Opinion
1:21-CV-1188-RP
05-17-2023
U.S. BANK TRUST NATIONAL ASSOCIATION, as trustee of THE TIKI SERIES IV TRUST, Plaintiff, v. JERRY K. WALDEN, Jr. a/k/a JERRY K. WALDEN and TAMATHA WALDEN, Defendants.
TO THE HONORABLE ROBERT PITMAN UNITED STATES DISTRICT JUDGE
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
MARK LANE UNITED STATES MAGISTRATE JUDGE
Before the court is Plaintiff's Motion for Summary Judgment (Dkt. #24) and all related briefing. Having considered the motion, briefing and the entire case file and determined that a hearing is not necessary, the court issues the following report and recommendation.
The motion and related briefing have been referred to the undersigned for a Report and Recommendation by the United States District Judge pursuant to 28 U.S.C. § 636(b)(1)(B), Federal Rule of Civil Procedure 72, and Rule 1(d) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas. Jan. 23, 2023 Text Order in Case No. 1:21-cv-1188-RP.
I. Background
Plaintiff U.S. Bank Trust National Association, as Trustee of the Tiki Series IV Trust (“U.S. Bank”) and Defendants Jerry K. Walden, Jr. a/k/a Jerry K. Walden and Tamatha Walden (“Borrowers”) are engaged in dispute arising from a home equity loan (“Loan”). See Dkt. #24 at 1. U.S. Bank is seeking, inter alia, a declaratory judgment that a prior final judgment (“Final Judgment”) from the Fifth Circuit obtained by its predecessor-in-interest is enforceable by U.S. Bank. Dkt. #1 at 7. The prior Final Judgment allowed U.S. Bank's predecessor-in-interest to proceed with foreclosure of Borrowers' real property due to Borrowers' default on the Loan. Dkt. #24 at 1.
All page number references refer to the CM/ECF page number found in the CM/ECF document header.
U.S. Bank's predecessor-in-interest, MTGLQ Investors, L.P., assigned the Loan to U.S. Bank while the appeal of the Final Judgment was pending in the Fifth Circuit. Dkt. #25-1 at 43.
While the appeal was pending, U.S. Bank's predecessor-in-interest assigned the Loan to U.S. Bank. Dkt. #24 at 4 (Plaintiff's Motion for Summary Judgment). The Fifth Circuit issued its initial opinion on July 20, 2021, affirming the District Court's granting of summary judgment for U.S. Bank's predecessor-in-interest. MTGLQ Inv'rs, L.P. v. Walden, 853 Fed.Appx. 957 (5th Cir. 2021). Subsequently, U.S. Bank's counsel mailed a notice of default (“Notice”) to Borrowers in August 2021. Id.; Dkt. #29 at 2 (Defendants' Response to Plaintiff's Motion for Summary Judgment). U.S. Bank contends that the Notice was sent inadvertently and contained inaccurate information, namely information indicating that U.S. Bank was abandoning acceleration. Dkt. #24 at 4; Dkt. #29 at 2. Specifically, the Notice stated Borrowers could cure the default by paying less than the full accelerated amount due under the loan agreement. Dkt. #24 at 4.
U.S. Bank became the holder of the Loan, which is serviced by SN Servicing Corporation.
The Fifth Circuit issued a substitute opinion on October 19, 2021. MTGLQ Inv'rs, L.P. v. Walden, No. 20-50944, 2021 U.S. App. LEXIS 31343 (5th Cir. Oct. 19, 2021) (affirming summary judgment, denying rehearing, and denying motion to vacate and dismiss on mootness grounds). U.S. Bank's counsel then sent Borrowers another notice (“Foreclosure Notice”) in November 2021, id., indicating that their property would be sold at a foreclosure sale on January 4, 2022. Dkt. #29 at 2.
U.S. Bank filed this action in December 2021, contending it has a right to foreclose under the Final Judgment issued by the District Court and affirmed by the Fifth Circuit. Dkt. #24 at 4.
The Final Judgment provided: “Plaintiff or its successors and assigns may enforce its lien against the Property through nonjudicial foreclosure and sale of the Property ....” Dkt. #25-1 at 85. (Final Judgment, 1:19-cv-992-RP).
MTGLQ Inv'rs, L.P. v. Walden, No. 20-50944, 2021 App. LEXIS 31343 (5th Cir. Oct. 9, 2021) (affirming summary judgment, denying rehearing, and denying motion to vacate and dismiss).
U.S. Bank now moves for summary judgment on the ground that the Notice was ineffective to abandon acceleration and requests a declaratory judgment that the Final Judgment is valid and enforceable. Id. at 5. In the alternative, U.S. Bank seeks an order allowing it to proceed with foreclosure. Id.
