Shastry et al v. U.S. Bank National Association

Filing 48

ORDER ACCEPTING 42 FINDINGS AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE: Plaintiffs Mahesh Shastry and Suryakalar R. Shastry's Motion for Leave to File Amended Complaint [Dkt. No. 34 ] is DENIED. Defendant U.S. Bank National Asso ciation's Motion to Dismiss [Dkt. No. 20 is GRANTED. Specifically, Plaintiffs' claims for breach of contract and injunctive relief are DISMISSED WITHOUT PREJUDICE, and Plaintiffs' quiet title claim and request for declaratory relief are DISMISSED WITH PREJUDICE. The Court hereby GRANTS Plaintiffs Mahesh Shastry and Suryakalar R. Shastry 21 days from the date of this order in which to file an amended complaint that repleads only their claims for breach of contract and injunctive relief consistent with the Findings and Recommendation of the United States Magistrate Judge. If Plaintiffs fail to do so, their claims for breach of contract and injunctive relief against Defendant U.S. Bank National Association will be dismissed with prejudice without further notice. (Ordered by Senior Judge A. Joe Fish on 8/27/2018) (sss)

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
MAHESH SHASTRY f/k/a MAHESH
GOPALAKRISHNA and
SURYAKALAR R. SHASTRY f/k/a
SURYAKALA R. HOSANAGRA,
Plaintiffs,
V.
U.S. BANK NATIONAL
ASSOCIATION, AS SUCCESSOR
TRUSTEE TO WACHOVIA BANK
NATIONAL ASSOCIATION AS
TRUSTEE FOR WELLS FARGO
ASSET SECURITIES
CORPORATION, MORTGAGE
PASS-THROUGH CERTIFICATES
SERIES 2005-AR16,
Defendant.

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No. 3:16-cv-3335-G-BN

ORDER ACCEPTING FINDINGS AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
After making an independent review of the pleadings, files and records in this
case, and the Findings and Recommendation of the United States Magistrate Judge
dated July 27, 2018 [Dkt. No. 42], the objections filed by Plaintiffs Mahesh Shastry and
Suryakalar R. Shastry [Dkt. No. 44], and Defendant’s response to those objections
[Dkt. No. 47], the Court finds that the Findings and Recommendation of the Magistrate
Judge are correct and they are accepted as the Findings and Recommendation of the
Court.
The Magistrate Judge’s Findings and Recommendation recommended that the
Court grant the Motion to Dismiss filed by Defendant U.S. Bank National Association,

