Court Opinion

ID: 6330366
Source: CourtListenerOpinion
Date Created: 2022-04-13 00:00:58.994735+00
Date Added: 2024-06-11T09:23:00.241716
License: Public Domain

Case: 21-20326     Document: 00516271052          Page: 1    Date Filed: 04/07/2022

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

                                                                              FILED
                                                                           April 7, 2022
                                   No. 21-20326                          Lyle W. Cayce
                                                                              Clerk

   U.S. Bank National Association, as trustee for CSMC Mortgage-
   Backed Trust 2007-3; PHH Mortgage Corporation, individually as
   successors in interest to Ocwen Loan Servicing,

                                                            Plaintiffs—Appellees,

                                       versus

   Josef M. Lamell, also known as J. M. Arpad Lamell,

                                                         Defendant—Appellant.

                  Appeal from the United States District Court
                      for the Southern District of Texas
                           USDC No. 4:19-CV-2402

   Before Stewart, Clement, and Elrod, Circuit Judges.
   Per Curiam:*
          Appellant Josef Lamell has not made the monthly mortgage payment
   on his house for over a decade. Following a protracted state court proceeding
   initiated by Mr. Lamell, Appellees United States Bank National Association

          *
            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   opinion should not be published and is not precedent except under the limited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: 21-20326      Document: 00516271052            Page: 2   Date Filed: 04/07/2022

                                    No. 21-20326

   (USBNA) and PHH Mortgage Corporation (PHH) filed a declaratory
   judgment action in federal district court.          USBNA and PHH sought
   declarations that (a) they were not time barred from foreclosing on Mr.
   Lamell’s property or collecting on the mortgage note; (b) they were entitled
   to pay taxes on the property; (c) they were entitled to non-judicial
   foreclosure; and (d) they were entitled to foreclosure under the theories of
   equitable and contractual subrogation.
          The district court granted summary judgment in favor of USBNA and
   PHH with respect to their request for a declaration on each of the foregoing
   grounds, and Mr. Lamell timely appealed. For the following reasons, we
   AFFIRM.
                                           I.
          In September 2006, Mr. Lamell mortgaged the real property located
   at 5131 Glenmeadow Drive, Houston, Texas 77096. To do so, he executed a
   note and deed of trust, which granted a security interest in the property to
   Home123 Corporation (Home123).               The deed of trust initially named
   Mortgage Electronic Registration Systems, Inc. (MERS) as the beneficiary,
   as well as the nominee of Home123. But in 2010, MERS and Home123
   assigned the deed of trust to USBNA, who is the current holder of the note
   and beneficiary of the deed of trust.
          In February 2010, Mr. Lamell stopped making his monthly mortgage
   payment. That same month, Mr. Lamell filed a state court petition against
   the Harris County Appraisal District, its Review Board, and the Harris
   County Tax Assessor, alleging fraud-related claims arising from certain tax
   assessments and charges on his property. In April 2010, the then-mortgage
   servicer of Mr. Lamell’s property, CIT Bank, N.A. (CIT), sent Mr. Lamell a
   notice of default, demand to cure, and notice of intent to accelerate the loan.

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   In response, Mr. Lamell amended his state court petition to add CIT as a
   defendant. 1 But he did not cure his default.
          Because of Mr. Lamell’s failure to cure, USBNA sent him a first
   notice of acceleration in June 2010. In it, USBNA demanded payment of the
   entire outstanding loan amount. Over the next three years, USBNA sent Mr.
   Lamell at least five more notices of acceleration, all of which demanded the
   entire amount outstanding on the loan. But Mr. Lamell never cured the
   default.
          In October 2013, CIT transferred its mortgage servicing rights to
   Ocwen Loan Servicing, LLC (Ocwen). Between January and April 2014,
   Ocwen sent Mr. Lamell four separate mortgage account statements
   demanding less than the full amount then due on the loan. Mr. Lamell still
   did not cure, nor did he pursue any of the mortgage foreclosure alternatives
   that Ocwen offered.
          It does not appear from the record that anything meaningful occurred
   in relation to this case until May 2019, when Ocwen transferred the mortgage
   servicing rights to PHH.        Around that same time, there were several
   developments in the state court proceeding. First, Mr. Lamell supplemented
   his state court petition, seeking a declaration that any pending or future
   foreclosure actions by CIT or its successors or assigns were time barred.
   Second, the parties settled, releasing all claims and counterclaims that were
   part of the state court suit. Third, the state court entered final judgment on

