Court Opinion

ID: 6322136
Source: CourtListenerOpinion
Date Created: 2022-03-11 01:00:37.376817+00
Date Added: 2024-06-11T09:20:37.994236
License: Public Domain

Case: 20-30670    Document: 00516234017       Page: 1     Date Filed: 03/10/2022

          United States Court of Appeals
               for the Fifth Circuit                                United States Court of Appeals
                                                                             Fifth Circuit

                             _____________                                 FILED
                                                                     March 10, 2022
                             No. 20-30670                             Lyle W. Cayce
                          consolidated with                                Clerk
                             No. 21-30060
                            _____________

   Darrell Berry; Constance Lafayette,

                                                        Plaintiffs—Appellants,

                                    versus

   Wells Fargo Bank, N.A.; Federal Home Loan Mortgage
   Corporation, "Freddie Mac" as trustee for securitized
   trust; Loancity; Freddie Mac Multiclass Certificates
   Series 3113 Trust; Mortgage Electronic Registration
   System, "MERS"; Does 1-100, "inclusive"; John Doe 1; John
   Doe 2, Sponsor of the Freddie Mac Multiclass
   Certificates, Series 3113 Trust,

                                                     Defendants—Appellees.

                 Appeal from the United States District Court
                     for the Middle District of Louisiana
                           USDC No. 3:18-CV-888

   Before Southwick, Haynes, and Higginson, Circuit Judges.
Case: 20-30670      Document: 00516234017         Page: 2    Date Filed: 03/10/2022

                                    No. 20-30670
                                  c/w No. 21-30060

   Per Curiam:*
          Proceeding pro se, Appellants Darrell Berry and Constance Lafayette
   appeal the district court’s dismissal of their various claims against Appellees
   Wells Fargo Bank, N.A. (“Wells Fargo”) and Federal Home Loan Mortgage
   Corporation, Freddie Mac Multiclass Certificates Series 3113, and Mortgage
   Electronic Registration System (collectively, “Freddie Mac Defendants”).
   For the following reasons, we AFFIRM.
                    I.    Factual and Procedural Background
          Appellants filed suit in Louisiana state court against LoanCity, Wells
   Fargo, Federal Home Loan Mortgage Corporation (“Freddie Mac”),
   Freddie Mac Multiclass Certificates Series 3113, Mortgage Electronic
   Registration System (“MERS”), and John Does 1–100. Appellants’ original
   petition asserted eight claims: (1) lack of standing/wrongful foreclosure;
   (2) unconscionable contract; (3) breach of contract against LoanCity and
   MERS; (4) breach of fiduciary duty; (5) quiet title; (6) slander of title;
   (7) injunctive relief; and (8) declaratory relief. Defendants–Appellees jointly
   removed the case to federal court.
          Appellants’ claims arose after Berry and Lafayette executed a
   promissory note for a home in Baton Rouge, Louisiana, in 2005, secured by a
   mortgage in the amount of $184,000. According to Appellants’ original
   petition, the “Original Lender” of the note and mortgage was LoanCity, and
   MERS served as nominee. Appellants asserted that the promissory note was
   “sold, transferred, assigned and securitized into the Freddie Mac Multiclass
   Certificates, Series 3113 with an issue date of February 27, 2006.” Following
   that assignment, “MERS failed to record any Assignment of Deed of Trust
   in the Parish of East Baton Rouge Recorder’s Office.”            MERS then

          *
            Pursuant to 5th Circuit Rule 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 Circuit Rule 47.5.4.

                                         2
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                                     No. 20-30670
                                   c/w No. 21-30060

   “attempt[ed] to assign” the mortgage to Wells Fargo on November 13, 2012.
   Appellants accordingly asserted that none of the Defendants–Appellees
   “perfect[ed] any security interest in the Real Property”; thus, they lacked a
   valid interest in the property and had no “power of sale” or “power to
   foreclose.”
          Wells Fargo and the Freddie Mac Defendants moved to dismiss
   Appellants’ original petition for failure to state a claim, and the district court
   granted both motions. Appellants filed motions to reconsider the dismissal
   of their claims. Concluding that Appellants potentially raised new issues, the
   district court granted the motions for reconsideration and granted leave for
   Appellants to file an amended petition.
          Appellants asserted the same eight claims against Defendants–
   Appellees in their amended petition. Though the amended petition was
   largely duplicative of the original, Appellants elaborated on their claims and
   asserted two new allegations: that (1) Wells Fargo falsely told the district
   court that it had not foreclosed on the relevant property; and (2) the
   mortgage note had been cancelled, making the note an absolute nullity and
   any subsequent conveyance fraudulent. Defendants-Appellees again moved
   to dismiss. Concluding that, despite their “second bite of the apple,”
   Appellants were still unable to assert cognizable claims against Defendants–
   Appellees, so the district court dismissed Appellants’ amended petition.
   Appellants filed a motion to vacate the judgment, which the district court
   denied. Appellants timely appealed both the district court’s dismissal of the
   original petition and the amended petition.            We now consider the
   consolidated appeals.
                             II.    Standard of Review
          We review a district court’s grant of a Rule 12(b)(6) motion to dismiss
   de novo. Hammer v. Equifax Info. Servs., L.L.C., 974 F.3d 564, 567 (5th Cir.

