Vanderbilt Mortg. & Fin., Inc. v. Flores

• Decision Date: 23 August 2012
• Docket Number: No. 11–40602.,11–40602.
• Parties: VANDERBILT MORTGAGE AND FINANCE, INCORPORATED, Plaintiff–Intervenor Defendant–Appellant, v. Cesar FLORES; Alvin E. King, Defendants–Appellees. Arturo Trevino; Maria M. Trevino, Intervenor Plaintiffs–Appellees, v. Clayton Homes, Incorporated; CMH Homes, Incorporated, Intervenor Defendants–Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

692 F.3d 358

VANDERBILT MORTGAGE AND FINANCE, INCORPORATED, Plaintiff–Intervenor Defendant–Appellant,

v.Cesar FLORES; Alvin E. King, Defendants–Appellees.

Arturo Trevino; Maria M. Trevino, Intervenor Plaintiffs–Appellees,

v.Clayton Homes, Incorporated; CMH Homes, Incorporated, Intervenor Defendants–Appellants.

No. 11–40602.

United States Court of Appeals,Fifth Circuit.

Aug. 23, 2012.

Lee Edmundson Bains, Jr. (argued), Lorrie Lizak Hargrove, Edward Simmons Sledge, IV, Thomas W. Thagard, III, Maynard Cooper & Gale, P.C., Wayne Scott Simpson, Simpson, McMahan, Glick & Burford, P.L.L.C., Birmingham, AL, Jorge C. Rangel, Rangel Law Firm, Corpus Christi, TX, Carlos Ramon Soltero, McGinnis, Lochridge & Kilgore, L.L.P., Austin, TX, for Plaintiff–Intervenor Defendant–Appellant and Intervenor Defendants–Appellants.

Brendan K. McBride (argued), McBride Law Firm, San Antonio, TX, David L. Rumley, Wigington Rumley Dunn, L.L.P., Corpus Christi, TX, for Intervenor Plaintiffs–Appellees.

Jose Javier Gutierrez, Baldemar F. Gutierrez, Gutierrez Law Firm, Inc., Alice, TX, for Defendants–Appellees.

Appeals from the United States District Court for the Southern District of Texas.

Before DAVIS, SMITH and DENNIS, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Vanderbilt Mortgage and Finance, Incorporated (“Vanderbilt”), sued to foreclose against appellees Cesar Flores and Alvin King for defaulting on their installment payments on a mobile home. Flores and King responded by claiming they had been released from any underlying debt on the retail installment contract; they counterclaimed that Vanderbilt had unlawfully continued to collect payments on the released debt. Arturo and Maria Trevino intervened with claims against Vanderbilt and CMH Homes, Incorporated (“CMH”), and their parent company, Clayton Homes, Incorporated (“CHI”), asserting, inter alia that those three companies had filed false liens on their land as collateral for Flores and King's retail installment contract. A jury found against plaintiffs on all claims, and Vanderbilt, CMH, and CHI appeal.

I.

Flores and King entered into a Retail Installment Contract with CMH for the purchase of a mobile home in 2002; Vanderbilt provided the financing. When they signed the contract at CMH's Corpus Christi, Texas, store, Flores and King opted to finance the entire $40,815.19 purchase price, obligating themselves to pay a total of $73,641.60. The debt was secured by two vacant lots in Jim Wells County, Texas, owned by the Trevinos, the sister and brother-in-law of Flores, through CMH's “land-in-lieu” program, which permitted purchasers to avoid making a down payment if a friend or family member offered land as collateral for the financing. A Deed of Trust (“DOT”) and a Builder's and Mechanic's Lien (“BML”) were filed in the county records on the Trevinos' property.¹

II.

In 2004, various lawsuits were filed alleging that many of the property owners whose property secured debts incurred under the land-in-lieu program had not voluntarily pledged their property to secure the purchases of manufactured homes. Rather, employees at CMH's Corpus Christi store allegedly forged and then falsely notarized the signatures of property owners to create liens on their property without ensuring they had the owners' permission to create the liens. In 2005, CMH and Vanderbilt attempted to rectify the situation by unilaterally releasing the liens created by BMLs and DOTs for nearly 400 parcels of land, including the Trevinos' property.

Flores and King, meanwhile, continued to live in their mobile home and made eighty-four payments on the Retail Installment Contract until they defaulted; they paid $25,000 after the BML and DOT releases had been filed. In August 2009, Vanderbilt sued to foreclose on Flores and King's home. Flores and King counterclaimed, asserting that the BML and DOT releases operated to release not only the liens on the Trevinos' land but also the debt owed by Flores and King, which was secured by those liens. Accordingly, Flores and King alleged common-law unfair debt collection, violations of the Texas and Federal Debt Collection Practices Acts, fraud, and claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”). The Trevinos intervened, claiming violations of Chapter 12 of the Texas Civil Practice & Remedies Code (“Chapter 12”), which prohibits the filing of false liens,² and joining current appellants CMH and CHI, a holding company that is the parent company of CMH and Vanderbilt. CMH removed the action to federal court based on federal-question jurisdiction under RICO and 28 U.S.C. § 1331.

