Court Opinion

ID: 4673437
Source: CourtListenerOpinion
Date Created: 2021-04-01 00:05:41.363052+00
Date Added: 2024-06-11T08:03:13.638187
License: Public Domain

Case: 20-10547     Document: 00515803806          Page: 1     Date Filed: 03/31/2021

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

                                                                                FILED
                                                                          March 31, 2021
                                   No. 20-10547
                                                                           Lyle W. Cayce
                                                                                Clerk
   Lorita Davis; Desi Arnez Davis,

                                                            Plaintiffs—Appellants,

                                       versus

   Ocwen Loan Servicing, L.L.C.; Bank of New York
   Mellon Trust Company, N.A., As successor to JPMorgan
   Chase Bank NA, as Trustee for Residential Asset
   Securities Corporation, Home Equity Mortgage Asset-
   Backed Pass Through Certificates Series 2004-KS2,
   formerly known as Bank of New York Trust Company,
   N.A.,

                                                         Defendants—Appellees.

                  Appeal from the United States District Court
                      for the Northern District of Texas
                           USDC No. 3:18-CV-2720

   Before Owen, Chief Judge, and Graves and Ho, Circuit Judges.
   Per Curiam:*

          *
            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   opinion should not be published and is not precedent except under the limited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: 20-10547         Document: 00515803806               Page: 2      Date Filed: 03/31/2021

                                          No. 20-10547

           This is an appeal of the district court’s dismissal with prejudice of all
   of the appellants’ claims in an action for declaratory relief stemming from a
   foreclosure matter. Finding no error, we AFFIRM.
                       Facts and Procedural History
           Desi Arnez Davis and Lorita Davis purchased real property in Cedar
   Hill, Texas in 1991. In 2004, the Davises obtained a home equity loan in the
   original principal amount of $109,600. On the same day, the Davises
   executed a deed of trust to secure the payment of the note. The Davises
   began making all of their monthly loan payments to GMAC Mortgage, LLC,
   which was the servicer on the loan and the predecessor-in-interest to Ocwen
   Loan Servicing, LLC. The loan was ultimately assigned to the Bank of New
   York Mellon Trust Company (hereinafter “the bank” or “Mellon”), which
   is the current mortgagee of the home. Ocwen is the agent and loan servicer
   for Mellon.
           On May 1, 2006, the Davises defaulted on the loan. 1 Of relevance to
   this appeal, they were sent written notices of default and opportunity to cure
   on December 28, 2007. On March 10, 2009, the Davises were sent a written
   notice from the bank advising that, because they had failed to cure the default
   pursuant to prior notices, the loan would be accelerated.
           On June 11, 2010, the bank, through GMAC, filed its application for
   home equity foreclosure pursuant to the Texas Rules of Civil Procedure in
   Dallas County. 2 The Davises again failed to cure the default pursuant to
   notices of intent to accelerate on December 19, 2012 and February 15, 2013.

           1
             The briefs in this matter indicate that the Davises have failed to make a payment
   on the loan for almost ten years.
           2
            The Davises assert that the first application for foreclosure was filed on July 17,
   2006 and dismissed for want of prosecution. Any such filing is not significant to this appeal.

                                                 2
Case: 20-10547      Document: 00515803806           Page: 3    Date Filed: 03/31/2021

                                     No. 20-10547

   The bank filed a second application for expedited foreclosure in Dallas
   County on June 21, 2013. The court denied that application on September 4,
   2013. The bank filed a third application for expedited foreclosure in Dallas
   County on February 2, 2016. The state court granted that application by
   order on April 29, 2016.
          On June 2, 2017, the Davises filed suit against Mellon in Dallas County
   seeking a jury trial, monetary relief of over $100,000, including costs,
   attorney’s fees and other relief, and “to challenge the foreclosure order and
   to fully ascertain the true and nature and extent, if any, of any alleged default
   under the note, whether there is actually a default, the extent of that default,
   or whether proper notices have been given.” The bank then filed an answer,
   asserting various defenses, including res judicata, and a counterclaim.
          Subsequently, the state court granted Mellon’s motion for partial
   summary judgment on August 10, 2018 and authorized it to proceed with
   foreclosure. The court also ordered that the plaintiffs take nothing. On
   August 24, 2018, Ocwen and the bank sent written notice stating that the
   property was posted for foreclosure sale on October 2, 2018.
          On October 1, 2018, the Davises filed the underlying action against
   Ocwen and Mellon (collectively “the bank” or “appellees”) to delay the
   foreclosure process, asserting claims for declaratory and injunctive relief and
   wrongful debt collection practices based upon a miscalculation of the four-
   year limitations period for foreclosure. The bank removed the action to
   federal court and moved for dismissal. The Davises were then granted leave
   to amend their pleadings to withdraw all claims except for declaratory relief.
   The bank then again moved to dismiss the Davis’ second amended complaint
   under Rule 12(b)(6).
          On January 27, 2020, the magistrate judge entered its Findings,
   Conclusions and Recommendation to grant the motion to dismiss. The

