Onabajo, et al v. Household Finance, et al

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

No. 19-50365
Summary Calendar

FEMI ONABAJO; CHRISTY ONABAJO,

Plaintiffs - Appellants

v.

HOUSEHOLD FINANCE CORPORATION III; HSBC MORTGAGE
SERVICES, INCORPORATED, formerly known as Household Financial
Services, Incorporated; STANWICH MORTGAGE LOAN TRUST A,

Defendants - Appellees

Appeal from the United States District Court
for the Western District of Texas
USDC 1:18-CV-233

Before JOLLY, JONES, and SOUTHWICK, Circuit Judges.
PER CURIAM:*
Following judicial foreclosure on their home, Femi and Christy Onabajo
brought this suit, alleging that the foreclosure sale was void because their
home equity loan failed to comply with the requirements of the Texas

*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5
TH
CIR. R. 47.5.4.
United States Court of Appeals
Fifth Circuit
FILED
January 7, 2020

Lyle W. Cayce
Clerk
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No. 19-50365
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Constitution. The Onabajos appeal the district court’s dismissal of their quiet
title claim and denial of a motion to amend their complaint. We affirm.
I.
On October 15, 1999, the Onabajos purchased a home for a contract price
of $228,780, with a mortgage note of $205,900. A few months prior, an
appraiser had valued the property at $230,000. In June 2001, the Onabajos
refinanced their mortgage through a home equity loan for $248,000. At that
time, Home Capital, Inc., the Onabajos’ lender, appraised the fair market value
of the home at $310,000, which the Onabajos contend was inaccurate.
According to the Onabajos, the true value of their property was closer to
$239,738, which reflected the value of the property as assessed by the Travis
County Central Appraisal District. The Onabajos further contend that they
were unaware that the lender had conducted an appraisal because no
appraiser entered their home to conduct an appraisal, they were not provided
a copy of an appraisal report, and they do not remember receiving a document
providing them with instructions on how to obtain a copy of the appraisal.
Eventually, the Onabajos defaulted on their home equity loan, and Household
Finance Corporation III (HFC), an assignee of Home Capital, Inc., initiated
judicial foreclosure proceedings against them. On October 20, 2011, the state
court granted HFC’s request for judicial foreclosure, and HFC subsequently
foreclosed and sold the property to itself for $238,046.90.
Following several state court forcible detainer proceedings between the
Onabajos and HFC, the Onabajos filed this suit. Relevant to this appeal is the
Onabajos’ quiet title claim, which alleged that their home equity loan was void
because the principal loan amount exceeded eighty percent of the home’s fair
market value. The defendants filed a motion to dismiss the Onabajos’ second
amended complaint, which the district court referred to a magistrate judge.
The magistrate judge recommended that the district court dismiss the
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Onabajos’ second amended complaint and deny the Onabajos leave to amend
the complaint. The Onabajos timely filed objections to the magistrate judge’s
report and recommendation and filed a motion for leave to amend their
complaint. The district court overruled the Onabajos’ objections, denied their
motion for leave to amend, and dismissed the suit. This appeal follows.
II.
As an initial matter, the Onabajos have failed to substantively address
the denial of their motion for leave to amend. Instead, in their initial brief,
they recite the standard of review for the denial of leave to amend, and state
in a single sentence that “even if [the Second Amended Complaint] was still
lacking, it would not be futile for the Onabajos to amend their complaint to
include all of the facts described herein.” Even in their reply brief, the
Onabajos fail to respond to the defendants’ argument that their motion to
amend was untimely under the district court’s scheduling order. The
Onabajos’ briefing on this issue falls short of the requirement that an
appellant’s brief “must contain . . . appellant’s contentions and the reasons for
them, with citations to the authorities and parts of the record on which the
appellant relies.” Fed. R. App. P. 28(a)(8). And we therefore consider the issue
waived.
We thus turn to the Onabajos’ challenge to the district court’s dismissal
of their quiet title claim. We review a district court’s 12(b)(6) dismissal of a
complaint de novo. See Walker v. Beaumont Indep. Sch. Dist., 938 F.3d 724,
734 (5th Cir. 2019). We view the allegations contained in the complaint as true
and view the facts in the light most favorable to the plaintiff. Id. at 735. “To
survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). Typically, when ruling on a motion to dismiss, courts
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may consider only the allegations in the complaint and any exhibits attached
thereto. See Fed. R. Civ. P. 12(d). However, this court may also consider
documents attached to a motion to dismiss if those documents: (1) are referred
to in the plaintiff’s complaint and (2) are central to the plaintiff’s claim. Collins
v. Morgan Stanley Dean Witter, 224 F.3d 496, 498–99 (5th Cir. 2000).
To prevail in an action to quiet title, a “plaintiff must show (1) an interest
in a specific property, (2) title to the property is affected by a claim by the
defendant, and (3) the claim, although facially valid, is invalid or
unenforceable.” Vernon v. Perrien, 390 S.W. 3d 47, 61 (Tex. App.–El Paso 2012,
pet. denied). Here, the Onabajos allege that their home equity loan was void
because the loan amount was more than eighty percent of their home’s value.
The Texas Constitution limits the extension of credit to a principal loan
amount that “does not exceed 80 percent of the fair market value of the
homestead on the date the extension of credit is made.” T
EX. CONST. art. XVI,
§ 50(a)(6)(B).
1
When this requirement is not met, the lien is invalid, and all
principal and interest are forfeited. Id. § 50(a)(6)(Q)(x). Under Texas law,
however, a “lender or assignee for value may conclusively rely on [a] written
acknowledgement as to the fair market value of the homestead property” so
long as two requirements are met:
(1) the value acknowledged to is the value estimate in an appraisal
or evaluation prepared in accordance with a state or federal
requirement applicable to an extension of credit under Subsection
(a)(6); and
(2) the lender or assignee does not have actual knowledge at the
time of the payment of value or advance of funds by the lender or
assignee that the fair market value stated in the written
acknowledgement was incorrect.

