Court Opinion

ID: 4459395
Source: CourtListenerOpinion
Date Created: 2019-11-27 01:00:29.995474+00
Date Added: 2024-06-11T14:23:38.943387
License: Public Domain

Case: 19-10701       Document: 00515215560          Page: 1     Date Filed: 11/26/2019

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT    United States Court of Appeals
                                                      Fifth Circuit

                                                                                  FILED
                                                                            November 26, 2019
                                     No. 19-10701
                                   Summary Calendar                            Lyle W. Cayce
                                                                                    Clerk

CRAIG PITTMAN; KELLY KONACK PITTMAN,

               Plaintiffs - Appellants

v.

SETERUS, INCORPORATED,

               Defendant - Appellee

                   Appeal from the United States District Court
                        for the Northern District of Texas
                             USDC No. 3:18-CV-3076

Before JOLLY, JONES, and SOUTHWICK, Circuit Judges.
PER CURIAM:*
       Two pro se plaintiffs, Craig Pittman and Kelly Koncak Pittman (the
Pittmans), appeal the district court’s dismissal of several claims against their
loan servicer, Nationstar Mortgage, LLC (Nationstar). 1 They seek to void a

       * 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
       1 Though Seterus, Inc. (Seterus), remains on the caption, Nationstar acquired Seterus
earlier this year and replaced Seterus in this litigation. Meanwhile, the Federal National
Mortgage Association (Fannie Mae) is not a party to this appeal, despite its role as the lender
    Case: 19-10701      Document: 00515215560       Page: 2    Date Filed: 11/26/2019

                                    No. 19-10701
foreclosure sale of their residence, quiet title, and obtain injunctive and
declaratory relief sufficient to ensure that Nationstar “is forever barred from
foreclos[ing] on [their] property.” We affirm.
      The Pittmans’ appeal turns entirely on whether Nationstar and Fannie
Mae satisfied Texas’s four-year statute of limitations for foreclosure actions
and foreclosure sales. See Tex. Civ. Prac. & Rem. Code § 16.035. The district
court held that the statute of limitations was satisfied in 2014, when Fannie
Mae counterclaimed for a federal-court order authorizing foreclosure. The
Pittmans argue that this conclusion was in error because the counterclaim and
the proceedings that it initiated were moot given an earlier state-court order
authorizing non-judicial foreclosure under Texas Rule of Civil Procedure 736
(the Rule 736 order).

      The Pittmans appear to believe that, properly construed, the statute of
limitations can be satisfied only by claims and proceedings that meet the
Article III case or controversy requirement; it would follow that the allegedly
moot proceedings initiated by the 2014 counterclaim do not suffice. According
to the Pittmans, the counterclaim must have been moot because (1) the Rule
736 order allowed Fannie Mae to proceed to a foreclosure sale, such that (2)
the order produced by the counterclaim could not afford new relief “affect[ing]
the rights of the litigants in the case.” North Carolina v. Rice, 404 U.S. 244,
246 (1971).

      We assume arguendo that the Pittmans’ interpretation of the statute is
correct, though the Pittmans have not directed us to any authority suggesting
that it is, and we assume also that the Rule 736 order was effective when the
counterclaim was filed, though Nationstar disputes that it was. Even so, the

on the Pittmans’ home loan and despite having played an active role in earlier, related
proceedings.
                                          2
     Case: 19-10701       Document: 00515215560          Page: 3     Date Filed: 11/26/2019

                                       No. 19-10701
Pittmans’ argument fails to persuade. There is simply no reason to believe
that the 2014 counterclaim was moot. Fannie Mae’s counterclaim requested
authorization for non-judicial foreclosure and judicial foreclosure in the
alternative. 2 Texas law draws a careful distinction between the two, with each
implicating different rights, remedies, and procedures. See De La Garza v.
Bank of New York Mellon, No. 02-17-00427-CV, 2018 WL 5725250, at *8–*9
(Tex. App.—Fort Worth Nov. 1, 2018, no pet.); see also In re Erickson, 566 F.
App’x 281, 284 (5th Cir. 2014) (under Texas law, judicial foreclosure and non-
judicial foreclosure are “separate and distinct remedies”).                     Non-judicial
foreclosures are subject to burdensome statutory restrictions that do not apply
to judicial foreclosures, and so (at least in some respects) judicial foreclosure is
a superior remedy that could be attractive to a lender already authorized to
foreclose non-judicially. See Tex. Prop. Code § 51.002; De La Garza, 2018 WL
5725250, at *8.
       Rule 736 is an avenue for non-judicial foreclosure only, having been
enacted to provide a “streamlined alternative to judicial foreclosure.” Huston
v. U.S. Bank Nat’l Ass’n, 359 S.W.3d 679, 682 (Tex. App.—Houston [1st Dist.]
2011, no pet.) (emphasis added); Tex. R. Civ. P. 735.1, 735.3. Thus, Fannie
Mae’s 2014 counterclaim could not have been entirely moot. Even if the Rule
736 order provided a path to non-judicial foreclosure, the counterclaim
initiated a live controversy with respect to judicial foreclosure. The Pittmans
do not suggest that a partially moot, partially live foreclosure action could fail
to satisfy the statute of limitations, and we do not see how it could. See Tex.

       2  A similar counterclaim was found to satisfy the statute of limitations in Metcalf v.
Wilmington Sav. Fund Soc’y, FSB, No. 03-16-00795-CV, 2017 WL 1228886, at *4 (Tex. App.—
Austin Mar. 29, 2017, pet. denied). Though that case did not address a mootness argument
like the one at issue here, we find it instructive nonetheless. Metcalf makes clear that a party
seeking authorization for non-judicial foreclosure can rely on an alternative claim for judicial
foreclosure to satisfy the statute of limitations and preserve its power of sale.
                                               3
    Case: 19-10701     Document: 00515215560       Page: 4   Date Filed: 11/26/2019

                                    No. 19-10701
Civ. Prac. & Rem. Code § 16.035(a) (requiring only a “suit for . . . the foreclosure
of a real property lien”).
      In any event, Rule 736 is no ordinary vehicle for non-judicial foreclosure.
The rule imposes special restrictions that would not have applied to an order
obtained by the counterclaim. When a Texas court grants an application for
non-judicial foreclosure under Rule 736, it “is not intended to be a binding
adjudication of the merits of any dispute[] between a lender and a borrower.”
Huston, 359 S.W.3d at 682. An “order under [Rule 736] is automatically stayed
if a respondent files a separate, original proceeding . . . related to the
origination, servicing, or enforcement of the loan agreement.” Tex. R. Civ. P.
736.11(a). The order is “without prejudice and has no res judicata, collateral
estoppel, estoppel by judgement, or other effect in any other judicial
proceeding.” Tex. R. Civ. P. 736.9.

      In this case, the Pittmans commenced an independent judicial
proceeding soon after Fannie Mae received foreclosure authorization under
Rule 736.    As such, the presiding court was necessarily asked to decide
questions that would “affect the rights of the litigants” when Fannie Mae
brought its counterclaim. Rice, 404 U.S. at 246. The counterclaim requested
a final, binding order that would allow Fannie Mae to foreclose without the
potential disturbance of subsequent litigation. By contrast, the Rule 736 order
was at all times subject to a contingency and would have been nullified if the
Pittmans had prevailed in their lawsuit.

      For these reasons, it is apparent that the counterclaim initiated an
Article III controversy and that the statute of limitations was satisfied. The
judgment of the district court is

                                                                      AFFIRMED.

                                         4