as Successor Trustee to Wachovia Bank National Association as Trustee for Wells
Fargo Asset Securities Corporation, Mortgage Pass-Through Certificates Series
2005-AR16 (“U.S. Bank”) [Dkt. No. 20] and deny Plaintiffs’ Motion for Leave to File
Amended Complaint (the “Motion for Leave”) [Dkt. No. 34]. See Dkt. No. 42 at 35.
Plaintiffs object to the Magistrate’s recommendation only as to Plaintiffs’ Motion
for Leave. Specifically, Plaintiffs object to the portion of the Magistrate Judge’s
Findings and Recommendation wherein the Magistrate Judge recommends that the
Court not grant Plaintiffs leave to add a claim for wrongful foreclosure.
The Magistrate Judge concluded that Plaintiffs do not meet Rule 16(b)(4)’s “good
cause” standard in moving for leave to amend after the deadline to do so had passed
because (1) Plaintiffs’ explanation for their failure to timely move to amend was
unpersuasive; (2) Plaintiffs had not shown the importance of the amendment; (3) U.S.
Bank would suffer prejudice in allowing the wrongful foreclosure claim to be added at
this late date; and (4) a continuance would not avoid the prejudice to U.S. Bank.
Plaintiffs object to each of the Magistrate Judge’s reasons. See id. at 30-42.
First, as to Plaintiffs’ explanation for their failure to timely move to amend,
Plaintiffs state in their objections that they did not seek leave to add their wrongful
foreclosure claim earlier because
Defendants took no action to assert an ownership claim to the house until
(1) after the deadline to amend passed, and (2) after Plaintiff (Mrs.
Shastry solely) filed and emerged from Bankruptcy. After the discharge
was granted, Defendant filed a suit for eviction. It was at this point that
Plaintiffs sought relief as to the foreclosure.
Dkt. No. 44 at 5.
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But Plaintiffs’ wrongful foreclosure claim, as they describe it, is based on U.S.
Bank’s conducting a foreclosure sale in violation of a Temporary Restraining Order
(“TRO”). See Dkt. No. 44 at 2-3. And that foreclosure sale occurred well before the
deadline to seek leave to amend had passed. As the Magistrate Judge noted in his
Findings and Recommendation, Plaintiffs give no indication that the facts giving rise
to their wrongful foreclosure claim did not exist – or that Plaintiffs otherwise could not
have brought the claim – before the deadline for moving to amend expired. See Dkt.
No. 42 at 31. The Court accordingly agrees with the Magistrate Judge that the
Plaintiffs’ explanation for their failure to timely request leave to amend is
unpersuasive.
Second, as to the importance of their wrongful foreclosure claim, Plaintiffs argue
that, despite the Magistrate Judge’s contrary conclusion, “under the facts of this case
a suit for wrongful foreclosure will lie.” Dkt. No. 44 at 2.
The Magistrate Judge concluded that “Plaintiffs’ assertion that the amendment
will enable the parties to more fully litigate the issues that exist between them [was]
unconvincing,” Dkt. No. 42 at 31, because (1) “Plaintiffs’ proposed First Amended
Complaint fails to allege any of the three elements of a wrongful foreclosure claim,” id.;
and (2) “even assuming that Plaintiffs can meet the elements of wrongful foreclosure,
Plaintiffs appear to still possess the Property and are either currently defending or
expecting to defend against eviction,” id. at 32.
Plaintiffs cannot maintain a wrongful foreclosure action on the basis of U.S.
Bank’s foreclosing in violation of the TRO. “As a matter of law, foreclosure in violation
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of a temporary restraining order does not give rise to a cause of action for wrongful
foreclosure.” See Russell v. BAC Home Loans Servicing, L.P., No. SA-14-CA-480-FB,
2014 WL 12489704, at *9 (W.D. Tex. Aug. 21, 2014) (citing Pickens v. U.S. Bank Nat’l
Ass’n, No. 3:12-cv-2210-O-BK, 2013 WL 866171, at *6 (N.D. Tex. Jan. 8, 2013) (“A
foreclosure sale in contravention of a TRO is not a defect in the foreclosure proceeding
itself, and consequently, cannot give rise to a wrongful foreclosure cause of action.”).
Plaintiffs explain in their objections that their labeling their claim as one for
“wrongful foreclosure” was misleading and that Plaintiffs do not seek to add a true
wrongful foreclosure claim that, as the Magistrate Judge explained, requires a litigant
without possession to prove (1) a defect in proceedings, (2) a grossly inadequate sales
price, and (3) a causal connection between those two factors. See Dkt. No. 44 at 3.
Plaintiffs clarify in their objections that the basis of their new claim is Texas
law’s rule that “a foreclosure conducted in violation of a TRO is void ab initio.” Dkt. No.
44 at 2 (citing cases). Plaintiffs maintain that because “[i]n this case, Plaintiffs allege
and can demonstrate that the sale being void ab initio, they are entitled to a judgment
reflecting such.” Id. at 3. Plaintiffs further note that “[p]erhaps the claim asserted
should be styled ‘quiet title’ rather than ‘wrongful foreclosure’” because, “[a]fter all, the
