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Featherston v. DRRF II SPE, LLC

United States District Court, W.D. Texas, San Antonion Division

September 5, 2017



          Royce C. Lamberth, United States District Judge.


         This is a foreclosure case masquerading as a consumer protection case. For the reasons articulated in a Memorandum Opinion dated September 26, 2016, this Court determined that the plaintiffs here-Donald and Connie Featherston-were judicially estopped from pursuing their claims and therefore had failed to state a claim upon which relief may be given. Thus, the Court ordered the case dismissed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Now before the Court is the plaintiffs' motion to alter or amend the Court's judgment, ECF No. 18. Upon due consideration of defendants' motion, defendants DRRF II SPE, LLC, Servis One, Inc. d/b/a/ BSI Financial Services, Inc., and Mackie Wolf Zientz & Mann, PC's response, ECF No. 20, and the applicable law, and for the reasons set forth below, the Court will deny the motion to alter or amend the previous judgment.


         The facts of this case are set out in more detail in the Court's September 26, 2016 Memorandum Opinion. To summarize, the Featherstons purchased a home in San Antonio with a mortgage loan provided by DRRF and services by BSI. They defaulted on the loan payments. In August 2014, attorneys from the law firm Mackie Wolf Zientz & Mann, representing DRRF and BSI, sent notices of acceleration. Defendants initiated foreclosure proceedings in state court in October 2014, and they obtained an order authorizing foreclosure in November 2014. Defendants demanded the overdue payments be paid by January 5, 2015. The Featherstons disputed some of the escrow and tax fees and did not pay the overdue amount. Instead, on the January 5 due date, the Featherstons filed for Chapter 7 bankruptcy in the Western District of Texas. The foreclosure proceedings were initially stayed, but DRRF was granted relief from the automatic stay by the bankruptcy court.

         In the Featherstons' bankruptcy schedules, they listed no contingent or unliquidated claims against any of the defendants here. They did, however, state that the amount and validity of their lien was in dispute. On March 17, 2015, the home was noticed for foreclosure and sale by public auction to be conducted on April 7, 2015. On April 6, 2015, the Featherstons filed this action in state court, the 73rd Judicial District Court for Bexar County, alleging that the defendants' inaccurate accounting of the debt owed was a misrepresentation in an attempt to collect on an amount to which the defendants were not entitled. Plaintiffs sought recovery of damages under the Texas Deceptive Trade Practices Act (DTPA) and Texas Debt Collection Act (TDCA). As a result of this case, the November 2014 foreclosure order was vacated by order of the 166th Judicial District Court for Bexar County dated April 21, 2015. This case was then removed to federal court onMay8, 2015.

         In a Memorandum Opinion dated September 2016, this Court found that the Featherstons' failure to include any claims against defendants for alleged inaccurate accounting, fraud, or deceptive practices on their bankruptcy schedules was a representation to the Bankruptcy Court that those claims did not exist. ECF No. 16. Further, that representation was inconsistent with the one taken here, that the claims do exist. Thus, this Court decided, the Featherstons' were precluded under the doctrine of judicial estoppel from bringing those claims. Further, this Court determined that any such claims existed before the Featherstons instituted bankruptcy proceeding and were therefore assets of the bankruptcy estate, not the Featherstons. Accordingly, this Court determined that the bankruptcy estate was the real party in interest and the Featherstons lacked any standing to bring their claims. The case was dismissed. ECF No. 17.

         The Featherstons filed a motion to amend judgment, arguing that this Court erred in making its determinations and should reconsider its analysis. ECF No. 18. Defendants filed a response, ECF No. 20. Plaintiffs did not file a reply.


         The Federal Rules of Civil Procedure do not expressly allow for motions for reconsideration. However, Rule 59 of the Federal Rules of Civil Procedure allows a motion to alter or amend judgment within 28 days after the entry of judgment. Fed.R.Civ.P. 59(e). "A motion to alter or amend judgment must 'clearly establish either a manifest error of law or fact or must present newly discovered evidence. These motions cannot be used to raise arguments which could, and should, have been made before the judgment issued. Moreover, they cannot be used to argue a case under a new legal theory.'" Ross v. Marshall, 426 F.3d 745, 763 (5th Cir. 2005) (quoting Simon v. United States, 891 F.2d 1154, 1159 (5th Cir. 1990); see also Firestone v. Firestone, 16 F.3d 1205, 1208 (D.C. Cir. 1996) ("A Rule 59(e) motion is discretionary and need not be granted unless the district court finds that there is an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice.") (internal quotations omitted). A court's decision to review a decision on a motion to alter or amend a judgment under Rule 59(e) is within its discretion, reversible only if the court's decision is based on an erroneous view of the law or an erroneous assessment of the evidence. Ross, 426 F.3d at 763.

         IV. ANALYSIS

         Plaintiffs appear to have filed their motion to amend or alter the judgment under Rule 59(e), despite never explicitly invoking Rule 59.[1] The Featherstons' argument is that this Court's prior opinion "contains a clear error or will result in manifest injustice." Mot. 3. Specifically, the Featherstons claim that their failure to include their claims on the bankruptcy schedules was inadvertent, rather than intentional. Id. Further, they argue that even if this Court dismisses their underlying claims, they should be allowed to challenge the allegedly dubious accounting itself.

         As noted in this Court's prior opinion, a party is judicially estopped from taking a position if (1) the position of the party against which estoppel is sought is plainly inconsistent with its prior legal position; (2) a court accepted the prior position; and (3) the party did not act inadvertently. See Reed v. City of Arlington, 650 F.3d 571, 575 (5th Cir. 2011); Jethroe v. Omnova Solutions, Inc., 412 F.3d 598, 600 (5th Cir. 2005). Inadvertence exists when the actor lacks knowledge of the undisclosed claims or has no motive to conceal it from the court. In re Coastal Plains, 179 F.3d 197, 210 (5th Cir. 1999). A plaintiff generally has motive to conceal a cause of action from the court in a bankruptcy proceeding if it would increase the size of the estate. See In re Superior Crewboats, 374 F, 3 d 330, 336 (5th Cir. 2004) (finding sufficient motive to conceal where plaintiffs would "reap a windfall had they been able to recover on the undisclosed claim without having disclosed it to the creditors"). This Court found that the Featherstons had knowledge of their potential claims against defendants before and during the bankruptcy proceedings. And the Featherstons had motive to conceal these claims from the court because the value of the claims (and the damages sought) would normally go to the bankruptcy estate. Were they able to recover those damages here, they would reap a windfall on claims that were not disclosed to creditors or the bankruptcy court. Accordingly, this Court found that the Featherstons' failure was not inadvertent.

         Plaintiffs provide no intervening change in the law applied here, nor do they provide any previously unavailable evidence as to why the Featherstons may have acted inadvertently. Rather, they re-hash the arguments that this Court has previously ...

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