Case 4:10-cv RAS -DDB Document 10 Filed 03/15/10 Page 1 of 8

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1 Case 4:10-cv RAS -DDB Document 10 Filed 03/15/10 Page 1 of 8 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS SHERMAN DIVISION RODNEY WILLIAMS, R.K. INTEREST INC., and JABARI THOMAS, Plaintiffs, v. CIVIL ACTION NO. 4:10-CV-34 CHEYENNE CROSSING RESIDENTIAL ASSOCIATION, INC. and MARK DISANTI, Defendants. DEFENDANT CHEYENNE CROSSING RESIDENTIAL ASSOCIATION, INC. S MOTION FOR SUMMARY JUDGMENT TO THE HONORABLE DON D. BUSH, UNITED STATES MAGISTRATE JUDGE: Defendant Cheyenne Crossing Residential Association, Inc. ( Cheyenne ) hereby files this Motion for Summary Judgment, 1 as follows: I. Summary of the Argument A threshold question is before the Court in this foreclosure case: (1) Is the Texas Property Code, which provides for notice via certified mail, return receipt requested, 2 constitutional? The Court should unequivocally answer Yes to this question. The Fifth Circuit and Texas courts have held that property owners associations such as Cheyenne are not state actors under the Due Process Clause to the Fourteenth Amendment of the United States 1 See FED. R. CIV. P. 56(b). 2 See TEX. PROP. CODE ANN (a) (Vernon Supp. 2002) ( [T]he association or its agent must give written notice to the owner by certified mail, return receipt requested. ); see also TEX. PROP. CODE ANN (b) (Vernon Supp. 2009) ( The notice must be sent by certified mail, return receipt requested.... ). 1

2 Case 4:10-cv RAS -DDB Document 10 Filed 03/15/10 Page 2 of 8 Constitution ( the Due Process Clause ). 3 Thus, Cheyenne did not violate Plaintiffs Rodney Williams, R.K. Interest Inc., and Jabari Thomas ( Plaintiffs ) Due Process rights in foreclosing on the property. Nor did a taking occur under the Fifth Amendment to the United States Constitution. Finally, Plaintiffs rely on recent Supreme Court precedent that simply has no application here. The Court should issue a judicial declaration that the Texas Property Code is constitutional and does not violate Plaintiffs Due Process rights. The Court should also issue a judicial declaration that the foreclosure on the property did not violate Plaintiffs constitutional rights. II. Background Plaintiffs state that they owned the property. 4 Plaintiffs acknowledge that Cheyenne foreclosed on the property. 5 Defendant Mark DiSanti ( DiSanti ) purchased the property at a foreclosure sale on November 6, Plaintiffs judicially admit that DiSanti has filed a forcible entry and detainer action. 7 Plaintiffs argue that they did not receive constitutionally adequate notice either of the foreclosure sale or of their right to redeem the property. 8 Plaintiffs contend that the Texas Property Code which provides for notice via certified mail, return receipt requested violates 3 Daniel v. Ferguson, 839 F.2d 1124, (5th Cir. 1988); Barrera v. Sec. Building & Inv. Corp., 519 F.2d 1166, 1174 (5th Cir. 1975); Williamson v. Tucker, 615 S.W.2d 881, 892 (Tex. Civ. App. Dallas 1981, writ ref d n.r.e.); Armenta v. Nussbaum, 519 S.W.2d 673, 679 (Tex. Civ. App. Corpus Christi 1975, writ ref d n.r.e.). 4 Exhibit A: Plaintiffs Original Petition For Title And For Declaratory Relief at p Id.; see also Exhibit C: Certificate of Incorporation and Articles of Incorporation for Cheyenne Crossing Residential Association, Inc. 6 Exhibit A at p. 1; see also Exhibit D: Assessment Lien Deed at p Exhibit A at pp This judicial admission binds Plaintiffs. E.g., White v. Arco/Polymers, Inc., 720 F.2d 1391, 1396 (5th Cir. 1983). 8 Exhibit A at p. 2. 2