                                           3
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                                          No. 20-30670
                                        c/w No. 21-30060

   2020). “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.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp.
   v. Twombly, 550 U.S. 544, 570 (2007)). We “accept as true all of the
   allegations contained in a complaint,” but that principal does not apply to
   legal conclusions or “[t]hreadbare recitals of the elements of a cause of
   action, supported by mere conclusory statements.” Id.
                                      III.     Discussion
           Appellants advance eighteen issues on appeal.                      We recognize
   Appellants’ pro se status, and thus construe their filings liberally. See
   Erickson v. Pardus, 551 U.S. 89, 94 (2007). We note, however, that pro se
   litigants are not “exempt . . . from compliance with relevant rules of
   procedural and substantive law.” Birl v. Estelle, 660 F.2d 592, 593 (5th Cir.
   Nov. 1981) (per curiam).            With this in mind, we discuss Appellants’
   jurisdictional, procedural, and merits arguments, in turn. 1
           A. Subject Matter Jurisdiction
           Appellants assert multiple arguments challenging jurisdiction. We
   find these arguments unconvincing and conclude that federal court
   jurisdiction is proper. Appellants first argue that Defendants-Appellees

           1
              The Freddie Mac Defendants assert that Appellants waived many of the issues
   on appeal by failing to present them to the district court. However, Appellants raised most
   of these issues in their motion to vacate the district court judgment. Construing
   Appellants’ briefing liberally and acknowledging that at least some “[i]ssues may be raised
   for the first time in post-judgment motions,” N.Y. Life Ins. Co. v. Brown, 84 F.3d 137, 141
   n.4 (5th Cir. 1996), we conclude that waiver has not been proven. That said, Appellants’
   opening brief fails to specifically address how the district court erred in dismissing many of
   their claims (including breach of contract, unconscionable contract, and their claims for
   injunctive and declaratory relief). These claims are thus forfeited on appeal. See Jefferson
   Cmty. Health Care Ctrs., Inc. v. Jefferson Par. Gov’t, 849 F.3d 615, 626 (5th Cir. 2017).

                                                 4
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                                          No. 20-30670
                                        c/w No. 21-30060

   improperly removed the case to federal court because the district court
   lacked subject matter jurisdiction. We disagree; removal was proper here.
   Wells Fargo removed this case based on diversity jurisdiction, and all
   requirements for diversity jurisdiction were met. See 28 U.S.C. § 1332(a)(1).
   Moreover, the district court had federal question jurisdiction because
   Freddie Mac is statutorily authorized to remove any case to which it is a party
   under 12 U.S.C. § 1452(f). 2 See also 28 U.S.C. § 1442(a).
           Second, Appellants urge that Younger abstention prevented the
   district court from hearing the case. According to Appellants, Younger
   abstention applies because they filed this action in state court to reverse a
   foreclosure judgment issued in a separate state court proceeding. 3 Thus, per
   Appellants, removal of this action impermissibly interfered with state court
   action. But Younger abstention is inapplicable in this civil case because there
   is no relevant ongoing state action. The state court proceeding where the
   foreclosure judgment was rendered is no longer pending; and this action was
   removed entirely to federal court. See Ankenbrandt v. Richards, 504 U.S. 689,
   705 (1992) (“Absent any pending proceeding in state tribunals,” applying
   “Younger abstention was clearly erroneous.”); see also Village of DePue v.
   Exxon Mobile Corp., 537 F.3d 775, 783 (7th Cir. 2008) (“Removal under 28