Borrowers oppose summary judgment on several grounds. First, Borrowers assert that neither the District Court nor the Fifth Circuit had subject matter jurisdiction to issue or affirm the Final Judgment in the prior action. Dkt. #29 at 3. They argue second that this court does not have subject matter jurisdiction in this case. Id. at 4. Third, they argue that U.S. Bank seeks an advisory opinion. Id. Fourth, if this court does have jurisdiction, the Notice together with the absence of a subsequent notice of acceleration preclude a judgment of foreclosure. Id. Fifth, if this court has jurisdiction, the Final Judgment precludes the granting of another judgment. Id. And in the alternative, should the court deny summary judgment, Borrowers seek time to take discovery to present facts to justify their opposition to summary judgment. Id.
Borrowers do not assert-or at least do not discernably assert-any argument in support of several of their grounds. See generally, Dkt. #29.
II. Standard of Review
Summary judgment is appropriate under Rule 56 of the Federal Rules of Civil Procedure only “if the movant shows there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a). A dispute is genuine only if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254 (1986).
The party moving for summary judgment bears the initial burden of “informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrates the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then shifts to the nonmoving party to establish the existence of a genuine issue for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986); Wise v. E.I. Dupont de Nemours & Co., 58 F.3d 193, 195 (5th Cir. 1995). The parties may satisfy their respective burdens by tendering depositions, affidavits, and other competent evidence. Est. of Smith v. United States, 391 F.3d 621, 625 (5th Cir. 2004).
The court will view the summary judgment evidence in the light most favorable to the nonmovant. Griffin v. United Parcel Serv., Inc., 661 F.3d 216, 221 (5th Cir. 2011). The non-movant must respond to the motion by setting forth particular facts indicating that there is a genuine issue for trial. Miss. River Basin Alliance v. Westphal, 230 F.3d 170, 174 (5th Cir. 2000). “After the non-movant has been given the opportunity to raise a genuine factual issue, if no reasonable juror could find for the non-movant, summary judgment will be granted.” Id.
III. Analysis
A. Subject Matter Jurisdiction
1. Standing
Two of Borrowers' grounds for opposing summary judgment are that this court lacks and the courts in the prior action lacked subject matter jurisdiction because U.S. Bank does not and did not have standing to sue. Dkt. #29 at 3-4. Borrowers contend that U.S. Bank has not suffered any concrete injury. Id. U.S. Bank argues Borrowers are wrong on the law and there is no fact question on this issue that would deprive the court of subject matter jurisdiction and prevent summary judgment. Dkt. #31 at 2-3.
“Article III of the Constitution limits federal courts' jurisdiction to certain ‘Cases' and ‘Controversies.'” Clapper v. Amnesty Int'l USA, 568 U.S. 398, 408 (2013) (cleaned up and citing cases). “One element of the case-or-controversy requirement is that plaintiffs must establish that they have standing to sue.” Id. (cleaned up and citing cases). “To establish Article III standing, an injury must be concrete, particularized, and actual or imminent; fairly traceable to the challenged action; and redressable by a favorable ruling.” Id. at 409 (cleaned up and citing cases). “Stated differently, the plaintiff must demonstrate personal injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief.” Daves v. Dallas Cnty., 22 F.4th 522, 542 (5th Cir. 2022) (cleaned up). “The plaintiff, as the party invoking federal jurisdiction, bears the burden of establishing these elements.” Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016).
Borrowers argue U.S. Bank has not established an ownership interest in the Loan and therefore cannot demonstrate injury by Borrowers. Dkt. #29 at 6. Borrowers point to the Loan's chain of title in support of their argument. Id. at 4-6. They note that the Loan was conveyed to the Federal National Mortgage Association (“Fannie Mae”) on April 16, 2008, Dkt. #29 at 4 (citing Dkt. #25 at 36-37), and from Fannie Mae to U.S. Bank's predecessor-in-interest. Id. (citing Dkt. #25 at 40-42). Borrowers argue that these transfers are “problematic [because] Fannie Mae had no ownership interest in the [L]oan to convey.” Id. at 5.
