U.S. Bank v. Lamell

Case: 21-20326 Document: 00516271052 Page: 1 Date Filed: 04/07/2022
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
April 7, 2022
No. 21-20326 Lyle W. Cayce
Clerk
U.S. Bank National Association, as trustee for CSMC Mortgage-
Backed Trust 2007-3; PHH Mortgage Corporation, individually as
successors in interest to Ocwen Loan Servicing,
Plaintiffs—Appellees,
versus
Josef M. Lamell, also known as J. M. Arpad Lamell,
Defendant—Appellant.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:19-CV-2402
Before Stewart, Clement, and Elrod, Circuit Judges.
Per Curiam:*
Appellant Josef Lamell has not made the monthly mortgage payment
on his house for over a decade. Following a protracted state court proceeding
initiated by Mr. Lamell, Appellees United States Bank National Association
*
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opinion should not be published and is not precedent except under the limited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.
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No. 21-20326
(USBNA) and PHH Mortgage Corporation (PHH) filed a declaratory
judgment action in federal district court. USBNA and PHH sought
declarations that (a) they were not time barred from foreclosing on Mr.
Lamell’s property or collecting on the mortgage note; (b) they were entitled
to pay taxes on the property; (c) they were entitled to non-judicial
foreclosure; and (d) they were entitled to foreclosure under the theories of
equitable and contractual subrogation.
The district court granted summary judgment in favor of USBNA and
PHH with respect to their request for a declaration on each of the foregoing
grounds, and Mr. Lamell timely appealed. For the following reasons, we
AFFIRM.
I.
In September 2006, Mr. Lamell mortgaged the real property located
at 5131 Glenmeadow Drive, Houston, Texas 77096. To do so, he executed a
note and deed of trust, which granted a security interest in the property to
Home123 Corporation (Home123). The deed of trust initially named
Mortgage Electronic Registration Systems, Inc. (MERS) as the beneficiary,
as well as the nominee of Home123. But in 2010, MERS and Home123
assigned the deed of trust to USBNA, who is the current holder of the note
and beneficiary of the deed of trust.
In February 2010, Mr. Lamell stopped making his monthly mortgage
payment. That same month, Mr. Lamell filed a state court petition against
the Harris County Appraisal District, its Review Board, and the Harris
County Tax Assessor, alleging fraud-related claims arising from certain tax
assessments and charges on his property. In April 2010, the then-mortgage
servicer of Mr. Lamell’s property, CIT Bank, N.A. (CIT), sent Mr. Lamell a
notice of default, demand to cure, and notice of intent to accelerate the loan.
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In response, Mr. Lamell amended his state court petition to add CIT as a
defendant. 1 But he did not cure his default.
Because of Mr. Lamell’s failure to cure, USBNA sent him a first
notice of acceleration in June 2010. In it, USBNA demanded payment of the
entire outstanding loan amount. Over the next three years, USBNA sent Mr.
Lamell at least five more notices of acceleration, all of which demanded the
entire amount outstanding on the loan. But Mr. Lamell never cured the
default.
In October 2013, CIT transferred its mortgage servicing rights to
Ocwen Loan Servicing, LLC (Ocwen). Between January and April 2014,
Ocwen sent Mr. Lamell four separate mortgage account statements
demanding less than the full amount then due on the loan. Mr. Lamell still
did not cure, nor did he pursue any of the mortgage foreclosure alternatives
that Ocwen offered.
It does not appear from the record that anything meaningful occurred
in relation to this case until May 2019, when Ocwen transferred the mortgage
servicing rights to PHH. Around that same time, there were several
developments in the state court proceeding. First, Mr. Lamell supplemented
his state court petition, seeking a declaration that any pending or future
foreclosure actions by CIT or its successors or assigns were time barred.
Second, the parties settled, releasing all claims and counterclaims that were
part of the state court suit. Third, the state court entered final judgment on
1
The “Amended 2009 Petition” purported to assert the following claims:
“Violation of Due Process, Violation of Fair and Uniform Tax Appraisal, Fraud and
Misrepresentation, Unlawful Tax Collection, Failure to Disclose, Conversion, and False
Agency.”
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the settlement agreement, dismissing with prejudice all claims that were or
could have been asserted.
On July 2, 2019, PHH sent its first notice of foreclosure to Mr. Lamell.
The very next day, USBNA and PHH commenced the present action in
federal district court, seeking a declaratory judgment “to confirm that the
Statute of Limitations does not prevent them from enforcing the Loan
Agreement, that Defendant released any claims he may have had to bar the
enforcement of the Loan Agreement, and for foreclosure so it may enforce its
security interest in the Property.” USBNA and PHH also sought a
declaration that they were equitably or contractually subrogated to the rights
of prior lienholders. Mr. Lamell counterclaimed for both declaratory and
monetary relief.
Despite the July 2, 2019 notice of foreclosure, Mr. Lamell still did
not cure his default. So, in August 2019, PHH sent Mr. Lamell a notice of
acceleration of loan maturity, which demanded the full amount outstanding
on the loan—$1,289,102.72.
Meanwhile, USBNA and PHH moved for summary judgment on their
claims for declaratory relief in the federal suit. The magistrate judge
recommended granting the motion on the ground that Mr. Lamell’s statute
of limitations defense was barred by res judicata, and that USBNA and PHH
presented sufficient summary judgment evidence showing entitlement to
non-judicial foreclosure. It further recommended that there was a genuine
factual dispute regarding whether USBNA and PHH abandoned acceleration
of the full loan amount; whether USBNA and PHH were entitled to a
declaratory judgment as to their right to equitable and contractual
subrogation; and whether PHH and USBNA were entitled to pay taxes on
the property. The district court adopted the magistrate judge’s
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recommendations in full and entered final judgment in favor of USBNA and
PHH.
