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Morlock L.L.C. v. HSBC Bank USA N.A.

United States District Court, S.D. Texas, Houston Division

March 24, 2017

Morlock, L.L.C, Plaintiff,
v.
HSBC Bank USA, N.A., Defendant.

          MEMORANDUM OPINION & ORDER

          Gray H. Miller Judge.

         Pending before the court is a memorandum and recommendation (“M&R”) filed by Magistrate Judge Nancy Johnson. Dkt. 27. The Magistrate Judge considered a motion for summary judgment filed by defendant HSBC Bank U.S.A., N.A. (“HSBC”) (Dkt. 23), plaintiff Morlock, L.L.C.'s (“Morlock”) response (Dkt. 25), and HSBC's reply (Dkt. 26). Having considered the M&R, the motions, Morlock's objections (Dkt. 28), HSBC's response (Dkt. 29), and other relevant materials in the record, the court is of the opinion that Morlock's objections should be OVERRULED and the M&R should be ADOPTED IN FULL.

         I. Background

         In April 2005, George G. George executed an Adjustable Rate Note (the “Note”) to purchase property located at 17606 Meadow Crossing Lane, Houston, Texas 77095 (the “Property”) with a loan from People's Choice Home Loan, Inc. (“People's Choice”). Dkt. 23, Ex. A-1 at 8-12. The Note was secured by a deed of trust granting a security interest in the form of a lien on the Property to People's Choice. Dkt. 23, Ex. A-2 at 14-40. On December 6, 2007, (but effective as of October 30, 2007), both the Note and the deed of trust were assigned to HSBC. See Dkt. 23, Ex. A-3 at 42-43. George defaulted several times on the Note by failing to make timely payments. Dkt. 23, Exs. A, A-7. HSBC's loan servicer sent George a notice of default on September 15, 2012. Dkt. 23, Ex. A-4 at 52-58. On December 6, 2011, Morlock purchased the Property subject to any existing liens. Dkt. 23, Ex. B-1. On November 29, 2012, after George continued to default on the mortgage, HSBC's loan servicer sent George a notice of acceleration, and a notice of sale to take place on January 1, 2013. Dkt. 23, Ex. B-1 at 5-8. On July 10, 2015, HSBC sent George a notice of rescission of acceleration on the Note. Dkt. 23, Ex. A-6 at 67-68.

         In December 2012, Morlock filed suit against HSBC in the 295th District Court of Harris County, Texas seeking a temporary restraining order to prevent a sale of the Property and a determination of HSBC's assignment of the lien and interest in the Property. Dkt. 23, Ex. B-5. The case was removed to federal court and Morlock's claims were dismissed on July 23, 2014, for failure to state a claim. Dkt. 23, Ex. B-5 at 63-72.

         On July 6, 2015, Morlock brought a second suit against HSBC in the 133rd District Court Of Harris County, Texas. Dkt. 1, Ex. B-1. Morlock requested a temporary restraining order preventing any action by HSBC and claimed that HSBC's right to enforce the lien was barred by section 16.035 of the Texas Civil Practice and Remedies Code. Dkt. 1, Ex. B-1. On August 11, 2015, HSBC removed this case on the basis of diversity jurisdiction. Dkt. 1. On August 18, 2015, HSBC filed a motion to dismiss (Dkt. 3) which the Magistrate Judge recommended denying on October 21, 2015 (Dkt. 15). The court adopted the Magistrate Judge's decision on the motion to dismiss on December 3, 2015. Dkt. 17. On June 10, 2016, HSBC filed a motion for summary judgment. Dkt. 23. The Magistrate Judge considered HSBC's motion for summary judgment and issued an M&R recommending that the court grant HSBC's motion. See Dkt. 23.

         The Magistrate Judge's M&R addresses HSBC's motion for summary judgment (Dkt. 23) along with Morlock's response (Dkt. 25) and HSBC's reply in support of its motion for summary judgment (Dkt. 26). Dkt. 27. Morlock asserts that HSBC did not bring suit for foreclosure on the lien within four years of accrual of the cause of action as required by section 16.035 of the Texas Civil Practice and Remedies Code making the lien void and unenforceable. Dkt. 25. HSBC's motion for summary judgment asserts that the statute of limitations does not bar foreclosure because HSBC abandoned all instances of acceleration. Dkt. 23, Exs. A-6, A-7, A-8. Further, HSBC argued that the evidence shows that HSBC owns the Note and is the current beneficiary on the deed of trust because Morlock purchased the Property subject to any existing liens. Dkt. 23, Ex. B-1 at 6.

         The Magistrate Judge recommended that the court grant HSBC's motion for summary judgment (Dkt. 27 at 13) because, while HSBC exercised its option to accelerate more than four years ago, HSBC abandoned both instances of acceleration (Dkt. 27 at 12-13). Therefore, HSBC did not have to file a written extension because it acted to abandon the acceleration within the four-year statute of limitations. Dkt. 27 at 12. Further, because Morlock purchased the property at a foreclosure sale subject to any existing liens, George still owed a debt to HSBC, and HSBC could foreclose on the property. Dkt. 27 at 13. Morlock filed timely objections to the M&R. Dkt. 28. HSBC responded to the objections. Dkt. 29.

         II. Legal Standard

         A. Magistrate Judge

         For dispositive matters, the court “determine(s) de novo any part of the magistrate judge's disposition that has been properly objected to.” See Fed. R. Civ. P. 72(b)(3). “The district judge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions.” Id. “When no timely objection is filed, the court need only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.” Fed.R.Civ.P. 72(b), Advisory Comm. Note (1983). For non-dispositive matters, the court may set aside the magistrate judge's order only to the extent that it is “clearly erroneous or contrary to law.” Fed.R.Civ.P. 72(a).

         B. Motion for Summary Judgment

         A court shall grant summary judgment when a “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.” Fed.R.Civ.P. 56(c). “[A] fact is genuinely in dispute only if a reasonable jury could return a verdict for the non-moving party.” Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388, 392 (5th Cir. 2006). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548 (1986). If the party meets its burden, the burden shifts to the non-moving party to set forth specific facts showing a genuine issue for trial. Fed.R.Civ.P. 56(e). The court must view the evidence in the light most favorable to the non-movant and draw all justifiable inferences in favor of the non-movant. Envtl. Conservation Org. v. City of Dall., Tex., 529 F.3d 519, 524 (5th Cir. 2008).

         III. ...


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