PNC Bank v. Ruiz ( 2021 )

Case: 20-50255 Document: 00515763020 Page: 1 Date Filed: 03/02/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
March 2, 2021
No. 20-50255 Lyle W. Cayce
Clerk
PNC Bank, National Association,
Plaintiff—Appellee,
versus
Sylvia Ruiz,
Defendant—Appellant.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:15-CV-770
Before Elrod, Willett, and Engelhardt, Circuit Judges.
Kurt D. Engelhardt, Circuit Judge:
Appellant Sylvia Ruiz appeals a magistrate judge’s grant of Appellee
PNC Bank’s (“PNC”) motion for summary judgment for foreclosure. Ruiz
contests various evidentiary determinations and asserts that the magistrate
judge erred in granting PNC’s motion for summary judgment, but she also
challenges the magistrate judge’s jurisdiction to enter final judgment.
Because we conclude that the magistrate judge lacked jurisdiction, we
VACATE and REMAND for further proceedings consistent with this
opinion.
Case: 20-50255 Document: 00515763020 Page: 2 Date Filed: 03/02/2021
No. 20-50255
I.
Ruiz and her husband, Mark Rude, obtained a home equity loan (“the
loan”) from National City Mortgage Co. (“National City”) on May 24,
2002. Later that same year the couple divorced, leaving the property that
secured the loan to Ruiz. Rude transferred his interest in the property to Ruiz
and, in 2006, she asked National City to remove him from the loan.
Subsequently, Ruiz failed to satisfy her payment obligations. On July
2, 2009, National City sent a notice to Ruiz informing her that the loan was
in default. The notice stated that, to avoid acceleration of the maturity date,
she could cure the default by paying a certain amount by a specified date.
There is no indication that she ever did so.
PNC eventually obtained the loan by transfer on December 24, 2013,
and twice proceeded through its attorneys to notify Ruiz—on April 28, 2014
and June 25, 2014—that, because of her failure to cure the default, it had
elected to accelerate the loan. Ruiz remains in default for the April 1, 2010
payment and all subsequent payments in the unpaid principal amount of
$167,795.91.
Seeking judicial foreclosure and declaratory judgment, PNC initiated
the instant litigation against Ruiz in federal court on September 2, 2015.
Thereafter, the district court issued a scheduling order requiring the parties
to file a notice of consent to trial by magistrate judge. Ruiz did so, but PNC
expressly declined to consent on the provided form. Yet, apparently because
of an erroneous entry by the clerk’s office, the docket text reflected that PNC
had consented. That error lay dormant for some time because for much of
the next two years, proceedings in the case were stayed as the parties engaged
in unsuccessful settlement discussions. On lifting the stay in January 2019,
the district court observed that Mark Rude—who was named, for uncertain
reasons, in PNC’s original complaint but had not made any appearance—
remained a party to the case. Noting, erroneously with respect to PNC, that
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Ruiz and PNC had consented to having a magistrate judge conduct all
remaining proceedings in the case, the district court observed that trial before
a magistrate judge was unavailable without Rude’s consent. Accordingly, the
court instructed PNC that if it “intend[ed] to seek default judgment as to
Rude, [it] must file such a motion on or before January 23, 2019.” PNC did
so, and the court granted default judgment against Rude before transferring
the case to a magistrate judge.
In its transfer order, to which neither party objected despite the
express refusal in the record, the court noted that “the parties in this case
have waived the right to proceed before a judge of the United States District
Court and consented to have a United States Magistrate Judge conduct all
remaining proceedings in the case, including trial and the entry of
judgment.” The magistrate judge then set and held a scheduling conference
before entering an amended scheduling order. Again, neither party objected
at any point; nor did PNC expressly consent. Ruiz then filed an amended
answer and counterclaims and PNC filed a motion to substitute counsel—yet
again, all without objection. Finally, both parties moved for summary
judgment. On February 20, 2020, the magistrate judge granted PNC’s
motion for summary judgment, denied Ruiz’s motion, and entered final
judgment. Ruiz timely appealed.
II.
We first consider, as we must, whether the magistrate judge had
jurisdiction to conduct proceedings and enter final judgment in this matter.
