Court Opinion

ID: 3185077
Source: CourtListenerOpinion
Date Created: 2016-03-12 00:06:09.248453+00
Date Added: 2024-06-11T07:39:01.235112
License: Public Domain

Case: 15-20193      Document: 00513421220         Page: 1    Date Filed: 03/11/2016

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                       United States Court of Appeals
                                                                                Fifth Circuit
                                      No. 15-20193                            FILED
                                                                         March 11, 2016

DANIEL NUNNERY; ANGELA NUNNERY,
                                                                         Lyle W. Cayce
                                                                              Clerk

              Plaintiffs - Appellants

v.

OCWEN LOAN SERVICING, L.L.C.; DEUTSCHE BANK NATIONAL
TRUST COMPANY,

              Defendants - Appellees

                   Appeal from the United States District Court
                        for the Southern District of Texas
                              USDC No. 4:14-CV-250

Before KING, JOLLY, and PRADO, Circuit Judges.
PER CURIAM:*
       Daniel and Angela Nunnery sued Ocwen Loan Servicing and Deutsche
Bank National Trust Company to prevent foreclosure.                   The district court
granted Ocwen’s motion for summary judgment and authorized Ocwen to
proceed with foreclosure. Finding no error, we affirm.

       * 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
    Case: 15-20193       Document: 00513421220         Page: 2     Date Filed: 03/11/2016

                                     No. 15-20193
                                             I.
      In 2005, Daniel and Angela Nunnery executed a promissory note secured
by a deed of trust on their property in Sugar Land, Texas. Following several
assignments, Deutsche Bank obtained the note and deed of trust on the
property, with Ocwen Loan acting as the mortgage servicer. The Nunnerys
failed to make regular payments and defaulted on the note as of May 1, 2009.
On July 21, the prior mortgage servicer sent the Nunnerys a letter of default
and intent to accelerate. Subsequently, the servicer scheduled a foreclosure.
      The Nunnerys filed a lawsuit in Texas state court disputing the servicer’s
authority to foreclose on the property. During this first suit, the defendants—
Deutsche Bank and the previous mortgage servicer—did not file a
counterclaim seeking an order of judicial foreclosure. They did, however, mail
the Nunnerys two notices allegedly abandoning acceleration on the note. First,
on September 25, 2012, the previous mortgage servicer sent a letter to the
Nunnerys titled “Notice of Rescission of Acceleration of Loan Maturity.” 1 The
following year, Ocwen sent a similar letter to the Nunnerys’ attorney. 2
Eventually, the Nunnerys voluntarily nonsuited this first lawsuit.

      1 This notice stated that:
              [W]ithout prejudice or waiver of any right or remedy available to it by
      reason of any past or future default, other than the specified default, hereby
      rescinds the Acceleration of the debt and the maturity of the Note that occurred
      on [April 27, 2012]. This notice is subject to any subsequent Notice of
      Acceleration that may have been given since the date of acceleration referenced
      in this Notice, and the Note and Deed of Trust are now in effect in accordance
      with their original terms and conditions, as though no acceleration took place.
      2This letter stated:
              Please be advised that acceleration of the Loan at issue in this suit,
      Ocwen Loan Servicing, LLC Loan No. 7142748743 (homeward Residential, Inc.
      Loan No. 4000810574) has been abandoned, and the Loan has been un-
      accelerated. Lender, Deutsche Bank National Trust Company, . . . reserve[s]
      all rights under the Note and Deed of Trust to accelerate the Loan in the future
      upon proper notice. As counsel of record, we are providing this Notice to you
      as proper service under the Loan. Please forward this Notice to your clients.

