Reyna v. Deutsche Bank Nat'l Trust Co.

• Decision Date: 24 September 2012
• Docket Number: Civil Action No. SA–11–CA–1053–FB.
• Citation: 892 F.Supp.2d 829
• Parties: Javier REYNA, Plaintiff, v. DEUTSCHE BANK NATIONAL TRUST COMPANY, Defendant.
• Court: U.S. District Court — Western District of Texas

892 F.Supp.2d 829

Javier REYNA, Plaintiff,

v.DEUTSCHE BANK NATIONAL TRUST COMPANY, Defendant.

Civil Action No. SA–11–CA–1053–FB.

United States District Court,

W.D. Texas,

San Antonio Division.

Sept. 24, 2012.

Kenneth Ernest Grubbs, Attorney at Law, San Antonio, TX, for Plaintiff.

Jeffrey Hiller, Cacheaux, Cavazos & Newton, L.L.P., San Antonio, TX, for Defendant.

ORDER CONCERNING PENDING MOTIONS

FRED BIERY, Chief Judge.

Before the Court are Defendant Deutsche Bank National Trust Company's Motion to Dismiss Plaintiff's Original Petition (docket # 3), Plaintiff's Motion to Remand to State Court and for Legal Fees (docket # 8), Defendant's Response in Opposition to Motion to Remand (docket # 10), Defendant's Supplement to Motion to Dismiss and Request for Hearing (docket # 16), Plaintiff's Response to Supplement (docket # 17) and Plaintiff's Motion for Leave of Court to Amend Pleadings (docket # 18). For the following reasons, the Court finds Plaintiff's Motion to Remand and for Legal Fees (docket # 8) should be DENIED, Defendant's Motion to Dismiss Plaintiff's Original Petition (docket # 3) should be DENIED AS MOOT WITHOUT PREJUDICE to refiling, Defendant's Request for Hearing (docket # 16) should be DENIED, and Plaintiff's Motion for Leave of Court to Amend Pleadings (docket # 18) should be GRANTED.

I. Background

This case arises out of the foreclosure of residential real property located at 331 McLaughlin Avenue in San Antonio, Texas. Plaintiff Javier C. Reyna borrowed $60,000.00 through a home equity loan secured by the McLaughlin Avenue property in 2006. (Plaintiff's Original Petition, attached as Exhibit A to Defendant's Notice of Removal, docket # 1.) Plaintiff is alleged to have defaulted on the loan, and defendant Deutsche Bank National Trust Company (hereinafter “Deutsche Bank”) instituted judicial foreclosure proceedings in the 224th Judicial District Court of Bexar County, Texas. Id. Defendant obtained a state court order permitting the foreclosure of the property and then purchased the property at auction. Id. Following the foreclosure sale, defendant sought to evict plaintiff. On October 17, 2011, Mr. Reyna filed an Original Petition against Deutsche Bank in the 131st Judicial District Court of Bexar County, Texas, Cause No. 2011–CI–16760. Plaintiff seeks to restrain defendant from evicting plaintiff and alleges various defects in the assignment of the lien and in the foreclosure. Id. at 3–6. Deutsche Bank removed the action to this Court on December 7, 2011.

II. Motion to Remand

Plaintiff filed a Motion to Remand (docket # 8), arguing this Court lacks subject matter jurisdiction under the Rooker–Feldman doctrine, and requesting the case be remanded to state court. A defendant has the right to remove a case to federal court when federal subject-matter jurisdiction exists and the removal procedure has been properly followed. See28 U.S.C. § 1441. However, “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c).

A. Diversity Jurisdiction

In the Notice of Removal (docket # 1), defendant argues this Court has original jurisdiction based on diversity pursuant to 28 U.S.C. § 1332(a). Section 1332 confers jurisdiction on a federal district court “where the matter in controversy exceeds the sum or value of $75,000, ... and is between citizens of different States.” Here, plaintiff Javier Reyna is a citizen of Texas, and defendant Deutsche Bank is a citizen of New York. Accordingly, there is complete diversity among the parties. Furthermore, plaintiff demands at least $750,000 in damages. (Plaintiff's Original Petition at page 11.) Plaintiff does not dispute diversity jurisdiction exists. Because there is complete diversity and the amount in controversy exceeds $75,000, the Court concludes it has original jurisdiction of this matter pursuant to 28 U.S.C. § 1332(a).

B. Rooker–Feldman Doctrine

Despite the Court's diversity jurisdiction, plaintiff argues defendant's removal constitutes the type of collateral attack on a state court judgment prohibited by the Rooker–Feldman doctrine. Under the Rooker–Feldman doctrine, “federal district courts lack jurisdiction to entertain collateral attacks on state court judgments.” Liedtke v. State Bar of Tex., 18 F.3d 315, 317 (5th Cir.1994). The doctrine “is confined to ... cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp, 544 U.S. 280, 284, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005). Where there has not been a final state court judgment which can be attacked by a defendant, the Rooker–Feldman doctrine does not apply. See Del–Ray Battery Co. v. Douglas Battery Co., 635 F.3d 725, 730 (5th Cir.2011) (state court's partial summary judgment orders were not final judgments, and, therefore, the Rooker–Feldman doctrine did not apply to bar their review in federal court).