The 2008 Housing Economic Recovery Act (“HERA”), enacted July 30, 2008, created the Federal Housing Finance Agency (“FHFA”) and authorized its director to place Fannie Mae into conservatorship. Id. (citing 12 U.S.C. § 4617(a)). The director placed Fannie Mae into conservatorship on September 7, 2008. Collins v. Yellen, 141 S.Ct. 1761, 1772 (2021). By that act, FHFA succeeded to “all rights, titles, powers, and privileges of” Fannie Mae. 12 U.S.C. § 4617(b)(2)(A)(i). Borrowers argue, the conveyance of the Loan from Fannie Mae to U.S. Bank's predecessor-in-interest in 2017 “conveyed nothing as a matter of law” because FHFA controlled all of Fannie Mae's operations, including its authority to sell assets. Dkt. #29 at 6. Because that conveyance was ineffective, conveying nothing, Borrowers submit, the predecessor-in-interest's conveyance to U.S. Bank likewise conveyed nothing. Dkt. #29 at 6 (emphasis removed).
Borrowers argue Fannie Mae still owns the Loan because it has not been sold by FHFA. Dkt. #29 at 6.
U.S. Bank argues that Borrowers are “simply, wrong.” Dkt. #31 at 2. U.S. Bank contends that Fannie Mae has retained authority over management of its loans. Id. In support of its position, U.S. Bank argues, citing 12 U.S.C. § 4617(g), that the language of HEAR provides that FHFA “may take over the assets of Fannie Mae, but it is not obligated to do so.” Id. at 2-3 (emphasis added).
U.S. Bank notes that in an unrelated, race discrimination case, the Fifth Circuit stated that “Fannie Mae . . . buys and sells mortgages and loans.” Dkt. #31 at 2 (quoting Warren v. Fannie Mae, 733 Fed.Appx. 753, 755 (5th Cir. 2018)).
As U.S. Bank notes, the language of HERA as it pertains to the agency's power to convey assets is permissive. “The Agency may . . . transfer or sell any asset or liability of [Fannie Mae] ....” 12 U.S.C. § 4617(g) (emphasis added). Indeed, this is FHFA's understanding of its role as Fannie Mae's conservator. “FHFA has the powers of the management, boards, and shareholders of Fannie Mae . . .,” but “Fannie Mae and Freddie Mac continue to operate as business corporations.” FHFA's Role as Conservator, FHFA (May 9, 2023, 3:38 PM), https://www.fhfa.gov/Conservatorship.
The Supreme Court has interpreted FHFA's role similarly, noting “[FHFA] is tasked with supervising nearly every aspect of [Fannie Mae's] management and operations.” Collins, 141 S.Ct. at 1771 (emphasis added). “[FHFA] may reject acquisitions and certain transfers of interests ....” Id. (emphasis added). “It may order the companies to dispose of or acquire any asset. Id. (emphasis added). Specifically with regard to conservatorship, the Supreme Court notes, “[FHFA] has the authority to take control of [Fannie Mae's] assets and operations, conduct business on their behalf, and transfer or sell any of their assets or liabilities.” Id. at 1772. “In performing these functions, [FHFA] may exercise whatever incidental powers it deems necessary, and it may take any authorized action that is in the best interests of the companies or [FHFA] itself.” Id. (emphasis added). Thus, HERA did not completely circumscribe Fannie Mae's ability “to continue to operate as a business corporation[],” including its authority transfer assets. See FHFA's Role as Conservator, supra at 6.
Because Fannie Mae has not been divested completely of its authority under HERA, the conveyance by Fannie Mae was valid. And the summary judgment evidence shows U.S. Bank owns the Loan. Dkt. #25-1 at 44 (Assignment of Deed of Trust). Fannie Mae conveyed the Loan to U.S. Bank's predecessor-in-interest, who in turn, conveyed it to U.S. Bank. Id.; Dkt. #25-1 at 40. Because U.S. Bank has a property interest in the Loan on which Borrowers defaulted, U.S. Bank has suffered an injury sufficient to establish Article III standing. For the foregoing reasons, the court concludes that it has subject matter jurisdiction over this action and for the same reasons concludes that the District Court and the Fifth Circuit had subject matter jurisdiction in the prior action.
Although Borrowers argue that Fannie Mae owns the Loan, they do not otherwise take issue with U.S. Bank's presentation of the chain of title. See generally, Dkt. #29.
2. Advisory Opinion
Borrowers argue that any decision other than denying U.S. Bank's Motion for lack of subject matter jurisdiction would be advisory, and federal courts are prohibited from issuing advisory opinions. Dkt. #29 at 8-9. U.S. Bank replies that an actual case and controversy exists because U.S. Bank is seeking a declaration that the Notice had no effect on the Final Judgment. Dkt. #1 at 4-5.
