     Case: 17-51118      Document: 00515406162         Page: 1    Date Filed: 05/06/2020




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                          United States Court of Appeals
                                                   Fifth Circuit

                                                                          FILED
                                                                         May 6, 2020
                                      No. 17-51118                     Lyle W. Cayce
                                                                            Clerk

BRENDA G. MATTHEWS STIDHAM,

               Plaintiff - Appellant

v.

OCWEN LOAN SERVICING, L.L.C.; THE BANK OF NEW YORK MELLON,

               Defendants - Appellees




                   Appeal from the United States District Court
                        for the Western District of Texas
                             USDC No. 7:16-CV-193


Before OWEN, Chief Judge, and KING and STEWART, Circuit Judges.
PER CURIAM:*
       Brenda Stidham and her then-husband, Ray Matthews, entered into an
executory contract to purchase a house in Odessa, Texas, in 1994. Stidham
made her final payment on October 2014, but she did not receive the deed
transferring ownership of the house until August 2016. Stidham primarily
sought liquidated damages under § 5.079 of the Texas Property Code, which
requires sellers to transfer legal title to property covered by an executory


       * 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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contract within thirty days of the purchaser’s final payment. The district court
granted summary judgment to the defendants, finding that Stidham was not
entitled to liquidated damages. We AFFIRM.
                                       I.
                                      A.
      Stidham and Matthews entered into an executory contract to purchase a
house from Nick and Shirley Flaker in 1994. Under the contract, after Stidham
and Matthews made 240 monthly payments, the Flakers would be obligated
“to convey a General Warranty Deed to the premises.” The parties do not
dispute that the Flakers later sold their rights, which resulted in the Bank of
New York as the owner of the loan and Ocwen Loan Servicing, L.L.C. (Ocwen)
as its loan servicer.
      Stidham and Matthews moved into the house a few months after the
contract was signed, and lived there until they separated, pending divorce, in
August 1997. During their separation period, only Matthews lived in the house,
and once their divorce was finalized in January 1998, only Stidham lived there.
In January 2015, Stidham moved into a nearby property, which she inherited
from her father. Stidham claims to have lived in both places until she started
renting the house in April 2016. Around this time, Stidham also contemplated
selling the house to a prospective buyer, but she never discussed an actual
price or received an offer.
      In August 2015, Ocwen confirmed to Stidham that the executory contract
“was satisfied and paid in full” on October 27, 2014. Ocwen also noted that
“there [was] no lien to be released” because Stidham’s “mortgage [was] not of
record.” In response, Stidham requested through her attorney that Ocwen, as
“the present title holder,” execute a deed conveying her title to the house. She
also stated, “If a Special Warranty deed cannot or will not be executed by the


