Tyler et al v. Deutsche Bank National Trust Company et al
MEMORANDUM OPINION AND ORDER re 31 MOTION for Leave to File Defendants' Supplemental Answer filed by Deutsche Bank National Trust Company. Defendants Motion for Leave to File Defendants Supplemental Answer to Plaintiffs Second Amended Complaint (Dkt. #31) is hereby DENIED. Signed by Judge Amos L. Mazzant, III on 8/16/17. (cm, )
United States District Court
EASTERN DISTRICT OF TEXAS
ERIC LANE TYLER, JOANN LUCYLLE
DEUTSCHE BANK NATIONAL TRUST
COMPANY, AS TRUSTEE ON BEHALF
OF THE CERTIFICATE HOLDERS OF
MORGAN STANLEY ABS CAPITAL I
INC. TRUST 2003-NC10 MORTGAGE
SERIES 2003-NC10, AS SUCCESSOR-ININTEREST TO BANK OF AMERICA,
NATIONAL ASSOCIATION; AND
SELECT PORTFOLIO SERVICING INC,
AS SUCCESSOR-IN-INTEREST TO BNAK
OF AMERICA, NATIONAL
Civil Action No. 4:16-CV-00088
MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendants’ Motion for Leave to File Defendants’
Supplemental Answer to Plaintiffs’ Second Amended Complaint (Dkt. #31). After reviewing the
relevant pleadings and motion, the Court finds the motion should be denied.
On June 27, 2003, Plaintiffs obtained a home equity loan from New Century Mortgage
Corporation. Plaintiffs allege that the property securing said home equity loan was designated as
agricultural property for tax purposes. Plaintiffs allege that they discovered the home equity loan
violated the Texas Constitution when they attempted to refinance the home equity loan with a
new lender. As a result, Plaintiffs allege that above-described home equity loan and the lien that
secures it, both of which have been assigned to Defendant, are invalid.
The current numbered and styled case began on February 1, 2016, when the Court
entered an order severing actions against Bank of America (who no longer hold the note) and
against Deutsche Bank National Trust Company (the current holder) (Dkt. #1). On February 2,
2016, Plaintiffs filed their Second Amended Complaint (Dkt. #2). On the same day, Defendants
filed their Answer to Plaintiffs’ Second Amended Complaint (Dkt. #3). On February 22, 2016,
Defendants filed their First Amended Answer (Dkt. #6). On April 12, 2016, the Court entered a
scheduling order (Dkt. #11). The scheduling order set a deadline of July 5, 2016, and July 19,
2016, for Plaintiffs and Defendants, respectively, to file amended pleadings. A bench trial in this
case is set for September 14 and 15, 2017 (Dkt. #36).
On July 19, 2017, Defendants filed their Motion for Leave to File Defendants’
Supplemental Answer (Dkt. #31). On July 21, 2017, the Court held a pretrial conference. On
August 2, 2017, Plaintiffs filed a response (Dkt. #38).
Rule 15(a) of the Federal Rules of Civil Procedure provides that a party may amend its
pleading once without seeking leave of court or the consent of the adverse party at any time
before a responsive pleading is served. Fed. R. Civ. P. 15(a). After a responsive pleading is
served, a party “may amend only with the opposing party’s written consent or the court’s leave.”
Id. Rule 15(a) instructs the court to “freely give leave when justice so requires.” Id. The rule
“evinces a bias in favor of granting leave to amend.” Jones v. Robinson Prop. Grp., L.P.,
427 F.3d 987, 994 (5th Cir. 2005) (quoting Lyn-Lea Travel Corp. v. Am. Airlines, Inc., 283 F.3d
282, 286 (5th Cir. 2002)). But leave to amend “is not automatic.” Matagorda Ventures, Inc. v.
Travelers Lloyds Ins. Co., 203 F. Supp. 2d 704, 718 (S.D. Tex. 2000) (citing Dussouy v. Gulf
Coast Inv. Corp., 660 F.2d 594, 598 (5th Cir. 1981)). Whether to allow amendment “lies within
the sound discretion of the district court.” Little v. Liquid Air Corp., 952 F.2d 841, 845–46
(5th Cir. 1992). A district court reviewing a motion to amend pleadings under Rule 15(a)
considers five factors: (1) undue delay; (2) bas faith or dilatory motive; (3) repeated failure to
cure deficiencies by previous amendments; (4) undue prejudice to the opposing party; and
(5) futility of amendment. Smith v. EMC, 393 F.3d 590, 595 (5th Cir. 2004) (citing Foman v.
Davis, 371 U.S. 178, 182 (1962)).
