Court Opinion

ID: 820489
Source: CourtListenerOpinion
Date Created: 2013-02-14 00:24:21.25345+00
Date Added: 2024-06-11T15:26:30.978635
License: Public Domain

Case: 12-40032     Document: 00512142421     Page: 1   Date Filed: 02/13/2013

         IN THE UNITED STATES COURT OF APPEALS
                  FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                  Fifth Circuit

                                                                     FILED
                                                               February 13, 2013
                                  No. 12-40032
                                                                 Lyle W. Cayce
                                                                      Clerk

JOHN PRIESTER, JR.; BETTIE PRIESTER,

                                            Plaintiffs-Appellants,
versus

JP MORGAN CHASE BANK, N.A.; JP MORGAN CHASE & COMPANY.;
LONG BEACH MORTGAGE COMPANY; ALAMO TITLE COMPANY;
CRISTOBAL M. GALINDO, P.C.; GALINDO LAW & TITLE;
GALINDO CRISTOBAL TITLE SERVICES; CRISTOBAL M. GALINDO;
KRISTEN L. TINSLEY,

                                            Defendants-Appellees.

                 Appeal from the United States District Court
                      for the Eastern District of Texas

Before DAVIS, JONES, and SMITH, Circuit Judges.
JERRY E. SMITH, Circuit Judge:

      Appellants John and Bettie Priester obtained a loan backed by a lien on
their homestead from a bank eventually obtained by JP Morgan Chase Bank,
N.A. The mortgage agreement was signed at the Priesters’ house in violation of
the Texas Constitution. Almost five years later, the Priesters sued for a declara-
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                                 No. 12-40032

tory judgment that the lien was void and that the mortgage holder was required
to forfeit all principal and interest. The Priesters also sought damages for
defamation. The defendants successfully moved to dismiss on the ground of limi-
tations. We affirm.

                                       I.
      In November 2005, the Priesters obtained from Long Beach Mortgage
Company (“Long Beach”) a home equity loan of $180,000 secured by a first lien
on their house. They allege that the closing of the loan occurred in their home
rather than at the office of an attorney, the lender, or a title company as
required by the Texas Constitution. They also contend that they did not receive
notice of their rights twelve days before closing as required by the state
constitution.
      In July 2010, the Priesters sent a letter to Long Beach seeking “cure” of
those alleged constitutional deficiencies. No action was taken, because the loan
had been acquired by Chase. The Priesters therefore sent a letter to Chase in
August 2010, requesting cure and attaching the letter that had been sent to
Long Beach. Chase took no action to cure the perceived infirmities.
      In October 2010, the Priesters sued various defendants (collectively,
“Chase”) in state court for a declaratory judgment that, under the Texas Consti-
tution, the loan and accompanying lien on their home were “void ab initio,” that
defendants had failed to cure constitutional violations, and that therefore Chase
was required to forfeit all principal and interest. The Priesters also sought
actual and exemplary damages and attorney’s fees for defamation, maintaining
that Chase had engaged in libel by asserting that they were past due on their
payments. Chase removed to federal court.
      Chase then moved to dismiss the suit as time-barred under the four-year
statute of limitations. The Priesters, by order of the magistrate judge (“MJ”),

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filed an amended complaint, and the motion to dismiss was denied. They then
filed a second amended complaint and motion to remand and later a motion for
leave to file a second amended complaint. The suit was stayed during settlement
negotiations, and the MJ dismissed all pending motions as moot; when the par-
ties failed to settle, he allowed fourteen days for refiling, and Chase again filed
a motion to dismiss. The MJ recommended that the motion to dismiss be
granted, but the Priesters objected and filed a third amended complaint and a
second motion to remand.
       The district court adopted the recommendation of the MJ, dismissed the
suit, and struck the second and third amended complaints because they would
have joined non-diverse parties, destroying jurisdiction. The Priesters timely
appealed.

