Court Opinion

ID: 2767414
Source: CourtListenerOpinion
Date Created: 2015-01-08 01:00:46.407005+00
Date Added: 2024-06-11T11:27:31.320867
License: Public Domain

Case: 14-50281      Document: 00512893142         Page: 1    Date Filed: 01/07/2015

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT

                                    No. 14-50281                         United States Court of Appeals
                                  Summary Calendar                                Fifth Circuit

                                                                                FILED
                                                                          January 7, 2015
DUNG QUE TRANG,                                                            Lyle W. Cayce
                                                                                Clerk
              Plaintiff - Appellant

v.

TAYLOR BEAN & WHITAKER MORTGAGE CORPORATION; U.S. BANK
NATIONAL ASSOCIATION; BARRETT DAFFIN FRAPPIER TURNER &
ENGEL, L.L.P.,

              Defendants - Appellees

                   Appeal from the United States District Court
                        for the Western District of Texas
                              USDC No. 1:13-CV-44

Before KING, JOLLY, and HAYNES, Circuit Judges.
PER CURIAM:*
       This appeal arising out of a state-law foreclosure dispute requires us to
answer two questions of procedure. First, Dung Que Trang, the borrower,
asserts that the district court should have remanded her suit because of the
presence of Barrett Daffin Frappier Turner & Engel, L.L.P. (“Barrett Daffin”),

       * 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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: 14-50281     Document: 00512893142     Page: 2   Date Filed: 01/07/2015

                                  No. 14-50281
a non-diverse defendant.       Second, Trang asserts that because another
defendant, Taylor Bean & Whitaker (“TBW”), never appeared in the case, the
district court should have entered a default judgment against it. We reject
both assertions, however, because Trang failed to state a claim against either
defendant. We therefore AFFIRM the judgment of the district court.
                                        I.
      In 2008, Dung Que Trang obtained a loan from TBW to purchase
property in Pflugerville, Texas. The Deed of Trust executed to secure the loan
named Mortgage Electronic Registration Systems, Inc. (“MERS”) as
beneficiary and nominee for TBW, and gave MERS the “right to exercise any
or all of those interests [granted by Borrower] including, but not limited to, the
right to foreclose and sell the Property and to take any action required of
Lender.”   TBW declared bankruptcy in 2009, and, in the course of its
bankruptcy proceedings, rejected its executory contracts.       In 2011, MERS
assigned the Deed of Trust to U.S. Bank. Trang later defaulted, prompting
U.S. Bank, along with its counsel Barrett Daffin, to initiate foreclosure
proceedings on the property. Trang then sued U.S. Bank, Barrett Daffin, and
TBW in state court, alleging a host of state-law claims founded on the notion
that, because of TBW’s bankruptcy, MERS’s assignment of the Deed of Trust
to U.S. Bank was invalid.
      Asserting diversity jurisdiction, U.S. Bank removed the suit to the
district court. Trang moved to remand, arguing that Barrett Daffin was, like
Trang, a Texas citizen, and so its presence in the suit precluded the district
court from exercising diversity jurisdiction. The district court denied Trang’s
motion, however, on the ground that Barrett Daffin had been improperly
joined. It then granted motions to dismiss filed by U.S. Bank and Barrett
Daffin. Trang filed a motion for default judgment against TBW, who had not

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appeared in the suit. The district court denied this motion and entered a final
judgment against Trang.
      On appeal, Trang challenges (1) the district court’s denial of her motion
to remand; and (2) the district court’s denial of her motion for default judgment
against TBW. We review the district court’s denial of a motion to remand de
novo, Clayton v. ConocoPhillips Co., 722 F.3d 279, 290 (5th Cir. 2013), and its
denial of a motion for default judgment for abuse of discretion. Lewis v. Lynn,
236 F.3d 766, 767 (5th Cir. 2001).
                                        II.
                                        A.
      We consider first the district court’s denial of Trang’s motion to remand.
When federal jurisdiction is based on diversity, a motion to remand should be
granted if any “properly joined” defendant resides in the same state as the
plaintiff. B., Inc. v. Miller Brewing Co., 663 F.2d 545, 550 (5th Cir. 1981); see
28 U.S.C. § 1332. A non-diverse defendant is improperly joined if “there is no
reasonable basis for the district court to predict that the plaintiff might be able
to recover against” that defendant. Smallwood v. Ill. Cent. R.R. Co., 385 F.3d
568, 573 (5th Cir. 2004) (en banc). To determine whether there is a reasonable
basis to predict that the plaintiff might be able to recover against a non-diverse
defendant, “[t]he court may conduct a Rule 12(b)(6)-type analysis, looking
initially at the allegations of the complaint to determine whether the complaint
states a claim under state law against” the non-diverse defendant. Id. Here,
Trang seeks recovery against the non-diverse defendant, Barrett Daffin, under
§ 12.002 of the Texas Civil Practices and Remedies Code. Thus, the critical
question is whether Trang’s allegations “contain sufficient factual matter,
accepted as true, to ‘state a claim to relief’” under § 12.002 “‘that is plausible
on its face.’” See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2006)).
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       They do not. The elements of a claim under § 12.002(a) are
       that the defendant (1) made, presented, or used a document with
       knowledge that it was a “fraudulent lien or claim against real or
       personal property or an interest in real or personal property,” (2)
       intended that the document be given legal effect, and (3) intended
       to cause the plaintiff physical injury, financial injury, or mental
       anguish.
Henning v. OneWest Bank FSB, 405 S.W.3d 950, 964 (Tex. App. 2013) (quoting
Tex. Civ. Prac. & Rem. Code § 12.002(a)). Trang’s allegations are insufficient
as to the third element. Trang alleges no facts tending to show that Barrett
Daffin acted with intent to cause her “financial injury” or “mental anguish,”
rather than just “for business purposes.” See Golden v. Wells Fargo Bank, N.A.,
557 F. App’x 323, 327 (5th Cir. 2014). The allegation that might be construed
as touching on § 12.002’s intent element is that “the transactions by the
Defendants jointly and severally were designed to defraud the Plaintiff out of
her property.” But this allegation is, at most, a legal conclusion that Barrett
Daffin acted with the requisite intent; it lacks any “factual content” that would
“allow[] the court to draw the reasonable inference” that the intent element
was met. Iqbal, 556 U.S. at 678. The district court therefore held correctly
that Barrett Daffin was improperly joined and that Trang’s motion to remand
should be denied. 1

