John Smither, et al v. Ditech Financial, L.L.C.
UNPUBLISHED OPINION FILED. [16-20392 Affirmed] Judge: CES, Judge: CDK, Judge: JLD. Mandate pull date is 03/31/2017 [16-20392]
Date Filed: 03/10/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fif h Circuit
March 10, 2017
JOHN SMITHER; PATRICIA SMITHER,
Plaintiffs - Appellants
Lyle W. Cayce
DITECH FINANCIAL, L.L.C.,
Defendant - Appellee
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:16-CV-38
Before STEWART, Chief Judge, and KING and DENNIS, Circuit Judges.
After Plaintiffs–Appellants John and Patricia Smither defaulted on their
home equity loan, Defendant–Appellee Ditech Financial, L.L.C., applied for an
order allowing it to proceed with foreclosure. The Smithers then filed the
present suit, seeking a declaration that Ditech’s right to foreclose was timebarred by Texas Civil Practice and Remedies Code § 13.605’s four-year statute
of limitations for foreclosure actions and asserting that Ditech had violated the
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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
Date Filed: 03/10/2017
Texas Debt Collection Act and Fair Debt Collection Practices Act. The district
court granted Ditech’s motion to dismiss and denied the Smithers’ motion for
reconsideration. We AFFIRM.
I. FACTUAL AND PROCEDURAL BACKGROUND
In 2006, John and Patricia Smither executed a home equity loan (the
Loan), which was secured by their homestead in Houston, Texas (the
Property). 1 The Smithers divorced in 2007, and John transferred his interest
in the Property to Patricia, retaining a lien on the Property pursuant to the
divorce decree. In July 2009, Bank of America, the then mortgagee, sent
notices of acceleration to the Smithers (the 2009 Acceleration) and, in August
2009, applied in state district court for an order allowing it to proceed with
foreclosure (the 2009 Foreclosure Suit). Patricia filed a Chapter 13 bankruptcy
petition in September 2009, and Bank of America dismissed the 2009
Foreclosure Suit without prejudice in December 2009. Patricia’s bankruptcy
petition was dismissed in January 2010, but she refiled for bankruptcy shortly
On July 20, 2010, the bankruptcy court confirmed Patricia’s
bankruptcy plan, which provided for Patricia’s surrender of the Property to
Ditech Financial, L.L.C., the then-and-current mortgagee. However, in June
2011, Patricia’s bankruptcy plan was amended to allow her to resume payment
on the Loan. Patricia did not, however, resume payment, and on November 6,
2015, following the discharge of Patricia’s other debts in her bankruptcy case,
Ditech filed a new application for foreclosure in state district court (the 2015
On November 20, 2015, the Smithers filed the instant suit against Ditech
in state district court. The Smithers requested a declaration that Ditech’s “lien
This factual background is drawn from the allegations in the Smithers’ pleadings,
which the court must accept as true in considering whether dismissal was appropriate. See
Sullo & Bobbitt, P.L.L.C. v. Milner, 765 F.3d 388, 391 (5th Cir. 2014).
Date Filed: 03/10/2017
on the Property [wa]s no longer enforceable.” According to the Smithers, Texas
Civil Practice and Remedies Code § 13.605 required Ditech to bring suit
foreclosing on its lien on the Property within four years of the 2009
Acceleration, when Ditech’s cause of action allegedly accrued. 2 Because the
2015 Foreclosure Suit was brought more than four years later, the Smithers
asserted that it was “barred by the statute of limitations.” The Smithers also
asserted that Ditech had violated the Texas Debt Collection Act (TDCA) by
“report[ing] the past-due amounts on the Loan on the [Smithers’] credit reports
even though the debt is no longer enforceable.”
On December 28, 2015, Ditech filed a general denial in state district
court. After timely removing the lawsuit to federal district court on the basis
of diversity jurisdiction, Ditech moved for dismissal under Federal Rule of Civil
Procedure 12(b)(6). In pertinent part, Ditech argued that Bank of America’s
voluntary dismissal of the 2009 Foreclosure Suit constituted abandonment of
the 2009 Acceleration, thereby restoring the Loan’s maturity date to its
original condition and rendering the 2015 Foreclosure Suit timely. Ditech also
argued that the Smithers’ TDCA claim failed because, inter alia, it was based
on the Smithers’ mistaken belief that their debt was no longer enforceable.