A declaratory judgment action is ripe for adjudication only where an “actual controversy” exists. See 28 U.S.C. § 2201(a) (“In a case of actual controversy within its jurisdiction . . . any court of the United States . . . may declare the right and other legal relations of any interested party seeking such declaration.”); Tex. v. W. Publ'g. Co., 882 F.2d 171, 175 (5th Cir. 1989). “As a general rule, an actual controversy exists where ‘a substantial controversy of sufficient immediacy and reality exists between parties having adverse legal interests.'” Orix Credit All., Inc. v. Wolfe, 212 F.3d 891, 896 (5th Cir. 2000) (cleaned up and quoting Middle S. Energy, Inc. v. City of New Orleans, 800 F.2d 488, 490 (5th Cir. 1986)). “Whether particular facts are sufficiently immediate to establish an actual controversy is a question that must be addressed on a case-by-case basis.” Id.
The meat of Borrowers' argument on this ground comprises a couple of conclusory sentences (and several others imploring the court to deny summary judgment on the previously asserted standing grounds). Dkt. #29 at ¶¶ 39, 42.
As U.S. Bank points out, “The federal Declaratory Judgment Act provides that the courts may ‘declare the rights and other legal relations of any interested party” where an “actual controversy” exists. Dkt. #31 at 4 (quoting 28 U.S.C. § 2201(a)). An actual controversy is when “a substantial controversy of sufficient immediacy and reality between parties having adverse legal interests.” Orix, 212 F.3d at 896 (cleaned up and quoting Middle S. Energy, 800 F.2d at 490). U.S. Bank is seeking a declaratory judgment as to whether the Notice adversely affected the Final Judgment. Dkt. #31 at 4-5.
Because the parties have actual adverse legal interests in this live litigation and because U.S. Bank is not seeking an opinion on the Final Judgment itself but whether that judgment was affected by the Notice, an opinion in this lawsuit would not be advisory.
Even the threat of litigation can establish a controversy in which a declaratory judgment may issue. Orix, 212 F.3d at 897.
B. Final Judgment, Abandonment of Waiver & Notice Effectiveness
U.S. Bank argues that it is entitled to summary judgment because the Notice was ineffective to abandon acceleration and thus that the Final Judgment remains enforceable. Dkt. #24 at 5. U.S. Bank seeks a declaration that (1) the Notice had no effect on the Final Judgment, (2) the Final Judgment is in full force and effect, and (3) U.S. Bank may immediately proceed with a non-judicial foreclosure. Dkt. #24 at 7. U.S. Bank argues it did not abandon acceleration and is entitled to summary judgment for two reasons. Borrowers do not address U.S. Bank's argument, including U.S. Bank's primary ground for summary judgment. Dkt. #31 at 1; see generally Dkt. #29.
“A lienholder can abandon acceleration ‘by agreement or other action of the parties.'” Boren v. U.S. Nat'l Bank Ass'n, 807 F.3d 99, 104 (5th Cir. 2015) (quoting Khan v. GBAK Props., Inc., 371 S.W.3d 347, 353 (Tex. App.-Houston [1st Dist.] 2012, no pet.)). “Abandonment ‘has the effect of restoring the contract to its original condition' and ‘restoring the note's original maturity date” for accrual purposes. Sexton v. Deutsche Bank Nat'l Tr. Co., 731 Fed.Appx. 302, 305 (5th Cir. 2018) (quoting Khan, 371 S.W.3d at 353). Texas courts apply traditional principles of waiver to abandonment of acceleration. Boren, 807 F.3d at 105 (citing cases). “The elements of waiver include (1) an existing right, benefit, or advantage held by a party; (2) the party's actual knowledge of its existence; and (3) the party's actual intent to relinquish the right, or intentional conduct inconsistent with the right.” Thompson v. Bank of Am. Nat'l Ass'n, 783 F.3d 1022, 1025 (5th Cir. 2015) (quoting Ulico Cas. Co. v. Allied Pilots Ass'n, 262 S.W.3d 773, 778 (Tex. 2008)). “The central element is intent, which must be unequivocally manifested.” Id. “Where waiver is claimed by inference rather than express renunciation, ‘it is the burden of the party who is to benefit . . . to produce conclusive evidence that the opposite party unequivocally manifested its intent to no longer assert its claim.'” Id. (quoting Sgroe v. Wells Fargo Bank, N.A., 941 F.Supp.2d 731, 748 (E.D. Tex. 2013)).
First, U.S. Bank argues it could not abandon acceleration after the Final Judgment was awarded because it could not bring another action seeking the same relief its predecessor-in-interest was awarded. Dkt. #24 at 8. U.S. Bank cites Texas Rules of Civil Procedure 735 and 736, which govern foreclosure actions. Id.; see also generally TEX. R. CIV. P. 735 & 736. Texas Rule of Civil Procedure 736 “has no res judicata, collateral estoppel, estoppel by judgment, or other effect in any other judicial proceeding.” TEX. R. CIV. P. 736.9. Rule 735 contains no such limitation. See TEX. R. CIV. P. 735. U.S. Bank contends that because the Final Judgment was awarded pursuant to Texas Rule of Civil Procedure 735, U.S. Bank was estopped from relitigating the foreclosure issue. Dkt. #24 at 8.