       1  The defendants urge several alternative grounds on which we might affirm the
district court’s denial of Trang’s motion to remand, including that an assignment of a lien is
not a “lien or claim” that can support liability under § 12.002(a). Courts have split on this
issue of statutory interpretation. Some appear to agree with the defendants. See, e.g., Bond
v. Barrett Daffin Frappier Turner & Engel, L.L.P., C.A. NO. G-12-188, 2013 U.S. Dist. LEXIS
55924, at *34–35 (S.D. Tex. Mar. 22, 2013); Perdomo v. Fed. Nat’l Mortg. Ass’n, Civil Action
No. 3:11-cv-734-M, 2013 U.S. Dist. LEXIS 37139, at *17–19 (N.D. Tex. Mar. 18, 2013); Marsh
v. JPMorgan Chase Bank, N.A., 888 F. Supp. 2d 805, 812–14 (W.D. Tex. Aug. 29, 2012).
Others—including one Texas appellate court—appear to go the other way. See, e.g., Bernard
v. Bank of Am., N.A., No. 04-12-00088-CV, 2013 Tex. App. LEXIS 1045, at 11–13 (Tex. App.
Feb. 6, 2013); Kingman Holdings, LLC v. Citimortgage, Inc., CASE NO. 4:10-CV-619, 2011
U.S. Dist. LEXIS 52770, at *13–14 (E.D. Tex. Apr. 21, 2011). We affirm on the ground stated
in the text, and so we do not weigh in on this split of authority.
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                                             B.
       We turn next to the district court’s denial of Trang’s motion for default
judgment against TBW. Generally, a defendant’s failure to appear is grounds
for a default judgment. See Fed. R. Civ. P. 55(a). But a plaintiff “is not entitled
to a default judgment as a matter of right, even where the defendant is
technically in default.” Ganther v. Ingle, 75 F.3d 207, 212 (5th Cir. 1996).
Instead, “[t]here must be a sufficient basis in the pleadings for the judgment
entered.” Nishimatsu Constr. Co. v. Hous. Nat’l Bank, 515 F.2d 1200, 1206
(5th Cir. 1975). Thus, TBW’s failure to appear should have resulted in a
default judgment against it only if Trang’s factual allegations, taken as true,
state a claim against TBW. See Lewis, 236 F.3d at 767.
       Trang fails to state a claim against TBW. Trang’s claims against TBW
hinge on her allegation that the Deed of Trust is an executory contract that
was rejected in TBW’s bankruptcy, see 11 U.S.C. § 365, and thus that MERS
lacked authority to assign it.           But even making the highly contestable
assumption that the Deed of Trust was “executory” under the Bankruptcy
Code, 2 Trang mistakes the nature of rejection.              Rejection of an executory
contract “relates only to those aspects of the contract[] which remain
unfulfilled” as of the bankruptcy filing, Stewart Title Guar. Co. v. Old Republic
Nat’l Title Ins. Co., 83 F.3d 735, 741 (5th Cir. 1996) (internal quotation marks
omitted); it “does not invalidate the contract, or treat the contract as if it did
not exist.” In re Continental Airlines, 981 F.2d 1450, 1459 (5th Cir. 1993).
MERS obtained its right to assign the Deed of Trust when the Deed of Trust
was executed, in 2008.           That right was independent of any unfulfilled
obligations on the part of TBW. It therefore was not “undo[ne] or revers[ed]”

       2 The district court rested its denial of Trang’s motion on the ground that the Deed of
Trust was not executory. Because we hold that Trang does not state a claim against TBW
even if the Deed of Trust is executory, we need not reach this question.
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by TBW’s rejection of its executory contracts in bankruptcy. Stewart Title, 83
F.3d at 742 (internal quotation marks omitted); see also Khan v. Wells Fargo
Bank, N.A., CIVIL ACTION NO. H-12-1116, 2014 U.S. Dist. LEXIS 6559, at
*24 (S.D. Tex. Jan. 17, 2014) (“Rejection of executory contracts means that the
debtor . . . need not continue to perform under the contract, but does not impact
prior completed acts under the contract.”); In re Marron, 485 B.R. 485, 488–89
(D. Mass. 2012) (“A lender’s bankruptcy does not affect the ability of MERS to
assign a mortgage.”). Thus, the district court did not abuse its discretion in
denying Trang’s motion for default judgment.
                                      III.
      For these reasons, the district court’s denials of Trang’s motions to
remand and for default judgment are
                                                                   AFFIRMED.

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