          1
             The “Amended 2009 Petition” purported to assert the following claims:
   “Violation of Due Process, Violation of Fair and Uniform Tax Appraisal, Fraud and
   Misrepresentation, Unlawful Tax Collection, Failure to Disclose, Conversion, and False
   Agency.”

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   the settlement agreement, dismissing with prejudice all claims that were or
   could have been asserted.
          On July 2, 2019, PHH sent its first notice of foreclosure to Mr. Lamell.
   The very next day, USBNA and PHH commenced the present action in
   federal district court, seeking a declaratory judgment “to confirm that the
   Statute of Limitations does not prevent them from enforcing the Loan
   Agreement, that Defendant released any claims he may have had to bar the
   enforcement of the Loan Agreement, and for foreclosure so it may enforce its
   security interest in the Property.”       USBNA and PHH also sought a
   declaration that they were equitably or contractually subrogated to the rights
   of prior lienholders. Mr. Lamell counterclaimed for both declaratory and
   monetary relief.
           Despite the July 2, 2019 notice of foreclosure, Mr. Lamell still did
   not cure his default. So, in August 2019, PHH sent Mr. Lamell a notice of
   acceleration of loan maturity, which demanded the full amount outstanding
   on the loan—$1,289,102.72.
          Meanwhile, USBNA and PHH moved for summary judgment on their
   claims for declaratory relief in the federal suit.        The magistrate judge
   recommended granting the motion on the ground that Mr. Lamell’s statute
   of limitations defense was barred by res judicata, and that USBNA and PHH
   presented sufficient summary judgment evidence showing entitlement to
   non-judicial foreclosure. It further recommended that there was a genuine
   factual dispute regarding whether USBNA and PHH abandoned acceleration
   of the full loan amount; whether USBNA and PHH were entitled to a
   declaratory judgment as to their right to equitable and contractual
   subrogation; and whether PHH and USBNA were entitled to pay taxes on
   the property.       The district court adopted the magistrate judge’s

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   recommendations in full and entered final judgment in favor of USBNA and
   PHH.
           Mr. Lamell then moved for a new trial under Federal Rule of Civil
   Procedure 59, which the district court denied. 2 USBNA and PHH moved to
   amend the judgment, asking the district court to enter summary judgment in
   their favor with respect to their abandonment of acceleration claim. The
   district court denied the motion.
           Mr. Lamell timely appealed the district court’s summary judgment
   order and its order denying his motion for a new trial.
                                               II.
           We review a district court’s order granting a motion for summary
   judgment de novo, applying the same standard as the district court. Hyatt v.
   Thomas, 843 F.3d 172, 176 (5th Cir. 2016). Summary judgment is appropriate
   when “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). A disputed
   fact is material if it “might affect the outcome of the suit under the governing
   law[.]” Hyatt, 843 F.3d at 177 (quoting Anderson v. Liberty Lobby, Inc., 477
   U.S. 242, 248 (1986)). “We construe all facts and inferences in the light most
   favorable to the nonmoving party[.]” Dillon v. Rogers, 596 F.3d 260, 266 (5th
   Cir. 2010) (quoting Murray v. Earle, 405 F.3d 278, 284 (5th Cir. 2005)).
                                              III.
           The district court devoted considerable space in its order to discussing
   whether summary judgment was proper as to (a) USBNA’s request for a
   declaration that it abandoned its acceleration of the loan, and (b) USBNA’s

           2
             The district court construed Mr. Lamell’s motion as a Rule 60(b) motion for relief
   from a final judgment, order, or proceeding.