Mr. Lamell then moved for a new trial under Federal Rule of Civil
Procedure 59, which the district court denied. 2 USBNA and PHH moved to
amend the judgment, asking the district court to enter summary judgment in
their favor with respect to their abandonment of acceleration claim. The
district court denied the motion.
Mr. Lamell timely appealed the district court’s summary judgment
order and its order denying his motion for a new trial.
II.
We review a district court’s order granting a motion for summary
judgment de novo, applying the same standard as the district court. Hyatt v.
Thomas, 843 F.3d 172, 176 (5th Cir. 2016). Summary judgment is appropriate
when “there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A disputed
fact is material if it “might affect the outcome of the suit under the governing
law[.]” Hyatt, 843 F.3d at 177 (quoting Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986)). “We construe all facts and inferences in the light most
favorable to the nonmoving party[.]” Dillon v. Rogers, 596 F.3d 260, 266 (5th
Cir. 2010) (quoting Murray v. Earle, 405 F.3d 278, 284 (5th Cir. 2005)).
III.
The district court devoted considerable space in its order to discussing
whether summary judgment was proper as to (a) USBNA’s request for a
declaration that it abandoned its acceleration of the loan, and (b) USBNA’s
2
The district court construed Mr. Lamell’s motion as a Rule 60(b) motion for relief
from a final judgment, order, or proceeding.
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request for a declaration that the state court settlement and dismissal was res
judicata as to Mr. Lamell’s statute of limitations affirmative defense. But we
need not address either issue. USBNA is entitled to enforce its equitable
subrogation rights to foreclose on Mr. Lamell’s property. See Ballew v. Cont’l
Airlines, Inc., 668 F.3d 777, 781 (5th Cir. 2012) (“We may . . . affirm on any
ground supported by the record.”).
The doctrine of equitable subrogation is a legal fiction that “allows a
lender who discharges a valid lien on the property of another to step into the
prior lienholder’s shoes and assume that lienholder’s security interest in the
property, even though the lender cannot foreclose on its own lien.” PNC
Mortg. v. Howard, 616 S.W.3d 581, 582 (Tex. 2021) (quoting Fed. Home Loan
Mortg. Corp. v. Zepeda, 601 S.W.3d 763, 766 (Tex. 2020)). It “applies ‘in
every instance in which one person, not acting voluntarily, has paid a debt for
which another was primarily liable and which in equity should have been paid
by the latter.’” Frymire Eng’g Co. ex rel. Liberty Mut. Ins. Co. v. Jomar Int’l,
Ltd., 259 S.W.3d 140, 142 (Tex. 2008) (Willett, J.) (quoting Mid-Continent
Ins. Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765, 774 (Tex. 2007)).
“Texas courts are particularly hospitable to the doctrine” and apply
it liberally. Bank of Am. v. Babu, 340 S.W.3d 917, 925 (Tex. App.—Dallas
2011, pet. denied). Its general purpose “is to prevent unjust enrichment of
the debtor.” Id. (citing First Nat’l Bank of Kerrville v. O’Dell, 856 S.W.2d
410, 415 (Tex. 1993)).
The district court held that USBNA was entitled to a declaratory
judgment that it could foreclose on Mr. Lamell’s property pursuant to its
equitable subrogation rights. We agree. Notably, Mr. Lamell does not
dispute this conclusion on its merits, arguing instead that USBNA is barred
by res judicata from enforcing its equitable subrogation rights on the ground
that USBNA was required to assert its foreclosure claim as a counterclaim in
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the state court action. Not so; at least one Texas appellate court has held that
foreclosure claims are not compulsory counterclaims. See, e.g., Casterline v.
OneWest Bank, FSB, No. 13-17-00118-CV, 2018 WL 1755821, at *4 (Tex.
App.—Corpus Christi Apr. 12, 2018, pet. denied). Mr. Lamell has not
directed us to on-point, controlling authority suggesting otherwise.
Mr. Lamell argues further that “the doctrine of equitable subrogation
is essentially a red herring” given that the statute of limitations to bring suit
for foreclosure has expired. He goes on to argue that lenders cannot invoke
equitable subrogation to avoid the statute of limitations. Remarkably, Mr.
Lamell cites PNC Mortgage v. Howard, 618 S.W.3d 75, 85 (Tex. App.—Dallas
2019) for this proposition. Yet, prior to Mr. Lamell’s submission of his brief
in this court—and indeed, a few days prior to the district court’s issuance of
its summary judgment order—the Supreme Court of Texas reversed that
decision, holding that a lender’s failure to timely foreclose under a deed of
trust does not bar its subrogation rights. PNC, 616 S.W.3d at 585; cf. Zepeda,
601 S.W.3d at 769.
The Supreme Court of Texas’s decision in PNC puts an end to the
matter. Equitable subrogation protects USBNA’s right to foreclose, even if
the four-year statute of limitations under § 16.035 of the Texas Civil Practice
and Remedies Code has expired and even if res judicata does not bar Mr.
Lamell from asserting his limitations defense. Of course, we express no view
on either issue.
* * *
Summary judgment was proper in favor of USBNA on equitable
subrogation grounds. Accordingly, the judgment is AFFIRMED.
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