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Deleon v. Select Portfolio Servicing, Inc.

United States District Court, W.D. Texas, San Antonio Division

May 17, 2019

MICHELLE DELEON, Plaintiff/Counter-Defendant
v.
SELECT PORTFOLIO SERVICING, INC., Defendant/Counter-Plaintiff and Third-Party Plaintiff JOHN PELAYO Third-Party Defendant

          REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

          RICHARD B. FARRER UNITED STATES MAGISTRATE JUDGE

         To the Honorable United States District Judge Fred Biery:

         This Report and Recommendation concerns the Motion for Summary Judgment, Dkt. No. 15, filed by Defendant/Counter-Plaintiff and Third-Party Plaintiff Select Portfolio Servicing. All pretrial matters in this case have been referred for disposition pursuant to Rules CV-72 and 1 of Appendix C to the Local Rules for the United States District Court for the Western District of Texas. Dkt. No. 4. The Court has diversity jurisdiction, see 28 U.S.C. § 1332, and the undersigned has authority to enter this recommendation pursuant to 28 U.S.C. § 636(b)(1)(B).

         For the reasons set forth below, Select Portfolio's Motion for Summary Judgment, Dkt. No. 15, should be GRANTED, and all claims asserted by Plaintiff Michelle DeLeon should be dismissed. The District Court should also issue an order authorizing foreclosure on the subject property, issue a writ of possession, and award Select Portfolio its reasonable attorneys' fees.

         I. Factual and Procedural Background

         Plaintiff Michelle DeLeon initiated this action on February 6, 2018 in the 438th Judicial District Court in Bexar County, Texas. She did so to prevent the scheduled foreclosure of property located at 3046 Quakertown Drive in San Antonio, Texas. Dkt. No. 1-1 (Pl.'s Orig. Pet.). The property utilized a Texas Home Equity Note executed solely by DeLeon's ex-husband, Third Party Defendant John Pelayo, and payable to First Franklin Financial Corporation. A Deed of Trust signed by both DeLeon and Pelayo secured the Note. See Mot. at Appx. 8-36. The Note and Deed of Trust were later assigned to Wells Fargo Bank, National Association, Trustee for the CertificateHolders of First Franklin Mortgage Loan Trust 2004-FF6, Mortgage Pass-Through Certificates, Series 2004-FF6, and Defendant/Counter and Third Party-Plaintiff Select Portfolio Serving Inc. was appointed the servicer on the mortgage. See Id. at 37-41.

         By early 2016, Pelayo had defaulted on the mortgage. See Id. at 45-48. Accordingly, on February 24, 2016, Select Portfolio sent Pelayo a letter entitled “Demand Letter-Notice of Default, ” which advised Pelayo of the following: (1) that he was currently in default; (2) how he could cure the default (a payment of $223, 625.06 by March 25, 2016); and (3) the consequences for a failure to timely cure the default (acceleration of the debt and foreclosure). See Id. Having failed to timely cure the default, Select Portfolio, by and through counsel, sent Pelayo a Notice of Acceleration on May 26, 2016. See Id. at 50-51. The Notice of Acceleration explained that the Note had been accelerated, declared all sums owed on the Note immediately due and payable, and advised Pelayo that Select Portfolio was proceeding with the foreclosure. See id.

         In August of 2017, Wells Fargo sought authorization, in the 73rd Judicial District of Bexar County, Texas, to foreclose on the property. See Id. at 2-7. It received permission in November of 2017. See Id. at 57-59.

         Plaintiff DeLeon initiated this action a few months later. DeLeon's Original Petition alleges that the foreclosure sale is “unjust under the circumstances of this case in that Defendant has failed to act in good faith; it has noticed acceleration of Plaintiff's indebtedness against her said homestead and posted same for foreclosure sale, having failed to negotiate fairly and justly toward her fixing the extent of and curing any default.” Pl's Orig. Pet. ¶ 6. DeLeon further alleges that Defendant Select Portfolio “has misled Plaintiff by encouraging her to apply for and accepting her application for modification of her note, then announcing her purported ineligibility for modification when it was too late in practicality for Plaintiff to cure her default before the foreclosure auction scheduled for February 6, 2018 could take place.” Id. DeLeon concedes that Select Portfolio has an “ultimate right to foreclosure as a remedy but seeks to delay foreclosure proceedings pending determination of the parties' respective rights.” Id. at ¶ 17. DeLeon seeks, ultimately, to enjoin Select Portfolio from proceeding with the foreclosure, and requests a full and complete accounting. On February 6, 2018, the Bexar County District Court granted DeLeon's request for a Temporary Restraining Order, setting the matter for a temporary injunction hearing on February 20, 2018. See Dkt. No. 1-1 at 2-3.

         It's unclear from the record whether that temporary-injunction hearing occurred. According to Select Portfolio, DeLeon failed to serve it with a copy of the Temporary Restraining Order, as ordered by the Bexar County District Court. See Dkt. No. 1 ¶ 3.

         On March 12, 2018, Select Portfolio removed this action to federal court, citing federal diversity jurisdiction. See Dkt. No. 1. According to the Notice of Removal, Select Portfolio is a Utah corporation with its principal place of business in Utah. DeLeon is a Texas citizen. See Id. ¶¶ 10-11. As to the amount in controversy, DeLeon “avers affirmatively that she seeks less than $75, 000.00 in combined relief” but at the same time also seeks injunctive relief. See Orig. Pet. ¶ 16 & Prayer for Relief ¶ G. Accordingly, the amount-in-controversy is determined by the value of the property, which is currently $253, 580. See Farkas v. GMC Mortg., L.L.C., 737 F.3d 338, 341 (5th Cir. 2013); Ex. B to Notice of Removal.

         In September of 2018, Select Portfolio filed counterclaims against DeLeon and third-party claims against Pelayo to obtain an order authorizing foreclosure on the property, a writ of protection, and an award of reasonable attorneys' fees. See Dkt. Nos. 10 & 11.

         Select Portfolio now moves for summary judgment on DeLeon's claims and also on its counterclaims and third-party claims against Pelayo. Dkt. No. 15. DeLeon has not responded to Select Portfolio's Motion. And despite being served with a copy of the Summons and Complaint, see Dkt. No. 14, Pelayo ...


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