Janos Farkas v. Ocwen Loan Servicing, L.L.C., et a ( 2018 )

Case: 17-20488 Document: 00514362186 Page: 1 Date Filed: 02/26/2018
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 17-20488 United States Court of Appeals
Summary Calendar Fifth Circuit
FILED
February 26, 2018
JANOS FARKAS, Lyle W. Cayce
Clerk
Plaintiff - Appellant
v.
OCWEN LOAN SERVICING, L.L.C.; DEUTSCHE BANK TRUST
COMPANY AMERICAS, AS TRUSTEE FOR RESIDENTIAL ACCREDIT
LOANS, INCORPORATED, MORTGAGE ASSET-BACKED PASS-
THROUGH CERTIFICATES, SERIES 2006-QS9; POWER DEFAULT
SERVICES, INCORPORATED,
Defendants - Appellees
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:16-CV-3720
Before KING, ELROD, and HIGGINSON, Circuit Judges.
PER CURIAM:*
Plaintiff–Appellant Janos Farkas initiated this action against
Defendants–Appellees Ocwen Loan Servicing, LLC, Deutsche Bank Trust
Company Americas, and Power Default Services, Inc., claiming that
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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No. 17-20488
foreclosures of his two residential investment properties were barred. Ocwen
and Deutsche Bank filed a motion for judgment on the pleadings under Federal
Rule of Civil Procedure 12(c). In ruling on this motion, the district court
decided that Farkas will take nothing from all three defendants. We AFFIRM.
I.
Janos Farkas owns two residential investment properties: one located on
Claretfield Court in Humble, Texas (the “Claretfield Property”), and one
located on Oakview Creek Lane in Houston, Texas (the “Oakview Property”).
On May 31, 2006, Farkas borrowed $87,288 from Cornerstone Mortgage
Company (“Cornerstone”) to purchase the Claretfield Property. On June 6,
2006, he borrowed $88,061 from Cornerstone to purchase the Oakview
Property. At the origination of these loans, Cornerstone was the lender and
mortgage servicer. The loans for the properties were evidenced by promissory
notes, which were secured by deeds of trust and signed by Farkas. Both deeds
named Mortgage Electronic Registration Systems, Inc. (“MERS”), its
successors and assigns, as Cornerstone’s beneficiary with the right to enforce
Cornerstone’s legal interests.
In 2006, after closing, both loans were sold to Residential Funding
Corporation. The mortgage servicing rights were transferred to Homecomings
Financial, LLC, then to its affiliate GMAC Mortgage, LLC (“GMAC”), and
finally to Ocwen Loan Servicing, LLC (“Ocwen”). By June 2011, MERS had
assigned the deed and note for each property to Deutsche Bank Trust Company
Americas (“Deutsche Bank”).
Farkas defaulted on both loans in December 2010. In March 2011,
GMAC sent a notice of default and intent to accelerate the loans. In May 2011,
GMAC sent notices of acceleration for both loans, declaring all unpaid principal
and accrued interest due and payable. GMAC received no payments from
Farkas, so it sent notices of substitute trustee’s sales for the properties—both
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scheduled for August 2, 2011. In July 2011, Farkas sued GMAC and Deutsche
Bank in Texas state court for wrongful foreclosure. The case was removed to
federal court. GMAC and Deutsche Bank filed a motion for summary
judgment, which the district court granted. Farkas appealed. This court
affirmed. Farkas v. GMAC Mortg., L.L.C. (Farkas I), 737 F.3d 338, 339 (5th
Cir. 2013).
In early 2015, Ocwen began servicing the loans. Power Default Services,
Inc. (“Power Default”), as an agent for Ocwen, sent notices of substitute
trustee’s sales for the properties—both scheduled for December 6, 2016. On
November 29, 2016, Farkas initiated this action against Ocwen, Deutsche
Bank, and Power Default. Farkas claimed that foreclosures of his properties
were barred because (1) the mortgagee, Deutsche Bank, did not inform him of
the name of the servicer, Ocwen, and (2) the four-year limitations period to
foreclose has expired. In December 2016, Ocwen and Deutsche Bank then
removed the case to federal court. In January 2017, they filed a motion for
judgment on the pleadings under Federal Rule of Civil Procedure 12(c). On
February 3, 2017, Farkas moved to recuse the district court judge, claiming
that the judge was prejudiced against him. The district court denied this
motion on February 7, 2017. On July 3, 2017, the district court ruled on the
motion and decided that Farkas will take nothing from Ocwen, Deutsche Bank,
and Power Default. 1 Farkas timely appealed.
1 On July 3, 2017, the district court also dismissed Farkas’s claims against Power
Default with prejudice as Farkas pleaded nothing that suggests he had been injured by Power
Default and Farkas’s claims against Power Default were entirely derivative of his claims
against Ocwen and Deutsche Bank. As we affirm the district court’s dismissal of all of
Farkas’s claims based on the merits, we need not address whether the separate order of
partial dismissal of Farkas’s derivative claims against Power Default was appropriate. See
United States v. Chacon, 742 F.3d 219, 220 (5th Cir. 2014) (“We may affirm the district court’s
judgment on any basis supported by the record.” (citing United States v. Le, 512 F.3d 128,
134 (5th Cir. 2007))).
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II.
A.
“We review a district court’s ruling on a Rule 12(c) motion for judgment
on the pleadings de novo.” Gentilello v. Rege, 627 F.3d 540, 543 (5th Cir. 2010)
(citing Great Plains Tr. Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305,
312 (5th Cir. 2002)). “We evaluate a motion under Rule 12(c) for judgment on
the pleadings using the same standard as a motion to dismiss under Rule
12(b)(6) for failure to state a claim.” Id. at 543–44 (citing Doe v. MySpace, Inc.,
528 F.3d 413, 418 (5th Cir. 2008)). “To avoid dismissal, a plaintiff must plead
sufficient facts to ‘state a claim to relief that is plausible on its face.’” Id.
