Ocwen Loan Servicing, L.L.C. v. Robert Berry
852 F.3d 469
5th Cir.2017Background
- In 2007 Robert Berry obtained a home-equity loan later owned/serviced by Ocwen; Berry defaulted and Ocwen sought a judgment permitting foreclosure in 2014.
- Berry asserted affirmative defenses and a counterclaim alleging the loan and lien were invalid because of violations of Article 16, §50(a)(6) of the Texas Constitution (home-equity rules).
- Ocwen moved for summary judgment, arguing Berry’s constitutional claims were barred by Texas’s four-year residual statute of limitations; the district court granted summary judgment for Ocwen on that basis.
- Berry argued his counterclaim was timely under Tex. Civ. Prac. & Rem. Code §16.069 (counterclaim exception) or otherwise not subject to the four-year period by recoupment.
- After the district court’s decision, the Texas Supreme Court decided Wood v. HSBC, holding that no statute of limitations applies to quiet-title claims attacking home-equity liens under §50(a)(6); the Fifth Circuit panel applied Wood and held the district court erred in applying a four-year limitations period.
Issues
| Issue | Plaintiff's Argument (Ocwen) | Defendant's Argument (Berry) | Held |
|---|---|---|---|
| Whether a four-year residu al limitations period bars Berry’s §50(a)(6) claims | Four-year statute applies; Berry’s claims are time-barred | No four-year period should bar the claims: timely under §16.069 or recoupment; alternatively Wood eliminates the limitations issue | Court: Wood controls; no statute of limitations applies to §50(a)(6) claims asserted to invalidate a home-equity lien, so district court erred |
| Whether Berry waived reliance on Wood by not raising it in opening brief | Berry waived the argument by failing to brief Wood | Issue is central and purely legal; court should consider it despite not being in opening brief | Court exercised discretion to consider Wood because the statute-of-limitations issue was the core of Berry’s brief and is a pure question of law |
| Whether Berry waived the §16.069 avoidance by not pleading it expressly in the counterclaim | Berry failed to plead §16.069 and thus waived that avoidance theory | §16.069 argument remains relevant if a limitations period existed; but Wood makes this moot | Court did not need to decide waiver of §16.069 because Wood eliminated the applicable limitations period |
| Whether the Fifth Circuit should follow its Priester precedent or the Texas Supreme Court’s later decision | Priester indicates a four-year residual period applies | Wood (Texas Supreme Court) rejects Priester’s reasoning; state law controls in diversity | Court follows Wood (state supreme court) over prior Fifth Circuit panel precedent in a diversity case |
Key Cases Cited
- Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542 (Tex. 2016) (Texas Supreme Court holds no statute of limitations applies to quiet-title claims invalidating home-equity liens under §50(a)(6))
- Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667 (5th Cir. 2013) (prior Fifth Circuit panel applied Texas’s four-year residual statute to §50(a)(6) claims)
- Farnham v. Bristow Helicopters, Inc., 776 F.2d 535 (5th Cir. 1985) (in diversity cases, later state-court decisions that change state law may be followed over prior federal panel precedent)
- Lozovyy v. Kurtz, 813 F.3d 576 (5th Cir. 2015) (federal court reviews state-law determinations de novo)