3 Case 4:10-cv RAS -DDB Document 10 Filed 03/15/10 Page 3 of 8 their rights under the Due Process Clause. 9 Plaintiffs therefore ask the Court to set aside the foreclosure sale of the property due to this alleged constitutional violation. 10 Plaintiffs have prayed for a declaratory judgment as to the rights of the parties Plaintiffs ask either that the Court order the property deeded back or that Plaintiffs receive the right to redeem the property under the Texas Property Code. 12 III. Statement Of Summary Judgment Evidence Cheyenne relies on the following summary judgment evidence and incorporates it by reference: Exhibit A: Exhibit B: Exhibit C: Plaintiffs Original Petition For Title And For Declaratory Relief; Affidavit of Tom Fabry; Certificate of Incorporation and Articles of Incorporation for Cheyenne Crossing Residential Association, Inc.; and Exhibit D: Assessment Lien Deed Effective November 6, IV. Arguments and Authorities A. Legal Standard A movant is entitled to summary judgment if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. 13 Issues of material fact are genuine only if they require resolution by a trier of fact. 14 The party moving for summary judgment bears the initial burden of informing the district court of the basis for its motion, and identifying those 9 Id. ( If the certified mail is returned unclaimed there are no requirements for additional steps to notify the owner of the impending foreclosure and the owner s right to redemption. ). 10 Id. 11 Id. at p Id. 13 FED. R. CIV. P. 56(c); see also FED. R. BANKR. P Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 3

4 Case 4:10-cv RAS -DDB Document 10 Filed 03/15/10 Page 4 of 8 portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact. 15 The burden then shifts to the nonmoving party to establish the existence of a genuine issue for trial. 16 To meet this burden, the nonmovant must do more than simply show that there is some metaphysical doubt as to the material facts by coming forward with specific facts showing that there is a genuine issue for trial. 17 Summary judgment should be granted only if the evidence indicates that a reasonable fact-finder could not find in favor of the nonmoving party. 18 B. Analysis 1. The Texas Property Code Is Constitutional. Plaintiffs contend that [t]he Texas Property Code is unconstitutional in that it provides for notice of a foreclosure sale of an owner s right to redemption by simply sending said notices by certified mail. 19 Plaintiffs believe that the Texas Property Code violates the Due Process Clause. 20 Plaintiffs constitutional challenge plainly fails because Cheyenne is not a state actor. 21 The Fourteenth Amendment to the United States Constitution provides, among other things, the following: No state shall make or enforce any law which shall abridge the privileges or immunities of the citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); see also FED. R. CIV. P. 56(c). 16 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, (1986). 17 Id. (quotation omitted). 18 Anderson, 477 U.S. at Exhibit A at p Id. 21 Rather, Cheyenne is a homeowners association and a non-profit corporation. Exhibit B: Affidavit of Tom Fabry at p. 1, 2; see also Exhibit C. 22 U.S. CONST. amend. XIV, 1 (emphasis added). 4

5 Case 4:10-cv RAS -DDB Document 10 Filed 03/15/10 Page 5 of 8 The Due Process Clause protects individuals only from governmental and not from private action Thus, the Due Process Clause can be violated only by conduct that may be fairly characterized as state action. 24 In the context of non-judicial foreclosure, the question becomes whether there is a sufficiently close nexus between the state and the challenged action... so that the action... may be fairly treated as that of the State itself. 25 In Barrera v. Security Building & Investment Corp., 26 the Fifth Circuit held that there is no significant state involvement in non-judicial foreclosures under Texas law. 27 Two reasons supported this conclusion. 28 First, the State has no direct involvement in non-judicial foreclosures. 29 Second, the State s decision to regulate foreclosures does not mean that foreclosures are imputed to the State. 30 Accordingly, the Fifth Circuit affirmed the district court s order of dismissal. 31 Barrera has remained good law for over a generation. The Fifth Circuit has reaffirmed Barrera. 32 Texas courts, in turn, have rejected constitutional challenges based on the Due Process Clause. In Armenta v. Nussbaum, 33 the Thirteenth Court of Appeals held that a trustee s actions under a predecessor statute to Chapter 209 were not sufficient to establish significant state 23 Lugar v. Edmonson, 457 U.S. 922, 930 (1982) (emphasis added). 24 Id. at Jackson v. Metro Edison Co., 419 U.S. 345, 351 (1974) (citation omitted) F.2d 1166, 1169 (5th Cir. 1975) 27 Id. at Id. at Id. 30 Id. at Id. at 1168; cf. Earnest v. Lowentritt, 690 F.2d 1198, 1201 (5th Cir. 1982) ( Private misuse of a state statute alone does not describe conduct that can be attributed to the state. ). Cheyenne expressly denies that it violated any statutes in foreclosing on the property. 32 See, e.g., Daniel v. Ferguson, 839 F.2d 1124, 1129 & n.9 (5th Cir. 1988) S.W.2d 673 (Tex. Civ. App. Corpus Christi 1975, writ ref d n.r.e.) 5

