Case: 16-41343 Document: 00514044817 Page: 1 Date Filed: 06/22/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 16-41343 FILED
Summary Calendar June 22, 2017
Lyle W. Cayce
Clerk
ALAN L. FEUERBACHER; BILLIE M. FEUERBACHER,
Plaintiffs–Appellants,
v.
WELLS FARGO BANK NATIONAL ASSOCIATION, as Trustee for ABFC
2006-OPT 1 Trust, Asset Backed Funding Corporation Asset-Backed
Certificates, Series 2006-OPT1; OCWEN LOAN SERVICING, L.L.C.; SAND
CANYON CORPORATION,
Defendants–Appellees.
Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 4:15-CV-59
Before HIGGINBOTHAM, PRADO, and HAYNES, Circuit Judges.
PER CURIAM:*
Appellants Billie and Alan Feuerbacher initially sued Appellees Wells
Fargo Bank and Ocwen Loan Servicing seeking to vacate a bankruptcy court
order permitting the Appellees to foreclose on their home. After the case was
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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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removed to federal court on the basis of federal question and diversity
jurisdiction, the Feuerbachers amended their complaint to eliminate their
federal claims and add three additional defendants, including two nondiverse
parties. Thereafter the district court dismissed the nondiverse defendants,
denied the Feuerbachers motion to remand the case to state court, and
ultimately granted summary judgment in favor of the Appellees. We AFFIRM.
I. FACTS AND PROCEDURAL BACKGROUND
On June 5, 2006, Alan Feuerbacher obtained a home equity loan. The
terms of the loan were set forth in a Texas Home Equity Adjustable Rate Note
(“the Note”); a Texas Home Equity Security Instrument (“the Security
Instrument”), which secured the Note with a lien on the Feuerbachers’
homestead; and a Texas Home Equity Affidavit and Agreement. Wells Fargo
Bank became the holder of the Note and was eventually assigned the Security
Instrument by Appellee Sand Canyon Corporation. Appellee Ocwen Loan
Servicing began servicing the Note on March 1, 2013. The Feuerbachers allege
that the loan, from the outset, suffered from the following constitutional
defects: (1) Billie Feuerbacher had not signed the Note, see Tex. Const. art.
XVI, § 50(a)(6)(A); (2) the loan principal exceeded eighty percent of the fair
market value of the property at closing, see id. § 50(a)(6)(B); (3) the loan closing
took place in the Feuerbachers’ living room, see id. § 50(a)(6)(N); and (4) the
original lender failed to sign an acknowledgment of the fair market value at
closing, see id. § 50(a)(6)(Q)(ix). The Feuerbachers defaulted on the loan in
2013.
Billie Feuerbacher filed for bankruptcy on October 6, 2009. In filing her
schedules, Billie represented that: (1) there was a $323,840.88 secured claim
in the form of a mortgage on the Feuerbachers’ home; and (2) that she did not
have any “contingent and unliquidated claims of every nature, including tax
refunds, counterclaims of the debtor, and rights to setoff claims.” The same
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day, Billie also filed an Amended Statement of Financial Affairs and Chapter
7 Individual Debtor’s Statement of Intention. In those documents, Billie
declared under penalty of perjury that she had made payments on the home
equity loan in the four months immediately preceding her filing for bankruptcy
and that she intended to retain the property and reaffirm the debt. Based on
these representations, the bankruptcy court granted Billie discharge on
January 6, 2010.
On January 5, 2015, the Feuerbachers filed suit against the Appellees in
state court seeking to vacate an order permitting Wells Fargo to foreclose on
their home. The Feuerbachers’ initial complaint asserted both federal and
state law claims. The Appellees then removed this case to federal court on the
basis of both federal question and diversity jurisdiction. Upon removal, the
district court ordered the parties “to replead as necessary to comply with the
Federal Rules of Civil Procedure and the Court’s Local Rules.” About a month
later, the Feuerbachers submitted their First Amended Complaint. In their
amended complaint, the Feuerbachers had taken out all their federal claims
and, without seeking leave of the court, had joined three defendants, two of
which were nondiverse. 1 On June 23, 2015, the Feuerbachers filed a motion to
remand the case to state court. The district court denied the motion and
dismissed the two nondiverse defendants without prejudice.
The Feuerbachers’ fourth and final amended complaint alleged breach of
contract, unjust enrichment, a claim to quiet title, and claims under the Texas
Debt Collection Practices Act and Texas Deceptive Trade Practices Act. On
January 22, 2016, the Appellees filed a joint motion for summary judgment,
1 The Feuerbachers joined Sand Canyon Corporation, FNF Lawyers Title of DFW,
Inc., and Jill Clay as defendants in their First Amended Complaint before the district court.