                                             II.
       We review a dismissal under Federal Rule of Civil Procedure 12(b)(6) de
novo, “accepting all well-pleaded facts as true and viewing those facts in the light
most favorable to the plaintiff.” Bustos v. Martini Club Inc., 599 F.3d 458, 461
(5th Cir. 2010) (internal quotation marks omitted). “To survive a motion to dis-
miss, a complaint must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its fact.’”1
       We review a denial of leave to amend a complaint for abuse of discretion.
See Gentilello v. Rege, 627 F.3d 540, 546 (5th Cir. 2010). “A district court abuses
its discretion if it: (1) relies on clearly erroneous factual findings; (2) relies on
erroneous conclusions of law; or (3) misapplies the law to the facts.” In re Volks-
wagen of Am., Inc., 545 F.3d 304, 310 (5th Cir. 2008) (en banc).

       1
         Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)). See generally 2 JAMES W. MOORE ET AL., MOORE’S FEDERAL PRACTICE
§ 8.04[1][b] (3d ed. 2012).

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                                             III.
       Jurisdiction is based on diversity of citizenship, so we apply the laws of
Texas as interpreted by Texas authorities.2 We therefore first look to the text of
the Texas Constitution and any decisions of the Texas courts in interpreting
these provisions. Although not controlling, “decisions of Texas intermediate
appellate courts may provide guidance.” Packard v. OCA, Inc., 624 F.3d 726, 729
(5th Cir. 2010).
       The Priesters claim that defendants violated two provisions of the Texas
Constitution. The first states that
       [t]he homestead of a family, or of a single adult person, shall be, and
       is hereby protected from forced sale, for the payment of all debts
       except for
       ...
       (6) an extension of credit that:
       ...
       (M) is closed not before:
       (i) the 12th day after the later of the date that the owner of the
       homestead submits a loan application to the lender for the extension
       of credit or the date that the lender provides the owner a copy of the
       notice prescribed by Subsection (g) of this section.

TEX. CONST. ART. XVI § 50(a)(6)(M)(i). The notice under Subsection (g) includes
a list of rights of the homeowners in securing a loan guaranteed by a lien on
their homestead.
       The second provision states that a lien on a homestead is valid only if it “is
closed [ ] at the office of the lender, an attorney at law, or a title company.” Id.
§ 50(a)(6)(N). No lien on a homestead “shall ever be valid unless it secures a
debt described by this section.” Id. § 50(c).
       If a lien is made in contravention of these requirements, the constitution

       2
         Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78–79 (1938); Guaranty Trust Co. v. York, 326
U.S. 99, 111–12 (holding that a period of limitations is a matter of state law to be determined
pursuant to Erie).

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provides for “cure.” Under Section 50(a)(6)(Q)(x), a party may give notice of a
defect, and the other party has sixty days to cure. The Priesters allege that they
did not receive the twelve-day notice, that the lien agreement was closed in their
living room, and that defendants did not cure when served notice, so the lien is
invalid.   Chase responds, and the MJ and district court agreed, that the
affirmative defense of limitations bars suit.
      We first address whether a limitations period applies to the Priesters’
claims. Although the state constitution does not include a limitations period
related to claims under Section 50(a)(6), “[e]very action for which there is no
express limitations period, except an action for the recovery of real property,
must be brought not later than four years after the day the cause of action
accrues.” TEX. CIV. PRAC. & REM. CODE § 16.051.
      The Texas Supreme Court has not addressed whether that residual limi-
tations period applies to defects in homestead liens, but the two Texas courts of
appeals that have addressed the issue have found that the residual statute
applies. Addressing a Section 50(a)(6) defect, the court in Rivera v. Countrywide
Home Loans, Inc., 262 S.W.3d 834, 839 (Tex. App.SSDallas 2008, no pet.), con-
cluded that the “four-year statute of limitations applies to the constitutional and
fraudulent lien causes of action” embodied in the Texas Constitution. The court
in Schanzle v. JPMC Specialty Mortg. LLC, No. 03-09-00639-CV, 2011 WL
832170, at *4 (Tex. App.SSAustin Mar. 11, 2011, no writ), adopted that position
as well, noting that the “four-year statute of limitations has been applied to vio-
lations of the constitutional requirements for home equity loans, calculated from
the date of closing on the loan.”
      Those courts relied in part on appellate decisions that had applied the
residual limitations period to other types of constitutional claims. For example,
in Ho v. University of Texas at Arlington, 984 S.W.2d 672, 686 (Tex. App.SS
Amarillo 1998, pet. denied), the court held that a claim under the Equal Pro-