                                             2
    Case: 15-20193    Document: 00513421220     Page: 3   Date Filed: 03/11/2016

                                 No. 15-20193
      After that lawsuit, the Nunnerys remained in arrears. Accordingly, in
late 2013, Ocwen and Deutsche Bank mailed a new notice of default and intent
to accelerate to the Nunnerys. Under this notice, the note was accelerated
effective January 13, 2014, and the foreclosure sale was set for February.
      Before the foreclosure could occur, the Nunnerys brought the present
action in Texas state court, challenging Appellees’ authority to foreclose.
Ocwen removed the action to the federal court on the basis of diversity
jurisdiction and sought an order of foreclosure. The district court granted
Ocwen’s motion for summary judgment. The Nunnerys timely appealed.
                                      II.
      “We review a grant of summary judgment de novo, applying the same
standards as the trial court.” R & L Inv. Prop., L.L.C. v. Hamm, 715 F.3d 145,
149 (5th Cir. 2013). Summary judgment is proper “if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The parties agree that
Texas law governs. “In determining questions of Texas law, this court looks to
decisions of the Texas Supreme Court, which are binding.” Packard v. OCA,
Inc., 624 F.3d 726, 729 (5th Cir. 2010). “The decisions of Texas intermediate
appellate courts may provide guidance, but are not controlling.” Id.
                                     III.
      The Nunnerys argue that the district court erred in two respects. First,
they argue that the district court should not have granted summary judgment
because Ocwen never effectively rescinded the 2009 acceleration of the note;
therefore, according to the Nunnerys, the statute of limitations had run and
Ocwen could not foreclose. Second, the Nunnerys argue that the prior servicer
was required to move for a judicial foreclosure in the first lawsuit and that,
because it failed to do so, Ocwen should be barred from foreclosing now. We
address each argument in turn.
                                      3
    Case: 15-20193    Document: 00513421220     Page: 4   Date Filed: 03/11/2016

                                 No. 15-20193
      The Nunnerys contend that the 2009 acceleration of the loan was never
rescinded because unilateral actions of a lender cannot rescind an acceleration.
This argument, however, is foreclosed by our precedent.
      We addressed this issue in Boren v. United States National Bank Ass’n,
807 F.3d 99 (5th Cir. 2015). There, we noted that “the Texas Supreme Court
has not decided whether a lender may abandon its acceleration of a loan by its
own unilateral actions and, if so, what actions it must take to effect
abandonment.” Id. at 105. Thus, “we must make an ‘Erie guess’ as to how the
Court would resolve this issue.” Id. “In making an Erie guess, we defer to
intermediate state appellate court decisions, unless convinced . . . that the
highest court of the state would decide otherwise.” Mem’l Hermann Healthcare
Sys., Inc. v. Eurocopter Deutschland, GMBH, 524 F.3d 676, 678 (5th Cir. 2008).
Moreover, “Texas’ intermediate appellate courts are in agreement that the
holder of a note may unilaterally abandon acceleration after its exercise, so
long[] as the borrower neither objects to abandonment nor has detrimentally
relied on the acceleration.” Boren, 807 F.3d at 105.
      Not only may lenders unilaterally rescind an acceleration, Ocwen did so
here. A lender unilaterally abandons acceleration of a note “by sending notice
to the borrower that the lender is no longer seeking to collect the full balance
of the loan and will permit the borrower to cure its default by providing
sufficient payment to bring the note current under its original terms.” Id.
Abandonment is even clearer when, as here, it is express: Ocwen’s 2013 notice
stated “that acceleration of the Loan . . . has been abandoned, and the Loan
has been un-accelerated.”     Accordingly, Ocwen effectively rescinded the
acceleration and “the statute of limitations period under § 16.035(a) ceased to

