Court Opinion

ID: 4674060
Source: CourtListenerOpinion
Date Created: 2021-04-02 00:00:39.488215+00
Date Added: 2024-06-11T08:03:18.178789
License: Public Domain

Case: 20-50254     Document: 00515805478         Page: 1     Date Filed: 04/01/2021

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

                                            FILED
                                                                      April 1, 2021
                                  No. 20-50254                      Lyle W. Cayce
                                                                         Clerk

   Alice Byrd,

                                                           Plaintiff—Appellant,

                                       versus

   Lakeview Loan Servicing, L.L.C.; Cenlar, FSB,

                                                         Defendants—Appellees.

                  Appeal from the United States District Court
                       for the Western District of Texas
                            USDC No. 1:17-CV-620

   Before King, Smith, and Haynes, Circuit Judges.
   Per Curiam:*
          Plaintiff-appellant Alice Byrd states claims under Texas law against
   defendants-appellees Lakeview Loan Servicing, L.L.C., and Cenlar, FSB,
   based on those entities’ attempt to foreclose on her property. The district
   court granted summary judgment in favor of defendants-appellees on all of
   Byrd’s claims. 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   opinion should not be published and is not precedent except under the limited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: 20-50254      Document: 00515805478          Page: 2   Date Filed: 04/01/2021

                                    No. 20-50254

                                         I.
          Plaintiff-appellant Alice Byrd purchased a home in Hays County,
   Texas, in February 2014. Byrd financed her purchase through a 30-year
   mortgage from Cornerstone Home Lending secured through a deed of trust.
   The mortgage was subsequently assigned to defendant-appellee Lakeview
   Loan Servicing, L.L.C., (“Lakeview”) with servicing by defendant-appellee
   Cenlar FSB (“Cenlar”).
          Byrd subsequently failed to make the required monthly payments. As
   a result, Cenlar sent Byrd a notice of default on March 4, 2016. Cenlar’s
   notice informed Byrd that she was in default after missing payments due in
   February and March. Byrd was told that, if the payments were not received
   by March 27, 2016, “legal action may be instituted, which could result in your
   losing your home.”
          Byrd and Cenlar agreed to a six-month forbearance period during
   which Byrd was obligated to pay only $5.00 per month. However, Cenlar
   subsequently rejected Byrd’s request for a loan modification or other
   foreclosure alternative. On May 10, 2017, counsel for Cenlar and Lakeview
   sent Byrd a notice of acceleration notifying her that the property would be
   sold on June 6, 2017. On May 29, 2017, Byrd filed suit in state court asserting
   state law claims and seeking a temporary restraining order to prevent
   foreclosure of the property. Byrd obtained the temporary restraining order
   from the state court. According to Lakeview and Cenlar, Byrd still lives in the
   property and has not made a mortgage payment since January 2016.
          On June 26, 2017, Lakeview and Cenlar removed to federal court on
   the basis of diversity jurisdiction. Byrd filed an amended complaint in August
   2019, asserting claims of breach of contract, negligence, violations of the
   Texas Debt Collection Act (“TDCA”), TEX. FIN. CODE § 392.001, et seq.,

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                                     No. 20-50254

   and violations of the Texas Deceptive Trade Practices Act (“DTPA”), TEX.
   BUS. & COM. CODE § 17.01, et seq.
          The district court granted Lakeview and Cenlar’s motion for
   summary judgment as to all of Byrd’s claims in February 2020. The court
   held that Byrd’s breach-of-contract claim failed because Lakeview and
   Cenlar complied with the relevant terms, Byrd’s negligence claim was barred
   by the economic loss doctrine, Lakeview and Cenlar did not breach the
   TDCA, and Byrd’s claim under the DTPA failed because she was not a
   consumer.
          Byrd now appeals, arguing that the case was improperly removed to
   federal court; Lakeview and Cenlar violated the TDCA by failing to provide
   the requisite notice of default and notice of intent to accelerate; and the
   economic loss doctrine did not bar her negligence claim. We consider each
   argument in turn.
                                         II.
          “A lack of subject matter jurisdiction may be raised at any time and
   may be examined for the first time on appeal.” Volvo Trucks N. Am., Inc. v.
   Crescent Ford Truck Sales, Inc., 666 F.3d 932, 935 (5th Cir. 2012).
          In this case, Bryd first contends that Lakeview and Cenlar failed to
   establish diversity jurisdiction in removing the case to a federal forum. In
   their notice of removal, Lakeview and Cenlar alleged that “Lakeview Loan
   Servicing, LLC is a Delaware limited liability company” with its principal
   place of business in Florida and “[i]ts member . . . incorporated in
   Delaware.” The notice further alleged that “Cenlar, FSB is a Saving Bank,
   organized under the laws of the United States of America and located in the
   state of New Jersey.” As Byrd is a citizen of Texas, Lakeview and Cenlar
   claimed diversity jurisdiction.