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                                   No. 17-51118
title holder, Brenda Stidham will have no alternative but to file a trespass to
title lawsuit to clear up the title to her realty.”
                                         B.
      In May 2016, Stidham filed suit in Texas state court alleging trespass to
try title and other torts against the Bank of New York and Ocwen (collectively
BONY). BONY removed the suit to federal court and filed a warranty deed
conveying the house to Stidham on August 9, 2016. Stidham then filed an
amended complaint seeking (1) liquidated damages under Texas Property
Code § 5.079 for failing to provide a recorded warranty deed within thirty days
after the contract was paid in full and (2) actual damages for the taxes and
insurance that she paid on the house between October 27, 2014, (when the
contract was paid in full) and August 9, 2016 (when the deed was recorded).
      BONY moved for summary judgment, which the district court granted.
The district court concluded that Stidham was not eligible for liquidated
damages because, among other things, the executory contract that the Flakers
recorded in 1997 also operated as a deed. The district court did not expressly
evaluate whether Stidham suffered actual damages, or if she did not, whether
that precluded her from collecting liquidated damages under § 5.079. This
appeal followed.
                                         II.
      We review the district court’s grant of summary judgment de novo.
Vuncannon v. United States, 711 F.3d 536, 538 (5th Cir. 2013). “Summary
judgment is required when ‘the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of
law.’” Trent v. Wade, 776 F.3d 368, 376 (5th Cir. 2015) (quoting Fed. R. Civ. P.
56(a)). Although we interpret the facts and draw all reasonable inferences in
favor of the nonmoving party, Ion v. Chevron USA, Inc., 731 F.3d 379, 389 (5th
Cir. 2013), “[s]ummary judgment is appropriate when the record does not
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                                       No. 17-51118
contain evidence that would lead a reasonable jury to find in favor of the non-
moving party,” BMG Music v. Martinez, 74 F.3d 87, 89 (5th Cir. 1996).
Moreover, “[t]his Court can affirm the district court’s decision based on any
legally sufficient ground, even one not relied upon by the district court.” Id.
                                             III.
      As noted, the district court determined that Stidham was ineligible for
liquidated damages under § 5.079(b). In doing so, the district court concluded
that BONY did not have title at the time of the alleged violation, that Stidman
failed to convert the executory contract into a promissory note and deed of trust
as required by the statute, and that she failed to comply with chapter 5 of the
Texas Property Code since she did not continually reside at the house. We
agree that § 5.079(b) does not permit Stidham to recover liquidated damages,
although we do so for different reasons.
      BONY argues that Stidman cannot recover liquidated damages because
she “provided no evidence demonstrating she suffered actual damages.”1 This
argument has two parts. BONY first asserts that chapter 41 of the Texas Civil
Practice and Remedies Code (chapter 41) requires plaintiffs like Stidham to
first prove that they suffered actual damages before they may recover
liquidated damages under § 5.079. Second, BONY contends that Stidham did
not suffer any actual damages. Analyzing each part of this argument
sequentially, we conclude that BONY is correct.
                                              A.
      Chapter 41 expressly “applies to any action in which a claimant seeks
damages,” which includes “an action for which damages are awarded under
another law of this state.” Tex Civ. Prac. & Rem. Code Ann. § 41.002(a)-(b).
This chapter also “prevail[s] over all other law to the extent of any conflict.”


      1   Although BONY argued this point below, the district court did not address it.
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§ 41.002(c). Importantly, chapter 41 provides that “exemplary damages may be
awarded only if damages other than nominal damages are awarded.”
§ 41.004(a). Exemplary damages are “any damages awarded as a penalty or by
way of punishment but not for compensatory purposes.” § 41.001(5).
      BONY contends that liquidated damages arising from § 5.079(b) qualify
as “exemplary damages” under chapter 41 because they can be “awarded as a
penalty.” Accordingly, BONY concludes that “Chapter 41 requires proof of
actual damages as a predicate to exemplary damages.”
      As a preliminary matter, we find this reading persuasive because it is
supported by the plain language of chapter 41. After all, liquidated damages
can be awarded for punitive purposes, see, e.g., Comm’r v. Schleier, 515 U.S.
323, 332 & n.5 (1995), and the liquidated damages at issue here do not clearly
serve a compensatory purpose. If these liquidated damages qualify as
exemplary damages, then Stidham must show that she is entitled to damages
other than nominal damages, i.e., actual damages.
      Nonetheless, this is a question of Texas state law, and therefore “we are
‘guided by the decisions of state intermediate appellate courts unless other
persuasive data indicate[ ] that the [state’s] Supreme Court would decide
otherwise.’” Stem v. Gomez, 813 F.3d 205, 213 (5th Cir. 2016) (alterations in
original) (quoting Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640, 646
(5th Cir. 2002)). Although neither the Texas Supreme Court nor any
intermediate appellate courts appear to have interpreted § 5.079 in the context
of chapter 41, Texas intermediate appellate courts have interpreted § 5.077,
which “share[s] a similar statutory formula for computing liquidated
damages,” Flores v. Millennium Interests, Ltd., 185 S.W.3d 427, 433 (Tex.
2005). Additionally, the Texas Supreme Court has held that § 5.077 liquidated
damages are “penal in nature,” id., although it declined to address whether
they qualify as exemplary damages under chapter 41, id. at 434.
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      Two intermediate Texas appellate courts have concluded that liquidated
damages arising under § 5.077 qualify as exemplary damages under chapter
41. See Smith v. Davis, 462 S.W.3d 604, 613 (Tex. App.—Tyler 2015, pet.
denied); Henderson v. Love, 181 S.W.3d 810, 817 (Tex. App.—Texarkana 2005,
no pet.). Both opinions reasoned that, because § 5.077 liquidated damages are
“penal,” they therefore satisfy chapter 41’s definition of exemplary damages,
which includes “any damages awarded as a penalty.” Smith, 462 S.W.3d at 613
(citing Tex. Civ. Prac. & Rem. Code Ann. § 41.001(5)); accord Henderson, 181
S.W.3d at 816-17 (same). Consequently, both courts concluded that purchasers
must establish actual damages in order to collect liquidated damages under
§ 5.077. Smith, 462 S.W.3d at 613; Henderson, 181 S.W.3d at 816-17.
      No intermediate appellate courts have held to the contrary. One court
held, without addressing chapter 41, that § 5.077 does not impose an actual-
harm requirement, Marker v. Garcia, 185 S.W.3d 21, 29 (Tex. App.—San
Antonio 2005, no pet.), and commented in dicta in another decision, again
without considering chapter 41, that “Section 5.079 does not include a
requirement that the buyers be harmed,” Zuniga v. Velasquez, 274 S.W.3d 770,
775 n.4 (Tex. App.—San Antonio 2008, no pet.).2
      Because they did not consider chapter 41, neither Marker nor Zuniga is
useful for interpreting whether liquidated damages qualify as exemplary
damages. We therefore find that the plain language of chapter 41 and
intermediate appellate decisions such as Smith and Henderson are instructive:
plaintiffs seeking liquidated damages under § 5.079(b) must first demonstrate
that they suffered actual damages.




