593 F. App'x 265
5th Cir.2014Background
- In 2007 Dennis Shaver executed a $504,000 Note and a Deed of Trust with National City Mortgage (NCM) to buy residential property; Dennis and Catherine Shaver later defaulted.
- NCM (later acquired by PNC) foreclosed in 2009, purchased the property at sale, and conveyed it to National City Bank; counsel BDFTE then sued to evict the Shavers.
- The Shavers filed multiple state and federal suits contesting the foreclosure; earlier suits resulted in summary judgment for the bank and/or voluntary dismissals by the Shavers.
- In the instant action the Shavers sued NCM, BDFTE, Wells Fargo (trustee), the Trust (assignee), and later PNC; the district court dismissed all claims — some under Rule 12(b)(6) and PNC under the Rule 41(a)(1)(B) two-dismissal rule — and entered final judgment.
- On appeal the Fifth Circuit reviewed dismissal de novo and affirmed, holding the Shavers failed to plead plausible claims (breach, fraud, unjust enrichment, quiet title, standing to enforce the PSA) and that the two-dismissal rule barred claims against PNC.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract | NCM never provided a valid loan/consideration (loan funds were not NCM’s own) so foreclosure invalid | The Note/Deed required only that funds be provided; source of funds irrelevant and Shavers do not allege funds were not delivered | Dismissed — no plausible allegation that NCM failed to provide loan funds; no breach pleaded |
| Fraud / fraudulent nondisclosure / unjust enrichment | NCM/Trust concealed securitization, CDS, or other payments and should have credited those proceeds to Shavers’ loan | No duty to disclose securitization or CDS payments; no basis to force lender to credit third-party payments; no confidential/fiduciary relationship | Dismissed — no duty to disclose, fraud elements not plausibly alleged, unjust enrichment theory novel and unsupported |
| Enforcement of PSA / Assignment validity | Assignment to Trust violated PSA (loans not transferred before closing) so assignment void; borrowers can challenge | Borrowers lack standing to enforce PSA (not a party/third-party beneficiary); violation makes assignment voidable at most | Dismissed — Reinagel controls: Shavers lack standing; PSA violations do not render assignments void such that borrowers may block foreclosure |
| Quiet title / defective foreclosure documents | Various defects: invalid lender, split note, defective trustee appointment, fraudulent deeds | Deed authorized substitute trustee; note possession not required to foreclose; alleged defects unsupported | Dismissed — plaintiffs failed to show superior title or invalidate encumbrance; theories not cognizable under Texas law |
| Discovery / Due process | Dismissal prior to discovery denied Shavers opportunity to obtain evidence (e.g., on securitization/CDS) | District court may limit/stay discovery pending Rule 12(b)(6); dismissal based on pleadings is appropriate | Dismissed — no due process violation; court within discretion to decide motion to dismiss before discovery |
| Two-dismissal rule as to PNC | PNC is a distinct defendant; Shavers contend dismissal rule should not apply | Shavers previously voluntarily dismissed same claims against NCM/its successor; Rule 41(a)(1)(B) bars refiling against same corporate successor | Affirmed — two-dismissal rule bars claims against PNC because PNC is NCM’s successor and the Shavers had two prior dismissals |
Key Cases Cited
- Haase v. Countrywide Home Loans, Inc., 748 F.3d 624 (5th Cir. 2014) (standard of review for Rule 12(b)(6) dismissal)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for complaints)
- Reinagel v. Deutsche Bank Nat’l Trust Co., 735 F.3d 220 (5th Cir. 2013) (borrowers lack standing to enforce PSA; PSA violations generally make assignments voidable not void)
- Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249 (5th Cir. 2013) (note possession not required to foreclose)
- Lewis v. Bank of Am. N.A., 343 F.3d 540 (5th Cir. 2003) (elements of breach of contract under Texas law)