CAP Holdings, Inc. v. Lorden

790 F.3d 599

CAP HOLDINGS, INCORPORATED, doing business as Recovery Management International, Plaintiff–Appellant

v.Kathleen A. LORDEN; Justin Pruitt; Gary E. Haisler; Urika R. Mendoza; Judith C. Rushing; Joyce M. Stephan, Defendants–Appellees.

No. 14–50397.

United States Court of Appeals, Fifth Circuit.

June 22, 2015.

Bruce K. Thomas, Law Office of Bruce K. Thomas, Dallas, TX, for Plaintiff–Appellant.

Matthew Albert Nowak, Esq., Trial Attorney (argued), Nowak & Stauch, L.L.P., Ashley Anne Smith, Fidelity National Law Group, Dallas, TX, for Defendants–Appellees Kathleen A. Lorden, Gary E. Haisler, Urika R. Mendoza, Judith C. Rushing and Joyce M. Stephan.

Louis Andrew Oliver (argued), Oliver Law Office, Austin, Ashley Anne Smith, Fidelity National Law Group, Dallas, TX, for Defendant–Appellee Justin Pruitt.

Appeal from the United States District Court for the Western District of Texas.

Before JOLLY, WIENER, and CLEMENT, Circuit Judges.

Opinion

E. GRADY JOLLY, Circuit Judge:

In 1990, property encumbered by a deed of trust held by the Resolution Trust Company (“RTC”) was foreclosed upon and sold to a third party in a tax sale, purportedly extinguishing the RTC's lien. Two years ago, Plaintiff CAP Holdings, Inc.—the alleged current holder of the deed of trust—sued the current owners of the property seeking a declaration that the foreclosure and resulting sale were void for violating 12 U.S.C. § 1825(b)(2), which prohibits “property of the” RTC from being foreclosed upon or sold “without the consent of” the RTC.¹ The district court dismissed CAP Holdings's complaint on the ground that the six-year limitations period had expired. Because our precedent dictates that, if the sale was conducted in violation of § 1825(b)(2), then it indeed is entirely void, and because the district court failed to consider whether the sale's being void would render the defendants without standing under Texas law to assert a limitations defense, we VACATE the district court's judgment and REMAND this case for further proceedings.

I.

In 1985, an entity called the Jefferson Group purchased a 94–acre tract of land in Georgetown, Texas (“the Property”), using a loan from Lincoln Federal Savings & Loan. In exchange for the loan, the Jefferson Group executed a promissory note in favor of Lincoln in the amount of $5.5 million, secured by a deed of trust on the Property. In 1987, the loan matured, apparently unpaid. In mid–1990, Lincoln failed and went into receivership, with the RTC as its receiver. Soon after, the RTC successfully sued the Jefferson Group over the unpaid note in a Florida court, obtaining a money judgment (“the Florida Judgment.”).

In addition to not paying the note, the Jefferson Group, it seems, also did not pay its property taxes. Accordingly, in October 1990, the Georgetown Independent School District (“the GISD”) filed a tax-foreclosure suit against the Property, naming as defendants, among others, the Jefferson Group and the RTC. The RTC answered and appeared at trial in the suit but, apparently, did not argue that under § 1825(b)(2) its consent was required for the GISD to foreclose upon its lien. After obtaining a judgment of foreclosure against all defendants, the GISD purchased the Property. Eventually, subsequent purchasers developed and subdivided the Property into a residential subdivision with approximately 400 houses, including those owned by the defendants.

Meanwhile, in 1995, the RTC was dissolved and the FDIC was substituted as its “statutory successor.” See, e.g., FDIC v. Barton, 233 F.3d 859, 862 (5th Cir.2000). Accordingly, the FDIC assumed ownership of the Jefferson Group loan.

In 1996, the FDIC assigned some of its assets to an entity called the Reliant Group, L.P. Among those assets was an asset referred to in the assignment documentation as “Jefferson Group.” According to CAP Holdings, the “Jefferson Group” asset included all of the FDIC's interest in the Jefferson Group loan—that is, both the Florida Judgment and the deed of trust.² Following a series of subsequent assignments, CAP Holdings acquired the Jefferson Group asset. After doing so, CAP Holdings filed a notice of recording in the public records of Williamson County, Texas, claiming a deed-of-trust lien on the Property.

