Ocwen Loan Servicing, L.L.C. v. Su Nguyen ( 2018 )

Case: 18-40278 Document: 00514720853 Page: 1 Date Filed: 11/13/2018
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 18-40278 United States Court of Appeals
Summary Calendar
Fifth Circuit
FILED
November 13, 2018
OCWEN LOAN SERVICING, L.L.C., Lyle W. Cayce
Clerk
Plaintiff - Appellant
v.
REOAM, L.L.C.,
Defendant - Appellee
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 3:15-CV-10
Before HIGGINBOTHAM, ELROD, and DUNCAN, Circuit Judges.
PER CURIAM:*
This appeal concerns a mortgage-foreclosure dispute arising under
Texas law. The only issue here is whether the statute of limitations provided
under Texas Civil Practice and Remedies Code § 16.035(a), which delineates
the time within which a lien-holder must bring suit for the foreclosure of real
property, expired before appellant Ocwen Loan Servicing (“Ocwen”) foreclosed
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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its superior lien. After a one-day bench trial, the district court concluded that
Ocwen did not abandon or waive its acceleration meaning that its foreclosure
action was time-barred. We reverse.
I.
In 2008, Su Thanh Nguyen and Hongdao Thi Vo (the “Borrowers”)
obtained a home equity loan for the principal amount of $370,500.00 (the
“Loan”) from GMAC Mortgage (“GMAC”). Borrowers executed a Texas Home
Equity Note (the “Note”) payable to GMAC granting GMAC a security interest
in a parcel of real property in Pearland, Texas. Borrowers defaulted on the
Loan in 2010 and the Loan is due for the May 1, 2010 payment and all
subsequent monthly payments. A notice of default and request to cure was
mailed to Borrowers in June 2010 advising them that the loan was in default
and that they would need to tender $10,184.52 within thirty days to become
current. The notice of default advised Borrowers that failure to bring the loan
current would result in an acceleration of the debt.
Borrowers did not timely cure the default and the note was accelerated
on August 24, 2010. GMAC filed an application for foreclosure pursuant to
Texas Rule of Civil Procedure 736 in December 2010 which was dismissed by
GMAC in January 2015. GMAC filed a second Rule 736 foreclosure action in
September 2011 which was nonsuited by GMAC in August 2014. GMAC
negotiated the Note to Ocwen, who is the current holder of the Note, and Ocwen
became the loan servicer in February 2013. Ocwen’s system of records indicates
that Ocwen sent nine statements to Borrowers between July 18, 2013 and May
19, 2014, requesting an amount less than the full amount outstanding on the
loan.
Borrowers had additional obligations to the Village of Reflection Bay
Homeowners Association (the “HOA”) by a declaration of covenants, providing
that the HOA was permitted to assess liens for unpaid maintenance
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assessments. Under that declaration, liens for those assessments were
subordinate to “any first priority lien mortgages relating to the Lots or Tracts”
of the development. After Borrowers failed to pay all of their assessments owed
under the declaration, the HOA placed a lien on the property and the property
was sold at a foreclosure sale in January 2015 to appellee REOAM, LLC
(“REOAM”).
Prior to the foreclosure sale in October 2014, Ocwen brought the present
action in the Southern District of Texas seeking judicial foreclosure. After
REOAM purchased the property, Ocwen filed its First Amended Complaint
adding REOAM as a defendant in April 2015. After a one-day bench trial, the
district court held that (1) Ocwen had standing to enforce the loan agreement
and foreclose on the Loan, (2) REOAM had standing to raise a statute of
limitations defense as a third party with interest in the property, and (3)
Ocwen did not unequivocally manifest an intent to abandon the August 2010
acceleration, meaning its claim was barred by the statute of limitations. This
appeal followed.
II.
Ocwen contends on appeal that the district court erred in concluding that
its judicial foreclosure action was time-barred because it effectively abandoned
the prior loan servicer’s acceleration by sending monthly statements to
Borrowers requesting less than the full amount of the accelerated debt, thereby
permitting Borrowers to bring the Loan current without paying the accelerated
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balance. “The standard of review for a bench trial is well established: findings
of fact are reviewed for clear error and legal issues are reviewed de novo.” 1
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.” 2 Where the note is payable in “installments and is secured by a real
property lien, the four-year limitations period does not begin to run until the
maturity date of the last note, obligation, or installment.” 3 If the note contains
an optional acceleration clause, the cause of action accrues “when the holder
actually exercises its option to accelerate.” 4 However, if the acceleration is
abandoned before the limitations period expires, the contract is restored to its
original condition thereby “restoring the note’s original maturity date.” 5 If
abandonment is effective, the noteholder is no longer required to foreclose
within four years of the date of the acceleration.