(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). As this is a diversity case,
we apply Texas substantive law. See Graper v. Mid-Continent Cas. Co., 756
F.3d 388, 391 (5th Cir. 2014).
First, Farkas argues that Ocwen is not a proper mortgage servicer under
Texas Property Code § 51.0001(3) and is therefore unable to initiate a
foreclosure proceeding under § 51.0025. A “‘[m]ortgage servicer’ means the last
person to whom a mortgagor has been instructed by the current mortgagee to
send payments for the debt secured by a security instrument.” Tex. Prop. Code
§ 51.0001(3). Texas Property Code § 51.0025 permits a “mortgage servicer” to
administer the foreclosure of property on behalf of a mortgagee. Farkas
specifically contends that Ocwen, who initiated the challenged foreclosures, is
not a valid mortgage servicer because the current mortgagee, Deutsche Bank,
did not inform him of the name of the servicer, Ocwen. His argument is
unavailing.
Under Texas law, “[q]uasi-estoppel precludes a party from asserting, to
another’s disadvantage, a right inconsistent with a position previously taken.”
Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 864 (Tex. 2000)
(citing Atkinson Gas Co. v. Albrecht, 878 S.W.2d 236, 240 (Tex. App.—Corpus
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Christi 1994, writ denied)). It “applies when it would be unconscionable to
allow a person to maintain a position inconsistent with one to which he
acquiesced, or from which he accepted a benefit.” Id. (collecting cases).
Farkas made monthly payments on both the Claretfield and Oakview
mortgages to companies identified to him as the mortgage servicers from the
origination of these mortgages in 2006 to his default on both loans in December
2010. The mortgage servicing rights were transferred in 2006, 2009, and 2013.
Each time, the preceding servicer—not the mortgagee—notified him of the
identity of the succeeding servicer. From 2006 to 2010, Farkas did not raise
the issue that only the current mortgagee could provide notice of the identity
of the mortgage servicer. Based on his prior conduct, he has acquiesced to the
validity of the notice of transfer from one servicer to the next. In Farkas I, this
court applied the quasi-estoppel doctrine to Farkas’s challenge to GMAC’s
status as the servicer of the loans based on these facts. See 737 F.3d at 344. As
the differences between Farkas I and the situation at hand are immaterial, the
doctrine also applies to Farkas’s challenge to Ocwen’s status as servicer of his
loans.
Second, Farkas argues that the four-year limitations period to foreclose
has expired. This contention is also unavailing. “Under Texas law, a secured
lender ‘must bring suit for . . . the foreclosure of a real property lien not later
than four years after the day the cause of action accrues.’” Boren v. U.S. Nat’l
Bank Ass’n, 807 F.3d 99, 104 (5th Cir. 2015) (citing Tex. Civ. Prac. & Rem.
Code § 16.035(a)). The four-year limitations period can be triggered when the
holder of a note or deed of trust exercises its option to accelerate. See id. (citing
Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001)).
However, “a lender may unilaterally abandon acceleration of a note, thereby
restoring the note to its original condition . . . by sending notice to the borrower
that the lender is no longer seeking to collect the full balance of the loan and
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will permit the borrower to cure its default by providing sufficient payment to
bring the note current under its original terms.” Id. at 105.
In May 2011, GMAC sent notices of acceleration for both loans, which
initially triggered § 16.035(a)’s four-year statute of limitations. But these
initial accelerations were abandoned when Ocwen sent Farkas new notices of
default in early 2015. Ocwen no longer demanded the full balance, and Farkas
had the chance to cure his arrearages. Thus, foreclosures of his two properties
were not barred.
B.
On appeal, Farkas also challenges the denial of his motion to recuse. He
argues that the district court judge was prejudiced against him because the
judge (1) in the case management order, gave Farkas only six days to file a
response to the Rule 12(c) motion and (2) after denying Farkas’s motion to
recuse, gave him a week to file an amended response to the Rule 12(c) motion.
“We review the denial of a recusal motion for abuse of discretion.” Garcia v.
City of Laredo, 702 F.3d 788, 793–94 (5th Cir. 2012) (citing Trevino v. Johnson,
168 F.3d 173, 178 (5th Cir. 1999)). Under 28 U.S.C. § 144, recusal is required
if a party “files a timely and sufficient affidavit that the judge before whom the
matter is pending has a personal bias or prejudice either against him or in
favor of any adverse party.” Under 28 U.S.C. § 455(a) and (b)(1), recusal is
required when the judge “has a personal bias or prejudice concerning a party,
or personal knowledge of disputed evidentiary facts concerning the
proceeding,” or when the judge’s “impartiality might reasonably be
questioned.” “Under either statute, the alleged bias must be personal, as
distinguished from judicial, in nature.” United States v. Scroggins, 485 F.3d
824, 830 (5th Cir. 2007) (emphasis added) (quoting Phillips v. Joint Legis.
Comm. on Performance & Expenditure Review, 637 F.2d 1014, 1020 (5th Cir.
1981)).
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Farkas has not shown any personal bias or prejudice on the part of the
district court judge, but “merely expresses disagreement with specific rulings
by the court on motions and routine case management matters.” Kastner v.
Lawrence, 390 F. App’x 311, 317 (5th Cir. 2010) (per curiam). Farkas has thus
failed to demonstrate that the district court abused its discretion by denying
his recusal motion.
III.
For the foregoing reasons, we AFFIRM the district court’s ruling that
Farkas will take nothing from Ocwen, Deutsche Bank, and Power Default.
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