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U.S. Rof III Legal Title Trust 2015-I v. Morlock, L.L.C.

Court of Appeals of Texas, Fourteenth District

January 14, 2020

U.S. ROF III LEGAL TITLE TRUST 2015-I, Appellant
v.
MORLOCK, L.L.C., Appellee

          On Appeal from the 281st District Court Harris County, Texas Trial Court Cause No. 2016-14187

          Panel consists of Justices Christopher, Hassan, and Poissant.

          MEMORANDUM OPINION

          Meagan Hassan Justice

         Appellant, U.S. ROF III Legal Title Trust 2015-I ("ROF"), appeals the grant of summary judgment in favor of appellee, Morlock, L.L.C. ("Morlock"). ROF contends the trial court (1) erroneously granted summary judgment because it "fail[ed] to properly apply concepts of equity and fairness to toll limitations or otherwise estop Morlock from asserting that ROF III's lien was void based on passage of time"; and (2) abused its discretion when it denied ROF's motion for new trial because "evidence discovered after summary judgment would have produced a different result as a matter of law." We affirm.

         Background

         In 2008, Thearith Soeung and Maly May ("Borrowers") purchased property located at 14907 East Lime Blossom Court in Cypress, Texas (the "Property"). Borrowers executed a promissory note payable to lender, Destino Mortgage, Inc. The note was secured by a deed of trust under which Mortgage Electronic Registration Systems, Inc. was named a beneficiary and acted "as a nominee for Lender and Lender's successors and assigns." Mortgage Electronic Registration Systems, Inc. assigned its interest in the deed of trust to Metlife Home Loans, L.L.C. ("Metlife").

         The Property had a prior recorded homeowners' association lien for assessments created through a declaration of covenants. When the Borrowers failed to pay assessments, the homeowners' association foreclosed on the Property. Morlock then purchased the Property "subject to any superior liens and encumbrances against the property" at a foreclosure sale in September 2011.

         On December 12, 2011, Metlife sent the Borrowers a Notice of Prior Acceleration, in which it stated that (1) "despite the sending of written notice of default and notice of intent to accelerate the maturity of the Loan, the default was not timely cured"; (2) Metlife "accelerated the maturity of the Loan, and declared the entire balance of the Loan due and payable in full"; and (3) Metlife enclosed "a copy of the Notice of the Substitute Trustee's Sale that advises the foreclosure sale of the Property authorized by the Deed of Trust will take place on January 03, 2012, at the place designated by the Harris County Commissioners Court pursuant to Section 51.002, and the Property will be sold to the highest bidder for cash."

         Pursuant to the deed of trust, Metlife posted the Property for a substitute trustee's sale scheduled for January 3, 2012. On the day of the scheduled foreclosure sale, Morlock filed a petition and application for temporary restraining order in Texas state court seeking to enjoin the foreclosure sale and quiet title to the Property. Metlife removed the case to federal court based on diversity jurisdiction and moved to dismiss for failure to state a claim. On January 9, 2013, the magistrate judge signed a memorandum (1) rejecting Morlock's argument that "its lien, obtained pursuant to the Declaration of Covenants, is superior to" Metlife's lien because "under Texas law, a homeowners['] association's lien for assessments, such as that set forth in the Declaration of Covenants, is subordinate to first priority mortgage liens"; (2) finding Morlock "failed to establish the superiority of its title to the Property relative to" Metlife and thus Morlock could not establish a cause of action to quiet title; and (3) recommending that summary judgment be granted in favor of Metlife and that Metlife's motion to dismiss be granted. The Fifth Circuit affirmed in a per curiam opinion on September 12, 2013.

         Metlife did not post the Property for a foreclosure sale after the federal court opinions issued and the deed of trust was assigned to several different entities over time. ROF acquired the deed of trust by assignment in July 2015. On January 11, 2016, ROF posted a notice of foreclosure sale for February 2, 2016, pursuant to the deed of trust, then ROF purchased the Property at that sale. When ROF demanded possession of the Property, Morlock filed suit in March 2016 seeking a declaratory judgment that (1) enforcement of the deed of trust was barred by the statute of limitations and ROF could not conduct a foreclosure sale of the Property, (2) the deed of trust is unenforceable and the trustee's foreclosure sale and the foreclosure sale deed are void, and (3) "strikes the Trustees Deed and Deed of Trust as clouds on Plaintiffs title to the Property." Morlock also sought a temporary restraining order and temporary injunction.

         In March 2017, Morlock moved for summary judgment arguing that the trustee's sale and trustee's sale deed "were conducted under a deed of trust which was void . . . because enforcement of the deed of trust was barred by the statute of limitations." ROF filed a response to Morlock's motion, arguing the statute of limitations was tolled because it was prevented from conducting a foreclosure sale during the pendency and resolution of Morlock's first suit. In April 2017, the trial court denied Morlock's motion for summary judgment.

         In May 2017, ROF filed a summary judgment motion asserting that (1) foreclosure of the Property was not barred by the statute of limitations but limitations was equitably tolled until Morlock's first suit was resolved in the courts because "the viability of [ROF]'s foreclosure action was dependent upon the outcome of the original quiet title suit against [ROF]'s predecessor in interest, Metlife"; and (2) Morlock's statute of limitations defense to foreclosure is barred by quasi estoppel. Morlock responded to ROF's motion making substantially similar arguments it had proffered in its summary judgment motion.

         The trial court signed an order denying ROF's summary judgment motion on October 31, 2017. On the same day, the trial court signed an order (1) setting aside its April 18, 2017 order denying Morlock's summary judgment motion, and (2) granting Morlock's summary judgment motion.

         In November 2017, ROF filed a "Motion for Reconsideration, Motion for New Trial, and Motion for Leave to Include Summary Judgment Evidence" based on newly discovered evidence. In response, Morlock argued that ROF failed to establish it ...


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