                                          3
Case: 20-10547      Document: 00515803806          Page: 4     Date Filed: 03/31/2021

                                    No. 20-10547

   Davises filed an objection that was overruled in its entirety by the district
   court, which accepted the magistrate judge’s recommendation on February
   24, 2020. The district court also found that the doctrine of res judicata
   prevented the Davises from obtaining a declaratory judgment based on the
   statute of limitations because they could have raised such a defense in
   opposition to the bank’s counterclaim in the 2017 action. Further, the
   district court declined to create an equitable exception.
          The district court entered final judgment of dismissal with prejudice
   on February 27, 2020. Davis v. Ocwen Loan Servicing, LLC (Davis I), 3:18-
   CV-2720, 2020 WL 880855 (N.D. Tex. Feb. 24, 2020). The district court
   also denied the Davis’ motion for reconsideration on May 4, 2020. Davis v.
   Ocwen Loan Servicing, LLC, 3:18-CV-2720, 2020 WL 2110590 (N.D. Tex.
   May 4, 2020). The Davises filed this appeal.
                            Standard of Review
          This court reviews “de novo a district court’s grant of a Rule 12(b)(6)
   motion, accepting all well-pleaded facts as true and viewing those facts in the
   light most favorable to the plaintiff.” Greene v. Greenwood Public School
   District, 890 F.3d 240, 242 (5th Cir. 2018) (internal marks and citations
   omitted). “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 v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility
   when the plaintiff pleads factual content that allows the court to draw the
   reasonable inference that the defendant is liable for the misconduct alleged.”
   Id.
                                  Discussion
   I. Whether the doctrine of res judicata bars the appellants’ request for
   declaratory relief.

                                          4
Case: 20-10547      Document: 00515803806            Page: 5     Date Filed: 03/31/2021

                                      No. 20-10547

          The appellants assert that the doctrine of res judicata does not bar
   their request for declaratory relief because they merely requested
   information about the loan in the 2017 lawsuit. The appellants also assert
   that “the extreme application of res judicata here” would be in contrast to
   equity or justice, as the application of res judicata penalizes them while giving
   the appellees a free pass.
          The appellees assert that the appellants had the opportunity to raise
   the statute of limitations defense in opposition to the 2017 counterclaim.
          Res judicata applies only where the following four conditions are met:
                  First, the parties in a later action must be identical to (or
          at least be in privity with) the parties in a prior action. Second,
          the judgment in the prior action must have been rendered by a
          court of competent jurisdiction. Third, the prior action must
          have concluded with a final judgment on the merits. Fourth,
          the same claim or cause of action must be involved in both
          suits.
   United States v. Shanbaum, 10 F.3d 305, 310 (5th Cir. 1994). “If these
   conditions are satisfied, claim preclusion prohibits either party from raising
   any claim or defense in the later action that was or could have been raised in
   support of or in opposition to the cause of action asserted in the prior action.”
   Id. (emphasis original).
          Here, the parties dispute only whether both suits involved the same
   claim. The district court found that, “[g]iven that both the 2017 action and
   the action at hand involve Defendants’ attempt to foreclose upon Plaintiffs’
   property,” it agreed with the magistrate judge that both suits “involve the
   same claim or causes of action.” Davis I, 2020 WL 880855, *2. We agree.
   Further, as set out above, the appellants did not merely request information