           2
             In their reply, Appellants argue that Defendants-Appellees cannot assert federal
   question jurisdiction because: (1) “they did not check [the] Federal Question” box on the
   civil cover sheet submitted with their notice of removal, and (2) “Freddie Mac is not a
   federal agency.” These arguments are unavailing. As to the first, of course, “a federal
   court always has jurisdiction to determine its own jurisdiction,” so whatever was indicated
   on the civil cover sheet is irrelevant. United States v. Ruiz, 536 U.S. 622, 628 (2002). As
   to the second, the Supreme Court has made it clear that Freddie Mac is an agency
   authorized to remove under 12 U.S.C. § 1452(c) and (f). Lightfoot v. Cendant Mortg. Corp.,
   137 S. Ct. 553, 564 (2017). Therefore, the district court has jurisdiction over cases removed
   by Freddie Mac, independent of any federal question.
           3
              Notably, this state court foreclosure judgment is not in the record on appeal and
   is only referenced as “Petition’s Order” in a screen shot of the state court docket.

                                                5
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                                         No. 20-30670
                                       c/w No. 21-30060

   U.S.C. § 1441 simply does not leave behind a pending state proceeding that
   would permit Younger abstention.”).
           Appellants’ third argument—that the Rooker-Feldman doctrine
   precludes federal court jurisdiction—also fails. Rooker-Feldman bars a federal
   district court from modifying or reversing a state court judgment. Union
   Planters Bank Nat. Ass’n v. Salih, 369 F.3d 457, 462 (5th Cir. 2004).
   Appellants assert that Rooker-Feldman applies because this action is a
   “wrongful foreclosure lawsuit” challenging a previously issued “foreclosure
   judgment” in state court. But, as the district court noted, Appellants failed
   to allege that Wells Fargo, or any other party, has foreclosed on their
   property. 4 So at this juncture, there is no foreclosure to address, rendering
   the claimed state court ruling inapposite and making Rooker-Feldman
   inapplicable. 5
                        i. Standing and Mootness
           The district court held that Appellants lacked standing to challenge
   the assignment of the relevant loan. We agree. Appellants are neither a party
   to, nor a third-party beneficiary of, the agreement assigning the mortgage to

           4
              Wells Fargo did initiate foreclosure proceedings in Louisiana state court. But
   before foreclosing on the property, Wells Fargo assigned the loan to Specialized Loan
   Servicing, LLC, who is not a party to this lawsuit. Additionally, as aforementioned, the
   “foreclosure judgment” is not in the record on appeal; and nothing in the record suggests
   that Appellants currently lack possession of their home. Indeed, the property’s address is
   listed in the signature block in Appellants’ briefing.
           5
              Appellants argue that they were harmed because they were “forc[ed]” to file for
   bankruptcy to prevent foreclosure and “possible eviction from their home.” Of course,
   Appellants could have filed for bankruptcy for a variety of reasons, and they have yet to be
   evicted. This alleged harm is accordingly too attenuated from the “foreclosure judgment”
   for Rooker-Feldman to apply. In any event, a “judgment” allowing (or banning) a
   foreclosure on a particular date is not necessarily determinative of all future proceedings
   regarding the mortgage as things can change (e.g., payments made or not, notices given or
   not, etc.).

                                                6
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                                         No. 20-30670
                                       c/w No. 21-30060

   another entity. They thus “lack the requisite standing to bring suit to enforce
   the terms of the [agreement] that govern the assignment of the mortgagor’s
   note.” See Farkas v. GMAC Mortg., L.L.C., 737 F.3d 338, 342 (5th Cir. 2013).
   Accordingly, all claims relating to the improper assignment of the loan fail for
   lack of standing. 6
           We also note that many of Appellants’ claims against Wells Fargo are
   likely moot. A claim is moot when “the parties lack a legally cognizable
   interest in the outcome.” Powell v. McCormack, 395 U.S. 486, 496 (1969).
   Before Appellants filed their original petition, Wells Fargo assigned the loan
   to Specialized Loan Servicing, LLC (“SLS”). Therefore, Wells Fargo has
   no interest in the loan, and no ability to “wrongful[ly] foreclose” or “assert[]
   an unsecured claim” against the property. 7 However, as the district court
   noted, Appellants’ original and amended petitions asserted a variety of
   general claims against “Defendants” without specifying which Defendant
   took which action. Without the ability to delineate which claims apply to