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                                  No. 12-40032

tection Clause of the Texas Constitution was subject to the residual limitations
period, “because statutes of limitation bar the remedy and not the right, and
therefore, constitutional rights may be subjected to those time limitations
imposed by statute.” Constitutional claims, the court noted, are encumbered by
the same problems as are other types of claims—they “may become stale as do
other claims, and bring with them the associated problems with overdue law-
suits, such as faded memories, departed witnesses, and misplaced evidence.” Id.
      The court in Ho relied on Calverley v. Gunstream, 497 S.W.2d 110, 115
(Tex. Civ. App.SSDallas 1973, writ ref’d n.r.e.), which similarly held that limita-
tions periods “apply to delay in pursuit of remedies for enforcement of constitu-
tional rights as well as to any other delay in pursuit of available remedies.”
Without a limitations period, a defendant would be forced to defend himself
“after memories have faded, witnesses have died or disappeared, and evidence
has been lost,” all of which would prejudice his defense. Id. at 114.
      The decision in Doody v. Ameriquest Mortgage Co., 49 S.W.3d 342 (Tex.
2001), offers indirect support for the applicability of limitations. The court
responded to a question certified by this court on the issue of cure, explaining
that a lien cured under Section 50(a)(6)(Q) became valid even if it was “invalid”
before the cure. Id. at 347. Discussing forfeiture, the court stated that “if a lien
that secures such a loan is voided,” the lender loses all rights to recovery. Id. at
346. That language suggests that the Texas Supreme Court considers liens cre-
ated in violation of Section 50(a)(6) to be voidable rather than void—a “void” lien
could not be “voided” by future action.
      We have not before analyzed in any depth whether the statute of limita-
tions applies to the constitutional provisions at issue here. In Boutari v. JP Mor-
gan Chase Bank N.A., 429 F. App’x 407 (5th Cir. 2011) (per curiam), however,
we affirmed a judgment that limitations applies to claims under Section 50(a)(6).
In a two-sentence opinion, we said that we had “determined that the judgment

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of the district court should be affirmed for essentially the reasons set forth by the
district court.” Id. The opinion we affirmed had applied the four-year statute
of limitations. See Boutari v. JP Morgan Chase Bank, N.A., 2010 U.S. Dist.
LEXIS 144094 (W.D. Tex. June 10, 2010).
       Therefore, we have arguably already acknowledged that a limitations per-
iod applies. Numerous district and bankruptcy courts3 have also applied the
four-year limitations period.4 We thus conclude that a limitations period applies
to constitutional infirmities under Section 50(a)(6).
       Having determined that limitations applies, we must address when the
claim accrues. Generally, under Texas law, “[c]auses of action accrue and stat-
utes of limitations begin to run when facts come into existence that authorize a
claimant to seek a judicial remedy.” Exxon Corp. v. Emerald Oil & Gas Co.,
L.C., 348 S.W.3d 194, 202 (Tex. 2011). “In most cases, a cause of action accrues

       3
        See Reagan v. U.S. Bank Nat’l Ass’n, 2011 WL 4729845 (S.D. Tex. Oct. 6, 2011);
Johnson v. Deutsche Bank Nat’l Trust Co., 2010 WL 4962897 (S.D. Tex. Dec. 1, 2010); In re
Ortegon, 398 B.R. 431, 439–40 (Bankr. W.D. Tex. 2008); Hannaway v. Deutsche Bank Nat’l
Trust Co., 2011 WL 891669 (W.D. Tex. Mar. 11, 2011); Williams v. Deutsche Bank Nat’l Trust
Co., 2011 WL 891645 (W.D. Tex. Mar. 11, 2011); In re Chambers, 419 B.R. 652 (Bankr. E.D.
Tex. 2009).
       4
         The Priesters note that not all district courts to address this question have agreed.
In Smith v. JPMorgan Chase Bank, Nat’l Ass’n, 825 F. Supp. 2d 859, 861 (S.D. Tex. 2011)
adhered to on reconsideration sub nom. Smith v. JPMorgan Chase Bank Nat’l Ass’n, 2012 WL
43627 (S.D. Tex. Jan. 9, 2012), the court held that under the Texas Constitution, a “noncom-
pliant mortgage lien against a homestead is [ ] void ab initio” and that therefore the limita-
tions period does not apply. In Santos v. CitiMortgage, Inc., 2012 WL 1065464 (N.D. Tex.
Mar. 29, 2012), the court, relying on Smith, held that the limitations period did not apply and
that a constitutionally infirm lien was invalid. It did, however, apply the limitations period
to the resulting claim for forfeiture of principal and interest due four years before the suit was
brought. Id.