      2 Tellingly, Henderson notes that these cases were “speaking just of Section 5.077
standing alone and not speaking to whether the provisions of Chapter 41 apply.” Henderson,
181 S.W.3d at 817 n.7 (citations omitted).
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                                            B.
       We now evaluate whether Stidham suffered actual damages. Stidham
contends that she did because BONY did not transfer title until August 2016,
which allegedly prevented her from selling the house to a specific buyer before
that time.3 Stidham acknowledges that she had not agreed on a price with her
prospective buyer, but she argues that, at the very least, if she had been able
to sell the house, she would not have been required to pay property tax or
property insurance. BONY counters that this does not constitute actual
damages because Stidham’s tax and insurance benefits ultimately benefitted
her own interest in the property.
       Under Texas law, “actual damages are either ‘direct’ or ‘consequential.’”
Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 816 (Tex. 1997)
(citation omitted). Under this framework, “[d]irect damages are the necessary
and usual result of the defendant’s wrongful act; they flow naturally and
necessarily from the wrong,” and “[c]onsequential damages, on the other hand,
result naturally, but not necessarily, from the defendant’s wrongful acts.” Id.
While consequential damages do not need to be “the usual result of the wrong,”
they “must be foreseeable, and must be directly traceable to the wrongful act
and result from it. . . . [I]f damages are too remote, too uncertain, or purely
conjectural, they cannot be recovered.” Id. (citations omitted). Because
homeowners usually must pay taxes and insurance on their home, Smith’s
alleged damages are better categorized as consequential damages rather than
direct ones. Stidham must therefore establish that her tax and insurance
payments can qualify as consequential damages.




       3 Stidham’s amended complaint seeks $6,358.39 in “actual damages” for the money
that she spent on property taxes and property insurance from October 27, 2014, (the date of
her final payment) to August 9, 2016 (the date when BONY recorded the deed).
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      The summary-judgment record reveals that she cannot. In deposition,
Stidham claimed that she spoke to someone, “a specific buyer,” about selling
the house. Nonetheless, Stidham did not specifically identify the buyer, and a
price was not discussed. Accordingly, Stidham perhaps lost a potential sale,
but she did not offer evidence that she lost an actual sale. Cf. Ramsey v. Davis,
261 S.W.3d 811, 817 (Tex. App.—Dallas 2008, pet. denied) (noting that
damages for slander of title include “the amount of money the seller would have
realized if the sale had been consummated”). Because Stidham offers no
evidence of why the sale failed to progress, her claimed damages are not
“directly traceable to the wrongful act.” See Perry Equip. Corp., 945 S.W.2d at
816. Instead, they are “too remote” and “uncertain,” id., to qualify as
consequential damages.
      Since Stidham did not suffer actual damages, which chapter 41 requires,
liquidated damages are unavailable under § 5.079(b). Accordingly, we need not
address Stidham’s arguments that the district court erred by concluding that
Stidham had legal title at the time of the alleged breach, that she failed to
convert the executory contract as required, and that she failed to comply with
chapter 5 of the Texas Property Code.
                                      IV.
      For the foregoing reasons, we AFFIRM the judgment of the district court.




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