On February 3, 2016, the Smithers filed a response to Ditech’s motion,
as well as an amended complaint. 3
The amended complaint contained
§ 16.035 states, in part, that “[a] person must bring suit for the recovery of real
property under a real property lien or the foreclosure of a real property lien not later than
four years after the day the cause of action accrues.” Tex. Civ. Prac. & Rem. Code § 16.035(a).
3 The parties dispute whether the Smithers’ amended complaint was timely filed
under Federal Rule of Civil Procedure 15(a)(1)(B), such that it, rather than the Smithers’
original petition, should be considered in analyzing whether the Smithers stated claims upon
which relief could be granted. Rule 15(a)(1)(B) allows a party to amend its pleadings “once
as a matter of course within . . . 21 days after service of a responsive pleading or 21 days after
service of a motion under Rule 12(b), (e), or (f), whichever is earlier.” The Smithers assert
that their amended complaint was timely because it was filed within 21 days of Ditech’s
motion to dismiss. Ditech counters that the amended complaint was untimely because it was
filed more than 21 days after Ditech filed its general denial in state court. We need not, and
Date Filed: 03/10/2017
additional factual allegations and added two new claims against Ditech. First,
it added an alternative claim under the TDCA, alleging that, even if Bank of
America abandoned the 2009 Acceleration, Ditech “misrepresented the
character, extent, or amount of a consumer debt in violation of Tex. Fin. Code
§ 392.304(a)(8)” by not reflecting that abandonment “on information provided
to credit reporting agencies.” Second, it added a claim that Ditech violated the
Fair Debt Collection Practices Act (FDCPA) by “continuing to report the pastdue amounts on the Loan and the foreclosure of the Loan on the [Smithers’]
credit reports even though either the debt is no longer enforceable or the
foreclosure was abandoned.”
On April 15, 2016, the district court granted Ditech’s motion to dismiss
and dismissed the entire case with prejudice. The Smithers timely moved for
reconsideration under Federal Rule of Civil Procedure 59(e), 4 arguing that the
district court erred in dismissing their entire case with prejudice because their
amended complaint asserted additional facts and additional causes of actions
that were not addressed in Ditech’s motion to dismiss. In response, Ditech
argued that the Smithers’ amended complaint, like their original petition,
failed to state a claim upon which relief could be granted. The district court
denied the Smithers’ Rule 59(e) motion on May 27, and the Smithers timely
appealed, challenging the “final order (judgment) of the District Court for
Southern District of Texas, Houston Division, entered in this action on . . . May
27, 2016, at docket number 18.”
do not, resolve this dispute because, as discussed infra, the Smithers’ amended complaint
and original petition both fail to state a claim upon which relief can be granted.
4 Although styled as a motion for new trial pursuant to Federal Rule of Civil Procedure
59(a), we construe the Smithers’ motion as a motion to alter or amend the judgment under
Rule 59(e) because there was no trial. See Calhoun v. FBI, 546 F. App’x 487, 489 n.2 (5th
Cir. 2013) (per curiam); Patin v. Allied Signal, Inc., 77 F.3d 782, 785, n.1 (5th Cir. 1996).
Indeed, on appeal, both parties analyze the Smithers’ motion as a Rule 59(e) motion to
reconsider the district court’s dismissal order.
