We’ll Not Depart from a Supreme Court of Texas Precedent says Fifth Circuit

Supreme Court of Texas

Except where a matter is governed by federal law, a federal district court sitting in a diversity case has the obligation to apply the law of the forum state. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).

The forum state here is Texas.

“To determine Texas law, we look to decisions of the state’s highest court, or in the absence of a final decision by that court on the issue under consideration, we must determine in [our] best judgment, how the state’s highest court would resolve the issue if presented with it.” Citigroup Inc. v. Fed. Ins. Co., 649 F.3d 367, 371 (5th Cir. 2011)(quotation marks omitted; alteration in original).

Opinions by a state’s lower courts provide guidance on how a state’s highest court would resolve the issue. Am. Nat. Gen. Ins. Co. v. Ryan, 274 F.3d 319, 328 (5th Cir. 2001).

A decision by an intermediate state appellate court should not “be disregarded by a federal court unless it is convinced by other persuasive data that the highest court of the state would decide otherwise.” West v. AT&T, 311 U.S. 223, 237 (1940).

Where we rely on Texas Courts of Appeals’ opinions, we have determined “not [to] depart from their holdings” because we find them “to be consistent with Texas precedent and probative of how the Texas Supreme Court would decide the issue in this case.” Am. Nat. Gen. Ins. Co., 274 F.3d at 328-29.

Accounting & Declaratory Judgment

The Williamses sought an accounting for all amounts paid and owed to Wells Fargo.

“A suit for accounting is generally founded in equity,” and whether to grant “an accounting is within the discretion of the trial court.” Sw. Livestock & Trucking Co. v. Dooley, 884 S.W.2d 805, 809 (Tex. App. — San Antonio 1994, writ denied).

Accounting is appropriate when “the facts and accounts presented are so complex adequate relief may not be obtained at law.” T.F.W. Mgmt., Inc. v. Westwood Shores Prop. Owners Ass’n, 79 S.W.3d 712, 717 (Tex. App. — Houston [14th Dist.] 2002, pet. denied).

The Williamses have alleged no facts suggesting the information they seek is complex such that the district court abused its discretion in denying their request for accounting.

A declaratory judgment is remedial in nature. Our conclusion that each of the Williamses’ causes of action was properly dismissed likewise warrants affirmance of the court’s dismissal of their request for declaratory judgment. See Sgroe, 941 F. Supp. 2d at 752 (declaratory judgment “provides no relief unless there is a justiciable controversy between the parties”).

RESPA

The Williamses alleged Wells Fargo violated Section 2605(e) of RESPA for failing to make a proper response to their correspondence regarding the dispute of debt.

Section 2605(e) describes the duty of a loan servicer to respond to borrower inquiries and provides that if a “servicer of a federally related mortgage loan receives a qualified written request [QWR] . . . for information relating to the servicing of such loan, the servicer shall provide a written response acknowledging receipt of the correspondence within 5 days . . . unless the action requested is taken within such period.” 12 U.S.C. § 2605(e)(1)(A).

To constitute a QWR, the correspondence from the borrower must enable the servicer to identify the name and account of the borrower, include a statement of the reasons for the borrower’s belief that the account is in error, or provide sufficient detail to the servicer regarding other information sought by the borrower. Id. § 2605(e)(1)(B).

Within thirty days of receipt of a QWR the servicer must either make appropriate corrections to the borrower’s account or, after investigation, provide a written explanation including a statement of  reasons the servicer believes the account is correct or any other information requested by the borrower. Id. § 2605(e)(2).

To state a viable claim under Section 2605(e), the Williamses had to plead that their correspondence met the requirements of a QWR, that Wells Fargo failed to make a timely response, and that this failure caused them actual damages. 12 U.S.C. § 2605(e), (f); see also Hurd v. BAC Home Loans Servicing, LP, 880 F. Supp. 2d 747, 768 (N.D. Tex. 2012) (“A plaintiff must allege actual damages resulting from a violation of § 2605.”).

The Williamses contend they first sent a QWR to Wells Fargo’s foreclosure counsel on January 28 requesting the foreclosure sale be postponed until Wells Fargo investigated their dispute of debt and produced requested documents.

Counsel responded on February 1 — within the five day RESPA period — expressly stating it was responding to the Williamses’ January 28 correspondence, verifying the indebtedness with a copy of the Deed of Trust, and advising them their correspondence did not contain any information to suggest a valid dispute existed.

We agree with the district court’s conclusion that the Williamses sufficiently alleged their correspondence of January 28 constituted a QWR but failed to allege facts indicating Wells Fargo’s response was insufficient under RESPA. See 12 U.S.C. § 2605(e)(1)(A), (B). The Williamses also failed to plead that Wells Fargo’s alleged failure to respond caused them actual damage.