Any subsequent reference to “the Appellees” includes Sand Canyon Corporation, the only
later-added defendant that remains a party in this suit.
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which the district court granted on judicial estoppel grounds. This appeal
followed. 2
II. DISCUSSION
A. Standard of Review
“We review a judicial estoppel determination for abuse of discretion.”
Jethroe v. Omnova Sols., Inc., 412 F.3d 598, 599–600 (5th Cir. 2005). Because
judicial estoppel is an equitable doctrine invoked at the discretion of the
district court, the abuse of discretion standard applies even where summary
judgment is granted on that basis. Kane v. Nat’l Union Fire Ins., 535 F.3d 380,
384 (5th Cir. 2008). A district court’s decision regarding whether to permit
post-removal joinder of a nondiverse party is likewise reviewed for abuse of
discretion. Hawthorne Land Co. v. Occidental Chem. Corp., 431 F.3d 221, 225
(5th Cir. 2005). “A district court abuses its discretion if it: (1) relies on clearly
erroneous factual findings; (2) relies on erroneous conclusions of law; or (3)
misapplies the law to the facts.” McClure v. Ashcroft, 335 F.3d 404, 408 (5th
Cir. 2003).
B. Judicial Estoppel
The Feuerbachers argue that the district court erred in granting the
Appellees summary judgment on the basis of judicial estoppel. First, the
Feuerbachers contend that their quiet title and breach of contract claims did
not accrue until after the bankruptcy proceeding, and therefore failure to
disclose these causes of action to the bankruptcy court could not serve as a
basis for judicial estoppel. Second, the Feuerbachers claim that judicial
estoppel is inapplicable here because the proceeds of any claim trace to exempt
property. Finally, the Feuerbachers insist that applying judicial estoppel is
2 On appeal, the Feuerbachers only contest summary judgment with respect to their
quiet title and breach of contract claims.
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inappropriate because a “lien cannot be estopped into existence.” Because the
Feuerbachers did not raise the latter two arguments before the district court,
we find them waived and address only the accrual argument. 3 See Pluet v.
Frasier, 355 F.3d 381, 385 (5th Cir. 2004) (“We will not disturb the district
court’s judgment based upon an argument presented for the first time on
appeal.”).
“[J]udicial estoppel is ‘a common law doctrine by which a party who has
assumed one position in his pleadings may be estopped from assuming an
inconsistent position.’” Jethroe, 412 F.3d at 600 (quoting Browning Mfg. v.
Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 205 (5th Cir. 1999)). “A court
should apply judicial estoppel if (1) the position of the party against which
estoppel is sought is plainly inconsistent with its prior legal position; (2) the
party against which estoppel is sought convinced a court to accept the prior
position; and (3) the party did not act inadvertently.” Id. “Judicial estoppel is
particularly appropriate where . . . a party fails to disclose an asset to a
bankruptcy court, but then pursues a claim in a separate tribunal based on
that undisclosed asset.” Id. The duty to disclose assets in bankruptcy extends
to “contingent and unliquidated claims,” including “all potential causes of
action.” In re Coastal Plains, Inc., 179 F.3d at 208 (citations omitted).
3 That said, we panel recognize that it is unclear whether the Feuerbachers can be
judicially estopped from claiming that the lien on their homestead is void. Texas law on this
point is not abundantly clear. See Hruska v. First State Bank of Deanville, 747 S.W.2d 783,
785 (Tex. 1988) (holding that a “lien cannot be ‘estopped’ into existence” where the borrowers
“promised to execute a lien in the manner mandated by the Constitution and then failed to
do so”). Although a lien that is void (as the Feuerbachers contend here) is void from its
inception, see Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542, 549 (Tex. 2016), it is not clear
whether this situation fits under Hruska’s pronouncement that a lien cannot be estopped into
existence, as the court in Hruska was considering a situation in which no lien document even
existed, Hruska, 747 S.W.2d at 784–85. As stated above, however, we do not consider this
argument on appeal because the Feuerbachers did not raise it before the district court.
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The Feuerbachers do not dispute that the elements required for a court
to apply judicial estoppel have been met; rather, they contend that their quiet
title and breach of contract claims had not accrued at the time of the
bankruptcy proceeding. Accordingly, the Feuerbachers argue that these were
not “potential claims” that they had a duty to disclose during bankruptcy. We
disagree.
