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King v. Select Portfolio Servicing, Inc.

United States District Court, E.D. Texas, Sherman Division

December 4, 2017

JOHN C. KING, Plaintiff,
v.
SELECT PORTFOLIO SERVICING, INC., and U.S. BANK, N.A., SUCCESSOR TRUSTEE TO BANK OF AMERICA, N.A., AS SUCCESSOR TRUSTEE TO LASALLE BANK, N.A., AS TRUSTEE FOR THE HOLDERS OF THE MERRILL LYNCH FIRST FRANKLIN MORTGAGE LOAN TRUST, MORTGAGE LOAN ASSET-BACKED CERTIFICATES, SERIES 2006-FF18, Defendants.

          MEMORANDUM OPINION AND ORDER

          KIMBERLY C. PRIEST JOHNSON UNITED STATES MAGISTRATE JUDGE.

         Pending before the Court is Defendants Select Portfolio Servicing, Inc. (“SPS”) and U.S. Bank, National Association, Successor Trustee to Bank of America, N.A., as Successor Trustee to LaSalle Bank, N.A., as Trustee for the Holders of the Merrill Lynch First Franklin Mortgage Loan Trust, Mortgage Loan Asset-Backed Certificates, Series 2006-FF18's (“Trustee Bank”) (collectively, “Defendants”) Motion for Summary Judgment (the “Motion”) (Dkt. 62). After review of the Motion and associated briefing (see Dkts. 75, 79, 80, 81, 82), the Court finds the Motion (Dkt. 62) is GRANTED and Plaintiff John C. King's (“Plaintiff”) claim is DISMISSED WITH PREJUDICE.

         I. BACKGROUND

         Plaintiff John C. King is the current owner of real property located at 11898 Eastpark Lane, Frisco, Texas 75033 (the “Property”). See Dkts. 60 at ¶ 6; 62 at 6. According to Plaintiff's Fourth Amended Complaint, Defendants or their predecessors filed a valid Deed of Trust (“Deed of Trust”) encumbering the Property on October 31, 2006, in Denton County, Texas. See Dkt. 60 at ¶ 8. Identical copies of the Deed of Trust, dated October 18, 2006, were submitted to the Court by Plaintiff and Defendants. See Dkts. 75-2; 34-1 at 13-33; and 62-2.[1] The Deed of Trust served as security for a Promissory Note (the “Promissory Note”), which was also dated October 18, 2006, and executed by Plaintiff's then-wife, Genevieve King (“Ms. King”), for the original principal amount of $192, 700.00 (the Deed of Trust and Promissory Note are collectively referred to as the “Loan”). See Dkt. 34-1 at 6-11. Plaintiff admits in his Fourth Amended Complaint that he has not made any payments towards the balance due on the Promissory Note since April 1, 2008. See Dkt. 60 at ¶ 16; see also Dkt. 62 at 7. Regardless of this fact, Plaintiff seeks a declaratory judgment granting him quiet title to the Property. See Dkt. 60 at ¶ 15. Plaintiff alleges that any lien Defendants had on the Property is now void due to inaction past the statute of limitations period after a notice of acceleration and foreclosure. Id. at ¶ 16.

         Plaintiff's claim centers on the timeline of several notices sent to him and/or Ms. King by Defendants and/or their predecessors. First, Plaintiff alleges (and Defendant accepts (see Dkt. 62 at 11)) that on November 10, 2008 (subsequent to Plaintiff's default on the Loan in April 2008), Balcom Law Firm, P.C., which had been retained by Defendants' predecessor mortgage servicer, sent a Notice of Acceleration and Notice of Foreclosure (the “November 2008 Acceleration Notice”), accelerating the debt owed under the Promissory Note, and notifying Plaintiff that foreclosure sale of the Property would occur if the debt owed was not paid in full. See Dkt. 75-6. The November 2008 Acceleration Notice informed Plaintiff that the debt owed was $191, 284.92, plus interest accruing from the date of default, late charges, expenses of collection, and Balcom Law Firm, P.C.'s attorneys' fees. See id. at 2-3. Next, Plaintiff stipulates that Ms. King received a letter late in December 2010 (the “December 2010 Notice”), which stated that if the Loan's default was “not cured on or before January 5, 2011, the mortgage payments [would] be accelerated.” See Dkts. 62-5 at 4; 75 at 11.[2] Lastly, the most recent undisputed notice came on October 8, 2014, when Barrett Daffin Frappier Turner & Engel, LLP, on behalf of Defendant SPS, sent a “Rescission of Acceleration of Loan Maturity” (the “October 2014 Notice”) to Plaintiff. See Dkts. 62 at 12; 62-13; 62-14; and 75 at 13.