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   request for a declaration that the state court settlement and dismissal was res
   judicata as to Mr. Lamell’s statute of limitations affirmative defense. But we
   need not address either issue. USBNA is entitled to enforce its equitable
   subrogation rights to foreclose on Mr. Lamell’s property. See Ballew v. Cont’l
   Airlines, Inc., 668 F.3d 777, 781 (5th Cir. 2012) (“We may . . . affirm on any
   ground supported by the record.”).
          The doctrine of equitable subrogation is a legal fiction that “allows a
   lender who discharges a valid lien on the property of another to step into the
   prior lienholder’s shoes and assume that lienholder’s security interest in the
   property, even though the lender cannot foreclose on its own lien.” PNC
   Mortg. v. Howard, 616 S.W.3d 581, 582 (Tex. 2021) (quoting Fed. Home Loan
   Mortg. Corp. v. Zepeda, 601 S.W.3d 763, 766 (Tex. 2020)). It “applies ‘in
   every instance in which one person, not acting voluntarily, has paid a debt for
   which another was primarily liable and which in equity should have been paid
   by the latter.’” Frymire Eng’g Co. ex rel. Liberty Mut. Ins. Co. v. Jomar Int’l,
   Ltd., 259 S.W.3d 140, 142 (Tex. 2008) (Willett, J.) (quoting Mid-Continent
   Ins. Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765, 774 (Tex. 2007)).
          “Texas courts are particularly hospitable to the doctrine” and apply
   it liberally. Bank of Am. v. Babu, 340 S.W.3d 917, 925 (Tex. App.—Dallas
   2011, pet. denied). Its general purpose “is to prevent unjust enrichment of
   the debtor.” Id. (citing First Nat’l Bank of Kerrville v. O’Dell, 856 S.W.2d
   410, 415 (Tex. 1993)).
          The district court held that USBNA was entitled to a declaratory
   judgment that it could foreclose on Mr. Lamell’s property pursuant to its
   equitable subrogation rights. We agree. Notably, Mr. Lamell does not
   dispute this conclusion on its merits, arguing instead that USBNA is barred
   by res judicata from enforcing its equitable subrogation rights on the ground
   that USBNA was required to assert its foreclosure claim as a counterclaim in

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   the state court action. Not so; at least one Texas appellate court has held that
   foreclosure claims are not compulsory counterclaims. See, e.g., Casterline v.
   OneWest Bank, FSB, No. 13-17-00118-CV, 2018 WL 1755821, at *4 (Tex.
   App.—Corpus Christi Apr. 12, 2018, pet. denied). Mr. Lamell has not
   directed us to on-point, controlling authority suggesting otherwise.
          Mr. Lamell argues further that “the doctrine of equitable subrogation
   is essentially a red herring” given that the statute of limitations to bring suit
   for foreclosure has expired. He goes on to argue that lenders cannot invoke
   equitable subrogation to avoid the statute of limitations. Remarkably, Mr.
   Lamell cites PNC Mortgage v. Howard, 618 S.W.3d 75, 85 (Tex. App.—Dallas
   2019) for this proposition. Yet, prior to Mr. Lamell’s submission of his brief
   in this court—and indeed, a few days prior to the district court’s issuance of
   its summary judgment order—the Supreme Court of Texas reversed that
   decision, holding that a lender’s failure to timely foreclose under a deed of
   trust does not bar its subrogation rights. PNC, 616 S.W.3d at 585; cf. Zepeda,
   601 S.W.3d at 769.
          The Supreme Court of Texas’s decision in PNC puts an end to the
   matter. Equitable subrogation protects USBNA’s right to foreclose, even if
   the four-year statute of limitations under § 16.035 of the Texas Civil Practice
   and Remedies Code has expired and even if res judicata does not bar Mr.
   Lamell from asserting his limitations defense. Of course, we express no view
   on either issue.
                                   *        *         *
          Summary judgment was proper in favor of USBNA on equitable
   subrogation grounds. Accordingly, the judgment is AFFIRMED.

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