                                       4
     Case: 15-20193        Document: 00513421220          Page: 5     Date Filed: 03/11/2016

                                        No. 15-20193
run at that point and a new limitations period did not begin” until the note was
re-accelerated. Boren, 807 F.3d at 106. 3
       Second, the Nunnerys argue that the counterclaim for a foreclosure order
was barred because it was a compulsory counterclaim in the earlier lawsuit.
This argument has superficial appeal, under both federal and Texas procedural
rules. See Tex. R. Civ. P. 97(a); Ingersoll–Rand Co. v. Valero Energy Corp., 997
S.W.2d 203, 207 (Tex. 1999). However, a Texas Court of Civil Appeal has
previously recognized:
       the mortgagor should not be permitted to destroy or impair the
       mortgagee’s contractual right to foreclosure under the power of
       sale by the simple expedient of instituting a suit, whether
       groundless or meritorious, thereby compelling the mortgagee to
       abandon the extra-judicial foreclosure which he had the right to
       elect, nullifying his election, and permitting the mortgagor to
       control the option as to remedies.
Kaspar v. Keller, 466 S.W.2d 326, 329 (Tex. Civ. App.—Waco 1971, writ ref’d
n.r.e.). And we have previously held that under the Kaspar rule, “lenders have
a substantive right to elect judicial or nonjudicial foreclosure in the event of a
default, and debtors have no right to force the lender to pursue a judicial
foreclosure remedy.” Douglas v. NCNB Tex. Nat’l Bank, 979 F.2d 1128, 1130
(5th Cir. 1993). Accordingly, “[a]pplication of [R]ule 13(a) in the instant case
would abridge the lender’s substantive rights and enlarge the debtor’s
substantive rights,” which is forbidden by the Rules Enabling Act.                           Id.
Following this logic, we hold that Rule 13(a) does not apply and that loan
servicers do not forfeit their right to a judicial foreclosure by not moving for
judicial foreclosure in a prior lawsuit.

       3The Nunnerys also argue that Ocwen did not comply with the recently enacted Texas
Civil Practice and Remedies Code § 16.038, which sets out a procedure for rescinding the
acceleration of a note. This is irrelevant, however, because “[t]he statute does not . . . create
an exclusive method for abandoning or waiving acceleration.” Boren, 807 F.3d at 106.
                                               5
        Case: 15-20193   Document: 00513421220      Page: 6   Date Filed: 03/11/2016

                                    No. 15-20193
         The Nunnerys contend that the present case is distinguishable from the
facts in Douglas and Kaspar on two grounds. First, Douglas and Kaspar
involved a situation where the borrower’s original lawsuit did not arise out of
the lender’s foreclosure sale.      Douglas, 979 F.2d at 1129 (noting that the
borrowers originally brought a class action based on fraud against the lender);
Kaspar, 466 S.W.2d at 327 (noting that the borrower originally sued the lender
for rescission of a contract of sale). Second, in the present case, the lender had
already exercised its right to a non-judicial foreclosure and, according to the
Nunnerys, therefore “the lender should be required to continue to pursue its
foreclosure as a compulsory counterclaim.”
         These distinctions are unavailing. As recently as last year, Texas courts
continued to recognize and broadly apply the Kaspar rule to new fact patterns,
such as foreclosure claims arising from home-equity liens, Steptoe v. JPMorgan
Chase Bank, N.A., 464 S.W.3d 429, 431–34 (Tex. Civ. App.—Houston [1st Dist.]
2015, no pet.), and against a party who purchased the property from the
original borrower, Alfatouni v. Montoya, No. 02-13-00064-CV, 2015 WL
1956357, at *3–4 (Tex. Civ. App.—Fort Worth Apr. 30, 2015, no pet.) (mem.
op.).     And while the Nunnerys contend that judicial economy supports
distinguishing the present matter, the courts have broadly applied the Kaspar
rule based on its underlying purpose “to preserve the lender’s remedy choice
and to curtail a debtor’s ability to control what remedy a creditor may pursue.”
Steptoe, 464 S.W.3d at 434. We therefore decline to create a new exception to
the broad Kaspar rule exempting foreclosure orders from being considered
compulsory counterclaims.
                                          IV.
         Accordingly, the judgment of the district court is, in all respects
                                                                       AFFIRMED.

                                           6