         After this series of notices, and after filing the present lawsuit (the “Lawsuit”), on November 3, 2015, Plaintiff filed for bankruptcy in the Eastern District of Texas. See Dkt. 62-15. Although Plaintiff filed the Lawsuit on October 26, 2015, he did not include his claim against Defendants in the bankruptcy schedules, wherein Plaintiff was asked to list his assets, including potential “[c]laims against third parties, whether or not [Plaintiff had] filed a lawsuit or made a demand for payment.” Dkt. 62-16 at10. Accordingly, the Lawsuit (and resulting potential quiet title to the Property) was not included in Plaintiff's Bankruptcy Estate (the “Bankruptcy Estate”). Instead, Plaintiff included the Lawsuit in his Statement of Financial Affairs. See Dkt. 62-18 at 40. The Bankruptcy Court ultimately issued an Order of Discharge on February 10, 2016. See Dkt. 62-17.

         II. LEGAL STANDARD

         A. SUMMARY JUDGMENT

         Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. See Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

         The mere existence of some alleged factual dispute between the parties will not defeat summary judgment; the requirement is that there be no genuine issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). A fact is “material” if a dispute over it might affect the outcome of a suit under governing law; factual disputes that are “irrelevant or unnecessary” do not affect the summary judgment determination. See Id. at 248. An issue is “genuine” if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See id.

         B.STANDING TO PURSUE CLAIM CONNECTED TO BANKRUPTCY PETITION

         Under Section 541 of the Bankruptcy Code, a debtor's bankruptcy estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C.§ 541(a)(1); see also Kane v. Nat'l Union Fire Ins. Co., 535 F.3d 380, 385 (5th Cir. 2008) (stating that “all of a debtor's assets, including causes of action belonging to the debtor at the commencement of the bankruptcy case, vest in the bankruptcy estate upon the filing of a bankruptcy petition.”). “Thus, a trustee, as the representative of the bankruptcy estate, is the real party in interest, and is the only party with standing to prosecute causes of action belonging to the estate once the bankruptcy petition has been filed.” Kane, 535 F.3d at 385 (citing 11 U.S.C. §§ 323, 541(a)(1); Wieburg v. GTE Sw. Inc., 272 F.3d 302, 306 (5th Cir. 2001). However, after notice and hearing, a trustee may abandon any property of the estate if it is “of inconsequential value and benefit to the estate.” 11 U.S.C. § 554(a).

         C. JUDICIAL ESTOPPEL CONNECTED TO BANKRUPTCY PETITION

         Judicial estoppel is a common law doctrine preventing parties from assuming advantageous, inconsistent positions in litigation. See In re Superior Crewboats, Inc., 374 F.3d 330, 334 (5th Cir. 2004). “Generally, judicial estoppel is invoked where ‘intentional self-contradiction is being used as a means of obtaining unfair advantage in a forum provided for suitors seeking justice.'” Id. at 334-35 (quoting Scarano v. Cent. R.R. Co., 203 F.2d 510, 513 (3d Cir. 1953)). The Fifth Circuit has recognized three factors when deciding whether to invoke judicial estoppel: whether (1) a party's position is clearly inconsistent with its previous one; (2) a court accepted the previous position; and (3) inconsistency was “inadvertent.” Id. at 335. In ...


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