1
Although this provision has subsequently been amended, the parties agreed that, for
the purposes of the defendants’ motion to dismiss, the version that was in effect when the
Onabajos refinanced their home is the version that applies to the Onabajos’ quiet title claims.
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Id. § 50(h).
The Onabajos admit that they signed an acknowledgment, which stated
that the fair market value of their home was $310,000. The Onabajos argue,
however, that the 2001 appraisal failed to comply with state and federal
requirements and that their lender knew that the fair market value listed in
the acknowledgement was inaccurate. But the Onabajos’ second amended
complaint does not point to any federal or state requirement that the 2001
appraisal failed to comply with. Instead, the facts that the Onabajos state
show that the appraisal failed to comply with the applicable regulations all
come from an expert report, which was not referred to in the second amended
complaint. Thus, the district court could not consider these facts when ruling
on the motion to dismiss. Collins, 224 F.3d at 498–99.
The allegations contained within the second amended complaint also fail
to plausibly suggest that the lender had actual knowledge that the fair market
value stated in the written acknowledgement was incorrect. The Onabajos’
allegation that “the lender, broker, appraiser and assignees acted in
collaboration to falsely inflate the value of the property” is a naked assertion,
which, standing alone, fails to state a plausible claim for relief. Iqbal, 556 U.S.
at 678. And, for the reasons explained by the district court, allegations that
(1) the Onabajos did not receive a copy of the 2001 appraisal report, (2) the
Onabajos do not remember signing a document providing them with
instructions on how to obtain a copy of the appraisal, (3) an appraiser never
entered their home, and (4) other valuations valued the property at less than
$310,000 do not give rise to the reasonable inference that the lender had actual
knowledge at the time of the loan that the fair market value stated in the
acknowledgement was incorrect. Nor do accusations that the defendants
contributed to the mid-2000s mortgage crisis or engaged in abusive practices
towards other borrowers plausibly suggest actual knowledge that the fair
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market value of the Onabajos’ home was less than $310,000. Thus, the district
court did not err when it dismissed the Onabajos’ claim that the loan violated
the Texas constitution because the principal loan amount exceeded eighty
percent of their home’s fair market value. The judgment of the district court
is
AFFIRMED.
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