The jury found against Vanderbilt, CHI, and CMH on all claims and counterclaims. As to Flores and King's claims, the jury apportioned causation 80% to Vanderbilt and 20% to Flores and King, awarding actual damages of $15,000 to each of Flores and King and $300,000 in exemplarydamages to each. The jury found that the Trevinos had suffered no actual damages, but it awarded $10,000 in statutory damages per violation per defendant, for a total of $120,000. The district court denied various post-verdict renewed motions for judgment as a matter of law (“JMOL”) and motions for a new trial but reduced the award of exemplary damages to Flores and King to $200,000 pursuant to the Texas exemplary-damages-cap statute. SeeTex. Civ. Prac. & Rem.Code 41.008. In a separate order, the court awarded attorneys' fees of about $88,000 to the Trevinos and a contingent award of fees of about $81,000 to Flores and King should they prevail on appeal.

III.

Vanderbilt, CMH, and CHI (the “companies”) ask us to review the district court's ruling on renewed motions for JMOL, motions for a new trial, and motions for remittitur of damages. “We review the district court's denial of a renewed JMOL motion de novo.” Black v. Pan Am. Labs., LLC, 646 F.3d 254, 258 (5th Cir.2011) (citation omitted). “The decision to grant or deny a motion for new trial or remittitur rests in the sound discretion of the trial judge; that exercise of discretion can be set aside only upon a clear showing of abuse.” Consol. Cos. v. Lexington Ins. Co., 616 F.3d 422, 435 (5th Cir.2010) (citation omitted). “A trial court abuses its discretion when it bases its decision on an erroneous view of the law or a clearly erroneous assessment of the evidence.” Black, 646 F.3d at 258–59 (quoting United States v. Caldwell, 586 F.3d 338, 341 (5th Cir.2009)). Texas substantive law controls the state-law claims, and, in applying Texas law, “we must do that which we think the Texas Supreme Court would deem best.” Calbillo v. Cavender Oldsmobile, Inc., 288 F.3d 721, 729 (5th Cir.2002) (brackets, citation, and internal quotation mark omitted).

IV.

The district court sustained the jury's rejection of Vanderbilt's claim against Flores and King for the unpaid debt on the mobile home under the Retail Installment Contract and also sustained the verdicts against Vanderbilt on Flores and King's counterclaims. Vanderbilt's arguments as to why it should have been granted JMOL on its affirmative claim and on each set of counterclaims against it center on the decisive question whether the DOT and BML releases released Flores and King's underlying debt on the mobile home.

The jury found that “Vanderbilt released the debt owed by Cesar Flores and Alvin King under the Retail Installment Contract as of October 14, 2005, when it filed the Deed of Trust Release.” Vanderbilt filed a renewed JMOL challenging that finding, which the district court denied; the court reasoned that the language of the DOT release, read in light of the BML release, was ambiguous with respect to intent to release the underlying debt, creating a fact issue for the jury. Under Texas law, “[a] release is a contract subject to the rules of contract construction. Accordingly, in order to establish the affirmative defense of release, the party asserting the defense of release is required to prove the elements of a contract.” In re J.P., 296 S.W.3d 830, 835 (Tex.App.—Fort Worth 2009, no pet.) (citations omitted).

We do not agree that the DOT release, even if read in conjunction with the BML release, is ambiguous with respect to an intent to release Flores and King from the underlying debt on the mobile home. The release provides in substantive part:

DEED OF TRUST RELEASE

VANDERBILT MORTGAGE AND FINANCE, INC. ... declares that it is the true and lawful owner and holder of that certain note and indebtedness secured by a deed of trust and/or mortgage executed by MARIA M. TREVINO & AUTURO [sic] TREVINO to KEVIN T. CLAYTON, trustee, and dated January 7, 2002, filed for record in the office of the Register of Deeds for JIM WELLS County, TEXAS ... to which deed of trust and/or mortgage or specific reference is hereby made; and for a valuable consideration in hand paid, the said VANDERBILT MORTGAGE & FINANCE, INC., does hereby RELEASE the lien of said deed of trust and/or mortgage.

The DOT release is dated October 8, 2005, and signed by “David R. Jordan,” “Asst. Secretary,” on behalf of Vanderbilt. It indicates that it was prepared by Kimberly Blackwell of “CMH HOMES INC.”

The BML release provides in substantive part:

MECHANICS LIEN RELEASE

CMH HOMES, INC., ... declares that it is the true and lawful owner of that certain note and indebtedness secured by a MECHANICS LIEN CONTRACT executed by MARIA M TREVINO & ARTURO TREVINO, dated JANUARY 5, 2002, and recorded in OFFICIAL PUBLIC RECORDS in Volume 774 Page 629, in the office of the COUNTY CLERK for JIM WELLS COUNTY, Texas to which THE MECHANIC LIEN CONTRACT or specific reference is hereby made; and for a valuable consideration in hand paid, the said CMH HOMES, INC. does hereby release the lien of said MECHANICS LIEN CONTRACT and has been paid in full.

Like the DOT release, the BML release is dated October 8, 2005, indicates it was prepared by Kimberly Blackwell of CMH, and is signed by Jordan as “Asst. Secretary,” though Jordan's signature is on...