gist of Plaintiffs’ complaint is that Defendant has filed a deed which is void, and which
clouds their title.” Id. at 4.
But, in their live pleading, Plaintiffs already bring a quiet title claim against
U.S. Bank. U.S. Bank moved to dismiss that claim, and, in considering U.S. Bank’s
Motion to Dismiss, the Magistrate Judge recommended that the Court dismiss
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Plaintiffs’ quiet title claim with prejudice. The Magistrate Judge concluded that
“Plaintiffs’ ‘failure to establish [their] own superior right to the property, such as by
pleading that [they] [are] current on [their] mortgage payments, also renders [their]
quiet title claim defective,’” and that the claim fails as a matter of law. Dkt. No. 42 at
29 (quoting Warren v. Bank of Am., N.A., 566 F. App’x 379, 383 (5th Cir. 2014)); see
also id. at 25 (“Texas courts have made clear that ‘a necessary prerequisite to [a quiet
title action] is tender of whatever amount is owed on the note.’” (citing Cook–Bell v.
Mortgage Elec. Registration Sys., Inc., 868 F. Supp. 2d 585, 591 (N.D. Tex. 2012) (citing
Fillion v. David Silvers Co., 709 S.W.2d 240, 246 (Tex. App. – Houston [14th Dist.]
1986, writ ref’d n.r.e.)))).
Plaintiffs do not object to the Magistrate Judge’s conclusions and
recommendation regarding Plaintiffs’ quiet title claim. And, even if Plaintiffs had
objected, the Court finds that the Magistrate Judge’s conclusion that Plaintiffs fail to
state a claim for quiet title as a matter of law is correct such that, even construing
Plaintiffs’ so-called wrongful foreclosure claim as one for quiet title, the claim is futile.
See Fillion, 709 S.W.2d at 246 (“Tender of whatever sum is owed on the mortgage debt
is a condition precedent to the mortgagor’s recovery of title from a mortgagee who is
in possession and claims title under a void foreclosure sale.” (citing Willoughby v.
Jones, 151 Tex. 435, 251 S.W.2d 508 (1952))).
Third, as to the prejudice to U.S. Bank, Plaintiffs argue that U.S. Bank will not
be prejudiced because U.S. Bank has not yet conducted any discovery, the Motion to
Dismiss had not yet been determined before Plaintiffs filed for bankruptcy, and the
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case was stayed during the Plaintiffs’ bankruptcy. See Dkt. No. 44 at 5. Despite this
case’s procedural history, the Magistrate Judge found that, “[g]iven the questionable
viability of Plaintiffs’ wrongful foreclosure claim and Plaintiffs’ unjustified delay in
adding it, the prejudice to U.S. Bank in allowing amendment would be great. Plaintiffs’
attempt to bring a wholly new, perhaps meritless cause of action ‘would cause [U.S.
Bank] great expense and extend the litigation needlessly.’” Dkt. No. 42 at 33 (quoting
Filgueira v. U.S. Bank Nat. Ass’n, 734 F.3d 420, 423-24 (5th Cir. 2013)). The Court,
having found that Plaintiffs’ proposed new claim is futile, finds that the Magistrate
Judge’s conclusion as to the prejudice to U.S. Bank is correct. See Filgueira, 734 F.3d
at 423 (affirming the district court’s denying the plaintiff leave to amend where “there
are no facts to suggest either of these claims would be viable”).
Fourth, as to whether a continuance would cure the prejudice to U.S. Bank,
Plaintiffs argue that “there is no need for a continuance as we do not have a trial
setting as of this time.” Dkt. No. 44 at 5. But that no trial date is set in this case does
not cure the prejudice to U.S. Bank described above. And, as the Magistrate Judge
noted in his Findings and Recommendation, if Plaintiffs were permitted to add their
new claim, which the Court has determined fails under Texas law, the prejudice to U.S.
Bank would be inevitable. See Dkt. No. 42 at 33
IT IS, THEREFORE, ORDERED that the Findings and Recommendation of
the United States Magistrate Judge are accepted. Plaintiffs Mahesh Shastry and
Suryakalar R. Shastry’s Motion for Leave to File Amended Complaint [Dkt. No. 34] is
DENIED. Defendant U.S. Bank National Association’s Motion to Dismiss [Dkt. No. 20]
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is GRANTED. Specifically, Plaintiffs’ claims for breach of contract and injunctive relief
are DISMISSED WITHOUT PREJUDICE, and Plaintiffs’ quiet title claim and request
for declaratory relief are DISMISSED WITH PREJUDICE.
The Court hereby GRANTS Plaintiffs Mahesh Shastry and Suryakalar R.
Shastry 21 days from the date of this order in which to file an amended complaint that
repleads only their claims for breach of contract and injunctive relief consistent with
the Findings and Recommendation of the United States Magistrate Judge. If Plaintiffs
fail to do so, their claims for breach of contract and injunctive relief against Defendant
U.S. Bank National Association will be dismissed with prejudice without further
notice.
SO ORDERED this 27 day of August, 2018.

___________________________________
A. JOE FISH
Senior United States District Judge

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