6 Case 4:10-cv RAS -DDB Document 10 Filed 03/15/10 Page 6 of 8 action or involvement. 34 As the Court noted, holding that any conduct that conforms to state law is state action would subject nearly all private activities to the constitutional limitations of the Fourteenth Amendment. 35 To put it simply, [n]o significant state action is involved in a foreclosure There consequently is no violation of the Due Process Clause. 37 Plaintiffs constitutional challenge to Chapter 209 is unavailing No Taking Occurred In Connection With The Foreclosure On The Property. Plaintiffs may well argue that a taking under the Fifth Amendment to the United States Constitution occurred in connection with the foreclosure on the property. A taking, however, only occurs when a state actor takes private property for public use without just compensation. 39 Property owners associations such as Cheyenne 40 are not state actors under federal law and Fifth Circuit precedent. 41 The Court should cast a skeptical eye on any assertion that a taking occurred. 3. The Case On Which Plaintiffs Rely Is Inapposite. Plaintiffs have relied on Jones v. Flowers. 42 There, the Supreme Court determined whether, when notice of a tax sale is mailed to the owner and returned undelivered, the 34 Id. at Id. (citation omitted). 36 Williamson v. Tucker, 615 S.W.2d 881, 892 (Tex. Civ. App. Dallas 1981, writ ref d n.r.e.) (following Armenta). 37 Id. 38 Barrera, 519 F.2d at 1174; see also Williamson, 615 S.W.2d at 892; Armenta, 519 S.W.2d at Williamson Cty. Reg l Planning Comm n v. Hamilton Bank of Johnson City, 473 U.S. 172, (1985); Carole Media LLC v. New Jersey Transit Corp., 550 F.3d 302, (3d Cir. 2008). 40 See Exhibit B at p. 1, 2; see also Exhibit C. 41 Barrera, 519 F.2d at 1174; see also Williamson, 615 S.W.2d at 892; Armenta, 519 S.W.2d at U.S. 220 (2006). 6

7 Case 4:10-cv RAS -DDB Document 10 Filed 03/15/10 Page 7 of 8 government must take additional reasonable steps to provide notice before taking the owner s property. 43 Jones involved a state-initiated seizure of property. 44 This lawsuit, however, involves no such facts, nor could it. 45 This distinction renders Jones inapposite. The Court should grant Cheyenne s motion for summary judgment and issue a judicial declaration that the Texas Property Code is constitutional and does not violate Plaintiffs rights under the Due Process Clause. In turn, Cheyenne did not violate Plaintiffs constitutional rights in foreclosing on the property. V. Conclusion and Prayer The Court should grant Defendant Cheyenne Crossing Residential Association, Inc. s Motion for Summary Judgment. Respectfully submitted, HAYS, McCONN, RICE & PICKERING By: /s/ Michael M. Gallagher w/permission James J. McConn, Jr. State Bar No West Loop South, Suite 1000 Houston, Texas Telephone: (713) Facsimile: (713) jmcconn@haysmcconn.com LEAD ATTORNEY FOR DEFENDANT CHEYENNE CROSSING RESIDENTIAL ASSOCIATION, INC. 43 Id. at 222 (emphasis added). 44 Id. at 222, See Exhibit B at p. 1, 2; see also Exhibit C. 7

8 Case 4:10-cv RAS -DDB Document 10 Filed 03/15/10 Page 8 of 8 OF COUNSEL: HAYS, McCONN, RICE & PICKERING Michael M. Gallagher State Bar No West Loop South, Suite 1000 Houston, Texas Telephone: (713) Facsimile: (713) mgallagher@haysmcconn.com CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing instrument has been duly sent via CM/ECF and via facsimile on this the fifteenth day of March, 2010 to all counsel of record and parties, as follows: Via CMECF and/or Via Facsimile: (972) Mr. Norman H. Ewert LBJ, S-435 Mesquite, Texas /s/ Michael M. Gallagher Michael M. Gallagher 8