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Burciaga v. Deutsche Bank National Trust Company

United States Court of Appeals, Fifth Circuit

September 18, 2017

JESSE C. BURCIAGA; EDNA K. BURCIAGA, Plaintiffs - Appellants
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE, Defendant-Appellee

         Appeal from the United States District Court for the Eastern District of Texas

          Before PRADO, HIGGINSON, and COSTA, Circuit Judges.

          STEPHEN A. HIGGINSON, Circuit Judge

         The Burciagas defaulted on their home equity loan in 2011. In 2013, Deutsche Bank filed a foreclosure suit in Texas state court. Without holding a hearing-as required by Texas law-the state court entered a foreclosure order. Although Texas law expressly required that any challenge to the foreclosure order be made in a separate, original proceeding, the Burciagas moved to vacate the foreclosure order in the same proceeding. The state court granted their motion. Several months later, Deutsche Bank foreclosed on the encumbered property. The Burciagas filed suit in another Texas state court challenging the foreclosure sale. Deutsche Bank removed the suit to federal district court, and the district court granted summary judgment to Deutsche Bank on all claims. The Burciagas appealed and we AFFIRM.

         I

         In 1999, Jesse and Edna Burciaga purchased a house in Flower Mound, Texas (the "Property"). The Burciagas refinanced their mortgage in 2003, and they executed a home equity fixed/adjustable rate note (the "Note") in the original principal amount of $344, 000. The Note and interest in the security instrument were assigned to Deutsche Bank.

         The Burciagas defaulted on their obligations under the Note in 2011. On July 11, 2011, Deutsche Bank notified the Burciagas of the bank's intent to accelerate the debt if the Burciagas did not cure their default. The Burciagas failed to do so, and Deutsche Bank accelerated the debt.

         In October 2013, Deutsche Bank filed a foreclosure suit in Texas state court pursuant to Texas Rule of Civil Procedure 736.1 (the "Foreclosure Action").[1] The Burciagas filed an answer, and a final hearing was set for December 20, 2013. On December 13, 2013, however, the state court issued an order permitting Deutsche Bank to proceed with foreclosure of the loan and sale of the Property (the "Foreclosure Order"). The court closed the Foreclosure Action that same day.

         On December 20, 2013, the Burciagas moved to vacate the Foreclosure Order and reopen the case. The state court granted the Burciagas' motion and vacated the Foreclosure Order on January 9, 2014 (the "Vacating Order").

         Nonetheless, on April 10, 2014, Deutsche Bank sent a copy of the Foreclosure Order and a Notice of Sale to the Burciagas. Deutsche Bank foreclosed on the Property on May 6, 2014, and purchased the Property at the foreclosure sale for $455, 784.96 (the "Foreclosure Sale"). Soon after, Deutsche Bank notified the Burciagas of the bank's intent to take possession of the Property.[2]

         II

         On June 4, 2014, the Burciagas filed suit in a different Texas state court, asserting three claims: trespass to try title, violation of the Texas Civil Practice and Remedies Code, and a request for a preliminary injunction. Deutsche Bank removed the case to federal court. Deutsche Bank filed a counterclaim seeking a declaratory judgment, quiet title to the Property, and judicial foreclosure based on breach of contract.

         The district court granted summary judgment in favor of Deutsche Bank. The court declared that the May 6, 2014 foreclosure sale was valid and entered an order granting quiet title to the Property to Deutsche Bank. The Burciagas moved for reconsideration, which the district court denied, and the Burciagas timely appealed.

         On appeal, the Burciagas make three arguments. First they contend that the district court's assumption of jurisdiction violated the Rooker-Feldman doctrine and that this court should dismiss the appeal for lack of subject-matter jurisdiction. Second, they argue that the district court erred in granting summary judgment to Deutsche Bank because the state court's Vacating Order was proper, and thus, the Foreclosure Order was invalid. Finally, the Burciagas argue that their due process rights under the United States and Texas Constitutions were violated when the state court entered the Foreclosure Order without first holding a hearing as required by Texas law.

         III

         Before considering the Burciagas' arguments, we briefly review the particular Texas foreclosure process that underlies this case-Texas Rule of Civil Procedure 736. A Rule 736 proceeding is not "an ordinary lawsuit, " but rather "a faster, more streamlined alternative to judicial foreclosure." Huston v. U.S. Bank Nat'l Ass'n, 359 S.W.3d 679, 682 (Tex. App.-Houston [1st Dist.] 2011, no pet.). Once the petitioner files a Rule 736 application for foreclosure, if the respondent files a response, Rule 736.6 requires that the court hold an evidentiary hearing before issuing an order on the application. A Rule 736 order "is without prejudice and has no res judicata, collateral estoppel, estoppel by judgment, or other effect in any other judicial proceeding." Tex.R.Civ.P. 736.9. "After an order is obtained, a person may proceed with the foreclosure process under applicable law and the terms of the lien sought to be foreclosed." Id.

         Rule 736 also provides an exclusive procedure for challenging an order on a Rule 736 application: "Any challenge to a Rule 736 order must be made in a suit filed in a separate, independent, original proceeding in a court of competent jurisdiction." Id. at 736.8(c) (emphasis added). An order granting or denying a Rule 736 application "is not subject to a motion for rehearing, new trial, bill of review, or appeal." Id. However, if a party files an independent suit challenging a Rule 736 foreclosure order before 5:00 p.m. on the Monday before the scheduled foreclosure sale, the Rule 736 proceeding or order is automatically stayed. Id. at 736.11(a). Once the Rule 736 court is notified that an independent suit has been filed challenging the Foreclosure Order, the court is required to dismiss the Rule 736 ...


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