Court Opinion

ID: 4644253
Source: CourtListenerOpinion
Date Created: 2020-12-17 19:01:04.745784+00
Date Added: 2024-06-11T08:00:44.087408
License: Public Domain

Case: 20-10378     Document: 00515677056          Page: 1    Date Filed: 12/17/2020

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

                                                                                 FILED
                                                                         December 17, 2020
                                   No. 20-10378                             Lyle W. Cayce
                                                                                 Clerk

   FFGGP, Incorporated, a Delaware Corporation as Trustee
   for the Fairway Park 2775 Land Trust,

                                                            Plaintiff—Appellant,

                                       versus

   Specialized Loan Servicing, L.L.C., a Delaware Limited
   Liability Company,

                                                            Defendant—Appellee.

                  Appeal from the United States District Court
                      for the Northern District of Texas
                            USDC No. 4:18-CV-875

   Before Owen, Chief Judge, and King and Engelhardt, Circuit Judges.
   Per Curiam:*
          Plaintiff FFGGP, Incorporated (“FFGGP”) appeals the district
   court’s grant of summary judgment in favor of Defendant Specialized Loan
   Servicing, L.L.C. (“SLS”). We affirm.

          *
            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   opinion should not be published and is not precedent except under the limited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.
Case: 20-10378     Document: 00515677056           Page: 2    Date Filed: 12/17/2020

                                    No. 20-10378

                                         I.
          Roger D. Freeman executed a Home Equity Note and Deed of Trust
   (collectively “the Note”) in favor of American Southwest Mortgage Corp.,
   granting a lien (“Home Equity Lien”) on a piece of real estate in Grand
   Prairie, Texas (“Property”). The Note subsequently was assigned to Bank
   of America. After Freeman passed away, his estate (“Freeman’s Estate”)
   failed to remit monthly mortgage payments due under the Note, and Bank of
   America sent Freeman’s Estate a Notice of Default and Intent to Accelerate.
          A second lien was filed against the Property by Fairway Park
   Homeowners Association, Inc. (“HOA”) after Freeman’s Estate failed to
   pay assessment dues (“HOA Assessment Lien”). Pursuant to the HOA
   Declarations and Covenants, the HOA Assessment Lien was subordinate to
   any mortgage lien on the Property. FFGGP alleges that it acquired the
   Property under the HOA Assessment Lien Deed.
          Bank of America sent Freeman’s Estate a Notice of Acceleration after
   it continued to neglect mortgage payments. Thereafter, Bank of America,
   along with its unnamed “successors and assigns,” filed a Petition Seeking a
   Judicial Judgment for Foreclosure (“Foreclosure Action”) against
   Freeman’s Estate in the 96th Judicial District Court of Tarrant County
   (“96th JDC”). While the Foreclosure Action was pending, Bank of America
   assigned the Note to SLS. The state court entered a default judgment in favor
   of Bank of America, “or its successors or assigns in interest,” ordering
   enforcement of the Home Equity Lien through a Foreclosure Sale
   (“Foreclosure Order”). Subsequently, SLS sent Freeman’s Estate a second
   Notice of Acceleration and a Notice of Foreclosure Sale.
          FFGGP then filed a separate lawsuit for declaratory relief and to quiet
   title against SLS in the 96th JDC to collaterally attack the default judgment
   from the Foreclosure Action. SLS removed the case to the Northern District

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Case: 20-10378      Document: 00515677056          Page: 3   Date Filed: 12/17/2020

