Court Opinion

ID: 9947093
Source: CourtListenerOpinion
Date Created: 2024-03-02 01:00:45.863562+00
Date Added: 2024-06-11T14:25:46.716066
License: Public Domain

Case: 23-10416            Document: 46-1          Page: 1     Date Filed: 03/01/2024

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

                                     No. 23-10416
                                                                                    FILED
                                                                                March 1, 2024
                                   ____________
                                                                               Lyle W. Cayce
Khaliq Bryant,                                                                      Clerk

                                                                  Plaintiff—Appellant,

                                          versus

Ditech Financial, L.L.C.,

                                             Defendant—Appellee.
                   ______________________________

                   Appeal from the United States District Court
                       for the Northern District of Texas
                             USDC No. 3:22-CV-252
                   ______________________________

Before King, Jones, and Oldham, Circuit Judges.
Andrew S. Oldham, Circuit Judge: *
       Khaliq Bryant sued to quiet title on property in Texas. The district
court dismissed Bryant’s suit for failure to state a claim. We reverse.
                                             I.
       In 2003, James Daugherty bought a condominium in Dallas. He
obtained a $225,060 mortgage on that condo. Daugherty defaulted on that

       _____________________
       *
           This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 23-10416        Document: 46-1        Page: 2   Date Filed: 03/01/2024

                                 No. 23-10416

mortgage in or around 2012 and negotiated a loan modification. We refer to
Daugherty’s condo mortgage as the “Daugherty Loan.”
       In 2016, the homeowner’s association (“HOA”) placed a lien on the
property for unpaid dues, foreclosed on the lien, and forced the sale of
Daugherty’s condo. Sherry Flewellen bought the condo. Then she filed suit
in Texas state court to evict Daugherty. The state court ruled in Flewellen’s
favor. Daugherty lost title to the property, ceased occupying it, and stopped
making payments on the Daugherty Loan.
       The condo changed hands several more times. Flewellen also failed to
pay her HOA dues, so the HOA again foreclosed and sold the property to
HUWA LLC. Then the property was sold to Kingdom Group Investments.
Finally, Kingdom Group sold the property to Bryant in 2021.
       Specialized Loan Servicing, LLC (“SLS”) is the successor in interest
to Ditech Financial, LLC (“Ditech”). SLS and Ditech serviced the
Daugherty Loan. SLS says it can now foreclose on the Daugherty Loan—
notwithstanding the intervening sales of the condo to Flewellen, HUWA,
Kingdom Group, and Bryant.
       In response, Bryant filed a quiet-title action in Texas state court. He
asserted that SLS’s foreclosure claim was time-barred. See Tex. Civ.
Prac. & Rem. Code § 16.035. Ditech and SLS removed to federal court
and then moved to dismiss under Federal Rule of Civil Procedure 12(b)(6).
The district court granted that motion. Bryant timely appealed. Our review
is de novo. Heinze v. Tesco Corp., 971 F.3d 475, 479 (5th Cir. 2020).
                                      II.
                                      A.
       “Jurisdiction is always first.” Louisiana v. DOE, 90 F.4th 461, 466
(5th Cir. 2024) (quotation omitted). This case arises under 28 U.S.C. § 1332

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and involves the citizenship of one or more LLCs—so we must be especially
vigilant about our jurisdiction. “This is an evergreen problem in our circuit,”
because parties often misunderstand the jurisdictional rules that apply to
LLCs. Partners & Friends Holding Corp. v. Cottonwood Mins., LLC, No. 23-
10192, 2023 WL 8649880, at *2 (5th Cir. Dec. 14, 2023); see, e.g., MidCap
Media Fin., LLC v. Pathway Data, Inc., 929 F.3d 310, 314 (5th Cir. 2019).
       Here, however, Ditech and SLS properly removed to federal court by
alleging the citizenship of each member of the LLC. Bryant is a citizen of
Texas; Ditech was a citizen of Delaware, Pennsylvania, and Maryland; and
SLS is a citizen of Australia. With complete diversity established—and
amount in controversy otherwise satisfied—we properly have jurisdiction to
review the district court’s final order under 28 U.S.C. § 1291.
                                       B.
       Under Texas law, a secured lender “must bring suit for . . . the
foreclosure of a real property lien not later than four years after the day the
cause of action accrues.” Tex. Civ. Prac. & Rem. Code § 16.035(a).
A cause of action typically accrues on the note’s maturity date. Holy Cross
Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001); accord Boren
v. U.S. Nat’l Bank Ass’n, 807 F.3d 99, 104 (5th Cir. 2015). That ordinary
rule, however, is modified when a note includes an optional acceleration
clause. Holy Cross, 44 S.W.3d at 566. In that latter circumstance, a cause of
action accrues when the note holder exercises the acceleration option. Ibid.
To exercise an acceleration clause, a lender must send both (1) a notice of
intent to accelerate and (2) a notice of acceleration. Ibid.
       The question of what facts must be pled to sufficiently allege the
invocation of an acceleration clause has divided our trial courts. Compare
DTND Sierra Invs. LLC v. Bank of N.Y. Mellon Tr. Co., 958 F. Supp. 2d 738,
749 (W.D. Tex. 2013) (dismissing a complaint pleading acceleration “on