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                                         No. 20-50254

           The citizenship of an LLC such as Lakeview “is determined by the
   citizenship of all of its members,” Tewari De-Ox Sys., Inc. v. Mountain
   States/Rosen, L.L.C., 757 F.3d 481, 483 (5th Cir. 2014). As Byrd points out,
   the notice specifies the state of incorporation for Lakeview’s sole member
   but omits reference to its principal place of business. Neeley v. Bankers Tr. Co.
   of Tex., 757 F.2d 621, 634 n.18 (5th Cir. 1985) (explaining that the citizenship
   of a corporation is based both on “the principal place of business of the
   corporation as well as the state of its incorporation”). Further, the
   citizenship of a federal savings bank such as Cenlar is determined by the
   location of the bank’s “home office,” but the notice does not specify the
   location of such an office. 12 U.S.C. § 1464(x). Accordingly, we asked the
   parties to submit supplemental briefing to address these issues.
           Lakeview and Cenlar responded with an affidavit by Lakeview’s CEO
   and President, which clarified that Lakeview’s “sole member is Bayview
   MSR Opportunity Corp., which is a Delaware corporation with its principal
   place of business in Coral Gables, Florida.” They also filed a declaration from
   Cenlar’s Vice President of Document Execution, Diane McCormick, which
   clearly stated that “Cenlar’s home office is in Ewing, New Jersey.” 1 We take

           1
             Byrd’s letter in response argues that McCormick lacked personal knowledge as
   she made no reference to Cenlar’s charter, which, pursuant to relevant federal regulations,
   would designate the home office of a federal savings association or bank. See 12 C.F.R. §
   5.40(b) n.3 (2021); see also 12 U.S.C. § 1462(3) (“The term ‘Federal savings association’
   means a Federal savings association or a Federal savings bank chartered under section 1464
   of this title.”). Byrd further argues, under the best evidence rule, that McCormick’s
   declaration cannot be admitted as evidence of the content of the charter. We disagree.
   McCormick’s personal knowledge of the location of Cenlar’s home office can be inferred
   as “such knowledge reasonably falls within [her] ‘sphere of responsibility.’” In re Green,
   968 F.3d 516, 524 (5th Cir. 2020). Moreover, as she did not attempt to prove the truth of
   the factual contents of the charter, the best evidence rule is irrelevant. See Dalton v.
   F.D.I.C., 987 F.2d 1216, 1223 (5th Cir. 1993) (explaining that a party cannot “use the best
   evidence rule to force the [opposing party] to produce the particular type of evidence . . .
   that he would prefer”).

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                                     No. 20-50254