                                    No. 20-10378

   of Texas based on diversity jurisdiction. Shortly after removal, SLS
   foreclosed on the Home Equity Lien at a Foreclosure Sale. Through its
   amended pleadings, FFGGP sought a declaration that the state court issued
   the Foreclosure Order without subject matter jurisdiction and that the
   subsequent Foreclosure Sale was void.
          SLS moved for summary judgment, arguing that it enforced a valid
   Foreclosure Order through the Foreclosure Sale as Bank of America’s
   assignee on the Note. FFGGP responded with a cross-motion for summary
   judgment, arguing that the failure to explicitly substitute SLS as Bank of
   America’s assignee during the pending Foreclosure Action divested the state
   court of subject matter jurisdiction to issue the Foreclosure Order, thus
   rendering the Foreclosure Sale void. The district court rejected FFGGP’s
   argument and granted summary judgment in favor of SLS.
          On appeal, FFGGP argues that there is no genuine issue of material
   fact that the state court was divested of subject matter jurisdiction over the
   pending Foreclosure Action when SLS was not explicitly substituted as
   plaintiff in Bank of America’s place, thus rendering the Foreclosure Order
   and Sale void. In response, SLS contends that the state court never lost
   subject matter jurisdiction over the Foreclosure Action because SLS—Bank
   of America’s assignee on the Note—was implicitly named as a plaintiff in the
   state court petition and as a party entitled to enforce the Foreclosure Order
   in the default judgment.
                                         II.
          We review the motion for summary judgment de novo, and we apply
   the same standard as the district court, viewing the evidence in the light most
   favorable to the nonmovant. First Am. Title Ins. Co. v. Continental Cas. Co.,
   709 F.3d 1170, 1173 (5th Cir. 2013). Summary judgment is appropriate where
   “there is no genuine dispute as to any material fact and the movant is entitled

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                                     No. 20-10378

   to judgment as a matter of law.” FED. R. CIV. P. 56(a). Courts do not disfavor
   summary judgment, but, rather, look upon it as an important process through
   which parties can obtain a “just, speedy and inexpensive determination of
   every action.” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). A party
   asserting that there is no genuine dispute as to any material fact must support
   its assertion by citing to particular parts of materials in the record. FED. R.
   CIV. P. 56(c)(1)(A).
                                         III.
          FFGGP acknowledges that Bank of America was the proper plaintiff
   to initiate the Foreclosure Action and that SLS was Bank of America’s lawful
   assignee on the Note. The state court record confirms that SLS was always
   implicitly part of the Foreclosure Action, because Bank of America’s
   “assigns” and “successors in interest” were named as plaintiffs in the
   petition and listed as parties entitled to enforce the Foreclosure Order in the
   default judgment. FFGGP contends that implicit references to SLS were
   insufficient for the state court to maintain subject matter jurisdiction and that
   Texas law required SLS to be explicitly substituted in Bank of America’s
   place upon assignment of the Note.
          “When reviewing issues of state law, federal courts look to the law of
   that state’s highest court.” City of Alexandria v. Brown, 740 F.3d 339, 351 (5th
   Cir. 2014). Absent a final decision by the Texas Supreme Court that
   “precisely resolves the legal issue, we must make an Erie guess and
   determine as best we can what the Supreme Court of Texas would
   decide.” Martinez v. Walgreen Co., 935 F.3d 396, 398 (5th Cir. 2019) (citation
   omitted). When compelled to make an Erie guess, federal courts “defer to
   intermediate state appellate court decisions, unless convinced by other
   persuasive data that the highest court of the state would decide
   otherwise.” Mem’l Hermann Healthcare Sys. Inc. v. Eurocopter Deutschland,

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                                      No. 20-10378