The Williamses sent a second letter to Wells Fargo’s foreclosure counsel on February 25, and the same letter to Wells Fargo on March 25. They allege Wells Fargo failed to respond until April 8.

The Williamses have failed to allege, however, that the communications of February and March complied with Section 2605(e)’s requirements for a QWR. See Hurd, 880 F. Supp. 2d at 768.

The Williamses have also failed to plead facts indicating how Wells Fargo’s failure to respond resulted in actual damages. In fact, the Williamses sent their second purported QWR at least three weeks after their property had already been sold at a foreclosure sale.

SUMMARY JUDGMENT

The district court concluded the Williamses’ TDCA claim for violation of Section 392.304(a)(8) was sufficiently pled to survive Wells Fargo’s motion to dismiss.

That provision prohibits a debt collector from “misrepresenting the character, extent, or amount of consumer debt . . . .” TEX. FIN. CODE. § 392.304(a)(8).

The Williamses claimed that through its communications and demands, Wells Fargo misrepresented the amounts owed by the Williamses on their loan and imposed wrongful charges to their account.

They supported this claim by contending Wells Fargo force-placed insurance and taxes on their property when their 2009 taxes were not delinquent and they had insurance, and that Wells Fargo did not credit the charges or late fees associated with the force-placed insurance and taxes.

The parties proceeded to discovery. Wells Fargo served its first request for admissions in January 2012.

The Williamses failed to respond by the thirty-day deadline, causing all requested admissions to be deemed admitted. See FED. R. CIV. P. 36(a)(3).

The admissions included that the Williamses failed to maintain insurance on the property or pay their taxes at the relevant times, and that Wells Fargo acted properly under the deed of trust in requesting reimbursement for its payment of the Williamses’ insurance and taxes.

The court also concluded that an affidavit submitted by the Williamses at summary judgment and averring they had paid their taxes, could not be used to contradict the Rule 36 admissions.

The admissions resulted in the court concluding there was no triable issue and granting summary judgment for Wells Fargo. The Williamses’ primary argument on appeal is that they should have been allowed to withdraw the admissions.

Under Rule 36(a), a matter in a request for admissions is deemed admitted unless the party to whom the request is directed answers or objects to the matter within thirty days. Hulsey v. State of Tex., 929 F.2d 168, 171 (5th Cir. 1991).

Rule 36 admissions are conclusive as to the matters admitted and cannot be overcome at the summary judgment stage by contradictory affidavit testimony or other evidence in the record. Id.

We have “stressed that a deemed admission can only be withdrawn or amended by motion in accordance with Rule 36(b).” In re Carney, 258 F.3d 415, 419 (5th Cir. 2001).

To withdraw an admission, Rule 36(b) requires that court to find that withdrawal “1) would serve the presentation of the case on its merits, but 2) would not prejudice the party that obtained the admissions in its presentation of the case.” Id.

Even if a party establishes these two factors, the district court retains discretion to deny a request to withdraw an admission, and admissions on file may be an appropriate basis for granting summary judgment. Id. at 419-20.

We review a district court’s decision to permit the withdrawal of an admission for abuse of discretion. Id. at 419.

The Williamses failed to move for withdrawal of the admissions pursuant to Rule 36(b). They did not challenge the admissions until making the challenge part of their response to Wells Fargo’s motion for summary judgment on July 16, 2012, over four months after the deadline to make the request.

Further, the Williamses have failed to argue that withdrawal of the admissions would not prejudice Wells Fargo.

On the other hand, Wells Fargo contends it would be prejudiced by the withdrawal because at the time of the Williamses’ request, discovery had been closed, the dispositive motion deadline had passed, Wells Fargo had filed its motion for summary judgment, and trial was set to take place in three weeks.

Because the Williamses failed to move for withdrawal under Rule 36(b), were not diligent in seeking relief, and have failed to demonstrate how withdrawal of the admissions will aid presentation of their case while not prejudicing Wells Fargo, we conclude the district court did not abuse its discretion in denying the Williamses’ request to withdraw the admissions.

The court also did not err in determining that the Williamses’ affidavit could not be used to overcome the Rule 36 admissions at the summary judgment stage. See In re Carney, 258 F.3d at 420.

Having affirmed the denial of the Williamses’ request to withdraw the admissions, we also conclude it was not error for the court to grant summary judgment on the remaining TDCA claim.

The Williamses’ admissions conclusively establish that Wells Fargo did not misrepresent the amount or extent of the Williamses’ debt by wrongfully imposing charges to their account.