        The key in Smith was the finding that constitutional noncompliance renders liens void
rather than voidable. The Priesters argue that this reasoning should be applied here and that
because the lien was void ab initio, no statute of limitations applies. That conclusion, how-
ever, is contrary to the constitutional scheme. Because a cure provision exists in Sec-
tion 50(a)(6)(Q), liens that are contrary to the requirements of § 50(a) are voidable rather than
void from the start. See Doody, 49 S.W. 3d at 342.

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when a wrongful act causes a legal injury, regardless of when the plaintiff learns
of that injury or if all resulting damages have yet to occur.” Provident Life &
Acc. Ins. Co. v. Knott, 128 S.W.3d 211, 221 (Tex. 2003). This accrual rule is
referred to as the “injury rule.”
      An alternative is the “discovery rule.” “The discovery rule exception oper-
ates to defer accrual of a cause of action until the plaintiff knows or, by exercis-
ing reasonable diligence, should know of the facts giving rise to the claim.” Wag-
ner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 734 (Tex. 2001). The discovery
rule is a “very limited” exception and will be applied only “when the nature of
the plaintiff's injury is both inherently undiscoverable and objectively verifiable.”
Id. The Texas courts have set the “inherently undiscoverable” bar high, to the
extent that the discovery rule will apply only where it is nearly impossible for
the plaintiff to be aware of his injury at the time he is injured. See S.V. v. R.V.,
933 S.W.2d 1, 6–7 (Tex. 1996).
      The Priesters argue that some version of the discovery rule, rather than
the injury rule, should apply here. They contend that the period runs at the
notice of demand for cure of the constitutional deficiencies or failure to cure.
      The Texas courts that have addressed this issue have applied the injury
rule rather than the discovery rule and have held that limitations begins to run
at the closing of a lien. In Rivera, the court concluded that “the legal injury
occurred when [the lender] made a loan” violating the Texas Constitution.
Rivera, 262 S.W.3d at 840. Similarly, the court in Schanzle, 2011 WL 832170,
at *4, held that the period of limitations is “calculated from the date of closing
on the loan.”
      The district court in Boutari, which this court upheld, adopted the finding
and recommendation of the MJ that the “four-year limitation period [ ] com-
menced when the home equity loan in question closed.” Boutari, 2010 U.S.
DIST. LEXIS 144094, at *27. The district courts have applied the injury rule

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rather than the discovery rule in every case in which they have applied limi-
tations to Section 50(a)(6) violations.5
       We therefore conclude that the legal injury rule applies to the creation of
unconstitutional liens.6 Insofar as the period of limitations exists to preserve
evidence and create settled expectations, it would essentially be nullified by
allowing parties to wait many years to demand cure. The injury occurred when
the Priesters created the lien, and there was nothing that made the injury undis-
coverable. The Priesters knew that the closing documents were signed in their
living room and that they were not given notice of their rights. A lack of knowl-

       5
        See, e.g., Reagan, 2011 WL 4729845, at *4 (holding that, because the injury was “not
inherently undiscoverable,” the injury rule applies).
       6
         The Priesters argue that the cure provision and sixty-day period for cure are where
the injury occurs. They are unable to find any direct support for that novel argument. They
do cite Cummins & Walker Oil Co. v. Smith, 814 S.W.2d 884, 887 (Tex. App.SSSan Antonio
1991, no writ), which held, in a contract case, that “where the parties so frame their contract
as to make prior demand an integral part of a cause of action or a condition precedent to a
right to sue, the statute of limitations does not begin to run until demand is made.”

        The demand provision in a contract, however, is distinguishable. There is no injury at
the creation of the contract, and the parties agreed that they would attempt to cure rather
than litigate what was already a valid contract. The lien, on the other hand, is voidable from
the day of creation; the legal injury occurs at a definite point in time. Additionally, there is
nothing in the Texas Constitution that suggests that the borrower must seek cure before filing
suit.