See Roell v. Withrow, 538 U.S. 580, 598 (2003) (Thomas, J., dissenting)
(“[T]he necessary precondition for a court of appeals’ jurisdiction over a
magistrate judge’s order is the parties’ consent to proceed before the
magistrate judge.”). We conclude that the magistrate judge lacked
jurisdiction and, it follows, so do we. Accordingly, our analysis must end
where it begins, without reaching the merits of Ruiz’s appeal.
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Pursuant to the Federal Magistrate Act, a magistrate judge “may
conduct any or all proceedings in a jury or nonjury civil matter and order the
entry of judgment in the case” if he is specially designated by the district
court and all the parties’ voluntary consent is obtained. 28 U.S.C.
§ 636(c)(1). Consent is thus “the touchstone of magistrate judge
jurisdiction.” Anderson v. Woodcreek Venture Ltd., 351 F.3d 911, 914 (9th Cir.
2003). In some circumstances, consent need not be express. See Roell, 538
U.S. at 582. Implied consent can be deduced from a party’s conduct during
litigation and is sometimes enough to satisfy the consent requirement. Id.But can consent implied by conduct alone trump a prior express and
unambiguous statement of non-consent? In other words, can jurisdiction-by-
estoppel overcome a written, properly-filed statement of non-consent? That
is the question at issue here, and, until now, we have not had occasion to
address it.
Our analysis starts with Roell v. Withrow, 538 U.S. 580 (2003). In
Roell, a pro se plaintiff agreed to have a magistrate judge preside over the
entire case, but two defendants never filed the form to indicate either their
consent or non-consent. Id. at 582–83. Nevertheless, the case proceeded
before the magistrate judge all the way to judgment in favor of the defendants.
Id. at 583. During the whole course of those proceedings, the defendants
voluntarily participated, voicing “no objection when, at several points, the
[m]agistrate [j]udge made it clear that she believed they had consented.” Id.
at 584 (footnote omitted). This court, acting sua sponte, first raised the issue
on appeal and concluded that express consent was required. See id. at 583.
But the Supreme Court rejected that bright-line rule, holding that consent
may be implied where “the litigant or counsel was made aware of the need
for consent and the right to refuse it, and still voluntarily appeared to try the
case before the [m]agistrate [j]udge.” Id. at 590. The Court reasoned that
this approach served the “good pragmatic” end of judicial efficiency, id. at
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588, while simultaneously checking “the risk of gamesmanship by depriving
parties of the luxury of waiting for the outcome before denying the magistrate
judge’s authority,” id. at 590.
While obviously instructive, Roell is unlike this case. To begin, Roell
held that consent may be implied only “in certain narrowly circumscribed
contexts.” Bismark v. Fisher, 213 F. App’x 892, 895 (11th Cir. 2007)
(interpreting Roell). See also Anderson, 351 F.3d at 915 (“Roell held that
voluntary consent could be implied in limited, exceptional circumstances.”).
It permitted implied consent only on the premise that the parties appeared
before the magistrate judge “without expressing any reservation” about
doing so. Id. at 586. That foundation is absent here, where, far beyond
signaling reservation, PNC expressly declined to consent and never
articulated any recantation of that refusal.
Moreover, we have previously held that, while it allowed for implying
consent from conduct, Roell nevertheless “did not alter our rule that the
party’s consent must be clear and unambiguous.” Donaldson v. Ducote, 373
F.3d 622, 624 n.1 (5th Cir. 2004). We cannot say that PNC’s consent was
clear and unambiguous because its express statement of non-consent is flatly
inconsistent with its subsequent conduct. See Stackhouse v. McKnight, 168 F.
App’x 464, 466 (2d Cir. 2006) (holding that inconsistent conduct renders the
evidence “inconclusive with respect to the parties’ intent” and “is not
enough to demonstrate consent”). If PNC, like the defendants in Roell, had
simply failed to register any position about referral to a magistrate judge, the
outcome here may well have been different. We agree that, absent its express
refusal to consent, PNC’s course of conduct during all proceedings before
the magistrate judge likely would imply its consent. PNC signaled consent
by conspicuously declining to object at any of the numerous opportunities it
had for doing so and affirmatively litigating before the magistrate judge. But
its prior inconsistent statement, which it never expressly recanted, renders
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that subsequent conduct inconclusive and precludes us from inferring clear
and unambiguous consent. See Donaldson, 373 F.3d at 624 n.1.