A noteholder can unilaterally abandon an acceleration if the borrower
does not object to the abandonment and has not detrimentally relied on the
acceleration. 6 This court has held that a lender can abandon its earlier
acceleration by putting the borrower on notice of its abandonment by
requesting payment on less than the full amount of the accelerated loan. 7 In
other words, if the noteholder informs the borrower that the loan can be
1 Guzman v. Hacienda Records & Recording Studio, Inc., 808 F.3d 1031, 1036 (5th
Cir. 2015) (quoting One Beacon Ins. Co. v. Crowley Marine Servs., Inc., 648 F.3d 258, 262 (5th
Cir. 2011) (internal quotation marks omitted)).
2 Tex. Civ. Prac. & Rem. Code § 16.035(a).
3 Boren v. U.S. Nat’l Bank Ass’n, 807 F.3d 99, 104 (5th Cir. 2015) (citing EMC Mortg.
Corp. v. Window Box Ass’n, Inc., 264 S.W.3d 331, 335 (Tex. Ct. App. 2008)).
4 Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001).
5 Khan v. GBAK Properties, Inc., 371 S.W.3d 347, 353 (Tex. App.—Houston [1st Dist.]
2012, no pet.).
6 Boren, 807 F.3d at 105 (internal citation omitted).
7 Id. at 106 (“A lender waives its earlier acceleration when it ‘put[s] the debtor on
notice of its abandonment . . . by requesting payment on less than the full amount of the
loan.’” (citing Leonard v. Ocwen Loan Servicing, LLC, 616 F. App’x 677, 680 (5th Cir. 2015)
(per curiam)).
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brought current by payment of the amount due under the original terms of the
loan rather than the full accelerated amount, such notice is sufficient to
“unequivocally manifest[] an intent to abandon the previous acceleration”
meaning that the limitations period triggered by the acceleration ceases to
run. 8
Ocwen argues it effectively abandoned the prior acceleration by sending
nine monthly statements to Borrowers giving them the opportunity to cure
their default without paying the full accelerated balance. REAOM responds by
contending (1) the “anti-waiver” clause in the Deed of Trust means that Ocwen
could not abandon the acceleration by sending mortgage statements requesting
less than the accelerated amount; (2) Ocwen did not produce competent
evidence that the mortgage statements were actually sent to the Borrowers;
and (3) Ocwen could not manifest an intent to abandon the prior acceleration
because of the two pending Rule 736 foreclosure proceedings.
REOAM first claims that the following “anti-waiver” clause in Section 11
of the Deed of Trust prevented Ocwen from abandoning the prior acceleration
by requesting less than the full accelerate amount:
Borrower Not Released; Forbearance by Lender Not a Waiver.
Any forbearance by Lender in exercising any right or remedy including,
without limitation, Lender’s acceptance of payments from third persons,
entities or Successors in Interest of Borrower or in amounts less than the
amount then due, shall not be a waiver of or preclude the exercise of any
right or remedy.
REOAM argues that because the terms of the contract allow the lender to
accept less than the fully accelerated amount without waiving its right to
acceleration, Ocwen cannot have unequivocally manifested its intent to
abandon the earlier acceleration by requesting less than the fully accelerated
8 Id.
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amount. We agree with Ocwen that the anti-waiver provision reserves the
lender’s rights under the agreement if it defers exercising one of its remedies;
it does not preclude the lender from abandoning an earlier acceleration. In
interpreting an identical clause as not precluding the lender’s ability to
abandon an acceleration, this court noted that “[a]bandonment of an existing
acceleration and waiver of [the lender’s] right to accelerate in the future are
two distinct issues and th[e subject] provision only addresses the latter,
providing [lender] with a ‘reservation of rights if [the lender] chooses to refrain
from exercising a right or remedy under the deed of trust.’” 9 In that case, the
lender abandoned an earlier acceleration by accepting less than the full
amount due, which the court found was compelling evidence of an intent to
abandon. 10 The anti-waiver provision, the court found, did not foreclose the
lender’s ability to abandon. 11 Accordingly, REOAM’s reliance on the anti-
waiver clause to distinguish this case from Boren and Leonard is unavailing;
the provision’s preservation of Ocwen’s lender’s right to accelerate in the future
did not affect its ability to abandon an existing acceleration.
In the alternative, REOAM contends that even if such statements were
sufficient to demonstrate abandonment, Ocwen did not present competent
evidence that the mortgage statements requesting less than the full
accelerated amount were actually sent to Borrowers. In its findings of fact and
conclusions of law, the trial court noted that:
While Ocwen’s system of records indicates that, between July 18, 2013
and May 19, 2014, Ocwen sent nine statements to Borrowers requesting
less than the total amount due on the loan, Ocwen offered no additional
9 Justice v. Wells Fargo Bank Nat’l Ass’n, 674 F. App’x 330, 335 (5th Cir. 2016) (quoting
Wells v. Bank of Am., N.A., No. 13-cv-3658, 2015 WL 4269089, at *6 (N.D. Tex. July 14,
2015)).
10 Id. at 334 (citing Martin v. Fed. Nat’l Mortg. Ass’n, 814 F.3d 315, 318 (5th Cir.
2016)).
11 Id. at 335.
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evidence that such statements were indeed sent or received by the
borrowers.
