Filed: Mar. 24, 2014
Latest Update: Mar. 02, 2020
Summary: Case: 13-20242 Document: 00512570701 Page: 1 Date Filed: 03/24/2014 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED No. 13-20242 March 24, 2014 Summary Calendar Lyle W. Cayce Clerk RONALD J. MORAN; JEAN M. MORAN, Plaintiffs – Appellants v. OCWEN LOAN SERVICING, L.L.C.; THE BANK OF NEW YORK MELLON, formerly known as The Bank of New York, as Trustee, for CWABS, Incorporated, Asset-Backed Certificates, Series 2002-5, Defendants – Appell
Summary: Case: 13-20242 Document: 00512570701 Page: 1 Date Filed: 03/24/2014 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED No. 13-20242 March 24, 2014 Summary Calendar Lyle W. Cayce Clerk RONALD J. MORAN; JEAN M. MORAN, Plaintiffs – Appellants v. OCWEN LOAN SERVICING, L.L.C.; THE BANK OF NEW YORK MELLON, formerly known as The Bank of New York, as Trustee, for CWABS, Incorporated, Asset-Backed Certificates, Series 2002-5, Defendants – Appelle..
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Case: 13-20242 Document: 00512570701 Page: 1 Date Filed: 03/24/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 13-20242 March 24, 2014
Summary Calendar
Lyle W. Cayce
Clerk
RONALD J. MORAN; JEAN M. MORAN,
Plaintiffs – Appellants
v.
OCWEN LOAN SERVICING, L.L.C.; THE BANK OF NEW YORK MELLON,
formerly known as The Bank of New York, as Trustee, for CWABS,
Incorporated, Asset-Backed Certificates, Series 2002-5,
Defendants – Appellees
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:13-CV-670
Before DAVIS, SOUTHWICK, and HIGGINSON, Circuit Judges.
PER CURIAM:*
Our court having announced the rule dispositive of this appeal—that
“liens that are contrary to the requirements of § 50(a) [of the Texas
Constitution] are voidable rather than void from the start”—we AFFIRM.
Preister v. JP Morgan Chase Bank, N.A., 708 F.3d 667, 674 n.14 (5th Cir. 2013).
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
Case: 13-20242 Document: 00512570701 Page: 2 Date Filed: 03/24/2014
No. 13-20242
FACTUAL BACKGROUND
Ronald and Jean Moran own a home in Harris County, Texas. On
September 25, 2002, the Morans executed a loan agreement under which Full
Spectrum Lending, Inc., acquired a lien on the Morans’ homestead to secure
repayment of the loan. Appellee Bank of New York Mellon (the “Bank”) now
holds the note and the deed of trust. The Bank sought to foreclose on the
Morans’ home by applying for an expedited foreclosure order in Texas state
court. On December 6, 2012, the Morans sent the Bank a Notice of Request to
Cure alleging that the loan violated the Texas Constitution. The Bank did not
cure the alleged defects in the loan agreement. Accordingly, on February 15,
2013, the Morans sued the Bank and Ocwen Loan Servicing, L.L.C., in Texas
state court to avoid foreclosure. Defendants removed the case to the United
States District Court for the Southern District of Texas and moved to dismiss
the Morans’ complaint for failure to state a claim. After a hearing, the district
court granted defendants’ motion to dismiss, noting on the record “I can’t
overcome the binding effect of a very recent . . . Fifth Circuit opinion.” The
Morans appealed.
STANDARD OF REVIEW
“We review dismissal under Rule 12(b)(6) de novo, accepting all well-
pleaded facts as true and viewing those facts in the light most favorable to the
plaintiff.” Toy v. Holder, 714 F.3d 881, 883 (5th Cir. 2013) (internal quotation
marks omitted). “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.’” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Bell
Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)).
DISCUSSION
The Morans allege that defendants violated Texas’s constitutional
requirements for creating a valid lien under Texas Constitution art. XVI,
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No. 13-20242
§ 50(a)(6)(B), (E), (M)(ii), and (Q)(ix). They allege claims for breach of contract
and to quiet title, and request a declaratory judgment specifying that the Bank
has failed to cure the defects in the loan documents, that the Bank has forfeited
all principal and interest on the Note, and that the lien is void. The Morans
did not challenge the constitutional validity of their loan agreement until over
ten years after its execution. Priester “conclude[d] that a limitations period
applies to constitutional infirmities under Section 50(a)(6)”—specifically,
Priester held that a four-year limitations period applies. 708 F.3d at 674.
Priester further held that “the legal injury rule applies to the creation of
unconstitutional liens” and therefore that the limitation period begins to run
at the creation of the lien.
Id. at 675–76. Accordingly, the Morans’ claims,
which were asserted over four years after the creation of the lien, are time-
barred.
The Morans make three attempts to avoid dismissal. First, they argue
that Priester is not controlling because it is incorrect. “It is a well-settled Fifth
Circuit rule of orderliness that one panel of our court may not overturn another
panel’s decision, absent an intervening change in the law, such as by a
statutory amendment, or the Supreme Court, or our en banc court.” Jacobs v.