        Further, courts that have applied Cummins have held that if there is a breach of con-
tract, a demand requirement does not indefinitely toll limitations. For example, in Aetna Cas.
& Sur. Co. v. State, 86 S.W.2d 826, 831 (Tex. Civ. App.SSFort Worth 1935, writ dism’d), the
court held that, “[w]here a demand is a condition precedent to suit, the plaintiff may not, by
failing or refusing to perform the condition, toll the running of the statute and reserve for
himself the right to sue within the statutory period from such time as he decides to make a
demand.” The court explained that “it is the general rule that in such a case a demand must
be made within a reasonable time after it may lawfully be made.” Id. This court has found
that “reasonable” period of time to relate to the statute of limitations. See United States v.
First City Capital Corp., 53 F.3d 112, 115 (5th Cir. 1995). Cummins therefore is inapposite
here; accrual occurs at injury.

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edge that that was a violation of the law is insufficient to toll limitations.7 This
is not one of the “rare” instances in which the discovery rule applies—the injury
is certain to be “discovered within the prescribed limitations period.”
       The Priesters argue that, even if a limitations period applies and accrued
at the creation of the lien, Chase is estopped from asserting a limitations
defense, because the originators of the loan “fraudulently concealed their illegal
conduct . . . , tolling the statute of limitations.” They base this argument on
Section 50(a)(6)(M)’s requirement that notice of constitutional rights be given to
homeowners twelve days before closing. They aver that defendants’ lack of
disclosure functioned as fraudulent concealment.
       The doctrine of fraudulent concealment estops defendants from raising
limitations as a defense. Where a defendant has hidden evidence of harm from
a plaintiff, he will not “be permitted to avoid liability for his actions by deceit-
fully concealing wrongdoing until limitations has run.” S.V., 933 S.W.2d at 6.
Fraudulent concealment tolls limitations “until the claimant, using reasonable
diligence, discovered or should have discovered the injury.” KPMG Peat Mar-
wick v. Harrison Cnty. Hous. Fin. Corp., 988 S.W.2d 746, 750 (Tex. 1999).
Fraudulent concealment has four elements: “(1) the existence of the underlying
tort; (2) the defendant’s knowledge of the tort; (3) the defendant’s use of decep-
tion to conceal the tort; and (4) the plaintiff’s reasonable reliance on the decep-
tion.” Holland v. Thompson, 338 S.W.3d 586, 596 (Tex. App.SSEl Paso 2010, pet.
denied).8

       7
         See Colonial Penn Ins. v. Mkt. Planners Ins. Agency Inc., 157 F.3d 1032, 1034 (5th Cir.
1998) (“The rule delays the statute of limitations only until the claimant knows or should
know the facts that could support a cause of action, not until she realizes that the facts do sup-
port a cause of action.”).
       8
        See also Glover v. Union Pac. R.R. Co., 187 S.W.3d 201, 217 (Tex. App.SSTexarkana
2006, pet. denied); Mitchell Energy Corp. v. Bartlett, 958 S.W.2d 430, 439 (Tex. App.SSFort
Worth 1997, pet. denied).

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      The first two elements are certainly met here. The constitutional violation
is not challenged, and insofar as constructive knowledge or a “should have
discovered” standard can be imposed on the Priesters, knowledge should be
imputed to the defendants as well.
      There is no evidence, however, that the defendants used “deception” to con-
ceal any constitutional violations. First, it would be impossible to conceal the
fact that the closing occurred in the Priesters’ living room. Second, the defen-
dants did not “conceal” the fact that they did not provide the required constitu-
tional notices. It is difficult to imagine how a party would conceal a lack of
disclosure.
      The Priesters argue, in their second and third amended complaints (which
were struck by the district court), that because the defendants had an attorney
sign the closing documents, they effectively represented that all legal disclosures
had been made and that the entire process comported with the constitutional
requirements. That argument, however, is meritless. The identity of the title
company signer does not represent anything. Moreover, it does not “conceal” the
Priesters’ legal rights. They could have hired their own attorney or discovered
their legal rights in any number of places. In both cases, the facts were known
and not able to be concealed.
      The Priesters contend that because the defendants had a “duty to disclose”
information pursuant to Section 50(a)(6)(M), their failure to do so acted as con-
cealment and deception; they cite no authority to support that proposition. More-
over, the disclosure did not amount to concealment, because the lenders only had
a duty to provide information regarding legal rights rather than factual informa-
tion. The Texas courts have held that this does not rise to the level of fraudulent
concealment.
      “Mere failure to disclose a cause of action or mere concealment of a cause
of action, when the defendant owes no duty to disclose, is not fraudulent conceal-

