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HSBC Bank USA, National Association v. Soria

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

January 17, 2018

HSBC Bank USA, N.A, Plaintiff,
v.
Augustin F. Soria, et al., Defendants

          MEMORANDUM OPINION AND ORDER

          GRAY H. MILLER UNITED STATES DISTRICT JUDGE.

         Pending before the court is a motion for default judgment filed by plaintiff HSBC Bank USA, N.A., as trustee for Ace Securities Corp., Home Equity Loan Trust, Series 2005-RM1 (“HSBC”). Dkt. 10. Defendants Augustin Soria and Maria Soria have not responded. Having considered the motion and applicable law, the court is of the opinion that the motion should be DENIED.

         I. Background

         HSBC sued the Sorias and defendant GAI IRA, LLC (“GAI”) seeking a judgment for judicial foreclosure. Dkt. 1 at 5. On or about November 24, 2004, the Sorias obtained a home equity adjustable rate note (the “Note”) for the property described as follows:

LOT THREE HUNDRED THIRTY-SEVEN (337), IN BLOCK TWELVE (12) OF LEXINGTON WOODS NORTH, A SUBDIVISION IN HARRIS COUNTY, TEXAS, ACCORDING TO THE PLAT THEREOF AS RECORDED IN VOLUME 258, PAGE 1 OF THE MAP RECORDS OF HARRIS COUNTY, TEXAS (the “Property”).

Id. at 2, 3. As part of the loan agreement, the Sorias also executed a security instrument (the “Security Instrument”), naming Mortgage Electronic Registration Systems, Inc. (“MERS”) as the beneficiary. Id. The Security Instrument was recorded in the Harris County property records. Id. Subsequently, MERS assigned its interest in the Security Instrument to HSBC. Id. The assignment was also recorded in the Harris County property records. Id. at 4.

         The Property is part of the Lexington Woods North Community Association (the “HOA”). Id. The HOA required the Sorias to pay assessments. Id. The HOA's declaration and covenants allowed the HOA to recover those assessments through a foreclosure sale if the Sorias did not pay them. Id. The Sorias failed to pay the assessments, and the HOA filed a judicial foreclosure action in state court. Id. HSBC was not a party to the suit. Id. The HOA obtained a final summary judgment against the Sorias. Id. That court entered an order of sale ordering a sheriff's or constable's sale of the property. Id. GAI purchased the Property at the constable's sale. Id.

         Since then, the Sorias have failed to make payments on the Note and have failed to comply with the covenants and conditions in the Security Instrument. Id. at 5. HSBC provided the Sorias with a notice of default and intent to accelerate, but the Sorias have not cured the default. Id. Further, the Sorias lost title to the Property at the HOA foreclosure sale, which also constitutes a default of the Security Instrument. Id. HSBC sued the Sorias and GAI seeking a judgment allowing it to foreclose on the property. Id. at 6.

         Subsequently, GAI agreed that its interest in the Property was subject to HSBC's lien interest. Dkt. 7. GAI does not contest HSBC's right to foreclose, and agreed to disclaim any interest in the Property. Id. Accordingly, the court entered an agreed judgment as to GAI's interest. Dkt. 11.

         On July 17, 2017, the Sorias were properly served with process. Dkts. 6, 6-1. The Sorias' deadline to answer or otherwise respond was August 18, 2017. See Fed. R. Civ. P. 12(a). They were informed of their deadline for responding and the consequences of failing to do so. Dkts. 6, 6-1. To date, the Sorias have not answered or responded to this lawsuit. Dkt. 10.

         On August 25, 2017, HSBC filed a motion for default judgment against the Sorias. Id. Pursuant to the Local Rules of the Southern District of Texas, HSBC served this motion for default judgment upon the Sorias via certified mail, with return receipt requested. Id.; see also S.D. Tex. L.R. 5.5. HSBC has filed a military affidavit for the Sorias that complies with the Servicemembers' Civil Relief Act, 50 U.S.C App. § 521. Dkt. 10-1.

         II. Legal Standard

         Under Federal Rule of Civil Procedure 55(a), “[w]hen a party against whom judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” Fed.R.Civ.P. 55(a). Under Rule 55(b)(2), a party may apply for the court to enter a default judgment, and the “court may conduct hearings or make referrals-preserving any federal statutory right to a jury trial-when, to enter or effectuate judgment, it needs to: (A) conduct an accounting; (B) determine the amount of damages; (C) establish the truth of any allegation by evidence; or (D) investigate any other matter.” Fed.R.Civ.P. 55(b)(2).

         A default judgment is a “drastic remedy, not favored by the Federal Rules[, ] and resorted to by courts only in extreme situations.” Sun Bank of Ocala v. Pelican Homestead & Sav. Ass'n, 874 F.2d 274, 276 (5th Cir. 1989). “The Federal Rules of Civil Procedure are designed for the just, speedy, and inexpensive disposition of cases on their merits, not for the termination of litigation by procedural maneuver.” Id. A default judgment, thus, “must be ‘supported by well-pleaded allegations' and must have ‘a sufficient basis in the pleadings.'” Wooten v. McDonald Transit Assocs., Inc., 788 F.3d 490, 498 (5th Cir. 2015) (quoting Nishimatsu Constr. Co. v. Hou. Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)). The well-pleaded allegations in the complaint are assumed to be true, except regarding damages. Nishimatsu, 515 F.2d at 1206; se ...


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