In March 2013, CAP Holdings filed a declaratory-judgment action against the defendants, seeking declarations that the 1990 judgment of foreclosure was void; that, therefore, the deeds held by the defendants were void; and that it had a valid lien on the portion of the Property claimed by the defendants. CAP Holdings's claim was based on § 1825(b)(2), which, as we have noted, prohibits the foreclosure or sale of the RTC's property without the RTC's consent; the tax sale, it was alleged, was conducted in violation of § 1825(b)(2) because the RTC had not expressly consented to it. And under our precedent, in cases like FDIC v. Lee, 130 F.3d 1139 (5th Cir.1997), Trembling Prairie Land Co. v. Verspoor, 145 F.3d 686 (5th Cir.1998), and First State Bank–Keene v. Metroplex Petroleum, 155 F.3d 732 (5th Cir.1998), CAP Holdings asserted, a tax sale conducted in violation of § 1825(b)(2) is “null and void ab initio. ”Several of the defendants—Lorden, Haisler, Mendoza, Rushing, and Stephan (“the Lorden Defendants”)—moved to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). They argued, primarily, that regardless of the foreclosure's validity, the foreclosure cannot now be challenged because of the statute of limitations bar. The other defendant—Pruitt—moved for summary judgment asserting the same argument. In response, CAP Holdings contended that, because the tax sale was entirely void, the defendants were not in “privity” with the Jefferson Group and thus lacked standing under Texas law to invoke the statute of limitations.

The district court granted both of the defendants' motions and dismissed the complaint. In so doing, the district court did not consider the questions posed by the parties' arguments—whether, under our precedent, a tax sale conducted in violation of § 1825(b)(2) is void; and if so, whether its being void renders the purchaser without standing to invoke the statute of limitations. Instead, without mentioning Lee, Trembling Prairie , or the relevant aspects of First State Bank–Keene, the district court summarily rejected CAP Holdings's voidness argument as being one “of the boot-strap variety.” CAP Holdings, Inc. v. Haisler, CIVIL NO. 1:13–CV–204–LY, 2014 WL 1333213, at *2, 2014 U.S. Dist. LEXIS 45583, at *6–7 (W.D.Tex. Mar. 31, 2014).³ It then proceeded to the merits of the defendants' limitations defense. Under federal law, the district court held, the limitations period was six years from the date the cause of action accrued or the date the RTC was appointed as receiver, whichever is later. Id. at *2–3, 2014 U.S. Dist. LEXIS 45583, at *9 (citing 12 U.S.C. § 1821(d)(14)(B) ). Accordingly, the limitations period began on the date the RTC was appointed as receiver in mid–1990, and it expired in mid–1996. Id. Thus, the district court concluded, CAP Holdings's suit was time-barred. Id. at *4, 2014 U.S. Dist. LEXIS 45583, at *12–13.

II.

The standard of review for all issues in this appeal is de novo. See Miller v. BAC Home Loans Servicing, L.P., 726 F.3d 717, 721 (5th Cir.2013) (12(b)(6)); Zephyr Aviation, L.L.C. v. Dailey, 247 F.3d 565, 570 (5th Cir.2001) (12(b)(1)); Carpenters Dist. Council v. Dillard Dep't Stores, 15 F.3d 1275, 1281 (5th Cir.1994) (summary judgment).

III.

A.

On appeal, CAP Holdings does not dispute the district court's calculation of the limitations period. Instead, its sole assignment of error is that the district court should have not ever reached the statute-of-limitations question because the defendants lack standing to even raise a limitations defense. This is so, in CAP Holdings's view, because (1) under Texas law, the statute of limitations may be invoked by a party other than the original debtor only if the party is in “privity” with the debtor; (2) the defendants here would be in privity with the debtor, the Jefferson Group, only if they could trace their title in the Property back to the Jefferson Group; (3) the tax sale through which the defendants' predecessor-in-interest, the GISD, obtained title to the Property was conducted without the RTC's consent and thus in violation of § 1825(b)(2) ; and (4) the defendants therefore cannot trace their title back to the Jefferson Group because the tax sale, having been conducted in violation of § 1825(b)(2), was without legal effect—“null and void ab initio. ”

The defendants do not defend the district court's summary rejection of CAP Holdings's argument as being “of the boot-strap variety.” See CAP Holdings, 2014 WL 1333213, at *2, 2014 U.S. Dist. LEXIS 45583, at *6–7. Nor do they dispute most of the premises underlying CAP Holdings's argument—that is, they do not dispute that, to assert a limitations defense, they must be in privity with the Jefferson Group; nor do they argue that they can show privity other than by tracing their title back to the Jefferson Group; nor do they argue that, by appearing as a party in the foreclosure proceedings, the RTC impliedly consented to the tax sale such that § 1825(b)(2) was not violated. Indeed, in their arguments before this court, the defendants have confined their disagreement with CAP Holdings to a single point: according to the defendants, CAP Holdings is wrong to assert that a tax sale conducted in violation of § 1825(b)(2) is void in its entirety; instead, the defendants say, such a sale is void only insofar as it affected the FDIC's lien on the Property. Thus, the defendants, assuming for the purposes of this appeal the RTC's failure to consent to the sale, conclude that the tax sale here nevertheless effectively conveyed title from the Jefferson Group to the GISD (albeit, title subject to the RTC's lien). The defendants, as successors-in-interest to the GISD, are therefore in privity with the Jefferson...