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ment.” DiGrazia v. Old, 900 S.W.2d 499, 503 (Tex. App.SSTexarkana 1995, no
writ). There is no duty to disclose here, and no special relationship. The Texas
Supreme Court has not found a mortgagor-mortgagee relationship to include
fiduciary duties.9 Because there was no evidence or allegation of the defendants’
attempting to conceal information, and because the facts that gave rise to any
claims were obvious and not hidden, the doctrine of fraudulent concealment does
not apply here to estop the lenders’ assertion of the limitations defense.
       The Priesters also claim they suffered defamation at the hands of the
defendants, because they “report[ed] delinquent payments on the Priesters’
credit reports.” The Priesters argue that this is defamatory for two reasons, first
because “home-equity loans are non-recourse,”10 and second because the “the
underlying lien is void and unenforceable.”
       The district court adopted the MJ’s conclusion that the Priesters’ defama-
tion claim was “completely dependent on a determination of the validity of the
loan” and that therefore, because the loan was valid, the derivative claim for
defamation should be dismissed. The court cited Boutari, in which we similarly
dismissed derivative defamation claims. The Priesters argue that the district
court’s conclusion was flawed: Their claim was independent and would not be
time-barred, because the alleged defamation occurred recently.
       Libel in Texas is “a defamation expressed in written [form] . . . that tends
to injure a living person’s reputation and thereby expose the person to public
hatred, contempt or ridicule, or financial injury or to impeach any person’s
honesty, integrity, virtue, or reputation.” TEX. CIV. PRAC. & REM. CODE § 73.001.

       9
        See Fed. Deposit Ins. Corp. v. Coleman, 795 S.W.2d 706, 709 (Tex. 1990) (“The rela-
tionship of mortgagor and mortgagee ordinarily does not involve a duty of good faith.”).
       10
         This argument is nonsensical. The defendants reported that the Priesters were delin-
quent in payments. Even though the Priesters are correct that the loan was non-recourse, that
does not have any bearing on whether they were delinquent.

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“In both libel and slander the issues are whether the utterance was made, if it
was false, if it damaged the complainant and if the speaker had any privilege.”
Peshak v. Greer, 13 S.W.3d 421, 426 (Tex. App.SSCorpus Christi 2000, no pet.).
The truth of a statement is “a complete defense to defamation.” Randall’s Food
Mkts., Inc. v. Johnson, 891 S.W.2d 640, 646 (Tex. 1995).
         The key issue here is the truth of defendants’ statements. The alleged
defamatory statements were contained in a report to credit agencies that stated
that the Priesters were delinquent on their loan payments. Because the loan
was valid, and the Priesters were delinquent, the statements to these effects
were true, and so no defamation occurred.
         The Priesters interpret the district court’s decision as dismissing the
defamation claim as time-barred itself. In support of their position, the Priesters
cite only Chevalier v. Animal Rehabilitation Center, Inc., 839 F. Supp. 1224,
1233 (N.D. Tex. 1993), in which the court held that “[a]s long as Plaintiff timely
filed his [derivative] claim, the remedy for it is unscathed and the extant liability
of an underlying defamation claim supports it regardless of the fate of a remedy
for that underlying claim.” The Priesters argue that the underlying constitu-
tional claims are still “extant” and that the statute of limitations bars only rem-
edies.
         That position is incorrect. To the extent that a constitutional claim under
Section 50(a)(6) renders a lien voidable rather than void, once the period of limi-
tations has passed, the lien is no longer voidable and is valid. Thus, the Pries-
ters’ underlying claim for liability is no longer “extant.” Unlike a claim for fraud
or conspiracy, as in Chevalier, in the present case the lien becomes valid after
the period of limitations passes, so the “harm” is, in effect, erased. There was
thus no defamation, and the claim was rightly dismissed.
         Finally, the Priesters appeal the decision to strike their second and third
amended complaints that sought to join additional parties that would have