Date Filed: 03/10/2017
Before proceeding to the merits, we must address Ditech’s apparent
argument that we lack jurisdiction to consider the Smithers’ challenge to the
underlying dismissal because they did not explicitly identify the district court’s
dismissal order in their notice of appeal. 5 Federal Rule of Appellate Procedure
3(c)(1)(B) provides that “[t]he notice of appeal must . . . designate the judgment,
order, or part thereof being appealed.” “Rule 3’s dictates are jurisdictional in
nature,” Gonzalez v. Thaler, 565 U.S. 134, 147 (2012) (quoting Smith v. Barry,
502 U.S. 244, 248 (1992)), but “a mere technical error in designating the proper
judgment being appealed will not divest us of jurisdiction,” Lockett v. Anderson,
230 F.3d 695, 700 (5th Cir. 2000). We “construe a notice of appeal liberally to
avoid technical barriers to review”; thus, “[a] mistake in designating orders to
be appealed does not bar review [(1)] if the intent to appeal a particular
judgment can be fairly inferred and [(2)] if the appellee is not prejudiced or
misled by the mistake.” N.Y. Life Ins. Co. v. Deshotel, 142 F.3d 873, 884 (5th
When a party appeals only the denial of a motion for
reconsideration under Rule 59(e), “we can infer that the party meant to appeal
the adverse underlying judgment.” Lockett, 230 F.3d at 700; see also, e.g., R.P.
ex rel. R.P. v. Alamo Heights Indep. Sch. Dist., 703 F.3d 801, 808 (5th Cir. 2012)
(“We have specifically treated appeals of 59(e) motions for reconsideration as
appeals of the underlying judgment when the intent to do so was clear.”
(alterations omitted) (quoting Alberta Energy Partners v. Blast Energy Servs.,
Inc., 593 F.3d 418, 424 n.3 (5th Cir. 2010))). “[I]n determining the fairly
inferred scope of the appeal,” we “consider not only the notice, but also the
In its cursory treatment of this issue, Ditech asserts that we are not required to
consider the underlying dismissal, but does not specifically assert that we lack jurisdiction
over that order. Nonetheless, the Smithers interpret and brief Ditech’s argument as a
challenge to our jurisdiction.
Date Filed: 03/10/2017
appellant’s brief.” Williams v. Henagan, 595 F.3d 610, 616 (5th Cir. 2010) (per
Here, the Smithers’ notice of appeal only designated the district court’s
May 27, 2016, order denying their Rule 59(e) motion. Nonetheless, we can
infer from their appeal of the denial of the Rule 59(e) motion, together with the
fact that the Smithers (and Ditech) fully briefed on appeal the issues raised by
the underlying dismissal, that the Smithers clearly intended to also appeal this
dismissal. See, e.g., R.P., 703 F.3d at 808; Lockett, 230 F.3d at 700. Because
Ditech has not asserted it was prejudiced by the omission of the dismissal from
the notice of appeal, we have jurisdiction to review the underlying dismissal
order. See, e.g., Alberta Energy Partners, 593 F.3d at 424 n.3; Lockett, 230 F.3d
III. STANDARD OF REVIEW
“We generally review a decision on a motion to alter or amend judgment
under Rule 59(e) for abuse of discretion.” Pioneer Nat. Res. USA, Inc. v. Paper,
Allied Indus., Chem. & Energy Workers Int’l Union Loc. 4–487, 328 F.3d 818,
820 (5th Cir. 2003). However, the standard of review is de novo where the
ruling seeks reconsideration of a question of law. Id. We likewise review a
district court’s grant of a motion to dismiss de novo, accepting all well-pleaded
facts as true and viewing them in the light most favorable to the plaintiff. Sullo
& Bobbitt, 765 F.3d at 391.
“To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on
its face.’” Aschroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.”
“Where a complaint pleads facts that are ‘merely consistent with’ a
Date Filed: 03/10/2017
defendant’s liability, it ‘stops short of the line between possibility and
plausibility of entitlement to relief.’” Id. (quoting Twombly, 550 U.S. at 557).
IV. FAILURE TO STATE A CLAIM
The Smithers contend that the district court erred in dismissing their
case and denying their motion for reconsideration because they stated a
plausible claim (1) for a declaration that Ditech’s right to foreclosure was timebarred by Texas Civil Practice and Remedies Code § 13.605’s four-year statute
of limitations for foreclosure actions; (2) that Ditech violated the TDCA; and
(3) that Ditech violated that FDCPA. We begin our analysis with the Smithers’
claim that Ditech is time-barred from foreclosing on its lien on the Property.