The district court did not make a factual finding that Ocwen had not sent the
mortgage statements, instead stating that the only evidence that they were
sent came from an employee’s testimony describing his review of Ocwen’s own
records. 12 Further, the court did not rely on a factual determination that the
mortgage statements had not been sent in its conclusions of law, and seems to
assume the opposite, concluding that, “in light of the two applications for Rule
736 Action for expedited foreclosure filed by GMAC, as Ocwen’s predecessor in
interest, Ocwen did not unequivocally manifest an intent to abandon the
August 24, 2010 acceleration by sending mortgage statements to the
Borrowers.” In other words, the district court concluded Ocwen did not
effectively abandon the acceleration because of the pending Rule 736 actions,
not because there was insufficient evidence that the mortgage statements were
sent. REOAM cites no statute or authority that would require further evidence
that the mortgage statements were sent. 13 In sum, there was not insufficient
evidence to conclude that the mortgage statements were sent and, after
12 Reviewing the trial testimony, a senior loan analyst from Ocwen was asked by the
district court (attempting to clarify a question asked by REOAM’s counsel): “[H]ow did you
draw that conclusion that [the statements were] mailed to the borrowers.” Ocwen’s employee
responded: “[O]ur system of record, which means our computer system which we use, it does
document when the statements are sent out, as well as shows the images of the actual
statement which is sent out.” He testified that the computer system images the statements
“into our system as it—when they were sent out to the customer.”
13 The two cases cited by REOAM for its contention that Ocwen was required to put
forth further “specific evidence of mailing or delivery” do not create the standard Ocwen
argues for. United States v. Wilson, 322 F.3d 353, 360–64 (5th Cir. 2003) (holding that district
court erred in determination that government had established by a preponderance of
evidence that letter was sent where witness’s testimony about correspondence practices was
contradictory and evinced a lack of personal knowledge); AMC Mortg. Servs., Inc. v. Shields,
No. 05-06-01194-cv, 2007 WL 1366048, at *1 (Tex. App.—Dallas 2007, no pet.) (considering
whether there was sufficient evidence that demand for possession was sent pursuant to
statutory provision governing mailing requirements, such as requiring “return receipt
requested”).
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reviewing the district court’s factual findings and conclusions of law, the
district court did not make a factual finding that such statements had not been
sent.
Finally, REOAM asserts that Ocwen could not manifest an intent to
abandon the earlier acceleration because of the two pending Rule 736 actions. 14
The Rule 736 actions were filed by GMAC in December 2010 and September
2011. It is undisputed that Ocwen is bound by the actions of the prior mortgage
servicer and that Ocwen took no steps to advance the proceedings. REOAM
argues that because Ocwen took no affirmative steps to terminate the Rule 736
actions within the limitations window, it could have moved for a hearing to
obtain an order for foreclosure at any time. Essentially, because Ocwen had
the option to pursue the proceedings, REOAM argues, no reasonable borrower
would believe that Ocwen unequivocally abandoned its earlier acceleration.
Ocwen responds that it did not advance the proceedings because it had
abandoned the prior acceleration.
This court has previously considered and rejected a borrower’s argument
that a Rule 736 proceeding precludes a lender from manifesting an intent
abandon an earlier acceleration by requesting payment on less than the full
amount of the loan. 15 REOAM’s argument “misapprehends the nature of a Rule
736 order, which is merely an order ‘allowing the foreclosure of a certain kind
of lien’” 16 and “‘not a substitute for a judgment for judicial foreclosure.’” 17
14The district court relied on this rationale in its conclusions of law to determine that
Ocwen did not manifest an intent to abandon the earlier acceleration. We now hold this was
in error.
15 Meachum v. Bank of New York Mellon Trust Co., N.A., 636 F. App’x 210, 213 (5th
Cir. 2016) (per curiam) (“Meachum tries to distinguish Boren by arguing that the Bank’s
predecessor actually obtained an order of foreclosure after initially accelerating the note,
such that any future attempts to abandon the acceleration were ineffectual.”).
16 Id. (citing Tex. R. Civ. P. 736.1(a)).
17 Id. (citing Tex. R. Civ. P. 735.3).
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REOAM attempts to distinguish the scenario here by pointing out that the
Rule 736 proceeding was still pending here whereas in Meachum, the lender
had already obtained the foreclosure order. Such distinction is of no moment.
We agree with REOAM that if a lender can abandon an acceleration through
the sending of mortgage statements requesting payment on less than the full
amount of the loan after obtaining a Rule 736 order, it can also do so while the
Rule 736 action is still pending. Ocwen did not advance the proceedings after
sending the mortgage statements requesting less than the full amount of the
loan and, as such, the fact that the proceedings remained pending did not
interfere with their manifested intent to abandon the earlier acceleration.
Accordingly, because Ocwen sent mortgage statements requesting less
than the entire accelerated amount, giving Borrowers the opportunity to cure
the default without paying the full accelerated balance, it abandoned the
earlier acceleration. Ocwen’s judicial foreclosure action was therefore not
time-barred under Section 16.035(a) of the Texas Civil Practice and Remedies
Code. We reverse.
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