“As a general matter, the mid-litigation assignment of an interest neither renders a case or controversy moot nor requires the assignee to substitute as a party.” Mtglq Inv'rs, 2021 U.S. App. LExiS 31343, at *1 (citing cases).
The Final Judgment awarded U.S. Bank's predecessor-in-interest the same relief U.S. Bank would have sought in a separate, subsequent action. See Dkt. #25-1 at 85. Accordingly, U.S. Bank was estopped from attempting to assert its right to foreclose via lawsuit in light of the Final Judgment. See Sapp v. Mem'l Hermann Healthcare Sys., 406 Fed.Appx. 866, 870-71 (5th Cir. 2010).
U.S. Bank also argues that because it did not manifest an unequivocal intent to abandon acceleration the elements required for waiver under Texas Law are not satisfied. Id. at 7, 8. “[T]he intent to abandon must be ‘unequivocally manifested.'” Sexton v. Deutsche Bank Nat'l Tr. Co., 731 Fed.Appx. 302, 305 (5th Cir. 2018) (quoting Thompson, 783 F.3d at 1025). U.S. Bank presents evidence that it continued to pursue foreclosure by sending the Foreclosure Notice shortly after the Fifth Circuit issued its substitute opinion affirming the Final Judgment. Dkt. #25-1 at 75-78 (Foreclosure Notice). Indeed, Borrowers acknowledge that U.S. Bank provided such notice. Dkt. #29 at 2. U.S. Bank's actions do not manifest an unequivocal intent to abandon acceleration.
Indeed, the lack of unequivocal intent is further supported by an email in which Borrowers' counsel expressed confusion as to the status of the debt. See Dkt. #31-1 at 5 (“It seems at least one of the notice of sale or the notice of recission misrepresents the status of the debt ....”).
Because U.S. Bank was estopped by the Final Judgment from relitigating the issue of whether it as a successor in interest could foreclose; and because U.S. Bank did not manifest an unequivocal intention to abandon acceleration; and because Borrowers presented no evidence that U.S. Bank in fact manifested an unequivocal intention to abandon acceleration, U.S. Bank is entitled to summary judgment on this ground.
Accordingly, the court does not reach U.S. Bank's alternative arguments.
IV. Borrowers' Request for Discovery
Borrowers request that the court deny or continue the summary judgment motion to permit Borrowers an opportunity to conduct discovery pertaining to jurisdiction and acceleration. But Borrowers' Response failed to show why they need additional discovery and how that discovery will create a fact issue. See Adams v. Travelers Indem. Co. of Conn., 465 F.3d 156, 462 (5th Cir. 2006). Additionally, Borrowers' request is not supported by an affidavit as required by Federal Rule of Civil Procedure 56(d). Because Borrowers have not met the requirements for additional discovery, the undersigned will not recommend denying or continuing the Motion to allow for additional discovery.
V. Conclusion
This action is a last-ditch effort by Borrowers to avoid foreclosure. However, their effort comes up short. Borrowers' challenge to the court's jurisdiction in this action as well as their challenge to the District Court and the Fifth Circuit's jurisdiction in the prior action are unavailing. The court also concluded that an opinion in this case would not be an impermissible advisory opinion. Accordingly, the court turned to the merits of U.S. Bank's Motion.
In support of its primary ground for summary judgment, U.S. Bank provided evidence that it did not express an unequivocal intent to abandon acceleration; U.S. Bank's argument and evidence went unchallenged. Indeed, Borrowers' Response did not even address U.S. Bank's primary ground for summary judgment. No question of material fact was presented, and summary judgment is appropriate based on U.S.'s primary ground. Accordingly, the court did not reach U.S. Bank's alternative arguments.
VI. Recommendation
For the reasons stated above, the court RECOMMENDS Plaintiff's Motion for Summary Judgment (Dkt. #24) be GRANTED and that a declaratory judgment issue confirming that the Final Judgment is valid and enforceable.
VII. Objections
The parties may file objections to this Report and Recommendation. A party filing objections must specifically identify those findings or recommendations to which objections are being made. The District Court need not consider frivolous, conclusive, or general objections. See Battles v. United States Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report and, except upon grounds of plain error, shall bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140 (1985); Douglass v. United Services Auto. Ass'n, 79 F.3d 1415 (5th Cir. 1996) (en banc).