Plaintiff argues the Rooker–Feldman requires remand because defendant “has already invoked the state court's power to decide these issues by filing an [sic] TRCP 736 suit, ... [and] [t]he suit now removed is actually part of those proceedings because under the rule, without regard to the order of foreclosure, Plaintiff has the right to challenge the Defendant's right to foreclose.” (Plaintiff's Motion to Remand at page 2, docket # 8.) More specifically, Mr. Reyna contends before he filed the present action, defendant filed a separate “suit to procure and [sic] order of foreclosure under Rule 736 of the Texas Rules of Civil Procedure (Cause No.2011–CI–06600).... Without service or notice, on or about June 7, 2011, the Defendant procured an order of foreclosure.” (Plaintiff's Original Petition at pages 2–3.)

The order at issue is a Home Equity Foreclosure Order, entered on June 7, 2011 in the 224th Judicial District Court of Bexar County, Texas. (Home Equity Foreclosure Order, attached as Exhibit 3 to Plaintiff's Motion to Remand.) The order states Deutsche Bank may proceed with a foreclosure sale of the McLaughlin Avenue property in accordance with the terms of the security instrument and applicable law and further states the “Order is not appealable pursuant to Rule 736(8)(A).” Id. at 3.

Rule 736 of the Texas Rules of Civil Procedure provides a procedure whereby a party seeking the foreclosure of a home equity loan may file a verified application in the district court where the encumbered property is located. Tex.R. Civ. P. 736(1). If the court finds the application meets certain elements—namely that the application establishes a home equity debt exists, it is in default, and the proper notices have been given—then the court shall grant the application. Tex.R. Civ. P. 736(8)(A). The Rule provides:

No order or determination of fact or law under Rule 736 shall be res judicata or constitute collateral estoppel or estoppel by judgment in any other proceeding or suit. The granting of an application under these rules shall be without prejudice to the right of the respondent to seek relief at law or in equity in any court of competent jurisdiction. The denial of an application under these rules shall be without prejudice to the right of the applicant to re-file the application or seek other relief at law or in equity in any court of competent jurisdiction.

Tex.R. Civ. P. 736(9) (emphasis added). Indeed, in this case, “respondent [Javier Reyna] [did] seek relief at law or in equity in [a] court of competent jurisdiction.” Id. Because of diversity, Deutsche Bank removed the action to this Court, another “court of competent jurisdiction.” Id.

The Court of Appeals for the Fifth Circuit has stated “the Rooker–Feldman bar generally should not extend to state decisions that would not be given preclusive effect under doctrines of res judicata and collateral estoppel.” Del–Ray Battery Co., 635 F.3d at 730. Here, Rule 736 specifically provides a Home Equity Foreclosure Order like the one in this case is not to be given preclusive effect under doctrines of res judicata and collateral estoppel. The Rooker–Feldman doctrine “applies only in circumstances closely akin to those addressed in the Rooker and Feldman decisions, in which a party suffered an adverse final judgment rendered by a state's court of last resort, and then initiated proceedings in a lower federal court seeking review and reversal of the state-court judgment.” Illinois Cent. R. Co. v. Guy, 682 F.3d 381, 390 (5th Cir.2012). It therefore usually applies only when a plaintiff explicitly attacks the validity of a state court's judgment or when “the plaintiff's federal claims are so inextricably intertwined with a state judgment that the federal court ‘is in essence being called upon to review the state court decision.’ ” Id. Based on the explicit language of Rule 736, the Court finds the Home Equity Foreclosure Order does not constitute a final state court judgment as contemplated under the Rooker–Feldman doctrine.

Nonetheless, plaintiff cites Nino v. JPMorgan Chase, N.A., SA–11–CV–0564–FB, 2011 WL 5040454 (W.D.Tex. Oct. 24, 2011), for the proposition that his claims are “inextricably intertwined” with a state judgment. (Plaintiff's Motion to Remand at page 3.) Like the case at bar, Nino dealt with the attempted foreclosure of property encumbered by a home equity loan, in which the original lender obtained an “order to proceed with notice of foreclosure sale and foreclosure” from state court under Rule 736. Id. at *1. However, because the Nino plaintiff did not show the defendant, an assignee of the note and deed of trust, had taken any step toward foreclosure, the magistrate judge found no case or controversy existed and recommended remanding the case to state court. Id. at *2. This Court subsequently adopted the magistrate judge's recommendation ...