Regina Foster v. Deutsche Bank Natl Trust Co., et

Case: 16-11045 Document: 00513867505 Page: 1 Date Filed: 02/08/2017

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

No. 16-11045 FILED
Summary Calendar February 8, 2017
Lyle W. Cayce
Clerk
REGINA NACHAEL HOWELL FOSTER,

Plaintiff - Appellant

v.

DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee; OCWEN
LOAN SERVICING, L.L.C.; POWER DEFAULT SERVICES,

Defendants - Appellees

Appeal from the United States District Court
for the Northern District of Texas

Before JOLLY, SMITH and GRAVES, Circuit Judges.
PER CURIAM:
This appeal concerns an attempted mortgage foreclosure sale of property
located in Grand Prairie, Texas, by Deutsche Bank National Trust Company
(“Deutsche Bank”), Ocwen Loan Servicing, LLC (“Ocwen”), and Power Default
Services (“Power Default”). Regina Foster appeals the district court’s denial of
her motion for remand based on its finding that Power Default, a non-diverse
defendant and substitute trustee for the attempted foreclosure, was
improperly joined in the proceeding because the foreclosure did not take place.
Foster also appeals the district court’s grant of summary judgment in favor of
the defendants–appellees. Finding no error, we AFFIRM.
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No. 16-11045
I.
In September 2004, Regina Foster’s then-husband, Carlos Foster,
executed a promissory note to finance the purchase of a house in Grand Prairie,
Texas. Regina Foster was not listed as an obligor on the promissory note. She
is, however, listed as a co-borrower with Carlos on a deed of trust, which was
executed on the same day as the promissory note. Regina later filed for divorce.
During the divorce proceedings, the state court issued a temporary order
awarding exclusive use of the Grand Prairie property to Regina.
Carlos defaulted on the loan and, after receiving notification, failed to
cure the default. In 2014, Power Default sent a Notice of Acceleration and
Notice of Substitute Trustee Sale to the Grand Prairie home address, where
Regina received the notices. The trustee sale notice listed Ocwen as the
mortgage servicer and Deutsche Bank as the mortgagee. Power Default was
the substitute trustee. The foreclosure sale was scheduled for May 6, 2014.
On May 5, 2014, Regina Foster filed her original petition in the Judicial
District Court in Tarrant County, Texas, alleging wrongful foreclosure and
requesting a temporary restraining order and injunctive relief and, in the
alternative, a reformation of the deed of trust. She also alleged that she did
not receive proper notice of the foreclosure sale and that she was not given an
opportunity to cure the default. The state court then issued a temporary
restraining order, putting a halt to the foreclosure sale. Ocwen did not pursue
the foreclosure sale on May 6, 2014. Defendants Deutsche Bank and Ocwen
removed the case to federal court on the basis of diversity jurisdiction,
notwithstanding Power Default’s involvement as a non-diverse defendant. In
their Notice of Removal, Deutsche Bank and Ocwen argued that Power Default
was improperly joined for the sole purpose of defeating diversity. The federal

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No. 16-11045
district court concluded that removal was proper and dismissed all claims
against Power Default with prejudice. 1
Then, in February 2016, the district court granted summary judgment
in favor of defendants Deutsche Bank and Ocwen and dismissed with prejudice
the claims in Foster’s second amended petition, including: a claim of attempt
to wrongfully foreclose on the property, a claim that the defendants violated
Texas Property Code § 51.002(b), 2 a claim that the deed of trust failed to create
a valid lien upon the property, a request for permanent injunctive relief, and a
request for reformation of the deed of trust.
The district court observed that it was undisputed that no foreclosure
sale had taken place and that Foster still resided on the property. Because no
foreclosure occurred, the district court rejected Foster’s claims for attempted
wrongful foreclosure and violation of § 51.002(b). Further, the court found that
the reasons Foster provided to support her invalid lien claim—that her name
was misspelled as “Reeba Nqchael Howell Foster” on the deed of trust and that
the document number was incorrectly given as Dallas County Document

1 In its order denying the remand motion, the district court also stated it would
“disregard[] Power’s joinder for purposes of determining jurisdiction.” Foster v. Deutsche
Bank Nat’l Trust Co., No. 4:14-CV-436-Y, 2014 WL 12591926, at *3 (N.D. Tex. Aug. 22, 2014).
2 Section 51.002(b) of the Texas Property Code sets forth the procedures for notice of