                                           5
Case: 20-10547          Document: 00515803806              Page: 6       Date Filed: 03/31/2021

                                           No. 20-10547

   in the 2017 action. Moreover, the appellants could have asserted the statute
   of limitations as a defense to the appellees’ counterclaim in 2017. 3
          The district court also declined to “carve out an equitable exception
   to the application of res judicata based on Plaintiffs’ suggestion that this
   involves an ‘extreme application’ of res judicata.” Id. The district court said
   that doing so “would be to disregard the ‘well-known rule that a federal court
   may not abrogate principles of res judicata out of equitable concerns.’” Id.
   (quoting In re Teal, 16 F.3d 619, 622 n.6 (5th Cir. 1994)).
          The appellants assert that they are not seeking to carve out an
   equitable exception, but rather attempting to apply the doctrine within the
   fundamental principle pronounced by this court. Appellants cite Dore v.
   Kleppe, 522 F.2d 1369 (5th Cir. 1975) for the proposition that “res judicata is
   a principle of public policy and should be applied so as to give rather than
   deny justice.” Id. at 1374. The appellants appear to be suggesting that justice
   could only be served by not applying res judicata to them rather than applying
   it. However, Dore also reminded us that, “[t]he general rule is that a final
   judgment is conclusive on the parties as to all questions of fact and law
   relevant to the same cause of action which were or could have been litigated
   in the prior proceeding.” Id. Based on the general rule in Dore and the rule
   set out in Teal, 16 F.3d at 622 n.6, quoted above, we likewise decline to adopt
   the equitable exception that the appellants seek.
          The appellants have failed to establish that their request for
   declaratory relief is not barred by the doctrine of res judicata. Regardless,
   even if res judicata did not apply, the appellees’ attempts to foreclose were
   not barred by the statute of limitations, as discussed below.

          3
              Appellants assert that the limitations period expired in 2013.

                                                 6
Case: 20-10547      Document: 00515803806          Page: 7   Date Filed: 03/31/2021

                                    No. 20-10547

   II. Whether the deed of trust and power of sale were void under the four-
   year statute of limitations.
          The appellants assert that the appellees’ attempts to foreclose are
   barred by the four-year statute of limitations applicable in Texas.
   Specifically, the appellants assert that the loan was fully accelerated and
   declared due and payable in full on March 10, 2009. Thus, the statute of
   limitations expired in 2013. The appellees counter that the limitations period
   has not expired because it abandoned the prior 2009 acceleration and reset
   the limitations period.
          Under Texas law, a suit for foreclosure of a real property lien must be
   brought no later than four years after the day the cause of action accrued.
   Tex. Civ. Pract. & Rem. Code §16.035(a). “On the expiration of the four-
   year limitations period, the real property lien and a power of sale to enforce
   the real property lien become void.”       Tex. Civ. Pract. & Rem. Code
   §16.035(d).
          However, even if the holder of the note notifies the borrower of intent
   to accelerate, the holder may unilaterally abandon the notice of acceleration.
   Boren v. U.S. Nat. Bank Ass’n, 807 F.3d 99, 105-06 (5th Cir. 2015). “If
   acceleration is abandoned before the limitations period expires, the note’s
   original maturity date is restored and the noteholder is no longer required to
   foreclose within four years from the date of acceleration.” Leonard v. Ocwen
   Loan Servicing, LLC, 616 Fed. App’x 677, 679 (5th Cir. 2015). Additionally,
   “a lender can unilaterally abandon an acceleration.” Id. at 680. This court
   has further stated, “[l]imitations began to run from the most recent
   acceleration, not from the earlier accelerations the bank had waived or
   abandoned.” Martin v. Federal Nat. Mortg. Ass’n, 814 F.3d 315, 318 (5th Cir.
   2016). “As relevant here, the request for payment of less than the full
   obligation—after initially accelerating the entire obligation—was an

                                         7
Case: 20-10547     Document: 00515803806           Page: 8   Date Filed: 03/31/2021

                                    No. 20-10547

   unequivocal expression of the bank’s intent to abandon or waive its initial
   acceleration.” Id.
          Here, the bank sent the Davises additional notices of default with an
   opportunity to cure and notice of an intent to accelerate on December 19,
   2012 and notice of acceleration on February 15, 2013.
          Thus, we agree with the district court that the bank’s actions
   constitute an abandonment of the initial notices of acceleration. Because the
   bank abandoned the 2009 acceleration as a matter of law, the subsequent
   foreclosure was timely and not barred by the four-year statute of limitations,
   even absent res judicata.
                                 Conclusion
          For these reasons, the district court did not err in dismissing with
   prejudice all of the appellants’ claims in the action for declaratory relief.
   Thus, we AFFIRM.

                                         8