abandonment if Bank of America and Ditech did, in fact, provide separate acceleration notices. Thus, the Smithers' argument about the statements is, at base, the same as their argument about Ditech's failure to provide a second set of acceleration notices.
[7] In fact, Ditech has provided the court with separate acceleration notices that were apparently provided to the Smithers in connection the 2015 Foreclosure Suit and asked that we take judicial notice of them. Because the Smithers' claim fails regardless of whether we accept or reject Ditech's request to take judicial notice, we need not, and do not, address whether it would be appropriate for us to take judicial notice of the separate acceleration notices.
[8] Contrary to the Smithers' position, the reports by Bank of America and Ditech "that the Property was in the process of foreclosure or in foreclosure" following the voluntary dismissal of the 2009 Foreclosure Suit do not support the inference that Bank of America did not abandon the 2009 Acceleration. As an initial matter, the Smithers' position assumes that Bank of America and Ditech could not subsequently foreclose on the Property to recover on only the unaccelerated, delinquent balance of the Loan. The Smithers, however, have cited absolutely no factual or legal basis for that assumption. Moreover, even if re-acceleration were a prerequisite to a subsequent foreclosure, as the Smithers assume, the pleadings are devoid of any factual allegation that would support the inference that Bank of America and Ditech did not provide, or would not have provided, separate notices of acceleration, which the Smithers concede would confirm abandonment.

[9] The Smithers concede that the other TDCA claim asserted in their original petition and amended complaint—that Ditech violated the TDCA by continuing to report on the Smithers' credit reports past-due amounts on the Loan, even though that debt was no longer enforceable—fails in light of our holding that they have not stated a claim for declaratory relief. Accordingly, we do not separately address that claim.

No comments:

Post a Comment