a foreclosure sale:
(b) Except as provided by Subsection (b–1), notice of the sale, which
must include a statement of the earliest time at which the sale will
begin, must be given at least 21 days before the date of the sale by:
(1) posting at the courthouse door of each county in which the
property is located a written notice designating the county in
which the property will be sold;
(2) filing in the office of the county clerk of each county in which
the property is located a copy of the notice posted under
Subdivision (1); and
(3) serving written notice of the sale by certified mail on each
debtor who, according to the records of the mortgage servicer
of the debt, is obligated to pay the debt.
TEX. PROP. CODE § 51.002(b).
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No. 16-11045
No. 3088999 on the Notice of Substitute Trustee Sale—did not support a
finding “that these discrepancies have caused her any confusion or harm.”
Because Foster’s substantive claims failed on the merits, the district court
denied her request for a permanent injunction. Foster’s request for
reformation of the deed of trust was likewise denied because she failed to
demonstrate why such reformation was necessary.
Foster then filed a Motion for Reconsideration and, in the alternative,
urged the district court to refer her case to the bankruptcy court. The court
reasoned that Foster’s legal claims arose after she filed for Chapter 7
bankruptcy in 2012 and therefore were not part of the bankruptcy estate; thus,
there was no basis on which to refer the case to the bankruptcy court. The
district court denied both requests. Foster timely appealed.
II.
We review a district court’s denial of a motion to remand de novo,
applying the same standard as the district court. Allen v. R&H Oil & Gas Co.,
63 F.3d 1326, 1336 (5th Cir. 1995). Grants or denials of summary judgment
likewise receive de novo review. LeMaire v. Louisiana Dep’t of Transp. & Dev.,
480 F.3d 383, 386 (5th Cir. 2007). 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).
III.
Foster challenges the district court’s denial of her motion to remand and
its improper joinder finding, asserting that she had a possibility of recovery
against Power Default as a substitute trustee under Texas property law. The
district court found that the defendants satisfied their burden of showing
improper joinder. Improper joinder can be established by the showing of
either: “(1) actual fraud in the pleading of jurisdictional facts, or (2) inability
of the plaintiff to establish a cause of action against the non-diverse party in
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No. 16-11045
state court.” Foster v. Deutsche Bank Nat’l Trust Co., No. 4:14-CV-436-Y, 2014
WL 12591926, at *2 (N.D. Tex. Aug. 22, 2014) (quoting Smallwood v. Ill. Cent.
R. Co., 385 F.3d 568, 572–73 (5th Cir. 2004) (en banc)).
In its analysis, the district court noted that Power Default is listed in
Foster’s amended petition solely in the context of its role as substitute trustee.
A substitute trustee has a duty under the deed of trust to “act with absolute
impartiality and fairness to the grantor in performing the powers vested in
him by the deed of trust.” Id. (quoting Hammonds v. Holmes, 559 S.W.2d 345,
347 (Tex. 1977)). The court observed that breach of a trustee’s duty does not
constitute an independent tort; rather, it yields a cause of action for wrongful
foreclosure. Id. (citing Allied Capital Corp. v. Cravens, 67 S.W.3d 486, 492
(Tex. App. 2002); Marsh v. Wells Fargo Bank, N.A., 760 F. Supp. 2d 701, 708
(N.D. Tex. 2011)). A claim of wrongful foreclosure cannot succeed, however,
when no foreclosure has occurred. See Marsh, 760 F. Supp. 2d at 708. The
court concluded that, here, Foster has no wrongful foreclosure claim against
Power Default absent an actual foreclosure. Because she would have been
unable to assert a cause of action against Power Default in state court, the
court found that joinder of Power Default as a defendant was improper. We
agree with the district court’s analysis and conclusion denying Foster’s motion
to remand the case to state court.
Foster also challenges the district court’s grant of summary judgment in
favor of the defendants. The district court found that Foster’s wrongful
foreclosure and statutory claims could not succeed because no foreclosure of
the property took place. Because the case was removed to federal court based
on diversity jurisdiction, the district court applied the substantive laws of
Texas in analyzing whether summary judgment was appropriate. Foster v.
Deutsche Bank Nat’l Trust Co., No. 4:14-CV-436-Y, 2016 WL 695658, at *2
(N.D. Tex. Feb. 22, 2016) (citing Hyde v. Hoffmann-La Roche, Inc., 511 F.3d
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No. 16-11045
506, 510 (5th Cir. 2007)). Ordinarily, Texas recognizes the following elements
of a wrongful foreclosure claim: “(1) a defect in the foreclosure sale proceedings;
(2) a grossly inadequate selling price; and (3) a causal connection between the
defect and the grossly inadequate selling price.” Sauceda v. GMAC Mortg.
Corp., 268 S.W.3d 135, 139 (Tex. App. 2008). We have noted, in an unpublished
opinion, however, that a party cannot “state a viable claim for wrongful
foreclosure” if the party “never lost possession of the Property.” James v. Wells
Fargo Bank, N.A., 533 F. App’x 444, 446 (5th Cir. 2013) (citing Motten v. Chase
Home Fin., 831 F. Supp. 2d 988, 1007–08 (S.D. Tex. 2011) (“[B]ecause recovery
is premised upon one’s lack of possession of real property, individuals never
losing possession of the property cannot recover on a theory of wrongful
foreclosure. As such, courts in Texas do not recognize an action for attempted
wrongful foreclosure.”)). Because the foreclosure of Foster’s property has not
taken place, we agree with the district court and find that Foster may not
assert a cause of action for wrongful foreclosure.
Moreover, because foreclosure of the property did not occur, we need not
revisit the district court’s conclusions as to whether Foster has a viable notice-
of-foreclosure cause of action under Section 51.002 of the Texas Property Code.
IV.
In sum, for the foregoing reasons, we AFFIRM.

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