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destroyed diversity jurisdiction. The Priesters argue that the amended com-
plaints were filed in accordance with the court’s scheduling order and that they
were necessary to join outside parties and introduce additional claims.
       Parties have an amendment of right under Federal Rule of Civil Procedure
15(a). Additionally, under Federal Rule of Civil Procedure 16(b), a scheduling
order must set the time in which parties are permitted to amend pleadings and
join other parties.
       “[L]eave to amend under Rule 15(a) is to be freely given.” Schiller v. Phy-
sicians Resource Group Inc., 342 F.3d 563, 566 (5th Cir. 2003). “[T]hat generous
standard is tempered by the necessary power of a district court to manage a
case.” Id. In deciding whether to grant leave to amend, the court may consider
factors such as “undue delay, bad faith or dilatory motive on the part of the mov-
ant, repeated failure to cure deficiencies by amendments previously allowed,
undue prejudice to the opposing party by virtue of the allowance of the amend-
ment, [and] futility of the amendment.”11
       The Priesters argue that they were not trying to amend under Rule 15(a)
but instead were relying on the Rule 16(b) scheduling order, which they claim
allowed them to amend essentially as many times as they wanted within the
period afforded by the MJ for amendment. They do not cite any authorities to
support that proposition; instead, they refer to the local rules of the Eastern Dis-
trict of Texas. The citation, however, is as unpersuasive at it is disingenuous.
       The Priesters cite Appendix L of the local rules, which offers a sample
scheduling order. They then argue that the sample is a “local rule.” Although
the sample does state that it “is not necessary to file a motion for leave to amend
before the deadline to amend pleadings,” as set by the scheduling order, that is
not a rule. See E.D. TEX, LOCAL R. APP’X L. Indeed, the actual scheduling order

      11
         Foman v. Davis, 371 U.S. 178, 182 (1962). See also Rosenzweig v. Azurix Corp., 332
F.3d 854, 864 (5th Cir. 2003).

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                                  No. 12-40032

issued in this case does not include that language at all but only states that the
deadline to amend the pleadings is October 28, 2011.
      Having not provided any waiver of the presumptive requirement of leave
to amend, the district court was well within its right to require such leave. And,
in fact, the language in the sample scheduling order shows that the default pre-
sumption is that leave to amend is required. There are no cases that support the
Priesters’ broad reading of Rule 16(b), which would allow unlimited amendments
so long as a scheduling order did not explicitly require leave to amend. The
court was justified in striking the amended complaints.
      Moreover, the court correctly struck the amended complaints because they
sought to join non-diverse parties. The district court “must scrutinize an amend-
ment [to a pleading] that would add a non-diverse party more closely than an
ordinary amendment.” Short v. Ford Motor Co., 21 F.3d 1107 (5th Cir. 1994).
This is because “the court’s decision will determine the continuance of jurisdic-
tion.” Id.
      “If after removal the plaintiff seeks to join additional defendants whose
joinder would destroy subject matter jurisdiction, the court may deny joinder, or
permit joinder and remand the action to the State court.” 28 U.S.C. § 1447(e).
The court should “use its discretion in deciding whether to allow that party to
be added.” Hensgens v. Deere & Co., 833 F.2d 1179, 1182 (5th Cir. 1987). This
court in Hensgens pointed out factors to consider in determining whether to
permit joinder of non-diverse parties, including “the extent to which the purpose
of the amendment is to defeat federal jurisdiction, whether plaintiff has been
dilatory in asking for amendment, whether plaintiff will be significantly injured
if amendment is not allowed, and any other factors bearing on the equities.” Id.
      The district court weighed each of the Hensgens factors and found that the
balance was in favor of denying amendment. It concluded that the Priesters
were adding the additional defendants to defeat jurisdiction, that they were

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                                 No. 12-40032

slightly dilatory, that they would not be injured by denial, and that the balance
of the equities weighed in favor of denial. The court thus applied the correct
legal standard, and its findings of fact were not clearly erroneous. It did not
abuse its discretion in striking the amended complaints.
      The judgment of dismissal is AFFIRMED.

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