   GMBH, 524 F.3d 676, 678 (5th Cir. 2008) (citations omitted). Federal courts
   not only look to intermediate state appellate decisions, but also to “the
   general rule on the issue, decisions from other jurisdictions, and general
   policy concerns.” Martinez, 935 F.3d at 398 (citations omitted).
          Although the Texas Supreme Court has not directly addressed the
   issue, Texas appellate caselaw is clear that where a plaintiff assigns its
   interest in a pending lawsuit to another, the assignment does not alter the
   parties’ rights to the prejudice of the defendant, the lawsuit may be continued
   in the name of the original plaintiff, substitution of the assignee is not
   mandatory, and the court has the discretion to allow a motion to substitute.
   Int’l Shelters, Inc. v. Pinehurst Inv. Corp., 474 S.W.2d 497, 499-500 (Tex. Civ.
   App. 1971), writ dismissed (Mar. 22, 1972); Mitchell, Gartner & Thompson v.
   Young, 135 S.W.2d 308 (Tex. Civ. App. 1939), writ refused; Paxton v. First
   State Bank of Tatum, 42 S.W.2d 837, 839 (Tex. Civ. App. 1931); Ferguson-
   McKinney Dry Goods Co. v. Garrett, 252 S.W. 738, 741 (Tex. Comm’n App.
   1923); Lee v. Salinas, 15 Tex. 495, 498 (1855).
          Texas appellate caselaw comports with Federal Rule of Civil
   Procedure 25(c), which provides that “[i]f an interest is transferred, the
   action may be continued by or against the original party unless the court, on
   motion, orders the transferee to be substituted in the action or joined with
   the original party.” Several cases from this court illustrate the policy of Rule
   25(c) that the original interest holder has standing to litigate a lawsuit to final
   judgment and that an assignee may enforce that judgment. Christiana Tr. v.
   Riddle as next friend of Riddle, 819 F. App’x 255, 256 (5th Cir. 2020) (per
   curiam) (plaintiff’s assignment of home equity loan to a bank while a
   foreclosure lawsuit was pending did not render the case moot, because “a live
   controversy—albeit between different parties—persisted”); FDIC v. SLE,
   Inc., 722 F.3d 264, 270 (5th Cir. 2013) (“in light of Rule 25’s wholly
   permissive terms,” a successor in interest “was not required under Rules

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                                    No. 20-10378

   25(c) and (a)(3) to substitute as a transferee” to have standing to enforce a
   judgment); Matter of Texas Gen., No. 93-2399, 1994 WL 24886, at *1 (5th Cir.
   Jan. 12, 1994) (concluding that it was erroneous to dismiss a claim for lack of
   standing due to a transfer of interest that occurred while litigation was
   pending); Matter of Covington Grain Co., Inc., 638 F.2d 1362, 1364 (5th Cir.
   1981) (“Rule 25(c) . . . is designed to allow the action to continue unabated
   when an interest in the lawsuit changes hands.”).
          FFGGP cites two Texas appellate court decisions in support of its
   argument that a mid-suit assignment of interest divests a court of subject
   matter jurisdiction absent explicit substitution of the assignee. Kingman
   Holdings, LLC v. Mortg. Elec. Registration Sys., Inc., 2016 WL 8115937 (Tex.
   App. Oct. 27, 2016); Mortg. Elec. Registration Sys., Inc. v. Disanti, 2011 WL
255815 (Tex. App. Jan. 27, 2011). However, neither case addressed a mid-
   suit assignment of interest, as both cases involved lawsuits filed after the
   assignment occurred and a lack of subject matter jurisdiction at the
   commencement of the lawsuit. Kingman Holdings, 2016 WL 8115937, at *5–
   7; Mortg. Elec. Registration Sys., 2011 WL 255815, at *2. The present case is
   distinguishable, because it is undisputed that subject matter jurisdiction was
   present when Bank of America filed the Foreclosure Action. FFGGP also
   cites a case where a Texas appellate court held that an employee allegedly
   injured on the job did not have a right to substitute himself as the real party
   in interest in a workers’ compensation insurer’s action after the action had
   already been dismissed and that his substitution was required to occur before
   disposition of the action. Rodriguez v. Crutchfield, 301 S.W.3d 772, 775 (Tex.
   App. 2009). However, unlike the present matter, Rodriguez did not involve a
   mid-suit assignment of a single interest, because the workers’ compensation
   insurer asserted its own claim for subrogation, and the employee attempted
   to assert his own claim for damages. Id. at 776.

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                                    No. 20-10378

           Based on the lack of a Texas Supreme Court decision precisely
   resolving the issue, deference to Texas appellate caselaw, and consideration
   of this court’s decisions interpreting Rule 25(c)’s policies, this court makes
   a confident Erie guess that the Texas Supreme Court would have concluded
   that explicit substitution of SLS as plaintiff in the Foreclosure Action was not
   required and that subject matter jurisdiction was present throughout the
   lawsuit. Thus, there is no genuine issue of material fact that the Foreclosure
   Order was validly issued by the state court and validly enforced by SLS
   through the Foreclosure Sale as Bank of America’s lawful assignee on the
   Note.
                                         IV.
           For the foregoing reasons, the judgment is AFFIRMED.

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