           6
             This includes Appellants’ claims regarding whether MERS properly assigned the
   note and mortgage from LoanCity to Wells Fargo in 2012; whether Appellees committed
   “[f]raud from misrepresentation or from silence”; and, to the extent this claim can be
   understood, whether the note is “non-negotiable” under the UCC, OCC regulations, and
   the doctrine of ultra vires.
           7
              Appellants assert that Wells Fargo committed perjury “when they stated that
   they were not going to foreclose” on Appellants’ property. In response, Wells Fargo noted
   that Appellants’ perjury claim is predicated on a “Notice of Seizure” issued by the East
   Baton Rouge Parish Sheriff’s Office over a month after Wells Fargo assigned its interest to
   SLS. We agree with the district court that “[i]t is reasonable that Wells Fargo, having
   assigned its interest in the note on Plaintiffs’ property to [SLS] and, therefore, no longer
   having an interest in the loan, has no plans to foreclose on Plaintiffs’ property,” and that
   the “statement that [Wells Fargo] is unaware if any other entity has plans to foreclose on
   Plaintiffs’ property also, without additional evidence, does not appear false.” That is
   especially true considering Appellants have not alleged or indicated that SLS confirmed
   plans to foreclose on the property or that any foreclosure sale has occurred.

                                                7
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                                         No. 20-30670
                                       c/w No. 21-30060

   whom, we proceed with reviewing the district court’s analysis and other
   issues raised on appeal. 8
           B. Alleged Procedural Deficiencies
           Appellants argue that the district court committed a myriad of
   procedural violations. None of these arguments have merit. Appellants first
   claim that, because LoanCity never made an appearance in the case, the
   district court failed to uphold its “duty to confirm unanimity was reached”
   and to ensure that “all parties were served at the onset of the case.” But, of
   course, it was Appellants’ duty to properly serve all named parties, and, by
   Appellants’ own admission, they were unable to serve LoanCity because the
   entity “imploded.”         Accordingly, the district court properly dismissed
   LoanCity under Federal Rule of Civil Procedure 4(m).                       The rule of
   unanimity, which only applies to properly served defendants, is not
   implicated. See Gillis v. Louisiana, 294 F.3d 755, 759 (5th Cir. 2002).
           Appellants next argue that this matter was improperly referred to a
   magistrate judge without their consent. Upon referral, the district court
   judge instructed the magistrate judge to prepare “a report and
   recommendation . . . for review” pursuant to 28 U.S.C. § 636(b)(1)(B). The
   magistrate judge issued a report and recommendation on the Freddie Mac
   Defendants’ motion to dismiss, which, after reviewing, the district court
   adopted in full. Consent is not required for a district court to refer a motion
   to dismiss to a magistrate under § 636(b)(1)(B). See Newsome v. EEOC, 301

           8
             Due to the lack of foreclosure and Appellants’ apparent possession of their home,
   we also question the ripeness of many of Appellants’ claims. To the extent that the
   allegations address past harm, however, we will proceed with our analysis.

                                               8
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                                          No. 20-30670
                                        c/w No. 21-30060

   F.3d 227, 230 (5th Cir. 2002) (per curiam). Thus, the referral was not
   improper.
           Third, Appellants assert that the district court was biased towards
   Appellees because the Freddie Mac Defendants did not file a disclosure
   statement as required by Federal Rule of Civil Procedure 7.1. The Freddie
   Mac Defendants concede that they failed to submit a disclosure statement
   below. However, judicial rulings are rarely a basis for a claim of bias. Liteky
   v. United States, 510 U.S. 540, 555 (1994). In any event, the appropriate
   remedy for a claim of judicial bias is recusal, which Appellants never sought.
   Because Appellants failed to advance any argument showing “good cause
   why [they] did not file an affidavit requesting the trial judge to recuse
   himself” pursuant to 28 U.S.C. § 144, or “exceptional circumstances why
   we should consider [the issue] for the first time on appeal,” we refuse to
   entertain this argument now. Clay v. Allen, 242 F.3d 679, 681 (5th Cir. 2001)
   (per curiam).
           Finally, 9 Appellants urge that the district court’s dismissal of their
   claims was “invalid.” This largely nonsensical argument is predicated on the
   fact that, despite initially claiming LoanCity was the original lender of the
   note, Equifirst (an entity that is not a party to this case) was actually the
   original lender. According to Appellants, the Equifirst note was cancelled

           9
              Appellants assert two additional procedural deficiencies: that (1) they were
   “denied the right to pursue discovery”; and (2) the district court erred by dismissing
   Appellants’ claims “in light of Fraud Rule 60(b)(3), (4).” Appellants’ argument regarding
   the right to discovery was not raised before the district court and is accordingly waived. See
   United States v. Bigler, 817 F.2d 1139, 1140 (5th Cir. 1987). Regarding “Fraud Rule 60(b),”
   Appellants quote directly from Federal Rule of Civil Procedure 60(b), so we assume
   arguendo that is what they refer to. Rule 60(b)(3) allows a court to set aside a final judgment
   for fraud, but Appellants’ argument is based on improper securitization, which, as
   discussed below, is meritless. We conclude that all other alleged procedural violations
   raised in Appellants’ opening brief are entirely baseless.