   judicial notice of these facts and find that complete diversity existed at the
   time of removal. See Greenwich Ins. Co. v. Capsco Indus., Inc., 934 F.3d 419,
   422 (5th Cir. 2019) (taking judicial notice of affidavits filed in this court to
   assure itself of the existence of complete diversity); see also Tex. Beef Grp. v.
   Winfrey, 201 F.3d 680, 686 (5th Cir. 2000) (“When removal is based on
   diversity of citizenship, diversity must exist at the time of removal.”).
          Having determined that diversity jurisdiction exists in this case, we
   proceed to the merits of Byrd’s appeal.
                                         III.
          We review a district court’s grant of summary judgment de novo,
   applying the same standard as the district court. Wilmington Trust, Nat’l
   Ass’n v. Rob, 891 F.3d 174, 176 (5th Cir. 2018). “Where, as here, the proper
   resolution of the case turns on the interpretation of Texas law, we are bound
   to apply Texas law as interpreted by the state’s highest court.” Id. (quoting
   Boren v. U.S. Nat’l Bank Ass’n, 807 F.3d 99, 104–05 (5th Cir. 2015)).
   However, “[o]n issues the Texas Supreme Court has not yet decided, we
   must make an ‘Erie guess’ as to how the Court would resolve [the] issue.”
   Id. (cleaned up).
   A. Liability Under the TDCA
          Byrd appeals the district court’s grant of summary judgment as to
   alleged violations of § 392.301(a)(8) and § 392.304(a)(19) of the TDCA. We
   address Byrd’s claims under each provision in turn.
          Section 392.301(a)(8) of the TDCA prohibits a debt collector from
   “threatening to take an action prohibited by law” in attempting to recover an
   outstanding loan. TEX. FIN. CODE § 392.301(a)(8). The TDCA also
   provides, however, that a debt collector is not prohibited from “exercising or
   threatening to exercise a statutory or contractual right of seizure,

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                                          No. 20-50254

   repossession, or sale that does not require court proceedings.” Id.
   § 392.301(b)(3). Byrd argues that Lakeview and Cenlar threatened to take an
   action prohibited by law when they attempted to accelerate after providing
   an insufficient notice of default and without providing her with a notice of
   intent to accelerate as required by both the deed of trust and Texas law. Byrd
   thus contends that Lakeview and Cenlar “were not within any contractual
   right to accelerate the loan” and therefore threatened an action prohibited by
   law.
           The question at issue is whether a debt collector violates the TDCA
   by threatening foreclosure after failing to comply with pre-foreclosure notice
   requirements. This question was answered by the court in Rucker v. Bank of
   America, N.A., 806 F.3d 828 (5th Cir. 2015). In Rucker, we explained that a
   debt collector does not violate § 392.301(a)(8) by threatening to foreclose so
   long as it has “retained its contractual right to foreclose and the mortgage was
   in fact in default.” Id. at 831 (emphasis in original). We specifically held that,
   “irrespective of any statutory notice requirements,” the threat to foreclose
   does not violate the TDCA so long as the debt collector has not “waived its
   contractual right to foreclose.” Id. This conclusion is consistent with the
   TDCA’s        protection      for    “exercising      or    threatening       to   exercise
   a . . . contractual right of seizure, repossession, or sale that does not require
   court proceedings.” TEX. FIN. CODE § 392.301(b)(3). Our decision in Rucker
   makes clear that, so long as such a “contractual right” has not been waived,
   the TDCA is not violated by failing to comply with relevant notice
   requirements in attempting to exercise the right. 2 See Rucker, 806 F.3d at 831;

           2
             In this case, the notice requirements at issue were set out in the deed of trust
   rather than codified in a statute. But we can find no reason to distinguish Rucker on that
   basis under these circumstances. The Rucker court held that the violation of such pre-
   foreclosure notice requirements while exercising a contractual right to foreclose does not
   also constitute a violation of § 392.301(a)(8). See Rucker, 806 F.3d at 831; see also F.D.I.C.

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                                          No. 20-50254

   see also McCaig v. Wells Fargo Bank, N.A., 788 F.3d 463, 478 (5th Cir. 2015)
   (finding an actionable violation of § 392.301(a)(8) where mortgagee
   threatened foreclosure after it had “contracted away its right to foreclose”).
           Next, Byrd raises a claim under § 392.304(a)(19). Specifically, Byrd
   contends that “misrepresentations in the ‘notice of acceleration’ coupled
   with the threatening ‘notice of sale’ were false representations or deceptive
   means to collect a debt” in violation of § 392.304(a)(19) of the TDCA.
   Section 392.304(a)(19) broadly prohibits a debt collector from “using any . .
   . false representation or deceptive means to collect a debt.” “To violate the
   TDCA using a misrepresentation, the debt collector must have made an
   affirmative statement that was false or misleading.” Verdin v. Fed. Nat’l
   Mortg. Ass’n, 540 F. App’x 253, 257 (5th Cir. 2013) (cleaned up); see also
   Compass Bank v. Collier, No. 09-19-00112-CV, 2020 WL 6494213, at *13
   (Tex. App.—Beaumont Nov. 5, 2020, no pet.) (“To maintain a claim under
   section 392.304(a)(19), a plaintiff needs to allege that the debt collector made
   an ‘affirmative statement’ that was false or misleading.”). “Statements that
   create misrepresentations only through inference or deduction are not
   affirmative misstatements.” Colbert v. Wells Fargo Bank, N.A., No. 20-10394,
   2021 WL 921526, at *2 (5th Cir. Mar. 10, 2021) (applying Texas law).
           Byrd largely fails to cite any specific “affirmative misstatements” in
   support of her claim under § 392.304(a)(19). Id. Byrd does claim that the
   notice of acceleration misrepresented the “status and amount of the debt.”
   The notice stated that Byrd was in default and that “the entire unpaid
   principal balance of the Note, all accrued interest, and all other sums lawfully
   owing” were due. Byrd does not contest that she was, in fact, in default, but

