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Ballard v. Carrington Mortgage Services, LLC

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

May 6, 2019



          Lee H. Rosenthal Chief United States District Judge

         Royce Ballard sued Carrington Mortgage Services, LLC, Bank of America, N.A., and the Mortgage Electronic Registration Systems, Inc. (collectively, the “Lenders”), challenging the attempted nonjudicial foreclosure sale of his home. He seeks damages and a declaratory judgment that the Lenders lacked the authority to foreclose on and sell his home. The Lenders have moved to dismiss, submitting documents relating to Ballard's loan, default, and foreclosure. Ballard did not respond.

         After a careful review of the motion, the properly considered evidence, and the applicable law, the court grants the motion to dismiss, (Docket Entry No. 9), dismissing Ballard's claims, without prejudice and with leave to amend by June 14, 2019. The reasons are explained in detail below.

         I. Background

         The facts are drawn from Ballard's well-pleaded allegations, accepted as true for this motion, and the documents that “are referred to in the pleadings and are central to” his claims. Brand Coupon Network, L.L.C. v. Catalina Mktg. Corp., 748 F.3d 631, 635 (5th Cir. 2014).

         In March 2010, Ballard obtained a $275, 793 home-mortgage loan from Southwest Funding, L.P., to purchase a home in Fort Bend County, Texas. (Docket Entry No. 9 at 12). Ballard signed a Promissory Note, agreeing to repay the loan amount, and a Deed of Trust, giving the Lenders a security interest in the home. The Deed was recorded in the Official Public Records of Fort Bend County. (Docket Entry No. 1-2 at 5; Docket Entry No. 9 at 12).

         The Deed named the Mortgage Electronic Registration Systems, known as MERS, as the nominee for Southwest Funding and the Deed beneficiary. (Docket Entry No. 9 at 12). The Deed stated that “MERS holds only legal title to the interests granted by [Ballard] in this Security Instrument, but, if necessary, ” MERS “has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the [p]property; and to take any action required.” (Id.). Carrington Mortgage Services serviced the loan. (Id. at 26).

         The Deed required Ballard to make timely payments under the Note. (Id. at 13). A failure to pay on time would result in default. (Id. at 14-15). If Ballard failed to cure a default, even after receiving notice and opportunity to do so, the Deed authorized the Lenders to “require immediate payment in full of all sums secured by this Security Instrument, ” called a loan acceleration. (Id.). The Lenders had the right to foreclose on and sell Ballard's home if he failed to pay the loan balance, after notice and an opportunity to cure the default and reinstate the loan. (Id. at 15-16).

         In December 2016, MERS assigned the Deed to the Bank of America. (Id. at 23-24). That assignment was recorded in the Fort Bend County Official Public Records. (Id.).

         Ballard failed to make the Note payments and defaulted. The Lenders required immediate payment of the full loan balance. Ballard did not seek to pay any part of the loan balance. Ballard alleged that he did not receive notice of the default or of the acceleration, but he did not explain why. (Docket Entry No. 1-2 at 7). The Lenders filed a notice with Fort Bend County scheduling a foreclosure sale for November 6, 2018. (Docket Entry No. 9 at 32). That sale was postponed because Ballard filed bankruptcy. The Lenders then filed a notice setting a foreclosure sale for July 3, 2018. (Id. at 29). The sale was again delayed because Ballard filed a second bankruptcy. In January 2019, the Lenders filed a notice with Fort Bend County that set a foreclosure sale for March 5, 2019. (Id. at 26). The notice was “posted at the FORT BEND County courthouse.” (Id.).

         Before the foreclosure sale, Ballard sued in the 400th Judicial District Court of Harris County. (Docket Entry No. 1-2). Ballard asserted Texas-law claims against the Lenders related to the foreclosure sale, sought a declaratory judgment and damages, and requested a temporary restraining order. (Id. at 7-12). His state-court petition asserted violations of the Texas Property Code and the Texas Civil Practice and Remedies Code, as well as a quiet-title claim. The petition alleged that: MERS lacked authority to assign the Note and Deed; the Lenders failed to give proper notice of acceleration or the foreclosure sale; the assignment to Bank of America was not recorded; the Lenders failed to perfect their security interest; and the Lenders “made, presented, or used the assignments associated with the mortgage loan with knowledge that the documents or other records [were] fraudulent.” (Id. at 5-11). The state court granted a temporary restraining order barring the Lenders from holding the scheduled March 5 foreclosure sale. (Docket Entry No. 1-3).

         The Lenders answered, removed based on diversity jurisdiction, and then moved to dismiss. (Docket Entry Nos. 1, 1-5, 9). The Lenders contend that: MERS, as a mortgagee, has authority to assign the Deed to a third party; Ballard has neither standing nor a legal basis to challenge the assignment; Ballard's allegations do not state a plausible claim that the Lenders' interest on his home is invalid or unenforceable; the Deed, Note, and assignment were perfected under Texas law; and Ballard has failed to state a plausible claim for wrongful foreclosure. (Docket Entry No. 9 at 2-8).

         Ballard has not responded to the motion to dismiss, though the deadline to do so has expired. The Lenders' motion and arguments are considered in detail below.

         II. The ...

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