The Fifth Circuit Keep Paying it Forward to OCWEN as We Close Out 2019

LIT COMMENTARY

Published; Dec. 20, 2019

Maintaining the 11 year run as we close out 2019, the Court of Appeals for the Fifth Circuit has gifted OCWEN Loan Servicing, the $3 billion dollars fined nonbank, another judgment in it’s favor. Homeowners – ZERO judgments in 11 years. But $3 billion dollars in fines. Even those slow at arithmetic understand common sense. The data doesn’t lie.

This case involves Servicemembers, those that put their lives on the line for the people of the United States of America. The DOJ states;

“The Civil Rights Division of the Department of Justice, created in 1957 by the enactment of the Civil Rights Act of 1957, works to uphold the civil and constitutional rights of all Americans, particularly some of the most vulnerable members of our society.”

GRAVES, JAMES E. (JR)

WILLETT, DON R.

KING, CARLOYN DINEEN, (MRS. REAVLEY)

No. 19-30279

Before KING, GRAVES, and WILLETT, Circuit Judges. JAMES E. GRAVES, JR., Circuit Judge:

Appellants Steven D. Fodge, Joseph E. Carey, Jon. A. Tokay, Pamela R. Jeffcoat, Andrew J. Kaltenmark, Lance K. Inovejas, and Deborah A. Inovejas appeal from the district court’s orders granting Appellees Ocwen Loan Servicing, LLC; Barksdale Federal Credit Union; Pennymac Loan Services, L.L.C.; Bank of America, N.A.; and PHH Mortgage Corporation’s motions to dismiss and Appellee Trustmark National Bank’s motion for judgment on the pleadings. We AFFIRM.

I.

Appellants brought a putative class action at the district court, alleging that they and similarly situated individuals were on active duty with the military when Appellees variously foreclosed on their properties through executory proceedings in Louisiana state courts based on mortgage, privilege, or security agreements each plaintiff and putative class member had entered with one of the defendants.

Appellants conceded that each of their agreements contained a clause importing a confession of judgment.

Nonetheless, Appellants alleged that Appellees’ foreclosure actions were in violation of the Servicemembers Civil Relief Act (SCRA), 50 U.S.C. § 3901, et seq., which provides active duty servicemembers with protections against default judgment absent a waiver that meets certain requirements. 50 U.S.C. §§ 3931 (setting out protections against default judgment) and 3918 (providing the requirements for waiving SCRA protections).

Appellants sought damages and declaratory and injunctive relief on behalf of themselves and the putative class.

Each appellee, except for Trustmark National Bank, filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).

The district court granted the motions, dismissing the claims against these appellees with prejudice.

Subsequently, Trustmark National Bank filed a motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c), arguing that the claims against it were nearly identical to the claims filed against the other defendants.

The district court also granted this motion and dismissed the remaining claims with prejudice.

II.

“We review dismissals under Rule[s] 12(b)(6) and 12(c) de novo.” Magee v. Reed, 912 F.3d 820, 822 (5th Cir. 2019). The standard for dismissal under Rules 12(b)(6) and 12(c) is the same: “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.” Edionwe v. Bailey, 860 F.3d 287, 291 (5th Cir. 2017) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

III.

Appellants argue that

(1) the state court orders authorizing seizure and sale of Appellants’ respective properties through executory proceedings constitute default judgments under the SCRA and;

(2) they did not waive their right to SCRA protections against default judgment because their confessions of judgment do not constitute proper waivers under the SCRA. These are matters of first impression in this and other circuits.

We address each argument in turn.

First, Appellants’ argument that the state court orders authorizing seizure and sale of Appellants’ respective properties constitute default judgments under the SCRA is unavailing.

As explained below, 50 U.S.C. § 3931 does not encompass Louisiana executory proceedings where, as here, the debtors confessed judgment.

Appellants rely on two sections of the SCRA—50 U.S.C. §§ 3931 and 3911—to support their argument.

Section 3931 is entitled “Protection of servicemembers against default judgments” and “applies to any civil action or proceeding, including any child custody proceeding, in which the defendant does not make an appearance.” § 3931(a).

Section 3931 requires, among other things, that a plaintiff file an affidavit stating whether a defendant is in military service and that courts appoint an attorney to represent defendants in military service. § 3931(b).

Appellants argue that § 3911’s definition of “judgment” applies to § 3931.

Section 3911 defines “judgment” as “any judgment, decree, order, or ruling, final or temporary.” § 3911(9).1

This definition, even if relevant to § 3931, is unavailing.

Section 3931 states that it applies to proceedings “in which the defendant does not make an appearance.” § 3931(a).

Appellants necessarily made an appearance at the respective executory proceedings through their confessions of judgment.

Under Louisiana law, an executory proceeding is an expedited in rem civil action. Hood Motor Co., Inc. v. Lawrence, 320 So.2d 111, 112–13 (La. 1975).

Louisiana law defines such proceedings as “those which are used to effect the seizure and sale of property, without previous citation and judgment, to enforce a mortgage or privilege thereon evidenced by an authentic act importing a confession of judgment, and in other cases allowed by law.”  LA. C.C.P. ART. 2631.

By virtue of a confession of judgment, a debtor in an executory proceeding “has appeared in the suit, and answered the demand.” Marbury v. Pace, 29 La. Ann. 557, 558–59 (La. 1877); Buckner v. Carmack, 272 So.2d 326, 331 (La. 1973) (same).

Thus, § 3931 does not apply to Louisiana executory proceedings where, as here, the debtors have confessed judgment.

In fact, Appellants conceded this. In opposing Bank of America’s motion to dismiss, Appellants “agree[d] 100%” that “Section 3931 does not apply to proceedings enforcing [valid] confessions of judgments.”

For all these reasons, Appellants’ first argument is unavailing.

Second, Appellants argue that they did not waive their right to SCRA protections against default judgment because their confessions of judgment do not constitute proper waivers under the SCRA, specifically, 50 U.S.C. § 3918, which provides the requirements for a valid waiver of SCRA protections.

This argument is moot.

As determined above, § 3931 does not apply to Louisiana executory proceedings where the debtor has confessed judgment.2 SCRA’s waiver requirements are therefore inapplicable because there is nothing to waive here; Appellants were never protected under § 3931 against seizures and sales ordered through Louisiana executory proceedings.3

IV.

For the foregoing reasons, we AFFIRM.

@BLaw ; Bank of America, Ocwen, Others Beat Military Foreclosure Suit; Six banks are entitled to dismissal by service members alleging the banks improperly foreclosed on their properties while they were on active duty, the Fifth Circuit affirmed Dec. 19 https://t.co/2RV7nNaKeP pic.twitter.com/DE4dGn1XW9

— LawsInTexas (@lawsintexasusa) December 20, 2019