A. Claim for Declaratory Relief
Under Texas law, “[a] person must bring suit for the recovery of real
property under a real property lien or the foreclosure of a real property lien not
later than four years after the day the cause of action accrues.” Tex. Civ. Prac.
& Rem. Code § 16.035(a). “On the expiration of the four-year limitations
period, the real property lien . . . become[s] void.” Id. § 16.035(d). Where, as
here, the note secured by the real property lien is payable in installments, “the
four-year limitations period does not begin to run until the maturity date of
the last . . . installment.” Id. § 16.035(e). However, if the note contains an
option to accelerate payment upon default, “the action accrues . . . when the
holder actually exercises its option to accelerate.” Holy Cross Church of God
in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001).
To effectively accelerate payment of a note, the noteholder must provide
“(1) notice of intent to accelerate and (2) notice of acceleration.” Id.; see also
Boren v. U.S. Nat. Bank Ass’n, 807 F.3d 99, 104 (5th Cir. 2015). The notice of
intent to accelerate “must afford an opportunity to cure the default” and
provide notice “that failure to cure will result in acceleration of the note and
foreclosure.” Ogden v. Gibraltar Sav. Ass’n, 640 S.W.2d 232, 233 (Tex. 1982).
Date Filed: 03/10/2017
Once the requisite notice of intent is provided, notice of acceleration may take
the form of the filing of a foreclosure action. See Burney v. Citigroup Glob.
Mkts. Realty Corp., 244 S.W.3d 900, 903–04 (Tex. App.—Dallas 2008, no pet.).
Notice of acceleration “cuts off the debtor’s right to cure his default and gives
notice that the entire debt is due and payable.” Ogden, 640 S.W.2d at 234.
However, once the noteholder has accelerated payment of the note, the holder
may abandon that acceleration, which “‘has the effect of restoring the contract
to its original condition,’ [and] thereby ‘restoring the note’s original maturity
date’ for purposes of accrual.” Boren, 807 F.3d at 104 (quoting Khan v. GBAK
Props., Inc., 371 S.W.3d 347, 353 (Tex. App.—Houston [1st Dist.] 2012, no
pet.)); see also Holy Cross Church of God in Christ, 44 S.W.3d at 566–67.
In determining whether a noteholder has abandoned acceleration, Texas
courts have referenced traditional principles of waiver. Boren, 807 F.3d at 105.
“Under Texas law, the elements of waiver include: (1) an existing right, benefit,
or advantage held by a party; (2) the party’s actual knowledge of its existence;
and (3) the party’s actual intent to relinquish the right, or intentional conduct
inconsistent with the right.” Id. (quoting Thompson v. Bank of Am. Nat’l Ass’n,
783 F.3d 1022, 1025 (5th Cir. 2015)). One way in which Texas courts have
recognized that a noteholder may evince its intent to waive a prior acceleration
is by voluntarily nonsuiting an action to collect on the note or to foreclose on
the lien securing the note. See Denbina v. City of Hurst, 516 S.W.2d 460, 463
(Tex. Civ. App.—Tyler 1974, no writ) (“[T]he City had a right to withdraw or
revoke its option to accelerate payment, and effectively expressed its intent to
do so by taking a non-suit.”); see also, e.g., Costello v. U.S. Bank Tr., N.A., No.
H-16-702, 2016 WL 5871459, at *4 (S.D. Tex. Oct. 7, 2016) (“Acceleration can
be abandoned by . . . a creditor’s voluntary dismissal of its claims against a
debtor.”), appeal docketed, No. 16-20739; Wells Fargo Bank v. Mata, No. A-14CA-00909-SS, 2016 WL 7616627, at *4 (W.D. Tex. Oct. 12, 2016) (“[T]he first
Date Filed: 03/10/2017
acceleration of Defendants’ debt . . . was abandoned . . . when Plaintiff filed its
motion for nonsuit in the First Foreclosure Action.”); Bitterroot Holdings, LLC
v. MTGLQ Inv’rs, L.P., No. 5:14-CV-862, 2015 WL 363196, at *6 (W.D. Tex.