   v. Abraham, 137 F.3d 264, 268 (5th Cir. 1998) (“[O]ne panel of this court cannot disregard,
   much less overrule, the decision of a prior panel. Adherence to this rule is no less immutable
   when the matter determined by the prior panel is the interpretation of state law . . . .”).

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                                     No. 20-50254

   contends that the notice “misrepresented” that the loan was accelerated
   because no clear notice of intent to accelerate had been sent. Byrd thus
   merely argues that the acceleration was improper and does not identify an
   “affirmative statement that was false or misleading.” Compass Bank, 2020
   WL 6494213 at *13 (cleaned up).
          Byrd further contests the notice of acceleration’s statement that she
   had been “informed of the intent to accelerate,” but does so for the first time
   on appeal. Though Byrd invoked § 392.304(a)(19) below, she did not do so
   on the basis of this or other particular statements in the notice of acceleration.
   “An argument not raised before the district court cannot be asserted for the
   first time on appeal.” HSBC Bank USA, N.A. as Trustee for Merrill Lynch
   Mortg. Loan v. Crum, 907 F.3d 199, 207 (5th Cir. 2018). As Byrd failed to raise
   the argument before the district court, she has waived it. See id.
          Based on the foregoing, Byrd’s claims under § 392.301(b)(3) and
   § 392.304(a)(19) of the TDCA fail.
   B. Economic Loss Doctrine
          The district court found that Byrd’s negligence claim was barred by
   the economic loss doctrine. Specifically, the court reasoned that Byrd’s
   allegations all arose out of the contractual agreement between the parties.
   Indeed, under Texas law, “[t]he economic loss rule generally bars a tort claim
   when no factual basis for the tort claim would exist had the defendant
   complied with the contract.” Lincoln Gen. Ins. Co. v. U.S. Auto Ins. Servs.,
   Inc., 787 F.3d 716, 726 (5th Cir. 2015). And “when the contract spells out the
   parties’ respective rights about a subject matter, the contract—not common
   law tort theories—governs any dispute about the subject matter.” Exxon
   Mobil Corp. v. Kinder Morgan Operating L.P. “A”, 192 S.W.3d 120, 127 (Tex.
   App.—Houston [14th Dist.] 2006, no pet.).
          In seeking review on this issue, Byrd once again raises a new argument

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                                           No. 20-50254

   not pressed below. In an effort to identify a duty independent of the parties’
   contractual obligations, Byrd claims for the first time on appeal that Lakeview
   and Cenlar were negligent in failing to provide pre-foreclosure notices. Such
   a claim was not set forth in Byrd’s Amended Complaint or her response to
   Lakeview and Cenlar’s motion for summary judgment. 3 As such, by failing to
   raise the argument before the district court, Byrd has waived it. See Crum,
   907 F.3d at 207.
                                                IV.
           Based on the foregoing, we AFFIRM the district court’s grant of
   summary judgment in favor of defendants-appellees.

           3
             Rather, Byrd consistently argued below that Lakeview and Cenlar were negligent
   in “failing to maintain the contents of their file on the Loan, placing personal notices on the
   front door of [Plaintiff’s] home that imply her Loan is still in foreclosure status, and failing
   to acknowledge Byrd’s request for an extension on the Plan.”

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