A factual setting like this one seems to have arisen only once in our
sister circuits. In Yeldon v. Fisher, a pro se plaintiff initially submitted a written
form refusing consent but at no point thereafter objected when the case
proceeded before a magistrate judge. 710 F.3d 452, 453 (2d Cir. 2013). The
Second Circuit refused to infer consent. Id. Distinguishing Roell, the court
noted that the plaintiff had affirmatively signed a consent form indicating that
he did not consent to disposition of the case by a magistrate judge. Id.Furthermore, the court observed that, as a pro se litigant, the plaintiff “may
not have appreciated that participating in proceedings before the [m]agistrate
[j]udge could impugn the effectiveness of his written refusal to consent.” Id.PNC contends that Yeldon is inapposite because here “both parties
were always represented by counsel and understood the significance of
participating in proceedings before the magistrate judge.” But the Second
Circuit did not hold that the plaintiff’s pro se status was a dispositive factor,
and, regardless, we are not convinced that it ought to be. Whether a party is
represented by counsel might generally be relevant to whether consent can
be inferred, but it does not overcome the ambiguity created by the
inconsistent implications of an express statement and subsequent contrary
conduct.
To be sure, dismissing this appeal for lack of jurisdiction seemingly
rewards what might be characterized as gamesmanship on the part of Ruiz.
See Hester v. Graham, Bright & Smith, P.C., 289 F. App’x 35, 40 (5th Cir.
2008) (“Allowing parties to object to a [magistrate judge] and insist upon a
new trial only when he issues an order unfavorable to them would allow a
‘gamesmanship’ of the system that the Supreme Court has sought to
avoid.”). In other contexts, indeed, she might be estopped by her own
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acquiescence from now asserting PNC’s failure to consent. But not where,
as here, fundamental questions of jurisdiction are involved. See Coury v. Prot,
85 F.3d 244, 248 (5th Cir. 1996) (noting that “parties can never consent to
federal subject matter jurisdiction, and lack of such jurisdiction is a defense
which cannot be waived.”). Besides, we must raise the jurisdictional issue
sua sponte if necessary. See Union Planters Bank Nat’l Ass’n v. Salih, 369 F.3d
457, 460 (5th Cir. 2004) (“[F]ederal courts are duty-bound to examine the
basis of subject matter jurisdiction sua sponte, even on appeal.”). We also
recognize that gamesmanship is a two-way street, and, if the shoe were on the
other foot, PNC might now be claiming non-consent based on its own initial
refusal. Accordingly, inferring consent under these facts would not
categorically eliminate the possibility of gamesmanship under similar
circumstances with a different posture in future cases.
In any event, we have little concern of widespread inefficiency and
gamesmanship because circumstances like these are bound to be quite
infrequent. This case is an outlier. Generally, one party’s express refusal to
consent is the end of the matter because, consistent with that refusal, the
district court simply would not transfer the case to a magistrate judge.
Hence, since Roell first permitted courts to infer consent from conduct
almost two decades ago, implied consent cases in this and other circuits—
with the apparent exception of Yeldon—have not involved any conflicting
express statements of non-consent. Even here, given the district court’s
insistence that it could not transfer this case to a magistrate judge absent
Rude’s consent, we can safely assume that it would have done the same
pursuant to PNC’s refusal had it not been operating under a faulty
assumption caused by the erroneous docket entry.
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III.
We are acutely mindful of the inefficiency and burden attending
relitigating a case in circumstances like these, especially where the outcome
on the merits may well have been the same had it emanated from a district
judge instead. But ours is a court of limited jurisdiction, and we cannot resort
to considerations of convenience and efficiency, albeit serious and legitimate
ones, to exercise jurisdiction where we have none. See Kokkonen v. Guardian
Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (“Federal courts are courts of
limited jurisdiction. They possess only that power authorized by
Constitution and statute, which is not to be expanded by judicial decree.”)
(internal citation omitted).
For the foregoing reasons, the judgment of the magistrate judge is
hereby VACATED and the case is REMANDED to the district court.
The district court is instructed, upon remand, to either: (1) dispose of the
summary judgment motions in the first instance; or (2) deem the magistrate
judge’s order a report and recommendation and allow the parties to file
objections thereto.
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