Under Texas law, “[c]auses of action accrue . . . when facts come into
existence that authorize a claimant to seek a judicial remedy.” Exxon Corp. v.
Emerald Oil & Gas Co., 348 S.W.3d 194, 202 (Tex. 2011). In the case of a quiet
title action regarding an unconstitutionally void lien, a claim accrues at the
moment the defective lien is created. Priester v. JP Morgan Chase Bank, N.A.,
708 F.3d 667, 675 (5th Cir. 2013), abrogated on other grounds by Wood v. HSBC
Bank USA, N.A., 505 S.W.3d 542 (Tex. 2016). The Feuerbachers’ quiet title
claim thus accrued on June 5, 2006, before the bankruptcy petition was filed
on October 6, 2009.
The Feuerbachers’ breach of contract claim likewise accrued at
origination of the lien. It is well-settled under Texas law that “a breach of
contract claim accrues when the contract is breached.” Via Net v. TIG Ins., 211
S.W.3d 310, 314 (Tex. 2006) (quoting Stine v. Stewart, 80 S.W.3d 586, 592 (Tex.
2002)). And as Texas courts have explained, a breach of contract claim (the
cause of action) is distinct from the availability of forfeiture (the remedy). See
Garofolo v. Ocwen Loan Servicing, L.L.C., 497 S.W.3d 474, 482 (Tex. 2016)
(explaining that the “constitution invokes forfeiture when a lender ‘fails to
correct the failure to comply’ . . . [but that] ‘failure to comply’ is a reference to
the lender’s original transgression: its ‘fail[ure] to comply with the lender’s or
holder’s obligations under the extension of credit’”); Wells Fargo Bank, N.A. v.
Robinson, 391 S.W.3d 590, 595 (Tex. App.—Dallas 2012, no pet.) (“A borrower’s
recourse for a lender’s failure to abide by the terms of his loan agreement is to
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assert traditional tort and breach of contract causes of action, not
constitutionally mandated forfeiture.”). Here, all the conditions the
Feuerbachers contend constitute a material breach of the obligations set out
by the promissory note existed at the time the note was created. So regardless
of when the Feuerbachers notified the Appellees of the lien’s constitutional
deficiencies and became entitled to a forfeiture remedy, their breach of contract
claim accrued on June 5, 2006, when the lien was created. See Tex. Const. art.
XVI, § 50(a)(6)(Q)(x) (forfeiture applies where the lender “fails to correct the
failure to comply not later than the 60th day after the date the lender or holder
is notified by the borrower of the lender’s failure to comply”).
Therefore, both the Feuerbachers’ quiet title and breach of contract
claims had accrued at the time of the bankruptcy proceeding. Because the
Feuerbachers failed to disclose these potential claims to the bankruptcy court,
we hold the district court did not abuse its discretion in applying judicial
estoppel and appropriately granted summary judgment in favor of the
Appellees.
C. Motion to Remand
The Feuerbachers also urge that the district court erred by dismissing
the nondiverse defendants that were joined after removal and refusing to
remand the case to state court. “If after removal the plaintiff seeks to join
additional defendants whose joinder would destroy subject matter jurisdiction,
the court may deny joinder, or permit joinder and remand the action to the
State court.” 28 U.S.C. § 1447(e). The court “should use its discretion in
deciding whether to allow [nondiverse parties] to be added.” Hensgens v. Deere
& Co., 833 F.2d 1179, 1182 (5th Cir. 1987). In determining whether to permit
post-removal joinder of nondiverse parties the court should consider: “[1] the
extent to which the purpose of the amendment is to defeat federal jurisdiction,
[2] whether plaintiff has been dilatory in asking for amendment, [3] whether
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plaintiff will be significantly injured if amendment is not allowed, and [4] any
other factors bearing on the equities.” Id.
The district court weighed each of the Hensgens factors and concluded
that they favored denying joinder and retaining jurisdiction. The court
determined that it was likely that (1) the Feuerbachers amended their
complaint to include nondiverse defendants for the purpose of defeating
jurisdiction, (2) they were dilatory in seeking leave to join the nondiverse
defendants, (3) they were unlikely to be prejudiced if their amendment was
denied, and (4) other equitable factors did not weigh in favor of either denying
or granting the amendment. The district court applied the correct legal
standard, and we do not find that any of its underlying fact findings were
clearly erroneous. Accordingly, the district court did not abuse its discretion in
dismissing the nondiverse defendants and retaining jurisdiction over this case.
III. CONCLUSION
For the foregoing reasons, we AFFIRM.
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