Nat’l Drug Intelligence Ctr., 548 F.3d 375, 378 (5th Cir. 2008). Accordingly, we
have no occasion to revisit Priester. Because Priester is controlling, we also
deny the Morans’ motion to certify. See Jefferson v. Lead Indus. Ass’n, Inc.,
106
F.3d 1245, 1247 (5th Cir. 1997) (“While the Texas Constitution allows this
court to certify questions to the Texas Supreme Court, certification is not a
proper avenue to change our binding precedent.”).
Second, the Morans argue that their declaratory-judgment action is a
“defense” to foreclosure and as such is not constrained by a statute of
limitations. The Priesters, like the Morans, also sued for a declaratory
judgment “that, under the Texas Constitution, the loan and accompanying lien
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No. 13-20242
on their home were ‘void ab initio,’ that defendants had failed to cure
constitutional violations, and that therefore [the lender] was required to forfeit
all principal and interest.” Priester, 708 F.3d at 671–72. Priester affirmed
dismissal of the declaratory-judgment action under the four-year statute of
limitations,
id. at 671, 674–75, and we are bound to do so as well.
Third, the Morans argue that their contract claims are not time barred
because their cause of action arose when the Bank refused to cure the alleged
defects, not when the agreement closed in 2002. Their complaint alleges that
the Bank breached their agreement by “failing to refund or ‘cure’” the alleged
violations within the 60-day cure period. Priester recognized that the
application of the statute of limitations is different for contract claims. Priester,
708 F.3d at 675 n.6. Specifically, it acknowledged that “‘where the parties so
frame their contract as to make prior demand an integral part of a cause of
action or a condition precedent to a right to sue, the statute of limitations does
not begin to run until demand is made.’”
Id. (quoting Cummins & Walker Oil
Co. v. Smith,
814 S.W.2d 884, 887 (Tex. App.—San Antonio 1991, no writ)).
Importantly, Priester also noted that “it is the general rule that in such a case
a demand must be made within a reasonable time after it may lawfully be
made,” and “[t]his court has found that ‘reasonable’ period of time to relate to
the statute of limitations.”
Id. (internal citations and quotation marks
omitted). Put another way, “[w]here a demand is a condition precedent to suit,
the plaintiff may not, by failing or refusing to perform the condition, toll the
running of the statute and reserve for himself the right to sue within the
statutory period from such time as he decides to make a demand.”
Id. (quoting
Aetna Cas. & Sur. Co. v. State,
86 S.W.2d 826, 831 (Tex. Civ. App.—Fort Worth
1935, writ dism’d)).
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The Morans failed to seek cure until 2012, which is ten years after the
closing of the agreement (2002) and six years after the running of the
applicable statute of limitations (2006). We have noted:
Under Texas law, where a demand is a condition precedent to suit
on a guarantee agreement, the demand must be made within a
period coincident with the statute of limitations on the underlying
note. . . . Under Texas law, this coincident four year statute of
limitations established the reasonable period of time in which a
demand for payment could have been made on the guarantee
agreement. Because the demand was not made within this
reasonable period of time, any action on the guarantee agreement
is barred under Texas law.
United States v. First City Capital Corp., 53 F.3d 112, 115–16 (5th Cir. 1995)
(Wisdom, J.).
The Morans rely on Aetna Cas. & Sur. Co. v. State for Use & Benefit of
City of Dall., for the proposition that “[w]hat this reasonable time is depends
upon the circumstances of each case, and in this respect no definite rule has
been laid down. The question is one of fact for the jury, and not of law for
abstract judicial decision.” 86 S.W.2d 826, 831 (Tex. Civ. App.—Fort Worth
1935, writ dism’d). But Aetna continued: “Ordinarily, however, in the absence
of mitigating circumstances, a time coincident with the running of the statute
will be deemed reasonable, and if a demand is not made within that period the
action will be barred.”
Id. The Morans allege no mitigating circumstances in
their complaint. Accordingly, the Morans did not make their demand within
the applicable statute of limitations, and their action is barred under Texas
law. See First City Capital
Corp., 53 F.3d at 116 (deciding demand was
unreasonably delayed as a matter of law); see also Irwin v. Prestresed
Structures, Inc.,
471 S.W.2d 865, 868 (Tex. Civ. App.—Eastland, writ ref’d
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No. 13-20242
n.r.e) (“Ordinarily a time coincidental with the running of the statute of
limitations will be deemed reasonable.”). 1
CONCLUSION
Priester controls the outcome of this dispute. AFFIRMED.
1 The invalidity of the Morans’ contract claims is apparent on the face of their
complaint, which alleges that they executed the agreement on September 25, 2002 and sent
their first cure demand on December 6, 2012. See, e.g., EPCO Carbon Dioxide Prods. Inc. v.
JP Morgan Chase Bank, NA, 467 F.3d 466, 470 (5th Cir. 2006) (“Although dismissal under
rule 12(b)(6) may be appropriate based on a successful affirmative defense, that defense must
appear on the face of the complaint.”); see also 5B Charles Alan Wright, Arthur R. Miller &
Mary Kay Kane, Federal Practice and Procedure § 1357 (3d ed. 2013) (“As the case law makes
clear, the complaint also is subject to dismissal under Rule 12(b)(6) when its allegations
indicate the existence of an affirmative defense that will bar the award of any remedy.”).
6