Defendants argue that their amendment should be allowed because they are entitled to
equitable subrogation, a right that is paramount to their defense; because Plaintiffs have known
the underlying facts since July 2003; and because all exhibits have already been disclosed.
Plaintiffs argue that the amendment is too late because it came a year after the deadline and only
days before pretrial conference. Plaintiffs further argue that although they may have been aware
of the factual basis of Defendants’ equitable subrogation claim, they have objected to its
supporting evidence and crafted a trial strategy based on the previous pleadings.
The Court finds that the motion for leave should be denied due to undue delay, failure to
cure deficiencies by previous amendments, and undue prejudice.
Defendants directly address only the undue delay factor. Defendants argument in whole
states: “Defendants’ Supplemental Answer will not cause undue delay because all exhibits and
evidence Defendants may use to support their right to equitable subrogation has already been
disclosed in the Parties’ Joint Final Pre-Trial Order” (Dkt. #31 at p. 2). Plaintiffs argue that this
argument is insufficient to support amendment because although Plaintiffs may have been aware
of the underlying facts, Plaintiffs have not adequately prepared for such a defense based on its
absence from the pleadings. Further, the pretrial order was filed only five days before the motion
for leave, and Plaintiffs have since objected to all of the documents supporting the equitable
subrogation defense. The Court agrees with Plaintiffs.
First, Defendants’ unduly delayed filing this motion for leave. Although Rule 15(a) does
not impose a time limit for permissive amendment, at some point, delay can be procedurally fatal
to a claim. Whitaker v. City of Hous., 963 F.2d 831, 836 (5th Cir. 1992). In such a situation, the
party seeking leave bears the burden of showing the delay was “due to oversight, inadvertence,
or excusable neglect.” Smith, 393 F.3d at 595 (quoting Gregory v. Mitchell, 634 F.2d 199, 203
(5th Cir. 1981)). Defendants have not given any explanation for the delay. Defendants seek to
amend their answer nearly eighteen months after their first amendment and one year after the
deadline to amend. When asked at the pretrial conference whether Defendants also knew about
the facts giving rise to equitable subrogation, Defendants did not provide an explanation except
to say that they have new counsel. Because Defendants could not articulate a reason for delaying
an entire year, the Court finds this factor weighs strongly against amendment. Gresham v. Wells
Fargo Bank, N.A., 642 F. App’x 355, 357 (5th Cir. 2016) (holding court did not abuse discretion
in prohibiting amendment when the motion for leave did not explain a reason for the delay and
was filed after the deadline, two amendments, and a year of litigation)
Similarly, Defendants failed to cure any deficiencies by prior amendment. Defendants
amended their answer in February 2016, but did not include a claim for equitable subrogation.
Now, Defendants argue that they should be allowed to assert equitable subrogation because it is
essential to their defense. As Plaintiffs point out, Defendants argument cuts against amendment.
If equitable subrogation was essential to their defense, Defendants should have added a claim in
before the July 2016 deadline. Defendants have not explained why they could not have asserted
this claim earlier. Therefore, the Court finds this factor weighs against amendment.
Finally, Plaintiffs would be unduly prejudiced by amendment on the eve of trial. This
case has been pending for eighteen months. Amended pleadings and dispositive motions were
due in July 2016. Defendants did not assert equitable subrogation in their original or amended
answer and did not file a motion for summary judgment. One week before the pretrial
conference, Plaintiffs objected to any claim of equitable subrogation by Defendants. This was the
first time equitable subrogation was mentioned in a paper with the Court. Defendants then filed
this motion for leave to amend just two days before the pretrial conference. The parties are now
one month away from trial. Plaintiffs have prepared for a substantial amount of time in reliance
on no claim for equitable subrogation and are now on the eve of trial. To force them to prepare a
defense different from the one that was before the court with just one month until trial would be
unduly prejudicial to Plaintiffs. Smith, 393 F.3d at 596 (citing Duggins v. Steak ‘N Shake, Inc.,
195 F.3d 828, 834 (6th Cir. 1999)). Thus, this factor weighs strongly against amendment.
Aware of the fact that the Court should not simply count the factors, the Court finds that
the factors provide “substantial reason” to deny Defendants’ request for leave to amend
considering the delay and potential prejudice to Plaintiffs. Jamieson v. Shaw, 772 F.2d 1205,
1208 (5th Cir. 1985) (citing Union Planters Nat’l Leasing, Inc. v. Woods, 687 F.2d 117, 121
(5th Cir. 1982)).
It is therefore ORDERED that Defendants’ Motion for Leave to File Defendants’
Supplemental Answer to Plaintiffs’ Second Amended Complaint (Dkt. #31) is hereby DENIED.
SIGNED this 16th day of August, 2017.
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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