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information and belief” without “factual support regarding when” notices
were sent), with Kafi, Inc. v. Sand Canyon Corp., No. 3:20-cv-354, 2022 WL
3084480, at *11 (S.D. Tex. Aug. 3, 2022) (holding that a complaint stated a
claim regarding acceleration and the statute of limitations without specific
allegations regarding required notices of acceleration).
       The Supreme Court has been clear about requirements at the pleading
stage. To survive a motion to dismiss, a plaintiff needs to plead “only enough
facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). And relatedly, “[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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
       Bryant’s claim meets these standards. He alleges that no payments
have been made on the Daugherty Loan “for between ten and fifteen years.”
ROA.206. That allegation is supported by ample non-conclusory allegations:

   • Daugherty fell into delinquency on the Daugherty Loan no later than
     2012.

   • Daugherty entered a loan modification in 2012.

   • Daugherty lost an eviction case in 2016 and also lost all use of the
     property in that year.

   • Daugherty ceased all payments on the Daugherty Loan no later than
     2016.

   • Property taxes on the condo are approximately $3,000 per year, yet
     Daugherty’s escrow account and corporate advances are
     approximately negative $70,000.

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                                  No. 23-10416

       Bryant further alleges that the condo has been sold four times since
Daugherty fell into delinquency ten to fifteen years ago. Specifically, the
complaint includes these well-pleaded facts:

   • The HOA foreclosed on its lien and sold the condo to Flewellen in
     2016.

   • The HOA foreclosed on another lien and sold the property to HUWA
     LLC in 2019.

   • The HOA foreclosed on another lien and sold the property to
     Kingdom Group.

   • Then Kingdom Group sold the property to Bryant in 2021.
During these sales, Bryant alleges, no one paid a penny on the Daugherty
Loan—which makes sense because Daugherty himself was long ago evicted
from the condo. And each of the intervening owners (Flewellen, HUWA,
Kingdom Group, and Bryant) were strangers to the Daugherty Loan.
       Finally, Bryant alleges the Daugherty Loan was accelerated more than
four years ago. He supported that allegation with the well-pleaded fact that
the Daugherty Loan was subject to acceleration upon default. And beyond
Daugherty’s default by non-payment of his debts for more than a decade, the
Daugherty Loan was also subject to acceleration upon transfer of the
property. Given that the condo was transferred four times after Daugherty
stopped paying his debts—and that two of those transfers were five or more
years ago—the complaint alleges it is “highly likely” that the lender
accelerated the Daugherty Loan and hence started § 16.035’s limitations
period more than four years ago. These well-pleaded facts allow a federal
court to infer that the limitations period has run. Iqbal, 556 U.S. at 678.
       True, Bryant did not allege precisely when the lender sent the
acceleration notices required by Texas law. See Holy Cross, 44 S.W.3d at 566.

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                                 No. 23-10416

But Twombly and Iqbal do not require such specificity. Bryant alleged, for
example, that the Daugherty Loan was subject to acceleration upon sale of
the condo; that the condo was indeed sold twice more than four years before
quiet-title action; and that therefore, the limitations period bars SLS from
foreclosing on the Daugherty Loan. Those facts easily give rise to the
inference that the Loan was accelerated with virtual certainty.
       And that is precisely the sort of inference the Federal Rules afford to
plaintiffs. A plaintiff can allege that objects dropped in water generally get
wet; the defendant dropped an object in water; and that it is therefore highly
likely the object got wet. Sure, it is possible that the defendant’s particular
object somehow escaped the water by landing on a boat or an animal. But just
as plaintiffs cannot state a claim using speculation, defendants cannot defeat
plausible inferences using speculation.
       It also bears emphasis that SLS has or had all the necessary
information it might need to defeat Bryant’s claim. If the Daugherty Loan in
fact was never accelerated, notwithstanding a decade or more of defaults,
SLS could prove it in minutes: It could file its loan documents along with its
answer and win under Federal Rule of Civil Procedure 12(c) or Rule 56. What
it cannot do is win dismissal under Rule 12(b)(6) by speculating that a piece
of property was sold four times, that the loan went unpaid for 10–15 years,
and that the lender nonetheless might’ve sat idly by, holding an
unaccelerated note and watching the property change hands, change hands,
change hands, and change hands again without ever protecting its rights.
       REVERSED.

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