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                                         No. 20-30670
                                       c/w No. 21-30060

   and paid in full, 10 making the district court’s order dismissing their claims
   “invalid” under La. Civ. Code Ann. art. 2033. That statute outlines the
   effect of a contract that “has been declared null by the court,” and is entirely
   inapplicable here. See id. In any event, the Equifirst note was from 2002,
   while the note at issue here was from 2005, so it is irrelevant.
           C. Merits
           We now turn to Appellants’ remaining issues on appeal. To the extent
   Appellants’ arguments challenge the district court’s dismissal of the claims
   in the original and amended petitions, we agree with the district court’s
   conclusions. To the extent Appellants raise extraneous issues on the merits,
   we conclude they are unavailing.
           Appellants first argue that the district court erred in its conclusion that
   they lack a private right of action for mortgage fraud. It did not. A criminal
   statute must “explicitly” indicate that it is providing for a private right of
   action. See Chevalier v. L.H. Bossier, Inc., 676 So. 2d 1072, 1076 (La. 1996),
   superseded by statute, La. Stat. Ann § 1173, as stated in Leon v. Diversified
   Concrete, LLC, 225 F. Supp. 3d 596, 600–01 (E.D. La. 2016). Louisiana’s
   mortgage fraud statute does not authorize such relief. See La. Stat. Ann
   § 14:71.3.
           Appellants also argue that the district court erred “because a faulty
   securitization process opens homeowners to false claims of enforcement of a

           10
              Appellants attempted to attach an “Affidavit of Lost Note and Authorization to
   Cancel Mortgage” to its amended petition to support this notion, but it was properly
   stricken from the record as untimely filed. Assuming arguendo that this document was
   properly submitted elsewhere in Appellants’ pleadings, it does not support Appellants’
   assertion. Though the document states that a note and mortgage was paid in full, it
   seemingly refers to a different note than the one at issue here. The note referenced in the
   affidavit was issued in 2002 for an amount of $176,310; whereas the note at issue in the
   original petition was executed in 2005 for an amount of $184,000.

                                               10
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                                           No. 20-30670
                                         c/w No. 21-30060

   note.” Per Appellants, the improper securitization eliminates all Appellees’
   interest in the note and property. Because “Appellees initiated action to take
   Appellants’ home in 2018, and have set the conditions for successors to try
   and do the same,” Appellants assert that they are entitled to quiet title “[t]o
   prevent a similar future traumatic event.” The district court aptly concluded
   that the faulty securitization argument has been “resoundingly rejected by
   federal courts across the country.” Berry v. LoanCity, No. 18-888-JWD-
   RLB, 2019 WL 2870849, at *5 (M.D. La. July 3, 2019) (holding the theory
   that improper securitization renders a subsequent assignment invalid
   meritless and collecting cases). We likewise reject the argument here.
           Finally, Appellants assert that their rights under the Louisiana
   constitution were violated for wrongful seizure and conversion. 11                          As
   discussed above, Appellants are still in possession of their property, meaning
   no seizure has occurred. This argument is meritless. 12
           AFFIRMED.

           11
               Appellants’ claim under 42 U.S.C. § 1983 is clearly inapplicable. Appellants
   utterly fail to advance a claim for violation of a federally secured right against an individual
   acting under color of state law.
           12
              We note that, in Louisiana, initiation of foreclosure proceedings combined with
   notices of eviction may be sufficient to create a cognizable claim for wrongful seizure. See
   Rayner v. Evangeline Bank & Tr. Co., 219 So. 3d 1122, 1124 (La. Ct. App. 2017). But here,
   Appellants only allege that Wells Fargo initiated foreclosure proceedings. Moreover, a
   valid claim for wrongful seizure requires that the seizure be caused by an individual or entity
   owing the plaintiff a duty, and breach of that duty. See Taylor v. Hancock Bank of La., 665
   So. 2d 5, 7 (La. Ct. App. 1995). Appellants failed to advance a cognizable claim that any
   Defendants-Appellees owed them a relevant duty. Thus, without more, we agree with the
   district court that Appellants have failed to state a claim for wrongful seizure of their
   property.

                                                 11