Jan. 27, 2015) (“[T]he prior Notices of Acceleration issued by [the lender] . . .
were abandoned when [the lender] dismissed its claims without prejudice in
state court.”), aff’d, 648 F. App’x 414 (5th Cir. 2016) (per curiam).
In both their original petition and amended complaint, the Smithers
alleged that Bank of America voluntarily dismissed the 2009 Foreclosure Suit.
They concede that, at the motion to dismiss stage, we must accept this fact as
true, but argue that the facts alleged nonetheless do not support the reasonable
inference that Bank of America waived the 2009 Acceleration because there is
“nothing in the [pleadings] to indicate that [Ditech] sent a second set of
acceleration notices to the[m].” 6 In support, the Smithers point to Callan v.
Deutsche Bank Tr. Co. Ams. (Callan I), 11 F. Supp. 3d 761 (S.D. Tex. 2014).
There, the district court held that Deutsche Bank had not abandoned
acceleration of a note when it dismissed a 2008 foreclosure action because
Deutsche Bank “relied on the same November 6, 2007 notice of acceleration in
filing its second foreclosure proceeding in February 2009.”
Id. at 769.
According to the district court, Deutsche Bank’s reliance on the prior notice of
acceleration “ma[d]e clear that Deutsche did not abandon the acceleration by
dismissing the 2008 action.” Id. The district court further held that Deutsche
Bank’s subsequent rescission of the November 6, 2007 notice of acceleration
The Smithers also argue that Bank of America and Ditech made statements
inconsistent with abandonment of the 2009 Acceleration—namely, that Bank of America and
Ditech reported to credit agencies “that the Property was in the process of foreclosure or in
foreclosure” following the voluntary dismissal of the 2009 Foreclosure Suit. According to the
Smithers’ own argument, however, these statements would be consistent with abandonment
if Bank of America and Ditech did, in fact, provide separate acceleration notices. Thus, the
Smithers’ argument about the statements is, at base, the same as their argument about
Ditech’s failure to provide a second set of acceleration notices.
Date Filed: 03/10/2017
was ineffective due to the borrower’s detrimental reliance on the acceleration
and, therefore, concluded that Deutsche Bank’s third foreclosure action, filed
in 2012, was time-barred. Id. at 772.
The Smithers’ “reliance on . . . Callan [I] is misplaced.” Leonard v. Ocwen
Loan Servicing, L.L.C., 616 F. App’x 677, 680 (5th Cir. 2015) (per curiam).
“[T]he district court [in Callan] later amended its judgment and held that,
contrary to its earlier opinion, ‘Deutsche was entitled to rescind, and its
[foreclosure application] . . . was not time-barred.’” Id. (omission and third
alteration in original) (quoting Callan v. Deutsche Bank Tr. Co. Ams. (Callan
II), 93 F. Supp. 3d 725, 737 (S.D. Tex. 2015)). Significantly, the district court’s
opinion in Callan II omitted the holding in Callan I that Deutsche Bank did
not abandon acceleration of the note when it dismissed the 2008 foreclosure
action—the holding upon which the Smithers almost entirely rest their case.
Callan II, 93 F. Supp. 3d at 737–38.
But even if the Smithers’ reliance on Callan I were not misplaced, the
Smithers’ position still must be rejected. The Smithers did not allege in either
their original petition or their amended complaint that Ditech did not, in fact,
provide them a second set of acceleration notices in connection with the 2015
Foreclosure Suit. Instead, they argue that the absence of an allegation as to
separate acceleration notices supports the reasonable inference that no
separate acceleration notices were provided and, therefore, that the 2009
Acceleration was not abandoned. We disagree. The original petition and
amended complaint are devoid of any factual allegations that would support a
reasonable inference that Ditech did not send separate acceleration notices, 7
In fact, Ditech has provided the court with separate acceleration notices that were
apparently provided to the Smithers in connection the 2015 Foreclosure Suit and asked that
we take judicial notice of them. Because the Smithers’ claim fails regardless of whether we
accept or reject Ditech’s request to take judicial notice, we need not, and do not, address
Date Filed: 03/10/2017
much less support the inference that Bank of America did not abandon the
Indeed, the credit reporting activity about which the
Smithers also complain suggests that the 2009 Acceleration was, in fact,
abandoned. For instance, in 2013, the Loan was reported as closed with a
delinquency of $13,101—far less than the Loan’s accelerated balance of
$406,323.83. 8 Accordingly, the Smithers failed to state a plausible claim for
B. TDCA Claim
In their amended complaint, the Smithers asserted, in relevant part,
that Ditech “misrepresented the character, extent, or amount of a consumer
debt in violation of Tex. Fin. Code § 392.304(a)(8)” by not reflecting the
abandonment of the 2009 Acceleration “on information provided to credit
reporting agencies.” 9 To state a claim under § 392.304(a)(8), a plaintiff must
plausibly allege a misrepresentation led him or her to be unaware (1) that he
or she had a mortgage debt, (2) of the specific amount owed, or (3) that he or
she had defaulted. See Rucker v. Bank of Am., N.A., 806 F.3d 828, 832 (5th
whether it would be appropriate for us to take judicial notice of the separate acceleration
8 Contrary to the Smithers’ position, the reports by Bank of America and Ditech “that
the Property was in the process of foreclosure or in foreclosure” following the voluntary
dismissal of the 2009 Foreclosure Suit do not support the inference that Bank of America did
not abandon the 2009 Acceleration. As an initial matter, the Smithers’ position assumes that
Bank of America and Ditech could not subsequently foreclose on the Property to recover on
only the unaccelerated, delinquent balance of the Loan. The Smithers, however, have cited
absolutely no factual or legal basis for that assumption. Moreover, even if re-acceleration
were a prerequisite to a subsequent foreclosure, as the Smithers assume, the pleadings are
devoid of any factual allegation that would support the inference that Bank of America and
Ditech did not provide, or would not have provided, separate notices of acceleration, which
the Smithers concede would confirm abandonment.
9 The Smithers concede that the other TDCA claim asserted in their original petition
and amended complaint—that Ditech violated the TDCA by continuing to report on the
Smithers’ credit reports past-due amounts on the Loan, even though that debt was no longer
enforceable—fails in light of our holding that they have not stated a claim for declaratory
relief. Accordingly, we do not separately address that claim.
Date Filed: 03/10/2017
Cir. 2015); Miller v. BAC Home Loans Servicing, L.P., 726 F.3d 717, 723 (5th
Cir. 2013); see also Robinson v. Wells Fargo Bank, N.A., 576 F. App’x 358, 363
(5th Cir. 2014) (per curiam). The Smithers’ amended complaint fails to make
any such allegation. Accordingly, the Smithers failed to state a plausible claim
that Ditech violated the TDCA.
C. FDCPA Claim
The Smithers asserted in their amended complaint that Ditech violated
the FDCPA “[b]y continuing to report the past-due amounts on the Loan and
the foreclosure of the Loan on the [Smithers’] credit reports even though either
the debt is no longer enforceable or the foreclosure was abandoned.” The
FDCPA prohibits “false, deceptive, or misleading representation[s] or means
in connection with the collection of any debt.” 15 U.S.C. § 1692e. A claim under
the FDCPA must be brought within one year from the date the violation occurs.
15 U.S.C. § 1692k(d). Here, the only credit reporting activity that is alleged to
have occurred within the one-year limitations period is a report by Greentree
Financial Services that foreclosure proceedings were initiated in 2015. The
Smithers have failed to show how Greentree Financial Services is related to
Ditech or how that specific report was false, deceptive, or otherwise misleading.
Moreover, the Smithers have failed to raise any basis for tolling limitations as
to any other alleged misrepresentation. Accordingly, the Smithers failed to
state a plausible claim that Ditech violated the FDCPA.
For the foregoing reasons, the judgment of the district court is
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